SUPPLY CHAIN MANAGEMENT


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INTRODUCTION
LEARNING OBJECTIVE
After reading this chapter you will be able to
• Appreciate what a supply chain is and its importance.
• Understand the different phases in supply chain.
• Identify the drivers of supply chain performance.
• Overview the supply chain models and its systems.

1.1 OVERVIEW

A supply chain may be considered as network of organizations, connected by a series
of trading relationships. This network covers the logistics and manufacturing activities from
raw materials to the final consumer. Each organization in the chain procures and transforms
materials and information into intermediate / final products, and distributes them to customers
and consumers. As such every organization has a supply chain and represents one step in
the total ‘value adding’ process. There are three aspects to the supply chain. Upstream–
those activities linking organizations to their suppliers. Internal – or primary activities and
Down stream those activities linking organizations to their customer. In this chapter let us
define what is supply chain and its management.

1.2 FUNDAMENTALS OF SUPPLY CHAIN

The term supply chain refers to the “processes from the initial raw materials to the end
user of the finished product linking across supplier-user”, or as the “functions within and
outside an industry that enable the value chain to make products and render services to the
customer”. Let us try to understand the meaning of the word ‘value chain’ and distinguish
it with ‘supply chain’. The supply chain is linking the companies from raw material stage to
the ultimate consumption. In the process more than one entity is involved. Where as the
‘value chain’ refers to the internal operations of a particular company. Operations include
purchasing, marketing and operations management. So, value chain is an internal concept
and the supply chain consists of both internal and external.



DISTRIBUTION CENTRE LOCATION MODELS

It is quite common to see manufacturers and retailers joining efforts to efficiently
handle the flow of products and to closely coordinate the production and supply chain
system. An important strategic issue related to the design and operation of a physical
distribution network in a supply chain system is the determination of the best sites for
intermediate stocking points or warehouses. The use of warehouses provides a company
with flexibility to respond to changes in the market place and can result in significant cost
savings due to economies of scale in transportation or shipping costs. Hence it is important
to design a distribution network that involves determining simultaneously the best sites of
both plants and warehouses and the best strategy for distributing the product from the
plants to the warehouses and from the warehouses to the customers.


SUPPLY CHAIN NETWORK OPTIMIZATION MODEL

In the past, researchers concentrated on designing single component of the overall –
production – distribution system, such as purchasing, production and scheduling, inventory,
warehousing or transportation. To date there exists little work that addresses the integration
of such single components in to overall supply chain. Later, researchers concentrated on
integrating two sub-systems of a whole supply chain. Some developed models integrating
buyer – vendor coordination, production – distribution coordination and inventory
distribution co-ordination. The need of the hour is integration of all the constituents of the
supply chain. Optimization of the complete supply chain needs to address the following: