Copyright © 2016 Pearson Education, Inc.

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Muhammad Faisal
Notable Quotes
“If your supply chain runs without many problems you either have a great
supply chain or running very fat.”

“Supply chains are everywhere. From the biggest company in the world to
running your household. We all have supply chain experience even if we
don’t know it.”

“Competition is becoming less between individual companies, and more

between the supply chains they are part of.”

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Given how quickly and continuously everything is changing these days,

It is essential to understand analytically the

functioning of supply chains and to be able
to know what strategies will produce the best
results.

Competition is no longer between companies

– it’s between Their supply chains.

In today's globalized and interconnected

world, competition isn't just about who has
the best product or service—it’s about who
has the most efficient, resilient, and agile
supply chain.
Growth is our mantra as an
organization. We know that

if you’re not growing,

you’re dying.

So we have to make sure that in

the supply chain organization,
we’re positioning our self for that
growth.
Introduction
• Linear & Circular Economy

• What is Supply Chain Management?

• Definitions and objectives of supply chain

• Basic Flows in Supply Chain

• Rights of Supply Chain Management

• Basic supply chain concepts and terminologies

• Supply chain decisions and cycle view

• Push & Pull view/ Push and pull boundary

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Introduction
• Linear & Circular Economy
• What is Supply Chain Management?
• Definitions and objectives of supply chain
• Basic Flows in Supply Chain
• Rights of Supply Chain Management

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Linear Economy
• Linear economy, sometimes referred to as the take-make-waste economy, is a
system where resources are extracted to make products that eventually end up as
waste and are thrown away
• Products and materials are generally not used to their full potential in a linear
economy and, as the name suggests, always move in one direction – from raw
material to waste
• It is a polluting system that degrades natural systems and is the driver of global
challenges, including climate change and biodiversity loss
• Soils that are being degraded, the ocean that is being polluted, the Biodiversity that
is being lost, the Freshwater that is drying up, and the forests that are being felled.

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Linear Economy

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 Circular Economy
• The circular economy is a systems solution
framework that tackles global challenges like
climate change, biodiversity loss, waste, and
pollution
• The circular economy is based on three
principles, driven by design:
• Eliminate waste and pollution
• Circulate products and materials (at their
highest value)
• Regenerate Nature
• https://ellenmacarthurfoundation.org/circular-economy-diagram
• https://www.youtube.com/watch?v=zCRKvDyyHmI

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Circular Economy

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Here are three everyday objects. Take a minute to ask yourself:

• What are they made from?

• How are they made?
• How is money made from them?
• Where will these products be in 25 year’s time?

We are all part of a Supply Chain in everything we buy 11

Different Perspectives on Supply Chain
Supply Chain – A Term with Many Definitions

Ask three business professionals to define supply chain, and you’ll likely get three different answers!

Why? Supply chains involve multiple functions, and each person sees it from their own perspective.
Different Perspectives on Supply Chain
• Procurement & Raw Materials--Some view the supply chain as purchasing, procurement, and
sourcing of raw materials and components for production

• Warehousing & Distribution-Others associate it with storage, transportation, and retail channels
that move products to customers

• Capital & Human Resources-Some even consider financial flows and human resources as part of
the supply chain

• The supply chain is an interconnected system that includes procurement, production, logistics,
finance, and workforce management.

• Understanding these different perspectives helps businesses optimize their supply chains for
maximum efficiency and value.
What is Supply Chain?
• A supply chain consists of all parties involved, directly or
indirectly, in fulfilling a customer request

• The supply chain includes not only the manufacturer and

suppliers, but also transporters, warehouses, retailers,
and even customers themselves
• Within each organization, such as a manufacturer, the
supply chain includes all functions involved in receiving
and filling a customer request

• These functions include, but are not limited to, new

product development, marketing, operations,
distribution, finance, and customer service
Definition
The Council of Supply Chain Management Professionals (CSCMP)
“The planning and management of all activities involved in sourcing and
procurement, conversion and all logistics management activities.
Importantly, it also includes coordination and collaboration with channel
partners, which can be suppliers, intermediaries, third-party service
providers and customers.”

The Institute for Supply Management (ISM)

“The design and management of seamless, value-added processes across
organizational boundaries to meet the real needs of the end customer.”
 Supply Chain Network
• Every product that reaches an end user
represents the cumulative effort of
multiple organizations.

• These organizations are referred to

collectively as the supply chain

• A supply chain is comprised of all parties

which are involved, directly or indirectly,
in fulfilling a customer request
History of Supply Chain Management

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Supply
Strength of Supply Chain

A chain is only as good as its weakest link

Recall that saying? The saying applies to the principles of building a
competitive infrastructure
A Basic Chain Structure - Channel

Supplier Manufacturer Distributor Retailers Customer

Chain’s Strength
Strong, well-structured supply chains are critical to sustain competitive
advantage.
A Basic Chain Structure - Channel

Supplier Manufacturer Dealers Customer

A Basic Chain Structure - Channel

Supplier Manufacturer Reatailer Customer

 A Basic Chain Structure - Channel

Supplier Manufacturer Customer

• A supplier-manufacturer-customer supply chain is a more direct model where goods flow from suppliers to
manufacturers and then directly to customers, without intermediaries like dealers or retailers.
• This model is common in B2B (business-to-business) transactions and industries where companies sell
directly to consumers.
 Intermediaries in Supply Chain
• Intermediaries play a crucial role in supply chains

• They improve efficiency, reach, and customer service

• Intermediaries act as middlemen between manufacturers and customers

• They help in distribution, logistics, and financing of goods

• Reduce the burden on manufacturers by handling storage, sales, and customer service

• Expertise & Market Knowledge – Help in pricing and promotions

• Increased Costs – Adds a margin, making products more expensive

• Loss of Control – Manufacturers rely on intermediaries for branding and customer experience

• Communication Gaps – Can lead to misalignment in demand and supply.

