Introduction to

Supply Chain Management

 What Is a Supply Chain?
Flow of products and services from:
– Raw materials manufacturers
– Intermediate products manufacturers
– End product manufacturers
– Wholesalers and distributors and
– Retailers
• Connected by transportation and storage
activities
• Integrated through information, planning, and
integration activities
• Cost and service levels
 What Is Supply Chain Management?

• 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.
 SCM Definition
Material Flow

Converter
Supplier Retailer
Distributor

Source
Converter Consumers
Distributor End-User
Supplier

Value-Added Services

Funds/Demand Flow

Information Flow

Reuse/Maintenance/After Sales Service Flow

The SCM Network
 Key Observations
• Every facility that impact costs need to be considered
• Efficiency and cost-effectiveness throughout the
system is required
– System level approach
• Multiple levels of activities
– Strategic – Tactical – Operational
The Development Chain
 Global Apparel Value Chain
Tracing back the dress you are wearing
 Evolution of Supply Chain Management

Electronic
SCM(ESCM)

SCM
Formation/
Extensions

JIT, TQM, BPR,

Alliances

Inventory Management/Cost
Optimization

Traditional Mass Manufacturing

1950s 1960s 1970s 1980s 1990s 2000s Beyond

 Electronic Supply Chain
Management(ESCM)
Integration of IT with SCM

Advantages

•Cost Saving
•Reduction in inventory levels
•Reduction in procurement costs
•Reduction in cycle time

Issues related to ESCM

•Security issues
•Changes to existing business processes
 Steps for Implementation of ESCM
1) Understand and evaluate the level of integration within the organization
2) Determine the number of suppliers who have a direct influence over the
products or services that are delivered to the customers , across the entire
supply chain
3) Divide suppliers into different categories : first tier, second tier , and so on
4) Define the customer base in term of sales , profitability, size etc.
5) Improve the information infrastructure within the organization to
accommodate ESCM requirements
6) Constitute a team with representation from various functions within the
organization and representatives from suppliers and customers to plan and
carry out the implementation
7) Identify leaders which are capable of guiding the implementation process
competently
 Complexity: The Magnitude
• Indian companies spend more than 1 trillion INR in supply-
related activities (10-15% of Gross Domestic Product)
– Transportation 58%
– Inventory 38%
– Management 4%
• The grocery industry could save 30 billion INR(10% of
operating cost) by using effective logistics strategies
• A typical box of cereal spends 104 days getting from
factory to supermarket.
• A typical new car spends 15 days traveling from the
factory to the dealership.