Topic  5:  Supply  Chain  Management    

This  week  we  move  on  from  capital  management  to  supply  chain  management.  The  first  article  offers  an  overview  of  what  supply  chain  management  is  and  the  different  stages   involved   in   supply   chain   management.   The   second   article   provides   further  insights   into  ways  CEO  can   improve   the  supply  chain.  The   last  article  sheds   light  on  supply  chain  financing,  which  helps  firms  build  long-­‐term  relationships  with  suppliers.      

 

   

 

 

 

 

http://www.bain.com/publications/articles/management-­‐tools-­‐supply-­‐chain-­‐management.aspx  

 

 

 

 

 

 

 

 

       http://www.mckinsey.com/insights/operations/three_ways_ceos_can_improve_the_supply_chain    

 

 

1.   This  article  by  Bain  and  Company   is   a  brief   introduction   into  what  supply  chain   management   is   about   and   how   it   is   implemented.  Supply   Chain  Management   synchronised   the   efforts   of   all   parties   in   order   to   deliver   the  right   products   to   the   right   places  at   the   right   times   for   the   right   costs.   The  goal   is   to  establish   such   strong  bond  of   communication  and  trust  among  all  parties   that   they   can   function   as   one   unit   and   achieve   total   customer  satisfaction.Implementing   Supply   Chain   Management   involve   4   stages:  First,  increase  the  level  of  trust  among  vital  links  in  the  supply  chain,  leading  to   long-­‐term   commitments   with   preferred   partners.   Second,   increase   the  exchange   of   information   to   make   sure   the   information   such   as   demand  forecasts,   inventory   levels,   delivery   dates   etc.   are   accurate   and   up-­‐to-­‐date.  Third,  integrate  the  supply  chain  as  one  overall  process  rather  than  dozens  of  individual  functions.   Lastly,  identify  and  implement  radical  ideas  to  transform  the   supply   chain   completely   and   deliver   customer   value   in   unprecedented  ways.  

2.   Supply   chain   is   much   more   than   the   cost   of   getting   products   into  customers’   hands.   In  a  broader   sense,   the   supply   chain   could  also   include  planning,   information   sharing,   and   value-­‐adding   activities,   from   raw  material   to   final   distribution.   This   article   published   by  Mckinsey   examines  three  ways  CEOs  can  improve  the  supply  chain.  First,  identify  key  strategy  of  the  business,  be  it  superior  service,  product  innovation,  or  cost  leadership,  and   ensure   that   supply   chain   is   helping   to   deliver   the   key   points   of   that  strategy.   Second,  use   sophisticated  data   analysis   to  manage   supply   chains  end   to   end,   across   tiers   and   traditional   functions   such   as   marketing,  manufacturing,   and   procurement.   Third,   set   key   performance   indicators  depending   on   the   needs   of   the   business,   the   product,   and   the   market  segment:  the  cost  of  production  for  value  players,  the  stability  of  supply  for  staples   and   critical   products,   agility   in   volatile   markets   with   fluctuating  demand,  and  launch  excellence  for  new  products  are  essential.    

 

 

 

         

         

 

http://www.pwc.co.uk/business-­‐recovery/publications/supply-­‐chain-­‐finance-­‐enhancing-­‐working-­‐capital-­‐performance.jhtml  

 

In   conclusion,   supply   chain   management   synchronizes   the   efforts   of   all  parties—suppliers,   manufacturers,   distributors,   dealers,   customers,   and   so  on—involved  in  meeting  a  customer's  needs.  Both  the  first  two  articles  highlight  the  importance  of  supply  chain  integration  in  which  sophisticated  data  analysis  and  freer  exchange  of  information  are  essential.  On  the  other  hand,  the  third  article  elaborates  on   good   supply   chain   financing,   which   contributes   to   long-­‐term   partnership   with  suppliers  who  play  vital  role  in  the  supply  chain.  

 

3.   This   article   from   PWC   is   based   around   supply   chain   finance   (SCF).  Supply   chain   finance   is   the   ability   to   provide   suppliers   with   good  financing   facilities   in   order   to   be   able   to   offer   buyers   longer   payment  terms,   without   harming   supplier   liquidity.   The   full   process   is   that   the  supplier  is  paid  by  a  financing  facility,  while  the  buyer  pays  the  financing  facility  in  fixed  installments.  This  is  considered  the  ‘procure  to  pay’  (PtP)  approach   for   the   buyer.   This   approach   must   have   three   distinct  characteristics,   invoice   process   optimisation,   payment   term  enhancement,   and   optimized   supplier   payment   cycles.    With   this  process  in  place  buyers  can  benefit  from  longer  payment  terms,  higher  liquidity,   and   longer-­‐term   relationships  with   suppliers.  However,   there  are   also   risks   involved,   such   as  bank   failure,   the   reclassification   of   the  loan,  and  others  as  elaborated  in  the  article.