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Ali haider

Supply chain Management

SUPPLY CHAIN
MANAGEMENT
Assignment 1

Submitted to :

Dr Muazzam
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Supply chain management is a hot topic today and a source of competitive advantage in
todays world. Businesses do not compete anymore, supply chains do. Just take the example
of Apple, it is not only competing on the basis its design but the overall supply chain which
includes its manufacturer, marketing partners, finance partners and all other partering entities
involved to provide Apples iphone or any product to the end consumer. Hence businesses
cannot develop competitive advantage by their own but by cooperating with all their suppliers,
retailers or all members of supply chain network.
What supply chain management is?
A supply chain is the system of organizations, people, activities, information and resources
involved in moving a product or service from supplier to customer. An integrated group of
processes to source, make, and deliver products. Supply chain activities transform raw
materials and components into a finished product that is delivered to the end customer. It is the
process of planning, implementing and controlling the operations of the supply chain with the
purpose to satisfy customer requirements as efficiently as possible. Supply chain management
manages all movement and storage of raw materials, work-in-process inventory, and finished
goods from point-of origin to point-of-consumption.
As defined by Ell ram and Cooper (1993), supply chain management is "an integrating
philosophy to manage the total flow of a distribution channel from supplier to ultimate
customer". Monczka and Morgan (1997) state that "integrated supply chain management is
about going from the external customer and then managing all the processes that are needed
to provide the customer with value in a horizontal way".
From these definitions, a summary definition of the supply chain can be stated as: all the
activities involved in delivering a product from raw material through to the customer including
sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory
tracking, order entry and order management, distribution across all channels, delivery to the
customer, and the information systems necessary to monitor all of these activities. Supply
chain management coordinates and integrates all of these activities into a seamless process. It
links all of the partners in the chain including departments within an organization and the
external partners including suppliers, carriers, third-party companies, and information systems
providers. Managers in companies across the supply chain take an interest in the success of
other companies. They work together to make the whole supply chain competitive. They have
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the facts about the market, they know a lot about competition, and they coordinate their
activities with those of their trading partners. It encompasses the processes necessary to
create, source, make to, and to deliver to demand. They use technology to gather information
on market demands and exchange information between organizations. A key point in supply
chain management is that the entire process must be viewed as one system. Any inefficiencies
incurred across the supply chain (suppliers, manufacturing plants, warehouses, customers,
etc.) must be assessed to determine the true capabilities of the process.

What supply chain management is not?

The definitions described and developed earlier and recent industry collaborative activities
indicate that supply chain management is not a standalone process. Many supply chain efforts
have fallen short of the potential advantages because the term is often viewed as only relating
to the supply side of the business or to the purchasing function. As indicated above, supply
chain management is much more than just procurement. Among the misunderstanding
evidenced, supply chain management is not:
inventory management;
logistics management;
supplier partnerships;
driven from the supply side;
a shipping strategy;
distribution management;
the logistics pipeline;
procurement management;
A computer system.
Despite the acceptance of the concept of managing the supply chain and partly due to the
limiting misunderstandings, growth of integrated supply chain management has been slow.
Reasons for the slow growth of integrated supply chain management include the following:
Lack of guidelines for creating alliances with supply chain partners.
Failure to develop measures for monitoring alliances.
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Inability to broaden the supply chain vision beyond procurement or product distribution
to encompass larger business processes.
Inability to integrate the company's internal procedures.
Lack of trust inside and outside a company.
Organizational resistance to the concept.
Lack of buy-in by top managers.
Lack of integrated information systems and electronic commerce linking firms.

What is supply chain analysis?

An accurate analysis of the supply chain serves several purposes and is more a continuous
task than a one-time eort. In todays fast changing business environment, although a supply
chain partnership is intended for a longer duration, supply chains keep evolving and changing
to accommodate best to the customers needs. In the beginning or when a specific supply
chain is analyzed for the first time in its entirety the result can be used as a starting point for
improvement processes as well as a benchmark for further analyses. While the initial analysis
itself often helps to identify potentials and opportunities it may well be used for target-setting.
. On the other hand, the supply chain analysis should evolve in parallel to the changes in the
real world. In this way the associated performance measures keep track of the current state of
the supply chain and may be used for supply chain controlling.
Finally, a holistic view on the supply chain needs to be kept. This is especially true here,
because overall supply chain costs are not necessarily minimized, if each partner operates at
his optimum given the constraints imposed by supply chain partners.
For analysis of supply chain we can use SCOR model, it is a tool for representing, analyzing
and configuring supply chains. It does not provide any optimization methods, but aims at
providing a standardized terminology for the description of supply chains. This standardization
allows benchmarking of processes and the extraction of best practices for certain processes.
How supply chain analysis can be best performed?
Having mapped the supply chain processes it is important to assign measures to these
processes to evaluate changes and to assess the performance of the complete supply chain
as well as of the individual processes.
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Three functions can be attributed to indicators:

Indicators are defined as numbers that inform about relevant criteria in a clearly
defined way.
Steering. Indicators are the basis for target setting. These targets guide those
responsible for the process considered to accomplish the desired outcome.
Controlling. Indicators are also well suited for the supervision of operations and
processes.

How to choose among the performance measures?

