Internal Supply Chain Management

KPB1923-SUPPLY CHAIN MANAGEMENT
Prepared for: Dr Marco Tieman
Prepared by: Esther Mingel (KBA15026) Page 1
EXECUTIVE SUMMARY
Effective supply chain process has become paramount in today’s organization, not
only it ensuring the overall successful supply chain management but also to increase the
organizational performance and to gain competitive advantage. In order for the
organization to compete successfully, there is a need for an effective integration and
collaboration of three macro processes in the supply chain activities which are the Supplier
Relationship Management (SRM), Internal Supply Chain Management (ISCM) and Customer
Relationship Management (CRM). Seeing that the competition is no longer between
organization, but rather among the supply chains, thus Chopra and Meindl (2016)
highlighted that the organization structure of an organization has a strong influence on the
success or failure of the integration effort. Over the time, the terminology of supply chain
management has undergone tremendous changes; where it can never focus only on
decreasing the overhead cost but rather it forces every single business units to become
more innovative in fulfilling the customer’s demand and satisfaction whilst realizing the
importance of Information System (IS) for supply chain activities. Savvy and innovative
companies like Zara, Dell continuously realizing the importance to stay innovative in
improving their supply chain. The question is that how do an organization approach the
supply chain integration today? Integration is all about the collaboration of both internal
and external supply chain; whereby ideally Internal Supply Chain Management (ISCM) will
fulfill the customer’s demand which falls under the Customer Relationship Management
(CRM) and involve in the strategic planning, demand planning, supply planning, decision
making and inventory management whilst Supplier Relationship Management (SRM)
covers the supplier management; ranging from payment terms, pricing, delivery terms,
design and supply collaboration.As Internal Supply Chain Management (ISCM) will be
discussed further, there is a need for understanding that the goal is to improve the cost and
performance through a more strategic relationships. In fact, supply chain output is all about
the MIX match of time, place, products or services proposition where it is contradict to most
believe that the output is the physical product only. Thus, an organization needs to
continuously improve their customer service, minimize and overcome the risks and
challenges in the internal supply chain management, especially their internal supply chain
integration.

Table of Content:
Page:
1. Internal supply chain concepts 3-6
2. Current internal supply chain practices 6-7
3. Future perspectives 7
4. References 8
Figure:
Page:
Figure 1: Supply Chain Management
Framework Elements and Key Decisions
(from: Chopra, Sunil, and Peter Meindl. Supply Chain
Management (6th Edition). Edinburgh Gate: Pearson,
2016)
3
Figure 2: Typical Supply Chain
(from: Tian, R. (2009). Internal logistics as a part of supply
chain: case: Nokia-China, Dongguang Branch. )
4
Figure 3: Supply Chain Macro Processes
(from: Chopra, Sunil, and Peter Meindl. Supply Chain
Management (6th Edition). Edinburgh Gate: Pearson,
2016)
5

1. Internal Supply Chain Concepts:
It is not alien anymore that because of the stiff competition between
supply chains, organizations are doing their best to improve the buyer-supplier
relationship, even a partnership, sourcing management, as well to optimizing the
use of information technology to manage the supply chain
operations.Subsequently, supply chain management definition is to be revisited.
In the past, as per the theory of Industrial Dynamics, the concept of supply
chain management was a bit unclear but the concept starts to develop in terms of
its function and logistics are part of it. Interestingly enough, according to
(Lambert, 2001), as per the Council of Logistics Management (CLM) in the year
1980, supply chain management was viewed as logistics. Secondly, some
modification of the definition of logistics; where logistics are part of supply chain
process including the information-sharing, storage and warehousing, as a service
provider, as it involve in transmitting the information from the point of origin to
the point of consumption.
According to (Bala, 2014), supply chain management develops a process to meet
the customer’s demands. An organization that are optimizing their supply chain
management will emphasize on the supply chain coordination, integration and
improving the relationships. Importantly, supply chain management is the
backbone of company’s direction, where it integrates both material and the
information. In managing a supply chain, three important inter-related elements
are the supply chain network structure, the supply chain business processes, and
the supply chain components as explained in Figure 1.
Figure 1: Supply Chain Management Framework Elements and Key Decisions
Supply Chain Business
Process
Supply Chain Management
Components
Supply Chain Network
Structure
(2) What process should be linked with each of
these supply chain members?
(3)What level of integration and
management should be applied for each
process link?
(1)Who are the key supply chain member
with whom to link processes?

