WHY SUPPLY CHAIN MANAGEMENT-1

Traditionally marketing , distribution planning, manufacturing and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives which are often conflicting. Marketing¶s objective of high customer service and maximum sales revenue conflicts with the manufacturing and distribution goals. Many manufacturing operations are designed to maximize production and lower costs with little consideration for the impact on inventory levels and distribution capabilities

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SCM applications link people and organizations (and their activities) to information and resources. as well as the movement and transformation of materials on their way to customers. and facilities. in order to obtain best results for all parties. The ultimate goal is for all components of the chain to exchange information with maximum efficiency and effectiveness. warehouses. and retailers). These systems are used to manage demand. transportation. trade logistics. wholesalers.What is SCM? Supply chain management (SCM) systems coordinate the movement of products and services from suppliers to customers (including manufacturers. .

in order to obtain best results for all parties. . The ultimate goal is for all components of the chain to exchange information with maximum efficiency and effectiveness.SCM applications link people and organizations (and their activities) to information and resources. A comprehensive SCM solution allows you to focus on and optimize key components of your supply chain operations: demand management order management warehouse management production and supply planning service parts planning supplier relationship management supply chain event management international trade logistics transportation management The difference between managing these components effectively and mismanaging them can mean the difference between success and disaster.

Supply Chain Management ‡ Supply Chain Strategy ‡ Supply Chain Planning ‡ Supply Chain Execution .

equipment and space across the company and provide flexible planning and control mechanisms.OBJECTIVES OF SUPPLY CHAIN MANAGEMENT Objectives of Supply Chain Management are to optimize pre and postproduction inventory levels. capital and plant through out the company Flexible planning and control procedures . obtain greater efficiency from labour. Supply Chain management strives for a single chain of supply having the following objectives: Controlled customer service performance Reduction of pre and post-production inventory Minimum variance (Standardization) Minimum total cost of operations and procurement Product quantity control Maximum efficiency in using labour.

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Components of Logistics Logistics Materials Management Manufacturing & Supply Service Physical Distribution Customer Service Suppliers Raw materials Sub assemblies Manufactured parts Packing materials Inbound Materials flow Work In Progress Finished Goods & parts Outbound Inventory In the field Finished Goods Transit depot Productions Intermediary Customers *OEMS *End Users * Govt. .

ELEMENTS Managerial activities OF LOGISTICS Regular activities Transportation Demand Forecasting Waste Management Inventory Planning & Control Ware housing Order Processing LOGISTICS Packing and Shipping Customer Service .

This is impossible with out logistics. When a consumer goes to the store he not only expects the products available but also expects them to be fresh.FRAME WORK OF LOGISTICS Internal Operations Physical Distributions Physical Supply Logistics is concerned with getting products and services where they are needed. Its an activity which is carried out 24 hours a day & 365 days a year. Thus logistics is an activity which never stops and rests. . when they are needed.

Its can be viewed as a logical extension of transportation & related area to achieve an efficient and effective goods distribution system. . In this context profit maximization over the long run ( with flexibility of investment and restructuring if required) emerges the major goal of S C M rather than cost minimization . which is really on one of the factors contributing to profit maximization.DIFFERENCE BETWEEN LOGISTICS & S C M Logistics management activity is supply driven ( cost minimization with respect to known or specific demand target & efficiency focused). quality and design and therefore aims for an effective management response over a longer run. Supply chain management is more demand driven ( profit maximization with some resource constraints at a broad level and effectiveness focused) S C M tries to capture the dynamic nature of the value creation itself ( by looking at several competitive elements such as responsiveness .

Right Customer . Right time . Right price . Right qty . Logistics consists of seven R¶s Right product . Logistics deals with the efficient management of the static gap between demand and supply in localized sense. Right condition .this common definition covers functions performed by logistics ( Time & place utilities .LOGISTICS MANGEMENT ACTIVITY Logistics management activity is supply driven ( cost minimization with respect to known or specific demand target & efficiency focused). product movement and storage and price & customer services are all specified) . Its can be viewed as a logical extension of transportation & related area to achieve an efficient and effective goods distribution system. Right place .

STORE & RETURN . DELIVER . SOURCE . MAKE .SUPPLY CHAIN MANAGEMENT ACTIVITIES SCM is the combination of art & science that goes Into Improving the way a company finds the raw materials And components it needs to make a product or service.Manufacture s that product or create service & delivers It to company and customers Activities involved in the supply chain : PLAN .

