INTRODUCTION TO SUPPLY
CHAIN MANAGEMENT
Definition of Supply Chain
Management
“To provide best possible product or service
at lowest possible cost”
A supply Chain consists of all
parties ,directly or indirectly involved in
fulfilling a customer request
What is a Supply Chain?
oFlow of products and services from:
1. Raw materials manufacturers
2. Intermediate products manufacturers
3. End product manufacturers
4. Wholesalers and distributors and
5. Retailers
o Connected by transportation and storage
activities
o Integrated through information, planning,
and integration
activities
A typical Supply Chain may involve a variety of
stages
1. Customers
2. Retailers
3. Wholesalers/Distributers
4. Manufacturers
5. Component/Raw material s
What is Supply Chain
Old Paradigm
Firm gain synergy as a vertically integrated
firm encompassing the ownership and
coordination of several supply chain activities.
New Paradigm
Firm in a supply chain focuses activities in it’s
areas of specialization and enters into
voluntary and trust based
Relationship with suppliers and customer firms.
Origins of supply chain
management
1950-1960
US manufacturers focused on cost reduction
and productive improvement strategies.
1960-1970
Introduction of new computer technology
lead to development of Material Requirement
Planning (MRP) & Manufacturing Resource
Planning(MRP11 software applications to
coordinate inventory management
Cont
1980-1990
Intense global competition lead U.S to adopt
Supply Chain Management along with
Just in Time
Total Quality Management and
Business Process Re engineering (BPR)
practices
Cont.
2000 and Beyond
Industrial buyers will rely more on third
party service providers to improve
purchasing and supply management.
wholesalers and retailers will focus on
transportation and logistics more and refer
to these as quick response ,service response
logistics and integrated logistics.
Supply Chain Stages
Supplier Manu-
Distributor Retailer Customer
facturer
Example: Detergent Supply Chain
Timber Paper Tenneco
Company Manufacturer Packaging
P&G or Wal-Mart
Wal-Mart
Other or Third Customer
Store
Manufacturer Party DC
Chemical Plastic
Manufacturer Producer
Chopra, S., Meindl, P., 2004, Supply Chain Management, 2. Edition, p. 4
Stephan Schmucker 11
Global Automotive Supply Chain
3 Tiers and 50.000 potential
Links
Tier 1: System
Tier 2: Raw Material / Supplier Vehicle
Part Suppliers (150 Factories (5 - Manufacturer
- 500) 20) Assembly Factories
(5)
Europe Europe Europe
Brazil Brazil Brazil
India India India
USA USA
Smith, R., 2002, Global Supply Chain Performance and Risk Optimization, 1. Edition, p. 8
Stephan Schmucker 12
Supply Network / Supply Web
Supplier Manu- Retailer Customer
Distributor
facturer
Supplier Manu- Retailer Customer
Distributor
facturer
Supplier Manu- Retailer Customer
Distributor
facturer
Chopra, S., Meindl, P., 2004, Supply Chain Management, 2. Edition, p. 5
Stephan Schmucker 13
Value chain Vs. Supply chain
Management
o The Value a Supply Chain generates is the difference between
what
the final product is worth to the customer and the costs supply
chain incurs in filling that request also known as the Supply chain
profitability Supply Chain Surplus.
o Supply Chain is the interconnection of all the activities that
starts from the manufacturing of raw material into the finished
product and ends when the product reaches the final customer
o The concept comes through business management and was first
described by Michael Porter in his 1985 bestseller, Competitive
Advantage: Creating and Sustaining Superior Performance
o Value Chain, on the other hand, is a set of activities that
focuses on creating or adding value to the product
Cont.
o The major difference between a supply
chain and a value chain is the simple fact
that within a supply chain, there is no value
added. In a supply chain, all that is being
done is conveyance.
o One product or material is taken from one
company or from one end and transported
to the other. Of course there are procedures
involved such as proper storage and careful
transportation but that is about it.
