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What is Supply Chain What is Supply Chain

Management Management
— A supply chain consists of all parties — Supply chain management is defined as “the
involved, directly or indirectly, in fulfilling a integration of key business processes from
customer request. end-users through original suppliers that
— The supply chain includes not only the provide products, services, and information
manufacturer and suppliers, but also and add value for customers and other
transporters, warehouses, retailers, and even stakeholders” (Cooper et al., 1997b, p. 2).
customers themselves.

What is Supply Chain A forward flow of goods and a

Management backward flow of information
— Supply chain not only includes manufacturer,
suppliers and distributors but also transporters,
warehouses and customer themselves.
— It is not companies but suppliers compete with each
other.
— The customer is only interested in price, quality and
availability of product in the neighborhood retail
outlet, where they come into contact with product
supplied by may be HUL & P&G.

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Upstream & Downstream
— All the activities before the Manufacturing is called the
Upstream and the distribution is called the
Downstream.
— Upstream Supply chain usually deal with suppliers,
purchases and production lines.
— With the assembly plant as the focus of the supply
chain, upstream activity includes suppliers of raw
materials, such as aluminum and copper. Activities
upstream could include a supplier mining these
materials to fulfill orders. Transporting or shipping to
the plant is another example of upstream activity.
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Upstream & Downstream
Upstream & Downstream
— Downstream from the assembly plant are distributors,
shipping partners, and point-of-sale stops along the
way, such as wholesalers and retailers.
— One important downstream activity is inventory
management. Distributors, wholesalers and retailers
all strive to carry inventory in quantities needed to
fulfill customer orders without overstocking.
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A forward flow of goods and a A forward flow of goods and a
backward flow of information
— Typically, a supply chain is composed of two main
business processes:
Material management (inbound logistics)
Physical distribution (outbound logistics)
— Material management is concerned with the
acquisition and storage of raw materials, parts, and
supplies.
— To elaborate, material management supports the
complete cycle of material flow—from the purchase
and internal control of production materials….
A forward flow of goods and a SCM: A General Process
backward flow of information
— Combining the activities of material management and
physical distribution, a supply chain does not merely
represent a linear chain of one-on-one business
relationships, but
— a web of multiple business networks and relationships.
Along a supply chain, there may be multiple
stakeholders, composed of various suppliers,
manufacturers, distributors, third-party logistics
providers, retailers, and customers.
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backward flow of information
— .., to the planning and control of work-in-process, to
the warehousing, shipping, and distribution
— Physical distribution encompasses all outbound
logistics activities related to providing customer
service. These activities include order receipt and
processing, inventory deployment, storage and
handling, outbound transportation, consolidation,
pricing, promotional support, returned product
handling, and support
Overview: Dell
— The all stages shown in the above image need not be
present in a supply chain.
— Dell has two supply chain structures that it uses to
serve its customers.
— for corporate clients and for individual customers who
want customized PC, initiates manufacturing at Dell.
— Dell does not have a separate retailer, distributor, or
wholesaler in the supply chain for the customized PC.
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SCM: A General Process SCM: A General Process

Overview: Dell
— Dell also sells consumer products such as PCs and
tablets through retailers such as Walmart in US and
Gome Group, china’s largest electronic retailer, which
carry Dell products in inventory.
— This supply chain thus contains an extra stage (the
retailer), compared with the direct sales model used by
Dell for servers.
Overview: Walmart
— need for detergent.
— Walmart retail store that the customer visits
— Walmart stocks its shelves using inventory
that may have been supplied from a
finished-goods warehouse or a distributor
using trucks supplied by a third party.
— The distributor, in turn, is stocked by the
manufacturer (say, Procter & Gamble

SCM: A General Process

Overview: Walmart
— The P&G manufacturing plant receives raw material
from a variety of suppliers, which may themselves have
been supplied by lower-tier suppliers.
— For example, packaging material may come from
Pactiv Corporation, whereas Pactiv receives raw
materials to manufacture the packaging from other
suppliers

