Chapter

9
Materials Management and Supply Chain

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9-1 Excel Books

Supply Chain
The Concept of Supply Chain Management is based on two core ideas.
1. The first is that practically every product that reaches an end user represents
the cumulative effort of multiple organization. These organizations are
referred to collectively as the supply chain.
2. The second idea is that organizations have to pay attention to what is
happening outside their “four walls” and manage the entire chain of activities
that ultimately delivers products to the final customer in order to maximize
profits.

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EXAMPLE OF SUPPLY CHAIN
KALYANI BREWERIES

Kalyani UBSN
Brewries DSIDC
Ltd
Supertech
NALCO
industry
FINAL
CUSTOMER
TRANSPORT CO.

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What is ‘Supply Chain Management’?
 ‘Supply Chain management’ is defined as the integration-oriented skills
required for providing competitive advantage to the organization that are
basis for successful supply chains. A typical supply chain may involve a
variety of stages. These supply chain stages include:
1. Customers
2. Retailers
3. Wholesalers/Distributors
4. Manufactures
5. Component/Raw material suppliers

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 Supply Chain is part of the value chain

SUPPORT Firm Infrastructure, HRM,

ACTIVITIES Technology development, Purchase
S3 > S2 S
S3 U
P Inbound Outbound Marketing Customer
S3 operation logistic service
> S2 logistic sales
S3 P
S3 L
S3 > S2
I
Value chain Primary Activity/ Supply Chain Customers
E
R

Material/ Supply management Physical distribution/Channel mgmt

Extended Value Chain/ Total supply chain/ Total Logistic Management

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Decisions of Supply Chain
 Supply Chain Design
 Supply Chain Planning
 Supply Chain Operating
 External Supply Chain
 Internal Supply Chains

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Supply Chain Process
 Pull and Push Processes: Pull processes are processes in a supply chain
initiated by a customer order. Push processes are processes in a supply
chain initiated and performed in anticipation of customer orders.

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PULL/PUSH PROCESS
Customer order Customer
cycle Customer
PULL order cycle

Retailer
Replenishment
cycle

Distributor

Manufacturing cycle

Procurement
Manufacturing Manufacturer
cycle PUSH Procurement cycle

Supplier
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Supply Chain Models
 SCOR Model
1. Plan
2. Source
3. Make
4. Deliver
5. Return

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Cycle View Model of Supply Chain

Customer Customer
order cycle

Replenishment Retailer
cycle

Manufacturing
Distributor
cycle

Procurement Manufacturer
cycle
Supplier
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Logistics
 Logistics is involved in facilitating all the required parts and raw materials in
the right sequence, the right quantity, the right quality and the right time to
manufacturing and service. Category items.

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Stores
 Overhead Cranes and Hoists
 Conveyors
 Industrial Trucks
 Forklifts
 Automated Guided Vehicles (AGVs)
 Elevators and Lifts

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Out-bound Logistics: Distribution and Shipping
 The Distribution System
1. The supplier’s facility
2. In transit
3. A regional warehouse
4. A distribution Center
5. The customer’s facility

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Shipping

 Warehouse stock is reduced by the delivery quantity

 Value changes are posted to the balance sheet account in inventory
accounting
 Requirements are reduced by the delivery quantity.
 The serial number status is updated.
 The goods issue posting is automatically recorded in the document flow.
 Stock determination is executed for the vendor’s consignment stock.
 A work list for the proof of delivery is generated.

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Supply Chain Relationship Focus
1. Customer Relationship Management (CRM): All processes that focus on
the interface between the firm and its customers.
2. Internal Supply Chain Management (ISCM): All process those are internal
to the firm.
3. Supplier Relationship Management (SRM): All processes that focus on the
interface between the firm and its suppliers.

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Supply Chain Macro Processes

SRM (Supplier ISCM (Firm Focus) CRM (Customer Focus)

Focus)
Source Strategic Planning Market Trends
Negotiate Demand Planning Sales and Marketing

Buy Supply Planning Information on Customers

Design Collaboration Fulfillment Order Management

Supply Collaboration Field Service Call Center Management

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Summary of Key Operations and Supply Chain Activities
Operations & Purpose Key: Inter- Key: Inter-
Supply Chain Functional Organizational
Activities Participants Participants
Process Selection Design and Implement the Engineering Customers
transformation processes that best Marketing Fiance
meet the needs of the customer Human Resource IT
and firm.
Forecasting Develop the planning numbers Marketing Finance Suppliers
needed for effective decision Accounting Customers
making.
Capacity Planning Establish strategic capacity levels Finance Suppliers
(“bricks and mortar”) and tactical Accounting Customers
capacity levels (workforce, Marketing Human
Inventory levels). Resources

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Summary of Key Operations and Supply Chain Activities
Inventory Manage the amount and placement IT Suppliers
management of inventory within the company and Finance Customers
the supply chain.

Planning and Schedule and manage the flow of Marketing Suppliers

Control work through an organization and IT Customers
the supply chain; match up Suppliers
customer demand to supply chain
activities

Purchasing Identify & Quality suppliers of goods Engineering Suppliers

& Services; manage the ongoing Finance
buyer-supplier relationships. Marketing

Logistics Manage the movement of physical Marketing Suppliers

goods throught the supply chain Engineering Customers

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Summary of Key Operations and Supply Chain Activities
Operations & Purpose Key: Inter-Functional Key: Inter-
Supply Chain Participants Organizational
Activities Participants
Recovery & “Close the loop’ by Marketing Suppliers
Recycling recovering and recycling Engineering Customers
used products and Engineering
materials

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Effect of Interdependence in Supply Chain Relationships

Partner Relatively High Level of

Powerful Interdependence

Organization Low Level of

Relatively Powerful Interdependence

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Purchasing Metrics
1. Purchase cost savings/avoidance
2. Managing supplier base. This includes time to market, supplier satisfaction,
partnerships, supplier health (financial and/or management stability)
3. Internal customer satisfaction
4. Purchasing cost
5. Resource utilization

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Logistics Metrics
 Overhead as % of Total Costs
 Overhead to Cost of Goods Sold Ratio
 Order Fulfillment Costs
 Order Fulfillment Cost as a % of Order Management Costs
 Process Costs
 Total Supply Chain Costs as a % of Revenue
 Total Supply Chain Costs as a % of Total Costs

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