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Introduction To SCM

The document provides an introduction to supply chain management, including: 1) It discusses the evolution of SCM from ancient times to modern approaches like lean manufacturing and mass customization. 2) It defines SCM and logistics, explaining that SCM takes a more strategic and inter-organizational approach than logistics. 3) It describes the key macro processes in a supply chain like the customer order cycle and replenishment cycle. 4) It explains the importance of collaboration between partners and the interface between technology, processes, and people in revolutionizing SCM.

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Raviteja Gogineni
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
252 views

Introduction To SCM

The document provides an introduction to supply chain management, including: 1) It discusses the evolution of SCM from ancient times to modern approaches like lean manufacturing and mass customization. 2) It defines SCM and logistics, explaining that SCM takes a more strategic and inter-organizational approach than logistics. 3) It describes the key macro processes in a supply chain like the customer order cycle and replenishment cycle. 4) It explains the importance of collaboration between partners and the interface between technology, processes, and people in revolutionizing SCM.

Uploaded by

Raviteja Gogineni
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction to Supply

Chain Management
Learning objectives
• Discuss the evolution of supply chain management
• Define supply chain management
• Comprehend the similarity and difference between logistics and supply
chain management
• Delineate the role of a supply chain manager
• Understand the concept of value chain and its correlation to supply chain
• Describe the macro processes of supply chain
• Explain the nodes and processes of supply chain
• Comprehend how the interface of technology, process, and people has
revolutionized supply
• chain management
• Understand the hierarchy and span of supply chain decisions
• Discuss the importance of professional excellence in supply chain
management
Evolution of SCM domain
• 323 BC, the great Macedonian General Alexander
conquered countries including Greece and Persia because
he had included logistics in his strategic planning
• In the early 1900s, Ford can be said to have ushered in the
mass production era
• Starting in the early 1970s, Japanese manufacturers such as
Toyota changed the rules of production from mass to lean
• In the 1990s Dell revolutionized global business, being one
of the earliest companies to adopt mass customization.
• Supply chain has evolved dramatically over the last four
decades
Supply chain management definitions
• ‘Supply Chain Management (SCM) is the integration of
key business processes from the end user through
original suppliers that provides products, services, and
information that add value for customers and other
stakeholders.’ (Lambert and Cooper 2000)
• ‘SCM is the term used to describe the management of
the flow of materials, information, and funds across
the entire supply chain, from suppliers to component
producers to final assemblers to distribution
(warehouses and retailers), and ultimately to the
consumer.’
Objective of SCM
• The objective of SCM is to manage a ‘…
network of organizations that are involved,
through upstream and downstream linkages,
in the different processes and activities that
produce value in the form of products and
services in the hands of the ultimate customer’
(Christopher 1998).
Complexity of Amul supply chain
Logistics definitions
• In 1991, the international Council of Logistics Management (CLM)
defined logistics as:
– ‘The process of planning, implementing, and controlling the efficient,
effective flow and storage of goods, services, and related information
from the point of origin to the point of consumption for the purpose
of conforming to customer requirements.’ – Applied when competition
is restricted or focused, in cases such as military operations, such
definitions clearly depict the function.
• Later was modified as:
– ‘Logistics is the process of strategically managing the procurement,
movement and storage of materials, parts and finished inventory and
the related information flows through the organization and its
marketing channels for the cost effective fulfilment of customers’
orders.’ - more appropriate for commercial organizations and business.
Logistics and SCM
• Logistics describes the entire process of material and products
moving into, through, and out of a firm. The gamut of logistics
management includes:
– Order management
– Outbound transportation and distribution management
– Inventory management
– In-plant logistics such as stores, movement towards line and shops
– Inbound transportation
– Procurement
– Information management
• Logistics management is oriented towards cost minimization for the
focal firm/group
• Logistics refers only to internal supply chain management
SCM is superset
– Primarily, Logistics is inward-looking.
– On the other hand, supply chain management is
more outward-looking and inter-organizational in
approach. It involves collaboration, partnering, and
coordination across entities serving the nodal
organization. Relationship management depends
heavily on logistics effectiveness and efficiency
• Supply chain is a super set of activities, which is
more strategic in nature and performs the
specific function of managing demand and
supply.
Role of Supply chain manager
• Supply chain manager must be efficient in managing
relationship within and across organization in the network
• Manager must be more outward-looking and inter-
organizational in approach. This requires good negotiating
skills representing both internal and partners interests.
• Ability to drive collaboration, partnering, and coordination
across entities serving the nodal organization.
• Must have strategic, planning and execution orientation
with ease of handling top management on various
perspectives.
Value chain – Logistics & Supply chain
Focus areas of SCM domain

