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Supply Chain Management (SCM)

Supply chain management is crucial for organizations to operate efficiently and remain competitive. It involves coordinating all activities involved in delivering products to customers, from sourcing materials to production to distribution. Effective supply chain management allows companies to anticipate problems, dynamically adjust prices, and improve inventory fulfillment. Coordinating both physical flows of materials and information flows between supply chain partners is important for optimizing operations.
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100% found this document useful (1 vote)
176 views

Supply Chain Management (SCM)

Supply chain management is crucial for organizations to operate efficiently and remain competitive. It involves coordinating all activities involved in delivering products to customers, from sourcing materials to production to distribution. Effective supply chain management allows companies to anticipate problems, dynamically adjust prices, and improve inventory fulfillment. Coordinating both physical flows of materials and information flows between supply chain partners is important for optimizing operations.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Supply Chain Management

(SCM)
OBJECTIVE

➢ To have a better understanding with Supply Chain Management


➢ To know the importance and benefit of SCM.
Lesson 1: What is the Supply Chain Management (SCM)?

 The best companies around the world are discovering a powerful new source of
competitive advantage. It's called supply-chain management and it encompasses
all of those integrated activities that bring product to market and create satisfied
customers.
Supply Chains

A supply chain is the connected network of individuals, organizations, resources, activities, and
technologies involved in the manufacture and sale of a product or service. A supply chain starts with
the delivery of raw materials from a supplier to a manufacturer and ends with the delivery of the
finished product or service to the end consumer.
Supply chain management is the management of the flow of goods and services and includes all
processes that transform raw materials into final products. It involves the active streamlining of a
business's supply-side activities to maximize customer value and gain a competitive advantage in
the marketplace.

SCM represents an effort by suppliers to develop and implement supply chains that are as efficient
and economical as possible. Supply chains cover everything from production to product
development to the information systems needed to direct these undertakings.
SCM oversees each touchpoint of a company's product or service, from initial creation to the final
sale. With so many places along the supply chain that can add value through efficiencies or lose
value through increased expenses, proper SCM can increase revenues, decrease costs, and impact a
company's bottom line.
How Supply Chain Management Works?

Typically, SCM attempts to centrally control or link the production,


shipment, and distribution of a product. By managing the supply chain,
companies are able to cut excess costs and deliver products to the
consumer faster. This is done by keeping tighter control of internal
inventories, internal production, distribution, sales, and the inventories
of company vendors.
SCM is based on the idea that nearly every product that comes to
market results from the efforts of various organizations that make up a
supply chain. Although supply chains have existed for ages, most
companies have only recently paid attention to them as a value-add
to their operations.
In SCM, the supply chain manager coordinates the logistics of
all aspects of the supply chain which consists of five parts:

 The plan or strategy


 The source (of raw materials or services)
 Manufacturing (focused on productivity and efficiency)
 Delivery and logistics
 The return system (for defective or unwanted products)
The supply chain manager tries to minimize shortages and keep costs down. The job
is not only about logistics and purchasing inventory. supply chain managers, “make
recommendations to improve productivity, quality, and efficiency of operations.”

Improvements in productivity and efficiency go straight to the bottom line of a company


and have a real and lasting impact. Good supply chain management keeps companies
out of the headlines and away from expensive recalls and lawsuits.

Supply chain management is the process of integrating the supply and demand
management, not only within the organization, but also across all the various members
and channels in the supply chain so they work together most efficiently and effectively.
There are five basic components in a supply chain
management system:

