MODULE 03:

SCM: INTRODUCTION TO
INVENTORY MANAGEMENT
SUPPLY CHAIN MANAGEMENT:
WHY IS IT IMPORTANT FOR YOU
 SUPPLY CHAIN DEFINITION & IMPORTANCE

• Supply Chain & Management Definition

• Supply Chain Management: Basic, Evolution, Ultimate
• Integrated Supply Chain Management
• Strategies involved in SCM
• Business Models for better integration
• Activities involved in SCM
• Importance of Planning
What is Supply Chain?

•The processes from the initial raw materials to the ultimate

consumption of the finished product linking across supplier-
companies.

•The functions inside and outside a company that enable the

value chain to make products and provide services to the
customer
 Supply Chain Management

“The systematic ,strategic, co-ordination of the traditional business functions

within a particular company and across companies between the supply
chain, for the purposes of improving the long-term performance of the
individual companies and the supply chain as a whole.”
The Evolution of Supply Chain

BASIC SUPPLY CHAIN

EXTENDED SUPPLY CHAIN
ULTIMATE SUPPLY CHAIN
 Integrated Supply Chain Management

Sources Suppliers Procurement Demand & Sales & Customers Consumers

of supply Supply Marketing
Planning

FLOW OF INFORMATION

FLOW OF GOODS

Manufacturing Distribution
 Strategy of Supply Chain Process
1. Outsourcing of entities that can contribute in achieving goal
in a cost efficient manner.
- Outsource of TPLs (Distributors, Franchising)
• Optimize warehousing & distribution facilities
• Encourage business with suppliers, distributors and
customers
• Apply efficient Logistics Strategy
• Invest in the improvement of Information technology and
channels.
• Train and improve people.
2. Customer Service Strategies

• Develop Customer Service as a single point of contact for all non-

commercial issues

• Build in-depth knowledge of customers and customize services that will

best serve his business (maintain a customer perspective)

• Position Customer Service as an integral part in doing business with the

customer

• Be the champion of customer service best practices

• Recognize effectiveness of action through improved KPIs

• Information Technology enabled.

3. Demand & Supply Planning Strategies

• Be a conduit of accurate, relevant and timely information

• Be the champion of planning processes across all areas

• Elevate and reposition KPIs as central focus to drive continuous

improvement
• Develop and maintain a pool of highly specialized planners
4. Distribution Resources Management
Strategies

• Apply the appropriate distribution network that will result to desired

customer service and at optimum cost
• define, identify and segment customers
• Avoid the pitfall of a ‘one-size fits all’ solution

• Leverage the capabilities of logistics providers who will act as

effective extension of SCM, focusing on solutions that will drive down
costs, enhance customer service and help identify opportunities for
future development.
• Make use of KPIs to drive cost efficiencies and effectiveness.
• Be early adaptors of supply chain standards, trends & best practices.
5. Organization & Training Strategies

• Hire and develop people who can work in different areas of supply
chain, be it in the Philippines or outside (flexibility)
• Provide formal and hands-on training programs
• Optimize use of cross functional team in resolving issues
• Advocate a performance driven culture in SCM (no excuses attitude)
• reward and recognize base on performance
• get everyone performing above expectations
• Create a shared mindset in the organization
• employees know what the organization is trying to accomplish (clear
mission and goals)
• why it is headed in one direction and not the other (alignment)
• what each individual contributes to the over-all goal (commitment)
 Improved information helps enterprises
Supply Chain Strategy to plan ahead and be more competitive

FINANCIAL •Planning and Acquisition

AND
PHYSICAL •Cash Flow impact
ASPECTS

INFORMATION HUMAN
RESOURCES •Securing and developing
SCM
•Supplier development
•Demand forecast programs
•Customer delivery
requirements
•Inputs of supply markets
NETWORKS &
RELATIONSHIPS
•Strategic Chain Alliances

•Supply chain services

 Supply Chain Ambition

• Customer Service
• Highly efficient, low-cost operations
• Accuracy and speed of information flow across the supply chain
• Innovation/Renovation
• Number 1 collaborator

The center of SCM competency and best practices in the Zone and the
preferred source of SCM practitioners.
ELEMENTS OF SUPPLY CHAIN
MANAGEMENT

• Planning
• Sourcing
• Distribution
Importance of Inventory

Balance the advantages and disadvantages of small and

large inventories

Pressures for small inventories

• Inventory holding cost
• Cost of capital
• Storage and handling costs
• Taxes, insurance, and shrinkage

• IM helps a business to prevent stockouts, manage

multiple locations, and ensure accurate
recordkeeping
Importance of Inventory

Pressures for large inventories

• Customer service
• Ordering cost
• Setup cost
• Labor and equipment utilization
• Transportation cost
• Payments to suppliers
 Reasons for Holding Inventory

• To meet anticipated customer demand

• To protect against stock outs
• To take advantage of economic order cycles
• To maintain independence of operations
• To allow for smooth and flexible production operations
• To guard against price increases
 In Short,
Buffer against uncertainty in…..

Supply (Raw material inventories)

Production process (Work in process inventories)

&
Demand (Finished good inventories)