You are on page 1of 38


SR No.


Page No.


Executive Summary


SCM in India

Importance Of SCM

Characteristics Of SCM

Supply Chain Decision


Supply Chain Modelling Approaches


Objectives Of SCM



Issues In SCM



TQM In Supply Chain Management






Case Study








STUDY OF Supply Chain

Executive Summary
The history of the supply chain initiative can be traced to
early beginnings in the textile industry with the quick response
program and later to efficient consumer response in the grocery
industry. More recently a variety of companies across many
industries have begun looking at the entire supply chain
A supply chain is a is a network of facilities and
distribution options that performs the function of procurement
of materials, transformation of these materials into
intermediate and finished products, and the distribution of
these finished products to customers. Supply chains exist in
both service and manufacturing organization, although the
complexity of the chain may vary greatly from industry to
industry and firm to firm.
Firms can no longer effectively compete in isolation of their
suppliers and other entities in the supply chain. Interest in the
concept of supply chain management has steadily increased
since the 1980s when companies saw the benefits of
collaborative relationships within and beyond their own
The Major Objectives of SCM can be summarized as given
a) To reduce the overall cost of the finished product sold to the
b) To reduce the overall delivery time from customer order to
delivery of goods
c) To minimize losses at every stage of the supply chain
d) To achieve higher customer satisfaction through quality,
variety, cost and time.

A supply chain is a network of facilities and distribution options
that performs the functions of procurement of materials,
transformation of these materials into intermediate and
finished products, and the distribution of these finished
products to customers. Supply chains exist in both service and
manufacturing organizations, although the complexity of the
chain may vary greatly from industry to industry and firm to
firm.The Supply Chain Management has evolved over a
period of time. The major phases through which the present
SCM evolved can be summarized as follows:
a) Before 1960s: M.R.P.-I
b) 1960s to 1980s: M.R.P.-I, II and E.R.P.
c) Post 1980s: SCM
Supply chain management is the systematic and the strategic
coordination management for supplying goods and products
required by the end customer. Or we can say that a practice of
products that reaches to an end user and represents the efforts
of the organization is known as supply chain management. It
represents a conscious effort by the supply chain firms to
develop and run supply chains in most effective and efficient
ways possible. Supply chain management activities cover
almost everything such as from products to its development,
sourcing, logistics and even information system also. The main
objective of SCM is creating net value, building a competitive
infrastructure, synchronize the goods supply, measures the
performance globally and leveraging worldwide logistics etc.
Today most of the global companies are forced to keep looking
for a production center where cost of labor and raw material is
cheap and in order to compete in the global market and
networked economy, SCM is very helpful for organizations.
Various activities are there in an organization which needs
strategic management like sourcing of raw materials from
different place and then from different locations these finished
goods are passed through different chains of distribution
network which includes retailers, distributors and end
customers. Below is an example of a very simple supply chain

for a single product, where raw material is procured from

vendors, transformed into finished goods in a single step, and
then transported to distribution centers, and ultimately,
customers. Realistic supply chains have multiple end products
with shared components, facilities and capacities. The flow of
materials is not always along an arborescent network, various
modes of transportation may be considered, and the bill of
materials for the end items may be both deep and large.
manufacturing, and the purchasing organizations along the
supply chain operated independently. These organizations have
their own objectives and these are often conflicting. Marketings
objective of high customer service and maximum sales dollars
conflict with manufacturing and distribution goals. Many
manufacturing operations are designed to maximize throughput
and lower costs with little consideration for the impact on
inventory levels and distribution capabilities. Purchasing
contracts are often negotiated with very little information
beyond historical buying patterns. The result of these factors is
that there is not a single, integrated plan for the organization--there were as many plans as businesses. Clearly, there is a
need for a mechanism through which these different functions
can be integrated together. Supply chain management is a
strategy through which such integration can be achieved.
The modern concept of Supply Chain Management has
evolved from a very old concept of Logistics. It is a word
originally associated with major wars. It means planning and
soldiers, armored vehicles, artillery and ammunition to the
battlefield as per the strategies of the generals. It involves also
all supporting activities like food and suppliers, medicines,
bringing back injured personnel, maintenance of vehicles,
equipment and many other tasks for the soldiers at difficult
locations. It also involves coordination with fighter aircrafts,
communication (signals), and engineering for roads / bridges in
the forward areas. Due to the development in supply chain
management, logistics has become a focal point for
organizations today in both manufacturing and services
organization employ special Logistics Managers.
Supply chain management is typically viewed to lie
between fully vertically integrated firms, where the entire

material flow is owned by a single firm, and those where each

coordination between the various players in the chain is key in
its effective management. Cooper and Ellram [1993] compare
supply chain management to a well-balanced and wellpracticed relay team. Such a team is more competitive when
each player knows how to be positioned for the hand-off. The
relationships are the strongest between players who directly
pass the baton, but the entire team needs to make a
coordinated effort to win the race.

