TABLE OF CONTENT

1. INTRODUCTION
1.1 Definition……………………………………………………6
2. DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT
2.1 Creation Era………………………………………………..10
2.2 Integration Era……………………………………………..10
2.3 Globalization Era…………………………………………..11
2.4 Specialization Era—Phase One……………………………11
2.5 Specialization Era—Phase Two……………………………12

2.6 Supply Chain Management 2.0 (SCM 2.0)…………..........13

3. SUPPLY CHAIN BUSINESS PROCESS INTEGRATION…..15

4. THEORIES OF SUPPLY CHAIN MANAGEMENT

4.1 Resource-Based View (RBV)………………………………...21

4.2 Transaction Cost Analysis (TCA)……………………………23

4.3 Knowledge-Based View (KBV) ………………………….......24

4.4 Strategic Choice Theory (SCT)………………………………25

4.5 Agency Theory (AT)………………………………………….25

4.6 Institutional theory (InT)……………………………….........26

4.7 Systems Theory (ST)………………………………………….26

5. SUPPLY CHAIN SUSTAINABILTIY

5.1 Components of supply chain integration…………………..27

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6. GLOBAL SUPPLY CHAIN MANAGEMENT……………….29

7. SAP SUPPLY CHAIN MANAGEMENT

7.1 Planning, Execution and Collaboration across the responsive

Supply network…………………………………………………32

7.2 Planning…………………………………………………………33

7.3 Execution ………………………………………………………..36

7.4 Collaboration …………………………………………………...40

8. SAP SUPPLY CHAIN MANAGEMENT:

BUSINESS BENEFITS…………………………………………..41

9. BIBILIOGRAPHY……………………………………………...44

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SUPPLY CHAIN MANAGEMENT

1. INTRODUCTION:

1.1 DEFINITION

Supply chain management (SCM) is the management of a network of

interconnected businesses involved in the ultimate provision
of product and service packages required by end customers (Harland,
1996). Supply Chain Management spans all movement and storage
of raw materials, work-in-process inventory, and finished goods from
point of origin to point of consumption (supply chain).

Supply chain management encompasses the planning and management

of all activities involved in sourcing, procurement, conversion,
and logistics management. It also includes the crucial components of
coordination and collaboration with channel partners, which can
be suppliers, intermediaries, third-party service providers,
and customers. In essence, supply chain management integrates supply
and demand management within and across companies. More recently,
the loosely coupled, self-organizing network of businesses that cooperate
to provide product and service offerings has been called the Extended
Enterprise.

Another definition is provided by the APICS Dictionary when it defines

SCM as the "design, planning, execution, control, and monitoring of
supply chain activities with the objective of creating net value, building
a competitive infrastructure, leveraging worldwide logistics,

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synchronizing supply with demand, and measuring performance
globally."

Supply chain management can also refer to supply chain management

software which includes tools or modules used to execute supply chain
transactions, manage supplier relationships and control associated
business processes.

Supply chain event management (abbreviated as SCEM) is a

consideration of all possible events and factors that can disrupt a supply
chain. With SCEM possible scenarios can be created and solutions
devised.

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A supply chain is 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. Supply chains exist
in both service and manufacturing organizations, although the
complexity of the chain may vary greatly from industry to industry and
firm to firm.

Below is an example of a very simple supply chain for a single product,

where raw material is procured from vendors, transformed into
finished goods in a single step, and then transported to distribution
centers, and ultimately, customers.

Realistic supply chains have multiple end products with shared

components, facilities and capacities. The flow of materials is not always
along an arborescent network, various modes of transportation may be
considered, and the bill of materials for the end items may be both deep
and large.

Traditionally, marketing, distribution, planning, manufacturing, and

the purchasing organizations along the supply chain operated
independently. These organizations have their own objectives and these
are often conflicting.

Marketing's objective of high customer service and maximum sales

dollars conflict with manufacturing and distribution goals. Many
manufacturing operations are designed to maximize throughput and
lower costs with little consideration for the impact on inventory levels

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and distribution capabilities. Purchasing contracts are often negotiated
with very little information beyond historical buying patterns. The
result of these factors is that there is not a single, integrated plan for the
organization---there were as many plans as businesses.

Clearly, there is a need for a mechanism through which these different

functions can be integrated together.

Supply chain management is a strategy through which such integration

can be achieved.

Supply chain management is typically viewed to lie between fully

vertically integrated firms, where the entire material flow is owned by a
single firm, and those where each channel member operates
independently.

