M-1 Concept of Supply Chain

Management
ABDULLAH AL MASUD
LEARNING OUTCOME:
1. What is Supply Chain Management.
❖ Why Supply Chain is so Important
✓ Improve customer Position
✓ Improve Financial Position
✓ Reducing Operating costs
2. The Evaluation of Supply Chain
3. The Evolution of the Industrial Ages: Industry 1.0 to 4.0

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4. Supply Chain Management & It’s Models
❖ SCOR Model (Supply Chain Operation Reference)
❖ GSCF Model ( Global Supply Chain Forum)
❖ The Frazelle Framework of Supply Chain Logistics
 What is Supply Chain Management?

What is Supply Chain Management?

Supply chain management in not only a process served to generate a cost
reduction in the budget or a mission to create greater operational efficiencies
within an organization. While these are a part of the whole ecosystem, modern
supply change management encompasses the strategic alignment of end-to-
end business processes to realize market and economic value, as well as giving a

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firm the Competitive Advantage over their business rivals.
In recent times, the dawn of the digital age has brought wholesale transformation to
the world of commerce. Only twenty years ago, these processes were arduous,
labor intensive, time consuming and disorganized. It now may seem like ancient
history; delivery times have gone from two weeks to a month down to a turnaround of
hours in some cases. Automated systems and high-speed communication have
paved the way for supply chain management and its increased demand.
CONCEPT

Why
Supply Chain Management
is So Important?

1. IMPROVE CUSTOMER
SERVICES

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2. IMPROVE FINANCIAL
POSITION

3. REDUCE OPERATING COSTS

 Why is Supply Chain Management So Important?

Why is Supply Chain Management So Important?

Today, more than ever before, supply chain management has
become an integral part of business and is essential to any
company’s success and customer satisfaction. Supply chain

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management has the power to boost customer service, reduce
operating costs and improve the financial standing of a
company, but how does this work?
 Why is Supply Chain Management So Important?
• IMPROVE CUSTOMER SERVICES
– Customers expect to receive the correct product mix and quantity to be
delivered on time. For example, if you buy five books from
AMAZON and only two of the actual titles arrive, one is
an entirely different book and two are missing, the
customer will lose faith in Amazon, prompting them to
leave a bad review and hinder them from returning to the
platform.
– Products need to be on hand in the right location. Customer satisfaction is
tarnished if your car’s brake pads fail and the auto repair
shop is delayed in making the repairs because parts are
not available in-house.
– Follow up support after a sale must be done quickly. When an appliance

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store sells a furnace with a warranty and it breaks down
when temperatures are below freezing, it is a great
possibility the customer will be irate if the heating unit
cannot be fixed immediately.
 Why is Supply Chain Management So Important?

• REDUCE OPERATING COSTS

– Decreases Purchasing Cost – Cost reduction remains the top priority of the
CPOs. This eventually contribute to the bottom line/ Profitability of the
company
– Decrease Production Cost - Any delay in production can cost a company ten of
thousands of dollars. This factor makes supply chain management ever more
important. Reliable delivery of materials to assembly plants avoids any costly
delays in manufacturing.

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– Decrease Total Supply Chain Cost - Wholesale manufacturers and retailer
suppliers depend on proficient supply chain management to design a network
that meets customer service goals. This gives businesses a competitive edge in
the marketplace.
 Why is Supply Chain Management So Important?

• IMPROVE FINANCIAL POSITION

– Insert Profit Leverage - Businesses value supply chain managers
because they help control and decrease supply chain expenditures.
– Decrease Fixed Assets - Supply chain managers decrease the use of
large fixed assets such as plants, warehouses and transportation
vehicles, essentially diminishing cost.
– Increases Cash Flow - Firms appreciate the added value supply chain

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management contributes to the speed of product flows to customers
 The Evolution of Supply Chain
Management

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 The Evolution of Supply Chain Management
The evolution of supply chain management has been characterized by
an increasing degree of integration of separate tasks, a trend that
was underlined in the 1960s as a key area for future productivity
improvements since the system was highly fragmented. Although the
tasks composing logistics have remained relatively similar, they
initially consolidated into two distinct functions related to materials
management and physical distribution during the 1970s and 1980s.
This process moved further in the 1990s as globalization incited a

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functional integration and the emergence of logistics in a true sense;
all the elements of the supply chain became part of a single
management perspective.
The Evolution of the Industrial Ages:
Industry 1.0 to 4.0

