ENGG*6290 Special Topics in

Mechanical Engineering

Supply Chain Management

Winter 2023

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• What is a Supply Chain Management (SCM)?

• The management the flow of a production or a

of
service and involve all processe that transfer supplier of
s
raw materials into final product or service.

• Sometimes called Value Chain or Demand Chain

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• What is a Supply Chain Management (SCM)?

Raw Material Supplier Factory

Distribution Retail Customer

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Source: https://www.freepik.com/free-vector/diagram-supply-chain-management_25537237.htm
• What is a Supply Chain Management (SCM)?
•Businesses striving to a certain
achieve positioningworkingby strategic to their
improve
together
operating efficiency.

• Requires acknowledgement success of

that on
depends group
individual member.
success of each
•Need to manage processes spanning areas of multiple
producers, suppliers, and customers across business
boundaries.

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• Importance of Supply Chain Management

•Field of study related to fulfilling customer demand

for
products and services.

•Customers/Manufacturers/Suppliers can now be

located anywhere in the world.

•Effective supply chain management can reduce costs, more

effectively manage the of
goods,
movement maintain/improve quality, save 5
• Supply Chain Management (SCM)

• Requires designing, planning, executing, or

measuring
activities related to:
• Sourcing
• Procurement
• Manufacturing
• Integrated Operation Planning
• Transportation
• Inventory Management
• Warehousing
• Customer Service
• Returns and Repairs 6
• Supply Chain Operation

• Components of Supply Chain Management:

1- Plan,
2- Source,
3- Make,
4- Deliver & Return,

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• Supply Chain Operation
• Components of Supply Chain Management:
1- Plan,
- To control and production processes,
inventory
- To match supply with total demand by analytical
method,
To plan:
What is ample for production?
Attain service level by delivering on time
Value-chain to avoid Bullwhip effect

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• Supply Chain Operation
•Components of Supply Chain Management:
2- Source,
- Identify sellers who will obtain goods,
- Suppliers need to fulfil certain standards to
ensure
company to deliver quality products to customer,

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• Supply Chain Operation
•Components of Supply Chain Management:
3- Make,
- Company will perform all processes from raw material to the
final product. Other activities such as assembling, testing, and
packing are done at the MAKEe stag
of Supply Chain Management.
- Feedback from consumers is improving the
production operation continuously.

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• Supply Chain Operation
• Components of Supply Chain Management:
4 Deliver,
To Finalize product or service as demanded by consumer, firm
should meet the expectations through the delivery and logistics
services.
For seamless delivery, the company uses various roads, rail, and air.
Return,
- It is known as Reverse Logistics,
- It is the most important stages of SCM to reduce potential
deterioration of relationships with customers,
Return: Low quality, defective, expired, ….. 11
• Example: Bottle of Water

• Buy from store cost $

1.5

•HOW MUCH DO YOU THINK

PROFIT ?

https://www.vectorstock.com/royalty-free-vector/shopping-store-cartoon-vector-23674456

$ 0.5
$ 0.25 Sources: https://www.123rf.com/stock-photo/water_bottle_cartoon.html
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• Supply Chain Management , Example?
• Example: Bottle of Water

Clean water,

a plastic bottle,

a plastic cap,

and label,

Sources: https://www.123rf.com/stock-photo/water_bottle_cartoon.html
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• Example: Bottle of Water

• Product cost is not equal to material cost

• So,to figure out where the profit win we need
to
know what it took for that Bottle of water to get
into
customer hands.
• Negotiate purchase of empty bottle and caps.

Source: https://www.shutterstock.com/image-vector/empty-plastic-bottle-vector-cartoon-illustration-1528829549
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• Example: Bottle of Water

• Easy to transport in box and seal them (tape)

• Move all boxes quickly if all put on

pallets.

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• Example: Bottle of Water

• To move the pallets need forklift, driver

• Forklift take the pallets to put them in the truck,

• Need: truck, driver, full, and insurance
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• Example: Bottle of Water

•Also, we need the label,

Therefore we need to:
- Design the label,
- Print the label,
- Get the label ship to the plant,(other, : truck,
driver, full, and insurance)

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• Example: Bottle of Water

•Water Bottle Plant needs energy uses. In

the factory:
- Employees,
- Bottling machines,
- Other items like : light bulbs, garbage, machine parts,
cleaners, clean supply, toilette paper, and anything
use by employees.
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• Example: Bottle of Water

• Access to drinking water

Needs:
- Machines to purify the water,
- Other machines to bottle the water and fixed
the label to bottles,
- Also, other machine to box and palletize the bottles,
- Move those pallets again, need forklift, drive,
and
truck 19
• Example: Bottle of Water

• Trucks take the bottles to distribution center (DC)

Needs:
- Trucks: driver, full, insurance,
- Distribution center requires employees, forklift ,
and energy,
- From DC head out to retail store: still require
trucks (driver, full, insurance),
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• Example: Bottle of Water

• Retail Stores
• Needs:
- Employees,
- Energy,
- Security (Security guard or security system),
- Store requires insurance,

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• Example: Bottle of Water

• Also, cost associated with return and damage.

- Replace,
- Damage,

• Customer Services.
- Call centre,
- Employees,

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• Example: Bottle of Water

All these materials:

• Boxes,
• People,
• Machines,
• Buildings, MONEY
• Energy,
• Full,
• Vehicles,
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• Review: What is a supply chain

•Definition: Combination of all organizations involved

in transforming raw materials into a final product or
service.

