Supply Chain Principles

Supply Chain Concepts

Introduction Supply Chain

Welcome to Supply Chain Principles.
My name is Tim Brown, and I'll be your instructor, and I'm so glad that you're joining us.
Have you ever wondered how potato chips or orange juice make their way from being raw
ingredients to finished package products in your home?
Have you ever wondered how complex modern marvels such as smartphones, with all their
complexities make their way from being chemicals, mined from the fields into the indispensable
products they are today?
Everything around us got where it is today through supply chains.
The creation and movement of goods from raw materials to finished products delivered to end
consumers, is what the supply chain is all about.
In a way, supply chain management is the oldest profession and since the dawn of human
existence, humans have had the need to address their hunger.
And this has caused them to collaborate, and collaborate on planning to balance supply with
demand.
Sourcing food, whether it is fish, vegetables, or berries.
Manufacturing food through farming, fishing, or other food preparation activities.
Transporting food from source to humans and storing food untill it's needed.
Planning, sourcing, manufacturing, transporting and warehousing are core elements of supply
chain.
This course in Supply Chain Principles will provide a solid understanding of what a supply
chain is all about.
The course provides an introduction to supply chain, leverages graphics to promote the
Integrated Supply Chain model, emphasizes understanding the Extended Supply Chain.
Presents a holistic approach, incorporating the people, process and technology elements of
supply chain.
The course calls out industry specific supply chain nuances.
Leverages discussions, videos, quizzes, and questions for consideration.
Provides awareness of career path opportunities in supply chain.
And given that at Georgia Tech we are focused on developing what's next in the world, we
include discussion of emerging and futuristic trends and techniques in supply chain.
There's very little math involved in this course, so you don't have to worry at all about your
math skills.
The course is designed for a wide range of learners, including individuals who are currently
working in a supply chain domain that are interested in improving their knowledge of supply
chain.
Individuals curious about pursuing a career in supply chain.
Students working or studying in an adjacent business field, such as marketing, accounting, or
finance.
Seasoned professionals who may be moving to a new area of supply chain.
And hobbyists, seeking to learn more about the world around them.
The format of this course is as follows.
It is a five week course with very similar format followed each week.
Each week, there will be one learning unit that is covered with the exception of week two in
which two units will be covered.
Each learning unit consists of eight video lectures of approximately five minutes each of
length.
Within the videos, we'll have in-video questions for consideration.
Each learning unit will have a discussion forum topic, a one hour reading assignment, and one
additional learning assignment.
Each learning unit will also have an end of unit assessment quiz.
And as we noted, week two will have two units, which each of these units being approximately
half the learning time as a standard learning unit.
So over the course of these activities, students should plan for about five hours of engagement
per week.

It's important to note also that students must achieve a score of 80% or more on every quiz to
receive a credential.
Now that we have covered the format of the course, let's take a look at the topics to be covered.
Each week, one learning unit will be presented with the exception of week 2 as we mentioned.
So in week 1, we'll cover supply chain concepts. Week 2, supply and demand planning as well
as sourcing. Week 3, manufacturing and service operations. Week 4, distribution operations,
and week 5, transportation operations.
Through covering the various course learning units, learners will come to understand the
integrated supply chain model.
We sometimes refer to this graphic as the supply chain molecule.
And as we progress, we'll learn about each of the elements presented here.
By the time you complete this course, you will have a solid understanding of supply chain
concepts and how they are applied in different industries.
Perhaps, you will have interest in pursuing additional courses in cross supply chain
understanding.
Or perhaps, you'll have an interest in a specific supply chain domain, such as manufacturing,
sourcing, transportation, or procurement.
Our hope is that after participating in this introduction to supply chain, learners will join us in
additional courses in supply chain, either cross supply chain courses, or domain specific supply
chain courses.
Which are offered in online formats, as wells as in classroom formats at the various locations
of the George Tech's Supply Chain and Logistics Istitute.
I look forward to engaging with you in the discussion forums and thank you for attending, we'll
see you on the next lesson.
supply chain concepts
where we will introduce the various elements of supply chain, and how they work together to
create the integrated supply chain model.
Upon completion of this lesson, learners should be able to provide a definition of supply chain,
and identify the core components of supply chain.
Let's begin by discussing the overall objective of the supply chain.
Which is the transformation of raw materials and components into a finished product that is
delivered to the end customer or consumer.
Raw materials are basic, unprocessed materials that are used to produce goods, finished
products, energy or intermediate materials.
Which are used as imputes to the creation of finished products.
Examples may include sand, petroleum, trees, and minerals.
Finished products are items that are consumed by an end customer, otherwise known as a
consumer.
We will see that there may be many customers throughout a supply chain.
However, the end customer that consumes the finished product is known as the end consumer.
Examples of finished products may include gasoline, furniture, and smart phones.
Let's now take a look at a more complete definition of supply chain.

