SUPPLY CHAIN MANAGEMENT
Dr.GB. Karthikeyan
Assistant Professor and Head Department of commerce(IB) Government Arts College, CBE-18
Name of the Staff : Dr.GB. Karthikeyan
Subject : Supply Chain Management Subject Code : 18BIB61C
Unit : I
Books of Reference : K.Shridhra Bhatt – Himalaya Publications
Supply Chain Management
What is Supply Chain Management?
Supply Chain Management is an essential aspect of business today. The idea is to apply a total systems approach to managing the entire flow of information, materials and services from raw materials suppliers through factories and warehouses and the end customers.
Consider how materials might flow from a company’s suppliers, through the company’s operations and then on to its customers. An increasingly popular perspective today is to view the flow of materials from suppliers all the way to customers as a system to be managed.
This perspective is commonly referred to as supply chain management.
What is Supply Chain?
Supply chain refers to the way that materials flow through different organisations, starting with raw materials and ending with finished products delivered to ultimate customers.
A Supply Chain is a sequence of suppliers, transporters, warehouses, manufactures, wholesalers/ distributors, retail outlets and final customers.
Different companies may have different supply chains due to the nature of their
operations and whether they are primarily a manufacturing operation or a
service operation.
How is Supply chain is carried in i) Manufacturing organisation and ii) Service organisation?
A company can identify its supply chain by first selecting a particular product group or product family. Then it should trace the flow of materials and information from the final customer backward through the distribution system, to the manufacturer and then to the suppliers and the source of raw materials. This entire chain of activities and processes is known as the supply chain for that product group.
Explain Stages of a Detergent Supply chain?
Explain the importance of supply chain management?
Supply chain cycle time leads to a corresponding reduction in inventory, increased flexibility, reduced costs and better deliveries.
Supply chain gain further improvements in their operations internally and externally.
Supply chain thinking is an application of systems thinking and provides a basis for understanding processes that cut across a company’s internal department and processes that extend outside the company as well.
The goals of supply chain management are to reduce uncertainty and risks in the supply chain, thereby positively affecting inventory levels, cycle time, processes and ultimately end – customer service levels. The focus is on system optimization.
The design, planning and operation of a supply chain have a strong impact on overall profitability and success.
Supply chain management has become a hot competitive advantage as companies struggle to get the right stuff to the right place at the right time.
All the “Total quality management”, “Just-in -time”, Reengineering”, Team work” and
“Delighting the customers” depends on the relationships with suppliers and distributors who are part of the supply chain.
Supply chain management includes transportation vendors, suppliers, distributors, banks, credit and cash transfers, bills payable and receivable, warehousing and inventory levels, order fulfilment and sharing customer, forecasting and production information.
As firms strive to increase their competitiveness via product customization, high quality, cost reductions and speed-to- market, they place added emphasis on supply chain management.
Supply chain management builds a chain of suppliers that focus on both waste and maximizing
value to the ultimate customer. The key to effective supply chain management is to make
suppliers “partners” in the firm’s strategy to satisfy the ever- changing market place.
Explain the relevance of supply chain management to TQM?
Supply Chain Management includes determining:
Transportation vendors
Credit and cash transfers
Suppliers
Distributors & banks
Accounts payable and receivables
warehousing and inventory levels
order fulfilment
sharing customer, forecasting and production/ information.
Explain the overview of supply chain management?
How is inventory created? A basic purpose of supply-chain management is to control inventory by managing the flow of materials. Inventory is a stock of materials used to sati.
customer demand or support the production of goods or services. In a manufacturing organisation, there is an inward flow of input materials such as raw materials (steel for example), component parts, office supplies and consumables to facilitate the manufacturing process (conversion or transformation process). The rate of production depends on the demand (customer orders) for the finished goods. Another possible outward flow is that of scrap generated in the conversion process and defective products produced and rejected. Together, the rate of input and output flows determine the level of usable inventory (cushion against stock out of input materials). Firms use total quality management to reduce defective materials, the larger the scrap flows, the larger will be the input flow of materials required for a given level of output. Inventories may be held in the form of raw materials and bought out components, work-in-process (WIP) and finished goods.
