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Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. It spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. It encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. It also includes the crucial components of 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.
CONTENTS 1. 2. 3. 4. 5. INTRODUCTION WHAT IS A SUPPLY CHAIN SUPPLY CHAIN MODELLING ISSUES IN SCM ACTIVITIES OF SCM 5.1) STRATEGIC 5.2) TACTICAL 5.3) OPERATIONAL 6. DEVELOPMENT OF SCM 7. METRIC & DATA COLLECTION 8. COMPONENTS OF SCM INTEGRATION 8.1) THE MANAGEMENT COMPONENTS OF SCM 8.1.1) REVERSE SC 9. SUPPLY CHAIN BUSINESS PROCESS INTEGRATION 10. SUPPLY CHAIN NETWORK 11. THEORIES OF SCM 12. SUPPLY CHAIN SUSTAINABLITY 13. SUPPLY CHAIN OPTIMIZATION 14. FLOWCASTING 15. GLOBALIZATION 16. IMPROVING SCM 17. SUPPLY CHAIN RISK MANAGEMENT 18. SUPPLY CHAIN SECURITY 19. VALUE CHAIN 20. VALUE REFERENCE MODEL 21. VALUE NETWORK 21.1) EXTERNAL VALUE NETWORK 21.2) INTERNAL VALUE NETWORK 22. IMPORTANT TERM & CONCEPT 23. FLEXIBILITY, INVENTORY, & CUSTOMER SERVICE 24. TWO UNUSUAL EXAMPLE OF SCM 25. CONCLUSION 26. REFERENCES
SUPPLY CHAIN MANAGEMENT INTRODUCTION: In the 21st century, changes in the business environment have contributed to the development of supply chain networks. In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans, 2001). First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, there were found to be significant success factors, following the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices. Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network (Coase , 1998). Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System". Organizations increasingly find that they must rely on effective supply chains, or networks, to successfully compete in the global market and networked economy. In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This interorganizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990) NOW WHAT IS A ‘SUPPLY CHAIN’? A supply chain is the 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 residual value is recyclable. Supply chains link value chains. A BASIC SUPPLY CHAIN. SUPPLY NETWORK A supply network is a pattern of temporal and spatial processes carried out at facility nodes and over distribution links, which adds value for customers through the manufacturing and delivery of products. It comprises the general state of business affairs in which all kinds of material (work-in-process material as well as finished products) are transformed and moved between various value-add points to maximize the value added for customers.
A supply chain is a special instance of a supply network in which raw materials, intermediate materials and finished goods are procured exclusively as products through a chain of processes that supply one another. In the semiconductors industry, for example, work-in-process moves from fabrication to assembly, and then to the test house. The term "supply network" refers to the high-tech phenomenon of contract manufacturing where the brand owner does not touch the product. Instead, she coordinates with contract manufacturers and component suppliers who ship components to the brand owner. This business practice requires the brand owner to stay in touch with multiple parties or "network" at once. A SUPPLY CHAIN NETWORK. SUPPLY CHAIN MODELING There are a number of different modeling techniques that have been used to model the supply chain. Some of the important models that have been used in supply chain management are. 1) The supply chain operations reference (SCOR) model; and 2) The ERP reference models. A DIAGRAM OF A SUPPLY CHAIN(CONCEPTS). The red arrow represents the flow of materials and information and the green arrow represents the flow of information and backhauls. The elements are (a) the initial raw material supplier, (b) a component supplier, (c) a manufacturer, (d) a retailer, (e) the final customer. There are a variety of supply chain models, which address both the upstream and downstream sides. 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. 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. SCOR MODEL The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework is built on eight key business processes that are both cross-functional 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. 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. Figure (from NEVEM-workgroup translates this overall objective into four main areas of concern within supply chain management. Figure: HIERARCHY OF OBJECTIVES. The two middle boxes in the lower row of Fig. delivery reliability, and delivery times, are both aspects of customer service, which is highly dependent on the first box, flexibility, and on the last box, inventory. ACTIVITIES OR FUNCTIONS OF SCM Supply chain management is a cross-function approach to manage the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and then the movement of finished goods out of the organization toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible,
they have reduced 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 SUPPLY CHAIN PLANNING PROCESSES 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 improving inventory velocity. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels of activities. Strategic • Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities • Strategic partnership 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 • Information Technology infrastructure, to support supply chain operations • Where-to-make and what-to-make-or-buy decisions • Aligning overall organizational strategy with supply strategy Tactical • 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. Operational • 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.
DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization Phases One and Two, and SCM 2.0. 1. Creation Era The term supply chain management was first coined by an American industry consultant in the early 1980s. However the concept of supply chain in management, was of great importance long before in the early 20th century, especially by the creation of the assembly line. The characteristics of this era of supply chain management include the need for large scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management. 2. Integration Era This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internetbased collaborative systems. This era of SC evolution is characterized by both increasing value-added and cost reduction through integration. 3. Globalization Era The third movement of supply chain management development, globalization era, can be characterized by the attention towards global systems of supplier relations and the expansion of supply chain over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back to several decades ago (e.g. the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing competitive advantage, creating more value-added, and reducing costs through global sourcing.