It has been said that supply chain management consists of several functions
including sourcing, purchasing, inventory management, warehouse management,
operation’s supervision to the distribution of products to the customers (John,
2011) whilst (Tian, 2009) firstly stated that supply chain management manages all
internal and external business activities. Secondly, relates the supply chain
management as also the logistics management in terms of efficient and effective
logistics.
For this reason, the notion of internal supply chain comprises of purchasing,
production and distribution flow, as it composed of networks of supply and
demand as per the Figure 2.
Figure 2: Typical Supply Chain
Thirdly, the internal supply chain management refers to the activities of
management itself that is planning, organizing, control and coordination of the
supply chain. It is very important to achieve the integration and coordination in the
entire supply chain network. Chopra and Meindl (2016) identify seven suggestions
to achieve coordination: quantify the bullwhip effect, getting the top management’s
commitment for coordination, allocate the resources, communication with other
stages of a supply chain, optimizing the technology to improve visibility of
information and sharing the benefits of coordination equally. Hence, the internal
supply chain integration makes use of the flow in supply-demand with the goal to
turn the supply-demand flow into more flexible, efficient and effective. There are
four main facets in internal supply chain integration; information integration,
decision making integration, financial integration and the operations of this
integration.
Within the supply chain management literature, internal supply chain process is
Supplier CustomerPurchasing Production Distribution
Internal Supply Chain

not just about a process occurring from marketing to distribution, for example
(Chen & Paulraj, 2004) cited that the understanding of internal supply chain
management also emphasize on the strategic issues, supplier involvement and the
role of buyer-supplier relationship and it’s consequences. Secondly, (Tian, 2009)
summarized internal supply chain management key concept as the whole idea of
processes involved internally in the firm which includes; planning, organizing,
controlling as well as coordinating in the logistics, information-flow and
throughout the business process stages. Thus, the absence of internal supply chain
integration incorporates all the activities to enhance the efficiency of the supply
chain. For example, Chopra and Meindl (2016) summarized the internal supply
chain management processes include the planning of internal production, storage
capacity, preparation of demand and supply plans and fulfillment of the actual
orders as per the Figure 3.
Figure 3: Supply Chain Macro Processes
SRM ISCM CRM
The present study by (Carter, Monczka, Robert, & Ragatz, Gary, 2009) therefore
proposes the antecedents of supply chain integration are the alignment,common
objective, goals across the firm; information-flow through a two-way
communication of by the sharing of data from a common system.Essentially,
numerous of studies have addressed the imperative role of firm’s business
strategy; for example, the correlation between supply chain strategies and its’
business strategies. Thus, strategic planning decision includes the common vision
and objectives, the right people, good control systems, excellent facilitation of
Supplier CustomerFirm
 Source
 Negotiate
 Buy
 Design
Collaboration
 Supply
Collaboration
 Strategic Planning
 Demand Planning
 Supply Planning
 Fulfillment
 Field Service
 Market
 Price
 Sell
 Call Center
 Order Management

supply chain alignment are essential for firm to be competitive which requires the
involvement of the management and the members of supply chains.
As pointed out by Chopra and Meindl (2016), in Figure (3), internal supply chain
management is conceptualized into five dimensions. Therefore, planning of
demand and supply can be seen for instance, in an operational process whereby
typically the planning will be kicked off from drafting of a production schedule in
order to estimate and allocate resources that will be used. Next, from the schedule,
procurement activity will took place for a decision making and to build a
relationship to sustain customer, loyalty and to add value to a product. Supported
by a study done by (Chen & Paulraj, 2004)indicated that more purchasing is
playing a crucial role in a strategic purchasing and aligned with the business
strategies element; for instance, managing the buyer-supplier relationship.
Subsequently, an effective communication is essential in this relationship to
achieve a common goal, maximize the profit, andto add value to both the firm and
the suppliers.
Many studies shows that demand and supply planning and the order fulfillment,
include the aspects of demand forecasting while taking the capabilities of
procurement, manufacturing and distribution into consideration. (Croxton,
Lambert, García-Dastugue, & Rogers, 2002) reveals that a good demand
management process is about being proactive in anticipate demand; where two
primary considerations in developing this process are; (1) understand how to
reduce the demand variability and thus to foresee any future demand
interruptions, whilst understand the benefits of having the right and long term
relationship with suppliers and (2) understand that the forecasting requires every
member in the supply chain to actively participate. Subsequently, an excellent
demand forecasting can leads to a more cost effective firm. In additional, the
concept of forecasting as including, forecasting timeframe of a firm, forecasting
procedures, where different forecasting process is used to cater different needs;
for instance to forecast upon a new product, or to forecast for any members in the
supply chain. Last but not least, is to do the field service for instance, scheduling
service call. In the nutshell, as per the Figure (3), ISCM aims to fulfill the demand
that generates from CRM and hence the SRM is where the order fulfillment and the
field service to integrate in the forecasting of demand; demand planning.
1. Current Internal Supply Chain Practices
As today’s organization is moving from competing amongst the organization to
competing amongst supply chains, to be competitive in the market requires
practices as such; (1) using the Inter-Organizational System (IOS) not only to store

