An Introduction

to
Strategic Supply Chain
Management
 Text Book and References
There is no Specific text book for the course. However the
following books may be consulted:
1. Sourcing and Supply chain Management, 5/e by
Monczka Robert M.
2. Supply Chain Management, Sunil Chopra, Peter
Menindl D. V. Kalra, 5th Edition.
3. Operations Management, William J. Stevenson, 10th
Edition.
4. Bozarth, C. & Handfield, R. (2008) Introduction to
Operations and Supply Chain Management. Second
Edition. Pearson Education Inc. Upper Saddle River,
New Jersey.
 What is supply chain
A supply chain is the system of organizations, people, activities,
information and resources involved in moving a product or service
from supplier to customer.
Supply chain activities transform raw materials and components into a
finished product that is delivered to the end customer.
A supply chain consists of the flow of products and services from/to:
--Raw materials manufacturers
--Intermediate products manufacturers
--End product manufacturers
--Wholesalers and distributors
--Retailers and,
--End customers
 Supply chain

Supplier Manufacturer Distributor Retailer Customers

 Typical Supply Chain for a
Manufacturer
Supplier

Supplier }
Storage Mfg. Storage Dist. Retailer Customer

Supplier
 Typical Supply Chain for a Service

Supplier

Supplier
} Storage Service Customer
What is supply chain management
The design and management of seamless, value-
added process across organizational boundaries
to meet the real needs of the end customer
-- Institute for Supply Management

Managing supply and demand, sourcing raw

materials and parts, manufacturing and assembly,
warehousing and inventory tracking, order entry
and order management, distribution across all
channels, and delivery to the customer
-- The Supply Chain Council
Goal of Supply Chain Management
Supply chain management is concerned with the
efficient integration of suppliers, factories,
warehouses and stores so that merchandise is
produced and distributed:
In the right quantities
To the right locations
At the right time
In order to
Minimize total system cost
Satisfy customer service requirements
 Supply Chain Management

As the economy changes, as competition becomes more global, it

is no longer company vs. company but supply chain vs. supply
chain
Harold Sirkin (1994), Boston Consulting Group

has captured the imagination of more & more managers and business
organizations

requires them to think beyond their organization to think about their

product in its entirety, from the origin of all goods (Mother Earth), up to the
final customer, consumer or user
Supply Chain Management
is the management of the acquisition, transformation and delivery
processes that enable and direct the flows of products & services as well as
the supporting reciprocal flows of information & funds along a chain leading
from the sources of the original inputs up to the end customers, all aimed at
achieving the best possible customer service at the lowest possible cost.

Fundamentals:
A supply chain is a dynamic concept that involves the constant flow of
resources (products, information, funds) amongst all the participants
along the chain
It is essentially a system of interconnecting chains i.e. a supply network or
a supply web
 The Four Interrelated Flows in SCM: an example
Material Flow

Funds Flow

Information Flow

E&T Flow

Orange Fruit
farm packing

Food Retail
Mother Earth processor
Distributor outlet

Bauxite Aluminium Aluminium Can

mine smelter strip mill maker
 The Four Interrelated Flows in SCM
1. Product & Service Flows:
The value-adding flow, as products & services
progress along the supply chain from point of
origin to point of final use or consumption.
Generally flow downstream the chain
but also upstream (e.g. reprocessing)

2. Information Flows:
The bi-directional flows of information throughout the chain
particularly on customer demand which pulls the supply chain, but
also on supply conditions & eventual disruptions

3. Funds Flows:
The flows of funds, mainly upstream (payments for goods
& services received) but also in some cases downstream

4. Expertise & Technology Flows:

Sharing in areas such as IT systems, SCM expertise, product design,
marketing, developing joint SC performance indicators, etc.
 Materials
1 Management

Manufacturer

2 Purchasing & Supply Physical Distribution

Supplier Manufacturer Customer

3 Inbound Logistics Outbound Logistics

4 INTEGRATED LOGISTICS

2nd Tier 1st Tier 1st Tier 2nd Tier

Manufacturer
Supplier Supplier Customer Customer

5
Mother Earth SUPPLY CHAIN / SUPPLY NETWORK MANAGEMENT End User
 Basic SCM-related tasks
of an organization in a supply chain

PURCHASING

OPERATIONS (&
LOGISTICS
INVENTORY)
(Warehousing &
CONTROL
Transportation)

DEMAND
PLANNING
Strategic
SCM

embraces &
builds upon TQM
and JIT
 Strategic SCM (contd)

Key elements are the elimination of waste - especially inventory - and

continuous improvement

Strategic SCM integrates supply & demand

Effective SCM strategies can provide a sustainable competitive advantage.

