Supply Chain Supply Chain ManagementManagement

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Supply Chain Supply Chain ManagementManagementA supply chain is a set of organizations directly linked

by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management'

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

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Supply Chain Supply Chain ManagementManagement

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The Supply ChainThe Supply Chain

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts

TransportationCostsInventory CostsManufacturing Costs

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The Supply Chain – Another ViewThe Supply Chain – Another View

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts Transportation

CostsInventory CostsManufacturing Costs

PlanPlan Source Source Make Make Deliver Deliver Buy Buy

Supply Chain for Service Supply Chain for Service ProvidersProviders

More difficult than manufacturingDoes not focus on the flow of physical goodsFocuses on human resources and support

servicesMore compact and less extended

Value vs. Supply ChainValue vs. Supply ChainValue chain

◦ every step from raw materials to the eventual end user

◦ ultimate goal is delivery of maximum value to the end user

Supply chain◦ activities that get raw materials and

subassemblies into manufacturing operation

Terms are used interchangeably

Supply Chain Supply Chain Management (SCM)Management (SCM)Managing flow of information through

supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs

Keys to effective SCM◦ information◦ communication◦ cooperation◦ trust

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What Is Supply Chain Management (SCM)? What Is Supply Chain Management (SCM)?

A set of approaches used to efficiently integrate◦ Suppliers◦ Manufacturers◦ Warehouses◦ Distribution centers

So that the product is produced and distributed◦ In the right quantities◦ To the right locations◦ And at the right time

System-wide costs are minimized and Service level requirements are satisfied

Plan Source Make Deliver Buy

WHAT IS SUPPLY CHAIN MANAGEMENT

" Is the strategic management of activities involved in

the acquisition and conversion of materials to finished

products delivered to the customer"

SupplierManagement

Schedule /Resources Conversion

Stock Deployment Delivery

CustomerManagement

Leads to Business Process Integration

Material Flow

Information Flow

Supply chain is the system by which organizations source, make and deliver their products or services according to market demand.

Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level.

Supply chain as defined by experienced practitioners extends from suppliers’ suppliers to customers’ customers.

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History of Supply Chain ManagementHistory of Supply Chain Management

1960’s - Inventory Management Focus, Cost Control

1970’s - MRP & BOM - Operations Planning1980’s - MRPII, JIT - Materials Management,

Logistics1990’s - SCM - ERP - “Integrated” Purchasing,

Financials, Manufacturing, Order Entry2000’s - Optimized “Value Network” with

Real-Time Decision Support; Synchronized & Collaborative Extended Network

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Why Is SCM Difficult? Why Is SCM Difficult?

Uncertainty is inherent to every supply chain◦ Travel times◦ Breakdowns of machines and vehicles◦ Weather, natural catastrophe, war◦ Local politics, labor conditions, border issues

The complexity of the problem to globally optimize a supply chain is significant◦ Minimize internal costs◦ Minimize uncertainty◦ Deal with remaining uncertainty

Plan Source Make Deliver Buy

Supply Chain UncertaintySupply Chain Uncertainty

One goal in SCM:◦ respond to uncertainty

in customer demand without creating costly excess inventory

Negative effects of uncertainty◦ lateness◦ incomplete orders

Inventory◦ insurance against

supply chain uncertainty

Factors that contribute to uncertainty◦ inaccurate demand

forecasting◦ long variable lead times◦ late deliveries◦ incomplete shipments◦ product changes batch

ordering ◦ price fluctuations and

discounts◦ inflated orders

CASE STUDYCASE STUDYWHY MANAGE SUPPLY CHAINS

DIFFERENT RESPONSES OF NOKIA DIFFERENT RESPONSES OF NOKIA AND ERICSSON ON A FIRE AT ONE AND ERICSSON ON A FIRE AT ONE OF THE SUPPLIER’S FACILITYOF THE SUPPLIER’S FACILITY

◦ Supplier was Philips Semiconductors in Albuquerque, NM

Nokia:◦ Changed product design to source components

from alternate suppliers◦ For parts that could not be sourced from

elsewhere, worked with Philips to source it from their plants in China and Netherlands

◦ All done in about five days

DIFFERENT RESPONSES OF NOKIA DIFFERENT RESPONSES OF NOKIA AND ERICSSON ON A FIRE AT ONE AND ERICSSON ON A FIRE AT ONE OF THE SUPPLIER’S FACILITYOF THE SUPPLIER’S FACILITYEricsson’s experience was quite different

◦ Took 4 weeks for the news to reach upper management

◦ Realized five weeks after the fire regarding the severity of the situation.

