Chapter 1

SUPPLY CHAIN
MANAGEMENT:
AN INTRODUCTION
Learning Objectives
After reading this chapter, you will be able to understand:
The conceptual framework of supply chain management, its historical perspective leacding
to their development and growth
Scope of supply chain and variousflows of supply chain

Different functions, types and factors affecting the SCM

Various drivers of Supply Chain Management and its trends and challenges

businesses
Supply chain management is growing field that is becoming important as
a

numerous brands of cars,

adopt a global approach to sourcing and management. Now-a-days,
consumers were left
two-wheelers, and consumer goods are available. But a few years back,
with very few brands for their choice. Over the past years, the traditional purchasing and logistics
materials and distribution
functions have evolved into a wider strategic approach to
management known as Supply Chain Management.
demands for better, faster, cheaper
During the 1980s and 1990s, firms deal with increased
outsourced logistic activities and their focus
logistical services. As a result, many manufacturers
transferred to core competencies. Therefore, many manufacturer went more for a relationship
oriented approach with their supplier and customer.

During the past fwo decades the rapid technological changes and development of speedy
telecommunication network have given a boost to organisations in restructuring their business
operations and developing a smoother flow of information, goods, services, money, etc.
Introduction of Enterprise Resource Planning (ERP) gave a boost to the evolution of SCM
and buyer-supplier relationship. ERP systems were mainly concerned with intra-organisational
integration. The evolution continues in the 2lst century with the development of more
sophisticated IT systems.
As industry is growing globally, business houses are increasing their product portfolio with
a focus on quick information, prominent display, ready and intact delivery and so on.
 Supply Chain Manageent
This is done in order to satisfy their customers with a difference, To ats
ttain all
all these
th
best quality product ata reasonably least price
companies have to present as and When
when rea goels
required
Development of supply chain management involves developing a set of m a.

that will ensure that the material, information and cash flows are smooth
ractices
History ofSupply Chain Management
(1) The Early Years: In the 1940s and 1950s, the focus of logistics
research was t ou
to use mechanisation to improve the labour intensive
processes of material how
and how to take better advantage of space and better
warehouse design and andling
In the mid 1950s this concept was extended to
transportation management with layou
development of intermodal containers together with ships, trains, th thi
the
and trucks
handle these containers. Buy the 1960s a clear trend had to
developed in shifting mo
time-dependent freight transportation to truck rather than rail. This led
to need of
joint consideration of warehousing, material
handling and freight transportation
which emerged under the label of
physical distribution. Prior to 1960s,
transactions and record keeping were done virtually all
manually. The computerisation of this
data opened the door to a huge
opportunity for innovations in logistics
from randomised storage in warehouses
to
planning,
optionisation inventory and truck
of
routing
(2) Logistics Comes of Age: The 1980s marked
the beginning of a sea-change in
logistics in the history of supply chain
management. The emergence of personal
computers in early 1980s provided tremendously
and a new graphical environment better computer access to
for planning. planners
logistics in the 1980s was that it had begun to Perhaps the most important trend for
as being very get tremendous recognition in industry
expensive, important and very complex. A
included the integration of
inbound, discipline was evolving that
and related information. outbound and reverse flow of
goods, services
(3) The Technology Revolution:
The logistics boom was fueled
by the emergent of further in the 1990s
Enterprise
motivated in part by Material
Resource Planning (ERP)
systems. These systems were
Requirement
the desire to
integrate the multiple databasesPlanning Systems developed, in part by
that existed in
seldom talked to each other almost all companies and
and in part by concern that
The result of this existing systems have failures.
change to ERP
systems was tremendous improvement in data
availability and accuracy. a

(4) Globalisation and Supply Chains: This

gVEn to be characterised tne
era can
supplier relationships and the expansion ofbysupply chains
global systems of artenton
oVEr hatonal boundaries and into other
continents. The organisations acted with the
n g their competitive advantage, value adding and reducing costs
through global sourcing
Supply Chain Management: An Introduction

