INSTRUCTIONAL MODULE

FOR
BS HOSPITALITY MANAGEMENT

Subject: : HPC 205: Supply Chain Management in

Hospitality Industry

Module Title: : UNIT 1 - Introduction to Supply Chain Management

Authors: : Prof. Whalter M. Sosmeña Dr.Ma.Rocelyn N. Cardinal

Prof. Shella G. Larroza Dr. Gladys T. Evidente
Prof. Alexander H. Demegillo
 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Outline of the Topics of HPC 205 Module

MIDTERM COVERAGE

MODULE UNIT 1. INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Lesson 1: Supply Chain: Concept

Lesson 2: Operations and Supply Chain Management : Basic Concepts

Lesson 3: Supply Chain Management: Evolution

Lesson 4: Supply Chain Management: Impact

Lesson 5: Advantages of Supply Chain Management

MODULE UNIT II. SUPPLY CHAIN PLANNING

Lesson 1: Production Planning and Control

Lesson 2: Demand Forecasting

Lesson 3: Production Planning

Lesson 4: Capacity Planning

Lesson 5: Production Control

MODULE UNIT III. SUPPLY CHAIN MANAGEMENT PROCESS

Lesson 1: Planning

Lesson 2: Procurement

Lesson 3: Distribution

Lesson 4: Transportation

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

FINAL COVERAGE

MODULE UNIT IV. SUPPLY CHAIN MANAGEMENT AND SERVICE

INDUSTRY

Lesson 1: Supply Chain Management

Lesson 2: Customer Service

Lesson 3: Customer Satisfaction Enablers of Supply Chain

Management

MODULE UNIT V. TRENDS IN THE SUPPLY CHAIN MANAGEMENT

Lesson 1: Types of IT Use in Supply Chain Management

Lesson 2: Customer Relationship Management (CRM)

Lesson 3: International Supply Chain Management

Lesson 4: Supplier Relationship Management (SRM)

Lesson 5: Future of IT

Lesson 6: Overcoming Barriers to Supply Chain Integration

Lesson 7: Creating Sustainable Supply Chain

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Preface

Mabuhay!

Welcome to module HPC 205: Supply Chain Management in Hospitality

Industry. This module deals with the knowledge, skills, and application of basic
operations of supply chain management towards the tourism and hospitality
industry.

HPC 205 Module contains activities that describe the skills, knowledge
and performance outcomes required in understanding the basic concepts on
managing the complete movement of products or services in the supply chain
from the suppliers to the customers. It also emphasizes on identifying the effects
of current and future trends in supply chain management, and on assessing the
processes and performances in a supply chain to optimize processes into a
seamless, innovative and most cost-effective way to help companies build a
competitive edge.

You are required to go through a series of learning activities in order to

complete each of the lesson outcomes of each lesson title in the module. In each
lesson outcome, there are exercises and tasks for you to perform. Follow these
activities on your own and answer the assessment at the end of each learning
activity.

If you have questions, don’t hesitate to ask your professor for assistance.

Authors

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

HPC 205 Module Outcomes:

At the end of the course, the student must have:

1. Assessed and discussed the role of supply chain management in the

hospitality industry;

2. Evaluated the important contribution that supply chain management

can make in enhancing customer service and differentiating
organizations in the face of competitive markets;

3. Reported on and analyse an optimized supply chain for a particular

hospitality business and context;

4. Examined the role of technology in the supply chain and how

technology may be leveraged to gain competitive advantage; and

5. Constructed a detailed optimized supply chain system for a

hospitality organization.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

MODULE (UNIT) 1:

INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Unit Outcomes:

At the end of the unit, the students must have:

1. Discussed the concept of supply chain and its operation;

2. Described the evolution of supply chain system and its quality; and
3. Explained the impact and advantages of supply chain system.

Module (Unit) 1 establishes the strategic importance of supply chain

management to achieve success in business. Module 1 is compose of five (5)
lessons that will discuss the framework of supply chain management. Lesson 1
presents the supply chain concept which will focus on activities such as plan,
develop, make, deliver, and return. Lesson 2 describes the operations and
supply chain management basic concepts and will discuss the significance and
functions of operations and supply chain management. Lesson 3 provides an
overview about the evolution of supply chain management. The evolution from
manufacturing to operations management, physical distribution to logistics, and
then finally to supply chain management. Lesson 4 presents the impacts of
supply chain management in the global competition and technological changes. It
decribes several ethical and environmental issues brought about by supply chain
functions. Lesson 5 provides an overview on the advantages of supply chain
management with focus on improving supply chain network, minimizing delays,
and enhancing collaboration.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Lesson 1:

SUPPLY CHAIN MANAGEMENT: CONCEPT

Lesson Outcomes:

At the end of this lesson, the students must have:

 Described the Plan-Source-Make-Develop-Return activities in Supply Chain
Operations Reference (SCOR) Model
 Explained the benefits using the SCOR model

Teaching Delivery:

Chain is a system of organizations, people, activities, information, and

resources involved in moving a product or service from supplier customer.
A supply chain is a network of retailers, distributors, transporters, storage
facilities and suppliers that participate in the production, delivery and sale of a
product to the consumer. It is typically made up of multiple companies who
coordinate activities to set themselves apart from the competition
(Choo, 2015).

According to Lee and Billington “A supply chain is a network of facilities

that procure raw materials, transform them into intermediate goods and then final
products, and deliver the products to consumers through a distribution system”.

Ganeshan and Harrison described supply chain as “a network of facilities

and distribution options that performs the functions of procurement of materials,
transformation of these materials into intermediate and finished products, and the
distribution of these finished products to customers.”

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

The term “Supply Chain Management” entered the public domain when
Keith Oliver, a consultant at Booz Allen Hamilton, used it in an interview for the
Financial Tome in 1982.

Supply chain management is a set of approaches utilized to efficiently

integrate suppliers, manufacturers, warehouses, and stores, so that merchandise
is produced and distributed at the right quantities, to the right locations, and at
the right time, in order to minimize system wide costs while satisfying service
level requirements (3G Elearning, 2014).

A supply chain management consists of multiple firms collaborating to

leverage startegic positioning and to improve operating efficiency. For each firm
involved, the supply chain relationship reflects a strategic choice
(Bowersox et al., 2014).

Supply chain management (SCM) examines the supply, storage,

movement of materials, and finished goods within an organization while the
significance and functions of operations relate to the efficient and most effective
use of personnel, machines, and other resources.

There are three key parts to a supply chain:

1. Supply focuses on the raw materials supplied to manufacturing including

how, when, and from what location.

2. Manufacturing focuses on converting these raw materials into finished

products.

3. Distribution focuses on ensuring these products reach the consumers

through an organized network of distributors, warehouses, and retailers.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Aside from using the concept of supply chain in manufacturing and

consumer products, it also shows how processes supply one another. Supply
chain strategy defines how the network should operate in order to compete in
the market, evaluating the benefits and the costs relating to the operation. If
business strategy focuses on the overall direction of the company, a supply
chain strategy focuses on the actual operation of the organization and the path
that will be used to meet a specific goal.

(http://www.wisegeek.org/what-is-a-supply-chain.htm)

Figure 1: The Key Parts of the Supply Chain

The Supply Chain Operation Reference (SCOR) model is a management

tool used to address, improve, and communicate the supply chain management
decisions within a company and with suppliers and customers of a company.
SCOR model describes the business processes required to satisfy a customer’s
demands. This model also helps to explain the processes along the entire
supply chain and provides a basis on how to improve processes.

(Choo, 2015. Supply Chain Management)

Figure 2. Plan-Source-Make-Deliver-Return Structure of the SCOR Model

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

SCOR model was developed by the supply chain council with the
assistance of 70 of the world’s leading manufacturing companies and described
to be the “most promising model for supply chain strategic decision making. The
model integrates business concepts of process re-engineering, benchmarking,
and measurement into its framework. This framework focuses on five areas of
the supply chain: plan, source, make, deliver, and return. These five areas
repeat all over again along the supply chain. This process spans from “the
supplier’s supplier to the customer’s customer” according to the supply chain
council.

 Plan
This is the strategic portion of supply chain management. Companies
need a strategic plan for managing all the resources that go toward meeting
customer demand for their product or service. A big piece of supply chain
management planning is developing a set of metrics to monitor the supply chain
so that it is efficient, costs less and delivers high quality value to customers.
Supply chain planning (SCP) is the component of SCM involved with predicting
future requirements to balance supply and demand.

The SCM is sometimes broken down into the stages of planning,

execution and shipping. Supply chain planning (SCP) and supply chain execution
(SCE) are the two main categories of supply chain management (SCM) software.
The SCP products may include supply chain modeling, and design, distribution
and supply network planning. SCE software applications track the physical status
of goods, the management of materials, and financial information involving all
parties. Demand and supply planning and management are included in this first
step. Elements included balancing resources with requirements and determining
communication along the entire chain efficiency. These business rules span
inventory, transportation, assets, and regulatory compliance, among others. The
plan also aligns the supply chain plan with financial plan of the company.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

 Develop (Source)
This step describes sourcing infrastructure and material acquisition. It
describes how to manage inventory, the supplier network, supplier agreements,
and supplier performance. It discusses how to handle supplier payments and
when to receive, verify, and transfer product.

The companies must choose suppliers to deliver the goods and services
they need to create their product. Therefore, supply chain managers must
develop a set of pricing, delivery and payment processes with suppliers and
create metrics for monitoring and improving relationships. And then, SCM
managers can put together processes for managing their goods and services
inventory, including receiving and verifying shipments, transferring them to
manufacturing facilities and authorizing supplier payments.

 Make
Manufacturing and production are the emphasis of this step. Is the
manufacturing process make-to-order, make-to-stock, or engineer–to-order? The
make step includes: production activities, packaging, staging product, and
releasing. It also includes managing the production network, equipment and
facilities and transportation.

