OME752 – Supply Chain Management

Supply chain specialization enables companies to improve their overall competencies in the
same way that outsourced manufacturing and distribution has done; it allows them to focus
on their core competencies and assemble networks of specific, best-in-class partners to
contribute to the overall value chain itself, thereby increasing overall performance and
efficiency. The ability to quickly obtain and deploy this domain-specific supply chain
expertise without developing and maintaining an entirely unique and complex competency in
house is a leading reason why supply chain specialization is gaining popularity.

Stage 6– SCM Evolution : [ Supply Chain Management 2.0]

Building on globalization and specialization, the term ―SCM 2.0‖ has been coined to describe
both changes within supply chains themselves as well as the evolution of processes, methods,
and tools to manage them in this new ―era‖.

Web 2.0 is a trend in the use of the World Wide Web that is meant to increase creativity,
information sharing, and collaboration among users such as,

 Multi suppliers and Customers

 Automated Business Transaction
 Multiple Competitors

SCM 2.0 leverages solutions designed to rapidly deliver results with the agility to quickly
manage future change for continuous flexibility, value, and success. This is delivered through
competency networks composed of best-of-breed supply chain expertise to understand which
elements, both operationally and organizationally, deliver results, as well as through intimate
understanding of how to manage these elements to achieve the desired results.

Decision Phases in Supply Chain

Decision phases can be defined as the different stages involved in Supply Chain Management
for taking an action or decision related to some product or services.

Successful supply chain management requires decisions on the flow of information, product,
and funds that fall into three decision phases.

 Supply Chain Strategy

 Supply Chain Planning
 Supply Chain Operation
 OME752 – Supply Chain Management

Supply Chain
Strategy

Supply Chain Decision Phases

Management

Supply Chain
Planning

Supply Chain
Operation

Decision Phases in Supply Chain

1. Supply Chain Strategy (Long Term Planning)

A supply chain strategy is a formal approach to managing the network between an

organization and its suppliers. A supply chain manager usually develops this strategy with the
primary goal of maximizing value across all stages of the production cycle.

This allows a business to spot inefficiencies and potential risks in the supply chain, and it
helps to analyse the scenarios and optimize operations to improve costs, service and speed to
market.

The objective of supply network or SCM is to maximize the overall value. Value is
correlated to supply chain profitability. Here, profitability is the difference between the total
revenue generated from the customer and the overall supply chain costs.

Strategies and designing of the supply chain include:

 Deciding on the supply chain structure and the activities each stage of the supply
chain will perform
 Selecting a location and capacities of facility
 Deciding on the products that are to be made and the location where they need to be
stored
 Choosing the modes of transportation and the source from where the information is to
be collected
 OME752 – Supply Chain Management

2. Supply Chain Planning (Mid Term Planning)

Supply chain planning (SCP) is the process of anticipating the demand for products and
planning their materials and components, production, marketing, distribution and sale.
Its overall goal is to balance supply and demand.

Importance of Supply Chain Planning

Supply chain planning can help streamline operations, enhance efficiency, avoid delays and
bring down operating costs. Done right, planning can reduce costs associated with several
processes, including purchasing, production, inventory management and logistics. Supply
chain planning is used for solving the constraints

Planning decisions include

 which market will be supplied from which locations,

 the subcontracting for manufacturing,
 the inventory policies to be followed, and
 the timing and size of marketing promotions

Supply chain planning should be done according to the demand and supply view. In order to
understand customers‘ demands, a market research should be done. The second thing to
consider is awareness and updated information about the competitors and strategies used by
them to satisfy their customer demands and requirements. As we know, different markets
have different demands and should be dealt with a different approach.

This phase includes it all, starting from predicting the market demand to which market will be
provided the finished goods to which plant is planned in this stage. All the participants or
employees involved with the company should make efforts to make the entire process as
flexible as they can. A supply chain design phase is considered successful if it performs well
in short-term planning.

3. Supply Chain Operations. (Short Term Planning)

The third and last decision phase consists of the various functional decisions that are
to be made instantly within minutes, hours or days. The objective behind this
decisional phase is minimizing uncertainty and performance optimization. Starting
from handling the customer order to supplying the customer with that product,
everything is included in this phase.
 OME752 – Supply Chain Management

Decisions related with

 Allocation of inventory or production to individual orders

 Set a date that an order is to be filled
 Generate pick lists at a warehouse
 Allocate an order to a particular shipping mode and shipment
 Set delivery schedules of trucks
 Place replenishment order.
 Achieve the reduction in uncertainty and optimize performance
Example. A customer demanding an item manufactured by the company. Initially, the
marketing department is responsible for taking the order and forwarding it to production
department and inventory department. The production department then responds to the
customer demand by sending the demanded item to the warehouse through a proper medium
and the distributor sends it to the customer within a time frame. All the departments engaged
in this process need to work with an aim of improving the performance and minimizing
uncertainty.

Process View of Supply Chain

A supply chain is a process and a flow that works in order between and within the different
phases of supply chain so that the organization can fulfil the demands of a customer. There
are various processes and flows within and between stages of a product supply chain, all
designed to meet a customer‘s need for a product.

Supply Chain Process

View

Cycle View Push / Pull View