WHAT IS A “SUPPLY CHAIN”

1. WHAT IS A “SUPPLY CHAIN” Industrial / Commercial/ Home

2. Supply Chain … aka “ Value Chain” A supply chain is a coordinated system of • a. Organizations • b. People • c. Activities • d. Information • e. Resources Involved in moving a product or service in physical or virtual manner from Source of Supply to a Customer. Goal is to satisfy demand at the right place and right time. Supply Chain activities transform raw materials and components into finished product that is delivered to an end customer. Supply chains link value chains. Supply Chains can be simple or complex.

3. Supply Chain a.k.a. Value Chain • Simple Supply Chain – Rock Quarryto Customer Limestone Crush Screen Stock Pile Deliver mined sized by size to Cust. Demand Identified

4. Rock Quarry Supply Chain • Very Simple Product. Demand is forecast based on DOT contracts let. Limited number of customers. • Supply Chain elements are under the control of one company with a singular objective. • Communications between extraction and crushing is very simple. Mostly visual. • Quality is very important since the ultimate customer is often a govt. agency such as DOT ( Road Repair w/ asphalt or concrete) Specifications are clear and DOT inspections frequent.

5. Complex Supply Chains • Global in scope. Demand hard to forecast. • Technical complexity of final product (i.e. consumer goods, industrial goods,etc.) • Outsourcing of various functions within supply chain • Information exchanges within supply chain are critical • Different companies within the supply chain may have non-complimentary objectives and in some cases competing objectives.

6. COMPLEX SUPPLY CHAINEXAMPLES –CAT, SONY, SPSX • Basic Elements 1 2 3 4 5 6 7 Product Raw Materials Plants Produce Preservation Transport Lead Time Design Process Finished Purchased Raw Sub Assy’s Packaging Distribute Customer Demand Finished Materials Satisfaction Items Assemble Labeling Push / Pull Inspect Test Final Count Product RFID Purchased Finished Items Elements Not Shown: Electronic Data between elements of SC. ( EDI,Telecom Stds ( AIAG / BISG ) , ASN/X12 , e-procurement, Negotiations between sources, Sub-contractor communications, Outsourcing, TAKT Balancing, LEAN Inventory Management, Forecasting Technologies for Demand ( Deterministic vs. Stochastic) allows for Pull vs. Push replenishment, etc.

7. COMPLEX SUPPLY CHAINEXAMPLE –CAT • Basic Elements 1 2 3 4 5 6 7 Product Raw Materials Plants Produce Preservation Transport Lead Time Design Process Finished Purchased Raw Sub Assy’s Packaging Distribute Customer Finished Materials Satisfaction Demand Items Assemble Labeling Push / Pull Count Product RFID Purchased Inspect Test Finished Items ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ D-11 Steel Foundry East Unit Rail 180 Day Lead Time 5yrs. Castings Casts Peoria Assembled or Prove Bearings Engine Plant Tested Truck D-11 Assembled Design Pistons Block Certified to w/ Attachments 3000 SKU’s Manifold Receives Painted Customer Inspects S/N Applied Site Begin generating Suppliers Schedules Warranty Revenue Demand Bearings Routes Labels Pistons to Markings Attachments Rings LEAN Protect Blade/ Ripper Gaskets CELLS Package (PULL) for Transit

8. COMPLEX SUPPLY CHAINEXAMPLE –SONY Basic Elements 1 2 3 4 5 6 7 Product Raw Materials Plants Produce Preservation Transport Lead Time Design Process Finished Purchased Raw Sub Assy’s Packaging Distribute Customer Demand Finished Materials Satisfaction Items Assemble Labeling Push / Pull Inspect Test Final Count Product RFID Purchased Finished Items ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ BRAVIA Chips 28 Plants Assemble Diagnostic Pull 90 Day 52” LCD LED Testing vs. HD-TV Surface Receive Label Cycle Push BEST BUY Mount Sub Assy Circuit City Demand Boards from Package WalMart Suppliers Label Direct 2 years Flat and Plants Owner DC’s to Prove Panel Manuals Design TAKT Triggers PULL

9. COMPLEX SUPPLY CHAINEXAMPLE –SPSX Basic Elements 1 2 3 4 5 6 7 Product Raw Materials Plants Produce Preservation Transport Lead Time Design Process Finished Purchased Raw Sub Assy’s Packaging Distribute Customer Demand Finished Materials Satisfaction Items Assemble Labeling Push / Pull Inspect Test Final Count Product RFID Purchased Finished Items ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SPSX Cu Mine Metals Wire Plnt. Wire Plnt. Spool 60 Days 8Ga. Cathode Processing Process Coats Weigh OEM – PULL Rect. Utah Center Rod to wire with Package Motor Rep. Wire Chile Wire Enamel Bar Code Customer-Push Canada Label/Palletize

10. STUDENT / FAMILY SUPPLY CHAIN iPod Need Source? $ ?? NEW USED ??? Source + Funding Student Happy with iPod Product ID ID New Best Buy In 24-48 Desire Sources Funding or Warranty Stock Hrs. “Demand of Supply Savings Used Packaged Pick Lead Planning” “Best Buy” Earnings Warranty from Time “Circuit City” Mom/Dad Grandma Stock “E-Bay “ Relative Funding MISSING FROM DIAGRAM: Communications: Phone, Internet Site Visits: Travel to Sources Negotiations: Funding Sources New vs. Used Decision Process Decision: iPod vs. MP3, etc.

11. PERSONAL SUPPLY CHAINS • Groceries • DIY ( Home Improvement, Landscaping) • Auto Repair ( e.g. Oil Change) • School Books ( New Used, Internet, Book Store, Barter/ Trade)

12. SUMMARY • Variety of Supply Chain Models • Performance of the Supply Chain must be measured. • Inventory Performance, Transportation costs, Loss, Damage, Customer Service all impact effectiveness of Supply Chain. • Information Technology is revolutionizing Supply Chain Performance. ( i.e . EDI, ASN, Real Time Tracing/ Tracking, Material Tracking, RFID, Bar Code, WMS/ TMS, MRP, Push vs. Pull Technologies, Broker / Forwarder/ Compliance Systems. • LEAN & Six Sigma methodologies reduce variability in Supply Chains, and remove WASTE .