SUPPLY CHAIN MANAGEMENT

• Supply chain- a sequence of

organization-their facilities,
functions, and activities-that are
involved in producing and
delivering a product or service.
What is supply chain management ?
• the management of flow of products and
services, which begins from the origin of
products and ends at the products consumption.

• Movement and storage of raw materials that are

involved in work in process, inventory and fully
furnished goods.
Logistics
-The movement of goods, services, cash and information in a
supply chain.

•Supply chain:
- Supply component(beginning of the chain, ends with the
internal operations of the organization)
- Demand component(starts at the point where the
organizations output delivered to its immediate customer
and ends with the final customer of the chain
•Demand chain
-Is the sales and distribution of the sales
• 3 types flow management:
-service flow
-information flow
-financial flow
SUPPLY CHAIN FUNDAMENTALS
SUPPLY CHAIN FUNDAMENTALS
 Risk Management and Resiliency
• Involves identifying risks, assessing their
likelihood of occurring and their potential
impact and then developing strategies for
addressing those risks.
• Strategies can pertain to:
risk avoidance , risk reduction, and risk sharing
with supply chain partners.
ERP AND SUPPLY CHAIN MANAGEMENT

• Implementation of ERP involves establishing

operating systems and operating performance
measurements to enable them to manage
business operations and meet business financial
objectives.
• ERP software also plays a key role in
centralizing transaction data.
Enterprise resource planning (ERP)

Enterprise resource planning (ERP) is

business process management software that
allows an organization to use a system of
integrated applications to manage the business
and automate many back office functions
related to technology, services and human
resources.
15.6 Small Business

Three Aspects of Supply Chain

Management

* Inventory management

* Reducing risk

* International trade
Important steps to reduce risk:

* Use only reliable suppliers

* Determine which suppliers are critical

* Measure supplier performance

* Recognize warning signs of supplier issues

* Have plans to manage supply chains

problems
15.7 Management Responsibilities
Three Corporate Management Responsibilities

1. Legal responsibilities- include being knowledgeable

about laws and regulations of the countries where supply
chains exist, obeying the laws, and operating to conform to
regulations.
2. Economic Responsibilities- include supplying products
and services to meet demand as efficiently as possible.
3. Ethical Responsibilities- include conducting business
in ways that are consistent with the moral standards of
society.
Strategic Responsibilities

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 locations 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. Products and Services- making decisions on new product and services selection
and design.
5. Capacity Planning- assessing long-term capacity needs, including when and how
much will be needed and the degree of flexibility to incorporate.
6. Strategic Partnership- partnership choices, level of partnering, and degree of
formality.
7. Distribution Strategy- deciding whether to use centralized or decentralized
distribution and deciding whether to use the organization’s own facilities and
equipment for distribution or to use third-party logistics providers.
8. Uncertainty and Risk Reduction- identifying potential sources of risk and
deciding the amount of risk that is acceptable.
 Key Tactical and Operational Responsibilities

Tactical Responsibilities:
Forecasting: prepare and evaluate forecasts.
Sourcing: choose suppliers and some make-or-buy decisions.
Operations Planning: coordinate the external supply chain and internal operations.
Managing Inventory: decide where in the supply chain to store the various types of
inventory (raw materials, semi-finished goods, finished goods)
Transportation Planning: match capacity with demand
Collaborating: work with supply chain partners to coordinate plans.

Operational Responsibilities
Scheduling: short-term scheduling of operations and distribution.
Receiving: management of inbound deliveries from suppliers.
Transforming: conversion of inputs into outputs.
Order Fulfilling: linking production resources and/or inventory to specific customer
orders.
Managing Inventory: maintenance and replenishment activities.
Shipping: management of outbound deliveries to distribution centers and/or customers.
Information Sharing: exchange of information with supply chain partners.
Controlling: control of quality, inventory, and other key variables and implementing
corrective action, including variation reduction, when necessary.
15.8 PROCUREMENT
Purchasing Interfaces

• Operations- constitute the main source of requests for purchased materials,

and close cooperation between these units and the purchasing department is
vital if quality, quantity, and delivery goals are to be met.
• Accounting- is responsible for handling payments to suppliers and must be
notified promptly when goods are received in order to take advantage of
possible discounts.
• Design and Engineering- usually prepare material specifications, which must
be communicated to purchasing.
• Receiving- checks incoming shipments of purchased items to determine
whether quality, quantity, and timing objectives have been met, and it moves
the goods to temporary storage.
• Suppliers or vendors- work closely with purchasing to learn what materials
will be purchased and what kind of specifications will be required in terms of
quality, quantity, and deliveries.
The Purchasing Cycle

Purchasing Cycle
Series of steps that begin with a request for purchase and end with notification
of shipment received in satisfactory condition.