Importance of Supply Chain
Management
Importance of Supply Chain
Management
Supply Chain Flows
Product Cash
Flow: Flow:
Manu-
Supplier Wholesaler Retailer Customer
facturer
Information Flow
(Integrated Information Systems)
Stephan Schmucker 18
Decision Phases in Supply
Chain
The designing ,planning and operations
of a supply chain have a strong impact on
overall profitability and success and
decisions need to be made related to flow
of information, funds and products
These decisions fall into 3 categories
depending on the frequency of each
decision and the time frame
1. Supply Chain Strategy or Design
2. Supply Chain Planning
3. Supply Chain Operations
Supply Chain Strategy or
Design
The company decides the :
• Decisions made for next several years
• How resources will be allocated
• What processes each stage will perform
• Whether to outsource or perform function
in house
• Location and capacities of the
warehousing facilities
• Modes of transportation will be used
• Types of information system to be utilised
Supply Chain Planning
• Time frame considered for these
decisions is a quarter to a year
• Which markets will be supplied from
which locations
• The subcontracting of manufacturing
• Inventory policies to be followed
• The timings and size of marketing and
price promotion
• Consider the uncertainty in demand,
exchange rates and competition.
Supply Chain Operations
• Decisions made on weekly or daily basis
• Regarding individual customer orders
• Allocate order to particular shipping
mode and shipment
• Set a date when that an order needs to
be completed
• Set deliveries schedules of trucks
• Place replenishment orders
SCOR Model
SCOR Model
SCOR stands for:
Supply Chain Operations Reference
Why need for SCOR
SCOR helps to regularly evaluate the
efficiency and productivity of the Supply
Chain.
SCOR Model
• SCOR methodology assumes that all supply
chain processes can be subdivided into one
of five general subtypes /components
1. plan
2. source
3. make
4. deliver and
5. return.
• Each component plays a vital role in
improving supply chain operations.
Plan
o Demand Planning: Demand planning is a multi-step
operational supply chain management (SCM) process
used to create reliable forecasts. Effective demand
planning can guide users to improve the accuracy of
revenue forecasts, align inventory levels with peaks
and troughs in demand, and enhance profitability for a
given channel or product.
o Supply Planning: Supply chain planning (SCP) is the
component of supply chain management (SCM)
involved with determining how best to fulfill the
requirements created from the Demand Plan. Its
objective is to balance supply and demand in a
manner that achieves the financial and service
objectives of the enterprise.
Source
o Raw Material Procurement
o Packaging Material Procurement
o Non Production Item (NPI) Procurement
Make
o Production
o Engineering and Research
o MRO (Maintenance repair operation)
Deliver
o Warehousing: Operations of administrative and
physical functions associated with storage of goods and
materials. These functions include receipt,
identification, inspection, verification, putting away,
retrieval for issue, etc.
o Distribution: Distribution is the process of making a
product or service available for the consumer or
business user that needs it. This can be done directly
by the producer or service provider, or using indirect
channels with intermediaries.
o Logistics: Ease and pace for the transition of goods
from one point to another.
Return
• CRM
• Order returns
• Reverse Logistics
Current Trends in Supply Chain
Management
Supply chain analytics :
It refers to examining raw supply chain data and then
reaching conclusions or making predictions with the
information.
It is used in many industries to allow supply chain
managers to make better business decisions. The market
for supply chain analytics solutions is growing at about 15
percent per year, with the 2018 global revenues
exceeding $4.8 billion.
Cont.
Improving Supply Chain Sustainability
Supply chain sustainability refers to meeting the needs of
current supply chain members without hindering the
ability to meet the needs of future generations in terms of
economic, environmental, and social challenges.
CONT.
Increasing Supply Chain Visibility
Supply chain visibility is defined as the ability of
suppliers, manufacturers, business partners, and
customers to know exactly where products are, at any
point in the supply chain.
This inventory visibility is obviously made easier by
technology and can prove very advantageous when
dealing with disruptive events such as pandemics, floods,
hurricanes, and political upheavals.
