Supply chain network

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Example of a supply-chain network Supply Chain Network Example.png
Example of a supply-chain network

A supply-chain network (SCN) is an evolution of the basic supply chain. Due to rapid technological advancement, organizations with a basic supply chain can develop this chain into a more complex structure involving a higher level of interdependence and connectivity between more organizations, this constitutes a supply-chain network. [1]

Contents

A supply-chain network can be used to highlight interactions between organizations as well as to show the flow of information and materials across organizations. [2] Supply-chain networks are now[ when? ] more global than ever and are typically structured with five key areas: external suppliers, production centers, distribution centers (DCs), demand zones, and transportation assets. [3]

Overview

All organizations can purchase the components to build a supply-chain network, it is the collection of physical locations, transportation vehicles and supporting systems through which the products and services firm markets are managed and ultimately delivered.[ citation needed ]

Physical locations included in a supply-chain network can be manufacturing plants, storage warehouses, carrier cross-docks, major distribution centers, ports, intermodal terminals whether owned by a company, suppliers, a transport carrier, a third-party logistics provider, a retail store or an end customer. Transportation modes that operate within a supply-chain network can include the many different types of trucks, trains for boxcar or intermodal unit movement, container ships or cargo planes.[ citation needed ]

There are many systems which can be utilized to manage and improve a supply-chain network include Order Management Systems, Warehouse Management System, Transportation Management Systems, Strategic Logistics Modelling, Inventory Management Systems, Replenishment Systems, Supply Chain Visibility, Optimization Tools and more. Emerging technologies and standards such as the RFID and the GS1 Global Standards are now making it possible to automate these Supply Chain Networks in a real time manner making them more efficient than the simple supply chain of the past.[ citation needed ]

Supply-Chain Network Design

A supply-chain network can be strategically designed in such a way as to reduce the cost of the supply chain; it has been suggested by experts that 80% of supply chain costs are determined by location of facilities and the flow of product between the facilities. [4] Supply chain network design is sometimes referred to as 'Network Modelling', due to the fact a mathematical model can be created to optimize the supply-chain network. [4]

Companies have been led to modify their basic supply chain, investing in the tools and resources to develop an improved SCN design that takes into account taxation regulations, new entrants into their industry and availability of resources, has resulted in more complex network designs. [5]

Designing a SCN involves creating a network that incorporates all the facilities, means of production, products, and transportation assets owned by the organization or those not owned by the organization but which immediately support the supply-chain operations and product flow. The design should also include details of the number and location of facilities: plants, warehouses, and supplier base. Therefore, it can be said that a SCN design is the combination of nodes with capability and capacity, connected by lanes to help products move between facilities [6] As accessibility to data continues to improve, it is becoming increasingly important for organizations to make data-driven supply chain network design decisions regarding transportation procurement, based on accurate freight data.

There is no definitive way to design a SCN as the network footprint, the capability and capacity, and product flow—all intertwine and are interdependent. Following on from this, there is also no single optimal SCN design, in designing the network there is an apparent trade-off between responsiveness, risk tolerance and efficiency. [6]

Despite the network design inefficacies for a standard model, modern technologists cite the advantages of a connected ecosystem. An intertwined network of shippers, carriers, operators, brokers, and all incumbent entities within the supply-demand continuum. Donned as a freight platform, it acts as an online marketplace for loads and hauls. Shippers and carriers connect to haul freight and benefit from the latest tech innovations that proffer value-added services to the platform users. Real-time visibility, ETA, live status updates - with freight ecosystems, shippers are poised to be close with their orders, and carriers assume greater asset control.[ citation needed ]

Reverse Supply-Chain Network Design

A new requirement for 'reverse supply-chain network design' has arisen from the environmental impact of end-of-life goods. This particular network design addresses logistical issues such as collection, processing and recycling of end-of-life goods. [7] Companies that design both forward and reverse supply-chain processes together, with recycling & disposal in mind, have been noted to have the greatest success. [8] Through this, organizations can support goods from production to disposal creating a 'closed-loop system'. [7] [9]

Examples of reverse supply network design

Bosch is a company that capitalizes on this closed-loop system by building sensors into their power tool motor. Bosch can quickly assess the state of a motor reducing the cost of inspection and disposal, thereby increasing their profit margin on refurbished power tools. [8]

Supply-Chain-Network Risk Analysis

Though designing a supply-chain network can cut costs within a company, it is important to note the supply chain is not static but rather a continually improving model and adapt in response. A key part of designing the supply-chain network is ensuring the network is versatile enough to cope with future uncertainties. [3] Though there is inherent uncertainty about the future, a supply chain network risk analysis can be conducted; by using information available, the future business environment can be characterized.

