SUPPLY CHAIN MANAGEMENT
SUPPLY CHAIN MANAGEMENT (SCM) is
integrating management practices and
information technology to optimize information
and production flow among the processes and
business partners within a supply chain. SCM is
a management concept that integrates the
management of supply chain process.
WHAT IS SUPPLY CHAIN ?
Consists of all parties involved, directly or indirectly, in
fulfilling a customer request, include not only
manufacturers & suppliers, but also transporters,
warehouses, retailers & even customers.
Supplier Manufacturer Distributor Retailer Customer
Basic Supply Chain Process
& Raw Materials
B2B & B2C
Suppliers Production Distribution Sales Channel
In a supply chain, virtually all of the members serve as
both customers as well as suppliers.
In the Li & Fung example, the Korean yarn producer and
the Japanese zipper producer are probably only suppliers
and the customer’s customers (folks like you and me) are
probably only customers.
Every other organization in the supply chain is both
a customer and a supplier. See the figure on slide seven.
WHY IS SCM SO IMPORTANT?
TO Gain efficiencies from procurement,
distribution and logistic
To reduce transportation costs of inventories
To meet the challenge of globalization and longer
To meet the new challenges from e-commerce
To manage the complexities of supply chains
To manage the inventories needed across the
IMPORTANT ACTIVITIES INCLUDE DETERMINING
Credit and cash transfers
Accounts payable and receivable
Warehousing and inventory
Sharing customer, forecasting, and
WHAT ARE THE MERITS AND DEMERITS OF
With the increased visibility into the supply chain
and adaptive supply chain network, you can be
more responsive. You can sense and respond quickly
to changes and quickly capitalize on new
By offering a common information framework that
supports communication and collaboration, SCM
enables you to better adapt to and meet customer
You can track and monitor compliance in areas as
environment, health and safety.
With SCM, you can low operational expenses with
timelier planning for procurement, manufacturing
and transportation. Better order, product and
execution tracking can lead to improvements in
performance and quality - and lower costs. You can
also improve margins through better coordination
with business partners.
Tight connection with trading partners keep your
supply chain aligned with current business
strategies and priorities, improving your
organization's overall performance and
achievement of goals.
SCM is hard to implement in immature/informal
SCM can fail if both parties are not willing to share
their insights ,information throughout.
If in an entire SCM chain even one single node is
hiding information ,this will effect the profits and
gains of the entire network which may finally
collapse. So transparency is highly required in SCM.
Imbalance of power.
SUPPLY CHAIN ELEMENTS
Supply Chain Design
Long Term Planning (1 Year ++)
Production/ Distribution Planning
Medium Term Planning(Quarterly, Monthly)
Short Term Planning (Weekly,Daily)
FUNCTIONS OF SCM
OBJECTIVES & GOALS OF SCM
to cut costs
Improve performance in relationships with customers
Develop value added services that give a company a
Objective is to be able to have the right products in
the right quantities(at the right place) at the right
moment at minimal cost
Reduced inventory , reduced lead times , reduced
warehouse cost , helps in forecast accuracy
• Moves the vast majority of
• Chief advantage is flexibility
• Capable of carrying large loads
• Little flexibility though containers
and piggybacking have helped with
• Fast and flexible for light loads
• May be expensive
• Used for transporting oil, gas, and
other chemical products
• Typically used for bulky, low-value
• Used when shipping cost is more
SUPPLY CHAIN RISK
More reliance on supply chains means more
Fewer suppliers increase dependence
Compounded by globalization and logistical
Vendor reliability and quality risks
Political and currency risks
IMPORTANT POINTS TO KEEP IN MIND
Segment customers based on service needs.
Modify the supply chain to meet these service
Customize the logistics network.
Delay product differentiation till the last possible
Segmentation of customers based on service
Customization of logistics network.
Listen to signals of market demand and plan
Differentiate product close to the customer.
Develop a supply chain wide technology
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