Essential Guide to the Supply Chain

ESSENTIAL GUIDE TO THESUPPLY CHAIN

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WHAT IS THE PURPOSE OF THIS GUIDE?This guide is structured in a way that will give you anoverview of supply chain principles. The purpose ofthe guide is to create an awareness of the keycomponents of the supply chain. It is not designed togive you an in-depth knowledge and understanding ofthe subject.You will find the guide a useful introduction to the areaof supply chain. It will give you a broadunderstanding of how effective supply chainmanagement supports, and helps deliver, anorganisation’s business strategy.The guide begins by explaining the fundamentals ofsupply chain management and how a supply chainworks. The way in which product and information flows through the supply chain is examined.Attention is paid to the issue of complexity and the importance of visibility in the supply chainis demonstrated.A number of basic concepts are explained and these set the framework for the final part of theguide, which deals with performance measurement and supply chain improvement.Performance needs to be measured both within organisations and between organisations in asupply chain. A number of metrics are listed, leading the reader to the final part of the guide,namely the targeting of potential areas of supply chain improvement. Major benefits canaccrue through the identification and exploitation of such improvement opportunities. Theguide suggests some of the areas that will deliver benefit for organisations.

WHAT IS A SUPPLY CHAIN?At first glance there is nothing really complicated about a supply chain. If you are going to sellsomething, then clearly it must be made and then delivered to the customer. Of course thedifficulty of the task will depend on the product complexity; a car is much more complex than apen. The location of the customer will also help or hinder; reaching a customer in Londonfrom your distribution centre in Holland will clearly be easier than reaching the customer inVladivostok.Start to explore what lies behind these simple activities and it does not take long to realise thatthe costs of supporting them could vary greatly from one company to the next. And of coursehow well you perform the activities will surely determine whether the customer returns to buysome more. Getting it right therefore could have a dramatic impact on the success of anorganisation.The simplest supply chain is one where the consumer places an order and there is sufficienttime available to enable the factory to make and deliver the product. If there were also timeavailable for suppliers of parts or components to also deliver then the supply chain wouldneed no inventory at all. This would be a true Make to Order supply chain.A Simple Supply Chain

Gradually complexity gets added. Consumers require product to be available when they wantit and so Points of Sale (such as retailers) get added. In time the retailers create distributioncentres to supply their outlets. As the retailer becomes more demanding the supplier decidesto create their own distribution centre holding inventory of finished products. Later they add amaterials warehouse to ensure supply of materials for the production line. Finally, supplierstoo may choose to hold inventory in a warehouse to meet the demands of the factory.Adding ComplexityComplexity is created for a variety of reasons:To overcome uncertainty and variability withinprocessesTo aid the maximisation of factory capacity utilisationTo improve delivery reliabilityTo reduce the risk of product becoming obsolete or passing the sell bydate.To overcome the lack of trust between supply chain partnersTo aid the maximisation of transport capacityutilisation

To facilitate the attainment of functional objectivesTo compensate for long cycle timesTo enable product to made in efficient batchsizesTo protect against the variability in demandTo compensate for the seasonality in demand and/orsupplyTo minimise factory changeover costsTo overcome the lack of informationTo provide product varietyTo minimise the impact of poorcommunicationTo protect against the inaccuracy of forecastsTo allow silo thinking instead of processthinking.Most of all complexity gets added to ensure product is available to the next stage of the supplychain. Product availability is the key linking theme for supply chain management.WHAT IS SUPPLY CHAIN MANAGEMENT?Supply chain management commences with understanding consumer demand. This is thedemand that arises from the actual use of the product. Customer demand may be differentin that this arises from your immediate customer, such as a retailer, before it is then sold toa consumer.At the other end of the chain is supply. Again this can be taken back as far as possible tothe providers of materials or to growers.Supply chain management is about connecting this supply to the demand.

There are a number of flows:The primary goods flow connects supply to demand. During this flow product maychange format several times from raw material, into work in progress beforebecoming a finished product.There is also a reverse goods flow, covering the return of defective product orthe recycling activity.Finally there are information flows that act as a trigger to the activity (the consumer order)and accompany the product to control and monitor the flow.To receive the full length version of this guide, please complete our online format the following link http://bit.ly/1lEFZdJFor more information about the courses LLA provide, please contact us;Call 0800 158 8231 or Skype admin_llaEmail enquiry@logisticslearningalliance.com, visit www.logisticslearningalliance.comor Search for ‘Logistics Learning Alliance’ on LinkedIn, Twitter and Facebook.