SUPPLY CHAIN MANAGEMENT

INTRODUCTION
Supply Chain Management
• From logistics to materials
management to SCM, the evolution
has been slow & steady.
Historical Perspective: -
• Following the World War, production
outstripped demand, resulting in
more marketing or selling problems
than buying problems.
• Also, the World War emphasized the
importance of reaching the right
products at the right time in the right
amount & of the right quality. If the
soldiers could not get whatever they
wanted at the right time, the
consequences could be disastrous.
• These requirements & the criticalities
associated with them made the
defense forces seriously analyze the
supply system.
• The supply system includes the
process of planning, implementing
& controlling the efficient,
effective flow & storage of goods
or services from the organization
from its place of production to the
place where it is required.
• This supply system was referred
to as ‘Logistics Management’.
 LOGISITCS MANAGEMENT
• However, the focus was always
more on outbound logistics, i.e.
the flow of finished goods from
the manufacturing unit to the
distributors, to the retailers &
finally to the customers. Inbound
logistics, i.e. flow of basic
materials, components etc. into
the organization was ignored.
• One of the reasons was that
traditionally, purchasing has been
an isolated function in an
organization & hence rarely
attracted the desired attention.
• Hence, inbound logistics never got
the same treatment as outbound
logistics.
• Also, the belief that profits came
from the finished goods market &
that the more finished goods sold.
• CUSTOMER REVOLUTION
• The manufacturer was the king &
pushed his products to the customer.
Quality was a non-issue. Nobody even
talked about it. Customers had to
wait for as long as 8-10yrs to buy a
two wheeler or 4-5yrs for a four-
wheeler.

• There were licenses to be procured

by manufacturers, a long &
cumbersome process which
discouraged entrepreneurship.
• Suppliers & manufacturers had
antagonistic relations & each one tried
to squeeze out the other.

• Globalization & change in government

policy saw more players enter the
market, thus increasing competition.
• These new players brought with them
not only sophisticated production &
manufacturing techniques, but also a
customer-centered approach. Soon, the
customer became king. He was offered
more options, better quality &
affordable prices at the time he
desired.
Defining SCM
• A supply chain includes all the
processes that add customer-desired
value to material & bring it to the
customer. This value gets added at
various stages of the journey that
material takes till it reaches the
customer.
Supply chain Definitions:
• There are number of definitions given
by various authors………………...
1. Raw Supply Chains.
2. Ripe Supply Chains.
3. Internal Supply Chains.
4. Extended Supply Chains.
5. Self-monitored Supply Chains.
6. Outsourced Supply Chains.
7. Production Oriented Supply Chains.
8. Financial Oriented Supply Chains.
9. Market Oriented Supply Chains.
10.Value Chains (Complete Supply Chains).
• Raw Supply Chains------Basic
type, loosely organized
• Ripe Supply Chains. All the
activities are done in an organized
manner, companies have improved
relationships with their suppliers &
distributors & there was some
amount of information flowing in
through the chain.
• Internal Supply Chains: where the
companies have implemented
sophisticated enterprise resource
planning packages & their internal
operations are absolutely fine
tuned & well coordinated.
• Extended supply chains are the
internally optimized chains that
extend well beyond the companies
boundary to include the suppliers &
distributors into their fold.
• Self-monitored supply chains are
the ones where the manufacturing
company takes the lead in bringing
all partners in its fold & hence
these supply chains are company
centric and not customer centric.
• Outsourced supply chains are where
the logistics partner (a 3 PL) usually
takes care of everything-outbound
logistics, inbound logistics,
relationships, information flow, etc.
• They make decisions & they monitor
the supply chain.
• This is very rare & is found to exist
in some of the export house. As there
are only activities such as procuring &
exporting (no production) this is the
most feasible alternative.
• Production-oriented supply chains
have a one point agenda: produce to
optimize the capacity & labor.

