Table of contents:

Task Contents
1 Explain the importance of effective supply chain management in
achieving organisational objectives
Explain the link between supply chain management and business
functions in an organisation
Discuss the key drivers for achieving an integrated supply chain
strategy in an organisation
2 Evaluate the effectiveness of strategies used by an organisation
to maintain supplier relationships
Use information technology to create strategies to develop an
organisations relationship with its suppliers
Develop systems to maintain an organisations relationship with
its suppliers
3 Assess how information technology could assist integration of
different parts of the supply chain of an organisation
Evaluate how information technology has contributed to the
management of the supply chain of an organisation
Assess the effectiveness of information technology in managing
the supply chain of an organisation
4 Explain the role of logistics in supply chain management in an
organisation
Evaluate procurement practices in an organisation
Discuss the factors that must be considered when improving
logistics and procurement practices in an organisation
5 Plan a strategy to improve an organisations supply chain
Assess how a supply chain improvement strategy will benefit
overall business performance in an organisation
Explain how barriers will be overcome in an organisation when
implementing a supply chain improvement strategy



Introduction
Supply chain management operates at three levels; strategic, tactical and operational. At the
strategic level, company management makes high level strategic supply chain decisions that are
relevant to whole organization. The decisions that are made with regards to the supply chain
should reflect the overall corporate strategy that the organization is following.
The strategic supply chain processes that management has to decide upon will cover the breadth
of the supply chain. These include product development, customers, manufacturing, vendors and
logistics.
Product Development: Senior Management has to define a strategic direction when considering
the products that the company should manufacture and offer to their customers. As product
cycles mature or products sales decline, management has to make strategic decisions to develop
and introduce new versions of existing products into the marketplace, rationalize the current
product offering or whether develop a new range of products and services. These strategic
decisions may include the need to acquire another company or sell existing businesses. However,
when making these strategic product development decisions, the overall objectives of the firm
should be the determining factor.
Customers: At the strategic level, a company has to identify the customers for its products and
services. When company management makes strategic decisions on the products to manufacture,
they need to then identify the key customer segments where company marketing and advertising
will be targeted.
Manufacturing: At the strategic level, manufacturing decisions define the manufacturing
infrastructure and technology that is required. Based on high level forecasting and sales
estimates, the company management has to make strategic decisions on how products will be
manufactured. The decisions can require new manufacturing facilities to be built or to increase
production at existing facilities. However, if the overall company objectives include moving
manufacturing overseas, then the decisions may lean towards using subcontracting and third
party logistics. As environmental issues influence corporate policy to a greater extent, this may
influence strategic supply chain decisions with regards to manufacturing.
Suppliers: Company management has to decide on the strategic supply chain policies with
regards to suppliers. Reducing the purchasing spend for a company can directly relate to an
increase in profit and strategically there are a number of decisions that can be made to obtain that
result. Leveraging the total companys purchases over many businesses can allow company
management to select strategic global suppliers who offer the greatest discounts. But these
decisions have to correspond with the overall company objectives. If a company has adopted
policies on quality, then strategic decisions on suppliers will have to fall within the overall
company objective.
Task 1: Understand the relationship between supply chain management
(SCM) and organisational business objectives
Task 1.1: Explain the importance of effective supply chain management in
achieving organisational objectives
In the ancient Greek fable about the tortoise and the hare, the speedy and overconfident rabbit
fell asleep on the job, while the "slow and steady" turtle won the race. That may have been true
in Aesop's time, but in today's demanding business environment, "slow and steady" won't get
you out of the starting gate, let alone win any races. Managers these days recognise that getting
products to customers faster than the competition will improve a company's competitive position.
To remain competitive, companies must seek new solutions to important Supply Chain
Management issues such as modal analysis, supply chain management, load planning, route
planning and distribution network design.
Companies must face corporate challenges that impact Supply Chain Management such as
reengineering globalisation and outsourcing. Why is it so important for companies to get
products to their customers quickly? Faster product availability is key to increasing sales, says R.
Michael Donovan of Natick, Mass., a management consultant specialising in manufacturing and
information systems. "There's a substantial profit advantage for the extra time that you are in the
market and your competitor is not," he says. "If you can be there first, you are likely to get more
orders and more market share." The ability to deliver a product faster also can make or break a
sale. "If two alternative [products] appear to be equal and one is immediately available and the
other will be available in a week, which would you choose? Clearly, "Supply Chain Management
has an important role to play in moving goods more quickly to their destination.
Task 1.2: Explain the link between supply chain management and business
functions in an organisation
Williams et al. (2002) stated organizational innovation would drive the changes of the whole
organizational framework and that of employees, which further affects the operation of the whole
supply chain. The increasing requirements for the cooperation and the connection between
buyers and suppliers would cause strong effects to the organizational innovation (Lee, 1995).
Atuahene-Gime (1996 a/b) also stated that supply chain management mainly concentrates on the
advantage and quality of the product innovation. As for service industry, the advantages of
innovation in both service and quality are subject to a good supply chain management. Athaide et
al. (1996) said that in the proceeding of both product innovation and technique innovation, the
supply.
The type of the corporate culture affects the possibility of the individual innovation and the
organizational innovation. The bureaucratic culture restrains the individual innovation and the
corporations ability to make any transformation against competition. The supportive culture is
