Supply Chain Management

1. SCM – Introduction
2. SCM – Historical development
3. Supply Chain Management – Advantages >
4. Supply Chain Management – Goals
5. SCM – Problem addressed
6. SCM – Activities/functions
7. SCM – Process
8. SCM – Process Flow
9. SCM – Flow Components
10. SCM – Decision Phases
11. SCM – Performance Measure
12. SCM – Strategic Sourcing
13. SCM – Make Vs Buy
14. SCM – Networks
15. SCM – Inventory Management
16. SCM – Pricing and Revenue
17. SCM – Integration
18. SCM – Business process integration
19. Differences in Push and Pull System
20. Push and Pull System
21. Demand – Driven Strategies
22. SCM – Role of IT
23. SCM – Agile and Reverse
24. Customs Clearance – Meaning, Scope and Documentation

1. SCM – Introduction
1) The concept of Supply Chain Management (SCM) if based on two core ideas:
2) Physical Flows
3) Information Flows
4) Definition
5) Why SCM strategy is important for an Organization

2. SCM – Historical development

1) Creation era
The term supply chain management was first coined by Keith Oliver in 1982.
2) Integration era
3) Globalization era
 4) Specialization era (phase I): outsourced manufacturing and distribution
5) Specialization era (phase II): supply chain management as a service
6) Supply chain management 2.0 (SCM2.0)

3. Supply Chain Management – Advantages

 Key benefits of supply chain management - 9
1) Develops better customer relationship and service.
2) Creates better delivery mechanisms for products and services in demand with minimum delay.
3) Improvises productivity and business functions.
4) Minimizes warehouse and transportation costs.
5) Minimizes direct and indirect costs.
6) Assists in achieving shipping of right products to the right place at the right time.
7) Enhances inventory management, supporting the successful execution of just-in-time stock
models.
8) Assists companies in adapting to the challenges of globalization, economic upheaval, expanding
consumer expectations, and related differences.
9) Assists companies in minimizing waste, driving out costs, and achieving efficiencies throughout
the supply chain process.

4. Supply Chain Management – Goals - 6

 The important goals of supply chain management
1) Supply chain partners work collaboratively at different levels to maximize resource productivity,
construct standardized processes, remove duplicate efforts and minimize inventory levels.
2) Minimization of supply chain expenses is very essential, especially when there are economic
uncertainties in companies regarding their wish to conserve capital.
3) Cost efficient and cheap products are necessary, but supply chain managers need to concentrate
on value creation for their customers.
4) Exceeding the customers’ expectations on a regular basis is the best way to satisfy them.
5) Increased expectations of clients for higher product variety, customized goods, off-season
availability of inventory and rapid fulfillment at a cost comparable to in-store offerings should be
matched.
6) To meet consumer expectations, merchants need to leverage inventory as a shared resource and
utilize the distributed order management technology to complete orders from the optimal node in
the supply chain.

5. SCM – Problem addressed

1) Distribution Network Configuration
2) Distribution Strategy
3) Trade-Offs in Logistical Activities
4) Information
5) Inventory Management
6) Cash-Flow

6. SCM – Activities / Functions

1) Strategic level
2) Tactical level
3) Operational level

7. SCM – Process - 6
1) Plan
2) Develop (Source)
3) Make
4) Deliver
5) Return

8. SCM - Process Flow - 3

 There are three different types of flow in supply chain management –
 1) Material flow
2) Information/Data flow
3) Money flow

9. SCM - Flow Components - 9

1) Transportation
2) Long-term Decisions
3) Lane Operation Decisions
4) Choice and Mode of Carrier
5) Dock Level Operations
6) Warehousing
7) Sourcing and Procurement
8) Returns Management - 3
a) Speed
b) Visibility
c) Control
9) Post – Sales Service

