INTRODUCTION

A supply chain or logistics network is the system of organizations, people, technology,

activities, information and resources involved in moving a product or service from supplier to
customer. Supply chain activities transform natural resources, raw materials and components
into a finished product that is delivered to the end customer. In sophisticated supply chain
systems, used products may re-enter the supply chain at any point where residual value is
recyclable.

Supply chain management (SCM) is the oversight of materials, information, and finances as
they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
Supply chain management involves coordinating and integrating these flows both within and
among companies. It is said that the ultimate goal of any effective supply chain management
system is to reduce inventory (with the assumption that products are available when needed).
Supply chain management flows can be divided into three main flows:
• The product flow

• The information flow

• The finances flow

The product flow includes the movement of goods from a supplier to a customer, as well as
any customer returns or service needs. The information flow involves transmitting ordersand
updating the status of delivery. The financial flow consists of credit terms, payment schedules,
and consignment and title ownership arrangements.
What is Supply chain management?

A supply chain is the group of components (suppliers, distribution points,

transportation providers) necessary to bring your product from its raw material state
to the end user.

Supply chain management is the term used for controlling and regulating your supply chain.

A simple supply chain model consists of four components:

» Supplier supplies the raw materials

» Manufacturer produces the product

» Warehouse or Distribution Center stores and ships the product

» End User receives the product

replaces supply chain consultants for the Warehouse / Distribution center piece of your supply
chain puzzle. We will talk to you about your needs, assess your current warehousing and
distribution needs, and make recommendations on how you can make simple adjustments to
save you time and money while increasing your service levels and efficiency. We even offer
transition assistance to help you notify suppliers, vendors, and clients.
Supply chain management (SCM) is the oversight of materials, information, and finances as
they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
Supply chain management involves coordinating and integrating these flows both within and
among companies. It is said that the ultimate goal of any effective supply chain management
system is to reduce inventory (with the assumption that products are available when needed).

As a solution for successful supply chain management, sophisticated software systems with
Web interfaces are competing with Web-based application service providers (ASP) who
promise to provide part or all of the SCM service for companies who rent their service.

Effective supply chain management is an intricate loop, one that begins with the customer
and ends with the customer. In earlier days, the phrase Supply Chain Management meant
assembly lines, warehouses, truckers and time sheets. Traditionally, marketing, distribution,
planning, manufacturing, and purchasing organizations operated independently along the
supply chain. These organizations functioned with their own objectives which were often
conflicting. The imbalance in the entire practice demanded for a mechanism which integrates
different functions together. Supply chain management is a strategy through which such
integration can be achieved.
History
There is the focus on the term Supply Chain, from many years, there are six major movements
that are considered important or observed essential in the studies. The movements or studies
bring the evaluation in the supply chain management. However, the six major movements are
creation era, integration era, SCM 2.0, specialization phases one and two and the globalization
era (Baldwin, Kawai, & Wignaraja, 2014).

Creation Era

The term Supply Chain was first coined in 1882, by the Keith Oliver, from the 20th century
the concept of Supply Chain is there and considered important, there is the creation of the
assembly line. However, with the tome there are the changes in the characteristics of the
Japanese’s management practices, moreover, the in this era, there are several aspects of the
Supply Chain as there is the re-engineering, cost reduction, and effectiveness, large scale
attention etc. In 1999, there is the introduction of Supply Chain Management by the Robert B.
Handfield and Ernest L. Nichols, Jr.

Integration Era

The era of the supply chain management was highlighted in the 1960’s when there is the
development of the electronic data interchange (EDI), and there is the introduction to the
enterprise resource planning (ERP) through the 1990’s. The era of the supply chain
management had continued in the 21st century, there were internet collaboration efforts, which
took place so that the effectiveness could be there through the cost reduction or adding the
value to the processes. In this era, for the first time the production of the material, storage of
the material, control on the material, distribution or management of the material take place, an
example if such supply chain management is Tesco.

Globalization Era

Globalization could be considered as the era, when the business transactions or the products
exchange or given to the global countries or companies, for the advantages, the benefits then
started. The globalization is considered as the third movement of supply chain management,
development, in this era, the attention is given to the supplier relationship in the global system
so that there could be effectiveness in the expansion of supply chain. However, in the
organizations, the global business started and the companies did efforts to increase the
competitive advantages, through managing the function or the processes efficiently. The
companies considered their core businesses and the categorized the supply chain management,
though the global sourcing.

SCM 2.0

Supply chain management 2.0 could be described as the evaluation of the processes and the
changes with the supply chain with the time, however, with the time; there were the changes,
which were considered as a tool to manage the new era of a supply chain. The growing
popularity of the supply chain programs, give effectiveness to the companies, there are the
several collaboration platforms that connected the buyers and suppliers so that there could be
the supply chain finance, transactions. It could name as the World Wide Web that has increased
the productivity, collaboration and the sharing among the users. There are the specific tools,
methodologies, and the processes to speed up the supply chain; however, the global
competition is increasing with time (Hugos, 2011).

