J.D.

BIRLA INSTITUTE (Department of Management)

SESSIONALS

Semester: 5 Section: A Subject: Enterprise Resource Planning Topic: Supply Chain Management By Group No: 2 members Roll 7- Prerna Khosla Roll 8- Akshita Jain Roll 9- Ananya Barua Roll 10- Puja Jain Roll 11- Prabhdeep Singh Roll 12- Kamran Ahmed

SUPPLY CHAIN INTRODUCTION AKSHITA Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain). A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain includes not only the manufacturers 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. Most supply chains are actually networks. It may be more accurate to use the term supply network or supply web to describe the structure of most supply chains. A typical supply chain may involve a variety of stages. These stages include: o Customers o Retailers o Wholesalers/ distributors o Manufacturers o Component/ raw material suppliers

A supply chain is a sequence of processes and flows that take place within and between different stages and combine to fill a customer need for a product. Consider a customer walking into a Wal-Mart store to purchase detergent. The Supply chain begins with the customer and their needs for detergent. The next stage of this supply chain is the Wal-Mart retail store that the customer visits. Wal-Mart stock its shelves using inventory that may have been supplied from a finished-goods warehouse that Wal-Mart manages or from a distributor using trucks supplied by this party. The distributor in turn is stocked by the manufacturer. The P&G manufacturing plant receives raw materials from a variety of suppliers who may themselves have been supplied by lower tier suppliers. A Supply chain is dynamic and involves the constant flow of information, product and funds between different stages. Wal-Mart provides the product as well as pricing and availability information to the customer. The customer transfers funds to Wal-Mart. Wal-Mart conveys point of sale data as well as replenishment orders to the warehouse or distributors, who transfers the replenishment order via trucks back to store. Wal-Mart transfers funds to the distributor after the replenishments. The distributor also provides pricing information and sends delivery schedules to Wal-Mart. Similar flow of information, material and funds flow take place across the entire supply chain.

OBJECTIVE OF A SUPPLY CHAIN The objective is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the costs the supply chain incurs in filling the customers request. For most commercial supply chains, value will be strongly correlated with supply chain profitability(or supply chain surplus), the difference between the revenue generated from the customer and the overall cost across the supply chain. All flows of information, product, or funds generate costs within the supply chain. Thus, the appropriate management of these flows is the key to supply chain success. Effective supply chain management involves the management of supply chain assets and product, information, and fund flows to maximize total supply chain profitability.

BENEFITS Business Benefits of Supply Chain Management. SCM can help you transform a traditional linear supply chain into an adaptive network with the following benefits. 1. Faster response to changes in supply and demand : with increased visibility into the supply chain and adaptive supply chain networks, you can be more responsive. You can sense and respond quickly to changes and quickly capitalise on new opportunities.

2. Increased customer satisfaction : by offering a common information framework that supports communication and collaboration, mySAP SCM enables you to better adapt to and meet customer demands. 3. Compliance with regulatory requirements : you can track and monitor compliance in areas such as environment, health and safety. 4. Improved cash flow : information transparency and real-time business intelligence can lead to shorter cash-to-cash cycle times. Reduced inventory levels and increased inventory turns across the network can lower overall costs. 5. Higher margins : with SCM, you can lower operational expenses with timelier planning for procurement, manufacturing and transportation. Better order, product and execution tracking can lead to improvements in performance and quality - and lower costs. You can also improve margins through better coordination with business partners. 6. Greater synchronisation with business priorities - tight connections with trading partners keep your supply chain aligned with current business strategies and priorities, improving your organisation's overall performance and achievements of goals.

DELL SUPPLY CHAIN MANAGEMENT ACTIVITY- ANANYA Dell's Direct Model Dell Inc. pioneered the Direct Model of selling PCs directly to the consumers. How it enabled Dell to manage its supply chain efficiently is discussed in this case study. Dell Computer Corporation a leading direct computer systems company was founded in 1984. Dell sells its computer systems directly to end customers, bypassing distributors and retailers (resellers). Dell's supply chain consists of only three stages the suppliers, the manufacturer (Dell), and end users. Dells direct contact with customers allows it to: Properly identify market segments, Analyze the requirements and profitability of each segment, and Develop more accurate demand forecasts. Dell matches supply and demand because its customers order computer configurations over the phone or online (Internet). These computer configurations are built up from components that are available. Dells strategy is to provide customized, low cost, and quality computers that are delivered on time. Dell successfully implemented this strategy through its efficient manufacturing operations, better supply chain management and direct sales model. Dell takes orders directly from its customers; either on phone or online. Thus, Dell reduces the cost of intermediaries that would otherwise add up to the total cost of PC for the customer. Dell also saves time on processing orders that other companies normally incur in their sales and distribution system. Moreover, by directly dealing with the customer Dell gets a clearer indication of market trends. This helps Dell to plan for future besides better managing its supply chain. Another advantage Dell gets by directly dealing with the customer is that it is able to get

