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SUPPLY CHAIN MANAGEMENT

S.No. TOPIC Page No.

1. Introduction 3
• Definitions 3
• Objectives
3
• Examples of Organizations
3
1. Key Issues in SCM 3
• Strategic Level 5
• Tactical Level
5
• Operational Level
5
1. Importance of Supply Chain Management 5

2. Stages of Supply Chain 6


• Cycle view of supply chain processes 7
• Push / Pull View of Supply Chain Processes
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1. Drivers of Supply Chain Performance 9
• Distribution in the supply chain Management 9

1. Types of Supply Chain Management 10

2. E- Supply Chain Management 10

3. E-Business Management 11

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4. Agri Supply Chain management 12

5. Conclusion 12

6. References 13

INTRODUCTION
Definition
Supply Chain Management is the cooperation between producers, processors, wholesalers,
and/or retailers, to guarantee high quality and/or to minimize costs for a product or products.
It is the effective, coherent and responsive integration of the flow of materials, money and
information across the entire supply chain, to serve customers while maintaining the
profitability and growth of all the partners involved. It is effectively and efficiently managing
the network for delivering products / services from raw materials to end customers through an
engineered flow of information, physical distribution and cash. Supply chain. management
can be defined as a combination of different arrangements occurring between various business
entities involved in the production, procurement, processing, and marketing of a product or
products. The arrangements include aspects of marketing, economics, logistics and
organizational behavior.
Supply Chain Optimization is Coordinating procurement, processing, storage requirement
and distribution strategies to efficiently allocate the supply chain resources to minimize
system wide costs or maximize profit under varying conditions of demand and supply.

The Major Objectives of SCM are


a) To reduce the overall cost of the finished product sold to the customer.
b) To reduce the overall delivery time – from customer order to delivery of goods.
c) To minimize losses at every stage of the supply chain
d) To achieve higher customer satisfaction through quality, variety, cost and time.
e) Value addition at each stage to be enhanced by constant effort.
f) Ensuring profitability and growth of all the partners involved through proper integration,
collaboration and profit & risk sharing.

Examples of Organizations Practicing SCM

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i) Global - All automobile manufacturers like Ford, Toyota, General Motors who have design,
manufacturing, procurement, distribution / marketing spread over many continents and
countries; Consumer durables, pharmaceuticals, consumer product manufacturers like Proctor
& Gamble, Unilever, Sony, Dell (Computer), Nestle ,Mercks, Nike etc. and Global retailers
like Walmart, Food-chains like McDonald.

ii) Indian - I.T.C, Reliance, Godrej, Larsen & Toubro, Liberty Shores, J.K.Corporation,
Kirloskar, Tata, Blue Star, Reddy Labs, Maruti etc.

KEY ISSUES IN SCM

The first issue in supply chain management is the relationship between members of the
chain and include:
• Sharing long term development goals and seasonal business planning,
• the relationships between operational staff within the businesses on issues such as
timing, amount, ripeness and temperature of deliveries,
• the development of shared quality and safety standards and how they will be measured
and monitored;
• the information systems to track product and standards.
At the farmer level a key preliminary step is often the development of relationships between
individual farmers to create a trading entity with capacity to supply sufficient quantity and
continuity to be a credible supply chain member. This may be championed by a farmer, by
another member of the chain, or by an external facilitator or manager. Hence the technical
and professional issues in supporting the operation of supply chains may include facilitating:
• the development of relationships between farmers to allow their participation
• the development of relationships between members of the supply chain
• information flows between members of the supply chain
• establishing common standards between members of the supply chain
• optimizing performance within each level of the supply chain and in the linkage
processes.

Figure 1 : Dimensions of innovation through (international) food supply chains

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There are four dimensions of innovation through the (international) food
supply chain (Trienekens and Willems, 2002):
•the economics dimension is related to efficiency (in cost-benefit perspective) and to
consumer orientation.
•the environment dimension is related to the way production, trade and distribution of food is
embedded in its (ecological) environment.
•the technological dimension is related to the way technology (product and process
technology, transport technology, information and communication technology) can be applied
to improve production and distribution of high quality and safe food products. A range of new
technologies has been developed over the past decade to improve logistics, increase the use of
ICT and to boost quality management in the supply chain.

