Chapter 1

Introduction to Supply
Chain Management
By: Bhagyesh Balkrishna Kasle

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 What is Supply Chain Management?
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Operational
Sourcing Making Delivery Return
Strategy
 What is Supply Chain Management?
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Supply Chain Management (SCM) is the design and

management of flows of products, information, and funds
throughout the supply chain
1-4 Supply Chain Management Objectives

1. Improving Efficiency
2. Improving Quality
3. Optimising Transportation and Logistics
4. Reducing Costs
5. Enhancing Customer Satisfaction
6. Improving Distribution
7. Maintaining Better Coordination
 Supply Chain Stages
A typical supply chain may involve many different trading partners,
called stages

Stages may include:

– Planning
– Source
– Make
– Delivery
– Return

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 Value Chain Process
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• Value chains are an integral part of strategic planning for many

businesses today. A value chain refers to the full lifecycle of a
product or process, including material sourcing, production,
consumption and disposal/recycling processes.
• A value chain is a concept describing the full chain of a
business's activities in the creation of a product or service -- from
the initial reception of materials all the way through its delivery to
market, and everything in between.
• Michael E. Porter, of Harvard Business School, introduced the
concept of a value chain in 1985
 Basic model of Porter’s value chain

 Support activities

Firm infrastructure (General management, IT systems)

Human Resource (Recruiting, training development)

Technology development (R&D, product and process improvement

Procurement (purchasing of raw materials, machines, suppliers

Out
Marketi
Inbound bound
operations ng & Service
logistics logistic
sales
s

 Primary activities
 Benefits of value chains
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• Support decisions for various business activities.
• Diagnose points of ineffectiveness for corrective action.
• Understand linkages and dependencies between different
activities and areas in the business. For example, issues in human
resources management and technology can permeate nearly all
business activities.
• Optimize activities to maximize output and minimize organizational
expenses.
• Potentially create a cost advantage over competitors.
• Understand core competencies and areas of improvement.
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 Key Issues in Supply Chain Management
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1. Globalization
2. Fast-changing Markets
3. Quality and Compliance
 1- What Are Logistics?
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1. Logistics includes planning and executing the storage and

movement of goods between different points in the supply
chain. Logistics coordinates facilities, people, equipment and
other resources to ensure products move when they’re supposed
to and there is space for them at the next stop.
2. Demand planning, transportation (including fleet management),
inventory management, material handling and order fulfilment
are all processes that fall under logistics. To learn more, read our
article on logistics management.
Sr. No Logistic Supply Chain
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16 Supply chain management covers a wide
range of activities, including planning,
Logistics is one activity in supply
1 sourcing materials, labour and facilities
chain management
management, producing and delivering
those goods and services
Logistics focuses on the efficient Supply chain management targets higher
2 and cost-effective delivery of operational performance that will give the
goods to the customer business a competitive advantage
The modern practice of supply chain
management started in the 20th century.
Logistics started with the military.
The Ford Motor Company production lines
3 Many say Alexander the Great,
perfected the concept. Many credit
born 356 B.C., as a logistics master
logistician Keith Oliver as the person who
coined the term in the early 1980s
SCM oversees the development of raw
Logistics are centered on the materials into finished goods that move
4 movement and transport of goods from the producer to the manufacturer.
within a company Those goods get distributed to retailers or
directly to consumers
 Supply Chain Drivers
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1. Production
2. Inventory
3. Location
4. Transportation
5. Information
 Obstacles in Strategic Fit Achievement
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1. Increase in product variety
2. Increase in demanding customers
3. Smaller product lifecycles
4. Effect of globalisation
5. Difficulty in execution of strategies
 Supply Chain Strategies
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1. Set up a supply chain council
2. Leverage technology
3. Create alliances
4. Aim for overall cost of ownership
5. Strategically source suppliers
6. Centralized contract management
7. Optimized inventory management
8. Regular assessment
9. Monitor and set risk levels
1- Achieving Strategic Fit Through SCM
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Strategic Fit may be defined as matching resources and

capabilities but in Procurement it means requiring that both
the competitive and supply chain strategies of a company
have aligned goals. To provide the highest level of service as
a procurement organization, strategic fit must be achieved
 Achieving Strategic Fit
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1. Understanding Customer Requirements & Uncertainties

