CHAPTER NO 1 SUPPLY CHAIN

supply chain: a chain of providing good to customer

Supply chain management is all about making a smooth and valuable process that goes through different companies to
give customers what they actually want.
Here are two definitions:
The design and management of seamless, value-added process across organizational boundaries to meet the real needs of
the end customer. (Institute for Supply Management
Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.
(The Supply Chain Council)
Supply Chain Management is primarily concerned with the efficient integration ( combination) of suppliers, factories,
warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at
the right time, and so as to minimize total system cost subject to satisfying customer service requirements.

- **Tier 1 Supplier:** These are suppliers who directly provide goods or services to the primary manufacturer or
company. They are usually in direct contact with the manufacturer and play a significant role in the production process.
For instance, if a car manufacturer sources its engines from a specific company, that company would be a Tier 1 supplier.
- **Tier 2 Supplier:** Tier 2 suppliers are the suppliers that provide goods or services to Tier 1 suppliers, not directly to
the primary manufacturer. These suppliers are further down the supply chain and may provide components or materials
that are assembled or integrated by Tier 1 suppliers into the final product. For example, if the Tier 1 supplier of a car
manufacturer sources tires from another company, that tire company would be a Tier 2 supplier.
- **Tier 3 Supplier:** Tier 3 suppliers are even further down the supply chain and supply goods or services to Tier 2
suppliers. They might provide raw materials, parts, or components that are used by Tier 2 suppliers to create their
products. These suppliers might not have direct contact with the primary manufacturer but are crucial to the overall
supply chain.

importance of scm:
Cost savings and better coordination of resources are reasons to employ Supply Chain Management
❖ Reduced Bullwhip Effect- the magnified reduction of safety stock costs based on coordinated planning and sharing of
information
❖ Process Integration- Interdependent activities can lead to improved quality, reduced cycle time, better production
methods, etc. BENEFITS OF SCM

This positively Contributes

Reduces affects inventory to overall
uncertainty levels, cycle increase in
& risks in time, business profitability
the supply processes & &
chain. customer competitive
service. advantage

Important Elements of Supply Chain Management

PURCHASE trends
Long term relationships
❖ Supplier management- improve performance through
❖ Supplier evaluation (determining supplier capabilities)
❖ Supplier certification (third party or internal certification to assure product quality and service requirements)
❖ Strategic partnerships successful and trusting relationships with top-performing suppliers

OPERATIONS TREND
Demand management- match demand to available capacity
❖ Linking buyers & suppliers via MRP and ERP systems
❖ Use JIT to improve the “pull” of materials to reduce inventory levels
❖ Employ TQM to improve quality compliance among suppliers
Distributions trends
• Transportation management- tradeoff decisions between cost & timing of delivery/customer service via trucks,
rail, water & air
• Customer relationship management- strategies to ensure deliveries, resolve complaints, improve communications,
& determine service requirements
• Network design- creating distribution networks based on tradeoff decisions between cost & sophistication of
distribution system

SUPPLY CHAIN:
• Supply Chain Integration- when supply chain participants work for common goals. Requires intra-firm functional
integration. Based on efforts to change attitudes & adversarial relationships
• Global Supply Chains- advantages that accrue from sourcing from larger global market e.g., lower cost & higher
quality suppliers. May involve operating exposure, which is risk found in foreign settings
Supply Chain Performance Measurement- Crucial for firms to know if procedures are work

DEFINITIONS
The bullwhip effect on the supply chain occurs when changes in consumer demand causes the companies in a supply
chain to order more goods to meet the new demand. The bullwhip effect usually flows up the supply chain, starting with
the retailer, wholesaler, distributor, manufacturer and then the raw materials supplier. AIK DEMAND KCHOTA SA
CHANGE KI WAJA SA WHOLESALE SA RETALER ZADA LE OR WHOLESAR LE ZADA DISTRIBUTOR OR
DISTRIBUTOR LE PRODUCER
Safety stock is an additional quantity of an item held in inventory in order to reduce the risk that the item will be out
of stock
Safety stock inventory, sometimes called buffer stock, is a term used by inventory managers to describe a level of
extra stock that is maintained to mitigate risk of stock outs or (shortfall in raw material or finished goods) due to
uncertainties in supply and demand.
Benchmarking: the practice of copying what other business do best; studying how things are done well in other firms to
potentially make use of the same methods.
Business Process Reengineering (BPR): A radical rethinking and redesigning of business processes that seeks to reduce
waste and increase performance. The goal is to create significant changes through assessment of current process, design
of better processes using modeling techniques, implementation of the new processes, and continuing performance
assessments
Integration: A Shared-process view of the supply chain that CONECTS multiple departments, processes and software
applications for internal users and external partners.
- **Third Tier Customer:** Conversely, "Third Tier Customer" indicates customers or clients who are situated at the
third level within a customer hierarchy. In a business-to-business context, they might be customers of customers (second-
level customers) or downstream in the customer chain. They might indirectly receive products or services through
intermediaries or secondary customers rather than directly from the original supplier.

MRP System: MRP systems focus specifically on materials and inventory management within a manufacturing context.
They help plan and manage materials needed for production, controlling inventory levels based on demand forecasts.
ERP System: ERP systems are broader and encompass various aspects of a business, including MRP. They integrate
core business processes such as finance, human resources, inventory, procurement, and customer relationship
management into a single system, offering a comprehensive view of the entire organization's operations.

**Purchase Trends:**
Building long-term relationships with suppliers by assessing their capabilities, ensuring product quality through
certifications, and nurturing successful partnerships.
**Operations Trends:**Matching demand with available capacity, connecting buyers and suppliers using systems like
MRP and ERP, reducing inventory through JIT (Just-in-Time), and ensuring quality compliance through TQM (Total
Quality Management).

**Distribution Trends:**Making decisions on transportation methods based on balancing cost and timely delivery,
managing customer relationships for smooth deliveries and service improvement, and designing distribution networks
balancing cost and efficiency.
**Supply Chain:**Integrating efforts among supply chain participants toward common goals, leveraging advantages of
sourcing globally for cost and quality benefits, and measuring performance to ensure effective procedures are in place.\
Absolutely, let's condense it down:

**Example: FruitBite's Supply Chain**

1. **Purchase Trends:** FruitBite forms long-term relationships with top-quality fruit suppliers, certifying them for
consistent quality.
2. **Operations Trend:** They track juice demand, ordering the right amount of fruit to reduce excess inventory and
work closely with suppliers to improve fruit quality.
3. **Distribution Trends:** FruitBite decides on delivery methods, balancing cost and speed, while ensuring timely
deliveries and efficient routes.
4. **Supply Chain:** FruitBite focuses on seamless collaboration among suppliers, production, and distribution for
smoother operations.Supply Chain Performance Measurement:** FruitBite uses tools to gauge production speed,
customer satisfaction, and delivery efficiency, aiding in identifying areas for improvement.