1. Planning
To meet customer demands, supply chain managers have to plan
ahead. This means forecasting demand, designing the supply chain
intentionally, and determining how the organization will measure the
supply chain to ensure it is performing as expected in terms of
efficiency, delivering value for customers and helping to achieve
organizational goals.
2. Sourcing
Selecting suppliers who will provide the goods, raw materials, or
services that create the product is a critical component of the supply
chain. Not only does this include creating the contracts that govern
the suppliers, but also managing and monitoring existing relationships.
As part of strategic sourcing, supply chain managers must oversee the
processes for ordering, receiving, managing inventory and authorizing
invoice payments for suppliers.
3. Making
Supply chain managers also need to help coordinate all the steps
involved in creating the product itself. This includes reviewing and
accepting raw materials, manufacturing the product, quality testing
and packaging. Generally, businesses evaluate the quality, production
output and employee productivity to ensure overall standards are
upheld.
4. Delivering
Ensuring the products reach the customers is achieved through logistics
and it’s fundamental to supply chain success. This includes
coordinating the orders, scheduling delivery, dispatching, invoicing,
and receiving payments. Generally, a fleet of vehicles must be
managed to ship the products—from tankers bringing product
manufactured overseas to fleet trucks and parcel services handling
last mile delivery. In some cases, organizations outsource the delivery
process to other organizations who can oversee special handling
requirements or home delivery.
5. Returning
Supply chain managers also need to develop a network that supports
returning products. In some cases, this may include scrapping or re-
producing a defective product; in others, it may simply mean returning
a product to the warehouse. This network needs to be responsible and
flexible to support customer needs.
The foundation for each of these components is a solid network of
supporting processes that can effectively monitor the information
across the supply chain and assure adherence to laws and regulations.
This involves a wide number of departments, including HR, IT, quality
assurance, finance, product design and sales, according to CIO.
Lesson 1.1.1: Importance of Supply Chain Management (SCM)

 In the ancient Greek fable about the tortoise and the hare, the speedy and
overconfident rabbit fell asleep on the job, while the "slow and steady" turtle won
the race. That may have been true in Aesop's time, but in today's demanding
business environment, "slow and steady" won't get you out of the starting gate, let
alone win any races. Managers these days recognise that getting products to
customers faster than the competition will improve a company's competitive
position. To remain competitive, companies must seek new solutions to important
Supply Chain Management issues such as modal analysis, supply chain
management, load planning, route planning and distribution network design.
Companies must face corporate challenges that impact Supply Chain Management
such as reengineering globalisation and outsourcing.
Supply chain management is crucial for any organization because doing it
well can introduce several benefits to the organization; however, poor
supply chain management can result in very expensive delays, quality
issues, or reputation. In some cases, poor supply chain management can
also cause legal issues if suppliers or processes are not compliant.
Technology advances have unlocked huge potential for supply chain
management, enabling supply chain managers to work closely – and in
real time – with members of the supply chain. With supply chain
management, organizations can:

Anticipate problems
Dynamically adjust prices
Improve inventory and fulfillment
Effective supply chain management systems minimize cost, waste and
time in the production cycle. The industry standard has become a just-
in-time supply chain where retail sales automatically signal
replenishment orders to manufacturers. Retail shelves can then be
restocked almost as quickly as product is sold. One way to further
improve on this process is to analyze the data from supply chain
partners to see where further improvements can be made.
• Identifying potential problems. When a customer orders more product than
the manufacturer can deliver, the buyer can complain of poor service. Through
data analysis, manufacturers may be able to anticipate the shortage before the
buyer is disappointed.
• Optimizing price dynamically. Seasonal products have a limited shelf life. At
the end of the season, these products are typically scrapped or sold at deep
discounts. Airlines, hotels and others with perishable “products” typically adjust
prices dynamically to meet demand. By using analytic software, similar
forecasting techniques can improve margins, even for hard goods.
• Improving the allocation of “available to promise” inventory. Analytical
software tools help to dynamically allocate resources and schedule work based
on the sales forecast, actual orders and promised delivery of raw materials.
Manufacturers can confirm a product delivery date when the order is placed —
significantly reducing incorrectly-filled orders.
The organizations that make up the supply chain are “linked” together
through physical flows and information flows.