easiest to encourage the individual innovation, and can also make corporations happy to change
for improving their competences. The effective culture can encourage the individual innovation.
However, its excessive emphasis on results will bring on the contrary conflicts among staff, and
becomes a big obstruction for the organizational transformation. Hurley and Hut (1998) said that
an organization would provide more resources to encourage more innovation and develop
competences if its culture stresses innovation.
Task 1.3: Discuss the key drivers for achieving an integrated supply chain
strategy in an organisation
As companies increasingly use their supply chain to compete and gain market share, spending
and activity in this area are notably on the upswing. Technology and process upgrades at
forward-thinking companies clearly show that supply chain excellence is more widely accepted
as an element of overall business strategy and that increasing value to customers is not just
managements, but everyones business.
The shift in how companies view their supply chain is taking hold. Examine how your company
views its supply chain and consider your answers to these basic questions. Does leadership view
your supply chain as a strategic competitive advantage? If not, are you considering outsourcing
your supply chain? Are the capacity strengths of your supply chain commonly known and
understood by leadership of the company? If so, how do they impact growth, profitability and
customer service?
Hitachi Consulting works closely with leading manufacturing and distribution companies and
helps them address their business challenges. From our experience working with key companies
in food and beverage, consumer products, high tech and industrial manufacturing, there are six
key trends causing significant impact and change to supply chain design and performance:
Trend 1 Demand planning
Trend 2 Globalization
Trend 3 Increased competition and price pressures
Trend 4 Outsourcing
Trend 5 Shortened and more complex product life cycles
Trend 6 Closer integration and collaboration with suppliers
Task 2: Be able to use information technology to optimise supplier
relationships in an organisation
Task 2.1: Evaluate the effectiveness of strategies used by an organisation to
maintain supplier relationships
Effective management of suppliers is one of the ways manufacturing companies can improve
their performance. There are several important aspects of supplier management, they include
sourcing strategies, the way relationships are management and the information exchange policies
adopted by manufacturers. Typically, it has been argued in the literature that close relationships
with suppliers should be developed, in contrast to the traditional price-driven transactional
relationship. In conjunction with this approach manufacturers should employ a single sourcing
strategy rather than multi-sourcing. This paper presents the results of a study (using a survey) of
supplier management practices among German manufacturing companies. The research found
that significant portion of the companies surveyed had experienced a change in their relationship
with suppliers in the last few years. In the main relationships had become closer and the use of
partnerships was in evidence. Although the companies had developed partnerships with some of
their suppliers the majority of firms continued to prefer a multi-sourcing policy. The research
results have implications for German manufacturing companies as they indicate the potential for
improvement through the greater adoption of best practices in the area of supplier management.
Task 2.2: Use information technology to create strategies to develop an
organisations relationship with its suppliers
As search costs and other coordination costs decline, theory predicts that firms should optimally
increase the number of suppliers with which they do business. Despite recent declines in these
costs due to information technology, there is little evidence of an increase in the number of
suppliers used. On the contrary, in many industries, firms are working with fewer suppliers. This
suggests that other forces must be accounted for in a more complete model of buyer supplier
relationships.
As firms try to increase their performance, the interface with suppliers has become a major point
of emphasis in the quest for additional efficiencies. This topic is enjoying increasing popularity,
especially in view of the differences in customer-supplier relationships between Japanese and
American firms. For instance, superior supplier relations have been estimated to provide a $300-
600 per car cost advantage to Japanese manufacturers. These trends are reflected in the
information technology (IT) literature as well, which has identified the impact of IT on supplier
relationships as an important area for research, and has discussed these relationships in an
institutional economics framework addressing the implications of firm size and the governance
structure of the relationship.
Task 2.3: Develop systems to maintain an organizations relationship with its
suppliers
A natural approach to determining the optimal number of suppliers is to start from the
assumption that a firm would benefit by increasing the number of its suppliers, thereby
broadening its choice, but that technological considerations constrain this strategy. In this
perspective, the number of suppliers is limited by considerations such as the cost of setting up a
relationship, search costs, and transaction costs, which can generally be summarized as
coordination costs.
For example, in trying to determine the optimal number of suppliers for a given input, it may be
assumed that suppliers' product offerings are substitutes for one another, except that they differ
in some desirable feature, such as price, fit, or product characteristics. Interacting with each
supplier entails a coordination cost. After surveying some number of suppliers, the buyer selects
the product offering that provides the best value according to its set of criteria. The optimal
number of suppliers is determined by trading off the cost of further searches against the expected
benefit from identifying a better supplier. To illustrate these trade-offs, in this section we offer a
model for the optimal number of suppliers in the neoclassical tradition of Stigler (1951).
For example, Consider a two-period setting with a buyer firm and N risk-neutral potential
suppliers with identical production technology facing the same marginal cost, assumed to be
zero. Supplier offerings differ in a product characteristic, which, without loss of generality, is
assumed to be one-dimensional, providing to the buyer firm utility e distributed in the interval
[0,1] according to a known density function fe; e can be thought of as a "fit" indicator. Suppliers'
e can be discovered only after a relationship has been established between the buyer firm and the
corresponding supplier. The buyer firm faces an irreversible cost K for each supplier it does
business with, which can be thought of as a coordination cost. In the first period, the buyer firm
selects n suppliers from the N available suppliers as the suppliers it will do business with. In the
second period, the buyer discovers the values of the fit parameters i.e. for the suppliers and
purchases from the supplier whose offering provides the "best match" (i.e., the highest e).