2. Understanding Procurement Capabilities
3. Procurement Responsiveness
Step
1- 1- Customer Requirements & Uncertainties
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1. Quality
2. Cost
3. Delivery
4. Service & Safety
5. Corporate Responsibility
 Step 2- Understanding Procurement
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Capabilities

1. Important to The Customer

2. Specifies Requirements
3. Can Be Measured
4. Establishes A Target
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Step 3 - Procurement Responsiveness
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 Best practices in SCM
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1. Set up a supply chain council
2. Establish a supply chain structure
3. Leverage technology
4. Create alliances
5. Focus on the total cost of ownership
6. Strategically source suppliers
7. Move contract management to the supply chain
8. Optimize inventory for reduced cost
9. Establish regular reviews
10. Set control and risk levels
 Obstacles of Streamlined SCM
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1. Optimising the supply chain process
2. Integrating supply chain data
3. Elimination of duplicate Data
4. Gearing up existing systems
5. Think beyond the horizon
1- Supplier Selection
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1. Supplier Selection Scorecard

2. Identify Suitable Suppliers
3. Scorecard Ranking
4. Negotiate
5. Create Contract
 Supplier Characteristics
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Cost Reputation
Quality Certifications
Delivery Collaboration

Location Customer Base

Capacity Financial Health

Flexibility Social Responsibility

Lead Time Product Development

 Supplier quality audits
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1. A supplier audit inspects a supplier’s usage of industry
regulation practices, including the health and safety and
correct manufacturing processes.
2. Generally, auditing a supplier covers a large area with
several practices.
3. Therefore they are usually bespoke to the client’s
requirements.
4. The supplier auditing process can differ for each
industry, from food to electrical goods.
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Types of Supplier Audits
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1. Announced Supplier Audits

2. Unannounced Supplier Audits
3. Desktop Supplier Audits
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Supplier Audit Procedure
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1. Pre Audit Questionnaire and Pre-inspection Meeting
2. Team Selection
3. Notification of Audit to Supplier
4. Pre-inspection Meeting
5. Execution of Supplier Audit
6. Reporting on Findings and Closure of Audit
1- Benefits of Supplier Audits
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1. The Audit Reveals Potential Risks

2. Improves Customer Satisfaction
3. Helps build communication with supplier
1- Contract Management
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1. Simply put, a procurement contract is a legal document
that binds a buyer and seller, enforcing specific conditions.
2. The seller agrees to fulfil the buyer’s request, and in turn,
the buyer agrees to pay for the goods or services.
3. All the terms and conditions governing the relationship
with the supplier concerning procurement are outlined in
the procurement contract within the procurement solution
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Types of supply chain contracts
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1. Fixed Price Contracts

2. Cost Reimbursable Contracts
3. Purchase Orders
4. Time and Materials Contracts
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Non-Disclosure Agreement
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1. A confidentiality or non-disclosure agreement (NDA) is a
legal document that prevents the release of trade secrets and
other confidential information.
2. Confidential information may include the company’s
business plan, financial data, customer lists and other
proprietary information. These agreements can be used in a
wide range of situations, including:
 Make-or-Buy Decision
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1.36 A make-or-buy decision is an act of choosing between
manufacturing a product in-house or purchasing it from an
external supplier.
2. A make-or-buy decision compares the costs and benefits
associated with producing a necessary good or service internally
to the costs and benefits involved in hiring an outside supplier
for the resources in question.
3. To compare costs accurately, a company must consider all
aspects regarding the acquisition and storage of the items versus
creating the items in-house, which may require the purchase of
new equipment, as well as storage costs.
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THE END