Therefore coordination between the various players in the chain is key

in its effective management. Cooper and Ellram [1993] compare supply
chain management to a well-balanced and well-practiced relay team.
Such a team is more competitive when each player knows how to be
positioned for the hand-off. The relationships are the strongest between
players who directly pass the baton, but the entire team needs to make a
coordinated effort to win the race.

2. DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT:

Six major movements can be observed in the evolution of supply chain

management studies: Creation, Integration, and Globalization

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(Lavassani et al., 2008a), Specialization Phases One and Two, and SCM
2.0.

2.1. CREATION ERA

The term supply chain management was first coined by a U.S. industry
consultant in the early 1980s. However, the concept of a supply chain in
management was of great importance long before, in the early 20th
century, especially with the creation of the assembly line. The
characteristics of this era of supply chain management include the need
for large-scale changes, re-engineering, downsizing driven by cost
reduction programs, and widespread attention to the Japanese practice
of management.

2.2. INTEGRATION ERA

This era of supply chain management studies was highlighted with the
development of Electronic Data Interchange (EDI) systems in the 1960s
and developed through the 1990s by the introduction of Enterprise
Resource Planning (ERP) systems. This era has continued to develop
into the 21st century with the expansion of internet-based collaborative
systems. This era of supply chain evolution is characterized by both
increasing value-adding and cost reductions through integration.

2.3. GLOBALIZATION ERA

The third movement of supply chain management development, the

globalization era, can be characterized by the attention given to global
systems of supplier relationships and the expansion of supply chains

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over national boundaries and into other continents. Although the use of
global sources in the supply chain of organizations can be traced back
several decades (e.g., in the oil industry), it was not until the late 1980s
that a considerable number of organizations started to integrate global
sources into their core business. This era is characterized by the
globalization of supply chain management in organizations with the
goal of increasing their competitive advantage, value-adding, and
reducing costs through global sourcing.

2.4. SPECIALIZATION ERA—PHASE ONE: OUTSOURCED

MANUFACTURING AND DISTRIBUTION

In the 1990s industries began to focus on “core competencies” and

adopted a specialization model. Companies abandoned vertical
integration, sold off non-core operations, and outsourced those
functions to other companies. This changed management requirements
by extending the supply chain well beyond company walls and
distributing management across specialized supply chain partnerships.

This transition also re-focused the fundamental perspectives of each

respective organization. OEMs became brand owners that needed deep
visibility into their supply base. They had to control the entire supply
chain from above instead of from within.

Contract manufacturers had to manage bills of material with different

part numbering schemes from multiple OEMs and support customer

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requests for work -in-process visibility and vendor-managed inventory
(VMI).

The specialization model creates manufacturing and distribution

networks composed of multiple, individual supply chains specific to
products, suppliers, and customers who work together to design,
manufacture, distribute, market, sell, and service a product. The set of
partners may change according to a given market, region, or channel,
resulting in a proliferation of trading partner environments, each with
its own unique characteristics and demands.

2.5. SPECIALIZATION ERA—PHASE TWO: SUPPLY CHAIN

MANAGEMENT AS A SERVICE

Specialization within the supply chain began in the 1980s with the
inception of transportation brokerages, warehouse management, and
non-asset-based carriers and has matured beyond transportation and
logistics into aspects of supply planning, collaboration, execution and
performance management.

At any given moment, market forces could demand changes from

suppliers, logistics providers, locations and customers, and from any
number of these specialized participants as components of supply chain
networks. This variability has significant effects on the supply chain
infrastructure, from the foundation layers of establishing and managing
the electronic communication between the trading partners to more

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complex requirements including the configuration of the processes and
work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall

competencies in the same way that outsourced manufacturing and
distribution has done; it allows them to focus on their core competencies
and assemble networks of specific, best-in-class partners to contribute
to the overall value chain itself, thereby increasing overall performance
and efficiency. The ability to quickly obtain and deploy this domain-
specific supply chain expertise without developing and maintaining an
entirely unique and complex competency in house is the leading reason
why supply chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the

late 1990s and has taken root primarily in transportation and
collaboration categories. This has progressed from the Application
Service Provider (ASP) model from approximately 1998 through 2003
to the On-Demand model from approximately 2003-2006 to the
Software as a Service (SaaS) model currently in focus today.

2.6. SUPPLY CHAIN MANAGEMENT 2.0 (SCM 2.0)

Building on globalization and specialization, the term SCM 2.0 has been
coined to describe both the changes within the supply chain itself as well
as the evolution of the processes, methods and tools that manage it in
this new "era".

