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MODULE 02:
Supply Chain
Management
Description Part 2
AE 323
Strategic Operation Supply Chain
Management
Prepared by:
Engr. Divine Mae L. Magangan
AERONAUTICAL ENGINEERING FACULTY 2020
PhilSCA-InET
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
CONTENTS
Title Ref. no Page
Supply Chain Principles / Methodology and Solutions I, II, III, IV 9
Supply Chain Principles I, II, III, IV 10
Methodology of a Supply Chain Management Project
I, II 12
– Solutions
Expected Results / Benefit I, II, III 14
Opportunity Areas (Examples) I, II 15
Characteristics of firms/organizations and Service
I, II, V 17
Providers
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
REFERENCES
Reference No.
Marker, A. (n.d.). Supply Chain Management 101: Principles, Examples, and
Templates. Smartsheet. https://www.smartsheet.com/supply-chain-management
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
The concentration of this learning module is the second part of description and related
concepts about Supply Chain Management.
LEARNING OUTCOMES
Program Learning Outcomes [PLO]
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
INTRODUCTION
Below is the ranking of Top 25 Supply chain of 2020 by a leading research and
advisory company, Gartner Inc.. The ranking is released every year to identify the top
performing supply chain leaders and highlight their best practices. Each supply chain’s
strategies and methods were challenged by changes brought by the COVID-19
pandemic in the business context. Identify the company logos below, describe what
products they offer and if possible, what products did you already purchased from
them.
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
As an institution of higher learning, students are expected to display highest degree of honesty and professionalism in
their class work, requirements, and activities; thus, in no case that cheating—or any form of it, may it be plagiarism,
copying other students' works, and fabrication of materials—shall be tolerated. The Philippine State College of
Aeronautics assumes as a simple and minimal preferred of habits in academic matters that students be truthful and
that they publish for deposit solely the merchandise of their personal efforts.
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
SUPPLY CHAIN PRINCIPLES/METHODOLOGY AND SOLUTIONS
As an institution of higher learning, students are expected to display highest degree of honesty and professionalism in
their class work, requirements, and activities; thus, in no case that cheating—or any form of it, may it be plagiarism,
copying other students' works, and fabrication of materials—shall be tolerated. The Philippine State College of
Aeronautics assumes as a simple and minimal preferred of habits in academic matters that students be truthful and
that they publish for deposit solely the merchandise of their personal efforts.
9|Page
PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
Principle 1 Segment customers based on service needs and adapt supply chain
based on the service needs of each customer segment.
Business managers and sales professionals traditionally focus on customer needs
only. However, every business has a large base of customers and they need to divide
or as we call it in business terms ‘segment’ the customers into smaller groups. This
segmentation can be done based on sales volume, demographics, customer types,
etc.
The 1st principle suggests that for better efficiency of the supply chain management
the customers should be grouped based on their service needs like same day delivery,
one week delivery, etc.
Principle 2: Customize the logistics network to the service requirement of the
customer segments.
Customization is the key to providing the best service experience. Once customers
are segmented as per their service needs, tailor made supply chain networks must be
designed to meet separate customer segments. Many business houses run into the
mistake of using a median technique of supply chain to reach out to all customers.
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
However, the 2nd principle strongly holds that separate, distinct and customized
logistics networks must be implemented for different segments of customers like
different modes of transport, diverse delivery type, etc.
Principle 3: Listen to signals of market demand and plan accordingly ensuring
steady forecasting and optimum resource allocation.
The 3rd principle focuses on cumulative forecasting. A single business involves many
departments like production, warehousing, sales, etc. It is of utmost necessity that
forecasting of market demand must be done at a cross functional level and not at an
individual department level alone. Each department must plan towards a common
operational goal for minimizing costs, cutting down inventory levels and maximizing
profits.
Principle 4: Differentiate product closer to the customer and speed conversion
in the supply chain process.
The 4th principle stresses on having different variants of the product for different
segments of the customers. The basis of product differentiation must be the customer
needs. There must be provisions for differentiation of the products as one single
standard product cannot fulfil the demands and needs of all customers. There must
be a flexibility to modify, alter, redesign the product and also make it readily available
to the end customer on time. The redesigned products or parts of the product must be
readily available within a shorter lead time. To achieve this, the flexibility to modify the
product must be as near to the end of the production as possible.
