Supply Chain Management Review PDF

**\*SUPPLY CHAIN MANAGEMENT -** is the management of the flow of goods and services **\*ADVANTAGES OF OPTIMIZING SUPPLY CHAIN** 1. **Saving Money** 2. **Streamlining your inventory** 3. **Boosting efficiency** 4. **Improving customer satisfaction** **\*Five components or stages of traditio...

**\*SUPPLY CHAIN MANAGEMENT -** is the management of the flow of goods and services **\*ADVANTAGES OF OPTIMIZING SUPPLY CHAIN** 1. **Saving Money** 2. **Streamlining your inventory** 3. **Boosting efficiency** 4. **Improving customer satisfaction** **\*Five components or stages of traditional supply chain management systems:** - **Planning** - Plan and manage all resources required to meet customer demand - **Sourcing -** Choose suppliers to provide the goods and services needed to create the product - **Manufacturing -** Organize the activities required to accept raw materials, manufacture the product, etc. - **Delivery and Logistics -** Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive payments. - **Returning -** Create a network or process to take back defective, excess or unwanted products. **Raw Materials -\> Supplier -\> Manufacturer -\> Distributor -\> Retailer -\> Consumer** **\*Supply chain -** captures the entire flow that brings a product or service to market **\*Logistics - **is a small segment of the supply chain, focused on the movement and transportation of the products **\*Several other key supply chain management processes involved in transforming raw goods into finished products.** - **Demand planning: **Forecasting the customer demand for a product or service. - **Supply planning: **Determining how to best meet the needs discovered during demand planning. Basically, how will you balance supply and demand? - **Production planning: **Ironing out the details of how you'll manufacture the products called for in your demand and supply plans. - **Material requirements planning: **Ensuring sufficient materials are available to produce the necessary products. - **Sales and operations planning: **Gathering data, discussing, and reconciling demand plans with production plans, oftentimes with manager approval. \***Supply chain planning -** is the process of designing the most optimal supply chain, where items move from raw materials to finished products \- "forward-looking process of coordinating assets **\*Here are several strategies that small business owners can use.** - **1. Build relationships with multiple suppliers** - **2. Go straight to the source** - **3. Understand the lead times for your supply chain** - **4. Nurture your relationships with suppliers** - **5. Understand the importance of your inventory** - **6. Know your limits** **\*Value chain** also known as **Porter's Value Chain Analysis** - is a business management concept that was developed by \***Michael Porter.** **\*Value Creation** - creates added value which leads to competitive advantage by research and development. **[\*Porter's Value Chain Analysis Model]** - It links systems and activities to each other and demonstrates what effect this has on costs and profit margins. - It focuses on the systems and business activities with customers as the central principle rather than on department **[\*Value Chain Activities]** - **Primary activities** have an immediate effect (cost advantage) on the production, maintenance, sales and support of the products or services to be supplied - **Support activities** within the Porter's Value Chain Analysis assist the primary activities and they form the basis of any organization. **[\*Value Chain Activities-Primary Activities:]** - **Inbound Logistics** These are all processes that are involved in the receiving, storing, and internal distribution of the raw materials or basic ingredients of a product or service. - **Production** These are all the activities (for example production floor or production line) that convert inputs of products or services into semi-finished or finished products. - **Production** These are all the activities (for example production floor or production line) that convert inputs of products or services into semi-finished or finished products. - **Marketing and Sales** These are all processes related to putting the products and services in the markets including managing and generating customer relationships. - **Service** This includes all activities that maintain the value of the products or service to customers as soon as a relationship has developed based on the procurement of services and products. **[\*Value Chain Activities-Support Activities:]** - **Firm infrastructure** This concerns the support activities within the organization that enable the organization to maintain its daily operations. EX. Line management, administrative handling, financial management - **Human resource management** This includes the support activities in which the development of the workforce within an organization is the key element. EX. recruiting staff, training and coaching of staff - **Technology development** These activities relate to the development of the products and services of the organization, both internally and externally. EX. IT, technological innovations and improvements - **Procurement** These are all the support activities related to procurement to service the customer from the organization. **[\*Using the Porter's Value Chain Analysis]** **Step 1 of the Porter's Value Chain Analysis: identify sub activities for each primary activity** **Step 2: identify sub activities for each support activity** **Step 3: identify links** **Step 4 of the Porter's Value Chain Analysis: look for opportunities/ solutions to optimize and create value** Three categories of sub activities, namely: - **Direct activities** (for instance online sales from Marketing& sales) - **Indirect activities** (for instance keeping the [CRM](https://www.toolshero.com/marketing/customer-relationship-management/) up-to-date from Marketing& sales or organizing a golf tournament for customers) - **[Quality assurance](https://www.toolshero.com/quality-management/quality-assurance/) **(Proofreading and editing advertisements from Marketing& sales). **[\*FIVE SUPPLY CHAIN DRIVERS]** Supply chain capabilities are guided by the decisions you make regarding the five supply chain drivers.  **1. PRODUCTION** This driver can be made very responsive by building factories that have a lot of excess capacity and use flexible manufacturing techniques to produce a wide range of items.  **2. INVENTORY** Responsiveness can be had by stocking high levels of inventory for a wide range of products. **3. LOCATION** A location decision that emphasizes responsiveness would be one where a company establishes many locations that are close to its customer base. **4. TRANSPORTATION** Responsiveness can be achieved by a transportation mode that is fast and flexible such as trucks and airplanes.  **5. INFORMATION** The power of this driver grows stronger every year as the technology for collecting and sharing information becomes more wide spread, easier to use, and less expensive.  **\*Purchasing organization** is a company\'s department or group responsible for procuring materials, goods, and services from suppliers, negotiating contracts, managing relationships, and ensuring optimal value for purchases. **\*ORGANIZATIONAL STRUCTURE** **TIER 1** - Upper-level function - reporting to an executive Vice Presidents **TIER 2 -** Mid-level function - reporting to an executive one level below an Executive Vice President **TIER 3 -** Lower-level function - reporting at least two level below an Executive Vice President **\*FOUR MAJOR AREA OF PURCHASING** SOURCING AND NEGOTIATING OPERATIONAL SUPPORT AND FOLLOW UP ADMINISTRATION AND SUPPORT PURCHASING RESEARCH **\*OBJECTIVES OF PURCHASING** **Cost Reduction** -Negotiating favorable prices and ensuring optimal value for money spent on goods and services **Supply Chain Optimization** -Managing the flow of goods and services from suppliers to customers, minimizing delays and disruptions. **Relationship Management** -Building strong relationships with suppliers and collaborating effectively to achieve shared goals **Quality Assurance** -Ensuring that all goods and services meet the company\'s quality standards. **PURCHASING DEPARTMENT ACTIVITIES:** - BUYING - EXPEDITING - INVENTORY CONTROL - TRANSPORTATION - MANAGING COUNTERTRADE ARRANGEMENTS - INSOURCING-OUTSOURCING - VALUE ANALYSIS - PURCHASING RESEARCH - MATERIAL FORECASTING - SUPPLY MANAGEMENT **\*FORM OF PURCHASING DEPARTMENT** **1. CENTRALIZED PURCHASING** - With centralized purchasing, all records are kept at one place and under one supervision and control **2. DECENTRALIZED PURCHASING** In decentralized purchasing, individual departments are responsible for their own purchasing needs. **KEY PROCESSES:** - Customer Relationship Management - Customer Service Management - Demand Management - Order Fulfillment - Manufacturing Flow Management - Sourcing - Product Development/Commercialization - Return Channel Processes **3. HYBRID COMBINATION** **\*Direct Material Costs** - The cost of raw materials used in production. **\*Transportation Costs** - Expenses incurred for moving goods from suppliers to the company\'s facilities. **\*Taxes and Duties** - Government levies imposed on imported goods or services. **\*Administrative Costs** - Expenses associated with managing the purchasing process, such as salaries and office supplies. **\*SUPPLIER'S APPRAISAL** - Supplier appraisal is a critical component of purchasing management \* **Quality Assessment** - Evaluating the quality of goods and services provided by suppliers. **\*Delivery Performance** - Assessing suppliers\' ability to deliver goods or services on time. **\*Pricing Analysis** - Comparing prices and negotiating favorable terms with suppliers. **\*Financial Stability** - Assessing the financial health of suppliers to ensure their long-term viability. **[\*Effective supplier appraisal]** is crucial for ensuring product quality, timely delivery, and financial stability. - Factors influencing purchasing organization decisions **[include internal] [needs]**, **[market trends]**, **[legal regulations]**, and [**economic conditions**.] **\*Procurement** - is the management of all processes involved in obtaining the goods and services necessary for manufacturing products and providing services to customers. **\*Procurement Strategies** - is