Web 2.0 is defined as a trend in the use of the World Wide Web that is
meant to increase creativity, information sharing, and collaboration

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among users. At its core, the common attribute that Web 2.0 brings is to
help navigate the vast amount of information available on the Web in
order to find what is being sought. It is the notion of a usable pathway.
SCM 2.0 follows this notion into supply chain operations. It is the
pathway to SCM results, a combination of the processes, methodologies,
tools and delivery options to guide companies to their results quickly as
the complexity and speed of the supply chain increase due to the effects
of global competition, rapid price fluctuations, surging oil prices, short
product life cycles, expanded specialization, near-/far- and off-shoring,
and talent scarcity.

SCM 2.0 leverages proven solutions designed to rapidly deliver results

with the agility to quickly manage future change for continuous
flexibility, value and success. This is delivered through competency
networks composed of best-of-breed supply chain domain expertise to
understand which elements, both operationally and organizationally,
are the critical few that deliver the results as well as through intimate
understanding of how to manage these elements to achieve desired
results. Finally, the solutions are delivered in a variety of options, such
as no-touch via business process outsourcing, mid-touch via managed
services and software as a service (SaaS), or high touch in the
traditional software deployment model.

3. SUPPLY CHAIN BUSINESS PROCESS INTEGRATION

Successful SCM requires a change from managing individual functions

to integrating activities into key supply chain processes. An example

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scenario: the purchasing department places orders as requirements
become known. The marketing department, responding to customer
demand, communicates with several distributors and retailers as it
attempts to determine ways to satisfy this demand. Information shared
between supply chain partners can only be fully leveraged
through process integration.

Supply chain business process integration involves collaborative work

between buyers and suppliers, joint product development, common
systems and shared information.

According to Lambert and Cooper (2000), operating an integrated

supply chain requires a continuous information flow. However, in many
companies, management has reached the conclusion that optimizing the
product flows cannot be accomplished without implementing a process
approach to the business.

The key supply chain processes stated by Lambert (2004) are:

 Customer relationship management

 Customer service management
 Demand management
 Order fulfillment
 Manufacturing flow management
 Supplier relationship management
 Product development and commercialization
 Returns management

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Much has been written about demand management. Best-in-Class
companies have similar characteristics, which include the following: a)
Internal and external collaboration b) Lead time reduction initiatives c)
Tighter feedback from customer and market demand d) Customer level
forecasting

One could suggest other key critical supply business processes which
combine these processes stated by Lambert such as:

a. Customer service management

b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between

the organization and its customers. Customer service is the source of
customer information. It also provides the customer with real-time
information on scheduling and product availability through interfaces
with the company's production and distribution operations. Successful
organizations use the following steps to build customer relationships:

 determine mutually satisfying goals for organization and

customers

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  establish and maintain customer rapport
 produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the

manufacturing flow management process and the development of new
products. In firms where operations extend globally, sourcing should be
managed on a global basis. The desired outcome is a win-win
relationship where both parties benefit, and a reduction in time
required for the design cycle and product development. Also, the
purchasing function develops rapid communication systems, such as
electronic data interchange (EDI) and Internet linkage to convey
possible requirements more rapidly.

Activities related to obtaining products and materials from outside

suppliers involve resource planning, supply sourcing, negotiation, order
placement, inbound transportation, storage, handling and quality
assurance, many of which include the responsibility to coordinate with
suppliers on matters of scheduling, supply continuity, hedging, and
research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product

development process in order to reduce time to market. As product life
cycles shorten, the appropriate products must be developed and

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successfully launched with ever shorter time-schedules to remain
competitive. According to Lambert and Cooper (2000), managers of the
product development and commercialization process must:

1. coordinate with customer relationship management to

identify customer-articulated needs;
2. select materials and suppliers in conjunction with
procurement, and
3. develop production technology in manufacturing flow to
manufacture and integrate into the best supply chain flow for the
product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the

distribution channels based on past forecasts. Manufacturing processes
must be flexible to respond to market changes and must accommodate
mass customization. Orders are processes operating on a just-in-time
(JIT) basis in minimum lot sizes. Also, changes in the manufacturing
flow process lead to shorter cycle times, meaning improved
responsiveness and efficiency in meeting customer demand.

