MODULE 7 – SUPPLY CHAIN MANAGEMENT

Content Summary:

This module discusses Supply Chain and Supply Chain Management, its role on
suppliers, manufacturers, distributors and consumers.

Learning Outcomes:

At the end of this module, students should be able to:

1. Explain what supply chain and supply chain management (SCM).

2. Value the role of suppliers, manufacturers, distributors and consumers in supply

chain
management.
3. Describe the efficient flow and process of supply chain management

3. Analyze the concepts of supply chain management and appreciate the need for

establishing a supply chain management in a global setting.

Table of Contents:
1. Supply Chain and Supply Chain Management Defined
2. The Need of Supply Chain Management (SCM)
3. Elements of SCM
4. Logistics
5. SCM Process
6. Global Supply chain management
7. Outsourcing

Module Content:

Introduction

Supply Chain Management (SCM) represents an ongoing effort by companies to make

their supply chains as efficient and economical as possible.

Typically, SCM attempts to centrally control or link the production, shipment,

and distribution of a product. By managing the supply chain, companies can cut excess
costs and needless steps and deliver products to the consumer faster. This is done by
keeping tighter control of internal inventories, internal production, distribution, sales,
and the inventories of company vendors.

SCM is based on the idea that nearly every product that comes to market does so as
the result of efforts by multiple organizations that make up a supply chain. Although
supply chains have existed for ages, a lot of companies didn't pay attention to them as
a value-add to their operations until recently.

I – SUPPLY CHAIN AND SUPPLY CHAIN MANAGEMENT DEFINED

A supply chain is a network of companies and people that are involved in the production
and delivery of a product or service.

The components of a supply chain include raw materials, supplier,

manufacturer/producers, warehouses, distributor/vendors, retail location, and customer.
The functions of a supply chain include product development, marketing, operations,
distribution, finance, and customer service.

Effective supply chain management results in lower costs and faster production cycles.

Supply chain management (SCM) is the monitoring and optimization of the production
and distribution of a company’s products and services. It seeks to improve and make
more efficient all processes involved in turning raw materials and components into final
products and getting them to the ultimate customer. Effective SCM can help streamline
a company's activities to eliminate waste, maximize customer value, and gain a
competitive advantage in the marketplace.

II - THE NEED OF SUPPLY CHAIN MANAGEMENT (SCM)

Supply Chain Management (SCM) is the strategic coordination of processes

involved in producing and delivering goods and services, from raw material sourcing to
end-customer delivery. It ensures efficiency, resilience, and alignment across suppliers,
manufacturers, distributors, and retailers. SCM Involves overseeing the flow of goods
and services from production to delivery. Because without proper management,
companies could face issues like delays, excess inventory, or unsatisfied customers.
Why the need of SCM? SCM is vital for balancing cost, speed, risk, and sustainability in
a competitive, interconnected world. Companies like Toyota, Amazon, and Patagonia
exemplify how effective SMC drives operational excellence, customer trust, and long-
term success. Without it, businesses risk inefficiency, disruption, and loss of market
share. This also incorporates with: - Efficiency and Cost Reduction - Risk Management -
Customer Satisfaction – Globalization - Sustainability - Collaboration

III – ELEMENTS OF SUPPLY CHAIN MANAGEMENT

An effective supply chain management system should be supremely agile and

functional as it leads to strategic decision-making and reduction in operational costs.
More importantly, the supply chain tends to operate at maximum efficiency and scale up
the analytical capabilities that provide end-to-end visibility in the operations.

Some of the basic elements of a supply chain management are:

1. Integration

Every business needs strategic planning for the better functioning of operations. In a
data-driven world, integrating the supply chain across the processes is an essential step
to eliminating errors. It has become imperative for organizations to facilitate the
integration in each division across suppliers, co-manufacturers, third-party logistics
providers, and so on. This tends to provide complete transparency to better forecast,
plan and execute the operational activities.

Communicating and collaborating with the entire process can unlock the true potential
of supply chain processes. With integrated planning and visibility, business owners can
easily plan and monitor future opportunities.

2. Operations
Managing operations is one of the major elements of supply chain management as it
leads to more efficient fulfillment processes. Getting powerful insights and real-time data
can be useful in creating the path of sustained improvement in the entire value chain.
Evaluating and determining the day-to-day operations enable business owners to make
cost-effective decisions.

