1. Supply Chain Management
Training Course “EIMC United Pharmaceuticals”
Mahmud Abouel-Atta

2. Course Overview
Session 1: Essentials of Supply Chain
Session 2: Capacity Planning
Session 3: Inventory Control
Session 4: Production Scheduling
Session 5: Purchasing
Mahmud Abouel-Atta

3. Essentials of Supply Chain
OPEN your MIND
Mahmud Abouel-Atta
SESSION 1

4. Overview
• Introduction to Supply Chain Concepts
• History of Supply Chain
• Supply Chain Management
• Objectives & Goals of SCM
• Why SC Has Become an Important Issue
• Activitiesof Supply Chain
• Supply Chain Performance
• Supply Chain Performance Measurements
• SCOR Model
• Supply Chain Flows
Mahmud Abouel-Atta

5. Introduction
• Firms can no longer effectively compete in isolation of their
suppliers and other entities in the supply chain. Interest in the
concept of supply chain management has steadily increased
since the 1980s when companies saw the benefits of
collaborative relationships within and beyond their own
organization.
Mahmud Abouel-Atta

6. Introduction
• Supply Chain Management is not a standalone process
• Supply Chain Management is much more than just
procurement.
• Supply Chain Management is not:
• Inventory management;
• Logistics management;
• Supplier partnerships;
• A shipping strategy;
• Distribution management;
• Procurement management;
• A computer system.

7. History of Supply Chain
• 1950’s – Inventory Management, focus on Cost Control
1957, American Production and Inventory Control Society (APICS) established
• 1960’s – Materials Management, Logistics, focus on MRP & BOM
1961, Gene Thomas at IBM develops earliest version of MRP.
1963, Council of Logistics Management CLM has founded under name National
Council of Physical Distribution Management.
1969, Early work on Customer/Supplier Relationship.
• 1970’s – Operations Planning, focus on MRPII & JIT.
• 1980’s – SCM, 1990’s - ERP - “Integrated” Purchasing,
Financials, Manufacturing, Planning.
1982, Allen and Hamilton Inc. coins the term “SCM”.
2004, “CLM” changes name to Council of Supply Chain Management
Professionals “CSCMP”.
Mahmud Abouel-Atta

8. Supply Chain Management
• Materials are any commodities used directly or
indirectly in producing a product or service.
– Raw materials, Packaging materials, component parts,
and supplies.
• Supply chain activities transform raw materials
and components into a finished product that is
delivered to the end customer.
Mahmud Abouel-Atta

9. Supply Chain Management
• A Supply chain is a term that describes how
organization (suppliers, manufacturing, distributers,
and customers) are linked together.
• A Supply chain consists of three entities;
customers, a producer, and the producer’s
supplier.
• The supply chain starts at the supplier's production
line and ends at the customer's point of use.
Mahmud Abouel-Atta

10. Supply Chain Management
• Supply chain management is the management,
design, planning, execution, control, monitoring
and follow-up of all activities related to delivery
the finished product for the end customer in the
right quantities, to the right location, and at the
right time with minimum cost.
• SCM connects a company’s supply side with its
demand side.
Mahmud Abouel-Atta

11. Supply Chain Management
• Supply chain management
• A set of activities used to efficiently integrate with
Suppliers, Manufacturers, Warehouses, and Distribution
centres
• So that the product is produced and distributed
In the right quantities,
To the right locations, and
At the right time
• With minimum System-wide costs
• With coordinating and integrating its flows with
all departments and related companies.
Mahmud Abouel-Atta

12. Supply Chain Objective & Goals
• Objective:
-To have the right products in the right quantities at the right
place at the right moment at minimal cost.
-Reduce uncertainty & risks, inventory, cycle time.
-Improve business processes, customer service.
-Increased profits & competitiveness.
• Goals: Efficient supply chain management must result
in tangible business improvements. It is characterized
by a sharp focus on:
-Maximize the overall profit.
-Better asset utilization.
-Cost reduction.
Mahmud Abouel-Atta

13. Supply Chain Management
• Why implementing a Supply Chain approach...
Its all about ……………………………..
Poor service
Empty shelves
Poor forecasting
Mahmud Abouel-Atta

14. Supply Chain Activities
-Forecasting demand.
-Selecting suppliers.
-Sourcing and procurement.
-Handling material.
-Processing order.
-Managing inventory.
-Scheduling production.
-Shipping and delivery.
-Organizing information exchange.
Mahmud Abouel-Atta

15. • Why Supply chain has become an important issue:
- Matching supply and demand
Prices adjust to match supply with demand.
Boeing announced a $2.6 billion write-off in 1997 due to “raw
materials shortages, internal and supplier parts shortages and
productivity inefficiencies”
U.S Surgical Corporation announced a $22 million loss in 1993
due to “larger than expected inventories on the shelves of
hospitals”
U.S. firms spent $898 billion (10% of GDP) on supply-chain
related activities in 1998
Mahmud Abouel-Atta