an essential element of organizations' objectives, and by linking procurement and overall strategies - **Full visibility on spend** - **Identify savings opportunity** - **Streamline Operations** - **Manage Risk** - **Improve supplier Performance** - **Benchmark Performance** - **Data-driven sourcing** - **Identify** - **Extract** - **Cleanse** - **Enrich** - **Classify** - **Analyze** **\*Supply Positioning Model Factors** - **BOTTLENECKS --** it include items that may halt the smooth running processes. - **CRITICAL --** the items which are not available or deliver on time. - **ROUTINE --** this contain the items least critical to the business - **LEVERAGE --** though the items are least critical in leverage, however the spending value is high. **\*Strategic sourcing -** is a key component of the procurement function. \- is defined as the process of determining long-term supply requirements, finding potential sources to fulfill those needs **\* Organizational strategy** - contains long-term goals and objectives **\*Procurement strategies** - must be linked to and support organizational strategy. According to **Monczka et al. (2005)**, another key element in effective strategic sourcing is translating company-wide procurement goals and objectives into specific commodity-level goals and objectives. **\*Strategic Sourcing Process 7 Steps:** **\*Business unit strategy** - is the driving force of procurement strategies **\*Supply base** - comprises all suppliers that organizations utilize to procure their goods and services. **\*Total Quality Management (TQM)** - is a management system that involves all employees in ongoing quality improvement efforts. **\*Early involvement of suppliers** - in design is the process of working with suppliers early during the design and development. **\*Total Cost of Ownership (TCO) -** is a calculation designed to help procurement personnel make more informed financial decisions **\*E-procurement (ELECTRONIC PROCUREMENT)** - is a way of using Enterprise Resource Planning (ERP) systems and the Internet to allow businesses to purchase goods and services in an easier, faster, and less-expensive way. **\*Co-location** - occurs when procurement individuals are physically situated in close proximity with supply chain professionals in organizations. **\*GSCM (GREEN SUPPLY CHAIN MANAGEMENT) -** integrates sustainable environmental practices into traditional supply chains. **\*Benefits of Green Supply Chain Management (GSCM):** **Cost Reduction** - Implementing energy-efficient practices, reducing waste, and optimizing resource use can lead to significant cost savings. - Reducing reliance on non-renewable resources and ensuring compliance - Companies that adopt green practices are often viewed more favorably by consumers, leading to increased brand loyalty and market differentiation. - Green supply chains can provide a competitive edge by attracting environmentally conscious customers **Innovation and Efficiency** - Greening the supply chain often drives innovation in product design, materials sourcing, and production processes **\*Drivers of Greening the Supply Chain** **\*Environmentally Preferable Purchasing (EPP)** - Purchasing of goods and services that cause less harm to humans and the environment than competing goods and services that serve the same purpose. - Recycled Paper Products - Energy-Efficient Electronics - Low-Emission Vehicles - Green Cleaning Products - Sustainable Building Materials - Water-Efficient Fixtures - Biodegradable Packaging - Renewable Energy Contracts **\*Environmental Management Systems (EMS)** - Provides a structured approach for organizations to manage their environmental responsibilities by setting goals, implementing policies, and monitoring progress. - Often based on standards like **ISO 14001**, **\*Inbound logistics -** brings supplies or materials into a business. **\*Inbound** - is all about receiving. **\*Inbound logistics** - includes steps like purchasing and sourcing, recording and receipts, notification, load arrival, receiving, and reverse logistics. **\*INBOUND LOGISTICS ACTIVITIES:** - **[Sourcing and procurement:]** Identifying and evaluating [potential suppliers](https://www.netsuite.com/portal/resource/articles/inventory-management/supplier-relationships.shtml), obtaining price quotes, negotiating with and managing suppliers. - **[Ordering/purchasing:]** Buying the goods and materials the company needs so the right quantity arrives at the right time. - **[Transportation:]** involves selecting delivery speed for incoming supplies, contracting with third-party carriers and working with vendors on price and route. - **[Receiving:]** Handling the arrival of new materials, unloading trucks, and ensuring they match the order. - **[Material handling:]** Moving the received goods short distances within the facility and staging them for later use. - **[Put away:]** Moving goods from the receiving dock to storage. Staff puts everything away in assigned locations. - **[Storing and warehousing:]** This department is responsible for making sure items are placed in logical locations for fulfillment and the right storage conditions are met. - **[Inventory management:]** Deciding the