To-do list | May 18 SCM NOTES

✍🏼 To do
• Introduction and definition of supply chain
management
• Evalution of the concept of SCM
• Key drivers of SCM
• Topology of SCM...
• Cycle of view of supply chain management...
• Problems in SCM...

INTRODUCTION OF SUPPLY CHAIN MANAGEMENT

Supply Chain Management (SCM) is essential in today's

fast-paced environment, overseeing the efficient
movement of goods, information, and finances from
suppliers of raw materials to the final consumers. It
encompasses a series of complex, interrelated processes
designed to ensure that products are produced and
delivered in the right quantities, to the right locations, at
the right time, and at optimal costs.

DEFINITION
A supply chain is like a network that provides facilities and options like
distribution which performs operations like Procurement of material, the
transformation of these materials to specific intermediates, and after that
finished product and the distribution procedure starts which starts
distributing respective products to customers. Following are some key points
regarding the supply chain.

• In the previous times, all the organizations like marketing, distribution,

planning, manufacturing, and purchasing organizations work
independently along the supply chain.
• Organizations have their independent objectives which are sometimes
conflicting also.
• To work in an efficient manner there arises a need through which these
different functions can integrate.
• Therefore, Supply chain management is a strategy that came into
arising through which such integration can be achieved.

Key Components of a Supply Chain

• Suppliers: Provide raw materials, components, and services required to

produce finished products.
• Manufacturers: Transform raw materials into finished goods through
various production processes.
• Warehouses: Store raw materials, intermediates, and finished products
until they are needed further down the chain.
• Distribution Centers: Facilitate the efficient movement and distribution
of goods to various locations.
• Retailers: Sell finished products directly to end customers.
 • Customers: The final recipients of the products, whose demands drive
the entire supply chain.

HOW DOES SCM WORK

Supply chains operate through a network of linked activities and processes
that enable the movement of goods, information, and finances from suppliers
to customers. Here's an overview of how supply chains work:

1. Planning: Developing strategies to meet customer demand while

optimizing resources.

Key Activities:

• Demand forecasting
• Inventory management
• Capacity planning
• Production scheduling
2. Sourcing: Sourcing involves identifying and selecting suppliers that
provide the necessary raw materials, components, and services.

Key Activities:

• Supplier selection
• Supplier relationship management
• Procurement
• Contract negotiation
3. Manufacturing: Coordinating production processes to create finished
goods efficiently.

Key Activities:

• Production process design

 • Quality control
• Production scheduling
• Equipment maintenance
4. Warehousing: Warehousing involves storing raw materials, intermediates,
and finished products until they are needed. Efficient warehousing is crucial
for maintaining inventory levels and ensuring timely delivery.

Key Activities:

• Inventory management
• Storage solutions
• Order picking
• Packing
5. Distribution: Coordinating the movement of goods from manufacturers to
customers.

Key Activities:

• Transportation planning
• Logistics management
• Order fulfillment
• Delivery scheduling
6. Returns and Reverse Logistics: Returns and reverse logistics involve
managing the return of defective or unwanted products from customers back
to the manufacturer or supplier. This process includes handling returns,
refurbishing products, and recycling.

Key Activities:

• Return processing
• Refurbishing and recycling
• Disposal management
• Customer support
7. Technology integration: Implementing systems like Enterprise Resource
Planning (ERP) and Transportation Management Systems (TMS) to facilitate
information flow.

8. Performance measurement: Continuously monitoring and improving

supply chain metrics.

SCM works by integrating these processes across different departments and

organizations, using technology and data analytics to improve decision-
making and operational efficiency.

