Unit-I SUPPLY

CHAIN
MANAGEMENT
Dr.P.Nivetha
Assistant Professor
Department of Management Studies
 SUPPLY CHAIN MANAGEMENT
• A supply chain is a global network used to deliver products and services
from raw materials to end customer through Information flow, physical
distribution and cash.
• Supply chain involved all the stages directly or indirectly in fulfilling a
customer request which includes Manufacturers, suppliers,
transporters, warehouses, retailers and customers.
• Examples of supply chain activities include Farming, refining, design,
manufacturing, packaging, and transportation.
 OBJECTIVES OF SUPPLY CHAIN
MANAGEMENT
• To maximize overall value generated
• To meet consumer demand for guaranteed delivery of high quality and low
cost with minimal lead time
• To fulfill customer demand through efficient resources
• To maximize efficiency of distribution side
• Helps in better decision
 IMPORTANCE OF SUPPLY CHAIN
MANAGEMENT
 Improves Customer Services Reduce Operating Costs
 Customers expect to receive the Decreases Purchasing Cost
correct product mix and quantity Decrease Production Cost
to be delivered on time
Decrease Total Supply Chain Cost
 Products need to be on hand in the
right location Improves Financial Position
 Follow up support after a sale
must be done quickly
 FUNCTIONS OF SUPPLY CHAIN
MANAGEMENT
 Customer Relationship Management: Consistent focus on end customer
demands to meet the increasing customer requirements and ensures a high
degree of flexibility.
 Flexibility and demand-oriented production: Continuous cost reduction
and resource optimization across all stages of the value chain.
 Synchronization of supply and demand: Increasing the adaptability and
development capability of the supply chain.
 ADVANTAGES OF SUPPLY CHAIN
MANAGEMENT
 Develops better customer relationship and service.
 Creates better delivery mechanisms for products and services in demand with
minimum delay.
 Improvises productivity and business functions.
 Minimizes warehouse and transportation costs.
 Minimizes direct and indirect costs.
 Assists in achieving shipping of right products to the right place at the right time.
 Enhances inventory management, supporting the successful execution of just-in-time
stock models.
 CHARACTERISTICS OF SUPPLY CHAIN
MANAGEMENT
 Focuses more on the customer
 Sourcing of raw materials or finished goods from anywhere in the world
 Centralized global business
 Ability to manage information not only within a company but across
industries and enterprises.
 Responsibility of multiple flow in supply chain network both upward and
downward
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History of SCM
• Creation Era
• Integration Era
• Globalization Era
• Specialization Era
• SCM 2.0
 Creation Era
• The term "supply chain management" was first coined by Keith Oliver in
1982.
• The concept of a supply chain in management was of great importance long
before, in the early 20th century, especially with the creation of the assembly
line.
• The characteristics of this era of supply chain management include the need
for large-scale changes, re-engineering, downsizing driven by cost reduction
programs, and widespread attention to Japanese management practices.
 Integration Era
• This era of supply chain management studies was highlighted with the
development of electronic data interchange (EDI) systems in the 1960s, and
developed through the 1990s by the introduction of enterprise resource
planning (ERP) systems.
• This era has continued to develop into the 21st century with the expansion
of Internet-based collaborative systems.
• This era of supply chain evolution is characterized by both increasing
value added and cost reductions through integration.
 Globalization Era