Performance measurement is generally defined as the process of quantifying the efficiency
and effectiveness of action (Neely et al., 1995). Effectiveness is the extent to which customers
requirements are met, while efficiency measures how economically a firms resources are
utilized to achieve a predetermined level of customer satisfaction. Based on Neely et al.s
assertions (Neely, 1998; Neely, 2005), only when you can measure something and express it
in numbers, you have good background and knowledge about it. Otherwise, your knowledge
about it is limited and unsatisfactory. According to Bhagwat and Sharma (2007), performance
measurement describes the feedback on operations which are geared towards customer
satisfaction, strategic decisions and objectives. They further point out that performance
measurement reflects the need for improvement in operational areas which are referred to as
bottlenecks in performance measures. Performance measurement is an important aspect of
successful SCM. Gunasekaran et al. (2001) described effective performance measurement as
necessary for SCM. Lai et al. (2002) further asserted that the lack of adequate performance
measurement is one of the major obstacles to efficient SCM. According to Abu-Suleiman et al.
(2004), the importance of performance measurement systems can be summarized in the
following reasons:
a. Drive Organizational Actions
Performance measurement drives actions in two respects: First, monitored measures
get high visibility within an organization and people strive to achieve high performance
with respect to these measures. Second, measured metrics drive actions by identifying
areas of improvement. Once identified poor, management should take corrective actions
to address such issues.
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b. Framework for Decision Making

Measurement provides basis to evaluate alternatives and set decision criteria. The
structure of the measurement system drives decisions and actions at the strategic,
tactical and operational levels. Hence, a relevant performance management system
targets optimizing the performance across multiple objectives.

c. Closed Loop Control

Feedback is an integral part of any process. An effective performance management
system provides necessary feedback information to reveal progress, diagnose
problems, identify potential opportunities for improvement, facilitates inter-
understanding and communication among supply chain members and tests the effect of
different strategies.

Justification Methodologies

Strategic Approaches Analytic Approaches Economic Approaches

Technical Payback
Benefits
Value Mathematical Experimental Net Present
Analysis Analysis Analysis Value
Business
Advantage Internal Rate
Scorecards Back-of-the- Trace-driven of Return
Competitive envelope
Simulations
Factors Linear calculations Other
Discounted
additive Monte Carlo
Future models Spreadsheets Simulations Cash Flow
Expansion Queuing Methods
AHP Models networks Non DCF
Optimization methods
techniques Sensitivity
Analysis

What different models and methods for analysis and designing of supply chains are available?
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Multi-stage models for supply chain design and analysis can be divided in four
categories depending on modeling approach:
Deterministic analytical models (known and specified variables). Batch sizes,
order quantities, stock levels, lead times, transportation mode, location etc.)
Stochastic analytical models (at least one variable unknown, assumed to
followed a distribution)
Economic models (e g game-theoretic models)
Simulation models (sensitivity, scenario-testing, decision support)
Deterministic Analytical Models
Williams (1981) presents seven heuristic algorithms for scheduling production and
distribution operations in an assembly supply chain network (i.e., each station has at most one
immediate successor, but any number of immediate predecessors). The objective of each
heuristic is to determine a minimum-cost production and/or product distribution schedule that
satisfies final product demand. The total cost is a sum of average inventory holding and fixed
(ordering, delivery, or set-up) costs. Finally, the performance of each heuristic is compared
using a wide range of empirical experiments, and recommendations are made on the bases of
solution quality and network structure.
Stochastic Analytical Models
Cohen and Lee (1988) develop a model for establishing a material requirements policy
for all materials for every stage in the supply chain production system. In this work, the authors
use four different cost-based sub-models (there is one stochastic sub-model for each
production stage considered). Each of these sub-models is listed and described below [12]: (1)
Material Control: Establishes material ordering quantities, reorder intervals, and estimated
response times for all supply chain facilities, given lead times, fill rates, bills of material, cost
data, and production requirements. (2) Production Control: Determines production lot sizes
and lead times for each product, given material response times. (3) Finished Goods Stockpile
(Warehouse): Determines the economic order size and quantity for each product, using cost
data, fill rate objectives, production lead times, and demand data. 7 (4) Distribution:
Establishes inventory ordering policies for each distribution facility, based on transportation
time requirements, demand data, cost data, network data, and fill rate objectives.
Simulation Models Towill (1991) and Towill, et. al. (1992) use simulation techniques to
evaluate the effects of various supply chain strategies on demand amplification. The strategies
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investigated are as follows [38]: (1) Eliminating the distribution echelon of the supply chain, by
including the distribution function in the manufacturing echelon. (2) Integrating the flow of
information throughout the chain. (3) Implementing a Just-In-Time (JIT) inventory policy to
reduce time delays. (4) Improving the movement of intermediate products and materials by
modifying the order quantity procedures. (5) Modifying the parameters of the existing order
quantity procedures.
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References
Kilger, C. (Ed.). (n.d.). Supply chain management and advance planning.
Lummus, R. R., & Vokurka, R. J. (1999). Defining supply chain management: a historical perspective
and practical guidelines.
Industrial Management & Data Systems,99(1), 11-17.
Quantitative methods in supply chain network design and green supply chain management. (n.d.).