STRATEGIC SUPPLY CHAIN MANAGEMENTFullscreen Mode
CHAPTER 1
OVERVIEW OF STRATEGIC SUPPLY CHAIN MANAGEMENT
Definition of Supply Chain Management Concepts
***A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and
finished products, and the distribution of these finished products to customers.
Supply chains exist in both service and manufacturing organizations
The term―supply chain management arose in the late 1980s and came into wide spread use in the 1990s.Priortothattime, businesses used terms such as―logistics and―operations
management instead.
―A supply chain is the alignment of firms that bring products or services to the market.
―A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also
transporters, warehouses, retailers, and customers themselves.
The Supply Chain is a Network of Suppliers (feeding in to the organisation) and intermediaries/distributors (interface between organisation and customer).
Supply chains are sometimes referred to as value chains, a term that reflects the concept that value is added as goods and services progress through the chain
****In short, Supply chain management (SCM) is the management of a network of interconnected business involved in the ultimate provision of product and service packages
required by end customers. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.
****According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management.
It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers
Elements of SCM
Inventory management
Warehousing
Transportation
Evolution of supply chain management
There is a basic pattern to the practice of supply chain management.
Each supply chain has its own unique set of market demands and operating challenges and yet the issues remain essentially the same in every case.
Companies in any supply chain must make decisions individually and collectively regarding their actions in five areas:
1. Production Decisions
2. Inventory Decisions
3. Location Decisions
4. Transportation Decisions
5. Information Decisions
1. Production Decisions -what products does the market want? How much of which products should be produced and by when? This activity includes the creation of master production schedules that take into account plant capacities, workload balancing, quality control, and equipment maintenance. (Readon MRP)
2. Inventory Decisions-what inventory should be stocked at each stage in a supply chain?
How much inventory should be held as raw materials, semi-finished, or finished goods? The primary purpose of inventory is to act as a buffer against uncertainty in the supply chain.
However, holding inventory can be expensive, so what are the optimal inventory levels and reorder points?
3. Location Decisions-where should facilities for production and inventory storage be located? Where are the most cost efficient locations for production and for storage of
inventory? Should existing facilities be used or new ones built? Once these decisions are made they determine the possible paths available for product to flow through for delivery to
the final consumer.
4. Transportation Decisions-How should inventory be moved from one supply chain location to another? Air freight and truck delivery are generally fast and reliable but they are
expensive. Shipping by sea or rail is much less expensive but usually involves longer transit times and more uncertainty. This uncertainty must be compensated for by stocking higher levels of inventory. When is it better to use which mode of transportation?
5. Information Decisions-how much data should be collected and how much information should be shared? Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it.
The sum of these decisions will define the capabilities and effectiveness of a company’s supply chain.