the customers requirements regarding software to be loaded. Dell loads the ordered software in its plant itself before dispatching it. By eliminating the need of a PC support engineer to load software, the customers gain both in time and cost. They can use the PCs the moment they arrive. When a customer purchase online from DELL computer, supply chain includes among others, the customers Dells web site that takes the customer orders, the dell assembly plant and all of dell s suppliers and their suppliers. The website provides the customer with information regarding pricing, product variety and product availability. Having made a product choice, the customer enters the order information and pays for the product. The customer may later return to the web site to check the status of the order. Supply chain uses customer order information to fill the order.

DECISION PHASES IN A SUPPLY CHAIN - ANANYA Successful supply chain management requires many decisions relating to the flow of information, product, and funds. Each decision should be made to raise the supply chain surplus. These decisions fall into three categories or phases, depending on the frequency of each decision and the time frame during which a decision phase has an impact. As a result, each category of decisions must consider uncertainty over the decision horizon. 1. Supply chain strategy or design: During this phase, given the marketing and pricing plans for a product, a company decides how to structure the supply chain over the next several years. It decides what the chains configuration will be, how resources will be allocated, and what processes each stage will perform, strategic decisions made by companies include whether to outsource or perform a supply chain function in-house, the location and capacities of production and warehousing facilities, the products to be manufactured or stored at various locations, the modes of transportation to be made available along different shipping legs, and the type of information system to be utilized. A firm must ensure that the supply chain surplus during this phase. Ciscos decisions regarding its choice of supply sources for components, contract manufacturers for manufacturing, and the location and capacity of its warehouses are all supply chain design or strategic decisions. Supply chain design decisions are typically made for the long term and are very expensive to alter on short notice. 2. Supply chain planning: For decisions made during this phase, the time frame considered is a quarter to a year. Therefore, the supply chains configuration determined in the strategic phase is fixed. This configuration establishes constraints within which planning must be done. The goal of planning is to maximize the supply chain surplus that can be generated over the planning horizon given the constraints established during the strategic or design phase. Companies start the planning phase with a forecast for the coming year of demand in different markets. Planning includes making decisions regarding which markets will be supplied from which locations, the subcontracting of manufacturing, the

inventory policies to be followed, and the timing and size of marketing and price promotions. Dells decisions regarding markets supplied by a production facility and target production quantities at each location are classified as planning decisions. Planning establishes parameters within which a supply chain will function over a specified period of time. 3. Supply chain operation: The time horizon here is weekly or daily, and during this phase companies make decisions regarding individual customer orders. At the operational level, supply chain configuration is considered fixed, and planning policies are already defined. The goal of supply chain operations is to handle incoming customer orders in the best possible manner. During this phase, firms allocate inventory or production to individual orders, set a date that an order is to be filled, generate pick lists at a warehouse, allocate an order to a particular shipping mode and shipment, set delivery schedules of trucks and place replenishment orders. PROCESSES PERFORMED IN A CYCLE VIEWA supply chain a sequence of processes and flows that take place within and between different stages and combine to fill a customer need for a product. There are two different ways to view the processes performed in a supply chain: CYCLE VIEW The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain. Each cycle starts with an order placed by one stage of the supply chain and ends when the order is received from the supplier stage. PUSH/PULL VIEW The processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order or in anticipation of customer orders. A push/pull view of a supply chain characterizes processes based on their timing relative to that of a customer order. Pull processes are initiated by a customer order, whereas push processes are initiated and performed in anticipation of customer orders. CYCLE VIEW- PUJA All supply chain processes can be broken down into the following 4 process cycles: Customer order cycle Replenishment cycle Manufacturing cycle Procurement cycle

