INTRODUCTION TO

SUPPLY CHAIN
MANAGEMENT
GEZATE GETE (ASST.
PROF)
2019
 Chapter Contents

 Introduction to SCM
 Objectives of SCM
 Evolution of SCM
 Importance of SCM
 Important Elements of SCM
 Role of SCM
INTRODUCTION
A supply chain is the system of organizations, people,
activities, information and resources involved in moving a
product or service from supplier to customer.
 An integrated group of processes to “source,” “make,” and
“deliver” products.
Supply Chain Management (SCM), the management of the
flow of goods and services, involves the movement and storage
of raw materials, of work-in-process inventory, and of finished
goods from point of origin to point of consumption.
 Cont…
Supply Chain Management flows can be divided into three main flows:
 Product flow - which is the movement of goods from a supplier to a
customer, as well as any customer returns or service needs.
 Information flow - which involves transmitting orders and updating the
status of delivery.
 Financial flow- any financial flow within the chain
Supply chain Management encompasses the planning,
implementing, controlling and management of all activities involved in
sourcing and procurement, conversion, and all logistics management
activities.
 Objectives of Supply Chain
Management
 Supply chain management is concerned with the efficient integration of suppliers,
factories, warehouses and stores so that merchandise is produced and distributed:
 In the right quantities
 To the right locations
 At the right time
 In order to
 Minimize total system cost
 Satisfy customer service requirements
 face global competition
 Improve standardization
Evolution of SCM

Six major movements in the evolution in SCM

 Creation Era
 Integration Era
 Globalization Era
 Specialization Era 1
 Specialization Era 2
 SCM 2.0
Creation Era

 The term "supply chain management" was first coined by Keith Oliver
in 1982.
• The concept of a supply chain in management was of great
importance long before, in the early 20 th 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 Japanese
management practices.
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 21 st century with the
expansion of Internet-based collaborative systems.
• This era of supply chain evolution is characterized by both
increasing value added and cost reductions through integration.
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 beyond
national boundaries and into other continents.
Specialization Era 1

 This specialization model creates manufacturing and

distribution networks composed of several individual supply
chain specific to producer to end consumer.
• Supply chain management works as a service.
Specialization Era 2

 There are many function of this era:

 Transportation Management
 Storage and Inventory Management
 Planning Development Management
 Performance Management
SCM 2.0

• SCM 2.0 is a trend in the use of the WWW, that means to

increase creativity, information sharing and collaboration
among users(End Users).
• SCM 2.0 designed to rapidly deliver results with the
quickly manage the future change for continuous flexibility,
value and success.
 Importance of Supply Chain
Management
Firms have discovered value-enhancing and long term benefits
* Who benefits most? Firms with:
 - Large inventories
 - Large number of suppliers
 - Complex products
 - Customers with large purchasing budgets
* General Benefits
 - Lower purchasing/inventory costs, higher quality customer service
 Important Elements of SCM
 Purchasing- Supplier alliances, supplier management,
strategic sourcing
 Operations- Demand management, MRP, ERP, JIT, TQM
 Distribution- Transportation management, customer
relationship management, network design, service response
logistics
 Integration- Coordination/Integration activities, global
integration, performance measurement
 Cont…
 Purchasing:

•Long term relationships

•Supplier management- improved performance through-
-- Supplier evaluation (determining supplier capabilities and
performance)
-- Supplier certification (third party or internal certification
to assure product quality and service compliance)
•Strategic partnerships- successful and trusting, long-term
relationships with top-performing suppliers
 Cont…
Operations:
 Demand management- match demand to available
capacity
 Linking buyers & suppliers via MRP and ERP systems
 UseJIT to improve the “pull” of materials to reduce
inventory levels
 Employ TQM to improve quality compliance among buyers
and suppliers
 Cont…
Distribution:
 Transportation management- tradeoff decisions between cost & timing
of delivery/customer service via trucks, rail, water & air.
 Customer relationship management- strategies to ensure deliveries,
resolve complaints, improve communications, & determine service
requirements.
 Network design- creating distribution networks based on tradeoff
decisions between cost & sophistication of distribution system.
 Cont…
Integration:
 SupplyChain Integration- when supply chain participants work for
common goals, it requires intrafirm functional integration.

 Global Supply Chains- advantages that grow from sourcing from larger
global market e.g., lower cost & higher quality suppliers.

 Supply Chain Performance Measurement- Crucial for firms to know if

procedures are working or not.
 What is the Role of Supply Chain Management?

 The major role of the supply chain management is to assure that

the demand of customers is met with the supply of the products.
It has to be assured that the companies never produce extra or
insufficient products.

 Here we have everything you should know about the supply

chain roles and responsibilities.
 Five Supply Chain Roles and
Responsibilities
1. Increase Customer Service
One of the most important supply chain roles and responsibilities is
to manage the customer service.
The customers should always get what they are looking for. Whether
it is a product, solution to their issues or answers to their questions.
The supply chain management team as to assure that the customer
service platform is accessible 24/7 so the customers will feel
connected to the organization they would like to do business with.
 2. Reduce Production Cost

The first and most important thing managers have to do is to reduce the
production cost of the items. It is done by:
 Introducing advanced machines in the industry.
 Buythe raw materials directly from the source factories or the wholesale
markets.
 Reduce the number of rejected or failed items.
 Increasing the efficiency of the workforce.
 3. Improve Quality of Products

It is a fact that the production cost of the products has to be reduced

but at the same time, the quality of the items has to be enhanced.
It has to be assured that the raw material and manufacturing of the
items are in high-class because only then that customers will be
attracted.

The products have to be durable, reliable and long-lasting.

4. Improve Financial Position
The company has to improve its financial status. It has to be assured that
the customers will return to buy the products once again because they
are satisfied with the previous items. The supply chain management has
to work in such a way that:
 The cash flow of company will increase.
 Amount of fixed assets will decrease.
 The profit leverage will increase.
It will make the customer believe that company is progressing and
showing positive results.
 5. Development of Best Marketing
Strategies
The supply chain management team has to develop the best
marketing strategies for the company to assure that their
products will be present in the best possible way. The
customers often decide whether they would buy a certain item
or not by looking at the advertisements shared on different
platforms.