SCM

Supply chain management is the integration of the activities that procure materials and services,
transform them into intermediate goods and the final product, and deliver them to customers

• Supply chain management is the systematic and the strategic coordination management for
supplying goods and products required by the end customer.
• Supply chain management activities cover almost everything such as from products to its
development, sourcing, logistics and even information system also
• The main objective of SCM is creating net value, building a competitive infrastructure,
synchronize the goods supply, measures the performance globally and leveraging worldwide
logistics etc.
• SCM plays a vital role in organizational activities and an essential element to operational
efficiency which can be applied to customer satisfaction and company’s success.
• It is just like the backbone of an organization which manages the critical issues of the
business organization such as rapid growth of multinational corporations, global expansion
and environmental concerns which indirectly or dramatically affects the corporate strategy.
Importance

• Reduces inventory costs

• Increases cash flow
• Provides better medium for information sharing between partners
• Improves customer satisfaction as well as service
• Maintains better trust between partners
• Provides efficient manufacturing strategy
• Improves process integration
• Improves quality and gives higher profit margin
• SCM offers various tools and techniques that help business organization to diagnose the
problems and also provide solutions of these disruptions around the business environment.
• It plays an important role in moving goods more quickly to their destinations.
• The most important thing in today’s business is managing competition among partners and
in order to win this competition SCM helps business organization in a very efficient manner
• It streamlines and mobilizes manual business processes making real time information
available at the click of a button.
elements

1. Transportation vendors 5. Accounts payable and receivable

2. Credit and cash transfers 6. Warehousing and inventory
3. Suppliers 7. Order fulfillment
4. Distributors 8. Sharing customer, forecasting, and
production information

Supply Chain Strategies

1. Negotiating with many suppliers

 Cost-Based Price Model – supplier opens books to purchaser

 Market-Based Price Model – price based on published, auction, or indexed price
 Competitive Bidding - used for infrequent purchases but may make establishing long-term
relationships difficult
2. Long-term partnering with few suppliers
Vendor evaluation
 Find potential vendors
 Determine the likelihood of them becoming good suppliers
Vendor Development
 Training
 Engineering and production help
 Establish policies and procedures
3. Virtual companies that use suppliers on an as needed basis
 Rely on a variety of supplier relationships to provide services on demand
 Fluid organizational boundaries that allow the creation of unique enterprises to meet
changing market demands
 Exceptionally lean performance,
 low capital investment, flexibility, and speed
MODELS OF SUPPLY CHAINS
supply chains models depend on the nature of the company.
The following four models are very common:
1. Integrated make-to-stock,
2. Build-to-order,
3. Continuous replenishment, and
4. Channel assembly.
INTEGRATED MAKE- BUILD-TO-ORDER CONTINUOUS CHANNEL ASSEMBLY
TO-STOCK MODEL MODEL REPLENISHMENT MODEL
Focus : on tracking Dell Computer is best MODEL >A slight modification
customer demand in known for its > constantly replenish to the build-to-order
real time, so that the application of the the inventory by model is the channel
production process build-to-order model. working closely with assembly supply chain
can restock the > In this model the suppliers and/or model.
finished goods company begins intermediaries. > In this model, the
inventory efficiently. assembly of the > However, if the parts of the product
> This integration is customer’s order replenishment process are gathered and
often achieved almost immediately involves many assembled as the
through use of an after receipt of the shipments, the cost product moves
information system order. may be too high, through the
that is fully integrated > This model requires causing the supply distribution channel.
(an enterprise careful management chain to collapse. > This is accomplished
system). of the inventories and > Therefore, very tight through strategic
> Through application delivery of needed integration is needed alliances with third-
of such a system, the supplies along the between the order- party logistics (3PL)
organization can supply chain. fulfillment process > These services
receive real-time > One of the primary and the production sometimes involve
demand information benefits of this type of process. either physical
that can be used to supply chain model is > Real-time assembly of a product
develop and modify the perception that information about at a 3PL facility or the
production plans and each customer is demand changes is collection of finished
schedules receiving a required in order for components for
> This information is personalized product. the production delivery to the
passed further down > In addition, the process to maintain customer.
the supply chain to customer is receiving the desired
 the procurement it rapidly. This type of
function(suppliers), so supply chain model
that the modified supports the concept
production plans and of mass
schedules can be customization.
supported by input
materials.
> An example is
Starbucks Coffee.
Starbucks uses several
distribution channels,
not only selling coffee
drinks to consumers,
but also selling beans
and ground coffee to
businesses such as
airlines, supermarkets,
department stores,
and ice-cream makers.
> Sales are also done
through direct mail,
including the Internet.
> Starbucks is
successfully
integrating all sources
of demand and
matching it with the
supply by using
Oracle’s automated
information system
for manufacturing
(called GEMMS).
> The system does
distribution planning,
manufacturing
scheduling, and
inventory control
(using MRP).
TYPES OF SUPPLY CHAIN
Raw supply chain
>Very basic type
>found in small scale
industries
>loosely organized
>not enough cooperation
between units of the
organization.
replenishment >For example, a
schedules and levels. computer company
> This model is most would have items
applicable to such as the monitor
environments with shipped directly from
stable demand its vendor to a 3PL
patterns, as is usually facility, such as at
the case with Federal Express and
distribution of UPS.
prescription > The customer’s
medicine. computer order would
> The model requires therefore come
intermediaries when together only when all
large systems are items were placed on
involved. a vehicle for delivery.
> A channel assembly
may have low or zero
inventories, and it is
popular in the
computer technology
industry
Ripe supply chain Internal supply chain
>This supply chain is little >This type is the most
advanced, better organized, common type
>better relations with > implemented ERP
suppliers and some amount of (Enterprise resource
information flowing, planning),
> but no other supply chain > well-organized from the
initiative appearing. inside
> This type of chain exists in >but not connected to the