Customer

Customer Order Cycle

Retailer

Replenishment Cycle Distributor

Manufacturer

Manufacturing Cycle

Procurement Cycle Supplier

SUB PROCESSES IN SUPPLY CHAIN PROCESS CYCLE Each cycle consists of 6 sub processes as shown below

Supplier stage markets product

Buyer returns reverse flows to supplier or third party

Buyer stage places order

Buyer stage receives supply

Supplier stage receives order

Supplier stage supplies order

Each cycle consists of 6 sub processes. Each cycle starts with the supplier marketing the product to customers. A buyer then places an order that is received by the supplier. The supplier supplies the order which is received by the buyer. The buyer may return some of the product or other recycled material to the supplier or a third party. The cycle of activities then begins all over again. CUSTOMER ORDER CYCLE The Customer order cycle takes place at customer retailers interface and includes all processes directly involved in receiving and filling the customers order: Customer Arrival Customer Order Entry Customer Order Fulfillment Customer Order Receiving Typically customer initiates this cycle at a retailer site and the cycle primarily involves filling customer demands. The retailers interaction with the customer begins when the customer arrives or contact is initiated and ends when the customer receives the order. Customer Arrival The term customer arrival refers to the customers arrival at the location where he/she has access to his /her choices and makes a decision regarding a purchase. Customer arrival can occur when customer walks into supermarket to make a purchase. The customer calls a mail order telemarketing center. The customer uses the web or an electronic link to mail order firm. Customer Order Entry The customer order entry refers to customer informing the retailer what products they want to purchase and the retailers allocating products to customers. At supermarket order entry may take form of customer loading all items they intends to purchase on to their carts. At a mail order, the customer uses the website to inform the retailers the item that they have selected and their respective quantity. Customer Order Fulfillment During this process the customers order is filled and sent to the customer. At a supermarket, customer performs this process. At a mail order firm this process generally includes picking the order from inventory, packaging it, and shipping it

to the customers. All inventories will need to be updated, which may result in the initiation of replenishment cycle. In general customer order fulfillment takes place from retailer inventory. Customer Order Receiving During this process, the customer receives the order and takes ownership. Records of this receipt may be updated and payment completed. At a supermarket receiving occurs at the check out counters. REPLENISHMENT CYCLE It is initiated when a retailer places an order to replenish inventories to meet future demands. A replenishment cycle may be triggered at a supermarket that is running out of stock of a detergent or at a mail order that is low on stock of particular shirts. The replenishment is similar to customer order cycle except that retailer is now the customer. The objective of the replenishment cycle is to replenish inventories at the retailer at minimum cost while providing high product availability. Retail Order trigger Retail order Entry Retail order Fulfillment Retail order receiving

The replenishment cycle occurs at the retailers/distributor interface and includes all processes involved in replenishing retailers inventory. Retail Order Trigger As the retailer fills customer demands, inventory is depleted and must be replenished to meet future demands. A key activity the retailers perform during the replenishments or ordering policy that triggers an order from previous stage. The objective when setting replenishment orders triggers is to maximize profitability by ensuring economies of scale and balancing product availability and cost of holding inventory. The outcome of retail order triggers process is the generation of a replenishment order that is ready to be passed on to the distributor or manufacturer

Retail Order Entry This process is similar to customer order entry at the retailer. The only difference is the retailer is now the customer placing the order placing the order that is conveyed to the distributor. This may be done electronically or by some other

medium. The objective of order entry process is that an order to be entered accurately and conveyed quickly to all supply chain processes affected by the order.

Retail Order Fulfillment This process is very similar to customer order fulfillment except that it takes place at the distributors. A Key difference is the size of each order as customer orders tends to be much smaller than replenishment orders. The objective of the retail order fulfillment is to get the replenishment order to the retailers on time while minimizing costs.

Retail Order Receiving Once the replenishment order arrives at a retailer, the retailer must receive it physically and update all inventory records. This process involves product flow from the distributor to the retailers as well as information updates at the retailers and flow of funds from the retailers to the distributors. The objective of retail order processing is to update inventories and display quickly and accurately at the lowest possible costs.

MANUFACTURING CYCLE The manufacturing cycle typically occurs at the distributor/ manufacturer, retailers/ manufacturer interface and includes all processes involved in replenishment of inventory. The manufacturing cycle is triggered by customer order, by the forecast of customer demand and customer product availability in the manufacturers finished goods warehouse. The manufacturing cycle takes place at distributor/manufacturer interface. Process includes order arrival from the finished goods warehouse, distributor, retailer or customer. Production scheduling Manufacturing and shipping Receiving at the distributor, retailor or customer.

