CONTENTS

 Objective.

 Introduction about Supply Chain management.

 Supply chain at tactical level.

 Supply chain management software.

 Proposed work.

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Objective :
• Minimizing the time required for converting orders into cash.
• Minimizing the total Work-In-Process (WIP) in the Supply Chain.
• Improving pipeline visibility, that is the visibility of each one of the
activities of the Supply Chain by each one of the partners.
• Improving visibility of demand by each one of the partners.
• Improving quality.
• Reducing costs.
• Improving services.

DEFINITION OF A SUPPLY CHAIN MANAGEMENT :

Supply Chain Management is a set of synchronized decisions and

activities utilized to efficiently integrate suppliers, manufacturers,
warehouses, transporters, retailers, and customers so that the right
product or service is distributed at the right quantities, to the right
locations, and at the right time, in order to minimize system-wide costs
while satisfying customer service level requirements. The objective of
Supply Chain Management (SCM) is to achieve sustainable competitive
advantage.

Generalized Supply Chain Model

Relationship Management

Material Flow
Information Flow

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SUPPLY CHAIN AT THE TACTICAL LEVEL:

A decision made by any partner of the Supply Chain disseminates

among the whole Supply Chain. It means that such a decision requires
adjustment decisions from the other partners.

As a consequence, a global information system is necessary to allow

all the partners to be informed in real time of the state of the system and
the decisions made anywhere in the system. Also, each partner should
accept the rules derived from the co-operation arrangements decided at
the strategic level. The goal of these rules is to make sure that each one
of the partners is prepared to adjust itself to any decision that complies
with these rules.

THE TACTICAL OBJECTIVES IN A SUPPLY CHAIN:

The global objective of a Supply Chain is customers’ satisfaction. At

the same time, individual components of the Supply Chain aim at
maximizing their shareholder value by maximizing the Return on
Investment (ROI) of their investors. ROI is the ratio of profit to capital
employed over one year. This strategic objective can be translated into
several short- and medium-term objectives at the tactical level.

1. Minimizing the time required converting orders into cash:

This objective is much more than reducing the production cycle. It

includes the time required to get raw material and components, to control
their quality, to handle and, if necessary, store them until they are used. It
also includes the time finished products are stored and prepared to be
shipped to retailers, the transportation time, and the time they are stored
again before being delivered to customers.

Minimizing the time required to convert orders into cash requires

scheduling each order as soon as it arrives in the Supply Chain. This
scheduling activity should cover simultaneously all the activities that is
buying, making, moving, storing and selling activities. Due to the
complexity of the scheduling problems and the fact that each order is
scheduled as soon as it arrives in the Supply Chain, re-scheduling of
existing tasks should be avoided, baring exceptional cases.

• The times needed to perform the activities required to complete a

process can be reduced gradually through the mapping of the
project process and the analysis of each one of the activities.

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 • Reengineering is an abrupt approach that is hard to apply.

Mapping of the project process

2. Minimizing the total Work-In-Process (WIP):

• In the past, the relationships between the partners of the production

chains were more adversarial than co-operative. Each one of them
was trying to increase its own efficiency instead of working to
increase the global efficiency of the system.

• The goal of each partner was not to decrease inventories, since

inventories favour productivity, but more to move them upstream or
downstream in the chain to keep the advantages of inventories
while transferring the related costs to other partners or
subcontractors.

• This was quite common in the auto industry where auto makers
used to ask subcontractors to deliver parts or subsystems "Just-In-
Time", which often resulted in transferring inventories to
subcontractors. It is still the case in production systems working on
a master-slave basis: the "master" builds his success at the expense
of the "slaves".

• The philosophy behind the Supply Chain paradigm is totally

different: the goal is to improve the efficiency of the whole system,
and thus to reduce the total WIP.

• A real time approach has been proposed that both minimizes the
completion time and controls the W.I.P.

