Supply Chain Management (3rd Edition) Ch1 Summary

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Traditional View: Logistics in the Economy (1990, 1996)

Supply Chain Management (3rd Edition)
Chapter 1 Understanding the Supply Chain

Freight Transportation Inventory Expense Administrative Expense Logistics Related Activity

$352, $455 Billion $221, $311 Billion $27, $31 Billion 11%, 10.5% of GNP

Source: Cass Logistics

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Traditional View: Logistics in the Manufacturing Firm
Profit Logistics Cost Marketing Cost Manufacturing Cost 4% 21% 27% 48%
Manufacturing Cost Profit Logistics Cost Marketing Cost

Supply Chain Management: The Magnitude in the Traditional View
Estimated that the grocery industry could save $30 billion (10% of operating cost) by using
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tal supply chain profitability, not profits at an individual stage
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The Objective of a Supply Chain
Sources of supply chain revenue: the customer Sources of supply chain cost: flows of information, products, or funds between stages of the supply chain Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability

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Decision Phases of a Supply Chain
Supply chain strategy or design Supply chain planning Supply chain operation

Supply Chain Strategy or Design
Decisions about the structure of the supply chain and what processes each stage will perform Strategic supply chain decisions
– – – – Locations and capacities of facilities Products to be made or stored at various locations Modes of transportation Information systems

Supply chain design must support strategic objectives Supply chain design decisions are long-term and expensive to reverse – must take into account market uncertainty
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Supply Chain Planning
Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year
– – – – –

Supply Chain Planning
Planning decisions:
Which markets will be supplied from which locations Planned buildup of inventories Subcontracting, backup locations Inventory policies

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