Definition

Control of inventory by managing the flow of

materials i.e. inflow of raw materials, services and outflow of finished goods is known as the Supply Chain Management. The three vital functions of a firm are:
Purchase of Raw Materials Transportation & Services

Processes & Production

Distribution & (Marketing)

Supply Chain management is basically the control of purchase and distribution activity.

Supply Chain Management

The inward flow of materials (purchases)depends upon

the performance of the suppliers. The outward flow of materials (products) depends upon the distribution networks.
_ The firm may be a producer of Consumer goods on a mass scale OR _ The firm may be a producer of products to customers requirements (customized products)

Backward Vertical Integration

If a firm is in the production of a product with very high

market demand on a consistent and sustainable basis and also has strong financial footings, it may have a backward vertical integration with its major supplier/s
Backward Vertical Integration means, buying controlling

interest in the suppliers firm.

Tiers of Suppliers
The product of one firm could be a raw material

for the other. First Tier of suppliers: Are those who have a direct link with the manufacturing (Buying) Second & Third Tier of Suppliers: Are those on whom the first tier of supplier depends

Functions of the Supply Chain Management

Basically speaking there are five functions/ people

involved in the supply chain management i.e. Suppliers, Purchase, Production Control, Distribution and the Customers. Successful Organizations tend to have a Supply Chain Integrated system. Where the suppliers, Internal Activities (Purchase, Prod. Control and Distribution) and the Customers become one unit in a way that they behave as being from the same organization however maintaining their entities.

 Phase 1: Independent Supply Chain Entities

Supply Chain Integration

Supplier

Purchase

Prod. Cont
Distribution

Customers

 Phase 2: Internal Integration

Supplier

Purchase

Prod. Cont

Distribution

Customers

 Phase 3: Supply Chain Integration

Supply Chain Integration

Purchase

Supplier

Prod. Cont

Customers

Distribution

Purchase
Purchase actually is the management of the acquisition

Process. It is an activity to see which suppliers to use and when? Purchase goes through five steps:

1. Recognize a need:
2. Selection of Supplier 3. Placement Of Order

4. Tracking Of Order
5. Receiving of Ordered Goods

Supplier Relations
Purchase Supplier Relations

1. Competitive Orientation: Short term 2. Cooperative Orientation: Long term -Centralized Vs Local Purchase Or a Compromise Policy

- Outsourcing Or Sub-Contracting & Flexibility in the supply chain

Value Analysis
It is a systematic effort to reduce the cost or to improve

the performance. This needs to be a continuous activity of Production, engineering and purchase dept. This involves 5 steps.

1. What is the function of the item/s being purchased? 2. Is that function vital? 3. Can a standard part of lower cost which may serve the same purpose be identified? 4. Can the products substitute be designed which can be produced more quickly, more efficiently and more economically. 5. Can such a feature be added to the product that the customer would value high?

Distribution
Outbound flow of materials is known as distribution. It

can be:

a) Manufacturer
b) Warehouse

Customer
Retailers

(Involving Storage and transport)

Duties of Distribution Manager

The distribution manager has to decide the

following:

1. Where to stock the finished goods? (Forward Placement or Backward placement ) 2. What Transport mode to use? (By road or by Railway or by air or by sea) 3. Scheduling & Routing (More than one customers could be dealt at a time if on the same rout)