Supply Chain Management (CNTN)

SUPPLY CHAIN MANAGEMENT
Lecturer: Đinh Thu Phương
Email: [email protected]
LEARNING AND ASSESSMENT
 Midterm exam score: 40% of study score (presentation)

 Academic exam score: 60% of the course score (essay)
REFERENCES
[1] Đỗ Thanh Phong (2020), “Giáo trình quản trị chuỗi cung ứng”,
Trường ĐH Bà Rịa – Vũng Tàu
[2] F. Robert Jacobs, Richard B. Chase (2018), Operations and
Supply Chain Management, Mc Graw Hill Education
CHAPTER 1:
SUPPLY CHAIN OVERVIEW
1. DEFINITION
A supply chain consists of
Supplier Manufacturer Distributor Retailer Customer
Upstream
Downstream
1. DEFINITION
• Supply chain management (SCM) is the management of the flow of goods.
It includes the movement and storage of raw materials, work-in-process
inventory, and finished goods from point of origin to point of consumption.
• The Chartered Institute of Procurement and Supply (CIPS) states that supply
chain management (SCM) is “the handling of the flow of goods and
services from the raw manufacturing of the product through to the
consumption by the consumer.”
1. DEFINITION
- aims to Match Supply and Demand,
profitably for products and services
SUPPLY SIDE DEMAND SIDE

- achieves
+ + + + + =
The right The right The right

The right The right The right Higher
Product Price Store Quantity Customer Time Profits
1. DEFINITION
P&G or other Third Albertson’s Customer wants
manufacturer party DC Supermarket detergent
Chemical
Plastic cup Tenneco
manufacturer
Producer Packaging
(e.g. Oil Company)
Chemical
Paper Timber
manufacturer
Manufacturer Industry
(e.g. Oil Company)
DETERGENT SUPPLY CHAIN

2. FLOWS IN A SUPPLY CHAIN
Capacity, Inventory level,
delivery schedule, payment terms
SUPPLIER MANUFACTURER DISTRIBUTOR CONSUMER
Orders, return requests, repair and

service request, payments
MATERIAL
INFORMATION
FINANCIAL
3. SCM IN A SUPPLY NETWORK
 Supply Chain Management (SCM) is concerned with the management and control
of the flows of material, information, and finances in supply chains.
Cash
Products and Services
Information
THAILAND INDIA MEXICO TEXAS US
N-Tier Suppliers Suppliers Logistics Distributors Retailers
Supply Side OEM Demand Side
Demand
Supply
 The task of SCM is to design, plan, and execute the activities at the different
stages so as to provide the desired levels of service to supply chain customers
profitably
4. IMPORTANCE OF SCM
FOR BUSINESSES
• Reduced Operating Cost
• Greater Efficiency
• Higher Profits
• Improved Financial Position
• Better Quality Control
FOR CUSTOMERS
• Lesser Delays
• Lower PricesV
• Better Customer Experience
WALMART: Superior design, planning and operation of SC, $1 billion

sales in 1980 => nearly $519 billion sales in 2019
5. TRADITIONAL SCOPE OF THE SUPPLY CHAIN
Business logistics
Physical supply Physical distribution

(Materials management)
Sources of Plants/
Customers
supply operations
• Transportation • Transportation
• Inventory maintenance • Inventory maintenance
• Order processing • Order processing
• Acquisition • Product scheduling
• Protective packaging • Protective packaging
• Warehousing • Warehousing
• Materials handling • Materials handling
• Information maintenance • Information maintenance
Internal supply chain

6. EVOLUTION OF SCM
7. GLOBAL OPTIMIZATION
 Geographically dispersed complex network

 Conflicting objectives of different facilities
 Dynamic system
 Variations over time
 Matching demand-supply difficult
 Different levels of inventory and backorders
 Recent developments have increased risks
 Lean production/Off-shoring/Outsourcing
GLOBAL APPAREL VALUE CHAIN
TRACING BACK THE DRESS YOU ARE WEARING
8. SUPPLY CHAIN COMPONENTS
REVIEW
https://www.youtube.com/watch?v=AwemFfdD6VI&
ab_channel=BYUSupplyChain
https://www.youtube.com/watch?v=R8rYsCmAEEY&
ab_channel=Educationleaves
CHAPTER 2:
PLANNING AND SOURCING
1. SUPPLY CHAIN PLANNING (SCP)
1.1. DEFINITION
• It is part of supply chain management (SCM).
• Supply chain planning can be defined as ensuring a
business has the right amount of goods and services
to meet the market demand.
• It involves forecasting future demand and then
organizing production and inventory accordingly.
There are various types of SCP, each with its own set
of processes.
1.2. TYPE OF SCP
Supply chain planning matrix

