Supply Chain Management Readings PDF

SUPPLY CHAIN MANAGEMENT LESSON 1: Introduction reduction related activities. The major development and the significant increases of A supply chain is basically a group of publications in the areas of supply chain inde...

SUPPLY CHAIN MANAGEMENT LESSON 1: Introduction reduction related activities. The major development and the significant increases of A supply chain is basically a group of publications in the areas of supply chain independent organizations connected integration and supplier-buyer relationship together through the products and services came in the 1990s when the concept as we that they separately and/or jointly add value know it today was gradually established. on in order to deliver them to the end consumer. It is very much an extended It is therefore clear that supply chain concept of an organization which adds value management is not one of the legacy to its products or services and delivers them academic subjects that existed for hundreds to its customers. or thousands of years, but rather a young and even nascent subject. It is only recently Over the last three decades, the concept and that the business world started making use theory of business management have of this concept. So, the question is “Why undergone profound changes and now?” A convincing answer to this question development. Many old ways of doing is that our business environment has business have been challenged and many changed, which includes globalization, more new ideas and approaches have been severe competition, heightened customer created, among them are business process expectation, technological impact and re-engineering, strategic management, lean geopolitical factors and so on. Under such a thinking, agile manufacturing, balanced renewed business environment, an scorecard, blue ocean strategy,... just to organization focused management approach name a few. Supply chain management is is no longer adequate to deliver the required undoubtedly one of those new and well competitiveness. Managers must therefore grown management approaches that understand that their businesses are only part emerged and rapidly developed across all of the supply chains that they participated in industries around the world. and it is the supply chain that wins or loses the competition. The earliest appearance of the term ‘supply chain management’ as we know it today The survival of any business today is no published in recognizable media and longer solely dependent on its own ability to literature can be traced back to the early compete but rather on the ability to 1980s. More precisely, it first appeared in a cooperate within the supply chain. The Financial Times article written by Oliver seemingly independent relation between the and Webber in 1982 describing the range of organizations within the supply chain activities performed by the organization in becomes ever more interdependent. You procuring and managing supplies. However, “sink or swim with the supply chain.” It is the early publications of supply chain for this reason that gives rise to the need for management in the 1980s were mainly supply chain management. focused on purchasing activities and cost 1 SUPPLY CHAIN MANAGEMENT Fundamentals of Supply Chain Supply Chain (SC) and Supply Chain Management Management (SCM) is beyond anybody’s reasonable doubt. Based on that, the author Consequently, aspiring to become an would like to offer his definition of SC here excellent business simply through an and SCM in the next section. entirely inward-looking management approach can be very elusive. What’s more In this definition, there are a number of key practical and indeed a more assured way of characteristics that have been used to better managing a business is to manage it portrait a supply chain. First, a supply chain along with the supply chain through is formed and can only be formed if there appropriate strategic positioning, adequate are more than one participating companies. structural configuration, collaboration, Second, the participating companies within integration and leadership. The paramount a supply chain normally do not belong to the importance of doing so does not derive from same business ownership, and hence there is the theories or reasoning, rather it is a legal independence in between. Third, withstood by the business performance those companies are interconnected on the improvement and market measured common commitment to add value to the customer results. It is the tangible benefits steam of material flow that runs through the and success that it delivers that makes the supply chain. This material flow, to each subject important. company, comes in as the transformed inputs and goes out as the value-added Supply chain management is also pervasive. outputs. One can hardly find any aspect of business that has nothing to do with supply chain Intuitively, one can imagine a supply chain management. Take an example of quality as something resembling a “chain”, in which management – a very important part of the “links” are the participating companies today’s business management, and ask that are inter-connected in the value adding yourself a question: can you manage and process. The link on the upstream side of the improve the quality standard of your product material flow is the supplier’s supplier; and or service measured by the end-consumer on the downstream side of the material flow without managing the suppliers and buyers is the customer. There is usually an OEM – in the supply chain at all? Of course not. Original Equipment Manufacturer in between. The OBM sometimes is LESSON 2: Defining supply chains represented by OBM – Original Brand Manufacturer, or sometimes simply the Ploughing through the plethora of literature, “focal company.” one will come to realize that there are as many different definitions as many of those who cared to write about it. However, a broad conceptual consensus on the notion of 2 SUPPLY CHAIN MANAGEMENT OEM - a company that produces parts and like to call the supply chain the “Demand equipment that may be marketed by another Chain”. manufacturer. OBM - is a term used to describe Since the business connections between manufacturers who can develop and produce organizations are pervasive, how could one products under their brand draw a boundary of a supply chain? -is to understand the four intrinsic flows of a Supplier’s Supplier → Supplier → OEM supply chain → Distributor → Retailer → Consumer ➔ Material Flow: All manufacturing At the end of a supply chain is the product supply chains have material flows and/or service that are created by the supply from the raw materials at the chain for the end consumer. Thus, the beginning of the supply chain to the fundamental reason of a supply chain’s finished products at the end of the existence is hinged on serving the end supply chain. A furniture-making consumer in the marketplace. The degree of supply chain will have the wood cut how well a supply chain can serve their down from forest at the beginning of consumer ultimately defines its competitive its supply chain and home furniture edge in the marketplace. at the end of supply chain. The continuous flow