Supply Chain

Business Plan, Supply Chain Strategy, Collaboration Relationships

The following topics are discussed in this section:

Business Plan

  • A business plan is a written document that describes the overall direction of the firm and what it wants to become in future.

(Definition) Business Plan is a statement if long-range strategy and revenue, cost and profit objectives usually accompanied by...Read More »

Organizational Strategy

The following topics are discussed under this section:

Goals of Organizational Strategy

  • Whatever strategy the corporation adopts to satisfy customers, grow, compete, organize itself and make money the supply chain has to operate in a manner that furthers those goals.
  • Four types of organizational strategy:
    • Customer focus and alignment
    • Forecast driven enterprise
    • Demand driven enterprise
    • Product type...Read More »

Business Strategy and Competitive Advantages

Following topics are discussed in this section:

Business Strategy

  • Least cost relates to a lower cost flow than competition for an otherwise equivalent product or service.
  • Differentiation relates to a product or service with more features, options or models than the competitive.
  • Focus relates to weather the product or service is designed for a...Read More »

Supply Chain Alignment with Business Strategy

(Definition) Strategic Plan is a plan that describes how to marshal and determine actions to support the mission, goals and objectives of an organization. It generally includes an organization’s explicit mission, goals and objectives and the specific actions needed to achieve those goals and objectives.

The supply chain...Read More »

Accounting and Financial Statement Basics

The Flow of Funds

  • The flow of money or funds goes upstream from customer to producer and from producer to supplier as intermediate or final products or service are paid for.
  • This funds flow is not linear since some upstream payments may occur long before the final good or service is even...Read More »

Supply Chain Management Benefits

The numerous benefits of marketing supply chain management practices, systems and technologies include:

  • Improved market knowledge.
  • The three Vs – Increase velocity, increased visibility, and reduced variability in the flows of goods and services, funds and information.
  • Integrated operations.
  • Improved management of risk.
  • Increased sustainability.

Improved Market Knowledge

  • With supply chain management in place, partners in the...Read More »

Supply Chain Management Objectives

Supply chain is more accurately viewed as a set of linked processes that take place in the extraction of materials for transformation into products or perhaps services for distribution to customers.

(Definition) Supply Chain Management is the design, planning, execution, control and monitoring of supply chain activities with the...Read More »

Stages of Supply Chain Management Evolution

Stage 1: Multiple Dysfunction

The nucleus firm lacks clear internal definition and goals and has no external links other than transactional ones.

In the dysfunctional organization, this is what tends to happen:

  • Internal activities tend to be undertaken impulsively rather than according to plan.
  • Management provides only the most general sense of mission, communicated...Read More »

Vertical Vs Horizontal Integration

Shift from Vertical to Lateral (Horizontal) Supply Chain Management

  • Vertical integration, or vertical supply chain management, refers to the practice of bringing the supply chain inside one organization.
  • It is difficult for one corporation to garner the expertise needed to excel in all elements of the supply chain, and it increases their...Read More »

The SCOR® Model

(Definition) The SCOR® model is a process reference model developed and endorsed by non-profit corporation, the Supply Chain Council (SCC), as the cross-industry standard diagnostic tool for supply chain management.

Basic Supply Chain

  • In the past the strategic focus for many organizations was on improving their internal quality and reducing costs, the new focus is on implementing total supply chain solutions that require collaboration from partner organizations both upstream and downstream.
  • Forces that will impact virtually every supply chain:
    • Global Expansion
    • Increased project complexity and scope
    • Great...Read More »

Demand Management Functional Responsibilities and Interfaces

Demand management has functional responsibilities and interfaces that include:

  • Product Development and brand management
  • Marketing
  • Sales
  • Operations

Demand management serves as an intermediary between product development and brand management, marketing, sales, and operations so that all of these functions plans, communications, influences, and priorities are coordinated to maximize and satisfy demand.

Demand management interfaces with product...Read More »

Collaborative Planning, Forecasting and Replenishment (CPFR)

  • Collaborative planning, forecasting and replenishment (CPFR®) is a way to integrate the elements of demand management among supply chain partners.
  • CPFR is:
    • A collaborative process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and...Read More »

Linkages to Match Organizational Strategy

Planning Demand (fixed high capacity strategy)

  • The organizational strategy is to meet demand to the maximum extent possible by providing the necessary capacity to meet peak demand at any time.
  • Ensuring that capacity will be available requires a focus on planning demand, especially in terms of long-term planning.
  • Such a strategy could be...Read More »

Linkages as a Cycle

On a conceptual level, the following picture shows how the elements are cyclical. All of these elements are necessary for long and medium term planning. However, at the short term operational level, the dotted lines show how the cycle can be shortened to reduce the need for management and prioritization...Read More »

Linkages Among the Elements

Planning, communicating, influencing, and managing and prioritizing demand can be linked in several ways, including:

...Read More »