◦ By that time, the alternative supply of chips was already taken by Nokia.

◦ Devastating impact on Ericsson $400M in potential sales was lost Part of the loss was covered by insurance.

Led to component shortages Wrong product mix and marketing problems caused:

$1.68B loss to Ericsson Cell Phone Division in 2000 Forced the company to exit the cell phone market

TOYOTA SUPPLY CHAINTOYOTA SUPPLY CHAIN

In 1997, Aisin Seiki the sole supplier of 98% of brake fluid proportioning valves (P-valves) used by Toyota

Inexpensive part (about $7 each) but important in the assembly of any car.

Saturday, February 1, 1997:Fire stopped Aisin’s main factory in the industrial area of Kariya, ◦ Two weeks to restart the production◦ Six months for complete recovery

Toyota producing close to 15,500 vehicles per day. ◦ JIT meant only 2-3 days of inventory supply

Recovery Effort by Toyota Recovery Effort by Toyota Blueprints of valves were distributed among all

Toyota’s suppliersEngineers from Aisin and Toyota relocated to

supplier’s facilitiesOther manufacturers like Brother were also

brought in Existing machinery adapted to build the valves

according to original specificationsNew machinery acquired in the spot marketWithin days, firms with little experience with P-

valves were manufacturing and delivering parts to Aisin◦ Aisin assembled and inspected valves before shipment to

Toyota ◦ About 200 of Toyota’s suppliers were involved

OutcomeOutcomeAccident initially cost:

◦7.8B Yen ($65M) to Aisin◦160B Yen (or $1.3B) to Toyota

Damage reduced to 30B Yen ($250M) with extra shifts and overtime

Toyota issued a $100M token of appreciation to their providers as a gift for their collaboration

The Need for Supply Chain The Need for Supply Chain ManagementManagementThe need to improve operations.Increasing levels of outsourcing. Increasing transportation costs.Competitive pressures.Increasing importance of e-

commerce.The need to manage inventories

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What the supply chain is notWhat the supply chain is notThe definitions described and

developed earlier and recent industry collaborative activities indicate that supply chain management is not a standalone process. Many supply chain efforts have fallen short of the potential advantages because the term is often viewed as only relating to the supply side of the business or to the purchasing function. As indicated above, supply chain management is much more that just procurement.

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Among the misunderstanding Among the misunderstanding evidenced, SCM is not:evidenced, SCM is not:

Inventory management; Logistics management; Supplier partnerships; Driven from the supply side; A shipping strategy; Distribution management; The logistics pipeline; Procurement A computer system

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Reasons for the slow growth of Reasons for the slow growth of integrated SCM include the following:integrated SCM include the following:Lack of guidelines for creating

alliances with supply chain partners.Failure to develop measures for

monitoring alliances.Inability to broaden the supply chain

vision beyond procurement or product distribution to encompass larger business processes.

Inability to integrate the company internal procedures.

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Reasons cont…….Reasons cont…….Lack of trust inside and outside a

company.

Organizational resistance to the concept.

Lack of buyin-by top managers.

Lack of integrated information systems

and electronic commerce linking firms.

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The Importance of Supply Chain Management The Importance of Supply Chain Management

Dealing with uncertain environments – matching supply and demand◦ Boeing announced a $2.6 billion write-off in 1997 due

to “raw materials shortages, internal and supplier parts shortages and productivity inefficiencies”

◦ U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals”

◦ IBM sold out its supply of its new Aptiva PC in 1994 costing it millions in potential revenue

◦ Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquake

U.S. firms spent $898 billion (10% of GDP) on supply-chain related activities in 1998

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The Importance of Supply Chain Management The Importance of Supply Chain Management

Shorter product life cycles of high-technology products◦ Less opportunity to accumulate historical data on

customer demand◦ Wide choice of competing products makes it difficult to

predict demand The growth of technologies such as the Internet enable

greater collaboration between supply chain trading partners◦ If you don’t do it, your competitor will◦ Major buyers such as Wal-Mart demand a level of

“supply chain maturity” of its suppliers Availability of SCM technologies on the market

◦ Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes

SUPPLY CHAIN INCLUDES :

◦MATERIAL FLOWS

◦INFORMATION FLOWS

◦FINANCIAL FLOWS

SUPPLY CHAIN MANAGEMENT IS FACILITATED BY :

◦ PROCESSES

◦ STRUCTURE

◦ TECHNOLOGY

Supply chain serves two functions:

◦Physical

◦Market mediation

Supply chain objectives may differ from situation to situation.