Extended supply chain
This type of supply chain is
internally optimized , and
extend well beyond the
company boundaries
> problem is that this type only
concentrate on partial
integration.
>This type is very common,
especially in the automotive
sector
food sector.
Self monitored supply chain
This type of supply chain is
company centric not customer
centric
> brings all partners together,
it can achieve a considerable
speed to market, but it is not
because of total optimization.
suppliers or distributors In
their fold
Outsourced supply chain
This type of supply chain let
the logistic partner take care
of everything (inbound,
outbound logistics
relationship, information
flow…. Etc.
>This type is very rare and can
be found in some of the export
houses.

HOSPITAL SUPPLY CHAIN-PHASES

1. Supply chain strategy /decisions
SCM Requires many decisions related to flow of information product and funds. Company
decides what the chain configuration will be, how resources will be allocated and what
process each stage will perform. Supply chain configuration should support a firm’s
strategic objectives and increase the supply chain surplus Decisions are 2 categories,
1)frequency of each decision & 2) time frame during which decision has impact
Decisions made by companies include:
a. Whether to outsource or perform in-house
b. Location of facilities
c. Capabilities of production
d. Warehousing facilities
e. Products to be manufactured
f. Mode of transportation
g. Type of information system to be utilised
2. Supply chain planning
• Companies define a set of operating policies
• Starts with a forecast for the coming year of demand in different markets.
Decisions in this phase include:
• Which market to be served from which locations
• Subcontracting of manufacturing
• Replenishment and inventory policies
• Policies regarding backup locations incase of stock out
• Planning establishes parameters within which a supply chain will function over a specified
period of time.
3. Supply chain operations
Goal is to handle incoming customer orders in the best possible manner. operational
decisions are in the short term hence there is less uncertainty about demand information
goal is to exploit the reduction of uncertainty and optimise performance with constraints of
phase 1 and 2 .
Decisions in this phase include:

 firm allocates inventory ,production to individual orders

 set dates that order can be fulfilled
  generate pick up list at warehouse
 allocates order to particular shipment mode
 hey delivery schedule of trucks
 place replenishment orders

PROCESS VIEW OF A SUPPLY CHAIN

Two different ways to view the process performed in a supply chain are:
1. Cycle view
2. Push-pull view

2. Push – pull view:

a) Push process(speculative) – execution is in anticipation of customer order, demand is not
known but forecasted
 The logistics are driven by long-term projections of customer demand.
 Example, at the end of the summer season, clothing brands start to manufacture
more warm clothes.
 This type of planning becomes valuable to companies as it helps plan them for
events in the future and be prepared when winter comes.
 Companies meet their needs in time and also gives them time to figure out other
logistics like where to store the inventory.
b) Pull process(reactive) – execution is initiated in response to customer order, demand is
known with certainty
 In this type of supply chain logistics, inventory is acquired on a need-basis.
 The benefits of this type of planning include less wastage in the case of lower demand.
 The problem, is low inventory to meet rising demands due to unforeseen factors.
 For example, an auto repair shop that only orders parts that it needs. In this case, the
business waits until it gets an order to procure the parts required for the repair.