 Deliver
Delivery includes order management, warehousing, and transportation. It
also includes receiving orders from customers and invoicing them once product
has been received. This step involves management of finished inventories,
assets, transportation, product life cycles, and importing and exporting
requirements.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

 Return
This can be a problematic part of supply chain for many companies.
Supply chain planners have to create a responsive and flexible network for
receiving defective and excess products back from their customers and
supporting customers who have problems with delivered products. Companies
must be prepared to handle the return of containers, packaging, or defective
product. The return involves the management of business rules, return inventory,
assets, transportation, and regulatory requirements.

Benefits of Using the SCOR Model

The SCOR process can go into many levels of process detail to help a
company analyze its supply chain. It gives companies an idea of how advanced
its supply chain is. The process helps companies understand how these steps
repeat over and over again between suppliers, the company, and customers.

Each step is a link in the supply chain that is critical in getting a product
successfully along each level. The SCOR model has proven to benefit
companies that use it to identify supply chain problems.

SCOR model enables full leverage of capital investment, creation of a

supply chain road map, alignment of business functions, and an average of two
to six times return on investment (Choo, 2015).

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

ASSESSMENT FOR LESSON 1

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Challenge Question:

Describe the concept of modern supply chain versus the traditional distribution
channels. Be specific regarding similarities and differences.
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Assignment Question:

What could be the constraints or problems in each element of the SCOR model
(plan, develop, make, deliver, return)? Give at least three (3) for each.
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Output to be collected:

Identify a product that is important to you. If you are the maker or manufacturer,
identify the success factors or elements of the product. You may provide pictures
or you may draw the product and provide the description.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Lesson 2:

OPERATIONS AND SUPPLY CHAIN

MANAGEMENT: BASIC CONCEPTS

Lesson Outcomes:

At the end of this lesson, the students must have:

 Described the supply chain management flows
 Discussed the elements of the supply chain
 Explained significance and functions of operations and SCM

Teaching Delivery:

Operations Management is the management of systems or processes

that create goods or provide services.

The scope of operations include quality, quality control, supply chain

management, inventory management, aggregate planning, materials requirement
planning, just–in–time (JIT), lean systems, scheduling, and project development .

Supply Chain Management being one of the major elements in

opetaions management, have related concepts to operations in terms on design,
planning, control, business analytics, delivery systems, project management, and
improvement of manufacturing and service operations.

The operations in supply chain management examines the integration

of all key business processes from original suppliers to end users and provides
products, services, and information that can add value for customers and
stakeholders.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Supply chain management creates channels and business

organizational arrangements based on acknowledged dependency and
collaboration. Operations in supply chain require managerial processes that span
traditional functional areas within individual firms and link suppliers, trading
partners, and customers across businesses.

The role inventory manager plays a huge function in the entire

operations of supply chain management. Inventory refers to the goods and
materials that a business holds for the ultimate purpose.

Supply Chain Management is ultimately used by companies to ensure

efficiency and cost effectiveness. Supply chain management as the collection of
steps that a company takes to transform raw materials into final products and
deliver them to customers have several stages. This is typically comprised of
five stages: planning, development, manufacturing, logistics and returns.

During the planning stage, a strategy must be developed to address

how a given product will meet the needs of the customers. A significant portion of
this strategy often focuses on planning a profitable supply chain.

The development stage involves building a strong relationship with

suppliers of the raw materials that are needed in making the product the
company delivers. This phase involves not only identifying reliable suppliers but
also creating methods for shipping, delivery and payment.

In the manufacturing stage, the product is made, tested, packaged and

scheduled for delivery. Then, at the logistics stage, products are delivered,
customer orders are received, and delivery of the goods is planned.

The return stage of SCM is when customers can return defective

products. The company also must address customer questions during this stage.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Supply Chain Management Flows

The supply chain management can be divided into three main flows:

 The product flow includes the movement of goods from a supplier to a

customer, as well as any customer returns or service needs.
 The information flow involves transmitting orders and updating the status of
delivery.
 The financial flow consists of credits terms, payment schedules, and
consignment and title ownership arrangements.

SUPPLY CHAIN MANAGEMENT FLOW

The product flow The information flow The finances flow

Figure 3. The Supply Chain Management Flow

Elements of the Supply Chain

A simple supply chain is made up of several elements that are linked by
the movement of products along it. The supply chain starts and ends with the
customer.

 Customer: The customer starts the chain of events when they decide to
purchase a product that has been offered for sale by a company. The
customer contacts the sales department of the company, which enters the
sales order for a specific quantity to be delivered on a specific date. It the

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

product has to be manufactured, the sales order will include a requirement

that needs to be fulfilled by the production department.

 Planning: The requirement triggered by the customer’s sales order will be

combined with other orders. The planning department will create a production
plan to produce the products to fulfill the customer’s orders. To manufacture
the products, the company will then have to purchase the raw materials
needed.