1.3. SCP PROCESS
DEMAND PLANNING
Definition
It is part of the demand
management process.
The demand planning process
involves predicting future
demand for goods and
services. This forecasting is
done by analyzing past sales
data and trends in market
demand. The output of this
process is a demand plan.
DEMAND PLANNING
Importance
It is essential because it helps
businesses understand and
forecast customer demand. This
information can decide what
products to produce and how
many to keep on hand.
It also helps businesses identify
trends and change their
manufacturing or marketing
strategies accordingly.
DEMAND PLANNING
Importance
 Improved inventory management
 Increased profitability
 Improved customer satisfaction and
retention
 Better business decisions:
CAPACITY PLANNING
Definition
Capacity planning determines
how much supply a company
has to meet forecasted
demand. It includes organizing
production, setting up
suppliers, and managing
inventory.
Capacity planning is estimating
how much business your
company will have in the future
and ensuring you have the
resources you need to meet
that demand.
The Goal
Capacity planning is crucial because it helps an organization be
efficient and scalable. This means that the organization can meet
its current and future needs. That involves:
• Assessing how much capacity an organization currently has.
• Predicting how much capacity will be needed in the future.
• Ensuring the necessary resources are available when needed.
The Process
PRODUCTION PLANNING
Definition
Production planning determines
what products will be made and
when they will be made. This
includes setting up schedules,
ordering materials, and preparing
production lines.
Production planning is a process
that creates a plan for producing
products. The production plan is a
document that explains what will be
produced and when it will be
produced.
PRODUCTION PLANNING
Outcomes
INVENTORY MANAGEMENT
Definition
Inventory management refers to
strategies, techniques, tools, and
technologies used by companies to
manage the process of ordering,
storing, using, shipping, and selling a
company’s inventory. More
specifically it helps you to have the
right amount of stock in your stock,
improve tracking of inventory
movement, manage production
inventory from raw materials, work-in-
progress, and components to finished
goods, and improve customer
experience.
INVENTORY MANAGEMENT
Benefits
SALES & OPERATIONS PLANNING (S&OP)
Definition
Sales & Operations
Planning: All demand
(sales) and supply
(capacity, materials)
of a product is
balanced and
planned to secure on
time delivery to
customers, while
making optimal use
of full supply network.
Importance
Process
How does S&OP work?
2. DEMAND FORECASTING
2.1. DEMAND
Customer demand is the key

driver of the supply chain.
2.1. DEMAND
Balancing supply and demand is a constant process

• Too much demand and low supply = business loss that may not
be recaptured (stockouts)
• Low demand and high supply = money tied up in inventory and
storage facilities, risk that product become obsolete
2.2. DEMAND PLANNING
 Demand planning is a comprehensive, collaborative process
that requires consensus
 Companies need a common demand plan
 Collaborative Planning, Forecasting, and Replenishing
(CPFR) is the process used to achieve an agreed-upon plan
 KeyTerms:
• Materials Required Plan
• Master Production Schedule
• Enterprise Resource Planning
Historical Data Procurement
Material
Requirements Plan
(MRP)
Demand Forecast Demand Plan
Master Production
Schedule (MPS)
Sales, Marketing & Manufacturing

Business Intelligence Execution
Plan to Match Estimated Future Detailed Plans for “What to Buy”

Estimate of Future Demand
Demand with Capability & Supply & “What to Make”
Demand planning process of supply chain management

(Bonde and Hvolby, 2005)
Demand Planning Inaccuracies

• Forecasting is almost never perfect
• May lack customer demand data early enough
• New products also present more challenges due higher
levels of coordination and no previous data
• Plans should consider and allow for inaccuracies
• Long-range forecasts tend to have a greater degree of
error than short-term forecasts
2.3. DEMAND FORECASTING
2.3.1. DEFFINITION
Demand forecasting refers to the process
of planning and predicting goods and
materials demand to help businesses stay
as profitable as possible. Without strong
demand forecasting, companies risk
carrying wasteful and costly surplus – or
losing opportunities because they have
failed to anticipate customer needs,
preferences, and purchasing intent.
2.3.2. THE IMPORTANCE
Effects of demand forecasting on supply chain and

related domains in manufacturing and retails
2.3.3. THE BENEFITS
2.3.4. TYPES
There are various ways to
perform Demand
Forecasting for a business.
They can be broadly
classified based on the level
of detail, the time period,
and the scope of the market
considered.
•Macro-Micro level
•Short-term
•Long-term
•Active Demand Forecasting
•Passive Demand
Forecasting
2.3.4. TYPES
There are various ways to
perform Demand Forecasting
for a business. They can be
broadly classified based on the
level of detail, the time period,
and the scope of the market
considered.
•Macro-Micro level
•Short-term
•Long-term
•Active Demand Forecasting
•Passive Demand Forecasting
2.3.5. DEMAND PATTERNS
• Trend - predictable growth or

decline
• Seasonal - patterns of increase
and decline that repeat cycle after
cycle
• Cyclical - patterns that
are influenced by external factors
(e.g. recession, recovery)
• Random - changes and
variances that are not predictable
2.3.6. FACTORS INFLUENCING DEMAND
PLANNING AND FORECASTING
• Seasonality and inventory forecasting

• Competition as it relates to demand forecasting
• Types of goods and demand estimates
• Geography
2.3.7. METHODS OF DEMAND FORECASTING
2.3.8. PROCESS OF DEMAND FORECASTING
PEER PROCESS
Step 1. Preparing By Identifying the

