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SCM 1
HANDOUT 1

INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Name:
Year and Section:

Prepared by: Claerlyn G. Vitto, LCB

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Introduction
This lesson explains you the Logistics and Supply Chain Management and its relation to
Customs Administration.
Learning Objectives:
 Define Logistics and Supply Chain Mgt. and its relation to Customs Administration.
 Present the history and evolution of Logistics and SCM
 Illustrate the key differences between Logistics and SCM

“Supply chains are everywhere. From the biggest company in the world to running
your household. We all have supply chain experience even if we don’t know it.
-
EverythingSupplyChain.com

Supply Chain is a network between company and its suppliers to produce and
distribute a specific product to the final buyer; it includes different activities, people
entities, information and resources.
Supply Chain Management is the integration of all activities associated with the
flow and transformation of goods from raw materials through to end user, as well as
information flows, through improved supply chain relationships, to achieve a
sustainable competitive advantage.
BASIC ENTITIES OF SUPPLY CHAIN

1. SUPPLIER
- is a party in the supply chain that makes goods and services available to companies or
consumers‖
-Suppliers are also called vendors and the two words can be used interchangeably. Vendors
can be both sellers of finished products and a manufacturer of goods.

2. PRODUCERS

- Producers (manufacturers or service providers) are organizations that make products or

services. This includes companies that are producers of raw materials and companies that are
producers of finished goods. Producers of raw materials are organizations that mine for minerals, drill
for oil and gas, and cut timber. It also includes organizations that farm the land, raise animals, or
catch seafood. Producers of finished goods use the raw materials and sub-assemblies made by
other producers to create their products.

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 2. CUSTOMERS
- Customers (or consumers) are individuals or organizations that purchase and use a product
or service. A customer may be an organization (a producer or distributor) that purchases a
product in order to incorporate it into another product that they in turn sell to their customers
(ultimate customers). Customers - depend on producers, distributors, and retailers to meet
their needs for products and services.

Why Is Supply Chain Management Important?

Supply chain management is important because it can help achieve several
business objectives. For instance, controlling manufacturing processes can improve
product quality, reducing the risk of recalls and lawsuits while helping to build a strong
consumer brand. At the same time, control over shipping procedures can improve
customer service by avoiding costly shortages or periods of inventory oversupply.
Overall, supply chain management provides multiple opportunities for companies to
improve their profit margins and is especially important for businesses with large and
international operations.

Key Words…
SUPPLY CHAIN
 Logistics MANAGEMENT
 Inbound Logistics
 Outbound Logistics
 Network S
LOGISTICS

 Supply Chain Management

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 Defining Logistics & Supply Chain Management

In the world of business, logistics and supply chain are common terms that have
been used interchangeably. Obviously, 0it appears that is become confusing for
people to indicate whether one is participating logistical management or supply chain
management. Such mix-up may be addressed by understanding the basics of both
subjects.
Supply chain involves multiple facets such as operations and procurement that a
company running smoothly. It is a sequence of events intended to satisfy a customer.
Logistics, on the other hand, is just one component of a supply chain. It has to do
with the coordination and movement of goods. Logistic Management is a small
portion of Supply Chain Management that deal with the management of goods in an
efficiency way.

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Logistics is the process of planning, implementing, and controlling the efficient, cost-
effective flow and storage of raw materials, in-process inventory, finished goods, and
related information from the point of origin to the point of consumption for the purpose
of confirming to customer requirements.

Logistics Two Broad Categories:

 Inbound Logistics
- The activities which are concerned with procurement of material, handling,
storage and transportation.
 Outbound Logistics
- The activities which are concerned with the collection, maintenance, and
distribution or delivery to the final consumer.

Network / Supply Chain Network the primary purpose of a supply chain network
design is to assess company policies and programs and to meet targets to
accomplish long‐term strategic objectives, and most business units or functional
areas within a company are impacted by a network design project. It is important to
recognize that a company’s network determines its supply chain efficiency and
customer satisfaction.

What Is Supply Chain Management vs. Business Logistics

Management?

Terms supply chain management (SCM) and business logistics management—or

simply, logistics—are often used interchangeably. However, logistics is really one
link in the supply chain.

Logistics deals with the planning and control of the movement and storage of goods
and services from their point of origin to their final destination.

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 The Logistics/Supply Mission:

Rs
Getting the

Right goods and/or services

to the right place/customer
at the right time
and in the right/desired condition
at the right/lowest possible cost
and right/highest return on investment

History and Evolution of Logistics & Supply Chain

Logistics – this word which came from the Greek adjective ―logistikos‖ has military roots and has
evolved through time and assumed critical roles.
Details of its history and evolution are as follows:
 The birth of logistics can be traced back to the Greek and Roman empires, it was a time when
specific military officers where designated as “Logistikas” and tasked to provide services
related to supply and distribution of resources. This was done to enable soldiers to move from
their base position to a forward position efficiently that could be crucial to the outcome of the
war.
 These beginning led to the development of a system that can be related to current day system
of logistics management.
 During the World War 2, logistics evolved rapidly. The army logistics of US and its allies
proved to be more that what the German can handle.
 Logistics gave birth to so many techniques and has now evolved to a kind of relief to many
organizations that formerly looked at this activity as a burden.

