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Supply Chain Management Fundamentals A. Overview of supply chain management 1. Supply chain management process overview

Without a supply chain, there would be no thriving economy, and the lack of management of that chain implies that the end product that consumers get would always be high priced and unaffordable. Supply chain is the one responsable for the products produced far and wide being found in our homes. It is the one responsable for the food people consume where as they did not grow that food. It is the one responsable for earning the farmers a living since it gets their produce from their hands to the final consumer and earn a living in the process. As such, it is imposible to have a thriving economy without supply chain. From this description, it is evident that products undergoe a series of operations before they reach the final consumer. Inclusive in this movement, is the pysical movement of goods/material which is generally referred to as a supply chain. The discussion in this paper will be based on the management that is responsable for this flow of goods i.e the logistics involved in the movement of materials from the producer to the final consumer. The paper looks at the supply chain management in broad view, right from the design to the tools used in the management. 2. Definitions of supply chain, supply chain management, including reverse supply chain Supply chain can be defined as the physical flow of materials from their source or producer to the final consumer. It includes all the functions, activities and facilities used in the production and deliverance of final service/product to the final customer. These activities include; transportation, supply planning, warehousing, purchasing, supply cain management, demand planning and manufacturing. In short, it is made up of all resources, activities, people and information that is used in making sure that a product reaches the end consumer from the suppliers. From the above definition, it is evident that supply chain management is a component of supply chain. As such, supply chain management is aimed towards optimizing every single component of a supply chain in order to have an efficient and cost effective supply chain. Therefore, supply chain management makes sure that the supply chain is streamlined such that the products take a short time to reach the end consumer and that they retain their aceptable consumer standard i.e both in quality and the Price at which the products are sold. Value and benefits of supply chain management (using the supply chain to improve profitability and decrease working capital) Every business establishment relies upon its supply chain to provide them with both raw materials that they are selling and the profits that comes with it for them to thrive in the competitive business environment. To achieve their goals, each business has one or more different supply chain through which it conducts its operations. The type of supply chain depends on the type of goods and services that the company is producing and selling. Hence,
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managers of various business realize the importance of practicing supply chain management. Supply chain management is the one responsible for the integration of key process in the development of a product from the initial stage of extracting raw material, processing of the raw materials, the storage, transportation and the final presentation or sale of the product to the customer. As a result, supply chain management is an instrumental practice toward maintaining the competitiveness of a company. Components of supply chain management Having resulted from outgrowth of logistics and purchase process, supply chain management is concerned with the following four areas; flexibility, delivery reliability, delivery time and the level of inventory . The figure below shows the hierarchy of objectives in supply chain management

Decisions made in supply chain management are of different levels, the decisions made from a higher level are the one which sets the conditions underwhich the reset of the decisions are made and ultimately set the standard or the efficiency under which the supply chain will be operating. The type of decisions made by the management during its operations exists in three different level i.e strategic, tactical and operational levels. Being at the helm of the decision level, strategic decisions are long term decisions that management use in its supply chain management. Ganeshan and Harrison ( ) states that strategic decisions are decisions that ar concerned with the number, size and geographical location of the supply chain element like distribution centers and plants. As such, the production decisions made at this level is used to determine what the kind of product would be produced, in which location will they be produced, what kind of suppliers will be used to ferry in the raw, and in which production plants would be the circulation of the products begin. At this level, it is where the inventory decisions that deal with the way inventory of the supply chain would be made and also the decisions on the mode of transtportation that would be used to ferry the good from the production centers to the end consumers. Since the decisions made at the strategic level are long term decisions. They affect decisions made in other levels of supply chain managementsl. For instance, the decision of where warehouses and plants are placed will influence the decision on the mode of transportation to be used, and the choice of where production will take place and the suppliers to be used will affect the inventory policies. As a result, different simulations and models are used to scrutinize the interrelation of all these decisions and the impact the impact of changing the strategic level decisions on the supply chain. Models of Supply chain management In the course of supply chain management, various models aimed towards the management and control of the operations involved in production were made. These models include; Just