SCM in India
Todays businesses have become extremely complex. The
interplay of the three Cs, namely, consumers, competition and
convergence, has thrown open new challenges for
organizations all over the world. Consumers have become
highly discerning in their choice of products and services. The
pressure of competition has accelerated product changes,
supercharged by
shortening product and technology
development lifecycles.
Worldwide interest in supply chain management has increased
steadily since the 1980s when organizations began to see the
benefits of collaborative relationships. This management
concept is, however, nascent in India. Indias economic and
infrastructure scenario Before the 1990s, Indian organizations
operated in a protected environment. However the deregulation of the Indian economy in the last decade has
attracted global players in every industrial sector and has
unleashed a new competitive spirit in the Indian organizations.
Statistics reveal that India, the fifth largest country in terms of
gross national product (GNP) and purchasing power parity (PPP)
and a consumer base of over a billion (CMIE, 2000), constitutes
one of the fastest growing markets in the world.
Stages / Components of SC
The basic stages / components in a supply chain can be
classified as:
a) Suppliers / Vendors / Sub-Contractors
b) Processing plants / facilities

c) Distribution / sale channels of finished products to

However, the chain becomes very large and complex in larger
organizations due to the large number of suppliers from whom
raw materials / components and other services are procured,
located at different places geographically as well as processing
factories which may at more than one location and finally the
warehouses, wholesalers and retailers spread over large
regions to reach customers. All the external organizations
involved in this supply chain are considered as SC PARTNERS
who have a share in the profits and risks of the total chain
performance. This creates a deep sense of participation,
overcoming individual objectives of each partner.

Importance of SCM
SCM plays a vital role in organization activities and an
essential element to operational efficiency which can be
applied to customer satisfaction and companys success. You
can say that it is just like the backbone of an organization which
manages the critical issues of the business organization such as
rapid growth of multinational corporations, global expansion
and environmental concerns which indirectly or dramatically
affects the corporate strategy.
Other benefits and importance of supply chain management
Reduces inventory costs
Provides better medium for information sharing between
Improves customer satisfaction as well as service
Maintains better trust between partners
Provides efficient manufacturing strategy
Improve process integration

Improves bottom line (by decreasing the use of fixed assets in

the supply chain)
Increase cash flow
Improves quality and gives higher profit margin
SCM offers various tools and techniques that help business
organization to diagnose the problems and also provide
solutions of these disruptions around the business environment.
It plays an important role in moving goods more quickly to their
destinations. The most important thing in todays business is
managing competition among partners and in order to win this
competition SCM helps business organization in a very efficient
manner. All the benefits and importance of SCM makes its
future so bright and because of emerging trends in organization
SCM becomes the most critical business discipline in the world

Todays supply chains function as a result of extensive research
into how a supply chain behaves, its chief concerns, successful
risk management, diverse markets, widespread collaboration,
and technological advances. However, current supply chains
fall victim to the problems of inefficiencies, inexcusable rigidity,
and failure to recognize the growing demands of consumers.
Some of todays supply chain service providers have already
taken steps to advance supply chain entities into the future; a
best in class supply chain will focus on these 7 key areas.

1. Proactive Use of Big Data

With the onslaught of information on the Internet and its

applications, data will prove to be an important aspect of future

supply chains. Supply chain service providers and supply chain

managers (SCM) will be able to use data to identify
inefficiencies, create proposed solutions, and implement such
solutions. Furthermore, the use of such data can be applied to
creating verifiable forecasts for needs in inventory.


Inventory Optimization

Having too much, or too little, of a given item is detrimental to

a supply chain, and research suggests the service parts supply
chain will become more prevalent than current supply chains.
Inventory optimization relies on accurate, precise forecasts for
needed items. However, it also requires an extensive
evaluation and rapid identification of sudden changes in the
market, which will impact manufacturing, shipping, and all
other aspects of the supply chain process.

3. Flexibility
As the global economy becomes more interconnected with
newer, emerging markets, the number of corporate players
within the supply chain will increase. This leads to one ultimate
problem: how will more orders be fulfilled at todays pace? This
is where flexibility will become important. Flexibility refers to
the ability of the supply chain to adapt to the changes within
the market, political climates, and other events, which would
otherwise affect the supply chain.

4. Rapid Fulfillment

The widespread increase in connectivity, particularly

through mobile devices, has taught consumers to believe in the
power of their voice and demand instant gratification.
Obviously, instant transport has not yet been invented, so the
alternative remains ensuring orders are processed without
error, quickly, and via the fastest method of transport.
Tomorrows supply chains will need to combine varying
methods of transports to gain a competitive advantage to
giving consumers their rewards: intricate shipping and tracking
details and their products.

5. Customization

Customization is a tricky aspect of a best in class supply

chain. At first glance, it seems most appropriate to define
customization as individual ERP systems for each supplier,
distributor, or retailer within the supply chain. However,
customization refers to how unique supply chain processes may
be implemented across the supply chain to provide consumers
with what they want. For example, an order of new mobile
devices may need to be fulfilled within 24 hours and all
appropriate packaging may be manufactured on-site at the
shipping facility. Additionally, increases in the number of
individual businesses within the supply chain will lead to a more
diverse group of products to manufacture and, subsequently,
repair. As a result, the service parts supply chain will need to be
able to adapt and create customized parts to meet this growing
demand. Crowd sourcing venues, such as Kickstarter &
GoFundMe , have given ordinary people the power to gather
funds to create new products and services, which will also
influence the need to ensure customizability is top priority for
the supply chain.

6. Sustainability

Sustainability will be a driving force in a best in class

supply chain. The Earth has a finite amount of fossil fuels left,
and future supply chains will have no option other than using
renewable forms of energy. Some renewable forms of energy to
use will depend on the geographic location of the varying
aspects of supply chain. However, most areas will be able to
benefit from the use of photovoltaic cells to produce energy
from sunlight. Other areas may take advantage of volcanic
activity in the form of geothermal energy, and other places may
enhance technologies to use biodiesel, which comes from the
decay of living tissue. Additionally, governments may
implement strict requirements for moving toward renewable
sources of energy for manufacturers in the coming years.
Although some argue this will not happen, consider the recent
sunset of the incandescent light bulbs. It started in
manufacturing, and it has trickled down to individual homes.
The same process will occur with renewable energy resource,
and tomorrows supply chain leaders will need to be ready to a
proactive role.