16. • Why Supply chain has become an important issue:
- Sourcing raw materials
For many companies, purchases account for 60% of sales. And
over half of quality problems.
Poor quality of supplier items increase the cost of purchase,
75% of warranty claims came from purchased components.
The new view of supplier relations has changed the relation from
a traditional one into a strategic view.
Hewlett-Packard and Dell found it difficult to obtain important
components for their PC’s from Taiwanese suppliers in 1999, due
to a massive earthquake.
Mahmud Abouel-Atta

17. • Why Supply chain has become an important issue:
- Warehousing and inventory tracking
Why Hold Inventory?
* Unexpected changes in customer demand.
* Uncertain supply.
Inventory policies can dramatically alter a supply chain’s efficiency
and responsiveness.
- more inventory: greater responsiveness but greater cost
- less inventory: lower cost but lower responsiveness
How often to review?
When to place an order?
How much to order?
How much stock to keep?
Who – supplier?
How order be delivered?
Mahmud Abouel-Atta

18. • Why Supply chain has become an important issue:
- Achieving efficiency and effectiveness objectives
Process Performance = Effectiveness x Efficiency
Efficiency measures the relationship between inputs & outputs,
or how successfully the inputs are being transformed into outputs.
Efficiency focuses on the cost of making and delivering the
product to the customer.
Effectiveness measures the relationship between organization &
customer, or how well an organization is meeting the demands of
its customer.
Mahmud Abouel-Atta

19. Supply Chain Performance
Supply chain performance is focused on:
• Reliability – ability of a system to perform its required functions
under stated conditions for a specific period of time.
Such as on-time delivery, perfect order fulfillment, supplierfill rate
• Responsiveness - the time it takes to react to and fulfill customer
demand.
Such as order fulfillment lead time (order-to-deliverycycle time)
• Agility or Flexibility - the ability of supply chain to increase/decrease
demand within a given planned period.
Such as Supply Chain Response Time, prod. flexibility
• Cost - objective assessment of all components of supply chain cost.
Such as Total SCM cost, cost of goods sold, Value-added productivity,Warranty cost
or returns processing cost
• Assets - the assessment of all resources used to fulfill customer
demand.
Such as Cash-to-cash cycle time, Inventory days of supply, asset turns
Mahmud Abouel-Atta

20. SC Performance Measurement
Mahmud Abouel-Atta
• On-Time Delivery – this metric measures the % of all orders delivered by
the requested delivery dates, as indicated in the PO/contract during a defined
period of time.
• Supplier Fill Rate – this metric measures a supplier’s ability to fill orders
completely in terms of items and quantity, as defined in the PO/contract,
during a defined period of time.
• Perfect Order Fulfillment – this metric measures the % of orders meeting
delivery performance requirements.
These orders to be delivered to the right place, with the right product, at the
right time, in the right condition, in the right package, in the right quantity, with
the right documentation, to the right customer with the correct invoice.
• Order Fulfillment Lead Time – this metric measures the ability of an
organization to quickly serve customer demands, speed of service and
indicates the average time from order placement to customer receipt.

21. SC Performance Measurement
To show improvement in operations, many supply chain
management specialists consider implementing supply chain
performance indicators or metrics as one of the simplest, least
expensive, and least time-consuming activities. It is a well-
known fact that, “people behave based on the way they are
measured”
Achieving efficiency and effectiveness objectives requires a set of
standards to compare to actual performance, thses standards
called Metrics.
Mahmud Abouel-Atta

22. SC Performance Measurement
Performance Categories:
• Time – These indicators focus on the time it takes to complete specific
activities. They show where saving time during specific activities
Such as On-time Delivery/Arrival, Order Cycle Time, Response Time,
Forecasting/Planning Cycle time.
• Quality – These indicators are often the simplest to implement and measure.
Typically, they tell you how well you are performing a specific activity—a
common SC indicator in this classification is accuracy— including order
accuracy, inventory accuracy, picking accuracy, etc.
Such as Overall Customer Satisfaction, Process Accuracy, Perfect Order
Fulfillment (on-time delivery, processed orders, accurate productselection, accurate
invoice), Forecast Accuracy, Planning Accuracy (budgets, operating plans),
Schedule.
Mahmud Abouel-Atta

23. SC Performance Measurement
Performance Categories:
• Finance – These indicators help managers identify the supply chain cost
drivers and help move toward a more efficiently managed supply chain—a
common SC indicator in this classification is cost.
Such as Finished Goods Inventory Turns, Cost-to-Serve, Cash-to-Cash Cycle
Time, Total Delivered Cost (cost of goods, transportation costs, inventory carrying
costs, material handling costs), Other Costs (information systems, administrative
costs).
• Productivity - These indicators examine how well resources are used. For
example, filling vehicles to their capacity, instead of sending out vehicles half-
full, could reduce costs and improve efficiency.
Mahmud Abouel-Atta

