Question

• What is a supply chain?
• What are the different parts?
• What could occur if a part of the supply chain is not working properly?
• Give examples of a time you worked/experienced working with a supply chain

Answer 1

1.

What Is a Supply Chain?

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer.

Companies develop supply chains so they can reduce their costs and remain competitive in the business landscape.

Supply chain management is a crucial process because an optimized supply chain results in lower costs and a faster production cycle.

Understanding Supply Chains

A supply chain involves a series of steps involved to get a product or service to the customer. The steps include moving and transforming raw materials into finished products, transporting those products, and distributing them to the end-user. The entities involved in the supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.

2.

W,Whilesupply chain is a very broad career field, it has 7 primary functional areas: Purchasing, Manufacturing, Inventory Management, Demand Planning, Warehousing, Transportation, and Customer Service. These areas may appear to be independent functions, but in an efficient supply chain, they must interact to a great degree and are very dependent upon one another.   

Purchasing:   The activity of acquiring goods or services to accomplish the goals of an organization.

The major objectives of purchasing are to (1) maintain the quality and value of a company's products, (2) minimize cash tied up in inventory, (3) maintain the flow of inputs to ensure the flow of outputs, and (4) strengthen the organization's competitive position. Purchasing may also involve (a) development and review of the product specifications, (b) receipt and processing of requisitions, (c) advertising for bids, (d) bid evaluation, (e) award of supply contracts, (f) inspection of good received, and (g) their appropriate storage and release.* Business Dictionary.com

The purchasing function is core to any company, as it provides the materials and resources needed to create a product. As the economy becomes more global, the opportunities become even more exciting. The roles that exist within this function are numerous, and here are just a few: coordinator or analyst, materials manager, corporate purchasing manager. These roles can exist at a field location such as a plant or at a corporate location. Depending on the company, individuals could be involved in purchasing anything from office supplies to parts for the construction of airplane engines.

Manufacturing: is the production of merchandise for use or sale using labour and machines, tools, chemical and biological processing, or formulation. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for manufacturing other, more complex products, such as aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users and consumers. Wikipedia

The manufacturing function has received a lot of notice in the press as companies move various production operations overseers. Despite this, there are still many job opportunities available. These include: production planner, production manager, corporate manager of production planning, plant manager, line operator, machine operator, QA analyst, or engineer. Manufacturing will always play a key role in the US economy as many products will always be produced here. From food to cars, companies will continue to manufacture in the US because of the skilled workforce and natural resources available.

Inventory Management: Activities employed in maintaining the optimum number or amount of each inventory item.

The objective of inventory management is to provide uninterrupted production, sales, and/or customer-service levels at the minimum cost. Since for many companies inventory is the largest item in the current assets category, inventory problems can and do contribute to losses or even business failures.   Business Dictionary.com

The management of inventory is a key function of any manufacturing company, whether domestic or foreign. Physical inventory is often one of the most signification assets of a company, and without it, a company would have no sales. Its important to have the right product, at the right place at the right price, and inventory allows this to occur. In todays global economy the inventory function has become more important and challenging as product can be produced and available anywhere in the world.

Demand Planning:   is the process of forecasting customer demand to drive execution of such demand by corporate supply chain and business management. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data and statistical techniques or current data from test markets. Demand forecasting may be used in production planning, inventory management, and at times in assessing future capacity requirements, or in making decisions on whether to enter a new market

Demand forecasting is predicting future demand for the product. In other words it refers to the prediction of probable demand for a product or a service on the basis of the past events and prevailing trends in the present. Wikipedia

Demand planning today requires analytical skills and a love of computer modeling. It helps if you have a crystal ball, but since few people do, the art and science of forecasting what people will buy, or what components you will need, or what trends will impact the sales of your product is left to those who can analyze and interpret data effectively.

Warehousing:  Performance of administrative and physical functions associated with storage of goods and materials. These functions include receipt, identification, inspection, verification, putting away, retrieval for issue, etc. Businessdictionary.com.

