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Supply Chain Management can be defined as the management of flow of products and services, which
begins from the origin of products and ends at the product’s consumption. It also comprises movement
and storage of raw materials that are involved in work in progress, inventory and fully furnished goods.

The main objective of supply chain management is to monitor and relate production, distribution, and
shipment of products and services. This can be done by companies with a very good and tight hold over
internal inventories, production, distribution, internal productions and sales.

Supply Chain Management - Goals

Every firm strives to match supply with demand in a timely fashion with the most efficient use of
resources. Here are some of the important goals of supply chain management −

 Supply chain partners work collaboratively at different levels to maximize resource productivity,
construct standardized processes, remove duplicate efforts and minimize inventory levels.

 Minimization of supply chain expenses is very essential, especially when there are economic
uncertainties in companies regarding their wish to conserve capital.

 Cost efficient and cheap products are necessary, but supply chain managers need to concentrate
on value creation for their customers.

 Increased expectations of clients for higher product variety, customized goods, off-season
availability of inventory and rapid fulfillment at a cost comparable to in-store offerings should be
matched.

Supply Chain Management - Process

Plan: The initial stage of the supply chain process is the planning stage. We need to develop a plan or
strategy in order to address how the products and services will satisfy the demands and necessities of the
customers. In this stage, the planning should mainly focus on designing a strategy that yields maximum
profit.

Develop (Source): After planning, the next step involves developing or sourcing. In this stage, we mainly
concentrate on building a strong relationship with suppliers of the raw materials required for production.
This involves not only identifying dependable suppliers but also determining different planning methods
for shipping, delivery, and payment of the product.

Make: The third step in the supply chain management process is the manufacturing or making of products
that were demanded by the customer. In this stage, the products are designed, produced, tested,
packaged, and synchronized for delivery.

Deliver: The fourth stage is the delivery stage. Here the products are delivered to the customer at the
destined location by the supplier. This stage is basically the logistics phase, where customer orders are
accepted and delivery of the goods is planned. The delivery stage is often referred as logistics, where firms

Return: The last and final stage of supply chain management is referred as the return. In the stage,
defective or damaged goods are returned to the supplier by the customer. Here, the companies need to
deal with customer queries and respond to their complaints etc.
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Four Fundamentals of Supply Chain Management

1. SCM Objectives: To begin, SCM’s goals are to reach or surpass the required or desired level of customer
service in specific markets/segments, as well as to optimize total supply chain investment and cost. Supply
chain management has long recognized this service/cost strategy as crucial. This strategy necessitates that
businesses have a thorough awareness of both concerns. The marketplace dictates customer service
expectations, which “sets the spec” for the supply chain. To achieve this level of service at the lowest
possible cost, the supply chain’s “Non-Value Adding activities” (NVAs) must be eliminated.

2. SCM Philosophy: Second, each product or service is supplied to the final consumer (the only source of
“real” money in the chain) via a series of frequently complex moves among the enterprises that make up
the entire chain. Inefficiencies in any part of the network will prevent the chain from reaching its full
competitive potential. To put it another way, rather than corporations merely competing with other
companies, supply chains are increasingly competing with other supply chains. The term “supply chain”
refers to how the chain is only as strong as its weakest link.

3. Managing the Flows: Material flows, money flows, and information flows across the supply chain must
be managed in an integrated and holistic manner, driven by overall service and cost objectives, for a
supply chain to achieve optimum effectiveness and efficiency. The image of a macro chain presented in
Figure 1 (above) depicts the flow of materials, money (funds), and information amongst the enterprises
that make up the chain. The functions that make up the micro chain can be treated in the same way. The
most crucial of these operations, it may be claimed, is managing information flows. This is because the
flow or movement of things or money is almost always accompanied by a flow of knowledge. As a result,
efficient management of material and financial flows is contingent on good management of corresponding
information flows. As a result, information and communication technology (ICT) is quickly becoming a key
SCM enabler.

4. Supply Chain Relationship: Finally, this comprehensive approach necessitates a rethinking of how
internal and external customer/supplier relationships are formed and managed. SCM isn’t a “zero-sum”
game with antagonistic relationships. Rather, it must be a “win-win” game built on collaborative efforts.
This concept applies to interactions between the major “internal” supply chain operations of buy, make,
store, move, and sell, as well as relationships between an organization’s external customers and suppliers.
In recent years, one of the most visible manifestations of supply chain philosophy has been the shift away
from antagonistic relationships with key external suppliers toward relationships built on mutual trust and
benefits, openness, and shared aims and objectives

Q- Times series methods refer to different ways to measure timed data. Common types include:
Autoregression (AR), Moving Average (MA), Autoregressive Moving Average (ARMA), Autoregressive
Integrated Moving Average (ARIMA), and Seasonal Autoregressive Integrated Moving-Average (SARIMA).

The important thing is to select the appropriate forecasting method based on the characteristics of the
time series data.

Smoothing-based models: In time series forecasting, data smoothing is a statistical technique that involves
removing outliers from a time series data set to make a pattern more visible. Inherent in the collection of
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data taken over time is some form of random variation. Smoothing data removes or reduces random
variation and shows underlying trends and cyclic components.

