FOOD SUPPLY CHAIN MANAGEMENT Dr.

Veena Paul
(20FP3022)
 INTRODUCTION
❖Food industry plays an important role in providing basics and necessities for
supporting various human activities and behaviors.
❖ Once harvested or produced, the food should be stored, delivered, and
retailed so that they could reach to the final customers by due date.
❖ About one-third of the produced food has been abandoned or wasted yearly
(approximately 1.3 billion tons).
❖ Two-third of the wasted food (about 1 billion tons) is occurred in supply chain
like harvesting, shipping and storage.
SUPPLY CHAIN MANAGEMENT
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.
 FOOD SUPPLY CHAIN MANAGEMENT (FSCM)
❖ FSCM has been coined to depict the activities or operations from production,
distribution, and consumption so as to keep the safety and quality of various food
under efficient and effective modes.
❖ A food supply chain or food system refers to the processes that describe how food
from a farm ends up on our tables.
❖Because a food supply chain is domino-like, when one part of the food supply chain
is affected, the whole food supply chain is affected, often manifested through price
changes.
PLAYERS OF SUPPLY CHAIN
EXAMPLE
 FACTORS INFLUENCING FOOD SUPPLY CHAINS
1. agriculture production;
2. involvement of various governmental/non-governmental actors;
3. processing and maintaining quality;
4. consumer and market choices;
5. local authorities;
6. logistics companies;
7. a host of other small companies actively involved in this food supply chain and
providing secondary value.
 LOGISTICS
❖ Food logistics is the movement of food through the supply chain until
it reaches the consumer’s plate.
❖ The flow of information from the consumer back into the chain is also
an important part of logistics.
❖ Logistics activities are the operational component of supply chain
management, including quantification, procurement, inventory
management, transportation and fleet management, and data
collection and reporting.
 WHY DO WE HAVE TO MOVE MATERIALS?
❖ Let us try to answer this question by analysing a Restaurant:
❖ What foods do you find on the menu?
❖ How are they produced or prepared?
❖ What ingredients go into the preparation?
❖ Where are they sourced from?
❖ Imagine how many tangible and intangible goods have been
moved in this case.
❖ All organisations have to move materials for even the smallest of
their processes.
❖Manufacturers have to procure raw materials from suppliers and
distribute finished products to the customers
❖ The function that is responsible for controlling such movement is
termed ‘logistics’
 INBOUND LOGISTICS + MATERIAL MANAGEMENT
+ PHYSICAL DISTRIBUTION = LOGISTICS
1. Inbound logistics: the movement of materials received from suppliers.

2. Material management: the movement of material and components inside a firm.

3. Physical distribution: to movement of goods outward from the end of the assembly line to the
customer.

4. According to Council of Logistics Management: “Logistics is the process of planning, implementing

and controlling the efficient, effective flow and storage of goods, services and related information
from the point of origin to the point of consumption for the purpose of conforming the customer
requirement”
OUTBOUND LOGISTIC OBJECTIVES
 Supply Chain
Management
➢ SCM deals with managing
materials, information, and financial
flows in a network of suppliers,
manufacturers, distributors, and
customers.
➢ SCM encompasses the planning and
management of all activities involved
in sourcing and procurement,
conversion, and all logistics
management activities.
Logistics
➢ Logistics involves managing the flow
of items, information, cash and ideas
through the coordination of supply
chain processes and through the
strategic addition of place, period and
pattern values
➢ Part of SCM that plans, implements,
and controls the efficient, effective
forward and reverse flow and storage
of goods, services and related
information between the point of origin
and the point of consumption in order
to meet customers' requirements.
OBJECTIVE OF SUPPLY CHAIN MANAGEMENT
▪ Systems approach to viewing the channel as a whole, and to
managing the total flow of goods inventory from the supplier to the
ultimate customer
▪Strategic orientation towards cooperative efforts to synchronize
and converge intrafirm and inter-firm operational and strategic
capabilities into a unified whole
▪Customer focus to create unique and individualized sources of
customer value, leading to customer satisfaction.
 SUPPLY CHAIN MANAGEMENT: ACTIVITIES AND
PROCESSES
1. Planning: It represents a strategic segment to manage resource
utilisation to satisfy customer product and service requirements.
2. Information: Detailed information on all components is critical for
effective SCM, which is managed through systems and computers.
3. Source: Selecting the best suppliers for supplying raw materials to
produce the product. It requires developing a set pricing and
delivery system in the supply chain.
 CONT…
4. Production: In manufacturing, the supply chain manager should schedule
the activities needed to produce, test, package, and label. It is the most
important component of the supply chain.
5. Delivery: This part is mainly referred to as logistics by the supply chain
manager, which starts with the receipt of orders from the customer. It has a
network of warehouses for storing the product, choosing carriers to deliver
the product to the customer and establishing a system for receiving
payments.
6. Return of goods: This is a critical part of the system, wherein a flexible
and responsible network is created to take back excess or defective
products delivered to customers and provide support services to those who
encounter problems with its usage.
 SUPPLY CHAIN MANAGEMENT: CHALLENGES
1. Manufacturing: The supply chains begin with the process of manufacturing and end with
getting the product into the hands of the consumer. The production department is
responsible for coordinating production schedules, determining how long the manufacturing
process of a product will take and keeping track of the inventory of finished products. The
materials analyst keeps track of inventory and material schedules and coordinates
materials with production schedules.
2. Data analysis: Data management by data analyst, data acquisition engineer, data
manager, data administrator or statistician is a key component in the supply chain. A
proper understanding and analysis of this data helps supply chains work efficiently. In fact,
data analysis and management are vital within SCM since all the processes involved in
serving consumers effectively have to be data-driven.
3. Procurement: Procurement, focusing primarily on identifying and purchasing the raw
materials needed to create products, is a key part of what keeps supply chains going.
There is a wide range within this, from procurement analyst focusing on one specific
aspect of purchasing, to purchasing managers who oversee the purchasing decisions
for an entire organisation.
4. Transportation: Getting products into the hands of consumers is the main goal of a
supply chain and meeting this goal is possible through transportation. This is the
responsibility of transportation analysts or logistics analysts under a transportation
manager with primary focus on getting products from the factory to the consumer.
5. Customer service: Always a crucial part of any interaction between a business and a
consumer, customer service ensures that customers are satisfied with the products they
receive. There are many roles, from accounts specialist at a logistics firm working to
coordinate product shipments and resolve customer issues, to a customer service
manager overseeing the satisfaction of a company’s entire client base.
 FOOD SUPPLY CHAIN MANAGEMENT
- A supply chain consists of

