1. Supply Chain Management
Overview

2. What is supply chain?
A connected set of activities concerned with planning,
coordinating and controlling materials, parts, and
finished goods from supplier to customer.
It is concerned with two distinct flows (material
and information) through the organization.

3. What does it mean to manage a supply chain?
The supply chain needs to be managed as a single entity.
Strategic management: design of the supply chain itself;
Tactical management: establishing contracts (incentives and
penalties) between interacting partners in the supply chain.

4. Supply Chain for Diapers
Raw materials supplier
Equipment supplier
Manufacturer
Regional Warehouse
of the manufacturer
Regional Warehouse
of the Supermarket
Local Supermarket
Household
Flow of materials
Baby: The Ultimate Consumer
Flow of information

5. Old-fashioned Supply Chain for PCs
Component Suppliers
P C Manufacturer
P C Warehouse
P C Store
Consumer

6. Modern Supply Chain for PCs
Component Supplier
Manufacturer
Consumer

7. Proposed Supply Chain at Dell
Printer
Supplier
Sub-
component
Supplier
Monitor
Supplier
Dell
Assembly
Plant
Customer
Material Flow
Information Flow

8. Issues in SCM What items to stock, and where to stock them.
For each item: how much to order, and when to order.
Supply contracts.
Information sharing.
Global operations.

9. Why hold inventory? Uncertainty in demand, supply, lead times
Price fluctuations
Customer goodwill (Stock-out costs)
Reduce ordering/set-up costs

10. Why not hold unlimited amount of inventory?
Storage costs
Capital costs
Spoilage and pilferage
Insurance and taxes

11. Supply Contracts Quantity discounts Product bundling
Return of unsold goods
Order filling strategies
Lead time guaranties
Quantity/quality guaranties

12. Information Sharing Who has the demand information?
Who has the cost information?
Who has the production information?

13. Global operations International laws Exchange rate fluctuations
Larger lead times
Social Issues