in time (JIT) inventory management mode, zero inventory model (ZI), Vendor Managed Inventory model (VMI) and Total quality. All these models, were aimed towards optimizing the performance of various areas of the supply chain and such optimizing the full chain in the process. Limitations of the models A company competitiveness and productivity depends upon its flexibility to respond to changes in demand of the products it produces. For instance, if a company is able to process all the orders it receives from its customers within a single day of its reception, then that company would be deemed as being totally flexible in its opererations. This level of operation is literary impossible since the supply chinc is composed of various levels which increases the delivery time of goods to the final consumer. As such, if the efficiency of supply chain depended on the inventory managenement, managers would implement Just In Time management mode of operation in totality. Since this is not the case, the management responds to the uncertainity brought about by unseen events in the delivery process by having safety stocks in its warehouses. This stocking of supplies in the warehouses is faced with the following challenges; 1. Most supply chain managers focus more on the internal supply chain as a result the external suppliers who are essential in the the whole chain are ignored. 2. The stocking policies in one plant of an organization may differ totally with stocking policty of another organization. Also, the level of safety stocks is greately influenced by the stocking policies in place since they determine what level of stock can be transacted on a daily basis and which level of the same will remain as safety stock. 3. The uncertainity in the distribution process are not usually tracked. This brings about non-optimal safety stocks stocking levels. Which have the effect of increasing the cost incurred in the supply chain. From above, it is evident that application of just in time mode of application in totality or application of any other model in totality, ignores the fact that their application is interdependent upon other operations and production functions other departments in the organization. For istance, marketing decisions undertaken by the management have significant impact upon the logistics involved in production, stocking and distribution of goods. This means that the model used in managing the distribution process should be coordinated with market planning since a high demand of the products would arise. Apart from affecting marketing decisions, the inventory management should take into consideration the financial management responsible for financing of the production plan. From this discussion, there are various challenges that are undergone in the supply chain management process. This implies that the modes of inventory used in managing the supply chain are interrelated to each other i.e marketin, production, distribution and financing of the districution chain decisions have to be made made in relation to each other. Hence, managers must apply other tools in supply management by integrating their supplies in order to improve the operations of the supply chain to increase its flexibility.

Principles, Tools and Methodologies used in Supply Chain Management Principles of Supply Chain Management In abid to experience a profitable company growth and conumer satisfaction, managers in various companies have engaged in aggressive practices with an aim of improving the supply

chain managemnt. To achieve this objectiives, majority of the companies having efficient supply systems employ the use of seven effective principles of supply chain management. These principles are; (i) dividing/segmenting the customers based on their needs and (ii) customization of the supply chain managzement network to meet the needs of the consumers (iii) Making elaborate plans after listening to demand signals in the market (iv) Identificaiton of the product that consumers purchase in high numbers (v) Managing sorces of raw material in order to minimize the total costs experienced in their management (vi) Developing a wide supply chai strategy that covers all levels of decisin making and (vi) adopting cannel spinning performance measures. In segmentation of consumers based on their needs is can be equated both as a principle or a tool in supply chain management. This is due to the fact that when the management segments the market, it enables the company to develop products that are tailored to the needs of the customers in order to optimize the supply chain and maximize on the sale of products or services. As such, many companies have resulted in using various analytical tools and techniques such as conjoint and cluster analysi to assess to predict the profitability margin and consumer trades offs in each segment. To understand the products that are close to consumers, the management conducts market research and gather the requiered information to facilitate rolling out of customized product that will reach the consumers within the shortest time posible in order to maxize on the profits. Companies have a default format in which they organize their distribution network. Right from the way they handly the inventory, the transportaion, warehousing, and production activities. This kind of network, has been designed so as to meet the general average requirements of all the customers that the companys product targets. As such, customization of the chain of distribution comes in Handy in making sure that the supply network is tailored to specific consumer segement. Therefore, to accrue high level of profitablility in the market, the manufacture applier various tools of supply chain management that will lead to creation of multi-levle logistical network that makes sure that the commodities reaches the final consumer within the shortest time posible. To support this customized supply chain, decidion support tools that handle the distribution of the products and those that are time-sensitive to the managing or the distribution and transport system such as new inventory systems are used. The demands of various goods and services offered by a company change with time. In one season one good is the most close to customers while in another season the same product is fall short of satisfying customers needs. To survive in the competitive market, supply managers have employed various tools in listening to market signals so as to be able to align the delivery of the demanded products within the shortest possible time. The application of this tools, ensured that there is consistent prediction of the prevailing market demand and as such, the supplying company has been able to use their resources optimumly. Forecasting has historically proceeded silo by silo, with multiple departments independently creating forecasts for the same products--all using their own assumptions, measures, and level of detail. Many consult the marketplace only informally, and few involve their major suppliers in the process. The functional orientation of many companies has just made things
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worse, allowing sales forecasts to envision growing demand while manufacturing secondguesses how much product the market actually wants. Such independent, self-centered forecasting is incompatible with excellent supply chain management, as one manufacturer of photographic imaging found. This manufacturer nicknamed the warehouse "the accordion" because it had to cope with a production operation that stuck to a stable schedule, while the revenue-focused sales force routinely triggered cyclical demand by offering deep discounts at the end of each quarter. The manufacturer realized the need to implement a cross-functional planning process, supported by demand planning software. Initial results were dismaying. Sales volume dropped sharply, as excess inventory had to be consumed by the marketplace. But today, the company enjoys lower inventory and warehousing costs and much greater ability to maintain price levels and limit discounting. Like all the best sales and operations planning (S&OP), this process recognizes the needs and objectives of each functional group but bases final operational decisions on overall profit potential. Excellent supply chain management, in fact, calls for S&OP that transcends company boundaries to involve every link of the supply chain (from the supplier's supplier to the customer's customer) in developing forecasts collaboratively and then maintaining the required capacity across the operations. Channel-wide S&OP can detect early warning signals of demand lurking in customer promotions, ordering patterns, and restocking algorithms and takes into account vendor and carrier capabilities, capacity, and constraints. Exhibit 3 illustrates the difference that cross supply chain planning has made for one manufacturer of laboratory products. As shown on the left of this exhibit, uneven distributor demand unsynchronized with actual end-user demand made real inventory needs impossible to predict and forced high inventory levels that still failed to prevent out-of-stocks. Distributors began sharing information on actual (and fairly stable) end-user demand with the manufacturer, and the manufacturer began managing inventory for the distributors. This coordination of manufacturing scheduling and inventory deployment decisions paid off handsomely, improving fill rates, asset turns, and cost metrics for all concerned. Such demand-based planning takes time to get right. The first step is typically a pilot of a leading-edge program, such as vendor-managed inventory or jointly managed forecasting and replenishment, conducted in conjunction with a few high-volume, sophisticated partners in the supply chain. As the partners refine their collaborative forecasting, planned orders become firm orders. The customer no longer sends a purchase order, and the manufacturer commits inventory from its available-to-promise stock. After this pilot formalizes a planning process, infrastructure, and measures, the program expands to include other channel partners, until enough are participating to facilitate quantum improvement in utilization of manufacturing and logistics assets and cost performance.

