TATA INFOTECH OFFICES	Supply Chain Network Optimisation models are constructed from network representations of a company's supply chain. A typical network is comprised of geographically dispersed facilities where raw materials, intermediate products, or finished products are acquired, transformed, stored, or sold, and transportation links connecting facilities along which products flow. The facilities may be operated by the company, or they may be operated by vendors, customers, third-party providers or other firms with which the company has business arrangements. We distinguish between plants, which are manufacturing facilities where physical product transformations take place, and distribution centers, which are facilities where products are received, sorted, put away in inventory, picked from inventory, and dispatched, but not physically transformed. The company's goal is to add value to its products as they pass through its supply chain and transport them to their markets in the correct quantities, with the correct specifications, at the correct time, and at a competitive cost. Integrated Supply Chain Planning The underlying purpose of optimisation models is to assist supply chain managers achieve competitive levels of integrated planning. Such planning is concerned with functional integration of purchasing, manufacturing, transportation and warehousing activities. It also refers to spatial integration of these activities across geographically dispersed vendors, facilities, and markets. Finally, it refers to inter-temporal integration of these activities over strategic, tactical and operational planning horizons. Roughly speaking, strategic planning involves resource acquisition decisions taken over long-term planning horizons. Tactical planning involves resource allocation decisions over medium-term planning horizons. And operational planning involves decisions affecting the short-term execution of the company's business. Objectives of Supply Chain Management A range of objectives may drive optimisation models for supply chain management. The traditional objective is to minimise the total supply chain cost to meet given demand. We argue, however, that total cost minimisation is an inappropriate objective for the firm to pursue when it analyzes its longer term plans. Instead, the firm should seek to maximize net revenues where net revenues = gross revenues - total cost Our objection to focusing only on cost control is that the model provides insights into product costs that should be exploited to increase net revenues by adjusting sales as well as reducing costs. The difficulty with trying to model decisions affecting demand management, even in the modest way we just described, is that it requires the commitment of marketing personnel, who generally feel uneasy with quantitative analysis. Nevertheless, integration of supply chain and demand management is an area of growing interest and importance in many companies. Of course, a company will also be concerned with non-monetary objectives, such as customer service, product variety, flexibility, quality, and time. Some authors even suggest that costs or revenues are relatively unimportant and that the company should focus instead on time or another attribute of their business to achieve competitive advantage. Such recommendations are misleading since the company exists to earn profits. From an analytic perspective, it is not necessary to chose one objective over another. Instead, optimisation models can assist management in evaluating the tradeoffs among objectives . <<<back
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