of wood been It is not really a “chain”, rather it is more transformed through the chain and like a “network”, when you consider that end up to furniture ties the whole there are usually multiple suppliers and supply chain together and defines its multiple customers for each participating clear boundary. A furniture supply company in the chain. There are also chain can never be confused with a possible nested chains within the chains. For chocolate manufacturing supply example an engine manufacturing supply chain because the material flows in chain is a nested supply chain within the between are clearly different and connected automobile supply chain. never will they cross with each other. Depending on how you would like to see the ➔ Information Flow: All supply supply chain, there are similar but different chains have and make use of names you may like to call the supply chain. information flows. Throughout a If you view a supply chain as basically a supply chain there are multitude of chain of value adding activities, you may information flows such as demand like to call it “Value Chain”; if you information flow, forecasting perceive a supply chain as continuous information flow, production and demands originated from the and scheduling information flows, and stretched to upstream suppliers, you may design and NPI information flows. Unlike the material flow the 3 SUPPLY CHAIN MANAGEMENT information can run both directions, process of buying and selling shifts towards upstream and downstream the material flow’s ownership from alike. Interestingly most of them are the supplier to the buyer repeatedly unique to the specific supply chain. until the end of the supply chain – The information of women's fashion the end-consumer. This clothing has no value to a motorbike transactional commercial flow will supply chain. Any supply chain will only take place in a supply chain have its own set of information where there are more than one flows that are vital to its existence company. On the other hand, if it is which are often jealously protected with an organization there will be against those of other supply chains material flow, but no ownership change, and hence no commercial ➔ Finance Flow: All supply chains flow. have finance flow. It is basically the The four flows described above not only money flow or the bloodstream of a better explain the function of the supply supply chain. Without it, a supply chain, but also define it more rigorously. chain will surely demise. However, They represent four major areas of concerns for any supply chain, there is only and research activities in supply chain one single source of such finance management, which covers most of the flow – the end-consumer. This known issues in the published literature. understanding of a single source of finance has led to a concept of LESSON 3: DEVELOPMENT TRENDS “single entity” perspective of a IN SUPPLY CHAIN supply chain, which is a very useful foundation for supply chain Another difficulty in understanding and integration and collaboration. The defining supply chain and supply chain distribution and sharing of this single management is that it is never at standstill financial resource fairly across a and the subject has been continuously supply chain will allow for the better evolving since its inception in the early alignment between the contribution 1980s. The continuous development is partly and reward for the participating propelled by the changes of overall business companies. environment and heightened competitions in the global marketplace. But partly it is ➔ Commercial flow: All supply chains influenced by the new understanding of the represent a transactional commercial supply chain that they participate in. flow. This means that the material flow that runs through the supply 1. From a functional to process chain changes its ownership from perspective. Business management one company to another, from used to see and take action on the supplier to buyer. The transactional functional silos in the business. It 4 SUPPLY CHAIN MANAGEMENT was understandable that naturally the supply chains. Management thinking function is what seemed to be the over the extended enterprise delivery part of the business. But, produces a great deal of ideas that today with supply chain management single enterprise alone cannot. concept managers can see their problems more from the process 4. From transactional to perspective, understanding that relationship-based engagement. functions can only make sense if it is Business engagement between firms perceived from a supply chain in the past was predominantly process perspective. transaction based and cost driven. The merit of any purchasing and 2. From operational to strategic procurement of externally sourced viewpoint. At early years of materials and services was judged by applying the supply chain the transactional measures such as management concept, managers tend price, volume and delivery terms. to see it as another operational tactic But what’s now more of the practices that will help to reduce operational in working with external cost, such as purchasing function organizations within the supply chain improvement and optimizing the is so called relationship-based logistics operations. But, gradually engagement. This relationship more and more managers realized approach does not abandon the that the effective changes can only transactional activities but put its be achieved if the operational issues decision baking on much wider are addressed from the supply chain consideration of knowledge wide strategic viewpoint. exchange, long-term commitment, Operational excellence can only be incentives and reward. manifested through its strategic fit. 5. From local to regional, and from 3. From single enterprise to extended regional to global. Connections of enterprise. Enterprise management supply networks have over the last is now arguably displaced by the two decades grown from local to supply chain management, where the regional and to global. Hardly any supply chain is by definition the major enterprise and supply chain is extended enterprise. The long not connected to some part of the established enterprise centered world. You need to get out before management thinking was based on you can get up. This trend is spurred that the competition was raging by the lower cost of labor and between the organizations, thus it materials in many parts of the world, became obsolete as the competitions as well as first mover advantages in are now predominantly between the setting up global market presence. 5 SUPPLY CHAIN MANAGEMENT The trends of supply chain development are not always positive and encouraging. There is now enough evidence to support that supply chain risks are now continuously growing to the level that is higher than ever before; and supply chain integration still remains as the major management shortfall across all industrial sectors (PRTM Global supply chain trends report 2010-12). The task of managing and improving supply chain performances across all industrial sectors is only becoming tougher, not easier. This calls for deeper and more thorough understanding of the challenges supply chains are facing. 6