Activities related to planning, scheduling and supporting manufacturing

operations, such as work-in-process storage, handling, transportation,
and time phasing of components, inventory at manufacturing sites and

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maximum flexibility in the coordination of geographic and final
assemblies postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In

physical distribution, the customer is the final destination of a
marketing channel, and the availability of the product/service is a vital
part of each channel participant's marketing effort. It is also through
the physical distribution process that the time and space of customer
service become an integral part of marketing, thus it links a marketing
channel with its customers (e.g., links manufacturers, wholesalers,
retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and

components, but also outsourcing of services that traditionally have
been provided in-house. The logic of this trend is that the company will
increasingly focus on those activities in the value chain where it has a
distinctive advantage, and outsource everything else. This movement
has been particularly evident in logistics where the provision of
transport, warehousing and inventory control is increasingly
subcontracted to specialists or logistics partners. Also, managing and
controlling this network of partners and suppliers requires a blend of
both central and local involvement. Hence, strategic decisions need to be
taken centrally, with the monitoring and control of supplier
performance and day-to-day liaison with logistics partners being best
managed at a local level.

g) Performance measurement

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Experts found a strong relationship from the largest arcs of supplier
and customer integration to market share and profitability. Taking
advantage of supplier capabilities and emphasizing a long-term supply
chain perspective in customer relationships can both be correlated with
firm performance.

As logistics competency becomes a more critical factor in creating and

maintaining competitive advantage, logistics measurement becomes
increasingly important because the difference between profitable and
unprofitable operations becomes more narrow.

A.T. Kearney Consultants (1985) noted that firms engaging in

comprehensive performance measurement realized improvements in
overall productivity.

According to experts, internal measures are generally collected and

analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

External performance measurement is examined through customer

perception measures and "best practice" benchmarking, and includes
1) customer perception measurement, and

2) best practice benchmarking.

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Components of Supply Chain Management are

1. Standardization

2. Postponement

3. Customization

4. THEORIES OF SUPPLY CHAIN MANAGEMENT

Currently there is a gap in the literature available on supply chain

management studies: there is no theoretical support for explaining the
existence and the boundaries of supply chain management.

A few authors such as Halldorsson, et al. (2003), Ketchen and Hult

(2006) and Lavassani, et al. (2008b) have tried to provide theoretical
foundations for different areas related to supply chain by employing
organizational theories. These theories include:

4.1 RESOURCE-BASED VIEW (RBV)

The resource-based view (RBV) is an economic tool used to determine

the strategic resources available to a firm. The fundamental principle of
the RBV is that the basis for a competitive advantage of a firm lies

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primarily in the application of the bundle of valuable resources at the
firm’s disposal.To transform a short-run competitive advantage into a
sustained competitive advantage requires that these resources are
heterogeneous in nature and not perfectly mobile. Effectively, this
translates into valuable resources that are neither perfectly imitable nor
substitutable without great effort. If these conditions hold, the firm’s
bundle of resources can assist the firm sustaining above average
returns.

The key points of the theory are:

1. Identify the firm’s potential key resources.

2. Evaluate whether these resources fulfill the following
(VRIO) criteria:
 Valuable - A resource must enable a firm to employ a value-
creating strategy, by either outperforming its competitors or
reduce its own weaknesses.
 Rare - To be of value, a resource must be by definition rare.
In a perfectly competitive strategic factor market for a
resource, the price of the resource will be a reflection of the
expected discounted future above-average.
 In-imitable - If a valuable resource is controlled by only one
firm it could be a source of a competitive advantage . This
advantage could be sustainable if competitors are not able to
duplicate this strategic asset perfectly The term isolating
mechanism was introduced by Rumelt to explain why firms
might not be able to imitate a resource to the degree that they

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 are able to compete with the firm having the valuable
resource.
 Non-substitutable - Even if a resource is rare, potentially
value-creating and imperfectly imitable, an equally important
aspect is lack of substitutability. If competitors are able to
counter the firm’s value-creating strategy with a substitute,
prices are driven down to the point that the price equals the
discounted future rents, resulting in zero economic profits.
3. Care for and protect resources that possess these
evaluations because doing so can improve organizational
performance.

4.2 TRANSACTION COST ANALYSIS (TCA)

Financial markets are inherently volatile, characterized by shifting

values, risks and opportunities. The prices of individual securities are
frequently changing for numerous reasons, including shifts in perceived
value, localized supply/demand imbalances, and price changes in other
sector investments or the market as a whole. Reduced liquidity adds
price volatility and market risk to any contemplated transaction, and in
the face of this volatility, Transaction Cost Analysis (TCA) has become
increasingly important to help firms measure how effectively both
perceived and actual portfolio orders are completed.

Conceptually, TCA represents the difference between two amounts, and

Stream Base’s Event Processing Platform can play an active role in
computing TCA in real-time. The first amount represents the amount if
the transaction was instantaneously executed at the price prevailing

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when the portfolio manager made the decision, without any additional
costs. The second amount represents what would have been or actually
was realized. This second amount includes direct costs, such as
commissions, settlement costs and taxes, as well as indirect costs from
timing delays, market impact and missed opportunities. The difference
between these two amounts is often referred to as transaction
"slippage".