Moving-average model: In time series analysis, the moving-average model (MA model), also known as
moving-average process, is a common approach for modeling univariate time series. The moving-average
model specifies that the output variable depends linearly on the current and various past values of a
stochastic (imperfectly predictable) term.

Together with the autoregressive (AR) model (covered below), the moving-average model is a special case
and key component of the more general ARMA and ARIMA models of time series, which have a more
complicated stochastic structure.

Contrary to the AR model, the finite MA model is always stationary.

Exponential Smoothing model: Exponential smoothing is a rule-of-thumb technique for smoothing time
series data using the exponential window function. Exponential smoothing is an easily learned and easily
applied procedure for making some determination based on prior assumptions by the user, such as
seasonality. Different types of exponential smoothing include single exponential smoothing, double
exponential smoothing, and triple exponential smoothing (also known as the Holt-Winters method)

Decision Phases of Supply Chain Management

The many stages involved in supply chain management for taking an action or making a decision
connected to a product or service are known as decision phases.

The three primary decision phases of supply chain management are:

1. Supply chain design (Strategy)

2. Supply chain management decision (Planning)

3. Operational level (Operation)

Three decision phases are required for successful supply chain management: information flow, product
flow, and fund flow.

Supply Chain Strategy: During this period, management makes the majority of the decisions. The decision
to be taken takes into account areas such as long-term forecasting and the cost of goods, which can be
highly costly if things go wrong. At this point, it’s critical to research market conditions.

These selections are based on the current and future market conditions.

They make up the supply chain’s structural layout. The tasks and responsibilities of each are put out after
the layout is completed.

The higher authority or senior management is in charge of all strategic choices. Manufacturing the
material, factory site, warehouse location, and many other considerations are among them.

Supply Chain Planning: Demand and supply should be considered when planning the supply chain. A
market study should be conducted in order to comprehend customer demands. The second factor to
evaluate is public knowledge and current information about the situation competition and the techniques
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they employ to meet customer demands requirements. Distinct markets have different demands, as we
all know be approached in a different ways.

This phase covers everything, from forecasting market demand to determining which market will receive
final goods to determining which factory will be built in this stage. All firm participants or workers should
make every effort to make the entire procedure as adaptable as possible. If a supply chain design phase
works well in short-term planning, it is deemed successful.

Supply Chain Operations: The third and final decision phase entails making a variety of functional
decisions in a matter of minutes, hours, or days. The goal of this decision-making step is to reduce
ambiguity and improve performance. This phase includes everything from taking the customer’s order to
delivering the product to the consumer.

Consider a consumer who requests a product that your company produces. The marketing department is
initially in charge of receiving orders and forwarding them to the production and inventory departments.
The manufacturing department subsequently reacts to the client’s request by delivering the requested
item to the warehouse via proper media, where it is distributed to the consumer within a reasonable time
limit. All of the departments involved in this process must work together to improve performance and
reduce uncertainty

Q-Quantitative vs. qualitative forecasting methods

There are two types of data used in supply chain forecasting methods: quantitative and qualitative. Here
is a quick comparison:

 Quantitative forecasting uses historical data to determine the future, including sales projections.
Based on the assumption that the future will largely mimic the past, it involves the use of formulas
to calculate a predetermined forecasting measurement.

 Qualitative forecasting data is often used for new product lines or when a business first launches,
since historical data doesn’t exist yet. Common types of qualitative data include surveys and
interviews, industry benchmarks, competitive analyses, and more.

Q-Supply Chain Risk

External Supply Chain Risks

As the name implies, these global supply chain risks come from outside of your organization.
Unfortunately, that means that they are harder to predict and typically require more resources to
overcome. Some of the top external supply chain risks include:

 Demand Risks: Demand risks occur when you miscalculate product demand and are often the
product of a lack of insight into year-over-year purchasing trends or unpredictable demand.

 Supply Risks: Supply risks occur when the raw materials your business relies on aren’t delivered
on time or at all, thereby causing disruption to the flow of product, material, and/or parts.

 Environmental Risks: Environmental risk in the supply chain is the direct result of social-
economic, political, governmental, or environmental issues that affect the timing of any aspect of
the supply chain.
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 Business Risks: Business risks occur whenever unexpected changes take place with one of the
entities you depend on to keep your supply chain running smoothly — for example, the purchase
or sale of a supplier company.

Internal Supply Chain Risks

This refers to any supply chain risk factors that are within your control, and that can be identified and
monitored using supply chain risk assessment software, robust analytics programs, IoT capabilities, and
more. Although internal supply chain risks are more manageable than external ones, they’re still — to
some degree — unavoidable. Here’s what to look for:

 Manufacturing Risks: Manufacturing risks refer to the possibility that a key component or step of
your workflow could be disrupted, causing operations to go off schedule.

 Business Risks: Business risks are a product of disruptions to standard personnel, management,
reporting, and other essential business processes.

 Planning and Control Risks: Planning and control risks are caused by inaccurate forecasting and
assessments and poorly planned production and management.

 Mitigation and Contingency Risks: Mitigation and contingency risks can occur if your business
doesn’t have a contingency plan for supply chain disruptions.