 Purchasing: The purchasing department receives a list of raw materials and

services that are required by the production department to complete the
customer’s orders. The purchasing department sends purchase orders to
selected suppliers to deliver the necessary raw materials to the
manufacturing site on the required date.

 Inventory: The raw materials are received from the suppliers, checked for
quality and accuracy and moved into the warehouse. The supplier will then
send an invoice to the company for the items they delivered. The raw
materials are stored until they are required by the production department.

 Production: Based on a production plan, the raw materials are moved

inventory to the production area. The finished products ordered by the
customer are manufactured using the raw materials purchased from
suppliers. After the items have been completed and tasted, they are stored
back in the warehouse prior to delivery to the customer.

 Transportation: When the finished product arrives in the warehouse, the

shipping department determines the most efficient method to ship the
products so that they are delivered on or before the date specified by the
customer. When the goods are received by the customer, the company will
send an invoice for the delivered products.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Significance and Functions of Operations and Supply Chain Management

The supply chain management is an essential element to operation

efficiency. Supply chain management can be applied to customer satisfaction
and company success, as well as within societal settings including medial
missions; disaster relief operations and other kinds of emergencies; cultural
evolution; and it can help improve quality of life. Due to the vital role SCM plays
within organizations, employees seek employees with an abundance of SCM
skills and knowledge.

Customer Satisfaction is a term frequently used in marketing. It is a

measure of how products and services supplied by a company meet surpass
customer expectation.

SCM is critical to business operation and success for the following

reasons:

SCM is Globally Necessary

Basically, the world is one big supply chain. SCM touches major issues,
including the rapid growth of multinational corporations and strategic partnerships;
global expansion and sourcing; fluctuating gas prices and environmental
concerns. Each issue dramatically affects corporate strategy and bottom line.
Because of these emerging trends, SCM is the most critical business discipline in
the world today.

Reasons for SCM in Society

SCM is necessary to the foundation and infrastructure within societies.
SCM within a well-functioning society creates jobs, decreases pollution,
decreases energy use and increase the standard of living.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Reason for SCM in Business

Clearly, the impact that SCM has on business is significant and
exponential. Two of the main ways SCM affects businesses include:

 Boosts Customer Service

SCM impacts customer service by making sure the right product
assortment and quantity are delivered in a timely fashion. Additionally, those
products must be available in the location that customers expect. Customers
should also receive quality after-sale customer support.

 Improves Bottom Line

SCM has a tremendous impact on the bottom line. Firms value their
supply chain managers because they decrease the use of large fixed assets
such as plants, warehouses and transportation vehicles in the supply chain
operation. Also, cash flow is increased because if delivery of the product can be
expedited, profits will also be received quickly.

Supply chain management helps streamline everything from day-to-day

product flows to unexpected natural disasters. With the tools and techniques that
SCM offers, one will have the ability to properly diagnose problems, work around
disruptions and determine how to efficiently move products to those in a crisis
situation.

Benefits of Supply Chain Management

According to Choo (2015) industries implementing SCM may realize the
benefits of SCM as follows:
 Reduced inventory
 Reduced distribution costs
 Reduced time to market
 Reduced market risks through effective co-ordination and communication
 Improved quality of product/service

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

 Improved inventory management

 Increased ability to implement just-in-time delivery
 Increase in on-time deliveries
 Increased factory responsiveness
 Order cycle time reduced
 Increased revenue
 Increased visibility of processes
 Increased customer service
 Create competitive advantage
 Etc.

Functions of Supply Chain Management

Strategic activities that are part of the SCM involve strategic network
optimization; establishment of partnerships with suppliers, distributors and
customer; planning for the integration of existing products into the supply chain;
and the design of a business strategy.

Taking inventory and production decisions, devising transportation

strategies, benchmarking of operations and focusing on customer demands are
some of the other activities involved in the supply chain management.

Planning of daily production and distribution, planning and scheduling of

inbound and outbound operations are some of the important operational activities
involved in supply chain management (Choo, 2015).

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

ASSESSMENT FOR LESSON 2

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Challenge Questions:

1. Discuss the relationship between the elements of the supply chain. How can
trade-offs between these elements can be made?
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2. How does improved planning improve the supply chain management process?
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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Assignment Questions:
1. Cite possible risks of holding inventory by retailers, wholesalers, and
manufacturers.
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2. Discuss how a change in demand impact supply chain variation at distributors,

manufacturers, and suppliers?
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Output to be collected:
Identify one product wherein consumers are expressing increased demand for
customization in the form of features, labeling, color, and packaging. What do
you think can be the impact of this trend on the supply chain especially in the
inventory element? What strategies can firms and supply chains use to mitigate
this impact?

