Supply Chain Management

Learning Objectives
 Explain what a supply chain is.
 Explain the need to manage a supply chain and
the potential benefits of doing so.
 State the objective of supply chain management.
 List the elements of supply chain management.
 Major challenges and issues faced by
organizations in developing and implementing
supply chain strategies.
 The contributions of a supply chain approach to
organizational efficiency and effectiveness.

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 The Supply chain
 Supply Chain: The sequence of organizations -
their facilities, functions, and activities - that are
involved in producing and delivering a product or
service.
 A supply chain is a system of organizations,
people, activities, information, and resources
involved in moving a product or service from a
supplier to a customer.
 A supply chain is actually a complex and dynamic
supply and demand network.
Sometimes referred to as value chains
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 Examples of Supply chains
 Industrial Supply Chain
 Agricultural Supply Chain
 Health Care Supply Chain
 Educational Supply Chain
 Transportation Supply Chain
 Military Supply Chain
 Humanitarian Supply Chain
 Disaster Management Supply Chain
 Waste Management Supply Chain, etc.

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 Industrial Supply Chain
 Production of products or services and delivering
them to customers

 It includes collection of raw materials, conversion

of inputs into output, and delivering them to
customers

 It requires demand planning and fulfillment

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 Integrated supply chain
 Integrated supply chain: The supply chain can
be viewed as a series of integrated enterprises
that must share information and coordinate
physical execution to ensure a smooth,
integrated flow of goods, services, information
and cash through the pipeline. The scenario can
be shown as follows:
Retailers/
 Suppliers Wholesalers Manufacturers Wholesalers
Customers

 Product/Services
 Information
 Finances

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 Facilities

 Warehouses
 Factories
 Processing centers
 Distribution centers
 Retail outlets
 Offices
 Functions and Activities
 Forecasting
 Purchasing
 Inventory management
 Information management
 Quality assurance
 Scheduling
 Production and delivery
 Customer service
 Typical Supply Chains

- A supply chain consists of

Supplier Manufacturer Distributor Retailer Customer

Upstream
Downstream

- aims to Match Supply and Demand,

profitably for products and services

SUPPLY SIDE DEMAND SIDE

- achieves

The right
Product
+ + + + +
The right
Price
The right
Store
The right
Quantity
The right
Customer
The right
Time
= Higher
Profits
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 Change in organizations
Change

Time

10
 Change in organizations
 Leading Retailers from 1930

 Montgomery Ward – lost the market because of

the failure to deliver its products to suburbs after
World War II.

 Sears and Roeback succeed in that respect in

1950 by opening multiple, smaller stores in the
suburbs providing locational convenience and
parking.

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 Change in organizations
 Kmart replaced Sears in 1970 providing discount
on its products.

 In 1990 Wal-Mart replaced kmart by providing

multi-faceted strategy such as
1) Discount pricing on brand name products
2) locating its store in smaller communities
3) Providing more customer service, etc.
Continual focus of Wal-Mart on improving supply
chain process provided the ability to discount brand
name product.
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 Change in organizations
 The dynamics of the global environment today
requires new thinking and perspectives.

 So, an examination of the major external forces or

change drivers shaping the economic and political
environment is essential.

 Here we have the intention to understand the impact of

these forces of change on business and other
organizations and hence the requirement of supply
chain management.
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 Major external forces
 Globalization
 Some important issues or challenges for supply chains of
the global economy are
 More volatility (instability) of supply and demand
 Shorter product life cycles
 The blurring of traditional organizational boundaries.

 Technology
 Organizational Consolidation (the action or process
of making something stronger or more solid)
 The empowered customer
 Government Policy and regulation

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Benefits of Supply Chain Management
 Lower inventories
 Higher productivity
 Greater agility (alertness, liveliness, quickness)
 Shorter lead times
 Higher profits
 Greater customer loyalty
 Integrates separate organizations into a cohesive
operating system

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 Global Supply Chains
 Increasingly more complex
 Language
 Culture
 Currency fluctuations
 Political
 Transportation costs
 Local capabilities
 Finance and economics
 Environmental

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 ERP AND SUPPLY CHAIN
MANAGEMENT
 SCM that integrates ERP is a formal approach to
effectively plan and manage all the resources of a
business enterprise.
 Implementation of ERP involves establishing
operating systems and operating performance
measurements to enable them to manage business
operations and meet business and financial
objectives.
 ERP software provides the ability to coordinate,
monitor, and manage a supply chain.

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 INVENTORY MANAGEMENT
 The location of inventories is an important factor for effective
material flow through the chain and for order fulfillment.
 Centralized inventories
 Decentralized inventories
 Inventory velocity The speed at which goods move
through a supply chain.
 Bullwhip effect Inventory oscillations become progressively
larger looking backward through the supply chain.
 Vendor-managed inventory (VMI) Vendors monitor good
and replenish retail inventories when supplies are low.

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 Bullwhip Effect

Demand

Initial Final Customer

Supplier

Inventory oscillations become progressively

larger looking backward through the supply chain

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 ORDER FULFILLMENT
 Order fulfillment refers to the processes involved in
responding to customer orders.
 It is often a function of the degree of customization
required. Some common approaches are:
 Engineer-to-Order (ETO).
 Make-to-Order (MTO).
 Assemble-to-Order (ATO).
 Make-to-Stock (MTS).

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 Logistics
 Logistics
 Refers to the movement of materials and
information within a facility and to incoming
and outgoing shipments of goods and
materials in a supply chain

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 Logistics
• Movement within the facility
• Incoming and outgoing shipments
• Bar coding 0

• Tracking Goods: RFID

214800 232087768
• Evaluating Shipping Alternatives
• Distribution
• Third-party logistics (3-PL)

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 Materials Movement
Work center
Work center Work
center

Work Storage
center

Storage

Storage
RECEIVING

Shipping

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 Effective Supply Chain
 Requires linking the market, distribution channels
processes, and suppliers
 Supply chain should enable members to:
 Share forecasts
 Determine the status of orders in real time
 Access inventory data of partners

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Creating an Effective Supply Chain
1. Develop strategic objectives and tactics
2. Integrate and coordinate activities in the
internal supply chain
3. Coordinate activities with suppliers and with
customers
4. Coordinate planning and execution across the
supply chain
5. Form strategic partnerships

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 Major Supply chain Issues
 The challenge to develop efficient and effective supply
chain(s) requires organizations to address a number of
issues as follows:
 Supply Chain Networks
 Complexity
 Inventory Deployment
 Information
 Cost/Value
 Organizational Relationships
 Performance Measurement
 Technology
 Transportation Management
 Supply Chain Security
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