10. SCM - Decision Phases - 3

1) Supply Chain Strategy
2) Supply Chain Planning
3) Supply Chain Operations

11. SCM - Performance Measures QL/QT - 7

Qualitative measures − for example, customer satisfaction and product quality.
Quantitative measures − for example, order-to-delivery lead time, supply chain response time, flexibility, resource
utilization, delivery performance.
1) Quantitative Measures - 2
a) Non-financial measures
b) Financial measure
2) Non – financials Measures
3) Cycle Time - 2
a) Supply chain lead time
b) Order-to-delivery lead time
4) Customer Service Level - 4
a) Order fill rate
b) Stock out rate
c) Back order level
d) Probability of on-time delivery
5) Inventory Levels - 5
a) Raw materials
b) Work-in-process, i.e., unfinished and semi-finished sections
c) Finished goods inventory
d) Spare parts
6) Resource Utilization - 5
a) Manufacturing resources − Include the machines, material handlers, tools, etc.
b) Storage resources − Comprise warehouses, automated storage and retrieval systems.
c) Logistics resources − Engage trucks, rail transport, air-cargo carriers, etc.
d) Human resources − Consist of labor, scientific and technical personnel.
e) Financial resources − Include working capital, stocks, etc.
7) Financial Measures - 10
a) Cost of raw materials.
b) Revenue from goods sold.
c) Activity-based costs like the material handling, manufacturing, assembling rates etc.
d) Inventory holding costs.
e) Transportation costs.
 f) Cost of expired perishable goods.
g) Penalties for incorrectly filled or late orders delivered to customers.
h) Credits for incorrectly filled or late deliveries from suppliers.
i) Cost of goods returned by customers.
j) Credits for goods returned to suppliers.

12. SCM - Strategic Sourcing - 7

1) Understanding the Spend Category - 5
The five major regions that are analyzed in the first stage are as follows −
1. Complete previous expenditure records and volumes.
2. Expenditures divided by items and sub items.
3. Expenditures by division, department or user.
4. Expenditures by the supplier.
5. Future demand projections or budgets.
2) Supplier Market Assessment
3) Supplier Survey - 4
1. Feasibility
2. Capability
3. Maturity
4. Capacity
4) Building the Strategy - 3
1. How willing is the marketplace to oppose the supplier?
2. How supportive are the clients of a firm for testing incumbent supplier relationships?
3. What are the substitutes to the competitive assessment?
5) RFx Request
6) Selection
7) Communication with New Suppliers

13. SCM - Make Vs Buy

The Make Vs Buy decision of a nation depends on three pillars. These pillars are –
1) Business strategy
In simple worlds, companies must opt for outsourcing in the following scenarios −
i. Remove the processes, which are intensive on the balance sheet, e.g., capital or labor.
ii. Minimize the costs.
iii. Achieve flexibility for adjusting output in comeback to changing demand.
iv. Phase out management of paperwork, documents or training.
v. Monitor fewer workers.
vi. Have access to new process or network tools and technologies.
vii. Leverage external expertise.
2) Risks
3) Economic factors
The costs that are often neglected in outsourcing manufacturing operations are as follows −
1. Transportation and handling charges.
2. Expanded, extended inventories.
3. Administrative bills like the supplier management and quality control rates.
4. Casted complexity and its effect on lean flows.
5. Minimal return on invested capital.
6. Production dependability and quality control.

14. SCM – Networks

- Warehouse Location
- Traffic network design
- Reshoring
1) Networks Models
1. Producer storage with direct shipping
2. Producer storage with direct shipping and in-transit merge (cross docking)
3. Distributor storage with package carrier delivery
4. Distributor storage with last mile delivery
 5. Producer or distributor storage with costumer pickup
6. Retail storage with customer pickup
2) Producer storage with direct shipping
3) Producer storage with direct shipping and in-transit merge
4) Distributor storage with package carrier delivery
5) Distributor storage with last mile delivery
6) Producer/distributor storage with customer pickup
7) Retail storage with customer pickup

15. SCM - Inventory Management

1) Role of Inventory
The most fundamental functions that inventory has in supply chains are as follows –
 To supply and support the balance of demand and supply.
 To effectively cope with the forward and reverse flows in the supply chain.
2) Optimization Mode
3) Mixed Integer Linear Programming
4) Uncertainty Modeling
5) Bi-level Optimization

16. SCM - Pricing & Revenue

The assets in supply chain are present in two forms, namely capacity and Inventory
Revenue management plays a major role in supply chain and has a share of credit in the profitability of supply
chain when one or more of the following conditions exist –
 The product value differs in different market segments.
 The product is highly perishable or product tends to be defective.
 Demand has seasonal and other peaks.
 The product is sold both in bulk and the spot market.
1) RM for Multiple Customer Segments
CH = F-1(1-PL/PH, DH, σH) = NORMINV (1-PL/PH, DH, σH)
Where,
CH = reserve capacity for higher price segment
PL = the price for lower segment
PH = the price for higher segment
2) RM for Perishable Assets
We use two approaches for perishable assets in the revenue management. These
approaches are −
 Fluctuate cost over time to maximize expected revenue.
 Overbook sales of the assets to cope or deal with cancellations.
3) RM for Seasonal Demands
4) RM for Bulk and Spot Demands
Q* = F-1(P*, μ, σ) = NORMINV (P*, μ, σ)
Where,
P* = probability demand for the asset doesn’t exceed Q *
Q* = the optimal amount of the asset to be purchased in bulk
17. SCM – Integration
1) Push System
2) Pull System

