Republic of the Philippines

GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras

OPERATIONS MANAGEMENT (TQM)

CHAPTER 7
SUPPLY CHAIN MANAGEMENT AND LOGISTICS

ANALIZA GALIDO INSTR. ZINNIA B. IBIEZA

JENELYN GANDECILA SUBJECT TEACHER
REPORTER/S

Supply Chain Management (SCM)

Supply chain management, simply put, is the complete management of operations

involved in the movement of goods. This includes the process of transforming raw
materials into final products, the transportation of shipments containing these goods
and the distribution to the end consumer. Good supply chain management ensures
that these processes are all streamlined and maintains a good balance of supply and
demand.

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 supply-side activities to maximize customer value
and gain a competitive advantage in the marketplace.

Supply chain management (SCM) represents an effort by suppliers to develop and

implement supply chains that are as efficient and economical as possible. Supply
chains cover everything from production to product development to the information
systems needed to direct these undertakings.

Typically, SCM attempts to centrally control or link the production, shipment, and
distribution of a product. By managing the supply chain, companies can cut excess
costs and deliver products to the consumer faster. This is done by keeping tighter
control of internal inventories, internal production, distribution, sales, and the
inventories of company vendors.

SCM is based on the idea that nearly every product that comes to market results
from the efforts of various organizations that make up a supply chain. Although
supply chains have existed for ages, most companies have only recently paid
attention to them as a value-add to their operations.
 Republic of the Philippines
GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras

5 Parts of SCM

The supply chain manager tries to minimize shortages and keep costs down. The job
is not only about logistics and purchasing inventory. According to Salary.com, supply
chain managers “oversee and manage overall supply chain and logistic operations to
maximize efficiency and minimize the cost of organization's supply chain.
“Productivity and efficiency improvements can go straight to the bottom line of a
company. Good supply chain management keeps companies out of the headlines
and away from expensive recalls and lawsuits. In SCM, the supply chain manager
coordinates the logistics of all aspects of the supply chain which consists of the
following five parts.

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. This relates to raw materials needed during
each stage of manufacturing, equipment capacity and limitations, and staffing needs
along the SCM process. Large entities often rely on ERP system modules to
aggregate information and compile plans.

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. A company may be able to plan and work
with a supplier to source goods in advance. However, different industries will have
different sourcing requirements. In general, 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.

Supply chain management is especially critical when manufacturers are working with
perishable goods. When sourcing goods, firms should be mindful of lead time and
how well a supplier can comply with those needs.
 Republic of the Philippines
GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras
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.

The manufacturing process may be further divided into sub-tasks such as assembly,
testing, inspection, or packaging. During the manufacturing process, a firm must be
mindful of waste or other controllable factors that may cause deviations from
original plans. For example, if a company is using more raw materials than planned
and sourced for due to a lack of employee training, the firm must rectify the issue or
revisit the earlier stages in SCM.

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. In strong SCM processes, a company has robust logistic capabilities and
delivery channels to ensure timely, safe, and inexpensive delivery of products.

This includes having a backup or diversified distribution method should one method
of transportation temporarily be unusable. For example, how might a company's
delivery process be impacted by record snowfall in distribution center areas?

Returning

The supply chain management process concludes with support for the product and
customer returns. It’s 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. This return process is often
called reverse logistics, and the company must ensure it has the capabilities to
receive returned products and correctly assign refunds for returns received. Whether
a company is performing a product recall or a customer is simply not satisfied with
the product, the transaction with the customer must be remedied.

Many consider customer returns as an interaction between the customer and the
company. However, a very important part of customer returns is the intercompany
communication to identify defective products, expired products, or non-conforming
goods. Without addressing the underlying cause of a customer return, the supply
chain management process will have failed, and future returns will likely persist.
 Republic of the Philippines
GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras

Logistics

Logistics is the general term used to describe the management of transportation,

inventory, packaging, supplies and warehousing. It relates to a specific moment in
the overall supply chain management process, referring only to how resources are
acquired, stores and transported to their destination.

Logistics includes planning and executing the storage and movement of goods
between different points in the supply chain. Logistics coordinates facilities, people,
equipment and other resources to ensure products move when they’re supposed to
and there is space for them at the next stop.

