SUPPLY CHAIN MANAGEMENT:

Supply chain management (SCM) is the process of planning, implementing and controlling
the operations of the supply chain as efficiently as possible. Supply Chain Management spans
all movement and storage of raw materials, work-in-process inventory, and finished goods
from point-of-origin to point-of-consumption.

Supply Chain Management encompasses the planning and management of all activities
involved in sourcing, procurement, conversion, and logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners, which can
be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply
Chain Management integrates supply and demand management within and across companies.
More recently, the loosely coupled, self-organizing network of businesses that cooperates to
provide product and service offerings has been called the Extended Enterprise.

Some experts distinguish Supply Chain Management and logistics, while others consider the
terms to be interchangeable. Supply Chain Management can also refer to Supply chain
management software which are tools or modules used in executing supply chain
transactions, managing supplier relationships and controlling associated business processes.
Supply chain event management (abbreviated as SCEM) is a consideration of all possible
occurring events and factors that can cause a disruption in a supply chain. With SCEM
possible scenarios can be created and solutions can be planned.

A supply chain is a network of facilities and distribution options that performs the functions
of procurement of materials, transformation of these materials into intermediate and finished
products, and the distribution of these finished products to customers. Supply chains exist in
both service and manufacturing organizations, although the complexity of the chain may vary
greatly from industry to industry and firm to firm.

Supply chain management is typically viewed to lie between fully vertically integrated firms,
where the entire material flow is owned by a single firm, and those where each channel
member operates independently. Therefore coordination between the various players in the
chain is key in its effective management. Cooper and Ellram compare supply chain
management to a well-balanced and well-practiced relay team. Such a team is more
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competitive when each player knows how to be positioned for the hand-off. The relationships
are the strongest between players who directly pass the baton, but the entire team needs to
make a coordinated effort to win the race.

SUPPLY CHAIN MANAGEMENT PROBLEM:

Supply chain management must address the following problems:

1. Distribution Network Configuration: Number, location and network missions of

suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.
2. Distribution Strategy: Including questions of operating control (centralized,
decentralized or shared); delivery scheme (e.g., direct shipment, pool point shipping,
Cross docking, DSD (direct store delivery), closed loop shipping); mode of
transportation (e.g., motor carrier, including truckload, LTL, parcel; railroad;
intermodal, including TOFC and COFC; ocean freight; airfreight); replenishment
strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated,
private carrier, common carrier, contract carrier, or 3PL).
3. Information: Integration of and other processes through the supply chain to share
valuable information, including demand signals, forecasts, inventory, transportation,
and potential collaboration etc.
4. Inventory Management: Quantity and location of inventory including raw materials,
work-in-process and finished goods.
5. Cash-Flow: Arranging the payment terms and the methodologies for exchanging
funds across entities within the supply chain.

Supply chain execution is managing and coordinating the movement of materials,

information and funds across the supply chain. The flow is bi-directional.

ACTIVITIES/FUNCTIONS:

Supply chain management is a cross-functional approach to managing the movement of raw

materials into an organization, certain aspects of the internal processing of materials into
finished goods, and then the movement of finished goods out of the organization toward the

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end-consumer. As organizations strive to focus on core competencies and becoming more
flexible, they have reduced their ownership of raw materials sources and distribution
channels. These functions are increasingly being outsourced to other entities that can perform
the activities better or more cost effectively. The effect is to increase the number of
organizations involved in satisfying customer demand, while reducing management control
of daily logistics operations. Less control and more supply chain partners led to the creation
of supply chain management concepts. The purpose of supply chain management is to
improve trust and collaboration among supply chain partners, thus improving inventory
visibility and improving inventory velocity.

Several models have been proposed for understanding the activities required to manage
material movements across organizational and functional boundaries. SCOR is a supply chain
management model promoted by the Supply Chain Management Council. Another model is
the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain
activities can be grouped into strategic, tactical, and operational levels of activities.