Now a distinction made that "Logistics is that part of the

was
that plans, supply chain process
implements and controls the etficient, etfective forward
and
storage of goods, services and related information between and reverse flow
and point of the point of origin
consumption in order to meet customers
Chain
Management is the
requirements
while "Supply
business functions and the
systematic, strategic co-ordination of the traditional
tactics these business functions within a
across
company and across business within the particular
the supply chain for the purposes of
improving
long-term performance of the individual
whole companies and the supply chain as a
nis era, the attention is given to the supplier relationships in the global system so
that these could
be effective in the
expansion of supply
()Supply Chain Management 2.0 (SCM 2.0): SCM 2.0chain. could be described as the
evaluation of the processes and the
however with the time, there
changes with the supply chain with the time,
were changes, which were considered as a tool
to
manage the new era of a supply chain. It could name as
worldwide web that has
increased the productivity,
collaboration and sharing among the users. There are
specific tools, methodologies and the
processes to speed up supply chain.
Meaning of Supply, Supply Chain
and Supply Chain Management
Supply chain management is of
manufacturers
a set
approaches that integrates supplier and
so as to distribute the right quantity of goods and at
right location with the
objective of reducing the system wise cost. It consists of three words:
Supply: t is the total amount of a product (good or service) available for
purchase at any
specified price. Or we can say it is the total quantity of goods offered at a
to the particular type of market in a
particular period of time
particular marketing environment by a specific producer.
Supply Chain: It is the sequence of processes involved in the production and
distribution of a commodity. It is a network betweena company and its suppliers to
produce and
distribute a specific product to the final buyer. This network includes different activities,
people,
entities, information and resources. It also represents the steps it takes to get the
product or
service form its original state to the consumer.

Supply Chain Management: Supply chain involves all those activities associated with
the flow and transportation of goods trom the raw-material stage, through to the end-user, as
well as the associated information flows. Materials and information flow both up and down the
supply chain. Supply chain is a network of concerned and interdependent organisations
mutually and co-operatively working together to control, manage and improve the flow of

materials and information from suppliers to end users.

 Supply Chain Managen
6

blend ol àct and science that goes into improsie

Supplychain management is the ng the wa
comnany finds the raw components required to make a product or service and di.

to customers. So, the supply chain includes only the upstream suppliers of an
not
item andng
an ito
veringi
make the components used to create that item, but also the dou nthe
organisations that ream
retailers or distributors for the
item.

Definitions of Supply Chain Management

1. Harland defines "Supply Chain Management is the management of a netuork o
interconnected business involved in the ultimate provision of product and seruice
ervice
packages required by end customers."
2. Cooper defines it as "An integrative philosophy to manage the total flow of
distribution channelfrom supplier to ultimate user.

3. According to Sweeney (2007) "Supply Chain Management is the systematic;

strategic co-ordination of the traditional business function and tactics across these
business functions within a particular company and across business within the supply
chain, for the purpose of improving the long-term performance of the individual
companies and the supply chain as a whole."
4. According to Bozarth and Handfield (2008) "Supply Chain Management is the
active management of supply chain activities and relationships in order to maximise
customer value and achieve a sustainable competitive advantage."
5. According to Wisner, Tan and Leong (2012) "Supply Chain Management is the
integration of trading partners' key business processes from initial raw material
extraction to the final or end consumer, including all intermediate. Processing
transportation and storage activities and final sale to the end product consumer."
6. According to Lambert, "Supply Chain Management is the integration of key
business processes from end users through original suppliers that provides
products
services and information that add value for customers and stakeholders."
7. According to Council of Supply Chain Management Professionals (CSCMP),
"Supply Chain Management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion and all
logistics
management activities."
So, we can say that A supply chain is a network of facilities and distribution options that
performs the functions of procurement of materials, transformation of these materials into
intermediate and finished products and this distribution to
customers. It not only includes
manufacturer and suppliers but also
transporters, warehouses, retailers and customers
themselves.
Supply Chain Management: An Introduction

Some Examples for clear Understanding of Supply Chain

Ifa customer makes an online
purchase from Amazon, the supply chain includes, among
others, the customer, Amazon's Website, the Amazon warehouse, the carrier who delivers
package to customers, and all ot Amazon's suppliers and their
suppliers.

