Supply Chain Management

(SCM/SLM)
 Supply Chain Management
 Logisticians have devoted little
attention to managing the chain of
supply up to the purchasing
function.

 And similarly, materials managers

have ignored the management of
the flow of products down to the
customers through distribution
channels.
 Supply Chain Management
 On the contrary Supply Chain
Management views the entire
chain as a system to be managed.

 It can be defined as “managing

the entire chain of raw material
supply, manufacture, assembly
and distribution to the end
customer.”
Supply Chain Management

 In long supply chains, it is not

easy to co-ordinate the whole
chain.

 This is especially true when

part of the supply chain serves
two sets of end cutomers.
 Supply Chain Management
 For example, many manufacturers of
automobile components serve two different
groups of end customers:

- One group buys new cars (vehicle market)

- The other group buys spare parts for repair

of their cars (spares market)

 The spares market is also known as

“aftermarket” for the car components.
Supply Chain Management
Supply Chain Management

The Role of
Inventory, The
planning and
control priorities,
and price
negotiations will
All be different for
each chain.
Supply Chain Management

Since the components for both

chains are produced by the
same Component
Manufacturer, Operations
should be split between the
two chains, AND they should
be well managed.
Types of Relationships in
Supply Chains

1- Integrated Hierarchy

2- Semi-Hierarchy

3- Co-Contracting

4- Coordinated contracting

5- Coordinated revenue links

Types of Relationships in
Supply Chains
 1) Integrated hierarchy means that
a firm houses all activities in the
supply chain

 FROM raw material source TO

distribution of products to end
users (figure).

 This is also called Full Vertical

Integration.
Types of Relationships in
Supply Chains
 2) In a Semi-hierarchy organization, the
firms in the Supply Chain are owned by
the same holding Company, But they
operate as Separate Business Units.

 For example, An Oil Company delegates

the following activities to the following
business units: Oil extraction, Oil
refining, Petrol Distribution, and Petrol
Retailing.
 Types of Relationships in
Supply Chains
 3) Co-contracting is a term used to describe
alliances between organizations that have

 Long term relationships but do not Merge

together.

 They rather transfer some Equity

(ownership), technology, Information, AND
People.

 Such alliances are evident in aerospace

industry (Airbus transfers technology with
others).
Types of Relationships in Supply Chains
 4) Coordinated Contracting involves a prime
contractor who employs a set of sub-
contractors.

 For example, a building trader (or

decorator) employs a set of sub-
contractors, such as carpenters,
electricians, and bricklayers AND calls them
when needed.

 There is a long-standing relationship

between contractor and sub-contractors.
Types of Relationships in
Supply Chains
 The contractor provides
Materials and usually take
responsibility for the planning
and control of the entire job.

 But the sub-contractor provides

the necessary equipment
required for its profession.
Types of Relationships in
Supply Chains

 5) The category of
Coordinated revenue links is
used primarily for Licensing
and Franchising. (e.g., fast
food chains)
Types of Relationships in
Supply Chains

 It is a form of relationship
that transfers ownership to
other firms (usually smaller)
while guaranteeing an
income for the franchiser or
the licensor.
 Types of Relationships in
Supply Chains
 In this form of contract Franchiser,
- Has the property rights of the product
- sets the territory in which the franchisee
can operate
- sets the process specification to be used in
operations, and
- monitors the performance of the franchisee.