Order Arrival During this process, a finished goods warehouse or distributor sets a replenishment order triggers based on the forecast of future demand and current product inventories. The resulting order is then conveyed to the manufacturer. In some cases the customer or retailers may be ordering directly from the manufacturer. Other cases a manufacturer may be producing to stock a finished

products warehouse. In later case an order may be triggered based on product availability and a forecast of future demand. During this process, a finished goods warehouse or distributor sets a replenishment order triggers based on the forecast of future demand and current product inventories. The resulting order is then conveyed to the manufacturer. In some cases the customer or retailers may be ordering directly from the manufacturer. Other cases a manufacturer may be producing to stock a finished products warehouse. In later case an order may be triggered based on product availability and a forecast of future demand.

Production Scheduling This process is similar to the order entry process in the replenishment cycle where inventory is allocated to an order. During the production scheduling process, orders are allocated to a production plan. Given the desired production quantities for each product, the manufacturer must decide on the precise production sequence. If there are multiple lines, the manufacturer must also decide which product to allocate to each line. The objective of the production scheduling process is to maximize the proportions of orders filled on time while keeping cost down.

Manufacturing and Shipping This process is equivalent to the order fulfillment process described in the replenishment cycle. During the manufacturing phase of the process, the manufacturer produces to the production schedules. During the shipping phase of this process, the product is shipped to the customer, retailer, distributor or finished-product warehouse. The objective of the manufacturing and shipping process is to create and ship the product by the promised due date while meeting quality requirement and keeping cost down

Receiving In this process, the product is received at the distributor, finished goods warehouse, retailer, customer and inventory records are updated. Other processes related to storage and funds transfers also take place. PROCUREMENT CYCLE- PRABHDEEP The procurement cycle occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that materials are available for manufacturing to occur according to the schedule.

During the procurement cycle the manufacturer orders components from suppliers that replenish the component inventories. The relationship is quite similar between distributor and manufacturer. Components order depends on production schedules The relationship is quite similar to that between the distributor and manufacturer with one significant difference. Where as retailers/distributors orders are triggered by uncertain customer demands, components orders can be determined precisely once the manufacturer has decided what the production schedule will be. Thus it is important that suppliers be linked to the manufacturers production schedule. If suppliers lead times are long, the supplier has to produce to forecast because manufacturer production schedule may not be fixed that far as advance. The relationship is quite similar to that between the distributor and manufacturer with one significant difference. Where as retailers/distributors orders are triggered by uncertain customer demands, components orders can be determined precisely once the manufacturer has decided what the production schedule will be. Thus it is important that suppliers be linked to the manufacturers production schedule. If suppliers lead times are long, the supplier has to produce to forecast because manufacturer production schedule may not be fixed that far as advance. Order based on manufacturer production schedule or supplier stock needs. Supplier production Schedules Component Manufacturing and Shipping Receiving at Manufacturer.

CYCLE VIEW OF SUPPLY CHAIN DEFINES The process involved and owner of each process This view is very important when considering operational decision. It specifies the roles and responsibilities of each member of the supply chain and the desired outcome for each process. Integral part of decision phase.

PUSH/PULL VIEW OF SUPPLY CHAIN PROCESSES

All processes in a supply chain fall into one of the two categories depending on the timing of their execution relative to end customer demand. With pull processes, execution is initiated in response to a customer order. With push processes execution is initiated in anticipation of customer orders. Therefore, at the time of execution of a pull process, customer demand is known with certainty, whereas at the time of execution of a push process, demand is not known and must be forecast. Pull processes may also be referred to as reactive processes because they react to customer demand. Push processes may also be referred to as speculative processes because they respond to a speculated (or forecasted) rather than actual demand. The push/pull boundary in a supply chain separates push processes from pull processes. Push processes operate in an uncertain environment because customer demand is not yet known. Pull processes operate in an environment in which customer demand is known. They are, however constrained by inventory and capacity decisions that were made in the push phase.

