RG

SCM 300 Module 1

Fundamentals Overview

  • Supply chains are systems that link multiple business functions and external partners to transform raw materials into finished goods and services that reach end-users.
  • Core flow: Purchasing → Production → Distribution → Retail Sales.
  • Objective: Add value while minimizing waste at every stage.

Simple Supply-Chain Illustration

  • Purchasing / Supplier Network
    • Acquisition of raw materials & components.
  • Production / Assembly & Manufacturing
    • Conversion of inputs into finished goods.
    • Packaging for distribution.
  • Distribution / Warehousing
    • Storage, transportation, order fulfillment.
  • Retail Sales
    • Final interface with customers.

Value-Adding Versus Waste

  • Operations & Logistics add value through control of:
    • Materials, Inventory, Resources.
    • Cost, Quality, Speed, Flexibility.
  • Waste = Non-valuable outputs (defects, garbage, emissions, resource waste).
  • Reverse Logistics handles returns, recycling, disposal of waste products.

Definition of Supply Chain Management (SCM)

  • "The efficient integration of suppliers, manufacturers, transporters, DCs, warehouses, retailers, and all other parties tasked with the successful delivery of the final product and/or service."
  • Efficiency is impossible without integration – siloed activities create delays, cost, quality issues.

Functional Scope of SCM in the Organization

  • Buy It (Purchasing / Procurement)
  • Make It (Operations / Production)
  • Move It (Logistics / Distribution)
  • Idea / Need (Strategy, Design, Marketing)
  • Sell It (Sales, Retail Ops, Support)
  • Service It (Support, Returns, Maintenance)
  • Support functions: IT, Marketing, Accounting, Finance.

Three Core Flows

  1. Money – payments, credit, ROI.
  2. Materials – physical goods, spare parts, returns.
  3. Information – forecasts, orders, inventory levels, shipment status.

Stakeholder Mentality

  • Owners / Investors / Stockholders / Donors – financial returns, sustainability.
  • Managers, Employees, Business Partners – job security, collaboration.
  • Customers / Victims / Beings Served – value, reliability, ethics.

Supply-Chain Goals & Financial Metrics

  • Primary Goal: Sustainable long-term profits and/or maximum ROI.
    • \text{Profit} = \text{Revenue} - \text{Cost}
    • ROI = \frac{\text{Profit}}{\text{Investment}}
  • Approaches:
    • Make Money – grow revenue.
    • Be Efficient / Avoid Waste – lower denominator of ROI.
    • Be Different / Better – develop core competencies.

Value & Productivity Perspectives

  • Customer (Value)
    • "What do I get?" – quantity, quality, size.
    • "What is the price?" – money, waiting time, warranty.
  • Organization (Productivity)
    • "What did I make?" – outputs.
    • "What was the cost?" – inputs.
  • SCM Charge: Increase outputs while reducing inputs.

Core Supply-Chain Functions

Procurement (Purchasing)

  • Obtain services, supplies, equipment per policies.
  • Supplier selection, negotiations, relationship management, inventory/material control.

Operations (Production Management)

  • Design & improve systems that turn inputs into outputs.
  • Capacity planning, scheduling, waiting-line management, continuous improvement.

Logistics (Transportation & Distribution)

  • Coordinate packaging, shipping itineraries, warehousing, distribution.
  • Documentation, containerization, infrastructure, third-party logistics (3PL) relationships.

Supply-Chain Currency: Competitive Priorities

  1. Cost
  2. Quality
  3. Speed/Time
  4. Flexibility

Cost Considerations

  • Material, production (machine & labor), packaging, transportation, storage.
  • Quality costs – returns, warranties, repairs, rework, error correction, time.
  • Customer service cost, marketing, finance, technology, waste disposal, rent, insurance, legal, HR.
  • Example: Buying bottled water involves much more than water—consider production, transportation, shelf space, return handling.

Quality Dimensions

  • Design Quality – inherent features & specifications.
  • Material & Production Quality – system capability, craftsmanship, durability.
  • Quality Level Delivered – final customer condition after transit & storage.
  • Consistent Quality – repeatability across large markets.
  • Service Quality – sales interaction, repair, maintenance, assembly, delivery.

Time / Speed Metrics

  • Delivery Time (Lead Time) – from order placement to fulfillment.
    • Includes supplier, manufacturing, transport, and waiting.
  • On-Time Delivery – % shipments delivered when promised.
  • Industries may prioritize "fast," "accurate," or both.

Flexibility Variants

  1. Product / Customization Flexibility – options offered or built-to-spec.
  2. Volume Flexibility – accommodate demand swings, large or small orders.
  3. Mass Customization – ability to deliver both variety and large volumes.
  • Additional Flexibilities:
    • Design – ease of modifying color, size, features.
    • Materials/Parts – interchangeable components.
    • Facility – multi-product plants.
    • Tools/Machinery – versatile equipment.
    • Employee – agile, multiskilled, intelligent workforce.
    • Service – global repairs, returns, on-site support, recycling.

Key Terminology

  • Supply-Chain Visibility – ability to see upstream/downstream inventory, orders, shipments in real time.
  • Inventory Visibility – internal & network-wide stock levels, locations, ownership status.
  • Supplier Tiers
    • Tier 1: Direct suppliers to focal firm.
    • Tier 2+: Suppliers to suppliers, etc.

Example Multi-Echelon Network

  • Retail Distributor → Industry Distributor → Manufacturing → Parts Manufacturers (S1–S9).
  • Highlights complexity and need for tiered management.

Being a Supply-Chain Manager

  • Satisfy Customers – design competitive priority mix that creates value.
  • Satisfy Company – maximize productivity, cut waste, contribute to profits.
  • Seek Integration – internal & external collaboration.
  • Consider the Future – adaptability, proactive response to change.