Supply Chain Management

A supply chain is the sequence of organizations—their facilities, functions, and

activities— that are involved in producing and delivering a product or service. The
sequence begins with basic suppliers of raw materials and extends all the way to the
final customer.
Facilities include warehouses, factories, processing centers, distribution centers, retail
outlets, and offices. Functions and activities include forecasting, purchasing, inventory
management, information management, quality assurance, scheduling, production,
distribution, delivery, and customer service.

Supply chain management is the strategic coordination of business functions within a

business organization and throughout its supply chain for the purpose of integrating
supply and demand management. Supply chain managers are people at various levels
of the organization who are responsible for managing supply and demand both within
and across business organizations. They are involved with planning and coordinating
activities that include sourcing and procurement of materials and services,
transformation activities, and logistics.

Logistics is the part of a supply chain involved with the forward and reverse flow of
goods, services, cash, and information. Logistics management includes management of
inbound and outbound transportation, material handling, warehousing, inventory, order
fulfillment and distribution, third-party logistics, and reverse logistics (the return of goods
from customers).
Customer
The customer arrives at the location of choice to make a buying decision. The Supply
Chain’s goal is to convert customer arrivals into customer orders. Clients who habitually
return to a seller develop customs that allow for regular, sustained commerce that
allows the seller to develop statistical models to optimize production processes and
supply chains that change the location or formalize the changes of ownership or
entitlement transactions.

Retailer
The retailer is informed of what products they are buying. The goal is to ensure order
entry is quickly and well communicated among all other processes. In supply chain
management (SCM), the management of the flow of goods and services involves the
social movement and storage of raw materials, work-in-process inventory, and finished
goods from the point of inception to the point of consumption.
Distributor
There are some distribution channels that enhance the Supply Chain network as a
whole to reach the product to the customer. In a supply chain, distribution is
fundamentally concerned with ensuring that products reach target customers in the
most direct and cost-efficient manner. In the case of services, distribution is principally
concerned with access. Although distribution, as a concept, is relatively simple, in
practice distribution management may involve a diverse range of activities and
disciplines including detailed logistics, transportation, warehousing, storage, and
inventory management.

Manufacturer
Manufacturing facilities make the product according to an order placed by the customer.
In order to do this, they need to do necessary interaction with other members of the
Supply Chain Cycle. It is mentioned that manufacturing processes are the steps through
which raw materials are transformed into a final product. The manufacturing process
begins with the creation of the materials from which the design is made. They then
modify these materials through manufacturing processes to become the required parts.

Supplier
A Supplier in a Supply Chain is an enterprise that contributes goods or services in a
Supply Chain Cycle. Usually, they manufacture a stock item, which is supplied to the
next link of the Supply Chain, which contributes to enhancing the value of the Supply
chain. A supplier supplies goods and services to another organization. This entity is part
of the supply chain of a business, that may provide the bulk of the value contained
within its products. A supplier is usually a manufacturer or a distributor.
Process View of a Supply Chain
Cycle view: processes in a supply chain are divided into a series of cycles, each
performed at the interfaces between two successive supply chain stages
Push/pull view: processes in a supply chain are divided into two categories depending
on whether they are executed in response to a customer order (pull) or in anticipation of
a customer order (push)

Cycle View of Supply Chains

Cycle View of the Supply Chain is useful to make operational decisions as the role of
each member of the Supply Chain is defined. Usually, members of Supply Chain
Processes are Customers, Retailers, Distributors, Manufacturers and suppliers. In
supply chain management (SCM), the management of the flow of goods and services
involves the movement and storage of raw materials, work-in-process inventory, and
finished goods from the point of inception to the point of consumption.

Each cycle occurs at the interface between two successive stages of the supply chain.
Customer order cycle (customer retailer)
Involves all processes directly involved in receiving and filling the customer’s order
Customer arrival
Customer order entry
Customer order fulfillment
Customer order receiving
Replenishment cycle (retailer distributor)
All processes involved in replenishing retailer inventories (retailer is now the customer)
Retail order trigger
Retail order entry
Retail order fulfillment
Retail order receiving
Manufacturing cycle (distributor manufacturer)
All processes involved in replenishing distributor (or retailer) inventory
Order arrival from the distributor, retailer, or customer
Production scheduling
Manufacturing and shipping
Receiving at the distributor, retailer, or customer
Procurement cycle (manufacturer supplier)
All processes necessary to ensure that materials are available for manufacturing to
occur according to schedule
Manufacturer orders components from suppliers to replenish component inventories
However, component orders can be determined precisely from production schedules
(different from retailer/distributor orders that are based on uncertain customer demand)
Important that suppliers be linked to the manufacturer’s production schedule

Push vs Pull System

• In a push system, products are pushed through the channel from workshops up to the
assembly line and warehouse. This means that production happens based on demand
forecast (high inventory and uncertain environment) .
• In a pull system, procurement, production, and distribution are demand-driven rather
than based on predictions. Goods are produced in the amount and time needed.

