Supply Chain Management - Chapter 1

CHAPTER 1
FUNDAMENTALS OF SUPPLY
CHAIN MANAGEMENT
INTRODUCTION
Organizations must increasingly rely on effective supply chains (SCs) in order to compete
in global markets and networked economies. A supply chain management (SCM) system
involves getting raw materials, manufacturing the final product, and delivering it to
customers, which is a highly detailed process used by both small and large businesses.
Optimizing operations functionality for speed and efficiency is an important aspect of
a well-organized SCM system. The management of SCs has become a vital part of
every company today, and it is essential to their success and customer satisfaction
more than ever before. The management of SCs can improve customer service, reduce
operating costs, and boost a company’s financial position. In order to achieve maximum
efficiency, reduce costs, and lower net worth, SCs must be orchestrated, which involves
sourcing, managing, storing raw materials and manufacturing, transporting, delivering,
storing finished goods, and providing aftermarket services. SCs streamline the process of
delivering products to market, and ultimately to consumers, resulting in lower consumer
costs. The purpose of this chapter is to introduce SC and SCM.
2 Essentials of Supply Chain Management
Learning Objectives
After completing this chapter, you will be able to understand:
• The basics of SC
• SC network and technology
• The strategy of SCM
• The quality of SC system
Key Terms
• Physical distribution
• Customer demand
• Brand leadership
• Logistics managers
• Organizational culture
• Globalization
• Distribution management
• Operational efficiency
• Customer satisfaction
• Cost minimization
• Quality control
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Fundamentals of Supply Chain Management 3
1.1. BASICS OF SUPPLY CHAIN

A supply chains is a network of manufacturers, suppliers, distributors,
carriers, storage facilities, and retailers that perform functions
such as the sourcing and acquisition of materials, the processing,
and transformation of the materials into intermediate and finished KEYWORD
tangible goods, and finally the physical distribution of the materials
key-Tangible
finished goods to intermediate or end customers. To understand
goods are physical
the importance of SCM, it pays to first think about the meaning of products defined
a SC at its most basic level. Traditional SCs follow a linear path. by the ability to be
The output of one step is typically the input of the next step. For touched.
example, suppliers must send raw materials to the manufacturer
before the products can be manufactured. If there is a problem
at any step, the entire linear chain will be disrupted.
Bridge�eld Group (2006) de�nes Supply Chain as “a connected set of

resources and processes that starts with the raw materials sourcing and
expands through the delivery of �nished goods to the end consumer”.
1.1.1. Major Components of Supply Chain

A SC may consist of a variety of components depending on the
business model selected by a firm. A typical SC consist12s of the
following components:
• Customers: The customer forms the focus of any SC. An
order placed with a retailer activates the processes in a SC.
Retailers fill customer orders from existing inventories, or
by placing fresh orders with wholesalers and manufacturers.
Customers can sometimes bypass all these SC components
by directly contacting manufacturers. When a customer buys
a computer online from Dell Computers, the manufacturer
receives the order directly from the customer.
• Retailers/Distributors: The retailer acts as a link between
the customer and the distributor/manufacturer. He caters
to the needs of the customer by making the products
available in his store. As part of this process, the retailer
orders from the manufacturer to replenish stock. In a
typical SC, orders come from the retailer end, but in
some cases where there is an agreement to share the
POS information with the manufacturers, the manufacturer
monitors and automatically replenishes inventory, Wal-Mart
has such an agreement.
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• Manufacturers: The manufacturer plays a key role in

deciding the structure of the SC. Depending on the market
situation, the manufacturer uses either the pull or the push
strategy to generate the demand needed to move products
in the SC. The manufacturer then plans a production
schedule depending on the resulting demand.
• Suppliers: Suppliers make the production process easier
for manufacturers by ensuring a continuous supply of raw
materials. Manufacturers place orders with suppliers based
on forecast customer demand. Since it is very difficult to
accurately forecast demand, manufacturers are trying to
integrate their processes with those of suppliers to better
respond to fluctuations in customer demand. Suppliers help
manufacturers reduce inventory by arranging just-in-time
(JIT) deliveries.
SCM involves using a range of approaches to efficiently integrate
KEYWORD the activities of suppliers, manufacturers, warehousing providers,
Customer service and retailers so that goods are produced in the right quantity,
is the support in the right places, and at the right time, in the right order, and
you offer your distributed at system-wide costs minimize while meeting customer
customers — both service expectations.
before and after
they buy and use
your products Pienaar W. (2009b) de�nes Supply Chain as “a general descrip on of the
process integra on involving organiza ons to transform raw materials into
or services —
�nished goods and to transport them to the end-user”.
that helps them
have an easy
and enjoyable
experience with 1.1.2. Supply Chain Evolution and International
you. Retailing – A Perspective
The SC is the backbone of all industries. In international trade,
all elements of the SC are becoming increasingly important. In
fact, it is the SC and the logistic network that make the crucial
difference between the two competitors and give the company the
advantage to have a leading position in the market. SC efficiency
in an organization not only gives it a competitive position but
also contributes to or influences profitability. The fact that the SC
is a compromise between quantity and location of storage and
distribution makes it clear that the SC is the pillar that supports
international retail.
Traditionally, the SC study in the industrial age consisted of
the processes and strategies aimed at managing the supply of raw
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materials for production and the physical distribution of the product in

the markets separately. This was the time when manufacturers were
product-driven. As the concept of customer demand and market
demand began to gain traction, and manufacturers changed their KEYWORD
focus and direction from product manufacturing to meeting customer
Consumer
demand, the SC began to take center stage for companies. They
demand is an
found that by focusing on SC restructuring and control, they could economic measure
achieve tremendous economies of scale in terms of efficiencies of a group's desire
and cost reductions, and savings. The SC has evolved due to for a product or
overall changes in the industries. service based on
The advent of information technology (IT) and the concept availability.
of organizations focusing on their core business and outsourcing
non-core activities to third parties can perhaps be seen as the
most important factors that changed the face of the SC to what
it is today. The introduction of IT in the form of ERP systems and
web-enabled technologies including EDI has redefined all aspects
of manufacturing and distribution.
The industry moved from manually controlled activities to
process-controlled activities. In addition, the ERP software provided
complete seamless integration and full visibility of all processes,
inventory, as well as logistics operations, or in other words from
end to end of the entire SC. Technologies continued to evolve into
web-enabled modules and could interact with third-party systems,
making it possible to integrate SC networks and gain end-to-end
visibility and control. The most important element of the SC,
inventory, became visible with visibility.
Organizations could now control when, where, and how much
inventory to stock and improve market reach. EDI and web-enabled
technologies allow retailers to manage their design, sample, and
production processes offshore with suppliers as the instant exchange
of data and information was made possible by the internet and
other technologies. You could now save a considerable amount
of time.
1.1.3. Supply Chains as Sources of Competitive

Advantage
• Optimizing the Supply Chains: A SC is the web of
relationships between upstream and downstream
activities with all the stakeholders involved in that chain
of relationships. To give an example, when a particular
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good or service needs to be delivered to the customer,

there are raw materials needed for manufacturing, the
means of transportation and storage for the raw materials,
the transportation of the finished goods to the retailers,
and the logistics that brings the goods to the customer
are all parts of the SC that stretches from the suppliers
to the customers.
In other words, there is a chain of relationships between the
company and the partners involved in that chain. Therefore, SCs
are made up of all of these stakeholders, and the relationships
between them determine the effectiveness of the SC. In modern
times, SCs can be sources of competitive advantage as efficient
SCM leads to cost savings and synergies between SC components
leads to higher profitability for the companies. Because of this,
many business leaders have focused their energies on optimizing
KEYWORD SCs to increase both sales and profits.
Inventory • Supply Chains as Strategic Levers: In times of economic
management, a recession, SCs can be used as strategic leverage as they
critical element of can be optimized to outperform competitors, resulting in
the supply chain, more profits and lower costs. Optimizing the SC through
is the tracking of JIT or JIT methods of inventory management, focusing on
inventory from reducing COGS or manufacturing costs by streamlining
manufacturers to spending on SC components results in a situation that
warehouses and can be extremely beneficial to firms.
from these facilities
to a point of sale. Because of this, many companies such as Walmart, Proctor,
and Gamble, Tata Motors, and Unilever have focused on
streamlining the activities that make up the SC. The point
here is that with smart management of the SC, companies
can derive value from the process, which can then translate
into higher profits and lower costs. Apart from that, the
SCs can also be of strategic and competitive advantage
since a large part of the cost of goods sold or COGS
consists of the logistics and the SC costs.
• The Case of Walmart: To cite a few real-world examples,
Walmart is one retailer that has skillfully and efficiently
managed its global SC. Operating in different countries
around the world, it needs to be in control of its global SC
and this is where the company, with its focus on local skills
and global movement and integration, has made its SC
leaner and meaner. Additionally, the company is obsessed
with costs and as such is solely focused on how to run its
COGS and the logistical aspects of the SC efficiently and
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effectively. That being said, the single-minded obsession