Factors Likely to Affect Changes in
Demand
PEER PROCESS
Step 2. Execute to
Select Forecasting
Techniques
PEER PROCESS
Step 3. Evaluate
Forecasting Models
PEER PROCESS
Step 4. Reconcile
Final Forecasts
1. Analyzing Customer Demand: What

should we make and when?
2. Raw Material: Who do we buy from
and how much?
3. Bill of Materials: Are we producing
the right amount of the right product in
the right place and the right time?
4. Assembly: How do we make

the final product?
5. Distribution: Where do we
distribute product?
6. Retail/Wholesale: What is
the proper assortment and
allocation of merchandise in
stores?
2.3.9. BULLWHIP EFFECT
The bullwhip effect is a

supply chain phenomenon
describing how small
fluctuations in demand at
the retail level can cause
progressively larger
fluctuations in demand at
the wholesale, distributor,
manufacturer and raw
material supplier levels.
Causes/ Reasons of The bullwhip effect

The bullwhip effect in supply chains and its consequences

BEER GAME
3. PRODUCT PRICING
3.1. IMPORTANT TERMS
Revenue is defined as the total amount of money a
business receives from sales and investments. If a
business does not offer credit nor has other investments,
revenue is equal to sales, and the terms can be used
interchangeably. Most companies closely track sales, as
they are an indicator of a healthy business.
Total Revenue is equal to the price of the goods or
services multiplied by the quantity of units sold, as
demonstrated in the equation below:
R = Price x Quantity
3. PRODUCT PRICING
Costs are anything that contributes to the expense of

the product or service provided by a business. When
evaluating price, it is important to know all costs, as
they are a significant variable for business
profitability. In the equation for Profitability, P, the R
stands for Revenue, and C stands for Costs:
P=R–C
3. PRODUCT PRICING
Costs are typically broken down into two categories —

Fixed Costs and Variable Costs
3. PRODUCT PRICING
3.2. ANALYZE THE COMPETITION
• How many competitors operate in my market?
• Are my competitors large or small? Near or far?
• Is it difficult for new competitors to enter the industry?
• What types and numbers of products do they sell?
• What pricing methods do my competitors use?
3. PRODUCT PRICING
3.3. SELECT A PRICING STRATEGY
• Cost-based
• Competition-based
• Customer-based
 COST-BASED PRICING
Cost-based pricing can be

defined as a pricing method
in which a certain percentage
of the total cost is added to
the cost of the product to
determine its selling price. In
other words, it refers to a
pricing method in which the
selling price is determined by
adding a profit percentage to
the cost of making the
product.
 COST-BASED PRICING
 COMPETITION-BASED PRICING
“Competition based pricing includes setting

up your product or services pricing in respect
to their competitors.”
It solely depends upon the competitors’ pricing,

not any information regarding the customer value.
The markup pricing in this case can go as high as
possible.
 COMPETITION-BASED PRICING
 CUSTOMER-BASED PRICING
With Customer Based Pricing (sometimes

referred to as Value Based Pricing), the
seller makes decisions based on the
estimated value of the product or service
from the customer’s perspective. Since this
will likely result in variable pricing by
customer or customer segment, this
approach should deliver the maximum
amount a company can charge for its
product or service.
 CUSTOMER-BASED PRICING
SELECTING THE RIGHT PRICING STRATEGY
4. INVENTORY MANAGEMENT
4.1. INVENTORY DEFINED
There are three types of
inventory to include: Raw
Materials, Work in Process,
and Finished Goods. Raw
Materials are stock used to
make an end product. Work
in Process consists of the
raw materials that are being
made into finished goods.
And, Finished Goods are the
final products that get
produced for sale to
consumers.
4.2. INVENTORY MANAGEMENT DEFINED
Inventory management in
business refers to managing
order processing,
manufacturing, storage, and
selling raw materials and
finished goods. It ensures the
right type of goods reach the
right place in the right
quantity at the right time and
at the right price. Thus, it
maintains the product
availability at warehouses,
retailers, and distributors.
4.2. INVENTORY MANAGEMENT DEFINED
SOME POOR INVENTORY MANAGEMENT EXAMPLES
• Using outdated methods to track items

• Too large of an inventory
• Inadequate reports and demand forecasting
EXAMPLES OF POOR INVENTORY MANAGEMENT
4.3. INVENTORY MANAGEMENT PROCESS
4.4. INVENTORY MANAGEMENT BENEFITS
4.5. INVENTORY MANAGEMENT TECHNIQUES
 FIRST IN – FIRST OUT (FIFO)
 ABC ANALYSIS
 ABC ANALYSIS
 MINIUM ORDER QUANTITY (MOQ)
Minimum Order Quantity or MOQ

