MODULE 1

Introduction to Supply Chain

Management
Learning Objectives:

 Introduce Supply Chain Management;

 Define Supply Chain Management; and
 Distinguish Operations vs Supply Chain Processes.

What is Supply Chain Management (SCM)

Supply chain management (SCM) is the active management of supply chain activities to
maximize customer value and achieve a sustainable competitive advantage. It represents a
conscious effort by the supply chain firms to develop and run supply chains in the most effective
& efficient ways possible. Supply chain activities cover everything from product development,
sourcing, production, and logistics, as well as the information systems needed to coordinate
these activities.

Supply Chain Management (SCM) is the systemic, strategic coordination of

the traditional business functions within a particular company and across businesses within the
supply chain for the purpose of improving the long-term performance of the individual
companies and the supply chain as a whole. A supply chain consists of all parties involved,
directly or indirectly in fulfilling a customer request. The supply chain not only includes the
manufacturer and the supplier but also transporters, warehouses, retailers, and customers
themselves. Within each organization, such as a manufacturer, the supply chain includes all the
functions involved in receiving and filling a customer request. A typical supply chain may involve
a variety of stages.

Categorizing Supply Chain Processes

The Top-level of this model has five different processes which are also known as
component Supply Chain Management- Plan, Source, Make, Deliver and Return. Let’s deep
dive into each component:
 Plan: Planning is imperative to control inventory and manufacturing processes.
Companies always try to match supply with aggregate demand by developing a course
of action using analytics. To procure what is planned is Source. To plan what is ample
for production is Make and to attain significant services levels by delivering on time with
quoted lead time is Deliver. Furthermore, it is advisable to be alert with a vigilant eye on
demand variations along the value-chain to avoid bullwhip effects. For instance, firms
predicts market demand using analytical tools and plan the required raw materials using
certain planning tools such as Materials Requirement Planning.
 Source: Sourcing is identifying vendors who will produce goods and services to meet
planned/actual demand in the most economical and efficient way. There are certain
standards that suppliers need to fulfill, thus assuring the firm to deliver quality goods to
the client. Sourcing can be perishable as well as non-perishable products. In the case of
perishable products, it is mandated to have minimum supplier’s lead time which will
support a minimal inventory approach. On the other hand, in the case of non-perishable
products, the suppliers quoted lead time must be less than the number of days by when
inventory reaches zero, thus leading to no loss revenue.
 Make: As per the preference of the customer, the firm will perform all activities related to
the transformation of raw materials to the final product. Activities such as assembling,
testing packing happen at this elements of supply Chain Management. Feedback from
consumer creates a Win-Win situation for both (manufacturer and end-user) as for firm it
is improving their production operations continuously.
 Deliver: another most important component of supply chain management is contributing
to direct/indirect integration with the consumers. It has significant contribution to surge
the brand image of the firm. Finished goods, and services, as demanded by consumers,
have to meet expectations through the company’s delivery channels and logistics
services. To have a seamless delivery, the firm utilize various freights.
 Return: it is a post-delivery customer support process that is associated with all kinds of
returned products. It is also known as “Reverse Logistics” it is one of the most important
components of supply chain management to minimize potential deterioration of
relationship with customers. On the flip side, this process provides the same course of
action for the firm towards its suppliers. The firm returns the low quality, defective,
expired or excessive raw materials to the suppliers/vendors.
The historical development of SCM:

 The Manufacturing Strategy Paradigm was developed in the late 1970s and early 1980s
by researchers at the Harvard Business School;
 Lean manufacturing, Just-In-Time and Total Quality Management became popular by
the Japanese in the 1980s;
 Standardized service quality and productivity became popular by McDonalds;
 Total Quality Management and Quality Certification (e.g., ISO 9000) developed in the
late 1980s and 1990s by Deming, Juran and Crosby;
 Business Process Reengineering (revolutionary instead of evolutionary changes) was
necessary in the economic recession in the 1990s and was described by Michael
Hammer. Taylor (scientific management) and Frank and Lilian Gilbreth were also
important in this field;
 Six Sigma Quality tools were extended in the 1990s and can be used in many different
organisations;
 Supply Chain Management is a total system approach to managing the flow of
information, materials and services from material suppliers through factories and
warehouses to the end customer. Mass customization is the ability to produce a unique
product exactly to a particular customer’s requirements;
 Electronic Commerce became popular in the late 1990s because of the rise of the
Internet and the use of it as an essential element of business activity;
 Service science was a direct response to the growth of services;
 Business analytics is the use of current business data to solve business problems using
mathematical analysis.