Increased slippage amounts directly reduce investor returns and hurt

relative performance versus the performance of competing investment
managers. In an environment of increased regulatory scrutiny, fierce
competition, and relatively low returns on equities, TCA has become a
staple at buy-side firms to analyze the efficiency of their entire
investment processes.

If an entire stock order is sold at once, the resulting sale price generally
will be locally depressed relative to the portfolio manager's decision
price. This is due to the trade-off between time and price, even with
stocks that have the best market liquidity. Alternatively, if the order is
distributed into the market over time, there is an opportunity cost that
the market price might decline over time. What’s more, timing delays
between the portfolio manager, compliance officials, traders and actual
delivery of the order to the market contribute to overall opportunity
cost.

4.3 KNOWLEDGE-BASED VIEW (KBV)

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The knowledge-based theory of the firm considers knowledge as the
most strategically significant resource of a firm. Its proponents argue
that because knowledge-based resources are usually difficult to imitate
and socially complex, heterogeneous knowledge bases and capabilities
among firms are the major determinants of sustained competitive
advantage and superior corporate performance.

This knowledge is embedded and carried through multiple entities

including organizational culture and identity, policies, routines,
documents, systems, and employees. Originating from the strategic
management literature, this perspective builds upon and extends
the resource-based view of the firm (RBV) initially promoted
by Penrose (1959) and later expanded by others.

4.4 STRATEGIC CHOICE THEORY (SCT)

Strategic Choice Theory is a theory in which forces and variables in the

external environment are dynamic, and that business strategies are
affected by the interactions between these factors.

4.5 AGENCY THEORY (AT)

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A theory explaining the relationship between principals, such as
a shareholders, and agents, such as acompany's executives. In this
relationship the principal delegates or hires an agent to perform work.
The theory attempts to deal with two specific problems: first, that
the goals of the principal and agent are not in conflict(agency problem),
and second, that the principal and agent reconcile different tolerances
of risk.

4.6 INSTITUTIONAL THEORY (INT)

Institutional theory focuses on the deeper and more resilient aspects of

social structure. It considers the processes by which structures,
including schemas, rules, norms, and routines, become established as
authoritative guidelines for social behavior. Different components of
institutional theory explain how these elements are created, diffused,
adopted, and adapted over space and time; and how they fall into
decline and disuse.

4.7 SYSTEMS THEORY (ST)

In systems science, systems theory is an interdisciplinary theory about

the nature of complex systems in nature, society, and science, and is a

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framework by which one can investigate and/or describe any group of
objects that work together to produce some result. This could be a
single organism, any organization or society, or any electro-mechanical
or informational artifact. Systems theory first originated in biology in
the 1920s out of the need to explain the interrelatedness of organisms in
ecosystems. As a technical and general academic area of study it
predominantly refers to the science of systems that resulted
from Bertalanffy's General System Theory (GST), among others, in
initiating what became a project of systems research and practice.
Systems theoretical approaches were later appropriated in other fields,
such as in the American structural functionalist sociology of Talcott
Parsonsand Niklas Luhmann.

5. SUPPLY CHAIN SUSTAINABILTIY

Supply chain sustainability is a business issue affecting an

organisation’s supply chain or logistics network and is frequently
quantified by comparison with SECH ratings. SECH ratings are defined
associal, ethical, cultural and health footprints. Consumers have become
more aware of the environmental impact of their purchases and
companies’ SECH ratings and, along with non-governmental
organisations ([NGO]s), are setting the agenda for transitions to
organically-grown foods, anti-sweatshop labour codes and locally-
produced goods that support independent and small businesses. Because
supply chains frequently account for over 75% of a company’s carbon
footprint many organisations are exploring how they can reduce this
and thus improve their SECH rating.