• Goal:
Produce a product or provide a service as efficiently as
possible.

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• Typical Supply Chain (Figure 1.1)
Source: Schroeder, R, and Goldstein, S. (2021) Operatopsns Management in the Supply Chain: Decision and Cases, Eighth Edition,
McGraw Hill, chapter 16

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• The Integrated Supply Chain
Soruce: Bowersox, D., Closs, D., Cooper, M.B., Boweresox, J. (2020) Supply Chain Logistics Management, Fifth Edition, McGraw Hill, p. 6

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• Scope of Supply Chain Management
•Set of processes developed to ensure that goods are
moved in the correct quantities at the proper time
between suppliers, manufacturers, distribution
centers, distributors, and retailers at the least cost
while ensuring customer satisfaction.

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• What is Logistics?
•Work needed to move inventory through the supply
chain
•Process creating value by appropriately positioning
inventory throughout the supply chain when and where
needed.
•Consists of order management, inventory, transportation,
warehousing, materials handling, and packaging through
the entire supply chain network
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• What is Logistics?
•It is obtaining, producing, and distributing material and
product in suitable quantities to right place.
• Logistics Management:
it is importance of SCM Plans, Implements, and control an
efficient effective forward and reverse flow and storage of
goods, services and related information between the point
of origin and point of consumption.

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• Logistics Management
it is importance of SCM Plans, Implements, and control an efficient
and effective forward and reverse flow and storage of goods, services
and related information between the point of origin and point of
consumption to meet customer requirements.

Point of Consumption
Point of origin

Source: https://www.youtube.com/watch?v=4-QU7WiVxh8

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• Logistics Management
•Processes implemented to ensure control of timing and
geographical positioning of raw material, work-in-process,
and finished inventory.

• Goal: achieve lowest cost.

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• Measuring Supply Chain Performance
• Should not be done for a particular product or service,
•Must be done at the level of each individual link in the
chain,
•For example, raw materials inventory carried is a function
of supplier lead times and safety stock needed to adjust for
any variability in the system; finished goods inventory
depends on the lead time to ship a product to the
customer as well as any variability in customer demand
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• Measuring Supply Chain Performance
• Three measures span entire supply chain:

• Throughput time
• Cash-to-cash cycle time
• Total delivered cost

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• Throughput Time:

•Measured by adding throughput times of all members of

entire supply chain

• Cash-to-cash cycle time:

• Time it takes to get paid once product is sold

Cash-to-cash cycle time = days in inventory + days

in accounts receivable – days in accounts payable

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• Total delivered cost:

•Consists of sum of all costs starting with supplier sourcing

cost and all added costs from all elements of the supply
chain

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•Example : (Source: Schroeder, R, and Goldstein, S. (2021) Operations Management in the Supply
Chain: Decision and Cases, Eighth Edition, McGraw Hill, pp. 355)

• A supply chain has the following information:

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•Example : (Source: Schroeder, R, and Goldstein, S. (2021) Operations Management in the Supply
Chain: Decision and Cases, Eighth Edition, McGraw Hill, pp. 355)

• Notice in this example that the sourcing cost to the

factory is the supplier sales unit price ($18), the sourcing
cost to the wholesaler is the sales unit price from the
factory ($82), and the sourcing cost to the retailer is the
sales unit price from the wholesaler ($107). Therefore,
each entity passes its costs plus a profit down the supply
chain.

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•Example : (Source: Schroeder, R, and Goldstein, S. (2021) Operations Management in the Supply
Chain: Decision and Cases, Eighth Edition, McGraw Hill, pp. 355)

a. Calculate the total supply chain throughput time for all

entities from beginning to end.
b. Compute the cash-to-cash cycle time for each of the four
entities separately. Based on this calculation, who is
benefitting the most?
c. Compute the total delivered cost in the supply chain
from beginning to end. How much profit is there in the
supply chain?
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•Supply Chain Management –
The Bullwhip Effect
•Since materials and information flow up and down the
supply chain, easy to see that members are interrelated.

• Bullwhip effect:
• used to describe increasing variability in orders
that are received by upstream members of supply
chain
• Impacts amount of inventory carried by upstream
members of supply chain
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 Source: Schroeder, R, and Goldstein, S. (2021) Operations
Management in the Supply Chain: Decision and Cases, Eighth
Edition, McGraw Hill, pp. 356

Bullwhip Effect (Figure 16.2)

The farther away a
supply chain entity is, the
greater
the is
variability of orders it
places.
The same pattern of
upstrea magnification of
m order variability
describes inventory also
levels
and stockouts across the four
entities in this supply chain.
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•Reason Bullwhip Effect Common in Many
Industries
• Supply chain members not dealing directly with
public often don’t have access to actual market demand
• Use forecasts for initial planning; if inaccurate
relative to actual market demand, results in too
much or not enough inventory
• Replenishment lead time, larger the lead time, more
safety stock must be carried
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• Four Key Points About Supply Chain Dynamics
1. Supply chain is interactive system; decisions at one link
impact all other links in the chain
2. Bullwhip effect often observed due to
inaccurate demand information and
replenishment lead time
3. Reducing replenishment lead time and providing
4. actual demand
Marketing information
can reduce demandbest way to
spikes by improve
using supply
chain
everyday low pricing instead of promotions and
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discounts