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					Key Concepts of Supply
Chain Management

 Chapter – 1
   Appreciate what a supply chain is and what
    it does
   Understand where your company fits in the
    supply chain it participates in and the role it
    plays in those supply chains
   Discuss ways to align your supply chain with
    your business strategy
   Start an intelligent conversation about the
    supply chain management issues in your

   A supply chain is the alignment of
    firms that bring products or services to
    market – Lambert, Stock, and Ellram.

   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 – Chopra
    and Meindl

   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 – Ganeshan and Harrison.
…Supply Chain Management

    The systematic, strategic coordination of the
     traditional business functions and the tactics
     across theses business functions within a
     particular company and across businesses
     within the supply chain, for the purposes of
     improving the long-term performance of
     individual companies and the supply chain
     as a whole – Mentzer, Dewitt, et al.
…Supply Chain Management

     Supply chain management is the
      coordination of production, inventory,
      location, and transportation among the
      participants in a supply chain to
      achieve the best mix of
      responsiveness and efficiency for the
      market being served – author.
Logistics vs SCM
   Logistics refers to activities that occur within
    the boundaries of a single organization and
    supply chains refer to networks of
    companies that work together and
    coordinate their actions to deliver a product
    to market.
   SCM acknowledges all of traditional logistics
    and also includes activities such as
    marketing, new product development,
    finance, and customer service.
Company Actions in SC

    Companies in any SC must take
    decisions individually and collectively
    regarding their actions in five areas:
   Production
   Inventory
   Location
   Transportation
   Information
Goal of SCM
   The goal or mission of supply chain
    management can be defined as increasing
    throughput while simultaneously reducing
    both inventory and operating expense.
    (here throughput means sales to the end

   In some markets customers value and will
    pay for high levels of service while in others
    customers simply seek the lowest prices.

   The fundamental managerial decision is how
    to resolve trade-off between responsiveness
    and efficiency.
   Factories can be built to accommodate one
    of two approaches to manufacturing;
    product focus or functional focus.
   Warehousing can also be done using any of
    three approaches; stock keeping unit, job
    lot storage, or cross-docking.

   Inventory is spread throughout the supply
    chain and includes everything from raw
    material to work in progress to finished
   There are three basic decisions to make
    regarding the creation and holding of
    inventory; cycle inventory, safety inventory,
    and seasonal inventory.
   Location refers to the geographical sitting of supply
    chain facilities.
   It also includes the decision related to which
    activities should be performed in each facility.
   The responsiveness versus efficiency trade-off here
    is the decision whether to centralize activities in
    fewer locations to gain economies of scale and
    efficiency, or to decentralize activities in many
    locations close to customers and suppliers.
   Location decisions have strong impacts on the cost
    and performance of supply chain.

   Transportation refers to the movement
    of everything from raw material to
    finished goods between different
    facilities in a supply chain.
   Different modes of transportation are:
    ship, rail, pipelines, trucks, airplanes,
    and electronic transportation.

   All decisions are based on timely
    availability of information regarding
    other four supply chain drivers.
   Information is used for two purposes
    in supply chain; coordinating daily
    activities and forecasting and planning
    to anticipate and meet future
Evolving Structure of
Supply Chains - 21
   Vertical Integration: slow moving mass
    markets of the industrial age, it was
    common for successful companies to own
    much of their supply chain.
   Virtual Integration: companies now focus on
    their core competencies, and partner with
    other companies to create supply chains for
    fast moving markets.
Participants of Supply
          Producers
          Distributors
          Retailers
          Customers
          Service Providers
Aligning Supply Chain
with Business Strategy
   Understand the market your company
   Define core competencies of your
   Develop needed supply chain
    capabilities 37
Understand Markets Your
Company Serves
   The quantity of the product needed in each
   The response time that customers are
    willing to tolerate
   The variety of products needed
   The service level required
   The price of the product
   The desired rate of innovation in the

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