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Supply Chain Management

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Contents
1.0 Introduction1
2.0 The Function of Supply Chain Management2
2.1 Definition of Supply Chain (SC)2
2.2 Definition of Supply Chain Management (SCM)4
2.3 The Functions of Supply Chain Management 4
3.0 The Strategic Role that Can Be Associated with The Function5 3.1 The Company’s Competitive
Strategy5
Figure 3.1 The Value Chain in a Company5
3.2 The Strategic Role of Supply Chain6
4.0 Analyse How It Can Impact on the Performance of Organization7 5.0 How to Successful
Implementation of This Role 8
5.1 Achieving Strategic Fit8
Table 5.1 Impacts of Customer Needs on Implied Demand Uncertainty9 Customer need9
Figure 5.1 Cost-Responsiveness Efficient Frontier10
Figure 5. 4 Fits Between Competitive and Functional Strategies12 5.2 Obstacles to Achieving Strategic
Fit13
5.3 Drivers of supply chain performance 14
6.0 Conclusion17
7.0 Reference 17
1.0 Introduction
Supply chain management (SCM) is a concept that has flourished in manufacturing industry, and it is the
management of all the activities in any of the companies involved in a supply chain to provide the highest
possible level of customer service at minimum cost. So, supply chain management links to the corporate
performance tightly. This document aims to (1) reveal the strategic role that can be associated with the
functions of Supply Chain Management, (2) analyse how it can impact on the performance of
organisation, and (3) give an outline of what is involved in the successful implementation of this role.
Relevant examples and discussion are mainly based on the Wal-Mart supermarket.
2.0 The Function of Supply Chain Management

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2.1 Definition of Supply Chain (SC)
A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The
supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses,
retailers, and customers themselves. Within each organization, such as a manufacturer, the supply chain
includes all functions involved in filling a customer request. These functions include, but are not limited
to, new product development, marketing, operations distribution, finance, and customer service. For
example, a customer waling into a Wal-Mart store to purchase detergent, the supply chain of Wal-Mart
will be illustrated in Figure 1.1.
A supply chain is dynamic and involves the constant flow of information, product and funds between
different stages. Each stage of the supply chain performs different processes and interacts with other
stages of the supply chain. Such as Wal-Mart provides the product, as well as pricing and availability
information, to the customer. The customer transfers funds to Wal-Mart. Wal-Mart convey point-of-sale
data as well as replenishment orders to the distribution centre (DC), which transfers the replenishment
order via trucks back to the store. Wal-Mart transfers funds to the distributor after the replenishment. The
distributor also provides pricing information and sends delivery schedules to Wal-Mart. Similar
information, material, and fund flows take place across the entire supply chain.
Figure 1.1 Stages of Wal-Mart Supply Chain
This example illustrate that the customer is an integral part of the supply chain. The primary purpose for
the existence of any supply chain is to satisfy customer needs, in the process generating profits for itself.
Supply chain activities begin with a customer order and end when a satisfied customer has paid for his
or her purchase. A typical supply chain may involve a variety of stages. These supply chain stages are
shown in figure 1.2 and include the following:
Customers
Retailers
Wholesalers/distributors
Manufacturers
Component/raw material suppliers
Each stage in Figure 1.2 need not be present in a supply chain. The appropriate design of the supply
chain will depend on both the customer’s needs and the roles of the stages involved in filling those
needs.
Figure 1.2 Supply Chain Stages
2.2 Definition of Supply Chain Management (SCM)
SCM is originated and flourished in the manufacturing industry. The first signs of SCM were perceptible
in the JIT delivery system as part of the Toyota Production System (Shingo 1988). Two typical definitions,
which link SCM to the general strategic objectives of organisation, are cited as follow: Supply chain
management is the management of all the activities in any of the companies involved in a supply chain
to achieve two things: to provide the highest possible level of customer service at minimum cost. Supply-
Chain Management is the organization of the overall business processes to enable the profitable
transformation of raw materials or products into finished goods and their timely distribution to meet
customer demand.

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Actually, SCM looks across the entire supply chain, rather than just at the next entity or level, and aims
to increase transparency and alignment of the supply chain’s coordination and configuration, regardless
of functional or corporate boundaries (Cooper and Ellram 1993).
2.3 The Functions of Supply Chain Management
The primary function of the supply chain management might be said to be the provision of goods and /or
services required by customers and to provide appropriated form, time, place and quantity utilities in the
package offered. However, the chain also acts as a medium for the exchange of information and the
communication of orders or instructions. Also, as well as providing for the flow of goods, it provides a
channel for the flow of money form customers, which is the normal reward for the supplier. There is a
fourth object of exchange, according to the interaction model of the Industrial Marketing and Purchasing
Group, and this incorporates social values, which are involved in the interpersonal relationships between
suppliers and customers.
3.0 The Strategic Role that Can Be Associated with The Function
Strategic supply chain management includes strategic planning, monitoring and assessing, strategic
management of quality, strategic management of material flow/information flow/funds flow, strategic
management of cost and add value, strategic management of supplier relationship, strategic
management of human resources in the supply chain and strategic development of supply chain, etc.
Comparing with traditional purchasing and supply management, strategic supply chain management
covers more fields, the strategic role of it should be linked to other functional strategies; particular
business units’ strategies; and the corporate level where there are perceived synergistic benefits.
3.1 The Company’s Competitive Strategy
A company’s competitive strategy defines 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 reasonable
quality products at low process. 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. Thus, a firm’s competitive strategy is based on how the customer prioritises
product cost, product delivery or response time, product variety, and product quality. Competitive
strategy targets one or more customer segments and aims to provide products and services that will
satisfy these customers’ needs.
To see the relationship between competitive strategy and supply chain strategy, we should start with the
value chain for any organization, as shown in Figure 3.1
Figure 3.1 The Value Chain in a Company
The value chain begins with new product development, which creates pacifications for the product.
Marketing and sales generates demand by publicizing the customer priorities that the product and
services will satisfy. Marketing also brings customer input back to new product development. Using new
product specifications, operations transform inputs to outputs to create the product. Distribution either
takes the product to the customer or brings the customer to the product. Service responds to customer
request during or after the sale. Finance, accounting, information technology and human resources
support and facilitate the functioning of the value chain.

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