MODULE 1 SUPPLY CHAIN MANAGEMENT

MEANING Supply chain refers to the way that materials flow through different organizations, starting with raw materials and ending with finished products delivered to the ultimate customer. Supply chain is a sequence of suppliers, warehouses, manufacturers, wholesalers, distributors, retail outlets and final customers. Thus managing the entire flow of information, materials and services from raw materials though factories and warehouses to the end customers called supply chain management.

Definition of SCM
According to Ronald H Ballou SCM is defined as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across business within the supply chain for the purpose of improving the long term performance of the individual companies and the supply chain as a whole. According to Marty Weil SCM is the ability to get closer to the customer.

 Different companies may have different supply chains due to the nature of their operations supply chain for a manufacturing organization.
Supplier A

Supplier B

storage

Mfg

storage

distributor

Retailer

customer

Supplier C

 Stages of Detergent Supply Chain

(1) Manufacturer (2) Distribution centre (3) Food-world store

Customer wants detergent and goes to Food-world

Plastic producer

Packing

Chemical manufacturer (e.g., oil company)

Chemical Manufacturer

Paper manufacturer

Timber Industry

Objectives of SCM
To maximize the overall value generated. The value generates what the final product is worth to customer and the effort of the supply chain. To achieve maximum supply chain profitability through different supply chain stages. To reduce the supply chain costs to the minimum possible level.

Importance of SCM SCM reduces the costs: the total time for materials to travels through the entire supply chain can be quite long say (6 months to 1 year). Since the materials spend so much time waiting in inventory at various stages in the supply chain, there is a great opportunity to reduce the total supply chain cycle time leading to a corresponding reduction in inventory, increased flexibility, and better deliveries. Good relationships: Many companies have drastically improved their internal operations and find it necessary to consider relations with external customers and suppliers and gain further improvements in operations.

 Supply chain thinking is an application of systems thinking and provides a basis for understanding processes that cut across a companys internal department and outside the company as well. The design, planning and operation of supply chain have a strong impact on overall profitability and success. SCM plays a competitive advantage to supply the goods to customers at right time and at right place. TQM,JIT SYSTEM, are depends on relationships with suppliers and distributors who are the part of supply chain.

 SCM also includes transportation, suppliers, distributors, banks, credit and cash transfers, bills payable and receivable, warehousing and inventory levels, order fulfillment and sharing customers, forecasting and production information. As firms strive to increase their competitiveness via product customization, high quality, cost reduction and speed to market are depends on supply chain management.

 A Typical supply chain involve the following stages customers Retailers Wholesalers/Distributors Manufacturers material suppliers.

Decision Phases in a Supply Chain

There are there decision phases in a Supply Chain.

1. Supply Chain Strategy or Design: In this phase the company decides how to structure the supply chain. The long range decisions includes, the location and capacities of production and warehousing facilities products to be manufactured or stores at various locations . modes of transportation. type of information system to be utilized. Here the companys strategic objectives must be suported by its supply chain configuration.

2. Supply Chain Planning: in this phase, companies define a set of operating policies that govern short-term operations. The planning phase starts with a forecast for the coming year of demand in different markets. It includes Which market to be served from which locations The planned build up of inventories The subcontracting of manufacturing The replenishment and inventory policies to be followed Policies regarding backup locations The timing and size of marketing promotions. while planning decisions the companies also consider the uncertainty in demand, exchange rates and competition.

3. Supply Chain Operations: during this phase companies make decisions for the time horizon (weekly or daily) regarding individual customer orders. The supply chain operation aims at implementing the operating polices in the best possible manner. Various activities involved in this phase are Allocating individual orders to inventory or production Setting dates for fulfilling orders. Generating pick lists at a ware house.. Allocating an order to particular mode of shipment. Placing replenishment orders. Here operational decisions are made in the short term, there is often less uncertainty about demand information. Thus design, planning and operation of a supply chain strongly affect the overall profitability and success of a firm.

Process View of a Supply Chain

There are Two different ways to view the process performed in a supply chain are follows 1. Cycle View 2. Push-Pull View
1. CYCLE VIEW: in this view the processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain . Supply chain process cycles
Customer Customer Order Cycle Retailer Replenishment cycle

supplier

Procurement cycle

Manufacturer

Manufacturing cycle

Distributor

Cycle View of processes are broken down into four process cycle. They are as follows Customer order cycle: this occurs at the customer/retailer interface and include - customer arrival: it refers to customers visiting the location (supermarket or retail store) where he or she has access to his or her choices and make a decision regarding what to buy, how much to buy etc - customer order entry: refers to customers telling the retailer what products they want to buy and retailer allocating those products to customers - customer order fulfillment :refers to the process by which customer order is filled and sent to customer. - customer order receiving: here customer receives what he ordered and take the ownership of products ordered.

 Replenishment cycle: this occurs at the retailer/distributor interface and includes all processes involved in replenishing inventory of the retailer. It involves the following - Retail Order Trigger: as when the retailer fills customer order inventory is depleted which must be replenished to meet future demand. Here the retailer makes an order on the distributor so as to maximise profitability. - Retail Order Entry: here the retailer places an order with the distributor the purpose is to ensure that an order is entered accurately. - Retail order fulfillment: here the retail order is fulfilled by the distributor. - Retail order receiving: here the retailer receives the order and he updates all inventory records and settle all product from the distributor.

 Manufacturing cycle: this occurs at the distributor/manufacturer interface and includes all processes involved in replenishing distributor inventory. The process involved in the manufacturing cycle include - Order arrival from the distributor, retailer or customer. - Production scheduling. - Manufacturing and shipping . - Receiving at the distributor, retailer or customer.

 Procurement cycle: this occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that materials are available for carrying out manufacturing as per the schedule. The manufacturer orders components from suppliers to replenish inventories.

2. Push-Pull view of Supply Chain Process: All the processes in the supply chain fall into one of two categories Push processes : in push processes, execution is in anticipation of customer order. At the time of execution demand is not known but forecasted. it may be regarded as speculative processes because they respond to forecast demand rather than actual demand. In pull processes: in pull processes execution is initiated in response to a customer order. At the time of execution demand is known with certainty . it may be regarded reactive processes because they react to customer demand. A push/pull view is useful when considering strategic decisions relating to supply chain design. This view facilitates more global consideration of supply chain processes as they relate to a customer order.

Push/Pull Processes For A Personal Computer Manufacturing Companys Supply Chain

Pull Processes customer

Customer order and manufacturing cycle

-----------------Procurement cycle

Customer order received

manufacturer

Push processes

supplier