with cutting costs has paid off well for the company as it
maintains its number one position in the retail market largely
due to its cost-effective strategies, which translate to lower
unit prices for the products it stocks. Of course, there are
The twin challenges
many who believe the company is overemphasizing cost- of globalizing the
cutting in its SC, which has raised some ethical issues. world economy and
The point here, though, is that in times of economic gloom, increasing global
Walmart has scored well over its peers with its aggressive SC complexity
approach to SCM. Without suggesting that ethics should are daunting, and
be discarded or ignored, the fact remains that a focused combined with
the impact of the
effort to streamline the SC can pay off for companies.
ongoing economic
crisis, business
1.1.4. A Control Mechanism of Supply Chain leaders have their
hands full in making
The SC’s operations and network extend beyond the national decisions about how
borders and the global boundaries of every country. A logistical to proceed to meet
these challenges.
exercise starts from the buy-side and involves multiple agencies
including buyer, seller, 3PL freight forwarder, transport companies
at different hubs, shipping companies, airlines, various government
agencies, customs departments at different locations, and financial
institutions such as banks to complete the entire delivery chain cycle.
A smooth flow of material on a journey starting at one point and
going through the whole cycle of exports and imports to reach a
point of consumption would mean engagement and interaction with
all the above agencies involved in the said transaction. Decision-
making needs regarding financial, commercial, technical, and
operational issues regarding shipments arise at different points
in the cycle, requiring the 3PL, the logistics service provider, the
buyer, and the supplier to be actively involved and to be able
to view information and documentation for the shipments to run
smoothly across different transit points.
In fact, for error-free logistics operations, the documentation
and flow of information should precede the physical movement of
goods. Documentation becomes important not only for the physical
logistics operations involving multiple agencies involved in the
entire chain, financial, commercial, and accounting processes of
the two buyers and involved seller organizations and partner banks
rely on the complete documentation of each transaction to see
the sale, the value of the shipment, and the payment required.
Organizations’ accounting practices require detailed documentation
in accordance with accounting practices and standards. After all, at
each stage, goods, and services are recognized and identified only
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on the basis of the certified ownership documents, on the basis of

which customs allow their export or import to or from the country.
The carrier’s conditions of carriage as well as insurance
requirements and coverage require a set of specific documents
covering each transaction as well. As a result, the entire SC
involves standardized paperwork from both buyers and sellers,
3PL carriers, as well as documentation required by customs in
the exporting and importing countries, as well as commercial or
banking requirements. In order to facilitate international trade,
all documents and trading conditions have been developed and
KEYWORD standardized.
Documentation is INCO terms and EDI-approved/enabled standardized
any communicable documentation has made export and Imports smoother and hassle-
material that is free, thus cutting down on bottlenecks and delays arising out of
used to describe, documentation requirements.
explain or instruct
regarding some Today, software applications have standardized documentation
attributes of an templates and modules built into their offerings that reduce the time
object, system or and effort required to create documentation. ERP modules contain
procedure, such as the documentation formats as an integral part of their internal
its parts, assembly, processes. 3PL logistics providers work with various software
installation, applications that have integrated shipping documents into their
maintenance and operational processes and offer online shipment tracking with
use.
documentation transparency to customers. The submission of
documents to customs has been made EDI-enabled. Electronic
documentation has become an integral part of all authorities.
However, at customs and bank counters, original documents must
be presented as negotiation and valid legal documents for shipments
to be checked through design processes and document control
mechanisms. Errors in documentation lead to financial damage,
and delays in delivery, and performance which every manager
wants to avoid.
1.1.5. Finished Goods Supply Chain

Buying a desktop computer for your home or a laptop for your
use is very easy. You scour the web for the latest models and
configurations, decide on your specific needs and click to place
an order. Of course, sometimes you can go to an electronic
supermarket and look at the physical product before you buy it.
Immediately after payment, you can’t wait for delivery and expect
to be served with priority. Have you ever wondered how companies
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like HP, Dell, and IBM manage to place just the right products in all
outlets not just in your city, but anywhere in your country, around
the world, where product availability and standard processes are
provided will? When you start thinking about where the products
came from? Where were they made? Where they were stored
and ultimately how and who got them to your doorstep, you are
actually tracking the logistics of the SC.
Finished goods SCs are very dynamic and are the backbone
of a good sales organization. Some departments are responsible
to work in a coordinated and seamless manner to ensure the
finished products reach the markets and customers. Logistics and
SC departments must work together to stay one step ahead of KEYWORD
marketing and sales, ensuring that a product is announced, and
sold through marketing and that products are made available to Marketing refers
every corner of the city, state, and country. A situation in which to activities
a company
the customer goes to a sales counter to place an order and the
undertakes to
product is not available can and should generally never occur.
promote the buying
Taking the customer as the starting point, let us trace back the or selling of a
journey of finished goods and their functions. While the marketing product or service.
departments work on marketing and promoting the product and
focus on reaching the customer to sell them a product, further
coordination and deliveries are managed by order fulfi1lment teams
who are responsible for fulfilling the order when a customer places
an order place the orders in the distribution centers in the backend
to withdraw materials for forward storage points or make deliveries
to the customers.
Logistics teams are made up of multiple centers of excellence,
including inventory planners, freight managers who are responsible
for the transportation route, and warehouse operations professionals
who are responsible for inventory and warehouse operations,
including documentation control and regulatory compliance. Logistics
is never an event-free process. While tiered third-party service
providers handle cargo across various borders, at locations each
with unique local characteristics, there are many other vagaries of
nature and events that can disrupt the smooth flow of shipments,
and the situation is very dynamic.
Managing multiple product lines and vast distribution networks
coupled with managing third-party partners requires logistics
managers and SC managers to be always on their feet, constantly
innovating new processes and finding new ways to keep operations
running smoothly.
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1.1.6. Driving Supply Chain Efficiency for

Leadership
The dynamics of the business world have changed drastically over
the last few decades. With the changing purchasing behavior of
customers, the rules of the competition and the game of brand
management in the market have also changed. Every marketing
KEYWORD theory and practice is being rewritten in the wake of the internet
Virtual integration age, which brings with it online shopping, social media marketing,
means you and virtual transactions. Organizations have recognized the need
basically stitch for change to survive and grow their markets. By change we mean
together a business not just optimizing some of their product features etc. but revising
with partners that their focus, vision, and strategy including their organizational culture,
are treated as if operations as well as their business processes in line with their
they're inside the alignment with customers, markets, products, and value proposition.
company. Globalization and technology have been two important factors in
our lives and have impacted businesses and organizations equally.
More than five decades ago, we began to see computers being
used in all functions to automate repetitive tasks. Slowly the concept
of MRP emerged, bringing with it the concept of integration and
planning. Further technological advances led to ERP systems.
Today, it is the ERP systems that drive all operations and
business processes in organizations, across all functions, and across
multiple locations, including multiple lines of business. Organizations
today are focused on driving operational excellence and efficiency
in integrated SCs and utilizing systems and technology as the
backbone to power SCs. Systems, technology, and connectivity
have enabled seamless and virtual integration, resulting in the
downsizing of SC processes and resources. Companies run out
of inventory and block their money for stocks. Their systems are
integrated with their suppliers’ systems and can retrieve and pay
for materials as they consume the items for production or sale.
In many cases, the entire warehousing and stocking logistics are
eliminated.
Technological innovation and the resulting process refinement
have led to further specialization in SC models. Concepts such as
cross-docking and vendor-managed inventory, integrated logistics,
etc. have been put into practice. Cross-docking, where the incoming
truck and the outgoing truck are to dock at the warehouse at
the same time, eliminates the entire warehousing and shipping
cycle at the distribution center by transporting the materials from
the incoming truck directly to the exit truck for delivery to the
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shelf or to the end customer. The entire process of receiving,

inventory, and shipping is instantaneous and recorded by the
system, eliminating the need for physical tasks. Similarly, third-
party logistics (3PL) providers have begun to offer integrated
logistics concepts, where they handle all outbound shipping at
the customer’s facility, manage outbound transportation, including
multimodal transportation, documentation, as well as other logistics KEYWORD
requirements, and manage the entire outbound SC until the products
Quality control
reach their end customers. In many cases, 3PL providers operate (QC) is a process
their own regional and national warehouses, which are used as through which a
multi-tenant facilities for on-the-go distribution management. In such business seeks
cases, they calculate warehouse usage on a pallet or cubic meter to ensure that
basis, thereby avoiding huge SC costs for their customers. Things product quality
have also changed on the supplier side. Suppliers now work with is maintained or
customers as their partners. They sit down and engage with their improved.
clients in long-term planning, quality control, and forecasting, and
commit to reducing costs by improving their operational efficiencies.
With the help of 3PL service providers, the suppliers can get
the LSP to set up VMI hubs next to their customers’ product
centers and make JIT deliveries. Using 3rd party VMI hubs offers
suppliers huge cost advantages as they pay on a pay-per-skid
or transaction basis and do not incur any fixed costs. System
integration between the customer, the third-party warehouse hub,
and the supplier system enables real-time transactions where the
customer’s production program triggers an automatic call to the
warehouse, which delivers the materials within a set number of
hours. Upon delivery to the customer’s manufacturing facility, the
hub system reduces inventory and sends sales data to the supplier
system, which invoices the customer and processes the sales
data to monitor inventory at the hub and plan replenishment. The
amount of time, effort, space, and operational and logistical tasks
that are saved is enormous. Organizations focused on improving
their business operations as well as their SC to increase their value
proposition to their customers and thus improve their leadership
and business never rest on their laurels.
1.2. SUPPLY CHAIN NETWORK AND