Principle 5: Source strategically and reduce the cost of owning materials and
services.
Outsourcing a part or all of the operations must be done strategically. The 5th principle
suggests that having multiple players when it comes to sourcing is the key to maintain
a competitive environment and receive the best quote on the services. Every business
should be smart enough to realize that suppliers’ costs are indirectly the cost of the
company. The goal of cost reduction should be shared by the channel partners to
lower market prices and enhance the profit margin.
Principle 6: Develop a supply chain-wide technology strategy that supports
multiple levels of decision making.
Principle 6 is nothing but the IOT (Internet of Things). Even powerful and well-
established businesses can benefit from the use of advanced technologies. However,
the use of advanced and complex information system is not the real solution to achieve
reengineered business process. The information system in use must be such that it
not only captures the data pertaining to the supply chain management process but
also translates them into actionable and useful insights. These insights must help the
business to better their practices and operations on a real time basis.
A detailed report with all the information that flows in and out of the business but
provides no real output is not desirable by any business manager. Internet applications
and advanced systems should make the process easier and speed up the supply chain
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
management process by reducing time, effort and cost through automated electronic
transactions, invoices and payment records.
Principle 7: Adopt channel-spanning performance measures to achieve
collective success in reaching the end user effectively.
The 7th and the last principle in this context focuses on performance measurement.
No business can determine their success or identify new opportunities for betterment
until and unless their performance is regularly monitored and measured. Every supply
chain management also needs to have its own assessment card highlighting the
achievement of its goals and targets. This allows the process to showcase the areas
of expertise and identify scope for further utilization of these expertise to the overall
advancement of the supply chain management process.
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
Product development is an important part of the supply chain that is informed by
consumer demand. You must work with CRM and customer service data to determine
what they want, which influences new products, product line extensions, and also what
to stop making. You must integrate suppliers in this process because it affects cost,
quality, and delivery time.
Supplier relationship management goes without saying - if you want to produce your
products on time and on budget, you need a solid rapport with everyone you’re
outsourcing to in the chain. This impacts manufacturing flow management, which
ensures everything gets where it needs to go without delay, and at the correct spec.
Order fulfilment involves coordinating with distribution centers and either retail
locations or 3PL (Third-party logistics) to get the product direct to consumers. You
have now made it all the way back to the beginning of the cycle and need to pay
attention to new CRM and customer service data.
Returns management, also known as the “reverse supply chain,” is a vital part of the
flow of products that does not fit perfectly into the clean supply chain cycle. It involves
picking up online orders from 3PL (Third-party logistics) locations or from consumers’
addresses and accepting returns at retail locations. Once these items are put back
into inventory, they must be ready to get to a different customer while the product run
is still live.
A Four Step Integrated Approach
In view of the importance of Supply Chain Management to commercial success,
making the right decision about which system is best is vital. Before deciding how to
develop new service Supply Chain Management chains and economical distribution
centers, many factors must be considered, such as, the required customer service
levels, optimum location, stock holding policies and EDP systems. To help
organizations make the best decisions, the Miebach Supply Chain Management
Group employs an integrated planning approach, consisting of four steps from
planning to realization: "The integrated planning process helps to find solutions that
best match clients’ requirements and the technical demands of the problem", states
Dr Joachim Miebach, Chairman of the Miebach Supply Chain Management Group.
"The only way to manage the growing complexity in international Supply Chain
Management chains is through the integration of strategy, engineering and IT systems
and methods."
• Potential analysis
• Concept study
• Detailed planning
• Project or change management
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
EXPECTED RESULTS/BENEFIT
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
like time-based delivery and make-to-order; and enhanced revenues, which result
from such supply-chain-related achievements as higher product availability and more
customized products.
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
and supply chain management also can play key roles in increasing a company's
market share--"... not by cutting price, but by doing such a superb job that you attract
profitable market share," he says. In other words, a company needs to have not only
the right product, but also the right processes for the market.
Distribution network optimisation. Optimising the distribution network--that is
determining the best location for each facility, setting the proper system configuration,
and selecting the right carriers--brings immediate cost advantages of 20 to 30 percent.
That is the figure determined by IBM's (International Business Machines Corporation)
Wholesale Distribution Industry Segment, based on consulting engagements in a wide
range of industries. "This typically breaks down into transportation savings of 15 to 25
percent and improvements in inventory-carrying costs of 10 to 15 percent," says Mark
Wheeler, national solutions manager for the IBM consulting unit.