Evolution of Supply Chain Management 4. Specialization Era—Phase One—Outsourced Manufacturing and Distribution In the 1990s industries began to focus on “core competencies” and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond the four walls and distributing management across specialized supply chain partnerships. This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI). The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands. 5. Specialization Era—Phase Two—Supply Chain Management as a Service Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non asset based carriers and
has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management. At any given moment, market forces could demand changes within suppliers, logistics providers, locations, customers and any number of these specialized participants within supply chain networks. This variability has significant effect on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to the morecomplex requirements, including the configuration of the processes and work flows that are essential to the management of the network itself. Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of best in class domain specific partners to contribute to the overall value chain itself – thus increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity. Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root in transportation and collaboration categories most dominantly. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 20032006 to the Software as a Service (SaaS) model we are currently focused on today. 6. Supply Chain Management 2.0 (SCM 2.0) Building off of globalization and specialization, SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era". Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is it helps us navigate the vast amount of information available on the web to find what we are looking for. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM results – the combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near/far and off shoring, and talent scarcity. SCM 2.0 leverages proven solutions designed to rapidly deliver results with the ability to quickly manage future change for continuous flexibility, value and success. This is delivered through competency networks composed of best of breed supply chain domain expertise to understand which elements, both operationally and organizationally, are the critical few that deliver the results as well as the intimate understanding of how to manage these elements to achieve desired results, finally the solutions are delivered in a variety of options as no-touch via business process outsourcing, mid-touch via managed services and software as a service (SaaS), or high touch in the traditional software deployment model. METRICS AND DATA COLLECTION Management can be defined as the planning, execution, and control of goal oriented activities. Today's supply chains are too complicated to be controlled based on intuition. It is necessary to have access to statistical data on the performance of the supply chain. A metric is a standard of measurement of performance. Figure (from NEVEM-workgroup) shows the role of metrics in a control cycle. As we see the metrics give the basis on which to evaluate the performance of processes in the supply chain. They give managers the opportunity to follow the development of the supply chain. We see from the figure that the choice of which data to collect is of utmost importance. Only by collecting relevant data, can relevant metrics be calculated and performance be evaluated. A supply chain in which the appropriate data is not regularly collected cannot be properly managed.
FIGURE: A CONTROL CYCLE. Components of Supply Chain Management Integration: The Management Components Of SCM The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process reengineering, buyer-supplier relationships, and SCM suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components which are: • Planning and control • Work structure • Organization structure • Product flow facility structure • Information flow facility structure • Management methods • Power and leadership structure • Risk and reward structure • Culture and attitude However, a more careful examination of the existing literaturewill lead us to a more comprehensive structure of what should be the key critical supply chain components, the "branches" of the previous identified supply chain business processes, that is, what kind of relationship the components may have that are related with suppliers and customers accordingly. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs, 1996). A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk, thus including primary level components (Bowersox and Closs, 1996). A secondary level participant (specialized), is a business that participates in channel relationships by performing essential services for primary participants, thus including secondary level components, which are in support of primary participants. Third level channel participants and components that will support the primary level channel participants, and which are the fundamental branches of the secondary level components, may also be included. Consequently, Lambert and Cooper's framework of supply chain components does not lead us to the conclusion about what are the primary or secondary (specialized) level supply chain components (see Bowersox and Closs, 1996, p.g. 93). That is, what supply chain components should be viewed as primary or secondary, how these components should be structured in order to have a more comprehensive supply chain structure, and to examine the supply chain as an integrative one (See above sections 2.1 and 3.1). Reverse Supply Chain Reverse logistics is the process of planning, implementing and controlling the efficient, effective inbound flow and storage of secondary goods and related information opposite to the traditional supply chain direction for the purpose of recovering value or proper disposal. Reverse logistics is also referred to as "Aftermarket Customer Services". In other words, anytime money is taken from a company's Warranty Reserve or Service Logistics budget, that is a Reverse Logistics operation. SUPPLY CHAIN BUSINESS PROCESS INTEGRATION Successful SCM requires a change from managing individual functions to integrating
activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers as it attempts to satisfy this demand. Shared information between supply chain partners can only be fully leveraged through process integration. Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) are: • Customer relationship management • Customer service management • Demand management • Order fulfillment • Manufacturing flow management • Supplier relationship management • Product development and commercialization • Returns management Best in Class companies have similar characteristics. They include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting One could suggest other key critical supply business processes combining these processes stated by Lambert such as: a. Customer service management b. Procurement c. Product development and commercialization d. Manufacturing flow management/support e. Physical distribution f. Outsourcing/partnerships g. Performance measurement Supply Chain Schematic a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers. Customer service provides the source of customer information. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. Successful organizations use following steps to build customer relationships: • determine mutually satisfying goals between organization and customers • establish and maintain customer rapport • produce positive feelings in the organization and the customers b) Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship, where both parties benefit, and reduction times in the design cycle and product development are achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers in scheduling, supply continuity, hedging, and research into new sources or programs. c) Product development and commercialization
Here, customers and suppliers must be united into the product development process, thus to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched in ever shorter timeschedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: 1. coordinate with customer relationship management to identify customerarticulated needs; 2. select materials and suppliers in conjunction with procurement, and 3. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes, and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-inprocess storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. e) Physical distribution This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g. links manufacturers, wholesalers, retailers). f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything else it will outsource. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, to manage and control this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts internal measures are generally collected and analyzed by the firm including 1. Cost 2. Customer Service 3. Productivity measures 4. Asset measurement, and 5. Quality.
