SCH4801 2020 EXAM NOTES
,SUPPLY CHAIN
MANAGEMENT SCH4801
LONG QUESTIONS AND ANSWERS
SECTION 1 - INTRODUCTION: CONCEPTS AND
DEMARCATION LEARNING UNIT 1
SUPPLY CHAIN MANAGEMENT (SCM): CONCEPTS AND DEMARCATION
EXPLAIN THE CONCEPT OF SUPPLY CHAIN MANAGEMENT
Supply Chain Management (SCM) is a set of inter- and intra-company processes that produces and
delivers goods and service to customers. SCM can be seen as the strategic management of all the
traditional business functions that are involved in any supply chain flow, upstream or downstream,
across any aspect of the supply chain.
EXPLAIN THE BASIC PHILOSOPHIES ON WHICH THE SUPPLY CHAIN CONCEPT
IS FOUNDED
SCM is a management philosophy aimed at integrating all the linkages in the supply chain into a
seamless unit. The goals of managing the supply chain ought to reflect two levels of interest.
Firstly, there are the goals of the individual firms linked into the supply chain. The first group of
goals could be to balance customers’ demands with the need for making profit and attaining growth
objectives.
The characteristic of this philosophy is that the overall philosophy is indicated as a “vantage point
management philosophy”. Vantage point simply means that the supply chain should be managed
from an overall perspective, a holistic approach or a systems paradigm where one entity is
ultimately responsible for ensuring that all the goals of the SCM are attained. It means the ability
to view the entire supply chain processes at a glance.
DISCUSS THE EVOLUTIONARY PROCESS THAT CULMINATED IN MODERN
SUPPLY CHAIN MANAGEMENT
The SCM field has rapidly evolved. Previously, SCM focused on internal integration but now
focuses on suppliers, customers and information integration to reach optimal level of performance.
Poirier and Francis suggest an evolutionary model consisting of five consecutive phases or levels
aimed at adopting an SCM philosophy in logical steps, which are linked to the internal and external
business environment.
The first (internal) phase (phase I) is where the firm moves from complete functional independence
where there is no synergy or sometimes even no internal communication between functional areas
and activities in the area of supply, to a stage where there is some degree of integration that strives
for corporate alignment. Typical changes in this phase towards the ultimate goal of supply chain
integration would be to consolidate inventories, reduce the supplier base, introduce MRP and JIT
practices and establish an internal team of cross-functional experts to address the typical problems
of the functional approach.
,The second (internal) phase (phase II) in the evolutionary process of the supply chain that
organisations go through is internal integration. In this phase, an “end-to-end” planning framework
is established which represents the first holistic view of the concept of an integrated supply chain.
It also establishes the vision for supply chain integration. In reality, a long-term business plan is
developed to transform the organisation ultimately into a supply chain-oriented firm. The support
of top management for the internal integration of supply chain activities and functional areas is
vitally important during this phase, because the full integration of functional areas will require
substantial process redesign.
The development of suitable technology to support supply chain management is crucially
important for this phase. Although technology development is not limited to information systems,
it is a pivotal factor for future expansion of the supply chain concept to the external environment,
upstream and downstream. Compatibility of information systems between the firm and its
suppliers and customers is a priority and it is not uncommon for information interchange with the
supply market in particular to be established.
In the third (and first external) phase (phase III), organisations look externally to develop partner
collaboration. Moving externally with the supply chain concept requires very exceptional
leadership in the firm. It must be realised that for functional managers to think of managing beyond
the boundaries of the own organisation requires a completely new paradigm. Firstly, the change
from managing from the perspective of functional optimisation and maximising profit to one that
is entirely focused on customer value creation is a major step.
During this phase, inter-organisation information flow is expanded and information technology
extended to include electronic commerce. The establishment of a supply chain- wide database with
access to all members is also a priority.
The fourth (also external) phase (phase IV) is reaching the full potential of the integrated supply
chain. The supply chain stakeholders work to create value chain collaboration, among other things,
improved supply chain transparency and visibility. During this phase multifunctional and cross-
organisational teams manage almost all processes and activities in the integrated supply chain. The
demand chain will be solidly integrated with the supply chain in value networks.
Phase V, the final phase, is close to phase IV and consists of supply chain stakeholders achieving
full network connectivity. The value network of suppliers and customers that was established in
phase III is now extended to form a virtual organisation of supply chain linkages, and to form it
into a virtual information network. The organisation will in all probability also move into the global
market with the supply chain and in turn become part of many global supply chains of other
vantage point organisations.