Strategic:

• Strategic network optimization, including the number, location, and size of

warehouses, distribution centers and facilities.
• Strategic partnership with suppliers, distributors, and customers, creating
communication channels for critical information and operational improvements such
as cross docking, direct shipping, and third-party logistics.
• Product design coordination, so that new and existing products can be optimally
integrated into the supply chain, load management
• Information Technology infrastructure, to support supply chain operations.
• Where-to-make and what-to-make-or-buy decisions
• Aligning overall organizational strategy with supply strategy.

Tactical:

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, locations, scheduling, and planning
process definition.
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 • Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of best
practices throughout the enterprise.
• Milestone payments

Operational:

• Daily production and distribution planning, including all nodes in the supply chain.
• Production scheduling for each manufacturing facility in the supply chain (minute by
minute).
• Demand planning and forecasting, coordinating the demand forecast of all customers
and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in collaboration
with all suppliers.
• Inbound operations, including transportation from suppliers and receiving inventory.
• Production operations, including the consumption of materials and flow of finished
goods.
• Outbound operations, including all fulfillment activities and transportation to
customers.
• Order promising, accounting for all constraints in the supply chain, including all
suppliers, manufacturing facilities, distribution centers, and other customers.

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SUPPLY CHAIN MANAGEMENT SYSTEM:

Organizations increasingly find that they must rely on effective supply chains, or networks, to
successfully compete in the global market and networked economy. In Peter Drucker's
management's new paradigms, this concept of business relationships extends beyond
traditional enterprise boundaries and seeks to organize entire business processes throughout a
value chain of multiple companies.

During the past decades, globalization, outsourcing and information technology have enabled
many organizations, such as Dell and Hewlett Packard, to successfully operate solid
collaborative supply networks in which each specialized business partner focuses on only a
few key strategic activities. This inter-organizational supply network can be acknowledged as
a new form of organization. However, with the complicated interactions among the players,
the network structure fits neither "market" nor "hierarchy" categories. It is not clear what kind
of performance impacts that different supply network structures could have on firms, and
little is known about the coordination conditions and trade-offs that may exist among the
players. From a system's point of view, a complex network structure can be decomposed into
individual component firms. Traditionally, companies in a supply network concentrate on the
inputs and outputs of the processes, with little concern for the internal management working
of other individual players. Therefore, the choice of an internal management control structure
is known to impact local firm performance.

In the 21st century, there have been a few changes in business environment that have
contributed to the development of supply chain networks. First, as an outcome of
globalization and the proliferation of multi-national companies, joint ventures, strategic
alliances and business partnerships, there were found to be significant success factors,
following the earlier "Just-In-Time", "Lean Management" and "Agile Manufacturing"
practices. Second, technological changes, particularly the dramatic fall in information
communication costs, which are a paramount component of transaction costs, have led to
changes in coordination among the members of the supply chain network.

Many researchers have recognized these kinds of supply network structures as a new
organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual
Corporation", Global Production Network", and "Next Generation Manufacturing System". In
general, such a structure can be defined as "a group of semi-independent organizations, each
with their capabilities, which collaborate in ever-changing constellations to serve one or more

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 markets in order to achieve some business goal specific to that collaboration" (Akkermans,
2001).

SUPPLY CHAIN BUSINESS PROCESS INEGRATION:

Successful SCM requires a change from managing individual functions to integrating

activities into key supply chain processes. An example scenario: the purchasing department
places orders as requirements become appropriate. Marketing, responding to customer
demand, communicates with several distributors and retailers, and attempts to satisfy this
demand. Shared information between supply chain partners can only be fully leveraged
through process integration.

