What is a Supply Chain

Tom becomes the supply chain manager inABC company. He has noted that many employees don’t understand what a supplychain is and what they will do. So, he proposes that the HR department hold atraining course on supply chain. This is the first class and Tom is the teacher.

Tom:Good morning,everyone. I’m very happy to talk with you about supply chain. Afamous American economist, Christoph, says that “There are only existsupply chains, but not enterprises, in the market”. But, unfortunately many ofour staff are not quite sure about supply chain and supply chain management.

Staff1:Excuseme, sir. I have a question about supply chain.

Tom:Pleasego ahead.

Staff1:Whatis a supply chain?

Tom:A supplychain is a complex logistics system in which raw materials are converted intofinished products and then distributed to the final users.

Staff1:Thenwhat is the difference between logistics and the supply chain?

Tom:Actually,logistics is a part of the supply chain process. A supply chainfocuses on the whole distribution process, in which goods are delivered fromsuppliers through distributors to end users.

Staff2:Whatis SCM-supply chain management?

Tom:SCM isused to integrate, coordinate and control the flow of material,information and finances in supply chains.

Staff2:Whyis supply chain management important?

Tom:The mostimportant factor is that the elimination of inefficiencies in supply chains cansave companies millions of dollars.

Staff2:Wouldyou explain that in more detail?

Tom:Certainly.The objectives of the supply chain are to optimize pre-production and post-production inventory levels, obtain greater efficiency from labor, equipmentand space across the company and provide flexible planning and controlmechanisms.

Staff2:Now Isee. Thanks you.

Tom:You arewelcome. I believe that we can build an efficient supply chain if we all standshoulder to shoulder.

What is the Difference between MTO andMTS

Tom, the supply chain manager in ABC company,is in his second training class. The following is the dialogue between him andthe staff.

Tom:In theprevious lecture, we learned the definition of supply chain and you alreadyknow the difference between logistics and supply chain. Today, we are going tolearn more about supply chain as well as supply chain management.

Staff 1:Iknow that there are two typical supply chain categories: the pull and the pushsystems.

Tom:Right.

Staff 1:Whatdoes MTO mean?

Tom:MTOstands for “make to order”.

Staff 2:Howdoes it work?

Tom:Themanufacturer does not begin to make the product until or unless after itreceives the order from the customer.

Staff 2:Howabout inventory?

Tom:MTO isan order-driven supply chain model and in this model the manufacturer does nothold inventories in usual cases.

Staff 2:Itseems that MTS—make to stock—is the opposite of MTO.

Tom:Yes.

Staff 3:I’mcurious how MTS works.

Tom:In thecase of MTS, the production planners will forecast and estimate the effectivedemand and inventories are held in warehouse and at the retailers.

Staff 3:SoMTS is a forecast-driven supply chain model. Now I get the difference betweenMTO and MTS.

Tom:You’vegot it! 

Handling the Process in a Supply Chain

Mr. Johnson is a business manager and he is talking with Tony Edwards, a logistics operator, in an international logistic company.

Johnson:Tony, could you please come over here?

Edwards:Yes?

Johnson:A truck is at the warehouse gate. Go and check what will be unloaded.

Edwards:(coming back a few minutes later) Mr. Johnson, a container chassis is at the gate and our workers are unloading the carton cases. Hard disks are in the cartons.

Johnson:Well, now you can call the customs officers. Tell them to be on site, since these cargoes are going to be delivered to Austria. According to the sales contract, we are responsible for customs clearance.

Edwards:Some customs officers are there now.

Johnson:All right. Now, you need to check the storage space for these goods.

Edwards:When will the goods be leaving?

Johnson:They will leave for the airport the day after tomorrow. So, they should be arranged near the other end of the warehouse.

Edwards:OK, no problem. I think they can be placed at the shelves No. 11 and No. 12.

Johnson:Good. you direct the handling.

Edwards:OK.