MEANING OF SUPPLY CHAIN Supply chain is an overall system which covers the flow of material and information from a business to it customer. In a manufacturing organization, raw materials enters into the system through a SUPPLY SYSTEM and then the goods are transformed into finished good in ‘OPERATION SYSTEM’ and finished goods to final customers through ‘DISTRIBUTION SYSTEM’. Several companies are involved in this process, wherein, each company adds ‘value’ to the raw materials that is processed into finished goods and then delivered to the customers In short it is a “network of facilities and distribution options that executes 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 chain is an overall system which covers the flow of material and information from a business to it customer. In a manufacturing organization, raw materials enters into the system through a SUPPLY SYSTEM and then the goods are transformed into finished good in ‘OPERATION SYSTEM’ and finished goods to final customers through ‘DISTRIBUTION SYSTEM’. Several companies are involved in this process, wherein, each company adds ‘value’ to the raw materials that is processed into finished goods and then delivered to the customers In short it is a “network of facilities and distribution options that executes 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 CHAIN ELEMENTS Customer Planning Purchase Inventory Production Transportation Customer Planning Purchase Inventory Production Transportation

SUPPLY CHAIN ELEMENTS CUSTOMER Starts and ends with the customer Customer decides to buy – contacts the sales department or representatives – sales department records it and commit the date and time of supply – internally sales department generates sales order and direct it to the finished goods store for dispatch or delivery or the production planning department to take care CUSTOMER Starts and ends with the customer Customer decides to buy – contacts the sales department or representatives – sales department records it and commit the date and time of supply – internally sales department generates sales order and direct it to the finished goods store for dispatch or delivery or the production planning department to take care

SUPPLY CHAIN ELEMENTS PLANNING Planning department collates all information received from various customers, in order to raw up a production schedule Production Schedule indicates the quantities and time frames of requirements of finished products Production department works out the requirements to meet production schedule PLANNING Planning department collates all information received from various customers, in order to raw up a production schedule Production Schedule indicates the quantities and time frames of requirements of finished products Production department works out the requirements to meet production schedule

PURCHASE Purchase department receives the list of requirements Based on it, purchase department places orders on external sources for those materials that is not available in stock The purchase department receives invoices from suppliers and the same are processed for payment INVENTORY Inventory is the value of a firm’s current assets including raw materials, wip and finished goods The quantity of inventory is decided by the purchase department based on frequency of requirement by the production department, availability from external supply- market, prices, discounts etc. PURCHASE Purchase department receives the list of requirements Based on it, purchase department places orders on external sources for those materials that is not available in stock The purchase department receives invoices from suppliers and the same are processed for payment INVENTORY Inventory is the value of a firm’s current assets including raw materials, wip and finished goods The quantity of inventory is decided by the purchase department based on frequency of requirement by the production department, availability from external supply- market, prices, discounts etc.

PRODUCTION The production department undertakes the production/manufacturing of the products as per the production schedules The production department prepares the goods and these goods are then inspected, tested and certified as ‘fit for dispatch’ and stored again until actual delivery to customers TRANSPORTATION The shipping department will decide the best mode of transportation. Sometimes combined modes will be selected PRODUCTION The production department undertakes the production/manufacturing of the products as per the production schedules The production department prepares the goods and these goods are then inspected, tested and certified as ‘fit for dispatch’ and stored again until actual delivery to customers TRANSPORTATION The shipping department will decide the best mode of transportation. Sometimes combined modes will be selected

SUPPLY CHAIN CHARACTERISITCS Includes all activities and processes that are involved in generating and supplying products to the customer Comprise mutually linked companies and supplier – customer relationships as ‘Customer’ in a SC can become ‘Supplier’ to another entity Gathers products from supplier to customer along the Supply Chain (downstream) and the design requirements and demand information from the final customer to supplier (upstream) Includes all activities and processes that are involved in generating and supplying products to the customer Comprise mutually linked companies and supplier – customer relationships as ‘Customer’ in a SC can become ‘Supplier’ to another entity Gathers products from supplier to customer along the Supply Chain (downstream) and the design requirements and demand information from the final customer to supplier (upstream)

SCM Traditionally the retailing, distribution, marketing, planning, manufacturing, purchasing and supplying organizations operated independently. In the modern competitive scenario, the objective of maximizing sales through high level of customer service often conflicts with the objectives of manufacturing and distribution functions – the latter seek maximization of output at minimum cost whereas the former looks for delivering maximum value at most competitive prices Thus each organization in the chain look to maximizing returns for their companies, which has got a cascading effect on the final customer ( in the form of higher prices or lower quality) SCM offers an effective solutions to the above. Traditionally the retailing, distribution, marketing, planning, manufacturing, purchasing and supplying organizations operated independently. In the modern competitive scenario, the objective of maximizing sales through high level of customer service often conflicts with the objectives of manufacturing and distribution functions – the latter seek maximization of output at minimum cost whereas the former looks for delivering maximum value at most competitive prices Thus each organization in the chain look to maximizing returns for their companies, which has got a cascading effect on the final customer ( in the form of higher prices or lower quality) SCM offers an effective solutions to the above.

