Introduction

Supply chain management is becoming a vital part of an organizations strategic plan. Many factors are responsible for supply chain managements increased importance. These include the desire to quickly adapt to changes in customers demands, globalization of the market place creating longer supply chains, shorter product life cycles, and new technologies. Additionally, organizations are looking to create long-term partnerships with fewer suppliers to improve supply chain performance.

meaning
Supply chain management is a relatively new concept in business. The evolution from materials management or purchasing reflects its new strategic role. Companies have changed from isolating their technical core with raw materials and finished goods inventory to working more closely with suppliers and customers. This has allowed organizations to react more quickly to changing customers demands. Several factors have impacted the supply chain including reduced number of suppliers, increased competition, shorter product life cycles, technology, quick response programs, and shared or reduced risk. Advantages of supply chain management A successful supply chain requires trust, long-term relationships, information sharing, individual strengths of organizations, and choosing the right type of supply chain. Supplier managed inventories, and consignment inventories are becoming more common. ERP systems are a new generation of software that is providing a single, uniform software platform and database to facilitate transactions among the functional areas within a firm, and between firms and their customers and vendors. 7. ERP systems are an outgrowth of MRP. 8. ERP systems reduce the number of errors through the use of a common database, speed customer response times, speed order fulfillment times, and improve overall communication within the organization. 9. Reasons for ERP failure include lack of top management commitment, lack of adequate resources, lack of proper training, and lack of communication. Supply chain management

can be defined as the process of planning and implementing and at the same time controlling the supply chain in the most efficient possible way, the supply chain management involves controlling of finished goods from the origin to the consumption level. The traditional supply chain involved two or more companies which were in a series that enabled the link between the customers and the supplier. In this traditional method therefore the finished goods are supplied to the customer through a chain of distributors One of the advantages of supply chain management over the traditional chain management is that suppliers share valuable information throughout the chain and this information includes information on demand, forecasts on sales and demand and transportation, through sharing of information the firms in the chain will become more efficient and as a result this will reduce the cost of production rendering them to have competitive advantages over other firms. Disadvantages Supply Chain Management
individual strengths of the organizations. However, by having fewer suppliers, the risk of something occurring to your source of an item is increased because of a lack of redundancy. 2. Supply chain management as presented in this chapter pertains primarily to goods. What would be the different steps or elements in a supply chain for a service? Give an example. Generally, the supply chain is shorter since there is very little, if any, raw material or component parts. 3. How has technology accelerated the trend toward disintermediation?

Better communications allows the gap to close between suppliers and customers regardless of their location in the world. 4. What are the main differences between having a vendors employees working in your manufacturing operation and you haring your own employees to do the same work? The vendor's employees have direct access to the vendor's database and can provide the needed information in a shorter period of time. 5. Identify all of the steps in the supply chain for a hamburger that you buy at McDonalds. How might this supply chain differ for a McDonalds located in a developing country? The steps would be growing of the food and manufacture of paper product (wrappers, etc.) to processing of the food, to distribution to the stores, to the customer. The availability of certainfoods in developing countries could alter this system 1st we have to understand that Supply Chain purpose is providing the required goods or services to the firm in line with all relevant plans and forecasts. We have not to forget that Supply Chain unit is one of the strategic tools for the organization. On the other side, Supply Chain considered as the referee between production and operations environment, and Trade Marketing and Distribution environment, taking in consideration the soled bond between Supply Chain, and Finance. In line to the above, Lean supply chain should demonstrate the ability to supply and control the required inventory levels in line to the projected demand plans in a way to satisfy the needs considering OOS (Out Of Stock factors) and OVS (Overstock factors). The key element is having dynamic safety stock rather than fixed safety stock in order to balance the required stock satisfaction as well as the desired financial factors such as cash flow, operating cost, inventory holding capital level, and so on. The way of implementing such approach can be discussed later as it consists of big list of control points from all angels. However, the major risks that could contribute to well recognized pitfalls could be summarized in the following examples: - Insufficient monitoring and control to the suppliers delivery time. - Lack of suppliers engagements. - Lack of supply chain integration, and collaboration especially with trade marketing and distribution teams. - Lack of close inventory review out of not having periodical checks. - Lack of clear responsibility line inside supply chain management. - Lack of understanding and visibility to the desired marketing activities. - Lack of understanding and recognition to the production constraints and managementwell as capacity planning.

Logistics and distribution is one of the key components to the success of any business. At best, the logistics function will go almost unnoticed. At the other end of the spectrum, poor logistics can result in low KPI fulfilment and the loss of sales opportunities. One key consideration is whether to keep logistics and distribution in house or to contract such operations out to a dedicated third party logistics provider.Third party logistics companies are specialists who will provide a range of functions within the distribution channel for a given fee. Exactly what a 3PL provider offers will vary however, most third party logistics companies will offer at least a basic road haulage service and some from of warehousing operation.Fees range from provider to provider however, common forms of contract include open and closed book contracts. In the open book model, buyers will pay a management free to a 3PL company based upon a percentage of the cost of the operation. On the other hand, closed book models see the provider charging a fixed rate for various services, such as a charge for distribution based upon a radial charge for a specified tonnage transported.Third