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3. Improving pipeline visibility:

The evolution of the computer systems from central mainframe to

local workstations has drastically changed the way information is
delivered. Nowadays, information can be sent from the place it is
generated to any other place in the Supply Chain in real time.

Theoretically, this allows close monitoring over product movements,

inventories, market changes, logistics, etc.

Technical barriers in information systems have been virtually removed.

However, two problems remain sensitive when a new Supply Chain is

designed. These are:

• The removal of the psychological barriers that incite people and

organizations to hold back information.

• The selection of information to be sent to each partner, including

the instants these pieces of information should be sent and their
format, are of utmost importance.

4. Improving visibility of demand:

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 The goal when improving the visibility of demand is to move the
demand penetration point that is the point of the Supply Chain where the
demand is known, as downstream as possible. Tools are available to know
with a reasonable probability the customers’ demands even before it
emerge in their brains.

5. Improving quality:

• Quality is often defined as "the set of properties and characteristics

of a product or a service that allows it to meet requirements that
are explicitly or implicitly expressed by the customer”.

• Three main aspects should be considered when talking about

quality. These are quality mastery, quality insurance and total
quality.

Quality Mastery:

Quality mastery involves evaluating the product or service

characteristics’ fit with the specifications provided by the designers or the
customers. Quality mastery implies the ability to measure quality which,
in turn, allows measuring the efficiency of the activities performed to
improve quality.

Quality Insurance:

• The goal of quality insurance is to guaranty the required quality

level for services and products. Quality insurance is often supported
by the ISO (International Standard for Organization). ISO 9004
provides a guide for the management of quality system while ISO
9001, 9002 and 9003 aim at establishing quality standards that
guarantee the level and invariability of quality.

Total Quality:

• Total quality requires a special management, called Total Quality

Management (TQM) that involves each employee in the organization
in the improvement of quality.

• Total quality is a never-ending effort to improve quality. It could be

gradual (Kaizen) or drastic (reengineering).

6. Reducing costs:

For years, the so-called analytical accounting relied upon arbitrary

allocation of indirect costs to product types or services, and hence made it
impossible to evaluate the true profitability of these product types or
services. Accounting techniques have evolved dramatically (and
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positively) during the past few years, due to the new project-oriented
paradigm, which is the most important characteristic of Supply Chains.

Two basic rules are taken into account when evaluating the costs in a
Supply Chain. These are:

• Costs should be attached to projects instead of departments, i.e. the

approach when evaluating costs should be horizontal instead of
vertical.

• Only incremental costs should be considered. These incremental

costs should be evaluated for each activity of the project and even
for each customer segment.

Two approaches are used to reduce the incremental costs of a project.

These are:

• A gradual approach, similar to the Kaizen approach applied to

improve quality.

• A more abrupt approach which consists in changing drastically the

manufacturing process (reengineering).

7. Improving services:
Factors that improve customer service are the reduction of time
from customers’ orders to deliveries and the improvement of the quality

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of product / service documentation, reception of customers and
information about the Supply Chain.

Supply Chain Management Software:

Supply chain management software (SCMS) is a business term
which refers to a WHOLE range of software tools or modules used in
executing supply chain transactions, managing supplier relationships and
controlling associated business processes.

While functionality in such systems can often be broad – it commonly

includes:

1. Customer requirement processing

2. Purchase order processing
3. Inventory management
4. Goods receipt and Warehouse management
5. Supplier Management/Sourcing

A requirement of many SCMS often includes forecasting. Such tools often

attempt to balance the disparity between supply and demand by
improving business processes and using algorithms and consumption
analysis to better plan future needs. SCMS also often includes integration
technology that allows organizations to trade electronically with supply
chain partners.

Proposed work:
To minimize the Work In Process [WIP] in supply chain management
by improving the efficiency of the whole system, this is done by utilizing
various methodologies and software of Supply Chain Management [SCM].
Also improving quality, reducing cost and improving customer service.

The above tactical objectives of results in improved flow of material

and information, between the supplier and customer, at lower cost and
faster rate.

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