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Unit 10: Building of a Supply Chain
of co-ordination will result in shortages or oversupply in the supply chain. Therefore, it is Notes
important to perform aggregate plans over as wide a scope of the supply chain as is reasonably
possible.
Self Assessment
Fill in the blanks:
1. ……………… reflects the structure of the supply chain over the next several years.
2. After identifying the key supply chains, one must identify the supply chain ………………
that are considered most critical to the organization’s supply chain management efforts.
3. The ……………… plan serves as a broad blueprint for operations and establishes the
parameters within which short-term production and distribution decisions are made.
4. ……………… plans for an organization define demand from suppliers and establish supply
constraint for customers.
10.2 Implementation of Supply Chain Function within an
Organization
10.2.1 Internal Supply Chains
The internal supply chain is that portion of a given supply chain that occurs within an individual
organization. The first step in moving towards supply chain management is to develop these
internal chains. Internal supply chains can be quite complex. Given the multi-divisional,
international organizational structures found in many businesses, it is not uncommon for the
internal part of a supply chain to have multiple “links” that span the globe. Developing an
understanding of the organization’s internal supply chain is often an appropriate starting point
for firms considering an SCM initiative.
In these multi-divisional structures, the employees of one division often view the “other”
divisions in much the same manner as they would external suppliers or customers. In some
cases, turf wars between divisions make integrating cross-divisional functions and processes
very difficult.
The supply chain has to be seen as a set of interrelated processes rather than a series of discrete,
non-aligned activities. Process maps are developed to understand the overall internal supply
chain linkages. These maps provide the basic information required to link the different entities.
Examples: Key processes and associated entities include order information from sales,
order entry for materials planning, order preparation by purchasing, manufacturing, or
warehousing, and order shipment for distribution and transportation. Each key process is
documented along with current performance information.
It is beneficial when the different divisions understand the steps in their portion of the supply
chain and “what happens” outside their part of the process. Developing supply chain process
maps (flow charts) for major supply chains and their related processes is a basic requirement to
establish an effective supply chain.
10.2.2 External Supply Chains
Once one understands the internal supply chain, one must extend the analysis to the external
portion of the supply chain (i.e., key suppliers and customers). This is an important step, as
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