What is Supply Chain Management (SCM)?SCM encompasses the planning & management of all activities through which products and services are created and distributed to customers. Such activities include sourcing and procurement, manufacturing/operations, as well as warehousing, logistics and transportation. Importantly, it also includes coordination and collaboration with channel partners including suppliers, intermediaries, third-party service providers and customers. In essence, SCM integrates supply and demand management within and across companies.
Supply chain management is primarily concerned with the efficient integration 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, to minimize total system cost subject to satisfying service requirements.
Note:1.Many functions are involved2.Systems approach (viewing the supply chain holistically) is essential 3.Integration is the key4.Flow of information, product/service and funds between different stages
GSCM: C to C approach Desired Outcomes:1 Meet/Exceed Customer Expectations at Minimum System Cost;2 Improve Chain-wide Financial Performance. Multidisciplinary Concepts, Tools, and Skills: Operations Management, Marketing, Information Systems, Human Resource Management, Economics, Strategic Management////Demand Planning, Design for Logistics, Distribution Strategies, Flow Management, Global Sourcing, Inventory and Materials Management, Logistics, Measuring Supply Chain Performance, Risk Pooling, Supply Chain Systems Design, Systems Integration.
The Objective of a Supply Chain:Maximize the overall value generated (i.e., supply chain profitability). According to recent CSCMP State of Logistics Reports: While large retailers are keeping lean stocks on hand, they are pushing inventory back on their suppliers, requiring them to stock and re-supply stores more frequently.
Conflicting Objectives in the Supply Chain:1. Purchasing / sourcing2.Manufacturing / Operations3.Warehousing / Distribution4.Marketing / Sales5.Engineering / Product development6.Finance / Accounting “Virtually every organization suffers from the silo effect.”
Why Is Supply Chain Management So Relevant:1.Increasing competition2.Availability of better information systems 3.Increasing product variety- more fashion sensitive4.Decreasing product life cycles 5.Increasingly demanding customers 6.Less vertical integration / today’s global supply chains are longer, more variable and cross more borders7.Globalization: Multi-Polar World- multiple pockets of demand sources, supply sources and innovation8.Ensuring social responsibility & accountability9.Operations/manufacturing efficiency has already been achieved to a large extent10“Green” movement- mandated environmental regulations (e.g., RoHS)11.General increase in logistics costs12.General increase in the level of risk
The Complexity of Supply Chain Management: 1.Supply Chain Integration(Conflicting objectives,Sharing supply chain profits)2.System Variations Over Time(Increasing volatility of demand volume, demand mix, transportation & labor costs, commodity prices, etc.,Increasing volatility in supply resulting in disruptions)3.Matching Supply and Demand While Managing Capacity Constraints & Optimizing Asset Utilization4.Role of Information Systems5.The Human Elements
Example of Winning Supply Chains:1.Zara (high fashion / “fast fashion” Spanish apparel manufacturer and retailer)
2.Brings 12,000 new fashions to market each year, generally with a 2-3 week lead time3.Managers send customers feedback to in-house designers via handheld devices4.Acquire fabric in only 4 colors and postpone dyeing and printing close to manufacture5.Tight linkages between demand & supply resulting in reduced inventory, obsolescence costs and high service levels6.Parent company (Inditex) has been opening an average of more than a store a day for the past few years,