Hence, streamlining the operational processes can help you in anticipating the shortage
of demand and supply. Addressing supply chain challenges by optimizing all the
elements of storage and distribution can enhance the customer experience.

3. Purchasing

Effective supply chain management plays a major role in acquiring raw materials,
components, and services. It determines the necessary goods that need to be
purchased within your company. Also, sourcing products in your supply chain is one of
the major elements of the supply chain ecosystem as it tends to maintain the desired
quality of production and supply in the business. Therefore, demand forecasting can
increase efficiencies and profitability by anticipating highs and lows in the stocks. An
effective SCM can facilitate the planning and prediction of the stocks which can lower
the cost across the sourcing and purchasing process

4. Distribution

The final and most important process of the supply chain is ensuring that the product is
delivered to the right customers at the right time. It manages the transport, delivery, and
return of goods by deeply getting powerful insights into the operations.

Enhancing the distribution process tends to improve service capabilities and customer
retention. Supply chain distribution determines the overall profitability of the company as
it focuses on delivering the right product to the right customer swiftly and securely.
Therefore, role of logistics in supply chain processes is necessary for optimizing the
processes as it helps in integrating distribution strategies that can lead to better client
service. Some of the top distribution strategies are intensive, indirect, selective, and so
on.

5. Agility

It is a core element of the supply chain as it helps in determining the company’s ability
to quickly adapt to the changes. A strong supply chain can enable companies to combat
market unpredictability and volatility. Flexibility is significant as it is useful in staying
competitive and gaining real-time visibility into the operations. Identifying the medium- to
long-term supply chain plans can predict future demand shifts to improve efficiency.
Therefore, an agile supply chain is necessary in creating customer-centric business
processes.

6. Innovation

Supply chain management is largely useful in balancing the product flow and costs of
the operations. Innovation is a key element that can lead to optimally functioning supply
chains. It is imperative to plan the integration of SCM in the conceptual stages of the
product’s design.

In today’s world, businesses have embraced new-age technologies to manage the

transportation and logistics industry. Undoubtedly, transforming the supply chain
through innovation can greatly impact businesses by resolving both the structural and
organizational complexities. Therefore, modernizing the supply chain design can
improve decision-making transparency as it optimizes the functional process driven by
digital technology.

7. Performance Measurement

One of the major elements of supply chain management is to measure the performance
metrics by delving deeper into the operations. Getting powerful insights by analyzing the
metrics based on the procedures is the most significant way to enable responsiveness
and innovation in the organization.

An effective SCM ensures an articulate understanding of the business operations and

also helps in identifying the KPIs that should be established. Establishing a
measurement system is important for a standard process framework as it has the ability
to improve overall business performance.
8. Alignment

Supply chain needs should be strategically connected and aligned to the company’s
objective. It is a fundamental cornerstone as it leads to the transformation of entire
supply chain processes. The effort to foster alignment entails a successful internal and
external supply chain integration that can ensure efficient functioning in the value chain.
Also, the extensive analysis enables the synchronization of flows in the supply chain
that can lead to informed decision-making. A robust SCM is the best way to determine
organizational priorities and align them to regulate the operating model.

9. Technology

Implementing new-age technologies like artificial intelligence, the internet of things, and
blockchain is a major element of supply chain management that can add significant
value to your business. It transforms the business processes which can help to drive
automation and deliver insights that are sustainable to the business growth.

Therefore, it can also lead to creating strategies that can anticipate the demand and
supply. Advanced supply chain management software uses the newest logistical
technologies that is required to unlock new opportunities and improve collaboration.
Therefore, the future of supply chain management depends largely on technological
advancements.

10. Coordination
The supply chain strategy should be well planned and coordinated accordingly.
Communication and exceptional coordination is a basic element to maintaining good
relationships with the business’s various stakeholders. Additionally, it facilitates
information sharing and allows the companies to make better decisions.

Supply chain management consists of all the activities related starting from product
development to planning. It facilitates information sharing which is considered to be a
building block of the success of an organization.

III - LOGISTICS IN SUPPLY CHAIN MANAGEMENT

In supply chain management, logistics are responsible for the movement and storage of
goods and services, along with the documents and reports that record those
movements throughout an item's journey to the customer. Logistics include the
numerous transportation methods that get inventory from one location to another.

