Module 4.

1
The Supply Chain
 What will be covered?
Module 4.1 : The Supply Chain
Sr. No Topic

Understanding the concept of the supply chain, its main components and how it may vary in different
4.1
organizations

Understanding the importance of integrating and harmonizing physical and information flows within a
4.2
supply chain.

Understanding how an organization can manage and control its supply chain to gain competitive
4.3
advantage.

4.4 Know why supply chains may not always function effectively.
4.1 Understand the concept of the supply chain, its main
components and how it may vary in different
organizations

Supply Chains and Supply Chain Management

Define the terms supply chain

and supply chain management,
and discuss the benefits
of supply chain management
Supply Chain - Definition

The connected chain of all

Supply Chain
of the business entities,
both internal and external
to the company, that
perform or support the
logistics function
Supply Chain - Definition

A management system that

Supply Chain coordinates and integrates
Management all of the activities
performed by supply chain
members into a seamless
process, from the source to
the point of consumption,
resulting in enhanced
customer and economic
value
Supply Chain Managers

The philosophy behind supply chain

management is that by visualizing the entire
supply chain, supply chain managers can
maximize strengths and efficiencies at each
level of the process to create a highly
competitive, customer-driven supply system
that is able to respond immediately to changes
in supply and demand.
Supply Chain Management

Communicator of customer demand

from point of sale to supplier

Physical flow process that engineers the

movement of goods
What is Supply Chain (Watch Video)
4.2 Understand the importance of integrating and harmonizing physical and
information flows within a supply chain.

Supply chain oriented companies commonly report:

• Lower inventory, transportation,

warehousing, and packaging costs

• Greater supply chain flexibility

• Improved customer service

• Higher revenues

• Increased performance and profitability

Supply Chain Integration
Relationship Integration Firm-to-Firm Social
Interactions
Measurement Integration
Operational Planning
Technology and Planning and Control
Integration
Material and Service
Supplier Integration
Internal Operations
Integration Customer Integration

Customer Integration
Supply Chain Integration
Relationship Integration Firm-to-Firm Social
Interactions
Measurement Integration
Operational Planning
Technology and Planning and Control
Integration
Material and Service
Supplier Integration
Internal Operations
Integration Customer Integration

Customer Integration
Supply Chain Integration
The ability of two or more companies to
Relationship develop social connections that serve to
Integration guide their interactions when working
together.

The performance assessment of the

Measurement supply chain as a whole that also holds
Integration each individual firm or business unit
accountable for meeting its own goals
Supply Chain Integration
The creation and maintenance of
Technology and information technology systems that
planning connect managers across and through
integration the firms in the supply chain

Requires firms to link seamlessly to

Material and those outsiders that provide goods and
service supplier services to them so that they can
integration streamline processes and provide
quality customer experiences.
Supply Chain Integration
Internal Links internally performed work into a
Operations seamless process that stretches across
Integration departmental and/or functional
boundaries, with the goal of satisfying
customer requirements

A competency that enables firms to offer

Customer long-lasting, distinctive, value-added
Integration offerings to those customers who
represent the greatest value to the firm or
supply chain
Harmonizing Physical and information flows within a supply chain (Watch Video)
4.1.3. Understand how an organization can manage and control its supply chain
to gain competitive advantages is through managing.

Key Business Processes

1. Customer relationship management

2. Customer service management
3. Demand management
4. Order fulfillment
5. Manufacturing flow management
6. Supplier relationship management
7. Product development and
commercialization
8. Returns management
Customer Relationship Management

Customer
Relationship
Allows companies to prioritize their
Management
marketing focus on different
(CRM) Process
customer groups according to each
group’s long-term value to the
company or supply chain
Customer Service Management

Customer
Service Presents a multi-company,
Management unified response system
Process to the customer whenever
complaints, concerns,
questions, or comments
are voiced
Demand Management

Demand Seeks to align supply and demand

Management throughout the supply chain by
Process anticipating customer requirements
at each level and create demand-
related plans of action prior to
actual customer purchasing
behavior
Order Fulfillment

Order A highly integrated process, often

Fulfillment
requiring persons from multiple
Process
companies and multiple functions to
come together and coordinate to
create customer satisfaction at a
given place and time
Manufacturing Flow Management

Manufacturing
Concerned with ensuring that
Flow
Management firms in the supply chain have
Process the needed resources to
manufacture with flexibility
and to move products through
a multi-stage production
process
Supplier Relationship Management

Supplier
Closely related to the
Relationship
Management manufacturing flow
Process management process and
contains several
characteristics that parallel
the customer relationship
management process
Product Development and Commercialization

Product
Development and Includes the group activities
Commercialization that facilitates the joint
Process
development and marketing
of new offerings among a
group of supply chain partner
firms
Returns Management

