Understanding the Supply Chain

The network created amongst different companies producing, handling and/or distributing a specific product or service is supply chain. Supply chain encompasses the steps it takes to get a good or service from the supplier to the customer. It is a dynamic process and involves the constant flow of information, products and funds between different stages. Below are the stages involved in a typical supply chain: Customers Retailers Distributors Manufacturers Raw material suppliers

Supply Chain Surplus It is the difference between value of the product and its price which remains with customer. It is difficult to determine it in monetary terms as it is not clearly measurable as to how much a customer eventually pay for a product or service vis-a-vis what he actually paid. Importance of Supply Chain decisions Success of Supply chain depends on a close association between the efficient management of flows (information, fund and product) and its design. Supply chain design and planning should be adaptable to changing environment and customer expectation otherwise business will fall. Difference Phases in Supply Chain: 1. Supply chain strategy and design: In this phase a company decides how to structure the supply chain for next several years. It makes decision on chain configuration, resource allocation and what process should be performed at each stage. 2. Supply Chain Planning: Decisions are made for a quarter to a year. Supply chain planning (SCP) is the forward-looking process of coordinating assets to optimize the delivery of goods, services and information from supplier to customer, balancing supply and demand. Planning is made keeping in mind constraints made during design phase to maximise profit. 3. Supply Chain Operation: Time period is reduced to weekly or daily. This phase emphasizes on individual customer orders to handle in best possible manner. Decisions are made with less uncertain demand information since time period is weekly or daily. Process view of Supply Chain:

Cycle view: Whole process is divided into series of cycles and each cycle is performed between two successive stages. Following are four process cycles: 1. Customer order cycle 2. Replenishment cycle 3. Manufacturing cycle 4. Procurement cycle Push/Pull View: The push versus pull view of supply chain processes separates processes based on whether they are initiated in response or reaction to customer orders (pull) or in anticipation of customer orders (push). Actual demand drives pull processes while forecasts drive push processes. Push processes operates in an uncertain environment because customer demand is not known while pull processes operate in an environment in which is known.

The difference between push and pull view of supply chain Push View Execution initiated in anticipation of customer order Demand is uncertain Speculative process High complexity Focus on resource allocation Long lead time Helps in supply chain planning Objective is to minimize the cost Pull View Execution initiated in response to customer order Demand is certain Reactive process Low complexity Focus on responsiveness Short lead time Helps in order full-fillment Objective is to maximize the service