Supply Chain Management

SUPPLY CHAIN MANAGEMENT
SUPPLY CHAIN MANAGEMENT (SCM) IS AN ENTERPRISE SOFTWARE TO MANAGE AND INTEGRATE A NETWORK OF CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS, DISTRIBUTORS INTO ORGANISATIONS INTERNAL SUPPLY NETWORK INVOLVED IN THE ULTIMATE PROVISION OF PRODUCT AND SERVICE PACKAGES REQUIRED BY END USERS (HARNALD, 1996). SUPPLY CHAIN MANAGEMENT IS A CROSS-FUNCTIONAL APPROACH TO MANAGE THE MOVEMENT OF RAW MATERIALS AND COMPONENTS INTO AN ORGANISATION, ACTING AS A BRIDGE BETWEEN EXTERNAL NETWORK OF SUPPLIERS, CUSTOMERS AND BUSINESS PARTNERS. THESE FUNCTIONS ARE INCREASINGLY BEING OUTSOURCED TO OTHER ENTITIES THAT CAN PERFORM THE ACTIVITIES BETTER OR MORE COST EFFECTIVELY. THE PURPOSE OF SUPPLY CHAIN MANAGEMENT IS TO IMPROVE TRUST AND COLLABORATION AMONG SUPPLY CHAIN PARTNERS, THUS IMPROVING INVENTORY TURNOVER. THE SCM PERFORMANCE IS LINKED TO BUSINESS MODEL AND PROCESSES OF THE ORGANISATION
THE SCM SYSTEMS OUTCOME HAS BEEN ELABORATED BELOW AT THREE LEVELS :
STRATEGIC STRATEGIC NETWORK PERFORMANCE OPTIMISATION. STRATEGIC PARTNERSHIP WITH SCM PARTNERS TO COLABORATE FOR IMPROVING THE PERFORMANCE OF SUPPLY CHAIN. PRODUCT DESIGN AND PROCESS DESIGN COORDINATION, SO THAT NEW AND EXISTING PRODUCTS CAN BE INTEGRATED INTO THE SUPPLY CHAIN FOR SUPERIOR SUPPLY CHAN PERFORMANCE MANAGEMENT. INFORMATION TECHNOLOGY INFRASTRUCTURE, TO SUPPORT SUPPLY CHAIN OPERATION. MAKE OR BUY DECISIONS, MAKE OR SUBCONTRACT DECISION, DOMESTIC OR IMPORT DECISIONS. ALLIGNING OVERALL ORGANISATIONAL STRATEGY WITH SUPPLY STRATEGY. TACTICAL SOURCING CONTRACTS AND OTHER PURCHASING DECISIONS. PRODUCTION DECISIONS : PLANNING AND SCHEDULING. INVENTORY DECISIONS, INCLUDING QUANTITY, LOCATION, AND QUALITY OF INVENTORY. TRANSPORTATION STRATEGY, INCLUDING FREQUENCY, ROUTES, AND CONTRACTING. BENCHMARKING OF ALL OPERATIONS AGAINST COMPETITORS AND IMPLEMENTATION OF BEST PRACTICES THROUGHOUT THE ENTERPRISE. FOCUS ON CUSTOMER DEMAND.

OPERATIONAL DAILY PRODUCTION AND DISTRIBUTION PLANNING. PRODUCTION SCHEDULING FOR KEY MANUFACTURING FACILITIES. DEMAND FORECASTING, PLANNING AND SCHEDULING. SHARING ABOVE INFORMATION WITH SUPPLY CHAIN PARTNERS FOR COORDINATION AND COLLABORATION. INBOUND OPERATIONS : DELIVERIES FROM SUPPLIERS AND IMPACT ON INVENTORY. PRODUCTION OPERATIONS : RECEIVING MATERIALS ON SHOP FLOOR AND IMPACT ON DELIVERY. OUTBOUND OPERATIONS : PLANNING DISPATCHES AND TRANSPORTATION TO MEET PROMISED DELIVERY DATE. REACTING DAILY ON SUPPLY CHAIN PERFORMANCE MEASURE. A SUPPLY CHAIN NOT ONLY INCLUDES THE MANUFACTURER AND SUPPLIERS BUT ALSO TRANSPORTERS, WAREHOUSE, RETAILERS AND CUSTOMERS. A SUPPLY CHAIN ALWAYS NEED NOT HAVE ALL OF THEM. A SUPPLY CHAIN IS AN EXTENDED ENTERPRISE WHERE PARTICIPANTS IN THE CHAIN HAVE SPECIFIC CONTRIBUTING ROLES TO THE GOAL OF REACHING THE CUSTOMER. TABLE 15.3 SHOWS PARTICIPANTS IN DIFFERENT SUPPLY CHAIN MODELS FOR MANUFACTURING.

