Qs. 1 What is the benefit of understanding the value adding from supply chain Perspective?

Ans.1. Value-Added Functions and Differentiation of Supply Chains. The purpose of supply
chains is to add value to production and distribution. Depending upon the markets and the value
chains they are servicing, supply chains can be differentiated according to criteria such as costs,
time reliability and risk. Efficient logistics contributes to added-value in four major interrelated
ways:

Production costs. Derived from the improved efficiency of manufacturing with

appropriate shipment size, packaging and inventory levels. Thus, logistics contributes to
the reduction of production costs by streamlining the supply chain.

Location. Logistics adds value by taking better advantage of various locations, implying
access to expanded markets (more customers) and lower distribution costs.

Time. Added value derived from having goods and services available when required
along the supply chain (e.g. lower lead times) with better inventory and transportation
management.

Control. Added value derived from controlling most, if not all, the stages along the
supply chain, from production to distribution. By better synchronizing cycles and lead
times, logistics enables better marketing and demand response, thus anticipating flows
and allocating distribution resources accordingly.

A variety of factors are jointly shaping the configuration of supply chains:

Logistics costs. Considers the full array of costs to make products available to the final
consumer, namely transport, warehousing and transshipment. Supply chain managers are
particularly sensitive to the stability of the cost structure (consistent costs) implying that
routes having cost fluctuations may be discarded in favor to routes of a higher cost, but
with less volatility. Costs are therefore a standard criteria where the cheapest routing
option is sought, as long as the cost structure remains stable as supply chains are unlikely
to be modified if a cost advantage is only temporary. The concept of cost is relative since
its importance is in relation to the value of the cargo being carried. Cost considerations

tend to concern more containerized goods that have a low value, such as commodities
(e.g. paper) than high value goods (e.g. electronics).

Transit time. A factor that is increasingly being considered since it strongly influence
inventory carrying costs and inventory cycle time in supply chain management. So, for
cargo that has a higher value (clothing) or is perishable (reefers) the routing option that is
the fastest and/or shortest will be preferred.

Reliability. Relates to a factor that is mitigated by contemporary supply chain

management practices. For several supply chains, time can be a secondary factor as long
as shipments arrive at the distribution center within an expected time frame. If shipments
are regular and that this reliability remains consistent, it is possible to organize supply
chains accordingly by having more inventory in transit.

Supply chain risk. Relates to a factor that is generally imponderable and generally
involving the level of confidence that the shipment will reach its final destination within
expected costs, time and reliability considerations. In some cases, risk can also involve
potential cargo damage or theft. Low risks routes are obviously preferred over higher risk
routes.

Value-Added Contract Logistics

Nowadays companies provide professional contract logistics services for supply chains
that extend beyond the standard receiving, storing and shipping of products. Value-added
services add efficiencies and cost savings, meaning direct value to your supply chain.
Value added means providing services and processes that extend beyond standard
receiving, storing and shipping of the clients products. Unique partnerships entail a
significant volume and variety of value added services.
The major advantage is that additional services helps in better relationship with suppliers
and taking advantage of additional facilities provided in supply chain systems. It also
reduces risk and lead time and helps in catering better customer service.
Qs.2 Why managing Supply chain is becoming necessary and important in todays
business success.

Ans.2. Supply Chain Management (SCM) is an essential element to operational

efficiency. SCM can be applied to customer satisfaction and company success, as well as
within societal settings, including medical missions; disaster relief operations and other
kinds of emergencies; cultural evolution; and it can help improve quality of life. Because
of the vital role SCM plays within organizations, employers seek employees with an
abundance of SCM skills and knowledge. Supply chain management is critical to
business operations and success for the following reasons:
SCM is Globally Necessary
Basically, the world is one big supply chain. Supply chain management touches major
issues, including the rapid growth of multinational corporations and strategic
partnerships; global expansion and sourcing; fluctuating gas prices and environmental
concerns, each of these issues dramatically affects corporate strategy and bottom line.
Because of these emerging trends, supply chain management is the most critical business
discipline in the world today.
Reasons for SCM in Society
Supply chain management is necessary to the foundation and infrastructure within
societies. SCM within a well-functioning society creates jobs, decreases pollution,
decreases energy use and increases the standard of living. Two examples of the effect of
SCM within societies include: In 2005, Hurricane Katrina flooded New Orleans, LA,
leaving residents without access to food or clean water. As a result, a massive rescue of
the inhabitants had to be made. During the first weekend of the rescue effort, 1.9 million
meals and 6.7 million liters of water were delivered.
A society with a highly developed supply chain infrastructure that includes interstate
highways, a large railroad network, ports and airports is able to trade many goods at low
cost. Business and consumers are able to obtain these goods quickly, resulting in
economic growth.
Reasons for SCM in Business
Clearly, the impact that SCM has on business is significant and exponential. Two of the

main ways SCM affects business include:

Boost customer Service
SCM impacts customer service by making sure the right product assortment and quantity

are delivered in a timely fashion. Additionally, those products must be available in the
location that customers expect. Customers should also receive quality after-sale customer

support.
Improves Bottom Line
SCM has a tremendous impact on the bottom line. Firms value supply chain
managers because they decrease the use of large fixed assets such as plants, warehouses
and transportation vehicles in the supply chain. Also, cash flow is increased because if
delivery of the product can be expedited, profits will also be received quickly.
Supply chain management helps streamline everything from day-to-day product flows to
unexpected natural disasters. With the tools and techniques that SCM offers, youll have
the ability to properly diagnose problems, work around disruptions and determine how to
efficiently move products to those in a crisis situation.
Conclusion
Hence Supply chain in todays business is a critical factor for success and more and more
companies are adopting advanced supply chain to gain greater efficiency and reduce cost.