The Needs of SCM

Group 1 reporters:
SHARMAINE
MAYLA OMBAJEN SANTUELE KIM REBUCAS
1
THE NEED FOR SUPPLY CHAIN
MANAGEMENT
NEED TO FURTHER REDUCE
OPERATIONAL COST
The needs
INCREASED OUTSOURCING
REQUIREMENTS
INCREASING
TRANSPORTATION COST
introduction
It plays a vital role in addressing
the growing complexity of today's
global supply chains.
THE NEED FOR SUPPLY CHAIN MANAGEMENT

2022 4
1. Need to further reduce
operational cost
 Over the last century, companies have
done much to reduce their operations
cost within the organization through
Business Process Reengineering
(BPR), Enterprise resource planning
(ERP), Total Quality Management
(TQM), Total Productive Maintenance
(TPM), lean manufacturing, Just-in-
Time (JIT) etc.
 But there is still scope for improvement and

cost reduction in the areas of supply side,
delivery side and logistics of the company.
1. INCREASED
OUTSOURCING
REQUIREMENTS
• Outsourcing activities of
companies are on the increase.
This also increases the cost
associated with procurement,
distribution and logistics,
offering scope for substantial
efficiency improvement and
coordination beyond its
production activities.
3. INCREASING
TRANSPORTATION COST
• Transportation cost account to

5 to 30% of the operating
expenses of the company. It
needs focus to reduce cost
IMPORTANCE/OBJECTIVES OF SCM
1. ACHIEVE STRATEGIC ADVANTAGE
2. ACHIEVE COST CONTROL/REDUCTION
3. ENHANCES OUTSOURCING CAPABILITY
4. ACHIEVE GLOBALIZATION
5. BETTER INVENTORY MANAGEMENT
8
IMPORTANCE/OBJECTIVES OF SCM
6. EFFECTIVE USE OF SUPPLY AND LOGISTIC RESOURCES
7. REDUCED LEAD TIME BY DESIGN COLLABORATION
8. ACHIEVE ON TIME DELIVERY
9. FACILITATE E-COMMERCE
10. BOOST CUSTOMER SERVICE
9
SCM gives competitive edge to the firm by ensuring

smooth and systematic flow of goods, information
and funds. Underperformance of one link in the
supply chain can destroy strategic advantage of all
in the supply chain. It can help achieve capability to
reduce product development time and offer more
new products to the customers.
10
SCM support ERP which integrate other functional

areas for performance improvement. It supports TQM
to meet the quality and delivery needs of the customer
as well as supplies for production. It supports Customer
relationship management (CRM) which meets customer
expectation and bring customer satisfaction and delight.
SCM also supports e-commerce for buying and selling
increasing strategic competence further,
11
2. ACHIEVE COST CONTROL/REDUCTION
• Reduce all company costs by optimizing the cost of freight

and logistics.
• Identify waste sources to avoid them in the whole supply
chain.
• Ensure quality in the logistics of warehousing, transport
and handling
• Decreases Purchasing Cost - Retailers depend on supply
chains to quickly deliver expensive products to avoid holding
costly inventories to stores any longer than necessary.
12
3. ENHANCES OUTSOURCING CAPABILITY
• outsourcing generally reduces the

cost of operation of a company.
• An efficient and cost effective SCM
system will enable the firm to reap the
benefits of outsourcing.
13
4. ACHIEVE GLOBALIZATION
• helps to operate across world market.

• helps to make the product available in
existing and new markets at competitive
price
• Property designed and executed SC make
global outsourcing possible.
• SCM helps to meet global competition
successfully.
14
5.Better Inventory management
• eliminate the necessity to stock the

items in large quantities.
• Ensure availability of goods in right
quantity at right price with right
quality at the right time.
• Systematic inventory management
like JIT, ERP etc. can be implemented.
15
• Prevent Bull whip effect of

inventories in the entire SC. The
phenomenon of progressively larger
inventories at different stages of supply
chain from customer to backwards is
called Bull whip effect. Bull whip effect
increases the SC cost.
16
17
The Bullwhip Effect is another classic. Even

a small shock to customer demand can
rapidly lead to over-production, as each
player along the complex supply chain
attempts to adapt to the new demand. Even
with all of today’s technology, supply chain
communication has natural lag between the
various players, and everyone’s individual
incentives amplify the problem.
18
Producers, distributors, and retailers face a

problem meeting demand and tend to over-order in
order to prevent future stock-outs. However, the
latency between getting production or shipments
from each upstream provider means the new supply
will come late. Therefore, each player compensates
by securing even more of a buffer to ensure they
have enough supply. When the supply finally
comes, everyone will find they ordered too much!
19
6. EFFECTIVE USE OF SUPPLY AND LOGISTIC RESOURCES
• Few dedicated suppliers

• dedicated transportation and logistics.
• participation of suppliers in quality
improvement, design improvement, value
engineering and new product development
through Design Collaboration
• Competitive, participative and
collaborative pricing with suppliers and
logistics providers by sharing benefits
mutually.
20
7. REDUCED LEAD TIME BY DESIGN COLLABORATION
• lead time for product improvement

is less
• new product development time is
shorter.
21
8. ACHIEVE ON TIME DELIVERY
• ensure prompt delivery of

product and services to customers
on time.
22
9. FACILITATE E-COMMERCE
• Introduction of e-commerce and e-

business gives an entirely new
dimension to buying and selling using
internet which enhances operational
efficiency and customer satisfaction.
23
10. BOOST CUSTOMER SERVICE
• Customers expect the correct

product assortment and quantity to be
delivered.
• Customers expect products to be
available at the right location.
• Right Delivery Time - Customers
expect products to be delivered on time
• Right After Sale Support -
Customers expect products to be
serviced quickly.
24
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Group 1 reporters:

THE NEED FOR SUPPLY CHAIN MANAGEMENT

 But there is still scope for improvement and

• Transportation cost account to

2. ACHIEVE COST CONTROL/REDUCTION

3. ENHANCES OUTSOURCING CAPABILITY

5. BETTER INVENTORY MANAGEMENT

7. REDUCED LEAD TIME BY DESIGN COLLABORATION

8. ACHIEVE ON TIME DELIVERY

10. BOOST CUSTOMER SERVICE

SCM gives competitive edge to the firm by ensuring

SCM support ERP which integrate other functional

• Reduce all company costs by optimizing the cost of freight

• outsourcing generally reduces the

• helps to operate across world market.

• eliminate the necessity to stock the

• Prevent Bull whip effect of

The Bullwhip Effect is another classic. Even

Producers, distributors, and retailers face a

• Few dedicated suppliers

• lead time for product improvement

• ensure prompt delivery of

• Introduction of e-commerce and e-

• Customers expect the correct

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