Supply Chain Management (SCM)

Within the organisation, the supply chain refers to a wide range of functional areas.
These include Supply Chain Management-related activities such as inbound and outbound
transportation, warehousing, and inventory control. Sourcing, procurement, and supply
management fall under the supply-chain umbrella, too. Forecasting, production planning and
scheduling, order processing, and customer service all are part of the process as well.
Importantly, it also embodies the information systems so necessary to monitor all of these
activities. Simply stated, "the supply chain encompasses all of those activities associated with
moving goods from the raw-materials stage through to the end user." Advocates for this business
process realised that significant productivity increases could only come from managing
relationships, information, and material flow across enterprise borders.

"The delivery of enhanced customer and economic value through synchronised

management of the flow of physical goods and associated information from sourcing to
consumption. "As the "from sourcing to consumption" part of our last definition suggests, though,
achieving the real potential of supply-chain management requires integration--not only of these
entities within the organisation, but also of the external partners. The latter include the
suppliers, distributors, carriers, customers, and even the ultimate consumers.
"The goal of the extended enterprise is to do a better job of serving the ultimate
consumer,". Superior service, he continues, leads to increased market share. Increased share, in
turn, brings with it competitive advantages such as lower warehousing and transportation costs,
reduced inventory levels, less waste, and lower transaction costs.
The Supply Chain Management Program integrates topics from manufacturing
operations, purchasing, transportation, and physical distribution into a unified program.
Successful supplychain management, then, coordinates and integrates all of these activities into
a seamless process. It embraces and links all of the partners in the chain. In addition to the
departments within the organization, these partners include vendors, carriers, thirdparty

companies, and information systems providers.

Characterstics of SCM :
1. Service Response:Service response logistics relates to the co-ordination of non-material activities to fulfill
service efficiently and effectively. Physical logistics & service response logistics are mutually
dependent. The service response activities must operate in systematic manner & in good coordination. Almost all products have services attached to them, & many services have attached
products.
2. Integration of information:Information is the soul of supply chain management Integration. Information integration
is sharing of information among supply chain members. It is exploiting the information
collectively by all the people. In supply chain management, the information factor is moving to &
from the top to bottom & bottom to top. From bottom it flows as data. As against from top to
bottom it moves as decision taken on the basis of data received. There has to be total
transparency of demand information not just between immediate business partners but across all
business people.
3. Technology Assimilation:Technology enabled network solution is essential for sustained future prosperity. It is
essential to see that the accepted technology has to be assimilated properly within the people.
Supply chains should access the market through both physical channel & cyber-based channel to
serve the needs of the consumer.
4. Workflow co-ordination:It is the efficiency of order fulfillment processes for the products in the supply chain. To
achieve excellence is to adopt the logistics & supply chain model to balance the costs of holding
inventories against the need to serve end consumers quickly & reliably. It is essential for
companies to design the sc that balances economies of the product in terms of cost, quality,
delivery &flexibility.
5. Synchronization:Time is important factor in supply chain management. There has to be appropriate
matching of the time period at all the stages. If there is no synchronization of the time inventory
level will go up at all the places. The goal of synchronization in supply chain. Integration is to
develop production & delivery mechanisms & processes that can produce goods to the actual enduser rate of demand for the smallest time-period manageable.

6. The Trust :To get advantages of supply chain management & to achieve corporate excellence trust
is the important factor in the chain. The trust is required in the organization & across the chain
partners. The ability of cohesive integration based on trust & felicitated by systems & technology
between supply chain members will become the greatest source of competitive advantage.
7. Quick Response:It is just like Just-In-Time or Electronic Data Interchange (EDI). It is reducing the order
cycle. Many large retail shops like Big Bazaar, they have adopted the quick response principal.
There, when products are purchased the bar codes are scanned. This records the inventory
reductions in the shops automatically. Immediately the retailer orders get automatically
generated & electronic fed into the suppliers computers from the retail stores.
The suppliers then supply the order to retailer immediately. This help in reducing cost & increase
profit. So the quick response system can positively affect inventory management.

8. Efficient Consumer Response:Efficient Consumer Response creates link between manufacturer& retailer, to reduce cycle time
Efficient Consumer Response , retailers& suppliers work closely together ; to capture point- ofsale information and then send the information back through the distribution channels when the
information is reclined ,orders are automatically cut& the product is send to the grocery store.
Efficient Consumer Response can reduce consumer prices substantially.

