1: Definitions of Supply chain management

Supply chain management encompasses the planning and management of all activities involved in
sourcing, procurement, conversion, and logistics management. It also includes the crucial
components of coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third party service providers, and customers. In essence, supply chain management
integrates supply and demand management within and across companies. More recently, the
loosely coupled, self-organizing network of businesses that cooperate to provide product and
service offerings has been called the Extended Enterprise.

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

Global Supply Chain Forum - Supply Chain Management is the integration of key business
processes across the supply chain for the purpose of adding value for customers and stakeholder

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. Supply chains exist in both
service and manufacturing organizations, although the complexity of the chain may vary greatly
from industry to industry and firm to firm.

Supply chain management is typically viewed to lie between fully vertically integrated firms,
where the entire material flow is owned by a single firm and those where each channel member
operates independently. Therefore, coordination between the various players in the chain is key in
its effective management. Cooper and Ellram compare supply chain management to a well-
balanced and well-practiced relay team. Such a team is more competitive when each player knows
how to be positioned for the hand-off. The relationships are the strongest between players who
directly pass the baton, but the entire team needs to make a coordinated effort to win the race.

2: A typical Supply chain

A typical supply chain may involve many participants. But some orders may pass through only a
few. Not all participants will be in all supply chains. It will depend on the needs of the customer
and the roles of the participants fulfilling these needs.
3: Supply Chain Stages

A typical supply chain process may involve a variety of stages. The supply chain stages include,
• Suppliers
• Manufacturers
• Distributors/ Wholesalers
• Customers
• Retailers

10

Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer

Figure 2.1: Supply Chain Stages

Source: Chopra, Sunil and Meindl, Peter. Supply Chain Management: Strategy, Planning, and
Operation, 2nd ed. India: Pearson Prentice Hall, 2007 (21)

Each stage supply chain is connected through the flow of product, information, and funds. This
flow often occurs in both directions and may be managed by one of the stages or an intermediary.
The appropriate design of supply chain depends on both the customers’ needs and the roles played
by the stages involved. The sequence of the stages is depicted in figure 2.1.
4: Process View of Supply Chain
A Supply chain is a sequence of processes and flows that take place within and between different
stages and combined to fill a customer need for a product. There are two different ways to view the
processes performed in a supply chain.

• Cycle View
• Push Pull View
4.1: Cycle View of Supply Chain Process
All supply chain processes can be broken down into the following four process cycles and also are
shown in the figure 2.2.

• Customer order cycle

• Replenishment cycle
• Manufacturing cycle
• Procurement cycle

Customer

Customer Order Cycle

Retailer

Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer

Procurement Cycle

Supplier

Figure 2.2 : Supply Chain Process Cycles

Source: Chopra, Sunil and Meindl, Peter. Supply Chain Management: Strategy, Planning,
and Operation, 2nd ed. India: Pearson Prentice Hall, 2007 (27)
 Each cycle occurs at the interface between two successive stages of the supply chain. The five stages thus
result in four supply chain processes cycles. Not every supply chain will have all four cycles clearly
separated.

4.2: Push-Pull View of Supply Chain Process

All processes in a supply chain fall in to one of 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 order.
The pictorial presentation of push pull view is given in the figure 2.3.

Push/Pull Boundary

Push Process
Pull Process

Process Process Process Process Process Process Process

3
1 1 2 k k+1 N-1 N

Customer
Order
Arrives

Figure 2.3: Push/Pull View of the Supply Chain

Source: Chopra, Sunil and Meindl, Peter. Supply Chain Management: Strategy, Planning, and
Operation, 2nd ed. India: Pearson Prentice Hall, 2007 (29)
5: Advantages of Supply Chain Management

• Corporations have turned increasingly to global sources for their supplies. This
globalization of supply management has forced companies to look for more effective ways
to coordinate the flow of materials into and out of the company.
• SCM has allowed business nowadays to not just have productivity advantage alone but also
on value advantage. As Martin Christopher in his book, Logistics and Supply Chain
Management: Strategies for Reducing Cost and Improving Service' states, 'Productivity
advantage gives a lower cost profile, and the value advantage gives the product or offering
a differential 'plus' over competitive offerings.' Through maximizing added value and also
reduce the cost in the same time, more innovation can be added to the product and process.
• Mass manufacturing offers productivity advantage but through effective supply chain
management, mass customization can be achieved. With mass customization, customers are
given the value advantage through flexible manufacturing and customized
adaptation.Product life cycles also can be improved through effective use of SCM.
• Companies and distribution channels compete more today based on time and quality.
• Making a defect-free product and selling it to customer faster and more reliably than the
competition is no longer seen as a competitive advantage but simply as a requirement in the
market.
• Customers demand products consistently delivered faster, exactly on time and with no
damage.

