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Supply Chain Application

Week 1

Over the last two decades, the field of
supply chain management has not only
specialization in business administration
but also had immense impact on the
profitability of various industries.
There have been a number of industrial
sectors adopting the philosophy of supply
chain management. In fact, it is the
industry that has contributed to the
development of this subject. Many of the
state of the art supply chain strategies

Supply Chain Applications involves various
industrial applications of supply chain
management in the form of different
No matter, the strategy is being used in
the distribution area or in the procurement
area; the strategies are leaving everlasting
impact on the productivity and profitability
of the industries.

This course is designed to provide the
student with an understanding of the
foundations of the supply chain function in
both manufacturing and services.
The goal of the course is to help students
become effective supply chain managers
The course will cover Issue regarding
application, product and service design,
business process strategy, supply chain


What Is Important to the

Before exploring what we can do in supply chain
and operations to help create a profitable,
competitive, and valuable company, we need to
identify a companys main purpose and what is
important to CEOs.
Primarily, the central purpose of a company is to
increase shareholder value.
Total return to shareholders (TRS) is frequently used
From a CEOs perspective, there is pressure to show
returns to shareholders that either meet or exceed
shareholder expectations and achieve aboveaverage earnings compared to competitors.

What Is Important to the


Audiences of CEOs report :

1. Board of directors
2. Stock Exchanges analyst
3. Shareholders and investors
4. Creditors , banks and regulatory bodies
5. Stakeholders
Common measures to evaluate Company
Earnings before interest
Earnings per share (EPS
taxes depreciation and
Free cash flow (FCF)
amortization (EBITDA)
Return on investment
Earnings before interest
and taxes (EBIT)
Return on net assets

Role of Supply Chain & Operations

Supply chains are focused on delivering products
and services to customers at the right price, in
the right quantities, to the right places, and at the
right time. In doing so, they keep four areas in
mind to create value for our organizations:
1. Increasing quality
2. Increasing service
3. Lowering cost
4. Increasing throughput (reducing time)

SCOR Model

(Adapted from Supply Chain Council, In

Value chain
Value is created when customers purchase goods
or services at prices higher than the cost of
performing the value activities.
The value activities include primary activities that
encompass the physical creation, delivery, and
selling of the product or service, while the support
activities provide the infrastructure to carry out
the primary activities.
From a supply chain perspective, we create value
by maintaining a cost advantage in each primary
and support activity and through the coordination
and alignment of each activity.

Value chain Model

Adapted from Michael Porters Value Chain. Competitive Advantage: Creating

and Sustaining Superior Performance, NY: Free Press; 1985.)

Supply Chain and

Operations Financial Impact
As the emphasis on supply chain and operations
grows, CEOs are beginning to more commonly use
supply chain phrases such as:
1. Accountability
2. Collaboration
3. Innovation
4. Operational flexibility
5. Risk mitigation
6. Sustainability
7. Transparency

Supply Chain and Operations

Financial Impact
Why are these ideas so important to the Top
shareholders, and government officials demand
However, the real challenge is in implementing
these ideas, moving from discourse to action.
Supply chain and operations is still considered a
functional area that exists in silos for many
companies, implementing these ideas to achieve
true company value is difficult.
However, companies that moved their supply
chains from functional department to value
generator were rewarded.

Use of Financial Statements

Internal users uses this information for decisions related
to: Finance, Human resources, Marketing and Supply chain
& Operations
Supply chain & Operationsoutsourcing, asset utilization,
inventory management, commodity purchasing, supplier
relationships, and distribution.
External users include tax authorities, government
regulators, banks, investment firms, portfolio managers,
analysts, investors, suppliers, and many others.
Supplierspayment terms, contract terms, relationships,
process integration, and sharing information.
Customerspurchasing based on corporate socia


Financial Intelligence for Supply Chain Managers: Understand the

Link between Operations and Corporate Financial Performance (1st
Edition) by STEVEN M. LEON, Pearson Education, Inc., 2015.