Logistics and supply chain should not be confused. Logistics is a rather narrowly
focused concept (narrower than the SCM), which simply means globalization of
resource management — from every local unit to the entire network of production
points.
In turn, supply chain management is a more complex category. Supply chain
management involves logistics and thus performs end-to-end optimization – that is, not
only within the enterprise but also when working with counterparties.

The purpose of efficient logistics management is to achieve maximum competitiveness

and profitability of the company, as well as the entire network structure of supply chains,
including the end-user. In this regard, the integration and introduction of innovations into
the processes of supply chains, as well as into the processes of logistics, should be
aimed at increasing the overall productivity of all their participants.

The Functions of Logistics within Supply Chain Management

If we systematize all areas of logistics that need to be developed for the rational
management of production resources, we can single out the following functions:

 Warehouse design and management. This role of logistics in supply chain

management covers several tasks at once: from the design of storage facilities to
the requirements for storage of products and ending with the introduction of
various automation solutions (for example, for machinery intended for
transporting goods within warehouses);
 The formation of packages. Packaging, tracking and accounting – all of these
tasks allow for end-to-end control of goods on the way to the
customer/distributor;
 Transportation of products. This includes work with cargo carriers and vehicles
listed in the company’s fleet: planning their routes, calculating fuel costs, etc.;
 Working with customs. When an enterprise plans international delivery of goods,
it is very important that during their transportation the goods fully comply with
customs requirements and contain all the necessary documentation;
 Working with intermediaries. Intermediaries in logistics are all third-party, non-
company resources that are directly involved in the implementation of supply
chains. In turn, finding intermediaries with the most acceptable ratio of quality to
cost of services, as well as establishing long-term, reliable relations with them
are also included in the list of tasks for efficient logistics management;
 Working with written off and returned goods. There is also such a thing as
“reverse logistics”, which establishes the rules and routes for transporting the
returned/discarded goods, as well as ways to dispose of them.

Challenges Logistics Helps to Overcome in Supply Chain Management

Given the above list of tasks that logistics performs in supply chain management, we
can single out a number of advantages provided by its correct implementation:

 Minimization of enterprise expenses. The main role of logistics in supply chain

management is primarily to increase the overall value of each delivery, which is
identified by customer satisfaction. This means that the reduction and
optimization of labor resources must be tied in with keeping up a certain level of
quality customer service. This problem is solved both by reducing the total labor
resources (primarily by eliminating unnecessary chain links), and by introducing
automation solutions;
 Consolidation of traffic volumes. Transportation costs are one of the largest
expense categories in logistics management. In general, transportation costs
increase depending on the distance, batch size, and product exposure to
damage. On the other hand, the transportation cost per unit of weight decreases
as the lot size increases on long runs. Thus, the maximum consolidation of
transportation volumes can help reduce transportation costs. Enlargement can
be achieved by combining small lots into a single large one, intended for a long
run (i.e., for a longer distance);
 Improving the quality of service. With regard to the quality of service, it is largely
influenced by the speed of delivery of the goods to the end-user, as well as its
transportation in proper conditions (for example, many products today are
supplied with RFID tags so that both the manufacturer and the end customer
 could track whether all storage conditions are being observed during the
transportation of the goods) and within the allowed time limits (this refers
primarily to perishable goods);
 Reduction of actual losses and reduction of possible risks. As you know, a
business is profitable if the value it creates exceeds the costs associated with the
implementation of activities. To achieve a competitive advantage, a company
must either carry out these activities at lower costs or carry them out in a way
that will lead to differentiation and price increment. The first thing to be done to
effectively solve this problem is reducing the losses that are associated with the
return of goods. It is very important to plan not only the routes on the way to the
distributor or the end-user but also the routes by which the goods are delivered
back to the warehouse or to the establishments for their disposal. The second
factor affecting risk reduction is the correct planning of enterprise resources,
which minimizes the likelihood of damage or loss of goods or manufacturing
components on the way from the extraction of raw materials to delivery of the
finished product/service to the end-user;
 Minimization of the need for intermediary services. Intermediary services
(transportation, storage, marketing, recycling, etc.) take up the lion’s share of the
cost of the implementation of supply chains. Experienced logisticians plan routes
so as to minimize the need for involving third-party services for efficient logistics
management;
 Supporting goods with the necessary documentation. Insurance and support of
documentation are two fundamental tasks of logistics, solving which helps to
eliminate any problems associated with legal restrictions in the storage,
transportation, and marketing of goods;
 Timely response to changing market demands. Advanced logistics scenarios
also help to quickly adapt to changing market requirements and, thereby,
maintain top positions against the backdrop of competitors and remain in
demand for the target audience.
Values Logistics Provides to the Supply Chain Business
Supply chain management with the help of logistics tools helps to ensure a consistently
high level of customer service with some reduction in the cost of extracting raw
materials, storing, transporting, and selling goods/services to end-users. Thus, the role
of logistics in supply chain management is to carry the following values:

 ensuring the smooth operation of all parts of the supply chain. Continuity of
workflow is a rapid step towards both reducing the expenses and increasing
overall customer satisfaction. Usually, this is achieved through proper planning
and the formation of a fault-tolerant scheme of interaction between the individual
links in the supply chain;
 release of labor resources. On the other side of fault tolerance is the elimination
of redundant elements (intermediaries), the participation of which entails
additional costs. Thus, it is very important to find a balance in which the reduction
in labor resources does not entail forced downtime during the implementation of
supply chains;
 coverage of a new target audience. Increasing overall customer satisfaction is a
rapid step toward popularizing your brand by means of word of mouth. An
additional advantage is a fact that such advertising (which is also one of the most
effective methods) comes absolutely free for you;
 net cost reduction. By eliminating a number of intermediary links in the supply
chain, you will be able to reduce the net cost of a product or service, and thus
increase their availability to the end-user.
IV – SCM PROCESS
Supply chain management (SCM) is a sequence of processes in product distribution. It
is a way of managing the flow of goods and services to and from your business in the
most efficient and cost-effective way possible.

What is supply chain management?

The term 'supply chain management' describes overseeing all movement and storage
of:

 raw materials needed to make a product or service

 work-in-process information and inventory
 finished goods from production, through distribution and to the customer
The main function of supply chain management is to optimise the flow of materials,
information and financials in key areas of product distribution.

Key supply chain management processes

An effective supply chain management process involves five basic stages:

1. Planning
This involves creating strategic plans to manage all resources needed for getting your
product or service to the customers. It also includes setting ways to monitor supply
chain efficiency, including costs and delivery of goods or services.

2. Developing
During this stage, you choose suppliers of raw materials that you need for your product
or service. You also develop your pricing, delivery and payment process, and build a
strong relationship with your suppliers.

3. Making
This is the manufacturing stage of the process. It involves the production, testing and
packaging of goods or services, and getting ready to deliver to customers. Monitoring is
essential at this stage - including measuring product or service quality levels, production
output and worker productivity.

4. Delivering
Delivery, or the logistics stage, covers all the steps from handling customer queries to
choosing distribution and transport. For example, organising the receipt of orders from
customers, developing a network of warehouses and carriers, and setting up invoicing
systems for payments.

5. Returning
The final stage of the process involves receiving damaged products back from
customers, including identifying product condition, authorising returns and giving
refunds.

These processes can have a major impact on the success of your supply chain. You
can use specialist supply chain management software to improve them and achieve
efficiencies in your business.

IV – GLOBAL SUPPLY CHAIN

In an increasingly globalized world, the concept of a global supply chain is becoming
more and more important. Global supply chains refer to the interconnectedness of
countries and businesses around the world, allowing them to collaborate on production
and transport of goods. But what actually is a global supply chain? How does it work?
And why is it so important in today’s world? In this blog post, we will discuss
the definition of global supply chains, how they are changing the way businesses
operate, and why they are essential for success in an international market.

What is a Supply Chain?

A supply chain is a network of entities and activities that work together to move a
product or service from supplier to customer. Global supply chains are those in which
the activities and entities span multiple countries.

In a global supply chain, raw materials may be sourced from one country, manufactured
into products in another, and then sold and distributed in yet another country. Or, a
product may be designed in one country, assembled from parts made
in several countries, and then sold and distributed globally. In either case, multiple
companies and organizations are involved in moving the product along the supply chain
from supplier to customer.

