11- Supply Chain Management

Supply chain encompasses all activities

associated with the flow and transformation
of goods
1. From the raw material stage ( extraction )
2. Through to end users
3. As well as information flows (information
flows both up & down the supply chain ).
4. Getting the right product,
5. To the right place,
6. In the right quantity,
7. With the right quality,
8. At the right cost.
•The supply chain starts from the origin of the
raw material and ends once the product has
been discarded or recycled. 
•Supply chain management is referred as
"cradle to grave"
• "dirt to dirt." 
•Supply chain management is the
management of upstream and downstream
relationships with suppliers and customers to
deliver superior customer value at less cost to
the supply chain as a whole.”
Supply Chain:
– Sequence of activities and
organizations involved in producing
and delivering a good or service

Suppliers’ Direct Final

Producer Distributor
Suppliers Suppliers Customer
 Product Flow

C
S S
S S
R
S
D C
S S S C
S S
M
S R
D C
S S S C
S S
S
R
S S M C
S S D
S C
S
S S R C
S S
S

Information Flow & Financial Flow

•All nodes & entire supply chain exist for
customer
•If customer is happy with product
,services , quality ,it improves sales
figures and profits
•Each one is a supplier and each one is
a customer except first & last
•Like relay race ( baton ) race can not be
won best performance of any single
player .
•Collective effort / joint endeavor
•Level 0 supplier adds value
•Level 1 supplier (supplier’s supplier )adds
more value
•Level 2 supplier ( key supplier ) adds more
value, sub assemblies
•Manufacturer adds value by converting
into finished products from raw material ,
components , sub assemblies
•Distribution centre adds value by
supplying right product at right time
in right quantity
•Retailer adds value by adding sales
volume to companies /buying arm of
customer / first contact point with
customer
•Each stage may not be present in a
supply chain .
•Depending upon both customer’s
needs & role of the stages.
•Dell builds pc systems to order – no
retailer or wholesaler or distributor
•Mail order company – retailer but no
distributor
•FMCG – retailer , distributor
 Basic SCM model
.
SUPPLY CHAIN
MANAGEMENT

Manufacturing Logistics Management

Management

Sales and distribution Materials

Management Management
Supply Chain Management

Logistics Purchasing
 Customer
Analysis
Demand and Purchasing /
lead-time Supplier

Manufacturing Supply Chain Transportation

remanufacturin Management
g

Material
Inventory
management
Cost benefit Management
Analysis and Control
 Packaged Packaged Packaged serial
cereal serial serial

farmer Processi Distributo Grocery customer

ng facility r store

paperboar
d

Corrugate
d
manufactu
rer

Lumber
company Label
manufact
urer

Supply Chain For CEREAL

 Customer
wants
P & G and Wal Mart Wal Mart
detergent
other or 3rd party Store
& goes to
MFR’s DC
Wal Mart

Plastic Chemical
Packaging Tennece Manufactur
producer Packaging er ( oil )

Chemical Paper timber

manufactur Manufactur
er er
(granules )

Wal Mart Supply Chain for Detergent

 Supply Chain Integration Framework

Develop Overall SC
Understanding

Position Organization
within SC

Build Customer Success Build Supplier Success

Infrastructure Infrastructure

Create & Communicate

Common Vision

Cultivate Integrative
Mechanisms

Constantly Re-evaluate
- Scan & Plan
Principles of supply chain

1. Segment customers based on service needs

2. Customize logistics network
1. whether to meet average requirement of all
customers
2. or satisfy toughest requirement of single
customer
3. Plan based on market demand
4. Enhance ability to meet customer requirement
5. Improve relationships with suppliers
6. Have a supply –chain wide technology strategy
7. Devise a complete supply chain performance
measure
Key issues in Supply Chain Management
1. Distribution network configuration
2. Inventory control
3. Supplier contracts
4. Supply chain integration & strategic
partnering
5. Outsourcing & product strategies
6. Product design
7. Information technology & decision
Support Systems
8. Customer value
Business Processes in Supply Chain
1.Customer Relationship Management
2.Customer Service Management
3.Demand Management
4.Order Fulfillment
5.Manufacturing Flow Management
6.Procurement
7.Product Development and
Commercialization
8.Returns
Companies like Dell (home computers),
Wal-Mart (retail chain) and Amazon
(online book seller) have become
success stories primarily on account of
their ability to manage their supply
chains effectively.
 OBJECTIVES OF SCM
Major objectives of supply chain management is
to reduce the total amount of resources
necessary to provide the required level of
customer service to a particular customer
group.
Other objectives are to:
1.Reduce inventory levels.
2.Improve customer service.
3.Make more efficient use of human resources.
4.Ensure better delivery through reduced cycle
times.
5.Decrease the time required to market new
products.
6.Enable firms to focus on core
competencies.
7.Enhance the public image of companies.
8.Induce greater trust and interdependence
between supply chain partners.
9.Increase shareholder value.
10.Gain competitive advantage over others.
CRITICAL SUPPLY CHAIN DECISIONS
Sourcing
1. Quality of product
2. Choosing suppliers
3. Location of suppliers
4. How much product to order
5. Transportation channels
Production
Location of production (domestic, international)
Make vs. Buy
Capacity of plants
Quality of the product (low cost leader,
differentiation strategy)
Inventory
1. How much inventory to hold (safety
stock)
2. Should the company do JIT
3. How much to order
4. When to order
Logistics
1. Transportation - best way to get the product
to the customer
2. Mode of transport
• Truck
• Rail
• Air
• Sea
• Pipeline
• Multi Modal
3. Shipment size
4. Location of distribution centers in order to
keep customer service high and costs low
Bull whip Effect