7. Compliance and Visibility

The last, and perhaps the most significant, aspect of a

best in class supply chain will focus on maintaining compliance
and visibility. Compliance involves adherence to any applicable
local, state, and federal laws for supply chain entities. However,
end-to-end visibility can eliminate all of the potential issues by

allowing others to see into the supply chain. Essentially, this

equates a way of self-assessment and monitoring of supply
chain processes, which lead to greater compliance.

Supply Chain Decisions

We classify the decisions for supply chain management
into two broad categories -- strategic and operational. As the
term implies, strategic decisions are made typically over a
longer time horizon. These are closely linked to the corporate
strategy (they sometimes {\it are} the corporate strategy), and
guide supply chain policies from a design perspective. On the
other hand, operational decisions are short term, and focus on
activities over a day-to-day basis. The effort in these type of
decisions is to effectively and efficiently manage the product
flow in the "strategically" planned supply chain.
There are four



1) location,





2) production,
3) inventory, and
4) transportation (distribution),
and there are both strategic and operational elements in each
of these decision areas.

1. Location Decisions

The geographic placement of production facilities,

stocking points, and sourcing points is the natural first step in
creating a supply chain. The location of facilities involves a
commitment of resources to a long-term plan. Once the size,
number, and location of these are determined, so are the
possible paths by which the product flows through to the final
customer. These decisions are of great significance to a firm
since they represent the basic strategy for accessing customer
markets, and will have a considerable impact on revenue, cost,
and level of service. These decisions should be determined by
an optimization routine that considers production costs, taxes,
duties and duty drawback, tariffs, local content, distribution
costs, production limitations, etc. (See Arntzen, Brown, Harrison
and Trafton [1995] for a thorough discussion of these aspects.)
Although location decisions are primarily strategic, they also
have implications on an operational level.
2. Production Decisions

The strategic decisions include what products to produce,

and which plants to produce them in, allocation of suppliers to
plants, plants to DC's, and DC's to customer markets. As before,
these decisions have a big impact on the revenues, costs and
customer service levels of the firm. These decisions assume the
existence of the facilities, but determine the exact path(s)
through which a product flows to and from these facilities.
Another critical issue is the capacity of the manufacturing
facilities--and this largely depends the degree of vertical
integration within the firm. Operational decisions focus on
detailed production scheduling. These decisions include the

construction of the master production schedules, scheduling

production on machines, and equipment maintenance. Other
considerations include workload balancing, and quality control
measures at a production facility.
3. Inventory Decisions

These refer to means by which inventories are managed.

Inventories exist at every stage of the supply chain as either
raw materials, semi-finished or finished goods. They can also
be in-process between locations. Their primary purpose to
buffer against any uncertainty that might exist in the supply
chain. Since holding of inventories can cost anywhere between
20 to 40 percent of their value, their efficient management is
critical in supply chain operations. It is strategic in the sense
that top management sets goals. However, most researchers
have approached the management of inventory from an
operational perspective. These include deployment strategies
(push versus pull), control policies --- the determination of the
optimal levels of order quantities and reorder points, and
setting safety stock levels, at each stocking location. These
levels are critical, since they are primary determinants of
customer service levels.

4. Transportation Decisions

The mode choice aspect of these decisions are the more

strategic ones. These are closely linked to the inventory
decisions, since the best choice of mode is often found by
trading-off the cost of using the particular mode of transport
with the indirect cost of inventory associated with that mode.
While air shipments may be fast, reliable, and warrant lesser
safety stocks, they are expensive. Meanwhile shipping by sea
or rail may be much cheaper, but they necessitate holding
relatively large amounts of inventory to buffer against the
inherent uncertainty associated with them. Therefore customer
service levels, and geographic location play vital roles in such

decisions. Since transportation is more than 30 percent of the

logistics costs, operating efficiently makes good economic
sense. Shipment sizes (consolidated bulk shipments versus Lotfor-Lot), routing and scheduling of equipment are key in
effective management of the firm's transport strategy.

Supply Chain Modeling Approaches

Clearly, each of the above two levels of decisions require a
different perspective. The strategic decisions are, for the most
part, global or "all encompassing" in that they try to integrate
various aspects of the supply chain. Consequently, the models
that describe these decisions are huge, and require a
considerable amount of data. Often due to the enormity of data
requirements, and the broad scope of decisions, these models
provide approximate solutions to the decisions they describe.
Supply chain management is a cross-function approach to

manage the movement of raw materials into an organization,

certain aspects of the internal processing of materials into
finished goods, and then the movement of finished goods out of
the organization toward the end-consumer. These functions are
increasingly being outsourced to other entities that can perform
the activities as per following for better or more cost effectively.
The operational decisions, meanwhile, address the day to
day operation of the supply chain. Therefore the models that
describe them are often very specific in nature. Due to their
narrow perspective, these models often consider great detail
and provide very good, if not optimal, solutions to the
operational decisions.
To facilitate a concise review of the literature, and at the
same time attempting to accommodate the above polarity in
modeling, we divide the modeling approaches into three areas
--- Network Design, ``Rough Cut" methods, and simulation
based methods. The network design methods, for the most
part, provide normative models for the more strategic
decisions. These models typically cover the four major decision
areas described earlier, and focus more on the design aspect of
the supply chain; the establishment of the network and the
associated flows on them. "Rough cut" methods, on the other
hand, give guiding policies for the operational decisions. These
models typically assume a "single site" (i.e., ignore the
network) and add supply chain characteristics to it, such as
explicitly considering the site's relation to the others in the
network. A simulation method is a method by which a
comprehensive supply chain model can be analyzed,
considering both strategic and operational elements. However,
as with all simulation models, one can only evaluate the
effectiveness of a pre-specified policy rather than develop new
ones. It is the traditional question of "What If?" versus "What's