Materials Management: One area of operations and logistics playing a major role in supply chain management in that of materials management, which is concerned with decisions about purchasing materials and services, inventories, production levels, staffing patterns, schedules and distribution, either directly or indirectly.
Traditionally, organisations have divided the responsibility for materials management among three departments: purchasing, production control and distribution.
Purchasing is usually responsible for working with suppliers to ensure the desired inward flow of materials and services. Purchasing is also responsible for inventories of raw materials and components. Production control is responsible for determining production volumes and scheduling the labour directly responsible for transformation process. Distribution is normally responsible for the outward flow of the materials from the firm to its customers. It also may be responsible for finished goods inventories and selection of transportation suppliers. Marterials management then is responsible for coordinating the efforts of purchasing and distribution. Consequently, materials management decisions have a major cumulative effect on the profitability of a firm and thus attract considerable managerial attention.
Supply chains: A supply chain consists of all Stages involved, directly or indirectly, in fulfilling a customer’s request. It not only includes the manufacturer and suppliers, but also. transporters, warehouses, retailers and customers themselves. Within a manufacturing organisation, the supply chain includes functions such as new product development, marketing, operations, distribution, finance and customer service.
A supply chain is dynamic and involves the constant flow of information, product and funds between different stages. Each stage of the supply chain performs different processes and interacts with other stages of the supply chain.
supply chains are actually networks and may be called as supply networks or supply webs to describe the structure of supply chains.
A typical supply chain may involve the following stages:
Customers
Retailers
Wholesalers/distributors
Manufacturers and
Component/raw material suppliers.
State the objectives of a supply chain?
(i) To maximise the overall value generated. The value a supply chain generates is the difference between what the final product is wo the customer and the effort the supply chain expends in filling the customer’s request.
(ii) To achieve maximum supply chain profitability. Supply chain profitability is the total profit to be shared across all supply chain stages.
(iii) To reduce the supply chain costs to the minimum possible level.
(iv)Supply chain management involves the management of flows between and among stages in a supply chain to maximise total profitability.
Explain the Decision Phases in a Supply Chain?
The three decision phases in a supply chain are:
(i) Supply chain strategy or design
(ii) Supply chain planning and
(iii) Supply chain operation.
These three phases are briefly described in the following section.
(i) Supply Chain Strategy or Design: The company decides how to structure the supply chain during this phase.
The chain’s configuration and the processes each stage will perform are decided. Strategic or long-range decisions made by companies include
The location and capacities of production and warehousing facilities,
Products to be manufactured or stored at various locations,
Modes of transportation to be made available along different shipping legs and
Type of information system to be utilised.
(ii) Supply Chain Planning: In this phase, companies define a set of operating policies that govern short-term operations. Supply chain planning includes decisions regarding the following.
(i) Which market to be served from which locations (ii) The planned build up of inventories
(iii) The subcontracting of manufacturing
(iv) The replenishment and inventory policies to be followed.
(v) Policies regarding back up locations in case of a stock out and (vi) The timing and size of marketing promotions
(iii) Supply Chain Operations: During this phase, companies make decisions for the time horizon (weekly or daily) regarding individual customer orders.
Various activities involved in this phase are:
(i) Allocating individual orders to inventory or production, (ii) Setting dates for fulfilling orders,
(iii) Generating pick lists at a ware house,
(iv) Allocating an order to a particular shipping mode or shipment.
(v) Getting delivery schedules of trucks and (vi) Placing replenishment orders.
Explain the process view of supply chain?
Two different ways to view the process performed in a supply chain are:
1.Cycle view
2. The push-pull view
Cycle View: According to this view, the processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain. All supply chain processes can be broken down into the following four process cycles:
(a) Customer order cycle, (b) Replenishment cycle, (c) Manufacturing cycle and (d) Procurement cycle.
Each cycle occurs at the interface between two successive stages of the supply chain.
The four-process cycle in the supply chain are briefly discussed in the following section:
(i) Customer Order Cycle: This occurs at the customer/retailer interface and include customer arrival, customer order entry, customer order fulfillments and customer order receiving.
