Lecture 1 & 2 Notes OME752 Supply Chain Management

OME752 Supply Chain Management Lecture 1 & 2 Notes Date: __________
Lecture
Unit I INTRODUCTION 1&2
No.
Topic Role of Logistics and Supply chain Management
Lecture Outcome (LO) At the end of this lecture, students will be Bloom’s
able to Knowledge Level
LO1 Define supply chain. Remembering
LO2 Explain the importance of SCM steps. Understanding
LO3 Understand various stakeholders of supply chain. Understanding
Pre-requisite Knowledge
1. Customer
2. Product
Notes of the topic mentioned above for two periods
Supply Chain Management

� A supply chain consists of all parties involved, directly or indirectly, in fulfilling a
customer need.
� The supply chain includes not only the manufacturer and suppliers, but also
transporters, warehouses, retailers, and even customers themselves.
� Within each organization, such as a manufacturer, the supply chain includes all
functions involved in receiving and filling a customer request.
� These functions include, but are not limited to, new product development, marketing,
operations, distribution, finance, and customer service.
� A supply chain is dynamic and involves the constant flow of information, product,
and funds along both directions of this chain.
A typical supply chain may involve a variety of stages, including the following:
– Customers
– Retailers
– Wholesalers/distributors
– Manufacturers
– Component/raw material suppliers
Figure 1.1 Supply Chain Stages

Department of Mechanical Engineering Page 1 of 7
Figure 1.2 Stages of Detergent Supply Chain
Evolution of logistics and Supply Chain Management (SCM)

V The evolution of logistics and supply chain management (SCM) in the 1990s can be
traced back to “physical distribution management” in the 1970s when there was no
coordination among various functions of an organization, and each was committed to
attain its own goal.
V This myopic approach then transformed into “integrated logistics management” in the
1980s that called for the integration of various functions to achieve a system-wide
objective.
V Supply Chain Management (SCM) further widens this scope by including the
suppliers and customers into the organizational fold, and coordinating the flow of
materials and information from the procurement of raw materials to the consumption
of finished goods.
V The objectives of Supply Chain Management (SCM) are to eliminate redundancies,
and reduce cycle time and inventory so as to provide better customer service at lower
cost.
V The focus has shifted from the “share of the market” paradigm to the “share of the
customer paradigm, wherein the goal is to create “customer value” leading to
increased corporate profitability, shareholder value, and sustained competitive
advantage in the long run.
Logistics Vs Supply Chain Management
✔ Logistics management is a small portion of Supply Chain Management which
combines the flow of goods, services, information and capital right from raw material
to its final consumer.

✔ While Supply chain management is a broader term which is associated with the
sourcing of raw material, procurement of consumer requirements, conversion into
final products and delivering on time at consumer end (Logistics Management).
Sl. Logistics Supply Chain Management

No.
Focus on the process of integration and Focus on the coordination and management
01 maintenance (flow and storage) of goods in (movement) of supply chains of an
an organization organization.
Logistics management is Customer Supply chain management emphasizes
02
satisfaction. more on competitive advantages.
Multiple organizations (Coordination and
collaboration of parties likes suppliers,
03 It involves only one organization. intermediaries, distributors and customers)
are involved with supply chain
management
It involves the planning, implementation
Its main objective is to deliver the right
and effective point of origin and point of
04 product at the right time with all other
consumption to meet customer
attributes in place.
requirements.
It involves activities like warehousing, It is a series of interconnected activities
05 proper packaging, order fulfilment, stock related to the movement of raw materials to
control and stock management. finished goods until it reaches the end-user.
The Objective of a Supply Chain

✔ The objective of every supply chain should be to maximize the overall value
generated.
✔ The value (also known as supply chain surplus) a supply chain generates is the
difference between what the value of the final product is to the customer and the costs
the supply chain incurs in filling the customer’s request.
Supply Chain Surplus = Customer Value – Supply Chain Cost
Consumer Surplus
✔ The value of the final product may vary for each customer and can be estimated by
the maximum amount the customer is willing to pay for it.
✔ The difference between the value of the product and its price remains with the
customer as consumer surplus.
Supply Chain Profitability

✔ The rest of the supply chain surplus becomes supply chain profitability, the difference
between the revenue generated from the customer and the overall cost across the
supply chain.
✔ Supply chain profitability is the total profit to be shared across all supply chain stages
and intermediaries. The higher the supply chain profitability, the more successful is
the supply chain.
Role and Importance of Logistics & SCM

✍ Advances in technological and quantitative techniques.
✍ Significant opportunities presented by e-commerce potential.
✍ Profit leverage resulting from increased logistics efficiency.
✍ Increased focus on computer technology and distribution software.
✍ Recognition of the role of logistics in creating competitive advantage in the

marketplace, particularly in the face of domestic and foreign competition.
✍ Service activities continuing to be centralised and consolidated.
✍ Development of the systems approach and total cost analysis concept.
✍ The development and expansion of global competition and the increasingly

international growth of companies, with increasing foreign sourcing of raw materials,
components and labour, further impacts on the recognition of the importance of
logistics.

