Professional Documents
Culture Documents
CONTENTS
1. INTRODUCTION
2. WHAT IS A SUPPLY CHAIN
3. SUPPLY CHAIN MODELLING
4. ISSUES IN SCM
5. ACTIVITIES OF SCM
5.1) STRATEGIC
5.2) TACTICAL
5.3) OPERATIONAL
6. DEVELOPMENT OF SCM
7. METRIC & DATA COLLECTION
8. COMPONENTS OF SCM INTEGRATION
8.1) THE MANAGEMENT COMPONENTS OF SCM
8.1.1) REVERSE SC
9. SUPPLY CHAIN BUSINESS PROCESS INTEGRATION
10. SUPPLY CHAIN NETWORK
11. THEORIES OF SCM
12. SUPPLY CHAIN SUSTAINABLITY
13. SUPPLY CHAIN OPTIMIZATION
14. FLOWCASTING
15. GLOBALIZATION
16. IMPROVING SCM
17. SUPPLY CHAIN RISK MANAGEMENT
18. SUPPLY CHAIN SECURITY
19. VALUE CHAIN
20. VALUE REFERENCE MODEL
21. VALUE NETWORK
21.1) EXTERNAL VALUE NETWORK
21.2) INTERNAL VALUE NETWORK
22. IMPORTANT TERM & CONCEPT
23. FLEXIBILITY, INVENTORY, & CUSTOMER SERVICE
24. TWO UNUSUAL EXAMPLE OF SCM
25. CONCLUSION
26. REFERENCES
SUPPLY CHAIN MANAGEMENT
INTRODUCTION:
In the 21st century, changes in the business environment have contributed to the
development of supply chain networks. In general, such a structure can be defined
as "a group of semi-independent organizations, each with their capabilities, which
collaborate in ever-changing constellations to serve one or more markets in order
to achieve some business goal specific to that collaboration" (Akkermans, 2001).
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
(Coase , 1998).
Many researchers have recognized these kinds of supply network
structures as a new organization form, using terms such as "Keiretsu", "Extended
Enterprise", "Virtual Corporation", "Global Production Network", and "Next
Generation Manufacturing System". Organizations increasingly find that they must
rely on effective supply chains, or networks, to successfully compete in the
global market and networked economy. In Peter Drucker's (1998) new management
paradigms, this concept of business relationships extends beyond traditional
enterprise boundaries and seeks to organize entire business processes throughout a
value chain of multiple companies.
During the past decades, globalization, outsourcing and information technology
have enabled many organizations, such as Dell and Hewlett Packard, to successfully
operate solid collaborative supply networks in which each specialized business
partner focuses on only a few key strategic activities (Scott, 1993). This inter-
organizational supply network can be acknowledged as a new form of organization.
However, with the complicated interactions among the players, the network
structure fits neither "market" nor "hierarchy" categories (Powell, 1990)
NOW WHAT IS A ‘SUPPLY CHAIN’?
A supply chain 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 chains link value chains.
A BASIC SUPPLY CHAIN.
SUPPLY NETWORK
A supply network is a pattern of temporal and spatial processes carried out at
facility nodes and over distribution links, which adds value for customers through
the manufacturing and delivery of products. It comprises the general state of
business affairs in which all kinds of material (work-in-process material as well
as finished products) are transformed and moved between various value-add points
to maximize the value added for customers.
A supply chain is a special instance of a supply network in which raw materials,
intermediate materials and finished goods are procured exclusively as products
through a chain of processes that supply one another.
In the semiconductors industry, for example, work-in-process moves from
fabrication to assembly, and then to the test house. The term "supply network"
refers to the high-tech phenomenon of contract manufacturing where the brand owner
does not touch the product. Instead, she coordinates with contract manufacturers
and component suppliers who ship components to the brand owner. This business
practice requires the brand owner to stay in touch with multiple parties or
"network" at once.
A SUPPLY CHAIN NETWORK.
SUPPLY CHAIN MODELING
There are a number of different modeling techniques that have been used to model
the supply chain. Some of the important models that have been used in supply chain
management are.
1) The supply chain operations reference (SCOR) model; and
2) The ERP reference models.
The red arrow represents the flow of materials and information and the green arrow
represents the flow of information and backhauls. The elements are (a) the initial
raw material supplier, (b) a component supplier, (c) a manufacturer, (d) a
retailer, (e) the final customer.
There are a variety of supply chain models, which address both the upstream and
downstream sides.
The SCOR (Supply Chain Operations Reference) model, developed by the Supply Chain
Council, measures total supply chain performance. It is a process reference model
for supply-chain management, spanning from the supplier's supplier to the
customer's customer. It includes delivery and order fulfillment performance,
production flexibility, warranty and returns processing costs, inventory and asset
turns, and other factors in evaluating the overall effective performance of a
supply chain.
SCOR MODEL
The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This
framework is built on eight key business processes that are both cross-functional
and cross-firm in nature. Each process is managed by a cross-functional team,
including representatives from logistics, production, purchasing, finance,
marketing and research and development. While each process will interface with key
customers and suppliers, the customer relationship management and supplier
relationship management processes form the critical linkages in the supply chain.
ISSUES IN SUPPLY CHAIN MANAGEMENT
The classic objective of logistics is to be able to have the right products in the
right quantities (at the right place) at the right moment at minimal cost. Figure
(from NEVEM-workgroup translates this overall objective into four main areas of
concern within supply chain management.
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.
Operational
• Daily production and distribution planning, including all nodes in the
supply chain.
• Production scheduling for each manufacturing facility in the supply chain
(minute by minute).
• 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, warehousing and
transportation to customers.
