1. National Conference on Recent Trends in Management
On 29th May, 2014 at K. S. School of Engineering & Management
Title: A Study on Application of Supply Chain Management in Present Business Organizations.
Author
Depesh Banik , Student of MBA 1st Year, 2nd Semester
depeshbanik@gmail,com, AIMS Institutes, Peenya, Bangalore.
Abstract
A supply chain is dynamic process and involves the constant flow of information, product, and funds
between different stages. The supply chain, which is also referred to as the logistics network, consists of
suppliers, manufacturing centers, warehouses, distribution centers, and retail outlets, as well as raw
materials, work-in-process inventory, and finished products that flow between the facilities. We study
supply chain because of three things, they are pervasiveness, interdependence and profitability & survival.
Pervasiveness means every organization must make a product or provide a service that someone values.
They follow value chain process. Interdependence means most organizations functions as a part of larger
chain. They are all interrelated dependent on each other. Profitability and survival means organization must
carefully manage their operations and supply chain to prosper and to make profit indeed survive.
Objective of the paper:
1. To understand the application of supply chain concepts in present organizations
2. To have an in depth understanding of how supply chain works in an organization.
3. To conduct a comparative analysis of the effects of supply chain process adaptations in an organization.
However, the overall objective of this paper is to study and have an understanding as to how supply chain
management processes have adapted new ways to bring about desired changes to contest with the ever
changing competitive world. It is also to understand how these processes helped an organization to increases
their customer satisfaction and achieve overall profitability.
Research methodology: It is a conceptual research study which is carried by through in depth
understanding of various literature reviews. The research has been carried out across various different
renowned companies those are following very sophisticated supply chain management processes where
supply chain professionals are interviewed through online questionnaire.
Key Words: Supply chain management, value chain process, logistics, efficiency and effectiveness.
Introduction
The practice of supply chain management is guided by some basic underlying concepts that have not
changed much over the centuries. Several hundred years ago, Napoleon made the remark, “An army
marches on its stomach.” Napoleon was a master strategist and a skillful general and this remark shows that
he clearly understood the importance of what we would now call an efficient supply chain. Unless the
soldiers are fed, the army cannot move. Along these same lines, there is another saying that goes, “Amateurs
talk strategy and professionals talk logistics.” People can discuss all sorts of grand strategies and dashing
maneuvers but none of that will be possible without first figuring out how to meet the day-to-day demands
of providing an army with fuel, spare parts, food, shelter, and ammunition.
What is Supply Chain? Generally, a supply chain is the alignment of firms that bring products or
services to market. Broadly, a supply chain consists of all stages involved, directly or indirectly, in
fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also
transporters, warehouses, retailers, and customers themselves. A supply chain is a network of facilities
and distribution options that performs the functions of procurement of materials, transformation of these

2. materials into intermediate and finished products, and the distribution of these finished products to
customers.
Flows of Supply Chain: A supply chain is dynamic and involves the constant flow of information, product,
and funds between different stages. In our example, Wal-Mart provides the product, as well as pricing and
availability information, to the customer. The customer transfers funds to Wal-Mart. Wal-Mart conveys
point-of-sales data as well as replenishment order via trucks back to the store. Wal-Mart transfers funds to
the distributor after the replenishment. The distributor also provides pricing information and sends delivery
schedules to Wal-Mart. Similar information, material, and fund flows take place across the entire supply
chain.
Stages of Supply Chain: A typical supply chain may involve a variety of stages. These supply chain stages
include:
 Customers
 Retailers
 Wholesalers/Distributors
 Manufacturers
 Component/Raw material suppliers
Importance of Supply Chain Management
1. Start with key suppliers and move on to other suppliers
2. Similar protocol for customers and shippers as well
3 .Integrate second tier suppliers and customers. (Second tier refers to the customer’s (customers and the
supplier’s suppliers)
The Objective of a Supply Chain
Maximize overall value created
Supply chain value: difference between what the final products is worth to the customer and the
effort the supply chain expends in filling the customer’s request
Value is correlated to supply chain profitability (difference between revenue generated from the
customer and the overall cost across the supply chain)
Sources of supply chain revenue: the customer
Sources of supply chain cost: flows of information, products, or funds between stages of the supply
chain
Supply chain management is the management of flows between and among supply chain stages to
maximize total supply chain profitability
Example:
 Dell receives 30000/- from a customer for a computer (revenue)
 Supply chain incurs costs (information, storage, transportation, components, assembly, etc.)
 Difference between 30000/- and the sum of all of these costs is the supply chain profit
 Supply chain profitability is total profit to be shared across all stages of the supply chain
 Supply chain success should be measured by total supply chain profitability, not profits at an
individual stage.
Benefits of Supply Chain Management
 Inventory, cost and personnel reduction
 Productivity Improvement
 High customer satisfaction