TECHNOLOGY
The whole concept of business philosophy has evolved from the
traditional model to a more customer-centric orientation, driven by
demand and based on cooperative and shared operational strategies
in global markets. SC networks have recently evolved from simple
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sequential and linear process networks to sophisticated dynamic

processes that require information, sharing, and visibility to be
available throughout the network, coupled with real-time based
decision-making. An integrated approach to managing logistical
tasks in a highly dynamic marketplace is necessary as it involves a
number of internal and external business processes and agencies
working together to manage SCs.
Logistic events at every stage of the network require a
transactional exchange of information and documentation, which
further leads to continuous decision-making by different stakeholders
at every level of activity. Technology has not only shortened SC
timelines but also increased reliance on system and application
KEYWORD capabilities to manage critical processes.
Warranty is a Applications today manage multiple functions in the SC. While
statement of applications primarily act as information stores, and databases to
assurance or capture all transaction information and history, they also drive and
undertaking
enable processes in the SC. Various technology platforms work
issued by the
together and function to enhance SC network functions today.
manufacturer of a
Applications like ERP with different modules covering all functions
product concerning
the performance like MM, SCM, etc. Warehouse management systems (WMSs),
of the product and warranty management systems, and many other core business
parts supplied by systems control business processes in the SC network.
him by way of However, these systems alone are not enough. Many other
sale transaction to
applications to support these systems are used as needed based
the customer, for
on the specific processes and needs of the business. Supporting
a certain period
software can be used as a standalone application or integrated
as stated in the
with the ERP. The most common finding is that the systems are
Warranty Card
accompanying the used as standalone applications with no need for integration with
product. ERP, rather than the cost of integration and the associated hassle
of warehouse owned and operated by a 3PL service provider on
behalf of multiple vendors managed at Buyer’s facility to perform
JIT deliveries at a VMI distribution center.
The operation includes sellers on the one hand, and buyers
on the other, as well as internal operations and freight services
and logistics of inbound traffic. The 3PL warehouse must be
connected to the buyer to publish continuously updated inventory
information and snapshots to the buyer’s system to trigger a call-
off for materials to be delivered and trigger the procurement cycle.
The 3PL warehousing system also needs to talk to suppliers/
sellers to make inventory visible and trigger replenishment cycles
in the seller system. Additionally, 3PL operations require visibility
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to track and trace shipments in the pipeline with the carrier. All
these multiple systems communicating with each other in real-time
are made possible by communication-enabling applications such as
interfaces, EDI, internet, email, web-enabling of job applications,
etc. (Figure 1.1).
Figure 1.1. The flow

of information and
cargo in a supply
chain network.
Source: https://www.managementstudyguide. com/supply-chain-

network.htm.
In a sophisticated technology-driven supply chain, the need

to manage processes, events, and deviations 24/7 is imperative.
Multi-process networks, sharing knowledge, and information, and
enabling transactions can only be managed with electronically
supported technology solutions that drive business processes. These
technology companies need to be able to work in a collaborative
mode and be supported by infrastructure support and an enterprise-
level IT strategy.
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1.2.1. Supply Chain Network Design &

Contributing Factors
It is important to establish a satisfactory design framework when
developing SC networks for any industry or company, considering all
factors such as product, market, process, technology, cost, external
environment, factors, and their impacts, along with evaluating
alternative scenarios that correspond to your business needs.
There are no two SC designs the same. There are many factors to
consider when designing a network, such as location and whether
your business model is national, regional, or global.
• The process design of a SC network involves determining
KEYWORD the following:
Logistics is a part
Procurement:
of supply chain • What are your suppliers’ locations?
management that
deals with the
• What raw materials and components will you procure?
efficient forward Manufacturing:
and reverse
flow of goods, • In what locations will you locate the factories for
services, and manufacturing/assembly?
related information • Methodology for manufacturing
from the point of Finished Good:
origin to the point
of consumption • How many warehouses will you have, where will they be
according to located, etc.
the needs of • Transport and distribution logistics – How will you reach
customers. markets?
All of the above decisions are influenced and driven by Key
Driver which is Customer Fulfillment.
• Supply Chain Network Design involves determining and
defining the following elements:
• Market Structure;
• Demand Plotting or Estimation;
• Market Segment;
• Procurement Cost;
• Product /Conversion Costs;
• Logistics Costs including Inventory holding costs;
• Over heads; and
• Cost of Sales.
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• Network Design aims to define:

• Best fit Procurement model: Buying decision and processes-
VMI, JIT, Kanban, procurement cost models, etc.
• Production processes: One or more number of plants,
plant capacity design, Building to order, build to stock,
etc., in-house manufacturing or outsource manufacturing
and related decisions including technology for production.
• Manufacturing Facility design: Location, Number of
factories, size of the unit, time frames for the plant setup
project, etc.
KEYWORD
• Finished Goods SC network: Number of warehouses,
location & size of warehouses, inventory flow and volume Order
decisions, transportation. management is
the process of
• Sales and Marketing Decisions: Sales Channel and network
order capturing,
strategy, Sales pricing and promotions, order management,
tracking, and
fulfillment process, and service delivery process definitions.
fulfilling customer
• Network Design also examines: orders.
• Derives cost estimates for every network element
• Examines ways to optimize costs and reduce costs
• Extrapolates cost impact over various product lines and
all possible permutations and combinations to project
profitability
• SC network modeling is affected by a number of factors,
including:
• Policies of the government of the country where the plants
will be located.
• Political climate
• Availability of skilled and unskilled human resources,
industrial relations environment, infrastructure support,
energy availability, etc.
• The tax policies, incentives, subsidies, etc., across proposed
plant locations, as well as the tax structures in different
marketplaces.
• Status of the technology infrastructure.
• Policy and regulations related to foreign investment, foreign
exchange, and repatriation.
SC network designs not only provide an operational framework
of the whole company to guide management, but they also examine
the structure from a strategic perspective, considering external
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influences and interdependencies of all processes and critically

assessing opportunities to maximize profitability.
Remember 1.2.2. Logistics Operations in SC Network

SC design
consultants use
Logistics has helped make global trade possible. Third-party logistic
various design service providers on a global and local level form important partners
software and for managing and offering SC services, and the second important
optimization factor is the Internet and IT technology, which is used in the
techniques in
conjunction with
management of information and data before or along with the flow
input from industry of materials and goods helps. SC consultants and professionals
consultants and find it very important to have knowledge of the operational field
experts. and how things work on-site. Take an example from DELL, which
has successfully implemented its SC strategy based on the concept
of JIT manufacturing and direct marketing. Dell has Manufacturing
facilities in Austin-Texas, North Carolina, Miami, Florida serving US
markets. European markets are served from its plants in Ireland
and Poland. Asia and other subcontinents are supported by its
manufacturing facilities in Penang, Malaysia, and Xiamen, China
along with the newest factory in Chennai, India. South America will
be served from its Eldora do facility, while the new plan in Brazil
will support the African continent. One can imagine how complex
the design of procurement systems is. Dell does not purchase raw
materials and components or maintain inventory. Dell’s vendors use
outside service providers to set up logistic parks and distribution
warehouses near Dell’s plants and deliver materials JIT to the plant
against a production order triggered based on an order confirmed
by the customer on the web Logistics, bear here some logistics
service providers make a significant contribution to the smooth
process. Vendors are based in Europe, Taiwan, China, Singapore,
Hong Kong, Korea, Japan, etc. Although the raw materials are
owned by the vendors until they are delivered to the production floor,
the design, planning, and selection of logistics service providers
are initiated by Dell and managed. Dell has contracted carriers
such as DHL, CEVA, Panalpina, UPS, etc. on a sector-by-sector
basis to collect shipments from supplier locations, transport the
collected shipments by road, and consolidate and ship all suppliers’
inventories in the carriers’ consolidation warehouses at the gateways
in each country Freight by sea to the port of destination or air
freight shipments to factory sites after completion of export and
customs clearance formalities on behalf of suppliers.
While shipments are in transit, carriers electronically transmit
shipment information and documentation to their overseas offices
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or agents at the destination, keeping Dell and suppliers updated

on the status of shipments Upon the arrival of cargo, full customs
formalities and freight cleared are then transferred to the carrier’s
warehouse or bonded warehouse or another designated third-party
warehouse where all inventory destined for Dell is held. The third-
party vendor that manages inventory in its warehouse receives the
cargo, unpacks shipments from bulk skids to individual carton levels,
and completes inbound formalities, including updating inventory in
its system, and stores the materials in designated rack locations. KEYWORD
Both the suppliers and Dell are continuously informed about the Revenue
data on deliveries and stock levels. The warehouse maintains recognition is an
inventory on behalf of various suppliers at the SKU level. These accounting principle
warehouses are usually located next to or in the vicinity of the that asserts that
plant. Upon receipt of a production order from Dell according to revenue must be
the bill of materials received via DELL’s ERP system, the items are recognized as it is
picked up, loaded into the supply cages and trays according to the earned.
specified design and upon completion of the documentation and
system inputs for removal of inventory are shipped to the factory.
The system storing the name of the supplier, the issued invoice,
and the physical delivery together with documents complete the
SC cycle of raw material supply. Revenue recognition occurs when
the material is transferred from the warehouse and its system and
Dell is billed.
1.2.3. E-commerce and Internet-Enabled Supply

Chains
Internet technology has impacted our daily lives beyond imagination.
It has changed the way we make purchasing decisions, and the
process by which we compare products and ultimately buy the
product. All of this has been activated instantly with the click of
a button while sitting in the comfort of your home. Let’s take the
case of e-commerce on a B2C model. You have just logged onto
the DELL website and compared the products and configurations.
You design and build your own configuration laptop, get the prices
and click pay online with your credit card and you have completed
an online purchase. Was this conceivable a few decades ago?
No. Internet and e-commerce have helped bring markets closer
to customers. Customer decisions and sales processes have been
shortened. The financial payment and delivery mechanism in this
case was instantaneous and involved third-party gateways that
facilitated the transaction through collaborative networking. How
does the above transaction affect the SC? The customer order
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was entered in the backend and a corresponding order was placed

with the nearest plant in order to put together the required laptop
according to the order. This in turn triggers a BOM that is sent
to the Vendor Managed Inventory (VMI) Warehouse to deliver the
required parts. After verification of the forward transaction, the
laptop is assembled and from there shipped to the forward stocking
warehouse of the carrier or logistic partner, it is declared through
customs and exported to the customer’s site country or transported
to the customer’s site if it is within the same country. In the case
of importing to another country, the freight forwarder will do the
import customs clearance, and take it to their hub or warehouse to
complete the further stage of domestic transportation and delivery
to the customer. The entire exercise will be completed within 7
KEYWORD days, involving multiple suppliers, plants, and 3PL service providers
Consolidation is with integrated logistics flow-through activities (warehousing,
the process where shipment consolidation, labeling, packaging, and transportation at
a carrier or a different stages) alongside the involvement of airlines and customs
shipping company authorities, etc. The shipment will be continuously tracked and the
combines several shipment status is visible to everyone over the internet. This was
smaller shipments made possible by the various internal organizational systems that
into one full operate the Internet as a platform, extranet, ERP, EDI, and e-mail
container. in addition to online web tools.
Internet-enabled technologies have greatly impacted the SC.
ERP systems are used to revolutionize business models and
processes. These have also impacted the Internet enablement
of ERP applications in conjunction with other technologies and
applications. On the procurement front, e-commerce has led to
e-auctions, online bidding, and global RFQs conducted with vendor
reviews through video conferencing, etc. It has also enabled buyers
and suppliers to collaborate and use lean inventory management
concepts and automatic replenishment implementation models
such as VMI, JIT, Kanban, etc. In a typical SC, which involves
the delivery of raw materials and components to a manufacturing
site, there are three distinct systems: buyers, sellers, and the 3PL
service agency that manages inventory talk to each other in real-
time share information and data, and manages transactions. The
buyer can place an order, the 3PL can process the order, manage
inventory, and ship, and the supplier can replenish inventory in
a very short time. Transaction and inventory visibility is available
to all three parties involved. In the case of logistics, the carrier
system in the distribution center that manages the inventory can
be connected to the buyer’s system and initiate processes for
documentation from the buyer and generation of shipping labels.
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The cargo management department pulls details from the warehouse