While many people view the function of warehousing as the simple process of storing products, it has evolved into a function that does more than that. In today’s world of mass customization, the warehouse has evolved into a distribution center, and even a facility to customize the final product via repacking, labeling or other physical conversion. The importance of these facilities has grown as it’s the final “stop” before moving to the customer. Proper handling, storage and management of the products within these facilities must occur so that customer orders can be fulfilled with the right product at the right time.

Transportation: is the movement of people, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport is important because it enables trade between persons, which is essential for the development of civilizations. Wikipedia

The transportation function is critical to the supply chain because it is where the rubber literally meets the road. A company can have the right product at the right warehouse at the right time, but without transportation if won’t make it to the customer at the right time. In todays global economy, this function is even more critical as its no longer as easy as putting a product on a truck and having it delivered. Now it might be shipped via container ship, airplane, train, truck or even uber car before arriving at the customer. Companies have to evaluate the many different dimensions of each option such as cost, speed, reliability and ability to service when deciding which to utilize.

Customer Service: The process of ensuring customer satisfaction with a product or service. Often, customer service takes place while performing a transaction for the customer, such as making a sale or returning an item. Customer service can take the form of an in-person interaction, a phone call, self-service systems, or by other means. Investopedia.com

While the customer service function appears to be at the end of the supply chain, it is definitely not the end of the process. This function is critical in that its works to meet the needs of the customer and ensure the customer receives what they want, when they want it. This function is sometimes the only point of contact a customer has with a customer so its imperative that they have the skills and knowledge to understand a customers needs..and to meet those needs when possible

3.

1. Quantifying by Spend

Prioritizing functions by spend is one of the most common mistakes in supply chain optimization. A group purchasing organization typically finds that it spends 80 percent of its budget on their top 20 suppliers, and they also organize other resources such as time by spend. This practice worked well until the proliferation in outsourcing over the last 15 years, which has created supply chains with multiple layers throughout the world. Supply chains that rely on a single source are now more likely to experience disruptions.

The fundamental challenge in shipping for supply chain managers is the requirement to wait until all parts are present before shipping the product. Supplies without an alternate source can become a single point of failure for the supply chain. Managers in supply chain sustainability should consider the financial impact of losing a part when they consider a single source for that part.

2. Rushing the Launch of New Systems and Protocols

Many companies think they can do too much – without testing out the limits of new products and protocols. Before locking themselves into massive deals or expansions, get advice from an outsider on any blind spots you may have overlooked. This outsider’s view will ensure your company won’t face disrupted or run into problems launching a new product with multiple suppliers.

Take, for example, one of the worst-case scenarios of this issue. In 1999, Hershey’s didn’t deliver $100 million worth of Jolly Ranchers and Hershey’s Kisses to stores before Halloween. As a result, the company lost 8% of its shares – all because Hershey’s didn’t give enough time to its new ordering and distribution system before it was tested on a major holiday.

3. Lack of Visibility

The lack of visibility across dependencies in the supply chain is also a challenge for managers in the current global environment. Managers often don't know where their parts are coming from, which means they are unable to determine their true supply chain, undermining supply chain optimization. For example, a part that a manager believes is dual-sourced may actually be single-sourced one or more levels up the supply chain.

A particularly disastrous example was Nestle’s admission that they hadn’t known that fish used for their Fancy Feasts product were harvested using forced labor. The workers, mostly in Cambodia and Myanmar, were paid unreasonably and locked into contracts.

Most supply chain managers readily acknowledge that the lack of visibility is a problem, although they are unlikely to take the steps needed to regain control over their supply chain. This solution generally requires supply chain managers to establish a priority of correction based on the parts of the supply chain that have the greatest financial impact. This prioritization strategy allows managers to deal with catastrophic disruptions in the supply chain, as well as localized problems.

