Supply Chain Overview PDF

Chapter 1. Overview of Supply Chain and Supply Chain Management 1.1. Basic Concepts of Supply Chain A. Concept of Supply Chain Supply chain is the system of organizations, people, technology, activities and information needed to deliver a product or service from supplier to final customer. It incl...

Chapter 1. Overview of Supply Chain and Supply Chain Management 1.1. Basic Concepts of Supply Chain A. Concept of Supply Chain Supply chain is the system of organizations, people, technology, activities and information needed to deliver a product or service from supplier to final customer. It includes all the steps involved, from raw material extraction, manufacturing, packaging, transportation, storage, distribution and sales. B. The Basic Components of the Supply Chain B. Key Components of the Supply Chain 1 Suppliers 2 Manufacturers Suppliers provide raw materials or intermediate products for Manufacturers transform raw materials into final products. the manufacturing process. They can be material suppliers, They can be production plants, assembly plants, or service component manufacturers, or service providers. production units. 3 Warehouses 4 Transportation Warehouses are where products are stored and managed Transportation is the movement of products from before being distributed to customers. They can be manufacturers to warehouses, retail points, or end customers. intermediate warehouses, distribution warehouses, or retail Transportation modes include trucks, trains, ships, and planes. warehouses. 5 Distribution Channels 6 Customers Distribution channels are the paths that products take to reach Customers are the end consumers of the products or services. consumers. Distribution channels include direct retail, online They can be individuals, businesses, or organizations. retail, wholesale, and other distribution channels. C. Concept of Supply Chain Management (SCM) Supply Chain Management (SCM) is the process of planning, organizing, and controlling all activities related to the movement of goods and services from suppliers to customers. SCM includes activities such as demand planning, inventory management, transportation, warehousing, and customer service to optimize the flow of products, information, and finances throughout the entire supply chain, from raw materials to the final customer. Goals of Supply Chain Management Increase Efficiency Create Value Reduce Costs The primary goal of SCM is to increase SCM aims to create value for the entire SCM helps reduce costs by optimizing efficiency across the entire supply chain. supply chain, not just for a single part. activities throughout the supply chain. Enhance Transparency Improve Customer Service SCM allows for tracking and controlling the flow of goods, services, SCM contributes to enhancing customer satisfaction by providing and information across the entire supply chain. fast, efficient, and accurate service. The Importance of Supply Chains and Supply Chain Management Operational Efficiency Supply chains and SCM help optimize storage, transportation, inventory management, and other processes, leading to reduced costs and increased operational efficiency for businesses. Customer Satisfaction Effective supply chain management ensures that products and services are delivered on time, fully meeting customer needs, thereby enhancing their satisfaction. Competitive Advantage An efficient supply chain helps businesses reduce costs, improve product and service quality, and create a strong competitive advantage in the market. 1.2. Differentiate Between Supply Chain, Logistics, and Value Chain A. Supply Chain: Definition and Scope B. Logistics: Definition and Scope Narrow Scope Focus Key Function Logistics is a part of the supply chain, but Logistics focuses on storage, transportation, The key function of logistics is to ensure with a narrower scope. and delivery of goods, through activities such goods are moved from one place to another as transportation, warehouse management, at the lowest cost and in the shortest time. and packaging. Example of Logistics Operations 1 Warehouse Management Warehouse management is an important logistics activity, ensuring that goods are stored efficiently and safely. 2 Transportation Planning Transportation planning helps optimize the movement of goods, saving time and costs. 3 Order Processing Order processing ensures that customer requirements are met accurately and in a timely manner. Supply Chain vs. Logistics The Value Chain: Definition and Scope Concept 1 The value chain is a concept that focuses on creating value through each stage of production and distribution. 2 Scope The value chain includes everything from product design and development to after-sales customer service. Creativity & Strategy 3 The value chain encompasses both creativity and strategy to increase the value of the product. The Importance of the Value Chain Value Creation Each activity in the value chain must add value to the product. Strategy The value chain helps businesses identify key strategic activities. Innovation Focus on innovation and improvement in every stage of the value chain. Value Chain vs. Supply Chain Value Chain Supply Chain Focuses on value creation Focuses on operations and execution Includes creative and strategic elements Primarily involves execution activities 1.3. Past, Present & Future of the Supply Chain Past Supply Chain Present Supply Chain Future Supply Chain The supply chain in the past went through The current supply chain faces many The future supply chain will focus on data many stages: mass production, MRP and challenges: global crises, the COVID-19 digitization and visibility, "reshoring" trends, MRP II systems, JIT and TQM, business pandemic, the US-China trade war. and automation. process reengineering. Each stage reflected changes in the way supply chains were managed and optimized. A. Supply Chain in the Past 1950s-1960s: Mass Production Era 1 Companies focused on mass production to reduce costs. This led to high inventory levels and inflexible supply chains. 