Welcome To The Presentation ON Understanding The Supply Chain

WELCOME TO THE PRESENTATION
ON
UNDERSTANDING THE SUPPLY CHAIN
07/20/2022 Afzal Hossain (Assistant Professor) 1

COURSE NAME: PRINCIPLE OF SUPPLY
CHAIN MANAGEMENT
COURSE CODE: SCM 3611

Course Teacher: Afzal Hossain
Assistant Professor
Department of CSE
Army IBA
E-mail: afzal.armyiba@gmail.com
Contact: 01920979195

Presented by:
Hasrat Humayun
ID: 76
Batch: BBA – 7
Section: B

PRINCIPLE OF SUPPLY CHAIN
MANAGEMENT
UNDERSTANDING THE SUPPLY CHAIN

SUPPLY CHAIN
Definition of Supply Chain: A supply chain is a network between a

company and its suppliers to produce and distribute a specific product to
the final buyer. This network includes –
• Different activities
• People
• Entities
• Information and
• Resources.
The supply chain also includes the steps it takes to get the product or
service from its original state to the customer.
SUPPLY CHAIN

ELEMENTS OF SUPPLY CHAIN
Elements of Supply Chain: Supply chain management has four elements.
1. Integration
As with any project, planning is essential to long-term success. Part of good planning
is setting up the integration, which means that everyone involved in the manufacturing
process communicates and collaborates. Instead of functioning in separate divisions,
integrated teams work together to make sure the product gets to the distribution phase.
This improves communication and reduces errors that cost time and money. Since
everyone is working together, leaders can also monitor the entire operation and easily
identify areas along the supply chain that can be improved.

2. Operations
Day-to-day operations are the backbone of manufacturing. Managers monitor the
work being performed and make sure everything remains on track. Most
manufacturers operate using lean manufacturing strategies currently, which means
that processes are constantly evaluated to identify where things can be done more
efficiently.
3. Purchasing
The purchasing area of supply chain management makes sure a company has
everything it needs to manufacture products. It includes materials, supplies, tools, and
equipment. Errors in this process can cause delaying production, overbuying, and
strain on the company’s budget.
4. Distribution
The supply chain ends when the product lands on store shelves where customers can
buy them or their front door. But getting products there means having a well-
planned shipping process. Most companies today use logistics software to manage
their shipments, whether they handle it on their own or source shipping to a third-
party provider. When handled correctly, products are moved expeditiously from the
warehouse to the customer.

OBJECTIVE OF SUPPLY CHAIN
Objective of Supply Chain:

1. Improving Efficiency
2. Improving Quality
3. Optimizing Transportation and Logistics
4. Reducing Costs
5. Enhancing Customer Satisfaction
6. Improving Distribution
7. Maintaining Better Coordination

IMPORTANCE OF SUPPLY CHAIN DECISIONS
Importance of Supply Chain Decisions:

In supply chain management, all parties are directly or indirectly involved with each
other to fulfill the demand of consumers. It does not include only the manufacturers
and suppliers but also agents, brokers, retailers, wholesalers, and customers
themselves. In organizations, the supply chain involves receiving and fulfilling
customer demand. It may be new product development, marketing, operations,
distribution, finance, and customer service.


In supply chain management, all parties are directly or indirectly involved with each
other to fulfill the demand of consumers. It does not include only the manufacturers
and suppliers but also agents, brokers, retailers, wholesalers, and customers
themselves. In organizations, the supply chain involves receiving and fulfilling
customer demand. It may be new product development, marketing, operations,
distribution, finance, and customer service.

 Successfully managed their supply chain

decisions
 Effective supply chain
 Superior design, planning, and operation of
the supply chain

Ineffective supply chain decisions

Improper communication with suppliers
Fail to meet customer expectations
Inability to deliver

FUNCTIONS OF SUPPLY CHAIN MANAGEMENT
Five Functions of Supply Chain Management:
1. Purchasing
In manufacturing, raw materials are required
to produce goods and products. These
materials must be procured and delivered on
time to begin production. For this to occur,
coordination with suppliers and delivery
companies will be required to avoid potential
delays.