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Lesson 3:

SUPPLY CHAIN MANAGEMENT: EVOLUTION

Lesson Outcomes:

At the end of this lesson, the students must have:

 Described the role of industrial revolution and scientific management in

SCM
 Explained physical distribution to logistics to supply chain management

Teaching Delivery:

The traditional view of manufacturing management began in 18th century

when Adam Smith recognized the economic benefits of specialization of labor.
Smith recommended breaking of jobs down into subtasks and recognizes
workers to specialized tasks in which workers would become highly skilled and
efficient.

Operations and productions management has been recognized as an

important factor in the economic growth of many countries.

Frederick Winslow Taylor, an American mechanical engineer,

implemented Smith’s theories and developed scientific management theory in the
early 20th century. Scientific Management is a theory of management that
analyzes and synthesizes workflows. Its main objective is improving economic
efficiency especially labor productivity. From then, many techniques were
developed prevailing the traditional view.

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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

 Industrial Revolution

Started in 1770s at England, the Industrial Revolution spread in Europe

and to the United States during the 19th century. Goods were produced in small
shops by craftsmen and their apprentices prior to that time. It was common for
one person to be responsible for making a product from start to finish under that
system. Only simple tools were available.

In 18th century, a number of innovations have forever changed the face of

production by substituting machine power for human power. The most significant
of these perhaps was the steam engine since it provided a source of power to
operate machines in factories. New machines, made of iron, were much stronger
and more durable than the simple wooden machines.

During the earliest days of manufacturing, goods were produced using

craft production through highly skilled workers using simple, flexible tools which
produced goods according to customer’s specifications.

Since products were made by skilled craftsmen who custom fitted parts,
production was slow and costly. Craft production had major shortcomings. When
parts failed, the replacements also had to be custom made, which was also slow
and costly. Another shortcoming was that production costs did not decrease as
volume increased; there were no economies of scale, which would provide a
major incentive for companies to expand. Instead, many small companies
emerged, each with its own set of standards.

The development of standard gauging systems was a major change that

gave the Industrial Revolution a boost and greatly reduced the need for custom-
made goods. Factories began to spring up and grow rapidly, providing jobs for
countless people who were attracted in large numbers from rural areas.

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Management theory and practice had not progressed much from early
days despite the major changes that were taking place. An enlightened and more
systematic approach to management was more needed.

The production of goods for sale, at least in the modern sense, and the
modern factory system had their roots in the Industrial Revolution

 Scientific Management

The scientific management era brought widespread changes to the

management of factories. Movement was spearheaded by the efficiency
engineer and inventor Frederick Winslow Taylor, who is often referred to as the
“Father of Scientific Management”. Taylor believed in a “science of management”
based on observation, measurement, analysis and improvement of work
methods, and economic incentives. He studied work method in great detail to
identify the best method for doing each job. Taylor also believed that
management should be responsible for planning, carefully selecting and training
workers, finding the best way to perform each job, achieving cooperation
between management and workers, and separating management activities from
work activities.

Taylor’s methods emphasized maximizing output. They were not always

popular with workers, who sometimes thought the methods were used to unfairly
increase output without a corresponding increase in compensation. Certainly
some companies did abuse workers in their quest for efficiency. Eventually, the
public outcry reached the halls of Congress, and hearings were held on the
matter. Taylor himself was called to testify in 1911, the same year in which his
classic book, The Principles of Scientific Management, was published. The
publicity from those hearings actually helped scientific management principles to
achieve wide acceptance in industry.

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Physical Distribution to Logistics to Supply Chain Management

Transportation, logistics, supply chain management, materials handling

and inventory control continue to evolve. This evolution has created cross-
fertilization among these functions, driven by factors both conceptual matching
demand to supply and technological and enhanced ability to communicate and
collaborate.

People working in different functional areas of logistics often define

supply chain management (SCM) as it relates to what they do. Others say SCM
is more encompassing than logistics. Logistics veterans believe it has
progressed from transportation to physical distribution to logistics to supply chain
management. Purchasing managers have evolved their thinking from purchasing
management to procurement and now to supply chain management.

The material requirements planning (MRP) and enterprise resource

planning (ERP) systems now address resource commitments that go beyond
manufacturing to include other enterprises and supplier resources, ultimately
directed to satisfying customer demands with limited and efficient use of
resources. Enterprise Resource Planning is a business management software
usually a suite of integrated applications that a company can use to collect, store,
manage and interpret data from many business activities (Choo, 2015).

Enterprise reource planning (ERP) is the backbone of a firm’s logistics

information system which maintains current and historical data and processes to
initiate and monitor performance. Designed as integrated transaction modules
and processes with a common and consistent database that includes information
storage capability for both operations and financial transactions. ERP is use to
develop and organize insight regarding customers, products, and operations
(Bowersox et al., 2014).