Suppliers Amazon's Amazon's

to Supplier Suppliers Carriers Website
Warehouses Customers

Supplier 1
Electronics
Supplier 2

Supplier 1
Fashion Multiple
Supplier 2 Products Items

Supplier 1
Kitchen
Supplier 2 Appliances

Raw Material
Suppliers Tier 2 Suppliers Tier 1 Suppliers Assembly Plant Dealers Customers

Supplier 1

Supplier 2 Camera

Supplier 3
Electronic

Supplier 1
Factory
Cylinder
Supplier 2
Power Train

Supplier 1
Bearings
Supplier 2

An Automotive Supply Chain

 8
Supply Ch ain Marnag
Characteristics of Supply Chain Management
The definitions of SCM, suggest number of significant factors and related
ted
which are key to successful implementation. These characteristics are as follou
ws: charactcteer
1. Inventory: The very focus of SCM is managing the flow and level
off inventory.T
in
level inventory must sufficient provide acceptable customer
of be to
ser h
readylist but 1.
enough to minimise supply chain cost. An inventory means the ready ies
service. This lie ito-
raw materials and other essentials required for the product or
of
be regularly updated to demarcate available stock and required
stock 5
nagement is critical to the function of SCM, because without prope Invento
management the production, as well as sale of the product is not inventy
possible. Busine
now pay more attention to this component due to its impact on
the sunnks
2. Cost: Any SCM aims at higher level of efticiency on
lowering the cost. Hero
chain
means "cost at the end of supply chain." This means that the
companies that a that are part
of a supply
chain are to be aware of what impact their approach and
activities hhave
upon their vendors or customers or both. In present day
environmentof
globalisation,the companies have to coordinate their supply chain
activities by
sharing information and using joint planning to attain the cost objective.
3. Information: Management of the flow of information is a key factor
for both
efficiency and effectiveness in the supply chain. Certainly the information flow
shoul
be directional flow to really maximise the
potential of SCM. A key feature is sharing
information up and down the supply chain.
4. Effective Supply Chain
Planning and Network Design: Another characterstic
of an effective supply chain is effective
supply chain planning and network design.
Network design is defined as a company being able to meet the
long term objective of
the company. A supply chain network can be
used to highlight interactions between
companies. Companies actively design valuable networks in order to manage
demand and supply variability. A
companies network is not just used to create
effective supply chain it is also used to customer
ensure satisfaction.
Scope/Components of Supply Chain Management
Companies across the world are looking forward to
logic for high growth. Today it would be signify innovation as the straey
difficult to find an organisation either s1mall or
which does not
understand the importance of supply chain laly
that successful management. Companies a c
implementation of these principles can have a overall

success of the positive impact on tne

organisation. The following are the basic
management. components of supPPY
Supply Chain Management An Introduction

Source Production

Location
Planning

Physical Distribution Components Transportation

Procurement and of
Manufacturing Support Supply Chain
Return
of
Product Development
and
Goods
Customer
Commercialization Service
Management

Components of Supply Chain

the beginning of the entire supply

. Planning: This is the important stage. Before
chain, it is essential to finalise the strategies
and put them into place. It is important to
the viability, costing, profit
check the demand for the product or service, checking
benefits withouta
and manpower, etc. It is difficult to achieve effective andlongterm
proper plan or strategy.
services
who will deliver the goods and
2. Source: Here we have to select the suppliers
set of pricing,
so that final production may
be done. This involves developing a
mutual
with suppliers. Moreover, it involves
delivery and payment processes receive from
processes for managing
the inventory of goods and services that you
them, transferring them to
suppliers. It also includes receiving shipments, verifying
facilities and authorising supplier payments.
your manufacturing
the most important aspects of this system. It
3. Production: Production is one among
is only possible if all other components
of the SCM are in tandem with other. This
involves making schedule for the activities necessary for production, testing,
packaging and delivery. This is the most important part of supply chain as it requires
measurement of quality levels, production output and productivity of labour.
4. Location: Any business needs a suitable location profitable to the business to be
able to survive as well as flourish. Hence a suitable location, well connected and very
dose to the source of essential resources tor production is vital to business prosperity.
The requirement and availability of manpower must also be considered while setina

up a business unit.

