UNIT-I: Introduction to Supply Chain Management(Folder)

Description: This Unit will cover the introduction to supply chain management, key issues in
supply chain management, inventory management and risk pooling, effect of demand
uncertainty, network planning, resource allocation and supply contracts.

Chapter-1.1 Introduction to Supply Chain Management (Folder)

Description: This chapter will explain the basic concepts of Supply Chain Management
Introduction to Supply Chain Management by Dr Rajat Agrawal, Professor, IIT Roorkee:
https://www.youtube.com/watch?v=raqi4gjMLm8

“Supply Chain Management is the management of the flow of goods and services and includes
all processes that transform raw materials into final products. It involves the active streamlining
of a business's supply-side activities to maximize customer value and gain a competitive
advantage in the market.” --- Investopedia
SCM represents an effort by suppliers to develop and implement supply chains that are as
efficient and economical as possible. Supply Chains cover everything from production to product
development to the information systems needed to direct these undertakings.
Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers,
manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the
right quantities, to the right locations, and at the right time, in order to minimize system wide
costs while satisfying service level requirements.

Figure – 1: Supply Chain Management Source: Lincoln Bell

Objectives of Supply Chain Management
The objective of supply chain management is to coordinate activities within the supply chain to
maximize the supply chain’s competitive advantage and benefits to the ultimate consumer.
Strategic Importance of SCM
 The coordination of all supply chain activities, starting with raw materials and ending
with a satisfied customer
 Includes suppliers, manufacturers and/or service providers, distributors, wholesalers,
retailers, and final customer

Figure – 2: Supply Chain Management done by CISCO Source: Cisco

Development Chain
Development Chain is aet of activities and processes associated with new product introduction.
This includes:
– product design phase
– associated capabilities and knowledge
– sourcing decisions
– production plans
Figure – 3: Development Chain of SCM Source: Lionel Bell

Goals of Supply Chain Management

The definitions of supply chain management indicate that it is a complex undertaking that
extends beyond the scope and capabilities of a single organization. Significant effort is needed to
build and maintain a supply chain network. This involves a tremendous action list that requires
expertise, time, and money—establishing strategies, building relationships and roles, aligning
processes, developing people, implementing technology, and investing in capacity.

supply chain management capabilities is worthwhile because organizations need strong supply
chain capabilities to profitably compete in the marketplace. Their key goals for supply chain
management should be to achieve efficient fulfillment of demand, drive outstanding customer
value, enhance organizational responsiveness, build network resiliency, and facilitate financial
success.

Goal 1: Achieve Efficient Fulfillment

On the most basic level, the purpose of supply chain management is to make inventory readily
available in customer facing positions to fulfill demand. Organizations must pursue the goal of
matching supply with demand in a timely fashion. Supply chain partners must work together to
maximize resource productivity, develop standardized processes, eliminate duplicate efforts, and
minimize inventory levels. Such steps will help the organization reduce waste, drive out costs,
and achieve efficiencies in the supply chain.
Reduction of supply chain expenses is a popular goal, particularly during times of economic
uncertainty when companies desire to conserve capital. Efficiency initiatives can focus on any
aspect of supply chain operations, though transportation and inventory are frequent cost control
targets.

Ocean Spray, an agricultural cooperative that produces fruit juices and foods, was able to cut
freight costs after opening a regional distribution center in Florida.

Kimberly-Clark, a manufacturer of personal care products, has been on a 6-year journey to create
a demand-driven supply chain. The company has realigned its distribution center network and
streamlined the number of facilities to take inventory and costs out of the system.

Kimberly-Clark reduced its finished goods inventory by 19 percent.

Goal 2: Drive Customer Value

Cost efficient fulfillment and inexpensive products are important, but supply chain managers
must also focus on value creation for their customers. Customers are the lifeblood of the
organization and create the need for a supply chain. Hence, a fundamental objective in supply
chain management must be to consistently meet or exceed customer requirements.

The goal of driving customer value begins with a market-driven customer service strategy that is
based on clearly understood customer requirements.

Highly consistent, just-in-time delivery is critical to the restaurants and food service companies
supplied by McCain Foods, the world’s largest manufacturer of French fries. Rather than focus
on low–cost rail transportation, McCain works closely with a long–haul truckload carrier to
provide exceptional on-time delivery performance for these time–sensitive supply chains. They
preload trailers, secure additional capacity, and expedite deliveries as needed to ensure that
French fries are always on the menu

Goal 3: Enhance Organizational Responsiveness

Another important rationale for supply chain management capabilities is responsiveness to
change. The current business environment is one of rapid change with multiple forces shaping
how businesses operate and survive. Supply chain management can help organizations adapt to
the challenges of globalization, economic changes, expanding consumer expectations, and
related issues
The unprecedented expansion of global trade increases the intensity of competition from new
market entrants. For example, Panasonic, Samsung, and Sharp must battle for retail shelf space
and sales with Vivo, oneplus, and other television manufacturers. Also, the cost of global trade is
on the rise.. At the same time, globalization can present expansion opportunities. Organizations
with flexible supply chain networks that can adapt to the requirements of new markets will be
well positioned to grow.

Economic crises such as the recent global recession have a tremendous negative impact on
consumer demand and production. Weaker organizations that fail to anticipate the changes,
adjust capacity, and reduce inventory levels in their supply chains will not survive. Such was the
fate of Layman Brother, Circuit City Stores, and other retailers in 2009.