Along the way, each company or organization in the supply chain adds value to the
product or service through some combination of processing, assembly, packaging,
marketing, or other activities. The sum of all these activities and values added along the
supply chain is referred to as the value chain.

The term “supply chain” is sometimes used interchangeably with “value chain,” but there
is a subtle difference between the two concepts. A supply chain includes all of the
entities and activities involved in moving a product or service from supplier to customer.
The value chain includes only those activities that add value to the product or service;
activities that do not add value are considered part of the firm’s cost structure rather
than part of the valuechain.

What is Globalization?
Globalization is the process of expanding world trade, contacts among societies, and
the sharing of ideas around the world. The term globalization can be used to refer to
different processes, such as economic globalization (the globalization of production and
trade) or cultural globalization (the spread of ideas and cultures). In a business context,
globalization refers to the trend toward multinational corporations and the growth of
international trade.

What is a Global Supply Chain?

A global supply chain is a network of suppliers, manufacturers, distributors, and
customers that operate in multiple countries. The supply chain encompasses all
activities involved in the production and delivery of a product or service,
from sourcing raw materials to delivering the final product to the customer.

Global supply chains have become increasingly complex due to the rise of e-commerce
and the growth of international trade. Companies must now manage a network of
suppliers and partners spread across the globe. They must also deal with different
regulatory environments, currency fluctuations, and logistics challenges.

Despite the challenges, global supply chains offer many benefits. They allow companies
to source materials and products from around the world, access new markets, and
improve their competitiveness.

The Benefits of a Global Supply Chain

A global supply chain is a network of suppliers, manufacturers, distributors, and other
logistics professionals that work together to get products and materials to customers all
over the world.

The benefits of a global supply chain are many. For one, it can help companies tap into
new markets and reach more customers. A global supply chain can also lead to
increased efficiency and lower costs as companies can source materials and
components from wherever they are available at the best price. In addition, a
global supply chain can help companies respond quickly to changes in demand or
unexpected events such as natural disasters.

A well-functioning global supply chain is critical for businesses that want to compete in
today’s marketplace. By working with partners all over the world, companies can make
sure their products are available when and where customers want them.

The Disadvantages of a Global Supply Chain

There are a few disadvantages to having a global supply chain. One is the potential for
political instability in countries where suppliers are located. This can disrupt the supply
of goods and materials and lead to increased costs. Additionally, cultural differences
can make it difficult to manage a global supply chain effectively. Finally, distance and
time zones can make communication and coordination challenging.

Understanding Outsourcing in Supply Chain Management

Outsourcing in supply chain management refers to the practice of hiring an external

company to manage some or all of the supply chain processes. This can include
sourcing raw materials, managing inventory, transportation, and logistics, and delivering
finished products to customers.

There are two main types of outsourcing in supply chain management: strategic
outsourcing and operational outsourcing. Strategic outsourcing involves outsourcing the
entire supply chain management function to an external company. Operational
outsourcing involves outsourcing specific supply chain processes, such as
transportation or inventory management.

Outsourcing in supply chain management is important because it allows businesses to

focus on their core competencies while outsourcing non-core functions to external
experts. This can help businesses reduce costs, improve efficiency, and mitigate risks.

Benefits of Outsourcing in Supply Chain Management

Whether you’re a small startup or a large corporation, leveraging the power of

outsourcing can give you a competitive edge in the dynamic and fast-paced world of
supply chain management. Let’s dive into the top benefits that outsourcing brings to
the table!

Cost Savings
Outsourcing in supply chain management is a money-saver for businesses! First off,
you can say goodbye to those hefty labor costs because you won’t need to hire and
train in-house staff for supply chain tasks. Plus, when it comes to transportation and
logistics, outsourcing is the way to go. You can cut down on transportation costs by
tapping into the outsourcing company’s network of carriers and providers.

And wait, there’s more! By outsourcing inventory management, you’ll optimize inventory
levels, avoid pesky stockouts, and finally bid farewell to the overstocking headache.
Cha-ching! More savings in the bank!

Improved Efficiency
Outsourcing in supply chain management doesn’t just save the day with cost savings, it
also brings the A-game to boost efficiency! Say goodbye to those pesky inefficiencies
and bottlenecks because outsourcing streamlines your supply chain processes like a
pro!