6: Supply Chain Decisions

We classify the decisions for supply chain management into two broad categories -- strategic and
operational. As the term implies, strategic decisions are made typically over a longer time horizon.
These are closely linked to the corporate strategy (they sometimes the corporate strategy), and
guide supply chain policies from a design perspective. On the other hand, operational decisions are
short term, and focus on activities over a day-to-day basis. The effort in these types of decisions is
to manage the product flow effectively and efficiently in the "strategically" planned supply chain.

There are four major decision areas in supply chain management: 1) location, 2) production, 3)
inventory, and 4) transportation (distribution), and there are both strategic and operational
elements in each of these decision areas.

a) Location Decisions
The geographic placement of production facilities, stocking points, and sourcing points is the
natural first step in creating a supply chain. The location of facilities involves a commitment of
resources to a long-term plan. Once the size, number, and location of these are determined, so are
the possible paths by which the product flows through to the final customer. These decisions are of
great significance to a firm since they represent the basic strategy for accessing customer markets,
and will have a considerable impact on revenue, cost, and level of service. These decisions should
be determined by an optimization routine that considers production costs, taxes, duties and duty
drawback, tariffs, local content, distribution costs, production limitations, etc. Although location
decisions are primarily strategic, they also have implications on an operational level

b) Production Decisions
The strategic decisions include what products to produce, and which plants to produce them in,
allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these
decisions have a big impact on the revenues, costs and customer service levels of the firm. These
decisions assume the existence of the facilities but determine the exact path through which a
product flows to and from these facilities. Another critical issue is the capacity of the
manufacturing facilities--and this largely depends on the degree of vertical integration within the
firm. Operational decisions focus on detailed production scheduling. These decisions include the
construction of the master production schedules, scheduling production on machines, and
equipment maintenance. Other considerations include workload balancing, and quality control
measures at a production facility.

c) Inventory Decisions
These refer to means by which inventories are managed. Inventories exist at every stage of the
supply chain as either raw materials, semi-finished or finished goods. They can also be in-process
between locations. Their primary purpose to buffer against any uncertainty that might exist in the
supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their
value, their efficient management is critical in supply chain operations. It is strategic in the sense
that top management sets goals. However, most researchers have approached the management of
inventory from an operational perspective. These include deployment strategies (push versus pull),
control policies --- the determination of the optimal levels of order quantities and reorder points,
and setting safety stock levels, at each stocking location. These levels are critical, since they are
primary determinants of customer service levels.

d) Transportation Decisions
The mode choice aspects of these decisions are the more strategic ones. These are closely linked to
the inventory decisions, since the best choice of mode is often found by trading-off the cost of
using the particular mode of transport with the indirect cost of inventory associated with that
mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are
expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding
relatively large amounts of inventory to buffer against the inherent uncertainty associated with
them. Therefore customer service levels and geographic location play vital roles in such decisions.
Since transportation is more than 30 percent of the logistics costs, operating efficiently makes
good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing
and scheduling of equipment are key in effective management of the firm's transport strategy
7: Problems in Supply Chain Management
Supply chain management must address the following problems:

• Distribution Network Configuration: number, location and network missions of

suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.

• Distribution Strategy: questions of operating control (centralized, decentralized or

shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD
(direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier,
including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on
flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy
(e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier,
common carrier, contract carrier, or 3PL).

• Trade-Offs in Logistical Activities: The above activities must be well coordinated in order
to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one
of the activities is optimized. For example, full truckload (FTL) rates are more economical
on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full
truckload of a product is ordered to reduce transportation costs, there will be an increase in
inventory holding costs which may increase total logistics costs. It is therefore imperative
to take a systems approach when planning logistical activities. These trades-offs are key to
developing the most efficient and effective Logistics and SCM strategy.