For functional products, cost efficiency is the critical factor.

For innovative products, responsiveness is the important factor.

Leanness + Agility together make up Leagility

SUPPLY CHAIN DRIVERS

Not new. Value system of Michael Porter•Why sudden interest?

– Demanding customers– Shrinking product life cycles– Proliferating product offerings– Growing retailer power in some cases– Doctrine of core competency– Emergence of specialized logistics

providers– Globalization– Information technology

SUPPLY CHAIN ELEMENTS• Supply Chain Design• Resource Acquisition• Long Term Planning (1 Year ++)

Strategic

• Production/ Distribution Planning• Resource Allocation• Medium Term Planning (Qtrly,Monthly)

Tactical

• Shipment Scheduling• Resource Scheduling• Short Term Planning (Weekly,Daily)

Operational

Supply Chain IssuesSupply Chain Issues

Quality controlProduction planning and control

Inventory policiesPurchasing policiesProduction policiesTransportation policiesQuality policies

Design of the supply chain, partnering

Operating IssuesTactical IssuesStrategic Issues

Elements of Supply Chain Elements of Supply Chain ManagementManagement

Deciding how to best move and store materialsLogistics

Determining location of facilitiesLocation

Monitoring supplier quality, delivery, and relationsSuppliers

Evaluating suppliers and supporting operationsPurchasing

Meeting demand while managing inventory costsInventory

Controlling quality, scheduling workProcessing

Incorporating customer wants, mfg., and timeDesign

Predicting quantity and timing of demandForecasting

Determining what customers wantCustomers

Typical IssuesElement

Elements of SCMElements of SCMSupply chain management involves

coordinating activities across the supply chain central to these corresponding activities at each level of the supply chain.Elements Typical Issues

Customers - Determining what products and/or services customers want

Forecasting - Predicting the quantity and timing

of customer demand.

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Elements of SCM Cont…….Elements of SCM Cont…….

Inventory - Meeting demand requirements while managing the costs of holding

inventory

Purchasing - Evaluating potential suppliers,

supporting the needs of operations

on purchased goods and services

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Elements……..Elements…….. Suppliers - Monitoring supplier quality, on-time

delivery, and flexibility maintaining supplier relations

Location - Determining the location of

facilities

Logistics - Deciding how to best move information and materials

Elements cont…..Elements cont…..

Capacity Planning - Matching supply and demand

Processing - Controlling quality, scheduling work

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Supply Chain Management – Key IssuesSupply Chain Management – Key Issues

Overcoming functional silos with conflicting goals

PurchasingManufacturingDistributionCustomer Service/Sales

Few change- overs

Stable schedules

Long run lengths

High inventories

High service levels

Regional stocks

SOURCE MAKE DELIVER SELL

Low pur-chase price

Multiple vendors

Low invent-ories

Low trans-portation

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Supply Chain Management – Key IssuesSupply Chain Management – Key Issues

ISSUE CONSIDERATIONS

Network Planning • Warehouse locations and capacities• Plant locations and production levels• Transportation flows between facilities to minimize cost and time

Inventory Control • How should inventory be managed?• Why does inventory fluctuate and what strategies minimize this?

Supply Contracts • Impact of volume discount and revenue sharing• Pricing strategies to reduce order-shipment variability

Distribution Strategies • Selection of distribution strategies (e.g., direct ship vs. cross-docking)• How many cross-dock points are needed?• Cost/Benefits of different strategies

Integration and Strategic Partnering

• How can integration with partners be achieved?• What level of integration is best?• What information and processes can be shared?• What partnerships should be implemented and in which situations?

