32 Supply Chain Management

Neetika Sharma

    1. Learning outcomes :

 

After completing this module, the students will be able:

  • To know about the meaning of supply chain management
  • To know about the supply chain process
  • To know about the benefits of supply chain management
  • To know about the logistical components of the supply chain
  • To know about the new technology and emerging trends in supply chain management.

    2. Introduction :

 

In Today‟s marketplace, many companies are turning to Supply Chain Management for competitive advantage. For making products or services available to buyers there is a need of build proper relationships not only with the customers, but also with the key supplies and resellers in the Company‟s Supply Chain. This supply chain made up of “upstream” and “downstream” partners. Upstream marketing channel partners are those which supply the raw materials, components, parts, information, and finance and needed to create a product or service. On the other hand, downward marketing channel partners are wholesalers and retailers, which form a vital connection between the firm and its customers. Both upstream and downstream partners may also be the part of other firms supply chains. But every company has the unique design of supply chain that enables to deliver superior value to customers. An individual‟s firm‟s success depends not only how well it performs, but also on how effectively its whole supply chain and marketing channel competitors with competitors channel. The term supply chain only takes a make and sells aspect of the business. It reveals that raw material, productive inputs and factory capacity should serve as the starting point for market planning. In the place of it better term would be demand chain because it reveals a sense and respond view of the market. Under this view point, planning begins with the need of target customers, to which the company responds by organizing a chain of resources and various activities with the purpose of creating customer values.

 

3. Meaning of supply chain management :

 

Supply chain management is a management system that coordinates and integrated all of the activities performed by supply chain members into a seamless process, from the starting point to the consumption point, resulting in increased customer and economic value. The philosophy behind the whole supply chain management is that visualizing the whole supply chain, supply chain managers can increase strengths and efficiencies at each a highly competitive customer – oriented supply system that is able to respond quickly to changes in supply and demand. Today‟s supply chain management plays a dual role : First as a communicator of customers demands that extends from point of sale to the supplier , and second as a physical flow process that manage the timely and cost effective movement of goods through the entire supply pipeline. We can say that the supply chain is the connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics functions. Supply chain management is the completely customer driven process which enhance the product and services matched to customer needs.

 

4. Process of Supply Chain Management :

 

Supply chain management plays an important role for a firm and a critical component in marketing and corporate approach. Companies that focus on supply management commonly face lower inventory, transportation, warehousing, and distribution and packaging costs; increases supply chain flexibility; improved customer services; and higher profits. This is the process of Supply Chain Management which starts from supplier; from this stage the raw material is transferred to Manufacturing unit for further processing. After processing in manufacturing unit the finished goods are transferred to Distribution Centre or Warehouse Centre where all these goods are kept safely for further use or proper distribution. After this the next step is Retailers and Wholesalers,

 

In this step the stored goods are sent to the retailers and wholesalers for providing to the consumers and businesses. After received these goods by consumers the market research is conducted to know about the market scenario.

 

5.  Benefits of Supply Chain management :

 

Supply Chain management plays a very vital role for firm and corporate strategy. A well managed Supply Chain Management provides some benefits to firm such as

  • Reduced inventory, transportation, warehousing and packaging costs.
  • Increased flexibility between the various marketing channels.
  • Improved customer services.
  • Maximize the profits.

    6. Logistical Components of The Supply Chain:

 

The supply chain management coordinates and integrates all of the activities done by supply chain members into a seamless process. The supply Chain consists of several interrelated and integrated logistical components: 1.Sourcing and procurement of raw materials and supplies, 2.Production Scheduling, 3.Order Processing and Customer Service, 4.Inventory Control, 5. Warehousing and Material-Handling, 6.Transportation. Integrating and linking of the logistics components of the supply chain is the logistics information system. Electronic data, on-board computers, material – handling and warehouse management software, enterprise -wide systems solutions and Internet are the information enablers of successful supply chain management.

 

 

6.1 Sourcing and Procurement of raw materials and supplier –

 

One of the most important link in the supply chain is that between the producer and supplier. Purchasers are on the top of the supply chain management. Purchasing departments plan about the various purchasing policies , develop specifications, select supplierss and confer price and service levels. The purpose of the sourcing and procurement activities is to reduce the costs of raw materials and supplies. Purchasing professionals are mostly relied on hard conciliation to get the lowest price possible from supplirs of raw materials , supplies , and components. The major effort purchasing can make to supply chain management , however , is in the area of vendor relations. With the help of superior vendor relations, buyers and sellers can develop cooperative relationships that decreases the costs and improve efficiency with the purpose of lowering prices and enhancing profits. By coordinating and integrating suppliers into their companies businesses , purchasing managers have become healthier able to rationalize purchasing processes, manage inventory levels , and diminish overall costs of the sourcing and procurement operations.

