Supply chain mgmt.


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Supply chain mgmt.

  1. 1. . 1. Concept of Supply Chain ManagementSupply chain management (SCM) has been defined as "a process-oriented approach to procuring,producing, and delivering products and services to customers. SCM has a broad scope thatincludes sub-suppliers, suppliers, internal operations, trade customers, retail customers, and endusers. . Importantly, it also includes coordination and collaboration with channel partners, whichcan be suppliers, intermediaries, third-party service providers, and customers. In essence, SupplyChain Management integrates supply and demand management within and across companies. Itspans all movement and storage of raw materials, work-in-process inventory, and finished goodsfrom point-of-origin to point-of-consumption. The term supply chain management was coined bystrategy consulting firm Booz Allen Hamilton in 198.Supply chains are dynamic and complexreaching into many customers and back into many suppliers throughout the world. It exists inboth service and manufacturing organizations, although the complexity of the chain may varygreatly from industry to industry and firm to firm. The following definitions are the evidence ofrole played by the logistics business development. Supply chain management is facilitated by - Process, - Structure and -Technology Supply chain serves two functions: - Physical - Market mediationDefinitions of Supply Chain Management A strategic concept that involves the understanding and managing of the sequence of activities - from supplier to customer - that add value to the product supply chain. The supply chain encompasses all activities associated with the upstream and downstream flow and transformation of goods and information from the raw materials stage (extraction), through to the end user.
  2. 2. Supply chain management is the collaborative effort of multiple channel members to design, implement, and manage seamless value-added processes to meet the real needs of the end customer 2. Supply Chain Flows Information; Materials(product flow) Money(financial flow) Manpower; and, Capital equipmentThe product flow includes the movement of goods from a supplier to a customer, as well as anycustomer returns or service needs. The information flow involves transmitting orders andupdating the status of delivery. The financial flow consists of credit terms, payment schedules,and consignment and title ownership arrangements.The internal and external supply chainThe internal supply chainMost businesses can be described in terms of the five functions: buy, make, store, buy; make;store; move and sell. This is known as the „micro‟ or internal supply chain.The external supply chainSupply chain shows materials flow from the raw material source through the various stages inthe chain to the final consumer. Money then flows back down the chain. The point is that everylink matters and that value is added, and profit generated, at each link along the way.
  3. 3. Managing the FlowsFor a supply chain to achieve its maximum level of effectiveness and efficiency, material flows,money flows and information flows throughout the entire chain must be managed in anintegrated and holistic manner, driven by the overall service and cost objectives. It can be arguedthat managing the information flows is the most critical of these activities. This is because theflow or movement of materials or money is usually triggered by an associated informationmovement. Effective management of material and financial flows is, therefore, predicated uponthe effective management of the related information flows. For this reason, information andcommunications technology (ICT) is becoming an increasingly important SCM enabler.Supply Chain RelationshipsFinally, this holistic approach requires a reappraisal of the way in which both internal andexternal customer/supplier relationships are created and managed. SCM is not a “zero-sum”game based on adversarial relationships. Rather, it needs to be a “win-win” game based onpartnership approaches. This point is relevant to the interactions between the key “internal”supply chain functions of buy, make, store, move and sell, as well as to relationships between anorganization and its external customers and suppliers. One of the biggest manifestations of theapplication of supply chain philosophy in recent years has involved the move away fromadversarial relationships with key external suppliers towards relationships which are based onmutual trust and benefits, openness and shared goals and objectives.3. Difference between supply chain management and market logistics managementLogistic is typically based on the individual business with the objective of making thisenterprise‟s logistic system more efficient through internal and external planning and control. Onthe other hand, supply chain management (SCM) is based on the external relationship betweenthe players in the entire supply channel and focuses on how to improve trading in general. The
  4. 4. SCM concept provides broader concept across the supply chain that has been the traditionalapproaches within the logistic. A range of activities comprise by SCM concept concernexpansion of the business process reengineering concept to cover the entire supply chain.It is also interesting to note that logistics management is known by many names such asmaterials management, channel management, distribution, business or logistics management,business or logistics management and supply chain management. This only shows that supplychain management can be called the subset of logistics but the converse is not true. There is athin line of difference between the two. Logistics deals with strategy and coordination between marketing and production. supply chain management focuses more on purchasing and procurement. It is interesting to note that supply chain management can include factors relating to inventory, materials and production planning too in its concept. On the other hand logistics includes factors relating to demand management and forecasting in its concept Experts argue that logistics management is a part of the supply chain management that plans and implements the flow and storage of goods, services in order to meet the demands of the consumers. This is indeed an important study made by the experts. On the other hand supply chain management encompasses the management of all activities involved in the procurement and conversion. In addition to these activities the supply chain management takes care of all the logistics management activities. It is important to note that supply chain management involves all movements and storage of raw materials. In short it can be said that supply chain management takes care of the design, planning, execution, control, and monitoring of supply chain activities with the sole objective of creating net value and leveraging worldwide logistics. On the other hand logistics can be simply defined as the management of the flow of goods and the services between the point of origin and the point of consumption in order to meet the requirements of customers