Understanding Supply Chain

Supply, Supply Chain and Supply Chain Management

A Supply is the quantity of inventory/goods available (in required quantity) for use or the actual replenishment of a product or component. A Supply Chain is the link connecting set of facilities, companies, demand and supply points and service providers. Chain links suppliers and downstream customers with the flows of products, services, finances. Supply Chain Management (SCM) is the systematic and strategic coordination of all business functions within a company for the purposes of improving the long term performance of the supply chain as a whole.

Supply Chain Management

Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.
Source: Council of Supply Chain Management Professionals, http://cscmp.org/aboutcscmp/difinitions.asp

Generic Supply Chain

Dell Supply Chain

Supply Chain Components

Inventory Flow
PROCUREMENT
Supplier partnership Requirements planning Schedule co-ordination

MANUFACTURING
Master scheduling JIT Management Flexibility

DISTRIBUTION
Demand Management Quick Response Postponement

Information Flow Cash Flow

Extended Supply Chain...

Flow of orders upstream
Cotton Grower Yarn Maker Fabrics Producer Garments Maker Garments Retailer Customers

Flow of Material downstream

Extended Supply Chain of Garment Manufacturers

Flow of orders upstream

Coffee Plantation & Harvesting Coffee fruits washing & drying plant Coffee beans roasting and seizing and packaging Coffee shops/ Chain Grocery shops/ Chain Customers

Customers

Flow of Material downstream

Extended Supply Chain of Coffee Suppliers

What SCM Does?

Manages three flows
inventory, information and cash

Manages four cycles

procurement, manufacturing, replenishment and order fulfillment

Aligns capabilities of
Suppliers and service providers

Activities in Supply Chain

Integration of customers and suppliers to the business

processes Information flow among channel members for planning, implementation and monitoring processes Sharing channel risks among the partners to gain a competitive advantage Cooperation among channel members is required for effectively managing the distribution process Integration of processes for synergistic effects Build and maintain long term relationships with partners

Objectives of SCM
Improvement cost and quality
Shortening performance cycle

Speed to market
Flexibility volumes and variety

Demand management

Decisions in SCM
Network Vendors Production Inventory Distribution Information

Performance Metrics of SCM

Service Actual against desired with quality, place and timing. Cost Cost to customer in meeting his service and time requirements.

Assets Effectiveness of assets to meet variability of consumer demand and simultaneously creating operational efficiencies. Time The shortest time frame to convert customer order into cash realization.

Challenges in SCM
Increased supply chain volatility and uncertainty
Creating global customer and supplier network Creating optimized supply chain configuration Risk management in the end-to-end supply chain Integrating and empowering existing supply chain

Modern Approaches to SCM

Just-In Time (JIT) Inventory Management
Total Quality Management (TQM) Model Efficient Consumer Response (ECR)