A.

Course Code-Title:C-CBME1-Operations Management and Total Quality Management

B. Module No.6-Lesson 6-Supply Chain Management
C. Time frame: 3 hours (1 week)

Overview
Supply chains are the lifeblood of any business organization. They connect suppliers, producers,
and final customers in a network that is essential to the creation and delivery of goods and services.
Managing the supply chain is the process of planning, implementing, and controlling supply chain
operations. Moreover, the basic components are strategy, procurement, supply management,
demand management, and logistics. The goal of supply chain is to match supply to demand as
effectively and efficiently as possible. Specifically, after completion of this lesson, the students will
have a thorough understanding about the following:
● Meaning of supply chain management
● Trends in supply chain management
● Risk management and resiliency
● Complexities related to global supply chains
● Ethics and the supply chain
● Strategic responsibilities

Desired Learning Outcomes

1. Define supply chain management and identify its functions and activities that are involved in
the operations of the organization.
2. Explain the current trends in supply chain management.
3. Identify and discuss the main supply chain risks and what businesses can do to minimize those
risks.
4. Describe some of the complexities related to global supply chains.
5. Show how ethical issues in the supply chain as well as companies can avoid ethical problems.
 Content/Discussion
Supply chain management is the strategic coordination of business functions within a business
organization and throughout its supply chain for the purpose of integrating supply and demand
management. Supply chain managers are people at various levels of the organization who are
responsible for managing supply and demand both within and across business organizations. They
are involved with planning and coordinating activities that include sourcing and procurement of
materials, transformation activities, and logistics.

Supply Chain- is the sequence of organizations-their facilities, functions, and activities-that are
involved in producing and delivering a product or service. The sequence begins with basic suppliers
of raw materials and extends all the way to the final customer. Facilities include warehouses, factories,
processing centers, distribution centers, retail outlets, and offices. Functions and activities include
forecasting, purchasing, inventory management, information management, quality assurance,
scheduling, production, distribution, delivery, and customer service.
Supply chains are sometimes referred to as value chains, a term that reflects the concept that value
is added as goods and services progress through the chain. Supply or value chains typically comprise
separate business organizations, moreover, it has two components for each organization: a supply
component and a demand component. The supply component starts at the beginning of the chain
and ends with the internal operations of the organization. The demand component of the chain
starts at the point where the organization’s output is delivered to its immediate customer and ends
with the final customer in the chain. The demand chain is the sales and distribution portion of the
value chain. The length of each component depends on where a particular organization is in the chain,
the closer the organization is to the final customer, the shorter its demand component and the longer
its supply component.

Key aspects of supply chain management:

1. Determining the appropriate level of outsourcing
2. Managing procurement
D-M-M-M-B 3. Managing suppliers

4. Managing customer relationship

5. Being able to quickly identify problems and respond to them.
• Trends in supply chain management
1. Measuring supply chain ROI enables managers to incorporate economics into outsourcing
and other decisions, giving them a rational basis for managing their supply chains.

2. Greening the supply chain is generating interest for a variety of reasons, including
corporate responsibility, regulations, and public pressure. This may involve redesigning
products and services, reducing packaging, near-sourcing to reduce pollution from
transportation, choosing “green” suppliers, managing returns, and implementing end-of-life
programs, particularly for appliances and electronic equipment.

3. Reevaluating outsourcing ·Companies are taking a second look at outsourcing, especially

global suppliers. Business organizations outsource for a variety of reasons. Often decisions to
outsource have been based on lower prices resulting from lower labor costs. Potential
benefits include:
a. Ability to focus on core strengths
b. Converting fixed costs to variable costs A-C-F

c. Freeing up capital to devote to other needs

S-T-E
d. Shifting some risks to suppliers
e. Taking advantage of supplier expertise
f. Ease of expansion outside the home country

4. Integrating IT produces real-time data that can enhance strategic planning and help
businesses to control costs, measure quality and productivity, respond quickly to problems,
and improve supply chain operations. This is why ERP systems are so important for supply
chain management.

