CBMC 1 OPERATIONS MANAGEMENT WITH TQM

HANDOUT #5
Supply Chain Management

Introduction:
Supply Chain Management (SCM) plays a critical role in ensuring the efficient flow of goods,
services, and information from suppliers to customers, optimizing processes to reduce costs,
enhance customer satisfaction, and boost competitiveness. It involves coordinating key steps
such as sourcing, production, and distribution, while addressing challenges like demand
fluctuations and disruptions. Effective SCM brings significant benefits like improved efficiency,
better risk management, and enhanced resilience, while also incorporating ethical practices
and strategic responsibilities for managers. However, managing risks, maintaining ethical
standards, and adapting to global challenges remain key aspects of SCM that require careful
attention and proactive planning.

Date and Time Allotment:

Week 7 & 8 (6 hours)

Objectives:
1. At the end of the end of this lesson, students should be able to:
2. Explained what a supply chain is.
3. Explained the need to management a supply chain, roles, the steps and its potential
benefits.
4. Listed the elements of supply chain management.
5. Identified the challenges in supply chain management.

Lecture:

Supply chain management manages the flow of goods and services and includes all
processes that transform raw materials into final products. It involves actively streamlining a
business's supply-side activities to maximize customer value and gain a competitive
advantage in the marketplace.

Supply Chain- is the sequence of organizations-their facilities, functions, and activities

involved in producing and delivering a product or service. The sequence begins with basic
suppliers of raw materials and extends to the final customer. Facilities include warehouses,
factories, processing centers, distribution centers, retail outlets, and offices. Functions and
activities include forecasting, purchasing, inventory management, information management,
quality assurance, scheduling, production, distribution, delivery, and customer service.

Key aspects of supply chain management:

1. Determining the appropriate level of outsourcing
2. Managing procurement
3. Managing suppliers
4. Managing customer relationship
5. Being able to identify problems and respond to them quickly

IMPORTANCE OF SUPPLY CHAIN MANAGEMENT

1. Boost Customer Service

 Customers expect the correct product assortment and quantity to be delivered.
 Customers expect products to be available at the right location. (i.e., customer
satisfaction diminishes if an auto repair shop does not have the necessary parts
in stock and cannot fix your car for an extra day or two).
  Right Delivery Time – Customers expect products to be delivered on time.
 Right After Sale Support – Customers expect products to be serviced quickly.

2. Reduce Operating Costs

 Decreases Purchasing Cost – Retailers depend on supply chains to quickly
deliver expensive products to avoid holding costly inventories in stores any
longer than necessary.
 Decreases Production Cost – Manufacturers depend on supply chains to
reliably deliver materials to assembly plants to avoid material shortages that
would shutdown production.
 Decreases Total Supply Chain Cost – Manufacturers and retailers depend
on supply chain managers to design networks that meet customer service goals
at the least total cost. Efficient supply chains enable a firm to be more
competitive in the market place.

3. Improve Financial Position

 Increases Profit Leverage – Firms value supply chain managers because
they help control and reduce supply chain costs. This can result in dramatic
increases in firm profits.
 Decreases Fixed Assets – Firms value supply chain managers because they
decrease the use of large fixed assets such as plants, warehouses and
transportation vehicles in the supply chain. If supply chain experts can redesign
the network to properly serve
 Increases Cash Flow – Firms value supply chain managers because they
speed up product flows to customers.

ROLE OF SUPPLY CHAIN MANAGEMENT

1. Ensure Human Survival

 Helps Sustains Human Life – Humans depend on supply chains to deliver basic
necessities such as food and water. Any breakdown of these delivery pipelines
quickly threatens human life.
 Improves Human Healthcare – Humans depend on supply chains to deliver
medicines and healthcare. During a medical emergency, supply chain performance
can be the difference between life and death. For example, medical rescue
helicopters can save lives by quickly transporting accident victims to hospitals for
emergency medical treatment. In addition, the medicines and equipment
necessary for treatment will be available at the hospital as a result of excellent
supply chain execution
 Protects Humans from Climate Extremes – Humans depend on an energy
supply chain to deliver electrical energy to homes and businesses for light, heat,
refrigeration and air conditioning. Logistical failure (a power blackout) can quickly
result in a threat to human life.