Supply chain processes fall into one of two categories depending on the timing of their
execution relative to customer demand.
• Pull: execution is initiated in response to a customer order (reactive).
• Push: execution is initiated in anticipation of customer orders (proactive).

What is logistics management?

Logistics management is the process of planning, implementing, and controlling the
movement of goods, services, and information between the point of origin and the point
of consumption. It involves the integration of various activities, including transportation,
inventory management, warehousing, material handling, packaging, and security.

The following are the main functions of logistics management:

1. Material Handling and Distribution: This relates to the movement of material and
supplies from a central location e.g. a centrally located warehouse, to several other
points of its requirement in an organized and timely manner where further production or
distribution can continue.
As is natural with materials handling and distribution, this type of logistics involves a lot
of tracking, stock-keeping, loading, and unloading of materials.
2. Information handling Logistics is essentially an information-based activity that makes
merchandise across Supply chain. As a result information system is critical in providing
greater service to clients. The use of It technologies for information identification,
access, storage analysis , retrieval and decision support which are all important aspects
of logistics, is assisting businesses In improving their competitiveness.
3. Transportation It is best essential and vital element of logistics for moving products
from the Supplier to the customer. when a customer places an order the transaction is
not complete until the products are physically moved to their location
4. Inventory planning Planning the Inventory will help the organization in maintaining an
optimum level of Inventory. Activities like Inventory forecasting, maintaining the order
quantity, optimizing the level of service, etc are involved In the process of inventory
planning.

Types of logistics
1. Inbound Logistics: These are the operations, which precede manufacturing. These
include the movement of raw materials and components for processing from suppliers.
2. Outbound Logistics: These are the operations, which follow the production process.
These include activities like warehousing, transportation, and inventory
management of finished goods.
3. Reverse Logistics Management: This is also called Returns Management, and refers
to the handling of order returns.
4. Global Logistics:- The logistics flow of items across countries is governed by the
global logistics .
5. Domestic Logistics :- It relates with the flow of goods with in a Single country. It
covers tracking and co-ordinating the flow of goods and services from point of origin to
point of consumption.
6. Production Logistics :- It is also known as internal logistics or intra logistics. The goal
of production logistics is to make the most of available production capacity to meet the
demands of distribution logistics .
7. After Sales Logistics :- It handles the delivery of damaged products from customers to
merchants as well as the distribution of spare parts to customers and the delivery of
repaired products

Models of logistics
1. 1 PL :- It means first party logistics, Here an entrepreneur delivers goods from one
place to another without living any transportation or carrier company.
2. 2 PL :- It means two parity logistics. Here the entrepreneur takes the service of
transportation agencies or carrier Company for the distribution of products.
3. 3 PL :- under this model, the company outsource the activeties like packaging,
warehousing and transportation to a third party.
4. 4 PL :- Under 4PL, the manufacturer outsources every activity of logistics such as IT,
Procurement and finance to an external company or logistics company.
5. 5 PL :- Under 5PL the external party will plan, organise and Implement a client’s
logistic solution by taking into consideration all the supply chain activities.
5PL is a relatively new term in the logistics industry and reflects the development of full
logistic integration through many outsourced providers. 5PL services include fully
integrated logistics solutions that encompass the whole supply chain from beginning to
end through multiple outsourced service providers.

Critical to success in achieving this is the effective integration of IT and computer

systems to ensure real-time visibility and control of the entire supply chain no matter
how many different suppliers are involved.

SUPPLY CHAIN MACRO PROCESSES IN A FIRM

All supply chain processes discussed in the two process views and throughout this book
can be classified into the following three macro processes.
1. Customer Relationship Management (CRM): All processes that focus on the
interface between the firm and its customers
2. Internal supply chain management (/SCM): All processes that are internal to the firm
3. Supplier Relationship Management (SRM): All processes that focus on the interface
between the firm and its suppliers
1. Customer Relationship Management (CRM)
The CRM macro process aims to generate customer demand and facilitate the
placement and tracking of orders. It includes processes such as marketing, pricing,
sales, order management, and call center management.
At an industrial distributor such as W.W. Grainger, CRM processes include the
preparation of catalogs and other marketing materials, management of the Web site,
and management of the call center that takes orders and provides service.
 2. Internal supply chain management (/SCM)
ISCM macro process aims to fulfill demand generated by the CRM process in a timely
manner and at the lowest possible cost. ISCM processes include the planning of
internal production and storage capacity, preparation of demand and supply plans, and
fulfillment of actual orders.

At W.W. Grainger, ISCM processes include planning for the location and size of
warehouses; deciding which products to carry at each warehouse; preparing inventory
management policies; and picking, packing, and shipping actual orders.

3. Supplier Relationship Management (SRM)

The SRM macro process aims to arrange for and manage supply sources for various
goods and services. SRM processes include the evaluation and selection of suppliers,
negotiation of supply terms, and communication regarding new products and orders
with suppliers.
At W.W. Grainger, SRM processes include the selection of suppliers for various
products, negotiation of pricing and delivery terms with suppliers, sharing of demand
and supply plans with suppliers, and the placement of replenishment orders.