National Taiwan Ocean University

Department of Transportation and Navigation Science

Introduction to Supply
Chain Management

Instructor: Eric Ting

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 What Is A Supply Chain?
 The system of suppliers, manufacturers,
transportation, distributors, and vendors
that exists to transform raw materials to
final products and supply those products to
customers.

 That portion of the supply chain which

comes after the manufacturing process is
sometimes known as the distribution
network.

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 The Logistics Network
Warehouses and
Suppliers Customers
Distribution
Manufacturers Centers

Transportation Transportation
Costs Costs

Material Manufacturing Inventory

Costs Costs Costs 5
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What Is the Goal of Supply Chain
Management?
 Supply chain management is concerned
with the efficient integration of suppliers,
factories, warehouses and stores so that
merchandise is produced and distributed:
•In the right quantities
•To the right locations
•At the right time

 In order to
•Minimize total system cost
•Satisfy customer service requirements 7
 Sequential Optimization vs.
Global Optimization
Sequential Optimization

Procurement Manufacturing Distribution Demand

Planning Planning Planning
Planning

Global Optimization
Supply Contracts/Collaboration/Information Systems and DSS

Procurement Manufacturing Distribution

Demand
Planning Planning Planning
Planning
Why is Global Optimization Hard?
 The supply chain is complex.
 Different facilities have conflicting
objectives.
 The supply chain is a dynamic system.
 The system varies over time.

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 Conflicting Objectives
in the Supply Chain
1. Purchasing
•Stable volume requirements
•Flexible delivery time
•Little variation in mix
•Large quantities

2. Manufacturing
•Long run production
•High quality
•High productivity
•Low production cost 10
 Conflicting Objectives
in the Supply Chain
3. Warehousing
•Low inventory
•Reduced transportation costs
•Quick replenishment capability

4. Customers
•Short order lead time
•High in stock
•Enormous variety of products
•Low prices 11
Why Is Uncertainty Hard to Deal
With?
 Matching supply and demand is difficult.
 Forecasting doesn’ t solve the problem.
 Inventory and back-order levels typically
fluctuate widely across the supply chain.
 Demand is not the only source of
uncertainty:
•Lead times
•Yields
•Transportation times
•Natural Disasters
•Component Availability 12
 Dealing with Uncertainty
 Pull Systems
 Risk Pooling
 Centralization
 Postponement
 Strategic Alliances
 Collaborative Forecasting

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 The Bullwhip Effect
Warehouses and
Suppliers Customers
Distribution
Manufacturers Centers

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 Supply Chain Variability
Manufacturer
Manufacturer Forecast
Forecast
of
of Sales
Sales
Volumes

Actual
Actual
Consumer
Consumer
Retailer
Retailer Warehouse
Warehouse Demand
Demand
Retailer
Retailer Orders
Orders to
to Shop
Shop

Production
Production Plan
Plan

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 15
 Supply Chain Management Wants…
Volumes

Production
Production Plan
Plan
Consumer
Consumer
Demand
Demand

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 199816
 Key Issues on SCM

 Distribution Network Configuration

 Inventory control
 Supply Contracts
 Distribution Strategies
 Integration and Partnerships
 Procurement Strategies and Outsourcing
 Product Design
 Information Technology

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 New Concepts
 Push-Pull strategies
 Direct-to-Consumer
 Strategic alliances
 Manufacturing postponement
 Dynamic Pricing
 E-Procurement

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 The End
Thanks for your attention.

Your questions or comments

will be greatly appreciated.
Email: ericting@mail.knu.edu.tw
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