Managing and Prioritizing Demand

  • Managing and prioritizing demand requires an organization or supply chain wide view of demand.
  • It involves optimizing demand across the system as measured by optimum organizational profit, demand volume, sales revenue, and customer service, including customer retention.
  • This is a management activity because it involves setting and enforcing policies to promote this...Read More »

Influencing Demand

  • Influencing demand describes the activities of product and brand management, marketing, and sales to convince customers to purchase the organizations products and services so that the organizations business objectives are met or exceeded.
  • Another aspect of influencing demand is the requirement for the demand side of the organization to influence the...Read More »

Communicating Demand

Communicating demand rests on several principles of effective communication:

Communicate soon to minimize surprises

  • Communicating soon to minimize surprises is the principle that information communicated promptly is of far greater value than delayed communications for any reason. This is true for both good news as well as for information that is still...Read More »

Planning Demand

  • Planning demand is one element of demand management and is not to be confused with demand planning, which is the larger process of forecasting and demand management that is the subject of this entire section.
  • A key output of the demand planning process should be regular updates to the demand plan.

The...Read More »

Elements of the Demand Management Process

The Demand Management Process is a process that weighs both customer demand and firms output capabilities, and tries to balance the two. Demand management is made up of planning demand, communicating demand, influencing demand and prioritizing demand.

Demand management seeks a balance...Read More »

Demand Management




  • Demand management is a key part of the sales and operations planning (S&OP) process and the integrated business planning functions at an organization because it results in a demand plan that is used in and modified by these integration processes.
  • The S&OP is a disciplined monthly review process by...Read More »

Measures of Forecast Error

Since the first principle of forecasting is that forecasts are (almost) always wrong, organizations need to track the forecast against actual demand results and find ways to measure the size and type of error. Note that the size of an error can be measured in units or percentages, but often...Read More »

Qualitative Methods

  • When a product is new, however, or when data are lacking for one reasons, you have to rely on judgement and intuition. In such cases, you are best advised to find the most experienced, market-savy, objective person – or better yet, group of experts – and rely on them for...Read More »

Quantitative Methods

Quantitative forecasting techniques rely on historical data. They can be divided into two types:

  • Extrinsic
    • (Definition) Extrinsic Forecasting is a forecast method based on a correlated leading indicator, such as estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations, such as...Read More »

Quantitative and Qualitative Forecasting

Quantitative Forecasting Techniques

(Definition) An approach to forecasting where historical demand data are used to project future demand. Extrinsic and Intrinsic techniques are typically used.

Qualitative Forecasting Techniques

(Definition) An approach to forecasting that is based on intuitive or judgmental evaluation. It is used generally when data are scarce,...Read More »

Demand Forecasting Concepts

  • (Definition) Forecasting is the business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.
  • (Definition) Demand Forecasting is forecasting the demand for a particular good, component, or service.
  • Forecasts are subject to uncertainty,...Read More »

Define Demand and Demand Planning


A need for a particular product or component. The demand could come from any number of sources (for example: a customer order or forecast, an interplant requirement, a branch warehouse request for a service part or the manufacturing of another product).

Demand Planning

Using forecasts and experience to...Read More »

Understanding the Wants & Needs of Each Segment

Understanding the wants and needs of each segment involves market research and gathering information from multiple sources, including customers themselves, which is called the Voice of Customer (VOC).

Market Research

The wants and needs of prospective and existing customer segments may require phone surveys, questionnaires, focus groups or combination of these approaches.

Sources...Read More »

Ways to Segment Markets

Segmentation can be based on any number of criteria selected to suit a particular purpose, and each class may be segmented in more than one way.

Market segments can be defined by demographic characteristics such as gender, geography, age, occupation and wealth. Demographic categories can also be refined or customized.

Customers can...Read More »

Reasons to Identify and Understand Market Segments

  • The primary reason to identify and understand market segments is to increase the organization’s profits (or its equivalent) over the long term.
  • (Definition) Customer Segmentation is the practice of dividing a customer base into groups of individuals that...Read More »

Reverse Logistics

  • (Definition) Reverse Logistics is a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.
  • (Definition) Reverse Supply Chain is moving items from the consumer back to the producer for repair or disposal.

Motivating Factors

Following are some...Read More »

Logistics Service Providers – 3PL & 4PL

  • Third Party Logistics (3PL) and Fourth Party Logistics (4PL) refer to the outsourcing of some or all logistics operations.
  • The most compelling reason to let another party take over logistics functions is the decision to focus on core competencies – a common supply chain strategy.
  • The recent...Read More »

    Role of Logistics in Supply Chain


    • (Definition) Logistics is the art and science of obtaining, producing and distributing material and product in the proper place and in proper quantities.
    • This involves management of:
      • Order processing
      • Warehousing
      • Transportation
      • Materials handling
      • Packaging

    All of this should be integrated through a network of facilities.

    • Logistics adds value to the supply chain process if inventory...Read More »