 

6.2 Production Scheduling :

 

In usual mass – market manufacturing, production starts when predicts call for extra products to be made or Inventory control systems shows low inventory levels. The firm then produce a product and transports the finished goods to its own warehouses or intermediaries, where the goods wait to be ordered by retailers and consumers. For example, many types of convenience goods, like as detergent, toothpaste and detergent, are manufactured based on past sales and demand and sent to retailers for resell. Production scheduling focus on approaching a product down to the consumer apparently has its disadvantages, the most prominent being that companies risk making products that may become obsolete or that consumers don‟t want in the first place. Scheduling is the process of arranging, controlling and optimizing work and workloads in a production process or manufacturing process. More companies move towards mass customization and away from mass marketing. Mass customization (build- to – order) is a method of production where products are not made until an order is placed by the customer; products are made according to customer specification. An important manufacturing process common today in manufacturers is just –in –time manufacturing. JIT is a process that redefines and simplifies manufacturing by falling inventory levels and delivering raw materials just when they are needed on the production line .for manufacture the JIT means that raw materials reached at the congregation line in guaranteed working order “ just in time” to be installed. For the supplier JIT means supplying customer with products in just a few days or few hours, rather than weeks. For the ultimate consumers, JIT means lower costs; shorter direct times and products that are closely meet up the consumers needs.

 

6.3 Order Processing :

 

In supply chain management the order is only the medium which circulate it, especially in the mass customization. The order processing system processes the requirements of the customer and sends the information into the supply chain through the logistics information system. Firstly the order goes to the manufacturer‟s warehouse. If the products are available in the stock then the order is filled. If the product is not in stock, it triggers a refill request that finds its way to the factory ground. Order processing system is a system where orders are entered into supply chain and filled. Now a days the order processing is becoming more automated through the use of computer technology known as electronic data interchange (EDI) .Electronic data interchange focus on the replacement of paper documents that usually come with business transactions, like as purchase orders and invoices, with electronic transmission of the needed information to reduce inventory levels, improve cash flows, modernize operations, and increases the speed and correctness of information program. A typical EDI message includes all the information that would traditionally be included on a paper invoice such as product code, quality, and transportation details.

 

6.4 Inventory Control :

 

An inventory control system is a method of developing and maintaining an sufficient collection of materials or products to meet a manufacturer‟s or a customer‟s demand. The stock decision regarding the raw materials and finished goods, have a great impact on supply chain costs and the level of service provided. If too many products are kept in inventory, costs increases – as do risks of obsolescence, theft and damage. If too some products are kept on hand, then the company risks products shortages and angry customers, and finally lost sales. Managing inventory from the supplier to the manufacturer is called material requirement planning (MRP), or material management. This inventory control system manages the replacement of raw materials, supplies, and components from the supplier to the manufacturer. The system that manages the finished goods inventory from manufacture to end user is referred to as distribution resource planning (DRP). Both inventory systems use various inputs , such as sales forecasts , available inventory , outstanding orders , lead times , and mode of transportation to be used , to determine what actions must be taken to restock goods at all points in the supply chain.

 

6.5 Warehousing and Material Handling :

 

Supply chain logisticians supervise the regular flow of raw materials from suppliers to manufacturer and finished goods from the manufacturer to the ultimate consumer. While JIT manufacturing processes may abolish the need to the warehouse many raw materials, manufacturers may regularly maintain some safety stock on hand in the event of a crisis, such as a strike at a supplier‟s plant or a disastrous event that provisionally stops the flow of raw materials to the production line. The ultimate users may not want the goods at the same time the manufacturer produces and wants to sell them. Products such as corn and grain are produced seasonally, but consumers order them year-round. Other products, such as Christmas ornaments, are produced year- round, but the consumers do not want them until winter. Therefore, management must have a storage arrangement to embrace these products until they are shipped. Storage helps manufacturers control supply and demand, or production and consumption. It provides point utility to buyers and sellers, which means that the seller stores the product until the buyer wants or needs it. Still when products are used regularly, not seasonally, many manufacturers accumulate excess products in case the demand surpasses the amount produced at a given time. A materials-handling system moves inventory into, inside, and away of the warehouse. Materials-handling includes these functions:

  • Getting goods into the warehouse or distribution centre.
  • Identifying , cataloguing , and labelling the goods
  • Dispatching the goods to a temporary storage area
  • Recalling, selecting or picking the goods for delivery (may include packaging the product in a protective container for shipping.)

    The main purpose of the materials-handling system is to move items quickly with negligible handling.

 

6.6 Transportation :

 

Supply Chain logisticians must decide which mode of transportation to use to move products from supplier to producer and from producer to buyer. These decisions are, of course, related to all other logistics decisions. Railroads, motor carriers, pipelines, water transportation, and airways are the five major modes of transportation. Supply Chain managers prefer a mode of transportation on the basis of numerous criteria:

  • Cost
  • Transit time
  • Reliability
  • Capability
  • Accessibility
  • Traceability

   7. Emerging Trends In Supply Chain Management :

 

Several scientific advances and business trends are affecting the job of the supply chain manager today. Three of the most important trends are advanced computer technology, outsourcing of logistics functions, and electronic distribution.

 

TRENDS IN SUPPLY CHAIN MANAGEMENT

 

7.1 Advanced Computer Technology :

 

Advanced computer technology has boosted the effectiveness of logistics considerably with tools such as automatic identification systems using bar coding and radio frequency technology, communications technology, and supply chain software systems that help harmonize the flow of goods and information with customer order.