2. Operations
The operation team engages in demand planning and forecasting. Accordingly, it
further overlooks inventory management, production, and shipping. Before giving a
raw material purchase order, the organization must predict the possible demand for a
product and the number of units it needs to produce. If the demand is over
anticipated, it could result in excess inventory cost. If the demand is under
anticipated, the establishment would be unable to meet customer demand, leading to
revenue loss. So, the operation is a critical function of the supply chain department.


3. Logistics
Logistics is the part of supply chain management that coordinates all aspects of
planning, purchasing, production, warehousing, and transportation so that the
products will reach the end-consumer without any hindrances. It is helpful to have
adequate communication between multiple departments so that products can be
shipped to customers quickly and at the lowest cost.
4. Resource Management
Production consumes raw materials, technology, time, and labor. Resource
management ensures that the right resources are allocated to the right activities
optimally. This will ensure that an optimized production schedule is created to
maximize the efficiency of the operations.
5. Information Workflow
Information sharing and distribution keep all of the other functions of supply chain
management on track. If the information workflow and communication are poor, it could
break apart the entire chain. Many disruptions that arise in supply chains can be
prevented by increased visibility and communication. A consistent system that all
departments use will ensure that everyone is working with the same data set and will
prevent miscommunications and time spent updating everyone on new developments.

PROCESS VIEW OF A SUPPLY CHAIN
Process View of A Supply Chain
The supply chain process occurs in two ways:

1. Cycle View: Sequence of processes and flows that
take place within and between different stages and
combine to fill a customer need. Cycle view of
Supply chain process includes –
a. Customer order cycle
b. Replenishment cycle
c. Manufacturing cycle
d. Procurement cycle

PROCESS VIEW OF A SUPPLY CHAIN
2. Push/ Pull view

• A pull system initiates production as a reaction to present demand, while a push
system initiates production in anticipation of future demand.
• In a pull system, production is triggered by actual demands for finished products,
while in a push system, production is initiated independently of demands.

FISHER'S FRAMEWORK
Fisher's framework
• Based on demand
uncertainty
• Demand uncertainty: Supply
can be stable or evolving

FISHER'S FRAMEWORK
Demand Uncertainty
Low (Functional High (Innovative
Products) Products
Low Efficient Supply Responsive Supply

Supply Uncertainty
(Stable Process) Chains Chains
High Risk-hedging Agile Supply

(Evolving Process) Supply Chains Chains

FISHER'S FRAMEWORK
Demand Uncertainty
Low (Functional High (Innovative
Products) Products
Fashion apparel,
Low Grocery, basic apparel, computers, smart
Supply Uncertainty
(Stable Process) food, oil and gas phones, electronic

products
High Telecom, high end

(Evolving Process) Hydroelectric power computer,
semiconductors

SUPPLY CHAIN PERFORMANCE
ACHIEVING STRATEGIC FIT AND SCOPE
Competitive and Supply Chain Strategies
• Competitive strategy: defines the set of customer needs a firm seeks to satisfy through its products and
services
• Product development strategy: specifies the portfolio of new products that the company will try to
develop
• Marketing and sales strategy: specifies how the market will be segmented and product positioned,
priced, and promoted
• Supply chain strategy: determines the nature of material procurement, transportation of materials,
manufacture of product or creation of service, distribution of product
All functional strategies must support one another and the competitive strategy
Achieving Strategic Fit

Strategic fit : competitive and supply chain strategies have aligned goals
1.The competitive strategy and all functional strategies must fit together to form a
coordinated overall strategy.
2.The different functions in a company must appropriately structure their processes and
resources to be able to execute these strategies successfully.
3.The design of the overall supply chain and the role of each stage must be aligned to
support the supply chain strategy.
A company may fail because of a lack of strategic fit or because its processes and
resources do not provide the capabilities to execute

