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Syntel CQA Forum Supply Chain Management

CQA Doc No 29

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.

Figure: An Example of a Supply Chain

Materials flow downstream, from raw material sources through a

manufacturing level transforming the raw materials to intermediate
products (also referred to as components or parts). These are assembled
on the next level to form products. The products are shipped to
distribution centers and from there on to retailers and customers.

Issues in Supply Chain Management

The classic objective of logistics is to be able to have the right products

in the right quantities (at the right place) at the right moment at minimal
cost. Figure translates this overall objective into four main areas of
concern within supply chain management. The two middle boxes in the
lower row of Fig., delivery reliability, and delivery times, are both aspects

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Syntel CQA Forum Supply Chain Management
CQA Doc No 29

of customer service, which is highly dependent on the first box,

flexibility, and on the last box, inventory.

Figure: Hierarchy of Objectives.

Issues in Supply Chain Management and Suggested

The central aim of supply chain management, to have the right products
in the right quantities (at the right place) at the right moment at minimal
cost, is translated into the interrelated issues of customer satisfaction,
inventory management, and flexibility. Customer satisfaction is to a high
degree dependent on the flexibility of the supply chain, i.e. its ability to
respond to changes in demand. Flexibility is often imperfect because of
long lead times, uncertainties, and unforeseen event. To counterbalance
this lack of flexibility companies will keep inventories at various levels of
the supply chain. Balancing the costs of imperfect customer satisfaction
and holding inventory is a classic issue of logistics and supply chain

Eight pitfalls related to inventory management are:

• no supply chain metrics,
• inadequate definition of customer service,
• inaccurate delivery status data,
• inefficient information systems,
• ignoring the impact of uncertainties,
• simplistic inventory stocking policies,
• organizational barriers and
• an incomplete view of the supply chain.

Increasing globalization of supply chains causes longer lead times, which

worsen flexibility, and creates the need for more inventory. When lead
times can no longer be shortened, an important tool for improving the
supply chain performance is that of increased coordination.

There are 2 types of coordination-general coordination, which is

coordination within a plant, and multi-plant coordination, which is
coordination among several plants. For efficient coordination within a
supply chain both general and multi-plant coordination is necessary. A
survey among computer manufacturers in the USA found that only 15%
of the participants where communication through the use of EDI. This
indicates a large unrealized potential for electronic data exchange.

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Syntel CQA Forum Supply Chain Management
CQA Doc No 29

Modeling is an important tool for understanding and managing the

supply chain. The dynamic behavior of a real life system is usually so
complex that analytic models are not powerful enough to analysis the
system, simulation must therefore be used.

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