CHAPTER 1:

Introduction to Supply
Chain Management
WHAT IS SUPPLY CHAIN
MANAGEMENT?
Supply Chain Management can be defined as the management of flow
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of products and services, which begins from the origin of products and
ends at the product’s consumption. It also comprises movement and
storage of raw materials that are involved in work in progress,
inventory and fully furnished goods.

This includes material and information flows both up and down supply
chain. A full variety of processes such as system management,
operations and assembly, procurement, production plan, order
processing, inventory management, transport, warehousing, and
customer support are therefore included in the supply chain.
 In today’s changing business environment, there is an increased focus
on delivering value to the customer at the cheapest possible costs. Hence
there has been increased interest in logistics and supply chain management
practices since performance is not only determined by actions and decision,
but also the improvement on return on investment and greater profitability.
The main objective of supply chain management is to monitor and
relate production, distribution, and shipment of products and services. This
can be done by companies with a very good and tight hold over internal
inventories, production, distribution, internal productions and sales.
THE MAIN OBJECTIVE OF SUPPLY CHAIN
MANAGEMENT IS TO MONITOR AND RELATE
PRODUCTION, DISTRIBUTION, AND SHIPMENT OF
PRODUCTS AND SERVICES.
 IMPORTANCE OF SUPPLY CHAIN MANAGEMENT

• Identifying potential problems before they occur.

• Optimizing price dynamically.
• Improving the allocation of available to promise
inventory.
• Identifying potential problems before they occur. When a customer order
more product than the manufacturer can deliver, the traditional response has
been to short the order. This leaves the buyer feeling unimportant and convinced
the manufacturers service is poor. Manufacturer’s who anticipate the shortage
before the buyer is disappointed may be able to offer a substitute product or
other incentive to keep the buyer happy.
• Optimizing price dynamically. Seasonal products particularly fashion
products, have a limited shelf life. Any that don’t sell by the end of the season
are scrapped or sold at deep discounts to empty the warehouse. Airlines, hotels
and other companies with a limited, but perishable product, adjust price
dynamically to meet demand.
Improving the allocation of available promise inventory.
Today’s tools dynamically allocate resources and schedule work
based on the sales forecast, actual orders and promised delivery of
raw materials. Manufacture’s are able to confirm a product
delivery date when the order is placed, significantly reducing
incorrectly filled orders.
 SUPPLY CHAIN MANAGEMENT-ADVANTAGES

Supply chain management play a very significant role in this era of globalization, where firms
complete to supply consumers with the highest quality products and meet all their demands. Both industries
are heavily reliant on efficient supply chain process.

The key benefits of supply chain management are as follows:

• Assist companies in adapting to the challenges of globalization, economic upheaval,
expanding consumer expectations, and related differences.
• Assists companies in minimizing waste, driving out costs, and achieving efficiencies
throughout the supply chain process.
• Assist in achieving shipping of right products to the right place at the right time.
 SUPPLY CHAIN ADVANTAGES

• Creates better delivery mechanisms for product and services in demand with minimum
delay.
• Develops better customers relationship and service.
• Enhances inventory management, supporting the successful execution of just-in time
stock models.
• Improvises productivity and business functions.
• Minimizes direct and indirect costs.
• Minimizes warehouse and transportation costs.
 THE OVERALL GOALS OF SUPPLY CHAIN
MANAGEMENT

The main goal of SMC software is to improve supply chain performances. Timely and accurate supply
chain information allows manufacturers to make and ship only as much product as can be sold. Here are the
three main goals of supply chain management.

Improving Efficiency
Efficiency refers to the minimization of waste. Waste can exist in terms of wasted materials, wasted
money, wasted man hours, wasted delivery time, and much more. Making sure that waste is at a
minimum is a key component of supply chain management.
Improving Quality
Reducing waste isn’t the only goal of supply chain management. Making sure that the
product and the customer experience are as positive and as effective as they can be is another
significant goal.

