Everything is a
flow.

A typical chain runs through five kinds of stage — but not every chain has all of them:

• Customers — the only source of revenue and where every chain begins
• Retailers — e.g. the Walmart store
• Wholesalers / distributors — break bulk, aggregate, deliver
• Manufacturers — P&G in the detergent example
• Component / raw-material suppliers — and their lower-tier suppliers

Dell runs two structures at once. For servers it builds to order and sells direct — no retailer, distributor, or wholesaler. For PCs and tablets it sells through retailers like Walmart who hold inventory, adding an extra stage. Same company, two chains, because customer needs differ.

Procurement became a top-management, strategic function because of its direct hit on cash flow and profit. A footnoted example: in an industry working on a 10% net margin where logistics is ~60% of cost, a firm would need ₹4 of extra sales to match the profit gained by cutting ₹1 off the procurement price.

Materials management absorbed production planning/control (becoming "extended"), then order processing ("integrated"). India recognised its cost-reduction power in the 1970s, making the merger with purchasing an "obvious business compulsion."

Logistics emerged as the cross-functional integrator — purchasing, inventory, production control, inbound traffic, warehousing, quality control — once firms saw the trade-off between transportation choices and inventory policy. The authors call business logistics "the early avatar of supply chain management." It sits at both ends: inbound and outbound, with intracompany movement called manufacturing logistics.

Consumer surplus is the slice the customer keeps — the gap between what they'd maximally pay and the price they actually paid. Hard to measure (a man stranded in a desert might trade his estate for water), but generic vs. branded drug prices make it visible: same relief, far lower price, so the difference is measurable surplus.

Why distributors thrive in India but fade in the US: US retail is consolidated — big chains buy at such scale that adding a distributor mostly adds cost. India has millions of tiny outlets needing frequent, small replenishment. A distributor who takes a full truckload, breaks bulk, runs "milk runs" to many shops, stocks many manufacturers' goods, and handles collection cheaply grows the surplus. As Indian retail consolidates, the surplus argument predicts the distributor's role will shrink.

Decides the chain's configuration for years ahead: outsource or in-house? where to put plants and warehouses, and how big? what's made or stored where? which transport modes on which legs? what information systems?

Example: PepsiCo buying two of its largest bottlers in 2009 — a strategic/design decision to integrate the beverage business for faster innovation and more responsive distribution. Hard and costly to reverse, so it must absorb years of market uncertainty. Firms should still revisit strategy and make mid-course corrections (e.g. Indian kiranas and malls reshaping around e-tailing; Amazon India's "Kirana Now" pilot for 2–4-hour delivery via neighbourhood stores).

Configuration is now fixed; planning works within it to maximise surplus over the horizon. Starts from a demand forecast for the coming year, plus costs and prices per market. Decisions: which markets are served from which locations, subcontracting, inventory policies, timing and size of promotions.

Example: ArcelorMittal deciding which markets a plant supplies and its target output. With better forecasts than the design phase, planners exploit the flexibility designed in.

Config and planning policies are fixed; the goal is to handle each incoming order well. Allocate inventory/production to orders, set due dates, generate warehouse pick lists, assign shipping mode, set truck delivery schedules, place replenishment orders. Because the horizon is so short, demand uncertainty is lowest — so exploit that certainty to optimise.

Each cycle has the same six sub-processes: supplier markets → buyer places order → supplier receives order → supplier supplies order → buyer receives supply → buyer returns reverse flows. These map to the source/make/deliver/return processes of the SCOR model.

Two real differences across cycles: (1) in the customer order cycle demand is external and uncertain; elsewhere orders can be projected from policy (a tire supplier knows demand once the carmaker's schedule is set). (2) Order size grows and order count falls as you move upstream — one customer buys one car; the dealer orders many; the maker orders far more tires. So information-sharing matters more the further you are from the end customer. ERP systems use this view.

L.L. Bean (make-to-stock). All customer-order-cycle processes run after the order arrives — pull. Fulfilment draws from inventory built ahead of demand. Replenishment, manufacturing, and procurement cycles all run on forecast — push. Fabric is bought 6–9 months ahead; manufacturing starts 3–6 months before sale.

Ethan Allen (build-to-order furniture). A customer order triggers production, so the manufacturing cycle is folded into the customer order cycle — all pull. But components are replenished on forecast, so the procurement cycle is push. Effectively just two cycles.

Paint — moving the boundary paid off. Until the 1980s base production, colour mixing, and packing were all done in factories to forecast (all push), and the chain struggled to match supply to demand. In the 1990s, colour mixing moved to the store, after the order — pull. Base and packing stayed push. Result: customers always get their colour and total inventory fell. That's the goal — find the boundary that best matches supply and demand.

CRM generates demand and handles orders — marketing, pricing, sales, order & call-center management. At W.W. Grainger: catalogs, the website, the order/service call center.

ISCM fulfils that demand on time and at lowest cost — production/storage capacity planning, demand & supply plans, actual fulfilment. At Grainger: warehouse location and size, what each carries, inventory policy, picking/packing/shipping.

SRM arranges and manages supply — evaluating and selecting suppliers, negotiating terms, sharing plans. At Grainger: supplier selection, price/delivery negotiation, sharing demand-supply plans, placing replenishment orders.