Page 155 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes The flow of goods and information goes both ways which means that the participants in a
supply chain are both customers and suppliers.

Example: Supertech Industries places an order (information) with Nalco, who in turn
ships aluminium (product) to Supertech Industries. Supertech Industries is therefore a customer
to Nalco and a supplier to Kalyani Breweries. If Kalyani Breweries returns empty pallets or
containers to its first-tier suppliers, resulting in a flow of physical goods back up the supply
chain, it becomes a supplier to Supertech Industries in addition to being its customer. This
relationship reflects a single strand in the supply chain. There are many more participants in the
supply chain than the ones shown above—Kalyani Breweries has hundreds of suppliers and the
number of retailers is even higher.
Historically built on Procurement, Operations and Logistics foundations; Supply Chain
Management goes beyond these traditional concepts. Physical flows involve the transformation,
movement, storage of goods and materials and money and are the most visible part of the
supply chain. But just as important are information flows. Information flows allow the various
supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of
goods and material to the supply chain. The flow of products, services, and information go both
up and down the chain.

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Caution In order to make an effective supply chain, organizations that make up the supply
chain are “linked” together through both physical and information flows.
Though “supply chain relationships aren’t new”, historically most participants in supply chains
performed their activities independently of other firms in the chain. In contrast, supply chain
management efforts involve individual firms taking steps to improve the flow of information
between itself and its suppliers, improve and reduce variation in business processes and practices.
In essence, the supply chain concept tries to make each participant in the chain more efficient.
For any supply chain, there is only one source of revenue: the customer. At DSIDC, a customer
purchasing beer is the only one providing positive cash flow for the supply chain. All other cash
flows are simply fund exchanges that occur within the supply chain, given that different stages
have different owners. When DSIDC pays its supplier, it is taking a portion of the funds the
customer provides and passing that money on to the supplier. All flows of information, product,
or funds generate costs within the supply chain.

What is ‘Supply Chain Management’?

‘Supply Chain Management’ is defined as the integration-oriented skills required for providing
competitive advantage to the organization that are basis for successful supply chains. A typical
supply chain may involve a variety of stages. These supply chain stages include:
 Customers

 Retailers
 Wholesalers/Distributors
 Manufacturers

 Component/Raw material suppliers

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