Focus areas Focus areas


of Logistics of Logistics
domain domain

Value chain insight: Value is more important than the cost as it is believed that a
customer will be willing to pay a higher price for a value-added product
Value system– Logistics & Supply chain

Value system insight: The essence of a value system is to strategically manage


suppliers, channel partners, and customers, which are key to supply chain
management
Supply chain macro processes

• Logistics functional orientation Vs SCM process


orientation
• Sunil Chopra’s cycle view linked to supply chain macro
processes
– Customer order cycle (customer–retailer)
– Replenishment cycle (retailer–distributor)
– Manufacturing cycle (distributor–manufacturer)
– Procurement cycle (manufacturer–supplier)
The concept of “Pull”
• The concept of ‘pull’ in supply chain is about the
execution of processes in response to a customer
order.
• This concept is reactive but brings value creation
to customers by allowing flexible configuration of
products.
• The advantage to the focal organization in this
process is that it reduces finished goods inventory
by postponement.
• Ex. Dial-a-Pizza
The concept of “Push”
• The idea of ‘push’ in supply chain means the
execution of processes is initiated in anticipation
of customer orders.
• This mainly depicts the speculative character of a
supply chain where production and stocking
happens on the basis of demand forecasts.
• This process would be more driven by economies
of scale in operations and for low-value items.
• Ex. Popular models of two wheelers in India
Three interfaces
Supply chain decision hierarchy
• Operational level
• Planning level
• Strategic level
Span of decisions in SCM
• First, strategic decisions involving the supply chain domain and linkages of supply
chain strategy with other functional strategies—Strategic Business Unit (SBU) level
strategy and corporate strategy—must be clearly understood.
• Second, responsiveness and the efficiency spectrum calls for a trade-off between
cost management and service factors.
• Third, the span of decision would involve planning functionality like aggregate
plans, coordination of production plans, inventory plan, and so on. All these would
require functional capability to handle and coordinate.
• Fourth, another area of supply chain decision would be in relation to operational
issues, which may involve coordinating inbound and outbound transportation,
inplant logistics, day to day handling with suppliers for daily production schedule,
and so on.
• Fifth, supply chain managers must coordinate with technology support managers,
• process owners, and people managers for an interface of the three functions for
supply chain improvements.
Professional Excellence
• Supply chain function in a company must
strive for excellence in business
• Benchmarking across industry, peer group and
best in class are the order of the day.
• Focus on ultimate customer with synchronized
approach within and across partners in the
organization and continuously strive to
improve performance
Supply chain structure
Influencing factors
1. Character and type of product
2. Nature, type, and size of market
3. Distribution channel strategy
4. Facilities, locations, and options available
5. Customer characteristics and preferences
6. Tax including direct and indirect taxes and levies
7. Strength of logistics services and intermediary options
8. Strength of information and communication channels
9. Level of industry maturity and scope for innovations
Edible oil supply chain example
Agile supply chain

• Agility in a supply chain is the ability of a


supply chain to rapidly respond to changes in
the market and customer demands
Factors driving agile supply chains

• Change in business environment


• Industry and market conditions
• Level of flexibility and competence
• Collaborative relationship with partners
• Robust information system
• Example: Two wheeler industry in India
Process view of supply chain
Push or Pull choice
• The following are aspects in identifying
appropriate pull and push-based strategies:
– Resource availability with the organization
– Strategic vision with respect to business and
differentiation initiatives
– Innovativeness
– Demand and supply characteristics of products and
market
– Technology and its obsolescence
– Maturity of logistics service providers and support
system
Critical Thinking
• Consider a branded fresh coffee retailer like
Café Coffee Day in India. What are the key
supply chain issues that you would focus on
and how would you deploy push and pull
boundaries for the business?
• Consider recessionary economic trends as
experienced in the late 2008. You are a supply
chain manager with an auto major. How
would you make your supply chain agile?
Alternatively, what recommendations would
you suggest for the management for a near
term handling of the situations?

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