type and amount of raw materials/items you should store and where to locate them. - **[Expediting:]** Managing the progress of and schedule for materials as they make their way to your facility. - **[Distribution:]** Sending supplies to their destination inside the business. - **[Tracking:]** Checking on details about incoming orders, such as their location and documents like receipts. - **[Reverse logistics:]** Bringing goods back from customers for reasons such as returns, defects, delivery problems, repair and refurbishment. **\*CHALLENGES OF INBOUND LOGISTICS** - Inbound shipping inefficiencies - Information vacuum - Surges in deliveries and receiving - Processing returns - Supplier reliability - Balancing supply and demand **\*HOW TO OPTIMIZE YOUR INBOUND LOGISTICS:** 1. **Model your current process and measure performance.** 2. **Analyze your choices** 3. **Develop strategies to address inefficiencies system-wide.** **\*INTERNATIONAL PURCHASING** - The process of sourcing goods or services from suppliers outside of a company\'s domestic market. **\*KEY ASPECTS OF INTERNATIONAL PURCHASING:** - **Cost Savings:** Companies can often procure goods and materials at a lower cost due to cheaper labor, materials, or favorable exchange rates in other countries. - **Access to Specialized Products:** Certain products or resources may only be available or more advanced in specific countries. - **Supplier Diversity:** Working with international suppliers can reduce dependence on a single supplier and mitigate risks in the supply chain. - **Compliance and Regulations:** Companies need to be aware of international trade laws, tariffs, taxes, and import/export restrictions. - **Logistics:** Managing longer lead times, shipping complexities, and customs processes becomes a key part of international purchasing. **\*GLOBAL OUTSOURCING** - **The practice of contracting business processes, services, or production activities to external firms located in different countries.** **\*KEY ASPECTS OF GLOBAL OUTSOURCING** - **Cost Efficiency:** Outsourcing allows companies to lower costs, especially in countries where labor and operational expenses are cheaper. - **Focus on Core Competencies:** By outsourcing non-core activities, businesses can focus on their primary strengths and strategic goals. - **Access to Global Talent and Expertise:** Global outsourcing opens access to a large pool of skilled workers and expertise from different regions. - **Risk Management:** Outsourcing operations to various regions can reduce risks associated with natural disasters, political instability, or market fluctuations in one location. **\*INCOTERMS** - **Incoterms (International Commercial Terms)** are a set of internationally recognized rules published by **the International Chamber of Commerce (ICC).** - It is used to clarify the division of costs, risks, and responsibilities related to the shipping process, such as who pays for shipping,etc. **\*PURPOSE OF INCOTERMS IN INTERNATIONAL TRADE:** 1. **STANDARDIZATION** 2. **CLARIFYING RESPONSIBILITIES** 3. **RISK MANAGEMENT** 4. **COST ALLOCATION** 5. **FACILITATING TRADE** **IMPACT OF INCOTERMS IN LOGISTICS**: **COST -** Incoterms define who is responsible for which costs during the transportation of goods. **RISK TRANSFER POINTS -** Incoterms specify the point in the transportation process when the risk of loss or damage shifts from the seller to the buyer. **RESPONSIBILITIES OF THE PARTIES -** The clarity in responsibilities helps avoid disputes over who should handle various parts of the logistics process **\*DOCUMENTARY CREDITS** - Financial instruments used in international trade to facilitate secure payment transactions between buyers and sellers. - provide assurance to both parties in international trade by mitigating the risks associated with the transaction, such as non-payment or non-delivery of goods **\*TYPES OF DOCUMENTARY CREDITS** - **1. LETTER OF CREDIT (L/C):** A fORMAL, WRITTEN GUARANTEE BY A BANK THAT PAYMENT WILL BE MADE TO THE SELLER - **TYPES** - **[REVOCABLE LETTER OF CREDIT]:** RARELY USED BECAUSE IT PROVIDES LIMITED SECURITY. - **[IRREVOCABLE LETTER OF CREDIT]:** MOST COMMONLY USED FOR INTERNATIONAL TRANSACTIONS. - **[CONFIRMED LETTER OF CREDIT]:** THIS PROVIDES EXTRA PROTECTION FOR THE SELLER. - **[UNCONFIRMED LETTER OF CREDIT]:** THE ADVISING BANK (SELLER'S BANK) DOES NOT TAKE ON ANY PAYMENT OBLIGATIONS. - **2. STANDBY LETTER OF CREDIT (STANDBY L/C):** - A sAFETY NET THAT ENSURES PAYMENT IS MADE IN CASE ONE OF THE PARTIES FAILS TO FULFILL THEIR CONTRACTUAL OBLIGATIONS. **\*ROLE IN INTERNATIONAL TRADE** **1. Facilitating Secure Payment Between Buyer and Seller:** **[Seller's Protection:]** The seller is assured of receiving payment if they meet the contract conditions [**Buyer's Protection**:] The buyer knows that payment will only be made once the seller has complied with the contract terms and presented the documents. **2. Protecting Both Parties from Risk:** **[For Sellers:]** Documentary credits reduce the risk of non-payment, particularly when dealing with foreign buyers **[For Buyers:]** Documentary credits protect the buyer by ensuring that payment is only made when the seller meets the agreed terms