Overview
This lecture introduces the fundamentals of supply chain management (SCM), explores its strategies, flows, evolution, current challenges, and future trends, using real-world business examples.
What is Supply Chain Management?
- SCM coordinates resources, logistics, and processes moving products from suppliers to consumers.
- It ensures businesses deliver goods efficiently and cost-effectively.
- An efficient SCM is vital for business success; inefficiencies cause stockouts, overstocking, and losses.
Basic Supply Chain Structure
- Involves three key players: Seller (raw materials), Producer (manufactures product), Customer (buys product).
- Example: Coca-Cola sources sugar and water, manufactures beverages, and sells to consumers.
Key Components of SCM
- Procurement: Sourcing raw materials locally or globally affects speed and cost.
- Manufacturing: Turns raw materials into finished products with quality control and packaging.
- Logistics & Transportation: Ships products, includes warehousing and last-mile delivery.
- Inventory Management: Balances stock to minimize costs and prevent lost sales.
- Customer Service & Returns: Manages post-sale support and product returns.
Supply Chain Strategies
- Stable Supply Chain: Efficient for products with steady demand (e.g., Procter & Gamble).
- Reactive Supply Chain: Flexible, produces after orders for customized needs (e.g., Dell).
- Efficient Reactive Supply Chain: Combines efficiency and flexibility (e.g., Zara, Amazon).
Flows in Supply Chain Management
- Information Flow: Data moves between suppliers, producers, and customers for coordination.
- Cash Flow: Money flows from customers to businesses and suppliers.
- Product Flow: Moves materials and goods from suppliers to customers.
- Reverse Product Flow: Handles returns, repairs, recycling, or disposal.
Manufacturing vs. Service Supply Chains
- Manufacturing SCM manages sourcing, production, storage, and delivery of products.
- Service SCM manages people, processes, and technology to deliver intangible services, with real-time demand and customer involvement.
Supply Chain Models
- Vertical Integration: Company controls multiple supply chain stages (e.g., Apple).
- Horizontal Integration: Relies on third-parties for production/distribution (e.g., Nike).
Evolution of SCM
- Multiple Dysfunction: No structured coordination, high costs, and inefficiencies.
- Semifunctional Enterprise: Departmental improvements but siloed operations.
- Integrated Enterprise: End-to-end coordination with technology and partnerships.
- Extended Enterprise: Global, digital, and highly optimized using automation and AI.
Challenges in SCM
- Disruptions from global crises (e.g., COVID-19).
- Rising costs and tariffs raise consumer prices.
- Sustainability and ethical sourcing are increasingly demanded by consumers.
Future of SCM
- AI and automation for planning and logistics.
- Blockchain for transparent product tracking and fraud prevention.
- Drones and autonomous vehicles enable faster, cheaper deliveries.
Key Terms & Definitions
- Supply Chain Management (SCM) — coordinated movement of goods, information, and funds from source to consumer.
- Procurement — obtaining raw materials or components.
- Inventory Management — controlling product stock levels to balance costs and availability.
- Vertical Integration — company owns multiple supply chain stages.
- Horizontal Integration — company outsources supply chain functions to third-parties.
Action Items / Next Steps
- Review the recommended book linked in the description for a deeper understanding.
- Watch the suggested video on inventory management for further learning.