Operations Management: An Integrated Approach, 5th Edition

THE SUPPLY CHAIN LINK

Think of a supply chain as a pipeline that supplies a certain level of customer demand. In order for the pipeline to satisfy this demand, the pipeline must flow smoothly without disruption. This can only happen if capacity is uniform throughout the entire supply chain and is matched between entities. For example, a manufacturer must make sure that the capacity of its suppliers is sufficient to meet its own capacity needs and that there is no gap in product delivery. The link to supply chains also ties to the location decision. Many firms locate close to their source of supply or require their suppliers to locate in close proximity to them. Recall that Dell requires its suppliers to be located within a 15-minute radius of its production facility. Without close proximity and a match in capacity between supply chain entities, smooth flow throughout the supply chain would not be possible.