 Physical flows involve the transformation, movement, and storage of


goods and materials. They are the most visible piece of the supply
chain. But just as important are information flows.
 Information flows allow the various supply chain partners to
coordinate their long-term plans, and to control the day-to-day flow
of goods and materials up and down the supply chain.
Why is it so important for companies to get products to their customers
quickly?
Faster product availability is key to increasing sales. "There's a substantial profit
advantage for the extra time that you are in the market and your competitor is not. If the
company be there first, they are likely to get more orders and more market share." The
ability to deliver a product faster also can make or break a sale. "If two alternative
[products] appear to be equal and one is immediately available and the other will be
available in a week, which would you choose? Clearly, "Supply Chain Management has an
important role to play in moving goods more quickly to their destination. "

Supply chain management is important because it can help achieve several business
objectives. For instance, controlling manufacturing processes can improve product
quality, reducing the risk of recalls and lawsuits while helping to build a strong consumer
brand. At the same time, controls over shipping procedures can improve customer
service by avoiding costly shortages or periods of inventory oversupply. Overall, supply
chain management provides several opportunities for companies to improve their profit
margins, and is especially important for companies with large and international
operations.
Important Aspects of SCM Strategy
The supply chain network structure:
This considers physical structures, such as manufacturing facilities, warehousing, outlets, and customer locations, as well a s
logistics and the organizational philosophy as to where and how each are structured and handled.

Legal and ethical standards:


The identification of legal standards related to procurement along with appropriate ethical standards to ensure the
organization complies with its corporate responsibility and environmental pledges.

Supply chain software and technology:


Adoption of systems to monitor stocks, such as using barcoding or IoT devices for tracking locations and movements.
Additionally, software solutions that offer supply chain visibility and the degree of software integration with other corporate
systems.

S&OP policies:
Because the supply chain doesn't operate in a vacuum, decisions and strategies should align with the corporate philosophy
and be presented in the same financial language.

Supplier profiles:
The strategy should determine who the company does business with and require certain systems to be used by suppliers to
manage product quality and deliveries.
Typical SCM Key Performance Indices
Key performance indices (KPIs) are crucial elements of a successful SCM strategy. They
identify required performance standards and allow supply chain managers to measure
performance and identify areas needing attention. Additionally, they are useful for
measuring performance improvements. Common KPIs include:

 Cash to cycle time: The time between paying for raw materials and receiving
payment for goods delivered, which is an important factor in determining
working capital requirements.

 Perfect order rate: The number of orders delivered without errors, which is a
crucial metric for organizations striving for perfection and often broken down
further by function.

 Inventory turnover: The time it takes to sell the total inventory in dollars, which is
another factor that affects working capital.

 GMROI: The gross margin return on investment, measuring the amount of gross
profit earned on the cost of inventory used, which is a metric commonly used in
retail.
Benefits of supply chain management
 Supply chain management creates a number of benefits that translate to higher
profits, better brand image and greater competitive advantage. These include the
following:
 better ability to predict and meet customer demand;
 better supply chain visibility, risk management and predictive capabilities;
 fewer process inefficiencies and less product waste;
 improvements in quality;
 increased sustainability, both from a societal and an environmental standpoint;
 lower overhead;
 improvements in cash flow; and
 more efficient logistics.
Lesson 1.1.2: Supply Chain Management today
If we take the view that Supply Chain Management is what Supply Chain
Management people do, then in 1997 Supply Chain Management has a
firm hand on all aspects of physical distribution and materials
management. Seventy-five percent or more of respondents included the
following activities as part of their company's Supply Chain

Management department functions:


• Inventory management
• Transportation service procurement
• Materials handling
• Inbound transportation
• Transportation operations management
• Warehousing management
Moreover, the Supply Chain Management department is expected to increase its
range of responsibilities, most often in line with the thinking that sees the order
fulfilment process as one co-ordinated set of activities. Thus the functions most often
cited as planning to formally include in the Supply Chain Management department are:

 Customer service performance monitoring

 Order processing/customer service

 Supply Chain Management budget forecasting


On the other hand, there are certain functions which some of us might
feel logically belong to Supply Chain Management which companies
feel are the proper domain of other departments. Most difficult to bring
under the umbrella of Supply Chain Management are:
 Third party invoice payment/audit
 Sales forecasting
 Master production planning
Lesson 1.1.3: Supply Chain Management tomorrow

The future for Supply Chain Management looks very bright. This year, as
well as last year, two major trends are benefiting Supply Chain
Management operations. These are

