Supply Chain Management

The work of two students :

Sally Hassan Adher Noor Yousif el-ostaz

Under the supervision of miss : Rasha

Supply Chain Management

Is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management 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 management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed) .

Supply chain management flows can be divided into three main flows:

The product flowThe information flowThe finances flow

Increase demand accuracy and order fulfillment satisfaction levels

Reduce inventory levels and increased inventory turns across the network Increase profitability and productivity Integrate sales and operations planning process

Key Planning Benefits of Supply Chain Management

The 7 Principles of Supply Chain Management

Segment customers based on the service needs of distinct groups and adapt the supply chain to serve

these segments profitably.

Customize the logistics network to the service requirements and profitability of customer segments.

Listen to market signals and align demand planning accordingly across the supply chain, optimal resource

allocation.

Differentiate product closer to the customer and speed conversion across the supply chain.

Manage sources of supply strategically to reduce the total cost of owning materials and services.

Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives a clear view of the flow of products,

services, and information.

Adopt channel-spanning performance measures to gauge collective success in reaching the end-

user effectively and efficiently.

Decisions on Three Levels

Flexibility, Inventories, and Customer Service

A supply chainA supply chain

is a system of organizations, people, is a system of organizations, people, technology, activities, information and technology, activities, information and

resources involved in moving a product or resources involved in moving a product or service from supplier to customerservice from supplier to customer..

Supply Chain ManagementSupply Chain Management““encompasses the planning and management of all activities encompasses the planning and management of all activities

involved in sourcing and procurement, conversion, and all logistics involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand essence, supply chain management integrates supply and demand management within and across companies. Supply Chain management within and across companies. Supply Chain Management is an integrating function with primary responsibility for Management is an integrating function with primary responsibility for linking major business functions and business processes within and linking major business functions and business processes within and across companies into a cohesive and high-performing business across companies into a cohesive and high-performing business model. ,manufacturing operations, and across marketing, sales, model. ,manufacturing operations, and across marketing, sales,

product design, finance and information technologyproduct design, finance and information technology”.”.

Supply chain activities transform natural Supply chain activities transform natural resources, raw materials and components resources, raw materials and components into a finished product that is delivered to into a finished product that is delivered to the end customer. In sophisticated supply the end customer. In sophisticated supply

chain systems, used products may re-chain systems, used products may re-enter the supply chain at any point where enter the supply chain at any point where

residual value is recyclableresidual value is recyclable..

Supply Chain ManagementSupply Chain Management

is not a business function, rather it is a is not a business function, rather it is a new business model necessary for an new business model necessary for an

organization's success and everyone in organization's success and everyone in the organization needs to be involvedthe organization needs to be involved..

Successful supply chain management Successful supply chain management requires cross-functional integration within requires cross-functional integration within

the firm and across the network of firms the firm and across the network of firms that comprise the supply chain. It is that comprise the supply chain. It is

focused the improvements in performance focused the improvements in performance that result from better management of key that result from better management of key

relationshipsrelationships..

By understanding the supply chain By understanding the supply chain management processes and how they management processes and how they

should be implemented, management will should be implemented, management will better understand the value of more better understand the value of more

integrated supply chains and how this integrated supply chains and how this integration will lead to increased integration will lead to increased

shareholder value and a sustainable shareholder value and a sustainable competitive advantagecompetitive advantage..

The SCOR Supply-Chain Operations Reference model, The SCOR Supply-Chain Operations Reference model, developed by the Supply Chain Council, measures total developed by the Supply Chain Council, measures total supply chain performance. It is a process reference supply chain performance. It is a process reference model for supply-chain management, spanning from the model for supply-chain management, spanning from the supplier's supplier to the customer's customer It includes supplier's supplier to the customer's customer It includes delivery and order fulfillment performance, production delivery and order fulfillment performance, production flexibility, warranty and returns processing costs, flexibility, warranty and returns processing costs, inventory and asset turns, and other factors in evaluating inventory and asset turns, and other factors in evaluating the overall effective performance of a supply chainthe overall effective performance of a supply chain..

. .The basic idea behind the SCM is that The basic idea behind the SCM is that companies and corporations involve companies and corporations involve

themselves in a supply chain by themselves in a supply chain by exchanging information regarding market exchanging information regarding market

fluctuations and production capabilitiesfluctuations and production capabilities..

