MODULE 2-3 overall function and customer

service.
SUPPLIER – MANUFACTURER –
DISTRIBUTOR – RETAILER –
CUSTOMER
Supply Chain Management (Definition
from the Council of Supply Chain
Management Professionals)
Supply Chain Management
 It is the planning and
 The important keys that adds
management of all activities
value in the firm’s business
involved in sourcing and
process through improving the
procurement, conversion and all
customer service and decreasing
logistics management activities.
significantly the supply chain cost
 Planning and management of all
activities involved in sourcing and
Supply Chain Management (Definition
procurement, conversion and all
from the Institute of Supply
logistics management activities
Management)
 Set of techniques to plan and
acquire raw materials from  It is the design and management
vendors, transform into finished of seamless, value-added
goods, and deliver both goods processes across organizational
and services to customers boundaries to meet the real
 Planning - management of all needs of the end customer
activities involved sourcing,
procurement, logistics
management activities Supply Chain Management (Definition
 Design and management of from The Singapore-based Logistics &
seamless, value - added Supply Chain Management Society
processes across organizational about SCM)
boundaries to meet the real
 “It is the coordinated set of
needs of the end customer
techniques to plan and execute
Supply Chain Management all steps in the global network
used to acquire raw materials
 is highly regarded as one of the
from vendors, transform them into
important keys that adds value in
finished goods, and deliver both
the firm’s business process
goods and services to
through improving the customer
customers.”
service and decreasing
significantly the supply chain cost
as well as the inventory by
maximizing the efficiency of its

What is a Supply Chain?
 is the system of organizations,
people, activities, information and
resources involved in moving a
product or service from supplier
to customer.
 is the design and management of
processes across organizational
boundaries with the goal of
matching supply and demand in
the most cost-effective way.
The Strategic Importance of the Supply
Chain
 Supply-chain management is the
integration of the activities that
procure materials and services,
transform them into intermediate
goods and the final product, and
deliver them to customers
 Competition is no longer between
companies; it is between supply
chains
Importance of Supply Chain
Management
 To reduce inventory investment in
the chain
 One of the important
aspects of supply chain
management lies in the
goal of reducing the
inventory investment of the
firm in its chain.
 To increase customer service
 In order to increase the
customer service, the firm
must ensure that the
customer will receive the
correct product and the
desired quantity that is
delivered right on time to
avoid any bad reviews and
to not lose their trust.
 To help build a competitive
advantage in the channel
 Improving the financial
position of the firm will help
in building a competitive
advantage.
SCM vs Traditional Purchasing
 Traditional purchasing focuses on
initial cost; SCM focuses on total
cost of ownership
 Traditional purchasing tries to
negotiate the price that is best for
the purchaser; SCM focuses on
negotiating a price that is best for
the entire supply chain.
Ethics in the Supply Chain
 Opportunities for unethical
behavior are enormous and
temptations are high
 Many companies have strict rules
and codes of conduct that define
acceptable behavior
 Institute for Supply Management
(ISM) has developed a detailed
set of principles and standards for
ethical behavior
Managing the Supply Chain
* There are significant management
issues in controlling a supply chain
involving many independent
organizations
 Mutual agreement on goals
 Trust
 Compatible organizational
cultures

Vendor Selection
 Vendor evaluation
 Critical decision
 Find potential vendors
 Determine the likelihood of
them becoming good
suppliers
 Vendor Development
 Training
 Engineering and
production help
 Engineering and
production help
 Negotiations
 Cost-Based Price Model -
supplier opens books to
purchaser
 Market-Based Price Model
- price based on published,
auction, or indexed price
 Competitive Bidding - used
for infrequent purchases
but may make establishing
long-term relationships
difficult