 

7.2 Outsourcing logistics Functions :

 

Outside partners are becoming gradually more important in the efficient deployment of supply chain management. Outsourcing (Contract logistics) means when a supplier‟s use of an independent third party to manage an entire function of the logistics system, such as transportation, warehousing, or order processing.

 

7.3 Electronic Distribution:

 

Electronic Distribution is the most recent development in the logistics field. Electronic distribution includes any kind of product or service that can be spread by electronic means, whether over conventional forms such as fibre-optic cable or through satellite transmission of electronic signals.

 

For example, instead of buying and installing software from stores, computer users purchase software over the Internet and download it electronically to their private computers or rent the same software from Internet services that have the programme available for use on their servers.

 

8. Integrated Logistics Management :

 

In today‟s time period more and more companies are adopting the concept of integrated logistics management. This concept emphasizes that providing better customer service and adornment allotment costs require teamwork, both inside the company and among all the marketing channel organizations. Inside, the company‟s various departments must work closely together to make best use of the company‟s own logistics performance. Outside, the company must integrate its logistics system with those of its suppliers and customers to maximize the performance of the entire distribution system.

 

Intregrated Logistics Management

  8.1 Cross- Functional Teamwork Inside the Company :

 

In large number of companies, responsibilities for different logistics duties is assigned to many different departments- sales / marketing , operations , finance, operations , purchasing. Very frequently, each function tries to optimize its own logistics performance without consider for the activities of the other functions. Though, inventory, warehousing, transportation, and order – processing activities interact, often in opposite way. Lesser inventory levels decrease inventory – carrying costs. But they may also reduce customer service and increase cost from stockouts, back orders, special production runs, and costly fast – freight shipments. Since distribution activities involve strong trade-off, decisions by different functions must be harmonized to accomplish better over- all logistics performance. The main purpose of integrated supply chain management is to coordinate all of the company‟s logistics decisions. Close working relationships among departments can be achieved in several ways. Some of the companies have maintained permanent logistics committees, made up of managers responsible for different physical distribution activities. For example many companies have a vice president of logistics with cross-functional authority.

 

8.2 Building Logistics Partnerships :

 

Companies should do more than recover their own logistics. They should also work with other channel partners to develop whole – channel distribution. The members of a marketing channel are associated closely in creating customer value and build customer relationships. One company‟s distribution system is another company‟s supply chain system. Smart companies harmonize their logistics strategies and fake well-built partnerships with suppliers and customers to develop customer service and decrease channel costs. Many companies have created cross- functional, cross- company teams. Other companies partner through shared projects. For example, many large retailers are functioning with suppliers on in-store programs. Home Depot allows key suppliers to use its stores as a testing ground for new merchandising programs. The suppliers expend time at Home Depot stores examining how their product sells and how customers relate to it .They then create programme specially tailored to Home Depot and its customers. Evidently, both the supplier and the customer benefits from such partnerships. The point is that all supply chain members should work together in the reason of bringing value to final consumers.

 

8.3 Third – Party Logistics :

 

Often big companies love to make and sell their products. But many abhor the associated logistics grumble job. They detest the bundling, loading, unloading, storing, reloading, transporting, customs clearing and tracking required to supply their factories and to get products out of customers. They hate it so much that a growing number of firms now outsource some or all of their logistics to third – party logistics (3PL) providers. Third- party logistics provider is an self-regulating logistics provider that carry out any or all of the functions required to get their client‟s products to market .These 3PL‟s – companies such as UPS Supply Chain Solutions , Ryder System , Roadway Logistics Services- assist clients to tighten up lethargic , overflowing supply chains , hack inventories , and get products to customers more quickly and constantly.

 

9. Summary :

 

Supply chain management is a management system that coordinates and integrated all of the activities performed by supply chain members into a seamless process, from the starting point to the consumption point, resulting in increased customer and economic value. Supply Chain management plays a very vital role for firm and corporate strategy. A well managed Supply Chain Management provides some benefits to firm such as reduced inventory, transportation, warehousing and packaging costs, and increased flexibility between the various marketing channels. Improved customer services, Maximize the profits. The supply Chain consists of several interrelated and integrated logistical components: 1.Sourcing and procurement of raw materials and supplies, 2.Production Scheduling, 3.Order Processing and Customer Service, 4.Inventory Control, 5. Warehousing and Material-Handling, 6.Transportation. Integrating and linking of the logistics components of the supply chain is the logistics information system. Advanced computer technology, outsourcing of logistics functions, and electronic distribution are the three emerging trends in supply chain management. The integrated supply chain management concept recognises that improved logistics requires teamwork in the form of close working relationships across functional areas inside the company and across various organizations in the supply chain.

 

Suggested Readings (Books and Websites)

  1. Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
  2. Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
  3. McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
  4. Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
  5. Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
  6. McCarthy, Jerome  E.  (1975)”Basic  Marketing:  A  Managerial  Approach,”  fifth  edition, Richard D. Irwin