Supply Chain Management (SCM)

• A supply chain is a network consisting of organizations, people, activities, information, and resources
• A supply chain is involved in creating a product or service, the movement of it from the supplier to the customer

Supply Chain Management (SCM)

• SCM is the oversight of activities that turn raw materials into a finished product
• SCM delivers the finished product to the end customer

Key Components of SCM

• Suppliers provide raw materials, components, and services
• Manufacturers transform raw materials into finished products
• Distributors store and transport goods to wholesalers or retailers
• Retailers sell products directly to consumers
• Customers are the end-users of the product or service

Key Activities of SCM

• Sourcing identifies and selects suppliers of raw materials
• Production manufactures the product
• Inventory Management controls the flow of goods to minimize costs and prevent shortages
• Transportation moves goods between different points in the supply chain
• Logistics plans and executes the efficient flow of goods, information, and finances
• Customer Service provides support to customers throughout the product lifecycle

Why Supply Chain Management is Important

• Streamlining processes and optimizing logistics can significantly lower costs
• Faster delivery times, better product availability, and enhanced customer service can lead to higher satisfaction
• A well-managed supply chain can differentiate a company from its competitors and provide a competitive advantage
• SCM increases efficiency by minimizing waste, reducing lead times, and improving resource utilization
• Identifying and mitigating potential disruptions such as natural disasters or supply chain disruptions

Modern Trends in Supply Chain Management

• Use technology to track and monitor goods in real-time offering supply chain visibility
• Adapt quickly to changing market conditions and unexpected events and provide supply chain agility
• Incorporate environmental and social responsibility into supply chain practices and lead to sustainability
• Leverage technology such as AI, machine learning, and blockchain to improve efficiency and transparency through digitalization

Porter's Value Chain

• Porter's Value Chain is a framework developed by Michael Porter
• Porter's Value Chain is used to analyze the specific activities through which a company creates value and gains a competitive advantage

Core Idea

• Every business involves a series of activities that add value to the product or service
• By understanding these activities, companies can identify areas for cost reduction or differentiation

Two Main Categories

Primary Activities

• Primary Activities are directly involved in the creation and delivery of the product or service
• Inbound Logistics involves receiving, storing, and handling raw materials
• Operations transforms inputs into the final product
• Outbound Logistics involves warehousing, distribution, and delivery of the finished product
• Marketing and Sales includes customer relationship management, advertising, and sales channels
• Service involves after-sales support, maintenance, and customer service

Support Activities

• Support Activities support the primary activities and enable them to function effectively
• Procurement involves sourcing and acquiring raw materials, components, and other resources
• Technology Development includes research and development, process automation, and information technology
• Human Resource Management involves recruiting, training, and developing employees
• Firm Infrastructure includes general management, finance, accounting, and legal departments

Steps to Use Porter's Value Chain

• Identify all activities by breaking down the company's operations into specific activities
• Analyze each activity by determining the costs associated with each activity and identify areas for improvement
• Identify competitive advantages to determine how each activity contributes to the company's competitive advantage (cost leadership, differentiation, or focus)
• Develop strategies to enhance key activities and improve overall value creation

Benefits of Using Porter's Value Chain

• Improved efficiency by identifying and eliminating wasteful activities
• Focus on activities that directly impact customer satisfaction to provide enhanced customer value
• Cost reduction by reducing costs associated with specific activities
• Gain a competitive edge by differentiating the company's value chain to have a competitive advantage

Supply Chain Management (SCM) Drivers

• SCM drivers are the key decision areas that significantly impact the performance of the entire supply chain
• Decisions determine how efficiently and effectively goods and services flow from suppliers to customers

Primary SCM Drivers

Facilities

• Facilities relate to the physical locations within the supply chain, such as warehouses, factories, and distribution centers
• Key decisions for facilities include number and location, capacity and layout, and level of automation

Inventory

• Inventory deals with the management of stock levels at various points in the supply chain
• Key decisions for inventory include inventory levels at different locations, inventory policies, and inventory tracking and forecasting methods

Transportation

• Transportation concerns the movement of goods between different points in the supply chain
• Key decisions for transportation include the mode of transportation (e.g., truck, rail, air, sea), route selection and scheduling, and transportation carriers and contracts

Information

• Information relates to the flow of data and information throughout the supply chain
• Key decisions for information include information systems and technologies used e.g., ERP, WMS, TMS, data sharing and communication protocols, and information accuracy and timeliness

Sourcing

• Sourcing focuses on the selection and management of suppliers
• Key decisions for sourcing include supplier selection criteria, contract negotiations and terms, and supplier relationships and collaboration

Key Considerations

• Trade-offs often involve increase inventory levels that can improve customer service but also increase holding costs
• Optimal combination of drivers depends on the specific needs and competitive strategy of the company in terms of a strategic fit
• Some supply chains prioritize responsiveness while others focus on efficiency