• Information: Integration of processes through the supply chain to share valuable

information, including demand signals, forecasts, inventory, transportation, potential
collaboration, etc.

• Inventory Management: Quantity and location of inventory, including raw materials,

work-in-progress (WIP) and finished goods.

• Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across
entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information
and funds across the supply chain. The flow is bi-directional

8: Functions
Supply chain management is a cross-function approach including managing the movement of raw
materials into an organization, certain aspects of the internal processing of materials into finished
goods, and the movement of finished goods out of the organization and toward the end-consumer.
As organizations strive to focus on core competencies and becoming more flexible, they reduce
their ownership of raw materials sources and distribution channels. These functions are
increasingly being outsourced to other entities that can perform the activities better or more cost
effectively. The effect is to increase the number of organizations involved in satisfying customer
demand, while reducing management control of daily logistics operations. Less control and more
supply chain partners led to the creation of supply chain management concepts. The purpose of
supply chain management is to improve trust and collaboration among supply chain partners, thus
improving inventory visibility and the velocity of inventory movement.

Strategic

• Strategic network optimization, including the number, location, and size of warehousing,
distribution centers, and facilities.

• Strategic partnerships with suppliers, distributors, and customers, creating

communication channels for critical information and operational improvements such as
cross docking, direct shipping, and third-party logistics.

• Product life cycle management, so that new and existing products can be optimally
integrated into the supply chain and capacity management activities.

• Information technology chain operations.

• Where-to-make and what-to-make-or-buy decisions.

• Aligning overall organizational strategy with supply strategy.

• It is for long term and needs resource commitment.

Tactical

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, scheduling, and planning process definition.

• Inventory decisions, including quantity, location, and quality of inventory.

• Transportation strategy, including frequency, routes, and contracting.

• Benchmarking of all operations against competitors and implementation of best practices

throughout the enterprise.

• Milestone payments.

• Focus on customer demand.

Operational

• Daily production and distribution planning, including all nodes in the supply chain.
 • Production scheduling for each manufacturing facility in the supply chain (minute by
minute).

• Demand planning and forecasting, coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.

• Sourcing planning, including current inventory and forecast demand, in collaboration with
all suppliers.

• Inbound operations, including transportation from suppliers and receiving inventory.

• Production operations, including the consumption of materials and flow of finished goods.

• Outbound operations, including all fulfillment activities, warehousing and transportation to

customers.

• Order promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers.

9: Supply Chain Modeling Approaches

Two levels of decisions require a different perspective. The strategic decisions are, for the most
part, global or "all encompassing" in that they try to integrate various aspects of the supply chain.
Consequently, the models that describe these decisions are huge, and require a considerable
amount of data. Often due to the enormity of data requirements, and the broad scope of decisions,
these models provide approximate solutions to the decisions they describe. The operational
decisions, meanwhile, address the day to day operation of the supply chain. Therefore the models
that describe them are often very specific in nature. Due to their narrow perspective, these models
often consider great detail and provide very good, if not optimal, solutions to the operational
decisions.

To facilitate a concise review of the literature, and at the same time attempting to accommodate the
above polarity in modeling, we divide the modeling approaches into three areas --- Network
Design, ``Rough Cut" methods, and simulation based methods. The network design methods, for
the most part, provide normative models for the more strategic decisions. These models typically
cover the four major decision areas described earlier, and focus more on the design aspect of the
supply chain; the establishment of the network and the associated flows on them. "Rough cut"
methods, on the other hand, give guiding policies for the operational decisions. These models
typically assume a "single site" (i.e., ignore the network) and add supply chain characteristics to it,
such as explicitly considering the site's relation to the others in the network. Simulation methods
are a method by which a comprehensive supply chain model can be analyzed, considering both
strategic and operational elements. However, as with all simulation models, one can only evaluate
the effectiveness of a pre-specified policy rather than develop new ones.
Methods of Supply Chain Management Network Method

These methods determine the location of production, stocking, and sourcing facilities, and paths
the product(s) take through them. Such methods tend to be large scale, and used generally at the
inception of the supply chain. The earliest work in this area, although the term "supply chain" was
not in vogue, was by Geoffrion and Graves. They introduce a multicommodity logistics network
design model for optimizing annualized finished product flows from plants to the DC's to the final
customers. Geoffrion and Powers [1993] later give a review of the evolution of distribution
strategies over the past twenty years, describing how the descendants of the above model can
accommodate more echelons and cross commodity detail.

