An Introduction

to
Strategic Supply Chain
Management

Supply Chain Management

As the economy changes, as competition becomes
more global, it is no longer company vs. company but
supply chain vs. supply chain
Harold Sirkin (1994), Boston Consulting Group

has captured the imagination of more & more managers

and business organizations
requires them to think beyond their organization to think
about their product in its entirety, from the origin of all goods
(Mother Earth), up to the final customer, consumer or user

Supply Chain Management

is the management of the acquisition, transformation and
delivery processes that enable and direct the flows of
products & services as well as the supporting reciprocal
flows of information & funds along a chain leading from the
sources of the original inputs up to the end customers, all
aimed at achieving the best possible customer service at the
lowest possible cost.

Fundamentals:
A supply chain is a dynamic concept that involves the
constant flow of resources (products, information, funds)
amongst all the participants along the chain
It is essentially a system of interconnecting chains i.e. a
supply network or a supply web

he Four Interrelated Flows in SCM: an example

Material Flow
Funds Flow
Information Flow
E&T
Flow

Fruit
packing

Orange
farm

Food
processor

Mother Earth
Bauxite
mine

Aluminium
smelter

Aluminium
strip mill

Can
maker

Distributor

Retail
outlet

The Four Interrelated Flows in SCM

1. Product & Service Flows:

The value-adding flow, as products & services

progress along the supply chain from point of
origin to point of final use or consumption.
Generally flow downstream
the chain
but also upstream (e.g.
reprocessing)

2. Information Flows:
The bi-directional flows of information throughout the chain
particularly on customer demand which pulls the supply chain, but
also on supply conditions & eventual disruptions

3. Funds Flows:
The flows of funds, mainly upstream (payments for goods
& services received) but also in some cases
downstream

4. Expertise & Technology Flows:

Sharing in areas such as IT systems, SCM expertise, product design,

he Evolution of Supply Chain Management: Thinking out of the box

Materials
Management

Manufacturer

Purchasing & Supply

Supplier

3
4

2nd Tier
Supplier

Physical Distribution

Manufacturer

Inbound Logistics

Customer

Outbound Logistics

INTEGRATED LOGISTICS

1st Tier
Supplier

Manufacturer

1st Tier
Customer

2nd Tier
Customer

COLA
COLA
COLA

Mother Earth
SUPPLY CHAIN / SUPPLY NETWORK MANAGEMENTEnd User

THROUGHPUTS

Basic SCM-related tasks

of an organization in a supply
chain
Suppliers
INPUTS

OUTPUTS

PURCHASIN
G
OPERATIONS
(&
INVENTORY)
CONTROL
DEMAND
PLANNING

LOGISTICS
(Warehousing
&
Transportation
)

Customers

Strategi
c SCM

Environment
ELIMINATE
WASTE
CONTINUOUS
IMPROVEMENT

INVOLVE
EVERYONE

embraces
& builds
upon TQM
and JIT

SCM

SUPPLIER
RELATIONSHIPS

CUSTOMER
SERVICE

INFORMATION
Marketplace
SHARING

CONTINUOUS
IMPROVEMENT

CONTINUOUS
IMPROVEMENT

JIT
CUSTOMERRESPECT
INVOLVE
ELIMINATE
SATISFACTION
EVERYONE
FOR PEOPLE
WASTE
TQM

Strategic SCM

(contd)

Key elements are the elimination of waste - especially

inventory - and continuous improvement
Strategic SCM integrates supply & demand
Effective SCM strategies can provide a sustainable
competitive advantage. Factors to consider:
Globalization
Outsourcing
Location
Product Life Cycle
Time-based Competition
e-business
Collaborative Planning, Forecasting & Replenishment
Supply Chain Risk Management

Strategic SCM

(contd)

1. Globalization:
Globalization has increased competition and
changed the way organizations do business,
making
supply chains longer & more complex

2. Outsourcing:
Outsourcing is obtaining a product previously produced internally
from an external supplier it is occurring more frequently, especially
global outsourcing