Factors to consider:
Globalization
Outsourcing
Location
Product Life Cycle
Time-based Competition
e-business
Collaborative Planning, Forecasting & Replenishment
Supply Chain Risk Management
 Strategic SCM (contd)

1. Globalization:
Globalization has increased competition and
changed the way organizations do business,
making supply chains longer & more complex

2. Outsourcing:
Outsourcing is obtaining a product previously produced
internally from an external supplier it is occurring more
frequently, especially global outsourcing

3. Location:
The choice of location becomes even more complex when taken
from the perspective of the supply chain
 Strategic SCM (contd)

4. Product Life Cycle:

Product life cycles are becoming shorter as customers
demand new and a larger variety of products, leading to
changing requirements and the introduction of new supply
chains

5. Time-based Competition:
Organizations and supply chains compete in
reducing delivery lead-times and increasing
the speed to produce new products

ITC
 Strategic SCM (contd)

6. E-business:

IT especially electronic communications and e-business has strongly

stimulated the development of SCM.

7. Collaborative Planning, Forecasting &

Replenishment:

A recent development that facilitates information sharing among supply

chain participants in order to:
Improve customer service
Reduce inventories and logistics costs
Increase sales and profits
 Strategic SCM (contd)

8. Supply Chain Risk Management (SCRM):

A relatively new concept that has developed due to the risks of supply
globalization, single sourcing, outsourcing, lean systems, distribution,
etc.; it is intended to help identify the risks, protect from the
consequences of these risks and minimize any loss
 Other Important Factors in SCM

Purchasing / Procurement:

As SCM evolves, so Purchasing also continues to grow in importance and

today considers strategic supply issues far broader than just purchasing
transactions or buying, making it critical to effective SCM
 Cost structure of a typical
manufacturing enterprise:

Purchased Purchased
Materials Profit 10% Profit16%
Materials
60% Overheads 54% Overheads
Labour 15% Labour 15%
15%
15%

Before the savings achieved After the savings achieved

through better negotiations
through better negotiations
Five Core Discipline of Strategic SCM

View Supply chain as strategic asset

Develop an end to end process
architecture
Design organization for performance
Build right collaborative model
Use matrices to drive supply chain
performance
 RETURN ON
INVESTMENT

SUPPLY CURRENT FIXED

SALES
CHAIN COSTS ASSETS ASSETS

Inbound Manufactur- Outbound Capital

Purchas- Value of Customer
logistics ing & inven- logistics expen-
ing costs inventory service
costs tory costs costs diture

The Supply Chain

 Supply Chain Management

SCM has resulted in a major change in the way that

we do business.

Effective supply chain management strategies have

many potential benefits:

Improved customer service

Lower inventory & higher inventory turnover
Higher productivity
Shorter lead-times
Improved ROI
Increased market share
Supply Chain Management refers:

An area where buyers, suppliers and internal customers could work

closely together to ensure goods and services delivered as
required, of the appropriate quality and at the agreed cost

Flow of Information, Goods and Funds between supplier and buyer

Extended Supply Chain Management

Competition between SCM Vs SCM

Strength of SCM is the strength of weakest link in the chain

Represents and reflects a holistic approach to the operation of the

organization
 SUPPLY CHAIN MANAGEMENT
1. Understanding the Corporate Environment 10. Managing International
2. Specifying Requirements & Planning Logistics
Supply 11. Managing Inventory
3. Analyzing Supply Markets 12. Measuring & Evaluating
4. Developing Supply Strategies Performance
5. Appraising & Short listing Suppliers 13. E-Procurement
6. Obtaining & Selecting Offers 14. Environmental Procurement
7. Negotiating 15. Group Purchase
8. Preparing the Contract 16. Green Procurement
9. Managing the Contract & Supplier 17. Operations Management
Relationships 18. Managing Finance Along the
Supply Chain
Supply Market Analysis will ensure Suppliers Performance:

Performance is function of Motivation, Capability and

Environment ; P = f (m,c,e)

SCM Manager must be Able, Adaptable and Agile (AAA)

SCM manager should ensure RRR and PPP

SCM Manager must have HHH

SCM manager must be good negotiator; deal maker not deal destroyer.

SCM Manager is like a chef in five star hotel

SCM manager should not only make good contract but also ensure good
contract management
 Conclusion

ITC
Thank You