2 1960s-1970s: Material Requirements Planning and Material Requirements Planning II Material Requirements Planning and Material Requirements 1980s: JIT (Just-In-Time) and TQM (Total 3 Planning II systems were developed to manage material Quality Management) demand and production resources. JIT is a production strategy with zero inventory, aiming to have materials arrive in the production process exactly when needed. 4 1990s: Business Process Reengineering TQM emphasizes improving product quality and operational Businesses began reengineering their business processes to efficiency. reduce costs and focus on core competitive capabilities. Supply Chain in the Past: Mass Production Era (1950s- 1960s) 1 1950s-1960s: Mass Production Era Companies focused on mass production to reduce costs. This approach led to high inventory levels and inflexible supply chains. New product development was often slow. 2 Ford Motor Company Ford Motor Company was one of the pioneers in adopting mass production. This system helped Ford reduce costs and increase car production speed, making the "Fordism" model a symbol of mass production. By 1960, Ford had produced over 10 million vehicles. Supply Chain in the Past: MRP and MRP II Systems (1960s-1970s) MRP and MRP II In the 1960s and 1970s, MRP and MRP II systems were developed to manage material requirements and production resources. This helped companies focus more on inventory management, by reducing inventory costs and improving production efficiency. The adoption of these systems helped address the high and inflexible inventory issues from previous eras. Toyota During this period, Toyota developed and used the Kanban system, a tool within MRP, to manage materials and implement Just-In-Time (JIT) production, helping to minimize inventory. With this system, Toyota was able to reduce inventory to below 30% and achieve much shorter production lead times compared to its competitors. Supply Chain in the Past: JIT and TQM (1980s) 1 Just-in-time (JIT) JIT is a production strategy with no inventory, aiming to bring raw materials into the production process just as they are needed, avoiding waste and reducing storage costs. This requires extremely close coordination with suppliers and customers. 2 Total Quality Management (TQM) TQM emphasizes continuous improvement of product quality and operational efficiency through close coordination between departments within the company and customer feedback. TQM has improved production efficiency and delivery time, thereby enhancing customer satisfaction. 3 Toyota Toyota was also a pioneer in implementing JIT and TQM, especially with the Toyota Production System (TPS), which has made the company one of the most efficient automakers in the world. In the 1980s, Toyota reduced production time from 30 hours to 16 hours per vehicle, while reducing the defect rate from 4% to less than 1% through the TQM system. Supply Chain in the Past: Business Process Reengineering (1990s) 1 2 3 Business Process Supply Chain Management General Electric (GE) Reengineering (BPR) vs. Logistics GE implemented BPR to reduce costs In the 1990s, companies began to The concept of supply chain and enhance competitiveness. GE reengineer their business processes to management became more clearly focused on its core capabilities of reduce costs and emphasize core distinguished from logistics, with supply aircraft engine manufacturing and competitive capabilities in order to chain management being viewed as the healthcare equipment. After the achieve long-term advantages. integration of business processes from restructuring process, GE increased its suppliers to customers, aimed at aircraft engine production efficiency by optimizing the entire system. 15% and reduced operating costs by up to 25%. B. Chuỗi cung ứng Hiện tại Chuỗi cung ứng hiện nay đối mặt nhiều thách thức, bao gồm suy thoái kinh tế do COVID-19, chiến tranh Nga - Ukraine, căng thẳng thương mại Mỹ - Trung và các xung đột khác. COVID-19 gây gián đoạn nghiêm trọng chuỗi cung ứng, thiếu hụt lao động, gián đoạn sản xuất và đóng cửa biên giới. Chiến tranh thương mại Mỹ - Trung Quốc gây bất ổn chuỗi cung ứng toàn cầu, tăng chi phí và phức tạp giao dịch thương mại. The Current Supply Chain: A Global Crisis Global Supply Chain Crisis The current supply chain is facing a series of crises, from the economic recession due to the COVID-19 pandemic, the Russia-Ukraine war, to the US-China trade tensions and other conflicts such as in the Red Sea or Israel-Palestine. Impact These factors have caused disruptions in the global supply chain, significantly increasing logistics costs, fuel prices, and raw material prices. Consequences Businesses are facing many challenges in maintaining production operations and meeting customer demand. Current Supply Chain: COVID-19 Crisis The global supply chain has faced major challenges in maintaining continuity due to labor shortages, production shutdowns, and disruptions in transportation. This has created a "bullwhip effect", exacerbating the shortage of goods. Company Impact Losses Apple Disruption in $7 billion (2020) component supply chain from China Factories in China Temporary Global component shutdown for shortage several months Current Supply Chain: US-China Trade War Start of Trade War Supply Chain Shift US imposes tariffs on Chinese goods, leading China to retaliate, Many companies seek alternative sourcing in other countries to mitigate escalating the trade tensions. risks. 