Shipment consolidation. A proven, though often overlooked, supply-chain lever lies
in shipment consolidation. Nabisco offers an instructive example. For one retail
customer, the company had been delivering product from multiple plants via six
different LTL (Less than load) deliveries. Using a third-party SCM provider, it was able
to consolidate these multi-vendor loads into two truckloads. By strategically
consolidating the shipments, reports Rick D. Blasgen, senior director of product
supply, Nabisco cut its transportation costs by half. On top of that, it reduced inventory
levels, increased inventory turns, cut lead-times, improved on-time delivery, and
enhanced case-fill rates.
Cross docking. Another supply-chain technique with proven payback potential is
cross docking. This is the practice of receiving and processing goods for reshipping in
the shortest time possible and with minimum handling and no storage. According to
Maurice Trebuchon of Coopers & Lybrand's SysteCon Division, cross docking can
yield savings of 25 percent or more over conventional warehousing. Speaking at this
year's annual CLM (Claims and Litigation Management Alliance) meeting, Trebuchon
cited one manufacturer that used cross docking to achieve a net savings of $0.84 per
ton of freight processed. The savings came from the elimination ofcosts related to put
away and picking and storage.
Supplier management. Research from McKinsey & Co. demonstrates the substantial
improvements possible through aggressive supply management. An article by
McKinsey consultants in the Winter 1998 issue of SCM Review mentions a client in
the automotive industry that had successfully integrated vendors into its product-
development process. On one particular team, the integration paid dividends in
triplicate: the parts count dropped by 30 percent, the number of assembly steps and
material specifications wasreduced by half, and development time shrank from years
to months.
Supplier integration. The abundant advantages of supplier integration were again.
evident in a two-year study conducted by the Global Procurement and Supply Chain
Initiative at Michigan State University. Drawing on responses received from around
the globe, the study showed that companies that involved suppliers earlier on in the
product design and -development process consistently outperformed those that did
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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
not. This was true across a range of supply-management metrics. The comparative
improvement in purchased material costs alone was 15 percent.
Industry experts say most of those barriers fall into one of three broad categories:
• information sharing,
• integration,
• or the people themselves.
Until these barriers are dismantled, products will not flow swiftly to customers and
companies will not achieve the benefits promised by supply chain management.
The examples given above merely illustrate the kinds of competitive advantages that
can be captured through aggressive supply-chain management. Opportunities for cost
savings and enhanced service abound at all points in the chain--from initial sourcing
all the way to the point-of-sale business transaction.
The most important characteristic of firms that could apply SMC is the will to accept
innovations and new methods of working. Of course, there should be a physical
movement of goods. From raw material to the final consumer, firms should also have
an adequate managerial and organizational depth to capitalize the benefits that SCM
brings to a business. Service providers should have a profound experience in
organizing the supply chain using a sound methodology in applying organizational
change. Service providers should also have to adapt into their solutions SCM software
systems to facilitate the installation of the system into the organizational structure of a
firm.
LEARNING MODULE ACTIVITY 3
BEST PRACTICES REVIEW
Watch the following video presented in the link below then answer the review questions below:
https://www.youtube.com/watch?v=b3xXKQaqtGk
1. What are the specific strategies or processes that the Rolls-Royce Company used for the supply chain of
Pearl 15?
2. What barriers do you think that the Rolls-Royce encountered to came up with local supplier management
teams in managing their global supply chain?
3. Given the extensive time, effort, and commitment of resources involved, is design and execution of a
comprehensive supply-chain strategy worth it all?
As an institution of higher learning, students are expected to display highest degree of honesty and professionalism in their class work,
requirements, and activities; thus, in no case that cheating—or any form of it, may it be plagiarism, copying other students' works, and
fabrication of materials—shall be tolerated. The Philippine State College of Aeronautics assumes as a simple and minimal preferred of
habits in academic matters that students be truthful and that they publish for deposit solely the merchandise of their personal efforts.
17 | P a g e
PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Learning Module 02: SCM DESCRIPTION - PART 2
ASSESSMENT
➢ In accomplishing the activities in this learning module. Create a document
following the format below:
o Font/Size: Tahoma/12
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