system for further processing and creates shipping documents
and files with customs to clear the export shipment and airlines
to book the cargo. All documents are then uploaded to a website
from which the status of the shipment can be tracked by the
buyer, seller, and others. Pre-shipments are downloaded from the
internet at the destination by the carrier before the shipment lands
at the destination. He submits documents to customs for inbound
processing via EDI. After approval, the shipment is delivered to
the customer through the domestic distribution network and the
delivery confirmation is uploaded to the website, from which the
buyer collects information and the sales process is completed. The
Internet has shortened the transaction time of the SC and broken KEYWORD
the boundaries of operations, has increased the volume that the
SC network can handle, and has ultimately led to the reduction Procurement is
of logistics costs, procurement, and inventory costs, and reduced the method of
personnel costs. discovering and
agreeing to terms
and purchasing
1.3. STRATEGY OF SUPPLY-CHAIN goods, services, or
other works from
MANAGEMENT an external source,
SCM is the management of the flow of goods and services and often with the use
includes all processes that convert raw materials into end products. of a tendering or
It involves the active rationalization of a company’s supply-side competitive bidding
activities in order to maximize customer value and gain a competitive process.
advantage in the marketplace.
• In SCM, raw materials are transformed into products
through all processes involved in the flow of goods.
• Companies can reduce excess costs and deliver products
to consumers faster and more efficiently by managing
the SC.
• By managing SCs effectively, companies can avoid
expensive recalls and lawsuits.
• Development of a strategy, sourcing of raw materials,
production, distribution, and returns are the five most
critical elements of SCM.
• SC managers are responsible for controlling and reducing
costs and preventing shortages of supplies.
A JIT supply chain has evolved into a process in which retailers
signal manufacturers for replenishment orders automatically,
reducing costs, waste, and time associated with replenishment. A
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way to further improve this process is to analyze data from supply

chain partners in order to determine where improvements can be
made. Retail shelves can then be restocked almost as quickly as
products are sold.
According to partner data, effective SCM increases supply
chain value in three scenarios:
• Identifying potential problems: By analyzing data,
manufacturers can predict shortages before a customer
KEYWORD orders too many products.
Forecasting is • Optimizing price dynamically: At the end of the season,
the process of products with a limited shelf life are usually scrapped
making predictions or sold for a deep discount. Hotels, airlines, and others
based on past and often adjust prices dynamically to meet demand. Analytical
present data. software can improve margins even for hard goods by
applying similar forecasting techniques.
• Improving the allocation of “available to promise”
inventory: Through the use of analytical software tools,
resources, and work schedules are dynamically allocated
and scheduled based on sales forecasts, actual orders,
and promised raw material deliveries. Manufacturers can
confirm the delivery date of their products when they place
an order – reducing errors significantly.
1.3.1. Supply Chain Management Process

SCM consists of four main parts: demand management, supply
management, sales, and operations planning, and product portfolio
management.
• Demand Management: Demand management consists of
three parts: demand planning, merchandise planning, and
trade promotion planning.
- In order to ensure the reliable delivery of products,
demand planning involves forecasting demand. When
demand planning is effective, revenue forecasts can
be more accurate, inventory levels can be aligned
with demand peaks and troughs, and profitability can
be enhanced.
- The purpose of merchandise planning is to plan,
buy, and sell merchandise in a systematic manner
to maximize return on investment (ROI) while
simultaneously making merchandise available at
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the locations, times, prices, and quantities that the

market demands.
- As a marketing technique, trade promotion planning
involves using special pricing, displays, demonstrations,
value-added bonuses, no-obligation gifts, and other KEYWORD
promotions to increase demand for products in retail
Supplier
stores. In retail environments, trade promotions help management
drive short-term consumer demand. is a structured
• Supply Management: Supply management is made up of program to
five areas: supply planning, production planning, inventory manage suppliers
planning, capacity planning, and distribution planning. and improve their
- Supply planning aims to balance supply and demand impact on the
while achieving the organization’s financial and service buyer's business.
objectives.
- Production planning addresses the production and
manufacturing modules within a company. It considers
the resource allocation of employees, materials, and
of production capacity.
- Production/supply planning consists of:
- Supplier management and collaboration
- Production scheduling
- Inventory planning determines the optimal quantity
and timing of inventory to align it with sales and
production needs.
- Capacity planning determines the production staff and
equipment needed to meet the demand for products.
- Distribution planning and network planning oversee the
movement of goods from a supplier or manufacturer
to the point of sale. Distribution management is an
overarching term that refers to processes such as
packaging, inventory, warehousing, SC, and logistics.
• Sales and Operations Planning (S&OP):
- The sales and operations planning process (S&OP)
enables companies to focus on key SC drivers,
such as sales, marketing, demand management,
production, inventory management, and new product
introductions.
- With an eye on financial and business impact, the
goal of S&OP is to enable executives to make better-
informed decisions through a dynamic connection
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of plans and strategies across the business. Often

repeated on a monthly basis, S&OP enables effective
SCM and focuses the resources of an organization
on delivering what its customers need while staying
profitable.
• Product Portfolio Management: The purpose of product
KEYWORD portfolio management is to develop and introduce new
Portfolio product ideas and develop exit strategies for them when
management they reach the end of their profitable lives or fail to sell
is the selection, well.
prioritisation and Product portfolio management includes:
control of an
- New product introduction;
organisation's
programmes and - End-of-life planning;
projects, in line - Cannibalization planning;
with its strategic
- Commercialization and ramp planning;
objectives and
capacity to deliver. - Contribution margin analysis;
- Portfolio management; and
- Brand, portfolio, and platform planning.
• Supply Chain Management Best Practices: To succeed
in a growing global market, you need a supply chain that’s
connected from start to finish, across your enterprise and
beyond. Here are five steps we recommend to achieve
connected SC planning (SCP).
- Make the Move to Real-Time SCP: When companies
use ERP systems and spreadsheets for planning,
they typically only rely on historical data, leaving
little room for change should there be a disruption
in demand or supply. In the next quarter, companies
can estimate how many products they will sell based
on last year’s sales figures. But what happens if
a hurricane destroys a key distribution center and
leaves insufficient stock to sell? You can prepare
for disruptions with Anaplan’s real-time connected
SCP solution.
- Unify SCP with Enterprise Planning: The second step
is to connect traditionally SCP with sales, operations,
and financial planning. Businesses can benefit from
synchronizing their short-term operational planning with
their broader business planning processes to update
inventory forecasts and shipments in real time. Deploying
real-time S&OP solutions that enable enterprise-wide
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collaboration means that when an unforeseen event

occurs, key stakeholders across the organization can
create new scenarios and quickly assess how to deploy
their resources to optimize profitability.
- Anticipate the Demand of the End Customer:
Anticipating what customers want, when they want it, is
a constant challenge for consumer goods companies.
A solution like Anaplan enables end-to-end visibility KEYWORD
across the entire SC and beyond an existing network
of wholesalers and retailers to identify demand signals Real-time
from customers. When changing consumer sentiment data (RTD) is
can be quickly identified and changes in demand for information that
the product can be assessed, the company, partners, is delivered
and customers benefit from improved profitability, immediately after
margins, and lead time. collection.
- Leverage Real-Time Data Across All Points of the
Supply Chain: Because SCP typically involves a
variety of suppliers, channels, customers, and pricing
schemes, models can become large and potentially
unwieldy, especially when spreadsheets are the
primary planning tools. Integrating a solution that uses
real-time data enables planning with great accuracy
and reduces the risk of stock-outs or overstocks.
- Ensure the Flexibility to Cope with Change:
When technology enables efficient planning and
quick responses, disruptions are not disruptive as
rescheduling and forecasting is easy, resulting in
time and money savings and increased profitability.
1.3.2. Purpose of Supply Chain Management

