What makes SCM a different approach to conducting business? Firstly, SCM takes into account EVERY FACILITY that has an impact on cost and plays a role in making the product conform to customer requirements. Secondly, the objective of SCM is to be efficient and cost-effective across the entire system; - total system- wide costs, from transportation and distribution to inventories of raw materials, work-in-process, and finished goods, are to be minimized. Understanding the Supply Chain

Contd. Thus, the emphasis is not on simply minimizing transportation costs or reducing inventories, but, rather, on taking a Systems Approach to SCM. Finally, because, SCM revolves around efficient integration of suppliers, manufacturers, warehouses, and stores, it encompasses the firm’s activities at many levels, from the strategic level through the tactical to the operational level.

1. It is quite a task to operate a single facility so that costs are minimized and service level is maintained. The difficulty increases exponentially when an entire system is being considered that is: total system - wide costs are to be minimized, and system wide - service levels are to be maintained. The process of finding the best system - wide strategy is known as GLOBAL OPTIMIZATION. What makes SCM difficult?

2. Uncertainty is inherent in a supply chain – Customer Demand and can never be forecast exactly, trend times will never be certain, and machines and vehicles will break down. Supply chains need to be designed to eliminate as much uncertainly as possible and to deal effectively with the uncertainty that remains. What makes SCM difficult?

The objective of managing the supply chain is to synchronize the requirements of the customer with the flow of materials (and services) from suppliers in order to effect a balance between what are often seen as conflicting goals of high customer value, low inventory management and low unit cost. What makes SCM Difficult?