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 5.1 COMPONENTS OF SUPPLY CHAIN MANAGEMENT

INTEGRATION

The management components of SCM

The SCM components are the third element of the four-square

circulation framework. The level of integration and management of a
business process link is a function of the number and level, ranging
from low to high, of components added to the link (Ellram and Cooper,
1990; Houlihan, 1985). Consequently, adding more management
components or increasing the level of each component can increase the
level of integration of the business process link. The literature on
business process re-engineering, buyer-supplier relationships, and
SCM suggests various possible components that must receive
managerial attention when managing supply relationships. Lambert
and Cooper (2000) identified the following components:

 Planning and control

 Work structure
 Organization structure
 Product flow facility structure
 Information flow facility structure
 Management methods
 Power and leadership structure
 Risk and reward structure
 Culture and attitude

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However, a more careful examination of the existing literature[9] leads to
a more comprehensive understanding of what should be the key critical
supply chain components, the "branches" of the previous identified
supply chain business processes, that is, what kind of relationship the
components may have that are related to suppliers and customers.
Bowersox and Closs states that the emphasis on cooperation represents
the synergism leading to the highest level of joint achievement
(Bowersox and Closs, 1996). A primary level channel participant is a
business that is willing to participate in the inventory ownership
responsibility or assume other aspects of financial risk, thus including
primary level components (Bowersox and Closs, 1996). A secondary
level participant (specialized) is a business that participates in channel
relationships by performing essential services for primary participants,
including secondary level components, which support primary
participants. Third level channel participants and components that
support the primary level channel participants and are the fundamental
branches of the secondary level components may also be included.

Reverse Supply Chain Reverse logistics is the process of managing the

return of goods. Reverse logistics is also referred to as "Aftermarket
Customer Services". In other words, any time money is taken from a
company's warranty reserve or service logistics budget one can speak of
a reverse logistics operation.

6. GLOBAL SUPPLY CHAIN MANAGEMENT

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Global supply chains pose challenges regarding both quantity and
value:

Supply and Value Chain Trends

 Globalization
 Increased cross border sourcing
 Collaboration for parts of value chain with low-cost providers
 Shared service centers for logistical and administrative functions
 Increasingly global operations, which require increasingly global
coordination and planning to achieve global optimums Complex
problems involve also midsized companies to an increasing degree,

These trends have many benefits for manufacturers because they make
possible larger lot sizes, lower taxes, and better environments (culture,
infrastructure, special tax zones, sophisticated OEM) for their products.
Meanwhile, on top of the problems recognized in supply chain
management, there will be many more challenges when the scope of
supply chains is global. This is because with a supply chain of a larger
scope, the lead time is much longer.

Furthermore, there are more issues involved such as multi-currencies,

different policies and different laws.

The consequent problems include:

1. Different currencies and valuations in different countries;

2. Different tax laws(Tax Efficient Supply Chain Management;

3. Different trading protocols;

4. Lack of transparency of cost and profit.

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SAP SUPPLY CHAIN MANAGEMENT

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7. SAP SUPPLY CHAIN MANAGEMENT

7.1 PLANNING, EXECUTION, AND COLLABORATION

ACROSS THE RESPONSIVE SUPPLY NETWORK

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You face enormous pressure to reduce costs while increasing innovation
and improving customer service and responsiveness. SAP Supply Chain
Management (SAP SCM) enables collaboration, planning, execution,
and coordination of the entire supply network, empowering you to
adapt your supply chain processes to an ever-changing competitive
environment.

SAP SCM is part of the SAP Business Suite, which gives organizations
the unique ability to perform their essential business processes with
modular software that is designed to work with other SAP and non-SAP
software. Organizations and departments in all sectors can deploy SAP
Business Suite software to address specific business challenges on their
own timelines and without costly upgrades.

SAP SCM can help transform a linear, sequential supply chain into a
responsive supply network – in which communities of customer-centric,
demand-driven companies share knowledge, intelligently adapt to
changing market conditions, and proactively respond to shorter, less
predictable life cycles. SAP SCM provides broad functionality for
enabling responsive supply networks and integrates seamlessly with
both SAP and non-SAP software.

The application:

• Delivers planning and execution functions that are integrated by

design

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 • Supports best practices and provides preconfigured software for
enabling collaborative business, accelerating implementation, and
reducing costs
• Is recognized by key industry analysts as the market-leading SCM
application

7.2 PLANNING:

Real-time demand and signal-based replenishment need to drive supply

chains. Companies need to balance supply and demand and run their
businesses based on actual-versus-forecasted demand.

With SAP SCM, you can model your existing supply chain; set goals;
and forecast, optimize, and schedule time, materials, and other
resources with these planning activities:

• Demand planning and forecasting

• Safety stock planning
• Supply network planning
• Distribution planning
• Strategic supply chain design

Key Planning Benefits of SAP Supply Chain Management

SAP SCM enables you to:

• Increase demand accuracy and order fulfillment satisfaction

levels

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 • Reduce inventory levels and increased inventory turns across the
network
• Increase profitability and productivity
• Integrate sales and operations planning process

FEATURES & FUNCTIONS OF SAP SCM

SUPPLY CHAIN PLANNING AND COLLABORATION

SAP SCM includes features and functions to support collaborative

supply chain planning processes, including strategic, tactical, and
operational planning as well as service parts planning.