It is the minimum volume of stocks
that a supplier wishes to sell to a
producer. The only aim of the
supplier here is to earn more profits
while getting rid of the inventory
more quickly.
 MINIUM ORDER QUANTITY (MOQ)
 JUST IN TIME (JIT)
Just-in-time (JIT) inventory management is a type of inventory system designed to

keep just enough inventory on hand to meet customer demand. This may include a
week or even as little as a day’s worth of inventory. You can think of this as an
ongoing replenishment of parts or raw materials needed for manufacturing,
production, or assembly.
 JUST IN TIME (JIT)
JIT VS. JIT (JUST IN CASE)
JIT VS. JIT (JUST IN CASE)
JUST-IN-CASE JUST-IN-TIME
A "push" system where inventory purchases A "pull" system where inventory is essentially
are not based on actual current demand. purchased to order.
Focuses on maximizing flexibility with less Focuses on minimizing inventory and using
concern for capital application. capital efficiently.
Excess inventory is kept on hand to avoid Inventory is purchased only to meet immediate
running out due to supplier delays or demand production or sales needs.
spikes.
Companies generally make larger, more Less working capital is required because
expensive inventory orders inventory purchases occur in smaller batches.
Valuable when demand is unpredictable or Works best when demand is stable and
suppliers are unreliable. suppliers are highly dependable.
Demand forecasting is less critical as long as Requires accurate demand forecasts to avoid
there is enough inventory to meet the highest over- or under-buying inventory.
demand.
 ECONOMIC ORDER QUANTITY (EOQ)
Economic Order Quantity or EOQ

It refers to the minimum volume of stocks to reorder to meet the market demand
before the existing supply depletes. Knowing this reduces costs of inventory
holding and ordering due to excess production.
Here
D = Annual demand (in units)
S = Fixed cost per order and
H = Holding cost per unit per year
Suppose that Mr.X deals in bicycles and

has an annual sale of 6000 units. The
ordering cost per order is US$ 300, and the
holding cost per unit of the bicycle is
US$50. What will his Economic order
quantity calculation be?
Suppose that Mr.X deals in bicycles and

has an annual sale of 6000 units. The
ordering cost per order is US$ 300, and the
holding cost per unit of the bicycle is
US$50. What will his Economic order
quantity calculation be?
 SAFETY STOCK (SS)
Safety stock is the extra quantity of a
product that a company keeps in
inventory to lower the risk of running out
of stock for that product. We also call it
Buffer stock. It is a significant thing for a
retailer. It acts as a buffer in case the
sale of a product is more than the
estimates. Or if a supplier is unable to
deliver the product in the expected time.
In the case of a manufacturing
company, buffer stock could help to
minimize the risk of any production
disruption.
It is an important aspect of business growth

and is used mainly in cases of:
• Excess demand
• Delays in supplies
• Inefficient inventory management
(placing an inadequate amount of
supply)
• Financial constraints
HOW TO CALCULATE LEAD TIME DEMAND
HOW TO CALCULATE REORDER POINT

WHAT DOES THE REORDER POINT TELL US TO DO?
 DROP SHIPPING
 CONSIGNMENT
Consignment inventory is a supply chain model in which a retailer offers a product for sale,
but the supplier retains ownership of the product until a customer purchases it. Because
the retailer does not actually buy the inventory until it sells the products, it can return items
that customers don’t purchase. Popular products sold through the consignment model
include seasonal products, such as holiday decorations, and perishable items, such as
produce.
5. SOURCING
5.1. DEFINITION
Sourcing involves looking for
suppliers, assessing and
contracting them and
maintaining a chain of vendors
to cater for the needs of the
organization. For this, the
company must determine what
kind of raw materials and in
what quantity they require in
future.
5.2. PROCESS
CHAPTER 3:
MANUFACTURING AND DISTRIBUTION
1. PRODUCT DESIGN
The definition of product design describes the process of imagining, creating,

and iterating products that solve users’ problems or address specific needs in a
given market.
1. PRODDUCT DESIGN
1. PRODDUCT DESIGN
2. MANUFACTURING SUPPLY CHAIN
The manufacturing supply chain comprises

all the processes a business uses to turn
raw materials into final products that are
ready to be sold to customers. These
processes include raw materials
procurement, production, quality control,
distribution and post-sales service.
The manufacturing supply chain involves

more than just physically creating goods for
customers, though that is certainly a major
component. The elements of the
manufacturing supply chain can be
separated into three main categories —
procurement, production and product
distribution.
3. ODER MANAGEMENT
Order management involves the processes that
start once a customer places an order, generally
ending when the customer receives their items —
unless there’s an error that requires opening a
customer support ticket. Order management
entails the entire behind-the-scenes coordination
between people such as warehouse employees
and managers; software, including order
management, customer relationship management
and enterprise resource planning systems; and
partnerships, like third-party logistics and shipping
partners.
3. ODER MANAGEMENT
ORDER PROCESSING WORKFLOW

3. ODER MANAGEMENT
3. ODER MANAGEMENT
4. DISTRIBUTION MANAGEMENT
Distribution management refers to planning and transporting the products from the
place of manufacturing to where they are sold. It involves transporting raw
materials from suppliers to manufacturers, finished products from manufacturers
to wholesalers or retailers, and lastly to customers.
4. DISTRIBUTION MANAGEMENT
THE ROLE OF
DISTRIBUTION CHANNELS
CHAPTER 4:
INFORMATION TECHNOLOGY AND
SUPPLY CHAIN
1. SUPPLY CHAIN INFORMATION SYSTEMS
1.1. INFORMATION SYSTEM
Information system – A set of
interrelated components that
collect (or retrieve), process,
store, and distribute
information to support
decision making,
coordination, and control in
an organization.
SUPPLY CHAIN
ORGANIZATIONAL LEVELS
1.2. SUPPLY CHAIN INFORMATION NEEDS
1.3. SUPPLY CHAIN INFORMATION FLOWS
1.4. A MAP OF SUPPLY CHAIN INFORMATION
SYSTEMS
1.5. SUPPLY CHAIN INFORMATION SYSTEMS
Customer Relationship Management

