Supply Chain / Hoko

1. Supply Chain / Hoko Student will understand the roles supply chains in a business: • Define a supply chain • Understand the components and the effects of a change to one part of the supply chain on the other parts.

2. Supply Chain • A supply chain is a system of organisations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. • Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. • In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. http://en.wikipedia.org/wiki/Supply_chain

3. Supply Chain

4. Supply Chain A typical supply chain begins with ecological and biological regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing size and ever more remote geographical locations, and finally reaching the consumer.

5. Components of a Supply Chain Raw materials Suppliers Manufacturers Distribution Retailers Customers

6. Supply Chain – adding value + + All businesses – wherever they are in the supply chain are dependent on their suppliers and customers, e.g. a drought in Kenya may effect the coffee bean supplies to cafes in Wellington. Value is normally added at each stage of the supply chain, e.g. a sawmill will turn logs into different types of timber.

7. adding value At production • Extracting raw material • Combining resources • Testing for quality • Packaging Through distribution channel • Relocate from factory to retail • Point of sale promotion material • Break in bulk packaging • Retail staff training

8. So why be part of a supply chain? Decreased inventories Reduced labour costs Improved cash flow Improved lead in times product v payment Better reputation

9. Supply Chain – problems!! All businesses – wherever they are in the supply chain are dependent on their suppliers and customers, Problems with any component or part of a supply chain can have negative consequences on the remainder of the chain e.g. a drought in Kenya may effect the supply of coffee beans to NZ roaster which in tune will negatively effect supplies to cafes in Wellington. Supplier can’t supply product (leads to…) Lack of communication and cohesiveness between parties (leads to…) Additional costs added at each step in chain (leads to need of value added at each step ensuring costs < value added)

10. Solution - Supply Chain Management The primary objective of supply chain management is to fulfil customer demands through the most efficient use of resources, including distribution capacity, inventory and labour. In theory, a supply chain seeks to match demand with supply and do so with the minimal inventory.

11. Supply Chain + Supply Chain Management A supply chain, as opposed to supply chain management, is a set of organisations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management' (Mentzer et al., 2001).

12. Supply Chain Management (SCM) Supply chain management (SCM)is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply chain management spans: all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

13. Source: http://www.logistics-consultants.co.uk/example_supply_chain_process.htm

14. e.g: SCM 1. This flow chart shows a typical manufacturing supply chain work flow detailing which areas of the business are involved. 2. The sales department identifies a need for a product. The sales department tell the marketing department about their idea and provide any supporting information / data. 3. The marketing department use business analysts to support the project and to complete the research. 4. Data and supporting evidence is passed back to the marketing department for completion of a business plan. 5. A fully detailed business plan is forwarded to the Business Unit Manager / Directors. 6. This unit comprises of the senior business directors or managers who make a decision on the project.

15. e.g: SCM 7. After approval the plan is passed back to the analysts to prepare and implement the manufacturing process. 8. Details of raw materials and components passed to purchasing. 9. Purchasing work with logistics and transport to plan the purchase and delivery of the materials to the manufacturing plant. 10.Suppliers receive orders for product and then despatch on agreed transport on agreed dates. 11. Carriers approved by the business transport the raw materials and components to the manufacturing site. 12. Products are received into the warehouse and then moved to manufacturing. 13. Finished products are moved from manufacturing to the finished goods warehouse which might be situated locally or in a remote location.

16. e.g: SCM 14. Finished goods are put into inventory awaiting orders. The company computer system is updated. Product is now available to sales. 15. Customers place orders through customer services. 16. Customer Services take orders and input them to the company computer system. 17. The central computer system maintains transaction records and provided visibility of product for sale. 18. An order is completed and a pick list sent to the warehouse. 19. A copy of the order is sent to the export department for completion of export documentation. 20. Export department manages the final despatch of the product and produces any export documents.

17. e.g: SCM 21. Documents are sent to the warehouse to meet up with the finished order. 22. The order is despatched by the warehouse. 23. The transport company collects the consignment and delivers it to the customer based upon the INCO terms of carriage. 24. As stock has now been used the computer system generates a request for new stock. 25. The re-order process generates a request to the purchasing department to place new orders with the suppliers.