External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking. Components of Supply Chain Management are 1. Standardization 2. Postponement 3. Customization AN OVERVIEW OF SUPPLY & DISTRIBUTION SUPPLY CHAIN NETWORK Due to the rapid advancement of technology such as pervasive or ubiquitous wireless and internet networks, connective product marking technologies like RFID and emerging standards for the use of these defining specific locations using Global Location Number(s), the basic supply chain is rapidly evolving into what is known as a Supply Chain Network. Origins of the Concept All organizations have or can purchase the components to build a supply chain network, it is the collection of physical locations, transportation vehicles and supporting systems through which the products and services your firm markets are managed and ultimately delivered. Physical locations included in a Supply Chain Network can be manufacturing plants, storage warehouses, carrier crossdocks, major distribution centres, ports, intermodal terminals whether owned by your company, your suppliers, your transport carrier, a third-party logistics provider, a retail store or your end customer. Transportation modes that operate within a Supply Chain Network can include the many different types of trucks, trains for boxcar or intermodal unit movement, container ships or cargo planes. The many systems which can be utilized to manage and improve a Supply Chain Network include Order Management Systems, Warehouse Management System, Transportation Management Systems, Strategic Logistics Modeling, Inventory Management Systems, Replenishment Systems, Supply Chain Visibility, Optimization Tools and more. Emerging technologies and standards such as the RFID and the GS1 Global Standards are now making it possible to automate these Supply Chain Networks in a real time manner making them more efficient than the simple supply chain of the past. Optimizing a company's supply chain network for carbon emissions is an effective way for business to assist in combating Global Warming. THEORIES OF SUPPLY CHAIN MANAGEMENT Currently there exists a gap in the literature available in the area of supply chain management studies, on providing theoretical support for explaining the existence and the boundaries of supply chain management. Few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2008b) had tried to provide theoretical foundations for different areas related to supply chain with employing organizational theories. These theories includes: • 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) SUPPLY CHAIN SUSTAINABILITY Supply chain sustainability is a business issue affecting an organisation’s supply chain or logistics network and is frequently quantified by comparison with SECH ratings. SECH ratings are defined as social, ethical, cultural and health footprints. Consumers have become more aware of the environmental impact of their purchases and companies’ SECH ratings and, along with non-governmental organisations ([NGO]s), are setting the agenda for transitions to organicallygrown foods, anti-sweatshop labour codes and locally-produced goods that support
independent and small businesses. Because supply chains frequently account for over 75% of a company’s carbon footprint many organisations are exploring how they can reduce this and thus improve their SECH rating. Supply chain sustainability is a business issue affecting an organisation’s supply chain or logistics network in terms of environmental, risk, and waste costs. Sustainability in the supply chain is increasingly seen among high-level executives as essential to delivering long-term profitability and has replaced monetary cost, value, and speed as the dominant topic of discussion among purchasing and supply professionals. Background Supply chains are critical links that connect an organisation’s inputs to its outputs. Traditional challenges have included lowering costs, ensuring just-intime delivery, and shrinking transportation times to allow better reaction to business challenges. However, the increasing environmental costs of these networks and growing consumer pressure for eco-friendly products has led many organisations to look at supply chain sustainability as a new measure of profitable logistics management. This shift is reflected by an understanding that sustainable supply chains frequently mean profitable supply chains. Many companies are limited to measuring the sustainability of their own business operations and are unable to extend this evaluation to their suppliers and customers. This makes determining their true environmental costs highly challenging and reduces their ability to remove waste from the supply chains. One of the key requirements of successful sustainable supply chains is collaboration. The practice of collaboration — such as sharing distribution to reduce waste by ensuring that half-empty vehicles do not get sent out and that deliveries to the same address are on the same truck — is not widespread because many companies fear a loss of commercial control by working with others. Investment in alternative modes of transportation — such as use of canals and airships — can play an important role in helping companies reduce the cost and environmental impact of their deliveries. Three Tiers of Sustainability In 2008, The Future Laboratory produced a ranking system for the different levels of sustainability being achieved by organisations. This was called the Three Tiers of Sustainability: Tier 1: Getting the basics right This is the base level and is the stage in which the majority of organisations are at. Companies employ simple measures such as switching lights and PCs off when left idle, recycling paper, and using greener forms of travel with the purpose of reducing the day-to-day carbon footprint. Some companies also employ self-service technologies such as centralised procurement and teleconferencing. Tier 2: Learning to think sustainably This is the second level, where companies begin to realise the need to embed sustainability into supply chain operations. Companies tend to achieve this level when they assess their impact across a local range of operations. In terms of the supply chain, this could involve supplier management, product design, manufacturing rationalisation, and distribution optimisation. Tier 3: The science of sustainability The third tier of supply chain sustainability uses auditing and benchmarks to provide a framework for governing sustainable supply chain operations. This gives clarity around the environmental impact of adjustments to supply chain agility, flexibility, and cost in the supply chain network. Moving towards this level means being driven by the current climate (in which companies recognise cost savings through green operations as being significant) as well as pushing emerging regulations and standards at both an industry and governmental level. SUPPLY CHAIN OPTIMIZATION Supply Chain Optimization is the application of processes and tools to ensure the optimal operation of a manufacturing and distribution supply chain. This includes the optimal placement of inventory within the supply chain, minimizing operating