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ASSESSMENT FOR LESSON 3

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Challenge Question:
Discuss the most significant contribution of each era in the evolution of supply
chain.
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Assignment Question:
Compare and contrast the concept of the modern supply chain versus the
traditional distribution channel. Be specific regarding similarities and differences.
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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Lesson 4:

SUPPLY CHAIN MANAGEMENT: IMPACT

Lesson Outcomes:

At the end of this lesson, the students must have:

 Explained impact of global competition

 Discussed technological change in the SCM
 Described ethical and environmental sustainability on SCM functions
 Explained key issues in supply chain management

Supply chain management basically encompasses supervision on the

transfer of products from a supplier to a manufacturer, to a wholesaler, a retailer,
and finally to the consumer. The use of computer-based programs brought about
by the advancement of information technology (IT) have directly contrubuted to
the improvements and more effective virtual supply chains.

One significant impact of IT relates to the quality of information available

within the supply chain. Companies can develop web-based programs or
intranets to distribute information, such as about new products, delays or
changes in operations. IT allows everyone in the supply chain to be integrated
and thus, stay informed, which when used appropriately can translate into
management efficiency and reduced risks.

Impact of Global Competition

Business today is in a global environment. This environment forces
companies, regardless of location or primary market base, to consider the rest of
the world in their competitive strategy analysis. Firms cannot isolate themselves

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from or ignore external factors such as economic trends, competitive situations or

technology innovation in other countries, if some of their competitors are
competing or are located in those countries.

Companies are going truly global with Supply Chain Management. A

company can develop a product in the United States, manufacture in developing
country and sell in Europe. Companies have changed the ways in which they
manage their operations and logistics activities. Changes in trade, the spread
and modernization of transport infrastructures and the intensification of
competition have elevated the importance of flow management to new levels.

Majority of the manufacturers have global presence through exports,

strategic alliances, joint ventures or as a part of a committed strategy to sell and
produce in foreign markets.

Global Market Forces

There is tremendous growth potential in the foreign developing markets
which have resulted in intensified foreign competition in local markets which
forces the small and medium- sized companies to upgrade their operations and
even consider expanding internationally.

There has also been growth in foreign demand which necessitates the
development of a global network of manufacturing bases and markets. When the
markets are global, the production-planning task of the manager becomes
difficult on one hand and allows more efficient utilization of resources on the
other. Product-cycles are shrinking as customers demand new products faster. In
addition, the advances in communication and transportation technology give
customers around the world immediate access to the latest available products
and technologies. Thus manufacturers hoping to capture global demand must
introduce their new products simultaneously to all major markets.

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Furthermore, the integration of product design and the development of

related manufacturing processes have become the key success factors in many
high-technology industries, where fast product introduction and extensive
customization determine market success. Product design is the process of
creating a new product to be sold by a business to its customers. As a result,
companies must maintain production facilities, pilot production plants,
engineering resources and even research and development (R&D) facilities all
over the world.

Technological Change
SCM refers to the active management and control of materials,
information and finances as they move in a process from acquisition of raw
materials to delivery to the consumer. Radio frequency identification (RFID)
involves fitting items, with a small transponder, or RFID tag, which stores
information about the item, allowing it to be identified and tracked. RFID offers
some significant advantages over barcode technology in supply chain
management.

The RFID technology does not require line-of-sight between the RFID tag
and reader. This means that, unlike barcode technology, items do not require any
particular orientation or reading. Radio waves travel through most non-metallic
materials, so RFID can be read even if they are embedded or encased in
packaging, provided they are within range of a reader. Furthermore, RFID
readers can read RFID tags in thousandths of a second and can scan multiple
items simultaneously.

This technology can be extensively used in the domains of business:

 Retail supply chain management and warehousing management.
 Logistics, tracking of goods and trucks.
 Shipping, container tracking, cargo tracking.
 Security system etc.

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The RFID is the technology for future. In the field of supply chain,
establishing global standard will be a further good fortune for advancement of
this technology as a whole.

Automation
Labor accounts for up to 80% of the total distribution costs of a typical
distribution center. However, RFID technology can automate many supply chain
activities including check-in, order picking and verification leading to reduced
labor throughout the process. Even a small reduction in the amount of labor
required can yield substantial financial savings, up to 90% in some cases.

Ethical and Environmental Sustainability on SCM Functions

Environmentally Conscious Supply Chain Management (ECSCM) refers
to the control exerted over all immediate and eventual environmental effects of
products and processes associated with converting raw materials into final
products.

While much work has been done in this area, the focus has traditionally
been on either: product recovery (recycling, remanufacturing, or re-use) or the
product design function only (e.g., design for environment). Environmental
considerations in manufacturing are often viewed as separate from traditional,
value-added considerations. However, the case can be made that professional
people have an ethical responsibility to consider the immediate and eventual
environmental impacts of products and processes that they design and/or
manage (Choo, 2015).

