Supply chain management

1. Supply Chain Management

2. Introduction to supply chain concepts
• Firms can no longer effectively compete in isolation.
• The development in theory and practice of logistics at the end of the
20th century led to emergence of Supply Chain Management (SCM).
• The development of SCM has an objective basis: the growing role of
the client, globalization of markets and the informatization of society.
• “A supply chain is defined as a set of three or more entities
(organizations or individuals) directly involved in the upstream and
downstream flows of products, services, finances, and/or information
from a to a customer, (and return)” [Mentzer et al., 2001].

3. Definition of SCM
• Modern science offers many different definitions of supply chain management.
• There is no consensus on definitions of supply chain management.
Authors Definitions
Harjeet et al. (2016) “Supply chain management is simply the management of transport or flow of goods and
services, it also includes storage, shelf life, analysis of goods procured, and goods sold logistics,
etc. Supply chain management helps in planning and executing various supply chain activities of
a particular organization to build up a net value of the organization, determining the current
market trend related to the demand and supply of any goods or services and synchronizing the
same for measuring the performance of the organization”.
Dias et al. (2017) “SCM is the task of integrating organizational units along a supply chain and coordinating
materials, information and financial flows to fulfill customer demands to improve the
competitiveness of the supply chain.

5. The schematic flow of products and services across the HCSC

6. What is SCM
• All stages are involved, directly or indirectly in fulfilling a customer request.
• Includes manufacturers, suppliers, transporters, warehouses, retailers and
customers.
• Internal to an organization, SCM generally involves – functionaries required to
fulfil customer requests.
• Typically, involves product development, marketing, operations, distributions,
finance and customer service.
• Customer is an integral part of the SCM.
• SCM inevitably includes the movement of products from suppliers to
manufacturer to distributors that makes the flow of information, funds and
products in both directions.

7. Flows in a Supply Chain
Products
Information
Finance
Customers

8. The Objective of a Supply Chain
• Maximize the overall value creation.
• Supply chain value: the difference between worth of the final product
delivered to customer and the effort the supply chain extends in fulfilling
customer request.
• The value is correlated to supply chain profitabilitym (the difference
between revenue generated from customer and the overall supply chain
cost).
• Example: HP receives INR 50,000 from a customer for a laptop (revenue).
• The cost incurred by the supply chain (information, storage, transportation,
components, assembly, etc.)

9. • Difference between INR 50,000 and the sum of all the incurred costs
is the supply chain profit.
• This the supply chain profitability that is shared among stakeholders
across the supply chain.
• Hence, the source of supply chain profitability is the customer.
• Sources of supply chain cost: product flow, information flow and flow
of finance across the supply chain.
Therefore, SCM is the management of the flows between and among
supply chain stages to maximize the total supply chain profitability.

10. Significance of SCM
• Improved customer service
• Minimizes cost
• Increases profitability
• Reduces Asset cost
• Supports the healthcare sector
• Restore crisis situations
• Improves the economy

11. Process View of a Supply Chain Cycle
• Cycle view: processes in a supply chain are dividedinto a series
of cycles, each performed at theinterfaces between two
successive supply chain stages
• Push/pull view: processes in a supply chain aredivided into two
categories depending on whetherthey are executed in response
to a customer order(pull) or in anticipation of a customer order
(push)

12. Cycle View of Supply Chains

13. • Each cycle occurs at the interface between two
successivestages
• Customer order cycle (customer-retailer)
• Replenishment cycle (retailer-distributor)
• Manufacturing cycle (distributor-manufacturer)
• Procurement cycle (manufacturer-supplier)
• Cycle view clearly defines processes involved and theowners
of each process. Specifies the roles andresponsibilities of each
member and the desired outcomeof each process

14. Push/Pull View of Supply Chains

15. Push/Pull View of Supply Chain Processes
• Supply chain processes fall into one of two
categoriesdepending on the timing of their execution relative
tocustomer demand
• Pull: execution is initiated in response to a customerorder
(reactive)
• Push: execution is initiated in anticipation of customerorders
(speculative)
• Push/pull boundary separates push processes from pull
processes

16. • Useful in considering strategic decisions relating tosupply chain
design – more global view of howsupply chain processes relate
to customer orders
• The relative proportion of push and pull processes can have an impact
on supply chain performances.

17. Drivers of Supply Chain

18. Production
• This driver can be made more responsive.
• More smaller plants near to major customer groups.
• If efficiency is desirable, little less manufacturing units can be set up for a limited
range of items.
• For further efficiency, centralized production units can be set up for larger
economies of scale (even though the delivery times may be longer).

19. Inventory
• Responsiveness can be had by stocking high levels of inventory for a
wide range of products.
• Additional responsiveness can be gained by stocking products at many
locations so as to have the inventory close to customers and available
to them immediately
• Efficiency in inventory management would call for reducing inventory
levels of all items and especially of items that do not sell as frequently
• Also, economies of scale and cost savings can be gotten by stocking
inventory in only a few central locations such as regional distribution
centers (DCs).

20. Location
• Company establishes many locations that are close to its customer base.
• For example, fast-food chains use location to be very responsive to their customers by
opening up lots of stores in high volume markets.
• Efficiency can be achieved by operating from only a few locations and centralizing activities
in common locations.
• An example of this is the way e-commerce retailers serve large geographical markets from
only a few central locations that perform a wide range of activities.

21. Transportation
• Responsiveness can be achieved by a transportation mode that is fast and flexible such as
trucks and airplanes.
• Many companies that sell products through catalogs or on the Internet are able to provide
high levels of responsiveness by using transportation to deliver their products often within
48 hours or less.
• FedEx and UPS are two companies that can provide very responsive transportation
services.
• Now Amazon is expanding and operating its own transportation services in high volume
markets to be more responsive to customer desires. Efficiency can be emphasized by
transporting products in larger batches and doing it less often.
• Transportation can also be made more efficient if it is originated out of a central hub facility
or distribution center (DC) instead of from many separate branch locations.

22. Information
• The power of this driver grows stronger every year as the technology for collecting and sharing
information becomes more wide-spread, easier to use, and less expensive.
• Information, much like money, is a very useful commodity because it can be applied directly to
enhance the performance of the other four supply chain drivers.
• High levels of responsiveness can be achieved when companies collect and share accurate and
timely data generated by the operations of the other four drivers.
• Companies in these supply chains, the manufacturers, distributors, and the big retailers all collect
and share data about customer demand, production schedules, and inventory levels.
• This enables companies in these supply chains to respond quickly to situations and new market
demands in the high-change and unpredictable world of electronic devices (smartphones,
sensors, home entertainment and video game equipment, etc.).

24. Supply Chain Macro Processes in a Firm
• The supply Chain processes can be discussed in three forms
Customer relationship management
Internal supply chain management
Supplier relationship management
• The integration of the above mentioned three macro-processes leads to effective
and successful supply chain management.