Returns
Management Enables firms to manage volumes of
Process returned product efficiently, while
minimizing returns-related costs
and maximizing the value of the
returned assets to the firms in the
supply chain
Managing the Logistical Components of the Supply
Chain

Discuss the key strategic

decisions supply chain
managers must make when
designing their companies’
supply chains
Logistics

Logistics is…
The process of strategically managing
the efficient flow and storage of raw
materials, in-process inventory, and
finished goods from point of origin to
point of consumption.
Logistical Components of the Supply Chain

Sourcing & Procurement

Logistics Information System

Production Scheduling

Supply Order Processing

Chain
Team Inventory Control

Warehouse & Materials Handling

Transportation
Sourcing and Procurement

The Role of Purchasing:

 Plan purchasing strategies

 Develop specifications

 Select suppliers

 Negotiate price and service levels

 Reduce costs
Production Scheduling

Traditional Focus Customer Focus

Push / Pull
Push Pull
Strategy

Start of Inventory- Customer-Order

Production Based Based

Manufacturing Mass Production Mass Customization

Just-in-Time Manufacturing

JIT
A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials at the
precise time they are needed on
the production line.
Benefits of JIT

 For manufacturers: reduces raw material

inventories; immediate shipping of
products
 For suppliers: daily or hourly deliveries
rather than weekly
 For customers: lower costs; shorter lead
times; products tailored to customer needs
Order Processing
An Order Processing
System is…
A system whereby orders are
entered into the supply chain
and filled.

Order processing is becoming more automated through the use of computer

technology known as ELECTRONIC DATA INTERCHANGE (EDI).
Inventory Control

Inventory A method of developing and

Control
maintaining an adequate
System
assortment of materials or
products to meet a
manufacturer’s or a customer’s
demand
Inventory Control
Tools for managing inventory include:

 materials requirement planning (MRP) or

materials management – supplier to
manufacturer
 distribution resource planning (DRP) –
manufacturer to end user
 automatic replenishment programs – minimal
forecasting
Warehousing and Materials Handling

A Materials-Handling System
is… a method of moving inventory into,
within, and out of the warehouse.

Most manufacturers today have moved to AUTOMATED materials-handling

systems to minimize the amount of handling.
Transportation

Airways

Water

Pipelines

Motor Carriers

Railroads
Transportation Mode Choice

 Cost
 Transit time
 Reliability
 Capability
 Accessibility
 Traceability
Exhibit 4.1.3
Criteria for Ranking Modes of Transportation
Trends in Supply Chain Management

Advanced computer technology

Outsourcing of logistics functions

Electronic distribution
Advanced Computer Technology

 Automatic identification systems

- Bar coding
- Radio frequency technology

 Communications technology

 Supply chain software systems

Outsourcing Logistics Functions

Outsourcing Benefits

 Reduce inventories

 Locate stock at fewer plants and distribution

centers

 Provide same or better levels of service

Electronic Distribution

Electronic Distribution is…

a distribution technique that includes any
kind of product or service that can be
distributed electronically, whether over
traditional forms such as fiber-optic
cable or through satellite transmission of
electronic signals.
Green Supply Chain Management
Requires integrating green thinking into all
phases of the supply chain

 Green materials sourcing

 Environmental impact of packaging,
shipment, use
 Incorporate end-of-life management
 Recycling
 Clean disposal
Global Logistics and Supply Chain Management

Logistical challenges of global markets:

• Understanding and coping with the legalities
of trade in other countries
• Uncertainty regarding shipping
Supply chain to Gain Competitive Advantage (Watch Video).
4.4. Know why supply chains may not always
function effectively.

What’s causing the supply chain problem?

There are a myriad of reasons that supply chains
may be functioning poorly. Some of these include:
•Inefficient data tracking systems
•Poor supply chain visibility
•Unproductive systems that are cost and time ineffective
•Poor visibility into the supply chain means that when
something goes wrong, it’s almost impossible to pinpoint the
cause. If a product is mislaid, it can be difficult to find out
where or how – instead, the data is lost or impossible to find.
•Poor visibility and inefficient tracking also means that when
there’s a problem, such as wrong measurements or incorrect
recording, it can be very arduous to find out where, exactly,
things are going wrong.
How can we solve it?

Proper supply chain visibility starts with an organized system,

better technology and improved data analytics.

How, exactly, one go about implementing this is largely up to

what works best for any company. This means ensuring that
vendors and contractors input the correct data, and that it is
detectable if there are anomalies in the supply chain. It also means
that your company has a plan of action when something goes
wrong.

So, you might be able to pinpoint where a delivery has been

mislaid through tracking; however, your company must have
adequate procedures to tackle and deal with the problem, and
implement processes in the future to deter from it happening
again.

Unfortunately, technology can’t solve all our problems – but it can

definitely help.
Supply Chain Visibility (Watch Video)
Application of my learnings
Recap of Learning