Outsourcing & Procurement Strategies

• What are our core supply chain capabilities and which are not?• Does our product design mandate different outsourcing approaches?• Risk management

Product Design • How are inventory holding and transportation costs affected by product design?• How does product design enable mass customization?Source: Simchi-Levi

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Supply Chain Management Operations StrategiesSupply Chain Management Operations Strategies

STRATEGY WHEN TO CHOOSE

BENEFITS

Make to Stock standardized products, relatively predictable demand

Low manufacturing costs; meet customer demands quickly

Make to Order customized products, many variations

Customization; reduced inventory; improved service levels

Configure to Order many variations on finished product; infrequent demand

Low inventory levels; wide range of product offerings; simplified planning

Engineer to Order complex products, unique customer specifications

Enables response to specific customer requirements

Source: Simchi-Levi

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Supply Chain Imperatives for SuccessSupply Chain Imperatives for Success

View the supply chain as a strategic asset and a differentiator◦ Wal-Mart’s partnership with Proctor & Gamble to

automatically replenish inventory◦ Dell’s innovative direct-to-consumer sales and build-

to-order manufacturing Create unique supply chain configurations that

align with your company’s strategic objectives◦ Operations strategy◦ Outsourcing strategy◦ Channel strategy◦ Customer service strategy◦ Asset network

Reduce uncertainty◦ Forecasting◦ Collaboration◦ Integration

Supply chain configuration components

Decision Phases in a Supply ChainDecision Phases in a Supply Chain

• Successful supply chain management requires many decisions relating to the flow of information, product and funds.•Each decision should be made to raise the supply chain surplus•Decisions fall into three categories depending on;•Frequency of each decision.

•Time frame during which decision has an impact.

•Each category of decision has to consider uncertainty over the decision horizon.

Decision Phases in a Supply ChainDecision Phases in a Supply Chain

1. Supply Chain Strategy or Design (long term Dcns)•Company decides what the chain’s configuration will be, how resources will be allocated and what processes each stage will perform.

•Decisions made by companies include;•Whether to outsource or perform a supply chain function in-house.

•Location of facilities.

•Capabilities of production and warehousing facilities

•Products to be manufactured or sold at various locations

•Modes of transportation to be made available/utilized.

•Supply chain configuration should support a firms strategic objectives and increase supply chain surplus.

Decision Phases in a Supply ChainDecision Phases in a Supply Chain

2. Supply Chain Planning•Time frame considered is a quarter to a year.•Goal is to maximize the supply chain surplus that can be generated over the planning horizon given the constraints of phase 1.•Planning includes making decisions like;•Which markets will be supplied from which locations•Subcontracting of manufacturing•Inventory policies to be followed

•As a result of the planning phase, companies define a set of operating policies that govern short-term operations

Decision Phases in a Supply ChainDecision Phases in a Supply Chain

3. Supply Chain Operation

•Time horizon is weekly or daily

•Companies make decisions regarding individual customer orders.

•Supply chain configuration is considered fixed and planning policies already defined.

•Goal of supply chain operations is to handle incoming customer orders in the best possible manner.

Decision Phases in a Supply ChainDecision Phases in a Supply Chain

3. Supply Chain Operation …During this phase;•Firms allocate inventory/production to individual orders.

•Set a date that an order can be fulfilled.

•Generate pick lists at a warehouse.

•Allocate an order to a particular shipping mode and shipment.

•Set delivery schedules of trucks

•Place replenishment orders.

•Operational decisions are in the short term (minutes, hours or days) hence there is less uncertainty about demand information.

•Goal is to exploit the reduction of uncertainty and optimize performance with constraints of phase 1 & 2

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Value of InformationValue of Informationand SCMand SCM

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Information In The Supply ChainInformation In The Supply Chain

Source Source Make Make Deliver Deliver Sell Sell

Suppliers Manufacturers Warehouses &Distribution Centers

Retailer

Order Lead Time

Delivery Lead Time

Production Lead Time

Each facility further away from actual customer demand must make forecasts of demand

Lacking actual customer buying data, each facility bases its forecasts on ‘downstream’ orders, which are more variable than actual demand

To accommodate variability, inventory levels are overstocked thus increasing inventory carrying costs

It’s estimated that the typical pharmaceutical company supply chain carries over 100 days of product to accommodate uncertainty

Plan

Information Technology: A Information Technology: A Supply Chain EnablerSupply Chain Enabler Information links all

aspects of supply chain E-business

◦ replacement of physical business processes with electronic ones

Electronic data interchange (EDI)◦ a computer-to-computer

exchange of business documents

Bar code and point-of-sale◦ data creates an

instantaneous computer record of a sale

Radio frequency identification (RFID)◦ technology can send

product data from an item to a reader via radio waves

Internet◦ allows companies to

communicate with suppliers, customers, shippers and other businesses around the world, instantaneously