Scope of strategic fit

The functions and stages within a supply chain that devise an integrated strategy with a
shared objective:
One extreme: each function at each stage develops its own strategy
Other extreme: all functions in all stages devise a strategy jointly.
Five categories:
1. Intracompany intra-operation scope
2. Intracompany intra-functional scope
3. Intracompany inter-functional scope
4. Intercompany inter-functional scope
5. Flexible inter-functional scope
DIFFERENCES BETWEEN SUPPLY CHAIN MANAGEMENT
AND LOGISTICS MANAGEMENT
Logistics Supply Chain
Logistics is one activity in supply chain Supply chain management covers a wide
management. range of activities, including planning,
sourcing materials, labor and facilities
management, producing and delivering
those goods and services.
Logistics focuses on the efficient and cost- Supply chain management targets higher
effective delivery of goods to the customer. operational performance that will give the
business a competitive advantage.

Logistics started with the military. Many say The modern practice of supply chain
Alexander the Great, born 356 B.C., as a management started in the 20th century. The
logistics master. Ford Motor Company production lines
perfected the concept. Many credit
logistician Keith Oliver as the person who
coined the term in the early 1980s.
Logistics are centered on the movement and SCM oversees the development of raw
transport of goods within a company materials into finished goods that move
from the producer to the manufacturer.
Those goods get distributed to retailers or
directly to consumers.

Logistics started with the military. Many say The modern practice of supply chain
Alexander the Great, born 356 B.C., as a management started in the 20th century. The
logistics master. Ford Motor Company production lines
perfected the concept. Many credit
logistician Keith Oliver as the person who
coined the term in the early 1980s.
Logistics are centered on the movement and SCM oversees the development of raw
transport of goods within a company materials into finished goods that move
from the producer to the manufacturer.
Those goods get distributed to retailers or
directly to consumers.

SUPPLY CHAIN VS VALUE CHAIN
Particulars Supply Chain Value Chain

Involves businesses, persons, and activities for Involves activities to analyze customers, plan
Definition the procurement, logistics, transformation, and the production, and add value at each step of
delivery of finished goods the process
Process Operational management Business management
Facilitates production and distribution of the
Activities Adds value to the product
product
Start with the product request and ends with Begins with the customer request and
Order
the product delivery concludes with the product development
Objective Offers customer satisfaction Provides a competitive advantage
Order processing, procurement, logistics,
Research, innovation, development, testing,
Key Steps production, assembly, marketing, distribution,
packaging, sales and marketing, and aft
delivery, and customer support

SUPPLY CHAIN VS VALUE CHAIN

ROLE OF DISTRIBUTION IN SUPPLY CHAIN
• Distribution refers to the steps taken to move and store a product from the supplier
stage to a customer stage in the supply chain.
• Distribution occurs between every pair of stages in the supply chain. Raw materials
and components are moved from suppliers to manufacturers, whereas finished
products are moved from the manufacturer to the end consumer.
• Distribution is a key driver of the overall profitability of a firm because it affects
both the supply chain cost and the customer value directly.
• Choice of distribution network can achieve supply chain objective from low cost to
high responsiveness.
FACTORS INFLUENCING
DISTRIBUTION NETWORK DESIGN
Performance of a distribution
network should be evaluated along
two dimensions:
1. Customer needs that are met
(Service Factor)
2. Cost of meeting customer needs
(Cost Factor)

FACTORS INFLUENCING
Service Factor: The measures that are influenced by the structure of the
distribution network are as follows-
• Response time is the amount of time it takes for a customer to receive an order.
• Product variety is the number of different products/configurations that are
offered by the distribution network.
• Product availability is the probability of having a product in stock when a
customer order arrives.
• Customer experience includes the ease with which customers can place and
receive orders as well as the extent to which this experience is customized.
• Time to market is the time it takes to bring a new product to the market.

