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Supply Chain Management

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Supply chain is a collection of functional activities (transportation inventory control etc) which are repeated. Many times throughout the channels through which raw materials are converted into finished goods and consumer value added.

SCM Defined

American production and inventory control society (APICs) defined SCM as:

Organizations that successively transform raw materials into intermediate goods then to final goods and deliver them to customers. (Dushmukh Mohanty 1999)

According to T. Davis (1993)

The supply chain is the network of organizations that are involved through upstream and downstream linkages in the different processes and activities that produce value in the form of products and services in the hands of ultimate customers.

On the basis of various definitions

SCM can be defined as

 An integration of interrelated functions of the firm with its channel members, vendors and all third party logistics service providers who contribute in the flow of goods. (raw materials, semi finished and finished products) and related information from the point of inception to the point of consumption with efficiency (Agrawal,2001).

Activity Mix

The activities to be managed that make up business logistics/ SC process vary from firm to firm.

According to council of logistics management (CLM), the components of a typical logistics system are:

1) i) Customer service

* Customer service standards cooperate and marketing to:

- Determine customer needs and wants for logistics customer service

- Determine customer response to service

- Set customer service levels

2) Transportation: mode of transport service selection

- Vehicle scheduling

- Equipment selection

- Claims processing etc

3) Inventory management

- Raw materials and finished goods stocking policies

- Short term sales forecasting

- Product mix at stocking points

- Number of size and location of stocking points

- Just-in-time (push and pull strategies)

4) Information flows and order processing

- Sales order- Inventory interface procedure

- Order information transmitted method

- Ordering rules (terms and conditions apply)

ii) Support activities : These include:

1. Warehousing - Space determination

- Stock layout and design

- Warehouse configuration

- Stock place

2. Material handling : Equipment selection

- Equipment replacement policies

- Stock storage and retrieval etc

3. Purchasing:- Supply source selection (local/international)

- Purchase timing

- Purchase quantities

4. Protective packaging designed for: handling

- Storage

- Protection from loss and damage

5. Cooperate with production/operation to:

- Specify aggregate quantities

- Sequence and time production output

- Schedule supplies for production/operations

6. Information maintenance

- Information collection storage and manipulation

- Data analysis

- Control procedures

Importance of SCM

- In a highly competitive global market focus on time is the basic strategy for building competitiveness.

 SCM is concerned with the philosophy of nurturing the supplier and operate in a win-win situation by providing goods and services to the customer in a timely, cost-effective manner.


1) Minimising uncertainty

Supply uncertainty can be addressed through a number of initiatives such as (i) vendor development and certification, (ii) sharing of production planning information and (iii) joint attention to transport arrangements

Process uncertainty is due to M/c breakdown, uncertain yields and absenteeism which can be addressed through: i) good maintenance practices

ii) Better technology

Demand uncertainty can be reduced to some extent by (i) forecasting techniques and (ii) developing a better communication to customers

2) Reducing lead times

Lead times at the stages of procurement. Conversion and distribution can be cut down by:

i) Faster modes of transport (air)

ii) Better planning practices

iii) Process technologies

3) Minimizing the number of stages

- The number of stages add to the complexity of SCM

- Unification of tasks and reducing the number of stages ease the coordination of decisions


4) Improving flexibility

- Reducing set-up or changeover times in various processed and the use of flexible manufacturing and assembly techniques improves



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