Supply Chain Management

Supply chain management (SCM) is the process of

managing the flow of goods and services to and from a
business, including every step involved in turning raw
materials and components into final products and
getting them to the ultimate customer.
 The Evolution of Supply Chain
Management
The rise in the number of business associates,
the management of the supply chain becomes
even more difficult. With more discrepancy in
supply chain management, companies began
looking for solutions. These solutions are now
the basis of each stage of the evolution of
supply chain management.
 The Evolution of Supply Chain
Management
The Stages of evolution in Supply Chain Management:
Stage 1 – Consolidation: Starting from the early
1980s, businesses focused on products. They
focused more on quality and the key performance
metrics were – inventory turns and production cost.
For the purpose of achieving inventory turns, small
companies began merging into larger organizations.
This also led to organized planning of the production
cost which further resulted in becoming a good
solution for most businesses.
 The Evolution of Supply Chain
Management
Stage 2 – Integration: In the late 1980s, businesses
shifted their focus from products to the volume of
output. Keeping a close eye on the cost, the key
performance metrics for Stage 2 of the supply chain
evolution turned out to be production capacity and
throughput. Companies that started making profits in the
earlier stage now analyzed that just production cost will
not help them in making more profits. And for this
reason, the rate of production and the volume of
production became important. By the end of this stage,
companies found their solutions.
 The Evolution of Supply Chain
Management
Stage 3 – Market Value:Then came the third stage of the
supply chain evolution which began in the early 1990s.
Organizations in this stage started to focus more on
market-driven results. The key factor of this stage of
evolution was product availability and the performance
metrics were clearly – market share and order fill rate.
Now the problem was not about making more products
but about delivering them to the markets. So, by the
end of this stage, businesses had the solution again and
were onto their next stages of growth for even better
results.
 The Evolution of Supply Chain
Management
Stage 4 – Brand Value: During the late 1990s, firms
analyzed that customers were the game changers for
revenue generation. This is when they shifted their
business strategies and made ‘lead time’ the key factor in
their goals. With this, the key performance metrics
changed from market share and order fill rate to customer
satisfaction, value-added, and response time. Companies
now had the time to analyze that products that were made
with a prime focus on customers were what sold out
more. That’s how companies started focusing on
products that added value to their companies.
 The Evolution of Supply Chain
Management
Stage 5 – Automation: The twenty-first century is more driven
by knowledge and that is why having more information is
preferred to be ideal for a company’s supply chain
management. The key performance metrics for the 5th stage
of supply chain management is real-time communication and
business intelligence. Over the years, with a growth in each
segment of the supply chain, employment has also increased.
With more people in the circle, communicating every little
detail to each person has become a task. The process of
storing information also began to get hectic and for all these
reasons, automation started out to be the focus for companies
to grow.
 Key Issues of Supply Chain Management
1. Adapting to constantly changing consumer demands: -
Consumers around the globe are expecting a faster delivery,
without having to pay extra for the service. Their demand for
faster order fulfillment due to the e-commerce last mile race
currently occurring or meeting customer demands for omni
channel communications and better service.
Solution: - Flexibility and better communication within your entire
organization is the key component here. As well as establishing a
network of reliable suppliers to secure the lowest possible delivery
time. As far as reasonable pricing goes, consumers are expressing
their need for no added delivery costs. Better to raise the price of
the product to compensate for additional add-on regarding
delivery.
Key Issues of Supply Chain Management

2. Minimize the delivery and logistics costs and to

maximize sales: - When the products are ready to be
sent out from the manufacturing facility, the company
has to decide where to send the goods, how much to
send and through which channels the goods should be
shipped and delivered to minimize the delivery and
logistics costs and to maximize sales.
Solution: - Companies can overcome this challenge by
optimizing the supply chain through data, information
and using automated processes to make decisions.
Key Issues of Supply Chain Management

3. Mitigating and accounting for unforeseen

delays somewhere along the chain.
Solution: - Increase supervision and create
efficient procedures against delays in the
supply chain. Having a reasonable level of
buffer stocks on-hand, rather than trying to
mitigate issues is a key solution to challenges
in supply chain management.
 Key Issues of Supply Chain Management
4. The expectation of innovation and raising capital for investment in
technology: - Most surveys and research suggest that cost is the biggest
deterrent to investment in technology. Part of the problem is that
investing in technology relates to big risk. Will the technology be
compatible with suppliers and customers? Will employees adapt
quickly and well? Will it go obsolete quickly? Will it require frequent
maintenance and re-tooling?
Solution: - The solution for this problem can be hard for small- and
medium sized companies. Since raising capital is a major issue for
companies in a world influenced by inflation and rising consumer costs.
Companies with a healthy and sustainable economy, that have plenty
liquidity are better equipped for the challenge. For other companies,
starting with a simple solution to test compatibility and efficiency
benefits will be the better and less risky choice.
 Key Issues of Supply Chain Management
5. Global suppliers can result in a loss of control: - A global line of
suppliers increase the risk of loss of control. Who has responsibility
for safety protocols, quality testing, expenses, and labor? Extended
delivery times can result in a lower level of control. Companies
relying on global suppliers often does not possess the same amount
of overview. A high level of precision is also essential when it
comes to consumer satisfaction and if you outsource parts of the
supply chain, the risk of error could increase.
Solution: Creating a unified unit of suppliers and educating them well.
Thereby ensuring consistency and lower risk of errors. One central
logistics center flanked by smaller hubs of suppliers in different
countries around the world – all working towards the same goal and
through the same procedures.
 Key Issues of Supply Chain Management