1 2 3 Impact on Supply Chain Businesses face higher costs, supply disruptions, and difficulty forecasting demand. Current Supply Chain: US-China Trade War Affected Products Causes Impacts Mobile phones, network equipment and The US has imposed bans on Huawei and Huawei's phone production decreased by other consumer electronics products of ZTE, preventing them from purchasing 42% while ZTE was restricted from using Huawei and ZTE. components and technology from US 5G technologies. These companies have to suppliers, including Google, Qualcomm, seek alternative supply sources, which Intel and other chip manufacturers. increases costs and delays production. Current Supply Chain: Russia - Ukraine War Impact on Energy Supply Chain Disruptions Impact on Production The Russia - Ukraine war has caused global Both Russia and Ukraine are major exporters of Manufacturers globally are facing the risk of disruptions in energy supply, particularly natural critical raw materials such as wheat, sunflower oil, supply disruptions, rising raw material prices, and gas. This has led to high energy prices, impacting metals, and fertilizers. The disruption of these difficulties in predicting market demand. production and transportation costs. flows has caused supply shortages and price increases. C. The Supply Chain of the Future Data Digitization and Reshoring Trends and Connecting the Global Visibility Automation Supply Chain Digital technologies enable real-time Companies are finding ways to bring Collaboration among supply chain tracking of goods. This improves manufacturing closer to markets. partners enhances adaptability, forecasting and allows for more Automation helps increase efficiency, information sharing, and creates more flexible supply chain adjustments. reduce costs, and address labor sustainable supply chains. shortages. Supply Chain of the Future: Data Digitization and Visibility Digitizing the Supply Chain Amazon Digitizing the supply chain allows businesses to track their Amazon has implemented Blockchain to manage the supply chain in operations in real-time. With technology and data collection across its distribution centers. This technology helps Amazon track the the entire supply chain, managers can easily control and adjust entire journey of a product from the warehouse to the customer's operations to meet market demands. hands. Amazon reports a 30% reduction in delivery time and over $1 billion in annual savings due to the ability to accurately track and optimize the process. Supply Chains of the Future: The "Reshoring" Trend and Automation The "Reshoring" and Intel Automation "Nearshoring" Trend After the COVID-19 pandemic, many Automation in supply chain Businesses are increasingly bringing companies like Intel have decided to management, through technologies manufacturing activities back to bring chip production back to the US like artificial intelligence (AI), countries closer to home to reduce to reduce dependence on the supply blockchain, and IoT, will help minimize risks and transportation costs. This chain from Asia. Intel has committed errors and increase operational speed. has been strongly driven by trade to investing over $20 billion to build conflicts and disruptions caused by chip manufacturing plants in Arizona. the pandemic. 1.4. Future Supply Chain Trends A. Sustainable Supply Chain Resource Optimization Enhancing Social Responsibility A sustainable supply chain focuses on the efficient use of resources, A sustainable supply chain also ensures the rights of workers, protects the minimizing waste, and recycling materials throughout the entire supply environment, and supports the local community. chain, specifically reducing the environmental impact of production, transportation, and consumption of goods. Increased Transparency and Traceability Promoting Sustainable Development A sustainable supply chain provides clear information about the origin and A sustainable supply chain plays a crucial role in protecting the production process of products, helping consumers make informed environment, improving quality of life, and driving economic development. choices. B. Digital Supply Chain 1 Internet of Things (IoT) 2 Artificial Intelligence (AI) and Machine Learning Use sensors and connected devices to track goods in real-time, optimize inventory management, Apply AI to automate decision-making, optimize transportation routes, and predict market trends, and forecast demand more accurately. improving efficiency and reducing costs. 3 Blockchain 4 Big Data Analytics Utilize blockchain technology to enhance transparency, security, and traceability in the supply Leverage and analyze data from multiple sources to make smarter decisions, improve demand chain, while also improving contract management and payments. forecasting, and optimize inventory management. B. Digital Supply Chain Agile Supply Chain Diversify Supply Sources Flexible Production Proactive Risk Product Customization Model Management Develop the capability to Develop a diverse and flexible Adopt advanced manufacturing Utilize forecasting and simulation customize products to specific supplier network to minimize risk technologies like 3D printing and technologies to identify and customer requirements while and ensure a stable supply. automation to quickly adjust respond to potential risks in the maintaining production production to market demand. supply chain. efficiency. D. Circular Supply Chain D. Circular Supply Chain Stage Key Activities Benefits Design Design products for easy recycling Reduce waste, increase product and reuse lifespan Manufacturing Use recycled materials and clean Reduce environmental impact, production processes conserve resources Use Encourage sustainable use and Extend product lifespan, reduce product maintenance replacement needs Recovery Collect and recycle old products Reduce waste, create a source of recycled materials Recycling Convert old products into new raw Reduce need for new raw materials, materials create value from waste 1.5. Adjusting the Supply Chain to Fit the Business Goal Step 1: Clarify Business Objectives 1 Identify Short-Term Objectives Focus on goals that can be achieved within 6-12 months, such as increasing sales revenue by 10% or reducing transportation costs by 5%. 