costs (including manufacturing costs, transportation costs, and distribution costs). This often involves the application of mathematical modeling techniques using computer software. WHAT NEED IS BEING ADDRESSED? Typically, supply chain managers are trying to maximize the profitable operation of their manufacturing and distribution supply chain. This could include measures like maximizing gross margin return on inventory invested (GMROII)( balancing the cost of inventory at all points in the supply chain with availability to the customer ), minimizing total operating expenses (transportation, inventory and manufacturing), or maximizing gross profit of products distributed through the supply chain. Supply chain optimization addresses the general supply chain problem of delivering products to customers at the lowest total cost and highest profit. This includes trading off the costs of inventory, transportation, distributing and manufacturing. Supply chain optimization has applications in all industries manufacturing and/or distributing goods, including retail, industrial products, and consumer packaged goods (CPG). WHAT APPROACHES AND SOLUTIONS EXIST? The classic supply chain approach has been to try to forecast future inventory demand as accurately as possible, by applying statistical trending and "best fit" techniques based on historic demand and predicted future events. The advantage of this approach is that it can be applied to data aggregated at a fairly high level (e.g. category of merchandise, weekly, by group of customers), requiring modest database sizes and small amounts of manipulation. Unpredictability in demand is then managed by setting safety stock levels, so that for example a distributor might hold two weeks of supply of an article with steady demand but twice that amount for an article where the demand is more erratic. Then, using this forecast demand, a supply chain manufacturing and distribution plan is created to manufacture and distribute products to meet this forecast demand at lowest cost (or highest profitability). This plan typically addresses the following business concerns: - How much of each product should be manufactured each day? - How much of each product should be made at each manufacturing plant? Which manufacturing plants should re-stock which warehouses with which products? What transportation modes should be used for warehouse replenishment and customer deliveries? The technical ability to record and manipulate larger databases more quickly has now enabled a new breed of supply chain optimization solutions to emerge, which are capable of forecasting at a much more granular level (for example, per article per customer per day). Some vendors are applying "best fit" models to this data, to which safety stock rules are applied, while other vendors have started to apply stochastic techniques to the optimization problem. They calculate the most desirable inventory level per article for each individual store for their retail customers, trading off cost of inventory against expectation of sale. The resulting optimized inventory level is known as a model stock. Meeting the model stock level is also an area requiring optimization. Because the movement of product to meet the model stock, called the stock transfer, needs to be in economic shipping units such as complete unit loads or a full truckload, there are a series of decisions that must be made. Many existing distribution requirements planning systems round the quantity up to the nearest full shipping unit. The creation of for example, truckloads as economic shipment units requires optimization systems to ensure that axle constraints and space constraints are met while loading can be achieved in a damage-free way. This is generally achieved by continuing to add time-phased requirements until the loads meet some minimum weight or cube. More sophisticated optimization algorithms (ORTEC) take into account stackability constraints, load and unloading rules, palletizing logic, warehouse efficiency and load stability with an objective to reduce transportation spend (minimize 'shipping air'). Optimization solutions are typically part of, or linked to, the company's
replenishment systems distribution requirements planning, so that orders can be automatically generated to maintain the model stock profile. The algorithms used are similar to those used in making financial investment decisions; the analogy is quite precise, as inventory can be considered to be an investment in prospective return on sales. Supply chain optimization may include refinements at various stages of the product lifecycle, so that new, ongoing and obsolete items are optimised in different ways: and adaptations for different classes of products, for example seasonal merchandise. Whilst most software vendors are offering supply chain optimization as a packaged solution and integrated in ERP software, some vendors are running the software on behalf of their clients as application service providers. WHAT ARE THE CLAIMS FOR SUPPLY CHAIN OPTIMIZATION? Firstly, the techniques being applied to supply chain optimization are claimed to be academically credible. Most of the specialist companies have been created as a result of research projects in academic institutions or consulting firms: and they point to research articles, white papers, academic advisors and industry reviews to support their credibility. Secondly, the techniques are claimed to be commercially effective. The companies publish case studies that show how clients have achieved reductions in inventory whilst maintaining or improving availability. There is limited published data outside of these case studies, and a reluctance for some practitioners to publish details of their successes (which may be commercially sensitive), therefore hard evidence is difficult to come by. INVENTORY OPTIMIZATION Inventory optimization is the second type of modeling and optimization capability. Inventory optimization is a relatively new approach and technology, specifically focused on modeling uncertainty and variability and minimizing the risks they impose on the supply chain. Because of this need to capture and quantify these risks, inventory optimization employs stochastic methods of analysis and optimization. Advanced inventory optimization