Chapter 1 - Introduction To Supply Chain Management

JAY MARK F.
ARENDAIN, MIS
Subject Instructor
LEARNING OUTCOMES
At the end of the lesson, the students should be able
to;
1. Describe a supply chain and define supply chain

management.
2. Understand how supply chain management works.
3. Discuss the typical SCM key performance indicators (KPI)
4. Discuss the functions of supply chain management.
5. Understand the importance of supply chain management.
6. Discuss the benefits of supply chain management.
7. Discuss the skills and capabilities needed for Supply Chain
Management.
What is Supply Chain?
INDIVIDUALS
SALE ORGANIZATION
SUPPLY
CHAIN
TECHNOLOGIES RESOURCES
ACTIVITIES
DELIVERY OF FINISH
GOODS OR SERVICE TO
RAW MATERIALS MANUFACTURER THE END CONSUMER
SUPPLIERS
Organizations develop supply chains so they can…
REDUCE COST COMPETITIVE ADVANTAGE

What Is Supply Chain Management (SCM)?
❑ Supply chain management (SCM)
- is the management of the flow of goods and services
RAW MATERIALS
FINISHED PRODUCTS
❑ Supply chain management (SCM)
- It involves the active streamlining of a business's supply
side activities
COMPETITIVE ADVANTAGE
❑ Supply Chain Management (SCM) is a “design,

planning, execution, control, and monitoring of supply
chain activities to create net value, building a
competitive infrastructure, leveraging worldwide
logistics, synchronizing supply with demand and
measuring performance globally".
❑ Supply chain management (SCM) practice
- depends heavily on industrial engineering, systems
engineering, operation management, logistics,
procurement, information technology and marketing,
and strives for an integrated approach.
- It is the broad range of activities required to plan, control

and execute a product's flow from materials to
production to distribution in the most economical way
possible.
How Supply Chain Management Works?
❑ Typically, Supply Chain Management attempts
to control or link,
PRODUCTION SHIPMENT
DISTRIBUTION
❑ By managing the supply chain,
CUT EXCESS COST DELIVER PRODUCTS FASTER

❑ This is done by keeping tighter control of internal inventories,
internal production, distribution, sales, inventories of company
vendors.
❑ The supply chain manager coordinates the logistics of all
aspects of the supply chain,
❑ Which comprise five parts:
1. The plan or strategy
2. The source of raw materials or services
3. Manufacturing
4. Delivery and Logistics
5. The return system for defective or unwanted products
❑The supply chain manager tries to

minimize shortages and keep costs as
low as possible.
❑They recommend improving productivity,
quality, and efficiency of operations.
Process of Supply Chain Management
❑ The process of SCM involves every aspect of business operations,
including logistics, purchasing and information technology. It
integrates materials, finances, suppliers, manufacturing facilities,
wholesalers, retailers and consumers into a seamless system.
Typical SCM Key Performance Indicators
❑ A key performance indicator or KPIs are crucial components of

a successful SCM strategy
❑ They identify expected performance standards and allow supply
chain managers to measure performance and identify areas
needing attention.
is
Key Performance Indicators (KPIs)
❑ Key Performance Indicators (KPIs) are metrics used to
periodically track and evaluate the performance of a
business or organization toward the achievement of
specific goals.
In general, five of the most commonly used KPIs

include:
• Revenue growth.
• Revenue per client.
• Profit margin.
• Client retention rate.
• Customer satisfaction.
Functions of Supply Chain Management
❑ Supply chain management is a cross-functional way that includes
managing the flow of raw materials into an organization, certain aspects of
the internal processing of materials into finished goods, and the flow of
finished products from the organization and toward the end consumer.
❑ The aim of supply chain management is to improve trust and collaboration
among supply chain companions, thus improving inventory visibility and
the velocity of inventory movement.
❑ Main Functions of SCM are as follows:

1. Inventory Management 6. Supplier Management
2. Distribution Management 7. Transportation Management
3. Channel Management 8. Customer Service Management
4. Payment Management
5. Financial Management
1. Inventory Management: a systematic approach to sourcing,

storing, and selling inventory—both raw materials (components)
and finished
Customer goods (products). The right stock, at the right
levels, in the right place, at the right time, and at the right cost
as wellProduct/Program/
as price.
Service offerings
2. Distribution Management: refers to the process of overseeing
the movement of goods from supplier or manufacturer to point
of sale.
3. Channel Management: refers to a company's engagement
activities related to selecting, enabling and compensating
Technology
indirect channel partners.
4. Payment Management: the handling of a paid and unpaid

amount overdue from the customer or to third-party vendors for
purchases made on credit.
Customer
5. Financial Management: function in an organization which is
concerned with profitability, expenses, cash and credit, so that
Product/Program/
Service offerings
the "organization may have the means to carry out its objective
as satisfactorily as possible“.
6. Supplier Management: the process that ensures maximum
value is received for the money that an organization pays to its
suppliers.
Technology
7. Transportation Management: is a logistics platform that uses

technology to help businesses plan, execute, and optimize the
physical Customer
movement of goods, both incoming and outgoing, and
making sure the shipment is compliant, proper documentation
is available.
Product/Program/
Service offerings
8. Customer Service Management: is a term that refers to
practices, strategies, and technologies that companies use to
manage and analyze customer interactions and data
throughout the customer lifecycle, with the goal of improving
business relationships with customers, assisting in customer
Technology
retention, and driving sales growth.
Importance of Supply Chain Management
❑ An effective supply chain management processes

minimizes cost, waste of resources and time in the
production cycle of a company.
❑ A well-managed supply chain can significantly reduce a

company’s operating expenses, therefore driving up
profits. This efficiency can be reflected in every aspect
of the chain, from idea creation to the marketing of the
final product.
Benefits of Supply Chain Management
❑ Supply chain management creates several advances that

convert to higher profits, better brand image and greater
competitive advantage.
1. SCM lowers the cost of doing business: This is accomplished by

reducing purchasing and production expenses.
2. SCM builds the partnerships that can support future growth
3. SCM helps balance the supply of products with market demand
4. SCM allows for more efficient and effective customer service:
This occurs because customers receive their products quickly and as
promised.
5. Better ability to predict needs and meet customer's demand.
Skills and capabilities needed for Supply chain
Management
❑ Supply chain specialists need to have knowledge of managing
supply chain functions, such as transportation, warehousing,
inventory management, and production planning.
Source: Indago, April 2019 survey

1. Analytical skills was the clear winner,
selected by 94% of the respondents.
2. People skills (61%) and;
3. Communication skills (50%)
rounded out the top three.
JAY MARK F. ARENDAIN, MIS
Subject Instructor

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What is a supply chain?

What is a supply chain?

What is supply chain management?

What is supply chain management?

JAY MARK F.

1. Describe a supply chain and define supply chain

Organizations develop supply chains so they can…

REDUCE COST COMPETITIVE ADVANTAGE

❑ Supply Chain Management (SCM) is a “design,

- It is the broad range of activities required to plan, control

CUT EXCESS COST DELIVER PRODUCTS FASTER

❑The supply chain manager tries to

❑ A key performance indicator or KPIs are crucial components of

In general, five of the most commonly used KPIs

❑ Main Functions of SCM are as follows:

1. Inventory Management: a systematic approach to sourcing,

4. Payment Management: the handling of a paid and unpaid

7. Transportation Management: is a logistics platform that uses

❑ An effective supply chain management processes

❑ A well-managed supply chain can significantly reduce a

❑ Supply chain management creates several advances that

1. SCM lowers the cost of doing business: This is accomplished by

Source: Indago, April 2019 survey

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