Charasteristics of SCM Professionals

1. Intelligence
Only an intelligent person who is capable of comprehending complexcontexts quickly and who can
subsequently make targeted decisions issuitable for the SCM profession.
2. Positive Thinking
In any walk of life, positive thinking comes from a positive perception of theworld as well as a
positive attitude. This is important for being able to tackle problems actively and with a positive
approach, so as to develop suitablesolutions and surmount any difficulties that may arise in the
process.
3. Logical and analytical aptitude
Logical thinking is one of the foundations of modern economics. It is the prerequisite for the
required power of judgment. In addition to the necessaryaptitude for logical, i.e. consequent
thinking, the SCM professional alsoneeds analytical skills as a basis for taking decisions.-

4. Entrepreneurial capabilities and target-oriented approaches

The development of the profit- function of SCM calls for entrepreneurial capabilities and target
oriented approaches. This applies particularly when decisions have to be made whether to build a
product in-house or to outsource.
5. Dedication
Being involved in production and the value-added process, the SCMProfessional in his function
has to fulfill important tasks in his company. Itis therefore crucial that he has a sense of
corporate identity and is dedicatedto his work & his dedication would be rewarded.
6. Talent to conduct negotiations
The SCM professional has to conduct many negotiations. To be able to leada successful
negotiation, he needs some fundamental skills and knowledge such as: Technical/specialist
knowledge; the ability to present ones own point of view clearly; factual and objective
argumentation; different ways of reacting to suggestions of Ones counterpart; the ability to
refute arguments;understanding and staying power; power of persuasion; creativity; the abilityto
accept a compromise as well as the determination to make decisions.
7. Receptivity and adaptability
An important prerequisite for receptivity is the ability and willingness tolisten. Fast economic
and technological changes in all corporate sectors call for a high degree of adaptability.
An aptitude to recognize and understand
ew technologies, markets and products is a prerequisite for the swift adjustments which are vital
for the success and future survival of a company
8. Communication and presentation skills
For successful operations in the modern business world it is often decisivehow well a person
presents himself or his topic. The corresponding skillsshould therefore be familiar tools for the
SCM professional.
9. Power of persuasion
The SCM professional must be capable of persuading and convincing people(his colleagues,
superiors, suppliers, etc) of his sound opinion.
10. Flexibility
Both in general conversations and business negotiations a certain level of flexibility without
giving up ones objectives can be advantageous.
11. Ability to reach a compromise
It is often necessary to negotiate a compromise to complete difficult businesstransactions. A good
compromise offers both parties a fair share of thesuccess, without having to give up ones position
completely.

12. Strength and determination to make decisions

Working in todays business environment often calls for fast and clear decisions which may have
to be made at short notice. This requires specialstrengths and determination.
13. Team skills
For handling modern purchasing processes as well as ensuring optimumcooperation and
motivation of both in-house staff and outside suppliers, theSCM professional needs team building
and team working skills to be appliedthroughout the value-added chain
14. Leadership qualities
Companies expect from their SCM professionals to be capable of leadingtheir colleagues and staff,
and also to have the ability to establish long -termsupplier relationships and lasting networks.
15.Creativity
New markets, products and suppliers as well as the need to resolve complexProblems call for a
certain level of creativity in the SCM professionalsthinking and approaches. Creative new ideas
may lead to promising resultswhere traditional practical thinking possibly might not succeed.

Supply Chains: Retail vs. Manufacturing : Similarities

At a high level, supply chains address the same needs for all companies, managing the
flow of goods and services in an optimal fashion. However the core supply chain competencies
change based on the industry vertical. Understanding these differences enhances a corporations
ability to leverage their supply chain assets and solutions effectively. Here is a quick summary of
such competencies for retail and manufacturing environments.
1. Investment/Assets:
For Retail, the primary investment is in the merchandise flowing through its network, at
rest or in motion. (We exclude any real estate assets from this discussion as these are not core to
supply chain operations. Whether a retail company owns the stores, or leases them, does not
impact its operations substantially). Therefore managing this asset (inventory in the network)
becomes core to a Retailers success. That is why the Retail supply chains are distribution
focused. After the cost of merchandise, the largest overheads in retail are related to their stocking
and distribution of goods. So much so that GMROI for Retailers is quite commonly interpreted
and computed as Gross Margin Return on Inventory (as against Gross Margin Return
on Investment). A lean distribution chain means optimal services levels between the supplying
and consuming network nodes and a higher inventory turns. The level of inventory directly