Customer arrival refers to the customers visiting the location (supermarket or retail store) where he or she has access to his or her choices and make a decision regarding what to buy how much to buy and so on.
Customer order entry refers to customers telling the retailer what products they want to buy and the retailer allocating those products to customers.
Customer order fulfillment refers to process by which the customer order.is. filled and sent cycle to the customer.
Customer order receiving refers to the process by which customer receives what he has ordered and takes ownership of the products ordered.
(ii) Replenishment Cycle: This occurs at the retailer/distributor interface and includes all processes involved in replenishing inventory of the retailer. The processes involved in the replenishment cycle includes: Retail order trigger, Retailer order entry, Retail order fulfillment and Retailer order receiving
Retail Order Trigger: As and When the retailer fills Customer order, inventory is depleted winch must be replenished to meet future demand.
Retail Order Entry: The retailer places the order with the distributor
or manufacturer. The purpose of the retail order entry process is to ensure that an order is entered accurately and conveyed quickly to all supply chain processes affected by the order.
Retail Order Fulfillment: This is a process by which retail order is filled by the distributor balancing product availability and cost.
Retailer Order Receiving: This process helps to update inventories and displays quickly at the lowest possible cost.
iii)Manufacturing Cycle: The process involved in the manufacturing cycle include (a) Order arrival from the distributor, retailer or customer (b) Production scheduling, (c) Manufacturing and shipping and (d) Receiving at the distributor, retailer or customer.
iv) Procurement cycle: This occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that materials are available for carrying out manufacturing as per the schedule.
Push/ Pull view of supply chain process:
All processes in the supply chain fall into one of two categories: (i) Push processes and (i) Pull processes. In pull processes, execution is initiated in response to a customer order. In push processes, execution is in anticipation of customer order. At the time of execution of a pull process, demand is known with certainty whereas at the time of execution of a push process demand is not known but forecasted.
A push/pull view of the supply chain is useful when considering strategic decisions relating to supply chain design. This view facilitates a more global consideration of supply chain processes as they relate to a customer order. Pull processes may be regarded as reactive processes because they react to customer demand. Push processes may be regarded as speculative processes because they respond to forecast (speculative) demand rather than actual demand.
The push/pull boundary in a supply chain helps to separate, push processes from pull processes. For example, in a computer manufacturing company manufacturing personal computers, the beginning of assembly process represents the push/pull boundary. All processes carried out prior to assembly are push processes and all processes carried out after and including assembly are pull processes because they are initiated in response to a customer order.
Explain nature and scope of supply chain management?
Three important activities involved in supply-chain management are (i) purchasing,
(ii) logistics,
(iii) warehousing and expediting.
These activities form the framework for studying nature and scope of supply chain management.
Purchasing:
Purchasing is responsible for obtaining the materials, parts and supplies needed to produce a product or provide a service.
Purchasing Interfaces: Purchasing is the link between the organisation-and its suppliers. It exchanges information with suppliers and functional areas.
Operating units constitute the main source of requests for purchased materials and close co-operation between these units and the purchasing department is vital if quality, quantity and delivery goals are to be met.
Accounting is responsible for handling payments to suppliers, data processing is handled by the accounts departments which keeps inventory records, checks invoices and monitors vendor performance.
Design and engineering usually prepare material specifications which must be communicated to purchasing.
Receiving checks incoming shipments of purchased items to determine whether quality, quantity and timing objectives have been met and moves the goods to temporary storage. Suppliers or vendors work closely with purchasing to learn what materials will be purchased and what kinds of specifications will be required in terms of quality, quantity and deliveries.
The Purchasing Cycle: The purchasing cycle begins with a request from within the organisation to purchase material, equipment, supplies or other items from outside the organisation and the cycle ends when the purchasing is notified that a shipment has been received in satisfactory condition.
The main steps in the purchasing cycle are:
(i) Purchasing receives the requisition
(ii) Purchasing selects a supplier
(iii) Purchasing places, the order with the vendor
(iv) Monitoring orders and
(v) Receiving orders.