Supply Chain Risk Management Strategies

In today’s connected and digital world, supply chain risk mitigation can be difficult due to globalization
and potential cyber interference. That said, there are measures you can take to reduce your business’s
exposure to risk:

1. Leverage the PPRR risk management model. The PPRR risk management model is a popular
global supply chain risk management strategy and is used by businesses around the world. The
“PPRR” stands for:

Prevention Preparedness Response Recovery:

2. Manage environmental risk in your supply chain. This is more important than ever given that the
COVID-19 pandemic exposed gaps in global retail and manufacturing supply chains that leave
them prone to disruption. Back in December 2019, many retailers were forced to re-evaluate their
vendor relationships because many of their suppliers and manufacturers were based in China,
which was, at the time, the epicenter of the outbreak. With a significantly reduced workforce,
retailers struggled to process and get shipments out on time, and there were questions of
whether certain shipments would need to undergo quarantine before they could be delivered. As
a result, some retailers decided to move from a single-sourcing to a multi-sourcing model, which
would provide them with a contingency plan should their primary supplier become unavailable.
Others opted to change their business model entirely in order to adapt to drastic changes in
product seasonality and viability — for example, breweries and distilleries across the United
States started to produce hand sanitizer on a massive scale, and Ford announced plans to produce
ventilators for coronavirus patients at one of its facilities in Michigan. Although there’s no way to
prevent environmental risk in your supply chain, you can plan for it. Supply chain risk assessment
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software enables you to take a proactive approach to risk management by providing you with
greater visibility into the structure of your supply chain. With such a solution, you’ll be able to
identify weak points in your supply chain and receive data-driven insights into how you can
strengthen them. It’s also important that you develop a contingency plan — something that’s
come up a few times, now. Consider these strategies for improving supply chain resiliency:

3. Improve your cyber supply chain risk management. For many businesses, the Internet of Things
and other digital technologies play a major role in optimizing supply chain operations, but they
also leave businesses exposed to cybersecurity threats, such as malware, ransomware, phishing,
and hacking. Environmental risks can further compound these vulnerabilities. To strengthen your
cybersecurity defenses, try implementing the following supply chain risk management strategies:

4. Looks for ways to improve supply chain visibility. More information can be beneficial, and a
better understanding of all parts of your supply chain can alert you to issues before they become
problems. A greater visibility into your supplier’s financial stability can assist you with selecting
partners. Certain major credit rating agencies offer predictive financial stability reporting on
thousands of potential suppliers in order to reduce the external business risk that comes with
dealing with third-party vendors. Although this won’t help you with existing vendors, it can help
you develop more secure business relationships and reduce your vulnerability to supply chain risk.
Look into technology that will allow for greater product and shipment visibility so you can keep
your customers updated on delivery times and/or take actions earlier to avoid costly delays and
missed customer expectations. Service portals, IoT sensors on containers, automated reports on
inventory levels, and more can help keep you informed and updated in real time. This is especially
vital during the “last mile” of delivery, where 3rd party services can take over and you can lose
insight over that stretch of the customer journey experience.

5. Track the right freight carrier metrics. Manufacturers need to achieve dependable delivery to
clients to build their reputation, while retailers rely on merchandise arriving at the right place at
the right time in order to make selling windows. Regardless of where you are in the supply chain,
it’s important that you partner with a freight carrier that can deliver consistent results.
Unfortunately, not every carrier is up to the challenge, and even a single late delivery can disrupt
your entire supply chain. When evaluating new freight carriers — or even re-evaluating your
current freight carrier — be sure to consider the following metrics to support supply chain risk
management:

6. Implement a logistics contingency plan. Similar to an emergency response plan, it’s imperative
that retailers and manufacturers have a logistics contingency plan in place to ensure business
continuity in the event of supply chain disruption. The need for a solid contingency plan — or,
preferably, multiple contingency plans — has become especially pertinent in light of the COVID-
19 crisis, which caused supply chain disruption on a global scale.Some tips when creating a
contingency plan for supply chain risk mitigation:

Conduct internal risk awareness training. Management isn’t the only area of your organization that can
assist in supply chain risk mitigation. In fact, building a risk-aware culture requires buy-in at all levels of
your business. The easiest way to achieve this is to conduct risk awareness training for your entire
workforce.
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7. Consistently monitor risk. This might seem like a given, but consistently monitoring supply chain
risk factors really is the key to protecting your operations. Many organizations assume that they’re
secure once they’ve implemented a supply chain risk mitigation framework, but the work doesn’t
stop there. Every level of the supply chain should be carefully observed for potential risk
indicators. The easiest way to do this is to invest in a scalable digital retail solution that automates
monitoring for various aspects of your supply chain. This will not only provide you with security
and peace of mind, but also valuable intel into how you can streamline business operations.

8. Use data to model key risk event scenarios. Imagine being able to predict a risk event well before
it ever happens. Technology hasn’t brought us there just yet but, thanks to data science,
predictive analytics, and data modeling, we’ve come pretty close. Big Data has opened up a world
of opportunities for businesses, including using data science and predictive analytics to create
advanced models for potential risk event scenarios. By using data models to forecast what could
potentially happen during a worst-case scenario, you can develop more comprehensive
contingency plans that will better prepare your business for if and when disaster strikes. Curious
about how this “intelligent” supply chain works? Read our white paper on how you can compete
and win with an Intelligent Supply Chain.