Strategic, Tactical, and Operational Planning

With SAP SCM, you can optimize a full range of planning activities,
including:

• Demand planning and forecasting – Forecast and plan anticipated

demand for products or product characteristics. Use state-of-the-
art forecasting algorithms for product life-cycle planning and
trade promotion planning.
• Safety stock planning – Assign optimal safety stock and target
stock levels in all inventories in the supply network. Meet your
desired customer service levels while maintaining a minimum
amount of safety stock.
• Supply network planning – Integrate purchasing, manufacturing,
distribution, and transportation plans into an overall supply
picture – so you can simulate and implement comprehensive

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 tactical planning and sourcing decisions based on a single, globally
consistent model. This can involve heuristics and capacity
planning, optimization, and multilevel supply and demand
matching.
• Distribution planning – Determine the best short-term strategy to
allocate available supply to meet demand and to replenish stocking
locations. To achieve this, planners can determine which demands
can be fulfilled by existing supply elements.
• Supply network collaboration – Work with partners across your
supply network. Using collaboration features that improve
visibility into supply and demand, you and your partners can
reduce inventory buffers, increase the velocity of raw materials
and finished goods through the pipeline, improve customer service,
and increase revenues.

Service Parts Planning

With SAP SCM, you can also handle service parts planning activities,
including:

• Parts demand planning – Improve the accuracy of forecasts

through better modeling of demand quantities, events, and their
respective deviations. You can select sophisticated forecast models
and optimize model parameters to improve forecasting for slow-
moving parts or for parts with irregular demand patterns.
Through aggregated forecast-parameter profile maintenance, you
can make data maintenance more efficient.

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 • Parts inventory planning – Reduce inventory levels and achieve
retail service levels by providing more precise demand modeling.
You can distribute inventory optimally within the multi-echelon
supply chain to ensure high service levels while keeping inventory
levels at a minimum.
• Parts supply planning – Reduce inventory in the supply chain by
improving supplier alignment, increasing automation, and
developing accurate supply plans. You can also reduce operational
cost through efficient purchasing practices.
• Parts distribution planning – Set up stock transfers for parts
within a service parts network to reduce stock-out situations and
operational costs.
• Parts monitoring – Work with suppliers and customers to
exchange information and handle alerts collaborate.

7.3 EXECUTION

To meet the challenges of rapidly changing market dynamics, your

company needs to synchronize all logistics, transportation, and
fulfillment operations in a 24/7, always-on, environment.

SAP SCM enables you to carry out supply chain planning and generate
high efficiency at lowest possible cost. You can respond to demand
through a responsive supply network in which distribution,
transportation, and logistics are integrated into real-time planning
processes.

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Features include:

• Order fulfillment.
• Procurement.

• Transportation

• Warehousing

• Real-world awareness
• Manufacturing

Key Execution Benefits of SAP Supply Chain Management

With SAP SCM, you benefit from:

• Improved order, production, and execution tracking with RFID-

enabled processes.
• Seamless integration and global visibility of different
transportation process steps, and higher transparency.
• Improved warehouse efficiency and extend real-time visibility and
control of warehouse operations.
• Reduced costs of goods sold throughout your company.

SAP Supply Chain Management (SAP SCM) delivers supply chain

execution excellence and best-of-breed functionality by integrating sales
order management, transportation, and warehouse processes, and by
linking to back-end financials, manufacturing, and purchasing.

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Features and functions include:

• Materials management – By sharing information about inventory

and procurement orders, SAP SCM ensures that the materials
required for manufacturing are in the right place at the right time.
Plan-driven procurement, inventory management, and invoicing
close the feedback loop between demand and supply – and improve
fill rates and customer satisfaction through increased
replenishment speed, delivery confirmation, and invoice accuracy.
• Manufacturing execution – SAP SCM supports all production
processes, including engineer-to-order, configure-to-order, make-
to-order, and make-to-stock. It also generates optimized
production schedules that take into account real-time material and
capacity constraints. By integrating manufacturing with other
supply chain processes, SAP SCM enables a rapid, flexible
approach to responding to engineering changes and customer
requirements.
• Order promising – Based on the global available-to-promise
(ATP) capability, order promising receives queries from order
management or CRM systems, and determines when a product is
available across a fulfillment network or can be built. It also shows
how much the product will cost, and how long it will take to
deliver. Order promising is the critical link between order
management/CRM systems and supply chain planning systems,
providing a window into product availability.
• Transportation execution – SAP SCM allows distributed
enterprises to manage transportation from a centralized location