3. Location:
The choice of location becomes even more complex when taken
from the perspective of the supply chain

Strategic SCM

(contd)

4. Product Life Cycle:

Product life cycles are becoming shorter as customers demand
new and a larger variety of products, leading to changing
requirements and the introduction of new supply
chains

5. Time-based Competition:
Organizations and supply chains compete in
reducing delivery lead-times and increasing
the speed to produce new products

ITC

Strategic SCM

(contd)

6. E-business:
IT especially electronic communications and e-business has strongly
stimulated the development of SCM.

7. Collaborative Planning, Forecasting &

Replenishment:

A recent development that facilitates information sharing among supply

chain participants in order to:
Improve customer service
Reduce inventories and logistics costs
Increase sales and profits

Strategic SCM

(contd)

8. Supply Chain Risk Management (SCRM):

A relatively new concept that has developed due to the risks of supply
globalization, single sourcing, outsourcing, lean systems, distribution,
etc.; it is intended to help identify the risks, protect from the
consequences of these risks and minimize any loss

Other Important Factors in

SCM
Purchasing / Procurement:
As SCM evolves, so Purchasing also continues to grow in
importance and today considers strategic supply issues far
broader than just purchasing transactions or buying,
making it critical to effective SCM

Five Core Discipline of

Strategic SCM

View Supply chain as

strategic asset
Develop an end to end
process architecture
Design organization for
performance
Build right collaborative
model
Use matrices to drive supply

Cost structure of a typical

manufacturing enterprise:

Purchased
Materials Profit 10%
60%
Overheads
Labour 15%
15%

Before the savings achieved

through better negotiations

Purchased
Materials
54%

Profit16%

Overheads
Labour 15%
15%

After the savings achieved

through better negotiations

Supply Chain Leverage on Profit

ROI

RETURN ON
INVESTMENT

SUPPLY
CURRENT FIXED
SALE
CHAIN COSTS ASSETS ASSETS
S

Manufactu Outbound
Purchas- Inbound
Value of
r-ing &
logistics
logistics
ing costs
invento
inven-tory
costs
costs
ry
costs

Capital
Customer
expenservice
diture

The Supply Chain

Supply Chain Management

SCM has resulted in a major change in the way that
we do business.
Effective supply chain management strategies have
many potential benefits:
Improved customer service

Lower inventory & higher inventory turnover

Higher productivity

Shorter lead-times
Improved ROI
Increased market share

Supply Chain Management refers:

An area where buyers, suppliers and internal customers could work
closely together to ensure goods and services delivered as
required, of the appropriate quality and at the agreed cost
Flow of Information, Goods and Funds between supplier and buyer
Extended Supply Chain Management
Competition between SCM Vs SCM
Strength of SCM is the strength of weakest link in the chain
Represents and reflects a holistic approach to the operation of the
organization

SUPPLY CHAIN MANAGEMENT

1.
2.
3.
4.
5.
6.
7.
8.
9.

Understanding the Corporate Environment

Specifying Requirements & Planning Supply
Analyzing Supply Markets
Developing Supply Strategies
Appraising & Short listing Suppliers
Obtaining & Selecting Offers
Negotiating
Preparing the Contract
Managing the Contract & Supplier
Relationships

10. Managing International

Logistics
11. Managing Inventory
12. Measuring & Evaluating
Performance
13. E-Procurement
14. Environmental Procurement
15. Group Purchase
16. Green Procurement
17. Operations Management
18. Managing Finance Along the
Supply Chain

Balancing Demand and Supply

SUPPLY

DEMAND

Supply Market Analysis will ensure Suppliers Performance:

Performance is function of Motivation, Capability and
Environment ; P = f (m,c,e)
SCM Manager must be Able, Adaptable and Agile (AAA)
SCM manager should ensure RRR and PPP
SCM Manager must have HHH
SCM manager must be good negotiator; deal maker not deal destroyer.
SCM Manager is like a chef in five star hotel
SCM manager should not only make good contract but also ensure good
contract management

Conclusion

ITC

Thank You