De Leon, Gabrielle B.

INDE107
BSIE - 4

Supply Chain Management

Understanding Supply Chain:

Supply Chain Management – Optimizes a product's creation and flow from raw material
sourcing to production, logistics, and delivery to the final customer. It includes supply,
development, demand, sales, and operations planning and management.

Porter’s Value Chain - A useful strategic management tool. It works by breaking an

organization's activities down into strategically relevant pieces so that you can see a fuller picture
of the cost drivers and sources of differentiation and then make changes appropriately.

Supply Chain Management Drivers

1. Production—What products does the market want? How much of which products should
be produced and by when? This activity includes creating master production schedules
considering plant capacities, workload balancing, quality control, and equipment
maintenance.
2. Inventory—What inventory should be stocked at each stage in a supply chain? How
much inventory should be held as raw materials, semifinished, or finished goods? The
primary purpose of the list is to act as a buffer against uncertainty in the supply chain.
However, holding a stock can be expensive, so what are the optimal inventory levels and
reorder points?
3. Location—Where should facilities for production and inventory storage be located?
Where are the most cost-efficient places for the production and storage of inventory?
Should existing facilities be used or new ones built? Once these decisions are made, they
determine the possible paths for the product to flow through for delivery to the final
consumer.
4. Transportation—How should inventory be moved from one supply chain location to
another? Air-freight and truck delivery are generally fast and reliable but expensive.
Shipping by sea or rail is much less costly but usually involves longer transit times and
more uncertainty. This uncertainty must be compensated for by stocking higher levels of
inventory. When is it better to use which mode of transportation?
5. Information—How much data should be collected, and how much information should be
shared? Timely and accurate information holds the promise of better coordination and
better decision-making. With good news, people can make effective decisions about what
to produce, how much, where to locate inventory, and how best to transport it.

Purchasing Organization in the Enterprise

Centralized Purchasing – Centralized purchasing, also known as procurement, is a system

in which one department manages purchasing goods and services for the entire organization.
The purchasing department is usually located in the organization's headquarters, where it
handles the purchasing for all the firm branches.
De Leon, Gabrielle B. INDE107
BSIE - 4

Decentralized Purchasing - It refers to purchasing materials independently from all

departments and branches to fulfill their needs. Such purchasing occurs when departments
and units purchase separately and individually. Under decentralized purchasing, no one
purchasing manager has the right to purchase materials for all departments and divisions. A
decentralized purchasing system can overcome the defects of centralized purchasing.
Decentralized purchasing helps to buy the materials immediately in an urgent situation.

Purchase Costs - Purchase Cost means the total cost for the item(s) or service purchased,
including taxes, shipping costs and other fees, and contingencies.

Supplier Appraisal - An assessment of a supplier’s suitability and capability to supply

specific goods or services before awarding a contract. Delivery, quantity, price, and all other
factors must be embodied in an agreement.

Procurement Strategies

Analyzing the Supply Chain Market - Supply chain analysis is the process of evaluating
every stage of a supply chain starting from the time the business acquires raw materials or
supplies from its suppliers to the delivery of final products to the customers. The purpose of
the analysis is to determine which part of the supply chain can be improved or shortened to
deliver the product more quickly and efficiently to the customers. 

Spend Management - It is a set of practices that ensure organizations make procurement and
sourcing decisions in the interests of both the bottom line and company efficiency. Spend
management is about maximizing value from company spending while decreasing costs,
mitigating financial risk, and improving supplier relationships.

Spend Analysis - The process of identifying, gathering, cleansing, grouping, categorizing,

and analyzing your organization's spending data. This is done with the goal of decreasing
procurement costs and improving efficiencies by increasing visibility and transparency.

Supply Chain Model -It represents a conscious attempt to bring order into a supply chain to
achieve certain business objectives, such as the lowest supply cost, on-time delivery, and an
ability to cope with disruption.

E-Procurement - Electronic procurement, also known as e-procurement or supplier

exchange, is the process of requisitioning, ordering, and purchasing goods and services
online. It is a business-to-business process.