E-business and Supply E-business and Supply ChainChainCost savings and price reductionsReduction or elimination of the role of

intermediariesShortening supply chain response and

transaction timesGaining a wider presence and

increased visibility for companiesGreater choices and more information

for customers

E-business and Supply E-business and Supply Chain (cont.)Chain (cont.)Improved service as a result of instant

accessibility to servicesCollection and analysis of voluminous

amounts of customer data and preferences

Creation of virtual companiesLeveling playing field for small

companiesGaining global access to markets,

suppliers, and distribution channels

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Methods for Improving ForecastsMethods for Improving Forecasts

AccurateForecasts

Panels of Experts

• Internal experts• External experts• Domain experts• Delphi technique

• Moving average• Exponential smoothing• Trend analysis• Seasonality analysis

Judgment Methods

Time-Series Methods

Causal Analysis

Market Research Analysis

• Relies on data other than that being predicted• Economic data, commodity data, etc.

• Market testing• Market surveys• Focus groups

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Supply Chain Collaboration – What Is It?Supply Chain Collaboration – What Is It?

Many different definitions depending on perspective The means by which companies within the supply

chain work together towards mutual goals by sharing◦ Ideas◦ Information◦ Processes◦ Knowledge◦ Information◦ Risks◦ Rewards

Why collaborate?◦ Accelerate entry into new markets◦ Changes the relationship between cost/value/profit

equation

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Supply Chain CollaborationSupply Chain Collaboration

Cornerstone of effective SCM The focus of many of today’s SCM initiatives The only method that has the potential to eliminate

or minimize the Bullwhip effect

Manufacturer

Distributors/Wholesalers

Suppliers

Retailers

Collaborative Demand Planning

Collaborative Logistics Planning•Transportation services•Distribution center services

Synchronized Production Scheduling

Collaborative Product Development

Logistics Providers

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Benefits of Supply Chain CollaborationBenefits of Supply Chain Collaboration

CUSTOMERS MATERIAL SUPPLIERS

SERVICE SUPPLIERS

• Reduced inventory• Increased revenue• Lower order management costs• Higher Gross Margin• Better forecast accuracy• Better allocation of promotional budgets

• Reduced inventory• Lower warehousing costs• Lower material acquisition costs• Fewer stockout conditions

• Lower freight costs• Faster and more reliable delivery• Lower capital costs• Reduced depreciation• Lower fixed costs

• Improved customer service• More efficient use of human resources

Source: Cohen & Roussel

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Supply Chain Collaboration SpectrumSupply Chain Collaboration Spectrum

Source: Cohen & Roussel

Number of Relationships

Exte

nt

of

Collab

ora

tion

Many FewLimited

Extensive

TransactionalCollaboration

SynchronizedCollaboration

CooperativeCollaboration

CoordinatedCollaboration

Not Viable

Low Return

The green arrow describes increasing complexity and sophistication of:

◦ Information systems◦ Systems infrastructure◦ Decision support systems◦ Planning mechanisms◦ Information sharing◦ Process understanding

Higher levels of collaboration imply the need for both trading partners to have equivalent (or close) levels of supply chain maturity

Synchronized collaboration demands joint planning, R&D and sharing of information and processing models

◦ Movement to real-time customer demand information throughout the supply chain

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Successful Supply Chain CollaborationSuccessful Supply Chain Collaboration

Try to collaborate internally before you try external collaboration

Help your partners to work with you Share the savings Start small (a limited number of selected partners)

and stay focused on what you want to achieve in the collaboration

Advance your IT capabilities only to the level that you expect your partners to manage

Put a comprehensive metrics program in place that allows you to monitor your partners’ performance

Make sure people are kept part of the equation◦ Systems do not replace people◦ Make sure your organization is populated with

competent professionals who’ve done this before

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Emerging Best Practices in SCM StrategyEmerging Best Practices in SCM Strategy

Supply Chain IntegrationSupply Chain Integration

Information sharing among supply chain members◦ Reduced bullwhip effect◦ Early problem detection◦ Faster response◦ Builds trust and confidence

Collaborative planning, forecasting, replenishment, and design◦ Reduced bullwhip effect◦ Lower Costs (material, logistics, operating, etc.)◦ Higher capacity utilization◦ Improved customer service levels

Coordinated workflow, production and operations, procurement◦ Production efficiencies◦ Fast response◦ Improved service◦ Quicker to market

Adopt new business models and technologies◦ Penetration of new markets◦ Creation of new products◦ Improved efficiency◦ Mass customization

Supply Chain Integration Supply Chain Integration (cont.)(cont.)