With information at their fingertips, today’s consumers are empowered to make strong demands
on the supply chain. They can review product options, compare prices, and check availability in
real-time using mobile devices. This leads to increased expectations for greater product variety,
customized goods, off-season availability of inventory, and rapid fulfillment at a cost comparable
to in-store offerings.

In addition, shrinking product life cycles, the emergence of new technologies to facilitate supply
chain transformation, and increases in government regulation of supply chain processes like
transportation are compelling reasons to remain nimble. A flexible and responsive supply chain
will adapt to these changes with negligible disruption.

Goal 4: Build Network Resiliency

Beyond the business challenges that emerge over time, organizations may also encounter sudden
and severe supply chain disruptions. These atypical events—natural disasters, cataclysmic
weather, labor strikes, supplier failures, and so on—negatively affect the flow of goods and make
the organization vulnerable to financial, reputational, and relational damages.

Goal 5: Facilitate Financial Success

One of the most important roles of supply chain management is to contribute to the financial
success of the organization. Traditional initiatives focus on cost efficiency—streamline stock
levels to reduce inventory carrying cost, automate fulfillment operations to minimize labor
expense, consolidate orders to cut freight spend, and so on. In contrast, leading organizations use
the supply chain to enhance differentiation, increase sales, and penetrate new markets. Their goal
is to drive competitive advantage and shareholder value
Drivers of Supply Chain Management
Facilities

The facilities could be effectively managed to unleash the potential of green initiatives in the
manufacturing enterprise. However, effective supply chain management planning decrease cost
and faster services in facilities. The facilities management creates values for internal customers.
The actual meaning of facility is the physical placement of finished goods, work in process
material, and raw material in storerooms and warehouses. In this regard, more efficient or more
responsive facility management required to get better and quicker access to products near to the
customer Thus, warehousing facilities near to distributor location minimize cost, time, and fewer
resources utilize. In this way, the green initiatives can be achieved.

Inventory

A textile or FMCG industries proved to be more responsible with larger inventory but it takes the
huge cost to store finish goods and disseminate into the marketplace. The manufacturing
companies hire professionals to procure required inventory and ensure effective collaboration
with suppliers to minimize stock levels .For this reason, Vendor Management Inventory (VMI),
Just-in-Time, and Lean manufacturing considered to achieve supply chain sustainability goals.

Transportation

A better transportation approach for manufacturing company is necessary to reach the destination
in a timely manner. Joint route planning can be achieved by outsourcing transportation function.
The manufacturing firms contract with third parties to provide transportation services to remain
focus on production and sustainability goals. A smart transportation management system
required to meet delivery requirements. This model includes smart infrastructure, smart vehicle,
and smart freight as well

Information

The process of exchange of information between customer and supplier give desirable
information to meet the effectiveness of supply chain management. Thus, a continuous
conversation with customer helps to develop strategy and maximize the goals of green initiatives
When all stakeholders have symmetric information then there will be fewer chances of
uncertainty. A business information system developed inside the organization helps in
forecasting supply and demand and ensure firm sustainability

Sourcing

The green sourcing of raw material helps the companies to addresses the goals of sustainability.
Green outsourcing has a positive relationship with supply chain management. There are four key
strategies adopted by manufacturing firms to get the optimal level of operations. Focus, scaling
with-out mass, disruptive innovation, and strategic repositioning resolve sourcing issues .The
manufacturers adopt green sourcing option with key sourcing strategy to speed-up business
operations in a sustainable manner.
Pricing

Pricing should be , whereas both customer and supplier can be satisfied. The company objectives
aligned with a pricing strategy to remain sustainable in the business operations. Geographical
pricing, markup pricing, and bundling can be beneficial to facilitate effective supply chain
management

Global Perspectives of SCM

Global supply-chain management (GSCM) is defined as the distribution of goods and services
throughout a trans-national companies' global network to maximize profit and
minimize waste. Essentially, global supply chain-management is the same as supply-chain
management, but it focuses on companies and organizations that are trans-national.
Global supply-chain management has six main areas of concentration: logistics management,
competitor orientation, customer orientation, supply-chain coordination, supply management,
and operations management. These six areas of concentration can be divided into four main
areas: marketing, logistics, supply management, and operations management. Successful
management of a global supply chain also requires complying with various international
regulations
Global supply-chain management can be impacted by several factors who impose policies that
regulate certain aspects of supply chains. Governmental and non-governmental organizations
play a key role in the field as they create and enforce laws or regulations which companies must
abide by. These regulatory policies often regulate social issues that pertain to the implementation
and operation of a global supply chain (e.g. labour, environmental, etc.). These regulatory
policies force companies to obey the regulations set in place which often impact a company's
profit.
Operating and managing a global supply chain comes with several risks. These risks can be
divided into two main categories: supply-side risk and demand side risk. Supply-side risk is a
category that includes risks accompanied by the availability of raw materials which effects the
ability of the company to satisfy customer demands. Demand-side risk is a category that includes
risks that pertain to the availability of the finished product. Depending on the supply chain, a
manager may choose to minimize or take on these risks.
Successful global supply-chain management occurs after implementing the appropriate
framework of concentration, complying with international regulations set by governments and
non-governmental organizations, and recognizing and appropriately handling the risks involved
while maximizing profit and minimizing waste.

Additional Study Materials:

The Death of Supply Chain Management by  Allan Lyall , Pierre Mercier and Stefan
Gstettner, Harvard Business Review
https://hbr.org/2018/06/the-death-of-supply-chain-management
https://www.youtube.com/watch?v=raqi4gjMLm8&t=2s