6. Inflation at a global scale: - Everybody is experiencing a

huge increase in price for goods and products –
consumers ad well as businesses. Inflation is hitting
consumers purchasing powers hard, and a lot of homes
are saving up – rather than investing or spending money.
Solution: A huge problem in supply chain management is
finding the perfect balance between “out of stock” and
overflowing stocks. Many companies tend to use a LEAN
strategy to avoid overflowing stocks. However, with ever
increasingly costs, investing in products and a big
warehouse stock could be the solution.
 Compititive Edge of Supply Chain
Management
Enable supply chain automation through
robotics: While adoption isn’t prolific (yet),
industry giants like Amazon are already
looking to robotics to automate the supply
chain, cutting overhead from operations and
labor. Amazon “employs” more than 30,000
robots, according to Business Insider, and
many major China-based manufacturers are
boosting their use of robots as well.
 Compititive Edge of Supply Chain
Management
Leverage smart supply chains: Organizations can
capitalize on big data sets mined from machines tagged
with sensors to move supply chain planning from
reactive to proactive. Applying advanced analytics
enables organizations to find and predict issues before
they occur, instead of detecting and responding to issues
after it’s too late. While less than a quarter (23.4%) of
organizations report using this now, almost 90% of
respondents agreed this is a good or outstanding
opportunity, according to a
Supply Chain Digest Benchmark Study.
 Compititive Edge of Supply Chain
Management
Automate orders: Errors are less likely to occur
in automated processes that aren’t subject to
human delays or errors and automating routine
orders can help to avoid financial loss in the
form of over- or under-stocking a retailer. For
example,
P&G leverages a standardized data wareho
use
that automates commerce between suppliers
and retailers.
 Compititive Edge of Supply Chain
Management
Employee artificial intelligence (AI):
AI applications can tackle customer service
payment processing, IT support, or operations,
eliminating overhead costs. P&G is also
embracing this application in its payment
processing.
Strategic Fit in Supply Chain Management

Strategic Fit may be defined as matching

resources and capabilities but in Procurement
it means requiring that both the competitive
and supply chain strategies of a company have
aligned goals. To provide the highest level of
service as a procurement organization,
strategic fit must be achieved.
Strategic Fit in Supply Chain Management
Step 1 | Understanding Customer Requirements & Uncertainties
Procurement leaders are commonly tasked to understand the larger business and customer needs
prior to executing a purchase. This discovery process should involve gaining a
comprehensive understanding of the customer’s project scope, goals and budget. In addition
to covering the basic information Procurement requires, the customer will likely also have
their own set of requirements and uncertainties. When identifying Customer Requirements
& Uncertainties, it is important to establish an initial Voice of Customer (VOC) with the
customer. An effective way to do this is through scheduling a call or meeting to understand
some basic information such as:
• Quality
• Cost
• Delivery
• Service & Safety
• Corporate Responsibility
By connecting with the customer to review a basic list of procurement requirements, not only is
Procurement able to establish the Critical Customer Requirements (CCR); they’ve taken the
first step toward further growing relationships with their colleagues and suppliers.
Strategic Fit in Supply Chain Management
Step 2 | Understanding Procurement Capabilities: - Once the VOC has
been gathered the next step is to build on the initial discovery in order
to generate Critical Customer Requirements (CCR). CCR is commonly
practiced across Lean Six Sigma but can be leveraged to understand
and meet the needs of Procurement’s customer.
Translating VOC to CCR can be quite simple dependent upon customer
compliance and Procurement’s ability to capture VOC. When
translating Voice of Customer to Critical Customer Requirements it is
important to keep lot of things in mind. In some cases, translating
Voice of Customer to a Critical Customer Requirement can be
straightforward, such as Lead Time. In other cases, a customer may
still be uncertain as to what they are looking for and it is
Procurement’s responsibility to guide them within existing
procurement capabilities to achieve their goals.
Strategic Fit in Supply Chain Management
Step 3 | Procurement Responsiveness: - The final step in
Achieving Strategic Fit is to match customer requirements to the
procurement organization’s capabilities. This can may be
achieved through utilizing the already translated CCR’s to
enable an appropriate level of procurement responsiveness. For
example, a large consumer product distributor may require more
responsive procurement due to product variability, or seasonal
demand. Procurement would respond by enabling additional
suppliers or working with suppliers to increase existing
manufacturing capacity. The below graphic represents the Zone
of Strategic Fit and how Procurement’s responsiveness will vary
based on customer requirements and uncertainty.
END