•the social and legal dimension (norms and values) is related to societal constraints to
production, distribution and trade of food and to issues like human well-being, animal welfare
and sustainable social-economic development. Unequal power relationships in the chain (e.g.
increasing global power of retailers) and trade barriers impact the organization of the cross-
border supply chain and the division of costs and benefits.

1. Strategic Level
Decisions with more than one year time span.
a)The number, location and capacity of manufacturing plants / warehouse.
b)Strategic Partnerships – With suppliers, Transporters, Distributors, Retailers.
c)Flow of materials through the logistic networks.
d)Supply contracts
e)Distribution Strategies – Own / outsource, Centralised / De-centralised.
f)Product Design – Features, size, capacity, technology needed, cost.
g)Customer value – Utility, cost, uniqueness / pride, service.
h)IT and Decision Support Systems. Flow of money / finance through the chain – system of
payments / Receipts policies.

1. Tactical Level

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Decisions from 3 months to one year time span: (without details)
a)Production: Which items / how much value / when to produce.
b)Purchasing: Procurement of raw materials / Components / External Services
c)Transportation: Type, frequency, cost, time location of moving materials.
d)Inventory Policies: When / how much / at what rate to purchase & store.
e)Customer-Calls Frequency: Contacting customers to receive orders and payments.
f)Cash Flow Review: Payment / Receipt / Credit.

1. Operational Level
The information contained in the daily/weekly production – planning sheets with full
details.
a)Scheduling: When and what item to produce–time period for starting each product.
b)Lead Time: How much time is needed for the specific quantity to produce.
c)Routing: Where / on which machines / facilities- to produce.
d)Loading: Moving the materials physically through the various production stages.

IMPORTANCE OF SUPPLY CHAIN MANAGEMENT

Some of the major reasons for popularity of SCM practice are:


a) Competition and saturation of markets in developed countries need for new markets.
b) Globalization practices being politically accepted by most of the nations.
c) Higher expectations and affordability of products by customers
d) Growth of transportation and manufacturing facilities within and across countries.
e) Shortened Product-life cycles and faster introduction of new products.
f) Cheaper labour availability in backward regions of a country as well as in
Developing/Under-developed nations.
g) Availability of cheaper sources of raw materials across the country/world not earlier
tapped.
h) Progress of Information Technology to provide cheap hardware , software and
communication system. Many software vendors now develop software for SCM which
enhances the existing ERP systems to SCM as add-ons. Ex: MANUGISTICS, I2-
TECHNOLOGIES, BAAN, SAP .

• SCM is customer oriented and is aimed towards the integration of business planning and
balancing supply and demand across the entire supply chain. It tries to bring suppliers and
customers together in one concurrent business process. It spans the entire chain from initial
source to the ultimate consumer.
• Advanced information and communication technology (e.g. E-commerce) systems are
increasingly becoming the backbone of these integrated supply chains.
• SCM research is well supported by mathematical modeling and modeling tools.
• SCM represents the management of the entire set of production,
manufacturing/transformations, distribution and marketing activities by which a consumer is
supplied with a desired product. The practice of SCM encompasses the disciplines of
economics; marketing, logistics and organizational behaviour to study how supply chains
are organized and how institutional arrangements influence industry efficiency,
competitions and profitability.
• SCM provides a means to conceptualize management of the changes required in the system
to efficiently respond to consumer needs, based on integration and co-ordination of the
efforts of all the business units involved in the production and delivery processes.

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• Managing supply chains requires an integral approach in which chain partners jointly plan
and control the flow of goods, information, technology and capital from ‘farm to fork’,
meaning from the suppliers of raw materials to the final consumers and vice versa.

Some important advantages are:


• Reduction of product losses in transportation and storage.
• Dissemination of technology, advanced techniques,
• Capital and knowledge among the chain partners.
• Better information about the flow of products, markets and technologies.
• Transparency, Tracking & tracing to the source.
• Better control of product safety and quality.
• Large investments and risks are shared among partners in the chain.

STAGES OF SUPPLY CHAIN

The supply chain stages include;


• Customers
• Retailers
• Wholesalers/Distributors
• Manufacturers
• Component / Raw material suppliers

Process view of a supply chain


A supply chain is a sequence of processes and flows that take place within and between
different stages and combine to fill a customer need for a product. There are two different
ways to view the processes performed in a supply chain.
1. Cycle 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.
2. Push/pull view: The processes in a supply chain are divided into two categories depending
on whether they are executed in response to a customer order or in anticipation of customer
orders. Pull processes are initiated by a customer order whereas push processes are initiated
and performed in anticipation of customer orders.