MAJOR SUPPLY CHAIN FUNCTIONS ARE MARKETING, MANUFACTURING, PROCUREMENT, OPERATIONS, INVENTORY, WAREHOUSING, DISTRIBUTION, AND CUSTOMER SERVICE. THE PROCESS BEGINS WITH CUSTOMER ORDER AND ENDS WITH DELIVERY OF GOODS OR SERVICES. TABLE 15.3 SUPPLY CHAIN MODEL AND PARTICIPANTS
MANUFACTURING BUSINESS TRADING SERVICE
CUSTOMER RETAILER DISTRIBUTOR TRANSPORTER WAREHOUSE SUPPLIER
CUSTOMER RETAILER TRANSPORTER WAREHOUSE SUPPLIER
CUSTOMER CONSULTANT SERVICE PROVIDER
THE OBJECTIVE OF SUPPLY CHAIN IS TO MAXIMISE THE VALUE OF SUPPLY CHAIN WHERE VALUE IS DEFINED AS FINAL PRODUCT WORTH TO THE CUSTOMER LESS THE VALUE OF EFFORT SPENT IN DELIVERING THAT PRODUCT WORTH. THEN THE SUPPLY CHAIN PROFITABILITY IS THE TOTAL PROFIT OF ALL PARTICIPANTS IN THE CHAIN. SUPPLY CHAIN IS DRIVEN BY THREE MAIN INPUTS : INFORMATION, FUNDS AND GOODS.

SUPPLY CHAIN CAN ALSO BE SEEN AS A PROCESS, MADE OF SEVERAL SUB-PROCESS. SUPPLY CHAIN MANAGEMENT MEANS MANAGEMENT OF THESE CYCLES EFFECTIVELY AND EFFICIENTLY. THE PROCESS VIEW OF SUPPLY CHAIN IS SHOWN IN FIGURE 15.8. FIGURE 15.8 PROCESS VIEW OF SUPPLY CHAIN STAGE
RETAILER RETAILER CUSTOMER CUSTOMER DISTRIBUTOR DISTRIBUTOR
CYCLE
1 2
CUSTOMER ORDER CYCLE CUSTOMER ORDER CYCLE RETAIL STOCK REPLACEMENT CYCLE RETAIL STOCK REPLACEMENT CYCLE
TRANSPORTER TRANSPORTER
3
4 5 6
TRANSPORTATION CYCLE TRANSPORTATION CYCLE GOODS HANDLING GOODS HANDLING CYCLE CYCLE GOODS MANUFACTURING & DELIVERY GOODS MANUFACTURING & DELIVERY CYCLE CYCLE PROCUREMENT CYCLE PROCUREMENT CYCLE
WAREHOUSE WAREHOUSE
MANUFACTURER MANUFACTURER SUPPLIER SUPPLIER
Supply Chain Management

SUPPLY CHAIN LIFE CYCLE
COMMIT
SCHEDULE
MAKE
DELIVER
SCM FUNCTIONAL STRATEGIC SOURCING AND PROCUREMENT PROCESS
FORECAST & DEMAND PLANNING CUSTOMER ORDER FULFILLMENT/SERVICE
DISTRIBUTION NETWORK & WAREHOUSE OPERATIONS

PRODUCTION LOGISTICS TRANSPORTAION & SHIPMENT MANAGEMENT
INTERNET SCM INTEGRATED SOLUTION
SHARED MARKET DATA
COLLABORATIVE FULFILLMENT
SUPPLIER
MANUFACTURER
RETAILER
CUSTOMER