Some elements of this definition that I'd like to focus on first, the types of flows.
Information flows, financial flows, and physical resource flows.
This introduces us to the concept that it takes more to move raw materials to end consumers
than simply physical flows.
Thought has to be put in to planning, communicating, and paying for those physical flows.
Payment such as the sourcing of raw materials, paying for freight movements, paying for
manufacturing operations, etc.
Another element to this definition that we should focus in on is that supply chain is composed
of various planning processes.
Internal and external organizations involved in transforming and moving goods.
And individuals motivated by compensation and metrics programs, to transform and move
items.
From raw materials to end consumers, a final point to note is that the word service is included
in the definition of supply chain.
And as we go through the course we will learn more about how service supply chains are
differentiated from manufacturing oriented supply chains.
Let's take a look at the definition provided by the Council of Supply Chain Management
Professionals, which is also known as CSCMP.
Supply chain encompasses the planning and management of all activities involved in sourcing,
procurement, conversion and logistics management.
It also includes coordination and collaboration with channel partners which may be suppliers,
intermediaries, third party service providers, or customers.
This definition is more comprehensive in that it clearly spells out that sourcing and procurement
are part of supply chain.
As is conversion activities, otherwise known as manufacturing.
And logistics activities, such as transportation, warehousing, and inventory control and
management.
The definition also brings to bear the thought that supply chains are not single entity activities.
There likely third parties involved with providing warehousing, transportation, or
manufacturing as items are transformed and moved and stored from raw material state to
finished good state.
While supply chain have been around since the dawn of the time.
The integrated supply chain concept is relatively new.
With the term supply chain first being used in the 1980s,
before the term supply chain was used,
the individual elements of supply chain were treated as independent activities.
Where housing separate from manufacturing, manufacturing separate from sourcing.
Sourcing separate from transportation etc, all activities working with separate sets of matrix
and often competing against the each other.
Without the supply chain concept in place, manufacturing operations were driven by a metric
to reduce cost per case.
To reduce cost per case, manufacturing needed to have long continuous runs on a single
product.
This may save a couple of pennies per case for discussion purposes, however, by producing
large runs on a single item saving two cents per case.
Customer service may suffer as the appropriate mix of various flavours may not be produced
in time to meet customer demand for a mixed assortment of beverages.
Additionally warehousing operations and transportation operations, and inventory management
operations may all suffer from excessive lengths of manufacturing runs.
And an example of this can be seen in that a capacity constrained warehouse may need to incur
additional labor and lease costs.
And transportation costs to shuttle around ineffectively stored product and excess inventory
may be damaged through this excess handling of moving products.
Within a warehouse to get to the needed products and moving excess product to temporary
storage and back, so, A key learning is to recognize that supply chain should be viewed as an
integrated set of activities and flows that must work together to effectively balance supply and
demand.
This diagram presents a typical network representation of the supply chain representing the
various tiers in the supply chain.
Transformation from raw materials to finished goods.
There're many steps in a supply that take place in internal to a company and
many more that take place through the use of third parties.
I think if you think about it for a minute, you can see how some supply chains are very simple.
Say the creation of orange juice, with relatively few numbers of raw materials versus more
complex supply chains.
Associated with products such as smartphones with a large number of parts and components
coming together to create the finished product.
Those supply chains for items such as orange juice can be more complex than thought of at
first.
If you think about it, in that there's more than just oranges that need to be squeezed to get the
product to the end consumer.
There are containers, there are boxes, there are pallets, etc, that all need to come together at
finished products manufacturing point to support the transport of the finished products.
Through distributors and retailers to the end consumer, so supply chain is really as simple as it
may seem.
We now present a somewhat comprehensive graphical representation of the integrated supply
chain process.
We have discussed several of these components, though not all of them, and this depiction helps
us visualize.
These components along with other components that we will learn about as we progress through
the course.
First of all on the left hand side we see raw materials flowing through an integrated set of
processes that end in delivery of the final product to customers.
Turning our attention now to the center of the process model, we see the demands of supply
chain, consisting of planning, sourcing, manufacturing, warehousing and transportation.
The arrows at the top and the bottom of the center section represent the common elements
throughout these processes.