Demand planning, transportation (including fleet management), inventory

management, material handling and order fulfilment are all processes that fall under
logistics. To learn more, read our article on logistics management.

Similarities of Supply Chain Management and Logistics

Both supply chain management and logistics focus on the flow of goods from the
point of origin to the endpoint. Both disciplines require careful coordination of
supplies, labor and facilities to make sure items can move through the supply chain
as required. Logistics is a key component of supply chain management, but just one
piece of the equation.

Supply chain management and logistics both work to move, store and deliver goods
as efficiently as possible. Supply chain management provides the strategic direction
that guides inbound and outbound logistics.

Some common aspects of SCM and logistics are:

 Both focus on goods, services or information.

 Both have the ultimate aim of supporting the company’s success and
distinguishing it from competitors.
 Both seek to increase customer satisfaction.
 Both revolve around the same flow of goods and services, from the supplier,
to the manufacturer, to the wholesaler and finally to the retailer or consumer.
 Republic of the Philippines
GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras

How Are Supply Chain Management and Logistics Different?

Supply chain management outlines the strategy and activities that go into planning,
sourcing, producing and delivering goods, as well as handling returns. Logistics
focuses on the right products being in the right place at the right time, and how to
get them there.

The Differences Between Supply Chain Management and Logistics

Supply Chain
Logistics
Supply chain management covers a wide
range of activities, including planning,
Logistics is one activity in supply chain
sourcing materials, labor and facilities
management.
management, producing and delivering
those goods and services.

Logistics focuses on the efficient and Supply chain management targets higher
cost-effective delivery of goods to the operational performance that will give
customer. the business a competitive advantage.

The modern practice of supply chain

management started in the 20th century.
Logistics started with the military. Many
The Ford Motor Company production
say Alexander the Great, born 356 B.C.,
lines perfected the concept. Many credit
as a logistics master.
logistician Keith Oliver as the person who
coined the term in the early 1980s.

SCM oversees the development of raw

materials into finished goods that move
Logistics are centered on the movement
from the producer to the manufacturer.
and transport of goods within a company
Those goods get distributed to retailers
or directly to consumers.

Role of Logistics in Supply Chain Management

In supply chain management, logistics are responsible for the movement and
storage of goods and services, along with the documents and reports that record
those movements throughout an item’s journey to the customer.

Logistics include the numerous transportation methods that get inventory from one
location to another. This component is responsible for figuring out where goods can
be kept at each stage until they’re needed at another location, which is essential to
effective supply chain management.
 Republic of the Philippines
GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras

Logistical Components of the Supply Chain

Supply chain logistical components help to manage goods or services. Each element
helps move materials, finished goods and services through the many steps in the
supply chain.

The following are the logistical components of supply chains:

 Information:

Information helps track the status of items and all supply chain processes,
informing business decisions at each step.

 Storage:

Storage is the practice of holding supplies in the right quantity and right
location. Businesses must strike a balance between demand and supply to
prevent overstock and out-of-stock situations.

 Warehousing:

This component controls the day-to-day warehouse operations, such as

receiving, put-away, picking, packing, shipping and receiving.

 Material handling:

Material handling can refer to the limited movement of items within a building
or a delivery vehicle. Others extend the definition to include the storage,
security and transfer of goods throughout the manufacturing, distribution and
delivery processes.

 Packaging:

Proper packaging ensures items arrive undamaged and ship for the lowest
possible cost.

 Unitization:

Unitization makes items efficient to arrange, transport and store. Unitization

methods also ensure that material handling equipment can move items
efficiently and without damaging them. The cube is one of the easiest units to
store and shift, so it’s a popular type of unitization.
 Republic of the Philippines
GUIMARAS STATE
UNIVERSITY
McLain, Buenavista, Guimaras

 Inventory control:

Inventory control incorporates storage and warehousing techniques to

optimize the types and amount of stock held and where. Companies can use
inventory management formulas to better calculate demand.

 Transportation:

This component is responsible for moving goods along the supply chain to the
next node or directly to the customer. Transportation modes include cars,
trains, trucks, planes and ships.