FACTORS INFLUENCING
Service Factor:
• Order visibility is the ability of customers to track their orders from placement
to delivery.
• Returnability is the ease with which a customer can return unsatisfactory
merchandise and the ability of the network to handle such returns.
Customer do not always expects the highest level of performance along all these
dimensions.

DESIGN OPTION FOR A DISTRIBUTION NETWORK

SUPPLY CHAIN DRIVERS

Production
To achieve a responsive supply chain, ensure your factories have excess capacity and
use flexible manufacturing techniques to produce a wide range of items. Flexibility
allows production to pivot to meet fluctuations in consumer demand quickly.
Additionally, having multiple, smaller production facilities close to distribution centers
and customer hubs increases consumer demand responsiveness by decreasing delivery
time.
Alternatively, having production facilities with little excess capacity and optimized for
producing a limited range of items increases efficiency. Centralizing production in large
central plants for better economies of scale furthers efficiency, though delivery times
may be longer for some customers.

Inventory
When it comes to inventory as a driver, optimizing responsiveness often
dictates stocking higher product levels and at more warehouse locations.
Efficient inventory allows for unexpected fluctuations in demand that can be
met promptly. However, this approach incurs higher storage costs and must
be weighed against the benefit of widespread availability. Efficiency in
inventory management calls for reducing inventory levels of all items,
especially those that do not sell frequently. Also, stocking inventory in only
a few central distribution centers achieves economies of scale and cost
savings.

Location
Prioritizing responsiveness for the location driver often involves maximizing convenience
by establishing many locations near customer groups. For example, fast-food chains use
location to be very responsive to their customers by opening many stores in high-volume
markets. Many sites allow them to respond quickly to consumer demand but increase
operating costs by operating many stores.

Efficiency is achieved by operating from a select few locations and centralizing activities.
An example of efficiency in location would be how e-commerce retailers serve global
markets from only a few central locations, performing a wide range of activities. While
this allows each site to be more efficient, it also makes them susceptible to disruptions, as
seen with the coronavirus outbreak.
Transportation
Faster modes of transportation, such as air freight–while often more expensive–allow for
shorter delivery times and greater response flexibility. FedEx and UPS are two companies
that provide high levels of responsiveness in last-mile delivery by using transportation to
deliver products often within 48 hours.
Efficiency in transportation is emphasized by moving products in larger batches, less

often, by bulk carriers such as ships or railroads. This type of transportation is more
efficient when products originate from a centralized distribution center instead of multiple
separate locations.

OBJECTIVES OF INVENTORY MANAGEMENT
The main objectives of inventory management are:

• To supply the required materials continuously: The main objective of inventory
management is to maintain the required inventory to run the production and sales
process smoothly.
• To minimize the risk of under and overstocking of material: Inventory

management manages to minimize the risk caused due to under and overstocking
of the inventory.
• To reduce losses damages and misappropriation of materials: Inventory

management aims to reduce or remove the losses of materials and stock, done by
maintaining the proper stock of materials with utmost care.

TYPES OF INVENTORY
The four types of inventory most commonly used are:

1. Raw Materials
Materials that are needed to turn inventory into a finished product are raw materials.
These inventory items are bits and pieces of component parts that are currently in stock
but have not yet been used in either work-in-process or finished goods inventory.
There are two types of raw materials:

• Direct materials—which are used directly in finished goods
• Indirect materials—which are part of overhead or factory costs.
Inventory example: For example, direct raw materials might be leather to make belts for a
company would fall under this category. Indirect raw materials might be lightbulbs,
batteries, or anything else that indirectly contributes to keeping the shop running.
TYPES OF INVENTORY
2. Work-In-Process
Whatever direct and indirect raw materials a business is using to create finished goods
is WIP inventory.
Inventory example: If you sell medical equipment, the packaging would be considered
WIP. That’s because the medicine cannot be sold to the consumer until it is stored in
proper packaging. It’s literally a work-in-process.
Another example would be a custom wedding dress that’s not quite finished when the
end of the fiscal year rolls around. That lace, silk, and taffeta are no longer raw
materials, but they’re not quite a “finished goods” wedding dress, either.