And hey, who needs to be a jack of all trades when you can have access to specialized
expertise? That’s right, outsourcing hooks you up with transportation, logistics, and
inventory management wizards.

But wait, brace yourself for some tech magic! With outsourcing, you can get access to
top-notch technology and software to supercharge your supply chain management
game. Efficiency level: Legendary!

Risk Mitigation
Alright, here’s the deal: outsourcing in supply chain management is like having a
superhero squad to tackle risks! First off, those pesky supply chain disruptions don’t
stand a chance. Outsourcing brings backup plans and contingency measures to the
rescue! And who doesn’t want to be the rule follower?

Outsourcing helps businesses stay on top of regulations and standards like a pro! But
that’s not all, folks. When it comes to risk management, outsourcing gives you the
ultimate edge. You get access to risk management experts and nifty tools to navigate
risks like a boss. So, rest easy knowing your supply chain is well-protected!

Factors to Consider When Outsourcing in Supply Chain Management

When considering outsourcing in supply chain management, businesses should

consider several factors, including cost, quality, communication, cultural fit, and location.

Cost
Businesses should consider the cost of outsourcing compared to the cost of in-house
supply chain management.

Quality
Businesses should also consider the quality of the outsourcing company’s services and
their ability to meet the business’s needs.

Communication
Effective communication is essential for successful outsourcing in supply chain
management. Businesses should ensure that the outsourcing company has effective
communication channels in place.

Cultural Fit
Businesses should also consider the cultural fit between their organization and the
outsourcing company.
Location
Finally, businesses should consider the location of the outsourcing company and how it
may impact supply chain operations.

Best Practices for Outsourcing in Supply Chain Management

To ensure successful outsourcing in supply chain management, businesses should
follow some best practices, including defining clear objectives and expectations,
choosing the right outsourcing partner, establishing effective communication channels,
monitoring performance, and continuously evaluating and improving the outsourcing
relationship.

Define Clear Objectives and Expectations

Businesses should define clear objectives and expectations for the outsourcing
relationship, including performance metrics and timelines.

Choose the Right Outsourcing Partner

Choosing the right outsourcing partner is critical for successful outsourcing in supply
chain management. Businesses should consider factors such as experience, expertise,
and reputation when selecting an outsourcing company.

Establish Effective Communication Channels

Effective communication is essential for successful outsourcing in supply chain
management. Businesses should establish effective communication channels with the
outsourcing company, including regular meetings and reporting.

Monitor Performance and Make Adjustments as Needed

Businesses should monitor the outsourcing company’s performance and make
adjustments as needed to ensure that objectives and expectations are being met.

Continuously Evaluate and Improve the Outsourcing Relationship

Finally, businesses should continuously evaluate and improve the outsourcing
relationship to ensure that it is meeting their needs and providing value.

Outsourcing in supply chain management is a no-brainer for businesses looking to

thrive. But hey, why stress about finding the perfect outsourcing partner when we’ve got
the ultimate recommendation for you?

With a proven track record of delivering top-notch services, RecruitFirst can help you
unlock the full potential of outsourcing. Say hello to cost savings, improved efficiency,
and a fortified risk management strategy – all in one package!

References:
Operations Management Copyright 2016 by McGraw-Hill Education

Production and Operations Management Basics 2015 by 3G Learning Publisher

Global Supply Chain and Operations Management 2nd Edition 2019 by Dmitry Ivanov,
Alexander Tsipoulanidis and Jorn Schonberger

https://www.google.com/search?q=sUPPLY+cHAIN+mANAGEMENT+pROCESS&oq=s
upply+chain+&gs_lcrp=EgZjaHJvbWUqDggCEEUYJxg7GIAEGIoFMgYIABBFGD

https://www.google.com/search?q=globalization+in+supply+chain&sca_esv=bc11e8338
9bb529e&sxsrf=ACQVn0_csffdsn7s5NY-Nf_UEiXkLTWYSw%3A171

https://www.google.com/search?q=supply+chain+management&sca_esv=bc11e83389b
b529e&sxsrf=ACQVn0_hUKFWM5pQ60RTVVCTKfMXS7Gq1Q%3A1711290499341&e
i=gzgAZv2vFOLVseMP452iiAw&ved=0ahUKEwi9_cfyjY2