Essentials of supply chain management. chapter 2

CHAPTER 2. Supply Chain Operations: Planning and Sourcing

After reading this chapter you will be able to
– Gain a conceptual appreciation of the business operations
In any supply chain
– Exercise an executive level understanding of operations
Involved in supply chain planning and sourcing
– Start to assess how well these operations are working within
Your own company.

As the saying goes,”It’s not what you know, but what you can remember
When you need it.” Since there is an infinite amount of detail
In any situation, the trick is to find useful models that capture the
Salient facts and provide a framework to organize the rest of the relevant
Details. The purpose of this chapter is to provide some useful models of
The business operations that make up the supply chain.

A Useful Model of Supply Chain Operations
In the first chapter we saw that there are five drivers of supply chain
Performance. These drivers can be thought of as the design parameters
Or policy decisions that define the shape and capabilities of any supply
Chain. Within the context created by these policy decisions, a supply chain goes about doing its job by performing regular, ongoing operations.
These are the “nuts and bolts” operations at the core of every
Supply chain.
As a way to get a high level understanding of these operations and
How they relate to each other, we can use the supply chain operations
Research or SCOR model developed by the Supply-Chain Council
(Supply Chain Council Inc., 1150 Freeport Road, Pittsburgh, PA 15238,
Www. supply-chain. org). This model identifies four categories of operations.
We will use these following four categories to organize and discuss
Supply chain operations:
– Plan
– Source
– Make
– Deliver


/> This refers to all the operations needed to plan and organize the operations
In the other three categories. We will investigate three operations
In this category in some detail: demand forecasting; product pricing; and
Inventory management.

Operations in this category include the activities necessary to acquire the
Inputs to create products or services. We will look at two operations here.
The first, procurement, is the acquisition of materials and services. The
Second operation, credit and collections, is not traditionally seen as a sourcing
Activity but it can be thought of as, literally, the acquisition of cash. Both
These operations have a big impact on the efficiency of a supply chain.

This category includes the operations required to develop and build the
Products and services that a supply chain provides. Operations that we
Will discuss in this category are: product design; production management;
And facility and management. The SCOR model does not specifically
Include the product design and development process but it is
Included here because it is integral to the production process.

These operations encompass the activities that are part of receiving customer
Orders and delivering products to customers. The two main operations
We will review are order entry/order fulfillment and product
Delivery. These two operations constitute the core connections between
Companies in a supply chain.
The rest of this chapter presents further detail in the categories of
Plan and Source. There is an executive level overview of three main
Operations that constitute the Planning process and two operations that
Comprise the Sourcing process. Chapter 3 presents an executive overview
Of the key operations in Making and Delivering.

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