and trace the information data, but it is widely use to mediate the buyer-supplier
relationship, (2) creating alliances with key suppliers to maximize the cost.
Subsequently, an effective alliance management program with key suppliers
include to provide a mechanism to ensure that the relationship stays healthy,
create a platform for problem resolution, develop continuous improvement goals
with the objective of achieving value for both parties and to ensure that
performance measurement objectives are achieved, (3) strategic sourcing, in the
sense that no longer a firm is depending only on the purchasing department, but
rather every business unit in a firm such as accounting, engineering, production
provide their feedbacks and to contribute actively in the decision making process,
thus this way it will be more beneficial to the organization, (4) optimizing
company-owned inventory which also means to not hold inventories for too long
as the overall idea of efficient supply chain is to reduce the cost of overhead by
efficient warehousing system and efficient planning and forecasting, (5) risk
mitigation, is as crucial in any firm to frequently reviewing, keep updated,
monitoring their supply chain policies and procedures to ensure compliance.
Business will runs smoothly when risks are in controlled. For instance, sourcing
decision process, the firm has the responsibility to identify the risk elements and
its probability of occurring and assessing the cost impact, last but not least, (6)
green supply chain, or reducing the supply chain’s carbon footprint. It is
conceptualized into green procurement, green manufacture, green distribution,
and green logistics. Green supply chain aims to educate every business firm of their
supply chain to eliminate or minimize waste such as chemical, solid wastes or
emissions (Ninlawan et al., 2010). Some examples of efforts are, create awareness
to 3Rs, using the energy efficient technology, green packaging for warehousing,
procurement, logistics, go paperless as well as collaborate with green partners.
2. Future Perspectives
Supply chain management is about a journey, not a destination. Interestingly, a
research on supply chain management versus supply chain orientation caught my
attention. As per (Mentzer et al., 2001) the argument was the antecedents of
supply chain management are the factors that enhance or impede the
implementation of supply chain orientation. Firstly, the supply chain orientation is
defined as tactical activities in managing the various flows in a supply chain, in
which it is applied if the management is involved throughout the entire supply
chain processes. Further explained in this study, stated that with the practice of
Just-In-Time delivery for instance in the supply chain, it is not sufficient unless it is

coordinated with a strategic and systemic orientation. Thus the question is how
does supply chain management change with regards to different type of
companies; it’s philosophies and culture as such; trust, top management support,
commitment, and organizational compatibility.
References:
Bala, K. (2014). Supply Chain Management : Some Issues and Challenges - A Review.
International Journal of Current Engineering and Technology E-ISSN, 4(2), 946–953.
Carter, P. L., Monczka, Robert, M., & Ragatz, Gary, L. (2009). Supply Chain Integration:
Challenges and Good Practices. CAPS: Center for Strategic Supply Research.
Chen, I. J., & Paulraj, A. (2004). Understanding supply chain management: critical
research and a theoretical framework. International Journal of Production Research,
42(1), 131–163. http://doi.org/10.1080/00207540310001602865
Chopra, Sunil, and Peter Meindl. Supply Chain Management (6th Edition). Edinburgh
Gate: Pearson, 2016
Croxton, K. L., Lambert, D. M., García-Dastugue, S. J., & Rogers, D. S. (2002). The demand
management process. The International Journal of Logistics Management, 13(2),
51–66. http://doi.org/10.1108/09574090210806423
John, A. (2011). Retail Supply Chain : Challenges and Prospects, (February).
Lambert, D. M. (2001). Supply Chain Management. The International Journal of Logistics
Management, 8(1), 13–36.
Mentzer, J. J. T., Dewitt, W., Keebler, J. J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z.
G. (2001). Defining supply chain management. Journal of Business …, 22(2), 1–25.
http://doi.org/10.1002/j.2158-1592.2001.tb00001.x
Ninlawan, C., Seksan, P., Tossapol, K., Pilada, W., C, N., P, S., … W, P. (2010). The
Implementation of Green Supply Chain Management Practices in Electronics
Industry. Proceeding of the International MultiConference of Engineers and

Computer Scientists IMECS 2010, March 17-19, 2010, III.
Tian, R. (2009). Internal logistics as a part of supply chain: case: Nokia-China,
Dongguang Branch. Retrieved from
http://publications.theseus.fi/handle/10024/3577

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