SUPPLY CHAIN MANAGEMENT AND THE PLACE-DISTRIBUTION SYSTEM

Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products. It involves the
active streamlining of a business ' s supplyside activities to maximize customer value
and gain a competitive advantage in the marketplace.

Supply chain manager is tasked with controlling and reducing costs and avoiding
supply shortages.

PARTS OF SUPPLY CHAIN MANAGEMENT

PLANNING -To get the best results from SCM, the process usually begins with planning
to match supply with customer and manufacturing demands. Firms must predict what
their future needs will be and act accordingly.

SOURCING- Efficient SCM processes rely very heavily on strong relationships with
suppliers. Sourcing entails working with vendors to supply the raw materials needed
throughout the manufacturing process.
SCM SOURCING INCLUDES ENSURING:
-the raw materials meet the manufacturing specification needed for the production of
goods.
-the prices paid for the goods are in line with market expectations.
-the vendor has the flexibility to deliver emergency materials due to unforeseen events.
the vendor has a proven record of delivering goods on time and in good quality.

MANUFACTURING- At the heart of the supply chain management process, the

company transforms raw materials by using machinery, labor, or other external forces to
make something new. This final product is the ultimate goal of the manufacturing
process, though it is not the final stage of supply chain management.

DELIVERING- Once products are made and sales are finalized, a company must get
the products into the hands of its customers. The distribution process is often seen as a
brand image contributor, as up until this point, the customer has not yet interacted with
the product.

RETURNING- The supply chain management process concludes with support for the
product and customer returns. Its bad enough that a customer needs to return a
product, and its even worse if its due to an error on the company ' s part.
WHY IS SUPPLY CHAIN MANAGEMENT IMPORTANT?
Supply chain management is important because it can help achieve several business
objectives. For instance, controlling manufacturing processes can improve product quality,
reducing the risk of recalls and lawsuits while helping to build a strong consumer brand. At the
same time, controls over shipping procedures can improve customer service by avoiding costly
shortages or periods of inventory oversupply. Overall, supply chain management provides
several opportunities for companies to improve their profit margins and is especially important
for companies with large and international operations.

SOURCING STRATEGIES- Sourcing strategy deals with planning, designing and building a
reliable and competitive supplier base, determining the strategy for procurement, defining
pricing strategies and supply chain requirements. The strategy involves integration of its
objectives in line with or confirming to the objectives of stake holders in operations, finance.
Marketing and distribution. Lastly sourcing strategy involves planning to competitive buying
sources for its raw materials, components and services along with alternative variables.

STEPS TOWARDS A SUCCESSFUL SOURCING STRATEGY

SPEND ANALYSIS - A spend analysis equips organizations to assess their biggest

spend categories and the main suppliers within them. It helps you understand which
aspects of your supply chain you’re acing in and those that need improvement.

SUPPLIER MARKET SHARE ANALYSIS- Supplier credibility is an essential ask all

procurement managers are faced with. Moreover, it’s a real challenge to sift through a
crowded market to find the perfect supplier that meets the firm’s needs. A supplier
market share analysis helps them weight their options better. It offers a detailed view of
the top suppliers based on their current market position and overall revenue.

SUPPLIER-SPEND SHARE ANALYSIS - Over time, a supplier may demand a price

hike for the material or service it renders. Deciding whether to resist or give in to this
demand, needs a step back to check how they fit into your overall organizational spend
and the revenue they bring in. A supplier spend share analysis offers this granular view
of your top suppliers and how your organization’s spends are distributed among them.

PROCUREMENT ORGANIZATION’S DEMAND - If your firm is planning on expanding

its business with a particular supplier, what are the chances they will offer you a value
add or make a price exception in exchange for your loyalty? Understanding how much
your organizational spend contributes to a supplier’s revenue reveals how important you
are to them.
CATEGORY RISK ANALYSIS - Every organization has a set of absolute essentials and
replaceable categories attached to its operations. It’s the procurement team that
assesses these categories and prioritizes them based on different mechanisms. Kraljic
portfolio matrix helps define a risk level for each category and estimate its impact upon
the organization’s profitability.