5. Transportation: It involves co-ordination of the receipt of orders from

customers,
developing a network of warehouses, transporting products through carriers to
customers and setting up an nvoice system to receive payments.
Any business
which pays attention to this component and takes good care of it, will benefit from the
 Supply Chain Managenen
10

time. We must
ensure zero damage
production and transportation of its goods on

and minimal loss in transit. from customer

reverse flow of goods
. Return of goods: This component refers to the
defective and excess
back to producer. It involves creating a network
for receiving
customers who have problems with
products back from customers and supporting
complaints,
lapses, followed by
consumer a
delivered products. In case of any
business must recall the products and issue an apology. This not only creates a good

customer bonding but also maintains goodwill in the long run.

Other Components
Customer Service Management: It includes the customer relationship
management, customer redressal committees, customer feedback forms, order taking,
order fulfillment, order delivery, collection of money and so on.
Product development and Commercialisation: It includes
Product Data Management, Product line
components such as
market share, customer satisfaction,
development, product launch, product supply,
profit margins and returns to stakeholders.
Physical distribution, Manufacturing
Support and Procurement: It includes
components such as Enterprise Resource Planning
material management, manufacturing (ERP), warehouse
planning, human resource management,
Various Flows in Supply management and so on.
Chain Management
The purpose to design a supply chain is to structure main three
(1) Product/Services Flow flows namely
(2) Information Flow and
(3) Finance Floww
in a way that customer requirements can be met in a
cost effective
Product!>e
(1) Product/Services Flow: The
direction, ensuringoter
better customer
ow of
goods
services or
ve manner.
customer service,
service, superior
are
always in
and increased market share. value,
ue, greater
Raw
greater market
greater
material ->
Work
Supplier/Vendors>> Manufacturer coverage,
coverage.
in
Progress/Semi-tinished goods
sub-systems Between various
various Production
Finished goods >> from production
centres >> to
final Production
Smooth flow of goods prevents stock-out
situation for items of consumers/ d
inventory.
istribution
Supply Chain Management: An Ihtroduction 11

(2) Information Flow: The second important flow of supply chain management is 1OW

of information without which supply chain cannot work in an effective manner. rlow

of information is in both ways-forward and backward flow.

korward flow of information includes availability of goods, transportation
flow incluaes
aistribution advice, invoice information, etc. Backward Information
feedback trom customers, timing and place ofdelivery of goods,changes required
product, etc.
and creates
cost of production
Any delay or lapse in flow of information may increase
imbalance in supply chain.
which is an
chain is flow of cash
(3) Finance Flow: Another important flow in supply backward
Finance/Cash flow is in
important element for the survival of any business or trom
from retailer to wholeseller
direction-rom customer to manufacturer,
wholeseller to manufacturer.

Information

Supplier Customer
or Product

Producer
Finance

Supply Chain Management

business processes of a focal
Chain Management is the integration of key
Supply on one side and
(customer and customer's Customer)
downstream players
organisation with side.
supplier) on the other
upstream players (supplier and supplier's
Management
Functions of Supply Chain
including managing the
is a cross-function approach
Supply Chain Management internal processing of materials to
convert
materials into an organisation,
movement of raw out of the organisation and
and movement of finished goods
them into finished products, stained to focus on core competencies
and becoming
As organisation
toward the end-consumer. raw materials sources
and distribution channels,
reduce their ownership of
more flexible, they
to other entities that can perform the
are increasingly being outsourced
These functions is to increase the number of organisations
I he eftect
more cost effectively.
activities better or control of daily logistic
customer demand, while reducing management
involved in satisfying Chain parthers led to the creation of supply chain
and more supply
operations. Less control
management concepts.
 Supply chain functions Supply Chain Mas
I . Strategic Functions can be
categorised into three level:
Strategic network
warehousing distributionoptimisation,
centres and
including the number of
locati
ation, siz
facilities.
Strategic Partnerships with
communication channels for critical
suppliers, distributors and customers
liers,
and
customers,
rs, creati
Cross
Docking, information and operational
Direct Shipping, and third improvements such
Creatir
Product Life Cycle party logistics.
optimally integrated intoManagement, so that new and existing products
cant
supply chain and
capacity management activities.
Information Technology Chain
Aligning overall organisational Operations.
strategy with supply strategy.
II. Tactical Function
Sourcing Contracts and other purchasing decisions
Production Decisions, like
contracting, scheduling and planning process.
Inventory Decisions, including quantity, location and Quality of
inventory.
Transport Strategy, including frequency, routes and contracting.
Focus on Customer Demand.
I . Operational Functions
Daily Production and Distribution Planning, including all nodes in the supply
chain.
Production Scheduling for each manufacturing facility in the
supply chain.
Demand Planning and Forecasting, co-ordinating the demand forecast
customers and
of al
sharing the forecast with all suppliers.
Sourcing Planning, including current inventory, and forecast demand in
collaboration with all suppliers.
Inbound Operations, including transportation from suppliers and receiving
inventory.
Outbound Operation, including all fulfillment activities, warehousing and
transportation to customers.

As we have discussed the important functions of Supply Chain Management, we perfom

different types of activities under Supply Chain Management so we can say that SCM is the
combination and blend of different managements like
(a) Inventory Management
(b) Distribution Management
 Introduction

Management:
An
Chain
Supply
(c) Channel Management

(d) Payment Management

(e) Finance Management

() Suppler Management

(g) Transport Management

Management
Service
Customer
(h) Management
Material and Store
(i)
Chain Management
Functions of Supply

Operational
Tactical Functions

Strategic Functionss
Functions

Chain
Types of Supply the steps include
moving and
In Raw Supply Chain, products and
1. Raw Supply Chain: transporting those
materials into finished
products,
raw chain include
transforming involved in supply
The entities
to the end user.
centres and
distributing them companies,
distribution
transportation
warehouses,
producers, vendors,

retailers. more
than previous one,
This supply chain is m o r e advanced
Chain:
2. Ripe Supply Food supply chains are complex
creates better relations with supplier.
organised and sized enterprises.
networks consisting of
small and medium
confronted
in food sector. Food Supply Chains are
exists
This type of supply chain
c o n s u m e r demands
for food quality and sustainability.
with increased
and extend
Chain: This type of chain is internally optimised,
3. Extended Supply is that this type only
boundaries, but the problem
well beyond the company is very c o m m o n in
integration. This type of supply chain
concentrate on partial
cannot develop products without
Automotive Sector. Today companies
and usage patterns. customers expect personal
understanding customer sentiments
and deliver these individual products
product and manufacturers must produce
while production cost efficiency.
operating at mass
4.Internal Supply Chain: It refers to the hain of activities within a company,
distribution. The internal supply chain
specifically, purchasing, production, sales and
has a significant impact on a company's success; Operations need to run smoothly in
order to create a harmonised working environment ànd an efticient workflow.
14 Supply Chain Manageme.

5. External Supply Chain: It refers to the network of activities compar faa

company
outside of
Such as transportation and the environmental factors, which can have a directe
tor
indirect effect on operations e.g. supplier failure, changes in laws and natu
natural
aisasters. These activities are usually have a greater impact on supply chain.
6. Self Monitored Supply Chain: Monitoring means to review on a continuous basi
the degree to which the supply chain activity is completed and if targets are being ne

This allows corrective actions to be taken.

Factors Affecting Supply Chain Management

There are several factors which need to be considered
while developing an efficient SCM
Following are the main factors:
location of Production
Decisions: Geographic
1. Location and Transportation
centers are the most important
factors in
Plants, warehouses and Distribution revenue, cost and level
the supply chain. These factors also impact the
determining
in such decisions. Determining the
service. Customer locations also playa vital role
of in supply chain
mode of transport is also an important a r e a
appropriate
but at the same time costly too, while shippingby
management. Air shipments are fast
rail is cheaper but large amounts of inventory need to be transported which
sea or

definitely affects the cost.

is important factors and whole
of the most
2. Product Type: Type of product
one

on it. Supply Chain Management

for solid
supply chain management depends
For example: Milk, Milk Products, Ice
products will be different from liquid products.
Cream, Medicines require sub zero temperature throughout the whole supply chain
be the most important criteria for some foods and
process and hygiene can

medicines.
3. Production Decisions: Production decisions which include type
of products to be

produced and the plants where those products will be produced, scheduling
production, etc. play an important role in determining the production decisions.
4. Inventory Control: Inventories are the most important part of Supply Chain and
exist as raw materials, semi-finished goods or finished goods. Proper inventory
management and control is very crucial as it determines the cost of production and
hence will affect the profitability.
5. Distribution Strategies: Distribution strategy is one of the most important factots
behind the plans of SCM. The distribution strategy deals with the relationship and the
connection between the suppliers and the warehouse managers. Supply Chain
Management focuses on improving the distribution strategies to optimise the overa
supply chain proces.
ent Supply Chain Management: An Introduction 15
ny 6. Supply Chain Integration: Supply Chain Management needs to integrate all the
Or
intormation available in one system to
effectively and efficiently track the progress.
That's why we need ERP's which integrate all the suppliers, procurement managers
and inventories into one system to control the overall supply chain system rora

particular organisation.
The Drivers of
Supply Chain Management
Supply Chain Management has five main drivers, which can be managed and developed
to improve responsiveness or
efficiency.
.Intormation: It is the most important and basic driver of the Supply Chain
Management. To formulate a strategy in this competitive era, a company needs to
collect the data and analyse the information accordingly. To get an idea of fufure
market of the products these information help to understand the trends. For the
collection of data, technology plays an important role and it is less expensive as well,
we can get data from anywhere at any place of any company or country througn
internet. So, technology is most important way to get information to maximise the
overall profitability of the company. Accurate information can enable very efficient
operating decisions and better forecasts but the cost of building and installing
systems to deliver this information can be very high. Information Flow is important
to connect the various stages of the
supply chain. This driver affects the performance
of the other drivers. Even a customer can
get data through this driver.
2. Production: Production, this driver helps in determining the number of
production
require according to the demand and how these demand will be met
customers get the product according to his choice and
effectively and
taste without delay. The
fundamental decision that managers face while making
production decision is how
toresolve the trade off between responsiveness and
warehouses are built with a lot of excess
efficiency. If
factories and
capacity, they can be very flexible
and
respond quickly to wide saving in the product.
3. Inventory: Inventory plays a key role in supply chain as demand
tend tomismatch. There are many reasons tor this mismatch. It and supply often
inappropriate production demanding a certain size, which wouldcould be because of
immediate demand, may be due to be over and
seasonality, may be due to
or
above
estimates, so inventory in supply chain is
required. Unless randomness of
Supply chain would be inefticient in this inventory well managed
is
cost-efticient in this
supply chain, especially for a standardised
product cost-efficiency driven
significant role in the competitive strategy also. category. Inventory plaus a.a
stocking high level of inventory for a Kesponsiveness can be
responsiveness can be gained by stocking
wide
range of products.enhanced by
proaucts at many Additional
locations so as to have
 Supply Chain Managerme
16

the inventory close to customers and make them

the
Benehit
available a s they demand
Benef
inventory in on
stocking
Of cost reduction and economies of scale can
be got by
There are three
basic decisions t
a rew central locations i.e. Distribution centres.

make regarding the inventory.

to satisty demand f
amount of inventory needed
C y c l e Inventory:This is the Usually companies
between purchases of the product.
the product in the period have the benefit o
in bulk in order to
produce and purchase the goods in increase in carrying
of goods in bulk results
economies of scale, but buying managers have
insurance all c o m e
in the way. So,
costs. Then cost to store and
better prices offered by
reduced cost of the order and
to trade off between the
quantities.
purchasing company in large has to keep inventory
uncertain, so a company
As future is
(ii) Safety Inventory: based on their past
do forecasting and planning
in large lots. Companies s o m e degree
of uncertainty. So, in
experiences but still every
forecasting has
in large quantity in case
with this situation, inventory is held
order to deal the
than anticipated. The trade off here is to weight
demand is suddenly greater to insufficient
the costs of losing sales due
cost of carrying extra inventory
against
inventory. of
that is built up in anticipation
(ii) Seasonal Inventory: This is inventory
demand that occur at certain times
of the year.
increase in
predictable
offa
4. Transportation: Transportation
plays a key role in Supply Chain Management
movement of goods to the ultimate
customer is an
nodal organisation as the
various
importantvalue activity. This driver helps in understanding the
creating
means of transport used to deliver
the product on time. If there is an increase in the
them.
time taken to deliver the products, the customers will dissatisfied

