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Unit 1: 21st Century Supply Chains

The success of supply chains is based on their ability to deliver superior cost, quality, delivery, Notes
and technological performance. These, along with the process linkages between the participants,
are critically important factors to make for a successful supply chain.
Finally, it is necessary to appreciate that in order to operate a supply chain successfully, you
need to clearly understand intra-organizational and inter-organizational supply chain processes.
Where organizations do not keep this in view or take too much time to evolve inter-
organizational processes, it generally becomes too late for the supply chain to succeed. There
are more failures in SCM than there are successes.
SCM is involved with integrating three key flows, between the different stages, across the
boundaries of the companies:

 Product/Materials: This is the most obvious and visible part of the supply chain. Physically,
the flow manifests itself in the form of goods and services. This is also called the ‘value
flow’. Goods and service flows follow a similar sequence.

Example: Goods flows constitute raw materials (including material being transported),
work in process, finished goods, and spares, and reverse flows due to returns, rework or recycling
of the goods. The vendor side of these flows is called ‘upstream’ and the flows towards the
customer are referred to as ‘downstream’.
 Flow of information: 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. It consists of flows both from vendor to the customer and from the
customer to the vendor. The downstream flow of information has important components
like capacity estimates for plans, stocks available, dispatch advices, stock transfer notes,
quality assurance reports, warranties, etc. The upstream components of information flow
are inputs for forecasts, marketing plans, dispatch plans, production plans and procurement
quantities and timing, orders from customers and dealers, quality feedback, and warranties.
 Funds: This is the commercial part of the supply chain, and runs counter to the direction of
the value flow. It reflects the money paid with respect to the transfer of title and/or service
delivery in the supply chain. Other features of cash flow are credit periods/advances for
payments from customers/dealers, and to vendors. The cash flow determines how the
value flow is financed by the various actors in the supply chain.

Self Assessment

Fill in the blanks:
4. In …………………… most participants performed as buyers and sellers independently of
other firms supplying to the buyer.
5. SCM philosophy drives supply chain members to have a …………………… orientation.
6. Effective SCM also requires supply chain partners mutually sharing channel risks and
rewards that yield a …………………….

1.3 Value Chain

Within a typical enterprise the three areas, physical distribution, manufacturing support, and
procurement overlap to provide integrated management of materials, semi-finished components,
and products moving between locations, supply sources, and customers of the enterprise. Viewing
each as an integral part of the overall value-adding process creates an opportunity to capitalize
on the unique attributes of each while facilitating the overall process.

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