Strategies of a supply chain

The supply chain has also developed its strategies, which

are reactive, stable and proficient reactive; the steady

supply chain strategy is focused on chains that are focused

on execution, efficiencies and cost performance in which

you need technology and real-time information. The

instance of a stable supply chain strategy is a salt

manufacturer with commodity oriented process, new scale

production and dedicated capital assets (Godsell, 2011).

A reactive strategy works well when a chain acts to fulfill

demand from trade partner sales and marketing strategies.

An example of the reactive supply chain strategy would be

the manufacturer of sports team apparel for the fans

competing rivals in the world championship tournament.

When a team makes it to the new round, all products are

needed for the round. However, when a team loses,

demand for apparel decreases. However, with n efficient

reactive supply chain strategy, it focuses on efficiency and

cost management on the total delivery of finished goods. So

the example of efficient reactive strategy will be a

Supermarket chain where the shops, distribution centers,

third-party logistics providers, manufacturers corporate to

replace what is sold in the shop within less than 24 hours

(Harrison, Lee, & Neale, 2005).

As one previously discussed that, there are 4 flows in the

supply chain. Those flows are; information flow, primary

product flow, primary cash flow and reverse product flow.

Information flow includes invoices, rules, and regulations,

receipts, order, sales literature, specifications. Primary cash

flow includes payments for products, supplies etc. Primary

product flow includes materials, components, supplies,

services, energy, finished products and the reverse product

flow includes returns for repair, replacement, recycling,

disposal etc (Lewis, 2013).

https://www.google.com/url?
sa=t&source=web&rct=j&url=https://www.ijser.org/researchpaper/Process-View-of-a-Supply-
Chain.pdf&ved=2ahUKEwjpspXPjsLgAhVUFogKHcHXDGUQFjABegQIDhAF&usg=AOvVaw
1-8wpe3HYJGVYhzBvq3atd

https://www.google.com/url?
sa=t&source=web&rct=j&url=https://smallbusiness.chron.com/definition-horizontal-integration-
supply-chain-
34736.html&ved=2ahUKEwi9qa7SkMLgAhUXM94KHaqOB8YQFjABegQIDRAF&usg=AOvV
aw0W9Ge1OBhurgHH6kcvJ8Ue

A supply chain is the network of vendors, distributors, manufacturers, retailers and other entities
that are directly and indirectly linked for the purpose of serving the same customer. This
interconnected and synchronized chain allows services and products to reach a large number of
consumers, both nationally and internationally. Horizontal integration is one tool used by entities
along this supply chain to expand market penetration and establish growth.

Horizontal Integration
Horizontal Integration is the expanding of a business at the same point within the supply chain,
either within the same industry or a different one. A company can achieve this growth through
internal expansion. This can occur when a retailer increases the variety of products it sells in a
specific category. For example, a hair salon that sells a limited number of shampoo brands may
add other brands to its shampoo offerings in order to appeal to a wider and more diverse customer
base.

Vertical Integration
Horizontal integration allows a company to expand and grow but the company also can achieve
growth through vertical integration. Unlike horizontal integration that occurs at the same stage of
production, vertical integration occurs through the merger or acquisition of companies at different
stages of production or distribution within the same industry. Forward integration is when the
company acquires a distributor, which is further down the supply chain. Backwards integration is
when the company acquires a supplier, which is further up the supply chain.

What is Supply Chain Management ?

Supply chain management (SCM) is a process used by companies to ensure that their supply chain
is efficient and cost-effective. A supply chain is the collection of steps that a company takes to
transform raw components into the final product. The following are five basic components of
SCM.

Plan
Develop (Source)
Make
Deliver
Return.

Plan

The first stage in supply chain management is known as plan. A plan or strategy must be
developed to address how a given good or service will meet the needs of the customers. A
significant portion of the strategy should focus on planning a profitable supply chain.

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.
Develop (Source)

Develop is the next stage in supply chain management .It involves building a strong relationship
with suppliers of the raw materials needed in making the product the company delivers. This
phase involves not only identifying reliable suppliers but also planning methods for shipping,
delivery, and payment.

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

At the third stage, make, the product is manufactured, tested, packaged, and scheduled for
delivery. 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

Then, at the logistics phase, customer orders are received and delivery of the goods is planned.
This fourth stage of supply chain management stage is aptly named 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
The final stage of supply chain management is called return. As the name suggests, during this
stage, customers may return defective products. The company will also address customer
questions in this stage.

