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• Combination of art and science to improve the

way a company finds the raw components or
service and deliver it to customers
• Complex sequence of events and decisions, which
connects sourcing raw materials with
manufacturing and the end customer
• Integration of supplier factories and
warehouses so that the product is produced
in the right quantity with right quality and
distributed to right location at the right time
without any damages there by reducing the
system cost satisfying the system
Components of SCM
• Plan
– A big piece of planning is developing a set of metrics to monitor the supply chain so that it is
efficient, costs less and delivers high quality and value to customers.
• Source
– Choose the suppliers for the delivery of goods and services to create product
– Develop a set of pricing, delivery and payment processes and create metrics for monitoring and
improving the relationships
– Put together processes for managing the inventory of goods and services including receiving
shipments, verifying them, transferring them to manufacturing facilities and authorizing supplier
• Make
– Schedule the activities necessary for production, testing, packaging and preparation for delivery.
– Measure quality levels, production output and worker productivity.
• Deliver
– Coordinate the receipt of orders from customers, develop a network of warehouses
– Pick carriers to get products to customers and set up an invoicing system to receive payments.
• Return
– Create a network for receiving defective and excess products back from customers and supporting
customers who have problems with delivered products.
• Reduce the supply demand gap
• Obtain greater efficiency from labor, equipment
and space
• Provide flexible planning and control mechanisms
• Minimizes the transportation cost
• Helps in decision making
• Pricing
• Choosing the supplier
Traditional SCM
Extended SCM
• Describes everyone who contributes to a product.

• It is important to keep track of what is happening in

extended supply chain
• Problem may be with a supplier or a supplier’s
supplier that could end up having an impact on the
Supply Chain Decision
• Strategic
– Made to Order
– Made to Stock
• Operational
• Decision areas
– Location
– Inventory
– Transportation
– Production
Supply Chain Model
• Network Design
– Focus more on the design aspect of the supply chain
and establishes network and the associated flows
• Rough Cut methods
– Assume "single site" (i.e., ignore the network)
– Add supply chain characteristics to it
– Eg: such as explicitly considering the site's relation to
the others in the network
• Simulation based methods
– Evaluate the effectiveness of a pre-specified policy
rather than develop new ones.
– It is the traditional question of "What If?" versus
"What's Best?".
SCM functions
• Physical function • Market interface
– Procurement function
– Transportation – Right product
– Storage – Right place
– Production – Right quality
– Right time
• Requirements to • Key dimensions to
implement SCM implement SCM
– Work flow condition
– Material – Synchronization
– Information – Information integration
– Financial flows – Trust factor
Benefits of SCM
• Increased Visibility
• Increased Reliability
• Increase in velocity of business
• Savings and revenue improvements