2. Improve Quality of Life

 Foundation for Economic Growth – Societies with a highly developed supply
chain infrastructure (modern interstate highway system, vast railroad network,
numerous modern ports and airports) are able to exchange many goods between
businesses and consumers quickly and at low cost. As a result, the economy
grows. In fact, the one thing that most poor nations have in common is no or a very
poorly developed supply chain infrastructure.
 Improves Standard of Living – Societies with a highly developed supply chain
infrastructure (modern interstate highway system, vast railroad network, numerous
modern ports and airports) are able to exchange many goods between businesses
 and consumers quickly and at low cost. As a result, consumers can afford to buy
more products with their income thereby raising the standard of living in the society.
 Job Creation – Supply chain professionals design and operate all of the supply
chains in a society and manage transportation, warehousing, inventory
management, packaging and logistics information. As a result, there are many jobs
in the supply chain field.
 Opportunity to Decrease Pollution – Supply chain activities require packaging
and product transportation. As a by-product of these activities, some unwanted
environmental pollutants such as cardboard waste and carbon dioxide fuel
emissions are generated.
 Opportunity to Decrease Energy Use – Supply chain activities involve both
human and product transportation. As a by-product of these activities, scarce
energy is depleted.

3. Protect Cultural Freedom and Development

 Protects Delivery of Necessities – Citizens of a country depend on supply chain
managers to design and operate food, medicine and water supply chains that
protect products from tampering. Sophisticated packaging techniques, state of the
art surveillance cameras, global positioning systems and RFID inventory tracking
are some of the methods used to deter terrorists from accessing these vital logistics
systems.

STEPS IN SUPPLY CHAIN MANAGEMENT

1. Designing: Determining what the process will look like, the goals, and what tools and
technologies are needed to streamline the process.
2. Planning: Figuring out how to implement the strategy given the facility's constraints,
cost, and return on investment (ROI).
3. Executing: Implementing the process from start to finish by establishing supply chain
partners and vendors, managing inventory, and optimizing distribution.
4. Controlling: Ensuring everything operates smoothly and consistently and inventory
levels remain steady.
5. Monitoring: Setting and measuring key performance indicators (KPIs) and ensuring
the operations' performance aligns with the company's objectives.

Facilities that excel in these steps provide their organization with a high net value and ROI.
These practices are also conducive to developing an infrastructure that wards off competitors,
leverages best-of-breed logistics practices and material handling technologies, and
synchronizes the supply chain while measuring performance levels and KPIs.

BENEFITS OF EFFECTIVE SUPPLY CHAIN MANAGEMENT

Supply chain management helps companies manage the flow of goods from start to
finish. As such, the term is comprehensive and encompasses a wide range of operations. The
benefits of supply chain management are similarly extensive. However, here are six positive
outcomes of effective supply chain management.

1. Increased Customer Satisfaction

Customer satisfaction is a facility's primary objective, particularly in e-
commerce. Supply chain management is key to customer satisfaction; ensuring
companies can fulfill customer promises and deliver products on time. If a finished
product is not delivered within two days of the promised date, a large percentage of
consumers say they are much less likely to shop with that company in the future.
 The COVID-19 pandemic has disrupted supply chain operations for many
organizations, but only 21% of consumers are willing to forgive companies for
pandemic-related delivery challenges.
Supply chain management is also critical to improve total order cycle time, the
time between an order being placed and when it is delivered to a customer. While a
streamlined supply chain process can improve your total order cycle time, an inefficient
process can damage customer satisfaction and retention.

