Introduction

to

ECT 7240

Supply Chain Management

Definition

A firm’s Supply chain consists of all processes and

activities that are necessary to bring products to market.

It includes

procurement to acquire raw material;

manufacturing to convert raw materials into

components and final products; and

distribution to respond to market demand

• SCM is a set of approaches to manage the SC, i.e.,

• to efficiently integrate suppliers, manufacturers, warehouses, and

stores, so that merchandise is produced and distributed at the right

quantity, to the right location, and at the right time.

• “Efficiently means “minimizing” the system-wide cost while satisfying

service level requirement, or maximizing the total profit.

Suppliers/vendors, service

providers – 3PL, …Production/planning, MPC,

…

Channels, wholesale, service

providers …

A process overview: manufacturing

SCM activities and main business processes

(Source: Ernst and Young Consulting)

Smile Curve 微笑曲線

Source: Adapted from the Stan Shih: Smile Curve concept.

Supply Chain

Example 1: Park’n Shop

Customers Request:

Buying detergent,

towels, heaters, …...

Park’n Shop

Stores

Park’n Shop

or third-

party

distribution

centers

Procter & Gamble (Thail.)

Plastic ProducerYarn Producer

Da-Fa Textile, Inc. (China)

Philico Factory (Malaysia)

Electronics Components Producer

Chemical Producers Color suppliers

Package Producer

Metal Processors

Supply Chain ExamplesSupply Chain Examples

Consumer

Retailer

Mfg.

Mat'l Flow

VISA®

Credit Flow

Supplier

Supplier Wholesaler

Retailer

CashFlow

OrderFlow

Schedules

Information

After sales support

Warehouse

Demand-Supply Web

Pietra Rivoli holds up the Fort Lauderdale t-shirt

that guided her journey.

Can T-shirt

manufacturers

survive in

Africa?

Four Components of SC

Materials flows (inventory)

Transportation

Facilities

Information flows

Cash flows

Looking at these flows -- logistics

Logistics Management and Supply Chain

Management: what are the differences?

• They are ALMOST the SAME THING!

• … but,

– Supply chain include Logistics - containing high level activities

– SCM emphasis more on relationship, and is used more often

when talking to customers and other partners on the

chain/channel, e.g., cost/profit-sharing, choosing suppliers,

coordinating channel…

– Logistics Management focuses more on Materials Flow execution

• Moving, storing, …

– We have a logistics industry but no SCM industry

However, “logistics” people are switching to call

themselves SCM professionals

Logistics Management and Supply Chain

Management: what are the differences?

… often they overlap

SCM activities actually are logistics

activities

Because, interactions between companies

– partners thru 3 flows - two of them are

logistical nature

Course Plan (tentative) Course Plan (tentative)

Session (Date) Process analysis

1 (7/9) Intro., Push & Pull Processes, Demand Forecasting: Chapters 1/7

2 (14/9) Demand Forecasting (continued) and Intro to MRP/DRP: Chapter 7

3 (21/9) Intro. To Inventory Management: Chapter 9

4 (28/9) Managing Uncertainty in SC + : Chapter 11

5(5/10) Design Supply Chains for Short Life Cycle Products: Chapter 12

6 (12/10) Midterm Exam. (90 min) +

7 (19/10) Determining the Optimal Level of Stock: Chapter 12

8 (2/11) Managing risk in operations & Postponement. Chapters 11/12

9 (9/11) Beer Game +

10 (16/11) Supply Chain Coordination/Integration: Chapter 17

11 (23/11) Supply chain coordination: contracts

12 (30/11) Transportation in a SC & Revenue Management: Chapters 13/15

13(7/12) Supply Chain Strategies and Network Design: Chapters 2/3/5

14 (14/12) Final Exam. (open-book/notes)

(Time allowed, green SC will be discussed)

Course Plan Course Plan

How about ECT 7030 Logistics Mgmt ?