Why Healthcare Needs Value-Based Supply Chain Management

• The ongoing shift away from fee-for-service into the value-based reimbursement realm
should intensify healthcare providers’ focus on supply chain management.
• Cutting healthcare costs has become a mantra for many hospitals and physician practices,
especially as payers start to tie claims reimbursement amounts to quality and cost
performance. 
• Healthcare supply chain management involves obtaining resources, managing supplies, and
delivering goods and services to providers and patients.
• The challenge lies in efficiently integrating suppliers, logistics, different hospital
departments to ensure optimum utilization of resources.
• The ultimate aim is to transform a sick patient to a healthy person at a reasonable cost,
in the shortest possible time and with superior patient satisfaction
• Consolidation of demands from all the departments and proper flow of information
between the departments and suppliers can remove a lot of bottlenecks and result in
reduced cost of all the parties involved.
• Having an established supply chain mechanism helps in systematic ordering and
consolidation of the order quantities.
• Forward contracts can be entered into which would result in lowering of medicine and
supply cost.
• The risk of stock-out also reduces since, inventory records and lead time for individual data
can be accommodated in the central SCM database.
• One of the biggest problems with medicines and supplies faced by hospitals is the risk of
expiration.
• Centralized procurement also yields significant power on the hands of the hospitals and
they can enter into contracts with manufacturers whereby they can return the unused
medicines when they near their usable life.
• This translates into direct waste reduction and reflects hugely in the profit margin
• Worldwide surveys proves that hospitals that have implemented SCM successfully have
recorded a 50% inventory reduction, 40% increase in on-time delivery, doubling of
inventory returns coupled with nine-fold reduction in out of stock rates
• Vendor Managed Inventory and Group Purchasing Organization take away the burden of
frequent ordering and bargaining off the hospitals
• Vendor rationalization helps in building trust between the buyer and the supplier, which
paves the way for collaborative resource planning approach.
• The computerized inventory control system enables automatic order placing, thus removing
chance of a stock out due to human error or a possible delay by the overseer.
• The “Glass Pipe Concept” in Supply Chain Management is the order of the days to come,
where there will be complete visibility of information from supplier to manufacturer
to distribution centre to transporter to customer.

GLOBAL Vs DOMESTIC SUPPLY CHAIN

• Why do we need GSCM (GLOBAL SUPPLY CHAIN MANAGEMENT)?
GLOBAL MARKET TECHNOLOGICAL GLOBAL COST POLITICAL AND
FORCES FORCES FACTORS ECONOMIC
– Foreign – Knowledge – Availability of FACTORS
competition in local diffusion across skilled/unskilled – Trade protection
markets national boundaries, labor at lower cost mechanisms:
– Growth in foreign hence need for – Integrated supplier • Tariffs, Quotas,
demand technology sharing infrastructure (as Voluntary export
 – Global presence to be competitive suppliers become restrictions, Local
as a defensive tool – Global location of more involved in content
– Companies forced R&D facilities design) requirements,
to develop and --Close to production – Capital intensive Environmental
enhance leading- (as product cycles facilities like tax regulations,
edge technologies get shorter) breaks, price breaks Government
and products. etc. procurement
policies (discount
for local)
– Exchange rate
fluctuations and
operating flexibility

GLOBAL Vs DOMESTIC SUPPLY CHAIN

• SIMILARITIES:
• Conceptual logistics framework of
linking supply sources, manufacturing
plants, warehouses and customers is
the same in both
• Both involve management of
movement and storage of products
• Both require functional processes of
inventory management, warehousing,
order processing, carrier selection,
procurement band vendor payment.
• MAJOR DIFFERENCES
• Distance
• Language
• Cultural differences
• Currency exchange fluctuations
• Political stability
• Differences in infrastructures
• Environmental regulations
• Laws regarding labeling(esp language)
• Customer regulations(import and
export)
• Transport regulations
• Paper work

Closed Loop Supply Chain The Reverse Supply Chain

• Consists of a forward movement at the
beginning of its life cycle
• Retrieval and reprocessing at the end of
its life (Reverse Supply Chain).
• Creating a secondary life cycle and
repeating steps; n number of times.
• Addresses the issues that businesses
face due to
– Public scrutiny
– Government regulation
– Life cycle and total costs due to
internalization
of disposal costs.
• Reduces costs due to substitution of
secondary resources in forward supply
chains.
In the context of the Closed Loop Supply Chain
this is
the component that involves the retrieval and
reprocessing at the end of the product life
cycle.
l Reverse Supply Chain is made up of the
following
components
– Product Acquisition
– Reverse Logistics
– Inspection and disposition
– Reconditioning
– Distribution and Sales
Freight Costs
l Population centers far dispersed from each
other and relatively small by world standards.
l Reconditioning or remanufacturing using
secondary resources would result in material
costs that are approx 80% lower than primary
 resources.

Change from a linear to a closed loop mindset.

The most significant supply chain trend affecting business due to the following reasons.
• Environmental Concerns- (Primary Factor)
• Geographical Location of the country and the costs due to the tyranny of
distance- (Secondary Factor)
• Challenges
• Pool of Supply Chain Managers
• Conditioned towards a linear approach
• Change needs to be driven by senior management;
• dearth of supply chain personnel representation at this level.