• Order promising, accounting for all constraints in the supply chain,
including all suppliers, manufacturing facilities, distribution centers, and other
customers.
DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT
Six major movements can be observed in the evolution of supply chain management
studies: Creation, Integration, and Globalization (Lavassani et al., 2008a),
Specialization Phases One and Two, and SCM 2.0.
1. Creation Era
The term supply chain management was first coined by an American industry
consultant in the early 1980s. However the concept of supply chain in management,
was of great importance long before in the early 20th century, especially by the
creation of the assembly line. The characteristics of this era of supply chain
management include the need for large scale changes, re-engineering, downsizing
driven by cost reduction programs, and widespread attention to the Japanese
practice of management.
2. Integration Era
This era of supply chain management studies was highlighted with the development
of Electronic Data Interchange (EDI) systems in the 1960s and developed through
the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This
era has continued to develop into the 21st century with the expansion of internet-
based collaborative systems. This era of SC evolution is characterized by both
increasing value-added and cost reduction through integration.
3. Globalization Era
The third movement of supply chain management development, globalization era, can
be characterized by the attention towards global systems of supplier relations and
the expansion of supply chain over national boundaries and into other continents.
Although the use of global sources in the supply chain of organizations can be
traced back to several decades ago (e.g. the oil industry), it was not until the
late 1980s that a considerable number of organizations started to integrate global
sources into their core business. This era is characterized by the globalization
of supply chain management in organizations with the goal of increasing
competitive advantage, creating more value-added, and reducing costs through
global sourcing.
FLOWCASTING
Collaborative Flowcasting is a business process that connects real time daily
consumer demand to trading partners in the retail supply chain to create an
integrated and comprehensive Model of the Business. While the concept is simple
and intuitive, technology has historically limited the ability of software
applications to scale economically a complete retail supply chain (in a time-
phased manner and one year into the future) to the volumes required by the largest
retailers and their suppliers
The Collaborative Flowcasting process starts at the head of the retail supply
chain (the retail store) and creates a unique sales forecast for every product in
every store and calculates time phased requirements one year into the future all
the way from the store shelf to the factory. This process enables retail trading
partners to manage their entire retail supply chain inside a single system and
driven by A Single Set of Numbers.
The Collaborative Flowcasting business process described in Andre Martin, Mike
Doherty and Jeff Harrop’s book “Flowcasting the Retail Supply Chain.”
Actual results to date demonstrate that deploying the Collaborative Flowcasting
business process will enable retailers and their trading partners to increase
store in- stock availability into the 98-99+% range resulting in sales increases
of 3%-4% at no additional incremental costs. Inventories across retail supply
chains in factories and DC’s will be reduced in the 20% to 40+% range and the cost
of operating retail supply chains will also be reduced in the 2 to 10+% range.
GLOBALIZATION
Through the past decades we have seen an increasing rate of globalization of the
economy and thereby also of supply chains. Products are no longer produced and
consumed within the same geographical area. Even the different parts of a product
may, and often do, come from all over the world. This creates longer and more
complex supply chains, and therefore it also changes the requirements within
supply chain management. This again affects the effectiveness of computer systems
employed in the supply chain.
A longer supply chain will often involve longer order to delivery lead times.
Flaherty states, in accordance with the discussion in Section, that the
consequences of longer lead times will often be;
• less dependable forecasts as these have to be made earlier,
• reduced production flexibility, i.e. greater difficulties to adjust to order
changes,
• higher levels of inventory.
The evident answer to the problem of longer lead times is to speed up the supply
chain. But a limit is often reached beyond which further effort to shorten lead
times are futile, especially in international supply chains. Another approach is
to restructure the supply chain. This simply means to reconsider the strategic
level decisions priorly made. A third approach identified by Flaherty is changing
coordination: The order, forecasting, procurement, and information sharing
procedures among the members of the supply chain. We will dwell on the issue of
coordination in the next section.
Globalization also brings foreign competition into markets that traditionally were
local. Local companies are thereby forced to respond by improving their
manufacturing practices and supply chain management. Bhatnagar et al states that
attempts have focused, among others, on reduction of inventory levels, and
increased flexibility through reduced lead times. Yet again we see how industry
focuses on the issues of inventory management and flexibility to maintain high
levels of customer satisfaction.
IMPROVING SUPPLY CHAIN MANAGEMENT
The above sections describe issues and challenges of supply chain management. It
is time to approach solutions. A key to improved supply chain management lies in
integration and coordination important tools of supply chain managers, modeling
and simulation.
Integration and Coordination
Definitions
The Webster's dictionary defines to integrate as: To make into a whole by bringing
all parts together; unify. In an enterprise, integration can simply mean that each
unit of the organization will have access to information relevant to its task and
will understand how its actions will impact other parts of the organization
thereby enabling it to choose alternatives that optimize the organization's goals.
The key to integration is coordination. To coordinate is to manage dependencies
among activities so as to achieve coherent operation of the entire system in
question.
General and Multi-Plant Coordination
Much research effort has been put into optimizing the performance of supply
chains. The major part of the early work tends to focus on very limited segments,
e.g. only material procurement, manufacturing, or distribution, and treat these as
separate systems. Though this might lead to improved performance in the segment in
question, the complex interaction among supply chain segments is ignored. Thereby
potential gains from coordination are lost.
In later years we have seen an increasing focus on the integration of different
segments of the supply chain. As for example Cohen and Lee and Chandra and Fisher
who treat integration and coordination of production and distribution functions.
These efforts are what Bhatnagar et al., who have reviewed the existing works on
coordination, refer to as general coordination. Bhatnagar et al. distinguish
between two broad levels of coordination. General coordination is the integration
of different functions, e.g. inventory and production planning, sales, and
distribution.
THE END