Supplier Manufacturer Distributor Retailer Customer

Upstream
Downstream

- aims to Match Supply and Demand, profitably for

products and services

SUPPLY SIDE DEMAND SIDE

- achieves

The right
Product
+ The right
Price
+ The right
Store
+The right
Quantity
+ The right
Customer
+ The right
Time
= Higher
Profits
 WHY IS SUPPLY CHAIN MANAGEMENT SO
IMPORTANT?
– To gain efficiencies from procurement, distribution and logistics
– To make outsourcing more efficient
– To reduce transportation costs of inventories
– To meet competitive pressures from shorter development times, more
new products, and demand for more customization
– To meet the challenge of globalization and longer supply chains
– To meet the new challenges from e-commerce
– To manage the complexities of supply chains
– To manage the inventories needed across the supply chain
WHY SO DIFFICULT TO MATCH SUPPLY AND
DEMAND?
– Different organizations in the supply chain may have different,
conflicting objectives
• Manufacturers: long run production, high quality, high
productivity, low production cost
• Distributors: low inventory, reduced transportation costs, quick
replenishment capability
• Customers: shorter order lead time, high in-stock inventory, large
variety of products, low prices
CONT..
➢ Purchasing
• Stable volume requirements, flexible delivery time, little variation
b/n products, large quantities
➢ Warehouse
• Low inventory ,reduced transportation costs, quick replenishment
capability
➢ Marketing/sales wants: fast delivery, many package types, special
wishes/promotions
CONT...
o Uncertainty in demand and supply
 Breakdowns of machines and vehicles
 Weather, natural catastrophe, war
 Local politics, labor conditions, border issues
o Changing customer requirements
o Decreasing product life cycles
o Fragmentation of supply chain ownership
o Barriers to integration of organizations
o Getting low commitment from top management
o Long lead times
PARTICIPANTS IN THE SUPPLY CHAIN
SUPPLIERS
Source of raw materials, component parts, semi-manufactured products and
unfinished or non-consumable products that occurs early in the supply chain.

MANUFACTURERS / PRODUCERS
Makers of final products. Manufacturers perform the task of final assembly or
product integration.

DISTRIBUTORS / WHOLE SALERS

Responsible for managing, storing and handling of products for organizations that
don’t want to carry entire variety of products in their own facilities.

LOGISTICS SERVICE PROVIDERS

Commercial provider of individual or multiple integrated service for other entities in
the supply chain e.g. transportation management, value-added warehousing and
distribution and information technology based services

RETAILERS
The entity that buys from the manufacturer and sell to the final customer.

CONSUMERS
People who go into the stores and buy and consume the product
DRIVERS OF SUPPLY CHAIN PERFORMANCE
How to achieve
Efficiency Responsiveness

Supply chain structure

Logistical Drivers
Inventory
Inventory Transportation
Transportation Facilities
Facilities