TYPES OF INVENTORY
3. Finished Goods
Any product that is ready to be sold to the customers falls under this
category.
Inventory example: Finished goods could be a pre-packaged fruit

salad, a monogrammed bathrobe, or a custom-built laptop ready for
an employee to use.

TYPES OF INVENTORY
4. Overhaul / MRO
Also known as Maintenance, Repair, and Operating Supplies, MRO inventory is
all about the small details. It is inventory that is required to assemble and sell the
finished product but is not built into the product itself.
Inventory example: For example, gloves to handle the packaging of a product

would be considered MRO. Basic office supplies such as pens, highlighters, and
paper would also be in this category.

INVENTORY ASSOCIATED COSTS
1. Ordering Costs
Ordering costs include payroll taxes, benefits and the wages of the procurement
department, labor costs etc. These costs are typically included in an overhead
cost pool and allocated to the number of units produced in each period.
• Transportation costs
• Cost of finding suppliers and expediting orders
• Receiving costs
• Clerical costs of preparing purchase orders
• Cost of electronic data interchange

2. Inventory Holding Costs

This is simply the amount of rent a business pays for the storage area where they
hold the inventory. This can be either the direct rent the company pays for all the
warehouses put together or a percentage of the total rent of the office area
utilized for storing inventory.
• Inventory services costs

• Inventory risk costs
• Opportunity cost - money invested in inventory
• Storage space costs
• Inventory financing costs

3. Shortage Costs
Shortage costs, also known as stock-out costs, occurs when businesses become out of
stock for various reasons. Some of the reasons might be as below :
• Emergency shipments costs
• Disrupted production costs
• Customer loyalty and reputation
4. Spoilage Costs
Perishable inventory stock can rot or spoil if not sold in time, so controlling inventory
to prevent spoilage is essential. Products that expire are a concern for many industries.
Industries such as the food and beverage, pharmaceutical, healthcare and cosmetic
industries, are affected by the expiration and use-by dates of their products.

MODES OF TRANSPORTATION
The following methods of transport are

used to move goods-
• Road Transport
• Railways Transportation
• Water Transportation
• Air Transportation
• Pipelines Transportation

IMPORTANCE OF MODES OF TRANSPORTATION
Advantages of Road Transport:

(i) It is very flexible in nature.
(ii) It helps to facilitate the movement of goods even in remote areas.
(iii) It provides alternatives in the form of car, rickshaw, auto, cars, bus, trucks,
and so on.
(iv) It is good for transporting perishable products.
(v) It requires low capital investments.
(vi) It is very suitable for a short distance journey.

Disadvantages of Road Transport:
(i) It is not suited for long distance as it is not economical.

(ii) Slow as compared to railways.
(iii) Goods can be destroyed/damage due to specks of dust and pollutions.
(iv) It is time-consuming.
(v) Accidents and Breakdowns.

Advantages of Railways Transportation:

(i) It is economical for long distances because it can easily cover all area of states
and cities.
(ii) This means of transport is very faster than roadways.
(iii) Most suitable for carrying a bulky amount of goods and products.
(iv) It provides proper protection from exposure to sun and dust pollutions.
(v) It is the most dependable means of transport.
(vi) It is the very safest means of transport.
(vii) Rail transport helps to provide employment opportunities to both skilled and
unskilled individuals.

Disadvantages of Railways Transportation:

(i) Huge capital required for construction maintenance.
(ii) It is not suitable for hilly areas.
(iii) It is not flexible in nature.
(iv) The cost and time of terminal operations are the major disadvantages of rail
transport.
(v) Monopoly in nature.
(vi) It consists much time for booking of goods through the comparison of road
transport.