VENDOR QUALIFICATION- It’s not new for procurement managers to find themselves
in a sea of potential suppliers vying for their attention. However, nailing the right fit goes
beyond looking just at the lowest bidder. Most companies use a criteria checklist within
common parameters like quality risk, financial risk, availability risk, and level of
co-operation expected.

DISTRIBUTION CHANNEL

- A distribution channel is the network of businesses or intermediaries through

which a good or service passes until it reaches the final buyer or the end
consumer. Distribution channels can include wholesalers, retailers, distributors,
and even the internet.

COMPONENTS OF A DISTRIBUTION CHANNEL:

PRODUCER- Producers combine labor and capital to create goods and services for
consumers.

AGENT- Agents commonly act on behalf of the producer to accept payments and
transfer the title of the goods and services as it moves through distribution.

WHOLESALER- A person or company that sells large quantities of goods, often at low
prices, to retailers.

RETAILER- A person or business that sells goods to the public in small quantities for
immediate use or consumption.

END CONSUMER- A person who buys a product or service.

TYPES OF DISTRIBUTION CHANNELS:

Direct - A direct channel allows the consumer to make purchases from the
manufacturer. This direct, or short channel, may mean lower costs for consumers
because they are buying directly from the manufacturer.

Indirect - An indirect channel allows the consumer to buy the goods from a wholesaler
or retailer. Indirect channels are typical for goods that are sold in traditional brick
and-mortar stores.

Hybrid - Hybrid distribution channels use both direct channels and indirect channels. A
product or service manufacturer may use both a retailer to distribute a product or
service and may also make sales directly with the consumer.

SHIPPING SYSTEM :

- A shipping system offers one or more solutions to improve compliance, reduce

shipping costs, and become a valuable asset in the shipping process. These
systems can help your business execute the entire shipping process, from
calculating shipping charges to tracking the shipment to the customer ' s door.

DIFFERENT MODES OF SHIPPING:

SHIPPING THROUGH AIR -the shipment of goods THROUGH AIR The main benefits
are focused on the speed of the service, as well as reliability for delivery, while the main
drawback is its high cost.
SHIPPING THROUGH SEA- Ocean freight means transporting goods through
designated sea lanes by container vessel The ocean shipping industry offers the most
competitive freight costs to shippers, especially over long distances.
-Cheap
-Suitable for all types

SHIPPING THROUGH LAND- This is the most useful when it comes to delivering
goods within a country or across neighboring borders. Trucks are typically used to
transport goods via roads, as they have huge spaces to ship bulkier items such as
construction material and even vehicles. This mode of shipping is comparatively
cheaper than the others.
THINGS TO KEEP IN MIND WHEN CHOOSING A SHIPPING MODE:

-Freight Cost
-Type Of Goods
-Speed
-Safety

Supply Chain Management and the Place Distribution Decisions:

Supply Chain Management- Refers to the coordination and management of all

activities involved in the creation and delivery of a product or service, from raw material
acquisition to final delivery to the customer.

Goal of Supply Chain Management- Is to optimize the flow of goods and services
while minimizing costs and maximizing customer satisfaction.
-One critical aspect of supply chain management is the distribution of products to
customers. Distribution decisions involve determining the optimal location of
warehouses and distribution centers, deciding on the most efficient modes of
transportation, and ensuring that products are delivered to customer in a timely and
cost-effective manner.
Effective distribution decisions can help companies reduce transportation costs,
improve order fulfillment times and increase customer satisfaction.
There are several key factors to consider when making distribution decisions, including
location of customers, transportation infrastructure, and the availability of transportation
modes. Companies must also consider the cost and time associated with different
transportation modes, such as air, sea, or land, and determine the optimal mix of
transportation methods to meet customer needs.

Logistics Management- Is the process of planning, implementing, and controlling the

movement of goods and services from the point of origin to the point of consumption. It
involves the coordination of various activities, such as transportation, storage, and
distribution, to ensure that products are delivered to customers in timely and efficient
manner.
Effective logistics management involves the use of various tools and techniques
•Transportation Optimization- it involves selecting the most efficient mode of
transportation for moving goods from one place to another.
•Inventory Management- this involves maintaining the right level of inventory to meet
customer demand, while also minimizing the cost of carrying excess inventory.
•Supply Chain Visibility- it involves tracking the movement of goods and services
throughout the supply chain from the point of origin to the point of consumption.

There are different types of logistics management that businesses use to manage
their supply chain operations efficiently
•Inbound Logistics- involves the transportation and storage of raw materials, supplies,
and other inputs suppliers to the production facility.
•Outbound Logistics- involves the transportation and storage of finished products from
the production facility to the end-user or customer.
•Reverse Logistics- involves the transportation and management of products or
materials that are returned by customers or are no longer needed by the business.
•Third- party Logistics(3PL)- involves outsourcing the management of the entire
supply chain to a single provider. The 3PL typically handles activities such as
transportation, warehousing and distribution on behalf of the organization.

Vertical Supply Chain Management

- Is a strategic approach to managing a company’s supply chain that focuses on
creating a seamless flow of goods, services, and information between different stages
of the supply chain. The key goal of vertical supply chain management is to create a
more efficient and effective supply chain that can respond quickly to changing customer
demands, reduce costs, and increase profitability.

Vertical Supply Chain Management some tools and techniques

•Vertical Integration- This involves bringing different stages of the supply chain under
the same ownership or control.
•Information Sharing- This involves sharing data and information between different
stages of the supply chain.
•Collaborative Planning- This involves working together with other members of the
supply chain to develop joint plan strategies.
•Performance Monitoring- This involves monitoring the performance of each stage of
the supply chain, and using this information to identify areas for improvement.
•Lean Principles- This involves applying lean principles to the supply chain, such as
reducing waste and improving efficiency.

There are three types of vertical supply chain management

•Backward Integration- occurs when a company integrates its supply chain with its
suppliers. In other words, the company takes control of its suppliers by acquiring or
establishing new relationships with them.
•Forward Integration- is the opposite of backward integration, and it occurs when a
company integrates its supply chain with its customers.
•Balanced Integration- occurs when a company integrates both backward and forward
in its supply chain.

Vertical Supply Chain Management ADVANTAGES:

•Increased Sales
•Reduced costs across various parts of production
•Tighter quality control
•Better flow of information across the supply chain
•More control over production volume
DISADVANTAGES:
•Concentration of resources in one approach
•Increased risk during uncertain times
•Potentially high organizational and coordination costs

There are different types of horizontal supply chain management

•Collaborative Planning- involves sharing information between supply chain partners
to develop a coordinated plan that meets the needs of all parties.
•Collaborative Forecasting- involves sharing demand forecasts between supply chain
partners. This allows companies to better plan their production schedules and inventory
levels which can improve overall efficiency and reduce costs.
•Vendor-managed Inventory(VMI)- where the suppliers takes responsibility for
managing the inventory levels of the customer. The suppliers uses-real-time data to
monitor inventory levels and replenish stock as needed. This can help to reduce
stockouts and improve inventory turns.
•Cross-Docking- where products are transferred directly from inbound trucks to
outbound trucks without being stored in a warehouse. This can help to reduce inventory
holding costs and improve delivery times.
•Electronic Data Interchange(EDI)- involves the electronic exchange of data between
supply chain partners. This can help to reduce paperwork and manual processes which
can improve efficiency and reduce errors.

Horizontal Supply Chain Management ADVANTAGES:

•Larger customer base
•Increase revenue
•Greater market share
•Less competition
•Economies of scale and reduced production costs
DISADVANTAGES:
•High level of scrutiny from government agencies
•Potential creation of monopoly
•Possibility of higher prices and fewer options for consumer
•New company may be more bureaucratic, less nimble

Tools and Techniques of Distribution Cost Analysis and Control

Distribution Cost Analysis and Control- are critical aspects of supply chain
management and it involves assessing and managing the costs associated with
delivering products to customers.
To effectively control distribution costs, businesses use various tools and techniques
that help them identify areas of inefficiency and take corrective measures to optimize
their distribution process.
•Cost- Benefit Analysis- is a technique that involves evaluating the costs associated
with a particular distribution channel or strategy comparing them to the benefits it
provides. By conducting cost-benefit analysis, businesses can determine the most
effective distribution channels and make informed decisions about which ones to use.
•Transportation Management Systems(TMS)- is a software tool that help businesses
manage and optimize their transportation operations. It provides real-time visibility in to
the movement of goods, helps in route optimization, and enables businesses to reduce
transportation costs by making better decisions.

