Page 299 - DMGT501_OPERATIONS_MANAGEMENT

Unit 13: Supply Chain Management and JIT

13.7.2 External Supply Chains Notes

Once one understands the internal supply chain, one must extend the analysis to the external
portion of the supply chain (i.e., key suppliers and customers). This is an important step, as
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.
13.7.3 Supply Chain Processes

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.
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).
Figure 13.6: Push/Pull Processes for a Retail Network

Customer
Order PULL
Cycle PROCESS Customer order Cycle Customer

Retailer
Customer Replenishment and
Order Manufacturing Cycle
Arrives
Manufacturer

Procurement PUSH
Procurement Cycle
Manufacturing, PROCESS Supplier
Replenishment Cycle

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