9. Consolidate your data for easy access. Too many solutions in your software ecosystem can gum
up the works, especially if you store business data in multiple disparate systems. In order to make
it easier to leverage data science, predictive analytics, and data modeling, invest in a
comprehensive retail solution that keeps all of your data within a single, centralized, and well-
organized repository

Material Requirements Planning (MRP) is a standard supply planning system to help businesses, primarily
product-based manufacturers, understand inventory requirements while balancing supply and demand

Enterprise resource planning (ERP) refers to a type of software that organizations use to manage day-to-
day business activities such as accounting, procurement,
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Lean Six Sigma can help enhance supply chain efficiency in the following areas.

Perfect Order Fulfillment – This is measured in the percentage of orders meeting delivery performance
with complete and accurate documentation and no delivery damage. Six Sigma methodology can help
maximize order fulfillment by identifying where possible problems lie, such as outdated planning
processes and inefficient execution systems. Lean can then be used to target areas of waste and enhance
performance.

Reduce Order Fulfillment Cycle Time – A Lean Six Sigma review of the company’s order fulfillment system
helps identify problems that need to be addressed. This review will most likely conclude that some obvious
improvements are in order. Improvement may require system integration, automated picking, automated
shipping planning, automated shipment verification and reduced paperwork. The Six Sigma DMAIC
cycle can help improve current processes; DMADV can help implement new processes.

Increase Supply Chain Flexibility – Supply chain performance requires a quick response to changes in
supply and demand through the ups and downs of business cycles, as well as during crises. Companies
with the most agile supply chains are those that are tailored to the needs of the customer. Establishing
critical to quality (CTQ) customer requirements in the Define Phase of Six Sigma helps companies build
customer focus and thus flexibility into their supply chains.

Zero Errors – Any supply chain that is losing efficiency because of a high error rate in the system is a prime
candidate for Lean improvement. The Poka-Yoke or mistake-proofing Lean approach prevents mistakes
by forcing the user to do a task one way. For example, lawnmowers now have safety bars that must be
engaged before the mower will start. The mower will stop when the safety bar is released.

Implementing the 5S Lean method – Sort out, Set in Order, Shine, Standardize, and Sustain – also reduces
errors that interrupt the supply chain efficiency by providing a clean, safe, efficient, and uncluttered
environment.

Zero Waste – Lean methodology was created to eliminate waste, which can be defined as activities that
don’t add value to the product or customer. Lean helps supply chains function more efficiently by
targeting and eliminating non-value added processing:

 Over-production – Producing more ahead of demand as the result of a speculative forecast results
in high inventory costs.

 Transportation – Unneeded movement of materials adds to production cost and cycle time. Lean
seeks to eliminate unnecessary transportation.

 Non-value added processing – Poor production facility layouts cause additional work that adds
no value to the product. Lean simplifies production to make the supply chain operate more
efficiently.

Increased Revenue – Organizations that use Lean Six Sigma to make their supply chains operate more
efficiently are able to provide a consistent service level to their customers. Dependable service leads to
satisfied customers, which gives organizations more pricing power and higher revenues.
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Q-What Is Inventory Management?

Inventory management refers to the process of ordering, storing, using, and selling a company's
inventory. This includes the management of raw materials, components, and finished products, as well as
warehousing and processing of such items.

 Just-in-Time Management (JIT) — This manufacturing model originated in Japan in the 1960s and
1970s. Toyota Motor (TM) contributed the most to its development.2 The method allows
companies to save significant amounts of money and reduce waste by keeping only the inventory
they need to produce and sell products. This approach reduces storage and insurance costs, as
well as the cost of liquidating or discarding excess inventory. JIT inventory management can be
risky. If demand unexpectedly spikes, the manufacturer may not be able to source the inventory
it needs to meet that demand, damaging its reputation with customers and driving business
toward competitors. Even the smallest delays can be problematic; if a key input does not arrive
"just in time," a bottleneck can result.

 Materials requirement planning (MRP) — This inventory management method is sales-forecast

dependent, meaning that manufacturers must have accurate sales records to enable accurate
planning of inventory needs and to communicate those needs with materials suppliers in a timely
manner.3 For example, a ski manufacturer using an MRP inventory system might ensure that
materials such as plastic, fiberglass, wood, and aluminum are in stock based on forecasted orders.
Inability to accurately forecast sales and plan inventory acquisitions results in a manufacturer's
inability to fulfill orders.

 Economic Order Quantity (EOQ) — This model is used in inventory management by calculating the
number of units a company should add to its inventory with each batch order to reduce the total
costs of its inventory while assuming constant consumer demand. The costs of inventory in the
model include holding and setup costs. The EOQ model seeks to ensure that the right amount of
inventory is ordered per batch so a company does not have to make orders too frequently and
there is not an excess of inventory sitting on hand. It assumes that there is a trade-off between
inventory holding costs and inventory setup costs, and total inventory costs are minimized when
both setup costs and holding costs are minimized.4

 Days sales of inventory (DSI) — is a financial ratio that indicates the average time in days that a
company takes to turn its inventory, including goods that are a work in progress, into sales. DSI is
also known as the average age of inventory, days inventory outstanding (DIO), days in inventory
(DII), days sales in inventory or days inventory and is interpreted in multiple ways. Indicating the
liquidity of the inventory, the figure represents how many days a company’s current stock of
inventory will last. Generally, a lower DSI is preferred as it indicates a shorter duration to clear off
the inventory, though the average DSI varies from one industry to another.

