Supply Chain Management

By Group 9

In the 1980s, the term Supply Chain Management (SCM) was developed to express the
need to integrate the key business processes, from end user through original suppliers.
Original suppliers being those that provide products, services and information that add value for
customers and other stakeholders.

The basic idea behind the SCM is that companies and corporations involve themselves in
a supply chain by exchanging information regarding market fluctuations and production capabilities.
The primary objective of supply chain management is to fulfill customer demands through the most
efficient use of resources, including distribution capacity, inventory and labor.

What is a Supply Chain?

A supply chain is a 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 chains link value chains.

An illustration of a company's supply chain; the arrows stand for supplier-relationship

management, internal SCM and customer-relationship management.

Seven Principles of SCM:

1. Segment customers based on their service needs:

This is about getting to know how to best, most profitably service the key types of customers of your
product and service offering.
2. Customize your logistics network:

Following on from determining which customer segments are most important to you, you will need to
customize the logistics network to the service requirements and profitability for each of them.

3. Drive operations from demand:

Listen to market signals and align demand planning to ensure optimal resource allocation.

4. Differentiate product closer to the customer:

Differentiate product and services closer to the customer to speed conversion across the supply chain.

5. Source strategically:

Manage sources of supply strategically to reduce the total cost of acquiring and owning materials and
services.

6. Develop a supply chain-wide technology strategy:

Support multiple levels of decision-making and give a clear view of the flow of products, services and
information.

7. Use supply chain spanning performance measures:

Gauge collective (that is, together with your trading partners) success in reaching the end-user
effectively and efficiently.

Value Chain

The value chain, also known as value chain analysis, is a concept from business
management that was first described and popularized by Michael Porter in his 1985 best-seller,
Competitive Advantage: Creating and Sustaining Superior Performance.

Value analysis defines a "basic function" as anything that makes the product work or
sell. A function that is defined as "basic" cannot change.
Secondary functions, also called "supporting functions", described the manner in which
the basic function(s) were implemented. Secondary functions could be modified or eliminated to
reduce product cost
Outsourcing

Outsourcing is contracting with another company or person to do a particular function.

Almost every organization outsources in some way. Typically, the function being outsourced is
considered non-core to the business.

An insurance company, for example, might outsource its janitorial and landscaping
operations to firms that specialize in those types of work since they are not related to insurance or
strategic to the business. The outside firms that are providing the outsourcing services are third-party
providers, or as they are more commonly called, service providers.

Evaluation of Supplier

Assessment of existing or new suppliers on the basis of their delivery, prices, production
capacity, quality of management, technical capabilities, and service.

Logistics

Logistics is the management of the flow of the goods, information and other resources in a
repair cycle between the point of origin and the point of consumption in order to meet the requirements
of customers.
The term logistics comes from the Greek logos (λόγος), meaning "speech, reason, ratio,
rationality, language, phrase", and more specifically from the Greek word logistiki (λογιστική),
meaning accounting and financial organization. The word logistics has its origin in the French verb
loger to lodge or to quarter. Its original use was to describe the science of movement, supplying &
maintenance of military forces in the field.