solutions also consider crucial interdependencies that they can model and optimize multiechelon/ multi-stage supply chain networks. Similar to network design, inventory optimization models the supply chain with a "total supply chain cost" perspective, and uses optimization-based solvers to output optimal answers. The outputs of inventory optimization are optimal inventory locations (stocking points) and optimal inventory amounts (target inventory levels) required to achieve customer service targets, and drive planning approach decisions. This type of design is both strategic and tactical in nature, therefore the modeling horizon is typically quarterly, monthly, and sometimes weekly. This planning is accomplished at the product line, potentially down to the SKU level (as appropriate), in order to capture the effects of item-level variability. This approach also enables inventory optimization to model and capture the correlation of demand streams, and the benefits of risk pooling at appropriate points in the supply chain. Inventory optimization utilizes a process flow approach to connecting the supply chain— nodes represent process steps, each with an associated time and cost. Demand and demand variance, supply lead-times and their variances, direct and indirect costs, target services levels, and inventory holding costs are some of the primary costs and constraints considered by inventory optimization. FLOWCASTING Collaborative Flowcasting is a business process that connects real time daily consumer demand to trading partners in the retail supply chain to create an integrated and comprehensive Model of the Business. While the concept is simple and intuitive, technology has historically limited the ability of software applications to scale economically a complete retail supply chain (in a timephased manner and one year into the future) to the volumes required by the largest retailers and their suppliers
The Collaborative Flowcasting process starts at the head of the retail supply chain (the retail store) and creates a unique sales forecast for every product in every store and calculates time phased requirements one year into the future all the way from the store shelf to the factory. This process enables retail trading partners to manage their entire retail supply chain inside a single system and driven by A Single Set of Numbers. The Collaborative Flowcasting business process described in Andre Martin, Mike Doherty and Jeff Harrop’s book “Flowcasting the Retail Supply Chain.” Actual results to date demonstrate that deploying the Collaborative Flowcasting business process will enable retailers and their trading partners to increase store in- stock availability into the 98-99+% range resulting in sales increases of 3%-4% at no additional incremental costs. Inventories across retail supply chains in factories and DC’s will be reduced in the 20% to 40+% range and the cost of operating retail supply chains will also be reduced in the 2 to 10+% range. GLOBALIZATION Through the past decades we have seen an increasing rate of globalization of the economy and thereby also of supply chains. Products are no longer produced and consumed within the same geographical area. Even the different parts of a product may, and often do, come from all over the world. This creates longer and more complex supply chains, and therefore it also changes the requirements within supply chain management. This again affects the effectiveness of computer systems employed in the supply chain. A longer supply chain will often involve longer order to delivery lead times. Flaherty states, in accordance with the discussion in Section, that the consequences of longer lead times will often be; • less dependable forecasts as these have to be made earlier, • reduced production flexibility, i.e. greater difficulties to adjust to order changes, • higher levels of inventory. The evident answer to the problem of longer lead times is to speed up the supply chain. But a limit is often reached beyond which further effort to shorten lead times are futile, especially in international supply chains. Another approach is to restructure the supply chain. This simply means to reconsider the strategic level decisions priorly made. A third approach identified by Flaherty is changing coordination: The order, forecasting, procurement, and information sharing procedures among the members of the supply chain. We will dwell on the issue of coordination in the next section. Globalization also brings foreign competition into markets that traditionally were local. Local companies are thereby forced to respond by improving their manufacturing practices and supply chain management. Bhatnagar et al states that attempts have focused, among others, on reduction of inventory levels, and increased flexibility through reduced lead times. Yet again we see how industry focuses on the issues of inventory management and flexibility to maintain high levels of customer satisfaction. IMPROVING SUPPLY CHAIN MANAGEMENT The above sections describe issues and challenges of supply chain management. It is time to approach solutions. A key to improved supply chain management lies in integration and coordination important tools of supply chain managers, modeling and simulation. Integration and Coordination Definitions The Webster's dictionary defines to integrate as: To make into a whole by bringing all parts together; unify. In an enterprise, integration can simply mean that each unit of the organization will have access to information relevant to its task and will understand how its actions will impact other parts of the organization thereby enabling it to choose alternatives that optimize the organization's goals. The key to integration is coordination. To coordinate is to manage dependencies among activities so as to achieve coherent operation of the entire system in