Specialization phase one

In the 1990’s, there was the specialization era, when the core competencies and the
specialization were being focused. However, there were the outsource functions take place in
this phase. The function of the other companies and the management requirements were
distributed across the company walls. There was the deep analysis of the process, the
contractor, and the manufacturer managed the bill of the original equipment manufacturers
(OEMs). The customers’ requests were also supported and the specialization models created,
for the manufacturing and the distribution. The changes were brought according to the unique
characteristics demand example, the region, channel etc.

Specialization phase two

The specialization in the supply chain, take place when there was the failure in managing the
process, in the 1980’s. There were the transportation brokerages, the problems with the
warehouse management and the inventory. However, specialization was focused, so that the
principles example, execution, planning, collaboration etc. can be effectively done. In phase
two, there are rapid changes in the market forces the locations suppliers, logistic providers
showed significant effects on supply chain infrastructure.
Goals of SCM
Every firm strives to match supply with demand in a timely fashion with the most efficient use
of resources. Here are some of the important supply chain management goals:

 Supply chain partners work collaboratively at different levels to maximise resource

productivity, construct standardised processes, remove duplicate efforts and minimise
inventory levels.
 Minimization of supply chain expenses is very essential, especially when there are
economic uncertainties in companies regarding their wish to conserve capital.
 Cost efficient and cheap products are necessary, but supply chain managers need to
concentrate on value creation for their customers.
 Exceeding the customers’ expectations on a regular basis is the best way to satisfy them.
 Increased expectations of clients for higher product variety, customised goods, off-
season availability of inventory and rapid fulfilment at a cost comparable to in-store
offerings should be matched.
 To meet consumer expectations, merchants need to leverage inventory as a shared
resource and utilise the distributed order management technology to complete orders
from the optimal node in the supply chain.

Lastly, supply chain management aims at contributing to the financial success of an enterprise.
In addition to all the points highlighted above, it aims at leading enterprises using the supply
chain to improve differentiation, increase sales, and penetrate new markets. The objective is to
drive competitive benefit and shareholder value.
Components of SCM
Supply chain management (SCM) is a network of facilities and distribution options that goes
into improving your company. Making a product or service and delivering to customers by
finding raw components. For example; transformation of materials into intermediate and
finished products and the distribution of finished products to consumers.

Here are the five basic components of SCM:

Plan- This is the strategic portion of SCM. Companies need a strategy for managing all the
resources that go toward meeting customer demand for their product or service. A big piece of
SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient,
costs less and delivers high quality and value to customers.

Source- Next, companies must choose suppliers to deliver the goods and services they need to
create their product. Therefore, supply chain managers must develop a set of pricing, delivery
and payment processes with suppliers and create metrics for monitoring and improving the
relationships. And then, SCM managers can put together processes for managing their goods
and services inventory, including receiving and verifying shipments, transferring them to the
manufacturing facilities and authorizing supplier payments.

Make- This is the manufacturing step. Supply chain managers schedule the activities necessary
for production, testing, packaging and preparation for delivery. This is the most metric-
intensive portion of the supply chain—one where companies are able to measure quality levels,
production output and worker productivity.

Deliver- This is the part that many SCM insiders refer to as logistics, where companies
coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers
to get products to customers and set up an invoicing system to receive payments.

Return- This can be a problematic part of the supply chain for many companies. Supply chain
planners have to create a responsive and flexible network for receiving defective and excess
products back from their customers and supporting customers who have problems with
delivered products.
SUPPLY CHAIN MANAGEMENT FLOWS
There are three different types of flow in supply chain management –
 Material flow
 Information/Data flow
 Money flow

Let us consider each of these flows in detail and also see how effectively they are applicable
to Indian companies.

Material Flow
Material flow includes a smooth flow of an item from the producer to the consumer. This is
possible through various warehouses among distributors, dealers and retailers.

The main challenge we face is in ensuring that the material flows as inventory quickly without
any stoppage through different points in the chain. The quicker it moves, the better it is for the
enterprise, as it minimizes the cash cycle.

The item can also flow from the consumer to the producer for any kind of repairs, or exchange
for an end of life material. Finally, completed goods flow from customers to their consumers
through different agencies. A process known as 3PL is in place in this scenario. There is also
an internal flow within the customer company.
Information Flow

Information/data flow comprises the request for quotation, purchase order, monthly schedules,
engineering change requests, quality complaints and reports on supplier performance from
customer side to the supplier.

From te producer’s side to the consumer’s side, the information flow consists of the
presentation of the company, offer, confirmation of purchase order, reports on action taken on
deviation, dispatch details, report on inventory, invoices, etc.

For a successful supply chain, regular interaction is necessary between the producer and the
consumer. In many instances, we can see that other partners like distributors, dealers, retailers,
logistic service providers participate in the information network.

In addition to this, several departments at the producer and consumer side are also a part of
the information loop. Here we need to note that the internal information flow with the
customer for in-house manufacture is different.

Money Flow
On the basis of the invoice raised by the producer, the clients examine the order for
correctness. If the claims are correct, money flows from the clients to the respective producer.
Flow of money is also observed from the producer side to the clients in the form of debit notes.

