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Understanding the
Supply Chain

PowerPoint presentation to accompany

Chopra and Meindl Supply Chain Management, 5e
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.

1-1
 Learning Objectives
1. Discuss the goal of a supply chain and explain
the impact of supply chain decisions on the
success of a firm.
2. Identify the three key supply chain decision
phases and explain the significance of each
one.
3. Describe the cycle and push/pull views of a
supply chain.
4. Classify the supply chain macro processes in a
firm.

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 What is a Supply Chain?
• All stages involved, directly or indirectly, in
fulfilling a customer request
• Includes manufacturers, suppliers, transporters,
warehouses, retailers, and customers
• Within each company, the supply chain includes
all functions involved in fulfilling a customer
request (product development, marketing,
operations, distribution, finance, customer
service)

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 What is a Supply Chain?
• Includes movement of products from suppliers to
manufacturers to distributors and information,
funds, and products in both directions
• May be more accurate to use the term “supply
network” or “supply web”
• Typical supply chain stages: customers,
retailers, distributors, manufacturers, suppliers
• All stages may not be present in all supply
chains (e.g., no retailer or distributor for Dell)

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 Flows in a Supply Chain

Figure 1-2

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 Supply Chain Management
Defined by Stock & Boyer in
2009
• The management of a network of relationships within
a firm and between interdependent organizations
and business units consisting of material suppliers,
purchasing, production facilities, logistics,
marketing, and related systems that facilitate the
forward and reverse flow of materials, services,
finances and information from the original producer to
final customer with the benefits of adding value,
maximizing profitability through efficiencies, and
achieving customer satisfaction.
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 The Objective of a Supply Chain

• Maximize overall value created

Supply Chain Surplus
= Customer Value – Supply Chain Cost

• Success should be measured by total

supply chain profitability, not profits at
an individual stage

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 The Objective of a Supply Chain

• Effective supply chain management is the

management of flows between and among
supply chain stages to maximize total
supply chain surplus

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 Decision Phases of a Supply Chain
• Supply chain design, planning and operation decisions plays a
significant role in the success or failure of a firm. To stay competitive,
supply chains must adapt to changing technology and customer
expectations.

• Supply chain strategy or design

– How to structure the supply chain over the next
several years
• Supply chain planning
– Decisions over the next quarter or year
• Supply chain operation
– Daily or weekly operational decisions
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 Supply Chain Strategy or Design
• Decisions about the structure of the supply chain
and what processes each stage will perform
• Strategic supply chain decisions
– Locations and capacities of facilities
– Products to be made or stored at various locations
– Modes of transportation
– Information systems
• Supply chain design must support strategic
objectives
• Supply chain design decisions are long-term and
expensive to reverse – must take into account
market uncertainty
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 Supply Chain Planning
• Planning decisions:
– Which markets will be supplied from which locations
– Planned buildup of inventories
– Subcontracting, backup locations
– Inventory policies
– Timing and size of market promotions
• Must consider in planning decisions demand
uncertainty, exchange rates, competition over
the time horizon

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 Supply Chain Operation
• Time horizon is weekly or daily
• Decisions regarding individual customer orders
• Goal is to implement the operating policies as
effectively as possible
• Allocate orders to inventory or production, set
order due dates, generate pick lists at a
warehouse, allocate an order to a particular
shipment, set delivery schedules, place
replenishment orders
• Much less uncertainty (short time horizon)

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 Process View of a Supply Chain
• Cycle View: processes in a supply chain are
divided into a series of cycles, each performed
at the interfaces between two successive supply
chain stages
• Push/Pull View: processes in a supply chain are
divided into two categories depending on
whether they are executed in response to a
customer order (pull) or in anticipation of a
customer order (push)

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 Cycle View
of Supply
Chain
Processes

Figure 1-3

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 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: execution is initiated in response to a
customer order (reactive)
• Push: execution is initiated in anticipation of
customer orders (speculative)
• Push/pull boundary separates push processes
from pull processes

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 Push/Pull View of Supply Chains

Figure 1-5

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 Push/Pull View – Dell

Figure 1-7

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 Supply Chain Macro Processes

• Supply chain processes discussed in the

two views can be classified into
– Customer Relationship Management (CRM)
– Internal Supply Chain Management (ISCM)
– Supplier Relationship Management (SRM)
• Integration among the above three macro
processes is critical for effective and
successful supply chain management

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 Supply Chain Macro Processes

Figure 1-8

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