The Supply Chain

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					   The Supply Chain

BSc Business Information Technology 1

                  Systems 1



     sjeary@bournemouth.ac.uk           1
                   Outline
• What is the supply chain?
• Why is it important?
• Examples




               sjeary@bournemouth.ac.uk   2
                  Logistics
• Is the time related positioning of resources,
  or the strategic management of the whole
  supply chain
• ‘getting the right materials, to the right
  place, at the right time, from the right
  source, with the right quality, at the right
  price’.

                sjeary@bournemouth.ac.uk          3
             Military Logistics
•   Sun Tzu
•   Von Clausewitz
•   American Civil War
•   Bonaparte
•   Second World War
    – U boats
    – Allied strategic bombing
• Cold War
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           Aims of logistics
• Finding reliable suppliers and developing
  business relationships
• Making purchases at lowest long-term cost
• Giving uninterrupted flows of materials into
  the organisation
• Maintaining the quality of materials
• Having efficient movement of work in
  progress
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                           ...
• Giving efficient movement of finished
  goods on to customers
• Protecting materials and avoiding damage
• Guaranteeing customer service and
  maintaining good relations
• Getting high turnover of stock and
  minimising associated costs
• Making the best use of available resources
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            Conflict of aims
• If each of these aims are separate functions
  then they contradict each other
• Not separate functions:
  – Marketing wants
  – Production wants
  – Finance wants
• The supply chain means looking at the
  whole
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      What is a supply chain?
• A supply chain refers to the flow of
  materials, information and services from
  raw materials suppliers through factories
  and warehouses to the end customers.




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            Definition continued.
• The supply chain also includes the organisations
  and processes that create and deliver these
  products, information, and services to the end
  customers.
• It includes many tasks such as
   –   purchasing
   –   materials handling
   –   production planning and control
   –   logistics and inventory control
   –   distribution
   –   delivery
                     sjeary@bournemouth.ac.uk        9
      The generic supply chain
• Upstream supply chain
  – this includes the organisations first tier
    suppliers, which can be manufacturers or
    assemblers and their suppliers
• Internal supply chain
  – this includes all the processes the organisation
    uses to transform its inputs into outputs
• Downstream supply chain
  – this includes all the processes involved in
    delivering the product to the customer
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           The generic supply chain
   Upstream                Internal                           Downstream

2nd Tier
Supplier      1st Tier
              Supplier      Assembly,
2nd Tier                   Manufacturing            Distribution
                               and                                  Retailers   Customers
Supplier                                              Centres
              1st Tier      Packaging
              Supplier
2nd Tier
Supplier




                         sjeary@bournemouth.ac.uk                                  11
                                         An example
               Upstream                           Internal                         Downstream

            2nd Tier
            Supplie r        1s t Tier
                             Supplie r             Assembly,
            2nd Tier                              Manuf acturing        Distribution
                                                      and                                  Retailers   Customers
            Supplie r                                                     Centres
                             1s t Tier             Packaging
                             Supplie r
            2nd Tier
            Supplie r




           Upstream                          Internal                              Dow nstream




                Grain                Cereal
                                                     Packaging      Distributors       Supermarkets    Customers
              producer             processing

  Tree
 felling        Corrugated
company           Paper               Boxes
                 company            Cardboard

                   Label
                                         Labels
                Manufacturer



                                         sjeary@bournemouth.ac.uk                                       12
 The function of Supply Change
         Management
• The supply chain is a system.
• All its activities need
  – Planning
  – Organising
  – Co-ordinating
• ‘In the end business all comes down to
  supply chain versus supply chain’
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       A simple example
         Eucalyptus leaves


                                                          Gas


             Grower


                    Bundled leaves                    Union
                                                     Carbide

           Transport                                            Alcohol
           Company
                                                    Shipping
                                                    Company
                     Packed leaves


                                                             Tanked alcohol
           Distributor

                             Packed leaves       Manufacturing
Corn                                               Company


                               Bundled corn

 Corn                        Transport
                             Company          Listerine
Farmer                                                                Listerine
         Bundled corn
                                               Wholesaler



                                                      Listerine
                                                                          Chemists



              sjeary@bournemouth.ac.uk                                               14
      The commercial requirements for
             Warner Lambert
• It should not overstock bottles of Listerine and incur costs
  because its resources are tied up in unsold goods.
   – It should stock enough to satisfy demand in the time that
     reordering and replenishing should take place
• It needs as quick a response to orders for raw materials as
  possible.
   – Every company in the supply chain should move quickly to
     process an order from the company that follows it in the chain
• The elimination of waste bureaucracy and indirect
  connections between companies in the chain
   – the use of paper and email for communication slows the reorder
     process
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             Supply Chain Goals
• The goals:
   – reduce risk
   – reduce uncertainty
   – disintermediation
• Thus positively affect:
   –    inventory levels
   –   cycle time
   –   business process
   –   customer service
• And as a direct result improve the efficiency and
  effectiveness of the whole chain
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                          Problems
• Uncertainty of the demand forecast and influenced by:
   –   competition
   –   price
   –   weather
   –   technological development
   –   customer confidence
• Uncertain delivery times caused by:
   – machine failures
   – road/sea/air conditions
• Quality problems
   – causing production delays
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 Competitive advantage using IT
     in the supply chain
• Improving internal business processes
• Allowing suppliers to view company orders,
  inventory etc
• Allowing customers to view inventory,
  delivery times etc
• Competing on time
  – time to design and manufacture
  – inventory management
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                  Example
• Dell computing who were already
  competing on price and quality and decided
  to compete on time.




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           The importance
• Is essential - all organisations move
  material
• The costs can be high (thus there can be
  considerable savings)
• Directly affects profits because it is an
  unavoidable overhead
• Links suppliers and customers and provides
  the means to develop long term
  relationships
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                            ...
• Influences lead time, reliability and other
  measures of quality and customer service
• Gives public exposure - advertising on
  lorries
• Can be a risk
• Determines the size and location of
  facilities
• May prohibit some operations
• Can encourage development with other
  organisations
                sjeary@bournemouth.ac.uk        21
                   Example
• Walmart whose costs (and thus their profit)
  relate directly to the quality of their supply
  chain




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         Learning Outcomes
• You will be able to analyse the supply chain
  system of any business and understand it.
• You will know the importance of improving
  the process for that business and how it can
  directly affect their profits.



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