Page 205 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes significant opportunities for improvement often lie at the interfaces between the various supply
chain member organizations. This step also adds a greater level of complexity, given that
multiple organizations and their representatives are now participating in the analysis.

At this point in the analysis, the organization needs to focus its efforts on those supply chains
that are most important to the organization’s success. The organization determines which products
should be produced internally or purchased. Once the decision is made to purchase a product or
service from external suppliers, purchasing is brought into the process.

Self Assessment

Fill in the blanks:

5. The ……………… supply chain is that portion of a given supply chain that occurs within
an individual organization.
6. The supply chain has to be seen as a set of ……………… processes rather than a series of
discrete, non-aligned activities.
7. Developing supply chain ……………… for major supply chains and their related processes
is a basic requirement to establish an effective supply chain.

10.3 Supply Chain Processes in an Organization

The management of the supply chain covers everything from product development, sourcing,
production, and logistics, as well as the information systems needed to co-ordinate inventory,
cost, information, customer service, and collaboration relationships. A supply chain is a sequence
of processes and flows that take place within and between different stages and combine to fill a
customer need for a product. There are two different ways to view the processes performed in a
supply chain, (a) the push-pull view and (b) the cycle view.

Push/Pull View of Supply Chain

Processes in a supply chain are divided into two categories depending on whether they are
executed in response to a customer order or in anticipation of customer orders. Pull processes
are initiated by a customer order whereas push processes are initiated and performed in
anticipation of customer orders.

Example: Tata Steel that collects orders that are similar enough to enable the manufacturer
to produce in large quantities. In this case, the manufacturing cycle is reacting to customer
demand (referred to as a pull process).

Example: Hindustan Lever Ltd., a consumer products firm, which must produce in
anticipation of demand. In this case, the manufacturing cycle is anticipating customer demand
(referred to as a push process).
Figure 10.1 shows graphically the push/pull system in a retail network. It can be clearly seen
from the figure that in the pull processes, customer demand is known with certainty at the time
of execution, i.e., it is executed after the customer order arrives, whereas for a push process,
demand is not known and must be forecast as the customer order is yet to arrive. Therefore, pull
processes may also be referred to as reactive processes because they react to customer demand.
Push processes may also be referred to as speculative processes because they respond to forecasted
rather than actual demand. The push/pull boundary in a supply chain separates push processes
from pull processes.

200 LOVELY PROFESSIONAL UNIVERSITY