, EXPLAIN THE CREATION OF VALUE IN SCM
The theory of supply chain management holds that, for the eventual product or service to be
commercially advantageous to the organisations involved in its creation and provision, value must
be added to a process faster than cost.
The objective of every supply chain should be to maximise the overall value generated. The value
a supply chain generates is the difference between what the value of the final product is to the
customer and the cost that the supply chain incurs in filling the customer’s need. Value in the
supply chain is regarded as supply chain surplus.
Customers’ perception of value is determined by the entire offering not just the products and
services, but also the many intangibles that are associated with delivering customer value. Value
is also clearly based on perceptions and intangible elements, which also emphasises the importance
of the relationship-building element that is so core to the concept of SCM.
EXPLAIN THE MANAGEMENT TASK IN SCM
SCM is often described as the planning, organising, implementing and control of the flow and
transformation of goods and services, including the essential information flows from the raw
material stage to the end user. A different perspective of the management of the supply chain may
therefore be obtained by analysing each of the traditional elements of management.
Planning for the supply chain
Strategic planning for supply chain management is directly linked to the overall business
strategy of the firm and is therefore directly involved in and supportive of the overall objectives
of the firm. It should therefore be emphasised that supply chain strategies should always be
focused on the two overarching objectives of the firm, that is, optimising shareholder value
and creating customer value.
Processes involved in the supply chain is another major element. Supply management is
process management and therefore planning will also cross functional and organisational
boundaries. Process planning therefore also involves identifying and including only those
partners who have internal processes that are highly efficient and compatible with the overall
supply chain processes.
Planning the intricate relationships typical of the supply chain is a delicate task since the
aspirations and limitations of many participants in the chain must be taken into consideration.
Relationship planning is closely linked to the human element in the supply chain.
Planning the resources available in the supply chain is perhaps the most difficult of the
planning tasks. If the supply chain ideal of optimising customer value (including lowest total
cost of ownership) is to be realised, then very precise planning will be required to ensure that
all resources are optimally deployed. This may, for example, mean that some manufacturing
capacity in the supply chain has to be shut down. The outsourcing of tasks to units in the supply
chain that have exceptional skills in a particular area of expertise may also be justified.
,SUPPLY CHAIN
MANAGEMENT SCH4801
LONG QUESTIONS AND ANSWERS
SECTION 1 - INTRODUCTION: CONCEPTS AND
DEMARCATION LEARNING UNIT 1
SUPPLY CHAIN MANAGEMENT (SCM): CONCEPTS AND DEMARCATION
EXPLAIN THE CONCEPT OF SUPPLY CHAIN MANAGEMENT
Supply Chain Management (SCM) is a set of inter- and intra-company processes that produces and
delivers goods and service to customers. SCM can be seen as the strategic management of all the
traditional business functions that are involved in any supply chain flow, upstream or downstream,
across any aspect of the supply chain.
EXPLAIN THE BASIC PHILOSOPHIES ON WHICH THE SUPPLY CHAIN CONCEPT
IS FOUNDED
SCM is a management philosophy aimed at integrating all the linkages in the supply chain into a
seamless unit. The goals of managing the supply chain ought to reflect two levels of interest.
Firstly, there are the goals of the individual firms linked into the supply chain. The first group of
goals could be to balance customers’ demands with the need for making profit and attaining growth
objectives.
The characteristic of this philosophy is that the overall philosophy is indicated as a “vantage point
management philosophy”. Vantage point simply means that the supply chain should be managed
from an overall perspective, a holistic approach or a systems paradigm where one entity is
ultimately responsible for ensuring that all the goals of the SCM are attained. It means the ability
to view the entire supply chain processes at a glance.
DISCUSS THE EVOLUTIONARY PROCESS THAT CULMINATED IN MODERN
SUPPLY CHAIN MANAGEMENT
The SCM field has rapidly evolved. Previously, SCM focused on internal integration but now
focuses on suppliers, customers and information integration to reach optimal level of performance.
Poirier and Francis suggest an evolutionary model consisting of five consecutive phases or levels
aimed at adopting an SCM philosophy in logical steps, which are linked to the internal and external
business environment.
The first (internal) phase (phase I) is where the firm moves from complete functional independence
where there is no synergy or sometimes even no internal communication between functional areas
and activities in the area of supply, to a stage where there is some degree of integration that strives
for corporate alignment. Typical changes in this phase towards the ultimate goal of supply chain
integration would be to consolidate inventories, reduce the supplier base, introduce MRP and JIT
practices and establish an internal team of cross-functional experts to address the typical problems
of the functional approach.
