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THE USE OF SUPPLY CHAIN MANAGEMENT IN MANUFACTURING ORGANISATION TO CONTROL INVENTORY LEVELS WHILE PROVIDING ADEQUATE SERVICE TO CUSTOMERS

CHAPTER ONE

INTRODUCTION 

1.1   BACKGROUND OF THE STUDY

Supply-chain management and it encompasses all of those integrated activities that bring product to market and create satisfied customers.The Supply Chain Management Program integrates topics from manufacturing operations, purchasing, transportation, and physical distribution into a unified program. Successful supply chain management, then, coordinates and integrates all of these activities into a seamless process. It embraces and links all of the partners in the chain. In addition to the departments within the organization, these partners include vendors, carriers, third party companies, and information systems providers within the organization, the supply chain refers to a wide range of functional areas. These include Supply Chain Management-related activities such as inbound and out bound transportation, warehousing, and inventory control. Sourcing, procurement, and supply management fall under the supply-chain umbrella, too. Forecasting, production planning and scheduling, order processing, and customer service all are part of the process as well. Importantly, it also embodies the information systems so necessary to monitor all of these activities. Simply stated, the supply chain encompasses all of those activities associated with moving goods from the raw-materials stage through to the end user." Advocates for this business process realized that significant productivity increases could only come from managing relationships, information, and material flow across enterprise borders. One of the best definitions of supply-chain management offered to date comes from Bernard J. (Bud) LaLonde, professor emeritus of Supply Chain Management at Ohio State University. 

LaLonde defines supply-chain management as follows: "Thedelivery of enhanced customer and economic value through synchronized management ofthe flow of physical goods and associated information from sourcing to consumption. "As the "from sourcing to consumption" part of our last definition suggests, though, achieving the real potential of supply-chain management requires integrationnot only of these entities within the organization, but also of the external partners. The latter include the suppliers, distributors, carriers, customers, and even the ultimate consumers. All are central players in what James E. Morehouse of A.T. Kearney calls the extended supply chain. "The goal of the extended enterprise is to do a better job of serving the ultimate consumer,". Superior service, he continues, leads to increased market share. Increased share, in turn, brings with it competitive advantages such as lower warehousing and transportation costs, reduced inventory levels, less waste, and lower transaction costs. The customer is the key to both quantifying and communicating the supply chain's value, confirms Shrawan Singh, vice president of integrated supply-chain management at Xerox. "If you can start measuring customer satisfaction associated with what a supply chain can do for a customer and also link customer satisfaction in terms of profit or revenue growth," Singh explains, "then you can attach customer values to profit & loss and to the balance sheet." The best companies around the world are discovering a powerful new source of competitive advantage. It's called supply-chain management and it encompasses all of those integrated activities that bring product to market and create satisfied customers.The Supply Chain Management Program integrates topics from manufacturing operations, purchasing, transportation, and physical distribution into a unified program. Successful supplychain management, then, coordinates and integrates all of these activities into a seamless process. It embraces and links all ofthe partners in the chain. In addition to the departments within the organization, these partners include vendors, carriers, thirdparty companies, and information systems providers.

The fundamental objective  of supply chain management  is to "add value". An example is the fish fingers. During the Supply Chain Management'98 conference in the United Kingdom , a participant in a supply chain management seminar stated that total time from fishing dock through manufacturing, distribution, and final sale of frozen fish fingers for his European grocery-products company was 150 days. Manufacturing took a mere 43 minutes. That suggests an enormous target for supply chain managers. During all that time, company capital is-- almost literally in this case--frozen. What is true for fish fingers is true of most products. Examine any extended supply chain, and it is likely to be a long one. James Morehouse, a vice president of consulting firm A.T. Kearney, reports that the total cycle time for corn flakes, for example, is close to a year and that the cycle times in the pharmaceutical industry average 465 days. In fact, Morehouse argues that if the supply chain, of what he calls an "extended enterprise," is encompassing, everything from initial supplier to final customer fulfillment, could be cut to 30 days, that would provide not only more inventory turns, but fresher product, an ability to customize better, and improved customer responsiveness. "All that add value," he says. And it provides a clear competitive advantage. Supply Chain Management becomes a tool to help accomplish corporate strategic objectives reducing working capital,taking assets off the balance sheet,accelerating cash-to-cash cycles,increasing inventory turns, and so on.

1.2    STATEMENT OF THE PROBLEM

The problem confronting the research is to appraise the use of supply chain management in manufacturing organization to control inventory levels while providing adequate service to customers;A case study of  east wind foods.

1.3     RESEARCH  QUESTIONS

1.   What is supply chain management?

2.   What is inventory level and how can supply chain management be used to control inventory while providing adequate service to customers

1.4   OBJECTIVES OF THE STUDY

1.   To appraise  the nature of supply chain management.

2   To determine the use of supply chain management  to control inventory level while providing   adequate service to customer.

1.5   SIGNIFICANCE OF THE STUDY

The study shall analyze supply chain management and project its importance in controlling inventory level while providing adequate service to customers. It shall also serve a veritable source of information  on issues on supply chain management.

1.6   STATEMENT OF THE HYPOTHESIS

Hypothesis I

H0: Inventory control and customer service in East-Wind foods is low.

H1: Inventory control and customer service in East-Wind foods is high.

Hypothesis II

H0: Supply chain management  inEast-Wind foods is not significant.

H1: Supply   chain management in East-Wind foods is significant.

Hypothesis III

H0: The impact of supply chain management  on inventory control and customer service in east wind foods is low.

H1: The impact of supply chain management on inventory control and customer service  in east wind foods is high.

1.7      SCOPE OF THE STUDY

The study provides an appraisal of the use of supply chain management in manufacturing organization to control inventory levels while providing adequate service to customers.

1.8       DEFINITION OF TERMS

SUPPLY CHAIN MANAGEMENT: The supply chain encompasses all of those activities associated withmoving goods from the raw-materials stage through to the end user." Advocates for this business process realized that significant productivity increases could only come from managing relationships, information, and material flow across enterprise borders. One of the best definitions of supply-chain management offered to date comes from Bernard J. (Bud) LaLonde, professor emeritus of Supply Chain Management at Ohio State University. LaLonde defines supply-chain management as follows: "Thedelivery of enhanced customer and economic value through synchronized management ofthe flow of physical goods and associated information from sourcing to consumption.