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Supply chain concepts

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supply chain

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Supply chain concepts

  1. 1. Supply Chain: Basic Concepts • What is a Supply Chain? • What are the problems involved in Supply Chain Management? • What are the levels of planning in Supply Chain Management? ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  2. 2. What is a Supply Chain? • It is not a “one-way” chain, but a network of stages • Consists of all stages involved in fulfilling customer demand • Includes: Manufacturers, External Suppliers, Vendors, Transporters, Warehouses, Retailers, Customers ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  3. 3. Schematic of a Nationwide Supply Chain ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  4. 4. Another Schematic Representation Suppliers Pre- assembly Manfr Plants Warehouses Customers Upstream Downstream ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  5. 5. Example: Dell • Customer • Website • Assembly Plants • Warehouses • Dell’s suppliers and their suppliers • Dell “builds-to-order” • Dell does not have retailers, wholesalers ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  6. 6. Example: Toyota • Produces nearly 900,000 vehicles annually • Over 35 manufacturing plants in 25 countries outside of Japan • For plants in the U.S., supply parts are shipped across the Pacific, and transported on rail • Deliveries are scheduled to the minute to keep inventories low (Just-in-time) • Complicated network with uncertainties ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  7. 7. Problems in Managing the Supply Chain • Customer Service Goals • Facility Location • Inventory Decisions • Transportation ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  8. 8. Decision Levels • Strategic: – Long term, permanence of many years • Tactical – Intermediate time range, usually three months to a year • Operational – Short range, week or less ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  9. 9. Decision Levels: Examples • Transportation – Strategic: Mode Selection – Tactical/Operational: Routing, scheduling • Location – Strategic: No. of plants and locations – Tactical: Assigning inventory positions • Warehouse – Strategic: Layout, site selection – Operational: Order picking ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  10. 10. Logistics in Economy (1990, 1996) • Freight Transportation: $352, $455 Billion • Inventory Expense: $221, $311 Billion • Administrative Expense: $27, $31 Billion • Logistics related activity: 11%, 10.5% of GNP ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary
  11. 11. Cost Break-up for a Manufacturing Firm ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary • Profit 4% • Logistics Cost 21% • Marketing Cost 27% • Manufacturing Cost 48% Profit Logistics Cost Marketing Cost Manufacturing Cost
  12. 12. Logistics: True Magnitude ISyE 3103 Supply Chain Modeling: Logistics Siddhartha Maheshwary • Compaq estimates it lost $0.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed • P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand • When the 1 gig processor was introduced by AMD, the price of the 800 meg processor dropped by 30% • Kmart versus Walmart

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