SUPPLY CHAIN MANAGEMENT

INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

BY: RYNHART L. SIBAYAN

PURCHASING AND SUPPLY MANAGEMENT IS A MAJOR
DETERMINAT OF CORPORATE SURVIVAL AND SUCCESS.

SUPPLY CHAIN PERFORMANCE INFLUENCE NOT ONLY

OPERATIONAL AND FINANCIAL RISK BUT ALSO REPUTATIONAL
RISK.
The global market faces a fierce competition today. The
introduction of products with shorter life cycles and the
heightened expectations of customers have forced business
enterprises to invest in, and focus attention on, their supply
chains. This, together with continuing advances in
communications and transportation technologies (e.g., mobile
communication, internet, and overnight delivery), has
motivated the continuous evolution of the supply chain and of
the techniques to manage it effectively. Recently, the
pressure of the competitive market and new information
technologies has affected the structures of the production
systems, calling for:
• Reduction of time to market
• Higher flexibility of the systems
• Drastic reduction of costs
• Extended quality concept
 WHAT IS SUPPLY CHAIN
MANAGEMENT
Supply Chain
• A supply chain is a system of organisations, people, technology,
activities, information and resources involved in moving a product or
service from supplier to customer.
• A supply chain is a network of retailers, distributors, transporters,
storage facilities, and suppliers that participate in the production, delivery
and sale of a product to the consumer.
• These activities are associated with the flow and transformation of
goods from the raw materials stage to the end user, as well as the
associated information and funds flows.
• Supply chain activities transform natural resources, raw materials and
components into a finished product that is delivered to the end customer.
• In simple terms, a supply chain is the link between a firm or business and
its suppliers and customers
The supply chain, which is also referred to as the logistics
network, consists of suppliers, manufacturing centers,
warehouses, distribution centers, and retail outlets, as well as
raw materials, work-in-process inventory, and finished products
that flow between the facilities.
A supply chain has three key parts:
• ‚ Supply which focuses on the raw materials supplied to
manufacturing, including how, when, and from what
location.
• ‚ Manufacturing which focuses on converting these raw
materials into finished products.
• ‚Distribution which focuses on ensuring that the products
reach the consumers through an organised network of
distributors, warehouses, and retailers.
• A supply chain strategy refers to how the supply chain should operate
in order to compete in the market.
• The supply chain integrates, coordinates and monitors the flow of
materials, information, and funds.
 CHALLENGES AHEAD

1.SUPPLY CHAIN MANAGEMENT

2.MEASUREMENT
3.RISK MANAGEMENT
4.SUSTAINABILITY
5.GROWTH AND INFLUENCE
6.TECHNOLOGY
7.EFFECTIVE CONTRIBUTION TO ORGANIZATIONAL
SUCCESS
 SUPPLY CHAIN MANAGEMENT

 Supply chain management (SCM) is the oversight of materials, information, and finances
distributed from supplier to consumer. The supply chain also includes all the necessary
stops between the supplier and the consumer. Supply chain management involves
coordinating this flow of materials within a company and to the end consumer.
 “Supply chain management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all logistics management
activities”. Importantly, it also includes coordination and collaboration with channel
partners, which can be suppliers, intermediaries, third-party service providers, and
customers. In essence, supply chain management integrates supply and demand
management within and across companies.
 Supply chain management is an integrating function with primary responsibility for linking
major business functions and business processes within and across companies into a
cohesive and high-performing business model. It includes all of the logistics management
activities noted above, as well as manufacturing operations, and it drives coordination of
processes and activities with and across marketing, sales, product design, and finance
and information technology.
 SCM is also called the art of management of providing the right product, at the right time,
right place and at the right cost to the customer
 Supply chain management can be divided into three main flows:
o The Product flow includes moving goods from supplier to consumer, as well as
dealing with customer service needs.
o The Information flow includes order information and delivery status.
o The Financial flow includes payment schedules, credit terms, and additional
arrangements.
 Supply chain management is a set of approaches utilized to efficiently integrate suppliers,
manufacturers, warehouses, and stores, so that merchandise is produced and distributed
at the right quantities, to the right locations, and at the right time, in order to minimize
system-wide costs while satisfying service level requirements.
 Supply chain management (SCM) involves the strategic planning, efficient
implementation, and precise control of supply chain operations to meet
customer demands. It encompasses the entire journey of raw materials, work-
in-process inventory, and finished goods, from their origin to the point of
•Supply chain management (SCM) software is a computer-based program or system created to help

firms manage and optimize their supply chain activities. It offers a collection of integrated tools and

functions that aid in streamlining and coordinating the processes involved in the flow of

commodities, information, and money across the supply chain network.

•Supply chain management software's main goal is to assist organizations in efficiently planning,

executing, monitoring, and controlling the many phases and elements of the supply chain. It

encompasses a variety of functions, such as:

 Planning
 Inventory management
 Sourcing
 Procurement
 Production coordination
 Logistics and transportation
 Warehouse management
 Order management
 Supply Chain Management Roles
•1. Supply Chain Manager: The Supply Chain Manager is pivotal in orchestrating all supply chain activities.
They oversee the entire supply chain, from planning and procurement to production, logistics, and customer service.
Their primary objective is to ensure the seamless flow of products, meeting customer demand while optimizing costs.
This role involves strategic decision-making, setting objectives, and coordinating various teams within the supply
chain.

•2. Demand Planner: Demand Planners are experts in forecasting future customer demand. They analyze
historical sales, data, and market trends and collaborate closely with sales and marketing teams to create accurate
demand forecasts. Their work ensures that companies have the right amount of inventory on hand to meet customer
needs without overstocking or experiencing stockouts.