affects the operational cash-flow and ability to service customers and both these competing
needs must be managed effectively.
For Manufacturers, the goods (raw materials as well as finished goods) within the
network are a large investment, but another substantial investment is in manufacturing/process
equipment, and resources. All equipment gets depreciated over time irrespective of the
percentage utilization. However such equipment adds value to a manufacturers operations only
when it is being utilized. Therefore manufacturers must worry about maintaining optimal levels
of inventory to maintain the services levels among the supplying and consuming network nodes
but also about keeping the equipment and resources effectively utilized. In doing so the focus of
the supply chain changes considerably from being distribution focused to being asset focused
(though the relative importance of asset utilization over optimal inventory management will be
determined by the cost of raw material to finished goods ratio that represents the value added).
This introduces the need for manufacturing planning, scheduling and sequencing so that all
manufacturing operations as well as transportation operations are optimally planned for best use
of resources.
2. Size of the Network:
Another difference that accentuates the different core requirements for the Retail and
Manufacturing supply chains is simply the size of the network. A retailers network typically
consists of multiple warehouses, and a large number of retail locations that may run into
thousands. A manufacturer on the other hand will normally have only a handful of
manufacturing locations and warehouses. Therefore managing the flow of material (merchandise,
raw materials, or finished goods) through this network through optimal transportation, and
warehouse planning becomes much more important in a retail environment.
Also the sheer number of items dealt within the Retail environments is huge compared to
most Manufacturing environments (exceptions exist). This adds a large number of vendor
shipping locations to the network making it unwieldy and complex for retailers.
3. Type of Network:
As above, Retailers network primarily consists of storage locations (such as warehouses)
and selling locations (such as stores). A Manufacturers supply chain network primarily consists
of storage locations (warehouses for raw materials, or finished goods),
and manufacturing locations (factories). An extended network for both the environments can
model the vendors shipping points as well.
These nodes represent different activities in the supply chain, and therefore present
different planning challenges. While the Retail chains typically emphasize managing inventory
and service levels, the Manufacturing chains also manage resource planning and usage.
This also affects the service-time length of supply chains. Manufacturing supply chains
usually have longer end-to-end lead times (due to manufacturing process lead times) and
therefore inherently less flexible to volatility. Retail chains can be nimble if managed and
modeled well though the size of these chains tends to make them harder to optimize.

4. Capacity Constraints:
In a Retail chain, the capacity constraints are seldom modeled. Most of the capacity can
be modeled as infinite as this capacity is mostly an outsourced service. Relevant capacities in
Retail that can potentially constrain the supply planning are the supplier capacities, stocking
capacities and transportation capacities. As most retailers have multiple suppliers and
merchandise that can be easily substituted, the supplier capacities can be considered
unconstrained. Same goes for the transportation capacities, as more carriers can be added on
routes where required. That leaves the warehousing storage constraints as the only real
constraint, but even these are seldom modeled in Retail chains.
In contrast, the Manufacturing chains are constrained by manufacturing capacity
(available resources, time, skills, etc.) and this is a real constraint that must be modeled for
feasible planning.
As a result, the Retail supply planning primarily consists of propagating demand through
the supply chain tiers largely unconstrained, with only the inventory levels and inventory
multiples having been modeled. The latter adequately address the need to maintain the desired
service levels.
In contrast, the Manufacturing supply planning consists of propagating demand through
the supply chain tiers constrained by the manufacturing/processing capacity (the capacity
modeling a composite of required resource, skill, and material) at each node, in addition to the
inventory levels and inventory multiples that must be maintained for sustaining the desired
service levels.
5.Collaboration with Partners:
In both environments, collaboration with partners can become a true differentiator.
However it can provide a substantially higher return in Retail environments than in (most)
manufacturing environments. The underlying reasons go back to some of the differences
discussed above. In a manufacturing environment, there are quite a few parameters around
resource planning that are fully controlled within the corporations four walls, and these alone
can provide a compelling ROI for a supply planning exercise. For retailers the main asset being
managed through the supply planning is inventory, and a fully collaborative chain can allow for
last minute changes, diversions, and re-balancing of this asset across the network for most
optimal demand fulfillment.
Therefore each supply chain opportunity needs to be evaluated based on the industry
vertical, company specific requirements/expectations. The technology solutions then follow the
requirements and expectation analysis. There are several vendors available for supply chain
solutions, and each one brings specific strengths that companies will do well to understand and
apply in their specific situations.