The goal of SCM is to maximize customer value and achieve
sustainable competitive advantage by managing SC activities. It
represents a conscious effort by SC companies to develop and
operate SCs as effectively and efficiently as possible.
The SC includes everything from product development, sourcing,
production, logistics, and information systems.
The concept of SCM is based on two core ideas:
• As a first point, virtually every product that reaches a
consumer represents the cumulative efforts of multiple
organizations, collectively known as the SC.
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• The second idea is that despite the existence of SCs for

many years, most organizations have focused only on
what is going on within their “four walls.” Few businesses
understand, much less manage, the entire SC that ultimately
delivers products to customers. As a result, SCs were often
ineffective and disjointed.
SC organizations are interconnected through physical and
information flows.
• Physical Flows: Physical flows refer to the transformation,
movement, and storage of goods and materials. Information
KEYWORD flows are equally important.
Marketplace is • Information Flows: Through information flows, the various
a location where SC partners are able to coordinate their long-term plans
people regularly and control the flow of goods and materials.
gather for the
purchase and 1.3.3. Parts of Supply Chain
sale of provisions,
livestock, and other A SC is a network of retailers, distributors, carriers, warehousing
goods. facilities, and suppliers involved in the manufacture, delivery, and
sale of a product to consumers. It usually consists of several
companies that coordinate activities to differentiate themselves
from the competition.
There are three key parts to a supply chain:
• In supply, raw materials are sorted according to their
location, when they are delivered, and how they are
packaged;
• These raw materials are transformed into finished products
during manufacturing; and
• In distribution, a network of warehouses, distributors, and
retailers ensures these products reach consumers.
It is common to use SCs to describe the processes that feed
one another, but they can also be applied to internet technology,
finance, and a variety of other industries. The definition in this
sense can be applied to internet technology, finance, and many
other industries. The SC strategy identifies how the network should
function to compete in the marketplace and evaluates the benefits
and costs associated with its operation. While a business strategy
focuses on the overall direction a company intends to take, a
SC strategy focuses on the actual operations of the organization
and the path that will be taken to achieve a specific goal. An
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associated term is SCM. This refers to the management of materials,

information, and finances as they are transported from a supplier
to a consumer. As part of the SC, all necessary stations between
the supplier and the consumer must be coordinated to ensure
that the flow of materials is controlled within the company and to
the end user.
The supply chain operations reference model (SCOR) is a
management tool for addressing, improving, and communicating
SC Decisions within the organization as well as with its suppliers
and customers. The model describes the business processes
KEYWORD
required to meet a customer’s needs. It also helps to explain the
processes along the entire SC and provides a basis for improving Benchmarking
those processes. Supply Chain Council members consulted 70 of is a process of
the world’s leading manufacturers in order to develop the SCOR measuring the
model. It has been described as the most promising model for performance of
strategic SC decision-making. The model incorporates business a company's
concepts of process redesign, benchmarking, and measurement into products, services,
its framework. Throughout the SC, these five areas are repeated or processes
repeatedly: Planning, Procurement, Manufacturing, Delivery, and against those of
Return. According to the supply chain council, this process extends another business
“from the supplier’s supplier to the customer’s customer.” considered to be
the best in the
• Plan: This is the strategic part of SCM. Businesses need industry, aka “best
a strategy to manage all of the resources needed to in class.”
meet customer demand for their product or service. An
important part of SCM planning is developing a set of
metrics to monitor the SC so it is efficient, costs less,
and delivers high quality and value to customers. SCP
is the component of SCM involved in forecasting future
requirements to balance supply and demand.
The SCM is sometimes broken down into planning, execution,
and shipping phases. SCP and Supply Chain Execution (SCE) are
the two main categories of SCM software. The SCP products can
include SC modeling and design, distribution, and supply network
planning. SCE software applications track the physical status of
goods, material management, and financial information involving all
parties. First, demand, and supply planning and management are
included. Among the elements of the plan are matching resources
to requirements and determining communication throughout the
SC. Establishing business rules will also improve and measure SC
efficiency. The plan aligns the SC plan with the company’s financial
plan and includes, but is not limited to, inventory, transportation,
assets, and regulatory compliance.
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• Develop (Source): This step describes procurement

infrastructure and material procurement. It describes how
inventory, supplier network, supplier agreements, and
supplier performance are managed. The supplier payment
process, as well as when to receive, review, and transfer
products, is explained. It is important that businesses
select suppliers who can provide the goods and services
they need for production. In order to monitor and improve
relationships with suppliers, SC managers need to develop
a set of pricing, delivery, and payment processes. As a
result, SCM managers can design processes for managing
their inventory of goods and services, such as receiving
and verifying shipments, transferring them to manufacturing
KEYWORD sites, and authorizing supplier payments.
• Make: Manufacturing and production are the focus of
Product life-cycle this step. Is the manufacturing process make-to-order,
management is make-to-stock, or make-to-order? The manufacturing step
the succession
includes production activities, packaging, product delivery,
of strategies
and release. It also includes managing the production
by business
network, equipment, and facilities, and transportation.
management as
a product goes • Deliver: The delivery includes order management, storage,
through its life- and transport. It also includes taking orders from customers
cycle. and billing them once the product is received. This step
includes managing finished inventory, assets, transportation,
product life cycle, and import and export requirements.
• Return: This can be a problematic part of the SC for many
companies. SC planners must create a responsive and
flexible network to recover defective and excess products
from their customers and to support customers who have
problems with delivered products. Businesses need to be
prepared to handle the return of containers, packaging,
or defective products. The return includes management
of business rules, return inventory, assets, transportation,
and regulatory requirements. Management must have
people, communication, and a positive entrepreneurial
spirit. Plans, measurements, motivational psychology tools,
goals, and economic metrics (profit, etc.) may or may not
be necessary components of management.
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1.3.4. Important Supply Chain Trends

The following are a few key trends in SCM.
• Artificial Intelligence and Machine Learning: Historical-
based forecasting is used to drive SCP, but artificial
intelligence (AI) and machine learning (ML) are poised
to change that forever. AI and ML-based predictive models
will transform processes such as demand capture, design,
and orchestration, and supply planning. AI will start driving
dynamic pricing and new product launches will be based
on predictive market intelligence. AI and ML will also
drive new models for managing product promotions and
responding to SC disruptions. AI and ML predictions will
play a key role in the future of SC operations and have
a transformative impact on other business processes. KEYWORD
• Regulatory Challenges and Security Risks: The threat Supply planning
of high-profile hacks putting millions of consumers’ is the entire
information at risk requires businesses to raise privacy planning process
and protection standards. As a result of the General Data which includes
Protection Regulation (GDPR), business operations will distribution,
also be impacted this year by new privacy regulations. manufacturing,
It is imperative that companies, including their SC, take and procurement
action on tax reform, Brexit, political instability, oil prices, operations
and resource availability. In order to plan for all potential according to
scenarios, SC planners require sophisticated modeling demand forecasts,
capabilities. considering
capacity constraints
• Blockchain and Beyond: Through 2022, technology
and material
will continue to push banks out of the picture, leverage
availability.
cryptocurrencies and distributed ledgers, and enhance
collaboration. Blockchain has already changed how trading
partner networks work together. SCP and execution will
also be improved with the help of blockchain. It continues
to be used in new ways this year as track and trace, once
a radio frequency identification (RFID) movement, uses
sensors and devices across plants and machinery. The
Internet of Things (IoT) will enable data to permeate the
SC and transform processes once analyzed and leveraged
by AI and ML.
• A Dynamic, Connected Future: With the evolution of the
modern SC, SC managers are constantly seeking new
ways to seize opportunities and overcome obstacles. The
use of new technologies and a connected SCP approach
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allows data to be brought together and more people to be

involved in decision-making. These trends will play a key
role in transforming the SC in the future as we approach it.
1.3.5. Skills Needed for Supply Chain

Management
To lead the way to a transformative future, they need to combine
technical, business, and collaborative skills. As SC initiatives often
span divisions, the ability to influence department heads who work
with the SC is crucial, along with the ability to interact intelligently
with leaders across the organization. It is essential that you have
KEYWORD strong business acumen. If you understand the jargon of your
Demand finance, sales, and marketing colleagues, you’ll be able to work
management more effectively with them.
is a planning
It is expected that SC leaders of the future are tech-savvy
methodology used
and enjoy working with machines. Some claim that AI will not
to forecast, plan
replace managers, but that managers who work with AI will replace
for and manage
the demand for
managers who don’t. This highlights the shift taking place in the SC:
products and humanity is essential, but so is technology. It’s not a paradox; it’s
services. the new normal. In addition to being digitally savvy, this leader is
also excellent with people. And this leader is a storyteller, learning
how to dig through the layers of the SC to find problems, and
then weaving together the right story to fix them.
Currently, SC leaders play a multifaceted role with changing
responsibilities. To thrive in this new world, SC professionals should
develop their collaborative, communication, and leadership skills
and combine these skills with deep technical knowledge to become
a powerful force for the future of SCM software.
1.3.6. The Role of Supply Chain Management

Software
In today’s SCM, technology plays a critical role, and ERP vendors
offer modules that cover relevant areas. Business software vendors
also provide SCM solutions.
A few important areas to note include:
• SCP software for activities such as demand management;
• SCE software for activities such as day-to-day manufacturing
operations;
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• Supply chain visibility software for tasks such as spotting

and anticipating risks and proactively managing them;
• Inventory management software for tasks such as tracking
and optimizing inventory levels;
• Logistics management software and transportation
management systems for activities such as managing
the transport of goods, especially across global SCs; and
• WMSs for activities related to warehouse operations.
The increasingly global nature of today’s SCs and the rise of
e-commerce, with its focus on near-instantaneous small shipments
direct to consumers, pose challenges, particularly in the area of
logistics and demand planning. A number of strategies such as lean
and newer approaches such as demand-driven material requirements
planning (MRP) can prove helpful. Technologies, particularly big KEYWORD
data, predictive analytics, IoT technology, SC analytics, robotics,
Traceability is
and autonomous vehicles are also being deployed to solve modern the ability to trace
challenges, including in the areas of SC risk and disruption and something as it
SC sustainability. To cite just two examples, IoT can help with moves through a
transparency and traceability to improve food quality and safety process.
by using sensors to monitor the temperature of perishable food
while it’s in transit. And analytics can help determine where smart
lockers should be placed in densely populated areas to reduce
the number of single-item deliveries and lower greenhouse gas
emissions.
1.3.7. The Advantages of Supply Chain