3.  On time delivery fulfillment
 Revenue/profit increase
 Better cash and order management
Supply Chain Management: The Magnitude in the Traditional View
 Estimated that the grocery industry could save $30 billion (10% of operating cost) by using
effective logistics and supply chain strategies.
 A typical box of cereal spends 104 days from factory to sale.
 A typical car spends 15 days from factory to dealership.
 Laura Ashley turns its inventory 10 times a year, five times faster than 3 years ago
Supply Chain Management: The True Magnitude
Compaq estimates it lost $.5 billion to $1 billion in sales in 1995 because laptops were not available
when and where needed.
P&G estimates that it saved $65 million retail customers by collaboration resulting in a better
match of supply and demand.
Boeing Aircraft, one of America’s leading capital goods producers, was forced to announce write-downs
of $2.6 billion in October 1997.
Some Estimates for India
 Logistics Spend … IN Rs. 2,40,000 crores (approx. US $ 50 Billion)
 Share of GDP …….…… 12-13 %
 Major Elements are ( Percentage of Total)
 Transportation ……… 35%
 Inventories ……… 25 %
 Packaging ……… 11 %
 Handling & Warehousing ….. 9 %
 Others & Losses ……… 14 %
Supply Chain: The Potential
 In 25 years, NDDB has enabled India to become the largest producer of milk by implementing a
logistics and supply chain system that has eliminated several intermediaries, thereby leading to a
much higher remunerative price (yield) for producers and lower price for consumers.
 As described in the FORBES magazine, the Dabbawalas of Mumbai has achieved an extremely
high level of reliability and precision (SIX SIGMA level in QA) in delivering to their customers
the products earmarked for them.
 Dell Computer has outperformed the competition in terms of shareholder value growth over the
eight years period, 1988-1996, by over 3,000% using - Direct business model - BTO (Build-to-
Order) strategy.
 In 10 years, Wal-Mart transformed itself by changing its logistics system. It has the highest sales
per square foot, inventory turnover and operating profit of any discount retailer.
Process View of a Supply Chain
 Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the
interfaces between two successive supply chain stages
 Push/pull view: processes in a supply chain are divided into two categories depending on whether
they are executed in response to a customer order (pull) or in anticipation of a customer order (push)
Each cycle occurs at the interface between two successive stages
 Customer order cycle (customer-retailer)

4.  Replenishment cycle (retailer-distributor)
 Manufacturing cycle (distributor-manufacturer)
 Procurement cycle (manufacturer-supplier)
 Cycle view clearly defines processes involved and the owners of each process. Specifies the roles
and responsibilities of each member and the desired outcome of each process.
Areas of action in Supply Chain: Companies in any supply chain must make decisions individually and
collectively regarding their actions in five areas:
1. Production: What products does the market want? How much of which products should be produced and
by when?
2. Inventory: What inventory should be stocked at each stage in a supply chain? How much inventory
should be held as raw materials, semi-finished, or finished goods?
3. Location: Where should facilities for production and inventory storage be located? Where are the most
cost efficient locations for production and for storage of inventory?
4. Transportation: How should inventory be moved from one supply chain location to another? Air freight
and truck delivery are generally fast and reliable but they are expensive.
5. Information: How much data should be collected and how much information should be shared? Timely
and accurate information holds the promise of better coordination and better decision making.
Conclusion: A supply chain is composed of all the companies involved in the design, production, and
delivery of a product to market. Supply chain management is the coordination of production, inventory,
location, and transportation among the participants in a supply chain to achieve the best mix of
responsiveness and efficiency for the market being served. The goal of supply chain management is to
increase sales of goods and services to the final, end use customer while at the same time reducing both
inventory and operating expenses. The business model of vertical integration that came out of the industrial
economy has given way to “virtual integration “of companies in a supply chain. Each company now focuses
on its core competencies and partners with other companies that have complementary capabilities for the
design and delivery of products to market. Companies must focus on improvements in their core
competencies in order to keep up with the fast pace of market and technological change in today’s economy.
References:
1. Chopra, Sunil and Peter Meindl. Supply Chain Management. 2 ed. Upper Saddle River: Pearson
Prentice Hall, 2004.
2. Lambert, Stock, and Ellram in their book Fundamentals of Logistics Management (Lambert,
Douglas M., James R. Stock, and Lisa M. Ellram, 1998, Fundamentals of Logistics Management,
Boston, MA: Irwin/McGraw-Hill, Chapter 14)
3. Supply Chain Management: Strategy, Planning, and Operations (Chopra, Sunil, and Peter Meindl,
2001, Supply Chain Management: Strategy, Planning, and Operations, Upper Saddle River, NJ:
Prentice-Hall, Inc. Chapter 1).
4. Ganeshan and Harrison at Penn State University in their article An Introduction to Supply Chain
Management published at http://silmaril.smeal.psu.edu/supply_chain_intro.html (Ganeshan, Ram,
and Terry P. Harrison, 1995,“An Introduction to Supply Chain Management,” Department of
Management Sciences and Information Systems, 303 Beam Business Building, Penn State
University, University Park, PA).
5. The reason? “Raw material shortages, internal and supplier parts shortages…” (Wall Street Journal,
Oct. 23, 1997)