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.

http://www.itinfo.am/eng/supply-chain-management/

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CONCEPTS > VERTICAL VS HORIZONTAL INTEGRATION > STAGES OF SUPPLY
CHAIN MANAGEMENT EVOLUTION
Stages of Supply Chain Management Evolution
Posted on October 18, 2015 by Paresh Sharma

Stage 1: Multiple Dysfunction

The nucleus firm lacks clear internal definition and goals and has no external links other than
transactional ones.

In the dysfunctional organization, this is what tends to happen:

Internal activities tend to be undertaken impulsively rather than according to plan.

Management provides only the most general sense of mission, communicated perhaps by pep talks
at the best or threats at worst.
Forecasting tends to be mostly guess work, often inflated by unwarranted marketing optimism.
Products are designated without advice from other areas that could provide guidance, such as
manufacturing or marketing.
Warehouses are cited near each market, stocked with an overabundance of inventory in
anticipation of big sale, and staffed with manual laborers who have little training.
Trucks and trains are unloaded when they arrive and loaded when an order comes in, without
much advance warning in either case.
There may be flaws of payments (but collection may be poorly executed) as well as materials but
the exchange of information tends to be tied mostly to giving orders internally, accepting bids and
sending invoices.
Material requirements planning (MRP) takes place at basic level, involving a Bill of Material
(BOM), a master schedule, and current on-hand/on-order data.
Stage 2: Semi Functional Enterprise
The nucleus firm undertakes initiatives to improve effectiveness, efficiency, and quality within
functional areas.

There is little or no overlap in decision making from one department to another.

An individual firm undertakes initiatives to improve specific functional areas. For example:

The largely manual operations in warehouses may be augmented by the addition of basic materials
– handling equipment.
Inventory management may find ways to reduce levels of inventory within the firm’s own
facilities.
Procurement might take advantage of new purchasing strategic to obtain supplies and services at
the lowest possible prices.
The traffic department may reduce transportation costs by strategic selection of carriers and
routes.
Some departments may institute more effective hard skills training and adopt strategies for making
jobs more challenging.
Marketing may develop more reliable research and forecasting techniques.
Manufacturing resource planning (MRP II) software may be in peace and the company may have
cross-functional integration of planning processes.
When the nucleus firm concentrates only on improvements within its separate departments, it may
find its efforts wasted through lack of communication.
Stage 3: Integrated Enterprise
This firm breaks down silo walls and brings functional areas together in process such as sales and
operations planning (S&OP) with a focus on companywide processes rather than individual
functions.

Historically, this shift in supply chain strategy is associated with the late 1980s and early 1990s,
the same time when personal computers were becoming more powerful, reliable and affordable.

There are a few key milestones that mark this phase:

Introduction of manufacturing and enterprise-wide software.

Increased cross-functional communication and training.
Centrally located and easily accessible database and files.
Periodic sales and operations planning meetings attended by representatives for all departments
involved.
This stage is marked differently from the previous one because of the following:

The focus on business processes is facilitated with the increased availability of e-mail, file
transfers, powerful databases, and enterprise wide software applications. Cross functional
cooperation becomes must faster and easier and takes place almost instantaneously across
functions, time zones, and international boundaries.
A variety of initiatives reduce the time it takes to get an order from a supplier, create the product,
and deliver it to the customer, including MRP II and ERP:
MRP has been upgraded to MRP II, a breakthrough development that allows cross-functional
communication between manufacturing a finance.
Enterprise Resource Planning (ERP) extends that process by adding modules for each functional
area until the most advanced version tie together entire companies. Further advances have reached
through the corporate wall to tie supply chain partners together.
Product design in some firms is now a team effort in which production engineers and other stake
holders, such as marketing and purchasing, collaborate with design engineers to “design for
marketing”, “design for logistics” or “design for the environment”. This approach results in
products that are on target for customer desires and are ready to be manufactured without making
costly modifications in processes, equipment or staffing.
There are improvements in customer service due to absolute segmentation of markets and more
efficient replenishment policies suited to each segment.
Inventory is treated more strategically as just-in-time procedures, more accurate demand planning
and improved logistics work together to make fulfillment more efficient and reliable.
Warehousing and transportation decisions are carried out in tandem to achieve the optimal balance
of cost-effectiveness and customer service.
Warehouse management benefits from more advanced equipment and automation.
At this point the nucleus firm may begin to take a step toward integration with the external
members of the chain by contracting with a logistics supplier, such as UPS, to “insource” by using
its expertise to help optimize logistics decision.
Stage 4: Extended Enterprise
The firm integrates its internal network with the internal networks of selected supply chain
partners to improve efficiency, product/service quality or both.

