Supply Chain Overview

A supply chain is a global network for delivering products and services from raw materials to end customers. It consists of various entities working together through engineered flows of information, physical distribution, and cash.

Basic Supply Chain Structure

• Entities in a Basic Supply Chain:
  • Supplier: Provides goods and services (e.g., raw materials).
  • Producer: Receives components to create finished goods (e.g., a bakery making cakes).
  • Customer: Receives the finished product (e.g., consumers purchasing cakes).

Four Basic Flows in Supply Chains

1. Flow of Physical Materials and Services: From suppliers to customers.
2. Flow of Cash: From customers to suppliers.
3. Flow of Information: Communication back and forth along the chain.
4. Reverse Flow of Product: Returns for repair, replacements, recycling, etc.

Supply Chain Strategies

1. Stable Supply Chain Strategy:

   • Focused on execution and efficiency.
   • Example: Table salt manufacturer using scale production.

2. Reactive Supply Chain Strategy:

   • Fulfills demand based on market conditions.
   • Example: Sports apparel manufacturer reacting to team performance.

3. Efficient Reactive Supply Chain Strategy:

   • Emphasizes cost management and efficiency.
   • Example: Supermarket chains quickly restocking sold goods.

Flows in Supply Chains

• Information Flow: Invoices, orders, specifications.
• Primary Cash Flow: Payments for products.
• Primary Product Flow: Materials, components, finished products.
• Reverse Product Flow: Returns, repairs, recycling.

Examples of Supply Chains

Bakery Supply Chain

• Supplier: Wholesale food distributor providing ingredients.
• Producer: Bakery creating cakes from ingredients.
• Retailer: Owner sells cakes to customers.

Complex Manufacturing Supply Chain Model

• Includes multiple tiers of suppliers and distribution centers.
• Example of Flour Supply Chain: From farmer to food distributor and then to retailers.

Supply Chain in Services

• Supply chains exist in service industries like electricity providers, legal advisors, etc.
• Example: Electric utility distributes services to customers.

Supply Chain Management Approaches

1. Vertical Integration:

   • Company owns its supply chain.
   • Example: Ford owning various stages of car production.

2. Horizontal Integration:

   • Expanding by acquiring similar companies.
   • Example: Shampoo manufacturer adding new brands.

Benefits of Integration

• Vertical Integration: Control over supply chain, reduced dependency.
• Horizontal Integration: Economies of scale, diversified products.

Stages of Supply Chain Management Evolution

1. Stage 0: Stable supply chain, minimal external connections.
2. Stage 1: Multiple dysfunctions, lack of coordinated flows.
3. Stage 2: Semi-functional enterprise, some collaboration.
4. Stage 3: Integrated enterprise with ERP systems.
5. Stage 4: Extended enterprise integration with partners.

Definition of Supply Chain Management

• Management of the flow of goods and services, from raw materials to end users.
• Emphasizes the cumulative efforts involved in delivering products to the final customer.