4. Short-Sighted Risk Management

Supply chain optimization presents many risks such as the following:

• Delivery days
• Increases in demand
• Quality problems
• Supplier issues
• Supply shortages

These factors make risk management a dynamic process that often requires organizations to implement one short-term solution after the other. This short-term risk management means that managers have trouble in proactively assessing problems in the supply chain. Rewards such as cost savings, time to market and inventory turnaround also contribute towards short-term goals. Risk management is the easiest activity in the supply chain process to de-prioritize since it conflicts with goals and rewards. Managers must tie their efforts to mitigate risk with metrics that will result in the long-term support of higher management.

5. Poor Framework for Accountability

Supply chain consulting firms find that most CEOs hold the Chief Procurement Officer responsible for disruptions to the supply chain, although the specific parties that the CPO holds responsible for this possibility is less clear. Organizations typically don’t assign the responsibility over supply chain disruptions to anyone at the operational level within the procurement organization. This lack of accountability results in confusion when the action needed to restore the supply chain falls outside the scope of normal activities.

For example, the Target corporation recently severed ties with Welspun India, a producer of cotton sheets, because the sheets weren’t actually made from Egyptian cotton, as advertised. When Welspun lost 50% of its value, the corporation tried to blame its suppliers, rather than taking responsibly for the error themselves.

Effective leadership during a supply chain optimization is typically as important in responding to a crisis as the supply system itself. This fact requires upper management to scrutinize supply managers carefully by appointing a leader in advance of such a crisis. This leader must have the proper training, tools and infrastructure that will allow the CEO to control the crisis rather than the other way around.

6. Reactive Management

Managers often manage supply chains reactively because a crisis fails to make a large impact or they can recover from it quickly. However, a small crisis that has little impact on an organization represents an excellent opportunity to manage a supply chain proactively. Reactive management often involves the creation of a war room that allows employees to meet executives, which can increase the transition to proactive management.

A famous example of poor reactive management is the production of Boeing’s 787 in the mid-2000’s. While the planes were supposed to hit markets in 2008, supply chain management problems delayed the production for three years. The company expected it could produce more than it could and failed to accurately assess production risks.

An assessment of a reactive response to a crisis often shows that the true cost of this approach is higher than expected. This assessment can also show the areas where team members have the greatest need for more information and coordination in a crisis. Managers should use rewards instead of punishment to ensure that the organization adopts a proactive approach to risk management.

The globalization of businesses has created a greater risk of disruption in supply chains. Supply chain managers should view risk management as a long-term investment that requires a different strategy from that used in traditional supply chain management. Organizations will continue to have trouble in maintaining their supply chains until they solve the root problems with proactive management.

4.

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Supply Chain Examples

Let’s look at two different examples of a supply chain.

Generic Supply Chain

The generic supply chain begins with the sourcing and extraction of raw materials. The raw materials are then taken by a logistics to a supplier, which acts as the wholesaler. Through logistics, the materials are taken to a manufacturer, or probably various manufacturers who refine and process them into a finished product.

Afterward, it goes to a distributor that wholesales the finished product, which is next delivered to a retailer. The retailer sells the product in a store to consumers. Once the consumers buy it, it completes the cycle, but it’s their demand that then goes back and drives the production of more raw materials, and the cycle continues.

Supply Chain for an e-Commerce Company

In this example, the e-commerce company operates a website, and that website sells various products on it. When a customer places an order for a product, the product order is being processed by technology such as a checkout cart, an order system, or a third-party product like Shopify. The payment processors then come in and deal with payment transactions for the order, which actually opens up a new supply chain.

The payment processors use their own systems, but in most cases, third parties such as PayPal and Stripe are employed, and they involve banks and other providers. When a product order is placed, the warehouse receives the order and ensure the product is ready for delivery. The warehousing company can be either in-house or a third-party logistics provider.

The order then goes from the warehouse to the shipping company. Once again, the shipping may be in-house or a third-party shipping company. After shipping, the package arrives at the customer’s door and the customer receives it. Finally, the customer’s demand eventually goes back to the website and drives further business