,The second (internal) phase (phase II) in the evolutionary process of the supply chain that
organisations go through is internal integration. In this phase, an “end-to-end” planning framework
is established which represents the first holistic view of the concept of an integrated supply chain.
It also establishes the vision for supply chain integration. In reality, a long-term business plan is
developed to transform the organisation ultimately into a supply chain-oriented firm. The support
of top management for the internal integration of supply chain activities and functional areas is
vitally important during this phase, because the full integration of functional areas will require
substantial process redesign.
The development of suitable technology to support supply chain management is crucially
important for this phase. Although technology development is not limited to information systems,
it is a pivotal factor for future expansion of the supply chain concept to the external environment,
upstream and downstream. Compatibility of information systems between the firm and its
suppliers and customers is a priority and it is not uncommon for information interchange with the
supply market in particular to be established.
In the third (and first external) phase (phase III), organisations look externally to develop partner
collaboration. Moving externally with the supply chain concept requires very exceptional
leadership in the firm. It must be realised that for functional managers to think of managing beyond
the boundaries of the own organisation requires a completely new paradigm. Firstly, the change
from managing from the perspective of functional optimisation and maximising profit to one that
is entirely focused on customer value creation is a major step.
During this phase, inter-organisation information flow is expanded and information technology
extended to include electronic commerce. The establishment of a supply chain- wide database with
access to all members is also a priority.
The fourth (also external) phase (phase IV) is reaching the full potential of the integrated supply
chain. The supply chain stakeholders work to create value chain collaboration, among other things,
improved supply chain transparency and visibility. During this phase multifunctional and cross-
organisational teams manage almost all processes and activities in the integrated supply chain. The
demand chain will be solidly integrated with the supply chain in value networks.
Phase V, the final phase, is close to phase IV and consists of supply chain stakeholders achieving
full network connectivity. The value network of suppliers and customers that was established in
phase III is now extended to form a virtual organisation of supply chain linkages, and to form it
into a virtual information network. The organisation will in all probability also move into the global
market with the supply chain and in turn become part of many global supply chains of other
vantage point organisations.
, EXPLAIN THE CREATION OF VALUE IN SCM
The theory of supply chain management holds that, for the eventual product or service to be
commercially advantageous to the organisations involved in its creation and provision, value must
be added to a process faster than cost.
The objective of every supply chain should be to maximise the overall value generated. The value
a supply chain generates is the difference between what the value of the final product is to the
customer and the cost that the supply chain incurs in filling the customer’s need. Value in the
supply chain is regarded as supply chain surplus.
Customers’ perception of value is determined by the entire offering not just the products and
services, but also the many intangibles that are associated with delivering customer value. Value
is also clearly based on perceptions and intangible elements, which also emphasises the importance
of the relationship-building element that is so core to the concept of SCM.
EXPLAIN THE MANAGEMENT TASK IN SCM
SCM is often described as the planning, organising, implementing and control of the flow and
transformation of goods and services, including the essential information flows from the raw
material stage to the end user. A different perspective of the management of the supply chain may
therefore be obtained by analysing each of the traditional elements of management.
Planning for the supply chain
Strategic planning for supply chain management is directly linked to the overall business
strategy of the firm and is therefore directly involved in and supportive of the overall objectives
of the firm. It should therefore be emphasised that supply chain strategies should always be
focused on the two overarching objectives of the firm, that is, optimising shareholder value
and creating customer value.
Processes involved in the supply chain is another major element. Supply management is
process management and therefore planning will also cross functional and organisational
boundaries. Process planning therefore also involves identifying and including only those
partners who have internal processes that are highly efficient and compatible with the overall
supply chain processes.
Planning the intricate relationships typical of the supply chain is a delicate task since the
aspirations and limitations of many participants in the chain must be taken into consideration.
Relationship planning is closely linked to the human element in the supply chain.
Planning the resources available in the supply chain is perhaps the most difficult of the
planning tasks. If the supply chain ideal of optimising customer value (including lowest total
cost of ownership) is to be realised, then very precise planning will be required to ensure that
all resources are optimally deployed. This may, for example, mean that some manufacturing
capacity in the supply chain has to be shut down. The outsourcing of tasks to units in the supply
chain that have exceptional skills in a particular area of expertise may also be justified.