Let us compare a make-to-stock environment like that of L.L.Bean and a build-to-order environment like that of Dell to compare the push/pull view and the cycle view. L.L.Bean executes all processes in the customer order cycle after the customer arrives. All processes that are a part of the customer order cycle are thus pull processes. Order fulfillment takes place from product in inventory that is built up in anticipation of customer orders. The goal of the replenishment cycle is to ensure product availability when a customer order arrives. All processes in the replenishment cycle are performed in anticipation of demand and are thus push processes. The same holds true for processes in the manufacturing and procurement cycle. In fact raw material such as fabric is often purchased six to nine months before customer demand is expected. Manufacturing itself begins three to six months before the point of sale. The processes in the L.L.Bean supply chain break up into pull and push processes. The situation is different for a build-to-order computer manufacturer like Dell. Dell does not sell through a reseller or distributor but directly to the consumer. Demand is not filled from finishedproduct inventory, but from production. The arrival of a customer order triggers production of the product. The manufacturing cycle is thus part of the customer order fulfillment process in the customer order cycle. There are effectively only two cycles in the Dell supply chain: (1) a customer order and manufacturing cycle and (2) a procurement cycle. All processes in the customer order and manufacturing cycle at Dell are thus classified as pull processes because they are initiated by customer arrival. Dell however does not place component orders in response to a customer order. Inventory is replenished in anticipation of customer demand. All processes in the procurement cycle for Dell are thus classified as push processes, because they are in response to a forecast. SUPPLY CHAIN MACRO PROCESSES IN A FIRM- PRERNA

Supply chain processes and be classified in to three macro processes: Customer relationship Management (CRM): All processes that focuses between the interface between the firm and its customer. Internal Supply chain Management: All processes that are internal to the firm. Supplier Relationship Management (SRM): All process that focus on the interface between the firm and its suppliers. The three macro processes manage the flow of information, product and funds required to generate, receive and fulfill a customer request. The CRM macro process aims to generate customer demands and facilitate the placement and tracking of orders. It includes processes like marketing, sales order management. The internal supply chain management process aim to fulfill demands generated by CRM process in a timely manner and at a lowest possible cost. ISCM process includes planning of Internal production and storage capacity, preparation of demand and supply plans and internal fulfillment of actual orders. Supplier relationship management macro process aims to arrange for and manage supply sources for various goods and services. SRM process includes the evaluation and selection of suppliers, negotiation and supply terms, and communication regarding new products and orders with suppliers There is a fourth important building block that provides the foundation on which the macro processes rest. We call this the category transaction management foundation (TMF), which includes the basic ERP systems (and its components, such as financials and human resources), infrastructure software, and integration software. The relationship between the three macro processes and the transaction management foundation can be seen in the figure Supplier Relationship Management (SRM) Internal Supply Chain Management (ISCM) Customer Relationship Management (CRM)

Transaction Management Foundation (TMF) CUSTOMER RELATIONSHIP MANAGEMENT: The key processes under CRM are as follows: Marketing: Marketing processes involve decisions regarding which customers to target, what products to offer, how to price the products, and how to manage the actual campaigns targeting customers. Sell: The sell processes focus on making an actual sale to a customer. The processes include proving the sales force the information it needs to make a sale and then to execute the actual sale. Order management: The process of managing customer orders as they flow

through an enterprise is important for the customer to track his order and for the enterprise to plan and execute order fulfillment. This process ties together demand from the customer with supply from the enterprise. Call/ service center: A call/service center is often the primary point of contact between a company and its customers. A call/service center helps customers to place orders, suggests products, solves problems, and provides information on order status.

INTERNAL SUPPLY CHAIN MANAGEMENT The various processes included in ISCM are as follows: Strategic planning: This process focuses on the network design of the supply chain. Demand planning: It consists of forecasting demand and analyzing the impact on demand of demand management tools such as pricing and promotions. Supply planning: It takes as an input the demand forecasts produced by the demand planning and the resources made available by strategic planning, and then produces an optimal plan to meet this demand. Fulfillment: Once a plan is in its place to supply the demand, it must be executed. The fulfillment process links each order to a specific supply source and means of transportation. Field service: Finally, after the product has been delivered to the customer, it eventually must be serviced. Service processes focus on setting inventory levels for spare parts as well as scheduling service calls. SUPPLIER RELATIONSHIP MANAGEMENT (SRM) SRM includes those processes focused on the interaction between the enterprise and suppliers that are upstream in the supply chain. There is a very natural fit between SRM processes and the ISCM processes, as integrating supplier constraints is crucial when creating internal plans. SRM Design collaboration Source Negotiate Buy Supply collaboration ISCM Strategic planning Demand planning Supply planning Fulfillment Field service TMF THE MACRO PROCESSES AND THEIR PROCESSES CRM Market Sell Call center Order management

