SUPPLY CHAIN ALIGNMENT
MNP3702
Supply Chain P5
The supply chain is a network of organisations that is involved, through upstream and downstream linkages, in the
different processes and activities that produce value in the form of products and services that satisfy the ultimate
customers’ needs.
- The upstream and downstream linkages are the different flows of products, services, finances and information
that begin with sourcing raw materials and extend to the delivery of end items to the final consumer or end
user. The upstream linkages are on the supplier side of the supply chain, whereas the downstream linkages
are the physical distribution of products/services and customer service to the end consumer.
- The activities are performed by all the organisational functions that enable the production, delivery and
recycling of materials, components, end-products and services.
A Generic Supply Chain P6
Supply Chain Management (SCM) P7
SCM is a management philosophy aimed at proactively integrating and coordinating a network (or web) of upstream
linkages (sources of supply), internal linkages (inside the organisation) and downstream linkages (distribution and
ultimate customers) in performing specific key business processes and activities that will ultimately create and
optimise value for the customer in the form of products and services specifically aimed at satisfying customer
demands and expectations.
- The management philosophy is based on a systems approach to manage the different flows.
- The flows extend across organisational boundaries to form networks.
- In SCM, “linkages” refer to the two-way movement and coordination between the different flows.
- The key business processes are sourcing and procurement, conversion, all logistics management activities and
the coordination and collaboration between channel partners.
1
, The Foundations of Supply Chain Management P14
The elements provided below form the foundation of supply chain management. They view supply chain management
as a culmination of four different elements: Purchasing, Operations, Distribution and Integration.
1. Supply elements
Purchasing (supply) is the process undertaken by the organisation unit that, either as a function or as part of
integrated supply chain, is responsible for procuring or assisting users to procure, in the most efficient
manner, required supplies at the right time, quality, quantity and price and the management of suppliers,
thereby contributing to the competitive advantage of the enterprise and the achievement of its corporate
strategy.
Important issues:
Supplier alliance, Supplier management, Strategic sourcing, Global sourcing, Ethical and Sustainable sourcing.
2. Operations elements
The operations of an organisation are the processes utilised to produce and distribute products and services.
Operational elements can have a critical impact on the success of any supply chain, as they determine the
efficiency and effectiveness with which assembling or processing of items occur into finished products,
ensuring the right amount is produced which meet specific quality, cost and customer service requirements.
Therefore, operations often include substantial measurement and analysis of internal processes.
Important issues:
Demand management, Material Requirements Planning (MRP), Enterprise Resource Planning (ERP), Inventory
management, Total Quality Management (TQM), Just-in-Time, Lean systems, Six Sigma.
3. Logistics elements
Once a product or service is completed, it should be delivered to the customer as timeously as possible in the
right quantity and quality. This requires a high level of planning and cooperation between the firm, its
customers and the various logistics elements or services employed such as transportation, warehousing and
break-bulk or repackaging services. Logistics decisions typically involve a trade-off between cost and delivery
timing or customer service.
Important issues:
Transportation management, Customer Relationship Management (CRM), Network design, Service response
logistics.
4. Integration elements
Processes in a supply chain are integrated when members of the supply chain work together to make
purchasing, inventory, production, quality, logistics and other decisions that impact the overall profits. If one
key activity fails, the flow of goods moving along the supply chain is disrupted, jeopardising the effectiveness
of the entire chain. Successful integration occurs when participants realise that effective supply chain
management must become part of each member’s strategic planning process, where objectives and policies
are jointly determined based on the end customer’s needs.
Important issues:
Coordination/Integration activities, Global integration problems, Performance measurement, Risk and security
management, Barriers to integration.
Return on Assets Effect P40
Return on assets (ROA) is a financial ratio of a firm’s net income in relation to its total assets. The ratio is also referred
to as return on investment (ROI).
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Return on assets (ROA) =
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Example: Assuming a firm has total assets of $500 000 and its profits before taxes is $50 000, its ROA is then 10
percent ($50 000 ÷ $500 000 = 10%). If the firm reduces its purchase spend on materials by $20 000, through a more
effective purchasing strategy, its ROA then increases to 14 percent ($70 000 ÷ $500 000 = 14%).