Effective SCs give companies a competitive advantage in the
marketplace and help mitigate risks associated with sourcing raw
materials and delivering products or services. By implementing SCM
systems, companies can scientifically reduce waste, overhead, and
shipping delays. The benefits of this systematic approach impact
areas ranging from product quality to order lead times (Figure 1.2).
• Quality Assurance: In an effort to cut production costs,
many U.S. manufacturers have moved operations overseas,
including to China, India, and Russia. This has led to
experienced domestic personnel seeking other employment
opportunities. Consequently, it is imperative that product
quality be maintained within the SC. The cost of doing
business is rising due to defects and rework caused by
poor systems. To improve operations, SCM incorporates
quality techniques, such as quality management systems.
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Figure 1.2.
Important way
of supply chain
management.
Figure 1.2. Important way of supply chain management.
Source: https://miro.medium.com/max/720/1*ANjW2DTZIVVVxTfTC8
7lgA.png.
• Inventory Buffers: There is variability in customer

spending in almost every type of business. Companies must
manage their inventories in a way that minimizes holding
costs while providing sufficient flexibility to meet customer
demands. Businesses may lose revenue if inventory levels
fall too low or have to pay overtime to produce products.
Inventory buffer levels are typically predetermined with
careful analysis of historical trends in SCM systems.
• Shipping Options: As e-commerce continues to grow
around the world, shoppers have more ways to order
products than ever before. Shipping options have to keep
up with the demands of the market, forcing companies
to adapt their SCs to customer preferences. Whether
it’s shipping small packages or larger bulk orders, fast,
and accurate shipping is key to business success. SCM
systems help companies determine the optimal shipping
routes while driving costs to the lowest possible levels.
• Risk Mitigation: Managing risk is a key responsibility for
executives, and SCM systems enable the identification
of critical risk factors within a company or its suppliers.
Whether it’s product quality, compliance with applicable
laws, or operational safety, management must effectively
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mitigate risks. SC methodologies help management

organize risk and identify the potential for internal or
external failure. Without effective SCM systems, many
companies face legal risk and liability.
1.3.8. The Supply Chain and Operations

Management
The Supply Chain and Operations Management (SCOM) focus
examines the integration of all important business processes
from the original supplier to the end user and provides products, KEYWORD
services, and information that can offer added value for customers
Product
and stakeholders. The SC portion of the syllabus examines the development is
delivery, storage, and movement of materials and finished goods the processes
within an organization, while the operational function relates to required to bring a
the efficient and most effective use of manpower, machinery, product from being
and other resources. Operations and SCM have related concepts a concept through
for designing, planning, controlling, and improving manufacturing to reaching the
and service operations. You will be introduced to an innovative market.
mix of analytical and empirical approaches to key issues faced
by the private and public sectors, including project management,
service systems, product development, business analysis, inventory,
and SCM, among others A SC is the collection of steps, that a
company undertakes to convert raw components into finished
products and deliver them to customers. The SCM is the process
used by a company to ensure that its SC is efficient and cost-
effective. This typically includes five phases: planning, development,
manufacturing, logistics, and returns. During the planning phase, a
strategy must be developed to address how a particular product will
meet customer needs. A key part of this strategy often focuses on
planning a profitable SC. The development phase involves building
a strong relationship with the suppliers of the raw materials needed
to manufacture the product supplied by the company. This phase
not only identifies reliable suppliers, but also creates shipping,
delivery, and payment methods. In the next phase, the product
is manufactured, tested, packaged, and scheduled for delivery. In
the logistics phase, the customer orders are then received and
the delivery of the goods is planned. In the last phase of SCM,
customers can return defective products. The company also needs
to answer customer questions at this stage.
1. Supply Chain Management Flows:
One can be divided into three main flows:
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- In a product flow, goods are moved from a supplier

to a customer, as well as customer returns and
service requests.
- Information flow involves transmitting orders and
updating delivery statuses.
- Financial flow includes credit terms, payment
schedules, and consignment and title ownership
agreements.
2. Elements of the Supply Chain
The SC is made up of several elements that are connected
by the movement of products along it. The customer starts
and ends the SC.
KEYWORD - Customer: As soon as a customer decides to
purchase a product offered for sale by a company,
Purchase orders a chain of events begins. An order for a specific
(POs) are quantity to be delivered on a specific date is submitted
documents sent by the customer to the company’s sales department.
from you, as the When a sales order specifies that a product must
buyer, to a supplier be manufactured, there will be a requirement for the
with a request production facility to meet.
for products or
services as an - Planning: The requirement triggered by the customer’s
order. sales order will be combined with other orders. The
planning department will create a production plan to
produce the products to fulfill the customer’s orders.
To manufacture the products the company will then
have to purchase the raw materials needed.
- Purchasing: In order to complete the customer’s
orders, the purchasing department receives a list of
raw materials and services required by the production
department. To ensure that raw materials arrive at the
manufacturing site on time, the purchasing department
places purchase orders (POs) with selected suppliers.
- Inventory: The raw materials are received from the
suppliers, checked for quality and accuracy, and
moved into the warehouse. The supplier will then
send an invoice to the company for the items they
delivered. The raw materials are stored until they are
required by the production department.
- Production: Based on a production plan, the raw
materials are moved inventory to the production area.
The finished products ordered by the customer are
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manufactured using the raw materials purchased from

suppliers. After the items have been completed and
tested, they are stored back in the warehouse prior
to delivery to the customer.
- Transportation: As soon as the finished product
arrives in the warehouse, the shipping department
determines how to get it delivered on or before the
customer’s specified date. An invoice will be sent to
the customer when the goods are received by the
customer.
1.3.9. Significance and Functions of SCM

The SCM is an essential element of operational efficiency. Besides
improving customer satisfaction and business success, SCM can KEYWORD
also be applied to societal settings such as medical missions,
disaster relief and other types of emergencies, cultural evolution, Product
and the improvement of quality of life in society. Increasingly, assortment is the
employers are looking for employees who have extensive knowledge merchandise mix
and skills about SCM, because SCM plays an important role within made available for
organizations. There are several reasons why SCM is critical to customers at the
business operations and success: store to choose
and buy from.
• SCM is Globally Necessary: Basically, the world is one
big SC. The SCM touches on important issues including
the rapid growth of multinational companies and strategic
partnerships; global expansion and sourcing; volatile gas
prices and environmental concerns, each of these issues
dramatically impact corporate strategy and bottom line.
Because of these emerging trends, SCM is the most
important business discipline in the world today.
• Reasons for SCM in Society: In a well-functioning society,
SCM creates jobs, reduces pollution, decreases energy
consumption, and increases the standard of living.
• Reasons for SCM in Business: Clearly, the impact that
SCM has on business is significant and exponential. Two
of the main ways SCM affects business include:
- Boosts Customer Service: The SCM impacts customer
service by making sure the right product assortment
and quantity are delivered in a timely fashion.
Additionally, those products must be available in the
location that customers expect. Customers should
also receive quality after-sale customer support.
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1
- Improves Bottom Line: The SCM has a tremendous

impact on the bottom line. Businesses value SC
managers because they reduce the use of large assets
like plants, warehouses, and transportation vehicles
in the SC. Also, the cash flow is increased because
if the delivery of the product can be expedited, the
profits will be made quickly as well. SCM helps
streamline everything from the daily flow of products
to unexpected natural disasters. With the tools and
techniques that SCM provides, one is able to properly
diagnose problems, bypass disruptions, and determine
how to efficiently get products to those in a crisis
situation.
1.3.10. Measurements of Supply Chain

Performance
KEYWORD A key component of SC design and analysis is the development of
suitable key performance indicators. An existing system’s efficiency
Cash flow is the
and/or effectiveness can be measured using a performance measure
amount of cash
that comes in or set of performance measures, or competing alternatives can
and goes out of a be compared using a performance measure. Using performance
company. measures, proposed systems can also be designed by determining
which decision variables yield the best performance level(s). SC
efficiency and effectiveness are measured by a number of key
performance indicators:
1. Qualitative Performance Measures: There is no single
direct numerical measure of qualitative performance,
although some aspects of them may be quantified. The
following objectives are identified as important, but are
not included in the models reviewed here:
- Customer Satisfaction: The degree to which
customers are satisfied with the product and/or
service received, and may apply to internal customers
or external customers. Customer satisfaction is
comprised of three elements.
o Pre-Transaction Satisfaction: The satisfaction asso-
ciated with service elements prior to the purchase of a
product.
o Transaction Satisfaction: satisfaction with the physi-
cal distribution of products.
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o Post-Transaction Satisfaction: the level of satisfac-

tion with the support provided after the purchase of the
product.
- Flexibility: The degree to which the SC can respond
to random fluctuations in the demand pattern.
- Information and Material Flow Integration:
The extent to which all functions within the SC
communicate information and transport materials.
- Effective Risk Management: All of the relationships
within the SC contain inherent risk. Effective risk
management describes the degree to which the
effects of these risks are minimized.
- Supplier Performance: With consistency suppliers KEYWORD
deliver raw materials to production facilities on time
Risk management
and in good condition. is the process
2. Quantitative Performance Measures: In addition to of identifying,
qualitative performance measures, quantitative SC assessing and
performance measures can be classified into the following controlling financial,
groups: legal, strategic and
- objectives that are based directly on cost or profit and security risks to
an organization's
- Objectives that are based on some measure of capital and
customer responsiveness. earnings.
- Measures Based on Cost
- Cost Minimization: This is the most widely used
objective. Costs are typically minimized for a SC
as a whole (total cost), as well as for individual
business units.
- Sales Maximization: Increase sales dollars or units.
- Profit Maximization: Reduce costs while maximizing
revenues.
- Inventory Investment Minimization: Reduce inventory
costs (product costs and holding costs).
- Return on Investment Maximization: Increase the net
profit to capital employed ratio.
- Measures Based on Customer Responsiveness
- Fill Rate Maximization: Maximize the percentage of
on-time deliveries to customers.
- Product Lateness Minimization: Reduce the time
between the promised and actual delivery dates.
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- Customer Response Time Minimization: Reducing

the time between the time an order is placed and
the time it is received by the customer.
- Usually refers to external customers only.
- Lead Time Minimization: Shorten the time it takes
for a product to be manufactured to the point of
completion.
- Function Duplication Minimization: Reduce the number
of business functions provided by multiple entities.
1.4. QUALITY OF SUPPLY CHAIN SYSTEM