2. Effective Inventory Management

Inventory management is critical for warehouse operations to run smoothly.
When done effectively, inventory tracking can improve inventory accuracy and
inventory visibility. This has several benefits, including:
Preventing orders from shipping late: Approximately 34% of businesses have
had to ship an order late because they did not realize it was not in stock. Inventory
visibility helps prevent this error and is vital to supply chain management.
Reducing total order cycle time: Without effectively managed inventory levels,
delivery times of placed orders will suffer. Supply chain management helps improve
throughput time and gets products to customers quickly.
Improving predictability: The ability to predict how much inventory is needed in the
future, based on historical patterns and seasonality, is critical to ensuring a positive
customer experience. Predicting an organization's peaks and valleys is key to the
supply chain management process. It helps to determine when to bulk up inventory in
response to increased customer demand.
Effective supply chain leaders will prioritize inventory management in their
supply chain activities to mitigate potential risks of late shipping and increase customer
retention. This gives them a competitive edge over facilities that need help with
inventory accuracy.

3. Improved Quality Control

Quality control is an incredibly important part of supply chain management.
Supply chain professionals should incorporate regular audits of their vendors and raw
materials into their supply chain management process to ensure consistent product
quality. This benefits both the facilities and their vendors because it can alert them to
potential areas of improvement, allowing them to correct their mistakes before making
them with other facilities.

4. Lower Costs
While overhead and operating costs are unavoidable in operating a business,
supply chain professionals aim to lower costs and increase returns. Without effective
supply chain management, your facility will experience increased costs. Ensuring the
product management process goes smoothly from start to finish is essential to
reducing spending and maximizing profits.

5. Optimized Distribution
Distribution is one of⁠ the essential facets of supply chain management.
Organizations that excel in distribution increase the profitability of their operations by
leveraging "best of breed" logistics practices and proper material handling
technologies for their facilities.

6. Improved Labor Optimization

Labor is one of the most pressing concerns for modern warehouses. The
number of available jobs is at a record high, with more people leaving the warehousing
industry than entering it.
 One of the primary advantages of supply chain management is the ability to
incorporate automation into the process. It helps determine when automation is appropriate
and how much is necessary for a facility.

ELEMENTS OF SUPPLY CHAIN MANAGEMENT

1. Integration
Integration starts at your strategic planning phase and is critical throughout
communications, information sharing, data analysis, and storage.
A single-view, accurate, and reliable source of information on your supply chain
activities and details reduces human error, delays, shortages, and over/under-stocking
and allows you to plan for and mitigate supply issues or interruptions.
Assess your technology needs, and ensure your choice gives you the right tools
to integrate your complete supply chain solution while being flexible enough to change
and grow with your business.

2. Operations
Your operations require an accurate, real-time representation of your inventory
and production schedules to monitor your output and forecast production and
distribution patterns.
With the right tools, you can align your operations with the rest of your business
and provide accurate and reliable information on the production and current inventories
for more efficient fulfillment processes.
Improve your profitability by predicting likely interruptions and challenges to
reduce their impact on your business and streamline your operational processes to
facilitate a smoother, less expensive path to fulfillment.

3. Purchasing
The right supply chain tools does a great deal in sourcing products in your
supply chain and ensuring you are taking advantage of the most competitive pricing
and reliable products.
Demand forecasting gives you a reliable and practical method of ensuring you
have the right product, in the correct quantity, at the right time. Keep track of suppliers,
competing producers, and demand cycles to reduce operating costs across the
sourcing and purchasing process.

4. Distribution
The transport, delivery, and return of goods are components of your supply
chain that can always be simplified, optimized, and corrected for better client service
and reduced operating costs.
With varying options of stock origin, your delivery and returns process should
be centralized for a real-time view of inventory, order status, and stock location,
regardless of whether an order originated in-store or online.