5. Being agile · Being agile means that a supply chain is flexible enough to respond quickly to
unpredictable changes or circumstances, such as supplier production or quality issues,
weather disruptions, changing demand (volume of demand or customer preferences),
transporting issues, and political issues.
As a result of these current and possible future trends, organizations are likely to give serious
thought to reconfiguring their supply chains to reduce risks, improve flow, increase profits,
and generally increase customer satisfaction.
• Risk Management and Resiliency
Risk management 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. Risk avoidance may mean
not dealing with suppliers in a certain area. Risk reduction can mean replacing unreliable suppliers,
and Risk sharing can mean contractual arrangements with supply chain partners that spread the
risk. Resiliency is the ability of a business to recover from an event that negatively impacts the supply
chain. Recovery is a function of the severity of the impact and the plans that are in place to cope with
the event. Businesses can reduce, but not eliminate the need for resiliency by managing risks.
The first step in risk management is to identify potential risk. Supply chain risks fall into several
categories. One is disruptions, Which can come from natural disasters such as fires, flooding,
hurricanes and the like that either disrupt shipping or that affect suppliers directly or indirectly. Other
disruptions can occur as a result of supplier issues such as labor strife, production problems, and
issues with suppliers including bankruptcy. Another source of risk is quality issues, which can
disrupt supplies and may lead to product recalls, liability claims, and negative publicity. Still another
risk is the potential for suppliers divulging sensitive information to competitors that weakens a
competitive advantage.

Key elements of successful risk management:

1. Know your suppliers • Mapping the supply chain can be helpful in grasping the scope of the
supply chain, this might also lead to the desirability of simplifying the supply chain.
2. Provide supply chain visibility • Supply chain visibility means that a major trading partner
can connect to any part of its supply chain to access data in real time on inventory levels,
shipment status, and similar key information.
3. Development event-response capability • Event-response capability is the ability to detect
and respond to unplanned events such as delayed shipment or a warehouse running low on a
certain item.
• Complexities related to global supply chains
As businesses recognize the strategic importance of effective supply chain management, they are also
discovering that global supply chains have additional complexities that were either negligible or
nonexistent in domestic operations. These complexities include:
1. Language and cultural differences
2. Currency fluctuations
3. Increased transportation costs and lead items
4. Increased need for trust and cooperation among supply chain partners

Furthermore, managers must be able to identify and analyze factors that differ from country to
country, which can affect the success of the supply chain, including the following:
1. Local capabilities
2. Financial
3. Communication
4. Transportation infrastructures
5. Government, environmental, regulatory issues, and political issues.

These and other factors have made risk management an important aspect of global supply chain
management. To compensate for this, some firms have increased the amount of inventory at various
points in their supply chains, thereby losing some of the benefits of global sourcing. Still other risks
can involve intellectual rights issues, contract compliance issues, competitive pressure, forecasting
errors, and inventory management.

• Ethics and supply chain

There are many examples of unethical behavior involving supply chains. They include bribing
government or company officials to secure permits of favorable status: ignoring health, safety,
environmental standards, violating basic rights of workers (e.g. substandard wages, forced
labor, child labor), mislabeling country of origin, and selling goods abroad that are banned at
home. Energy companies should develop an ethical supply chain code to guide behavior. A code
should cover behaviors that involve customers, supplier, contract negotiation, recruiting, and the
environmental issues.

A major risk of unethical behavior is that when such behavior is exposed in the media, consumers
tend to blame the company or brand in the supply chain associated with the ethical infractions that
were actually committed by legally independent companies in the supply chain. Unfortunately, many
companies lack the ability to quickly contact most or all of the companies in their supply chain, and
communicate with suppliers on critical issues of ethics and compliance. With global manufacturing
and distribution, supply chain scrutiny should include all supply chain activities from purchasing,
manufacturing, assembly, and transportation, to service and repair operations, and eventually to
proper disposal of products at the end of their useful life.

• Strategic responsibilities
Generally speaking, corporate management responsibilities have legal, economic, and ethical
aspects. 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.
Economic responsibilities include supplying products and services to meet demand as efficiently as
possible. Ethical responsibilities include conducting business in ways that are consistent with the
moral standards of society. More specific areas of responsibility relate to strategy, that includes the
following:
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 location 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. Capacity planning: Assessing long-term capacity needs, including when and how much will
be needed and the degree of flexibility to incorporate.
5. Strategic partnership: partnership choices, level of partnering, and degree of formality.
6. Distribution strategy: Deciding whether to use centralized or decentralized distribution and
deciding whether to use the organization’s own facilities and equipment for distribution.
7. Uncertainty and risk reduction: Identifying potential sources of risk and deciding the
amount of risk that is acceptable.
Reference for further readings
Create (2019) Operations Management with Total Quality Management, McGraw Hill
Education
Cachon, Gerard and Terwiesch, Christian (2017) Operations Management, New York, USA:
McGraw Hill Companies, Inc.
Create (2016) Operations Management. New York, USA: McGraw Hill Education Companies
Inc.
Create (2016) Production Operations Management. New York, USA: McGraw Hill
Education Companies, Inc.
Serrano, Angelita C/ (2016) Unlimited books Library Services and publishing, Inc.

Online Source
⮚ Mahfouz,S.S.A(2019).TQM practices and organizational performance in the manufacturing
sector in Jordan: The mediating role of HRM practices and innovation. Journal of Management
and Operational Research,1(22).