SuppliersSuppliers

Procurement◦ purchase of goods and services from

suppliersOn-demand (direct response) delivery

◦ requires supplier to deliver goods when demanded by customer

Continuous replenishment◦ supplying orders in a short period of time

according to a predetermined scheduleCross-enterprise teams coordinate

processes between company and supplier

OutsourcingOutsourcing

Sourcing◦ selection of suppliers

Outsourcing◦ purchase of goods and services from an

outside supplierCore competencies

◦ what a company does bestSingle sourcing

◦ a company purchases goods and services from only a few (or one) suppliers

Copyright 2006 John Wiley & Sons, Inc. 10-65

E-ProcurementE-ProcurementDirect purchase from suppliers over

the InternetDirect products go directly into

production process a product, indirect products not

E-marketplaces◦ web sites where companies and suppliers

conduct business-to-business activitiesReverse auction

◦ a company posts orders on the Internet for suppliers to bid on

Measuring Supply Chain Measuring Supply Chain PerformancePerformance

Key performance indicators◦ inventory turnover

cost of annual sales per inventory unit

◦ inventory days of supply total value of all items being held in inventory

◦ fill rate fraction of orders filled by a distribution center

within a specific time period

Inventory turns =Inventory turns =Average aggregate value of inventoryAverage aggregate value of inventory

Cost of goods soldCost of goods sold

Average aggregate value of inventory =Average aggregate value of inventory =

==(average inventory for item (average inventory for item ii))X (unit value item X (unit value item ii))

Days of supply =Days of supply =(Costs of goods sold)/(365 days)(Costs of goods sold)/(365 days)

Average aggregate value of inventoryAverage aggregate value of inventory

Key Performance Key Performance IndicatorsIndicators

Key Performance Key Performance Indicators: ExampleIndicators: Example

Inventory turns =Inventory turns =$34,416,000$34,416,000

$425, 000, 000$425, 000, 000

Days of supply =Days of supply =($425,000,000)/(365)($425,000,000)/(365)

$34,416,000$34,416,000

= 12.3= 12.3

= 29.6= 29.6

1. Cost of goods sold: $425 million2. Production materials and parts: $4,629,0003. Work-in-process: $17,465,0004. Finished goods: $12,322,0005. Total average aggregate value of inventory (2+3+4):

$34,416,000

Other Measures of Supply Other Measures of Supply Chain Performance Chain Performance Process Control

◦used to monitor and control any process in supply chain

Supply Chain Operations Reference (SCOR)◦establish targets to achieve “best in

class” performance

GREEN SUPPLY CHAIN GREEN SUPPLY CHAIN MANAGEMENT PRACTICES MANAGEMENT PRACTICES

Definition of GSCM Definition of GSCM GSC is a method to design and/or

redesign the supply chain that incorporates recycling and remanufacturing into the production process and it involves minimization of the firm’s total environmental impact from start to finish of the supply chain and also from beginning to end of the product life cycle.

The practiceThe practiceThis refers to supply chain management

functions which include:◦ Green purchasing (in-bound logistics)◦ Design for the environment (internal supply chain)◦ Green marketing (out-bound logistics)◦ Reverse logistics

The results of the research carried by Purba et al (2005), demonstrate that greening the inbound function, as well as greening production, lead to greening outbound, as well as to competitiveness and economic performance of the firm.

DriversDriversDemand – e.g organic foods, energy savers etc

Regulation- e.g NEMA

Own initiative - CSR

Competitiveness – ISO, world class Financial enterprises- IFC terms

BenefitsBenefitsCost savingsWaste minimizationCustomer satisfactionIncreased competitivenessEnhanced environmental

performanceIncreased awareness of HSEImproved productivityImproved business-to-business

relations

Global Supply ChainGlobal Supply Chain

To compete globally requires an effective supply chainTo compete globally requires an effective supply chainInformation technology is an “enabler” of global tradeInformation technology is an “enabler” of global tradeNations form trading groupsNations form trading groupsNo tariffs or dutiesNo tariffs or duties