• Customer service focus


• Information technology

Successful organisations must be excellent in both of these areas, so


the importance of Supply Chain Management and the tools available
to do the job right will continue to expand.
CONCLUSION:
 Supply chain management (SCM) is the centralized management
of the flow of goods and services and includes all processes that
transform raw materials into final products. By managing the supply
chain, companies are able to cut excess costs and deliver products
to the consumer faster.
 Good supply chain management keeps companies out of the
headlines and away from expensive recalls and lawsuits.
 Technology advances have unlocked huge potential for supply
chain management, enabling supply chain to be more efficient.
Supply chain management creates a number of benefits that
translate to higher profits, better brand image and greater
competitive advantage.
OBJECTIVE

➢ Understand the Supply Chain Management structure and objectives


➢ To be familiarize with the Supply Chain Management Principle and Methodology
Lesson 1.1.4: The Supply Chain Management Pipeline

 The freight transportation industry has undergone a revolutionary change during


the last decade. As deregulation spread to all modes of transport, the number of
surviving companies declined. Carriers unprotected by regulation discovered they
could not differentiate themselves from the competition on price alone. Successful
transportation companies must provide prompt pickup, excellent customer service,
and swift, complete and damage-free delivery.

 The motor carrier industry forges a critical link in a multimodal Supply Chain
Management system and must compete against time and service to stay in
business. Shippers move cargo over whatever mode provides the best service.
Less-than-truckload (LTL) motor carriers find their competition particularly stiff.
Parcel carriers constantly increase their maximum shipment weight while truck load
carriers now accept partial trailer loads as small as 10,000 pounds. Shorter cycle
times means better service.
 Customers' needs have also changed. The growth of Just-in-Time and
Quick Response inventory management and third-party Supply Chain
Management requires all participants in the Supply Chain
Management chain to consider shorter cycle time a competitive
advantage. Manufacturers, distributors, and some carriers effectively
use information technology to reduce cycle times and improve the
quality of freight handling. Package handlers use the technology to
great competitive advantage.

 LTL∗ carriers are beginning to adapt their information systems to provide


on-line, realtime data on the movement of freight through their systems.
To successfully use information technology to speed the movement of
freight, these carriers must have lowcost methods to accurately gather
and disseminate data. Bar code and radio frequency technologies
provide the tools for LTL carriers to survive and thrive.
 Traditional bar codes uniquely identify every package in the pipeline. Scanning
the packages positively confirms custody transfer from shipper to carrier to
consignee. Two-dimensional bar codes on shipping documents record the
entire bill of lading (BOL). Scanners in drivers' hands provide error-free entry of
the BOL in less than a second. Radio communication from the truck cab to
central operations immediately informs dispatchers of incoming freight. Similar
scanning during delivery shortens the billing cycle and provides positive
confirmation of delivery. Information technology speeds cargo through every
phase of LTL operations

 Dock management systems speed cross docking operations. A combination of


radio communication and bar code scanning immediately delivers control
information to people who need it. From dispatchers to fork operators, every
member of the dock team receives immediate information where they work.
The system efficiently tracks all packages from inbound docks through staging
to outbound docks. No package waits for information.
 Yard management systems ensure the delivery of the right
equipment to the right location at the right time. Radio
communication to yard tractors keeps shuttle drivers working on the
highest priority tasks. Real-time communication between yard
drivers, hub managers, and information support systems provides
positive control of all moving stock. Optimising personnel and rolling
stock results in shortened stripping and loading time at the doors.
Consistent application of appropriate information technology throughout
the Supply Chain Management pipeline results in shortened cycle times and
lowered effort. Immediate, reliable information allows managers to
optimise their physical and human resources. While maximum benefit
comes to those carriers who implement a consistent information strategy
throughout their operations, segmentation of the problem allows carriers
to phase in their transformation. Each phase provides immediate economic
benefits, while improving the strategic position of the carrier.
 Co-ordinating Multiple Initiatives through IT
The Supply Chain Management model of LTL carriers offers the greatest advantage and
the fundamental vulnerability of the mode. City terminals, break bulk consolidation, and
other cargo transfer techniques allow LTL carriers to sell economies of scale to shippers
with small cargo consignments. However, the same process requires multiple handling
and offers frequent opportunities for delays, misshipments, and cargo damage.