question. General and Multi-Plant Coordination Much research effort has been put into optimizing the performance of supply chains. The major part of the early work tends to focus on very limited segments, e.g. only material procurement, manufacturing, or distribution, and treat these as separate systems. Though this might lead to improved performance in the segment in question, the complex interaction among supply chain segments is ignored. Thereby potential gains from coordination are lost. In later years we have seen an increasing focus on the integration of different segments of the supply chain. As for example Cohen and Lee and Chandra and Fisher who treat integration and coordination of production and distribution functions. These efforts are what Bhatnagar et al., who have reviewed the existing works on coordination, refer to as general coordination. Bhatnagar et al. distinguish between two broad levels of coordination. General coordination is the integration of different functions, e.g. inventory and production planning, sales, and distribution. Figure: A very schematic illustration of what Bathnagar et al. calls General Coordination (top) and Multi-Plant Coordination (bottom). The other level of coordination identified, is that on which production decisions are coordinated among the plants of an internal supply chain. This is referred to as multi-plant coordination. The objective of multi-plant coordination is to coordinate the production plans of several plants in a vertically integrated manufacturing company so that the overall performance of the company is improved. Still according to Bhatnagar et al., in order for such coordination to be efficient, the effects of uncertainty of final demand, uncertainties in production process at each plant, and capacity constraints at each plant must be taken into consideration. Fig. illustrates, in a very schematic way, the principles of these two levels of coordination. Batnagar et al. conclude that there is much overlap and interaction between the two coordination levels, but there is today(1992) no unified body of literature on the issue. Research effort is required. RECENT DEVELOPMENTS The trend to provide software as a service is a new business model that is now being applied to building and designing optimization solutions. Services are charged as used, rather than through licensing installed or hosted software. Information Technology: An Unrealized Potential? The rapid development within the information technology and software engineering gives unprecedented opportunities for integration and coordination. The modern computer networks have the ability to rapidly distribute information to all concerned entities of an enterprise. The networks also present an infrastructure for coordination of planning and operational processes, not only within organizations, but also among them. Chee et al. states that there is an unrealized potential for using information technology in support of network coordination (1996). A survey was done of more than forty computer manufacturers. It was found that only about 15% of the partners were communicating through EDI. It was also found that much of the coordination activity occurs above the operational level. Modeling and Simulation A good explanation to the notions of modeling and simulation are given by Law and Kelton. The facility or process of interest is usually called a system, and in order to study it scientifically we often have to make a set of assumptions about how it works. These assumptions, which usually take the form of mathematical or logical relationships, constitute a model that is used to try to gain some understanding of how the corresponding system behaves. If the relationships that compose the model are simple enough, it may be possible to use mathematical methods (such as algebra, calculus, or probability theory) to obtain exact information on questions of interest; this is called an analytic solution.
However, most real-world systems are too complex to allow realistic models to be evaluated analytically, and these models must be studied by means of simulation. In a simulation we use a computer to evaluate a model numerically, and data are gathered in order to estimate the desired true characteristic of the model. Modeling has been used as a tool within supply chain management for several decades. Early models of the supply chain, or segments thereof, where evaluated analytically. As is stated by the above quote, this method is not powerful enough to understand real-world systems. Swaminathan et al. states that in recent years simulation as a tool for understanding issues of organizational decision-making has gained considerable attention and momentum. They mention the use modeling and simulation on the supply chain with different purposes, including studies of the effects of various supply chain strategies on demand amplification and a study of the effect of sharing supplier available-to-promise information. Modeling and simulation is most often used to test the impact strategic level decisions have on supply chain performance. This may for example be the impact of restructuring the supply chain by reducing the number of plants, changing modes of transport, or relocating warehouses. Simulation as a method, does not give the optimal solution. It simply allows the user to test different solutions. Simulations are run with various parameters or ``set-ups'', and the results are analyzed and compared to arrive at the optimal solution among those tested. SUPPLY CHAIN RISK MANAGEMENT Supply Chain Risk Management (SCRM) is a discipline of Risk Management which attempts to identify potential disruptions to continued manufacturing production and thereby commercial financial exposure. Supply Chain Exposures Sometimes, it's possible for Supply Chain Logistics techniques such as Supply chain optimization to prejudice contingency planning which would otherwise reduce the overall risk level for that particular supply chain. Contingency Options Some options to engineer an acceptable risk level include: • Managing stock • Considering alternative sourcing arrangements • Business Interruption / Contingency Insurance SUPPLY CHAIN SECURITY Supply chain security refers to efforts to enhance the security of the supply chain: the transport and logistics system for the world's cargo. It combines traditional practices of supply chain management with the security requirements of the system, which are driven by threats such as terrorism, piracy, and theft. Typical supply chain security activities include: • Credentialing of participants in the supply chain. • Screening and validating of the contents of cargo being shipped. • Advance notification of the contents to the destination country. • Ensuring the security of cargo while in-transit via the use of locks and tamper-proof seals. • Inspecting cargo on entry. Key initiatives There are a number of supply chain security initiatives in the United States and around the world today. These include: • The Customs Trade Partnership against Terrorism (C-TPAT), a voluntary compliance program for companies to improve the security of their corporate supply chains. • The Authorized Economic Operator as part of the World Customs Organization SAFE framework of standards • The Container Security Initiative, a program led by U.S. Customs and Border Protection in the Department of Homeland Security focused on screening containers at foreign ports. • Efforts for countries around the world to implement and enforce the
