MODULE 1

INTRODUCTION TO SUPPLY CHAIN AND LOGISTICS MANAGEMENT

What is supply chain?

Supply chain is a global network use to deliver products and services from raw materials
to end customers through engineered flow of information, physical distribution and cash.

Elements of Supply Chain

The supply chain exists in many different forms, but the most common structure contains
four separate entities:

Suppliers. These entities provide the materials needed to create the product, whether
they're raw materials or individual parts to a finished product. For example, Apple's iPad comes
from a variety of suppliers: Samsung manufactures its processor chips, LG produces the
touchscreen display, and Toshiba creates the flash memory.

Manufacturers. This stage of the supply chain entails bringing together all of the parts
provided by suppliers to create the finished product. Apple would take each individual part from
the suppliers and put them together to create a finished iPad for distribution.

Distributors. These entities store and sell the finished product, either at a physical
storefront or through an online store. Locations like Apple stores and Walmart provide physical
locations where consumers can buy an iPad, whereas online distributors ship the iPad directly
to a consumer's door.

Customers. Consumers create demand for products and ultimately influence the
quantity of products and the overall supply chain structure.

Flows in Supply Chain

There are 3 major flow in supply chain. Primary product flow, primary cash flow, and
information flow.

The Product Flow – The product flow involves the movement of goods from a supplier
to a customer. This supply chain management flow also concerns customer returns and service
needs.
The Information Flow – The information flow centers on transmitting orders and
updating the status of delivery.
The Financial Flow – The financial flow involves credit terms, payment schedules, and
consignment and title ownership arrangements.
Strategies in Supply Chain

There are three types of supply chain strategy: stable, reactive, and efficient reactive.
The stable supply chain strategy is appropriate for chains:

 Stable - With a significant history of stability between demand and supply.

 Reactive -That are focused on execution, efficiencies, and cost performance.
 Efficient Reactive-That use simple connectivity technologies and have little need for
real- information.

Types of Supply Chain

Horizontal Integration is the expanding of a business at the same point within the
supply chain, either within the same industry or a different one. A company can achieve this
growth through internal expansion. This can occur when a retailer increases the variety of
products it sells in a specific category.

Vertical Integration. Horizontal integration allows a company to expand and grow but
the company also can achieve growth through vertical integration. Unlike horizontal integration
that occurs at the same stage of production, vertical integration occurs through the merger or
acquisition of companies at different stages of production or distribution within the same
industry. Forward integration is when the company acquires a distributor, which is further down
the supply chain. Backwards integration is when the company acquires a supplier, which is
further up the supply chain.
Stages of Supply Chain Management Evolution

Stage 1: Multiple Dysfunction. The (potential) nucleus firm [organization] lacks clear
internal definitions and goals and has to external links other than transactional ones.
Stage 2: Semi-Functional Enterprise. The nucleus firm [organization] undertakes
initiatives to improve effectiveness, efficiency, and quality within functional areas. While some or
all functions engage in initiatives designed to increase efficiency within their departmental walls,
there is little or no overlap in decision-making from one department to another.
Stage 3 – Integrated Enterprise. The firm [organization] break down silo walls and
brings functional areas together in processes such as sales and operations planning (S&OP)
with a focus on company-wide processes [and cost reductions] rather than individual functions.
Stage 4 – Extended Enterprise. The firm [organization] integrates its internal network
with the internal networks of selected supply chain partners to improve efficiency, product /
service quality or both. The starting point is generally one inside / outside partnership that points
the way to a completely networked enterprise.

References:
Bowers, J. (2017). Supply Chain Management: What Small Businesses Need to Know.
Business News Daily. Retrieved from https://www.businessnewsdaily.com/4804-supply-
chain-management.html
Mitzsheva, M. (n.a). Definition of Horizontal Integration in a Supply Chain. Chron. Retrieved
from https://smallbusiness.chron.com/definition-horizontal-integration-supply-chain-
34736.html

Pontius, N. (2020). What is Supply Chain Management? Camcode. Retrieved from

https://www.camcode.com/asset-tags/what-is-supply-chain-management/#:~:text=There%20are
%20three%20main%20flows,customer%20returns%20and%20service%20needs.