SUPPLY CHAIN

MANAGEMENT
BY PROF. N. V. BADI
CHAPTER 1
INTRODUCTION TO SUPPLY CHAIN MANAGEMENT
• Introduction
• What is SCM?
• Functioning of SCM
• Objectives of SCM
• Scope of SCM
• Supply chain drivers and obstacles
• The complexity
• Key issues in SCM
• Strategic decisions in supply chain management
• Supply chain decision and tradeoffs
• Legal aspects in SCM
• Customers relationship management strategy
• Supply relationship strategy
• Summary
• Questions
Introduction
 Materials inflow was referred to as “stores management” and subsequently it got revised
to “stores and purchase management” in 50’s
 Since late eighties a serious thinking started that funds are blocked from raw materials
stage to final product delivery to customer
RM Supplies
Stores Stock

Components
Mfg. Direct
Boughtouts Product Consumer
process sale
Spares

Sub-contracts Distributor

Imports
Consumer

Consumables

Supply Chain System

 SCM manger has overall responsibility of stores incoming materials to finished goods
reaching customer
WHAT IS SCM?
 SCM can be adapted to even other areas like services and product cum
service areas. The resources (human resources in case of services) from
starting of the work to completion stage can value.

 The focus of customer satisfaction is achieved stage wise, care of time,

cost and quality factors

 The purchasing and warehousing are functional activities of supply

chain management it involves co-ordination close working of different
cross functional areas such as, engineering, purchasing, warehousing,
supplier quality assurances, warehousing, transport and handling.

 The SCM is composing of interrelated activities within an organisation

and also the external agencies who supply goods and services.
OBJECTIVES OF SCM
Identify flaws, delays and to take corrective action on weak links of
SCM.

Reduce costs in terms of inventory holdings, process delays,

waiting time reduction and getting outside suppliers on JIT basis.

Have an overall view of various activities to ensure that processing

and movement of materials is synchronised to ensure planned
objectives.

Involve outside sources in quality, quantity and timing of

suppliers.
Scope of SCM
a) Purchasing and JIT Purchasing.
b) Overall coordination of purchase team with inside and outside
functionaries.
c) Value engineering, make or buy decisions.
d) Outsourcing/ sub-contracting.
e) Vendor evaluation and selection.
f) Logistics.
g) Warehousing
h) Taking care of TQM culture.

The logistics industry is growing with double digits in India. The size
of the industry is large and as on date is around 3.6 lakh crore rupees.
Supply Chain Drivers
Drivers

 Top Management Support

 Clear objectives and action plans with flexibilities built in
 E-procurement and e-auctions
 Team work culture in the organisation
 Introduction of new technologies for real time information and decision support systems like
Material Requisition Planning (MRP), Resource Planning and Enterprise Resource Planning
(ERP)
 Efficient and Effective Management Approaches by total cost ownership
 A culture of learning and continuous improvements.
 Quick decision making
 Timely payments
 Ethics in all actions in the organisation
 Good vendor relations
 Market place adjustments and evolving strategies to meet customer requirements.
 Regular measurement and evaluation of the supply chain
Supply Chain Obstacles
 No clear objectives in the organisation
 Long hierarchy and organisational mismatches
 Delayed decision process
 Ethical standards not set
 Non use or wrong use of new technologies in knowledge or communication spread or
analysis.
 Lack of focus or team work
 Frequent changes in laws of the land, Government levies and incentives.
 Wrong selection of vendors and or no proper evaluation of Vendor performance.
 Flawed or delayed information in the Supply Chain Management. Replacement of
obsolete system is essential.
 Lack of Mutual trust in the organisation or internal resistances.
 Organisational deficiencies and lack of training and up-dating of skill sets.
 Delayed payments
 No measurement of performance of SCM.
 Lack of top management support or understanding solution.
The Complexity in SCM
 Market Dynamics
 Government Policies
 Seasons T
 Changes in Consumer Needs
 Supply Chain and logistics changes
 Resource Constraints
 Natural Calamities
 Technology
 Coordination with Outside Agencies
 Acts of Force
 Human Resource
 Competitive Advantage
Key Issues in Supply Chain
Management
Strategic Decisions in Supply Chain
Management
Outsourcing
Make or buy decisions
Making clear 4 classes of purchase and evolve separate
strategies
Transaction commodities
Problem items
Leverage items
Strategic items
TRADE OFFS IN SCM
Supply Chain Management try to achieve the 5 rights
principle.
That is right price, right quality, right quantity, right
time and right source.
The 5 Rs. are optimised in any decision making.
Always there is trade off among these 5 Rs.
Octroi Rules
Legal Aspects in SCM
Supply Chain Management deals with large chunk of financial
resources of an organisation. It is imperative that the money deals
be made legal and ethical standards.
Indian Contract Act
Sale of Goods Act
Income Tax Regulations
Excise Duty Laws
Customs Laws
Service Tax
Import and Export Regulations:
Inco terms
Legal Aspects in SCM (CONTD)
 Law of Agency
 Insurance Schemes
 Negotiable Instruments Act
 Foreign Exchange Regulations (Foreign Exchange Management
Act 1999)
 Octroi Rules
 Law of Carriage of Goods
 Indian Companies Act
 Arbitration Act
 Acts relating to the type of goods like Indian Explosives Act:
 Safety Acts
 WTO norms of Dispute Settlement
Customer Relationship Management
Strategy
All strategies and long term plan of actions in Supply
Chain Management need to be guided by customer
needs.
Proper forecast of market needs and pull strategy in
marketing call for close customer relationships
Supply Chain Strategy
All strategies in an organisation start with corporate
mission of the organisation.
The objectives of the corporate are drawn from the
mission statement.
Goals are set for achievement in external sphere and
internal working of the organisation.
Supply Chain Strategy (CONTD)
Short Questions
1) Define SCM.
2) Give 2 objectives of SCM
3) Is a purchase order a contract?
4) What is Logistics?
5) Write 2 Supply Chain drivers.
6) Name 3 Supply Chain obstacles.
7) Scope of SCM
8) Objectives of SCM
9) Make or buy decisions
10) 5R principle in SCM