BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
Definition of Supply Chain
Supply chain is the network of organizations that are involved through upstream and
downstream linkages, in the different processes and activities that produce value in the
form of product and services in the hands of the ultimate customers.
Supply chain is a set of approaches used to efficiently integrate suppliers,
manufacturers, and warehouses and stores so that merchandise is produced and
distributed at the right quantity, to the right locations and at the right time in order to
minimize system wide costs while satisfying services level requirements.
Supply chain is the management of upstream and downstream relationships with
suppliers and customers to deliver superior customer value at less cost to the chain
supply as a whole.
Is a network of connected and interdependent organizations mutually and co-
operatively working together to control and manage the flow of material, information
and finances from supplies to the end user.
This definitions leads to several observations;
i. Supply chain management considers every facility that has an impact on cost and plays
a role in making the product conform to customer’s requirements.
ii. The object of supply chain management is to be efficient and cost effective across the
entire system, and that total system wide costs, from transportation and distribution to
the inventory of raw materials work in the process and finished goods are minimized.
iii. It encompasses the firms activities at all levels from the strategic level through the
tactical, to the operational level.
A supply chain is that network of organizations that are involved through upstream and
downstream linkages in the different processes and activities that produce value in form of
products and services in the hands of the ultimate customer or consumer. A supply chain
consists of all the elements, activities and processes required to deliver a product from raw
material to a final customer. Such activities include, demand forecasting, resource allocation,
production planning and scheduling, inventory management, and customer delivery. The
success of a strong supply chain can be attributed to the effective implementation of supply
chain management (SCM) practices, which include communication within the organization,
support for supply chain management efforts and processes, information systems for data
collection, analysis and sharing, and measurement systems to assess total supply chain costs
and performance. Collaboration and cooperation, along with information sharing, among
upstream and downstream supply chain members have been cited as important SCM
practices, which have recently become very attractive for many companies because of their
power to improve efficiencies by reducing operating costs and providing higher service level.
By Gladys Kimutai Page 1 of 39
, BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
Characteristics of supply chain
Supply chains are networks- linked associations of discrete business
Supply chain linkages are upstream and downstream- upstream relates to the relationship
between an enterprise and its suppliers and supplier’s suppliers. Downstream relates to the
relationship between an enterprise and its customers
Linkages: The coordination of supply chain processes and relationships. A supply chain is
only as strong as its weakest link
Processes: a specific ordering of work activities across a time and place with a beginning
and an end and clearly identified inputs and outputs.
Value: It is what buyers are willing to pay. Superior value stems from offering lower
prices for equivalent benefits or providing unique benefits that more than offset a higher
price.
The ultimate customer- A customer is simply the recipient of the goods or services that
result from all processes and activities of the supply chain
Types of Supply Chains
Supply chains may be classified into several categories which include customer- supplier
characteristics, virtuality, scope, service, complexity, products, purpose and value.
1. Customer- Suppliers Characteristic:
This may give rise to
i. Concentrated chains found in business such as automotive industry that have few
demanding customers but many suppliers, customers with demanding requirements
and EDI systems or a requirement for JIT deliveries
ii. Batch Manufacture Chains that have many customers and many suppliers,
complicated relationship webs – an undertaking with which an enterprise is in contact
may at different times be a customer, supplier, competitor or ally
iii. Retail and Distribution Chains that have many customers but relatively few
suppliers, Customized methods e.g. vendor managed inventory (VMI) that
facilitates dealing with suppliers
iv. Service chains that implements the mission statements of organization such as
hospitals, libraries and banks -concerned with delivery of books, services, information
etc
2. Virtuality -Virtual supply chain is a series of relationship between partners that is based
upon the value added exchange of information. Information replaces the need for
By Gladys Kimutai Page 2 of 39
, BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
inventories. E.g. A mail order business may have no inventory and simply calls for
suppliers from the manufacturer when orders are received from customers.
3. Scope: Supply chains may be local, regional and international in scope .
4. Complexity: There are three degrees of complexity which are directed, extended and
ultimate.
i. Direct supply chain: Comprises of a supplier and a customer involved in the
upstream and a downstream flow of products, services, finances and information
Suppliers Organization Customer
ii. Extended supply chain : Includes suppliers of the immediate suppliers and
customers of the immediate customers
Supplier’s suppliers Suppliers organization customers customer’s customers
iii. Ultimate supply chain: Includes all organization involved in all upstream and
downstream flow of products, services and finances and information from three
ultimate suppliers to the ultimate customer.
5. Purpose: Efficient supply chains are primary concerned with reducing the cost of
operations as in lean supply chains. They work best when forecast accuracy is high and
products variety is low. Responsive supply chains concerned with minimizing the delivery
cycle e.g. agile supply chains. They work best when forecast accuracy is low and products
variety is high.
