Assignment 1 G.

Nagarjun II MBA 10459

1) What is a supply chain?

Supply chain:

A system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer to integrate demand and supply. Its activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems which are not unusual today, products may reenter the supply chain at any point where residual value is recyclable. Supply chains link value chains wherein information, products and money flow from end to end.

2) How do the firms customers benefit from SCM? What about the end customer/

consumer? Consider the following diagram:

The above diagram explains the three flows in the supply chain: material, financial and information, each one being vital. Supply chain Management helps in managing the network of interconnected operations in the supply chain. So everybody in the supply chain is the customer to the one above in the supply chain. Supply chain management enables proper design of the product, focus on each firms core competence, inventory management, logistics, concurrent engineering, through better communication across the supply chain.

Enables enhanced productivity and reduction in costs.

Since the supply chain spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption, a better SCM leads to lesser bull whip effect and consequently, the needs of the end customer is met profitably.
3) Could a firm have more than one supply chain?

Yes, a firm can have more than one supply chain.

Any firm wherein the product that needs to be assembled at any stage has multiple

suppliers, like Barbie Doll assembly.

Any firm whose product needs to be distributed through different channels. A combination of the above two. It is important to note that with globalization, widespread communication adn

development of infrastructure, multiple supply chains are common today with firms focussing on their core competency and outsourcing all other activites to others in the supply chain.

4) Why is a SCM more popular today than say 20 years ago?

SCM is a Competitive business edge today.

In many organizations, materials form the largest single expenditure item, accounting for nearly 50 to 65 % of the total expenditure. With increased competition, cost reduction in business operations yet making available various products to customers, as per their requirement, come into sharp focus.

Maintaining a flawless supply chain across all its operations thus becomes absolutely necessary for any business.

Conclusion: Supply chain management has become the cutting edge of business, after product quality and manufacturing capabilities of any business firm. Earlier firms used to compete with other firms. However in todays era of increased competition, firms compete among each other on their supply chains.
5) What role do you think trust plays in the practice of supply chain

management? Importance of Trust in task:

Direct effect on work group process and performance leading to better coordination and greater efficiency in a high-trust group. High trust between parties reduces the transaction costs; make savings in their operations; makes possible the sharing of sensitive information, exchanging technical and knowledge of the project and permits joint projects of various kinds between the parties. Enables sharing up-to-date information between participants leading to minimisation of errors, reduction of time delays and breaking the widespread rework cycle, which is crucial in both service and manufacturing organizations..

Importance of Trust in relationship:

Trust is a major component in building a cooperative relationship between partners. It creates an increase in openness between parties. Trust is perceived as a result of effective collaborative relationships, leading to higher levels of partner satisfaction.

Conclusion: Trust is an essential element of employing relationship management approaches in supply chain management. There is a need for culture change to bring about increased cooperation on the basis of trust between parties on a long-term basis. With strong relations, based on trust, a win-win situation can be created for all the relevant stakeholders in the supply chain. Trust in the Supply Chain Management is a sustainable approach to the industry in terms of people, environment and economics.
6) Is supply chain another passing fad or her to stay?

To answer this question we need to see the factors that have played a great role in restructuring the concept of Supply Chain management:

Movement of purchasing power to consumers from manufacturers.

Greater access to information, choice. Markets becoming customer centric from product centric.

Widespread internet and mobile phone for better reach and connectivity. Age of neo-capitalism with Laissez Faire becoming truer again. Globalisation Policy and regulation favouring more competition.

Conclusion: the above mentioned changes that have played a huge role in restricting the supply chain management across industries today are there to stay for long. So the concept of Supply Chain, Supply Chain Management re there to stay and is not a fad.
7) What are the differences in the terms purchasing, logistics, inventory

management and SCM? Thought the terms mentioned above are used interchangeably by a lay man, in strict business parlance there are certain key differences between the terms mentioned:
a) Purchasing:

It refers to a business or organization attempting for acquiring goods or services to accomplish the goals of the enterprise. It is different from procurement as the latter includes Expediting, Supplier Quality, and Traffic and Logistics (T&L) in addition to Purchasing.

b) Logistics:

It is a channel of the supply chain which adds the value of time and place utility. The management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. It involves the integration of information, transportation, inventory, warehousing, material handling and packaging, and often security.

c) Inventory management: The process of efficiently overseeing the constant flow of units into and out of an existing inventory.

It usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory. Effective inventory management is all about knowing what is on hand, where it is in use, and how much finished product results.

d) Supply Chain management:

The management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. It spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain). Technically speaking it involves "design, planning, execution, control, and monitoring of supply chain activities with the objective of:
Creating net value, Building a competitive infrastructure, Leveraging worldwide logistics, Synchronizing supply with demand

Measuring performance globally."

8) What are the significant differences between SC in product centric and customer

centric era?

The manufacturer vested greater power in the product centric era while the customer is the king is true in the customer centric era.

Greater access to information, choice in the customer centric era. Resources predominantly controlled by the manufactures in the product centric era. Focus was on production, cost and control in the product centric era whereas focus shifted to design, innovation adn service in customer centric era.

A movement from push to pull system. Era of globally local, wide spread technology, greater connectivity. Many external changes like favourable government policies towards competition, deregulation, technology transfers Supply chain management, Customer Relationship management; Administration has become a competitive strategy in customer centric era. A movement from mass production to customization to mass customization evident today for manufacturers in the supply chain.

9) Can non-profit, educational, government organizations benefit from SCM?

Any organization in which there are flow of materials, information and money can benefit from SCM. Since non- profit, educational, government organizations are aimed at delivering greater social value to consumers; generally not focussing on the revenue per se, SCM plays a vital role in cost reduction.
Better Communication in the supply chain. Usage of technology for quicker information. Application of CRM through SCM across the supply chain. Reduction of non-value adding expenditure. Ensuring the right product at the right place at the right time for the

right person. Conclusion: Using SCM effectively, non-profit, educational, government organizations can reduce their extra cost that is incurred on account of improper planning and non-value adding expenditure across the supply chain, they can use these cost savings to do further good to the society in which they are providing their service.

10) How can a small business like, say the Books and Publications Trust, Hostel

Cafeteria/ Suppliers store benefit from SC?

Better forecast of demand:

Increasing vendor float.

Increasing the accounts payable period.

 Decreasing the inventory levels. Decreasing the accounts receivables period.

Better working capital management on account of better vendor float. Usage of gains above for other profitable investment. Higher margins and greater satisfaction among all members in the supply chain.

11) Describe an example of how the local optimisation mindset could be detrimental

to the overall functioning of the SC/organization?

What is good at micro level need not be good at macro level. The optimization in the supply chain is not simply the sum of optimization of all its members in the supply chain. The concept of transfer pricing in the supply chain for maximising the profits of each individual firm may lead to losses in the overall supply chain with net increase equalling net decreases in the supply chain. The example in any industry wherein one entity in the supply chain to maximise his profit, leads to a fall in the profits of the other entities in the supply chain. Consider the example of:
Wal-Mart: Wal-Mart uses Low cost leadership as its strategy. Wal-Mart very good in local optimization of providing low cost to its

customers.
Very tough on its suppliers. Strict compliance needs to be adhered to its rules by the employees of

its suppliers.
Very destructive for other members in its supply chain as they are need

to sacrifice many things for profits with Wal-Mart.

(Hey! Dont these suppliers have other clients to leave Wal-Mart???

To be discussed in class.)

Note: The debate of 51% multi-brand retail is an interesting case to follow to understand that local optimization need not be always good to global optimization.