1. Network Design Methods

As the very name suggests, these methods determine the

location of production, stocking, and sourcing facilities, and
paths the product(s) take through them. Such methods tend to
be large scale, and used generally at the inception of the

supply chain. The earliest work in this area, although the term
"supply chain" was not in vogue, was by Geoffrion and Graves
[1974]. They introduce a multicommodity logistics network
design model for optimizing annualized finished product flows
from plants to the DC's to the final customers. Geoffrion and
Powers [1993] later give a review of the evolution of
distribution strategies over the past twenty years, describing
how the descendants of the above model can accommodate
more echelons and cross commodity detail.
Breitman and Lucas [1987] attempt to provide a
framework for a comprehensive model of a productiondistribution system, "PLANETS", that is used to decide what
products to produce, where and how to produce it, which
markets to pursue and what resources to use. Parts of this
ambitious project were successfully implemented at General
Cohen and Lee [1985] develop a conceptual framework for
manufacturing strategy analysis, where they describe a series
of stochastic sub- models, that considers annualized product
flows from raw material vendors via intermediate plants and
distribution echelons to the final customers. They use heuristic
methods to link and optimize these sub- models. They later
give an integrated and readable exposition of their models and
methods in Cohen and Lee [1988].
Cohen and Lee [1989] present a normative model for
resource deployment in a global manufacturing and distribution
network. Global after-tax profit (profit-local taxes) is maximized
through the design of facility network and control of material
flows within the network. The cost structure consists of variable
and fixed costs for material procurement, production,
distribution and transportation. They validate the model by
applying it to analyze the global manufacturing strategies of a
personal computer manufacturer.
Finally, Arntzen, Brown, Harrison, and Trafton [1995]
provide the most comprehensive deterministic model for supply
chain management. The objective function minimizes a
combination of cost and time elements. Examples of cost
inventory, transportation costs between various sites, duties,

and taxes. Time elements include manufacturing lead times

and transit times. Unique to this model was the explicit
consideration of duty and their recovery as the product flowed
through different countries. Implementation of this model at the
Digital Equipment Corporation has produced spectacular results
--- savings in the order of $100 million dollars.
Clearly, these network-design based methods add value to
the firm in that they lay down the manufacturing and
distribution strategies far into the future. It is imperative that
firms at one time or another make such integrated decisions,
transportation, and such models are therefore indispensable.
Although the above review shows considerable potential for
these models as strategic determinants in the future, they are
not without their shortcomings. Their very nature forces these
problems to be of a very large scale. They are often difficult to
solve to optimality. Furthermore, most of the models in this
category are largely deterministic and static in nature.
Additionally, those that consider stochastic elements are very
restrictive in nature. In sum, there does not seem to yet be a
comprehensive model that is representative of the true nature
of material flows in the supply chain.

2. Rough Cut Methods

These models form the bulk of the supply chain literature,

and typically deal with the more operational or tactical
decisions. Most of the integrative research (from a supply chain
context) in the literature seem to take on an inventory
management perspective. In fact, the term "Supply Chain" first
appears in the literature as an inventory management
approach. The thrust of the rough cut models is the
development of inventory control policies, considering several
levels or echelons together. These models have come to be
known as "multi-level" or "multi-echelon" inventory control
models. For a review the reader is directed to Vollman et al.
Multi-echelon inventory theory has been very successfully
used in industry. Cohen et al. [1990] describe "OPTIMIZER", one

of the most complex models to date --- to manage IBM's spare

parts inventory. They develop efficient algorithms and
sophisticated data structures to achieve large scale systems
Although current research in multi-echelon based supply
chain inventory problems shows considerable promise in
reducing inventories with increased customer service, the
studies have several notable limitations. First, these studies
largely ignore the production side of the supply chain. Their
starting point in most cases is a finished goods stockpile, and
policies are given to manage these effectively. Since production
is a natural part of the supply chain, there seems to be a need
with models that include the production component in them.
Second, even on the distribution side, almost all published
research assumes an arborescence structure, i. e. each site
receives re-supply from only one higher level site but can
distribute to several lower levels. Third, researchers have
largely focused on the inventory system only. In logisticssystem theory, transportation and inventory are primary
components of the order fulfillment process in terms of cost
and service levels. Therefore, companies must consider
important interrelationships among transportation, inventory
and customer service in determining their policies. Fourth, most
of the models under the "inventory theoretic" paradigm are
very restrictive in nature, i.e., mostly they restrict themselves
to certain well known forms of demand or lead time or both,
often quite contrary to what is observed.