6. Products: Vary widely according to the end product.eg build-to-order and build-to-
forecast supply chain
7. Value chains
SUPPLY CHAIN MANAGEMENT
• Supply chain management (SCM) is a term used in business literature to refer to the
control of materials, information, and finances as they move in a process from supplier
to manufacturer to wholesaler to retailer to consumer.
• According to the Council of Supply Chain Management Professionals (CSCMP,
2007), "Supply chain management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics
management activities.
• It also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third party service providers, and customers." In a functional
By Gladys Kimutai Page 3 of 39
, BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
sense, this focus on activities and relationships implies logistics, marketing,
purchasing/supply, and production/operations are involved in SCM.
Supply Chain Operations Reference Model
The Supply Chain Operations Reference (SCOR) model is the world’s leading supply chain
framework, uniquely linking business processes, performance metrics, practices and people
skills into a unified structure. In collaboration with 69 members consisting of manufacturers,
logistics / distribution service providers and software solutions suppliers Supply Chain
Council introduced Supply Chain Operations Reference-model (SCOR). Numbers of
companies have pooled their real-world supply chain experiences to build a flexible
framework and a common language that can help companies improve their supply chain
internally and externally
The model defines common supply chain management process, matches them against “best
practices. It provides companies with powerful tool in improving supply chain operations. It
allows manufacturers, suppliers, distributors and retailers with a framework to evaluate the
effectiveness of their supply chain operations and to target and measure specific process
operations
The SCOR model was designed to enable companies to communicate, compare and learn
from competitors and companies both within and outside of their industry. It not only
measures supply chain performance but also effectiveness of supply chain reengineering.
Further it has the ability to test and plan future process improvements.
The Supply Chain Operations Reference-model (SCOR) is a process reference model. At the
core of this model is a “pyramid of four levels” that represents the path a company takes on
the road to supply-chain improvement:
Level 1
Provides definition of the Plan, Source, Make, and Deliver process types. This is the point
where a company establishes its supply-chain competitive objectives
The basic structure of the reference-model focuses on the four key supply-chain processes:
Plan, Source, Make, Deliver
Plan:
Under this process the company should assess supply resources, aggregate and prioritize
demand requirements, plan inventory, distribution requirements, production, material and
rough-cut capacity of all products and all channels. Make/buy decisions are evaluated under
By Gladys Kimutai Page 4 of 39
Definition of Supply Chain
Supply chain is the network of organizations that are involved through upstream and
downstream linkages, in the different processes and activities that produce value in the
form of product and services in the hands of the ultimate customers.
Supply chain is a set of approaches used to efficiently integrate suppliers,
manufacturers, and warehouses and stores so that merchandise is produced and
distributed at the right quantity, to the right locations and at the right time in order to
minimize system wide costs while satisfying services level requirements.
Supply chain is the management of upstream and downstream relationships with
suppliers and customers to deliver superior customer value at less cost to the chain
supply as a whole.
Is a network of connected and interdependent organizations mutually and co-
operatively working together to control and manage the flow of material, information
and finances from supplies to the end user.
This definitions leads to several observations;
i. Supply chain management considers every facility that has an impact on cost and plays
a role in making the product conform to customer’s requirements.
ii. The object of supply chain management is to be efficient and cost effective across the
entire system, and that total system wide costs, from transportation and distribution to
the inventory of raw materials work in the process and finished goods are minimized.
iii. It encompasses the firms activities at all levels from the strategic level through the
tactical, to the operational level.
A supply chain is that network of organizations that are involved through upstream and
downstream linkages in the different processes and activities that produce value in form of
products and services in the hands of the ultimate customer or consumer. A supply chain
consists of all the elements, activities and processes required to deliver a product from raw
material to a final customer. Such activities include, demand forecasting, resource allocation,
production planning and scheduling, inventory management, and customer delivery. The
success of a strong supply chain can be attributed to the effective implementation of supply
chain management (SCM) practices, which include communication within the organization,
support for supply chain management efforts and processes, information systems for data
collection, analysis and sharing, and measurement systems to assess total supply chain costs
and performance. Collaboration and cooperation, along with information sharing, among
upstream and downstream supply chain members have been cited as important SCM
practices, which have recently become very attractive for many companies because of their
power to improve efficiencies by reducing operating costs and providing higher service level.
By Gladys Kimutai Page 1 of 39
, BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
Characteristics of supply chain
Supply chains are networks- linked associations of discrete business
Supply chain linkages are upstream and downstream- upstream relates to the relationship
between an enterprise and its suppliers and supplier’s suppliers. Downstream relates to the
relationship between an enterprise and its customers
Linkages: The coordination of supply chain processes and relationships. A supply chain is
only as strong as its weakest link
Processes: a specific ordering of work activities across a time and place with a beginning
and an end and clearly identified inputs and outputs.
