Page 80 - DMGT525_MATERIALS_MANAGEMENT

Unit 6: Supply Chain Management

Self Assessment Notes

Fill in the blanks:
1. ……………… activities transform natural resources, raw materials and components into a
finished product that is delivered to the end user.

2. The first widely recorded use of the term supply chain management came about in a paper
published by ………………. in 1982.
3. The success in the materials function led companies to understand the necessity of
…………….. all key business processes among the supply chain participants.
4. For the wholesaling and retailing industries, the supply chain management’s focus is on
………….. and logistics issues.

6.2 Understanding the Supply Chain Management

The traditional concept of business is obsolete. Companies, both manufacturing and service, are
creators of value, not simply makers of products. Supply Chain Management (SCM) focuses on
globalization and information management tools which integrate procurement, operations,
and logistics from raw materials to customer satisfaction. Future managers are prepared to add
product value, increase quality, reduce costs, and increase profits by addressing the needs and
performance of: supplier relations, supplier selection, purchasing negotiations, operations,
transportation, inventory, warehousing, benchmarking, third-party vendors, electronic
commerce, recycling, supply chain electronic software, and customer relations.
A “supply chain” consists of interconnected components required to transform ideas into
delivered products and services. Supply Chain Management is a business approach that focuses
on integration, and partnerships, in order to meet customers’ needs on a timely basis, with
relevant and high quality products, produced and delivered in a cost effective manner. Current
interest in supply chain management stems from the need of world-class organizations to
purchase, produce, move, and market goods and services on a global basis.

Supply Chain Management is involved in the process of planning, implementing and controlling
operations for serving customers as efficiently as possible. It encompasses all activities involved
in sourcing, procurement, conversion and logistics. The supply chain is based on two core
concepts:

 The first, practically every product that reaches an end user represents the cumulative
effort of multiple organizations. These organizations are referred to collectively as the
supply chain. A supply chain consists of multiple firms, both upstream (suppliers) and
downstream (distribution).
 The second, organizations have to minimize conflicts in objectives outside their “four
walls” and manage the entire chain of activities that ultimately delivers products to the
final customer in order that each stage of the supply chain and all its constituents can
maximize profits.
Historically built on Procurement, Operations and Logistics foundations; Supply Chain
Management exceeds these traditional concepts. Supply Chain Management is involved with
integrating three key flows, between the different stages, across the boundaries of the companies:
 Flow of information,
 Product/materials,

 Funds

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