Key Issues in Scm

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Key issues in scm

The supply chain management issues concern activities of the firm at various levels of decision

making, ranging from operational level to strategic level via tactical level.

The strategic level : The decision making at this level is made with long term objectives andwith long lasting effects. These include decisions regarding location of various facilities,

including the manufacturing plant, distribution warehouses and the structure of the distribution

channel.

The tactical level: Decision making at this level is concerned with purchasing and production

functions, inventory policies and transportation strategies. These decisions will be usually

updated on an annual basis.

The operational level: Decision making at operational level will concern day to day

management of activities such as scheduling, routing and vehicle loading etc.

Your text provided details of some of the key issues identified by the authors. Your text is laid

out in that line. The key issues in contemporary supply chain management are:

Configuration of distribution network : This issue deals with the design of adistribution network to serve a specific market. This will consist of a set of warehouses

and retail outlets, together with the manufacturing plant and supply sources. The design

will be based on consideration of location and capacity of each of these elements. The

total network cost will include the costs of inventory at various levels and costs of

transportation between various facilities. This will also determine the level of service

available to the customers.

Inventory control: This is concerned with the levels of inventory to be held at variouspoints in the supply chain. As inventory represents costs, the sensible approach is to hold

as low an inventory as possible but businesses are forced to hold inventories as a buffer to

counter the affects of an uncertain demand. How to minimise the uncertainty and

therefore the necessity of holding unnecessary inventory which increases the cost at the

end?? This is one of the key issues in supply chain management.

Distribution strategy: The distribution strategy is concerned with the distribution of thefirm's products. There are several strategies available such as cross-docking, the classical

distribution strategy or direct shipping. Which one is the best suitable for the firm to

achieve its supply chain and corporate goals??

Supply chain integration and strategic partnering: This is concerned with thecomplex issue of strategic inter organisational partnership for achieving competitiveadvantage. This is about sharing of information and efficient use of the information for

coordinating business processes to deliver a superior value to the customers. How to

achieve this and what are the challenges? This is one of the emerging issues in supply

chain management.

Product design: This is concerned with the design of the product and its impact on totalcost of the product. How does the design of a product affect the various cost elements

within the supply chain? It is possible that the design determines the strategies to be


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followed regarding inventory or transportation. The design may also determine the length

of the product life cycle and the extent of uncertainty associated with demand for this

product. How to leverage design to achieve supply chain management objectives.

Information technology and decision support systems: The enabling role ofinformation and communication technologies has been identified. The concerns of

contemporary supply chain management are the efficient use of modern technologyincluding the Internet and computerised decision support systems. The technology allows

acquisition of vast quantity of data, information and their subsequent processing in

accordance with selected decision criteria. Will these technologies emerge as key

determinants of success in the management of supply chains?

Customer value: The key issue is the definition of customer value in an age ofincreasing consumer power. How will supply chains will be designed to provide value to

the customers and how will firms define value?

Definition of Supply Chain Management. A number of definitions have been proposed forsupply chain management. Perhaps the best is simply, "an integrative approach to managing

supply and distribution networks." The key word is "integrative," making the chain work better

and at lower cost than would be possible by managing each segment of the chain independently.

Another way of defining supply chain management is to state that it is the management of

physical materials, services, information, money, and time across and between organizations in a

business relationship in a manner that achieves the objectives of all the organizations at the least

total cost.

Objectives of Supply Chain Management. Some common goals of supply chain management

include: Reduce waste and nonvalue-added activities (i.e. cost reduction) including excess

inventory, increase customer service/responsiveness, improve supply chain communication(speed/timeliness, accuracy of information, information sharing), reduce cycle time (e.g. new

product development, supply leadtime), improve coordination of efforts (continuous

improvement, understanding of goals) (Ellram 1994).

Examples of Competitive Advantage for a Supply Chain. Competitive advantage accrues to

supply chains in a variety of ways. Some of these include:

Ability to maximize leverage with other supply chain members Ability to identify and manage cost drivers Optimization of supply chain capacities/release of unused capacity/no added capital

balanced supply/demand throughout the chain

Improvement in total supply chain response time Leverage technologyadoption of current technology by other supply chain members Improved sourcing processes that enable optimal commodity strategies Improved cash flow throughout the chain


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Benchmarks and performance measures that represent the integrated operation of chainmembers rather than individual company results

Improved competitiveness of the supply base resulting from upgrades necessary toparticipate in the supply chain

Ability to tier strategies and implement enhanced business strategies

Lower total cost of ownership for purchased materials and services Improved economic value added (EVA) throughout the chain Reduced cycle times across the chain Reduced transaction costs for supply requirements Reduced supply process costs Ability to charge lower prices for products Ability to provide higher quality products Improved ability to consistently meet customer requirements for quality Improved ability to meet customer delivery requirements Improved Ability to provide improved customer service before, during, and after the sale

transaction

Ability to more effectively communicate with customers to determine their requirements

Concept of Core Competency. Supply chains, not surprisingly, often develop competitive

advantages around their core competencies. Core competencies can be defined as those activities

that a firm does best and most cost-effectively, and which are central or "core" to success in its

business. Thus there are some firms that only market, outsourcing all manufacturing, production,

and sourcing activities, because their core competency is marketing. The core competency

concept must be kept in mind when designing supply chains because, in an ideal supply chain,

each member will perform those things that are their core competencies and assign to other chain

members those things that are not core competencies.

Supplier relationship management is a comprehensive approach to managing an enterprise's

interactions with the organizations that supply the goods and services it uses. The goal of

supplier relationship management (SRM) is to streamline and make more effective the processes

between an enterprise and its suppliers just as customer relationship management (CRM) is

intended to streamline and make more effective the processes between anenterpriseand its

customers.

SRM includes both business practices and software and is part of the information flow

component ofsupply chain management(SCM). SRM practices create a common frame of

reference to enable effective communication between an enterprise and suppliers who may usequite different business practices and terminology. As a result, SRM increases the efficiency of

processes associated with acquiring goods and services, managing inventory, and processing

materials.
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Push pull

A push strategy means that you put all your efforts in pushing the product into the market. Sales people

would use the term hard selling. Pushing means that you see how to stock your distribution channels

up to the roof and then expect the pressure of inventory will make them sell your product, promote itand push it rather than competitor products. The benefit of a push strategy is that you dont need large

marketing budgets; the downside is that it can ruin your relationships.

A pull strategy is when you invest so much into advertisement and marketing, that consumers demand

your product and the retailer has no choice but stocking it, it is pulled out of his hands. Downside: VERY

expensive, benefit: Your product is so popular than you are in abetter position to negotiate.

You can combine the two depending how you distrubute the weight of your campaign.

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Key Issues in Scm