Environmental sustainability is emphasize by some supply chain

companies in firm values, strategies, structures and business processes. Firms
have different levels of commitment regarding environmental concerns resulting
in three firm type categories: (1) proactive green marketers (strong pursuit of
sustainability within free market system); (2) traditional consumption marketers

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(driven more by consumer beliefs regarding environment and firm product); (3)
reactive green marketers (pursuit of sustainability within government and
regulatory compliance framework). Firms have made environmental
sustainability investment decisions primarily from a reactive compliance
perspective. These environmental perspectives include effective conservation
and resource management; usage reduction such reducing wastes and
increasing recycling as well as managing products at end of life; and good
business management practices across multiple business processes like
switching to more proactive internal design efforts and collaboration with supply
chain partners that can lead to less raw material consumptionand waste
associated extending product life or enhancing product packaging that could be
labeled as environmental purchasing or purchasing social responsibility.

Ethical sustainability encompasses many of the issues relating to

corporate social responsibility (CSR). Ethical dimension of sustainability of
supply chains include employee ethical relations which include prescribe
employee working conditions; community involvement which describes the
firm’s explict (volunteerism) or implicit (disaster relief, hunger/poverty/disease
reduction) expectations or desires associated with employee participation within
the firm’s broader community; and business management practices to promote
ethical behaviour associated with safe materials acquisition, production, and
delivery of its products including product safety, responsible marketing and
product traceability (Bowersox et al., 2014).

Key Issues in Supply Chain Management

The following are the key issues in supply chain management:

 Sourcing and Procurement Issues.

Issues at the sourcing and procurement phase of supply chain
management deal with finding raw material suppliers for the product. Managers
must find raw material suppliers that can deliver the exact amount of materials

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needed at the best cost. If a certain material is not available for any reason or
might too costly, managers must look for a suitable substitute or decide for
changes in product design. Managers must also consider health effects on
consumers due to certain raw materials as well as environmental effects in
obtaining those.

 Production Issues.
Cost of production of a product weighed against the potential profit the
product can earn is the primary concern at the production phase of the supply
chain. Companies always want to produce a product at the lowest cost per unit
as possible and sell the product at the highest price the target customer is willing
to pay. In order to achieve or approach this goal, supply chain managers must
find reliable manufacturers that can meet company deadlines and product
quantities, and who offer the most cost-efficient method of production. If the
company manufactures the product itself, then the managers must still see to it
that the method of production is co-efficient, timely and produces the required
amount of products.

 Delivery Issues.
Delivery of the manufactured products is the nest hurdle for supply chain
managers. They must choose the most co-efficient method of transfering
products from the production facilities to the stores or directly to the customer.
Products can either be dilivered by air, on land, or by the sea. Most businesses
must use a combination of these methods and, therefore, must coordinate them
effectively. When delivering products to stores, managers must be mindlful of
inventory considerations and choose the delivery method that allows stores to
maintain sufficient inventory. When delivering to customers, managers must
verify that the correct quantity and type of product is delivered to the correct
customer at an agreed-upon time.

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 Customer, Government and Market Change.

The first three areas such as sourcing and procurement, production, and
delivery deal with problems arising within the supply chain, however, supply
chain managers must aso deal with external issues that may affect the supply
chain. If customers notice a defect in the product or complain about product
design or delivery, the managers must quickly respond by making changes in the
supply chain. If government issues a law that directly applies to product, the
managers must comply with the law by changing the supply chain. If the price of
a certain raw material rises on the stock market, then the managers must again
change the supply chain.

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ASSESSMENT FOR LESSON 4

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Challenge Question:
Discuss the difference of the impacts of supply chain operations in the past
compared to the present.
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Assignment Question:
Suppose you work for a small company with limited ability to invest in technology,
what actions will you take to provide you with measurement information that
larger firms obtain through technology investment?
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 Module 1 - INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Lesson 5:

ADVANTAGES OF SUPPLY CHAIN MANAGEMENT

Lesson Outcomes:

At the end of this lesson, the students must have:

 Explained improved supply chain network and reduced costs
 Discussed minimized delays and enhanced collaboration

Supply chain management software can offer tremendous value to any

company that relies on the smooth planning and executing of related operations
to achieve long-term profitability and maintain a solid competitive edge. That is
why more and more organizations are purchasing and implementing supply
chain applications. A software is any set of machine-readable instructions that
directs a computer’s processor to perform specific operations.

Here are some of the key benefits that SCM software delivers.

 Improved Supply Chain Network

Supply chain management (SMC) software provides complete, 360-
degree visibility across the entire supply chain network. It allows users to monitor
the status of all activities across all suppliers, production plants, storage facilities,
and distribution centers. This enables more effective tracking and management
of all related processes, from the ordering and acquisition of raw materials, to
manufacturing and shipping of finished goods to customers or retail outlets. The
status of mission-critical activities can be tracked at all times, and potential
inefficiencies or problems can be identified and corrected immediately, before
they become unmanageable.

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 Minimized Delays
Many supply chains particularly those that have enhanced with a supply
chain application are plagued by delays that can result in poor relationships and
lost business. Late shipments from vendors, hold-ups on productions lines, and
logistical errors in distribution channels are all common issues that can
negatively impact a company’s ability to satisfy customer demand for its products.
With SCM software, all activities can be seamlessly coordinated and executed
from start to finish, ensuring much higher levels of on-time delivery across the
board.