For example, performance metrics, change management, organizational alignment, the use of
technology, customer service considerations, etc.
And finally the icons along the process model and the cube represent the various activities or
subprocesses and decisions that need to take place in each of these processes.
While this diagram represents a model of a molecule of supply chain it's important to realize
that this, there are a number of third parties and providers involved in the overall process.
All of whom have their own supply chain models, molecules that need to interact with the given
companies molecule to create the finished product.
The course is laid out such that the first week will be focused on the overall supply chain
concept.
While week two will focused on planning sourcing, week three on manufacturing and service
operations.
Week four on warehousing and finally week five on transportation.

So, we have a questions here, stop and thing about a finished product that has a relatively simple
supply chain in terms of number of supply chain tiers.
In getting to the end consumer from raw material sourcing to the end customer.
How many ties does this product that you have in mind have, and what are they?

To summarize, in this lesson we've learned that supply chain management is a

complex, integrated framework.
Which incorporates several dimensions including physical, financial and information flows,
transformation, movement, and planning processes.
And must consider the nuances of specific industry and supporting infrastructure, thank you
and we'll see you on the next lesson.
Supply Chain Operations Reference Model.
Upon completion of this lesson, learners should be able to describe the Supply Chain
Operations Reference or SCOR Model and discuss how SCOR may be used to analyze and
improve Supply Chain Operations.
And we have a question, Why do you think it may be important to have a common nomenclature
and view of supply chain across customers,suppliers, and service providers in a supply chain?

I believe that different graphical representations resonate with different people.

Therefore, in these lessons, we'll present a wide variety of graphical depictions of supply chain.
We'll first turn our attention to the Supply Chain Operations Reference Model, also known as
the SCOR Model.
It was created by the Supply Chain Council and the Supply Chain Council is now merged with
the American Production and Inventory Control Society, which is one of the many professional
societies associated with Supply Chain.
It's interesting to note that since integrated supply chain management is a relatively new
concept, until the early 1990s, there were no definitions associated with supply chain
management.
Each company had its own words, phrases, and metrics to describe logistics and supply chain
activities.
And it was often difficult to talk with channel partners in precise terms.
The supply chain council was formed as a non profit in the 1990s to create a common
nomenclature and common process components and metrics with a goal of enabling
organizations to more effectively work with each other.
Let's start from the point of view of an organization producing a finished product.