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SCM: A General Process SCM: A General Process
Overview: Walmart
— Walmart provides the product, as well as pricing and
availability information, to the customer.
— The customer transfers funds to Walmart.
— Walmart conveys point-of-sales data and
replenishment orders to the warehouse or distributor,
which transfers the replenishment order via trucks
back to the store.
— Walmart transfers funds to the distributor after the
replenishment.
SCM: A General Process
Overview: Amazon
— when a customer makes a purchase online from
Amazon, the supply chain includes, among others,
— the customer,
— Amazon’s website,
— the Amazon warehouse,
— and all of Amazon’s suppliers and their suppliers.
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Overview: Walmart
— The distributor also provides pricing information and
sends delivery schedules to Walmart.
— Walmart may send back packaging material to be
recycled.
— Similar information, material, and fund flows take
place across the entire supply chain.
SCM: A General Process
Overview: Amazon
— The website provides the customer with information
regarding pricing, product variety, and product
availability.
— After making a product choice, the customer enters
the order information and pays for the product.
— The customer may later return to the website to check
the status of the order.
— Stages further up the supply chain use customer order
information to fill the request.
— That process involves an additional flow of
information, product, and funds among various stages
of the supply chain.
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Why Study Supply Chain Why Study Supply Chain
Management
Every organization must make a product or provide
a service that someone values
— Manufacturers produce physical goods that are used
directly by consumers or other businesses.
— Transportation companies provide valuable services by
moving and storing these goods.
— Design firms use their expertise to create products or
even corporate images for customers.
Why Study Supply Chain Why Study Supply Chain
Management
— The operations function is the collection
of people, technology, and systems within
an organization that has primary
responsibility for providing the
organization’s products or services.
— Regardless of what career path you might
choose, you will need to know something
about your organization’s operations
function.
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Management
— The need to provide a valuable product or service
holds true for not-for-profit organizations as
well.
— For example: Consider the variety of needs met
by government agencies, charities, and religious
groups.
— The common thread is that each organization
has an operations function.
Management
Most organizations function as part of larger
supply chains.
— A supply chain is a network of manufacturers
and service providers that work together to
create products or services needed by end users
— These manufacturers and service providers are
linked together through physical flows,
information flows, and monetary flows.
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Why Study Supply Chain Consider a sporting

goods store that sells

Management
athletic shoes.

— When the primary focus is on physical goods, much of

the supply chain activity will revolve around the
conversion, storage, and movement of materials and
products.
— In other cases, the focus might be on providing an
intangible service. For example bank accounts ,
insurance etc.
— Supply chains link together the operations functions of
many different organizations to provide real value to
customers.

Why Study Supply Chain Why Study Supply Chain

Management
— Although the store doesn’t actually make the shoes, it
provides valuable services for its customers—a
convenient location and a wide selection of products.
— Yet, the store is only one link in a much larger supply
chain that includes:
— Plastic and rubber producers that provide raw
materials for the shoes;
— Manufacturers that mold and assemble the shoes;
— Wholesalers that decide what shoes to buy and when;
Management
— Transportation firms that move the materials and
finished shoes to all parts of the world;
— Software firms and Internet service providers (ISPs)
that support the information systems that coordinate
these physical flows; and
— Financial firms that help distribute funds throughout
the supply chain, ensuring that the manufacturers and
service firms are rewarded for their efforts.

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Why Study Supply Chain Why Study Supply Chain
Management
Organizations must carefully manage their
operations and supply chains in order to prosper
and, indeed, survive
— think about the types of decisions facing a shoe
manufacturer.
— Some fundamental operations decisions that it must
make include the following:
— “How many shoes should we make, and in what styles
and sizes?”
Why Study Supply Chain
Management
— “Which transportation carriers will we use to ship our
shoes?”
— The right choices can lead to higher profitability and
increased market share,
while the wrong choices can cost the company
dearly—or even put it out of business.
Ref: SCOR Model
Supply-chain operations reference model is a process
reference model developed and endorsed by the
Supply Chain Council as the cross-industry, standard
diagnostic tool for supply chain management.
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Management
— “What kind of people skills and equipment do we
need?” “Should we locate our plants to take advantage
of low-cost labor or to minimize shipping cost and
time for the finished shoes?”
— In addition to these operations issues, the shoe
manufacturer faces many decisions with regard to its
role in the supply chain:
— “From whom should we buy our materials— the lower-
cost supplier or the higher-quality one?”
Key Issues in SCM
Implementation Challenges
— the potential of supply chain management is
predicated on the ability to modify traditional
functional practice to focus on integrated process
performance.
— To make integrated supply chain practice a reality, at
least four operational challenges must be resolved.
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Leadership Key Issues in SCM

Leadership
— For a supply chain to achieve perceived benefits for
participating firms, it must function as a managed
Issues process.
Loyalty and Measurement
Confidentiality — Such integrative management requires leadership i.e.
collaborative arrangement and that needed at very
early stage.
— Power determines which firm involved in a potential
Risk & Reward
Sharing supply chain collaboration will perform the leadership
role.