Principle 1: Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably. Principle 2: Customize the logistics network to the service requirements and profitability of customer segments. Principle 3: Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation. Principle 4: Differentiate product closer to the customer and speed conversion across the supply chain. Principle 5: Manage sources of supply strategically to reduce the total cost of owning materials and services. Principle 6: Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives a clear view of the flow of products, services, and information. Principle 7: Adopt channel-spanning performance measures to gauge collective success in reaching the end-user effectively and efficiently.
1. Segment customers based on service needs. Companies traditionally have grouped customers by industry, product, or trade channel and then provided the same level of service to everyone within a segment. Effective supply-chain management, by contrast, groups customers by distinct service needs--regardless of industry--and then tailors services to those particular segments. 2. Customise the Supply Chain Management network.In designing their Supply Chain Management network, companies need to focus intensely on the service requirements and profitability of the customer segments identified. The conventional approach of creating a "monolithic" Supply Chain Management network runs counter to successful supply-chain management. 3. Listen to signals of market demand and plan accordingly. Sales and operations planning must span the entire chain to detect early warning signals of changing demand in ordering patterns, customer promotions, and so forth. This demand-intensive approach leads to more consistent forecasts and optimal resource allocation. 4. Differentiate product closer to the customer.Companies today no longer can afford to stockpile inventory to compensate for possible forecasting errors. Instead, they need to postpone product differentiation in the manufacturing process closer to actual consumer demand. 5. Strategically manage the sources of supply. By working closely with their key suppliers to reduce the overall costs of owning materials and services, supply-chain
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management leaders enhance margins both for themselves and their suppliers. Beating multiple suppliers over the head for the lowest price is out, Andersen advises. "Gain sharing" is in. 6. Develop a supply-chain-wide technology strategy. As one of the cornerstones of successful supply-chain management, information technology must support multiple levels of decision making. It also should afford a clear view of the flow of products, services, and information. 7. Adopt channel-spanning performance measures. Excellent supply-chain measurement systems do more than just monitor internal functions. They adopt measures that apply to every link in the supply chain. Importantly, these measurement systems embrace both service and financial metrics, such as each account's true profitability. The principles are not easy to implement, the Andersen consultants say, because they run counter to ingrained functionally oriented thinking about how companies organise, operate, and serve customers. The organisations that do persevere and build a successful supply chain have proved convincingly that you can please customers and enjoy growth by doing so. Tools Used in Improving the Supply Chain management Having the realization of the challenges facing the supply chain management, supply chain managers employ various tools in managing and ensuring that the supply chain is streamlined for the delivery of products to the end consumers withing the shortes time posible without additional costs. Therefore, the supply chain management requires the use of intesive support tools that facilitate effective control, management and motitoring of the supply chain. These tools, are formed from a range of qualitative and analytical methods that makes sure that the input of suppliers is integrated into the system. These tools include; (i) tools for planning expected demand, (ii) configuration tools of supply, (iii) tools for planning the supply and (iv) distribution and transport management tools. Supply Chain Configuration Tool Supply chain configuration tools are tools used in making strategic decisons. These decisions include the number of plants required by the company, the geographical distribution of these strategic tools. This tools is used to modify the

Conclusion To have success in their operations, many business have adopted sypply management strategies Many modern businesses have adopted the concept and methodologies of supply chain

management in their business model and have great success. There are also many tools and consulting services available to help companies to plan and optimize their supply chain management practices. Gone are the days when the professionals or organizations in product design, purchasing, manufacturing, warehousing, distribution, materials handling, information technology, plant engineering, and logistics could do their jobs as if they had nothing do with anyone else. Networking, linage, material and information flows are the central concepts of supply chain management in the business world. It requires a change of mindset by all involved. People in the various functions and disciplines no longer be able to look at themselves as the sole pivot point in the supply chain. Instead, they are one of many pivot points. All actors in the supply 9 chain must also come to realize that the supply chain will not run without full participation by each function. And each has to be optimized for the good of the chain but not for its own good.