Advantages of Water Transportation:

(i) It is the very cheapest or easiest means of transportation.
(ii) Goods in bulk are transported.
(iii) It promotes foreign or international trade.
(iv) It can easily carry a huge quantity of goods such as timber and coal.
(v) In comparison to other transport, the risks capacity is very low.

Disadvantages of Water Transportation:

(i) One of the drawbacks is there is a delay in the movement of goods from
one place to another.
(ii) Performance is affected by seasonal variations.
(iii) It can be used in a limited area of operations because it can only run on
seas or oceans.
(iv) Water transport is very unsuitable for small businesses because it carries a
small number of goods.

Advantages of Air Transportation:

(i) Fastest means of transportation.
(ii) Useful moving the goods in the amount of bulk.
(iii) Each and every area of accessible.
(iv) Vital for national security and defense.
(v) Very useful in earthquakes and other floods.
(vi) It provides an efficient, regular, and quick service.
(vii) It is very suitable for emergency services.

Disadvantages of Air Transportation:

(i) The large capital investment needed.
(ii) Not suitable for working goods.
(iii) May be affected by rains.
(iv) Risks of accidents are highest.
(v) This mode of transport requires a specialized skill and a
high degree of training for its working operations.

Advantages of Pipelines Transportation:

(i) They are very flexible in transporting liquids and gases.
(ii) It consumes low energy power.
(iii) It needs a limited area of maintenance.
(iv) Pipelines are very safe and accident-free transport.
Disadvantages of Pipelines Transportation:

(i) It is not flexible in nature.
(ii) It is restricted in a limited area of work.
(iii) Difficult to make security arrangements for this transport.

COMPARISON OF MODES OF TRANSPORTATION

CROSS-FUNCTIONAL DRIVERS
Information, sourcing, and pricing are cross-functional drivers, which determine in some ways the
performance of a supply chain. Information is data about facilities, inventory, transportation, costs,
prices and customers throughout the supply chain, also gives shipping option to managers. Sourcing
is the particular supply chain activity should be done inside a firm or procures from other entities.
Pricing drivers determine the price of goods and services which the supply chain produces. Early
orders are less likely if with lead time price does not vary. Without investing on facility,
manufacturing etc. supply chain managers can consider the price change option in some cases.

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WELCOME TO THE PRESENTATION

07/20/2022 Afzal Hossain (Assistant Professor) 1

COURSE CODE: SCM 3611

07/20/2022 Afzal Hossain (Assistant Professor) 2

07/20/2022 Afzal Hossain (Assistant Professor) 3

07/20/2022 Afzal Hossain (Assistant Professor) 4

UNDERSTANDING THE SUPPLY CHAIN

Definition of Supply Chain: A supply chain is a network between a

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Elements of Supply Chain: Supply chain management has four elements.

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Objective of Supply Chain:

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Importance of Supply Chain Decisions:

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Importance of Supply Chain Decisions:

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Importance of Supply Chain Decisions:

 Successfully managed their supply chain

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Ineffective supply chain decisions

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Five Functions of Supply Chain Management:

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Five Functions of Supply Chain Management:

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Five Functions of Supply Chain Management:

Five Functions of Supply Chain Management:

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Process View of A Supply Chain

The supply chain process occurs in two ways:

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2. Push/ Pull view

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Low Efficient Supply Responsive Supply

(Stable Process) Chains Chains

High Risk-hedging Agile Supply

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(Stable Process) food, oil and gas phones, electronic

High Telecom, high end

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Competitive and Supply Chain Strategies

Achieving Strategic Fit

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Scope of strategic fit

Logistics Supply Chain

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Logistics Supply Chain

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Logistics Supply Chain

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Particulars Supply Chain Value Chain

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