EVOLUTION OF SCM Even though the concept of SC existed long back ( before 5000 BC in India and 1000s years back in other countries), the chronicled record of this practice can be traced back to the industrial revolution in 18 th Century. The above period was characterized by individual company’s attempts to maximize the efficiency of their own businesses only, the supplier-customer relationships were hostile and the situation was win-lose. The Toyota Production System, which is hailed as the second industrial revolution, started changing the situation, as the new attempts and practices in manufacturing were based on cooperation and collaboration between companies Even though the concept of SC existed long back ( before 5000 BC in India and 1000s years back in other countries), the chronicled record of this practice can be traced back to the industrial revolution in 18 th Century. The above period was characterized by individual company’s attempts to maximize the efficiency of their own businesses only, the supplier-customer relationships were hostile and the situation was win-lose. The Toyota Production System, which is hailed as the second industrial revolution, started changing the situation, as the new attempts and practices in manufacturing were based on cooperation and collaboration between companies

Evolution of SCM With the advent of Manufacturing Resource Planning (MRP) and ERP system, organizations began evolving as an integrated and cohesive unit and the concept of Internal Supply Chain gained ground. When the integrated units deal with other integrated companies, the concept of Modern Supply Chain Management was born. Thus while the concept of supply chain is very old, the concept of Supply Chain Management is quite recent With the advent of Manufacturing Resource Planning (MRP) and ERP system, organizations began evolving as an integrated and cohesive unit and the concept of Internal Supply Chain gained ground. When the integrated units deal with other integrated companies, the concept of Modern Supply Chain Management was born. Thus while the concept of supply chain is very old, the concept of Supply Chain Management is quite recent

Major Issues in SCM RELATIONSHIP QUALITY To improve customer satisfaction, greater emphasis is given to quality and constantly review to identify improvement can be made or deficiency can be reduced PERFORMANCE To ensure superior service delivery and excellent customer experiences, IT teams need real-time intelligence about application performance and the ability to find causes of incidents INTEGRATION Integration to get valuable information about demand signals, forecasts, inventory, transportation, potential collaboration RESPONSIVENESS SCM is the ability effectively “sense and response” RELATIONSHIP QUALITY To improve customer satisfaction, greater emphasis is given to quality and constantly review to identify improvement can be made or deficiency can be reduced PERFORMANCE To ensure superior service delivery and excellent customer experiences, IT teams need real-time intelligence about application performance and the ability to find causes of incidents INTEGRATION Integration to get valuable information about demand signals, forecasts, inventory, transportation, potential collaboration RESPONSIVENESS SCM is the ability effectively “sense and response”

Major Issues in SCM RISK MANAGEMENT To reduce risk there should be collaboration between customers and suppliers to improve the accuracy of forecast and quicker response to demand changes should be practiced AGILITY The SC business practices must be designed for the dynamics of the environment not for steady state of conditions INCENTIVE SYSTEM The members should work cooperatively for which proper incentive system should be designed RISK MANAGEMENT To reduce risk there should be collaboration between customers and suppliers to improve the accuracy of forecast and quicker response to demand changes should be practiced AGILITY The SC business practices must be designed for the dynamics of the environment not for steady state of conditions INCENTIVE SYSTEM The members should work cooperatively for which proper incentive system should be designed

Major Issues in SCM Different models such as JIT, VMI, Zero Inventory Model, TQM etc emerged during 1970s and 1980s. The major limitation of these models are it led to ‘sub optimization’. Sub optimization leads to trade-offs between different components of the chain or between different functional areas. E.g, JIT maintains less inventory whereas operations need heavy inventory. Another major issue is globalization of SC that leads to partnering with members across the globe where distance is quite high Even the laws in different countries are different Different models such as JIT, VMI, Zero Inventory Model, TQM etc emerged during 1970s and 1980s. The major limitation of these models are it led to ‘sub optimization’. Sub optimization leads to trade-offs between different components of the chain or between different functional areas. E.g, JIT maintains less inventory whereas operations need heavy inventory. Another major issue is globalization of SC that leads to partnering with members across the globe where distance is quite high Even the laws in different countries are different

IT in SCM Conducting business has become complex due to variety of products, shorter life cycle for products, stiffer competition and increasing demand from customers For managing this complexity on real time basis, the communication should be effective, efficient, flexible and responsive to changing customer demands. So IT has become very crucial in computation as well as communication Conducting business has become complex due to variety of products, shorter life cycle for products, stiffer competition and increasing demand from customers For managing this complexity on real time basis, the communication should be effective, efficient, flexible and responsive to changing customer demands. So IT has become very crucial in computation as well as communication

ROLE OF SCM SOFTWARE The five major steps in SC uses varied varieties of software Some big vendors have tried to consolidate these individual software into single whole but till date no single package of software has been developed The most effective way of visualizing SC software is to divide it into programs that help in planning the SC that assists in executing the SC steps themselves SCP (Supply Chain Planning ) software uses fancy algorithms to help improve the flow and efficiency of the SC and reduce inventory On the other hand, Supply Chain Execution (SCE) software aims to automate the different steps in SC SCM software solutions are not the same as ERP software solutions The five major steps in SC uses varied varieties of software Some big vendors have tried to consolidate these individual software into single whole but till date no single package of software has been developed The most effective way of visualizing SC software is to divide it into programs that help in planning the SC that assists in executing the SC steps themselves SCP (Supply Chain Planning ) software uses fancy algorithms to help improve the flow and efficiency of the SC and reduce inventory On the other hand, Supply Chain Execution (SCE) software aims to automate the different steps in SC SCM software solutions are not the same as ERP software solutions