International Ship and Port Facility Security Code (ISPS Code), an agreement of 148 countries that are members of the International Maritime Organization (IMO). • Pilot initiatives by companies in the private sector to track and monitor the integrity of cargo containers moving around the world using technologies such as RFID and GPS. • The International Organization for Standardization have released a series of Standards for the establishment and management of supply chain security. ISO/PAS 28000 - Specification for security management systems for the supply chain, offers public and private enterprise an international high-level management standard that enables organisations to utilise a globally consistent management approach to applying supply chain security initiatives VALUE CHAIN The value chain, also known as value chain analysis, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance. A value chain is a chain of activities. Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. A diamond cutter can be used as an example of the difference. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable than a cut diamond. The value chain categorizes the generic value-adding activities of an organization. The "primary activities" include: inbound logistics, operations (production), outbound logistics, marketing and sales (demand), and services (maintenance). The "support activities" include: administrative infrastructure management, human resource management, technology (R&D), and procurement. The costs and value drivers are identified for each value activity. The value chain framework quickly made its way to the forefront of management thought as a powerful analysis tool for strategic planning. The simpler concept of value streams, a cross-functional process which was developed over the next decade, had some success in the early 1990s. The value-chain concept has been extended beyond individual organizations. It can apply to whole supply chains and distribution networks. The delivery of a mix of products and services to the end customer will mobilize different economic factors, each managing its own value chain. The industry wide synchronized interactions of those local value chains create an extended value chain, sometimes global in extent. Porter terms this larger interconnected system of value chains the "value system." A value system includes the value chains of a firm's supplier (and their suppliers all the way back), the firm itself, the firm distribution channels, and the firm's buyers (and presumably extended to the buyers of their products, and so on). Capturing the value generated along the chain is the new approach taken by many management strategists. For example, a manufacturer might require its parts suppliers to be located nearby its assembly plant to minimize the cost of transportation. By exploiting the upstream and downstream information flowing along the value chain, the firms may try to bypass the intermediaries creating new business models, or in other ways create improvements in its value system. The Supply-Chain Council, a global trade consortium in operation with over 700 member companies, governmental, academic, and consulting groups participating in the last 10 years, manages the Supply-Chain Operations Reference (SCOR), the de facto universal reference model for Supply Chain including Planning, Procurement, Manufacturing, Order Management, Logistics, Returns, and Retail; Product and Service Design including Design Planning, Research, Prototyping, Integration, Launch and Revision, and Sales including CRM, Service Support, Sales, and Contract Management which are congruent to the Porter framework. The SCOR framework has been adopted by hundreds of companies as well as national entities as a standard
for business excellence, and the US DOD has adopted the newly-launched DesignChain Operations Reference (DCOR) framework for product design as a standard to use for managing their development processes. In addition to process elements, these reference frameworks also maintain a vast database of standard process metrics aligned to the Porter model, as well as a large and constantly researched database of prescriptive universal best practices for process execution. VALUE REFERENCE MODEL A Value Reference Model (VRM) developed by the global not for profit Value Chain Group offers an open source semantic dictionary for value chain management encompassing one unified reference framework representing the process domains of product development, customer relations and supply networks. The integrated process framework guides the modeling, design, and measurement of business performance by uniquely encompassing the plan, govern and execute requirements for the design, product, and customer aspects of business. The Value Chain Group claims VRM to be next generation Business Process Management that enables value reference modeling of all business processes and provides product excellence, operations excellence, and customer excellence. Six business functions of the Value Chain: • Research and Development • Design of Products, Services, or Processes • Production • Marketing & Sales • Distribution • Customer Service VALUE NETWORK A value network is a complex set of social and technical resources. Value networks work together via relationships to create social goods (public goods) or economic value. This value takes the form of knowledge and other intangibles and/or financial value. Value networks exhibit interdependence. They account for the overall worth of products and services. Companies have both internal and external value networks. External value networks External facing networks include customers or recipients, intermediaries, stakeholders, complementors, open innovation networks and suppliers. Internal value networks Internal value networks focus on key activities, processes and relationships that cut across internal boundaries, such as order fulfillment, innovation, lead processing, or customer support. Value is created through exchange and the relationships between roles. Value networks operate in public agencies, civil society, in the enterprise, institutional settings, and all forms of organization. Value networks advance innovation, wealth, social good and environmental wellbeing. Important terms and concepts Tangible value All exchanges of goods, services or revenue, including all transactions involving contracts, invoices, return receipt of orders, request for proposals, confirmations and payment are considered to be tangible value. Products or services that generate revenue or are expected as part of a service are also included in the tangible value flow of goods, services, and revenue (2). In government agencies these would be mandated activities. In civil society organizations these would be formal commitments to provide resources or services. Intangible value Two primary subcategories are included in intangible value: knowledge and benefits. Intangible knowledge exchanges include strategic information, planning knowledge, process knowledge, technical know-how, collaborative design and policy development; which support the product and service tangible value network. Intangible benefits are also considered favors that can be offered from one person