If all relevant information is accessible to any If all relevant information is accessible to any relevant company, every company in the supply relevant company, every company in the supply chain has the possibility to and can seek to help chain has the possibility to and can seek to help optimizing the entire supply chain rather than optimizing the entire supply chain rather than sub optimize based on a local interestsub optimize based on a local interest. . This will This will lead to better planned overall production and lead to better planned overall production and distribution which can cut costs and give a more distribution which can cut costs and give a more attractive final product leading to better sales attractive final product leading to better sales and better overall results for the companies and better overall results for the companies

involvedinvolved . .

The primary objective ofThe primary objective of supply chain managementsupply chain management is to fulfill is to fulfill customer demands through the most customer demands through the most efficient use of resources, including efficient use of resources, including distribution capacitydistribution capacity, , inventoryinventory and laborand labor. . In theory, a supply chain seeks to match In theory, a supply chain seeks to match demand with supply and do so with the demand with supply and do so with the

minimal inventoryminimal inventory . .

Supply chain management Supply chain management problemsproblems

Supply chain management must address the Supply chain management must address the following problemsfollowing problems::

Distribution Strategy:Distribution Strategy: number, location and number, location and network missions of suppliers, production network missions of suppliers, production facilities, distribution centers, warehouses, facilities, distribution centers, warehouses, cross-docks and customerscross-docks and customers..

TradeTrade--Offs in Logistical ActivitieOffs in Logistical Activitie:: a full truckload of a product is ordered to reduce a full truckload of a product is ordered to reduce

transportation costs, there will be an increase in inventory transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and developing the most efficient and effective Logistics and SCM strategySCM strategy..

Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.

#Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods.

#Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

ActivitiesActivities//functionsfunctions

Supply chain management is a cross-function approach including Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and among supply chain partners, thus improving inventory visibility and the velocity of inventory movementthe velocity of inventory movement..

StrategicStrategic

* * Strategic network optimization, including the number, location, and size of Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilitieswarehousing, distribution centers, and facilities..

* * Strategic partnerships with suppliers, distributors, and customers, creating Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logisticssuch as cross docking, direct shipping, and third-party logistics..

* * Product life cycle management, so that new and existing products can be Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activitiesoptimally integrated into the supply chain and capacity management activities..

* * Information technology chain operationsInformation technology chain operations.. * * Where-to-make and what-to-make-or-buy decisionsWhere-to-make and what-to-make-or-buy decisions..

* * Aligning overall organizational strategy with supply strategyAligning overall organizational strategy with supply strategy.. * * It is for long term and needs resource comittementIt is for long term and needs resource comittement..

TacticalTactical

* * Sourcing contracts and other purchasing decisionsSourcing contracts and other purchasing decisions.. * * Production decisions, including contracting, scheduling, and planning Production decisions, including contracting, scheduling, and planning

process definitionprocess definition..

* * Inventory decisions, including quantity, location, and quality of inventoryInventory decisions, including quantity, location, and quality of inventory..

* * Transportation strategy, including frequency, routes, and contractingTransportation strategy, including frequency, routes, and contracting..

* * Benchmarking of all operations against competitors and implementation of Benchmarking of all operations against competitors and implementation of best practices throughout the enterprisebest practices throughout the enterprise..

* *Milestone paymentsMilestone payments..

* * Focus on customer demandFocus on customer demand..

OperationalOperational

* * Daily production and distribution planning, including all nodes in the supply chainDaily production and distribution planning, including all nodes in the supply chain.. * * Production scheduling for each manufacturing facility in the supply chain (minute Production scheduling for each manufacturing facility in the supply chain (minute

by minute)by minute).. * * Demand planning and forecasting, coordinating the demand forecast of all Demand planning and forecasting, coordinating the demand forecast of all

customers and sharing the forecast with all supplierscustomers and sharing the forecast with all suppliers.. * * Sourcing planning, including current inventory and forecast demand, in Sourcing planning, including current inventory and forecast demand, in

collaboration with all supplierscollaboration with all suppliers.. * * Inbound operations, including transportation from suppliers and receiving Inbound operations, including transportation from suppliers and receiving

inventoryinventory.. * * Production operations, including the consumption of materials and flow of finished Production operations, including the consumption of materials and flow of finished

goodsgoods.. * * Outbound operations, including all fulfillment activities, warehousing and Outbound operations, including all fulfillment activities, warehousing and

transportation to customerstransportation to customers.. * * Order promising, accounting for all constraints in the supply chain, including all Order promising, accounting for all constraints in the supply chain, including all

suppliers, manufacturing facilities, distribution centers, and other customerssuppliers, manufacturing facilities, distribution centers, and other customers..