24. Supply Chain Management
Basic Components of SCM (SCOR Model)
1. Plan
This is the strategic portion of SCM. Companies need a
strategy for managing all the resources that go toward
meeting customer demand for their product or service.
A big piece of SCM planning is developing a set of
metrics to monitor the supply chain so that it is efficient,
costs less and delivers high quality and value to
customers.
Mahmud Abouel-Atta

25. Supply Chain Management
2. Source
Companies must choose suppliers to deliver the goods and
services they need to create their product, therefore,
supply chain managers must develop a set of pricing,
quality, delivery and payment processes with suppliers
and create metrics for monitoring and improving the
relationships. And then, SCM managers can put together
processes for managing their goods and services
inventory, including receiving and verifying shipments,
transferring them to the manufacturing facilities and
authorizing supplier payments.
Mahmud Abouel-Atta

26. Supply Chain Management
3. Make
This is the manufacturing step. Supply chain managers
schedule the activities necessary for production, testing,
packaging and preparation for delivery. This is the most
metric-intensive portion of the supply chain—one
where companies are able to measure quality levels,
production output and worker productivity.
Mahmud Abouel-Atta

27. Supply Chain Management
4. Deliver
This is the part that many SCM insiders refer to as
logistics, where companies coordinate the receipt of
orders from customers, develop a network of
warehouses, pick carriers to get products to
customers and set up an invoicing system to receive
payments.
Mahmud Abouel-Atta

28. Supply Chain Management
5. Return
This can be a problematic part of the supply chain for
many companies. Supply chain planners have to
create a responsive and flexible network for
receiving defective and excess products back from
their customers and supporting customers who
have problems with delivered products.
Mahmud Abouel-Atta

29. SCOR Model
Mahmud Abouel-Atta

30. Supply Chain Flows
1- Product Flow
2- Information Flow
3- Finance Flow
Mahmud Abouel-Atta

31. Product Flow
- Supplier Selection
- Capacity Planning
- Inventory Control
- Production Scheduling
- Order Management
- Fulfillment Management
Mahmud Abouel-Atta

32. Information Flow
- Supplier Database
- Supplier Quality System
- Supplier Qualification
- Supplier Auditing System
Mahmud Abouel-Atta

33. Finance Flow
- Contracts & Price Negotiation
- Purchase Orders
Mahmud Abouel-Atta

34. Thank You
Mahmud Abouel-Atta

35. Goals of Supply Chain
Efficient supply chain management must
result in tangible business improvements.
– Revenue growth
– Cost reduction
– Better asset utilization
– Reduce uncertainty & risks, inventory, cycle time
– Improve business processes, customer service
– Increased profits & competitiveness
Mahmud Abouel-Atta

36. • Why Supply chain has become an important issue:
- Relationship between each party
If every party join hand and work together, it will create cost
savings and time to market reduction and everyone will enjoy the
benefit.
- Warehousing and inventory tracking
Inventory policies can dramatically alter a supply chain’s
efficiency and responsiveness.
How often to review?
When to place an order?
How much to order?
How much stock to keep?
Who – supplier?
How order be delivered?
Mahmud Abouel-Atta

37. Introduction
• Production and Material Handling
When production is integrated into the supply chain, it
makes for a smoother flow of materials and data across the
entire supply chain.
• Strategic Planning
With all parts of the supply chain working in unison and the
supply and demand leveled between groups, the executive
can concentrate on strategic planning for the company.
Integration of all parts of the supply chain allows for better
use of company resources and finances, which gives
strategic planning a much better chance of being accurate
and fool-proof.

38. Supply Chain Management
• For many companies, purchases account for 60% of sales. And
over half of quality problems.
• Poor quality of supplier items increase the cost of purchases. (ex.
75% of warranty claims came from purchased components.)
• Current emphasis on inventory reduction require more focus on
quality.

39. Introduction
• Supplier and Purchaser
Bringing together the supplier's production schedule and
the demands of the purchasing group is a big challenge and
can be more complicated if either of the groups have their
own internal challenges. Leveling the supply and demand
allows for many positive outcomes, including quicker
response times, better utilization of transportation
equipment, smaller storage areas, less work-in-process
inventory and better utilization of manpower.

40. Just-in-time-production Methods
• Keeping supply chains moving is more challenging in the
21st-century by the growing use of "just-in-time" production.
The practice allows companies to maintain lower
inventories, ordering and reordering raw materials to arrive
with precision and go directly to production, reducing
warehousing costs. The method is cost efficient but it
requires a well-oiled supply chain. The tighter the time from
raw material source to factory, the more serious the impact
of supply chain disruptions, which could result in costly
assembly line shutdowns.

41. Supply Chain “ Iceberg ”
Transactional
Efficiency
Critical Data to improve:
Multiple handling
Transit damageProcess delays
Excess freight
Delays
End-to-end
cycle-time
Warehouse fees Inventory turns
Yield
Late Deliveries
Perceived Value
Intrinsic Value