Activity 1 - Role Play practice
Stages/Steps of Supply Chain Management

Role Play
1. Design the problem.
2. Design the rules and roles.
3. Set up the scenario.
4. Assign student roles.
5. Consider the practical limitations of playing out the simulation, and make adjustments to
the task design as necessary.
Activity 2 - Mind Map practice
1. Draw the mind map for supply chain stages/steps.
Mind Map
1. Choose the topic of the mind map and place it in the middle of the drawing
2. Come up with three to five+ main ideas, then evenly space them in a circular
formation around the mind map topic
3. Draw a line from the mind map topic to each main idea
4. Brainstorm supporting details such as ideas, tasks, and questions for each main idea
5. Draw lines connecting each main idea to its supporting details

Title and author of the reference book
1. Sunil Chopra, Peter Meindl and Kalra, “Supply Chain Management, Strategy, Planning, and
Operation”, Pearson Education, 2010.
Multiple Choice/ Select Questions to assess the learning of the students during the class
(Refer GATE/IES or other state or national level competitive examination)
Qn
Bloom’s
. Question
Knowledge Level
No.
1 The purpose of supply chain management is to_______.
A. increase the production level
B. manage and integrate supply and demand management Remembering
C. enhance the quality of a product and services
D. provide satisfaction to the customer
2 Another important purpose of supply chain management is to _______.
A. make inventory readily available
B. delight customers and suppliers Remembering
C. create warehouses at various locations
D. to promote supply chain process
3 Which of the following is true for supply chain management?
A. The physical material moves in the direction of the end of chain
B. Flow of cash backwards through the chain Remembering
C. Exchange of information moves in both the direction
D. All of the above
Short Questions (Refer Anna University questions)

Qn
Bloom’s
. Question
Knowledge Level
No.
1 Define supply chain management. Remembering
What are the objectives of supply chain management and what is the
2 Remembering
importance of the word “cycle time”?
3 Mention the stakeholders involved in supply chain? Remembering

4 Distinguish the logistics and supply chain management. Understanding
5 Mention one prime advantage of e-commerce portal Remembering
Descriptive Questions (Refer Anna University or GATE/IES Questions)

Qn Bloom’s
. Question Knowledge
No. Level
1 Discuss the goal of supply chain and explain the impact of supply chain Understanding
decision on success of the firm.
2 Explain in detail about integrated logistics and supply chain management. Understanding

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OME752 Supply Chain Management Lecture 1 & 2 Notes Date: __________

Notes of the topic mentioned above for two periods

Supply Chain Management

Figure 1.1 Supply Chain Stages

Figure 1.2 Stages of Detergent Supply Chain

Evolution of logistics and Supply Chain Management (SCM)

Department of Mechanical Engineering Page 2 of 7

Sl. Logistics Supply Chain Management

The Objective of a Supply Chain

Department of Mechanical Engineering Page 3 of 7

Role and Importance of Logistics & SCM

✍ Significant opportunities presented by e-commerce potential.

✍ Profit leverage resulting from increased logistics efficiency.

✍ Increased focus on computer technology and distribution software.

✍ Recognition of the role of logistics in creating competitive advantage in the

✍ Service activities continuing to be centralised and consolidated.

✍ Development of the systems approach and total cost analysis concept.

✍ The development and expansion of global competition and the increasingly

Department of Mechanical Engineering Page 4 of 7

Activity 1 - Role Play practice

Stages/Steps of Supply Chain Management

Activity 2 - Mind Map practice

1. Draw the mind map for supply chain stages/steps.

Department of Mechanical Engineering Page 5 of 7

Title and author of the reference book

Short Questions (Refer Anna University questions)

3 Mention the stakeholders involved in supply chain? Remembering

Descriptive Questions (Refer Anna University or GATE/IES Questions)

decision on success of the firm.

Department of Mechanical Engineering Page 7 of 7

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