Module-2

Concept & Definition Supply Chain

“A supply chain is a system of organizations, people, technology, activities, information and

resources involved in moving a product or service from supplier to customer.”

“A supply chain consists of all parties involved DIRECTLY and INDIRECTLY in fulfilling a
customer request. It includes not only the manufacturers and suppliers but also transporters,
warehouses, retailers and even customers themselves”

According to Christopher (1992)

“Supply chain is the network of organizations that are involved, through upstream and
downstream linkages, in the different processes and activities that produce VALUE in the form
of product and services in the hands of ultimate consumers”

MAJOR OBJECTIVE OF SUPPLY CHAIN

Objective of each supply chain is to MAXIMIZE THE OVERALL VALUE GENERATED.

SUPPLY CHAIN STAGES

3PL 3PL 3PL

Suppliers Manufacturers C & F Agents Distributors

Consumers 3PL Retailer 3PL

ELEMENTS OF SUPPLY CHAIN

 Customers
 Planning
 Purchasing
 Inventory
 Production
 Transportation

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SUPPLY CHAIN MANAGEMENT

“Supply chain management is a NETWORK of facilities that procure raw-material, transforms

them into immediate goods and the final products and deliver the product to customers through
distribution network system” - Lee & Belington

“SCM can be defined as an external integration of interrelated functions of the firm with its
customers, vendors and all third party logistics service providers who contribute in the flow of
goods and information from the point of inception to the point of consumption with the objective
of ensuring SUPERIOR VALUE to all stake holders”- D.K. Agarwal

OBJECTIVES OF SCM

1. Reduce the inventory levels

2. Improve customer service
3. Make more efficient use of human resource
4. Ensure better delivery through reduce cycle times
5. Increase sharing of information and technology among participants in the Supply Chain
6. Decrease the time required to market a new product
7. Enable the firms to focus on core competencies
8. Induce greater thrust and interdependence between supply chain partners
9. Gain competitive advantage
10. Increase shareholders Value

Benefits of SCM

1. Faster response to changes in supply and demand (i.e become more RESPONSIVE)

2. Increased customer satisfaction (Ex- SAP SCM enables to better adapt to meet the
customer’s demand)

3. Improved CASH-FLOW (information transparency and real time business intelligence

can lead to shorter cash-to-cash cycle time)

4. Higher MARGINS (with SCM one can lower operational expenses and could improve
margins through better co-ordination with business partners)

5. Greater Synchronization with business priorities (better communication and co-ordination

with the trading partners keep the SC aligned with current business strategies and
priorities, improving the organization’s overall performance and achievement of goals)

6. Compliance with regulatory requirements (by good SC one can track and monitor
compliance in the areas such as environment, health and safety)

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Process that are carried out across SCM

1. Customer Relationship Management (CRM)

2. Customer Service Management (CSM)
3. Demand Management (this also includes developing contingency mgmt to fulfill demand
during crises)
4. Order Fulfillment
5. Manufacturing Flow Management
6. Procurement
7. Product Development and commercialization
8. Returns

Flows in SCM

The major flows in any supply chain are:

 product flow,
 financial flow,
 information flow,
 value flow
 risk flow.

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Cycle view of Supply Chain

The processes in a supply chain are divided into series of cycle each performed at the
interface between two successive stages of supply chain. It is useful in making
operational decisions as role of each member of supply chain is defined clearly.