You see that there are several ovals representing the components of the supply chain.
An organization serving as a finished manufacture converts materials into finished products.
And once the conversion process is complete, they hand off or deliver the finished good to their
customer in the next stage in the supply chain.
This representation of the score model is at the very highest level.
Behind each of these ovals, there are hundreds of pages of documentation describing best
practices, nomenclature, and metrics associated with several levels deep of detail on the process
definitions. SCOR model additionally has differing process definitions based on the
specific operating model of an industry such as the engineer to order, manufacturer versus a
make-to-stock operation, such as in consumer products.
And would be a good example of a make-to-stock operation.
The efforts of the supply chain counselling creating and involving the SCOR model over the
years made it much easier for supply chain providers, manufacturers, shippers, third-party
providers, etc, to more effectively communicate on a day-to-day basis, and create rules, making
supply chains more efficient.
This chart provides several examples of very high corporate level supply chain metrics.
The metrics measure performance in key attributes such as supply chain reliability and
responsiveness, flexibility, costs and asset management.
And, as noted a moment ago, behind these high level metrics there are much more refined
process specific metrics.
Having these process and metric best practices available through the score model allows
companies to compare their current operations to establish practices and make improvements
where needed.
In this lesson, we have described the Supply Chain Operations Reference model and discussed
how SCOR may be used to analyze and improve Supply Chain Operations.
Thanks for listening, and we'll see you on the next lesson.
Supply Chain Networks.
Upon completion of this lesson, learner should be able to describe a supply chain network, draw
a supply chain network of a simple finished product, you will be able to practice drawing supply
chain network in assignment one of this course and discuss alternative network flow paths.
You will be discussing your understanding of this lesson with other learners in the discussion
forum after this video.
Let's take a quick look at another graphical representation of the supply chain.
From the point of view of a given organisation moving to the left, or the supply side, is often
referred to as moving upstream in the supply chain.
Likewise, from a given organization's point of view, moving to the right, toward the end
consumer is often viewed as being moving to the demand side or moving downstream in the
supply chain.
And again each industry and/or product may have a number of different tiers, both on the supply
side and the demand side of its network.
Lat's take another look at supply chain networks moving again from raw material suppliers,
through to end customers, crossing through a number of tiers both on the supply and the demand
side of the supply chain.
As we look at this relatively simple diagram, let's take a look at the various alternative paths
that may be followed in moving from material to finished goods.
And in particular, different finished goods distribution channels.
A supplier may have facilities that are focused on producing a single good such as a coal mining
operation harvesting coal or a supplier may produce a wide assortment from a single plant such
as a parts manufacturer producing hundreds of similar parts using the same plant equipment.
Hence, there may be relatively few flows between suppliers and finished product manufacturers
in a given supply chain or there maybe a wide variety of flows going between supplier locations
and manufacturer locations.
Likewise, a manufacturer sourcing strategy can have a big impact on
the nature of flows between suppliers and manufacturers.
For example, a manufacturer may choose to concentrate their sourcing spend on a single
supplier or single supplier's plant in order to leverage their spend or the manufacturer may have
a need or desire to source the same components or parts or materials from a wide variety of
plants and suppliers.
As we move from finished product production through delivery to the end consumer, there are
a number of paths that the product may flow.
Generally, these flows are determined by the nature and history of the specific industry.
However in recent years, with the advent and strong growth of e-commerce, and alternative
distribution models, there are now multiple paths that a finished product can take to get to an
end consumer.
Historically, manufacturers have had a core competency in manufacturing efficiency.
However, they may not have been effective in product distribution with consumers and in
managing customer relationships within consumers which entails customer account
management that maybe entail the dealing with the order of tens of thousands of customers who
are consumers, each with individual contracts and terms and shipping locations.
With the advent of online ordering, sophisticated shipping systems, track and trace
functionality, and the use of third party logistics providers, manufacturers now have the
opportunity to have a more direct relationship with end-consumers.
Now utilizing e-commerce tools and channels, manufacturers have the opportunity to bypass
retailers.
Basically serving as a retailer themselves and bypassing whole seller and distributer channels.
In some cases bypassing these channels may lead to an overall reduction in supply chain costs.
However in many cases, the nature of whole sellers and distributors are such that they can
provide added value in the supply chain which reduces overall supply chain costs.
Let's take another look at an industry specific supply chain.
That of a quick service restaurant, such as a subway-type restaurant.

Quick service restaurants are supplied by food service distributors.

The role of the food service distributor is to purchase multiple components for the restaurants.
This may be paper goods, produce, proteins, etcetera.
The food service provider combines these multiple components into single, efficient shipments
to the stores that meet all of their needs.
Without the distributor, the stores would have numerous shipments from
individual manufacturers hitting the stores throughout the day, making stores ineffective, and
making transportation between the individual manufacturers and the stores inefficient.
So, the distributors play an important role in consolidating multiple items efficiently.
This diagram depicts a supply chain for a quick serve restaurant showing flows from farm
through individual restaurants with the nature of the supply chain partners varying in terms of
number of flows and the role.
Note that each restaurant is assigned to a single food service distributor for efficiency purposes.
And we have a question.
When you consider that Subway has 35,000 restaurants, if you are a manufacturer of protein
for subway, would you prefer to handle distribution to 35,000 individual stores multiple times
per week or as a manufacturer who focuses on plant efficiency, would you prefer to ship in
truckload quantities to a handful of distributors who in turn handle distribution to those
restaurants?
Once again, let's take a look at another graphical representation of a supply chain.
Here we see a laptop supply chain, fairly simplified diagram of a laptop supply chain.
However, you can visualize that there are multiple components on the left or supply side that
are coming together through the various tiers to create the laptop computer.
For example moving from raw materials such as crude oil, through plastic creation to keyboard
component creation as an input to the laptop at the finished manufacturer location where it is
combined with various other components of the supply chain such as the power supply, display,
the case, the memory, the processor, etc.
The demand side, there are a number of different paths that the computer can flow throw to get
to the end consumer.
For example, a computer whole seller purchases laptops from the manufacturer, the wholesaler
may then sell computers, and deliver them to a retailer's distribution center.
And the retailer may then distribute the computer to the end consumer via direct delivery or
alternatively, the computer wholesaler may deliver computers to a computer store where they
are purchased by a walk-up customer.
In summary, in this lesson, we have described the supply chain network, practiced drawing a
supply chain network of simple finished product, and discussed alternative network flow paths.