Slides
Slides
➢ Flow of Information – back and forth along the supply chain, within entities and
between the chain and external entities
➢ Primary Product Flow – materials and services from suppliers through producers to
final customers
➢ Primary Cash Flow – from customers back upstream to the raw material supplier
➢ Reverse Flow of Returned Products – repairs, recycling, remanufacturing, or disposal
Vertical Integration
➢ Practice of bringing the supply chain inside one organization
➢ The primary benefit of vertical Integration/SCM is control
Ownership/
Management/Marketing/
Sales/Finance
Distribution
Control Primary
Plant Materials/Product
Flow
Component Production
Raw Materials
Upstream Activities Downstream Activities
Initial 3rd Tier 2nd Tier 1st Tier 1st Tier 2nd Tier 3rd Tier Final
Supplier Supplier Supplier Supplier Customer Customer Customer Customer
Organization
Lateral Integration
➢ The organization specialises in its core competencies and relies on other
specialist for the rest of the supply chain
➢ Achieve economies of scale
➢ Improve business focus and expertise
➢ Leverage communication and production competencies
Manufacturing Supply Chain
Tier 2 Materials
Supplier Customer
Tier 1 Materials
Supplier
Distributor
Tier 2 Materials Customer
Supplier
Tier 2 Materials
Supplier Customer
Tier 1 Service
Supplier
Distributor
Tier 2 Service Customer
Supplier
Information Flow
Primary Product Flow
Primary Cash Flow
Service Industry Supply Chain
Fuel Supplies
Janitorial Services
Typical Supply Chain
Factors Alternative Structures
• Product’s Complexity
• Number of Components • SC Length – the number of tiers that
• Technology materials flow through between
• Value source and destination
• Bulk
• Perishability • SC Breadth – the number of parallel
• Availability routes that materials flow through,
• Profitability or the number of organizations in
each tier
• The amount of control
• The quality of service
• The costs
Operations
Operations
Operations
Operations
Manufacturer Customer
Consolidation
Manufacturer Customer
Point
Inward Outward
Logistics Materials Management Logistics
Logistics
Definitions and Concepts
Customer Service
Logistics is
Supply responsible for all Demand
movement
Organize Passed to
Operations
Inputs
Other
needed by
Outputs
Operations
Effects on Financial Performance
Return on Assets = Profits Earned / Assets Employed
ROA = (Units Sold * Selling Price * Profit Margins) / (Current Assets + Fixed Assets)
• Inventory Costs= amount of stock * holding • Inventory Costs = 10 million * 0.2 * 0.2 = $
cost = 10 million * 0.25 * 0.2 = $ 0.5 million a 0.4 million a year
year • Total Costs = 7.5 million + o.4 million = $ 7.9
• Total Costs = operating costs + inv. costs = 7.5 million a year
million + o.5 million = $ 8 million a year • Profit = 10 million – 7.9 million = $ 2.1 million
• Profit = sales – total costs = 10 million – 8 a year
million = $ 2 million a year • Total assets = 20 million + 10 million * 0.2 = $
• Total Assets = other assets + inventory = 20 22 million
million + 10 million * 0.25 = $ 22.5 million • ROA = profit / total assets = 2.1 million / 22
• ROA = profit / total assets = 2 million / 22.5 million = 0.095 or 9.5%
million = 0.089 or 8.9%
Essential – every business relies on the movement of materials
Strategic importance – affects long-term performance
Expensive
Affects most operations in a company
Directly affects profits, lead time, reliability
Form links with upstream suppliers
Form links with downstream customers – customer satisfaction
Determines the best locations and sizes of facilities
Risky – safety, health, economic, environment
Foster growth of the other organizations in the supply chain