This chapter reviews the literature on SCM, SCM practices, FMCG industry and supply chain practices in India. Given the importance of SCM practices and IT strategy in SCM, there is a wealth of literature on the topic. However, this literature focuses explicitly on the IT utilization in supply chain and various IT technologies used in SCM.
2.2 Supply Chain Management
In 1980, the basic concept and related studies of SCM was first emerged in the literature of Keith and Webber. However, the primary suppositions on which SCM rests are much older. To understand in depth of the term SCM, first we need to understand the term supply chain.
2.2.1 Defining the Supply Chain
According to Chopra & Meindl (2007), supply chain consists of number of organizations involved in activities, directly or indirectly, in fulfilling the customer requirements. The supply chain which involves series of organizations in processes and activities, associated with transformation of goods from initial raw material stage through to end consumer (Jespersen & Skjott-Larsen, 2005). According to Porter (1985), supply chain is define as the set of autonomous companies together optimizes their resources in order obtain benefit of the market place. Based on ample of studies conducted by several authors on supply chain, Mentzer tries to make a single common definition for supply chain.
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"A supply chain is defined as a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances and/or information from a source to a customer." - (Mentzer, 2001)
2.2.2 Components of Supply Chain
According to Chen & Paulraj (2004), supply chain has three main elements:
Supply - Information about the raw materials supplied to the factory
Manufacturing - Transforming these raw materials into finished goods
Distribution - Delivery of goods to the customers through sequence of networks such as distributors, warehouses, and retailers.C:\Users\SATHISH\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Word\New Picture (35).bmp
Figure 2.1: Illustration of supply chain Source: (Chen & Paulraj, 2004)
The set of activities that operates internally between organization and suppliers such as purchasing, production, and distribution are termed as upstream supply chain. The set of transaction which carried out between the organization and end customers are termed as downstream supply chain (Chaffey, 2002).
The following are the main three flows of supply chain management (Institute of Logistics and Transport, 1998)
Product flow - Movement of goods from suppliers to customers and customer service maintenance
Information flow - It includes forecasts, ordering and delivery information
Financial flow - It includes payment schedules, credit terms, consignment etc.
With the added activities the future supply chain will not compete in the market place but can provide better service like quick response time and customized products (Poirier & Bauer, 2001). The utilization of information technology has given more opportunity to make closer relationships between the suppliers, manufacturers, distributors and end customers (Van Hoek, 2001).
2.2.3 Defining Supply Chain Management
SCM has been defined by number of authors in many different ways. However, there is a common definition that describe the SCM is the flow of products and information along the supply chain of an organization in order to meet the customer requirements in an effective manner. The two essential elements in the SCM are flow of information and flow of products. The movements of products are carried out by supply chain (Chopra & Meindl, 2007) and flow of information will be carried out by information system. SCM influence the performances of the supply chain and offers the desire results as required. SCM is the strategic coordination or integration between the members of supply chain organization through cooperative relationship in order to improve their business processes, quality, customer service, operating efficiencies and maintain high level of information sharing to make high performance value system to gain a sustainable competitive advantage for all the members of the organization.
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Figure 2.2: Members of supply chain Source: (Chaffey, 2002)
Thus for a successful supply chain, the organizations must work jointly by sharing information on essential part like demand forecast, production plan, marketing strategies, new product, new technologies and everything which have an impact on organization's purchasing, production and distribution plan (Wisner, Tan, & Leong, 2009). SCM provides much opportunity for an organization in continuous improvement in the internal operations and at same time integrating multiple suppliers (reducing operating costs) and customers (increasing customer satisfaction) and which thereby increasing the profitability of an organization (Chaffey, 2002).
2.3 Supply Chain Management Practices
Always on Time
Marked to Standard
SCM contains set of practices and approaches that effectively integrated the suppliers, manufacturers, distributors, and customers to improve their supply chain and the organization performance (Chopra & Meindl, 2007). These SCM practices signify the opportunities for organizations to differentiate themselves on the basis of greater performance in the context of inventory management, demand forecasting, distribution and product availability (Zielke & Pohl, 1996). Thus, firms that successfully implement SCM practices can achieve superior supply chain performance. However, this requires both external integration with suppliers or supply chain partners and internal cross-functional integration within the organization (Narasimhan, 1997). The table 2.1 provides some list of SCM practices used in previous literatures.