 Intermediaries in Supply Chain
• Wholesalers – Buy in bulk from manufacturers and sell to retailers

• Dealers act as a link between manufacturers and customers, Authorized seller with services typically in
industries like automobiles, machinery, electronics, and heavy equipment.

• Distributors – Manage regional supply and often provide after-sales support

• Retailers – Sell directly to end consumers (e.g., supermarkets, e-commerce)

• Agents/Brokers – Facilitate deals but don’t take ownership of goods

• Third-Party Logistics (3PLs) – Handle transportation, warehousing, and fulfillment

Distribution Supply Chain

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Detergent Supply Chain
Assemblers Supply Chain

https://pama.org.pk/wp-content/uploads/2022/04/AIDEP-2021-26.pdf
Supply Chain for
Milk Products
https://www.ocac.org.pk/oil-industry-statistics/
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Supply Chain Objective
• Maximizing Overall Value Generated
• The primary goal of every supply chain is to maximize the total
value it creates.
• This value is known as Supply Chain Surplus.
• The objective of every supply chain should be to maximize the
overall value generated

• Supply Chain Surplus = Customer Value – Supply Chain Cost

• Customer Value: The worth of the final product to the customer.
• Supply Chain Cost: The total cost incurred in fulfilling the
customer’s request.
• A successful supply chain aims to maximize this surplus rather
than focusing only on individual profits.

• Supply chain success should be measured in terms of supply

chain surplus and not in terms of the profits at an individual
stage.
 Supply Chain Objective
• Why Focus on Supply Chain Surplus?
• Traditional Approach: Companies focus on profit at each stage
(supplier, manufacturer, retailer).
• Better Approach: Optimize the entire supply chain to maximize
overall surplus, benefiting all stakeholders.

• Apple's iPhone Supply Chain

• Customer Value: A customer is willing to pay $1,000 for an iPhone.
• Supply Chain Costs:
• Component Suppliers: $300
• Manufacturing: $200
• Logistics & Distribution: $100
• Retail & Marketing: $150
• Total Cost: $750
• Supply Chain Surplus = $1,000 - $750 = $250
• Instead of focusing on profits at each stage, Apple optimizes its
entire supply chain to reduce costs, improve efficiency, and
enhance customer value.
Supply Chain Objective
Supply Chain Profitability (Maximum overall value created)

Supply Chain Surplus = Customer Value - Supply Chain Cost

Example:
English Biscuit Manufacturing 5=20-15 (Sooper)

Continental Biscuit 3=20-17 (Bakery)

In a Nut-Shell: Supply Chain Value is correlated to bottom-line i.e. SC profitability (difference between revenue
generated and the overall cost across SC)
Maximizing the Value

The Right To The Right At The Right At The Right In The Right In The Right At The Right
Product Customer Time Place Quantity Condition Cost

Using The
Through The With The
From The Right
Right Right
Right Source Technology
Channels Paperwork
Maximizing the Value

The Right To The Right At The Right At The Right In The Right In The Right At The Right
Product Customer
The Right
Time Place Quantity Condition Cost

From The
Strategy
Through The
Right
With The
Right
Using The
Right
Right Source
Channels Paperwork Technology
Basic Supply Chain Flows

Supplier Manufacturer Distributor Retailers Customer

Material / Goods

Information

Funds / Money
Basic Supply Chain Flows
Product Flow Financial Flow Information Flow
• This is the flow of the physical • Financial flow involves the • This is the flow of information
product from the supplier to the movement of money from the from supplier to customer and
customer customer to the supplier. from customer back to
supplier. This flow is bi-
• This flow is usually uni- • When the customer receives the directional, that is, it goes
directional, that is, it only flows product and verifies it, the both in directions in the
in one direction from supplier to customer pays and the money supply chain
the customer; however, in travels back to the supplier. • The types of information that
certain instances, when the
flows between customers and
customer returns the product,
suppliers are quotations,
the flow occasionally goes in the
purchase orders, delivery
other direction.
status, invoices and customer
complaints

By understanding your supply chain and how products, information, and money flows through it ,then you
will be in a good position to find several inefficiencies and figure out how to significantly improve your
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business.
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REFERENCES

• Chapter 1, Introduction to Supply Chain Management

Supply Chain Management (3ed.) by Chopra, Meindl and Kalra

• Chapter 1, Introduction to Supply Chain Management

Principles of Supply Chain Management by Wisner, Leong & Tan

https://www.youtube.com/watch?v=Mi1QBxVjZAw&t=196s