The uncertainties associated with supply-chain networks fall within two categories, Endogenous uncertainty and Exogenous uncertainty. [10]

Endogenous uncertainty

An uncertainty can be categorized as 'endogenous' when the origin of the risk is within the supply-chain network itself, such as market volatility or technological turbulence. [10]

Exogenous uncertainty

An uncertainty can be categorized as 'exogenous' when the origin of the risk is external to the supply-chain network. Exogenous uncertainties can be further categorized; ongoing risks such as economic volatility, can be described as a 'continuous risk'. 'Discrete' events refer to infrequent events that could disrupt the supply-chain process, such as natural disasters. [10]

Risk management

By distinguishing between these types of uncertainty, an organization can decide the best approach to risk management. A company has a very limited ability to prevent exogenous uncertainty. The risk to the supply-chain network can be minimized by being well prepared for potential events. Endogenous uncertainty can be somewhat mitigated with precautions such as regular communication between an organization and supplier. [10]

See also

Related Research Articles

<span class="mw-page-title-main">Supply chain management</span> Management of the flow of goods and services

In commerce, supply chain management (SCM) deals with a system of procurement, operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally". This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

<span class="mw-page-title-main">Logistics</span> Management of the flow of resources

Logistics is the part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the point of consumption according to the needs of customers. Logistics management is a component that holds the supply chain together. The resources managed in logistics may include tangible goods such as materials, equipment, and supplies, as well as food and other consumable items.

Logistics engineering is a field of engineering dedicated to the scientific organization of the purchase, transport, storage, distribution, and warehousing of materials and finished goods. Logistics engineering is a complex science that considers trade-offs in component/system design, repair capability, training, spares inventory, demand history, storage and distribution points, transportation methods, etc., to ensure the "thing" is where it's needed, when it's needed, and operating the way it's needed all at an acceptable cost.

<span class="mw-page-title-main">Supply chain</span> System involved in supplying a product or service to a consumer

A supply chain, sometimes expressed as a "supply-chain", is a complex logistics system that consists of facilities that convert raw materials into finished products and distribute them to end consumers or end customers. Meanwhile, supply chain management deals with the flow of goods within the supply chain in the most efficient manner.

<span class="mw-page-title-main">Cargo</span> Goods or produce transported

In transportation, freight refers to goods conveyed by land, water or air, while cargo refers specifically to freight when conveyed via water or air. In economics, freight refers to goods transported at a freight rate for commercial gain. The term cargo is also used in case of goods in the cold-chain, because the perishable inventory is always in transit towards a final end-use, even when it is held in cold storage or other similar climate-controlled facilities, including warehouses.

Vendor-managed inventory (VMI) is an inventory management practice in which a supplier of goods, usually the manufacturer, is responsible for optimizing the inventory held by a distributor.

Cross-docking is a logistical practice of Just-In-Time Scheduling where materials are delivered directly from a manufacturer or a mode of transportation to a customer or another mode of transportation. Cross-docking often aims to minimise overheads related to storing goods between shipments or while awaiting a customer's order. This may be done to change the type of conveyance, to sort material intended for different destinations, or to combine material from different origins into transport vehicles with the same or similar destinations.

<span class="mw-page-title-main">Freight company</span> Companies that specialize in the moving of cargo from one place to another

Freight companies are companies that specialize in the moving of freight, or cargo, from one place to another. These companies are divided into several variant sections. For example, international freight forwarders ship goods internationally from country to country, and domestic freight forwarders, ship goods within a single country.

Infor Nexus is an independent business unit of Infor LLC offering a multienterprise supply chain network. The on-demand global supply chain management platform and integrated applications are used worldwide by businesses to manage global direct procurement, supplier networks, global logistics and global trade processes. Founded in 1998, in Oakland, California, it merged with TradeCard in 2013, and in September 2015, GT Nexus was acquired by Infor. Today, Infor Nexus is a business unit of Infor.

Supply-chain operations reference (SCOR) model is a process reference model developed and endorsed by the Supply-Chain Council as the cross-industry, standard diagnostic tool for supply chain management. The SCOR model describes the business activities associated with satisfying a customer's demand, which include plan, source, make, deliver, return and enable. Use of the model includes analyzing the current state of a company's processes and goals, quantifying operational performance, and comparing company performance to benchmark data. SCOR has developed a set of metrics for supply chain performance, and Supply Chain Council members have formed industry groups to collect best practices information that companies can use to elevate their supply chain models.

<span class="mw-page-title-main">Supply chain risk management</span> Preventing failures in logistics

Supply chain risk management (SCRM) is "the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity".

Computer-aided lean management, in business management, is a methodology of developing and using software-controlled, lean systems integration. Its goal is to drive innovation towards cost and cycle-time savings. It attempts to create an efficient use of capital and resources through the development and use of one integrated system model to run a business's planning, engineering, design, maintenance, and operations.

