Section D

Supply Chain Management

Section D: OSCM

Section A: Supply Chain Management

Supply Chain Management: An Overview

• The chapter addresses the essence of Supply Chain Management (SCM), its relation to Advanced Planning, the meaning of "advanced" planning concepts, and the origins of SCM.

1.1 Definitions

• During the 1990s, authors aimed to define SCM, considering:

  • The object of the management philosophy.

  • The target group.

  • The objective(s).

  • The broad means for achieving these objectives.

• The object of SCM:

  • The supply chain is a network of organizations involved in processes and activities that produce value in the form of products and services to the ultimate consumer (Christopher 2005, p. 17).

  • It consists of two or more legally separated organizations linked by material, information, and financial flows.

  • Organizations include firms producing parts, components, and end products, logistic service providers, and the ultimate consumer/customer.

  • The definition incorporates the target group: the ultimate customer.

Supply Chain Network Structure

• Figure 2: Illustrates a supply chain network structure.

• A network manages divergent and convergent flows resulting from different customer orders handled in parallel.

• Organizations may focus on a portion of the overall supply chain to ease complexity.

  • Downstream view: limited by the customers of its customers.

  • Upstream view: ends with the suppliers of its suppliers.

• Supply chain can refer to a large company with sites in different countries.

  • Efficient coordination of material, information, and financial flows is crucial for multinational companies.

  • Decision-making is theoretically easier due to a single top management level.

• Supply chain types:

  • Inter-organizational: broad sense.

  • Intra-organizational: narrow sense.

• Close cooperation between functional units (marketing, production, procurement, logistics, and finance) is mandatory but not always a given.

Traditional and Basic Supply Chain Models

• Figure 1.1: Shows a traditional seller-buyer relationship (a) and a basic supply chain (b) from Upendra Kachru (2010), "Exploring the Supply Chain," Excel Books.

• An extended supply chain consists of a number of relationships referred to as tiers.

• Figure 1.2: Illustrates a simplified version of Kalyani Breweries' supply chain from Upendra Kachru, (2010), "Exploring the Supply Chain," Excel Books. The chain includes:

  • 2nd tier supplier: NALCO, DSIDC

  • 1st tier supplier: Supertech Industries

  • Focal Company Kalyani Breweries

  • Distributor: UBSN Ltd.

  • Retailer: Transportation companies, Supertech Industries

  • Final customers.

Supply Chain Stages

• Figure 1.5: Shows the different stages of a supply chain from Upendra Kachru (2010). "Exploring the Supply Chain". Excel Books.

  • Supplier

  • Mtl Whse (Material Warehouse)

  • Mfg Ops (Manufacturing Operations)

  • FG Whse (Finished Goods Warehouse)

  • Cust Whse (Customer Warehouse)

  • Retail

  • Consumer

Essential Features of Supply Chain Management

• Integrated behavior:

  • SCM incorporates integration of stakeholders from suppliers to customers.

• Mutually sharing information:

  • Effective SCM requires mutually sharing information among channel members, especially for planning and monitoring processes.

• Mutually sharing channel risk and Rewards:

  • Effective SCM requires mutually sharing channel risks and rewards that yield a competitive advantage.

  • Risk and reward sharing should happen over the long term with focus and cooperation among supply chain members.

• Co-operation:

  • Co-operation among channel members is required for effective SCM.

  • Co-operation refers to similar or complimentary coordinated activities performed by firms in a business relationship to produce superior mutual outcomes or singular outcomes that are mutually expected over time.

Customer Focus and Integration

• Focus on serving customers:

  • Supply chain succeeds if all members have the same goal and focus: serving customers.

  • Establishing the same goal and same focus among Supply chain members is a form of policy integration.

• Integration of Processes:

  • The implementation of SCM needs the integration of processes from sourcing to manufacturing and to distribution across the supply chain.

  • The integration can be accomplished through cross functional terms, in plant supplier personnel and third party service provide.

• Partners to Build and Maintain Long Term Relationship

  • Successful relationships aim to integrate channel policy to avoid redundancy and overlap while seeking a level of co-operation that allow participants to be more effective at lower cost levels.

  • Policy integration is possible if there are compatible cultures and management techniques among the chain members.

Objectives of Supply Chain Management

• Service Orientation.

• System Orientation.

• Competitiveness and Efficiency.

• Minimizing the Time.

• Minimizing Work in Progress.

• Improving Pipeline Visibility.

• Improving visibility Demand.

• Improving Quality.

• Reduces Transportation Cost.

• Reduces Warehousing Cost.

Detailed SCM Objectives

• Service Orientation:

  • Providing superior customer service is the basis of supply chains.

  • Service is about the value the customer gets, depending on their perception.

  • The design, alignment, integration, and coordination of companies in the supply chain are all for the ultimate customer.

• System Orientation:

  • System orientation is at the existence of any supply chain.

  • Synergy due to co-operation and coordination is the main gain of a supply chain.

  • Optimal results for the chain may mean less than optimal results for individual partners.

• Competitiveness and Efficiency:

  • Supply chain is a business organization, it provides value to the customers while being competitive.

  • Competitiveness is essential for its health and sustainability.

• Minimizing Time:

  • An efficient supply chain reduces the time required for converting orders into cash.

  • There is minimal time lag and increase in productivity of the organization.

• Minimizing Work in Progress:

  • Supply chain minimizes total work in process in supply chain.

• Improving Pipeline Visibility:

  • Efficient supply chain improves the visibility of each one of the activities of the supply chain by each one of the partner.

• Improving visibility Demand:

  • Efficient supply chain improves visibility of demand by each one of the partners.

• Improving Quality:

  • Efficient supply chain management helps in improving the quality of operation of the organization.

  • TQM has become a major commitment throughout all facet of industry.

  • Overall commitment to TQM is one of the major commitment throughout all facets of industry.

Components of Supply Chain Management

• Procurement

• Processing

• Distribution

Factors Influencing Supply Chain Management

• Consumer Demand.

• Globalization.

• Competition.

• Information and communication.

• Government Regulation.

• Environment.

Key Issues/Function of SCM

Functions of Supply Chain Management

• Supply chain management is a cross functional approach to manage the movement of raw material into an organization, certain aspects of the internal processing of material into finished goods, and then the movement of finished goods out of the organization towards the end consumers.

• As organization strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw material sources and distribution channel.

Functions of Supply Chain Management: Strategic Level

• Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities.

• Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.

• Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities.

• Information technology chain operations.

• Where-to-make and make-buy decisions.

• Aligning overall organizational strategy with supply strategy.

• It is for long term and needs resource commitment.

Functions of Supply Chain Management: Tactical Level

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, scheduling, and planning process definition.

• Inventory decisions, including quantity, location, and quality of inventory.

• Transportation strategy, including frequency, routes, and contracting.

• Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.

• Milestone payments.

• Focus on customer demand and Habits.

Functions of Supply Chain Management: Operational Level

• Daily production and distribution planning, including all nodes in the supply chain.

• Production scheduling for each manufacturing facility in the supply chain (minute by minute).

• Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.

• Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.

• Inbound operations, including transportation from suppliers and receiving inventory.

• Production operations, including the consumption of materials and flow of finished goods.

• Outbound operations, including all fulfillment activities, warehousing and transportation to customers.

• Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

• From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.