The starting point is generally one inside/outside partnership that points the way toward the
completely networked enterprise.

What is unique to this stage is the following:

There is an initial exploratory collaboration between a channel master and one or several partners
in chain often a manufacturer and are component supplier or a retailer and one supplier of finished
goods.
With MRP II merged with other functional applications and transformed into ERP, enterprise wide
planning software is able to link the entire internal supply chain together on one platform.
The networked enterprise is built on intranets, extranets, peer-to-peer networks, the internet, or a
combination of those platforms. Partners begin to synchronize their ERP systems across corporate
boundaries so they can share data as necessary for their efficient collaboration.
Cross-functional approaches are implemented with certain processes such as CPFR (Collaborative
Planning, Forecasting and Replenishment). Stage 4 companies institute periodic sales and
operations planning meetings in which representatives of sales and marketing, production (or
operations), and other functions meet to coordinate demand planning and production scheduling.
In stage 4, there are advances in e-commerce such as interactive sites where customers can order
products and services, track their shipment and communicate with customer service immediately
upon their arrival.
Related
Supply Chain Management Objectives
October 21, 2015
In "Supply Chain Management"
Business Plan, Supply Chain Strategy, Collaboration Relationships
October 26, 2015
In "Organizational and Supply Chain Strategy, Prioritization, capabilities and Alignment"
Role of Logistics in Supply Chain
March 5, 2015
In "Logistics Fundamentals"
Posted in Supply Chain Management, Supply Chain Management Concepts, Vertical Vs
Horizontal Integration Tagged chain, dysfunction, enterprise, evolution, extended, functional,
integrated, management, multiple, semi, supply
Post navigation
Vertical Vs Horizontal Integration →← Supply Chain Management Objectives
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THREAD PUNTER > SUPPLY CHAIN MANAGEMENT > SUPPLY CHAIN MANAGEMENT
CONCEPTS > VERTICAL VS HORIZONTAL INTEGRATION > STAGES OF SUPPLY
CHAIN MANAGEMENT EVOLUTION
Stages of Supply Chain Management Evolution
Posted on October 18, 2015 by Paresh Sharma

Stage 1: Multiple Dysfunction

The nucleus firm lacks clear internal definition and goals and has no external links other than
transactional ones.

In the dysfunctional organization, this is what tends to happen:

Internal activities tend to be undertaken impulsively rather than according to plan.
Management provides only the most general sense of mission, communicated perhaps by pep talks
at the best or threats at worst.
Forecasting tends to be mostly guess work, often inflated by unwarranted marketing optimism.
Products are designated without advice from other areas that could provide guidance, such as
manufacturing or marketing.
Warehouses are cited near each market, stocked with an overabundance of inventory in
anticipation of big sale, and staffed with manual laborers who have little training.
Trucks and trains are unloaded when they arrive and loaded when an order comes in, without
much advance warning in either case.
There may be flaws of payments (but collection may be poorly executed) as well as materials but
the exchange of information tends to be tied mostly to giving orders internally, accepting bids and
sending invoices.
Material requirements planning (MRP) takes place at basic level, involving a Bill of Material
(BOM), a master schedule, and current on-hand/on-order data.
Stage 2: Semi Functional Enterprise
The nucleus firm undertakes initiatives to improve effectiveness, efficiency, and quality within
functional areas.

There is little or no overlap in decision making from one department to another.

An individual firm undertakes initiatives to improve specific functional areas. For example:

The largely manual operations in warehouses may be augmented by the addition of basic materials
– handling equipment.
Inventory management may find ways to reduce levels of inventory within the firm’s own
facilities.
Procurement might take advantage of new purchasing strategic to obtain supplies and services at
the lowest possible prices.
The traffic department may reduce transportation costs by strategic selection of carriers and
routes.
Some departments may institute more effective hard skills training and adopt strategies for making
jobs more challenging.
Marketing may develop more reliable research and forecasting techniques.
Manufacturing resource planning (MRP II) software may be in peace and the company may have
cross-functional integration of planning processes.
When the nucleus firm concentrates only on improvements within its separate departments, it may
find its efforts wasted through lack of communication.
Stage 3: Integrated Enterprise
This firm breaks down silo walls and brings functional areas together in process such as sales and
operations planning (S&OP) with a focus on companywide processes rather than individual
functions.
Historically, this shift in supply chain strategy is associated with the late 1980s and early 1990s,
the same time when personal computers were becoming more powerful, reliable and affordable.