The network-design based methods add value to the firm in that they lay down the manufacturing
and distribution strategies far into the future. It is imperative that firms at one time or another make
such integrated decisions, encompassing production, location, inventory, and transportation, and
such models are therefore indispensable.

Rough Cut Methods

These models form the bulk of the supply chain literature, and typically deal with the more
operational or tactical decisions. Most of the integrative research (from a supply chain context) in
the literature seems to take on an inventory management perspective. In fact, the term "Supply
Chain" first appears in the literature as an inventory management approach. The thrust of the rough
cut models is the development of inventory control policies, considering several levels or echelons
together. These models have come to be known as "multi-level" or "multi-echelon" inventory
control models. For a review the reader is directed to Vollman et al.

Although current research in multi-echelon-based supply chain inventory problems shows

considerable promise in reducing inventories with increased customer service, the studies have
several notable limitations.

First, these studies largely ignore the production side of the supply chain. Their starting point in
most cases is a finished goods stockpile, and policies are given to manage these effectively. Since
production is a natural part of the supply chain, there seems to be a need with models that include
the production component in them.

Second, even on the distribution side, almost all published research assumes an arborescence
structure, i. e. each site receives re-supply from only one higher level site but can distribute to
several lower levels.

Third, researchers have largely focused on the inventory system only. In logistics-system theory,
transportation and inventory are primary components of the order fulfillment process in terms of
cost and service levels. Therefore, companies must consider important interrelationships among
transportation, inventory and customer service in determining their policies.
Fourth, most of the models under the "inventory theoretic" paradigm are very restrictive in nature,
i.e., mostly they restrict themselves to certain well known forms of demand or lead time or both,
often quite contrary to what is observed.

The preceding sections are a selective overview of the key concepts in the supply chain literature.
Following is a list of recommended reading for a quick introduction to the area.

10: Developments in Supply Chain Management

Six major movements can be observed in the evolution of supply chain management studies:
Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization Phases One and
Two, and SCM 2.0.

a) Creation Era

The term supply chain management was first coined by a U.S. industry consultant in the early
1980s. However, the concept of a supply chain in management was of great importance long
before, in the early 20th century, especially with the creation of the assembly line. The
characteristics of this era of supply chain management include the need for large-scale changes,
reengineering, downsizing driven by cost reduction programs, and widespread attention to the
Japanese practice of management.

b) Integration Era

This era of supply chain management studies was highlighted with the development of Electronic
Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction
of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st
century with the expansion of internet-based collaborative systems. This era of supply chain
evolution is characterized by both increasing value-adding and cost reductions through integration.
c) Globalization Era

The third movement of supply chain management development, the globalization era, can be
characterized by the attention given to global systems of supplier relationships and the expansion
of supply chains over national boundaries and into other continents. Although the use of global
sources in the supply chain of organizations can be traced back several decades (e.g., in the oil
industry), it was not until the late 1980s that a considerable number of organizations started to
integrate global sources into their core business. This era is characterized by the globalization of
supply chain management in organizations with the goal of increasing their competitive advantage,
value-adding, and reducing costs through global sourcing.

d) Specialization Era—Phase One: Outsourced Manufacturing and Distribution In the 1990s

industries began to focus on “core competencies” and adopted a specialization model. Companies
abandoned vertical integration, sold off non-core operations, and outsourced those functions to
other companies. This changed management requirements by extending the supply chain well
beyond company walls and distributing management across specialized supply chain partnerships.
This transition also re-focused the fundamental perspectives of each respective organization.
OEMs became brand owners that needed deep visibility into their supply base. They had to control
the entire supply chain from above instead of from within. Contract manufacturers had to manage
bills of material with different part numbering schemes from multiple OEMs and support customer
requests for work -in-process visibility and vendor-managed inventory (VMI).