 Enhanced Collaboration
Imagine having the ability to know exactly what suppliers and distributors
are doing at all times and vice versa.

Through offering a common information framework that supports

communication and collaboration, SCM enables to better adapt to and meet
customer demands.

SCM software makes that possible by bridging the gap between disparate
business software systems at remote locations to dramatically improve
collaboration among supply chain partners. With SCM software, all participants
can dynamically share vital information such as demand trend reports, forecasts,
inventory levels, order statuses, and transportation plans in real-time. This type
of instantaneous, unhindered communication and data-sharing will help keep all
key stakeholders informed, so that supply chain processes can run as smoothly
as possible.

 Reduced Costs
SCM software can help reduce overhead expenses in a variety of ways. It
can, for example, improve inventory management, facilitating the successful
implementation of just-in-time stock models and eliminating the strain on real

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estate and financial resources incurred by the storage of excess components and
finished goods Enable more effective demand planning, so production output
levels can be set to most effectively address customer requirements without the
shortages that result in lost sales or wastes that drain budgets. Improve
relationships with vendors and distributors, so that purchasing and logistics
professionals can identify cost-cutting opportunities such as volume discounts
(Choo, 2015).

Information transparency and real-time business intelligence can lead to

shorter cash-to-cash cycle times. Reduced inventory levels and increased
inventory returns across the network can lower over costs. With supply chain
management (SMC), operational expenses can be lowered with timlier planning
for procurement, manufacturing and transporation. Better order, product and
execution tracking can lead to improvements in performance and quality- and
lower costs. We can also improve margins through better coordination with
business partners. Tight connections with trading partners keep the supply chain
aligned with current business strategies and priorities, improving the
organization’s overall performance and achievement of goals
(3G Elearning, 2014).

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ASSESSMENT FOR LESSON 5

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Practical Question:

Why do transportation costs eventually decrease as the number of warehouses

increases?
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Assignment Question:

Identify one hospitality or tourism related establishment and discuss how it

handles and minimizes its delays and enhances it collaboration.

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ASSESSMENT FOR THE WHOLE MODULE (UNIT) 1

Student Name: ____________________________ Date Submitted: _________

Course and Section: ________________________

Multiple Choice: Encirle the letter of the correct answer.

1. From a system’s perspective, what is the sequence of an organization’s supply
chain?
a. acquisition of resources, transformation, process, delivery to customers
b. transformation process, delivery to customers, acquisition of resources
c. delivery to customers, acquisition of resources, transformation process
d. transformation process, acquisition of resources, delivery to customers
e. none of the above

2. It offers the opportunity to buy direct from the supplier with reduced costs and
shorter cycle.
a. countermediation
b. reintermediation
c. contramediation
d. disintermediation
e. none of the above

3. A downstream supply chain is:

a. involved with procurement of material from suppliers
b. distribution of products or delivery of services to customers
c. exclusively inside an organization
d. B and C
e. none of the above

4. An upstream supply chain is:

a. distribution of products or delivery of services to customers
b. exclusively inside an organization

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c. involved with procurement of material from suppliers

d. A and C
e. none of the above

5. An appropriate strategy to achieve timely, accurate, and paperless information

flow is:
a. revision of organization process supported by information systems
b. integrate this activity is integrated into all supply chain planning
c. efficient replacement
d. efficient store assortments
e. none of the above

6. An appropriate strategy to optimize the productivity of retail space and

inventory is:
a. integrate this activity is integrated into all supply chain planning
b. revision of organization process supported by information systems
c. efficient store assortments
d. efficient replacement
e. none of the above

7. An appropriate strategy to maximize efficiency of promotion is:

a. revision of organization process supported by information systems
b. integrate this activity is integrated into all supply chain planning
c. efficient replacement
d. efficient store assortments
e. none of the above

8. An appropriate strategy to optimize for time and cost in the ordering process is:
a. integrate this activity is integrated into all supply chain planning
b. revision of organization process supported by information systems
c. efficient store assortments

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d. efficient replacement
e. none of the above

Short-Response Questions
9. Give the overview from various perspectives of supply chain system.
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10. Explain physical distribution to logistics to supply chain management.

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11. Describe the significance and functions of supply chain management.

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12. Discuss the benifits of using the SCOR Model.

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13. Describe the “plan, develop, make, deliver, return” activities of the SCOR
model.
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Integration and Application Question

14. Survey and prepare a report on the “technological change in the SCM”.
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References

Books:

Choo, Shui (2015). Supply Chain Management

Bowersox, D.J, Closs, D.J, Cooper, Bowersox, J.C, (2014). Supply Chain
Logistics Management, 4th Edition

Christopher, M.(2014). Logistics and Supply Chain Management: creating value-

adding networks, 3rd Edition, Prentice Hall Financial Times

3G Elearning FZ LLC (2014). Acquisition and Supply Chain Management

Web:

http://www.wisegeek.org/what-is-a-supply-chain.htm

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