CHALLENGES OF SUPPLY CHAIN MANAGEMENT

1. Quality Customer Service. The supply chain management is centralized on the

needs of the customers. It is about giving the correct quantity and quality of the product
for the right amount of money. All this, in perfect timing and setting.
Solution: Customers have different preferences, and we have to always adjust to the
customer’s needs. Being able to provide customers with unique solutions makes a
difference entirely. Companies that excel in this field are the ones that make an effort
to learn and invest in new technologies.
 2. Costing. Globally speaking, the costs of raw materials, energy, and labor have
increased due to economic constraints. For operations to continue production and
provide customers with good quality items at affordable rates, adjustments must be
made to keep operations running.
Solution: The best solution to this issue would be to improve your cost control by
executing your plans efficiently through constant monitoring. Through efforts in
providing warehouse efficiency, you can do so.

3. Risk Management. Due to the constant change in the market, coming from various
sources such as consumer demands, political agendas, and global sourcing would
cause major issues to the operations.
Solution: Always be prepared with a risk management plan on how your company will
be able to overcome disruptions during operations. By hiring a logistics software
development company, you could manage these issues effectively with less effort.
After all, logistics management is vital to the entire operation.

4. Supplier Relationship. By creating a mutually sound and harmonious relationship

with your partners or suppliers, you will be able to provide your customers with
products of high standards promptly. This also allows you to create opportunities for
improvement in terms of performance.
Solution: By building a strong working relationship with your supplier, you could work
efficiently and produce a better output quickly.

5. Qualified Personnel. Over the years, finding talent interested and passionate about
this line of work has become a challenge. Personnel hired in this field must understand
the duties and responsibilities needed.
Solution: Since locating dedicated personnel in this field has become increasingly
hard to find, their market value will rise. Hiring and promoting through in-house staff
would be the most affordable solution at this point.

6. Unforeseen Delays. Procurement of materials and products may be easy, but the
delivery may only sometimes be 100% on time, especially with time differences and
various shipping time frames. Delays like this are very common when items are
sourced from different countries.
Solution: Always have buffer stocks. Through an efficient warehouse management
system, you can know when you need to have certain materials delivered and create
a time cushion in terms of delivery to ensure everything runs smoothly.

7. Fast-Changing Markets. With technological advancements changing our markets

every day, it is not easy to stay at pace and adapt to the variety of innovations in the
market. However, because the goal is to stay efficient in these changing times,
companies would have to be more flexible.
Solution: Change is inevitable. The way we adapt to change is definitely something
we need to manage by using logistics management software. We can move with the
flow and improve our output as a whole.

RISK MANAGEMENT AND RESILIENCY

Risk management involves identifying risks, assessing their likelihood of occurring

and their potential impact, and then developing strategies for addressing those risks.
Strategies can include risk avoidance, reduction, and sharing with supply chain partners. Risk
avoidance may mean not dealing with suppliers in a certain area. Risk reduction can mean
replacing unreliable suppliers, and Risk sharing can mean contractual arrangements with
supply chain partners that spread the risk. Resiliency is the ability of a business to recover
from an event that negatively affects the supply chain. Recovery is a function of the severity
of the impact and the plans that are in place to cope with the event. Businesses can reduce,
but not eliminate, the need for resiliency by managing risks.

The first step in risk management is to identify potential risks. Supply chain risks fall
into several categories. One is disruptions, which can come from natural disasters such as
fires, flooding, hurricanes, and the like that either disrupt shipping or affect suppliers directly
or indirectly. Other disruptions can occur due to supplier issues, such as labor strikes,
production problems, and issues with suppliers, including bankruptcy. Another source of risk
is quality issues, which can disrupt supplies and lead to product recalls, liability claims, and
negative publicity.

Key elements of successful risk management:

1. Know your suppliers -. Mapping the supply chain can help grasp the scope of the
supply chain. This might also lead to the desirability of simplifying the supply chain.
2. Provide supply chain visibility - Supply chain visibility means that a significant
trading partner can connect to any part of its supply chain to access data in real-time
on inventory levels, shipment status, and similar key information.
3. Development event-response capability - Event-response capability is the ability to
detect and respond to unplanned events such as delayed shipment or a warehouse
running low on a certain item.