Task 3: Understand the role of information technology in supply chain
management
Task 3.1: Assess how information technology could assist integration of
different parts of the supply chain of an organisation
Today companies are often not considered independent entities, but parts of multi-company,
multi-echelon networks, i.e. supply chains, delivering goods and services to the final customer
(Christopher, 1992; Lambert and Cooper, 2000). Supply chain management (SCM) literature
proposes that integrated control of these multi-company networks can provide significant
benefits (e.g. Cooper et al., 1997; Burgess, 1998; de Leeuw et al., 1999; Mason-Jones and
Towill, 1999; Norek and Pohlen, 2001). The utilisation of information technology (IT), in turn, is
considered an imperative requirement for managing these networks, and has been associated
with significant supply chain efficiency improvements (e.g. Lee and Billington, 1992; White and
Pearson, 2001).

Task 3.2: Evaluate how information technology has contributed to the
management of the supply chain of an organisation
Supply chain management (SCM) is concerned with the flow of products and information
between supply chain members' organizations. Recent development in technologies enables the
organization to avail information easily in their premises. These technologies are helpful to
coordinates the activities to manage the supply chain. The cost of information is decreased due to
the increasing rate of technologies. In the integrated supply chain model (Fig.1) bi-directional
arrow reflect the accommodation of reverse materials and information feedback flows. Manager
needs to understand that information technology is more than just computers. Except computer
data recognition equipment, communication technologies, factory automation and other
hardware and services are included.

Bi-directional arrow reflects the accommodation of reverse materials and information feedback
flows.
Managers need to understand that information technology is more than just computers. Except
computer, data recognition equipment, communication technologies, factory automation and
other hardware and services are included.
Task 3.3: Assess the effectiveness of information technology in managing the
supply chain of an organisation
Prior to 1980s the information flow between functional areas within an organization and between
supply chain members organizations were paper based. The paper based transaction and
communication is slow. During this period, information was often over looked as a critical
competitive resource because its value to supply chain members was not clearly understood. IT
infrastructure capabilities provide a competitive positioning of business initiatives like cycle time
reduction, implementation, implementing redesigned cross-functional processes. Several well
know firms involved in supply chain relationship through information technology. Three factors
have strongly impacted this change in the importance of information. First, satisfying in fact
pleasing customer has become something of a corporate obsession. Serving the customer in the
best, most efficient and effective manner has become critical. Second information is a crucial
factor in the managers' abilities to reduce inventory and human resource requirement to a
competitive level. Information flows plays a crucial role in strategic planning.