2 Establish Long-Term Objectives Build a 3-5 year vision for the business, including expanding into new markets or developing new product lines. 3 Align the Supply Chain Ensure that all decisions and activities within the supply chain are geared towards achieving the set objectives. Step 2: Identify Key Objectives This step requires the business to identify the most important tasks in the supply chain that need to be focused on to achieve the highest efficiency. Improve operational efficiency 1 Reduce delivery time, optimize processes Control costs 2 Reduce waste, optimize resources Improve product quality 3 Ensure compliance with standards, enhance satisfaction Example: For a manufacturing company, the key objectives may be to improve production efficiency, control product quality, and optimize the delivery cycle. Step 3: Identify Competitive Advantage Businesses need to clearly identify their competitive advantage in the market in order to optimize their supply chain to fully leverage these advantages. Step 3: Identify Competitive Advantage Competitive Pricing Superior Product Excellent Customer Rapid Market Quality Service Access Optimize processes, reduce production costs, and Enhance product quality, Provide professional Reduce delivery time, be provide better value to meet stringent demands, services, dedicated support, flexible in meeting market customers. and deliver a differentiated and ensure customer needs, and gain a experience. satisfaction. competitive advantage. Step 4: Evaluate and Optimize the Process Analyze the current state Implement solutions Use data analysis tools like ERP to evaluate the current Apply improvement methods like Lean Six Sigma to performance of each process in the supply chain. optimize the processes. 1 2 3 4 Identify weaknesses Continuous evaluation Identify bottlenecks and inefficient processes based on the Establish a monitoring and regular evaluation system to analysis data. ensure continuous improvement. Step 5: Mitigate Risks Supply chains must face many potential risks, from natural disasters, political instability, economic crises, to disease outbreaks, price fluctuations, and unexpected incidents. Developing effective contingency plans is essential to maintain stable business operations. Supply Chain Risk Mitigation Supplier Diversification Inventory Buffers Build a diverse supplier network across different Maintain safety stock levels for critical materials and geographic regions to mitigate the risk of disruptions products to cope with unforeseen fluctuations. due to natural disasters or political instability. Risk Insurance Contingency Planning Participate in supply chain insurance programs to Develop and regularly update emergency response protect the business from financial losses due to plans for various risk scenarios. supply chain disruptions. Step 6: Diversify Products and Services Market Research Conduct periodic market surveys and analysis to stay informed about new trends and changing customer needs. Product Development Invest in R&D to develop new products or improve existing ones, meeting the diverse needs of the market. Portfolio Optimization Regularly evaluate the performance of each product and eliminate underperforming ones to focus resources on promising products. Expand Distribution Channels Explore new distribution channels such as e-commerce or collaborate with distribution partners to expand your market reach. Step 7: Integrating Technology in the Supply Chain Automation Artificial Intelligence Deploy automation systems in warehouses and production Apply AI in demand forecasting and route optimization to processes to increase efficiency and reduce errors. enhance supply chain efficiency. Cloud Computing Blockchain Utilize cloud platforms to manage supply chain data, enabling Implement blockchain technology to increase transparency and real-time access and analysis from anywhere. traceability in the supply chain. 1.6. Supply Chain Processes SCOR (Supply Chain Operation Reference) Model SCOR (Supply Chain Operation Reference) Model 1 What is SCOR? 2 Benefits of SCOR 3 SCOR Structures The SCOR (Supply Chain SCOR helps businesses improve SCOR has 5 main structures, Operation Reference) model is a their operational efficiency. including Plan, Source, Make, reference model for supply chain SCOR provides tools to assess Deliver, and Return. operations; it provides a performance and drive standard framework and improvement in the supply chain. terminology. It helps companies align their management tools, redesign business processes, benchmark, and analyze best practices. A. Planning Process Planning is the first stage of the SCOR model. It is the foundation for the success of the entire supply chain. Advanced activities and tools used to optimize the planning process include: Demand Forecasting: Analyzing historical data, market trends, and other influencing factors to predict customer demand. Artificial