Supply Chain Management

Purchasing & supply involves all of those management processes and

operations needed to ensure that an organisation is able to obtain cost-
effectively from outside sources all of the products and services that it
requires. This is key to managing a firms integration into the supply chain.

Supply chain management aims at

coordinating the processes of all supply chain
members, both downstream towards
customers & upstream towards suppliers.
SCM is linked together with cross-
company strategies and processes
Traditional View: Cost breakdown of a
manufactured good

Profit 10% Profit

Supply Chain
Cost
Supply Chain Cost 20%
Marketing
Cost
Marketing Cost 25%

Manufacturing Cost 45%

Manufacturing
Cost

Effort spent for supply chain activities are invisible to the customers.
 Magnitude of Supply Chain Management
Compaq estimates it lost $0.5 B to $1 B in sales in 1995
because laptops were not available when and where
needed

P&G (Proctor&Gamble) estimates it saved retail

customers $65 M (in 18 months) by collaboration
resulting in a better match of supply and demand
 Top 25
Supply Chains

AMR research http://www.amrresearch.com

publishes reports on supply chains
and other issues.

The Top 25 supply chains report comes

out in Novembers.

The table on the right-hand side is from

The Second Annual Supply Chain
Top 25 prepared by Kevin Riley
 Scope of activities undertaken by
the purchasing & supply function
Forecastin Purchasing
g demand
& planning
production Negotiating Managing
Developing inbound
supply logistics Managing
strategies inventory

Preparing the
Specifying contract
Appraising & Managing
requirements
shortlisting inventory
& planning
supply suppliers
Managing the
contract &
Analysing supplier Trans-portation
supply Obtaining & relation- ships
markets selecting
offers In small enterprises,
Customer Storage, handling & one person undertakes
service
ITC
packaging a number of functions
 Output of supply Chain Analysis

Quality

Availability
Customer service &
responsiveness
Low cost

6
utdallas.edu/~metin
SCM Strategy
 What is Strategy ?
Strategic Planning Model

Analyze
Analyze Identify
the
the Strengths
Organizations
Organizations and
resources
resources weaknesses

Develop the
Identify
Identify the
the
Organizations Formulate Implement Evaluate
Organizations
Organizations
mission and strategies strategies results
Vision
Vision
objectives

Identify
Analyze
Opportunities
the
And
environment
threats
 Strategic Planning Model
Establishment of long term
Majorobjectives
Components of the Strategic Plan / Down to Action

Quality
Availability Strategic Plan
Customer service & Vision
What we want to be Action Plans
responsiveness
Low cost Evaluate Progress
Mission Why we exist

Strategies
ong term objectives/ Goals What we must achieve to be successful

Annual Objectives O1 Specific outcomes expressed in

O2 measurable terms (NOT activities)

itiatives/Activities Planned Actions to

AI1 AI2 AI3 Achieve Objectives

Measures/ Indicators and

M1 M2 M3
Standard Monitors of success
Targets T1 T1 T1 9 Desired level of performance
Budgets and timelines
Summary
Where are you going, your strategic plan and
SCM function??

Vision
Mission
Goals
Strategy
Policies

It is good practice for an organisation to publish its

vision, mission, goals and policies
How competitive are your firms
products or services?

Quality

Availability Benefits
Customer service & = customers
responsiveness seek

Low cost Regularly obtain

feedback from actual
or potential
customers.
 Levels of mission, goals & policy
Quality
CORPORATE Availability
Customer service &
Mission responsiveness
Aligned with Goals Low cost
Policies

FUNCTION / FUNCTION / FUNCTION /

OPERATING UNIT 1 OPERATING UNIT 2 OPERATING UNIT 3
Mission Mission Mission
Goals Goals Goals
Policies Policies Policies

SCM
function
 Scope of activities undertaken by
the purchasing & supply function
Forecastin Purchasing
g demand
& planning
production Negotiating Managing
Developing inbound
supply logistics Managing
strategies inventory

Preparing the
Specifying contract
Appraising & Managing
requirements
shortlisting inventory
& planning
supply suppliers
Managing the
contract &
Analysing supplier Trans-portation
supply Obtaining & relation- ships
markets selecting
offers In small enterprises,
Customer Storage, handling & one person undertakes
service
ITC
packaging a number of functions