•Warehouse Management Systems(WMS)- is a software tool that help businesses

manage their inventory and warehouse operations. It provides real-time visibility into
inventory levels, helps in optimizing storage space, and enables business to reduce
warehousing costs by making better decisions.
•Activity- Based Costing(ABC)- activity-based costing is a method of cost accounting
that involves identifying and assigning costs to specific activities in the distribution
process.

•Outsourcing- is a strategy that involves partnering with third-party logistics provides to

manage some of all of the distribution process.

Negotiation- is a technique that involves working with suppliers and carriers to

negotiate better rates and terms

RISK MANAGEMENT
IDENTIFY RISK -something that you should be doing regularly as part of your overall
risk management process.
ASSESS RISK - Identifying hazards by using the risk assessment process is a key
element when ensuring the health and safety of your employees and customers.
CONTROL RISK - set of techniques that are used by firms for evaluating potential
losses and taking action to either partly reduce or entirely eliminate these threats
BENEFITS OF RISK MANAGEMENT
● Forecasts probable issues and helps avoid catastrophic events
● Increased awareness of risks and opportunities
● Reduces the impact of negative risks
● Saving money through risk management analytics

APPROACHES IN RISK MANAGEMENT

● Risk management planning - identification, assessment, event response
planning, and event monitoring and control
● Risk avoidance - avoiding activities that may incur injury, sickness, or death
● Risk retention - accepting the risk and dealing with it if it occurs
● Risk sharing - sharing the risk with another party, such as an insurance
company
● Risk transfer - transferring the risk to another party, such as through a contract
or insurance policy
● Loss prevention and reduction - minimizing the risk, not eliminating it

RELEVANT RISK TERMINOLOGIES

● Strategic Risk: refers to the potential for failures in strategic planning that may
prevent a company from achieving its core objectives.
● Inherent Risk: refers to the level of risk that exists in a process or activity before
any actions are taken to reduce the likelihood
● Residual Risk: remaining after considering the existing control environment.
● Key Risk Indicator (KRI): A proactive measurement for future and emerging
risks that indicates the possibility of an event that adversely affects business
activities.
● Risk analysis: a process aimed at identifying and mitigating risks to business
operations.
● Risk plan: a plan developed by management to minimize losses due to potential
risks.

BANKRUPTCY- Bankruptcy is a vehicle through the court system that provides

protection for debtors from their creditors.
People who have high leverage are unable to pay their debts, are forced to file
bankruptcy to protect their other assets or their personal situation from course from their
various creditors.
TYPES OF BANKRUPTCY
1.LIQUIDATION – the bankruptcy trustee sells or "liquidates" the debtor's assets to pay
off creditors.

2.BUSINESS REORGANIZATION- allows a company to stay in business and

restructure its obligations.

3.PERSONAL REORGANIZATION– debtors propose a repayment plan to make

installments to creditors over three to five years.

ADVANTAGES OF BANKRUPTCY

● Providing temporary and permanent relief from creditors.

● Eliminating debt without having to pay or give up anything.
● Stopping collections agency calls or harassment.
● Fresh financial start.

DISADVANTAGES OF BANKRUPTCY

● Lose non-exempt assets.

● Tax debts are not discharged when you file for bankruptcy.
● Bankruptcy will affect your credit score which can impact your ability to get new
credit.

THE FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010

It encourage distressed businesses and individuals to undergo rehabilitation and to

provide a framework for the resolution of competing claims and property rights between
debtors and creditors. It promote a fair and efficient system for the rehabilitation and
liquidation of financially distressed businesses and individuals, and to provide a
mechanism for the protection of the rights of creditors and other stakeholders.