SCM directly impacts product quality and a company’s overall
profitability. For these reasons, SC quality control is critical to
KEYWORD maintaining a competitive advantage in the marketplace and reducing
operational costs. Without quality control, waste will predominate
Business
disruption is
beyond a tolerable level. In order to improve customer satisfaction,
the process in the aspect of quality in the SC is given more emphasis.
which a product Poor-quality products, an unsafe work environment, or failure
becomes popular to comply with regulations ranging from product safety to social
enough to replace responsibility can result in business disruption, financial loss,
a traditional or
costly lawsuits, and long-term damage to the brand and corporate
common product or
image of dependent organizations after the performance of the SC
service.
provider. In extreme cases, a brand or even the reputation of a
company can be irreparably damaged. The crisis catalyst can arise
at any step in the SC, from design to raw materials to production
or transportation. Most often the problem revolves around inferior
materials or how well components or end products are designed
and manufactured.
Recently, companies’ reputations have been damaged by
substandard social responsibility practices by suppliers, even when
product quality was acceptable. Suppliers’ quality management
policies and practices must be aligned with the standards of the
company’s brand or sale of the product.
These quality management practices should also be aligned
with recognized international standards. This is because errors in
the SC are passed on to the companies that ultimately market
the products. Such failures can result in consumer dissatisfaction,
non-compliance with government regulations and, in some cases,
public criticism of corporate governance practices. In recent years
there have been numerous high-profile cases, from contaminated
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1
toothpaste to lead paint in toys to faulty work practices by

manufacturers. Companies are increasingly setting standards for
quality management systems and worker treatment for their suppliers
to avoid these types of problems. Supplier quality management
standards are increasingly becoming a contractual condition for
maintaining a supplier relationship.
To meet more stringent customer and international quality
management standards, some vendors need to invest in improving
practices, policies, and management systems. Many adopt
international standards, particularly those of the International
Organization for Standardization (ISO), the American National
Standards Institute (ANSI), and the American Society for Quality
(ASQ) to demonstrate acceptable practices. Additional security
KEYWORD
standards may also need to be met by transport, shipping, and Quality
logistics companies in the SC. While performance improvements management
require investment, there are compelling benefits for suppliers to is the act of
move forward. Compliance with quality management standards overseeing all
distinguishes suppliers from competitors who do not comply and activities and
strengthens the relationship between a company and the supplier. tasks that must be
accomplished to
Audit logs serve another critical role, which is identifying and maintain a desired
qualifying new vendors. The validation process includes on-site level of excellence.
supplier audits that compare actual and required standards of
policy and practice. These analyzes enable the identification of
critical performance gaps and improvement opportunities. Constantly
improving quality management helps reduce the risk of costly and
embarrassing failures.
• Defects and Scrap: When raw materials are defective, it
can render entire production lines inefficient and increase
the defect rate in finished goods inventory. Also, inferior
materials may require additional processing or finishing,
increasing employee workload and overall manufacturing
costs. Suppliers and the materials they supply are often
audited by SC workers to ensure raw materials meet
specifications. By controlling the quality of production
inputs, SC managers protect the integrity of their business
operations.
• External Failures: When quality control in the SC is poor,
products are more likely to break or wear out before their
warranty period expires. There are a large number of errors
that can occur once a product leaves a manufacturing
facility, depending on the type of business. Customers
who are forced to return items may lose respect for the
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1
company they bought the product from. Quality control in

the SC ultimately helps protect a company’s reputation. The
better control you have over supplier inputs, the lower the
risk of returns and potentially dangerous product failures.
• Inspections: Companies that experience large amounts
of defects and other forms of waste during manufacturing
often conduct manual inspections to ensure product quality.
Inspections increase operating costs and are unnecessary
if quality control works. Quality control procedures and
supplier relationship audits are critical to avoid continuous
KEYWORD inspections on the production line. Otherwise, man-hours
Production line is
are lost inspecting materials and finished goods inventories
a set of sequential that could be allocated to value-added activities.
operations • Toxic Materials: Hazardous materials are used for
established in various purposes in manufacturing around the world,
a factory where particularly in the defense industry. Quality control helps
components are protect employees and other stakeholders from exposure
assembled to make to the harmful side effects of toxic materials. The US
a finished article Department of Transportation imposes important rules for
or where materials the transportation of hazardous materials. Non-compliance
are put through a can result in penalties or fines, making quality control
refining process to imperative. The more efficiently and effectively toxic
produce an end- materials are managed in the SC, the better for all internal
product that is and external stakeholders.
suitable for onward
consumption.
1.4.1. Overview from Various Perspectives
Although there are several definitions of quality, simply put, quality
can be defined as meeting or exceeding customer expectations.
According to the ASQ, the definition of quality is “A subjective term
for which each person or sector has its own definition.
In technical usage, quality can have two meanings:
• It is the ability of a product or service to satisfy stated
or implied needs; it is a product or service that is free
of defects.
• According to Joseph Juran, quality means “fitness for
use;” according to Philip Crosby, it means “conformance
to requirements.” Quality tools exist and include, but are
not limited to: cause analysis (cause-and-effect diagrams,
Pareto charts, and scatter diagrams), evaluation, and
decision-making tools (decision matrix and multi-voting),
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1
process analysis (flowchart, failure modes, and effects

analysis, mistake-proofing, and spaghetti diagrams), data
collection and analysis (box and whisker plot, check sheet,
control chart, design of experiments, histogram, scatter
diagram, stratification, and surveys), idea creation (affinity
diagram, benchmarking, brainstorming, and nominal group
technique), an improvement project (Gantt chart and
Plan-Do-Study-Act continuous improvement model), and
management tools (relations diagram, tree diagram, matrix
diagram, L-shaped matrix, arrow diagram, and process
decision program chart). KEYWORD
Total quality management (TQM) is a set of quality practices Brainstorming is
that seek to continuously improve quality in processes. a group creativity
technique by
There are some key principles of total quality include:
which efforts are
• Consider the needs of the customer when defining quality; made to find a
conclusion for a
• Pursue quality at the source;
specific problem
• Stress objective rather than subjective analysis; by gathering
• Emphasize prevention rather than detection of defects; a list of ideas
• Focus on the process rather than the output; spontaneously
contributed by its
• Strive for zero defects; members.
• Establish continuous improvement as a way of life; and
• Make quality everyone’s responsibility.
To reduce the time to market, customers, and suppliers must be
integrated into the product development process. For firms to remain
competitive, they must develop and launch appropriate products
within ever-shorter timetables as product life cycles shorten.
1.4.1.1. Concept of Internal Customer

An internal customer is a client who buys products made by
the employer. The term can be used in a number of situations,
including corporate structures where one department is effectively
buying products from another as part of the manufacturing chain.
In other cases, an internal customer is simply an employee who
has purchased a finished product or service directly from the
employer, sometimes at a price discounted from prices charged
to other types of consumers. The concept of an internal customer
is slightly different than that of an external customer. External
customers are buyers who are not part of the company organization.
For example, if ABC Company decides to purchase widgets from
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1
XYZ Company, and the two companies are not subsidiaries of a

larger business, the purchase is said to be external. Should ABC
and XYZ actually be owned by the JKL company and operate
as subsidiaries of that parent company, the purchase would be
considered internal.
Many different types of businesses enjoy business volume
flow from internal customers. Retail organizations often offer
their employees the opportunity to purchase goods at discounted
prices, a move that prompts these employees to meet their needs
by purchasing from the employer rather than purchasing from a
competitor. Similarly, agents, and administrative staff working with
KEYWORD insurance agencies may choose to purchase policies from their
Administrative employer rather than from other agencies. Even people who work
Staff means the with communications companies can be offered services like DSL
staff appointed to or audio conferencing services at a discount not readily available
administrative and from other providers.
support positions
designated as One of the challenges for any business is finding ways to
such by the incorporate internal customer care into the overall customer strategy.
Council, including Because the focus of many customer service and support operations
professional is outward, the needs and concerns of a customer who is part of
staff in library the organization can be overlooked. This can be counterproductive
and information on several levels, sometimes to the point of losing business, and
technology services negatively impact how the employee perceives their contribution
and technical staff. to the company’s success. Choosing to include components that
incentivize each internal customer and give them the opportunity
to get support when needed often not only increases the desire
to buy from within but also has the benefit of motivating those
employees to do so as productively as possible on the job.
1.4.1.2. Overview of TQM and Lean Management

TQM is the ongoing process of reducing or eliminating manufacturing
defects, streamlining SCM, improving the customer experience, and
ensuring employees are up to date with their training. TQM aims to
hold all parties involved in the production process accountable for
the overall quality of the end product or service. Lean management
is an important part of lean thinking. When introducing Lean into any
organization, the traditional way of managing does not guarantee
the right focus, nor does it help sustain Lean initiatives. Unless
action is taken to change the way one manages processes, people,
and products, Lean implementations are likely to fail. Many people
on the lean journey fail to apply lean holistically. Usually, they start
applying tools without proper guidance, and guidance that fails
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1
to take the business to the next level. Therefore, a management

system that is specifically tailored to the needs of a changing
organization is very important. One of the main characteristics of
traditional management is that it is result-oriented. Is it good or
bad to be result-oriented? It’s not bad to have goals, but when
people stop caring about how to get there and only focus on the
bottom line, then you’re in trouble. This leads to misconduct such
as rushed orders, overproduction, and overstocking. One has to
wonder how management leads to these problems. Being in a
production organization is a better way to relate to this issue.
1.4.2. Digital Supply Chain for Success