Flows in the supply chain

Figure : Flow in supply chain

Flow resembles a chain reaction. In this, there is a flow of material from

supplier to customer. Both supplier and customer share information. There is
also a flow fund from customer to supplier. Supply Chain Management in
Supply Network :

• Supply chain management is responsible for the management and

control flow of material, information, and finances in supply chains.
• The task of Supply chain management is to design, plan, and execute
activities at different stages so as to provide desired levels of service to
supply chain customers profitably.
Examples of Supply Chain Management
• Dell
• Toyota/ Volkswagen
• McMaster Carr / W.W. Grainger, sell auto parts
• Amazon
 • Frozen food industry/Fast food industry/5-star restaurants
• Internet shopping

FUNCTION OF SUPPLY CHAIN MANAGEMENT

The main functions of Supply Chain Management include:

1. Defining business boundaries and relationships: It is the most

important of all SCM initiatives. It relates to the decision on
outsourcing.
2. Managing demand and supply: The basic demand is the demand for
the ultimate product or service from the end-user. To meet these needs
of the user, different links in the supply chain need to supply some
goods or services. to the following link in the chain.
3. Logistics: It refers to the processes involved in storing, moving,
transporting, or handling material in any other way.
4. Purchasing: It acts as a link between the vendors and the company to
get involvement and help of vendors in matters like Purchase material
specification, matching of lot sizes, and transportation packing.
5. Selling system interface: It is directly responsible to help customers
know, select buy pay for and take away the company's product
6. Manufacturing system interface: It supports SCM by reducing
manufacturing lead times and supplying material that closely matched
customer lot size and time requirements.
7. Product design interface: Basic quality of the product sold to the end-
user can be improved substantially by better collaboration among
channel partners.
IMPORTANCE OF SCM

The main functions of Supply Chain Management include:

1. Defining business boundaries and relationships: It is the most

important of all SCM initiatives. It relates to the decision on
outsourcing.
2. Managing demand and supply: The basic demand is the demand for
the ultimate product or service from the end-user. To meet these needs
of the user, different links in the supply chain need to supply some
goods or services. to the following link in the chain.
3. Logistics: It refers to the processes involved in storing, moving,
transporting, or handling material in any other way.
4. Purchasing: It acts as a link between the vendors and the company to
get involvement and help of vendors in matters like Purchase material
specification, matching of lot sizes, and transportation packing.
5. Selling system interface: It is directly responsible to help customers
know, select buy pay for and take away the company's product
6. Manufacturing system interface: It supports SCM by reducing
manufacturing lead times and supplying material that closely matched
customer lot size and time requirements.
7. Product design interface: Basic quality of the product sold to the end-
user can be improved substantially by better collaboration among
channel partners.

ADVANTAGES OF SCM
1. Supply chain planning and collaboration - With SCM users can model
his/her supply chain, set goals, and optimize and schedule time. It
enables users to maximize returns on assets and ensures a profitable
match of supply and demand.
2. Supply chain execution - It enables users to carry out supply chain
planning and generate high efficiency at the lowest possible costs.
3. Supply chain visibility design and analytics - SCM gives users
network-wide visibility across your extended supply chain to perform
strategic and as well as day-to-day planning.
4. Business benefits - It allows its users to transform a traditional linear
supply into an adaptive network with the following benefits :
a. Faster response to changes in supply and demand
b. Increased customer satisfaction
c. Compliance with regulatory requirements
d. Improved cash flow
e. Higher margins
f. Greater synchronization with business priorities
Key drivers of SCM

1. PRODUCTION
This driver can be made very responsive by building factories that have a
lot of excess capacity and use flexible manufacturing techniques to
produce a wide range of items. To be even more responsive, a company
could do their production in many smaller plants that are close to major
groups of customers so delivery times would be shorter. If efficiency is
desirable, then a company can build factories with very little excess
capacity and have those factories optimized for producing a limited
range of items. Further efficiency can also be gained by centralizing
production in large central plants to get better economies of scale, even
though delivery times might be longer.

2. INVENTORY

Responsiveness can be had by stocking high levels of inventory for a

wide range of products. Additional responsiveness can be gained by
stocking products at many locations to have the inventory close to
customers and available to them immediately. Efficiency in inventory
management would call for reducing inventory levels of all items and
especially of items that do not sell as frequently. Also, economies of
scale and cost savings can be gotten by stocking inventory in only a few
central locations such as regional distribution centers (DCs).