• The third movement of supply chain management development, the

globalization era, can be characterized by the attention given to global
systems of supplier relationships and the expansion of supply chains beyond
national boundaries and into other continents.
 Specialization Era
• This specialization model creates manufacturing and distribution networks
composed of several individual supply chain specific to producer to end
consumer.
• Supply chain management works as a service.
 Specialization Era
• There are many function of this era:
 Transportation Management
 Storage and Inventory Management
 Planning Development Management
 Performance Management
 SCM 2.0
• SCM 2.0 is a trend in the use of the WWW, that means to increase
creativity, information sharing and collaboration among users(End Users).
• SCM 2.0 designed to rapidly deliver results with the quickly manage the
future change for continuous flexibility, value and success. Globalization
Era Specialization Era
 VALUE CHAIN PERSPECTIVE
• Primary activities The first are primary activities which include the five
main activities. All five activities are directly involved in the production
and selling of the actual product. They cover the physical creation of the
product, its sales, transfer to the buyer as well as after sale assistance. The
five primary activities are
1. inbound logistics, 5. sales and service.
2. operations,
3. outbound logistics,
4. marketing
 Inbound Logistics
• Inbound logistics is where purchased inputs such as raw materials are
often taken care of. Because of this function, it is also in contact with
external companies such as suppliers. The activities associated with
inbound logistics are receiving, storing and disseminating inputs to the
product. Examples: material handling, warehousing, inventory control,
vehicle scheduling and returns to suppliers.
 Operations
• Once the required materials have been collected internally, operations can
convert the inputs in the desired product. This phase is typically where the
factory conveyor belts are being used. The activities associated with
operations are therefore transforming inputs into the final product form.
Examples: machining, packaging, assembly, equipment maintenance,
testing, printing and facility operations.
 Outbound Logistics
• After the final product is finished it still needs to finds it way to the
customer. Depending on how lean the company is, the product can be
shipped right away or has to be stored for a while. The activities
associated with outbound logistics are collecting, storing and physically
distributing the product to buyers. Examples: finished goods warehousing,
material handling, delivery vehicle operations, order processing and
scheduling.
 Marketing & Sales
• The fact that products are produced doesn’t automatically mean that there
are people willing to purchase them. This is where marketing and sales
come into place. It is the job of marketeers and sales agents to make sure
that potential customers are aware of the product and are seriously
considering to purchase them. Activities associated with marketing and
sales are therefore to provide a means by which buyers can purchase the
product and induce them to do so. Examples: advertising, promotion, sales
force, quoting, channel selection, channel relations and pricing. A good tool
to structure the entire marketing process is the Marketing Funnel.
 Service
• In today’s economy, after-sales service is just as important as promotional
activities. Complaints from unsatisfied customers are easily spread and
shared due to the internet and the consequences on your company’s
reputation might be vast. It is therefore important to have the right
customer service practices in place. The activities associated with this part
of the value chain are providing service to enhance or maintain the value
of the product after it has been sold and delivered. Examples: installation,
repair, training, parts supply and product adjustment.
 Support Activities
• The second category is support activities. They go across the primary activities
and aim to coordinate and support their functions as best as possible with each
other by providing purchased inputs, technology, human resources and various
firm wide managing functions. The support activities can therefore be divided into
four
1. procurement,
2. technology development (R&D),
3. human resource management and
4. firm infrastructure.
 Procurement
• Procurement refers to the function of purchasing inputs used in the firm’s
value chain, not the purchased inputs themselves. Purchased inputs are
needed for every value activity, including support activities. Purchased
inputs include raw materials, supplies and other consumable items as well
as assets such as machinery, laboratory equipment, office equipment and
buildings. Procurement is therefore needed to assist multiple value chain
activities, not just inbound logistics.
 Technology Development (R&D)
• Every value activity embodies technology, be it know how, procedures or
technology embodied in process equipment. The array of technology used
in most companies is very broad. Technology development activities can
be grouped into efforts to improve the product and the process. Examples
are telecommunication technology, accounting automation software,
product design research and customer servicing procedures. Typically,
Research & Development departments can also be classified here
 Human Resource Management
• HRM consists of activities involved in the recruiting, hiring (and firing),
training, development and compensation of all types of personnel. HRM
affects the competitive advantage in any firm through its role in
determining the skills and motivation of employees and the cost of hiring
and training them. Some companies (especially in the technological and
advisory service industry) rely so much on talented employees, that they
have devoted an entire Talent Management department within HRM to
recruit and train the best of the best university graduates.
 Firm Infrastructure

• Firm infrastructure consists of a number of activities including general (strategic)

management, planning, finance, accounting, legal, government affairs and quality
management. Infrastructure usually supports the entire value chain, and not
individual activities. In accounting, many firm infrastructure activities are often
collectively indicated as ‘overhead’ costs. However, these activities shouldn’t be
underestimated since they could be one of the most powerful sources of
competitive advantage. After all, strategic management is often the starting point
from which all smaller decisions in the firm are being based on. The wrong
strategy will make it extra hard for people on the work floor to perform well
 DECISION PHASES IN SUPPLY CHAIN

• Supply Chain Strategy

• Supply Chain Planning
• Supply Chain Operations
 Supply Chain Strategy
• In this phase, decision is taken by the management mostly. The decision to
be made considers the sections like long term prediction and involves
price of goods that are very expensive if it goes wrong. It is very
important to study the market conditions at this stage.
• These decisions consider the prevailing and future conditions of the
market. They comprise the structural layout of supply chain. After the
layout is prepared, the tasks and duties of each is laid out.
 Supply Chain Planning
• Supply chain planning should be done according to the demand and
supply view. In order to understand customers’ demands, a market
research should be done. The second thing to consider is awareness and
updated information about the competitors and strategies used by them to
satisfy their customer demands and requirements. As we know, different
markets have different demands and should be dealt with a different
approach. This phase includes it all, starting from predicting the market
demand to which market will be provided the finished goods to which
plant is planned in this stage
 Supply Chain Operations
• The third and last decision phase consists of the various functional decisions
that are to be made instantly within minutes, hours or days. The objective
behind this decisional phase is minimizing uncertainty and performance
optimization. Starting from handling the customer order to supplying the
customer with that product, everything is included in this phase.
• For example, imagine a customer demanding an item manufactured by your
company. Initially, the marketing department is responsible for taking the
order and forwarding it to production department and inventory department.
The production department then responds to the customer demand by sending
the demanded item to the warehouse through a proper medium and the
distributor sends it to the customer within a time frame.
PROCESS VIEWS OF SUPPLY CHAIN
Cycle View
• The processes in a supply chain are divided into a series of cycle, each performed at
the interface between two successive stages of a supply chain. Each cycle occurs at
the interface between two successive stages
Customer order cycle (customer-retailer)
Replenishment cycle (retailer-distributor)
Manufacturing cycle (distributor-manufacturer)
Procurement cycle (manufacturer-supplier)
 2. Push/ Pull view
• The processes in a supply chain are dividing into two categories
depending on whether they are executed in response to a customer order
or in anticipation of customer orders.
• Pull process are initiated by a customer order, whereas push process are
initiated and performed in anticipation of customer orders.