Objectives of SCM
Supply chain management is a collaborative approach to
getting goods from manufacturer to consumer. The primary
goals center on shared efficiency, optimized transportation and
utilization, quality improvement and long-term stability.
Shared Efficiency
Managing inventory, transportation and logistics is
complex and costly for companies that don't have an effective
system. When manufacturers, wholesalers and retailers
collaborate on a supply chain system, it is easier to ensure
efficiency. In many cases, suppliers and buyers in a channel
share inventory data, which allows for fast replenishment of
inventory to meet customer demand. Efficiency in getting
goods to the right place at the right time minimizes inventory
costs and meets customer demand.
Optimized Transportation and Logistics
The umbrella concept of supply chain management
encompasses transportation and logistics. In an independent
business environment, each company is responsible for its role
in ordering, shipping and transporting goods. In this structure,
costs are high and timing is poor. With supply chain
management, vendors and buyers plan optimized
transportation and logistics activities. Orders are automated
between a reseller and a vendor, and vendors quickly pull, ship
and transmit orders to buyers for clear communication.
Quality Improvement
Getting consumers the best value is a shared goal of
supply chain partners. To closely connect is the objective of
perpetual quality improvement. Retailers, as the most direct
link between consumers and goods, are the ones who often
hear formal and informal feedback about product quality. In a
collaborative supply chain, a system exists for retailers to
communicate customer feedback with wholesalers and
manufacturers. This feedback enables manufacturers to

address defects and deficiencies, and to focus on constant

improvement of products. Quality improvement objectives help
all channel members win because consumers recognize value.
Long-Term Stability
By forming strong trusting supply chain relationships and
working toward best practices in distribution, companies aim
for long-term stability. Collaborative planning, coordination and
distribution activities spread the risks of business decisions
across multiple companies. As each company looks for
improvement opportunities, a common result is stabilization in
industry business activities. Strong demand forecasts allow all
channel members to respond to production or buying
variations. Shared interests in meeting customer needs also
cause each participant to communicate on optimizing
distribution systems.

Issues in Supply Chains

Why has managing the supply chain become an issue for
the 1990s? Some of the major reasons for popularity of SCM
practice are:
a) Competition and saturation of markets in developed
countries need for new markets.
b) Globalization practices being politically accepted by most of
the nations.
c) Higher







d) Growth of transportation and manufacturing facilities within

and across countries.
e) Shortened Product-life cycles and faster introduction of new
In part, the answer lies in the fact that few companies
continue to be vertically integrated. Companies have become
more specialized and search for suppliers who can provide low

cost, quality materials rather than own their source of supply. It

becomes critical for companies to manage the entire network of
supply to optimize overall performance. These organizations
have realized that whenever a company deals with another
company that performs the next phase of the supply chain,
both stand to benefit from the others success. A second reason
partially stems from increased national and international
competition. A third reason for the shift in emphasis to the
supply chain is due to a realization by most companies that
maximizing performance of one department or function may
lead to less than optimal performance for the whole company.

TQM in Supply Chain Management


The primary focus of total quality management (TQM) is

customer satisfaction. Continuous improvement with cost
reduction, worker empowerment with measurement of results
of high quality goods and services are primary vehicles for
achieving customer satisfaction. Effective TQM hinges also on
management performance in planning, organizing, influencing
and controlling activities in all functional areas with proper
teamwork (such as marketing, purchasing, design, and
engineering, production, distribution, finance and accounting,
human resources etc.).
Customer focus
Customer focus is the core principle and idea of TQM
because quality effort comes of customers needs and ends
with customers acceptance. In supply chain circumstance,
customer includes not only the end user but also many inbetween users, such as suppliers, manufacturers, sellers, etc.
However, more than half of the quality problems in supply
chain are resulted by specifications because of the inadequate
communications between the members of supply chain. In
many cases, the procurement specifications released by buyers


are equivocal while suppliers dare not to argue against buyers

on the specifications in the bidding process [3]. Therefore, the
core enterprise must pay attention to the needs and
expectation of end users, and all the members of supply chain
must pay attention to the needs and expectation of their
backward users. The needs and expectation of end users
should be deployed layer upon layer in the whole supply chain
system. The end users will satisfy if all the member of supply
chain can satisfy the needs of their backward users. Moreover,
the operation efficiency of supply chain system can be
improved through the satisfaction level of the end users. In
supply chain quality management, some traditional tools of
TQM are also effective. For example, we can use Quality
Function Deployment (QFD) to identify the distinct and
potential needs and preferences of users, use Fishbone Chart to
investigate the factors affecting the satisfaction level of users
and then use Pareto Chart to find out the key factors.

The effective of quality management depend on the effective
of leadership because quality effort can get actual effect only
with the recognition and support of the leadership. In supply
chain circumstance, the core enterprise play as the leadership
since it establishes the development strategy and operation
targets of supply chain affect the actual efficiency and
effectiveness of the quality effort of all the other members.
Therefore, the core enterprise must act as leadership to
consider adequately the needs and expectation of the other
members, establish a clear, realizable and coincident holistic
target, and then lead and inspire the other members to strive
jointly for the target. At the same time, the core enterprise
should foster more leaders of TQM in each layer of supply chain
and make them take their responsibility zealously.


Involvement of people
The exertion of enthusiasm and creativity of all the
employees is the precondition of the actual effect of quality
management. In supply chain circumstance, an up-and-coming
excelsior work atmosphere should be established to inspire the
enthusiasm and creativity of the employees of all the members.
Each employee should understand his/her role and
responsibility in the supply chain system, solve the problems
forwardly as mastership, and learn the principles, skills and
technologies of TQM and ISO9000. Here, we can foster the
ethos of self-motion and self-knowledge in supply chain through
5S, i.e. seiri, seiton, seiso, seiketsu, and shitshke. Furthermore,
we can make all the employees participate into supply chain
quality management and strive for the satisfaction of users
jointly through the establishment of QC teams that cross
function or even enterprise.

