SUPPLY CHAIN
MANAGEMENT,
A STRATEGIC TOOL FOR ACHIEVING
BUSINESS GOAL
Presented by:
Isaac Owusu
MBA, MILT
Programme Coordinator, Logistics and Supply Chain Management
Pentecost University College
SUPPLY CHAIN MANAGEMENT, A STRATEGIC TOOL FOR ACHIEVING
BUSINESS GOAL
What are Business Goals?
What are Business Goals?
Business goals describe what a company expects to
accomplish over a specific period of time
What are Business Goals?
Tomorrow
Today
Goals are used to help a business grow and achieve its objectives
help the business describe what it wants to accomplish in future
Increase Revenue
achieve sales targets/quota
launch new product or service
Increase Profit
increase utilization rate
reduce production cost
Have Happy Customers
reduce or eliminate lead time variability
provide quick response
Support the Community
Sponsor charitable events
Build Amazing Product (s)
Increase feature set
Apply new design
Traditionally business activities such as
procurement, production and distribution were
managed independently with little coordinated
effort.
Inventory was used to buffer between these
activities, resulting in large stocks of
inventories being held and duplication of effort
and stockholdings.
Organizations focused more keenly on the
effectiveness of the activities as separate
functions.
Activities such as:
purchasing
production
warehousing
marketing and
transportation
were decoupled into functions ignoring the fact
that these activities are dependent upon each
other.
Now the picture is different
Organizations are moving away from this
traditional model towards:
Improved coordination and
integration of activities
In order to provide their markets with higher
service levels at reduced costs.
Organizations are now competing as supply
chains and NOT as individual firms
This brings about synergy-
Where two or more organizations interact or
cooperate to produce a combined effect greater
than the sum of their separate effects.
Where
2+2 =5
In simple terms, a supply chain consists of all parties
involved directly or indirectly in fulfilling a
customer’s request
These parties include the manufacturer suppliers,
transporters, warehouse providers, retailers, and
customers (Chopra and Meindl, 2004).
A supply chain is a “network of facilities and activities
that perform the functions of product development,
procurement of material from suppliers, the movement of
materials between facilities, the manufacturing of
products, the distribution of finished goods to customers,
and after-market support for sustainment” (Mabert and
Venkataraman 1998)
It includes all functions involved in receiving and filling
a customer’s request such as:
New product development,
Marketing,
Operations/Production,
Distribution
Finance,
Customer service
Illustration: Detergent Supply Chain
Timber Paper Manu- Tenneco
Company facturer Packaging
P&G (Manu- Distributor Wal-Mart Customer
facturer) ’s DC Store
Chemical Plastic
Manufacturer Producer
Supply chains are dynamic and involve the constant
flow of:
information,
product, and
funds between different stages
These are referred to as Supply Chain flows
Supply chain flows provide the linkages between the various
stages of the supply chain
In our example,
Wal-Mart provides the product, as well as pricing and availability
information, to the customer.
The customer transfers funds to Wal-Mart.
Wal-Mart conveys point-of-sales data as well as replenishment orders to
the warehouse or distributor, who transfers the replenishment order via
trucks back to the store.
Wal-Mart transfers funds to the distributor after the replenishment. The
distributor also provides pricing information and sends delivery
schedules to Wal-Mart.
Wal-Mart may send back packaging material to be recycled. Similar
information, material, and fund flows take place across the entire supply
chain.
The Concept has been variously defined
Simply, SCM is the management of the chain of
suppliers.
It is the management of upstream and
downstream relationships in order to deliver
superior customer value at less cost to the
supply chain as a whole” (Christopher 1998).
SCM is the oversight of materials,
information, and finances as they move in a
process from supplier to manufacturer to
wholesaler to retailer to consumer.
It involves coordinating and integrating these
flows both within and among companies.
This coordination and control of processes
results in:
smooth materials and goods flows in and out
of the organization
clean, well-designed work processes
sufficient production capacity for the demand
This coordination and control of processes
results in:
sufficient goods and service to satisfy the
customers
sufficient logistical resources for distribution
appropriate quality systems in place.
Supply chain network design is the practice of
locating and rationalizing the facilities within the
supply chain,
Determining the capacity of these facilities
Determining how to source demand through the
network and selecting modes of transportation in a
manner that provides the required level of customer
service at the lowest cost
Different businesses need different supply chains. Hence different Network Designs
A company’s supply chain needs to support its business strategy in order to achieve
Strategic Fit
Strategic Fit is when a company’s Supply Chain strategy and its competitive
(business) strategy have aligned goals
But different business strategies have different performance requirements (cost, lead
SC Networks are therefore designed around the chains’ competitive
strategic goals which are defined by competitive priorities such as:
cost,
lead
times,
reliability,
convenience,
variety,
The ultimate goal of a strategic network design project
is to gain competitive advantages and secure long-term
success by providing the right structure for the supply
chain.
Supply Chain Decisions
Decisions for supply chain management have been classified into
two broad categories - strategic and operational.
Strategic decisions are made typically over a longer time horizon.
These are closely linked to the corporate and guide supply chain
policies from a design perspective.
Supply Chain Decisions
Operational decisions are short term, and focus on activities over
a day-to-day basis.
The effort in these type of decisions is to effectively and efficiently
manage the product flow in the "strategically" planned supply
chain.
Supply Chain Decisions
There are four major decision areas in supply chain
management namely:
location
production
inventory
transportation (distribution)
Supply Chain Decisions
Inventory decisions - These refer to the means by which
inventories are managed.
Inventories exist at every stage of the supply chain as either raw
materials, semi-finished or finished goods.
Inventory Decisions-Rough cut Methods
The emphasis of the rough cut models is the development of inventory control
policies, considering several levels together.
These models are referred to as "multi-level" or "multi-echelon" inventory control
models.
Eg: the "OPTIMIZER", one of the most complex models to date - to manage IBM's
spare parts inventory.
Inventory Decisions-Rough cut Methods
The models have lot of criticism:
They ignore the production side of the supply chain. Their starting point in most
cases is a finished goods stockpile, and policies are given to manage these effectively
They assume that each site receives re-supply from only one higher level site
but can distribute to several lower levels
They largely focused on the inventory system only, and ignore possible trade
offs with other logistic activities
THANK YOU