What is Supply Chain Network Design?

Supply chain network design is a systematic approach to determining the best location and optimal size
of the facilities to be included in the supply chain and ensuring an optimal flow of products using advanced
mathematical modeling. The success of any supply chain network depends on the plants, suppliers,
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warehouses, and how the product flows from each of the origins to the final customer. For any successful
supply chain, the number of facilities and their locations is a critical factor. In fact, 80 percent of the
operational costs of the supply chain design on where the facilities are located and the product flows
between them. To cut costs, you need a more systematic engineering approach so that you can plan and
design the network efficiently. That is why the network design in the supply chain is so important.

Importance of Supply Chain Design:

Supply chain design involves identifying the value proposition of your business, the demand and supply
that you need to meet, and how you can best leverage the existing assets that you have to achieve these
goals. By doing this, you can maximize the efficiency and profitability of your supply chain.

 The process of designing involves several key tasks, including identifying the suppliers who can
supply the materials and components that are required.

 It also involves ensuring that all of these suppliers can work together effectively and deliver quality
products on time.

 The end goal is to develop a reliable, efficient, and cost-effective supply chain network.

A well-designed supply chain design can help reduce costs, increase efficiency and improve customer
satisfaction. By working closely with suppliers, manufacturers can ensure that they get the materials they
need at competitive prices, leading to reduced production costs. In addition to this, suppliers can be relied
upon to deliver products on time as well as within budget. As a result, there is improved customer
satisfaction and increased brand loyalty.

In general, there are following three main areas that you should focus on when designing your supply
chain network:

1. OPTIMIZATION: This is the process of optimizing your current supply chain network to make it more
efficient while also taking into account factors such as distribution costs and lead time.

2. SHRINKAGE: This is the process of reducing inventory by finding ways to reduce losses in transit or in
storage. For example, purchasing smaller vials or using smarter packaging could both be effective ways to
reduce shrinkage.

3. EXPANSION: This is the process of expanding your existing supply chain to meet new demand while
also taking into account factors such as lead time and transportation costs.

Role of Network Design in Supply Chain:

The supply chain network structure of any company will determine how efficient its processes are and
whether it is able to provide its customers with a great experience. Designing the most efficient supply
chain network structure requires the network to satisfy the strategic objectives of the company over an
extended period of time.

The role of network design in supply chain operations involves the following:

 Defining the business objectives Defining the project scope

 Determining the analyses to be performed Determining the tools to be utilized

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 Completion of the project in accordance with the design.

The network design in supply chain determines the path ahead for the business. If the supply chain
network is completed in accordance with the design, the business can expect to gain in a substantial way.

Globalization in Supply Chain Design:

Businesses are no longer just local in the days of globalization and supply chains have to be global in the
way they operate as well. In addition to the factors discussed above, Global Supply Chain Networks include
other factors such as the difference in culture, language, and currencies. Transportation, software
compatibility, and the cost of fuel or oil are also considered.

Supply Chain Network Models:

 The first step for network design in the supply chain is to collect the data specific to the business,
construct a basic model based on that and validate the same.

 The supply chain network design models include outputs such as the total costs, which are the
same as those in real-world operations.

 First, the basic model is validated, and then depending on the results an alternative design is
created or the existing one is modified for cutting costs further and increasing profits.

 The construction of the supply chain network design models is handled by highly skilled
consultants who collect high-quality data, validate the model, and propose alternative solutions.

Factors That Influence Supply Chain Design Decisions:

Here’s a look at the critical factors for network design in the supply chain.

1. Location and Distance: Distance between the different locations of the supply chain and the locations
themselves are important factors to be considered. The location of the supply chain network includes
customers, suppliers manufacturing abilities, airports, ports, and so on.

2. Current and Future Demand: The current and future demands of the company are taken into account
as well and should be grouped appropriately.

3. Service Requirements: The maximum allowable transit time and distance are used to determine the
location of the warehouses to be added to the supply chain.

4. Size and Frequency of Shipment: The size and frequency of the shipment are essential factors for
determining the costs – the higher the frequency, the greater the cost; the smaller the shipment, the
higher the cost.

5. Warehousing and Labor Costs: Warehousing costs are fixed costs and are factored into the decision-
making process. The labor costs are not fixed, and they play a role as well.

6. Trucking Costs: The cost and type of trucking are of considerable importance.

7. Mode of Transportation:

Which mode of transportation is used in the running of the supply chain matters as well.
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What is a Supply Chain Network Design Software?

Supply Chain Network Design software is an essential tool for managing the entire supply chain. Here are
some of the key features of the software:

 The software can be used to design and analyze a supply chain design, from initial planning to
production and shipment.

 The software can also be used to track inventory levels, monitor delivery progress, and optimize
logistics.

 By integrating data from multiple sources, it’s possible to better understand how products are
moving through the supply chain and identify opportunities for optimization.

 It can also help companies avoid bottlenecks, which can lead to delays in shipments and increased
costs.

How to Analyze a Supply Chain Network Design?

