Supply Chain

Management
Learning Objectives
• To familiarize with basic concepts of logistics
and supply chain
• To explain the decision phases in supply chain
management
• To know the importance of supply chain

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What is Supply Chain ?
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 Supply Chain
• A supply chain is a system of organizations, people, technology, activities,
information and resources involved in moving a product or service from
supplier to customer.
• A supply chain is a network of retailers, distributors, transporters, storage
facilities, and suppliers that participate in the production, delivery and sale of
a product to the consumer.
• These activities are associated with the flow and transformation of goods
from the raw materials stage to the end user, as well as the associated
information and funds flows.
• Supply chain activities transform natural resources, raw materials and
components into a finished product that is delivered to the end customer.

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 Supply Chain
 In simple terms, a supply chain is the link between a firm or business and its
suppliers and customers.

SUPPLIER FIRM CUSTOMER

Conceptual model of a Basic Supply Chain

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A supply chain has three key parts:

• Supply which focuses on the raw materials supplied

to manufacturing, including how, when, and from
what location.

• Manufacturing which focuses on converting these

raw materials into finished products.

• Distribution which focuses on ensuring that the

products reach the consumers through an organized
network of distributors, warehouses, and retailers.

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What is Supply Chain
Management ?
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 Supply Chain Management
• Is the process of managing the flow of goods and services to and
from a business, including every step 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.

• By managing the supply chain, companies can cut excess costs

and deliver products to the consumer faster and more efficiently.

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 Supply Chain Management

• SCM is also called the art of management of

providing the right product, at the right time,
right place and at the right cost to the customer.

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 Supply Chain Management
• The statement "Supply Chain Management (SCM) is also called the art of
management of providing the right product, at the right time, right place,
and at the right cost to the customer" captures the essence of SCM by
emphasizing key objectives and elements of effective supply chain
operations:
• The term "art of management" implies that effective supply chain
management involves a combination of skills, strategies, and decision-
making that goes beyond a purely systematic or technical approach. It
recognizes that there is a level of expertise, intuition, and adaptability
required to navigate the complexities of supply chain dynamics.

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 Supply Chain Management
• Right Product
- This refers to ensuring that the product offered meets the specifications and expectations of the customer. It involves managing the
entire product lifecycle, from design and production to distribution and after-sales service.

• Right Time
- Timing is crucial in supply chain management. Delivering products at the right time ensures that customers receive them when
needed, minimizing delays, stockouts, and disruptions in their operations or consumption patterns.

• Right Place
• - The location of product availability is a critical aspect of SCM. Efficient distribution networks and strategic placement of inventory
points help in reaching customers or end-users in various geographical locations promptly and cost-effectively.

• Right Cost
- Managing costs is integral to SCM. This involves optimizing the entire supply chain process to minimize expenses while maintaining
quality and service levels. This includes factors such as procurement costs, production costs, transportation costs, and inventory holding
costs.

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Diagram of
Supply Chain
Management
Supply chain management can be divided into three main flows:

• The Product flow includes moving goods from

supplier to consumer, as well as dealing with
customer service needs.

• The Information flow includes order

information and delivery status.

• The Financial flow includes payment

schedules, credit terms, and additional
arrangements. 13
Objectives of Supply Chain Management
The objectives of supply chain management can be listed
below:
• enhancing customer service
• expanding sales revenue
• reducing inventory cost
• improving on-time delivery
• reducing order to delivery cycle time
• reducing lead time
• reducing transportation cost
• reducing warehouse cost
• reducing supplier base
• expanding depth of distribution
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Importance of Supply Chain
Management

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 Importance of Supply Chain Management
• The supply chain plays a crucial role in the success and sustainability of
businesses across various industries. Its importance can be understood from
several perspectives:
1. Efficiency and Cost Management:
• A well-optimized supply chain improves efficiency, reduces lead times,
and minimizes operational costs. Streamlining processes and minimizing
waste contribute to overall cost-effectiveness.
2. Customer Satisfaction:
• A responsive and efficient supply chain ensures that products are available when and
where customers need them. This leads to improved customer satisfaction, loyalty, and
positive brand perception.

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Importance of Supply Chain Management
3. Globalization and Market Expansion:
• In an era of globalization, supply chains often span across countries and continents. A
robust supply chain enables companies to expand into new markets, capitalize on
global opportunities, and access diverse resources.
4. Risk Management:
• An effective supply chain includes strategies for risk management and resilience. This
involves identifying potential disruptions (such as natural disasters, geopolitical
events, or supply shortages) and developing contingency plans to minimize their
impact.
5. Innovation and Technology Integration:
• Supply chains benefit from technological advancements such as blockchain, IoT
(Internet of Things), and AI. These technologies enhance transparency, traceability,
and data analytics, providing insights for better decision-making and innovation.
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 Supply Chain Management
6. Inventory Management:
• Proper inventory management is critical in avoiding overstock or stockouts. An
optimized supply chain ensures that inventory levels are aligned with demand,
reducing carrying costs and preventing lost sales.
7. Competitive Advantage:
• A well-managed supply chain can be a source of competitive advantage. Companies
that can deliver products faster, more reliably, and at a lower cost than their
competitors often gain a competitive edge in the market.
8. Environmental and Social Responsibility:
• Sustainable and responsible supply chain practices are becoming increasingly
important. Companies are expected to consider the environmental and social impact of
their supply chain activities, from sourcing materials to transportation and disposal.

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 Supply Chain Management
9. Regulatory Compliance:
• Compliance with various regulations and standards is a key consideration in supply
chain management. Adhering to legal requirements ensures that companies avoid
fines, legal issues, and damage to their reputation.
10. Collaboration and Relationships:
• Effective collaboration with suppliers, manufacturers, distributors, and other partners
is vital for a smooth and efficient supply chain. Building strong relationships fosters
trust and can lead to mutually beneficial arrangements.

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