The specialization model creates manufacturing and distribution networks composed of multiple,
individual supply chains specific to products, suppliers, and customers who work together to
design, manufacture, distribute, market, sell, and service a product. The set of partners may change
according to a given market, region, or channel, resulting in a proliferation of trading partner
environments, each with its own unique characteristics and demands.

e) Specialization Era—Phase Two: Supply Chain Management as a Service

Specialization within the supply chain began in the 1980s with the inception of transportation
brokerages, warehouse management, and non-asset-based carriers and has matured beyond
transportation and logistics into aspects of supply planning, collaboration, execution and
performance management.

At any given moment, market forces could demand changes from suppliers, logistics providers,
locations and customers, and from any number of these specialized participants as components of
supply chain networks. This variability has significant effects on the supply chain infrastructure,
from the foundation layers of establishing and managing the electronic communication between
the trading partners to more complex requirements including the configuration of the processes
and work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in the same
way that outsourced manufacturing and distribution has done; it allows them to focus on their core
competencies and assemble networks of specific, best-in-class partners to contribute to the overall
value chain itself, thereby increasing overall performance and efficiency. The ability to quickly
obtain and deploy this domain-specific supply chain expertise without developing and maintaining
an entirely unique and complex competency in house is the leading reason why supply chain
specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken
root primarily in transportation and collaboration categories. This has progressed from the
Application Service Provider (ASP) model from approximately 1998 through 2003 to the
OnDemand model from approximately 2003-2006 to the Software as a Service (SaaS) model
currently in focus today.
11: Supply chain business process integration
Successful SCM requires a change from managing individual functions to integrating activities
into key supply chain processes. An example scenario: the purchasing department places orders as
requirements become known. The marketing department, responding to customer demand,
communicates with several distributors and retailers as it attempts to determine ways to satisfy this
demand. Information shared between supply chain partners can only be fully leveraged through
process integration.

Supply chain business process integration involves collaborative work between buyers and
suppliers, joint product development, common systems and shared information. According to
Lambert and Cooper (2000), operating an integrated supply chain requires a continuous
information flow. However, in many companies, management has reached the conclusion that
optimizing the product flows cannot be accomplished without implementing a process approach to
the business.

• Customer relationship management

• Customer service management

• Demand management

• Order fulfillment

• Manufacturing flow management

• Supplier relationship management

• Product development and commercialization

• Returns management

Much has been written about demand management. Best-in-Class companies have similar
characteristics, which include the following: a) Internal and external collaboration b) Lead time
reduction initiatives c) Tighter feedback from customer and market demand d) Customer level
forecasting

One could suggest other key critical supply business processes which combine these processes
stated by Lambert such as:

a. Customer service management

b. Procurement

c. Product development and commercialization

d. Manufacturing flow management/support

 e. Physical distribution

f. Outsourcing/partnerships

g. Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its
customers. Customer service is the source of customer information. It also provides the customer
with real-time information on scheduling and product availability through interfaces with the
company's production and distribution operations. Successful organizations use the following steps
to build customer relationships:

• determine mutually satisfying goals for organization and customers

• establish and maintain customer rapport

• produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the manufacturing flow management
process and the development of new products. In firms where operations extend globally, sourcing
should be managed on a global basis. The desired outcome is a win-win relationship where both
parties benefit, and a reduction in time required for the design cycle and product development.
Also, the purchasing function develops rapid communication systems, such as electronic data
interchange (EDI) and Internet linkage to convey possible requirements more rapidly. Activities
related to obtaining products and materials from outside suppliers involve resource planning,
supply sourcing, negotiation, order placement, inbound transportation, storage, handling and
quality assurance, many of which include the responsibility to coordinate with suppliers on matters
of scheduling, supply continuity, hedging, and research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order to
reduce time to market. As product life cycles shorten, the appropriate products must be developed
and successfully launched with ever shorter time-schedules to remain competitive. According to
Lambert and Cooper (2000), managers of the product development and commercialization process
must:

1. coordinate with customer relationship management to identify customer-articulated needs;