There are a few key milestones that mark this phase:

Introduction of manufacturing and enterprise-wide software.

Increased cross-functional communication and training.
Centrally located and easily accessible database and files.
Periodic sales and operations planning meetings attended by representatives for all departments
involved.
This stage is marked differently from the previous one because of the following:

The focus on business processes is facilitated with the increased availability of e-mail, file
transfers, powerful databases, and enterprise wide software applications. Cross functional
cooperation becomes must faster and easier and takes place almost instantaneously across
functions, time zones, and international boundaries.
A variety of initiatives reduce the time it takes to get an order from a supplier, create the product,
and deliver it to the customer, including MRP II and ERP:
MRP has been upgraded to MRP II, a breakthrough development that allows cross-functional
communication between manufacturing a finance.
Enterprise Resource Planning (ERP) extends that process by adding modules for each functional
area until the most advanced version tie together entire companies. Further advances have reached
through the corporate wall to tie supply chain partners together.
Product design in some firms is now a team effort in which production engineers and other stake
holders, such as marketing and purchasing, collaborate with design engineers to “design for
marketing”, “design for logistics” or “design for the environment”. This approach results in
products that are on target for customer desires and are ready to be manufactured without making
costly modifications in processes, equipment or staffing.
There are improvements in customer service due to absolute segmentation of markets and more
efficient replenishment policies suited to each segment.
Inventory is treated more strategically as just-in-time procedures, more accurate demand planning
and improved logistics work together to make fulfillment more efficient and reliable.
Warehousing and transportation decisions are carried out in tandem to achieve the optimal balance
of cost-effectiveness and customer service.
Warehouse management benefits from more advanced equipment and automation.
At this point the nucleus firm may begin to take a step toward integration with the external
members of the chain by contracting with a logistics supplier, such as UPS, to “insource” by using
its expertise to help optimize logistics decision.
Stage 4: Extended Enterprise
The firm integrates its internal network with the internal networks of selected supply chain
partners to improve efficiency, product/service quality or both.

The starting point is generally one inside/outside partnership that points the way toward the
completely networked enterprise.

What is unique to this stage is the following:

There is an initial exploratory collaboration between a channel master and one or several partners
in chain often a manufacturer and are component supplier or a retailer and one supplier of finished
goods.
With MRP II merged with other functional applications and transformed into ERP, enterprise wide
planning software is able to link the entire internal supply chain together on one platform.
The networked enterprise is built on intranets, extranets, peer-to-peer networks, the internet, or a
combination of those platforms. Partners begin to synchronize their ERP systems across corporate
boundaries so they can share data as necessary for their efficient collaboration.
Cross-functional approaches are implemented with certain processes such as CPFR (Collaborative
Planning, Forecasting and Replenishment). Stage 4 companies institute periodic sales and
operations planning meetings in which representatives of sales and marketing, production (or
operations), and other functions meet to coordinate demand planning and production scheduling.
In stage 4, there are advances in e-commerce such as interactive sites where customers can order
products and services, track their shipment and communicate with customer service immediately
upon their arrival.
Related
Supply Chain Management Objectives
October 21, 2015
In "Supply Chain Management"
Business Plan, Supply Chain Strategy, Collaboration Relationships
October 26, 2015
In "Organizational and Supply Chain Strategy, Prioritization, capabilities and Alignment"
Role of Logistics in Supply Chain
March 5, 2015
In "Logistics Fundamentals"
Posted in Supply Chain Management, Supply Chain Management Concepts, Vertical Vs
Horizontal Integration Tagged chain, dysfunction, enterprise, evolution, extended, functional,
integrated, management, multiple, semi, supply
Post navigation
Vertical Vs Horizontal Integration →← Supply Chain Management Objectives
Leave a Reply
Your email address will not be published. Required fields are marked *

Comment

Name *

Email *
Website

Time limit is exhausted. Please reload CAPTCHA.

9 × 6 =

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Notify me of new posts by email.

Search...