Syllabus for ECT7030 Logistics Management (-- stolen )

1. Introduction to Logistics Management

2. Global Logistics Network Design Issues

3. Transportation Strategy

4. Linear Optimization Review

5. Transportation Planning

6. Facility Location

7. Distribution Network Design

8. Warehouse Layout and Material Handling

9. Plant Visit to Hong Kong International Terminal

10. Global Logistics

11. Benchmarking a Supply Chain

12. Quick Response Logistics, Reverse Logistics, Third-party Logistics

Course Objectives

Introduce the SCM vocabulary

Understand major qualitative features regarding the operations of a

SC

Provide some basic SCM analytical tools

Gain insights into the IT implications

Textbooks and ReadingsTextbooks and Readings

Required textbook:

1. Chopra S. and Meindl, P.: Supply Chain Mgmt,

Strategy, Planning & Oper. (3rd edition)

Reference books

1. Designing and Managing the Supply Chain,

Simchi-Levi, D, Kaminsky, P & Simchi-Levi E.

Mcgraw-Hill, 2009.

2. Matching Supply with Demand: An Introduction to

Operations Management, 2nd Edition, by Gerard

Cachon and Christian Terwiesch. McGraw-Hill,

2009.

GradingGrading

There are three major parts to your final grade:

Individual:

There are 4 major parts to your final grade:

Case Preparation (I.e., case reading)

o The instructor will present 3 cases in class.

o These cases are typically long and contain complicated scenarios.

o 2 weeks before the case presentation, you are given a set of questions.

o You should hand in your answers to these questions prior to the class in which we will discuss the case.

o Any late submission will be discarded and marked zero. Those cases will be tested in the final examination.

Assignments (Two Sets) 18%

Case preparation 12%

Midterm (open book/notes) 20%

Final Examination (open book/notes 50%

Make-up

exams are not

offered.

GradingGrading

Assignments

o They consist of short case studies and homework. Assignments

will be graded. Only accept electronic submission is accepted

(via the course email), and the score to later submission will be

discounted according to the number of days of lateness.

Zero tolerance to plagiarism (both parties will be equally penalized).

Final Exam

Final is open-book

Textbooks, notes, everything except …

Combination of quantitative & qualitative questions

May include questions drawn from the cases

Course Logistics Course Logistics

TA:

Note handouts – also available online

My Tel No: 2609-8310, email: yhchen@se.cuhk.

Office Hrs: TBD, Office: Engg-II, 507

Class website www.aect.cuhk.edu.hk/~ect7240

Login ID: ECT7240, password: cEt7240

Teaching Method

Lectures

Topics

Case analysis

Assignments

Game playing (by applying what you

have learnt)

Mathematics: Simple algebra, Basic

Probability & Stat.

Quantitative > Qualitative

Why Take This Course?Why Take This Course?

HK, a service economy, is becoming a log’s/distribution hub

Natural trans-shipment point

Excellent infrastructure / competitive log industry

Many companies have their origin in mfg Working in a logistics company, you are better

acknowledged of your customer’s SCM needs

HK becomes a service economy, HQs here remotely control all flows thru information flow

When you aspire to work in a distribution network, the course provides with cutting-edge concepts/techniques

For general/operations “people”, the course is most relevant

For a business IT analyst, the knowledge is an asset

Logistics/Production/Operations Managers

Buyers

But

purchasing

is not

covered in

this course

End of Introduction

Components take different modes from

different parts of the world; changed hands

several times before reaching the destination

Global Sourcing

wooden casing: sea, Sweden

Cheap peripheral:

van, HK LCD: truck, China

screw: train, China

microphone: air, Japan

microprocessor: air, Malaysia

destination: USA

Customer HiFi Co. Ltd. places an order to Silvery

Consumer Products (a US Dealer/Distributor)

The Story of Pressing a Button

sales, production planning, product

costing, production

World Freight Logistics

container terminal

container

vessel

warehouse

logistics/shipping of Silvery Consumer

• Mr. Simon Smith of the Customer HiFi Co. Ltd. had just completed the

order form for shipment on his computer.

• He double checked the amount and the cost: 1,000 sets of Hi-Fi for $650K. It was not a big deal. Yet the order probably would give him $70K to $85K net profit in six months.

• He pressed the return button of the keyboard. The electronic data was transferred motionlessly and silently. There was no warning.

• Mr. Smith turned off his computer, feeling sorry for the other end of the world; the ants in Hong Kong, or Shenzhen,would start to work crazily when they discovered his button-push a few hours later in their morning.

