SUPPLY CHAIN

What Is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods

and services and includes all processes that transform raw materials
into final products. It involves the active streamlining of a business's
supply-side activities to maximize customer value and gain a
competitive advantage in the marketplace.

SCM represents an effort by suppliers to develop and implement

supply chains that are as efficient and economical as
possible. Supply chains cover everything from production to product
development to the information systems needed to direct these
undertakings.

FLOWS IN SUPPLY CHAIN

Material Flow
Material flow includes a smooth flow of an item from the producer to the
consumer. This is possible through various warehouses among
distributors, dealers and retailers.
The main challenge we face is in ensuring that the material flows as
inventory quickly without any stoppage through different points in the
chain. The quicker it moves, the better it is for the enterprise, as it
minimizes the cash cycle.
The item can also flow from the consumer to the producer for any kind of
repairs, or exchange for an end of life material. Finally, completed goods
flow from customers to their consumers through different agencies. A
process known as 3PL is in place in this scenario. There is also an internal
flow within the customer company.

Information Flow
Information/data flow comprises the request for quotation, purchase
order, monthly schedules, engineering change requests, quality
complaints and reports on supplier performance from customer side to
the supplier.
From the producer’s side to the consumer’s side, the information flow
consists of the presentation of the company, offer, confirmation of
purchase order, reports on action taken on deviation, dispatch details,
report on inventory, invoices, etc.
For a successful supply chain, regular interaction is necessary between
the producer and the consumer. In many instances, we can see that
other partners like distributors, dealers, retailers, logistic service
providers participate in the information network.
In addition to this, several departments at the producer and consumer
side are also a part of the information loop. Here we need to note that
the internal information flow with the customer for in-house manufacture
is different.

Money Flow
On the basis of the invoice raised by the producer, the clients examine
the order for correctness. If the claims are correct, money flows from the
clients to the respective producer. Flow of money is also observed from
the producer side to the clients in the form of debit notes.
In short, to achieve an efficient and effective supply chain, it is essential
to manage all three flows properly with minimal efforts. It is a difficult
task for a supply chain manager to identify which information is critical
for decision-making. Therefore, he or she would prefer to have the
visibility of all flows on the click of a button.

OBJECTIVE OF SUPPLY CHAIN IN OPERATION MANAGEMENT

1. Solving supplier’s problems and beyond his level.

2. Customer service performance improvement.

3. Reduction of pre & post production inventory.

4. Minimizing variance by means of activities like standardization, variety reduction,

etc.

5. Minimum total cost of operation & procurement.

6. Product Quantity control.

7. Achieving maximum efficiency in using labour, capital & plant through the
company.

8. Flexible planning and control procedures

DECISION PHASES OF SUPPLY CHAIN

Supply Chain Strategy

In this phase, decision is taken by the management mostly. The decision
to be made considers the sections like long term prediction and involves
price of goods that are very expensive if it goes wrong. It is very
important to study the market conditions at this stage.
These decisions consider the prevailing and future conditions of the
market. They comprise the structural layout of supply chain. After the
layout is prepared, the tasks and duties of each is laid out.
All the strategic decisions are taken by the higher authority or the senior
management. These decisions include deciding manufacturing the
material, factory location, which should be easy for transporters to load
material and to dispatch at their mentioned location, location of
warehouses for storage of completed product or goods and many more.

Supply Chain Planning

Supply chain planning should be done according to the demand and
supply view. In order to understand customers’ demands, a market
research should be done. The second thing to consider is awareness and
updated information about the competitors and strategies used by them
to satisfy their customer demands and requirements. As we know,
different markets have different demands and should be dealt with a
different approach.
This phase includes it all, starting from predicting the market demand to
which market will be provided the finished goods to which plant is
planned in this stage. All the participants or employees involved with the
company should make efforts to make the entire process as flexible as
they can. A supply chain design phase is considered successful if it
performs well in short-term planning.

Supply Chain Operations

The third and last decision phase consists of the various functional
decisions that are to be made instantly within minutes, hours or days.
The objective behind this decisional phase is minimizing uncertainty and
performance optimization. Starting from handling the customer order to
supplying the customer with that product, everything is included in this
phase.
For example, imagine a customer demanding an item manufactured by
your company. Initially, the marketing department is responsible for
taking the order and forwarding it to production department and
inventory department. The production department then responds to the
customer demand by sending the demanded item to the warehouse
through a proper medium and the distributor sends it to the customer
within a time frame. All the departments engaged in this process need to
work with an aim of improving the performance and minimizing
uncertainty.

PROCESS VIEW OF SUPPLY CHAIN

Cycle view

The processes in a supply chain are divided into a series of cycles, each performed at
the interface between two successive stages of a supply chain.
All supply chain processes can be broken down into the following four process
cycles:

1. Customer order cycle

2. Replenishment cycle
3. Manufacturing cycle
4. Procurement cycle
Each cycle occurs at the interface between two successive stages of the supply chain.
Not every supply chain will have all four cycles separated. For example, a grocery
supply chain in which a retailer stock finished goods inventories and places
replenishment orders, which a distributor is likely to have all four cycles separated.

Dell, in contrast, sells directly to customers, thus bypassing the retailer and distributor.
A cycle view of a supply chain is very useful when considering operational decisions
because it clearly specifies the rules and responsibilities of each member of the
supply chain. The detailed process description of a supply chain in the cycle view
forces a supply chain designer to consider the infrastructure required to support
these processes.