The purpose of Network Analysis is to design an optimal supply chain and to improve the ability of the
organization to make more tactical and strategic decisions. Supply chain analytics tools make use of a Big
Picture Thinking approach to the design from the conceptualization to the implementation. The analysis
is focused on determining the distribution nodes based on factors such as demand concentration,
customer locations, and service requirements.

Supply Chain Management - Role of IT

Companies that opt to participate in supply chain management initiatives accept a specific role to enact.
They have a mutual feeling that they, along with all other supply chain participants, will be better off
because of this collaborative effort. The fundamental issue here is power. The last two decades have seen
the shifting of power from manufacturers to retailers.

When we talk about information access for the supply chain, retailers have an essential designation. They
emerge to the position of prominence with the help of technologies. The advancement of inter
organizational information system for the supply chain has three distinct benefits. These are −

 Cost reduction − The advancement of technology has further led to ready availability of all the
products with different offers and discounts. This leads to reduction of costs of products.

 Productivity − The growth of information technology has improved productivity because of

inventions of new tools and software. That makes productivity much easier and less time
consuming.

 Improvement and product/market strategies − Recent years have seen a huge growth in not only
the technologies but the market itself. New strategies are made to allure customers and new ideas
are being experimented for improving the product.

It would be appropriate to say that information technology is a vital organ of supply chain management.
With the advancement of technologies, new products are being introduced within fraction of seconds
increasing their demand in the market. Let us study the role of information technology in supply chain
management briefly.
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The software as well as the hardware part needs to be considered in the advancement and maintenance
of supply chain information systems. The hardware part comprises computer's input/output devices like
the screen, printer, mouse and storage media. The software part comprises the entire system and
application program used for processing transactions management control, decision-making and strategic
planning.

Here we will be discussing the role of some critical hardware and software devices in SCM. These are
briefed below −

Electronic Commerce

Electronic commerce involves the broad range of tools and techniques used to conduct business in a
paperless environment. Hence it comprises electronic data interchange, e-mail, electronic fund transfers,
electronic publishing, image processing, electronic bulletin boards, shared databases and
magnetic/optical data capture.

Electronic commerce helps enterprises to automate the process of transferring records, documents, data
and information electronically between suppliers and customers, thus making the communication process
a lot easier, cheaper and less time consuming.

Electronic Data Interchange

Electronic Data Interchange (EDI) involves the swapping of business documents in a standard format from
computer-to-computer. It presents the capability as well as the practice of exchanging information
between two companies electronically rather than the traditional form of mail, courier, & fax.

The major advantages of EDI are as follows −

 Instant processing of information Improvised customer service

 Limited paper work High productivity

 Advanced tracing and expediting Cost efficiency

 Competitive benefit Advanced billing

The application of EDI supply chain partners can overcome the deformity and falsehood in supply and
demand information by remodeling technologies to support real time sharing of actual demand and
supply information.

Barcode Scanning

We can see the application of barcode scanners in the checkout counters of super market. This code states
the name of product along with its manufacturer. Some other practical applications of barcode scanners
are tracking the moving items like elements in PC assembly operations and automobiles in assembly
plants.

Data Warehouse

Data warehouse can be defined as a store comprising all the databases. It is a centralized database that is
prolonged independently from the production system database of a company.
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Many companies maintain multiple databases. Instead of some particular business processes, it is
established around informational subjects. The data present in data warehouses is time dependent and
easily accessible. Historical data may also be accumulated in data warehouse.

Enterprise Resource Planning (ERP) Tools

The ERP system has now become the base of many IT infrastructures. Some of the ERP tools are Baan,
SAP, PeopleSoft. ERP system has now become the processing tool of many companies. They grab the data
and minimize the manual activities and tasks related to processing financial, inventory and customer order
information.

ERP system holds a high level of integration that is achieved through the proper application of a single
data model, improving mutual understanding of what the shared data represents and constructing a set
of rules for accessing data.

With the advancement of technology, we can say that world is shrinking day by day. Similarly, customers'
expectations are increasing. Also companies are being more prone to uncertain environment. In this
running market, a company can only sustain if it accepts the fact that their conventional supply chain
integration needs to be expanded beyond their peripheries.

The strategic and technological interventions in supply chain have a huge effect in predicting the buy and
sell features of a company. A company should try to use the potential of the internet to the maximum
level through clear vision, strong planning and technical insight. This is essential for better supply chain
management and also for improved competitiveness.

We can see how Internet technology, World Wide Web, electronic commerce etc. has changed the way
in which a company does business. These companies must acknowledge the power of technology to work
together with their business partners.

We can in fact say that IT has launched a new breed of SCM application. The Internet and other networking
links learn from the performance in the past and observe the historical trends in order to identify how
much product should be made along with the best and cost effective methods for warehousing it or
shipping it to retailer.

What is a balanced scorecard (BSC)?

The balanced scorecard is a management system aimed at translating an organization's strategic goals
into a set of organizational performance objectives that, in turn, are measured, monitored and changed
if necessary to ensure that an organization's strategic goals are met.

A key premise of the balanced scorecard approach is that the financial accounting metrics companies
traditionally follow to monitor their strategic goals are insufficient to keep companies on track. Financial
results shed light on what has happened in the past, not on where the business is or should be headed.
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The balanced scorecard system aims to provide a more comprehensive view to stakeholders by
complementing financial measures with additional metrics that gauge performance in areas such
as customer satisfaction and product innovation.