Cycle view of Supply Chain Processes


All supply chain processes can be broken down into the following four process cycles.
• Customer order cycle
• Replenishment cycle
• Manufacturing cycle
• Procurement cycle

1. Customer Order Cycle


The customer order cycle occurs at the customer / retailer interface and includes all processes
directly involved in receiving and filling the customer’s order. Typically, the customer initiates
this cycle at a retailer site and the cycle primarily involves filling customer demand. The
retailer’s interaction with the customer starts when the customer arrives or contact is initiated
and ends when the customer receive the order.
○ Customer arrival
○ Customer order entry

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○ Customer order fulfillment
○ Customer order receiving

Figure 2 : Customer Order Cycle

1. Replenishment Cycle
The Replenishment cycle occurs at the retailer/distributor interface and includes all processes
involved in replenishing retailer inventory and is initiated when a retailer places an order to
replenish inventories to meet future demand. The objective is to replenish inventories at the
retailer at minimum cost while providing high product availability. The processes involved are:
- Retail order trigger - Retail order fulfillment
- Retail order receiving - Retail order entry

Figure 3 : Replenishment Cycle

2. Manufacturing Cycle
The manufacturing cycle typically occurs at the distributor/manufacturer (or
retailer/manufacturer) interface and includes all processes involved in replenishing distributor
(or retailer) inventory. The processes involved in the manufacturing cycle include the
following.
○ Order arrival from the finished-goods distributor, retailer, or customer
○ Production scheduling
○ Manufacturing and shipping
○ Receiving at the distributor, retailer, or customer

Figure 3 : Manufacturing Cycle

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1. Procurement Cycle
The procurement cycle occurs at the manufacturer/supplier interface and includes all processes
necessary to ensure that materials are available for manufacturing to occur according to
schedule. During the procurement cycle, the manufacturer order components from suppliers
that replenish the component inventories.

Fig. 4: Procurement Cycle

Push / Pull View of Supply Chain Processes


• Pull processes, execution is initiated in response to a customer order. With push processes,
execution is initiated in anticipation of customer orders. Therefore, at the time of execution
of a pull process, customer demand is known with certainty whereas at the time of
execution of a push process, demand is not known and must be forecast.

• Pull processes may also be referred to as reactive processes because they react to customer
demand. Push processes may also be referred to as speculative processes because they
respond to speculated (or forecasted) rather than actual demand. For example in Dell
(build-to-order computer manufacturer), the beginning of PC assembly represents the
push/pull boundary. All processes before PC assembly are push processes and all processes
after and including assembly are initiated in response to a customer order and are thus pull
processes. All processes that are part of the customer order cycle are thus pull processes.

DRIVERS OF SUPPLY CHAIN PERFORMANCE


Four key drivers of supply chain performance are facilities, inventory, transportation and

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information determine the supply chain’s performance in terms of responsiveness and
efficiency, and whether strategic fit is achieved across the supply chain.
1. Inventory – Inventory is nothing but raw materials, work in process and finished goods
within a supply chain. Inventory is an important supply chain driver and it is one of the
factors that decide the supply chain’s efficiency and responsiveness.
2. Transportationn – Transportation entails moving inventory from one point to another
point in the supply chain. Transportation choices have a large impact on supply chain
responsiveness and efficiency.
3. Facility – These are locations where raw materials, finished goods are stored or fabricated
and distributed. The two major types of facilities are production sites and storage sites.
Whatever the function of the facility, decisions regarding location, capacity and flexibility
of facilities have a significant impact on the supply chain’s performance.
4. Information – Information consists of data and analysis concerning facilities, inventory,
transportation, and customers throughout the supply chain. Information is potentially the
biggest driver of performance in the supply chain as it directly affects each of the other
drivers.

Distribution in the Supply Chain Management

• Distribution refers to the steps taken to move and store a product from the supplier stage to
the customer stage in the supply chain. It occurs between every pair of stages in the supply
chain.
• Distribution is a key driver of the overall profitability of a firm because it directly impacts
both the supply chain cost and the customer experience.
• Distribution related costs from about 10.5 percent of the U.S. economy and about 20 percent
of the cost of manufacturing. For commodity products, distribution forms an even higher
fraction of the product cost. In India, the outbound distribution cost of cement is about 30
percent of the cost of production and selling cement.