Process management

The focus of modern quality view is the process quality

management but not the product itself of traditional quality
view. It is the requirement of the quality management system
of ISO9004:2000 and the essential difference of modern and
traditional quality view. In each step of supply chain, there are
many correlative processes, such as procurement, logistics,
production, inventory, selling, service, etc. These processes
have their own independent objectives and programs. There
are usually conflicts among the objectives and programs.
Therefore, the processes and their mutual effects should be
identified and managed to ensure the harmonious operation of
supply chain. Then, all the processes, especially the key
processes, can realize high quality, i.e. small variation, small
waste, and more increment, through the continuous
improvement and total quality control in all the nodes of supply
chain system.


System management

The application of system approach in quality management

is to view the quality management system as a big and holistic
system, identify and manage the sub-systems respectively.
Then, the coordinated effect and mutual promotion among the
sub-systems will make the whole effect greater than the sum of
the improvement of each sub-system and improve the validity
and efficiency of the realization of final targets . In supply chain
dependence relationship among the processes in supply chain
system, break the boundary among supply chain members,
construct and integrate the processes in supply chain system.
Then, many well operation sub-systems can be constructed to
collocate the resources rationally among the sub-systems.
Finally, the whole supply Vol. 2, No. 2 International Business
Research 84 chain system, including supply, transport,
production, distribution, inventory, etc., can realize the target
and policy of quality through the optimal operation mode.

Continual improvement
Continual improvement is one of the focuses of modern
quality research and practice. Enterprise must improve the
quality of product and service continually and reduce the cost
to make customer satisfactory. In supply chain circumstance,
the pressure of continual improvement is more and more
pressing because the market competition is more and more
hard. Not only the core enterprise but also the other members,
such as suppliers, sellers, and logistics providers, must improve
their product and service respectively so as to construct the
continual improvement of products and services all over the
supply chain process. Then, the continual, stable and
harmonious ability of quality assurance can be established.
Furthermore, the core enterprise and other members must find
the ways and practices improving performance in or out of
supply chain through benchmarking to make the continual

improvement speed fast than the one of rivals. However, it is

ironical that one of the most important reason in the
predicament of Xerox, which initiated benchmarking practices,
was exactly its slow reaction with the fast changing

Factual approach to decision making

The sufficient and adequate data and information is the
foundation of making right and effective decisions. Up to now,
many enterprises have began to collect and deal with all kinds
of data and information by utilizing many advanced information
Intranet/Extranet/Internet, so as to provide foundation for
making effective decision. In supply chain circumstance,
enterprise should collect data and information of not only itself
but also the other members of supply chain to record and
analyze the current operation situation of each member.
Therefore, the potential problems in any step of supply chain
can be found duly according to the results of data analysis.
Then, the corresponding correct and timely decision can be
made to avoid or rectify the problem.

Mutually beneficial supplier relationships

What impact can suppliers have in achieving quality? TQM
authorities recommend that organizations work directly with
raw material suppliers to ensure that their materials are of the
highest quality possible. Currently, at least 50 percent of TQM
organizations collaborate with their suppliers in some way to
increase the quality of component parts. Often these
organizations send out quality action teams to consult with
their major suppliers. The objective is to help suppliers use TQM
to analyze and improve their work processes. Suppliers can
contribute to quality in a number of other ways. Therefore, the
organization and its supplier are mutually dependent.

Maintaining the mutually beneficial relationships between them

can improve the ability of creating value both of them. In
supply chain circumstance, the product quality is performed
and ensured by all the members of supply chain because the
production, sales and service process must be performed by all
the members. Therefore, the task of supply chain quality
management is not only to establish the product inspection
system and comprehensive evaluation system of suppliers, but
also to strengthen the mutual beneficial partner relationships
with suppliers. The core enterprise must realize the following

Identify and select the main suppliers, reduce the scale of

supply system, and realize small supply base
management; z Investigate the requirements of customers
and develop new product jointly with suppliers;
Share information, technology, and resource with
Admit the improvement and achievement of suppliers;
Take joint improving activities with suppliers;
Ensure the conformity of quality system between core
enterprise and the other members, including basic
conformity (e.g. program files, technology specification,
process interface) and advanced conformity (e.g. quality
target, quality policy, and quality culture).

In fact, there is a new trend in the international practices of

supply chain management. Namely, more and more large-scale
enterprises have pay attention to the management and
development of suppliers, e.g. providing capital, technology,
human resource, equipment and training for suppliers, sending
quality teams to help suppliers improve their processes, and
sharing the yields of continual improvement with suppliers.


Implementation refers to responsibility for the tendering of
equipment and supplier selection, contract negotiation and
placement. Contract Management through to completion to
ensure that the project is progressed in accordance with the
requirements of time, cost and quality. Work with the client on
preparing any organisational changes and training to ensure a
smooth start to the new operation. There has been found that
many companies have not thought comprehensively about the
design of their supply chains. Often, their attempts to achieve
excellence have been focused on perhaps one or two supply
chain building blocks--and not, as they should be, on all of the
dimensions required for world-class performance.
The framework below outlines the five key dimensions of
supply chain management through the implementation
procedure that are required to achieve superior performance.
These areas must be addressed iteratively and, generally, in a
hierarchical fashion:
1. Strategy--specifically, the alignment of supply chain
strategies with the overall business direction. Key decision
points for managers here include:
What is required to align the supply chain with the
business strategy?
What level of customer service must we provide to each
customer segment to compete effectively?
Which channels of distribution best meet our goals and
our customers' needs?