The business performance management framework was laid out in a 1992 paper published in the Harvard
Business Review by Robert S. Kaplan and David P. Norton, who are widely credited with having developed
the balanced scorecard system.

Here is how Kaplan and Norton began their 1992 paper:

What you measure is what you get. Senior executives understand that their organization's measurement
system strongly affects the behavior of managers and employees.

Executives also understand that traditional financial accounting measures, like return on investment and
earnings per share, can give misleading signals for continuous improvement and innovation -- activities
today's competitive environment demands.

The traditional financial performance measures worked well for industrial age companies, but they are
out of step with the skills and competencies companies are trying to master today.

What are the four balanced scorecard perspectives?

The balanced scorecard approach examines performance from four perspectives.

 Financial analysis, which includes measures such as operating income, profitability and return on
investment.

 Customer analysis, which looks at investment in customer service and retention.

 Internal analysis, which looks at how internal business processes are linked to strategic goals.

 The learning and growth perspective assesses employee satisfaction and retention, as well
as information system.

Why use the balanced scorecard?

Kaplan and Norton cited two main advantages to the four-pronged balanced scorecard approach.

1. First, the scorecard brings together disparate elements of a company's competitive agenda in a
single report.

2. Second, by having all important operational metrics together, managers are forced to consider
whether one improvement has been achieved at the expense of another.

The four-pronged balanced scorecard approach for translating strategic goals into a set of performance
objectives.

"Even the best objective can be achieved badly," the authors stated in their 1992 treatise. Faster time to
market, for example, can be achieved by improving the management of new product introductions.

It can also be accomplished, however, by making products that are only incrementally different from the
existing ones, thus diminishing the company's competitive advantage in the market long term.
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What are examples of a balanced scorecard?

In their 1993 paper, Putting the Balanced Scorecard to Work Kaplan and Norton offered examples of how
several companies applied the balanced scorecard, including Rockwater, an underwater engineering firm
listed as a wholly-owned subsidiary of Brown & Root/Halliburton; Advanced Micro Devices; and Apple.

The Apple case study is especially interesting in retrospect. According to the authors, Apple (then known
as Apple Computer) developed a balanced scorecard to expand the focus of senior management beyond
metrics such as gross margin, return on equity and market share.

A small steering committee, versed in the strategic thinking of executive management, chose to include
all four scorecard categories and develop measurements within each category.

 From the financial perspective of the scorecard, Apple emphasized shareholder value.

 For the customer perspective, it emphasized market share and customer satisfaction.

 For internal processes, it emphasized core competencies.

 For the innovation and improvement category, it stressed employee attitudes.

Among the highlights of Apple's balanced scorecard planning are the following:

 Apple wanted to shift its classification from a technology and product-focused company to a
customer-centric company. Recognizing that it had a diverse customer base, Apple decided to go
beyond the standard customer satisfaction metrics available at the time and develop its own
independent surveys that tracked key market segments around the world.

 Apple executives wanted employees to focus deeply on a few key competencies, including user-
friendly interfaces, powerful software architectures and effective distribution systems.

 Apple wanted to measure employee commitment and alignment with the strategic goals. The
company deployed comprehensive employee surveys -- as well as more frequent, small surveys
of employees selected randomly -- in order to measure how well employees understood the
company's strategy and whether or not the results they were asked to deliver by managers were
consistent with it.

 Market share was important to senior management, not only for sales growth but also as a factor
in attracting and retaining top software developers.

Apple also included shareholder value as a key performance indicator (KPI), even though this measure is
a result, not a driver of strategic performance, Kaplan and Norton wrote.

Apple intended its emphasis on shareholder value to offset the previous emphasis on such short-term
metrics as gross margin and sales growth, with a focus on investments that could impact future
performance.

Apple included shareholder value as a key performance indicator in the balanced score approach the
company developed.
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Elements of a balanced scorecard

In their 1993 paper, Kaplan and Norton offered guidance on how to build a balanced scorecard. The
process they discussed applies to business units and describes what they refer to as "a typical project
profile" for developing balanced scorecards.

In brief, here are the eight actionable steps they list.

1. Preparation. The organization identifies the business unit for which a top-level scorecard is
appropriate. Broadly defined, this is a business unit that has its own customers, distribution
channels, production facilities and financial goals.

2. The first round of interviews. A balanced scorecard facilitator interviews senior managers for
about 90 minutes each to obtain input on strategic goals and performance measures.

3. First executive workshop. Top management convenes with the facilitator to start developing the
scorecard by reaching a consensus on the mission and strategy and linking the measurements to
them. This can include video interviews with shareholders and customers.

4. The second round of interviews. The facilitator reviews, consolidates and documents input from
the executive workshop and interviews each senior executive to form a tentative balanced
scorecard.

5. Second executive workshop. Senior management, their subordinates and a larger number of
middle managers debate the vision, strategy and the tentative scorecard. Working in groups, they
discuss the measures, start to develop an implementation plan and formulate "stretch objectives
for each of the proposed measures."

6. Third executive workshop. Senior executives reach a consensus on the vision, objectives and
measurements hashed out in the prior two workshops and develop stretch performance targets
for each measure. Once this is complete, the team agrees on an implementation plan.