18. SCM – Business process integration

The key supply chain processes stated by Lambert (2004)[13] are:
1) Customer relationship management
2) Customer service management
3) Demand management style
4) Order fulfillment
5) Manufacturing flow management
 6) Supplier relationship management
7) Product development and commercialization
8) Returns management
Much has been written about demand management.
Best-in-Class companies have similar characteristics, which include the following:
a) Internal and external collaboration
b) Lead time reduction initiatives
c) Tighter feedback from customer and market demand
d) Customer level forecasting
One could suggest other key critical supply business processes which combine these processes stated by Lambert
such as:
a) Customer service management
 determine mutually satisfying goals for organization and customers
 establish and maintain customer rapport
 produce positive feelings in the organization and the customers
b) Procurement
c) Product development and commercialization
1) coordinate with customer relationship management to identify customer-articulated needs;
2) select materials and suppliers in conjunction with procurement, and
3) develop production technology in manufacturing flow to manufacture and integrate into the
best supply chain flow for the product/market combination.

d) Manufacturing flow management/support

e) Physical distribution
f) Outsourcing/partnerships
g) Performance measurement
1) Cost
2) Customer Service
3) Productivity measures
4) Asset measurement
h) Warehousing management
Components of supply chain management are as follows:
1) Standardization
2) Postponement
3) Customization

19. Differences in Push and Pull System

The major differences between push and pull view in supply chain are as follows −
1) In the push system, the implementation begins in anticipation of customer order whereas in the pull
system, the implementation starts as a result of customer’s order.

2) In the push system, there is an uncertainty in demand whereas in pull system, the demand remains

certain.

3) The push system is a speculative process whereas the pull system is a reactive process.

4) The level of complexity is high in the push system whereas it is low in the pull system.

5) The push based system concentrates on resources allocation whereas the pull system stresses on

responsiveness.

6) The push system has a long lead time whereas the pull system has a short lead time.

7) The push system assists in supply chain planning whereas the pull system facilitates in order completion.

20. Push & Pull System

21. Demand-Driven Strategies

22. SCM - Role of IT
 Cost reduction − The advancement of technology has further led to ready availability of all the products with

different offers and discounts. This leads to reduction of costs of products.

Productivity − The growth of information technology has improved productivity because of inventions of new

tools and software. That makes productivity much easier and less time consuming.

Improvement and product/market strategies − Recent years have seen a huge growth in not only the

technologies but the market itself. New strategies are made to allure customers and new ideas are being

experimented for improving the product.

1) Electronic Commerce

2) Electronic Data Interchange

The major advantages of EDI are as follows –

1. Instant processing of information

2. Improvised customer service

3. Limited paper work

4. High productivity

5. Advanced tracing and expediting

6. Cost efficiency

7. Competitive benefit

8. Advanced billing

3) Barcode Scanning

4) Data Warehouse

5) Enterprise Resource Planning (ERP) Tools

23. SCM - Agile and Reverse

In this chapter, we will throw some light on two specialized supply chains −

1) Agile Supply Chain

2) Reverse Supply Chain

Some examples of reverse supply chain are as follows −
 Product returns and handling product displacement.
 Remanufacturing and refurbishing exercises.
 Management and sale of surplus, along with returned equipment and machines from the
hardware leasing business.
Mostly reverse supply chain is designed to carry out the below given five key processes −
Product acquisition − Accumulating the used product from the user by the reseller or
manufacturer because of some manufacturing defect or some other reason. It is basically considered as a
company’s growth strategy.
Reverse logistics − Shipping of products from their final destination for auditing, sorting and
disposition.
Inspection and disposition − Examining the condition of the product returned along with
making the most profitable decision for reusing it in some other way.
Remanufacturing or refurnishing − Returning the product to its original source from where it
was ordered in the very first place along with specifications. This is done basically when there is a
manufacturing or furnishing defect in the goods.
 Marketing − Establishing secondary markets for the goods that have been recovered by the
merchant from the client who initially ordered it in the beginning but chose to return it.

24. Customs Clearance - Meaning, Scope and Documentation

1) Area of Operations and Authority
2) Customs and Trade Logistics
3) Imports and Customs Clearance
Some of the documents involved in customs clearance are:
1. Exports Documentation: Purchase order from Buyer, Sales Invoice, Packing List, Shipping Bill,
Bill of Lading or Airway Bill, Certificate of Origin and any other specific documentation as specified
by the buyer, or as required by financial institutions or LC terms or as per importing country
regulations.
2. Imports Documentation: Purchase Order from Buyer, Sales Invoice of supplier, Bill of Entry,
Bill of Lading or Airway bill, Packing List, Certificate of Origin, and any other specific documentation
required by the buyer, or financial institution or the importing country regulation.