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information Logistics management market microsoft model nav payment planning power rapid
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ShareThis Copy and PasteThread Punter DYNAMICS 365 BUSINESS CENTRAL DYNAMICS
NAV AZURE POWER BI SUPPLY CHAIN MANAGEMENT ABOUT THREAD PUNTER >
SUPPLY CHAIN MANAGEMENT > SUPPLY CHAIN MANAGEMENT CONCEPTS >
VERTICAL VS HORIZONTAL INTEGRATION > STAGES OF SUPPLY CHAIN
MANAGEMENT EVOLUTION Stages of Supply Chain Management Evolution Posted on
October 18, 2015 by Paresh Sharma Stage 1: Multiple Dysfunction The nucleus firm lacks clear
internal definition and goals and has no external links other than transactional ones. In the
dysfunctional organization, this is what tends to happen: Internal activities tend to be undertaken
impulsively rather than according to plan. Management provides only the most general sense of
mission, communicated perhaps by pep talks at the best or threats at worst. Forecasting tends to be
mostly guess work, often inflated by unwarranted marketing optimism. Products are designated
without advice from other areas that could provide guidance, such as manufacturing or marketing.
Warehouses are cited near each market, stocked with an overabundance of inventory in
anticipation of big sale, and staffed with manual laborers who have little training. Trucks and
trains are unloaded when they arrive and loaded when an order comes in, without much advance
warning in either case. There may be flaws of payments (but collection may be poorly executed)
as well as materials but the exchange of information tends to be tied mostly to giving orders
internally, accepting bids and sending invoices. Material requirements planning (MRP) takes place
at basic level, involving a Bill of Material (BOM), a master schedule, and current on-hand/on-
order data. Stage 2: Semi Functional Enterprise The nucleus firm undertakes initiatives to improve
effectiveness, efficiency, and quality within functional areas. There is little or no overlap in
decision making from one department to another. An individual firm undertakes initiatives to
improve specific functional areas. For example: The largely manual operations in warehouses may
be augmented by the addition of basic materials – handling equipment. Inventory management
may find ways to reduce levels of inventory within the firm’s own facilities. Procurement might
take advantage of new purchasing strategic to obtain supplies and services at the lowest possible
prices. The traffic department may reduce transportation costs by strategic selection of carriers and
routes. Some departments may institute more effective hard skills training and adopt strategies for
making jobs more challenging. Marketing may develop more reliable research and forecasting
techniques. Manufacturing resource planning (MRP II) software may be in peace and the company
may have cross-functional integration of planning processes. When the nucleus firm concentrates
only on improvements within its separate departments, it may find its efforts wasted through lack
of communication. Stage 3: Integrated Enterprise This firm breaks down silo walls and brings
functional areas together in process such as sales and operations planning (S&OP) with a focus on
companywide processes rather than individual functions. Historically, this shift in supply chain
strategy is associated with the late 1980s and early 1990s, the same time when personal computers
were becoming more powerful, reliable and affordable. There are a few key milestones that mark
this phase: Introduction of manufacturing and enterprise-wide software. Increased cross-functional
communication and training. Centrally located and easily accessible database and files. Periodic
sales and operations planning meetings attended by representatives for all departments involved.
This stage is marked differently from the previous one because of the following: The focus on
business processes is facilitated with the increased availability of e-mail, file transfers, powerful
databases, and enterprise wide software applications. Cross functional cooperation becomes must
faster and easier and takes place almost instantaneously across functions, time zones, and
international boundaries. A variety of initiatives reduce the time it takes to get an order from a
supplier, create the product, and deliver it to the customer, including MRP II and ERP: MRP has
been upgraded to MRP II, a breakthrough development that allows cross-functional
communication between manufacturing a finance. Enterprise Resource Planning (ERP) extends
that process by adding modules for each functional area until the most advanced version tie
together entire companies. Further advances have reached through the corporate wall to tie supply
chain partners together. Product design in some firms is now a team effort in which production
engineers and other stake holders, such as marketing and purchasing, collaborate with design
engineers to “design for marketing”, “design for logistics” or “design for the environment”. This
approach results in products that are on target for customer desires and are ready to be
manufactured without making costly modifications in processes, equipment or staffing. There are
improvements in customer service due to absolute segmentation of markets and more efficient
replenishment policies suited to each segment. Inventory is treated more strategically as just-in-
time procedures, more accurate demand planning and improved logistics work together to make