Factors influencing distribution network design


• Customer needs
• Cost of meeting customer needs
• Response time is the time between when a customer places an order and
receives delivery.
• Product variety is the number of different products/configurations that a
customer desires from the distribution network.
• Product availability is the probability of having a product in stock when a
customer order arrives
• Customer experience is purely experiential aspects like customer satisfaction
and customer delight.
• Order visibility is the ability of the customer to track their order from
placement to delivery.
• Return ability is the ease with which a customer can return unsatisfactory
merchandise and the ability of the network to handle such returns.

TYPES OF SUPPLY CHAIN MANAGEMENT


Vertical Coordination versus Vertical Integration

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Vertical Coordination is the organization of economic activity including all the ways of
harmonizing the various stages of production, processing, and distribution throughout the
supply chain. Vertical Integration is full ownership of the various stages of production,
processing, and distribution throughout the supply chain. Vertical Integration is a subset of
vertical coordination. Vertical Coordination includes strategic alliances which are
agreements mutually entered into by two independent firms to serve a common strategic
objective. For example, a strategic alliance between a pork processor and pork producer to
produce pigs via a certain method at a certain quality. Vertical coordination also includes
formal written contracts. These contracts may be market specification contracts such as an
agreement to buy a seller’s output. They could also be production management contracts
where the buyer participates in production management through inspecting production
processes and specifying input usage. Finally the contracts could be resource providing
contracts where the buyer supervises production and supplies key inputs. In resource
providing contracts the buyer often owns the product and the seller are paid by volume, for
example, the production of genetically modified crops.

E- SUPPLY CHAIN MANAGEMENT


All processes within its supply chain can be categorized into three main areas: processes
focused downstream, processes focused internally and processes focused upstream. We use
this classification to vdefine the three macro supply chain processes as follows:

1. Customer Relationship Management (CRM): Processes that focus on downstream


interactions between the enterprise and its customers.

2. Internal Supply Chain Management (ISCM): Processes that focus on internal


operations within the enterprise. Note that the software industry commonly calls this
“supply chain management” (without the word “internal”) even though the focus is
entirely within the enterprise. In our definition, supply chain management includes all
three macro processes CRM, ISCM and SRM.

3. Supplier Relationship Management (SRM): Processes that focus on upstream


interactions between the enterprise and its suppliers.

4. Transaction Management Foundation (TMF): Processes which include basic ERP


systems (and its components such as financials and human resources), infrastructure
software, and integration software. TMF software is necessary for the three macro
processes to function and to communicate with each other.
Macro Processes and their Processes

SRM ISCM CRM

Design Collaboration Strategic Planning Market

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Source Demand Planning Sell

Negotiate Supply Planning Call center

Buy Fulfillment Order management

Supply Collaboration Field Service -

E-BUSINESS MANAGEMENT
E-Business is the execution of business transactions via the Internet. Supply chain
transactions that involve e-business include the flow of information, product and funds. For
instance, the following are all transactions that can be executed with e-business.
• Providing product information to participants across the supply chain
• Placing orders with suppliers
• Allowing customers to place orders
• Allowing customers to track orders
• Filling and delivering orders to customers
• Receiving payment from customers

E-business can be divided into two main categories:


1. B2C: e-business involves transaction between a company and a consumer. Example
includes Amazon.com, Dell and Wal-Mart selling products to customers over the
Internet.

2. B2B: e-business involves transactions between two companies. Examples include Dell
selling computers to corporations and Intel selling microprocessors to Dell.Companies
like Dell, W.W.Grainger, Cisco Systems Inc., and Intel Corp. were the first to move
many supply chain processes online. The value of e-business, however, will vary
depending upon the industry and the stage in the supply chain a firm occupies.
Successful firms will be those that are able to tailor their e-business implementation to
support areas where the maximum value can be extracted.

