SUPPLY CHAIN

MANAGEMENT
December 8, 2021 pince dudhatra-9724949948 1
 Introduction
The approach of SCM encompasses all the
business partners in the chain.
The supply chain of a given manufacturer would
include the suppliers as well as the supplier’s
suppliers. It also include the customers and
customer’s customers.
Each of business unit involved in total supply
chain would have FOUR phases individually i.e.
Source, Procure, Manufacture & Deliver.
The procure phase of a given business unit
overlaps with the deliver phase of the previous
business unit in the supply chain.
December 8, 2021 pince dudhatra-9724949948 2
 Introduction (contd)
In order to produce a robust, reliable and integrated
supply chain where each component adds value to the
overall process, individual components have to be
robust, reliable and tightly integrated.
SCM tools provide appropriate responsiveness to
maximize the service levels without compromising on
the inventory levels.
The planning on the supply side has to be based on
capacity and related constraints including transportation
and logistics constraints.
As the problems and concern areas of specific industry
are different, SCM tools as well as the techniques
adopted for their implementation have to be industry
specific.
December 8, 2021 pince dudhatra-9724949948 3
 Introduction (contd)
There are examples of the same company – a single
legal entity having two different sales offices in the
same city.
In spite of using the latest tools and techniques, several
mfg orgns are known to suffer on TWO counts – time to
reach the customer and cost of reaching the customer.
With the ever-increasing competition in the market
place and the need to curtail costs, companies have to
look for ways and means of achieving better customer
service levels with lower inventory levels.
Successful implementation of SCM methodology can
result in reduction in inventories with simultaneous
improvement in on-time delivery performance.

December 8, 2021 pince dudhatra-9724949948 4

 Definition of SCM
“It is an integrated management approach for
planning and controlling the flow of material
from suppliers through the distribution channel
to the end user” – Lisa M. Ellram.

“SCM provides companies with a boundary-

spanning channel focus where all the steps of a
product’s movement, regardless of corporate,
political or geographical boundaries, from raw
material supply through final delivery to ultimate
user to satisfy a particular customer group are
planned and supervised” – D. F. Ross.
December 8, 2021 pince dudhatra-9724949948 5
 Supply Chain Management Scenarios
Developing and constant monitoring of supply
chain management strategies have to be
optimized to suit enterprise specific requirements
and needs to be flexible enough to adopt to
constantly changing needs of the marketplace.
In order to have better demand planning,
manufacturing orgns are creating channel linkup
programs.
This involves allowing the channel partners a
direct connection to the internal processes of the
orgn such as stock review and order booking.
E.g. Operation Leap of Hindustan Lever, MI-Net
of Marico Industries, Golden Eye of P&G.
December 8, 2021 pince dudhatra-9724949948 6
 Weaknesses in Supply Chain
Lack of trust between different business entities in the
supply chain resulting in obliteration of free exchange
of information.
High inventory levels at different stages of the supply
chain.
High occurrence of “stock out” situations resulting in
loss of production and delay in deliveries causing
cascading effect in terms of delays down the supply
chain.
High cost of operations due to inefficient procurement
and rush purchases.
Loss of business as customers move to competitors
due to non-availability of goods when customers need
them.
December 8, 2021 pince dudhatra-9724949948 7
 Supply Chain Management Scenarios

The relation between different business entities in

the supply chain can be transformed from a
“transaction” or case to case basis into that of a
partnership program.
Companies are entering into long term
agreements with their vendors instead of calling
for quotations every time.
When information systems are web-enabled, one
does not need to ask someone for information.
This can be used to trigger actions on a proactive
basis to avoid stock-outs as well as situations of
excess stocks.
December 8, 2021 pince dudhatra-9724949948 8
 Logistics and Supply Chain Management
As the customers are getting more demanding
and there is a constant pressure to provide right
product at the right cost at the right time at the
right place and of the right quality companies
offering products as well as services are focusing
on improving the logistics and SCM in order to
remain competitive.

A strong focus on logistics and SCM has given

Dell Computers an edge in the competitive
marketplace.

December 8, 2021 pince dudhatra-9724949948 9

 Features of Supply Chain Management
SCM operates on the “pull” factor where the
customer’s requirements force the orgn to respond in
form of more customized product.
ICT enables orgns to become market responsive and
orient themselves to changing market scenario.
With the inclusion of business partners in the entire
“chain”, a virtual orgn is created that includes
suppliers, mfg orgn as well as the marketing
channels.
The resources of all the constituent elements of the
supply chain are directed towards a common
objective of providing end customers with the right
product at the right time and at the right place.
December 8, 2021 pince dudhatra-9724949948 10
 Stages in SCM
In traditional setup, functions or depts orient the
orgn setup with very little emphasis on business
processes that cut across the functional
boundaries.
As the awareness of SCM increases, orgn tends
to shift to next stage towards identification of
business processes that create value for ultimate
customers and formation of cross functional
teams.
During this stage, the top mgmt has very little
information about the total costs involved in the
entire supply chain from end-to-end.
December 8, 2021 pince dudhatra-9724949948 11
 Stages in SCM (contd)
Then enterprise wide integration of information
systems that cut across the orgnal boundaries
and include the channel partners as well.
Now, the top mgmt is fully aware of the costs
involved in the entire supply chain from end-to-
end.
The top mgmt is also aware of the opportunities
of reducing the costs as well as cycle time of
supply chain without affecting the performance.

December 8, 2021 pince dudhatra-9724949948 12

 Key Drivers of SCM
THREE key drivers for SCM initiative i.e. MATERIAL,
MONEY & INFORMATION.
Materials blocked in form of inventory can cause
blockage of money. If info about such blockages or
possibility of such inventory build up is not available, the
concerned entity in the SCM may not be in a position to
initiate proactive actions to prevent such situations of
excess inventories as well as possible stock outs.
It is important that all the three key drivers are managed
through synchronization approach.
For effective SCM, periodic measurement and reporting
system for Key Performance Indicators (PKI).

December 8, 2021 pince dudhatra-9724949948 13

 Role of MIS in SCM

There is a common misconception that

SCM is just an extension of ERP or it is yet
another IT initiative.

MIS has an enabling role to play in

deployment of a SCM solution. MIS plays
an important role in ensuring that all the
three key drivers of SCM are managed in
perfect synchronization.
December 8, 2021 pince dudhatra-9724949948 14
 SCM related Concepts
VMI – Vendor Management Inventory. Here vendor
monitors the inventory of specific items at mfg
location and also reacts to the expected off take and
arranges to replenish the stocks.

3PL – Third Party Logistics. Third party i.e. other

than supplier or customer plays a role of handling
the logistics activities.

4PL – Fourth Party Logistics. It extends the

approach of third party logistics to include a fourth
party that is brought in to manage the planning and
mgmt functions that are provided by the third party.

December 8, 2021 pince dudhatra-9724949948 15

 SCM related Concepts (contd)
e-Procurement – Electronic Procurement. It
makes use of Internet based solutions including
concepts like reverse auctions, posting of
requirements at specialized electronic
marketplaces.

CPFR – Collaborative Planning Forecasting &

Replenishment. It involves collaborative efforts by
various entities in the supply chain in order to
bring about effective and efficient forecasting of
demand and activities associated with fulfilling the
demand through replenishment based shipments.

December 8, 2021 pince dudhatra-9724949948 16

December 8, 2021 pince dudhatra-9724949948 17