LESSON 02

SUPPLY CHAIN
MANAGEMENT
 Organizations are increasingly concentrating
on their core competencies and on becoming more
flexible and agile. To accomplish these objectives,
these organization should constantly monitor the
supply of the necessary goods and services. It is
vital because it is used create and deliver
products, information, and services to end
customers. The flow of materials, information,
money, and services from raw material suppliers,
through factories and warehouses, to the end
customers is called supply chain.
Lesson Objectives:
At the end of this lesson, you will be able to:
● Describe e-commerce and its components
● Identify the different types of e-commerce according to
the degree of digitization and participants
● Describe the advantages and disadvantages of e-
commerce
● Discover companies that utilize e-business and e-
commerce and describe its importance in the business
world nowadays.
 The diagram depicts a food chain which is a series of
organisms interrelated in their feeding habits, the smallest
being fed upon by a larger one, which in turn feeds a still
larger one. It shows the transfer of energy from one animal to
another. The food chain is comparable to a supply chain that
is widely used in businesses nowadays. It is a network
between a business and its suppliers to produce and distribute
a specific product to the final buyer. This network includes
different activities, people, entities, information, and resources.
Supply chains improve trust and collaboration among supply
chain partners, thus improving supply chain visibility and
inventory velocity.
 Supply chain visibility is the ability for all organizations in a supply chain
to access or view relevant data on purchased materials as these materials
move through their suppliers’ production processes and transportation networks
to their receiving docks. The sooner a company can deliver products and
services after receiving the materials required to make them that is, the higher
the inventory velocity the more satisfied the company’s customers will be.
BELOW IS A DIAGRAM OF A GENERIC SUPPLY CHAIN.
The Structure And Components Of Supply Chains

The term supply chain comes from a picture of

how the partnering organizations are linked together
and it involves three segments.
1. Upstream is where sourcing or procurement from external
suppliers occurs. In this segment, supply chain managers
select suppliers to deliver the goods and services the
company needs to produce its product or service. Further,
SC managers develop the pricing, delivery, and payment
processes between a company and its suppliers. Included
here are processes for managing inventory, receiving and
verifying shipments, transferring goods to manufacturing
facilities, and authorizing payments to suppliers.
2. Internal is where packaging, assembly, or
manufacturing takes place. SC managers schedule
the activities necessary for production, testing,
packaging, and preparing goods for delivery. SC
managers also monitor quality levels, production
output, and worker productivity.
3. Downstream, where distribution takes place, frequently by
external distributors. In this segment, SC managers
coordinate the receipt of orders from customers, develop a
network of warehouses, select carriers to deliver products to
customers, and develop invoicing systems to receive
payments from customers. The flow of information and
goods can be bidirectional.
 For example, damaged or unwanted products can
be returned, a process known as reverse flows or
reverse logistics. In the retail clothing industry, for
example, reverse logistics involves clothing that
customers return, either because the item had defects or
because the customer did not like the item.
 Tiers of Suppliers.
The diagram of generic supply chain shows
several tiers of suppliers. As the diagram indicates, a
supplier may have one or more sub-suppliers, a sub-
supplier may have its own sub-supplier(s), and so on.
For an automobile manufacturer, for example, Tier 3
suppliers produce basic products such as glass,
plastic, and rubber; Tier 2 suppliers use these inputs to
make windshields, tires, and plastic moldings; and Tier
1 suppliers produce integrated components such as
dashboards and seat assemblies.
 Flows in the supply chain
● Material flows are the physical products, raw
materials, supplies, and so forth that flow along the
chain including the reverse flows. A supply chain thus
involves a product life cycle approach, from “dirt to
dust.”
● Information flows consist of data related to demand,
shipments, orders, returns, and schedules, as well as
changes in any of these data.
● Financial flows involve money transfers, payments,
credit card information and authorization, payment
schedules, e-payments, and credit-related data.
 Supply Chain Management
Supply chain management (SCM) is to improve the
way a company finds the raw materials it needs to
produce a product or service and deliver it to its
customers. That is, supply chain management is the
process of planning, organizing, and optimizing the
various activities performed along the supply chain.
There are five basic components of SCM: 2
 Supply Chain Management utilizes information
systems and the goal of SCM systems is to reduce the
problems, or friction, along the supply chain. Friction can
lead to increased time, costs, and inventories as well as
decreased customer satisfaction. SCM systems reduced
uncertainty and risks by decreasing inventory levels and
cycle time while improving business processes and
customer service. All of these benefits make the
organization more profitable and competitive. SCM
systems are a type of Interorganizational Information
System (IOS), information flows among two or more
organizations. By connecting the information systems of
business partners, IOSs enable the partners to perform a
number of tasks:
● Reduce the costs of routine business
transactions;
● Improve the quality of the information flow by
reducing or eliminating errors;
● Compress the cycle time involved in fulfilling
business transactions;
● Eliminate paper processing and its associated
inefficiencies and costs;
● Make the transfer and processing of information
easier for users.