In short, to achieve an efficient and effective supply chain, it is essential to manage all three
flows properly with minimal efforts. It is a difficult task for a supply chain manager to identify
which information is critical for decision-making. Therefore, he or she would prefer to have
the visibility of all flows on the click of a button.
Elements of the Supply Chain

 Customer: The customer starts the chain of events when they decide to purchase a
product that has been offered for sale by a company. The customer contacts the sales
department of the company, which enters the sales order for a specific quantity to be
delivered on a specific date. If the product has to be manufactured, the sales order will
include a requirement that needs to be fulfilled by the production facility.

 Planning: The requirement triggered by the customer’s sales order will be combined
with other orders. The planning department will create a production plan to produce
the products to fulfill the customer’s orders. To manufacture the products the company
will then have to purchase the raw materials needed.

 Purchasing: The purchasing department receives a list of raw materials and services
required by the production department to complete the customer’s orders. The
purchasing department sends purchase orders to selected suppliers to deliver the
necessary raw materials to the manufacturing site on the required date.

 Inventory: The raw materials are received from the suppliers, checked for quality and
accuracy and moved into the warehouse. The supplier will then send an invoice to the
company for the items they delivered. The raw materials are stored until they are
required by the production department.

 Production: Based on a production plan, the raw materials are moved inventory to the
production area. The finished products ordered by the customer are manufactured
using the raw materials purchased from suppliers. After the items have been completed
and tested, they are stored back in the warehouse prior to delivery to the customer.

 Transportation: When the finished product arrives in the warehouse, the shipping
department determines the most efficient method to ship the products so that they are
delivered on or before the date specified by the customer. When the goods are received
by the customer, the company will send an invoice for the delivered products.
 Supply Chain Management Levels
To ensure that the supply chain is operating as efficient as possible and generating the
highest level of customer satisfaction at the lowest cost, companies have adopted Supply
Chain Management processes and associated technology. Supply Chain Management has
three levels of activities that different parts of the company will focus on: strategic;
tactical; and operational.

Strategic

• Strategic network optimization, including the number, location, and size of warehouses,
distribution centers, and facilities

• Strategic partnership with suppliers, distributors, and customers, creating communication

channels for critical information and operational improvements such as cross docking,
direct shipping, and third-party logistics

• Product lifecycle management, so that new and existing products can be optimally
integrated into the supply chain and capacity management

• Information Technology infrastructure, to support supply chain operations

• Where-to-make and what-to-make-or-buy decisions

• Aligning overall organizational strategy with supply strategy

At this level, company management will be looking to high level strategic decisions
concerning the whole organization, such as the size and location of manufacturing sites,
partnerships with suppliers, products to be manufactured and sales markets

Tactical

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, scheduling, and planning process definition.

• Inventory decisions, including quantity, location, and quality of inventory.

• Transportation strategy, including frequency, routes, and contracting.

• Benchmarking of all operations against competitors and implementation of best practices

throughout the enterprise.
• Milestone payments

• Focus on customer demand.

Tactical decisions focus on adopting measures that will produce cost benefits such as using
industry best practices, developing a purchasing strategy with favored suppliers, working with
logistics companies to develop cost effect transportation and developing warehouse strategies
to reduce the cost of storing inventory

Operational

• Daily production and distribution planning, including all nodes in the supply chain.

• Production scheduling for each manufacturing facility in the supply chain

• Demand planning and forecasting, coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.

• Sourcing planning, including current inventory and forecast demand, in collaboration with
all suppliers.

• Inbound operations, including transportation from suppliers and receiving inventory.

• Production operations, including the consumption of materials and flow of finished goods.

• Outbound operations, including all fulfillment activities and transportation to customers.

• Order promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers.

Decisions at this level are made each day in businesses that affect how the products move
along the supply chain. Operational decisions involve making schedule changes to production,
purchasing agreements with suppliers, taking orders from customers and moving products in
the warehouse.
WHY SUPPLY CHAIN MANAGEMENT?
In the 21st century, changes in the business environment have contributed to the development
of supply chain networks. First, as an outcome of globalization and the proliferation of
multinational companies, joint ventures, strategic alliances and business partnerships, there
were found to be significant success factors, following the earlier "Just-In-Time", "Lean
Manufacturing" and "Agile Manufacturing" practices. Second, technological changes,
particularly the dramatic fall in information communication costs, which are a significant
component of transaction costs, have led to changes in coordination among the members of
the supply chain network
Benefits of SCM
Companies implementing Supply Chain Management may realize benefits of SCM as:
Reduced inventory

 Reduced inventory
 Reduced distribution costs
 Reduced time to market
 Reduced market risks through effective co-ordination and communication
 Improved quality of product/service
 Improved inventory management
 Increased ability to implement just-in-time delivery
 Increase in on-time deliveries
 Increased factory responsiveness
 Order cycle time reduced
 Increased revenue Increased visibility of processes
 Increased customer service
 Create competitive advantage