2. select materials and suppliers in conjunction with procurement, and

3. develop production technology in manufacturing flow to manufacture and integrate into the
best supply chain flow for the product/market combination.
d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on
past forecasts. Manufacturing processes must be flexible to respond to market changes and must
accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in
minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times,
meaning improved responsiveness and efficiency in meeting customer demand. Activities related
to planning, scheduling and supporting manufacturing operations, such as work-in-process storage,
handling, transportation, and time phasing of components, inventory at manufacturing sites and
maximum flexibility in the coordination of geographic and final assemblies postponement of
physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the

customer is the final destination of a marketing channel, and the availability of the product/service
is a vital part of each channel participant's marketing effort. It is also through the physical
distribution process that the time and space of customer service become an integral part of
marketing, thus it links a marketing channel with its customers (e.g., links manufacturers,
wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also outsourcing of
services that traditionally have been provided in-house. The logic of this trend is that the company
will increasingly focus on those activities in the value chain where it has a distinctive advantage,
and outsource everything else. This movement has been particularly evident in logistics where the
provision of transport, warehousing and inventory control is increasingly subcontracted to
specialists or logistics partners. Also, managing and controlling this network of partners and
suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to
be taken centrally, with the monitoring and control of supplier performance and day-to-day liaison
with logistics partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to
market share and profitability. Taking advantage of supplier capabilities and emphasizing a
longterm supply chain perspective in customer relationships can both be correlated with firm
performance. As logistics competency becomes a more critical factor in creating and maintaining
competitive advantage, logistics measurement becomes increasingly important because the
difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney
Consultants (1985) noted that firms engaging in comprehensive performance measurement
realized improvements in overall productivity. According to experts, internal measures are
generally collected and analyzed by the firm including

1. Cost

2. Customer Service

3. Productivity measures 4. Asset measurement, and

5. Quality.

External performance measurement is examined through customer perception measures and "best
practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice
benchmarking.

Components of Supply Chain Management are 1. Standardization 2. Postponement 3.

Customization

12: Theories of supply chain management

Currently there is a gap in the literature available on supply chain management studies: there is no
theoretical support for explaining the existence and the boundaries of supply chain management. A
few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al.
(2008b) have tried to provide theoretical foundations for different areas related to supply chain by
employing organizational theories. These theories include:

 Resource-Based View (RBV)

 Transaction Cost Analysis (TCA)
 Knowledge-Based View (KBV)

 Strategic Choice Theory (SCT)

 Agency Theory (AT)
 Institutional theory (InT)
 Systems Theory (ST)
 Network Perspective (NP)

13: Supply chain sustainability

Supply chain sustainability is a business issue affecting an organisation’s supply chain or logistics
network and is frequently quantified by comparison with SECH ratings. SECH ratings are defined
as social, ethical, cultural and health footprints. Consumers have become more aware of the
environmental impact of their purchases and companies’ SECH ratings and, along with
nongovernmental organisations ([NGO]s), are setting the agenda for transitions to organically-
grown foods, anti-sweatshop labour codes and locally-produced goods that support independent
and small businesses. Because supply chains frequently account for over 75% of a company’s
carbon footprint[10] many organisations are exploring how they can reduce this and thus improve
their SECH rating.

14: Components of supply chain management integration

The management components of SCM

The SCM components are the third element of the four-square circulation framework. The level of
integration and management of a business process link is a function of the number and level,
ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan,
1985). Consequently, adding more management components or increasing the level of each
component can increase the level of integration of the business process link. The literature on
business process re-engineering,[11] buyer-supplier relationships,[12] and SCM[13] suggests
various possible components that must receive managerial attention when managing supply
relationships. Lambert and Cooper (2000) identified the following components:

 Planning and control

 Work structure
 Organization structure
 Product flow facility structure
 Information flow facility structure
 Management methods
 Power and leadership structure
 Risk and reward structure
 Culture and attitude

References:-

1. http://en.wikipedia.org/wiki/Supply_Chain_Management

2. http://en.wikipedia.org/wiki/Inventory_control_system

3. http://lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html

4. http://www.work.com/inventory-management-systems-127/

5. http://en.wikipedia.org/wiki/Customer_relationship_management

6. http://en.wikipedia.org/wiki/Service_management