Page 84 - DMGT525_MATERIALS_MANAGEMENT

Unit 6: Supply Chain Management

Transportation Notes

Responsiveness can be achieved by a transportation mode that is fast and flexible. Many companies
that sell products through catalogs or over the Internet are able to provide high levels of
responsiveness by using transportation to deliver their products, often within 24 hours. FedEx
and UPS are two companies who can provide very responsive transportation services. Efficiency
can be emphasized by transporting products in larger batches and doing it less often. The use of
transportation modes such as ship, rail, and pipelines can be very efficient. Transportation can
be made more efficient if it is originated out of a central hub facility instead of from many
branch locations.

6.2.3 Typology of Supply Chains

In most organizations, some products or services are produced internally or others are purchased.
The supply chain concept covers both internal as well as external parts. Therefore, there are
(a) Internal Supply Chains, and (b) External supply chains.

Internal Supply Chains

The flows of the supply chain that occur within the individual organization are called the
internal supply chain. The first step in moving towards supply chain management is to develop
these internal chains. Given the multidivisional, international organizational structures found
in many businesses, internal supply chains can be quite complex. In transnational companies
that have globalized operations, the internal part of a supply chain often has multiple “links”
that span the globe.
Complications in multidivisional and globalized companies are created, when the employees
of one division view the ‘other’ divisions in much the same manner as they would external
suppliers or customers. In some cases, this creates competition and conflict of interest between
divisions. The supply chain initiative in such structures should start from the organization’s
internal supply chain. Developing an understanding of this is often an appropriate starting
point. This makes integrating cross-divisional functions and processes simpler.
The supply chain is a set of interrelated processes and should not be visualized as a series of
discrete, independent 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. Some of the key processes and their extensions include order preparation by purchasing,
different activities related to manufacturing, order information from sales, order entry for
materials planning, warehousing and distribution operations, and order shipment for
transportation and delivery. Each of these key processes needs to be documented along with
current performance information.
In order to establish an effective and successful supply chain it is necessary that supply chain
process maps (flow charts) are developed for major supply chains and their related processes.
This is a basic requirement. It helps when the different divisions understand the steps in their
portion of the supply chain and also have an appreciation of “what happens” outside their part
of the process.

External Supply Chains
The decisions, to purchase a product or service from external suppliers, are the basis for the
external supply chain. From the supply chain point of view, the external portion of the supply
chain (i.e., key suppliers and customers) is an extension of the internal supply chain. The firm’s

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