party logistics providers range in size from large multinational corporations, capable of handling international operations, to small regional providers offering only a basic transport service. The major advantage of using a third party logistics company is the potential for both cost savings and improvements in performance. As specialists, in effect 3PL companies should be able to provide greater levels of performance, thus resulting in a higher on time performance indicator.In addition, many third party logistics companies also operate on multiple contracts. As such, this should result in cost savings through economies of scale and the effects of operating in a wider network with opportunities such as backhaul.The disadvantage of a third party logistics contract is that in effect, a company using such a service loses a great deal of control over its logistics function. The effects of this can become apparent, where the performance of a 3PL company does not meet initial expectations and service levels subsequently fall. In addition, whilst 3PL companies should be able to offer cheaper logistics solutions in theory. The savings may often be eroded by management fees and other costs associated with third party logistics companies. In summary, 3PL providers can often reduce costs and improve performance levels, where a reputable provider is chosen. However, not all third party logistics companies will live up to expectations, thus leading to an experience of inflexibility and loss of control. To remain competitive, small firms have to offer superior quality goods at the lowest prices possible. The need to minimize product costs makes effective supply chain management vital. There are costs involved in every process of the product life cycle, and it is the responsibility of management to ensure that these costs are kept low, so the company can continue to pass along these savings to the consumer. Despite the advantages associated with the supply chain management there exist disadvantages which are associated with it as compared to the traditional chain management. One of this disadvantage include the issue of employment, the traditional supply chain management involved salesmen and other managers who were to ensure that the transaction is completed as required, today after the introduction of this new supply chain management there has been increased unemployment which has resulted to high unemployment levels in the economies, despite the new management system providing a faster and convenient way to improve both the firms objectives and the customer.

The other disadvantage is that initializing the supply chain management is complex and requires a firm to invest more in terms of capital. therefore this method is costly and very complex as compared to the traditional method. It is also costly in that it requires the management of various activities within the firm.

Reduced Costs Supply chain management involves identifying those processes that increase cost without increasing the value of the final product. These processes are wasteful and do not add value, and should be eliminated whenever possible. Increased Efficiency Resource wastage is a common source of increase production costs. Often this is due to improper planning. A company that employs supply chain management is able to achieve efficiency of its operations since only those value adding activities are encouraged. This ensures that the organizations processes flow smoothly and output keeps inline with the company's needs. Increased Output A company that employs supply chain management can foster close-knit relationships with its suppliers and customers, ensuring the timely fulfillment of orders. A company known for its timeliness and responsiveness will attract more customers, and will grow as a result of increased output and sales. Increased Profits Businesses exist to make profits. One of the most efficient ways of increasing a companys profits is by ensuring that costs are kept as low as possible. The application of supply chain management by a small company leads to cost reductions due to elimination of wasteful processes. Since these are operating costs for the company, the savings on these costs reflect increased profits by the company. A Supply Chain Management (SCM) model embeds modules like Demand Management, Supplier Relationship Management (SRM), Product Technology, Supply Chain Optimization, Warehouse Management System (WMS), Production and Supply Planning, Service Parts Planning, Transportation Management System (TMS), International Trade Logistics (ITL), Order Management, and Supply Chain Event Managemet

The advantages are obvious from a wealth of existing materials, and they are real. The downside risks center on the limited-vision notion that Lean can be a sporadically applied tool. It must be built into the operational (and planning) DNA of

the supply chain organization (which is much more than a lip-service exercise). Further, Lean execution must be flawless - there is extraordinarily little room for error. There are several advantages in building a leaner supply chain: - Less end to end supply chain inventory means free up capital for value added investments, lower inventory management operating cost, lower risk of no-perfoming inventory (blocked finish product due to damages, out of age, phase out due to new initiatives, etc) - Shorter lead times from order to delivery means better response to demand volatility hence better service. - Shorter initiatives lead time means faster response to new emerging consumers/customers needs - higher reliable and more stable operations means lower operating cost and higher assets utilization. Building a leaner supply chain is a continuos improvement process which requires strong integration and synchronization accross the supply chain blocks (suppliers, manufacturers, logistics, customers) with the consumer demand and each organizations must be equipped with right capabilities (people, methods, systems, tools, equipments) and culture to pursue the lean concepts. Some of the risks could be Conclusion the initial investment and time necessary to build the right capability & culture to pursue a lean supply chain. The more complex is the supply chain (ex: high # product references, high # of materials, # delivery points, etc..) the higher is the investment. the integration/synchronization with suppliers could lead to long term contracts and dependable suppliers which could lead to business continuity risks. sporadic issues such as shortage of material, distribution capacity, etc..could have an impact on service and even sales A good approch for any organization is to pilot in a small scale, learn and expand by reapplying acquired best practices, this will also help generating the right end to end supply chain culture necessary for the success of the lean concept.

References
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CONTENTS Introduction Meanning Advantages of supply chain management Disadvantagews of supply chain management Conclusion

ANNAMALAI UNIVERSITY
DEPARTMENT OF BUSINESS ADMINISTATION

Assignment
Name : Class: Dinesh.N MBA 2 nd year A batch

Rollno: 64 Subject: Logistic and supply chain management Topic:drawback of advantages&disadvantages scm Model

Date: 10/03/2012

Submited to Mr.T.Vealmurugan (assist.prof)