Developments in Supply Chain Developments in Supply Chain ManagementManagement

. .Creation EraCreation EraThe term supply chain management was first coined by a U.S. The term supply chain management was first coined by a U.S.

industry consultant in the early 1980sindustry consultant in the early 1980s.. 22 . .Integration EraIntegration Era

This era of supply chain management studies was highlighted with This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of supply chain internet-based collaborative systems. This era of supply chain evolution is characterized by both increasing value-adding and cost evolution is characterized by both increasing value-adding and cost reductions through integrationreductions through integration..

. .Globalization EraGlobalization Era

can be characterized by the attention given to global can be characterized by the attention given to global systems of supplier relationships and the expansion of systems of supplier relationships and the expansion of supply chains over national boundaries and into other supply chains over national boundaries and into other continents. Although the use of global sources in the supply continents. Although the use of global sources in the supply chain of organizations can be traced back several decadeschain of organizations can be traced back several decades

.Specialization Era—Outsourced Manufacturing and Distribution

began to focus on “core competencies ”

5 .Specialization Era—Phase Two: Supply Chain Management as a Service

6 .Supply Chain Management 2.0 (SCM 2.0)

Building on globalization and specialization, the term SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era"

Global supply chains pose Global supply chains pose challenges regarding both quantity challenges regarding both quantity

and valueand value : : Supply and Value Chain TrendsSupply and Value Chain Trends

* * GlobalizationGlobalization * * Increased cross border sourcingIncreased cross border sourcing

* * Collaboration for parts of value chain with low-cost Collaboration for parts of value chain with low-cost providersproviders

* * Shared service centers for logistical and Shared service centers for logistical and administrative functionsadministrative functions

* * Increasingly global operations, which require Increasingly global operations, which require increasingly global coordination and planning to achieve increasingly global coordination and planning to achieve global optimumsglobal optimums

* * Complex problems involve also midsized Complex problems involve also midsized companies to an increasing degreecompanies to an increasing degree,,

Components of supply chain Components of supply chain management integrationmanagement integration

* * Planning and controlPlanning and control * * Work structureWork structure

* * Organization structureOrganization structure * * Product flow facility structureProduct flow facility structure

* * Information flow facility structureInformation flow facility structure * * Management methodsManagement methods

* * Power and leadership structurePower and leadership structure * * Risk and reward structureRisk and reward structure

* * Culture and attitudeCulture and attitude

Theories of supply chain Theories of supply chain managementmanagement

ResourceResource--Based View Based View ((RBVRBV)) Transaction Cost Analysis Transaction Cost Analysis ((TCATCA))

KnowledgeKnowledge--Based View Based View ((KBVKBV)) Strategic Choice Theory Strategic Choice Theory ((SCTSCT))

Agency Theory Agency Theory ((ATAT)) Institutional theory Institutional theory ((InTInT))

Systems Theory Systems Theory ((STST)) Network Perspective Network Perspective ((NPNP))

Supply Chain RelationshipsSupply Chain RelationshipsSuccess FactorsSuccess Factors

High level of cooperationHigh level of cooperationSimilar goals/objectivesSimilar goals/objectives

Clear communicationsClear communicationsSenior management supportSenior management support

Control of inventoryControl of inventoryInformation sharingInformation sharing

Recognition of mutual benefitsRecognition of mutual benefitsControlled implementationControlled implementation

Joint task forceJoint task forceResource commitmentResource commitment

Supply Chain Management:Supply Chain Management:Generic BenefitsGeneric Benefits

Reduced costsReduced costsInventory managementInventory management

TransportationTransportationWarehousingWarehousing

PackagingPackagingImproved serviceImproved service

Time-based deliveryTime-based deliveryMake-to-orderMake-to-order

Enhanced revenuesEnhanced revenuesHigh product availabilityHigh product availability

More customized productsMore customized products

Supply Chain ManagementSupply Chain ManagementIn manufacturing the supply chain is the vehicle for the movement of raw In manufacturing the supply chain is the vehicle for the movement of raw

materials and bought out goods from suppliers, through conversion and materials and bought out goods from suppliers, through conversion and assembly into product and finished goods that are distributed to the assembly into product and finished goods that are distributed to the customercustomer..