rrNrD E R.qTAr\TD rN c TlrE
After readingthis chapter, will be ableto:
1" Discussthe goal of a supptychaia and explain the
impacr of supply chain decisionson the
success a firm.
2' rdentify the three key supply chain decision phases
3. Describe the cycle and pusb/pull views of a supply chain.
the siguificance of eachone.
4. Classifythe supply chain macro processes a
this chapter, we provide a conceptual understanding
of what a supply chail is and
l-the various issues that need to be ionsidergd when
plunning, or operating
a supply chain.'we discuss the significance of supply chai;
de;isions ano supply chain
performance for the successof a firm.We utso pr-ovioe
several examples to*'aitt"r"ot
industries to emphasize the variety of supply ciain issues that companies need to consider at the strategic, planning, ana operationgl levels.
1.1 WHAT IS A SUPPLY CHAIN?
A supply chain cansists all parties involved, directly or indirectly,in futfiiling of
a customer request.The supply chain includesnot only the manufacturer and suppli-ers, but
retailers, and even customersthemselves.
organizslien, such as a manufacturer, the supply chain includes all fuactions involved in receiving aud filling a customerrequest.Th,ise
functioos include,but are not limited
to, new product development, marketing, operations, distribution, finance, and cus_
Consider a customer walking into a Wal-Mart store to purchase detergent.l[he supply chain begins with the customer and his or her need for letergent. The iext stage of this supply chain is the Wal-Mart retail sitorethat the customer visits. Wal-MJrt stocksits shelvesusing inventory that may have been supplied from a finishe&goods warehouseor a distributor using trucks supplied by a thirA party.The distributor in turn is stocked by the manufacturer (say,proptor & Gamble
tpabt in this case).
P&G manufacturing plant receives raw material from a varieiy of zuppliers, who may themselves
have been suppliedby lorver-tier suppliers.
pa"tagiog material may come from Tennecopackaging,
while Tennecoreceivesraw materialsto manufutu" the packaging from other suppliers.This suppiy chain is illustrated in Figure L-L,
with the arrows correspondingto the direction of physical product flow.
PART r I
Buirding a strategic
to Anaryze supply
SIages of a Detergent suppty Cfiain
A supply chain is dynamic and involves the co$tant flow of information,product, and funds between different stages.Inour example,Wal-Martprovides tle pioAuct, as well as pricing and availability informatiqn, to the customer.ihe customer transfers funds to Wal-Mart- Wal-Mart conveys point-of-sales data as well as replenishment orders to the warehouse or distributor, rfho transfers the replenishment order via trucks back to the store. Wal-Mart transfeSsfunds to the distriiutor after the replenishment.The distributor also provides priqing information and sendsdelivery r"n"aules to'Wal-Mart. Wal-Mart may send back packagingmaterial to be recycle6.5t-;tar information, material, and fund flows take place acrossthe entire supplytlain. In another example, when a customer makes a purchase ontine from Dell computer, the supply chain includes,among others,.thecustomer,Dell's web site,the Dell assemblyplant, and all of Dell's suppliers and their suppliers. The Web site provides the customer with information regarding pricing, product variety, and proluct availability. Having made a product choice, the customer enters the order information and pays for the product. The customermay later return to the'Web site to check the statusof the order. Stages
farther up the supply chain use customerorder information
to fill the request.
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