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Definition of SCM:
It is the management of a network of all
business processes and activities involving
procurement of raw materials, manufacturing
and distribution management of Finished
Goods.
Customer
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
1-10
Cycle View of a Supply Chain
• Each cycle occurs at the interface between two
successive stages
• Customer order cycle (customer-retailer)
• Replenishment cycle (retailer-distributor)
• Manufacturing cycle (distributor-manufacturer)
• Procurement cycle (manufacturer-supplier)
1-11
Push/Pull View of Supply Chains
Customer
Order Arrives
Push-Pull boundary
Push/Pull View of
Supply Chain Processes
Supply chain processes fall into one of two
categories depending on the timing of their
execution relative to customer demand
Pull:
In this execution is initiated in response to a
customer order (reactive)
It operate in an environment in which
customer demand is known
Therefore, at time of execution of a pull
process ,demand is known with certainty
• Push:
In this execution is initiated in anticipation of
customer orders (speculative or forecast)
In this execution process ,customer demand
is not yet known & must be forecast
• Push/pull boundary separates push processes
from pull processes
• The relative proportion of push and pull
processes can have an impact on supply chain
performance
Push/Pull View of Supply Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles
Customer
Order Arrives
Supply Chain Management [SCM]
PULL PULL
Process Process
Customer Order
Cycle
Cust Order & Mfrg
Customer order arrives Cycle
Procurement Procurement
Cycle Cycle
PUSH PUSH
Process Process
Pull Push
Marketing and sales strategy: specifies how the market will be segmented and
product positioned, priced, and promoted
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Step 2: Understanding the
Supply Chain
• How does the firm best meet demand?
• Dimension describing the supply chain is
supply chain responsiveness
High
Low
Cost
High Low
2-29
Step 3:achieving strategic fit
After mapping level of implied uncertainty &
understanding supply chain position on
responsiveness spectrum,
The third & final step is to ensure that the
degree of supply chain responsiveness is
consistent with implied uncertainty,
The goal is to target high responsiveness for
a supply chain facing high implied uncertainty,
&
high efficiency for a supply chain facing low
implied uncertainty
Achieving Strategic Fit Shown on the
Uncertainty/Responsiveness Map (Fig. 2.5)
Responsive
supply chain
Responsiveness
spectrum
Efficient supply
chain
Efficient Responsive
Primary goal Lowest cost Quick response
Product design strategy Min product cost Modularity to allow
postponement
Pricing strategy Lower margins Higher margins
Mfg strategy High utilization Capacity flexibility
Inventory strategy Minimize inventory Buffer inventory
Lead time strategy Reduce but not at expense Aggressively reduce even if
of greater cost costs are significant
Supplier selection strategy Cost and low quality Speed, flexibility, quality
Transportation strategy Greater reliance on low cost Greater reliance on
modes responsive (fast) modes
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Other Issues Affecting Strategic Fit
Multiple products and customer segments
Product life cycle
Competitive changes over time
Multiple Products and
Customer Segments
• Firms sell different products to different
customer segments (with different implied
demand uncertainty)
• The supply chain has to be able to balance
efficiency and responsiveness given its
portfolio of products and customer segments
• Two approaches:
– Different supply chains
– Tailor supply chain to best meet the needs of
each product’s demand
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Product Life Cycle
• The demand characteristics of a product and
the needs of a customer segment change as a
product goes through its life cycle
• Supply chain strategy must evolve throughout
the life cycle
• Early: uncertain demand, high margins (time
is important), product availability is most
important, cost is secondary
• Late: predictable demand, lower margins,
price is important
2-35
Competitive Changes Over Time
2-36
A Framework for
Structuring Drivers
Competitive Strategy
Supply Chain
Strategy
Efficiency Responsiveness
Supply chain structure
Logistical Drivers
• Facilities
– places where inventory is stored, assembled, or fabricated
– production sites and storage sites
• Inventory
– raw materials, WIP, finished goods within a supply chain
– inventory policies
• Transportation
– moving inventory from point to point in a supply chain
– combinations of transportation modes and routes
• Information
– data and analysis regarding inventory, transportation, facilities throughout the
supply chain
– potentially the biggest driver of supply chain performance
• Sourcing
– functions a firm performs and functions that are outsourced
• Pricing
– Price associated with goods and services provided by a firm to the supply chain
3-38