3. LOCATION

A location decision that emphasizes responsiveness would be one where

a company establishes many locations that are close to its customer
base. For example, fast-food chains use location to be very responsive
to their customers by opening lots of stores in high volume markets.
Efficiency can be achieved by operating from only a few locations and
centralizing activities in common locations. An example of this is the
way e-commerce retailers serve large geographical markets from only a
few central locations that perform a wide range of activities.
4. TRANSPORTATION
Responsiveness can be achieved by a transportation mode that is fast
and flexible such as trucks and airplanes. Many companies that sell
products through catalogs or on the Internet are able to provide high
levels of responsiveness by using transportation to deliver their products
often within 48 hours or less. FedEx and UPS are two companies that
can provide very responsive transportation services. And now Amazon is
expanding and operating its own transportation services in high volume
markets to be more responsive to customer desires. Efficiency can be
emphasized by transporting products in larger batches and doing it less
often. The use of transportation modes such as ship, railroad, and
pipelines can be very efficient. Transportation can also be made more
efficient if it is originated out of a central hub facility or distribution
center (DC) instead of from many separate branch locations.

5. INFORMATION
The power of this driver grows stronger every year as the technology for
collecting and sharing information becomes more widespread, easier to
use, and less expensive. Information, much like money, is a very useful
commodity because it can be applied directly to enhance the
performance of the other four supply chain drivers. High levels of
 responsiveness can be achieved when companies collect and share
accurate and timely data generated by the operations of the other four
drivers. An example of this is the supply chains that serve the electronics
market; they are some of the most responsive in the world. Companies
in these supply chains, the manufacturers, distributors, and the big
retailers all collect and share data about customer demand, production
schedules, and inventory levels. This enables companies in these supply
chains to respond quickly to situations and new market demands in the
high-change and unpredictable world of electronic devices
(smartphones, sensors, home entertainment and video game equipment,
etc.).

TYPOLOGY OF SUPPLY CHAIN MANAGEMENT

IN the context of supply chain management (SCM), "topology" refers to the

arrangement and structure of the network of entities involved in moving goods
and services from raw materials to the end consumer. This includes the
physical locations of suppliers, manufacturers, distributors, warehouses, and
customers, as well as the transportation routes and information flows between
them.

Key Aspects of Supply Chain Network Topology:

Physical Layout:
This involves the geographical locations of production facilities, storage depots, distribution
centers, and customers.
Transportation Networks:
The planning of transportation routes and the choice of transportation modes (e.g., trucks,
trains, ships, air) are crucial elements of the topology.
Information Flow:
The flow of data and information between different entities in the supply chain is also a key
aspect of the topology, including order processing, inventory management, and real-time
tracking.
Connectivity and Efficiency:
The topology should be designed to ensure efficient and cost-effective movement of goods,
while also meeting service level requirements and accommodating future expansion plans.
Resilience:
A well-designed topology should be able to withstand disruptions and uncertainties in the
supply chain, such as supply disruptions, demand fluctuations, and natural disasters.
Strategies:
Different supply chain strategies (e.g., efficient, responsive, risk-hedging, agile) can be
reflected in the choice of network topology. For example, an efficient supply chain might
prioritize cost-effectiveness and centralized production, while a responsive supply chain
might focus on speed and flexibility.

Examples of Supply Chain Network Topologies

Centralized Model:
A single manufacturing plant with a network of distribution centers and customers.
Decentralized Model:
Multiple production facilities located closer to customer demand zones.
Hub-and-Spoke Model:
A central hub (e.g., a warehouse or distribution center) connected to multiple spokes (e.g.,
retail stores, regional distribution centers).
Multi-Echelon Model:
A complex network with multiple layers of suppliers, manufacturers, and distributors.

