Page 202 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Unit 10: Building of a Supply Chain

10.1 Orientation of Supply Chain Function within an Organization Notes

Supply chain management involves proactively managing the two-way movement and
coordination (that is, the flows) of goods, services, information, and funds from raw material
through end user. A company with a “supply chain orientation” is one that recognizes the
strategic value of managing operational activities and flows across a supply chain. Its decisions
fall into three categories or phases:

10.1.1 Supply Chain Design

It reflects the structure of the supply chain over the next several years. It decides what the chain’s
configuration will be, how resources will be allocated, and what processes each stage will
perform.
In order to do so, it is essential to develop supply chain process maps (flow charts) for major
supply chains and their related processes helps establish an understanding of the supply chain.
There should be a clearly understood mapping convention to be utilized, along with other
information requirements. The objective of this exercise is to develop supply chain maps that
present all supply chain entities along with key processes.

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Caution It is to be kept in mind that successful design requires a high degree of functional
and organizational integration.

From this exercise will flow such decisions as the location and capacities of production and
warehousing facilities, the products to be manufactured or stored at various locations, the
modes of transportation, and the type of information system to be utilized. The organization
must also identify key and critical supply chains components. It must be knowledgeable regarding
its part of the supply chain and also must understand how the part interfaces with the other parts
of the supply chain.
The supply chain configuration should support the organization’s strategic objectives. In the
case of TI Cycles discussed in earlier unit, its decisions regarding the location and capacity of its
manufacturing facilities at Aurangabad, the joint manufacturing agreement with Avon Cycles
and distribution network are all supply chain design or strategic decisions.
These are long-term decisions and are very expensive to alter on short notice. Consequently,
when companies make these decisions, they must take into account uncertainty in anticipated
market conditions over the next few years.

Did u know? Supply Chain Design is a strategic decision.

10.1.2 Supply Chain Planning

In the planning phase, companies define a set of operating policies that govern short-term
operations and are normally determined on an annual basis. These decisions are made within
the supply chain’s configuration. Planning starts with a demand forecast for the coming year.
Based on the demand, an annual plan is worked out. Decisions regarding which markets will be
supplied from which locations, outsourcing and sub-contracting, inventory policies, etc. are
made. Planning, in other words, establishes parameters within which a supply chain will function
over a specified period of time.

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