• Financial-oriented supply chains or

more fondly known as “cash to cash
cycle” chain provides a company with
negative working capital. Goods flow
quickly.
• Upon demand, they are converted or
distributed & sold to customers who
pay before the supplier’s accounts
payable is settled. This was found in
big companies particularly in the fast
moving consumer goods sector.
• Market-oriented supply chains or
customer supply chains are the
typical built-to-order type of
chains that get triggered when the
customer places an order. Most
commonly found in computer
hardware sector, & other sectors
which are dominated by consumer
tastes, these supply chains are
highly responsive & agile.
• Value Chains (Complete Supply
Chains):is the ultimate integration
that is aimed at total optimization
& not optimization in parts.
• These supply chains also addressed
allied issues such as waste disposal,
improving productivity, etc. Not
very commonly found, but several
companies have such ultimate supply
chains on their agenda.
• WHAT IS SCM?
• Very simply put, SCM is a network of
the manufacturer’s suppliers &
suppliers’ suppliers on the one hand &
customers & customer’s customers on
the other hand.
• This network exists to ensure free &
smooth flow of information, goods,
services & profits among all its
participants.
• Every node or link stands to gain
from this association. In supply
chain parlance each player is a
supplier & supplies to the next
player either basic raw materials,
or components or semi-finished
products or the finished goods.
• The manufacturer supplies to the
distributor, who in turn supplies
them to the retailer & who then
supplies to the end user. It is an
equivalent of a relay race.
• The race cannot be won by best
performance of any single player.
It has to be a collective effort, a
joint endeavor.
 Material Flow
R1
S C
0.0 S 1.0

D1
S 2.0
S R
0.1 2
S 1.1 C

S R3
0.2 C
S 1.2 S 2.1
M
S D2
R4
0.3
C
S 1.3

S S 2.2
0.4 R5
S 1.4 C

D3
S R6
0.5
C

Information
Flow
• SCM Network: -
• The level 0 supplier is the basic
materials supplier. They supply to
level 1 supplier.
• The second set of nodes (suppliers’
supplier), represents the second tier
of suppliers. They add value to the
basic materials procured from the
first tier of suppliers & pass them on
to the next node who is the key
suppliers.
• These key suppliers add more
value to the materials procured by
them & supply it to the
manufacturer. He procures the
different types of raw materials,
components & manufactures the
finished product that he is known
for.
• He then supplies (he is also a supplier to the
next set of nodes) the finished product to
the next tier of supplier who is more
popularly known as the distributor.

• The next set of nodes, i.e. the distributor

supplies he finished goods to the retailers.

• They add value by supplying the right

product at the right time in the right
quality to the retailer who is the buying
arm of the customer.
• A retailer exists to supply the
finished product to the customer,
the end user
• All the nodes & the entire supply
chain exist for this customer. If
the customer is happy with the
product, service & quality it will
show in the sales figure & profits.
• The key to the success of supply chain
is the speed with which these
activities can be accomplished & the
realization that customer needs &
customer satisfaction are the very
reasons for the network.
• Reduced inventories, lower operating
costs, product availability & customer
satisfaction are all benefits, which
grow out of effective supply chain
management.
• CHAPTER 13

OBJECTIVES OF SUPPLY CHAIN

• To reduce the physical supply
chain links. (Reduce the number of
vendors)
• To define supply chain
responsibilities to a specific core
service competency; &
• To decrease the time & cost of
getting the end user the products
in markets worldwide.
• Supply chain constituents
1.Information.
2.Supply
3.Production
4.Distribution
5.Supply stock (inventory) is another
key constituent of SCM. Achieving
a fine balance between
overstocking & under stocking is
the biggest challenge of SCM.
• SCM ACTIVITIES:
1. Plan
2. Source
3. Make
4. Return
• CHAPTER 14

SUPPLY CHAIN ORGANIZATION

 S U P P L Y C H A IN O R G A N IZ A T IO N

P re s id e n t a n d C E O

V ic e P re s id e n t V ic e P re s id e n t V ic e P re s id e n t
S a le s a n d M a rk e tin g S u p p ly C h a in F in a n c e

G e n e ra l M a n a g e r G e n e ra l M a n a g e r G e n e ra l M a n a g e r
M a te ria ls L o g is itic s M a n u fa c tu rin g
Implementing Supply Chain
1. Crafting project vision
2. Managing organizational change
3. Choosing the right implementation
approach
4. Managing technical challenges
Managing technical challenges:

• Technology architecture:
• Interfacing multiple systems:
• Data accuracy & integrity:
 CONCLUSION

SCM is here to stay & we are at

the beginning of the spectrum. We
still have a long way to go & miles
to conquer before the entire
industry, all players & all
participants become supply chain
enabled.
• Companies have a lot to gain from
SCM implementation. Individual
companies will definitely gain
tremendously but the benefits will
move beyond the four walls of the
company & everybody – all involved
entities will gain.
• This will obviously have direct
repercussions on the country as this
releases the locked-in working capital.