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 History and Evolution of Logistics & Supply Chain

SCM – over the last 100 years it has evolved from an initial focus of improving
relatively simple, but very labor-intensive processes to present day system.
Six Evolutions in Supply Chain Management:
• Creation Era: The term was coined by in 1982. It includes the need
for large-scale change, re-engineering, downsizing driven cost reduction
programs and widespread attention given to Japanese management system.
• Integration Era: Development of electronic data interchange (EDI) system in
1960. The introduction of the enterprise resource planning (ERP) system also
added. Continued to develop with the expansion of internet-based system and
vertical integration with upstream suppliers and downstream customers.
• Globalization Era: Characterized by the attention given to global system o
supplier relationships and expansion of SCM beyond national boundaries and
into other continents.
• Phase 1 Specialization Era: In the 1990s, companies focused on core
competencies and specialization. Created manufacturing and distribution
networks composed of several individual supply chain producers, suppliers, and
customers that work together to design, manufacture, distribute, market, sell and
service a product.
• Phase 2 Specialization Era: Began the inception of transportation brokerages,
warehouse management, and non-asset-based carriers. This has graduated
beyond transportation and logistics into supply planning, collaboration, execution
and performance management.
• SCM 2.0: Building on globalization and specialization, the term SCM 2.0 has
been coined to describe changes within supply chains themselves as well as
evolution of processes, methods and tools to manage this new era.

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 Key Differences between Logistics and Supply Chain Management

Basis of
Logistics Supply Chain Management
Comparison

The flow and storage of

The movement and integration of
Meaning goods inside and outside the
supply chain activities
firm

Objective Customer satisfaction Competitive Advantage

Evolution &
Traditional Modern
Development

Organizations Involved Single Multiple

Relationship with one

With SCM Incorporate Logistics
another

Relationship with
Minimal Significant interactions
another department

AREAS OF SUPPLY CHAIN MANGEMENT

While supply chain is a very broad career field, it has 7 primary functional
areas: Purchasing, Manufacturing, Inventory Management, Demand
Planning, Warehousing, Transportation, and Customer Service. These areas may
appear to be independent functions, but in an efficient supply chain, they must interact
to a great degree and are very dependent upon one another
Purchasing: The activity of acquiring goods or services to accomplish the goals of an
organization.
Manufacturing: is the term refer to production of merchandise for use or sale using
labor and machines, tools, chemical and biological processing, or formulation. The
term may refer to a range of human activity, from handicraft to high tech, but is most
applied to industrial production, in which raw materials are transformed into finished
goods on a large scale

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Inventory Management: Activities employed in maintaining the optimum number or
amount of each inventory item.
The objective of inventory management is to provide uninterrupted production, sales,
and/or customer-service levels at the minimum cost. Since for many companies’
inventory is the largest item in the current assets category, inventory problems can and
do contribute to losses or even business failures. Business Dictionary.com
Demand Planning: is the process of forecasting customer demand to drive execution
of such demand by corporate supply chain and business management. Demand
forecasting involves techniques including both informal methods, such as educated
guesses, and quantitative methods, such as the use of historical sales data and
statistical techniques or current data from test markets.
Warehousing: Performance of administrative and physical functions associated with
storage of goods and materials. The importance of these facilities has grown as it’s the
final ―stop‖ before moving to the customer. Proper handling, storage and
management of the products within these facilities must occur so that customer orders
can be fulfilled with the right product at the right time.
Transportation: The transportation function is critical to the supply chain because it is
where the rubber literally meets the road. A company can have the right product at
the right warehouse at the right time, but without transportation if won’t make it to the
customer at the right time. In today’s global economy, this function is even more
critical as it’s no longer as easy as putting a product on a truck and having it
delivered. Now it might be shipped via container ship, airplane, train, truck or even
uber car before arriving at the customer
Customer Service: The process of ensuring customer satisfaction with a product or
service. Often, customer service takes place while performing a transaction for the
customer, such as making a sale or returning an item. Customer service can take the
form of an in-person interaction, a phone call, self-service systems, or by other means.

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Name:
Year and Section:

ACTIVITY 1

......

By using the picture above, explain how logistics act as an integral component of
Supply Chain Management.

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Name:
Year and Section:

ACTIVITY 2

Suppose you are a Customs Officer, how important it is to know the

concept of Supply Chain Management?

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Name:
Year and Section:
ACTIVITY 3
The aim of every business is to be able to supply their respective goods and services to their
intended customers, therefore which do you think is most important features that a business must
have. LIMIT YOUR ANSWER TO 4-5 SENTENCES.

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