While there’s no denying supply chain logistics are always evolving, it’s safe to say 2020
caused disruptions that most consumer goods brands aren’t accustomed to seeing. Now, in
2021, there are new challenges companies must tackle to remain successful within the
competitive eCommerce space. With that said, a shift to online retail, increase in consumer
confidence, pent-up demand, and amassed savings all add up to a tremendous opportunity for
digitally native brands. 
Supply Chains in 2021

Companies who survived the volatility of 2020 likely did so by way of getting lean, selling
through inventory, and focusing on working capital. At times, the last year’s challenges have no
doubt felt unwieldy. Suppliers and manufacturers from all over the world have largely been put
to the test, encountering massive stock shortages, fulfillment delays, and lengthy backorders on
common inventory items.

We expect that supply chain challenges will persist, to some degree, for the remainder of
the year — driven by increased consumer spend on products, sustained appetite for the
convenience of buying online, and catch up required from last year’s bottlenecks. And yet, in
spite of 2021’s fragile supply chain network, companies are acclimating to these changes by
addressing inefficiencies head on and seeking to work smarter, not harder. 

6 supply chain challenges in 2021

The COVID-19 pandemic continues to disrupt the supply chain ecosystem with new and
unforeseen barriers to both productivity and profitability. The following are 2021’s biggest supply
chain challenges faced by product-based businesses from all over the globe.

1. Material scarcity

Insufficient inputs have been a concern since the pandemic began, due to an abrupt rise
in consumer demand like never before. Even now, companies and suppliers alike are struggling
to meet this demand in the midst of limited availability for many parts and materials. In speaking
to growth stage brands in our network, we’ve encountered everything from furniture
manufacturers facing foam shortages to bike manufacturers losing payment terms due to maxed
out component suppliers. In fact, a recent survey conducted by the Institute for Supply
Management (ISM) revealed ‘record-long lead times, wide-scale shortages of critical basic
materials, rising commodities prices, and difficulties in transporting products across industries.’

In light of these scarce inputs, a brand’s ability to sustain its growth is highly dependent
on working capital to weather downtime and ramp up for peak seasons. 
2. Increasing freight prices

Contrary to initial expectations, the need for container shipping has increased
considerably throughout the pandemic. With worldwide lockdown measures inciting a surge in
eCommerce sales, the response has been a greater import demand for raw materials and
manufactured consumer goods (a large percentage of which are moved in shipping containers).
And since this demand was much more substantial than anticipated, it was met with insufficient
shipping capacity and an unprecedented shortage of empty or available containers. 

As it often does, this scarcity has led to a spike in pricing. In the last year, freight rates
from China to the West Coast have jumped by 240%.

3. Difficult demand forecasting

Demand forecasting in the middle of a global pandemic has added a new layer of
complexity to many companies’ supply chain management. The onset of COVID-19 essentially
shattered the forecasts for countless retailers and suppliers of consumer goods/services,
leaving them without a guide as to how much inventory to stock or manufacture at any given
time. The challenge, then, has come from trying to improve predictions for customer demand,
while in many ways having to rely on gut instinct rather than data-driven research. 

In this situation, supply chain managers are encouraged to abandon their bias, pursue new data
sets for forecast models, and continually refine their results for the greatest accuracy.

4. Port congestion

Port congestion caused by the pandemic remains one of the top challenges for the
world’s supply chains, seeing as port owners, carriers, and shippers are collectively still
scrambling for a viable solution to this problem. Congestion occurs whenever a ship arrives at a
port but cannot load (or unload) because that station is already at capacity. Although the
loading/unloading process typically goes according to plan, labor shortages and social
distancing associated with the pandemic has notably steered things off course, creating major
bottlenecks at a number of busy global docks.
 Due to this congestion and the backlog it has created, a myriad of companies are unable
to get their goods out the door on time — which means carriers are also unable to adhere to
their specified delivery commitments.

5. Changing consumer attitudes

Consumer attitudes and behaviors have changed in some big ways during the
pandemic, as well, like lowering the threshold for delivery times and raising the requirements for
a positive customer experience. The challenge comes in having an agile supply chain that can
harness the power of automations to optimize fulfillment and handle accelerated demand with
ease. An excellent example of this supply chain flexibility comes from a multichannel order
fulfillment services and inventory management software.

“The pandemic drove eCommerce demand to an all-time high. While a rise in order
volume was a plus for merchants, new infrastructural needs and supply chain disruptions were
major points of concern and the subsequent focus for our clients. Strategically, one of our
biggest takeaways was the relationship management with customers through shared product
forecasting, a defensive tactic that served to prevent negative experiences and maintain brand
integrity.”

6. Digital transformation

When it comes to supply chain operations, digital transformation and IoT can be a mixed

blessing. Still, there are several technologies with potential to enhance the way we approach the
traditional supply chain, including: artificial intelligence, drones and robots, electric vehicles, and
on-demand delivery. But even though these systems/services are intended to make ecommerce
processes more efficient and cost-effective in the long run, the challenge lies in implementing
them across a company’s existing supply chain.