SUPPLY CHAIN MANAGEMENT Chapter-1

1. Why is Supply chain management more popular today than 20 years ago? Supply chain management (SCM) is the term used to describe the management of the flow of materials, information, and funds across the entire supply chain, from suppliers to component producers to final assemblers to distribution (warehouses and retailers), and ultimately to the consumer. Supply chain management has generated much interest in recent years for a number of reasons. Many managers now realize that actions taken by one member of the chain can influence the profitability of all others in the chain. Firms are increasingly thinking in terms of competing as part of a supply chain against other supply chains, rather than as a single firm against other individual firms. Also, as firms successfully streamline their own operations, the next opportunity for improvement is through better coordination with their suppliers and customers. The costs of poor coordination can be extremely high. However, because of trade promotions, volume discounts, long lead times, full-truckload discounts, and end-of-quarter sales incentives the orders seen at the manufacturers are highly variable. In fact, the variability increases in moving up the supply chain from consumer to grocery store to distribution center to central warehouse to factory, a phenomenon that is often called the bullwhip effect. E-Business is fueling even stronger excitement. E-Business facilitates the virtual supply chain, and as companies manage these virtual networks, the importance of integration is magnified. Thats why supply chain management is so popular now a day. 2. How can a small business benefit from SCM? Two major advantages that small business will realize as a result of implementing the latest supply chain management systems are economies of scale and higher system efficiencies. Benefits of the supply chain for small businesses:

Supply chain software helps the small businesses to lower the costs and makes the supply chain more effective and efficient. When sales are down and costs are rising, supply chain management enables an organization to maximize available cash and resources.

The outsourcing of the supply chain processes allows the small businesses to focus on the core competencies and to work towards achieving organizational goals. A 40 percent return on investment can be obtained by lowering costs, improving productivity, and increasing opportunities with supply chain. The global supply chain process allowed small companies to export their products to other countries at less costs.

3. How do your customer benefit from SCM? Our customer can be benefited from SCM: Accurate planning improves customer service and in turn customer retention. Detailed order-status information results in higher customer satisfaction Provide quality products and services at competitive prices. Have the ability to respond to unanticipated demand so you can commit to more orders. Respond to changing customer requirements quickly and efficiently. Share performance information and common goals among partners Chapter-2 1. When should a firm outsourcing instead of making the items in house? Often companies purchase subcomponents used to make their products instead of making them in their in-house manufacturing facilities. Buying services, products, or components of products from outside vendors instead of producing them is called outsourcing. The decision whether to produce a subcomponent in-house or to buy it externally from an outside vendor is called a "make or buy (outsource)" decision. There are many reasons that companies outsource, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about. Depending on location, it may also be more affordable to outsource to companies located in different countries.

Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries. 2. What factors should be consider for choosing suppliers? We have to consider following factors for choosing suppliers: Quoted Price Pricing terms Replenishment lead time On-time performance Supply flexibility Delivery frequency/minimum lot size Supply quality Inbound transportation cost Information coordination capability Exchange rates, taxes and duties Supplier viability 3. Describe centralized and decentralized purchasing and their advantage. Centralized purchasing involves having a central location within the organization to buy goods and services for the organization. An organization has a central procurement department with specialized buyers, project managers would then request certain purchases to be done for their project needs and the procurement department carries out those purchase requests. The centralized purchasing department has individuals who handle bids, quotes and ensure that the corporate purchasing standards are met during a purchasing process. Decentralized purchasing involves having the project managers, subsidiary, office or departments purchasing their own products or services. Decentralized purchasing normally has individuals attached to the project manager or office responsible for the purchasing needs of the project or office. Procurement & Advantages Disadvantages

Support Centralized Better IT asset management Ensure quality and standards Better accountability Shorter approval Decentralized Faster support More secure and faulttolerant Chapter-4 1. What are the advantages of reducing size of supply base? The benefits of a smaller supply base lie in the area of reduced costs: lower prices by leveraging volume with fewer suppliers, fewer transactions to manage, and better collaboration with the vital few, high-performing suppliers that remain. 2. What makes supplier alliances successful? The following attributes of supplier alliances were found to be significantly related to partnership success: trust and coordination, interdependence, information quality and participation, information sharing, joint problem solving, avoiding the use of severe conflict resolution tactics, and the existence of a formal supplier/commodity alliance selection process. 3. Describe how to reward and punishes to suppliers? Suppliers can be rewarded by using penalties to keep suppliers on track and also incentives to encourage suppliers to strive for success, beyond whats expected. The incentive approach would be to pay the Supplier the reduced price where they could earn the full price by meeting performance goals. The penalty approach would be to assess damages for each time they failed to meet the committed performance. Longer RFP cycles Longer support cycle Everything is in one place Unnecessary asset duplication Technology compatibility issues Difficult to manage