Supply Chain as a System

A supply chain can be perceived as a social-technical system. The system is defined as a tuple  

System = Components, Interrelationships, Boundary, Purpose, Environment, Input, Output, Interface, Constraints  

Refining the system s properties specifically to the supply chain case yields  

As for any other system, the key properties of the supply chain system are decomposition, modularity, coupling and cohesion. The supply chain can be decomposed starting with the top level network. As stated above, the top level network consists of units having distinct legal or spatial characteristics. The units are further decomposed to represent their internal structure. For instance, a warehouse consists of multiple docking places and subdivisions. The decomposition is related to different levels of supply chain decision making. There are decisions (1) associated with the entire supply chain (2) made at the unit level and (3) made 

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Companies also find, as they mature, that it is difficult to get the complement of metrics necessary to view the supply chain as a system. There are six metrics in supply chain management that are tightly woven with intrinsic trade-offs. These metrics are asset utilization, days of inventory (or inventory turns), forecast accuracy, customer service (on-time delivery of orders shipped complete), cost of goods, and revenue growth. 

Environmental protection. Supply chains as a system operate and interact with its environment including they impact on nature and consumption of natural resources. Increasingly supply chain management decisions are made with regard to these concerns. 

Think of the supply chain as a complex system. How do you make the right trade-offs ... 

In the functional organization, strong department heads sponsor change projects. Cross-talk in pursuit of interdepartmental process improvement is minimal. Information systems also center on the needs of the departments. Projects may or may not improve the supply chain as a whole. In fact, a local optimum can be injurious to the whole, yet department heads take credit for their savings. Where the functional viewpoint prevails, the actual impact of improvement projects on the total supply chain is not measured. 

A traditional strategic assessment gathers together information in the context of the company. But as we move into the new competitive model, we need to think of the organization as including the supply chain as a whole so that our systems become end-to-end solutions and data becomes accessible throughout the supply chain. 

Given the supply-chain context of this book, we will consider only the management of independent-demand items—i.e., those items that move between firms in the supply chain. Throughout this book, we focus on issues related to node-to-node relationships in the supply chain, consistent with the framework developed in Chapter 1 that defines a supply chain as a network of nodes. Dependent demand involves "within-node" effects and is outside the scope of this book, but is discussed extensively in books on production/operations planning and control systems (e.g., Vollmann et al., 2005 or Chapman, 2006, which also contains an excellent discussion on hybrid systems that combine appropriate elements of MRP and kanban control). Note, however, that the classification of an item as an independent-demand item or a dependent-demand item is not an absolute characterization. Rather, it only makes sense in context. For example, to the company that assembles the cell phones, the keypad is clearly a dependent-demand item, provided that its only demand is derived from the production schedule for cell phones (i.e., not from sales of keypads as stand-alone items). To the firm that produces the keypads and sells them to various cell phone manufacturers, however, the keypad is an... 

Many of the software systems available on the software market are designed for the planning and control of production and procurement, as well as for engineering and supply chains. As a potential user, you are faced with the question of which system is best suited to your enterprise. 

As suppliers take on more responsibility for technology innovation, they will need to become more agile and adept in managing the technology portfolio. This may create opportunities for the entry of more established suppliers from the consumer electronics to create modular systems. In some cases suppliers with high business volumes (because of multiple customers) can advance technology much more effectively than the OEM. The supply chain, as a whole, must determine what kind of partnership would be most effective. In what follows, we describe some of the elements of supplier management (shown in Fig. 4.1). 

Treat the supply chain as a complete system small changes made to optimise one echelon of the supply chain can result in massive changes in other parts of the chain. Driving down inventory and lead times may not always improve performance, it could result in the system slipping into chaos. 

Corporate management systems in the areas of environmental protection, employee protection and consumer protection should be integrated further to avoid a shift in risks and also to save costs. All areas require reliable and systematic data about substance properties and application-related exposure. Mechanisms are also required for effective dialogue along the supply chain as well as between companies and authorities. In addition, the comparative assessment of chemical products (for example, in purchasing or in product development) can only be done intelligently if all essential risk areas are included in the evaluation. 

For the networking systems of natural gas supply chains, the modular systems provide the designers and the process planners with a different (and independent) toolkit without restricting the application area. This is conceived as a new high-level tool for the representation of engineering knowledge and support that can be useful for the reduction of time and cost of the development and implementation of integrated distribution systems. 

For medical devices, inspectors expect to see a process improvement program in place encompassing all activities within the supply chain, including the systems that support it. Activities that would provide evidence that such a program is in place include the implementation of documented processes such as Corrective and Preventative Action (CAPA), self-inspection, and internal audits." Organizations should ensure that where an SOP has been put in place to initiate a process improvement activity, the SOP is adhered to. For example, if a quality audit SOP states that all areas shall be subject to audit at least once every 2 years, then inspectors will expect to see evidence that this has been the case. Failure to do so is likely to result in a citation similar to that issued to Krieger Medical, Inc. ... 

Supply Chain Coordination—Growing Network and Collection Recruitment A supply chain is defined as a system of suppliers, manufacturers, distributors, retailers, and customers where material, financial, and information flows connect... 

One approach for the seamless support of the entire supply chain of a company are so-called ERP systems (enterprise resource planning) [811]. The basic idea of an ERP system is that of a centralized database, which stores company-wide all relevant data concerning the business processes. This approach fails, because a monolithic ERP system cannot fulfill all conceivable requirements in general [817]. Nowadays, a typical company uses on average 50 different, mission-critical applications for the support of its business processes, as empirical studies have shown [830]. Furthermore, for economic reasons it is not feasible to replace these legacy systems by new applications [973]. 

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