Task 4: Understand the role of logistics and procurement in supply chain
management
Task 4.1: Explain the role of logistics in supply chain management in an
organisation
Both logistics and supply chain management are important and exciting areas that touch our
lives. Just imagine the different products that are bought and consumed by us every day. How do
they reach the customer and at what cost? In ancient times, international trade was dominated by
bulky raw materials. Today, in-process and finished products (not raw materials) play a greater
role in world trade. Owing to piling up of inventory and carrying cost, hospitals and factories
have put in systems in place to arrest unnecessary purchases.
Logistics management is that part of SCM that plans, implements and controls the efficient,
effective, forward and reverse flow and storage of goods, services and related information
between the point of origin and the point of consumption in order to meet customer requirement.
Logistics involves getting in the right way, the right product, in the right quantity and right
quality, in the right place at the right time, for the right customer at the right cost.
Getting some of these 'Rs' right may be easy for many, but getting all correct can be quite a
challenge. For example, in both retail distribution and in high-value manufacturing, it is now
quite common to offer suppliers quite specific and narrow time windows within which to deliver
freight.
Task 4.2: Evaluate procurement practices in an organisation
Today, purchasing must be the most progressive group in the company. Your systems,
techniques, and operational theories must be flexible and dynamic. The typical philosophy of
We have done it that way for 20 years, so it must be good, or, We make money in spite of
ourselves! does not apply in modern procurement practices.
Worldwide competitive pressures require greater contribution from the purchasing and supply
management functions, procurement practices and suppliers to improve the organizations
relative position on quality, price, technology, and responsivenessthat doesnt mean sitting
around and waiting for it to happen!
Here are some interesting general observations based upon recent purchasing analyses:
Each day, buyers spend hundreds of millions of dollars which can account for anywhere
from 20-70% of an organizations revenue, budget, or sales dollar.
An analysis of payments has shown that, in most companies, 50-60% of the numbers of
checks to vendors are of payments of less than $500.
These payments often represent less than 5% of the annual material expenditures.
The payments under $1,000 represent the disbursements and approximately 10% of the
dollars.
Task 4.3: Discuss the factors that must be considered when improving
logistics and procurement practices in an organisation
Procurement is a key activity in the supply chain. It can significantly influence the overall
success of an emergency response depending on how it is managed. In humanitarian supply
chains, procurement represents a very large proportion of the total spend and should be managed
effectively to achieve optimum value. Procurement works like a pivot in the internal supply
chain process turning around requests into actual products/commodities or services to fulfill the
needs. It serves three levels of users:
1. The internal customer.
2. Programs in response to emergencies and ongoing programs.
3. Prepositioning of stocks, for both internal customers and program needs.
In collaboration with the warehouse function, products/commodities are mobilized and delivered.





Task 5: Be able to plan a strategy to improve an organisations supply chain
Task 5.1: Plan a strategy to improve an organisations supply chain
This strategy (as is shown in diagram) was developed using a multi-tiered approach. The
Department brought together subject matter experts from component agencies and divisions
including the USCG, CBP, TSA, DHS Policy, Science and Technology, Domestic Nuclear
Detection Office, Grants and Training, and Preparedness to create an initial draft of the strategy.
This draft was then subjected to an extensive review process involving internal staff across the
Department, interagency reviews with non-DHS agencies, consultation with the private sector
through advisory committees, including: the National Maritime Security Advisory Committee
and the Commercial Operations Advisory Committee, and consultation with international trade
partners, principally selected by volume of trade with the United States (e.g., APEC).
After a final round of corrections, taking into account the recommendations and requests of the
reviewers and consultants, the strategy subject to a formal review by DHS components and
submitted for formal Department review.
Following initial release, further consultation in developing the final strategy is anticipated with:
The private sector through formal trade organizations (e.g., the World Shipping Council
and Port Authorities, including coastal and inland ports).
State and local stakeholders.
International organizations, including the IMO, the WCO, the International Labor
Organization, and the International Organization for Standardization.

Task 5.2: Assess how a supply chain improvement strategy will benefit overall
business performance in an organisation
It helps in the following ways:
1. Improved Supply: Chain Network: Supply chain management software provides
complete, 360-degree visibility across the entire supply chain network. It allows users to
monitor the status of all activities across all suppliers, production plants, storage
facilities, and distribution centers.
2. Minimized Delays: Many supply chains particularly those that havent been enhanced
with a supply chain application are plagued by delays that can result in poor
relationships and lost business. With SCM software, all activities can be seamlessly
coordinated and executed from start to finish, ensuring much higher levels of on-time
delivery across the board.
3. Enhanced Collaboration: This type of instantaneous, unhindered communication and
data-sharing will help keep all key stakeholders informed, so that supply chain processes
can run as smoothly as possible.
4. Reduced Costs: Supply Chain Management software can help reduce overhead expenses
in a variety of ways.
Task 5.3: Explain how barriers will be overcome in an organisation when
implementing a supply chain improvement strategy
Businesses need effective tools for supply chain management. The supply chain is inherently is
oftentimes unpredictable and always dynamic, and ineffective supply chain management means
poor business performance and a lower bottom line. Conventional software solutions to the
supply chain management problem have proved moderately effective, but they have been unable
to render data visible, manageable and accessible. The IBM Cognos SCPM solution provides an
integrated software application that enables supply chain managers to identify and remedy issues
effectively and efficiently, keeping information organized and at hand.
Companies can use the IBM Cognos SCPM solution to connect supply chain data to other
enterprise applications, including finance, HR, CRM, and external data. In this way, IBM
Cognos SCPM not only improves the performance of a supply chain, it integrates an entire
company into a single source of mission-critical information, effectively increasing not only
performance, but the value of existing IT resources. Employees throughout the organization can
access IBM Cognos SCPM for accurate and current data needed to collaborate on issues and
make better business decisions. The benefits of IBM Cognos SCPM thereby become those of the
entire organization.












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