ETHICS AND SUPPLY CHAIN

There are many examples of unethical behavior involving supply chains. They include
bribing government or company officials to secure permits of favorable status: ignoring health,
safety, and environmental standards, violating basic rights of workers (e.g., substandard
wages, forced labor, child labor), mislabeling country of origin and selling goods abroad that
are banned at home. Companies should develop an ethical supply chain code to guide
behavior. A code should cover behaviors that involve customers, suppliers, contract
negotiation, recruiting, and environmental issues.

STRATEGIC RESPONSIBILITIES

Generally speaking, corporate management responsibilities have legal, economic, and ethical
aspects. Legal responsibilities include being knowledgeable about the laws and regulations
of the countries where supply chains exist, obeying the laws, and operating to conform to
regulations. Economic responsibilities include supplying products and services to meet
demand efficiently. Ethical responsibilities include conducting business in ways consistent
with society's moral standards. More specific areas of responsibility related to strategy,
includes the following:

1. Supply chain strategy alignment: Aligning supply and distribution strategies with
organizational strategy and deciding on the degree to which outsourcing will be
employed.
2. Network configuration: Determining the number and location of suppliers,
warehouses, production/operations facilities, and distribution centers.
3. Information technology: Integrating systems and processes throughout the supply
chain to share information, including forecasts, inventory status, tracking of shipments,
and events.
4. Capacity planning: Assessing long-term capacity needs, including when and how
much will be needed and the degree of flexibility to incorporate.
5. Strategic partnership: partnership choices, level of partnering, and degree of
formality.
 6. Distribution strategy: Deciding whether to use centralized or decentralized
distribution and deciding whether to use the organization’s own facilities and
equipment for distribution.
7. Uncertainty and risk reduction: Identifying potential sources of risk and deciding the
acceptable amount of risk.

Activity:
Discussion on the Importance of SCM, Role of SCM, Steps in SCM, Benefits of effective SCM,
Elements of SCM, Challenges in Supply Chain Management, Risk Management and
Resiliency, Ethics in Supply Chain Management, Strategic Responsibilities of Managers in
Supply Chain Management.

Assessment:
The students will take a 30-point multiple-choice quiz to gauge their understanding of supply
chain management.

References:
 J.R. Evans. And W.M. Lindsay, Total Quality Management, Cengage Learning Asia,
2013.
 J. Heizer, B. Render, Operations Management, 10th Global Edition, New Jersey:
Pearson Education, 2011.
 S. Kale, Production and Operations Management, New Delhi, McGraw-Hill education,
2013.
 W.J. Stevenson, Operations Management 12th Edition. New York: McGraw-Hill
education, 2015.
 W.J Stevenson and S.C. Chuong, "Operations Management". 2nd Edition. New York:
McGraw-Hill education, 2014.
 Slack, N., Chambers, S., & Johnston, R. (2023). OPERATIONS MANAGEMENT (10th
ed.). Pearson Education Limited, 2023
 David Alan Collier, James R. Evans, William Lindsay (2020) Operations Management
and Total Quality Management, Cengage Learning Asia Pte Limited, 2020
 Facility Planning and Management Retrieved from:
https://www.mitsde.com/media/student%20corner/Next-Gen-
Learning/Sample%20PPT_Facility%20Location%20and%20Layout.pdf
 https://www.pmi.org/about/learn-about-pmi/what-is-project management
 https://www.projecttimes.com/articles/does-people-behavior-impact-projects-how-
and-what-do-we-do-about-it.html
 https://www.workamajig.com/blog/guide-to-work-breakdown-structures-wbs
 https://keydifferences.com/difference-between-pert-and-cpm.html
 https://hbr.org/1984/07/budget-choice-planning-versus-control
 https://en.wikipedia.org/wiki/Risk_management
 https://blog.hubspot.com/marketing/free-project-management-software

Prepared by:
Ryan O. Maramba, CHRA, CHRP, COMS, CSPE, LPT, DBA