Importance of Supply Chain Topology:

Cost Optimization:
A well-designed topology can reduce transportation costs, inventory holding costs, and
other operational expenses.
Service Level Improvement:
It can enable faster delivery times, higher product availability, and better customer service.
Risk Mitigation:
A robust topology can help to reduce the impact of disruptions and uncertainties in the
supply chain.
Competitive Advantage:
Companies with well-designed supply chain networks can gain a competitive advantage by
offering lower prices, faster delivery times, and a wider product selection.

CYCLE VIEW OF SUPPLY CHAIN

 The cycle view of a supply chain segments processes into distinct cycles
occurring between successive stages, like a customer order cycle,
replenishment cycle, manufacturing cycle, and procurement cycle. This
approach helps with better coordination and control, improving the overall
effectiveness of the supply chain. Each cycle involves processes like order
arrival, scheduling, fulfillment, and receiving between two consecutive stages.

Key aspects of the cycle view:

Defined Processes:
It clearly outlines the processes involved and the responsibilities of each party within the
supply chain.
Operational Decisions:
This view is beneficial for operational decisions, as it specifies roles, responsibilities, and
desired outcomes for each process.
Cycle Stages:
The main cycles include customer order, replenishment, manufacturing, and procurement.
Interfacing Stages:
Each cycle occurs at the interface between two consecutive stages of the supply chain.

Example:

• Customer Order Cycle: From the customer to the retailer, involves order arrival,
scheduling, and fulfillment.
• Replenishment Cycle: From the retailer to the distributor, focuses on
replenishing inventory to meet demand.
• Manufacturing Cycle: Between the distributor and manufacturer, involves
producing goods.
• Procurement Cycle: From the manufacturer to the supplier, focuses on sourcing
raw material

PROBLEM IN SCM AND suggested solution

A major problem in Supply Chain Management (SCM) is demand forecasting

inaccuracies, which can lead to both overstocking and stockouts. A suggested
solution is to adopt advanced software solutions powered by AI/ML that
analyze historical data and external factors to predict demand more
accurately. Another significant challenge is supply chain disruptions, which
can be mitigated by implementing diversification strategies like holding more
inventory and diversifying product sources.

Elaboration:

1. Demand Forecasting Challenges and Solutions:

Problem:
Inaccurate demand forecasting can lead to either overstocking (holding excess inventory,
increasing storage costs) or stockouts (running out of inventory, leading to lost sales and
customer dissatisfaction).
 Solution:
• Adopt advanced software solutions: Utilize AI/ML powered tools to analyze vast amounts
of data, including historical data, seasonal trends, and market fluctuations, to predict
demand more accurately.
• Improve data quality: Ensure the data used for forecasting is complete and up-to-date, as
inaccurate data can lead to poor forecasts, even with advanced tools.

2. Supply Chain Disruptions and Solutions:

Problem:
Supply chains are vulnerable to various disruptions, including natural disasters, global
pandemics, political instability, and labor shortages.
Solution:
• Hold more inventory: Increase inventory levels to buffer against potential disruptions and
ensure a consistent flow of products.
• Diversify product sources: Avoid relying on a single supplier or region by sourcing from
multiple sources to mitigate the impact of disruptions.
• Create a risk management plan: Develop a plan to identify, assess, and mitigate potential
risks, including external risks like geopolitical conflicts or weather events.

3. Other Common SCM Problems and Solutions:

Problem:
Inefficient processes, slow data entry, and lack of integration between different platforms
can lead to errors, delays, and employee dissatisfaction.
Solution:
• Automate processes: Utilize inventory management software to automate tasks like
tracking inventory levels, orders, sales, and deliveries.
• Implement integrated systems: Invest in modern technology infrastructure and integrate
different platforms to facilitate seamless data flow and collaboration.
Problem:
Regulatory compliance can be complex and time-consuming.
Solution:
• Utilize SCM software: SCM software can help manage and document regulatory
requirements, reducing the risk of non-compliance.