Mr. Smith was wrong. The ants had already been working

for some time on Smith’s order.

Right after Tommy, Sales Manager of Silvery Consumer

Products, caught the air about Smith’s order, he had

started pressing the Production Planning Department for

the earliest possible delivery date.

Johnny of the Planning Department had to check what

material was available and what was not. Luckily the

order only required standard components. It should be

easy for Johnny to buy, steal, or beg from vendors or other

orders.

It was estimated to complete this order within 2 weeks

Lou Pun took up the phone. “World Freight Logistics,”

he said hastily, while his eyes were still fixing on the

screen.

It was Horace of Silvery Consumer Products on the

other end of the line:

“1,000 sets of Hi-Fi’s. Around Six pallets. Oct. 15,

LA.”

“ When will they be ready?”

“Around the third week of September. There’s

plenty of time. By sea is good enough..”

Services of Freight ForwardersServices of Freight Forwarders

“How about Oct. 17 in LA? Short trip to LA. You mayget your goods ready by 26 or 27 of Sept. Standardcharge.”

“If you want to be in LA on or before Oct. 15, .. . OK,there is one. Woo! Long one; nearly round theworld. Goods must be ready by 20th. Absolutely nolater than that. “

“Another one: well, you won’t try that; first toSingapore; transit there; slightly more expensivethan the first one; store for two days in Singapore.Goods ready by 21st. Which one do you like?”

Orient Overseas

Container Line

“How much is the first one? FOB-HK.

Others are the same as usual.”

– “OK. Pick and pack, customer clearance, and

documentation in Hong Kong. Do you need

custom clearance in LA?” “No.”

Now it was Lou Pun’s turn to calculate. His

fingers flied over the keys of the large Casio

calculator. In less than 10 seconds he told

Horace the exact number.

– Horace seemed happy with the number.

– “Thanks, Horace. We will be at your Buji factory

on 27 of Sept. ”

Free On Board. A trade term which

indicates that the supplier is responsible

to send to the port and load on ship, after

which point the buyer takes

responsibility.

Joseph of Warehouse (under Logistics Dept) had prepared for this moment. Horace had informed him days ago the expected completion time.

Yesterday Joseph had ordered his subordinates to check out the Hi-Fi’s from the warehouse by this time.

Soon, the truck arrived … to the Container Terminal … loaded up to an APL ship (for LA)

Factory Warehouse

A Summary

An order

Horace

Joseph

Silv

er

Co

nsu

me

r P

rod

uct L

td

Types of Players

customers:

shippers send and

consignees receive

Manufacturers/

Distributors/

Retailers

Divisions of

Logistics

Transportation

Operations

Planning

Warehousing

carriers:

provide means

of

transportation

Cargo

Consolidators

Warehouse

Operators

warehouse

operators:

provide all sort of

storage needs

Consolidators: build

up and breakdown

cargoes

Air-cargo,

Ocean,

Rail

Terminals

Air-cargo,

Ocean,

Rail

Terminals

terminal operators: provide

facilities to (temporarily)

store, sort, change carriers,

and change hands for

cargoes

freight forwarders: the

travel agents of

cargoes

Logistics Service Companies, e.g. Express, Trucking,

Third-party Logistics

Agents: Forwarders who take care of the headache for

shippers and consignees

Carriers e.g.

Airlines, Rail,

Ocean Liners

實際營運人

When & Where

In every transaction, there is a point in both time & geography,

Where/when does the title to the goods change?

Who’s responsibility for insurance and caring for the shipment (say, a horse) change?

Who’s responsibility for paying & arranging transportation charge?

Jan. 18,

2007.

A Panama-flagged oil tanker split in two before

it sank near the Red Sea entrance to the Suez

Canal on Friday. August 30th, 2009

International payment is the most difficult link of international trade chain – pay or delivery cargo – who first

The process of exporting is incomplete without receipt of payment. Export income is considered earned only when payment has been received

Thousand miles between the Seller and the Buyer

Seller: sending out, but afraid of not getting paid (timely and rightly)

Buyer: paying, but afraid of not getting the right good (quant/quality/time,…)

Banks, insurances, legal services, …