(CRM) – Planning and control activities and
information systems that link a firm with its
downstream customers.
=> Market analysis, sell process, order
management, call/service center
management
Supplier Relationship Management (SRM) –

Planning and control activities and information
systems that link a firm with is upstream suppliers.
=> Design collaboration, sourcing decisions,
negotiations, buy process, supply collaboration
Enterprise Resource Planning (ERP)
systems– Large, integrated, computer-based
business transaction processing and reporting
systems.
ERP systems pull together all of the
classic business functions such as
accounting, finance, sales, and operations
into a single, tightly integrated package that
uses a common database.
Traditional strengths in routine decision
making and in execution and transaction
processing.
Captures data to support higher-level
decision support systems (DSS).
2. INFORMATION TECHNOLOGY IN SCM
• Information technology (IT) is an important enabler of effective
supply chain management.
• IT for supply chains includes internal and external systems that
facilitate information between various company and individuals.
• For many firms, IT provides a competitive advantage.
• In many cases, current IT that supports the components in the
supply chain process is diverse and disconnected.
• Various strategies are utilized by companies to overcome these
problems and create systems that can use the multitude of data in
the system effectively.
2.1. GOAL OF SC IT
Product flow
Suppliers Manufacturers Warehouses Retailers
Information flow
Intrafirm
Interfirm Interfirm
Flow of information and goods in the SC

2.1. GOAL OF SC IT
 Collect information on each product from production to delivery
or purchase point and provide complete visibility for all parties
involved.
 Access any data in the system from a single point of contact.
 Analyze, plane activities, and make trade-offs based on
information from the entire supply chain.
 Collaborate with supply chain partners.
2.1. GOAL OF SC IT
 COLLECT INFORMATION:
• The retailer needs to know the status of its orders and the
suppliers need to be able to anticipate an incoming the
manufacturer
• The availability of information regarding the status of products
and material is the basic on which intelligent supply chain
decisions can be made.
• This goal requires standardization of product identification (e.g.
bar coding) across the companies and industries.
2.1. GOAL OF SC IT
 ACCESS TO DATA:
• The single-point-of-contact concept: all the available
information, either information provided to a customer or
required internally, can be access to the same , regardless
of the mode of inquiry use or who is making the inquiry.
• Ideally, everyone who needs to use certain data should
have access to the same real-time data through any
interface device.
2.1. GOAL OF SC IT
Sales representative
Demand
planner Financial
Sales/ marketing systems
systems
Accountant
Operations Sales representative
Logistic/ manufacturing Customer

systems service
Current information systems

2.1. GOAL OF SC IT
SALES REPRESENTATIVE
DEMAND
PLANNER SINGLE POINT ACCOUNTANT
OF CONTACT
OPERATIONS SERVICE REPRESENTATIVE
New generation of information

2.1. GOAL OF SC IT
 ANALYZE BASED ON SUPPLY CHAIN DATA:
• Analyzing the data, especially in a way that takes into account the
global supply chain picture.
• The information system must be utilized to find the most efficient
ways to produce, assemble, warehouse and distribute.
 COLLABORATE WITH SUPPLY CHAIN PARTNERS:
• The ability to collaborate with supply chain partners is essential to
a company’s success. This requires not only sophisticated
alignment of IT systems but also the integration of business
processes.
• Collaboration has become the focus supply chain systems:
Supplier relationship management (SRM) and Customer
relationship management (CRM).
2.1. GOAL OF SC IT
Collect Access Analyze Collaborate
INTEGRATION/ STANDARDS
Electronic Supply chain

Infrastructure
commerce components
GOALS AND MEANS OF SC

2.2. HOW IT CAN BE APPLIED IN SCM?
2.3. ROLE OF IT IN SUPPLY CHAIN
2.4. TYPE OF ‘IT’ USE FOR OPTIMIZING SCM
CHAPTER 5:
MEASURE SUPPLY CHAIN
PERFORMANCE
1. DEFINITION
A supply chain performance measure is a method for
evaluating the performance of a supply chain system.
Measures of supply chain performance can be broadly
categorized into two types. Quality and Quantitative
measurements.
• Quality - Performance indicators focused on quality

are critical for businesses looking to improve
customer satisfaction.
• Quantitative measurements such as order-to-
delivery lead time, supply chain reaction time,
flexibility, resource utilization, and delivery
performance are examples of quantitative measures.
2. IMPORTANCE OF PERFOMANCE
MEASUREMENT
• Measurements are important for directly controlling

behavior indirectly performance of systems.
• Track company's progress toward achieving its
supply chain improvement objectives.
3. CHARACTERISTICS OF GOOD MEASURES
4. SUPPLY CHAIN PERFORMANCE METRICS
• The focus upon a least total cost system requires measuring the
tradeoff costs when a suggested change is made in one of the
components or elements of the system.
• Cost has long been recognized as an important metric for
determining efficiency.
• The important point to remember is that successful supply chain
performance measurement relies on appropriate metrics that
capture the entire essence of the supply chain process.
5. SC PERFORMANCE MEASUREMENT
APPROACHS
• The Balanced Scorecard