THE BROAD PRINCIPLES OF DESIGNING A SUPPLY CHAIN ARE AS UNDER : 1.LESS NUMBER OF STAGES ARE PREFERRED BETWEEN CUSTOMER AND GOODS/SERVICE PROVIDER. 2.PHYSICAL OPERATIONS AS FAR AS POSSIBLE SHOULD BE MECHANISED TO MAKE ECAH CYCLE FASTER. 3.EACH STAGE IS SUPPORTED BY IT SYSTEMS FOR FASTER INFORMATION PROCESSING FOR LOCAL DECISIONS AND SCM DECISION. 4.ALL STAGES ARE CONNECTED WITH NETWORK COMMUNICATIONS CAPABLE OF PROVIDING SEAMLESS FLOW OF INFORMTATION ABOUT STOCK, STOCK MOVEMENT, ORDER AND ORDER DELIVERIES, FUNDS RECEIVED AND SPENT. 5.DECISION ON LOCATION OF FACTORY, WAREHOUSE, DISTRIBUTOR AND THEIR NUMBERS WITH THE OBJECTIVE OF MINIMISING THE COST OF SUPPLY CHAIN OPERATIONS AND MAXIMISING THE VALUE OF SUPPLY CHAIN. 6. IT INFRASTRUCTURE IS TO BE MADE HIGHLY SECURED AND PROTECTED FROM UNAUTHORISED ACCESS USING FIREWALL AND PROXY SERVES IN THE NETWORK SYSTEM.

INFORMATION MANAGEMENT IN SCM INFORMATION IS A KEY DRIVER OF SCM . THE PARTICIPANTS IN SUPPLY CHAIN NEED INFORMATION ABOUT GOODS MOVEMENT, ORDER PLACED, AND ORDER DELIVERED AND PAYABLES AND RECEIV ABLES. FOR INTEGRATION OF SUPPLY CHAIN MANAGEMENT PARTNERS, SYSTEMS ACROSS THE CHAIN IS NECESSARY TO HAVE ONE VIEW OF DATA AND INFORMATION TO ALL USERS IN THE SUPPLY CHAIN. TABLE 15.4 SHOWS AN INFORMATION LIST WHICH ALL PARTICIPANTS NEED IN THEIR DECISION MAKING PROCESS FOR EFFECTIVE OPERATIONS OF SUPPLY CHAIN. TABLE 15.4 INFORMATION LIST FOR SCM
INFORMATION CUSTOMER EXAMPLES CUSTOMER CLASS (A,B,C) CREDIT LIMITS, VOLUME OF BUSINESS RECEIVABLES. BUYING PATTERN. PREFERENCES AND CHOICES. PRODUCT PURCHASE HISTORY. PRODUCT SPECIFICATION, PRODUCT QUALITY. PRODUCT APPLICATIONS, PRODUCT VERSUS CUSTOMER ANALYSIS, DRAWING AND DESIGN INFORMATION. SALES ANALYSIS BY REGION/SEGMENT/CLASS OF CUSTOMER. COMPARATIVE ANALYSIS BY PERIOD /SEGMENT. ABC ANALYSIS OF PRODUCT(sales/orders etc), SALES FORECAST.
PRODUCT
SALES

INFORMATION INVENTORY EXAMPLES CALSS OF ITEM, STORE LOCATIONS, INVENTORY CONTROL PARAMETERS, MOVEMENT PROJECTIONS. VALUE OF INVENTORY
PRODUCTION AND CAPACITY, CAPABILITY, SCHEDULES, AVAILABILITY, SUPPLIER PLANS. PRODUCT RANGE, SPECIFICATIONS, LEAD TIMES, QUALITY SPECIFICATIONS, PRICE AND COMMERCIAL INFORMATION, SUPPLIERS SUPPLY HISTORY, SUPPLIER RATING, STRENGTH AND WEAKNESS IN PRODUCT, SERVICE, QUALITY. TRANSPORTER AND MARKETING SUPPLY CHAIN FLEET CAPACITY, CARRIER TYPES, LEAD TIMES, COST OF TRANSPORTATION. CAMPAIGN SCHEDULE, MESSAGE AND OBJECTIVE, RESPONSE VERSUS SEGMENT ANALYSIS MEASURES : DELIVERY PERIOD, TOTAL COST PER UNIT, TOTAL INVENTORY IN THE CHAIN, TOTAL FUND BLOCKED IN THE CHAIN.

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SUPPLY CHAIN MANAGEMENT