2
MNP3702
Supply Chain P5
The supply chain is a network of organisations that is involved, through upstream and downstream linkages, in the
different processes and activities that produce value in the form of products and services that satisfy the ultimate
customers’ needs.
- The upstream and downstream linkages are the different flows of products, services, finances and information
that begin with sourcing raw materials and extend to the delivery of end items to the final consumer or end
user. The upstream linkages are on the supplier side of the supply chain, whereas the downstream linkages
are the physical distribution of products/services and customer service to the end consumer.
- The activities are performed by all the organisational functions that enable the production, delivery and
recycling of materials, components, end-products and services.
A Generic Supply Chain P6
Supply Chain Management (SCM) P7
SCM is a management philosophy aimed at proactively integrating and coordinating a network (or web) of upstream
linkages (sources of supply), internal linkages (inside the organisation) and downstream linkages (distribution and
ultimate customers) in performing specific key business processes and activities that will ultimately create and
optimise value for the customer in the form of products and services specifically aimed at satisfying customer
demands and expectations.
- The management philosophy is based on a systems approach to manage the different flows.
- The flows extend across organisational boundaries to form networks.
- In SCM, “linkages” refer to the two-way movement and coordination between the different flows.
- The key business processes are sourcing and procurement, conversion, all logistics management activities and
the coordination and collaboration between channel partners.
1
, The Foundations of Supply Chain Management P14
The elements provided below form the foundation of supply chain management. They view supply chain management
as a culmination of four different elements: Purchasing, Operations, Distribution and Integration.
1. Supply elements
Purchasing (supply) is the process undertaken by the organisation unit that, either as a function or as part of
integrated supply chain, is responsible for procuring or assisting users to procure, in the most efficient
manner, required supplies at the right time, quality, quantity and price and the management of suppliers,
thereby contributing to the competitive advantage of the enterprise and the achievement of its corporate
strategy.
Important issues:
Supplier alliance, Supplier management, Strategic sourcing, Global sourcing, Ethical and Sustainable sourcing.
2. Operations elements
The operations of an organisation are the processes utilised to produce and distribute products and services.
Operational elements can have a critical impact on the success of any supply chain, as they determine the
efficiency and effectiveness with which assembling or processing of items occur into finished products,
ensuring the right amount is produced which meet specific quality, cost and customer service requirements.
Therefore, operations often include substantial measurement and analysis of internal processes.
Important issues:
Demand management, Material Requirements Planning (MRP), Enterprise Resource Planning (ERP), Inventory
management, Total Quality Management (TQM), Just-in-Time, Lean systems, Six Sigma.
3. Logistics elements
Once a product or service is completed, it should be delivered to the customer as timeously as possible in the
right quantity and quality. This requires a high level of planning and cooperation between the firm, its
customers and the various logistics elements or services employed such as transportation, warehousing and
break-bulk or repackaging services. Logistics decisions typically involve a trade-off between cost and delivery
timing or customer service.
Important issues:
Transportation management, Customer Relationship Management (CRM), Network design, Service response
logistics.
4. Integration elements
Processes in a supply chain are integrated when members of the supply chain work together to make
purchasing, inventory, production, quality, logistics and other decisions that impact the overall profits. If one
key activity fails, the flow of goods moving along the supply chain is disrupted, jeopardising the effectiveness
of the entire chain. Successful integration occurs when participants realise that effective supply chain
management must become part of each member’s strategic planning process, where objectives and policies
are jointly determined based on the end customer’s needs.
Important issues:
Coordination/Integration activities, Global integration problems, Performance measurement, Risk and security
management, Barriers to integration.
Return on Assets Effect P40
Return on assets (ROA) is a financial ratio of a firm’s net income in relation to its total assets. The ratio is also referred
to as return on investment (ROI).
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Return on assets (ROA) =
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Example: Assuming a firm has total assets of $500 000 and its profits before taxes is $50 000, its ROA is then 10
percent ($50 000 ÷ $500 000 = 10%). If the firm reduces its purchase spend on materials by $20 000, through a more
effective purchasing strategy, its ROA then increases to 14 percent ($70 000 ÷ $500 000 = 14%).
2