 Effective use of information technology maximises the advantages and minimises the
risks inherent in LTL transportation. Each package must be positively identified every
time it is handled. Information about every destination must be checked and double
checked to maximise cargo speed while minimising empty trailer miles.

 Implementation of competitive information technologies begins wherever carriers feel


they need the most assistance. For many, dock management represents a logical
starting point. Positive tracking of every package in and out of every hub drastically
reduces the possibility of cargo delays and damage. Automatic optimisation
techniques simultaneously reduce handling expenses and allow some trailers to
bypass consolidation hubs entirely.
When carriers augment a dock management system with yard management support, the two
projects amplify each other's advantages. Yard management initiatives closely control the
movement of trailers and drivers based on information provided by the dock management system.

 The dock management system, in turn, profits from data provided by pickup and delivery
automation. When shipment information from city drivers immediately flows to the hubs, support
systems and supervisors can anticipate requirements. Incoming cargo stays in motion because
dock managers already know what is on each inbound truck. If pickup and delivery systems are
not immediately automated, carriers can implement intermediate systems to efficiently feed
information to hub management support projects.

 Dockside data collection allows operators to enter all data about an inbound truck's cargo at
the dock even as operators strip the cargo for consolidation.

 Dockside data collection becomes more efficient when carriers encourage their shippers to
produce scannable bills of lading. These documents can be produced on existing printers with
specialized software. A two-dimensional bar code encodes all necessary shipment information.
In less than one second, a dockside scanner captures an entire bill of lading. The same
scannable documents can be used when the carrier later implements a pickup and delivery
management system.
Effective supply-chain management may be the best way to achieve reduced
order-to-delivery cycle time. Instead of treating each function as consisting of
discrete activities, supply-chain management considers all functions to be linked
and interdependent. As a result, supply-chain management can reveal the
cumulative effect of problems anywhere in the chain, not just within Supply Chain
Management' areas of responsibility.
LESSON 1.2: Objectives of the Supply Chain Management

The fundamental objective is to "add value".

That brings us to the example of the fish fingers. During the Supply Chain Management '98
conference in the United Kingdom this fall, a participant in a supply chain management
seminar said that total time from fishing dock through manufacturing, distribution, and final
sale of frozen fish fingers for his European grocery-products company was 150 days.
Manufacturing took a mere 43 minutes. That suggests an enormous target for supply chain
managers. During all that time, company capital is-- almost literally in this case--frozen. What
is true for fish fingers is true of most products. Examine any extended supply chain, and it is
likely to be a long one. James Morehouse, a vice president of consulting firm A.T. Kearney,
reports that the total cycle time for corn flakes, for example, is close to a year and that the
cycle times in the pharmaceutical industry average 465 days. In fact, Morehouse argues
that if the supply chain, of what he calls an "extended enterprise," is encompassing
everything from initial supplier to final customer fulfilment, could be cut to 30 days, that
would provide not only more inventory turns, but fresher product, an ability to customize
better, and improved customer responsiveness. "All that add value," he says. And it provides
a clear competitive advantage.
Supply Chain Management becomes a tool to help
accomplish corporate strategic objectives:

 reducing working capital,


 taking assets off the balance sheet,
 accelerating cash-to-cash cycles,
 increasing inventory turns, and so on.
LESSON 1.3: Supply Chain principles/ Methodology and Solutions

If supply-chain management has become top management's new


"religion," then it needs a doctrine. Andersen Consulting has stepped
forward to provide the needed guidance, espousing what it calls the
"Seven Principles" of supply-chain management. When consistently
and comprehensively followed, the consulting firm says, these seven
principles bring a host of competitive advantages.
The seven principles as articulated by Andersen Consulting are
as follows:

1. Segment customers based on service needs. Companies traditionally have


grouped customers by industry, product, or trade channel and then provided the
same level of service to everyone within a segment. Effective supply-chain
management, by contrast, groups customers by distinct service needs--regardless
of industry--and then tailors services to those particular segments.
2. Customize the Supply Chain Management network. In designing their Supply
Chain Management network, companies need to focus intensely on the service
requirements and profitability of the customer segments identified. The
conventional approach of creating a "monolithic" Supply Chain Management
network runs counter to successful supply-chain management.
3. Listen to signals of market demand and plan accordingly. Sales and operations
planning must span the entire chain to detect early warning signals of changing
demand in ordering patterns, customer promotions, and so forth. This demand-
intensive approach leads to more consistent forecasts and optimal resource
allocation.
4. Differentiate product closer to the customer. Companies today no longer can
afford to stockpile inventory to compensate for possible forecasting errors. Instead,
they need to postpone product differentiation in the manufacturing process closer to
actual consuer demand.
5. Strategically manage the sources of supply. By working closely with their key
suppliers to reduce the overall costs of owning materials and services, supply-chain
management leaders enhance margins both for themselves and their suppliers.
Beating multiple suppliers over the head for the lowest price is out, Andersen advises.
"Gain sharing" is in.
6. Develop a supply-chain-wide technology strategy. As one of the cornerstones of
successful supply-chain management, information technology must support multiple
levels of decision making. It also should afford a clear view of the flow of products,
services, and information.
7. Adopt channel-spanning performance measures. Excellent supply-chain
measurement systems do more than just monitor internal functions. They adopt
measures that apply to every link in the supply chain. Importantly, these
measurement systems embrace both service and financial metrics, such as each
account's true profitability.
The principles are not easy to implement, the Andersen consultants
say, because they run counter to ingrained functionally oriented
thinking about how companies organise, operate, and serve
customers. The organisations that do persevere and build a successful
supply chain have proved convincingly that you can please customers
and enjoy growth by doing so.
Lesson 1.3.2: Methodology of a Supply Chain Management Project Solution

 The best supply-chain management programs display certain common


characteristics.For one, they focus intensely on actual customer
demand. Instead of forcing into the market product that may or may
not sell quickly (and thereby inviting high warehousing costs), they react
to actual customer demand. And by doing so, these supply-chain
leaders minimize the flow of raw materials, finished product, and
packaging materials at every point in the pipeline.

 To respond more accurately to actual customer demand and keep


inventory to a minimum, leading companies have adopted a number
of speed-to-market management techniques. The names by now have
become part of the Supply Chain Management vernacular JIT
manufacturing and distribution, quick response (QR), efficient consumer
response (ECR), vendor managed inventory (VMI), and more. These are
the tools that help build a comprehensive supply-chain structure.
A Four Step integrated Approach
In view of the importance of Supply Chain Management to commercial success, making the right
decision about which system is best is vital. Before deciding how to develop new service Supply
Chain Management chains and economical distribution centres, many factors must be considered,
such as, the required customer service levels, optimum location, stock holding policies and EDP
systems. To help organisations make the best decisions, the Miebach Supply Chain Management
Group employs an integrated planning approach, consisting of four steps from planning to
realization:
"The integrated planning process helps to find solutions that best match clients requirements and the
technical demands of the problem", states Dr Joachim Miebach, Chairman of the Miebach Supply Chain
Management Group. "The only way to manage the growing complexity in international Supply Chain
Management chains is through the integration of strategy, engineering and IT systems and methods."
• Potential analysis
• Concept study
• Detailed planning
• Project or change management
The main feature of Miebachs integrated approach is the simultaneous consideration of strategy,
engineering and IT at every step to arrive at an optimum Supply Chain Management solution, the
problem".
CONCLUSION:

 Transportation is the most essential component of a supply chain. It involves


the delivery of products from the start to the end of a supply chain. For a
supply chain to be deemed effective, the transportation segment must be
managed efficiently. This involves making sure the transport and logistics
strategy is dynamic and responsive to the demands of the market.

 Supply chain management has some key & important objectives which are
also applicable for International Logistics and Supply Chain management.
The main objectives of Supply chain management are to reduce cost,
improve the overall organization performance and customer satisfaction by
improving product or service delivery to the consumer.

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