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 or from locations throughout business units. Transportation
managers can consolidate orders and optimize shipments from
suppliers to customers – to get maximum efficiency for their
transportation dollars. They can also consider transportation
constraints and costs while ensuring time-definite deliveries. SAP
SCM supports shipment tendering and booking, carrier selection,
freight building, freight cost calculation, shipment cost settlement,
document printing, and international trade management, such as
denied-party list screening and embargo lists.
• Warehouse management – Warehouse management reconciles
open purchase orders with incoming shipments, supports a put-
away system that remembers where goods are stored, and
optimizes employee picking assignments. Warehouse management
also supports warehousing tasks such as labeling, kitting, and
deferred handling.

7.4 COLLOBORATION

To meet pressure to reduce costs while increasing innovation challenges,

you may do business in regions and countries where costs are lower,

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develop and maintain relationships with global suppliers, or outsource
nonstrategic activities to suppliers.

To do so, you must foster collaborative relationships with suppliers,

outsource manufacturers, and customers.

SAP Supply Network Collaboration, included in SAP SCM, helps you

connect to and collaborate with:

• Suppliers – Give them easy and seamless access to supply chain

information to facilitate your ability to synchronize supply with
demand.
• Customers – Provide broad capabilities for replenishment,
including min/max-based vendor managed inventory (VMI) and
for exclusion of promotions and transport load building.
• Contract manufacturers – Provide easy, seamless access to supply
chain information by extending visibility and collaborative
processes to their manufacturing processes.

Key Collaboration Benefits of SAP Supply Chain Management

With SAP SCM, you can gain these benefits:

• Streamline collaboration with your suppliers, contract

manufacturers, and customers

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 • Significantly decrease procurement, sales, and inventory costs
• Enhance supply chain visibility and increases overall speed,
accuracy, and adaptability of your supply network
• Reduce inventory levels while managing variations in supply and
demand.
• Improve communications and reduces errors and processing costs

8. SAP SUPPLY CHAIN MANAGEMENT: BUSINESS

BENEFITS:

SAP SCM can help you transform a traditional linear supply chain into
an adaptive network with the following benefits:

• Faster response to changes in supply and demand – With

increased visibility into the supply chain and adaptive supply chain
networks, you can be more responsive. You can sense and respond
quickly to changes and quickly capitalize on new opportunities.
• Increased customer satisfaction – By offering a common
information framework that supports communication and
collaboration, SAP SCM enables you to better adapt to and meet
customer demands.
• Compliance with regulatory requirements – You can track and
monitor compliance in areas such as environment, health, and
safety.
• Improved cash flow – Information transparency and real-time
business intelligence can lead to shorter cash-to-cash cycle times.

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 Reduced inventory levels and increased inventory turns across the
network can lower overall costs.
• Higher margins – With SAP SCM, you can lower operational
expenses with more timely planning for procurement,
manufacturing, and transportation. Better order, product, and
execution tracking can lead to improvements in performance and
quality – and lower costs. You can also improve margins through
better coordination with business partners.
• Greater synchronization with business priorities – Tight
connections with trading partners keep your supply chain aligned
with current business strategies and priorities, improving your
organization's overall performance and achievement of goals.

BIBLIOGRAPHY

REFERENCES:

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 1. Cooper, M.C., Lambert, D.M., & Pagh, J. (1997) Supply Chain
Management: More Than a New Name for Logistics. The
International Journal of Logistics Management Vol 8, Iss 1, pp 1–
14
2. Haag, S., Cummings, M., McCubbrey, D., Pinsonneault, A., &
Donovan, R. (2006), Management Information Systems For the
Information Age (3rd Canadian Ed.), Canada: McGraw Hill
RyersonISBN 0-072-81947-2
3. Lavassani, M. K., Movahedi B., Kumar V. (2008b) HISTORICAL
DEVELOPMENTS IN THEORIES OF SUPPLY CHAIN
MANAGEMENT: THE CASE OF B2B E-MARKETPLACES.
Administrative Science Association of Canada (ASAC), 2008,
Halifax, Canada.
4. Mentzer, J.T. et al. (2001): Defining Supply Chain Management,
in: Journal of Business Logistics, Vol. 22, No. 2, 2001, pp. 1–25
5. Simchi-Levi D.,Kaminsky P., Simchi-levi E. (2007), Designing and
Managing the Supply Chain, third edition, Mcgraw Hill

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• www://findarticles.com
• www.wikipedia.com
• www.ask.com

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