Improving Stability
Supply chain management is also about improving and maintaining overall stability of the
supply chain. Companies can aim to forge and maintain strong relationships with their suppliers and
distributors to make sure that business continues to run smoothly.
 SIX (6) COMPONENTS OF SUPPLY CHAIN
MANAGEMENT
Effective supply chain systems can help both manufacturers and retailers reduce excess inventory. This
decreases the cost of producing, shipping, and storing product that cannot be sold:

1. Planning
2. Sourcing
3. Making
4. Delivering
5. Returning
6. Enabling
• Planning - Enterprises need to plan and manage all resources required to meet
customer demand for their product or services. They also need to design their
supply chain and then determine which metrics to use in order to supply chain is
efficient, effective, delivers value to customers, and meets enterprise goals.
Planning is imperative to control inventory and manufacturing processes.
Companies always try to match supply with aggregate demand by developing a
course of action using analytics. To procure what is planned is Source’. To Plan
what is ample for production is ‘Make’ and to attain significant service levels by
delivering on time with quoted lead time is ‘Deliver’.
 SOURCING

Companies must choose suppliers to provide the goods and services needed to create their
product. After suppliers are under contract, supply chain management use a variety of processes
to monitor and manage supplier relationships. Key processes include ordering, receiving,
managing inventory and authorizing supplier payment.
Sourcing is identifying vendors who will procure goods and services to meet
planned/actual demand in the most economical and efficient way. Sourcing can be a perishable
and non-perishable products. In the case of perishable products, It is mandated to have a
minimum suppliers deal time which will support a minimal inventory approach. Non-perishable
products, the supplier’s quoted lead time must be less than the number of days by when
inventory reaches zero, thus leading to no loss in revenue.
 MAKING

Supply chain managers coordinate the activities required to accept raw materials,
manufacture the product, test for quality, package for shipping and schedule for
delivery. Most enterprises measure quality, production output, and worker
productivity to ensure the enterprise creates product that meet quality standards.
As per the preference of the consumer, the firm will perform all activities
related to the transformation of raw material to the final product. Activities such as
assembling, testing and packing happen at this element of Supply Chain
Management, Feedback from consumers creates a Win-Win situation for both
(manufacture and end-user) as for the firm it is improving their production operations
continuously.
 DELIVERING

Another most important component of supply chain management is contributing to direct/indirect

integration with the consumers often called logistics, this involves coordinating customers orders,
scheduling, dispatching loads, invoicing customers and receiving payments. It relies on a fleet of vehicles
to ship product to customers. Many organizations outsource large parts of the delivery process to specialist
organizations, particularly if the product requires special handling or is to be delivered to a consumers
home.
It has a significant contribution to surge the brand image of the firm. Finished goods and services,
as demanded by consumers, have to meet expectations through the company’s delivery channels and
logistics services. To have a seamless delivery, the firm utilizes various freights - roads, air and rail.
 RETURNING

It is a post delivery customers support process that is associated with all kinds of
returned products. It is also known as ‘Reverse Logistics’. It is one of the most
important components of supply chain management to minimize potential
deterioration of relationships with customers. The supplier needs a responsive and
flexible network to take back defective, excess, or unwanted products. If the produce
is defective it needs to be reworked or scrapped. If the product is simply unwanted or
excess it needs to be returned to the warehouse for sale. On the flip side, this process
provides the same course of action for the firm towards its suppliers, The firm returns
the low quality, defective , expired or excessive raw materials to the
suppliers/vendors.
 ENABLING

• To operate efficiently, the supply chain requires a

number of support processes to monitor information
throughout the supply chain and assure compliance with
all regulations. Enabling processes include finance, HR,
IT facilities, portfolio management, product design,
sales, and quality assurance.
 COMPETITIVE AND SUPPLY CHAIN STRATEGIES

• Competitive strategy defines the set of customer needs a firm seeks to satisfy through its product 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 segments 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.
SUPPLY CHAIN MANAGEMENT IN
THE HOSPITALITY INDUSTRY
• In the service industry, the hospitality industry is a wide group of
Industries including accommodation, restaurants, event planning, theme
parks shipping, cruise ship and additional fields within the tourism
industry. A hospitality unit such as a restaurant hotel, or even an
amusement park consists of multiple groups such as facility maintenance
direct operations (servers, housekeepers, porters, kitchen workers, etc.),
management marketing, and human resources.
• The supply chain is an important element within the hotel and catering
industry. For staff in this industry, it is crucial to build steady relationships
with suppliers and work with a good ordering system in order to improve the
service level towards customers. Cutting- edge hospitality chains are
reaching beyond inventory control systems to spend intelligence tools, which
help gather, rationalize, and analyze, historic and real-time purchasing
information. The creation of a supply chain leads to a better understanding of
the whole chain and thus implementation of common standards becomes
easier. It is implied and obvious that in coming era of hyper-competition the
basis of competition in many industries will revolve around supply chain
development.
Thank you for listening!