[SOUND] Welcome to our lecture on supply chain concepts where we will introduce the various elements of supply chain, and how they work together to create the integrated supply chain model. Upon completion of this lesson, learners should be able to provide a definition of supply chain, and identify the core components of supply chain. Let's begin by discussing the overall objective of the supply chain. Which is the transformation of raw materials and components into a finished product that is delivered to the end customer or consumer. Raw materials are basic, unprocessed materials that are used to produce goods, finished products, energy or intermediate materials. Which are used as imputes to the creation of finished products. Examples may include sand, petroleum, trees, and minerals. Finished products are items that are consumed by an end customer, otherwise known as a consumer. We will see that there may be many customers throughout a supply chain. However, the end customer that consumes the finished product is known as the end consumer. Examples of finished products may include gasoline, furniture, and smart phones. Let's now take a look at a more complete definition of supply chain. Some elements of this definition that I'd like to focus on first, the types of flows. Information flows, financial flows, and physical resource flows. This introduces us to the concept that it takes more to move raw materials to end consumers than simply physical flows. Thought has to be put in to planning, communicating, and paying for those physical flows. Payment such as the sourcing of raw materials, paying for freight movements, paying for manufacturing operations, etc. Another element to this definition that we should focus in on is that supply chain is composed of various planning processes. Internal and external organizations involved in transforming and moving goods. And individuals motivated by compensation and metrics programs, to transform and move items. From raw materials to end consumers, a final point to note is that the word service is included in the definition of supply chain. And as we go through the course we will learn more about how service supply chains are differentiated from manufacturing oriented supply chains. Let's take a look at the definition provided by the Council of Supply Chain Management Professionals, which is also known as CSCMP. Supply chain encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management. It also includes coordination and collaboration with channel partners which may be suppliers, intermediaries, third party service providers, or customers. This definition is more comprehensive in that it clearly spells out that sourcing and procurement are part of supply chain. As is conversion activities, otherwise known as manufacturing. And logistics activities, such as transportation, warehousing, and inventory control and management. The definition also brings to bear the thought that supply chains are not single entity activities. There likely third parties involved with providing warehousing, transportation, or manufacturing as items are transformed and moved and stored from raw material state to finished good state. While supply chain have been around since the dawn of the time. The integrated supply chain concept is relatively new. With the term supply chain first being used in the 1980s, before the term supply chain was used, the individual elements of supply chain were treated as independent activities. Where housing separate from manufacturing, manufacturing separate from sourcing. Sourcing separate from transportation etc, all activities working with separate sets of matrix and often competing against the each other. Without the supply chain concept in place, manufacturing operations were driven by a metric to reduce cost per case. To reduce cost per case, manufacturing needed to have long continuous runs on a single product. This may save a couple of pennies per case for discussion purposes, however, by producing large runs on a single item saving two cents per case. Customer service may suffer as the appropriate mix of various flavours may not be produced in time to meet customer demand for a mixed assortment of beverages. Additionally warehousing operations and transportation operations, and inventory management operations may all suffer from excessive lengths of manufacturing runs. And an example of this can be seen in that a capacity constrained warehouse may need to incur additional labor and lease costs. And transportation costs to shuttle around ineffectively stored product and excess inventory may be damaged through this excess handling of moving products. Within a warehouse to get to the needed products and moving excess product to temporary storage and back, so, A key learning is to recognize that supply chain should be viewed as an integrated set of activities and flows that must work together to effectively balance supply and demand. This diagram presents a typical network representation of the supply chain representing the various tiers in the supply chain. Transformation from raw materials to finished goods. There're many steps in a supply that take place in internal to a company and many more that take place through the use of third parties. I think if you think about it for a minute, you can see how some supply chains are very simple. Say the creation of orange juice, with relatively few numbers of raw materials versus more complex supply chains. Associated with products such as smartphones with a large number of parts and components coming together to create the finished product. Those supply chains for items such as orange juice can be more complex than thought of at first. If you think about it, in that there's more than just oranges that need to be squeezed to get the product to the end consumer. There are containers, there are boxes, there are pallets, etc, that all need to come together at finished products manufacturing point to support the transport of the finished products. Through distributors and retailers to the end consumer, so supply chain is really as simple as it may seem. We now present a somewhat comprehensive graphical representation of the integrated supply chain process. We have discussed several of these components, though not all of them, and this depiction helps us visualize. These components along with other components that we will learn about as we progress through the course. First of all on the left hand side we see raw materials flowing through an integrated set of processes that end in delivery of the final product to customers. Turning our attention now to the center of the process model, we see the demands of supply chain, consisting of planning, sourcing, manufacturing, warehousing and transportation. The arrows at the top and the bottom of the center section represent the common elements throughout these processes. For example, performance metrics, change management, organizational alignment, the use of technology, customer service considerations, etc. And finally the icons along the process model and the cube represent the various activities or subprocesses and decisions that need to take place in each of these processes. While this diagram represents a model of a molecule of supply chain it's important to realize that this, there are a number of third parties and providers involved in the overall process. All of whom have their own supply chain models, molecules that need to interact with the given companies molecule to create the finished product. The course is laid out such that the first week will be focused on the overall supply chain concept. While week two will focused on planning sourcing, week three on manufacturing and service operations. Week four on warehousing and finally week five on transportation. So, we have a questions here, stop and thing about a finished product that has a relatively simple supply chain in terms of number of supply chain tiers. In getting to the end consumer from raw material sourcing to the end customer. How many ties does this product that you have in mind have, and what are they? To summarize, in this lesson we've learned that supply chain management is a complex, integrated framework. Which incorporates several dimensions including physical, financial and information flows, transformation, movement, and planning processes. And must consider the nuances of specific industry and supporting infrastructure, thank you and we'll see you on the next lesson. [SOUND]