2. Infrastructure--which affects cost-service performance and

establishes the boundaries within which the supply chain must
operate. Pertinent questions include:
How must the physical network of plants and distribution
be structured?
Can we rationalise our current network?
Can we use contract manufacturing or third-party logistics
What transportation services can best link together the
network of facilities?
Which activities should we outsource?
3. Process--the drive to achieve functional excellence and
integration across all major processes. Managers must ask
themselves the following:
What are the core supply chain processes driving the
How can we adapt best-in-class approaches to our core
processes (e.g., manufacturing, integrated demand
planning, procurement, cycle-time compression, dynamic
How can we build linkages with our suppliers and
4. Organisation--providing the critical success factors of
cohesion, harmony, and integration across organisation
entities. Questions to consider include:
What level of cross-functional integration is required to
manage core processes effectively?
How can we leverage cross-company skills and abilities?
What performance-measurement and reporting structure
can help us achieve our objectives?
5. Technology-- which empowers the supply chain to operate
on a new level of performance and is creating clear competitive
advantages for those companies able to harness it. Companies
should address the following points:

Do our IT platform and core applications software support

world-class SCM?
Where will advanced decision-support capabilities have
the greatest impact on business performance?
What data are required to manage the core business
processes outlined above?
How can we capitalise on advanced communications (e.g.,
intranets and the Internet) in managing the supply chain?
How can we leverage enhanced visibility of customer
demand and other key operating parameters?


Amul (Anand Milk Union Limited) was formed in 1946.
During that time there was an acute shortage of milk in India.
One a bottle of milk per family per day was allowed by the
government. To address this shortfall Gujarat Cooperative Milk
Marketing Federation Ltd. (GCMMF) came up with a unique idea
of making improvement to the Supply Chain of milk in such a
way so as to cut down the dumping and wastage of milk. Amul
produces around 450000 litres of milk every day. And over 2
million milk farmers are associated with this brand currently.

Amul Supply Chain Management

Amul Shops on Major Railway Stations as a Result of Leading
Supply Chain Improvement in distribution network Amul slowly
47 milk storage depots to buffer inventory.
500000 retail outlets were opened across the country


Around 3500 distributor of Amul products across the

GCMMF started transacting in form of advance Demand
Drafts and Cash in order to maintain the liquidity ofthe firm.
This in turn helped both the suppliers and the consumers in a
big way.
Suppliers got their money on time and thus were more and
more willing to work for AMUL,and consumers got a better
quality of milk because dealers were able to hold only that
muchquantity of milk of which they were capable of paying in
terms of cash

The Business Model

The business model was simple. There was a need to find
out all the parties involved in the Business model. The main
stake holders are the Milk Producers, the Milk Consumers and
the people involved in logistics. GCMMF took the responsibility
of taking care of the secondary needs of the Milk producers. It
took initiative to educate the milk producers, provide them with
the knowledge of better Animal Husbandry System. GCMMF
also ensured that good quality milk was supplied to the
consumers. A number of chiller plants were established near
the collection centre. A major role was to be played by logistic
system. GCMMF had to ensure quality of the milk products. In
this regard generally third party logistic system was hired. The
union kept a watch on the performance of the logistic system.
The milk was transported in refrigerated containers. Efforts
were made to ensure the timely delivery of products. Such a
thing was crucial in the case of Amul as the products catered by
them are perishable. As a result of this collaboration Amul has
been able to enhance the production of milk and be a part of
White Revolution.
As mentioned earlier, the strategy, design and practices in
AMULs network are strongly driven by the objective of
establishing and operating an efficient supply chain from milk
production and procurement to product delivery to customers.
Management of this network is built around two key elements

(a) coordination of the diverse elements of the network and

(b) use of appropriate technology
that includes product, process and information technology and
managerial practices and systems. In what follows, we describe
various features of these elements that have contributed to the
evolution of an efficient supply chain.
Coordination for Competitiveness
Robust coordination is one of the key reasons for the
success of operations involving such an extensive network of
producers and distributors at GCMMF. Some interesting
mechanisms exist for coordinating the supply chain at GCMMF.
These range from ensuring fair share allocation of benefits to
various stakeholders in the chain to coordinated planning of
production and distribution. More importantly, the reason for
setting up of this cooperative is not amiss to any one in this
large network organization. Employees, third part service
providers, and distributors are constantly reminded that they
work for the farmers and the entire network strives to provide
the best returns to the farmers, the real owners of the
cooperative. It may be remembered that coordination
mechanisms have to link the lives and activities of 2.12 million
small suppliers and 0.5 million retailers!
There appear to be two critical mechanisms of
coordination that ensure that decision making is coherent and
that the farmers gain the most from this effort. These
mechanisms are:
Inter-locking Control
Coordination Agency: Unique Role of Federation
Inter-locking Control
Each Village Society elects a chairperson and a secretary
from amongst its member farmers of good standing to manage
the administration of the VS. Nine of these chairpersons (from
amongst those VS affiliated to a Union) are elected to form the
Board of Directors of the Union. The Chairperson of the Union
Board is elected from amongst these members. The managing
director of the Union, who is a professional manager, reports to
the chairperson and the board. All chairpersons of all the

Unions form the Board of Directors of GCMMF. The managing

director of GCMMF reports to its Board of Directors. Each
individual organization, the Union or GCMMF, is run by
professional managers and highly trained staff. It must be
pointed that all members of all the boards in the chain are
farmers who pour milk each day in their respective Village
A key reason for developing such an inter-locking control
mechanism is to ensure that the interest of the farmer is always
kept at the top of the agenda through its representatives who
constitute the Boards of different entities that comprise the
supply chain. This form of direct representation also ensures
that professional managers and farmers work together as a
team to strengthen the cooperative. This helps in coordinating
decisions across different entities as well as speeding both the
flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of the Federation