Cross- Functional
Information
Information Sourcing Pricing Drivers
 CONT...
✓ To understand how a company can improve supply chain performance in
terms of responsiveness and efficiency, we must examine the logistical
and cross functional drivers of supply chain performance.
✓ The drivers interact with each other to determine the supply chain’s
performance in terms of responsiveness and efficiency.
➢ As a result the structure of these drivers determines if and how strategic
fit is achieved across the supply chain.
➢ Therefore, the better management of all these activities leads to
increase a firm’s performance
LOGISTICS DRIVERS
1. Inventory Driver
▪ Changing inventory policies can dramatically alter the
supply chain's efficiency and responsiveness / effectiveness.
▪ For example, a food retailer can make itself more responsive by
stocking large amounts of inventory and satisfying customer demand
from stock.
▪ A large inventory, however, increases the retailer's cost, thereby making
it less efficient.
▪ Reducing inventory makes the retailer more efficient but hurts its
responsiveness.
 2. Transportation Driver
Transportation – moves inventories between the different stages in
the supply chain
Two primary transportation components
1. Method of transportation
2. Transportation route
3. Facilities
❖ The actual physical locations in the SC network where product
is stored, assembled or fabricated. The major types of facilities
are production site and storage site
❖ Decisions regarding the role, location , capacity and flexibility of
facilities have significant impact on the SC’s performance
CROSS FUNCTIONAL DRIVERS
4. Information
▪ Role in the supply chain
The connection between the various stages in the supply chain
Crucial to daily operation of each stage in a supply chain
 E.g., production scheduling, inventory levels Role in the
competitive strategy
Allows supply chain to become more efficient and more
responsive at the same time
 Two primary information components
1. Information sharing
2. Push verses pull strategy
o Information sharing efficiency – freely share lots of information to increase the
speed and decrease the costs of supply chain processing
o Information sharing effectiveness – share only selected information with certain
individuals, which will decrease the speed and increase the costs of supply chain
processing
➢Pull information strategy (efficiency) – supply chain partners are responsible for
pulling all relevant information
➢Pull technology – pulls / receives information
➢Push information strategy (effectiveness) – organization takes on the responsibility
to push information out to its supply chain partners
➢Push technology – sends information
5. SOURCING
Role in the supply chain
– Decisions determine what functions a firm performs and what functions the firm out-
sources.
– Sourcing decisions affect both the responsiveness and efficiency of a SC.
– Set of processes required to purchase goods and services in a supply chain
– Supplier selection, single vs. multiple suppliers, contract negotiation
Role in the competitive strategy
– Sourcing is crucial. It affects efficiency and responsiveness in a supply chain
– In-house vs. outsource decisions - improving efficiency and responsiveness
 6. PRICING
Role in the supply chain
– Pricing determines how much the firm will charge for goods or services that it
makes available in a supply chain
– Pricing affects the behavior of the buyers of the good thus
affects SC performance.
–Pricing strategies can be used to match demand and supply Role in the competitive
strategy
– Use pricing strategies to improve efficiency and responsiveness
– Low price and low product availability; vary prices by response times
Amazon: Faster delivery is more expensive
CONSIDERATIONS FOR SUPPLY CHAIN DRIVERS
Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation / Proximity /

Dedicated Flexibility
Information Low cost/slow/no High cost/
duplication streamlined/reliable
Sourcing Low cost sources Responsive sources

Pricing Constant price Low-high price

▪ SCM involves in integrating three key flows across the
boundaries of the companies Supply chain
➢ Product/material flows
➢ Information flows, and
➢ Financial-cash flows.
▪ Successful integration of the above three flows has produced
improved efficiency and effectiveness.
SUPPLY CHAIN PERFORMANCE METRICS
❖ The focus on a least total cost system requires measuring the tradeoff
costs when a suggested change is made in one of the components or
elements of the system.

❖ Cost has long been recognized as an important metric for

determining efficiency.

❖ The important point to remember is that successful supply chain

performance measurement relies on appropriate metrics that capture
the entire essence of the supply chain process.
 DEVELOPING SUPPLY CHAIN PERFORMANCE METRICS
❖ The development of a metrics program should result from a team effort.

❖ Second, involve customers and suppliers, where appropriate, in the metrics

development process

❖Develop a tiered structure for the metrics

❖ Identify metric “owners” and tie metric goal achievement to an individual’s

or division’s performance evaluation.
DEVELOPING SUPPLY CHAIN PERFORMANCE METRICS

❖Establish a procedure to mitigate conflicts arising from metric

development and implementation.

❖ Establish top management support for the development of a

supply chain metrics program
Dimensions of SCM Performance Metrics
Characteristics of Good Measures
 SCM Performance Measurement
❖ Measurement creates understanding:
✓if you cannot measure it, you cannot understand it.
❖Measurement drives behaviour:
✓What gets measured gets attention.
❖ Measurement help communicate strategy:
✓Measurement is a prerequisite for high level
execution and attainment of world-class results.
❖ Measurement leads to results:
✓What you measure is what you get.
Traditional Performance Measurement
Evaluation of Metric Utilization
❖ There are several stages for the development of meaningful
metrics
❖Stage 1: awareness of the importance of using the appropriate
metric
❖Stage 2: developing the actual metric
❖Stage 3: performance improvement
❖Stage 4: integration internally and across the supply chain
Supply Chain Metrics
Supply Chain Operations Reference (SCOR)
Model
Five Distinct Management Process of SCOR
Balanced Scorecard (BSC)