Steps in the Cycle

1. Purchasing receives the requisition- the requisition includes (a) a
description of the item or material desired, (b) the quantity and quality
necessary, © desired delivery dates, and (d) who is requesting the purchased.
2. Purchasing selects a supplier- the purchasing department must identify
suppliers who have the capacity of supplying the desired goods.
3. Purchasing places the order with a vendor- if the order involves a large
expenditure, particularly for a one-time purchased of equipment.
4. Monitoring Orders- routine follow-up on orders, especially large orders or
those with lengthy lead times, allows the purchasing department to project
potential delays and rely that the information to the operating units.
5. Receiving Orders- receiving must check incoming shipments for quality
and quantity.
• Centralized Purchasing
Purchasing is handled by one special
department.

• Decentralized Purchasing
Individual departments or separate locations
handle their own purchasing requirements.
Ethics in Purchasing
Guidelines for Ethical Behavior in Purchasing
1. Perceived Impropriety
2. Conflicts of Interest
3. Issues of Influence
4. Responsibilities to your Employer
5. Supplier and Customer Relationships
6. Sustainability and Social Responsibility
7. Confidential and Proprietary Information
8. Reciprocity
9. Applicable Laws, Regulations, and Trade
Agreements
10. Professional Competence.
15.9 E-BUSINESS

• E-Business
The use of electronic technology to
facilitate business transactions.
15.10 SUPPLIER MANAGEMENT
Choosing Suppliers

• Vendor Analysis
Evaluating the sources of supply in terms of
price, quality, reputation, and service.
Choosing a supplier

Factors:
1. Quality and Quality assurance
2. Flexibility
3. Location
4. Price
5. Product or Service changes
6. Reputation and financial stability
7. Lead times and on-time delivery
8. Other accounts
Supplier Relationship Management
Strategic considerations
• Supplier forums
• Supplier code of conduct

• Strategic Partnering
Two or more business organizations that
have complementary products or services
join so that each may realize a strategic
benefit.
Inventory management
• INVENTORY VELOCITY. The speed at which
goods moves through a supply chain.
• BULLWHIP EFFECT. Inventory oscillations
become progressively larger looking backward
through the supply chain.
• VENDOR-MANAGED INVENTORY (VMI).
Vendors monitor goods and replenish retail
inventories when supplies are low.
Order fulfillment
• ENGINEERING-TO-ORDER (ETO). With this approach,
products are designed and built according to customer
specification.
• MAKE-TO-ORDER (MTO). With this approach, a standard
product designed is used, but production of the final
product is linked to the final customers specification.
• ASSEMBLE-TO-ORDER (ATO). Products are assembled to
customer specifications from stock of standard and modular
components.
• MAKE-TO-STOCK. Production is based on forecast, and
products are sold to the customer from finished goods stock.
LOGISTICS
MOVEMENT WITHIN A FACILITY
1. From incoming vehicles to receiving.
2. From receiving to storage
3. From storage to the point of use.
4. From one work center to the next or to
temporary storage.
5. From last operation to final storage.
6. From storage to packing/shipping.
7. From shipping to outgoing vehicles.
• TRAFFIC MANAGEMENT. Overseeing the shipment
of incoming and outgoing goods.
• RADIO FREQUENCY IDENTIFICATION (RFID). A
technology that uses radio waves to identify objects,
such as goods in supply chain.
• 3-PL. the outsourcing of logistics management.
CREATING AN EFFECTIVE SUPPLY
CHAIN
• STRATEGIC SOURCING. Analyzing the procurement
process to lower costs by reducing waste and non-
value-added activities, increase profits, reduce risks,
and improve supplier performance.
The SCOR (SUPPLY CHAIN OPERATIONS
REFERENCE) model provides steps that can
be used to create an effective supply chain:
1. PLAN
2. SOURCE
3. MAKE
4. DELIVER
5. MANAGE RETURNS
• EFFECTIVE COMMUNICATION. Effective supply chain
communication requires integrated technology and
standardized ways and means of communicating among
partners.
• INFORMATION VELOCITY. The speed at which
information is communicated in a supply chain.
• PERFORMANCE METRICS. Performance metrics are
necessary to confirm that the supply chain is functioning
as expected, or that there are problems that must be
addressed.
• REVERSE LOGISTICS. The process of transporting
returned items.
• GATEKEEPING. Screening returned goods to prevent
incorrect acceptance of goods.
• AVOIDANCE. Finding ways to minimize the number of
items that are returned.