The cycle view of a supply chain is useful, for example, when setting up information
systems to support supply chain operations, as process ownership and objectives are
clearly defined.

Customer order cycle

The customer order cycle occurs at the customer/retailer interface and includes all
processes directly involved in receiving and filling the customer’s order.
Typically, the customer initiates this cycle at a retailer site and the cycle primarily
involves filling customer demand. The retailer’s interaction with the customer starts
when the customer arrives or contact is initiated and ends when the
customer receives the order.

Replenishment cycle
The replenishment cycle occurs at the retailer/distributor interface and includes all
processes involved in replenishing retailer inventory. It is initiated when a retailer
places an order to replenish inventories to meet future demand.

A replenishment cycle may be triggered at a supermarket that is running out of stock

of detergent or at a mail order firm that is low in stock of a particular shirt.

The replenishment cycle is similar to the customer order cycle except that the retailer
is now the customer. The objective of the replenishment cycle is to replenish
inventories at the retailer at minimum cost while providing high product availability.

Manufacturing cycle
The manufacturing cycle typically occurs at the distributor/manufacturer (or
retailer/manufacturer) interface and includes all processes involved in replenishing
distributor (or retailer) inventory.

Procurement cycle
The procurement cycle occurs at the manufacturer/supplier interface
and includes all processes necessary to ensure that materials are
available for manufacturing to occur according to schedule.

During the procurement cycle, the manufacturer orders components

from suppliers that replenish the component inventories. The
relationship is quite similar to that between a distributor and
manufacturer with one significant difference.
 PUSH AND PULL VIEW OF SUPPLY CHAIN

 Pull Supply Chain – Under pull supply chain, the process of
manufacturing and supplying is driven by actual customer demand. In this
type of supply chain logistics, inventory is acquired on a need-basis. The
benefits of this type of planning include less wastage in the case of lower
demand. The problem, however, is that the company might not have
enough inventory to meet rising demands due to unforeseen factors. For
example, an auto repair shop that only orders parts that it needs. In this
case, the business waits until it gets an order to procure the parts
required for the repair.

 Push Supply Chain – Under push supply chain, the logistics are
driven by long-term projections of customer demand. For example, at the
end of the summer season, clothing brands start to manufacture more
warm clothes. This type of planning becomes valuable to companies as it
helps plan them for events in the future and be prepared when winter
comes. This gives the companies meet their needs in time and also gives
them time to figure out other logistics like where to store the inventory.

SUPPLY CHIN MACRO PROCESS IN A FIRM

CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management (CRM) embodies those processes that take place
between an enterprise and its customers downstream in the supply chain. The goal of the
CRM macro process is to generate customer demand and facilitate the transmission and
tracking of orders.

Marketing: Marketing processes center on such issues as which customers to target, how to
target them, what products to offer, how to price products, and then 7 how to manage the
actual campaigns targeting customers.

Sell: The sell process focuses on making an actual sale to a customer. It includes providing
the sales force with the information needed to make the sale and then executing the actual
sale.

Order Management: The process of managing customer orders as they flow through an
enterprise is important both for the customer to track an order and for the enterprise to
plan and execute order fulfillment.
Call/Service center: A call/service center is often the primary point of contact between a
company and its customers. The center helps customers place orders, suggests products,
solves problems, and provides information on order status.

Supply Chain Management

Supply chain management, according to the definition set forth earlier, is focused on
operations internal to the enterprise and includes all processes involved in planning for and
fulfilling a customer order. The specific SCM processes are as follows:

Strategic Planning: The goal of this process is to plan resource availability across the supply
chain network. Strategic planning decision focus on where to locate plants and warehouses,
what type of facilities to build, and what markets to serve from each facility.

Demand Planning: This set of processes helps users forecast customer demand and make
demand-management decisions on such critical activities as promotion planning.

Supply Planning: This is the real heart of SCM--and in many respects, it is the heart of
extended supply chain management. The supply planning process takes as input the
demand forecasts generated by demand planning and the resources made available by
strategic planning.

Field service: After the product has been delivered to the customer, it eventually must be
serviced. Service processes focus on setting inventory levels for spare parts as well as
scheduling service calls.

Supplier Relationship Management

SRM includes those processes focused on the interaction between the enterprise and
suppliers that are upstream in the supply chain. There is a natural fit between SRM and SCM
macro processes, as supplier constraints are a critical component of SCM planning. The
major SRM processes include:

Design Collaboration: The goal of this process is to jointly design (with suppliers) products
that have positive supply chain characteristics such as ease of manufacturability and
commonality across several end products. Examples of design collaboration include the
sharing of engineering change orders between a manufacturer and its suppliers and the
creation of bill of material cross-reference databases.

Source: The source process qualifies suppliers and helps in supplier selection, contract
management, and supplier evaluation. By carefully analyzing how much it spends with its
different suppliers, companies can often find significant improvement opportunities.
Buy: The buy process executes the actual procurement of material from suppliers, and
includes the creation, management, and approval of purchase orders. Buy software
automates the procurement process and helps decrease processing cost and time.

Negotiate: Negotiations with suppliers involve many steps, starting with a request for quote
(RFQ). The negotiate process also may include the design and execution of auctions.