7. Implementation. A newly formed team implements a plan that aims to link performance
measures to databases and IT systems, to communicate the balanced scorecard throughout the
organization and to encourage the development of second-level metrics for decentralized units.

8. Periodic reviews. A quarterly or monthly "blue book" on the balanced scorecard measures is
prepared and viewed by managers. The balanced scorecard metrics are revisited annually as a
part of the strategic planning process.

History of the balanced scorecard

Kaplan and Norton stressed that the balanced scorecard is not a template to be applied to businesses in
general or even industrywide. Businesses must devise customized scorecards to fit their different market
situations, product strategies and competitive pressures.

Neither should the balanced scorecard approach be viewed strictly as a performance measurement
system.
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Rather, it is a strategic management system that will "clarify, simplify and then operationalize the vision
at the top of the organization," Kaplan and Norton wrote. How a company's mission statement and vision
are operationalized to create value is up to the employees.

"The measures are designed to pull people toward the overall vision," Kaplan and Nolan wrote. "Senior
managers may know what the end result should be, but they cannot tell employees exactly how to achieve
that result, if only because the conditions in which employees operate are constantly changing."

In the mid-1990s, the scorecard was modified to strengthen the link between performance measures
and strategic objectives using a "strategy map."

In the late 1990s, the design approach was again tweaked to include the vision or destination statement
-- a statement of what "strategic success" or the "strategic end state" would look like.

Criticism of the balanced scorecard method includes charges that Kaplan and Norton failed to cite earlier
research on this method and complaints about technical flaws in its methods and designs.

Others have noted that the four perspectives do not reflect important aspects of nonprofit organizations
and government agencies -- for example, social dimensions, human resource elements and political
issues.

The balanced scorecard approach to management gained popularity worldwide following the 1996
release of Kaplan and Norton's text, The Balanced Scorecard: Translating Strategy into Action.

The SCOR Model for Supply Chain Strategic Decisions

The supply chain operations reference model (SCOR) is a management tool used to address, improve, and
communicate supply chain management decisions within a company and with suppliers and customers of
a company (1). The model describes the business processes required to satisfy a customer’s demands. It
also helps to explain the processes along the entire supply chain and provides a basis for how to improve
those processes.

The SCOR model was developed by the supply chain council with the assistance of 70 of the world’s leading
manufacturing companies. It has been described as the “most promising model for supply chain strategic
decision making (2).” The model integrates business concepts of process re-engineering, benchmarking,
and measurement into its framework (2). This framework focuses on five areas of the supply chain: plan,
source, make, deliver, and return. These areas repeat again and again along the supply chain. The supply
chain council says this process spans from “the supplier’s supplier to the customer’s customer (3).”

Plan: Demand and supply planning and management are included in this first step. Elements include
balancing resources with requirements and determining communication along the entire chain. The plan
also includes determining business rules to improve and measure supply chain efficiency. These business
rules span inventory, transportation, assets, and regulatory compliance, among others. The plan also
aligns the supply chain plan with the financial plan of the company (3).

Source:This step describes sourcing infrastructure and material acquisition. It describes how to manage
inventory, the supplier network, supplier agreements, and supplier performance. It discusses how to
handle supplier payments and when to receive, verify, and transfer product (3).
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Make: Manufacturing and production are the emphasis of this step. Is the manufacturing process make-
to-order, make-to-stock, or engineer-to-order? The make step includes, production activities, packaging,
staging product, and releasing. It also includes managing the production network, equipment and
facilities, and transportation (3).

Deliver: Delivery includes order management, warehousing, and transportation. It also includes receiving
orders from customers and invoicing them once product has been received. This step involves
management of finished inventories, assets, transportation, product life cycles, and importing and
exporting requirements (3).

Return: Companies must be prepared to handle the return of containers, packaging, or defective product.
The return involves the management of business rules, return inventory, assets, transportation, and
regulatory requirements (3).

Benefits of Using the SCOR Model

The SCOR process can go into many levels of process detail to help a company analyze its supply chain. It
gives companies an idea of how advanced its supply chain is. The process helps companies understand
how the 5 steps repeat over and over again between suppliers, the company, and customers. Each step is
a link in the supply chain that is critical in getting a product successfully along each level. The SCOR model
has proven to benefit companies that use it to identify supply chain problems. The model enables full
leverage of capital investment, creation of a supply chain road map, alignment of business functions, and
an average of two to six times return on investment (4).

Push Supply Chain Strategies

A push-model supply chain is one where projected demand determines what enters the process. For
example, warm jackets get pushed to clothing retailers as summer ends and the fall and winter seasons
start. Under a push system, companies have predictability in their supply chains since they know what will
come when – long before it actually arrives. This also allows them to plan production to meet their needs
and gives them time to prepare a place to store the stock they receive.

Pull Supply Chain Strategies

A pull strategy is related to the just-in-time school of inventory management that minimizes stock on
hand, focusing on last-second deliveries. Under these strategies, products enter the supply chain when
customer demand justifies it. One example of an industry that operates under this strategy is a direct
computer seller that waits until it receives an order to actually build a custom computer for the consumer.

With a pull strategy, companies avoid the cost of carrying inventory that may not sell. The risk is that they
might not have enough inventory to meet demand if they cannot ramp up production quickly enough.