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The Evolution of the Industrial Ages:
Industry 1.0 to 4.0

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The Evolution of the Industrial Ages: Industry 1.0 to 4.0

Industry 1.0 The late 18th century introduced mechanical production

facilities to the world. Water and steam powered machines were
developed to help workers in the mass production of goods. The first
weaving loom was introduced in 1784. With the increase in production

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efficiency and scale, small businesses grew from serving a limited number
of customers to large organizations with owners, manager and employees
serving a larger number. Industry 1.0 can also be deemed as the
beginning of the industry culture which focused equally on quality,
efficiency and scale.
 The Evolution of the Industrial Ages: Industry 1.0 to 4.0

• Industry 2.0 The beginning of 20th century marked the start of the second industrial revolution
– Industry 2.0. The main contributor to this revolution was the development of machines running
on electrical energy. Electrical energy was already being used as a primary source of power.
Electrical machines were more efficient to operate and maintain, both in terms of cost and effort
unlike the water and steam-based machines which were comparatively inefficient and resource
hungry. The first assembly line was also built during this era, further streamlining the process of

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mass production. Mass production of goods using assembly line became a standard practice. This
era also saw the evolution of the industry culture introduced in Industry 1.0 into management
program to enhance the efficiency of manufacturing facilities. Various production management
techniques such as division of labor, just-in-time manufacturing and lean manufacturing
principles refined the underlying processes leading to improved quality and output. American
mechanical engineer Fredrick Taylor introduced the study of approached to optimize worker,
workplace techniques and optimal allocation of resources
 The Evolution of the Industrial Ages: Industry 1.0 to 4.0

• Industry 3.0 The next industrial revolution resulting in Industry 3.0 was brought about and spurred by the
advances in the electronics industry in the last few decades of the 20th century. The invention and
manufacturing of a variety electronic devices including transistor and integrated circuits auto- mated the
machines substantially which resulted in reduced effort, increased speed, greater accuracy and even
complete replacement of the human agent in some cases. Programmable Logic Controller (PLC), which
was first built in 1960s was one of the landmark inventions that signified automation using electronics.
The integration of electronics hardware into the manufacturing systems also created a requirement of

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software systems to enable these electronic devices, consequentially fueling the software development
market as well. Apart from controlling the hardware, the software systems also enabled many
management processes such as enterprise resource planning, inventory management, shipping logistics,
product flow scheduling and tracking throughout the factory. The entire industry was further automated
using electronics and IT. The automation processes and software systems have continuously evolved with
the advances in the electronics and IT industry since then. The pressure to further reduce costs forced
many manufacturers to move to low-cost countries. The dispersion of geographical location of
manufacturing led to the formation of the concept of Supply Chain Management.
 The Evolution of the Industrial Ages: Industry 1.0 to 4.0

• Industry 4.0 The boom in the Internet and telecommunication industry in the 1990’s revolutionized the
way we connected and exchanged information. It also resulted in paradigm changes in the manufacturing
industry and traditional production operations merging the boundaries of the physical and the virtual
world. Cyber Physical Systems (CPSs) have further blurred this boundary resulting in numerous rapid
technological disruptions in the industry. CPSs allow the machines to communicate more intelligently with
each other with almost no physical or geographical barriers. The Industry 4.0 using Cyber Physical Systems
to share, analyze and guide intelligent actions for various processes in the industry to make the machines

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smarter. These smart machines can continuously monitor, detect and predict faults to suggest preventive
measures and remedial action. This allows better preparedness and lower downtime for industries. The
same dynamic approach can be translated to other aspects in the industry such as logistics, production
scheduling, optimization of throughput times, quality control, capacity utilization and efficiency boosting.
CPPs also allow an industry to be completely virtually visualized, monitored and managed from a remote
location and thus adding a new dimension to the manufacturing process. It puts machines, people,
processes and infrastructure into a single networked loop making the overall management highly
efficient.
 Supply Chain Management & It’s Models

• SCOR Model (Supply Chain Operation Reference)

• GSCF Model ( Global Supply Chain Forum)
• The Frazelle Framework of Supply Chain Logistics
In general Supply chain modeling is used to test alternative supply chain decisions,
evaluate performance and analysis weakness of the supply chain by supply chain analyst or