• The Logistics Scorecard
• Activity-Based Costing (ABC)
• Economic Value Analysis (EVA)
5.1. THE BALANCED SCORECARD (BSC)
SUCCESS STORY
SUCCESS STORY
The Balanced Scorecard (BSC) is a dashboard definition that has revolutionised

the way organisations measure their performance and align their activities with their
vision and strategy. The Balanced Scorecard approach aims to 'balance'
performance indicators by examining business performance from four different
perspectives: financial, customer, internal processes, and learning and growth.
STRUCTURE OF THE BALANCED SCORECARD

Perspectives Goals Objectives Measurements

Decrease lead time Average lead time
Continuously Increase on-time Percentage of
Customer improve customer delivery deliveries on time
satisfaction Reduce customer Number of customer
complaints complaints
Decrease cycle time Average cycle time
Number of defects
Continuously
Internal Increase quality and the number of
improve business
Business items reworked.
processes
Average output per
Increase productivity
employee
Perspectives Goals Objectives Measurements
Continuously Increase sales of Percentage of sales
develop and new products and obtained from new
Innovation & deliver new services products & services
Learning innovative Average time from
Reduce development
products & initial design to
time
services production
Decrease costs Average unit costs
Increase sales The growth rate in
Continuously growth sales
Financial improve financial Increase market Company’s market
performance share share
Increase return on
Return on investment
investment
5.2. THE SUPPLY CHAIN OPERATION
REFERENCE MODEL (SCOR)
SCOR: Integrates Business Process Reengineering, Benchmarking, and
Process Measurement into a cross-functional framework.
Capture the “as-is” state of a

Capture the “as- process and derive the desired
is” state of a “to-be” future state
process and Quantify the
derive the desired operational Quantify the operational
“to-be” future performance of Characterize the performance of similar
state similar companies management companies and establish internal
and establish practices and targets based on “best-in-class”
internal targets software solutions results
based on “best- that result in
in-class” results “best-in-class” Characterize the management
practices and software
performance solutions that result in “best-in-
class” performance
Business Process Benchmarking Best Practices Process Reference

Reengineering Analysis Model
 The Primary Use of SCOR: To describe, measure and evaluate supply chain
configurations.
 SCOR contains:
• Standard descriptions of management processes
• A framework of relationships among the standard processes
• Standard metrics to measure process performance
• Management practices that produce best-in-class performance
 Enables the companies to:
• Evaluate and compare their performances with other companies effectively
• Identify and pursue specific competitive advantages
• Identify software tools best suited to their specific process requirements
Plan-Source-Make-Deliver-Return
Plan
Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source
Return Return Return Return
Supplier’s Return Return

Customer’s
Supplier Customer
Supplier Customer
(Internal or (Internal or
External) Your Company External)
Plan-Source-Make-Deliver-Return provide the organizational structure of the SCOR-model

SCOR FRAMEWORK LEVELS
Supply Plan
Chain Level-1 Sets Scope and
Context, Geographies, Source Make Deliver
Segments and Products
Return
M1 M2 M3 Level-2 Identifies Major

Make Make Make
Build to Stock Build to Order Engineer to Order Configurations within
Geographies, Segments and
Products
Level-3 Identifies key
business activities within a
configuration
M2.01 M2.02 M2.03 M2.04 M2.05 M2.06

Schedule Issue Product Produce & Test Package Stage Product Release Product to
Production Deliver
Activities
THREE LEVELS OF PROCESS DETAIL
Level
# Description Schematic Comments
Supply Chain Operations Reference Model

1 Level 1 defines the scope and content for the
Plan Supply chain Operations Reference-model. Here
Top Level Source Make Deliver basis of competition performance targets are set.
(Process Types)
Return Return
2
A company’s supply chain can be “configured-
Configuration Level to-order” at Level 2 from the core “process
(Process categories.” Companies implement their
Categories) operations strategy through the configuration
they choose for their supply chain.
3 Level 3 defines a company’s ability to compete

Process Element
successfully in its chosen markets, and consists
Level (Decompose
of:
Processes)
Process element definitions
P1.1
Identify, Prioritize, and Process element information inputs, and outputs
Aggregate Supply-Chain
Requirements P1.3
Balance Production Resources
P1.4
Establish and
Process performance metrics
P1.2
Best practices, where applicable
with Supply-Chain Requirements Communicate
Supply-Chain Plans
Identify, Assess, and Aggregate
Supply-Chain Requirements
System capabilities required to support best
practices
Systems/tools
4 Implementation Companies implement specific supply-chain