Supply chain business process integration involves collaborative work between buyers and
suppliers, joint product development, common systems and shared information. According to
Lambert and Cooper operating an integrated supply chain requires continuous information
flows, which in turn assist to achieve the best product flows. However, in many companies,
management has reached the conclusion that optimizing the product flows cannot be
accomplished without implementing a process approach to the business. The key supply
chain processes stated by Lambert are:

 Customer relationship management

 Customer service management
 Demand management
 Order fulfillment
 Manufacturing flow management
 Supplier relationship management
 Product development and commercialization
 Returns management

Other key critical supply business processes combining these processes stated by Lambert
such as:

a. Customer service management

b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
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 e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement

A) Customer service management process:

Service Management is integrated into Supply Chain Management as the joint between the
actual sales and the customer. The aim of high performance Service Management is to
optimize the service-intensive supply chains, which are usually more complex than the
typical finished-goods supply chain. Most service-intensive supply chains require larger
inventories and tighter integration with field service and third parties. They also must
accommodate inconsistent and uncertain demand by establishing more advanced information
and product flows. Moreover, all processes must be coordinated across numerous service
locations with large numbers of parts and multiple levels in the supply chain.

Customer Relationship Management concerns the relationship between the organization and
its customers.Customer service provides the source of customer information. It also provides
the customer with real-time information on promising dates and product availability through
interfaces with the company's production and distribution operations. Successful
organizations use following steps to build customer relationships:

• determine mutually satisfying goals between organization and customers

• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

B) Procurement process:

Strategic plans are developed with suppliers to support the manufacturing flow management
process and development of new products. In firms where operations extend globally,
sourcing should be managed on a global basis. The desired outcome is a win-win
relationship, where both parties benefit, and reduction times in the design cycle and product
development are achieved. Also, the purchasing function develops rapid communication
systems, such as electronic data interchange (EDI) and Internet linkages to transfer possible
requirements more rapidly. Activities related to obtaining products and materials from outside
suppliers requires performing resource planning, supply sourcing, negotiation, order
placement, inbound transportation, storage, handling and quality assurance, many of which
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include the responsibility to coordinate with suppliers in scheduling, supply continuity,
hedging, and research into new sources or programmes.

C) Product development and commercialization:

Here, customers and suppliers must be united into the product development process, thus to
reduce time to market. As product life cycles shorten, the appropriate products must be
developed and successfully launched in ever shorter time-schedules to remain competitive.
According to Lambert and Cooper, managers of the product development and
commercialization process must:

1. coordinate with customer relationship management to identify customer-articulated

needs;
2. select materials and suppliers in conjunction with procurement, and
3. develop production technology in manufacturing flow to manufacture and integrate
into the best supply chain flow for the product/market combination.

D) Manufacturing flow management process

The manufacturing process is produced and supplies products to the distribution channels
based on past forecasts. Manufacturing processes must be flexible to respond to market
changes, and must accommodate mass customization. Orders are processes operating on a
just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow
process lead to shorter cycle times, meaning improved responsiveness and efficiency of
demand to customers. Activities related to planning, scheduling and supporting
manufacturing operations, such as work-in-process storage, handling, transportation, and time
phasing of components, inventory at manufacturing sites and maximum flexibility in the
coordination of geographic and final assemblies postponement of physical distribution
operations.

E) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution,

the customer is the final destination of a marketing channel, and the availability of the
product/service is a vital part of each channel participant's marketing effort. It is also through
the physical distribution process that the time and space of customer service become an
integral part of marketing, thus it links a marketing channel with its customers (e.g. links
manufacturers, wholesalers, retailers).
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F) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of this trend
is that the company will increasingly focus on those activities in the value chain where it has
a distinctive advantage and everything else it will outsource. This movement has been
particularly evident in logistics where the provision of transport, warehousing and inventory
control is increasingly subcontracted to specialists or logistics partners. Also, to manage and
control this network of partners and suppliers requires a blend of both central and local
involvement. Hence, strategic decisions need to be taken centrally with the monitoring and
control of supplier performance and day-to-day liaison with logistics partners being best
managed at a local level.

G) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration
to market share and profitability. By taking advantage of supplier capabilities and
emphasizing a long-term supply chain perspective in customer relationships can be both
correlated with firm performance. As logistics competency becomes a more critical factor in
creating and maintaining competitive advantage, logistics measurement becomes increasingly
important because the difference between profitable and unprofitable operations becomes
more narrow. A.T. Kearney Consultants noted that firms engaging in comprehensive
performance measurement realized improvements in overall productivity. According to
experts internal measures are generally collected and analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

External performance measurement is examined through customer perception measures and

"best practice" benchmarking, and includes

1) customer perception measurement, and

2) best practice benchmarking.