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managers. Significant efforts have been put into the creation of an ideal supply chain model
so that accurate design on improvements in performance can be made.
In this various factors have to be considered. This involves selecting either the top down
approach of working from a comprehensive to a detailed model or from a strategic to an
operational mode. Next to be considered, are the modeling methods used to date, namely,
network design, ‘rough cut’ and simulation which is suitable to the problem scenario you are
looking at
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 SCOR Model and it’s Origination
• The supply chain operations reference model (SCOR) is a management tool used to
address, improve, and communicate supply chain management decisions within a company
and with suppliers and customers of a company. The model describes the business
processes required to satisfy a customer’s demands. It also helps to explain the processes
along the entire supply chain and provides a basis for how to improve those processes.
• The SCOR model was developed by the supply chain council with the assistance of 70 of
the world’s leading manufacturing companies. It has been described as the “most

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promising model for supply chain strategic decision making. The model integrates business
concepts of process re-engineering, benchmarking, and measurement into its framework.
This framework focuses on five areas of the supply chain: plan, source, make, deliver, and
return. These areas repeat again and again along the supply chain. The supply chain council
says this process spans from “the supplier’s supplier to the customer’s customer.
 SCOR Model Defining
• Plan: Demand and supply planning and management are included in this first step. Elements include balancing
resources with requirements and determining communication along the entire chain. The plan also includes
determining business rules to improve and measure supply chain efficiency. These business rules span
inventory, transportation, assets, and regulatory compliance, among others. The plan also aligns the supply
chain plan with the financial plan of the company
• Source: This step describes sourcing infrastructure and material acquisition. It describes how to manage
inventory, the supplier network, supplier agreements, and supplier performance. It discusses how to handle
supplier payments and when to receive, verify, and transfer product.
• Make: Manufacturing and production are the emphasis of this step. Is the manufacturing process make-to-

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order, make-to-stock, or engineer-to-order? The make step includes, production activities, packaging, staging
product, and releasing. It also includes managing the production network, equipment and facilities, and
transportation.
• Deliver: Delivery includes order management, warehousing, and transportation. It also includes receiving
orders from customers and invoicing them once product has been received. This step involves management of
finished inventories, assets, transportation, product life cycles, and importing and exporting requirements.
• Return: Companies must be prepared to handle the return of containers, packaging, or defective product. The
return involves the management of business rules, return inventory, assets, transportation, and regulatory
requirements.
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 GSCF Model and it’s Origination
The model applied to the recommendations for GSL is the GSCF framework.
The Global Supply Chain Forum (GSCF) developed a definition of supply
chain management (Cooper, Metal 1997). The GSCF defines supply chain
management as “the integration of key business processes from end user
through original suppliers that provides products, services, and information
that add value for customers and other stakeholders” (Lambert, D. et al

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1998:1).
This model was chosen to be a framework for the recommendations as it
encompasses all areas of the organizations, valuing input from the stake
holders. It will focus the organization on key issues, and highlight areas that
either not operating to full potential or that are wasting resources.
 GSCF Model Defining
• Customer Relationship Management: Provides the structure how relationship with
customers are developed and maintained.
• Customer Service Management: Provide the firm’s face to customer, a single source
of customer information.
• Demand Management: Balance the customers’ requirement with supply chain

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capabilities by forecasting & synchronizing.
• Order Fulfillment: Includes all activities necessary to define customer
requirements, design & networks, integrates firm’s function to meet customer
requests while minimizing the total delivery cost.
 GSCF Model Defining
• Manufacturing Flow management: Deals with making the product and establishing
manufacturing flexibility.
• Supplier Relationship Management: Provides the structure for how relationship
with supplier
• Product Development & Commercialization: Provides the structure for developing

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new products
• Returns Management: Managing all activities related to returns, reverse logistics,
gate keeping and avoidance.
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 Frazelle’s Model and it’s Origination
Frazelle Model is presented best practice in Supply Chain@logistics, the author, Ed.
Frazelle recommends the implementation of Right Chain model. He compared
Right Chain versus Wrong Chain. The author’s suggestion is to get off the Wrong
Chain from your vision
Right Chain integrates all components of the SC and the performance indicators are
global and not local where performances are focused to maximize the level of each

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element of the logistic chain. Because the
Wrong Chain is not a model to be followed in the case studies that we present to
you we will back on the structure of the set of indicators for measuring the
performance of a supply chain, so as to educate human resources towards a
systemic vision, focused on processes and integration.
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Thank You!