COMPETITIVE AND SUPPLY CHAIN STRATEGIES AND HOW THEY ARE IMPLEMENTED - KAMRAN A Companys competitive strategy defines, relative to its competitors, the set of customer needs that it seeks to satisfy through its products and services. For example, Wal-Mart aims to provide high availability of a variety of products of reasonable quality at low prices. Most products sold at Wal-Mart are commonplace (everything from home appliances to clothing) and can be purchased elsewhere. What Wal-Mart provides is a low price and product availability. McMaster-Carr sells maintenance, repair, and operations (MRO) products. It offers more than 400,000 different products through both a catalogue and a Web site. Its competitive strategy is built around providing the customer with convenience, availability, and responsiveness. With this focus on responsiveness, McMaster does not compete based on low price. Clearly, the competitive strategy at WalMart is different from that at McMaster. To execute a companys competitive strategy, all these functions play a role, and each must develop its own strategy. Here, strategy refers to what each process or function will try to do particularly well. A product development strategy specifies the portfolio of new products that a company will try to develop. It also dictates whether the development effort will be made internally or outsourced. Marketing and sales strategy specifies how the market will be segmented and how the product will be positioned, priced, and promoted. A supply chain strategy determines the nature of procurement of raw materials, transportation of materials to and from the company, manufacture of the product or operation to provide service, and distribution of the product to the customer, along with any follow up service and a specification of whether these processes will be performed in-house or outsourced. Supply chain strategy includes a specification of the broad structure of the supply chain and what may traditionally be called supplier strategy operations strategy and logistics strategy. The value chain emphasizes the close relationship between the functional strategies within a company. Each function is crucial if a company is to satisfy customer needs profitably. Thus, the various functional strategies cannot be formulated in isolation. They are closely intertwined and must fit and support each other if a company is to succeed For any company to be successful, its supply chain strategy and competitive strategy

must fit together. Strategic fit means that both the competitive and supply chain strategies have aligned goals. It refers to consistency between the customer priorities that the competitive strategy hopes to satisfy and the supply chain capabilities that the supply chain strategy aims to build. The issue of achieving strategic fit is a key consideration during the supply chain strategy or design phase. A key issue relating to strategic fit is the scope, in terms of supply chain stages, across which the strategic fit applies. Scope of strategic fit refers to the functions within the firm and stages across the supply chain that devise an integrated strategy with a shared objective. At one extreme, every operation within each functional area devises its own independent strategy with the objective of optimizing its individual performance. In this case the scope of strategic fit is restricted to an operation in a functional area within a stage of the supply chain. At the opposite extreme, all functional areas across all stages of the supply chain devise strategy jointly with a common objective of maximizing supply chain profit. In this case the scope of strategic fit extends to the entire supply chain A lack of strategic fit between the competitive and supply chain strategy can result in the supply chain taking actions that are not consistent with customer needs, leading to a reduction in supply chain surplus and decreasing supply chain profitability. Strategic fit requires that all functions within a firm and stages in the supply chain target the same goal, one that is consistent with customer needs. To achieve strategic fit, a company must first understand the needs of the customers being served, understand the uncertainty of the supply chain, and identify the implied uncertainty. The second step is to understand the supply chains capabilities in terms of efficiency and responsiveness. The key to strategic fit is ensuring that supply chain responsiveness is consistent with customer needs, supply capabilities, and the resulting implied uncertainty. The scope of strategic fit refers to the functions and stages within a supply chain that coordinate strategy and target a common goal. When the scope is narrow, individual functions try to optimize their performance based on their own goals. This practice often results in conflicting actions that reduce the supply chain surplus. As the scope of strategic fit is enlarged to include the entire supply chain, actions are evaluated based on their impact on overall supply chain performance, which helps increase supply chain surplus.

BIBLIOGRAPHY http://en.wikipedia.org/wiki/File:Supply_and_demand_network_(en).png http://supply-chain-case-studies.blogspot.com/2007/11/dell-supply-chainmanagement-case-study.html Supply Chain Management (Strategy, Planning and Operation) by Sunil Chopra, Peter Meindl and D. V. Kalra