Level (Decompose management practices at this level. Level 4
Not defines practices to achieve competitive
Process Elements)
in Scope advantage and to adapt to changing business
conditions.
6. PERFORMANCE CATEGORIES
• Perfect Order Measurement: The percentage of orders that are error-
free.
• Cash to Cash Cycle Time: The number of days between paying for
materials and getting paid for product.
• Customer Order Cycle Time: Measures how long it takes to deliver a
customer order after the purchase order (PO) is received.
• Fill Rate: The percentage of a customer’s order that is filled on the first
shipment. This can be represented as the percentage of items, SKU’s or
order value that is included with the first shipment.
• Supply Chain Cycle Time: The time it would take to fill a customer order
if inventory levels were zero.
• Inventory Days of Supply: The number of days it would take to run out of
supply if it was not replenished.
• Freight bill accuracy: The percentage of freight bills that are error-free.
• Freight cost per unit: Usually measured as the cost of freight per item or
SKU.
• Inventory Turnover: The number of times that a company’s inventory
cycles per year.
• Days Sales Outstanding: A measure of how quickly revenue can be
collected from customers.
• Average Payment Period for Production Materials: The average time
from receipt of materials and payment for those materials.
• On Time Shipping Rate: The percentage of items, SKU’s or order value
that arrives on or before the requested ship date.
• Transportation Efficiency: Metrics such as cost per mile, cost per ton-
mile, and fuel efficiency help gauge transportation effectiveness.
• Customer Satisfaction: Conduct customer surveys or gather feedback to
gauge overall satisfaction with the supply chain's performance
CHAPTER 6:
BUILDING A SUPPLY CHAIN SYSTEM
1. SUPPLY CHAIN DESIGN
1.1. PHASES OF SCD
The three phases of supply chain design

(Source: Compiled from Taylor, 2004: 259, 279, 284; Christopher, 2005: 57;
Fawcett et al., 2007: 20)
1.1. PHASES OF SCD
 Phase one of SCD: Understanding and meeting
the needs of end customers
Functional products: Functional products satisfy the basic needs of
customers. These needs do not change much over time. This means that the
demand for these products is stable and predictable, which makes market
mediation easy because a nearly perfect match between supply and demand
can be achieved.
Innovative products: Customers also have a need for innovative products.

Supply chains will introduce innovations to try to gain competitive advantage
by means of differentiation. Innovative products are new or modified products
organisations create to achieve higher margins. They are characterised by
high changes in demand over short times, which means that demand is
volatile and difficult to forecast, which in turn increases demand uncertainty.
1.1. PHASES OF SCD
 Phase one of SCD: Understanding and meeting
the needs of end customers
Some basic differences between innovative and functional products

1.1. PHASES OF SCD
 Phase one of SCD: Determining a value proposition to
meet customers’ needs
• Who are the organisation’s end customers and what are the exact
needs of the end customers?
• What are the market winners that will win end customers’ orders?
• Does the organisation have a value proposition that will meet the
needs of the end customers?
• Does the organisation possess the necessary core competencies to
provide the necessary value proposition?
• How predictable is the market demand for the product?
1.1. PHASES OF SCD
 Phase two of SCD: Selecting a supply chain strategy
Efficient (or lean) SC

An efficient (or lean) supply
chain is a set of organisations
directly linked by flows of
information, products and
finances that work
collaboratively to reduce cost
and waste. Efficient supply
chains utilise strategies aimed
at creating the highest cost
efficiencies in the supply chain.
1.1. PHASES OF SCD
Responsive (or agile) SC
The idea of agility in the
context of SCM focuses on
responsiveness and flexibility.
Agile SC utilise strategies
aimed at being responsive to
customer needs as well as
flexible. SC where demand and
supply uncertainties exist
require agility. The focus of
agile SCis on time
compression and quick
response and on eliminating
the barriers to quick response.
1.1. PHASES OF SCD
Some characteristics of lean and agile supply chains

1.1. PHASES OF SCD
 Phase three of SCD: Scoping the supply chain structure
1.1. PHASES OF SCD
 Supply chain partners
Lower level of collaboration results in information block and inefficiency

1.1. PHASES OF SCD
The characteristics of partnerships
• Sharing of information
• Trust and openness
• Coordination and planning
• Mutual benefits and sharing of risks
• A recognition of mutual interdependence
• Shared goals
• Compatibility of corporate philosophies
1.1. PHASES OF SCD
Characteristics of partnership types
Partnership type Activities Time horizon Scope of activities
Cooperation Fewer supplier; Short-term Single functional

Longer-term contract area
Coordination Information linkages; Long-term Multiple functional
WIP linkages; areas
EDI exchange
Collaboration Supply chain Long-term with Firms see each other
integration; no fixed date as extensions of
Joint planning; their own firm
Technology sharing
1.1. PHASES OF SCD
 Supply chain drivers
The relation of supply chain drivers towards supply chain strategy

1.2. SUPPLY CHAIN MODEL
The Continuous Flow Model
This traditional supply chain design is most suited for mature industries with a
good level of stability. It is ideal for companies that produce the same item
throughout the year. There may be highs and lows in demand for the product
and this model allows the company to operate smoothly during both events.
This type of design is suitable for organisations having customer profiles that
don’t change much. The performance of this model depends on continuous
demand and supply. The processes ensure a regular flow of information and
products.
The Agile Model
This supply chain design supports companies that have highly
fluctuating demand. It is also good for those making products on a
made–to–order basis. The model’s success depends on the
company’s ability to ramp up production when there is high demand.
It must also be able to remain static during periods of low demand.
While the production can be increased when needed, this model can
make very small batches of the product. A keen eye on the market to
know demand changes is essential to use this design best.
The Fast Chain Model