intelligence (AI) and machine learning (ML) technologies are being increasingly used in this field. Product Pricing: Determining the appropriate pricing strategy based on production costs, competitive pricing, product value, and market demand. Data analytics software helps make more accurate pricing decisions. Inventory Management: Tracking and controlling inventory levels to ensure customer demand is met without waste. Warehouse management systems (WMS) integrated with modern technologies help optimize inventory management efficiency. B. Sourcing Process Procurement Credit & Collections Procurement is the process of searching, selecting, and Managing credit and collections is an important part of purchasing raw materials from reliable suppliers. This is an maintaining a stable cash flow for the business. This includes important process that directly affects product quality and the managing credit terms with suppliers and customers, efficiency of the supply chain. ensuring effective and timely debt collection. Effective Strategic Sourcing 1 Supplier Diversification Develop a diverse supplier network to minimize risk and increase flexibility in the supply chain. 2 Procurement Automation Utilize e-procurement platforms to automate the ordering, payment, and contract management processes. 3 Supplier Data Analytics Apply big data analytics to evaluate supplier performance and make smarter procurement decisions. 4 Strategic Collaboration Build strategic partnerships with key suppliers to ensure stability and continuous improvement. C. Production Process (Make) Production is an important part of the supply chain, involving the activities that transform raw materials into finished products. The production process is typically divided into several stages, from product design to quality inspection: 1 Product Design 2 Production Scheduling 3 Facility Management Product design plays a crucial role in Production scheduling helps optimize Facility management ensures that the creating products that meet customer production time and resources. The infrastructure and production needs. Product design must combine production schedule must be based equipment operate efficiently. This aesthetic, functional, and durability on market demand, production includes maintaining, repairing, and factors. Additionally, product design capacity, and resource constraints. upgrading facilities, as well as must comply with safety and Production scheduling ensures that managing energy, water, and waste. environmental standards. products are manufactured on time and meet customer demand. Production processes must be organized and managed effectively to ensure that products meet customer requirements and are produced at an optimal cost. Advanced Manufacturing Technology Advanced manufacturing technology is a critical factor in improving production efficiency, enhancing product quality, and reducing costs: Collaborative Robots Internet of Things (IoT) Utilizing smart robots that can work safely alongside humans, Deploying IoT sensor systems to collect real-time data, enabling increasing productivity and accuracy in manufacturing. continuous monitoring and optimization of the production process. 3D Printing Augmented Reality (AR) Applying 3D printing technology to rapidly manufacture complex Using AR to assist workers in assembly, maintenance, and quality parts, reducing production time and costs. inspection, improving efficiency and reducing errors. D. Delivery Process Order Management Delivery Scheduling Return Processing Process orders, track the delivery Plan the transportation to ensure Efficiently manage and process process, and ensure customer products reach customers on time. returned goods, minimize costs, and satisfaction. optimize customer service. Technology in Transportation Management Transportation GPS Tracking and Autonomous Delivery Management System (TMS) Telemetrics Self-driving vehicles and drones are GPS and telemetrics technology being developed to automate the TMS software helps optimize routes, provide real-time information on the delivery process, especially in urban manage the fleet, and location and status of goods, helping areas and remote regions. comprehensively monitor to improve delivery accuracy. transportation performance. E. Returns Process 1 Receive Return Request Process and confirm customer return requests, identify reasons and product condition. 2 Retrieve Product Organize transportation to retrieve the product from the customer, ensure a smooth process. 3 Inspect and Categorize Evaluate the condition of the returned product, decide on the next steps (reuse, repair, recycle). 4 Process Refund/Exchange Provide refund or exchange the product for the customer according to the company's policy. Effective Return Management Strategy Clear Return Policy Develop and communicate a transparent and easy-to-understand return policy to minimize confusion and increase customer satisfaction. Process Automation Utilize technology to automate the return process, from creating requests to tracking and handling, to save time and reduce errors. Return Data Analysis Apply data analysis to understand the root causes of returns, and then improve products and services to reduce future return rates. Reuse and Recycle Develop processes to reuse or recycle returned products to minimize waste and increase the sustainability of the supply chain. Measuring Performance in the SCOR Model Process Key Performance Indicators (KPIs) Plan Forecast accuracy, Planning cycle time Source Procurement cost, Supplier lead time Make Production efficiency, Defect rate Deliver On-time delivery rate, Transportation cost Return Return rate, Return processing time