to another. Examples include offering political or emotional support to someone. Another example of intangible value is when a research organization asks someone to volunteer their time and expertise to a project in exchange for the intangible benefit of prestige by affiliation (3). All biological organisms, including humans, function in a self-organizing mode internally and externally. That is, the elements in our bodies—down to individual cells and DNA molecules—work together in order to sustain us. However, there is no central “boss” to control this dynamic activity. Our relationships with other individuals also progress through the same circular free flowing process as we search for outcomes that are best for our well-being. Under the right conditions these social exchanges can be extraordinarily altruistic. Conversely, they can also be quite self-centered and even violent. It all depends on the context of the immediate environment and the people involved. FLEXIBILITY, INVENTORIES, AND CUSTOMER SERVICE Satisfied customers is the desired end result of any supply chain management strategy the three key terms within supply chain management: Customer satisfaction says something about the level of satisfaction among a company's customers. It is in this sense a very vague term. Therefore customer service is often discussed in terms of the metrics which are used to measure it. Typical measures of customer service are a company's ability to fill orders within due date (fill rate), or its ability to deliver products to customers within the time quoted (on-time deliveries). Other metrics should be used to for example evaluate the delivery performance of orders that are not delivered on-time. A way to indicate this is to measure the average time from order to delivery. Inventories: Manufacturing entities have inventories for raw products (RPI), products in the production process (WIP), and finished products (FGI). In addition there are often warehouses or distribution centers between the different levels of the supply chain. Inventories are costly. Binding capital in inventories prevents the company from investing this capital in projects of higher return. The holing cost inventories are therefore often set as high as 30 - 40% of the inventory value! In addition it is desirable to avoid so-called dead inventory, i.e. inventory that is left when a product is no longer on the market (often referred to as end of life (EOL) write-off). As we see it is in every company's interest to keep inventory levels at a minimum. Much effort has been put into this, for example an entire manufacturing paradigm has come out of it. A main objective of the Just in Time (JIT) paradigm is to virtually abolish inventories. The efforts made have been more or less successful Flexibility can be defined as the ability to respond to changes in the environment. In the case of a manufacturer, flexibility is the ability to change the output in response to changes in the demand. In a supply chain the flexibility of one entity is highly dependent on the flexibility of upstream entities (see Fig.). The overall flexibility of a supply chain will therefore depend on the flexibility of all the entities in a supply chain, and their interrelations.
Figure: Illustrating how flexibility, inventories, and customer service are interrelated. TWO UNUSUAL EXAMPLE OF SCM Two unusual examples of SCM, wal-mart & dell computers both highly successful both multinationals. Wal-Mart being the pioneering exponent of scm rightly explained to the entire world the necessity of producing as per the market demand & decreasing on the concept of inventory sustainenability in fact Wal-Mart is the largest
retailer in the world. Dell on the other hand an ideal when concerned by SCM processes utilization, i.e. manufacturing products where they can be made cheaply using different by parts from areas where they can be availed with least cost, better efficiency ,& best technology utilization. SCM has in fact diversified its utility in various fields taking from manufacturing, retail, construction and even military. Armed forces are thought to the initial users of SCM, but its utility is not only restricted to army rather antisocial elements like gangsters and terrorists also use SCM for their activities. The 93 Bombay blast, the attack of 9/11 on the US , the whole underworld mafia of MUMBAI, PARIS etc. are some of the best studied examples of SCM and its utilities. When we say best studied there is one more example & that is the example of MUMBAI DABBABALAS, it is really surprising to know that these people with meager literacy and even more meager advantage of technology are able to provide food to such a huge population without any delay or mistake. In fact their example has become a case study in the curriculum of the most elite B-schools. The exact utility of SCM can be summed up using following analysis. CONCLUSION: Supply chain management is a major competitive weapon in 21th century business chain, it is a strategic business issue in today’s economy because of continuous changes regarding: Globalization, Outsourcing, Customization, Shorter Product Life Cycles. Because “A 5% reduction in costs can have the same effect on the bottom line as a 25% increase in turnover”. Entrepreneurship and innovation are needed to respond to change and thus provide competitive advantage and SCM inculcates this very ideal in business. Finally speaking SCM has emerged as a boon to human, their needs ,and finally to their industry and their Earth, but non judicious use of boon may also lead to a bigger bane. REFERENCES scmlowdown.com (Lee H, Billington C (1995) The Evolution of Supply-Chain Management Models and Practice at Hewlett-Packard, Interfaces 25 (5), pp 42-63, Sept/Oct 1995.) scmmicro.com/ Ganeshan R, Harrison T P (1995) An Introduction to Supply Chain Management, Penn lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html State University Saunders M J (1997) Strategic Purchasing and Supply Chain Management, Pitman, London EPA (2000) The Lean and Green Supply Chain.Posted on course website as EPA 2000. supply-chain/offerings/scm-practice /Tirole J (1988) The Theory of Industrial Organization, MIT Press, Cambridge, MA) wikipedia.org/wiki/Supply_chain_management /scm/scmfig. THE END
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