Value: It is what buyers are willing to pay. Superior value stems from offering lower
prices for equivalent benefits or providing unique benefits that more than offset a higher
price.
The ultimate customer- A customer is simply the recipient of the goods or services that
result from all processes and activities of the supply chain
Types of Supply Chains
Supply chains may be classified into several categories which include customer- supplier
characteristics, virtuality, scope, service, complexity, products, purpose and value.
1. Customer- Suppliers Characteristic:
This may give rise to
i. Concentrated chains found in business such as automotive industry that have few
demanding customers but many suppliers, customers with demanding requirements
and EDI systems or a requirement for JIT deliveries
ii. Batch Manufacture Chains that have many customers and many suppliers,
complicated relationship webs – an undertaking with which an enterprise is in contact
may at different times be a customer, supplier, competitor or ally
iii. Retail and Distribution Chains that have many customers but relatively few
suppliers, Customized methods e.g. vendor managed inventory (VMI) that
facilitates dealing with suppliers
iv. Service chains that implements the mission statements of organization such as
hospitals, libraries and banks -concerned with delivery of books, services, information
etc
2. Virtuality -Virtual supply chain is a series of relationship between partners that is based
upon the value added exchange of information. Information replaces the need for
By Gladys Kimutai Page 2 of 39
, BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
inventories. E.g. A mail order business may have no inventory and simply calls for
suppliers from the manufacturer when orders are received from customers.
3. Scope: Supply chains may be local, regional and international in scope .
4. Complexity: There are three degrees of complexity which are directed, extended and
ultimate.
i. Direct supply chain: Comprises of a supplier and a customer involved in the
upstream and a downstream flow of products, services, finances and information
Suppliers Organization Customer
ii. Extended supply chain : Includes suppliers of the immediate suppliers and
customers of the immediate customers
Supplier’s suppliers Suppliers organization customers customer’s customers
iii. Ultimate supply chain: Includes all organization involved in all upstream and
downstream flow of products, services and finances and information from three
ultimate suppliers to the ultimate customer.
5. Purpose: Efficient supply chains are primary concerned with reducing the cost of
operations as in lean supply chains. They work best when forecast accuracy is high and
products variety is low. Responsive supply chains concerned with minimizing the delivery
cycle e.g. agile supply chains. They work best when forecast accuracy is low and products
variety is high.
6. Products: Vary widely according to the end product.eg build-to-order and build-to-
forecast supply chain
7. Value chains
SUPPLY CHAIN MANAGEMENT
• Supply chain management (SCM) is a term used in business literature to refer to the
control of materials, information, and finances as they move in a process from supplier
to manufacturer to wholesaler to retailer to consumer.
• According to the Council of Supply Chain Management Professionals (CSCMP,
2007), "Supply chain management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics
management activities.
• It also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third party service providers, and customers." In a functional
By Gladys Kimutai Page 3 of 39
, BMS 317 : PRINCIPLES OF SUPPLY CHAIN MANAGEMENT NOTES
sense, this focus on activities and relationships implies logistics, marketing,
purchasing/supply, and production/operations are involved in SCM.
Supply Chain Operations Reference Model
The Supply Chain Operations Reference (SCOR) model is the world’s leading supply chain
framework, uniquely linking business processes, performance metrics, practices and people
skills into a unified structure. In collaboration with 69 members consisting of manufacturers,
logistics / distribution service providers and software solutions suppliers Supply Chain
Council introduced Supply Chain Operations Reference-model (SCOR). Numbers of
companies have pooled their real-world supply chain experiences to build a flexible
framework and a common language that can help companies improve their supply chain
internally and externally
The model defines common supply chain management process, matches them against “best
practices. It provides companies with powerful tool in improving supply chain operations. It
allows manufacturers, suppliers, distributors and retailers with a framework to evaluate the
effectiveness of their supply chain operations and to target and measure specific process
operations
The SCOR model was designed to enable companies to communicate, compare and learn
from competitors and companies both within and outside of their industry. It not only
measures supply chain performance but also effectiveness of supply chain reengineering.
Further it has the ability to test and plan future process improvements.
The Supply Chain Operations Reference-model (SCOR) is a process reference model. At the
core of this model is a “pyramid of four levels” that represents the path a company takes on
the road to supply-chain improvement:
Level 1
Provides definition of the Plan, Source, Make, and Deliver process types. This is the point
where a company establishes its supply-chain competitive objectives
The basic structure of the reference-model focuses on the four key supply-chain processes:
Plan, Source, Make, Deliver
Plan:
Under this process the company should assess supply resources, aggregate and prioritize
demand requirements, plan inventory, distribution requirements, production, material and
rough-cut capacity of all products and all channels. Make/buy decisions are evaluated under
By Gladys Kimutai Page 4 of 39