Hau L Lee and Corey Billington Supply chain consists of all parties involved . and the distribution of these finished products to the customers. The supply chain not only includes the manufacturer and supplier. Within each organization. such as a manufacturer. retailers and customer themselves. the supply chain includes all functions involved in receiving and filling a customer request. in fulfilling a customer request. transformation of these materials into intermediate and finished products. warehouse .What is Supply Chain Management?-1 ³´A supply chain is a network of facilities and distribution options that performs the function of procurement of materials. although the complexity of the chain may vary greatly from industry to industry and firm to firm ³´ . directly or indirectly . . but also transporter . Supply chain exists in both services and manufacturing organization.

by accepting the whole supply chain as a single entity .Supply Chain Management concept eliminates this interfunctional protectionism drive. . The emphasis is on integration rather than on interfaces between the different functions. All functions along the chain share the common objective of supply and are involved in strategic decision-making. The Supply Chain becomes responsible for total inventories in the supply pipe line and also for satisfying customer needs and expectations while meeting all agreed customer service parameters and company targets.

Primary Service Response Logistics Activities Waiting time Suppliers Capacity Delivery Customers The Integrated Logistics Process .Finance/ Accounting Production Operations Engineering Human Resource Mgt Marketing INTEGRATED LOGISTICS SYSTEM Inbound Logistics Conversion Operations Primary Logistics Activities Outbound Logistics Transportation Facility Inventory Matls Hldg Comm & Inform.

penalties. y Information. Distributor.DEFINITION : SUPPLY CHAIN MANAGEMENT Supply Chain may be defined as the network consisting of Customer. at every stage in the Supply Chain. . involving Customer order receipts in the Supply Chain to delivery from the warehouse till goods reach the End-customer. Retailer. involving physical product flow from Supplier to the End-customer including reverse flow of returns for servicing and repairs. payment schedules. y Material. etc. Manufacturer and Supplier. involving credit terms. change of title and ownership arrangements. y Finance. closely linked through efficient flows of.

without any loss of time. from Production Availability and from Supplier Availability.SUPPLY CHAIN CHARACTERISTICS . . The link is so fine tuned that any change in the status in any of the stages gets reported throughout the link immediately.1 In a company the Supply Chain links the Customer orders/ expected orders (Sales forecast) with finished product Availability. enabling corrective actions and adjustments at every stage.

SUPPLY CHAIN CHARACTERISTICS . working in progress) Finished goods Indirect material y Working capital costs Interest on all material and goods Depreciation / value adjustments y Overheads IT expenses Supply Chain organizations try to set free capital tied up in inventories in the whole pipeline from Supplier to Customer without sacrificing the desired levels of customer service . y Material costs Raw material Semi-finished goods (WIP.2 The Supply Chain organization has an active role in improving the bottom line of the company by taking advantage of its systematic influence upon the 3 cost categories.

When you manage a supply chain. potential market volumes. This integrated approach incorporates Suppliers. 1 . competitor¶s price etc. Marketing links the customer.you co -ordinate. Marketing analyzes changing trends. Integrated Logistics and Operations. the departmental function and supply chain management itself. organizing and controlling the flow of materials and services from supplier to end users / customers. Operations & Integrated logistics into a seamless pipeline to maintain a continual flow of product & services. Supply management. Supply management. Marketing then routes information to the other department so they can determine how & when to meet the customer demand.THE SUPPLY CHAIN MANAGEMENT CONCEPT The process of planning.

S C M may use competitive quotes and price analysis as the best method to conduct business. Co ordinate the smooth and continual flow of product and services into. ³preferred´ or alliance. 3. Concepts may be 1. Co ordinate the outsourcing of materials. operations and integrated logistics work to : 1. Target Pricing or Cost Design 2 . S C M begins with intensive cost negotiation to obtain long term agreement with Tier 1 and 2 suppliers.THE SUPPLY CHAIN MANAGEMENT CONCEPT Marketing along with supply management . Manage bottle necks and reduce the impact on customer. S C M will classify suppliers as ³approved´. through. and out of the firm. 2.

Building commitment to supply chain management Model implies a need to understand ³ total cost of ownership´. Sharing information among supply chain management members. 3 .THE SUPPLY CHAIN MANAGEMENT CONCEPT Tactics to implement S C M Includes : Developing strong relationship with supply chain management members. Developing high quality products and services. You minimize fragmentation and sub optimization of product/ services flow. Reducing the order cycle time. Reducing the numbers of suppliers and carriers. Minimizing inventory levels across the supply chain.