Transportation costs can be very high as compared to other operating costs of the
Supply Chain Management, so decisions related to transport are highly important to
be taken carefully.
Modes of transports are:

(a) Ship: Very cost efficient, but slow hence so much of time is required.
(b) Rail: It is also cost effective, but slow and it is also restricted to the places whicn
are connected by railway lines.
(c) Pipelines: Efficient mode of transportation but
restricted to liquids and gases
i.e. oil, water, natural gas, etc.
(d) Trucks: It is quick and flexible mode of
transportation. Cost of this mode o
transport fluctuates with the fluctuation in the
roads also play an prices of free and the condition or
important role in this mode of
transport.
 Supply Chain Management: An Introduction 17

(e) Airplanes: Very fast mode oftransport and very responsive. It is also expeliv
and the
mode and restricted by the quantily, nature of the products airpor
facilities.
Ciectronic: This is the most cost efficient, flexible and fastest mode or

transport, but this can be used only to transport particular type of products suc
as: Data, information, music, picture and text, etc.
. Location: The most important driver is the place where the products are stoCKed
location
up.
Ihis is the location where the distribution of products is initiated. Thecustomer is
to the
warehouse is equally important as it helps in delivering the product
a short period of time; so warehouses are located in the centre of the city or a distn.

Efficiency Responsiveness

Supply Chain Structure

Information Transportation

Location Inventory

Production

Drivers of Supply Chain

Supply Chain Trends -Challenges and Opportunities

As supply chain management is fast growing business all over the globe but it has some
challenges and opportunities ahead:
(a) Supply Chain must be designed to serve the "Base of the Pyramid".
(b) Service Chains will become more important than other chains.
(c) Micro segmentation will be key to success.
(d) Technology support SCM wll primarily be "OnTap".
to

(e) Artificial Intelligence will be embedded in mainstream

supply chain activities.
(6 Supply Chain Organisations will need to be truly integrated and
(a) Robotic Process Automation will be used
empowered,
to purchase
and sales orders.
(h) Crowding in Urban centres.
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Supply Chain Management
Summary
Supply Chain Management is growing field, during the past two decades the
rapid
technological changes and development of speedy telecommunication network have given a
boost to organisations in restructuring their business operations and developing a snoother tilow
of information, goods, money and services, etc. Supply Chain Management 1s the active

management of supply chain activities and relationships in order to maximise custorner value

and achieve a sustainable competitive advantage. Supply Chain has inventory, cost
information, planning and network design. Supply Chain consists of planning, sOurce
Chain has three mainflows
production, location, transportation and return of goods, etc. Supply
like material, finance and information. Flow of production is always
forward, tlow of finance is

backward and flow of information is both ways. There are

different types of supply chain and
Location transportation, inventory
various factors which affect the supply chain management.
distribution strategies are main factors that affect supply chain management

Questions
I.Short Answer Type Questions
1. What do you understand by "Supply Chain" and "Supply Chain Management ?
2. Elaborate the basic concept of Supply Chain Management.
3 Explain the history and evolution of the concept of Supply Chain Management.
4. What are different components of the Supply Chain Management?
5. What are the various functions of Supply Chain Management.
6. What are the various flows in Supply Chain Management
7. Explain the different drivers in Supply Chain Management.
8 What are the trends and the challenges faced by Supply Chain Management.
I. Long Answer Type Questions
1. What is Supply Chain Management? Discuss its main features
2. Write a note on functions of
Supply Chain Management and its different drivers.
3. Explain the components and various flows in the
Supply Chain Management.