fulfillment more efficient and reliable. Warehousing and transportation decisions are carried out in
tandem to achieve the optimal balance of cost-effectiveness and customer service. Warehouse
management benefits from more advanced equipment and automation. At this point the nucleus
firm may begin to take a step toward integration with the external members of the chain by
contracting with a logistics supplier, such as UPS, to “insource” by using its expertise to help
optimize logistics decision. Stage 4: Extended Enterprise The firm integrates its internal network
with the internal networks of selected supply chain partners to improve efficiency, product/service
quality or both. The starting point is generally one inside/outside partnership that points the way
toward the completely networked enterprise. What is unique to this stage is the following: There is
an initial exploratory collaboration between a channel master and one or several partners in chain
often a manufacturer and are component supplier or a retailer and one supplier of finished goods.
With MRP II merged with other functional applications and transformed into ERP, enterprise wide
planning software is able to link the entire internal supply chain together on one platform. The
networked enterprise is built on intranets, extranets, peer-to-peer networks, the internet, or a
combination of those platforms. Partners begin to synchronize their ERP systems across corporate
boundaries so they can share data as necessary for their efficient collaboration. Cross-functional
approaches are implemented with certain processes such as CPFR (Collaborative Planning,
Forecasting and Replenishment). Stage 4 companies institute periodic sales and operations
planning meetings in which representatives of sales and marketing, production (or operations), and
other functions meet to coordinate demand planning and production scheduling. In stage 4, there
are advances in e-commerce such as interactive sites where customers can order products and
services, track their shipment and communicate with customer service immediately upon their
arrival. Related Supply Chain Management Objectives October 21, 2015 In "Supply Chain
Management" Business Plan, Supply Chain Strategy, Collaboration Relationships October 26,
2015 In "Organizational and Supply Chain Strategy, Prioritization, capabilities and Alignment"
Role of Logistics in Supply Chain March 5, 2015 In "Logistics Fundamentals" Posted in Supply
Chain Management, Supply Chain Management Concepts, Vertical Vs Horizontal Integration
Tagged chain, dysfunction, enterprise, evolution, extended, functional, integrated, management,
multiple, semi, supply Post navigation Vertical Vs Horizontal Integration →← Supply Chain
Management Objectives Leave a Reply Your email address will not be published. Required fields
are marked * Comment Name * Email * Website Time limit is exhausted. Please reload
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TAG CLOUD 365 2016 2017 account azure bi business cash central chain chart configuration
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information Logistics management market microsoft model nav payment planning power rapid
sales segment segmentation Service setup standard start strategy supply user Theme by Out the
Box Thread Punter DYNAMICS 365 BUSINESS CENTRAL DYNAMICS NAV AZURE
POWER BI SUPPLY CHAIN MANAGEMENT ABOUT THREAD PUNTER > SUPPLY
CHAIN MANAGEMENT > SUPPLY CHAIN MANAGEMENT CONCEPTS > VERTICAL VS
HORIZONTAL INTEGRATION > STAGES OF SUPPLY CHAIN MANAGEMENT
EVOLUTION Stages of Supply Chain Management Evolution Posted on October 18, 2015 by
Paresh Sharma Stage 1: Multiple Dysfunction The nucleus firm lacks clear internal definition and
goals and has no external links other than transactional ones. In the dysfunctional organization,
this is what tends to happen: Internal activities tend to be undertaken impulsively rather than
according to plan. Management provides only the most general sense of mission, communicated
perhaps by pep talks at the best or threats at worst. Forecasting tends to be mostly guess work,
often inflated by unwarranted marketing optimism. Products are designated without advice from
other areas that could provide guidance, such as manufacturing or marketing. Warehouses are
cited near each market, stocked with an overabundance of inventory in anticipation of big sale,
and staffed with manual laborers who have little training. Trucks and trains are unloaded when
they arrive and loaded when an order comes in, without much advance warning in either case.
There may be flaws of payments (but collection may be poorly executed) as well as materials but
the exchange of information tends to be tied mostly to giving orders internally, accepting bids and
sending invoices. Material requirements planning (MRP) takes place at basic level, involving a
Bill of Material (BOM), a master schedule, and current on-hand/on-order data. Stage 2: Semi
Functional Enterprise The nucleus firm undertakes initiatives to improve effectiveness, efficiency,
and quality within functional areas. There is little or no overlap in decision making from one
department to another. An individual firm undertakes initiatives to improve specific functional
areas. For example: The largely manual operations in warehouses may be augmented by the
addition of basic materials – handling equipment. Inventory management may find ways to reduce
levels of inventory within the firm’s own facilities. Procurement might take advantage of new
purchasing strategic to obtain supplies and services at the lowest possible prices. The traffic