This supply chain design is most suited for companies making trendy items
with a very short life cycle. They must be able to quickly produce and deliver
the materials to their customers before the trend dies. There is a good
amount of flexibility in this design. The company must be able to go from
concept to market in a very short time. It must also possess the ability to
make accurate demand forecasts. Cost reduction is another aspect
organisations must concentrate on as customers demand a low price.
The Flexible Model
This is suitable for companies with periods of high demand and low
demand. But there are no unexpected demand peaks for these
organisations. They know when the demand will be high and when it will
be low. Companies making stationary articles are best for this supply chain
design as they have high demand when the schools reopen and then a
steady but slow demand during the other months. They can manage this
by having diversified suppliers who work on short-period contracts. Having
proper algorithms for managing inventory will help them produce only
goods that will be sold in low-demand periods.
The Custom Configured Model
As the name suggests, this supply chain design is best for companies
offering customisation of their products. It is a combination of agile and
continuous flow models. Automobile manufacturers use this model. They
offer a level of customisation in some parts of the vehicle. This will require
keen attention and takes a lot of time for assembly. But the other parts are
common for all customers, and this portion of the assembly line can work
like the continuous flow model. This model is also suitable for companies
offering other products that have a certain level of customisation.
The Custom Configured Model
As the name suggests, this supply chain design is best for companies
offering customisation of their products. It is a combination of agile and
continuous flow models. Automobile manufacturers use this model. They
offer a level of customisation in some parts of the vehicle. This will require
keen attention and takes a lot of time for assembly. But the other parts are
common for all customers, and this portion of the assembly line can work
like the continuous flow model. This model is also suitable for companies
offering other products that have a certain level of customisation.
Efficient Chain Model
This model is used by companies that sell products in highly competitive
markets where pricing is the main criterion for customers’ choice. All the
companies making similar products compete for the same set of
customers. In this market, the users are not very much concerned about
minor product differences between different competitors. What is most
important in this supply chain design is that the company must be able
to use its machinery to its maximum capacity. They must ensure the
optimum efficiency of all assets for a reduced cost. The focus is on
inventory management and order fulfilment.
2. HOW TO DESIGN THE RIGHT SC?
2.1. INCORPORATE EFFICIENCY IN THE SC
 Understanding Delivery Time
 Transportation
 Operations
 Forecasting & Planning
2.2. IMPROVE RESILIENCE IN THE SC
 Overcome Disruptions
 Flexible Inventory Positioning
 Flexible Capacity
2.3. HAVE A SIMPLE SC DESIGN
 Design For Primary Volume

 Enable Continuous Improvement
 Choose Collaborative Partners
 Ensure Better Visibility
3. BENEFITS OF DESIGNING AN EFFECTIVE SC
4. SUPPLY CHAIN OPTIMIZATION

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SUPPLY CHAIN MANAGEMENT

Lecturer: Đinh Thu Phương

 Midterm exam score: 40% of study score (presentation)

Supplier Manufacturer Distributor Retailer Customer

SUPPLY SIDE DEMAND SIDE

The right The right The right

DETERGENT SUPPLY CHAIN

SUPPLIER MANUFACTURER DISTRIBUTOR CONSUMER

Orders, return requests, repair and

Supply Side OEM Demand Side

WALMART: Superior design, planning and operation of SC, $1 billion

Physical supply Physical distribution

Internal supply chain

 Geographically dispersed complex network

Supply chain planning matrix

Customer demand is the key

Balancing supply and demand is a constant process

Sales, Marketing & Manufacturing

Plan to Match Estimated Future Detailed Plans for “What to Buy”

Demand planning process of supply chain management

Demand Planning Inaccuracies

Effects of demand forecasting on supply chain and

• Trend - predictable growth or

• Seasonality and inventory forecasting

Step 1. Preparing By Identifying the

1. Analyzing Customer Demand: What

4. Assembly: How do we make

The bullwhip effect is a

Causes/ Reasons of The bullwhip effect

The bullwhip effect in supply chains and its consequences

Costs are anything that contributes to the expense of

Costs are typically broken down into two categories —

Cost-based pricing can be

“Competition based pricing includes setting

It solely depends upon the competitors’ pricing,

With Customer Based Pricing (sometimes

• Using outdated methods to track items

Minimum Order Quantity or MOQ

Just-in-time (JIT) inventory management is a type of inventory system designed to

Economic Order Quantity or EOQ

Suppose that Mr.X deals in bicycles and

Suppose that Mr.X deals in bicycles and

It is an important aspect of business growth

HOW TO CALCULATE REORDER POINT

The definition of product design describes the process of imagining, creating,

The manufacturing supply chain comprises

The manufacturing supply chain involves

ORDER PROCESSING WORKFLOW

Customer Relationship Management

Supplier Relationship Management (SRM) –

Suppliers Manufacturers Warehouses Retailers

Flow of information and goods in the SC

Operations Sales representative

Logistic/ manufacturing Customer

Current information systems

OPERATIONS SERVICE REPRESENTATIVE

New generation of information

Collect Access Analyze Collaborate

Electronic Supply chain

GOALS AND MEANS OF SC