Supply Chain Management (SCM)

PRINCIPLE

Supply Chain Principles

Diagram 13 shows the seven principles of SCM

If supply-chain management has become top management's new "religion," then it needs a doctrine. Andersen Consulting has stepped forward to provide the needed guidance, espousing what it calls the "Seven Principles" of supply-chain management. When consistently and comprehensively followed, the consulting firm says, these seven principles bring a host of competitive advantages. The seven principles as articulated by Andersen Consulting are as follows:

1. Segment customers based on service needs

Companies traditionally have grouped customers by industry, product, or trade channel and then provided the same level of service to everyone within a segment. Effective supply-chain management, by contrast,groups customers by distinct service needs--regardless of industry--and then tailors services to those particular segments.

2. Customise the Supply Chain Management network

In designing their Supply Chain Management network, companies need to focus intensely on the service requirements and profitability of the customer segments identified. The conventional approach of creating a "monolithic" Supply Chain Management network runs counter to successful supply-chain management.

3. Listen to signals of market demand and plan accordingly

Sales and operations planning must span the entire chain to detect early warning signals of changing demand in ordering patterns, customer promotions, and so forth. This demand-intensive approach leads to more consistent forecasts and optimal resource allocation.

4. Differentiate product closer to the customer

Companies today no longer can afford to stockpile inventory to compensate for possible forecasting errors. Instead, they need to postpone product differentiation in the manufacturing process closer to actual consumer demand.

5. Strategically manage the sources of supply

By working closely with their key suppliers to reduce the overall costs of owning materials and services, supply-chain management leaders enhance margins both for themselves and their suppliers. Beating multiple suppliers over the head for the lowest price is out, Andersen advises. "Gain sharing" is in.

6. Develop a supply-chain-wide technology strategy

As one of the cornerstones of successful supply-chain management, information technology must support multiple levels of decision making. It also should afford a clear view of the flow of products,services, and information.

7. Adopt channel-spanning performance measures

Excellent supply-chain measurement systems do more than just monitor internal functions. They adopt measures that apply to every link in the supply chain. Importantly, these measurement systems embrace both service and financial metrics, such as each account's true profitability.

The principles are not easy to implement, the Andersen consultants say, because they run counter to ingrained functionally oriented thinking about how companies organise, operate, and serve customers. The organisations that do persevere and build a successful supply chain have proved convincingly that you can please customers and enjoy growth by doing so.

FUNCTION

Function

Why is supply chain management so important?

To gain efficiencies from procurement, distribution and logistics
To make outsourcing more efficient
To reduce transportation costs of inventories
To meet competitive pressures from shorter development times, more new products, and demand for more customization
To meet the challenge of globalization and longer supply chains
To meet the new challenges from e-commerce
To manage the complexities of supply chains
To manage the inventories needed across the supply chain

Diagram 8 shows a function of SCM

Diagram 9 shows the functional attributes of SCM

Diagram 10 shows how SCM function

Diagram 11 shows the function of SCM

DEFINITION

Definition

a)Supply chain

All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows.
An integrated group of processes to “source,” “make,” and “deliver” products.
The system of suppliers, manufacturers, transportation, distributors, and vendors that exists to transform raw materials to final products and supply those products to customers.

Diagram 1 shows a supply chain illustration

Diagram 2 shows a supply chain process

Diagram 3 shows a supply chain process

b) Definition SCM

Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. The following are five basic components of SCM.

1. Plan: 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.

2. Source: Next, 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.

3. Make: 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.

4. 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.

5. Return: 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.

Supply Chain management is the network of activities where the raw material is purchased then transformed into the usable goods and then finally delivered to the customers through the distribution systems. Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lower the costs.

Supply chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and final products, and deliver them through a distribution system.

Supply chain management deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible. In our example, Li & Fung is creating and managing the links. In non-brokered supply chains, one or more of the chain’s organizations can provide the management function. The objective is to build a chain of suppliers that focuses on maximizing value to the ultimate customer.

INTRODUCTION

Introduction
Supply chain management takes into consideration every facilities that has in impact on cost and plays a role in making a product to customer requirement. As we know, supply chain management revolves around efficient integration of suppliers, manufacturers, warehouse and stores, it encompasses the firm activities at many level from strategics level to operational level. So, there is several important activities includes determining:
1. Transportation vendors
2. Credit and cash transfers
3. Suppliers
4. Distributors
5. Accounts payable and receivable
6. Warehousing and inventory
7. Order fulfillment
8. Sharing customer, forecasting, and production information
The concept of Supply Chain Management (SCM) is based on two core ideas. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain. The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within "four walls." A few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains. Supply chain management, then, is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by supply chain firms to develop and run supply chains in the most effective and efficient ways possible. Supply chain activities cover everything from product development, sourcing, production and logistics as well as the information systems needed to coordinate these activities. The organizations that make up the supply chain are "linked" together through physical flows and information flows. Physical flows involve the transformation, movement and storage of goods and materials. They are the most visible piece of the supply chain. but it just as important are information flows. Information flows allow the various supply chain partners to coordinate their long-term plans and to control the day-to-day flow of goods and material up and down the supply chain.

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Tuesday, 19 November 2013