•3. Inventory Manager: Inventory Managers are responsible for maintaining the right balance of stock levels.
They make critical decisions regarding reorder points, safety stock, and inventory turnover. Their goal is to optimize
inventory management, ensuring products are available when needed while keeping carrying costs in check.

•4. Purchasing Manager: Purchasing Managers are responsible for procuring raw materials, components, and
finished products from suppliers. They negotiate contracts, assess supplier performance, and ensure that procurement is
timely, cost-effective, and aligned with the company's requirements.

•5. Supplier Relationship Manager: Supplier Relationship Managers are focused on building and
maintaining strong relationships with suppliers. They monitor supplier performance, address any issues that arise, and
ensure a consistent supply of materials. Hence, effective communication and collaboration with suppliers are
fundamental in this role.
•6. Production Planner: Production Planners optimize the manufacturing process. They
create production schedules, considering machine capacity, labor availability, and customer
demand. Their primary objective is to ensure efficient production, minimize waste, and adhere
to delivery schedules.

•7. Logistics Manager: Logistics Managers oversee transportation, warehousing, and

distribution processes within the supply chain. They manage the movement of products to
ensure efficient and cost-effective delivery.

•8. Distribution Manager: Distribution Managers are responsible for the final stages of
product delivery. They oversee distribution channels, manage inventory at distribution centers,
and ensure products reach customers safely and on time.

•9. Order Fulfillment Specialist: Order Fulfillment Specialists focus on the accurate
and timely processing of customer orders. Their role is to ensure that orders are picked, packed,
and shipped correctly, contributing to customer satisfaction.

•10. Quality Control Manager: Quality Control Managers maintain product quality
by developing quality control processes, conducting inspections, and implementing measures to
address defects or deviations from quality standards.
•Planning: In the planning stage of supply chain management (SCM),
companies forecast demand, set goals, develop strategies, and create budgets.
•Sourcing: Sourcing is a crucial step in SCM that involves identifying suppliers,
negotiating contracts, managing relationships, and ensuring quality control.
•Manufacturing: The manufacturing phase focuses on transforming raw
materials into finished products through efficient production processes.
•Delivery: This phase involves the transportation and delivery of products or
services to the customers. It includes activities such as order fulfillment, inventory
management, and logistics.
•Returns: Returns refer to the process of handling and managing product returns
from customers. This phase is also known as reverse logistics. Returns can occur
due to various reasons such as product defects, customer dissatisfaction, or
changes in customer requirements. The phase includes activities like product
inspection, refurbishment, disposal, issuance of return authorizations, and
processing of refunds or replacements. Managing returns effectively is crucial for
companies to minimize costs and maintain customer loyalty.
Types and Examples of Supply Chain Models

•Linear Supply Chain Model

•The linear supply chain model follows a sequential flow from suppliers to manufacturers to
distributors and finally to retailers. It is a traditional approach that focuses on efficiency and cost
reduction. In this model, each participant operates independently, with minimal collaboration or
information sharing.
•Networked Supply Chain Model

•The networked supply chain model emphasizes collaboration among multiple partners for shared
benefits. It involves interconnected relationships between various entities involved in the supply
chain. Collaboration is key in this model as participants work together to optimize processes and
achieve mutual goals.
•Hybrid Supply Chain Models

•Hybrid supply chain models combine elements of both linear and networked models for customized
solutions. They offer flexibility by incorporating different approaches based on specific business
requirements.
Challenges in Supply Chain Management
 KEY COMPONENTS

1. Demand Forecasting- This process involves analyzing historical data, market trends, and
customer insight to predict demand.
2. Capacity planning- It involves determining the optimal level of resources, including production
capacity and warehouse, to meet anticipated demand.
3. Inventory management- It aims to strike a balance between supply and demand, ensuring that
there is enough inventory to meet customer needs without incurring excessive carrying costs.
4. Risk Management- It involves identifying potentials disruptions, such as natural disasters,
supplier bankruptcies, or transportation delays, and developing contingency plans to mitigate
their impact.
5. Customer Management- The management of the customer interface, including all aspects of
order processing and fulfillment.
6. Supply Management- The identification, acquisition, positioning, and management of resources
and capabilities that a firm needs to attain its strategic objectives.
7. Logistics Management- Management of the movement and storage of materials at lowest cost
while still meeting customers’ requirements.
 OBJECTIVES OF SUPPLY CHAIN

 A supply chain is a global network of organisations that cooperate to improve the flows
of material and information between suppliers and customers at the lowest cost and the
highest speed. The final objective of a supply chain is customer satisfaction.

 The supply chain management takes into consideration every facility that has an impact
on cost and plays a role in making the product match to customer requirements: from
supplier and manufacturing facilities through warehouses and distribution centres to
retailers and stores.

 The main purpose of the supply chain is to maximise overall value generated. Value is
the difference between what the cost supply chain incurs and the worth end product
has to the customer. Value of the commercial supply chain is correlated with its
profitability generally known as supply chain surplus.

 Supply chain surplus can be defined as the total profit shared by all the stages and
intermediaries of a supply chain. The greater the supply chain surplus the more
successful is supply chain. But, Supply chain success is measured by its overall
surplus not by the profit at each stage.
 The supply chain management has to be efficient and cost-effective across
the entire system; from transportation and distribution to inventories of raw
materials, work in process, and finished goods, are to be minimized. The
emphasis is not on simply to minimise transportation cost or reducing
inventories but, rather, on taking a systems approach to supply chain
management.

 The objectives of supply chain management can be listed below:

o enhancing customer service
o expanding sales revenue
o reducing inventory cost
o improving on-time delivery
o reducing order to delivery cycle time
o reducing lead time
o reducing transportation cost
o reducing warehouse cost
o reducing supplier base
o expanding depth of distribution