Advantages of E-Business : Improved responsiveness primarily enables a company to gain


new revenue or to protect existing revenue. An e-business allows a firm or supply chain to
exploit the following responsiveness, and therefore revenue-enhancing, opportunities:
• Direct sales to customers
• Twenty-four-hour access from any location
• Wider product portfolio and information aggregation
• Personalization/customization
• Faster time to market

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• Flexible pricing, product portfolio, and promotions
• Efficient funds transfer
• Lower stock out levels
• Convenience/ automated processes

AGRI SUPPLY CHAIN MANAGEMENT


India stands second in Fruit production after Brazil and also second in vegetables production
after China. With increase in per capita income and changing food habits the demand for fruits
and vegetables will increase in the future. Tamil Nadu with its varied agro climatic regions
produces different kinds of fruits and vegetables in large quantities. Around 4.6 million tonnes
of fruits and 4.8 million tonnes of vegetables are produced in Tamil Nadu.
Post harvest losses and volatile prices. The post harvest loss in fruits and vegetables is
estimated to be around 35-40 per cent of the production. Infrastructure facilities for post
harvest handling like pre-cooling, refrigerated transport, grading, packing, cold storage etc.
are not adequate and results in considerable post harvest losses in horticultural produces.
Tamil Nadu Horticulture Development Mission set up in 2003 aims at providing adequate
infrastructure for post-harvest management and marketing.

Due to inadequate linkages with markets and lack of processing facilities, farmers do not
get good price for fruits and vegetables. Presence of large number of intermediaries and
absence of linkages lead to loss of value both for farmers and consumers. The farmer’s share
in consumer rupee varies from 40-60 per cent in the case of vegetables. Further the degree of
perishability, variety and quality, and various market imperfections, market
infrastructure etc also influence the marketing costs and price levels of fruits and vegetables.
This indicates the need for effective and efficient supply chain management arrangement.

CONCLUSION
Agriculture is the bedrock of the rural economy. The supply –chain of an agribusness
organization consists of a network of a) Suppliers / vendors of the raw materials and other
input components purchased from outside (b) Processing / production / manufacturing
facilities used to convert them into finished products needed by customers and (c) Distribution
/ marketing channels used to make the products reach the customers. Supply Chain
Management (SCM) is a set of practices & techniques to integrate the functioning of all the
three components for smooth & efficient flow of materials, information and money,
overcoming individual constraints. All the partners, internal & external, share the risks and
prosperity through overall healthy growth while serving the customer’s needs. Many critical
decisions are needed at different levels of management covering different time spans for
successful design and implementation of SCM. Due to the competitive environment in the
market varying customer’s demands, availability of resources across the world, and
globalization fired by rapid growth in Information Technology, SCM has evolved from earlier
material management practices to the present strategic partnerships of units across different
Nations in the world. Many examples of successful SCM are existing globally and in India.
Logistics is a function which gained importance in the modern Supply chain Management. It
helps the organization to effectively handle procurement of incoming materials and delivery
of final products to the customers in an integrated and planned way. Organizations today
cannot achieve success and market leadership unless they create and manage efficient,
responsive and profitable supply chains. SCM represents the management of the entire set of

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production, manufacturing /transformations, distribution and marketing activities by which a
consumer is supplied with a desired product.

REFERENCES
1. Brown J. William, Agribusiness Cases in Supply Chain Management, Department of
Agricultural Economics, University of Saskatchewan, Saskatoon, Saskatchewan,
Canada.
2. Chopra Sunil, Meindl Peter, ‘Supply Chain Management – Strategy, Planning and
Operation’, Prentice Hall of India Ltd., New Delhi 2005.
3. Cooper, M.C.; D.M. Lambert and J.D. Pagh (1997), Supply Chain Management: more
than a new name for Logistics, International Journal of Logistics Management Vol.8,
No.1,1-14.
4. David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi, Designing Managing the
Supply Chain. Tata McGraw Hill Publishing Company.
5. Gopalakrishnan. P & Sundaresan.M, Materials Management - An Integrated Approach.
Prentice Hall of India. New Delhi 2002.
6. Martin Christopher, Logistics and Supply Chain Management, Pitman, London.
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Delhi 2003.
8. Selvan Kalai, “Supply Chain Management in Food Industry” ICFAI Books, ICFAI
University Press, Hyderabad, 2008.
9. Trienekens H Jacques, etal., Innovation Through (International) Food Supply Chain
Development: A Research Agenda, International Food and Agribusiness Management
Review, Vol 6 Iss 1, 2003.

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