Key Issues in SCM Key Issues in SCM

— A supply chain seeking to link manufacturers (offering
nationally branded consumer merchandise) into a
supply chain arrangement with a large mass
merchandiser that has significant consumer store
loyalty can represent substantial power conflict.
— Risk issues related to supply chain involvement
essentially center on who has the most to gain or
lose from the collaboration
— For example, a trucking firm that provides
transportation services within a supply chain has far
less at stake than either the manufacturer or the mass
merchant discussed above.
— Generally, risk drives commitment to the
collaborative arrangement and therefore plays a
significant role in determining leadership.

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Key Issues in SCM
Loyalty and Confidentiality
— firms that participate in a specific supply chain are also
simultaneously engaged in other similar
arrangements.
— Some supply chain engagements may be sufficiently
different so as not to raise issues of confidentiality. For
eg. Dow Company
— the more common situation is for firms to be engaged
as members of supply chains that are direct
competitors. For example, Procter & Gamble is a
supplier of all major retailers.
Key Issues in SCM
— Partitioning involves the development of proprietary
organization and information collaborations to
accommodate the needs of specific relationships.
— it may be necessary to create separate organizational
units to deal with specific suppliers. For example, the
Prince Group of Johnson Controls needs to maintain
strict confidentiality as they simultaneously help
design future automotive interiors for divisions of
DaimlerChrysler, Ford, and General Motors.
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Key Issues in SCM
— Thus, when Kroger, Farmer Jack, Meijer, and several
retail members of Spartan Stores (American food
distributor and grocery store retailer ), all operating
stores in the same cities, develop collaborative
arrangements with Procter & Gamble, the potential for
conflict is very real.
— Firms that simultaneously engage in supply chains that
are competitive must develop programs to foster
loyalty and maintain confidentiality. The name used to
describe such arrangements is partitioning.
Key Issues in SCM
— Breaches in confidentiality can have major legal and
long-term business consequences.
— To achieve the benefits of cross-organizational
collaboration, these issues must be managed and
prospective damage must be controlled.
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Key Issues in SCM
Measurement
— Unlike an individual business, supply chains do not
have conventional measurement devices.
— Whereas an individual business has an income
statement and balance sheet constructed in
compliance to uniform accounting principles,
— no such universal documents or procedures exist to
measure supply chain performance
Key Issues in SCM
— The described scenario is the icon of supply chain
success. The product is better than competitors' and is
distributed on a more profitable basis.
— This scenario implies that waste, nonproductive effort,
duplication, and unwanted redundancy across the
supply chain have been reduced to a minimum while
the product and its logistical presentation have
reached new heights of achievement.
— The challenge in success or failure is how to share the
benefits or risks
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Key Issues in SCM
Risk & Reward Sharing
— The ultimate challenge is the equitable distribution of
rewards and risks resulting from supply chain
collaboration.
— To illustrate, assume a business situation wherein the
leadership of a major manufacturer in collaboration
with material suppliers and distributive organizations
results in a superior product reaching market at
improved profitability.
Key Issues in SCM
— In traditional practice, the method by which risk and
reward are shared is the transfer price.
— Transfer pricing, guided by market forces, works in
transactional driven business relationships
— However, supply chain engagements require a higher
level of collaboration involving risk and reward
sharing.
— In other words, if the process innovation is successful,
the collaborating firms must share benefits.
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Key Issues in SCM
— Conversely, if the innovation fails, risks must be
appropriately absorbed. While easy to frame in theory,
risk and reward sharing arrangements prove extremely
difficult to implement in practice.
— Example: P& G: supplier scorecard, award ceremonies
Key Issues in SCM
— The second criticism of supply chain arrangements
builds on the premise that operating efficiency may
not always be socially equitable.
— The argument questions the benefits of more precise
matching of supply to demand in terms of the
overall reduction in surplus goods.
— To illustrate, if a precise quantity of dresses is sold at
the top market price, then no overstocks or surplus
garments are available
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Key Issues in SCM
Social Challenges: Consumer Value Concerns
— The argument is that the public does not benefit
across the board from supply chain efficiency.
— First, the line of reasoning is that operating efficiency
does not automatically translate to or guarantee lower
consumer prices. Firms that collaborate may
individually or collectively make larger profits and
thereby generate large shareholder wealth. However,
no mechanisms exist to guarantee that efficiencies will
be passed on to consumers in the form of lower retail
prices.
Key Issues in SCM
— But what if the company has surplus stock and need to
be sold in a specific time period,
— the lady who purchases a final closeout garment at a
below-cost price receives a benefit from the
inefficiency of the marketing system.
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