SCM -- The complex chain

As it can be seen from the adjoining diagram that the SCM as a chain of activities is complex and comprises of the actvities interrelated and interconnected to each other.

If we were to define the history of the supply chain, we can divide it into three different era's
1) 1970's - 1980's
2) 1980's - 1990's
3) 1990's - Now

1970's to 1980's: this era is mjorly dedicated to the MArketing activiies the focus was majorly on the customer loyalty and the product's quality, companies tried to focus on product re engineering & transforming the old manufacturing ways into new ones. The Supply Chain in this time was majorly confined to the local markets, it was highly regulated and was not managed beyond the exte nded enterprises, it was rigid, slow but predictable.

"The essence of SCM understood. This first phase is characterized as an inventory 'push' era that focused primarily on physical distribution of finished goods."

1980's - 1990's The markets in this era were highly vulnerable, they demanded variety, cost was the king and and global markets had started to develop. Companies started to learn about managing the global supply & demands. Realization that productivity could be increased significantly by managing relationships, information and material flow across enterprise borders

1990's - Now The Markets
Throw away consumerism – product life measured at blink speed
Cost is still king, but manufacturing has nothing left to give
Global competition
Global markets

The Supply Chain
Technologically enabled
Services explosion
The network is the enterprise
Dynamic, agile and reconfigurable
Supply Chain as a strategic imperative

Computers change the way business is done, Internet revolutionized the information pathway and the distribution system of the business, e-commerce has changed the definition of business itself.

Supply Chain Decisions

We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.

There are four major decision areas in supply chain management:
1) location,
2) production,
3) inventory, and
4) transportation (distribution),

and there are both strategic and operational elements in each of these decision areas.

Location Decisions
The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thorough discussion of these aspects.) Although location decisions are primarily strategic, they also have implications on an operational level.




Production Decisions
The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility.




Inventory Decisions These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be in-process between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels.




Transportation Decisions
The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy.

From Logistics to SCM....... The Need Of the Hour !!!

The only truth in today’s business world is “Customer Retention” and this is one of the most difficult tasks also. The businesses in today’s era are facing huge competition from all sides weather directly or indirectly, and the only key to a business success is to retain the customers by providing “Customer Delight Customer is considered king in the market who dictates the market and makes the enterprise run. Therefore, we can say that the customer and market are inseparable from each other and thus, companies need o find the best possible ways to make the customer happy. Another most crucial thing that the companies cannot afford these days is the delayed response to the customer’s needs. The companies have to be present at the right place and at the right time when the customer needs the product else he will move to the competitor’s products instead of waiting for the products to reach him. In a competitive market meeting customer’s is the most difficult tasks, and thus comes the idea of Innovation & Invention which has becom the jargon of today’s business world.

Logistics in earlier days was thought to be the one of the supporting functions having no direct link with the customer satisfaction and having no relation with gaining competitive advantage. Companies thought logistics to be a useless burden involved in the process of serving the customer where in they have to unnecessarily deal with the Truck owners & Drivers and ultimately loosing additional money just to move the products from one place to another. But, there has been a paradigm shift from Logistics to a modern day concept of Supply Chain Management.

Ahead of all let us try to understand what exactly logistics means and how SCM is different from it.

As per the Definition in Oxford English Dictionary:-

“Logistics is the organization of supplies and services”

Putting into simple words the logistics may be defined as “An activity that involves the flow of goods, information & other resources” .

Logistics is thought to be originated from the military’s need to supply themselves with ammunition, food & other important supplies as they move from their base to a front position. in Business Logistics majorly dealt with the transportation of raw material or finished products from one place to another.

On the other hand a more complex operation is the SCM (Supply chain Management). A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved.

Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.

Why Logisics ???

Hey Everyone !!! Hello once again with a new & fresh topic this time for my blog. To be very frank actually I was bored and tiered of writing silly love poems every time & that too without a "GIRLFRIEND" in my life. Any ways I thought why should I promote something that does not makes any difference to anybody's lifea and then I thought what that I have expertise in, and out came the answer from every part of my brain... "NOTHING AS OF NOW".

And then came the question "What is it that I want to be expert at?" "Logistics & SCM" said my mind. so here I am without getting into the heap of philosophy blogging about Logistcs & SCM."

WHY LOGISTICS ONLY??

I joined "DRIVE INDIA ENTERPRISE SOLUTIONS LIMITED (DIESL)" a TATA group company in Feb 2008 and this was for the first time I got introduced to something which was far bigger that just the definition of logistics. It gave me a platform to understand and figureout how exactly the logistics for any product happens and above all how big & complex is this complete system of logistics across the globe. For a layman it might seem very simple someone said that a product is imported from china or anywhere in the world for that matter. But, for a logistician it takes a lots of hardwork involved day and night in arranging for every thing needed to make that product reach safely at the right place in right time.....