Channel coordination aims at improving supply chain performance by aligning the plans and the objectives of individual enterprises. It usually focuses on inventory management and ordering decisions in distributed inter-company settings. Channel coordination models may involve multi-echelon inventory theory, multiple decision makers, asymmetric information, as well as recent paradigms of manufacturing, such as mass customization, short product life-cycles, outsourcing and delayed differentiation. The theoretical foundations of the coordination are based chiefly on the contract theory. The problem of channel coordination was first modeled and analyzed by Anantasubramania Kumar in 1992.

Merge-in-transit (MIT) is a distribution method in which several shipments from suppliers originating at different locations are consolidated into one final customer delivery. This removes the need for distribution warehouses in the supply chain, allowing customers to receive complete deliveries for their orders. Under a merge-in-transit system, merge points replace distribution warehouse. In today's global market, merge-in-transit is progressively being used in telecommunications and electronic industries. These industries are usually dynamic and flexible, in which products have been developed and changed rapidly.

Third-party logistics is an organization's long term commitment of outsourcing its distribution services to third-party logistics businesses.

Urban freight distribution is the system and process by which goods are collected, transported, and distributed within urban environments. The urban freight system can include seaports, airports, manufacturing facilities, and warehouse/distribution centers that are connected by a network of railroads, rail yards, pipelines, highways, and roadways that enable goods to get to their destinations.

Inventory optimization refers to the techniques used by businesses to improve their oversight, control and management of inventory size and location across their extended supply network. It has been observed within operations research that "every company has the challenge of matching its supply volume to customer demand. How well the company manages this challenge has a major impact on its profitability."

Reverse logistics is for all operations related to the reuse of products and materials. It is "the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics."

In commerce, global supply-chain management is defined as the distribution of goods and services throughout a trans-national companies' global network to maximize profit and minimize waste. Essentially, global supply chain-management is the same as supply-chain management, but it focuses on companies and organizations that are trans-national.

<span class="mw-page-title-main">Container chassis</span>

A container chassis, also called intermodal chassis or skeletal trailer, is a type of semi-trailer designed to securely carry an intermodal container. Chassis are used by truckers to deliver containers between ports, railyards, container depots, and shipper facilities, and are thus a key part of the intermodal supply chain.

References

  1. ↑ Slack, Nigel; Chambers, Stuart; Johnston, Robert (2009-01-01). Operations and Process Management: Principles and Practice for Strategic Impact. Prentice Hall/Financial Times. ISBN   9780273718512.
  2. ↑ "What is a Supply Chain Network? - Logistics & Materials Handling Blog | Adaptalift Hyster". www.aalhysterforklifts.com.au. 27 September 2011. Retrieved 2015-10-31.
  3. 1 2 Klibi, Walid; Martel, Alain (2012-12-16). "Scenario-based Supply Chain Network risk modeling". European Journal of Operational Research. 223 (3): 644–658. doi:10.1016/j.ejor.2012.06.027.
  4. 1 2 Watson, Michael; Lewis; Cacioppi; Jayaraman (2013). Supply Chain Network Design: Applying Optimization & Analytics to Global Supply Chain. USA.: Pearson Education, Inc. p. 1. ISBN   978-0-13-301737-3.
  5. ↑ "How to Reduce Costs through Supply Chain Network Optimization". www.industryweek.com. 2013-07-09. Retrieved 2015-11-05.
  6. 1 2 "When is it a good time for supply chain network design?". www.opsrules.com. Archived from the original on 2016-09-25. Retrieved 2015-11-01.
  7. 1 2 Pishvaee, Mir Saman; Razmi, Jafar (2012-08-01). "Environmental supply chain network design using multi-objective fuzzy mathematical programming". Applied Mathematical Modelling. 36 (8): 3433–3446. doi: 10.1016/j.apm.2011.10.007 .
  8. 1 2 Wassenhove, Luk N. Van (February 2002). "The Reverse Supply Chain". Harvard Business Review. Retrieved 2015-11-05.
  9. ↑ Pishvaee, M. S.; Torabi, S. A. (2010-10-16). "A possibilistic programming approach for closed-loop supply chain network design under uncertainty". Fuzzy Sets and Systems. Theme: Games, Optimization and Discrete Structures. 161 (20): 2668–2683. doi:10.1016/j.fss.2010.04.010.
  10. 1 2 3 4 Trkman, Peter; McCormack, Kevin (2009-06-01). "Supply chain risk in turbulent environments—A conceptual model for managing supply chain network risk". International Journal of Production Economics. 119 (2): 247–258. doi:10.1016/j.ijpe.2009.03.002. S2CID   153556017.
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