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Internal Supply Chain Management

A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where value chains. residual value is recyclable. Supply chains link

Issues in Supply Chain Management

The classic objective of logistics is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost Four main areas of concern within supply chain management.

Figure: Hierarchy of Objectives.

Figure: Hierarchy of Supply Chain Decisions.

On the strategic level long term decisions are made. According to Ganeshan and Harrison these are related to location, production, inventory, and transportation. Location decisions are concerned with the size, number, and geographic location of the supply chain entities, such as plants, inventories, or distribution centers. The production decisions are meant to determine which products to produce, where to produce them, which suppliers to use, from which plants to supply distribution centers, and so on. Inventory decisions are concerned with the way of managing inventories throughout the supply chain. Transport decisions are made on the modes of transport to use. Decisions made on the strategic level are of course interrelated. For example decisions on mode of transport are influenced by decisions on geographical placement of plants and warehouses, and inventory policies are influenced by choice of suppliers and production locations. Modeling and simulation is frequently used for analyzing these interrelations, and the impact of making strategic level changes in the supply chain. On the tactical level medium term decisions are made, such as weekly demand forecasts, distribution and transportation planning, production planning, and materials requirement planning. The operational level of supply chain management is concerned with the very short term decisions made from day to day. The border between the tactical and operational levels is vague. Often no distinction is made, as will be the case in this thesis.

The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management as follows: Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.

A typical supply chain begins with ecological and biological regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing size and ever more remote geographical locations, and finally reaching the consumer.

Supply chain modeling

A diagram of a supply chain. The black arrow represents the flow of materials and information and the gray arrow represents the flow of information and backhauls. The elements are (a) the initial supplier, (b) a supplier, (c) a manufacturer, (d) a customer, (e) the final customer. There are a variety of supply chain models, which address both the upstream and downstream sides. However the SCOR model is most common.

The SCOR Supply-Chain Operations Reference model, developed by the Supply Chain Council, measures total supply chain performance. It is a process reference model for supply-chain management, spanning from the supplier's supplier to the customer's customer.[3] It includes delivery and order fulfillment performance, production flexibility, warranty and returns processing costs, inventory and asset turns, and other factors in evaluating the overall effective performance of a supply chain. The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework[4] is built on eight key business processes that are both crossfunctional and cross-firm in nature. Each process is managed by a cross-functional team, including representatives from logistics, production, purchasing, finance, marketing and research and development. While each process will interface with key customers and suppliers, the customer relationship management and supplier relationship management processes form the critical linkages in the supply chain. The American Productivity & Quality Center (APQC) Process Classification Framework (PCF) SM is a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. The PCF was developed by APQC and its member companies as an open standard to facilitate improvement through process management and benchmarking, regardless of industry, size, or geography. The PCF organizes operating and management processes into 12 enterprise level categories, including process groups, and over 1,000 processes and associated activities.

Supply chain management (SCM) was developed[5] to express the need to integrate the key business processes, from end user through original suppliers. Original suppliers being those that provide products, services and information that add value for customers and other stakeholders. The basic idea behind the SCM is that companies and corporations involve themselves in a supply chain by exchanging information market fluctuations and production capabilities regarding .

The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labor.

Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.

Theories of supply chain management Currently there is a gap in the literature available on supply chain management studies: there is no theoretical support for explaining the existence and the boundaries of supply chain management. A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2009) have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These theories include: Resource-Based View (RBV) Transaction Cost Analysis (TCA) Knowledge-Based View (KBV) Strategic Choice Theory (SCT) Agency Theory (AT) Institutional theory (InT) Systems Theory (ST) Network Perspective (NP) Materials Logistics Management (MLM) Just-in-Time (JIT) Material Requirements Planning (MRP) Theory of Constraints (TOC) Total Quality Management (TQM) Agile Manufacturing Time Based Competition (TBC) Quick Response Manufacturing (QRM) Customer Relationship Management (CRM)


>Reduced inventories along the chain >Better information sharing among the partners >Planning being done in consultation rather than in isolation


Planning lays down the strategy for managing and handling all resources that are used in providing the service or product that company is involved. Sourcing involves studying supplier competencies and selective one, based on one or more criteria. Manufacture --- use of the metric system enabling managers to measure quality , output of production and productivity of workers. Deliver --- process must synchronize activities of partner business involved in the transportation of good. Return --- often the trickiest component in supply chain management is establishing an efficient system for returns of defective goods.


Jessica C. Garcia BSBA OM 4