A digital SC is the next generation of SCM. Digital SCs and the
KEYWORD
digitalization of SCs align with the notion that the future of business Data redundancy
is heavily rooted in a digital transformation revolution: Blockchain, is when an
the IoT, advanced robotics, etc. For SC success, progressive organization stores
enterprises are leveraging Blockchain in five ways. the same data in
multiple places at
• Blockchain for Smart Contracts: Blockchain unravels the same time.
the immense complexity and interconnectedness of global
digital SCs. It does this by storing all relevant information
in a ledger (the Blockchain). Smart contracts ensure that
by storing the terms of the contract on the Blockchain and
measuring all proposed transactions against it, problems
with data redundancy are reduced and trading partners
can work together much more efficiently.
• Blockchain for Sustainable and Ethical Supply Chains:
When a product (or batch of products) is procured or
created, it may be assigned a unique identifier (UID)
that is encrypted. This identifier can be associated with
a time-stamped token that tracks the product throughout
the SC. All of this information is stored on the Blockchain,
allowing SC managers to ensure it has been produced
or sourced in an ethical and sustainable manner while
adding operational efficiencies to the overall process of
bringing a product to market. Some companies are also
harnessing the power of Blockchain to support positive
and socio-environmental change, such as the ability to say
thank you (in the form of a Blockchain token) to people
involved in making the products they buy.
• Blockchain for Better Security: Ensuring the security of
the SC is an important issue for all companies as valuable
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1
assets and confidential information change hands at a rapid

pace around the world. Because a Blockchain ledger is
inherently immutable and set up so that all parties involved
have a complete copy, it is virtually resistant to hacks and
cannot be modified without the ongoing permission of the
appropriate parties. The built-in protection of an immutable
ledger makes audits easier and the data incorruptible. It
further decreases the risk of cyber-attacks as it uses a
distributed storage system.
KEYWORD • Blockchain for Greater Efficiency: The global SC operates
Blockchain is a to transport millions of products around the world. All of
distributed ledger these products are tagged with information such as origin,
with growing lists destination, serial number, and manufacturer. By tracking
of records (blocks) products at every stage of their journey, Blockchain reduces
that are securely the risk associated with digital SCs, eliminating the need
linked together for dedicated software or multiple planners to monitor the
via cryptographic millions of goods passing through the SC.
hashes.
Because the Blockchain is immutable and transparent, everyone
involved in the digital SC can track relevant information about a
product and access that information in real time. Consequently,
the SC becomes more efficient, and smart contracts can further
improve efficiency by preventing wasted time arguing over contract
issues. The fact that terms and conditions travel through the SC
with a product eliminates recurring blame-hunting disputes.
1.4.3. Supply Chain System: Impact

SCM typically involves monitoring the transfer of products and
goods, e.g., from a supplier, then to a manufacturer, a wholesaler, a
retailer, and finally to the consumer. IT refers to the use of computer
programs to store and manipulate information. IT advances can
be directly correlated to SCM improvements, for example through
the advent of effective virtual SCs. A key impact of IT concerns
the quality of information available within the SC. Companies
can develop web-based programs or intranets to disseminate
information, such as new products, delays, or changes. IT enables
everyone in the SC to be integrated and therefore informed, which,
if used appropriately, can translate into management efficiencies
and reduced risk.
1.4.3.1. Impact of Global Competition

Today’s business world is in a global environment. This environment
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1
is forcing companies, regardless of their location or primary market

base, to include the rest of the world in their competitive strategy
analysis. Businesses cannot isolate or ignore external factors
such as economic trends, competitive situations, or technological
innovations in other countries when some of their competitors
compete in or are based in those countries. Companies go truly
global with SCM. A company can develop a product in the US,
manufacture it in a developing country, and sell it in Europe.
Businesses have changed the way they manage their operations
and logistics activities. Changes in trade, the proliferation and KEYWORD
modernization of transport infrastructure, and intensified competition Production
have raised the importance of river management to a new level. planning is
Over the past two decades, the global manufacturing environment the planning of
has evolved. The majority of manufacturers have a global presence production and
through exports, strategic alliances (SA), joint ventures, or as part manufacturing
of a committed strategy to sell and manufacture in foreign markets. modules in a
company or
• Global Market Forces: There is huge potential for growth
industry.
in developing foreign markets, which has led to increased
foreign competition in local markets, forcing small and
medium-sized enterprises to improve their operations and
even consider international expansion. Foreign demand
has also increased, which requires the development of
a global network of production sites and markets. When
markets are global, the manager’s production planning task
becomes both more difficult and allows for more efficient
use of resources.
Today there are only a few industries in which the international
product life cycle theory still applies. Product markets, especially
in technology-intensive industries, are changing rapidly. Product
cycles are shortening because customers are asking for new
products more quickly. In addition, advances in communications and
transportation technology provide customers around the world with
instant access to the latest products and technologies available.
Therefore, manufacturers who want to capture global demand
need to launch their new products simultaneously in all major
markets. In addition, product design integration and associated
manufacturing process development have become key success
factors in many high-tech industries, where rapid product introduction
and extensive customization determine market success. As a result,
companies are required to maintain manufacturing facilities, pilot
production facilities, engineering resources, and even research
and development (R&D) facilities around the world.
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1
For example, Apple Computer has established a global

manufacturing and development infrastructure with facilities in
California, Ireland, and Singapore. This network allows Apple to
launch new products simultaneously in the American, European,
and Asian markets.
KEYWORD Companies use the state-of-the-art markets as a learning ground

for product development and effective production management,
Barcode and then transfer this knowledge to their other manufacturing
technology is facilities around the world. This rationale explains why Mercedes-
mostly used in the Benz recently decided to locate a massive manufacturing facility in
circulation system Vance, Alabama. The Company recognizes that the United States
of a library and is the state-of-the-art sport utility vehicle market. It is planned to
most successful produce these vehicles at the Vance plant and introduce them
due to its speed, worldwide by 1997.
accuracy and
reliability.
1.4.3.2. Technological Change
The SCM refers to the active management and control of materials,
information, and finances as they move in a process from the
procurement of raw materials to delivery to the consumer. With
RFID, items are tagged with a small transponder, or RFID tag, that
stores information about the item so that it can be identified and
tracked. RFID offers some key advantages over barcode technology
in SCM. RFID technology requires no line of sight between the
RFID tag and the reader. In contrast to barcode technology, no
special alignment is required when reading the goods. Radio waves
can penetrate most non-metallic materials, so RFID can be read
even when embedded or enclosed in packaging, provided they are
within range of a reader. In addition, RFID readers can read RFID
tags in thousandths of a second and scan multiple items at once.
This technology can be extensively used in the domains of
business:
• Retail SCM and warehousing management.
• Logistics, tracking of goods & trucks.
• Shipping, container tracking, cargo tracking.
• Security systems etc.
RFID is the technology for the future. In the field of the
SC, establishing global standards will be a further boon for the
advancement of this technology as a whole.
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1
• Automation: Labor accounts for up to 80% of the total

distribution costs of a typical distribution center. However, KEYWORD
RFID technology can automate many activities in the SC,
Radio Frequency
including check-in, picking, and verification, resulting in Identification
less labor throughout the process. Even a small reduction (RFID) is a
in the amount of work required can result in significant technology that
financial savings, in some cases up to 90%. uses radio waves
to passively identify
1.4.3.3. Ethical and Environmental Issues on Operations and a tagged object.
Supply Chain Functions
Environmentally Responsible SCM (ECSCM) refers to controlling
all direct and eventual environmental impacts of products and
processes associated with the transformation of raw materials
into end products. Although much work has been done in this
area, the focus has traditionally been on either product recovery
(recycle, remanufacture, or reuse) or just the product design function
(e.g., design for the environment). Environmental considerations in
manufacturing are often considered separately from traditional value-
added considerations. However, it can be argued that professionals
have an ethical responsibility to consider the immediate and eventual
environmental impacts of products and processes they design and/
or manage.
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CHAPTER 1

1.1. BASICS OF SUPPLY CHAIN

Bridge�eld Group (2006) de�nes Supply Chain as “a connected set of

1.1.1. Major Components of Supply Chain

• Manufacturers: The manufacturer plays a key role in

materials for production and the physical distribution of the product in

1.1.3. Supply Chains as Sources of Competitive

good or service needs to be delivered to the customer,

effectively. That being said, the single-minded obsession

on the basis of the certified ownership documents, on the basis of

1.1.5. Finished Goods Supply Chain

1.1.6. Driving Supply Chain Efficiency for

shelf or to the end customer. The entire process of receiving,

1.2. SUPPLY CHAIN NETWORK AND

sequential and linear process networks to sophisticated dynamic

Figure 1.1. The flow

Source: https://www.managementstudyguide. com/supply-chain-

In a sophisticated technology-driven supply chain, the need

1.2.1. Supply Chain Network Design &

• Network Design aims to define:

influences and interdependencies of all processes and critically

Remember 1.2.2. Logistics Operations in SC Network

or agents at the destination, keeping Dell and suppliers updated

1.2.3. E-commerce and Internet-Enabled Supply

was entered in the backend and a corresponding order was placed

The cargo management department pulls details from the warehouse

way to further improve this process is to analyze data from supply

1.3.1. Supply Chain Management Process

the locations, times, prices, and quantities that the

of plans and strategies across the business. Often

collaboration means that when an unforeseen event

1.3.2. Purpose of Supply Chain Management

• The second idea is that despite the existence of SCs for

associated term is SCM. This refers to the management of materials,

• Develop (Source): This step describes procurement

1.3.4. Important Supply Chain Trends

allows data to be brought together and more people to be

1.3.5. Skills Needed for Supply Chain

1.3.6. The Role of Supply Chain Management

• Supply chain visibility software for tasks such as spotting

1.3.7. The Advantages of Supply Chain

Figure 1.2. Important way of supply chain management.

• Inventory Buffers: There is variability in customer

mitigate risks. SC methodologies help management

1.3.8. The Supply Chain and Operations

- In a product flow, goods are moved from a supplier

manufactured using the raw materials purchased from

1.3.9. Significance and Functions of SCM

- Improves Bottom Line: The SCM has a tremendous

1.3.10. Measurements of Supply Chain

o Post-Transaction Satisfaction: the level of satisfac-

- Customer Response Time Minimization: Reducing

1.4. QUALITY OF SUPPLY CHAIN SYSTEM

toothpaste to lead paint in toys to faulty work practices by

company they bought the product from. Quality control in

process analysis (flowchart, failure modes, and effects

1.4.1.1. Concept of Internal Customer

XYZ Company, and the two companies are not subsidiaries of a

1.4.1.2. Overview of TQM and Lean Management

to take the business to the next level. Therefore, a management