SUPPLY CHAIN MANAGEMENT

In todays global market, managing supply chain becomes key factor for the successful business
and Supply Chain Management (SCM) is a key strategic factor for increasing organizational
effectiveness and cost-effectiveness. Inventory management is an important area and represents
one of the most significant opportunities for cost savings in an industry. Inventory at different
points of the supply chain has serious impact on the cost and performance. The scenario
considered in the supply chain model has nodes in different stages with many suppliers,
manufacturers, distributors, retailer operating under the continuous review policy.
Supply Chain Management (SCM) is a set of approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed
at the right quantities, to the right locations and at the right time in order to minimize systemwide costs while satisfying service level requirements. Recently, however, there has been an
increasing attention placed on the performance, design, and analysis of the supply chain as a
whole. While managing a supply chain, decisions are made at three levels: strategic (long-term),
tactical (medium-term), and operational (short term or day-to-day decisions). The operational
decisions focus on controls and performance measures such as inventory investment, service
level, quality, cost, etc.
ORGANO:

Our chosen company uses the Supply Chain which is in combination, as the factory itself
manufactures the water and purifies it in its final form and then sells them to the consumers
directly. However, it acquires its raw materials from its suppliers such as bottles, lids and
chemicals, then processes the water and runs it through the process and then delivers the final
product to the consumer.

Raw
Consume
Materials Producer
r
acquired
Now this supply chain is an efficient in nature as it helps to reduce the cost and minimize the
lead time to a great extent. Since the operations are small in scale so maintaining the cost is very
crucial so every supplier of the raw material is carefully selected on basis of cost and quality
both. Bottles and lids both are purchased in large quantities in bulk to overcome cost
ineffectiveness. Since it a functional product the physical costs tends to rise as per the
productions so to minimize these costs, Organo constantly strives to improve its efficiency and
therefore gravitates towards a physically efficient supply chain.
Make-or-Buy Decisions:
They buy components such as bottles and lids from external sources instead of producing these
internally.
Reasons for Buying are:
1. It frees the firms management to deal with its core competence which in this case is
mineralizing water that is further poured in bottles in the mineralizing plant.
2. The firm has inadequate managerial and technical resources to support productions of
components such as bottles and lids as the plant is set up only for mineralizing water.
This inadequacy is due to low investments.

3. The firm being in introduction stage has low demand so the quantity of lids and bottles
needed is also low. So setting up plant for lids and bottles is not feasible.
4. There is inadequate capacity as there is only one factory so there is no available space for
setting up plants for lids and bottles.

The supply chain manager uses following strategies to enhance productivity:

1. Low-Cost Strategy:
They select suppliers based primarily on cost. Which means these suppliers should have
the ability to design low cost bottles and lids that meet the functional requirements,
minimize inventory, and drive down lead time.
2. Few Suppliers strategy for Bottles:
The firm has a single supplier for bottles namely, Continental plastic.
3. Many Suppliers strategy for Lids:
a) There are many different suppliers for lids. The lowest cost supplier with best delivery
and quality is chosen.
b) Long-Term partnering is not the goal of the firm when it comes to Lids.
4. Suppliers for chemicals:
The firm use chemicals purchased from multinational companies such as ICI and White
Chemicals.

Distribution System:
By Road: The distribution is mainly done by road and a Shehzore van is used for pick-up and
delivery on time, with no damage, paper work in order and at low cost.

Warehousing:
For stocking inventory there is one big hall in the factory for warehousing purpose. The
inventory is stocked in the following manner though;
1. Buffer Stock: The firm uses buffer inventory to reduce the incidence or severity of stockout situations in sales and thus provide better customer service. At an average 60-70
bottles of water bottles are kept as a buffer.

2. Standardization: The firm uses standardized bottles each of 19 liters and a standardized
design for lids is used.