department may reduce transportation costs by strategic selection of carriers and routes. Some
departments may institute more effective hard skills training and adopt strategies for making jobs
more challenging. Marketing may develop more reliable research and forecasting techniques.
Manufacturing resource planning (MRP II) software may be in peace and the company may have
cross-functional integration of planning processes. When the nucleus firm concentrates only on
improvements within its separate departments, it may find its efforts wasted through lack of
communication. Stage 3: Integrated Enterprise This firm breaks down silo walls and brings
functional areas together in process such as sales and operations planning (S&OP) with a focus on
companywide processes rather than individual functions. Historically, this shift in supply chain
strategy is associated with the late 1980s and early 1990s, the same time when personal computers
were becoming more powerful, reliable and affordable. There are a few key milestones that mark
this phase: Introduction of manufacturing and enterprise-wide software. Increased cross-functional
communication and training. Centrally located and easily accessible database and files. Periodic
sales and operations planning meetings attended by representatives for all departments involved.
This stage is marked differently from the previous one because of the following: The focus on
business processes is facilitated with the increased availability of e-mail, file transfers, powerful
databases, and enterprise wide software applications. Cross functional cooperation becomes must
faster and easier and takes place almost instantaneously across functions, time zones, and
international boundaries. A variety of initiatives reduce the time it takes to get an order from a
supplier, create the product, and deliver it to the customer, including MRP II and ERP: MRP has
been upgraded to MRP II, a breakthrough development that allows cross-functional
communication between manufacturing a finance. Enterprise Resource Planning (ERP) extends
that process by adding modules for each functional area until the most advanced version tie
together entire companies. Further advances have reached through the corporate wall to tie supply
chain partners together. Product design in some firms is now a team effort in which production
engineers and other stake holders, such as marketing and purchasing, collaborate with design
engineers to “design for marketing”, “design for logistics” or “design for the environment”. This
approach results in products that are on target for customer desires and are ready to be
manufactured without making costly modifications in processes, equipment or staffing. There are
improvements in customer service due to absolute segmentation of markets and more efficient
replenishment policies suited to each segment. Inventory is treated more strategically as just-in-
time procedures, more accurate demand planning and improved logistics work together to make
fulfillment more efficient and reliable. Warehousing and transportation decisions are carried out in
tandem to achieve the optimal balance of cost-effectiveness and customer service. Warehouse
management benefits from more advanced equipment and automation. At this point the nucleus
firm may begin to take a step toward integration with the external members of the chain by
contracting with a logistics supplier, such as UPS, to “insource” by using its expertise to help
optimize logistics decision. Stage 4: Extended Enterprise The firm integrates its internal network
with the internal networks of selected supply chain partners to improve efficiency, product/service
quality or both. The starting point is generally one inside/outside partnership that points the way
toward the completely networked enterprise. What is unique to this stage is the following: There is
an initial exploratory collaboration between a channel master and one or several partners in chain
often a manufacturer and are component supplier or a retailer and one supplier of finished goods.
With MRP II merged with other functional applications and transformed into ERP, enterprise wide
planning software is able to link the entire internal supply chain together on one platform. The
networked enterprise is built on intranets, extranets, peer-to-peer networks, the internet, or a
combination of those platforms. Partners begin to synchronize their ERP systems across corporate
boundaries so they can share data as necessary for their efficient collaboration. Cross-functional
approaches are implemented with certain processes such as CPFR (Collaborative Planning,
Forecasting and Replenishment). Stage 4 companies institute periodic sales and operations
planning meetings in which representatives of sales and marketing, production (or operations), and
other functions meet to coordinate demand planning and production scheduling. In stage 4, there
are advances in e-commerce such as interactive sites where customers can order products and
services, track their shipment and communicate with customer service immediately upon their
arrival. Related Supply Chain Management Objectives October 21, 2015 In "Supply Chain
Management" Business Plan, Supply Chain Strategy, Collaboration Relationships October 26,
2015 In "Organizational and Supply Chain Strategy, Prioritization, capabilities and Alignment"
Role of Logistics in Supply Chain March 5, 2015 In "Logistics Fundamentals" Posted in Supply
Chain Management, Supply Chain Management Concepts, Vertical Vs Horizontal Integration
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