Supply Chain: Manufacturing Model

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain and Corporate Strategy adding some additional support as well.

Supply Chain: Manufacturing Model

Supply complexity is a challenge across project types. Mega-projects are generally engineered-to-order projects that involve large numbers of suppliers supporting construction of a highway, bridge, building a rocket, ship, or even developing a computer system such as Digital Fortress having millions of processors. Another type of supply chain complexity involves manufacturing a complex finished good such as a automobile which typically has over 30,000 parts and sub-assemblies resulting in 10's of 1000's of suppliers. 

In manufacturing, a supply chain common practice is to have multiple tiers of suppliers adding increased complexity and quality challenges, Figure 1. 

Figure 1: Manufacturing Supply Chain Model

In this model, suppliers typically have suppliers. The model can become more complex adding Tiers 3 and 4 or more to the model. In the Skunk Works project (Formally called Advanced Development Projects) run by Lockheed Martin, the classified projects had tiers of subcomponent assemblies built and shipped off to the next Tier where they where consolidated into the next higher level assembly which was sent off to another Tier for further consolidation into the next higher level assembly. Eventually, subassemblies that were not discernible as to the whole assembly arrived at a final assemble location where they were assembled then delivered. The end product in this case, were aircraft such as the U-2, SR-71, F-117, F-22, and F-35.  There were over 100,000 suppliers of goods and services that had no knowledge of the scale of the project or the highly classified nature of the project that they were participating within. 

A distributor in this model, does not create the end product but instead purchases or has some sort of agreement to resell the products.  Not shown are wholesalers which are a kind of distributor usually of commoditized goods. 

Overall,  the model can become quite complex falling into a Systems of Systems paradigm and eventually map out an entire economy or at least a major segment of the economy.  Hence, supply chains can become very important in managing costs and revenues as well as the legal and contractual relationships among all the actors.  There is one more model to consider and that is the Service Supply Chain in the next post.

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.