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 COMPONENT OF SUPPLY CHAIN MANAGEMENT INTEGRATION:

The management components of SCM

The SCM components are the third element of the four-square circulation framework. The
level of integration and management of a business process link is a function of the number
and level, ranging from low to high, of components added to the link. Consequently, adding
more management components or increasing the level of each component can increase the
level of integration of the business process link. The literature on business process
reengineering, buyer-supplier relationships, and SCM suggests various possible components
that must receive managerial attention when managing supply relationships. Lambert and
Cooper identified the following components which are:

 a. Planning and control

 b. Work structure
 c. Organization structure
 d. Product flow facility structure
 e. Information flow facility structure
 f. Management methods
 g. Power and leadership structure
 h. Risk and reward structure
 i. Culture and attitude

However, a more careful examination of the existing literature will lead us to a more
comprehensive structure of what should be the key critical supply chain components, the
"branches" of the previous identified supply chain business processes, that is, what kind of
relationship the components may have that are related with suppliers and customers
accordingly. Bowersox and Closs states that the emphasis on cooperation represents the
synergism leading to the highest level of joint achievement. A primary level channel
participant is a business that is willing to participate in the inventory ownership responsibility
or assume other aspects of financial risk, thus including primary level components. A
secondary level participant, is a business that participates in channel relationships by
performing essential services for primary participants, thus including secondary level
components, which are in support of primary participants. Third level channel participants

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and components that will support the primary level channel participants, and which are the
fundamental branches of the secondary level components, may also be included.

Consequently, Lambert and Cooper's framework of supply chain components does not lead us
to the conclusion about what are the primary or secondary (specialized) level supply chain
components. That is, what supply chain components should be viewed as primary or
secondary, how these components should be structured in order to have a more
comprehensive supply chain structure, and to examine the supply chain as an integrative one.

Baziotopoulos reviewed the literature to identify supply chain components. Based on this
study, Baziotopoulos suggests the following supply chain components:

1. For customer service management: Includes the primary level component of

customer relationship management, and secondary level components such as
benchmarking and order fulfillment.
2. For product development and commercialization: Includes the primary level
component of Product Data Management (PDM), and secondary level components
such as market share, customer satisfaction, profit margins, and returns to
stakeholders.
3. For physical distribution, manufacturing support and procurement: Includes the
primary level component of enterprise resource planning (ERP), with secondary level
components such as warehouse management, material management, manufacturing
planning, personnel management, and postponement (order management).
4. For performance measurement: Includes the primary level component of logistics
performance measurement, which is correlated with the information flow facility
structure within the organization. Secondary level components may include four types
of measurement such as: variation, direction, decision and policy measurements.
More specifically, in accordance with these secondary level components, total cost
analysis (TCA), customer profitability analysis (CPA), and asset management could
be concerned as well.
5. For outsourcing: Includes the primary level component of management methods, and
the strategic objectives for particular initiatives in key areas of information
technology, operations, manufacturing capabilities, and logistics (secondary level
components).

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REVERSE SUPPLY CHAIN:

Reverse Logistics is the process of planning,implementing and controlling the efficient,

effective inbound flow and storage of secondary goods and related information opposite
to the traditional supply chain direction for the purpose of recovering value or proper
disposal. Reverse logistics is also referred to as "Aftermarket Customer Services". In
other words, anytime money is taken from a company's Warranty Reserve or Service
Logistics budget, that is a Reverse Logistics operation.

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BIBLIOGRAPHY:

1. http://en.wikipedia.org/wiki/Supply_Chain_Management

2. http://en.wikipedia.org/wiki/Inventory_control_system

3. http://lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html

4. http://www.work.com/inventory-management-systems-127/

5. http://en.wikipedia.org/wiki/Customer_relationship_management

6. http://en.wikipedia.org/wiki/Service_management

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