In addition to being the marketing and distribution arm of the
Unions, GCMMF plays the role of a coordinator to the entire
network within the State coordinating procurement
requirements with other Federations (in other states),
determining the best production allocation for its product mix
from amongst its Unions, managing inter-dairy movements, etc.
It works with two very clear objectives: to ensure that all milk
that the farmers produce gets sold in the market either as milk
or as value added products and to ensure that milk is made
available to increasingly large sections of the society at
affordable prices. In addition, it has to plan its production at
different Unions in such a way that market requirement
matches with unique strengths of each Union and that each of
them also gets a fair return on its capacity. In this regard,
GCMMF follows an interesting strategy. GCMMF, in consultation
with all the Unions, decides on the product mix at each Union

location. Some considerations that govern this choice are the

strengths of each Union, the demand for various products in its
region as well as the country, long term strategy of each Union,
procurement volumes at different Unions, distribution costs
from various locations etc. Demand for daily products and
supply of milk vary with the season. Further, demand and
supply seasons run counter to each other making the planning
problem more complex. In making allocations to Unions,
GCMMF is guided by two main objectives (i) maximizing the
network surplus, and (ii) maintaining equity among unions for
the surplus realized. In this regard, very often GCMMF is willing
to sacrifice realizable surplus and allocate products to less
efficient Unions in order to achieve better balance in surpluses
accruing to the Unions.
Technology for Effectiveness
Service to customers required the following: better and
newer products, processes that would deliver the low cost
advantage to the network and practices that would ensure
high productivity and delivery of the right product at the right
time. Thus technology or knowledge that was embodied in
products, processes, and practices became an important factor
in delivering effectiveness to the network of cooperatives. One
distinguishing feature of AMUL (in comparison with other similar
cooperatives globally) is the large variety in their product mix.
Producing them not only requires diverse skills but also
knowledge of different types of processes. AMUL dairy led the
way in developing many of these products and establishing the
processes for other member Unions.
Equally impressive are the achievements on process
technology. While several continuous innovations to equipment
and processes have been done at AMUL, the most significant
one has been the development of processes for using buffalo
milk to produce a variety of end products. Gujarat (and most of
India) is a buffalo predominant area. As more farmers joined the
cooperatives, the need to develop a mechanism for storage of

increasing quantities of milk became intense. Moreover, the

cooperative was established on the promise that it would buy
any quantity of milk that a member farmer wanted to sell. The
need to store milk in powder form increases as excess milk
quantities in winter seasons could then be used in lean summer
seasons. Moreover, demand for liquid milk was not growing
along with growth in milk production. No technology, however,
existed worldwide to produce powder from buffalo milk.
Engineers at AMUL successfully developed a commercially
viable process for the same first time in the history of global
diary industry. Subsequently, it also developed a process for
making baby food out of this milk powder. It has also developed
a unique process for making good quality cheese out of buffalo
milk thereby converting a perceived liability into a source of
comparative advantage the task was done through process
technology research. Most of its plants are state of art and
automated. Similar efforts in the area of embryo transfer
technology have helped create a high yield breed of cattle in
the country. AMULs innovations in the areas of energy
conservation and recovery have also contributed to reduction in
cost of its operations. AMUL also indigenously developed a low
cost process for providing long shelf life to many of its
perishable products.

Effective Supply Chain Management and Logistics
contributes to competitive advantage to organizations. This
paper conveys the conceptual idea of SCM and Logistics as well
as importance of information technology tools and technologies
for improving the performance of SCM and Logistics in India. To
achieve this improved performance, organizations should focus
on applying techniques which offer a strategic opportunity for
companies to gain an increase in revenue. This is possible by
refocusing on integrating IT with supply chain management and

Logistics The desired technology platform can capture

enterprise-level data and deliver information to support the
specific needs of their global manufacturing or distribution.
Organizations must realize that they must harness the power of
IT to collaborate with their business alliances. Business
organizations must offer more value for less money by utilizing
the latest innovative technologies to achieve continuous quality
improvement by being highly cost effective. In their search for
excellence, the leading business organizations of the world are
using SCM, which employs the latest and state-of-the-art IT
technologies and tools. This leads to the much sought after cost
effectiveness by exploring leading-edge use of information
technology in supply chain integration. Hence, to succeed in
todays global marketplace, Indian organizations must look at
streamlining their supply chain through the successful
deployment of information technology.
Many management gurus believe that India has the
potential to emerge as the economic super power of the world
in the near future. In order to achieve this status, the Indian
business organizations must strengthen their practices learning
a lesson from the global counterparts. The day is not far when
Indian professionals will combine their expertise in IT with
applications in SCM and Logistics to emerge as winners. A
detailed discussion on data analysis and concluding remarks
based on the research findings has been presented. It also
provides recommendations for implementing supply chain
management practice for overall growth of the large, medium
and smallscale engineering units of the Gujarat State.
It is found from the study that the companies face similar
issues and challenges related to the implementation of SCM
irrespective of their scale of operation. Some of the major
issues are number of locations, flow of materials, product
design, scheduling and routing. The firms that implement SCM
are likely to obtain certain advantages such as increase in
annual turnover, increase in market share, improvement in
productivity of labour & machines, and improved customer
satisfaction. The study also revealed that implementation of
SCM could help in reducing the rejection rate, customer
complaint and cost of production.






Research & Methodology - Manan Prakashan

An Introduction to Supply Chain Management an
article by Ram Ganeshan & Terry P. Harrison.