The issues of supply chain management

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Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (supply chain).

Organisations increasingly find that they must rely on effective supply chains, or networks, to successfully compete in the global market and networked economy

In the 21st century, there have been few changes in business environment that have contributed to the development of supply chain networks. First, as an outcome of globalization and proliferation of multi-national companies, joint ventures, strategic alliances and business partnerships were found to be significant success factors, following the earlier "Just-In-Time", "Lean Management" and "Agile Manufacturing" practices. Second, technological changes, particularly the dramatic fall in information communication costs, a paramount component of transaction costs, has led to changes in coordination among the members of the supply chain network (Coase, 1998).

Designing of Supply Chain

The following activities are considered for designing of Supply chain network:



Operational activities.


Strategic network optimization. It includes the number, location and size of warehousing, distribution centers, and facilities.

Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.

Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management.

Information Technology infrastructure, to support supply chain operations

Where-to-make and what-to-make-or-buy decisions.

Aligning overall organizational strategy with supply strategy.


Sourcing contracts and other purchasing decisions.

Production decisions, including contracting, scheduling, and planning process definition.

Inventory decisions, including quantity, location, and quality of inventory.

Transportation strategy, including frequency, routes, and contracting.

Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.

Milestone payments

Focus on customer demand.


Daily production and distribution planning, including all nodes in the supply chain.

Production scheduling for each manufacturing facility in the supply chain (minute by minute).

Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.

Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.

Inbound operations, including transportation from suppliers and receiving inventory.

Production operations, including the consumption of materials and flow of finished goods.

Outbound operations, including all fulfillment activities, warehousing and transportation to customers.

Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

Supply chain management is getting the right things to the right places at the right times, for profit. New information and communications technologies have revolutionised today's supply chains making them extraordinary better, faster and cheaper.


The cigarette consists of:

Filter made of 95% cellulose acetate.

Tipping paper to cover the filter.

Rolling paper to cover the tobacco.

Tobacco blend.

Sourcing the right tobacco

The tobacco crop will be procured through auctions based on order mapping of various customers, aggregation, processing and logistics. A team of trained managers and support staff will cover the remotest of tobacco growing regions to be in constant touch with tobacco farmers and act as a vital link between the farmers and the scientists, buyers and sales team. The tobacco leaf are stacked in piles and stored in warehouses.

Sufficient inventory is maintained from time to time to meet off-season customer needs, making it possible to offer a variety of tobaccos all round the year.

Procurement process

The procurement of tobacco leaf is directly done from farmers or Government cooperatives. The product is delivered to warehouses and the payments are made to the farmers or government cooperatives. The material is sourced from various sources. The procurement process is fully linked to MIS system and proper resource planning, supply sourcing, negotiation, order placement, storage and quality assurance are carried out. The other raw material like paper filters, packaging and chemicals etc. needed are bought from the short listed vendors after proper validation.

Leaf utilisation

Leaf utilisation competence is critical to meet and exceed customer specifications. Our well-trained classification team is adept in consistently delivering homogenous blocks based on physical, chemical and smoke parameters with a sound understanding of supply demand dynamics and over all utilization requirements. A core focus area of the leaf utilisation team is also to optimize operational efficiencies, to peg the cost table to a minimum.


The warehousing facilities are of international standards for phytosanitary, hygiene and infestation control. We manage our customers' inventory and facilitate just-in-time delivery.

The warehouse are refrigerated storage facility, where temperature and humidity are digitally monitored to substantially enhance the shelf life of processed leaf tobaccos, is a unique service proposition to niche customers.

The systems and procedures are conforming to all quality and service specifications, which are supported by an ERP system.


The state of art technology, modern electronic controls and instrumentation with feedback loops, high quality control enables a consistent product. The plant is fully automated and air-conditioned to ensure leaf-opening quality, right threshing, low curl redried product, good density and accurate weights in packed cartons.

The rolling of cigarette sticks, also known making process and packing process are fully automatic. Cigarettes are categorized in different segment based on filter or non-filter type, cigarette length, circumference, pack style, filter length and cigarette placement. Finished products are supplied from factory to warehouses using road and rail transportation.

Cigarette Supply Chain Diagram

Small Tobacco Farmers

Independent Suppliers:

Cigarette Papers





Other Chemicals, etc.

Government Co-ops

Departments/Tasks within the company:

Research and Development



Shipping(to wholesalers)


Distribution/Wholesale Companies

Retail Stores

(Convenience Stores, Grocery Stores ,Gas Stations, etc)



Logistics has been a key differentiator in the quality of supply chain solutions that we provide to the customer. The logistics is the value chain partner for the customer and has been serving various, delivering in accordance to customer specifications. The logistics is designed for committed to drive the philosophy of "On Time in Full".


Pull vs. Push Systems:

There are two basic approaches of bringing the product to its final destination, i.e. the customer. In a Push system ( Figure 1), products are pushed from the manufacturing plants to distribution points based on a sales forecast. The second approach is the Pull system ( Figure 2), which requires that the product be pulled from the plants based on actual demand.


In a Push system, since the entire product is deployed based on the sales forecast for each region, an inaccurate sales forecast incurs several severe penalties, which include:

Increased safety stock.

Larger Distribution Centers/Go downs

Higher stock transfer rates

The logistics and supply chain has a tremendous impact on revenue as direct customer dealing and huge cost related with transportation and storage is associated with it.

Distribution Channel

C&FA Agent (Carry and forward agent)

C&F agent is important link in supply chain. He receives fixed amount for his services. The stock is stored at their godowns. He performs the following functions:

Receives goods from the factory and updates the SAP.

Prints out Invoices/Delivery Orders.

The deliveries are made according to the deliver summary which he gets from the branch everyday.

Physical stock reconciliation is done every evening and a record of it is kept on a board.

Maintenance of the godown according to the prescribed norms.

Wholesale Distributor

Wholesale distributor is intermediary between the company and retailer.

Distributes product to retailer.

Maintain sufficient stock level

Maintain infrastructure like warehouse, sales/ distributing team, MIS system.

Information System

MIS system is the backbone of supply chain management. SAP and ERP are used for the

effective and efficient control of information. Computers and internet based Information

Technology system is used to get the feedback from factory, customers, retailers and


Supply chain risk management

Supply chain risk management (SCRM) forms the link between the organisation, customers, suppliers and business environment: it reduces dependency and promotes synergy.

Supply chain risk refers to an uncertainty or unpredictable event affecting one or more of the parties within the supply chain or its business setting, which can (negatively) influence the achievement of company's business objectives.

Supply Chain Business Process Integration

Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. The purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers, and attempts to satisfy this demand.

Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows, which in turn assist to achieve the best product flows.


The strategies and magnitudes by the Indian suppliers assure of attaining far reach to economic implications by directly affecting the lifestyle of millions of consumers, besides indirectly influencing livelihood of other millions.

The Indian supply industry is now on a verge of massive changes due to competitions, allowing the consumers to get the best deals out of it.

The suppliers need to invest much more in capturing more specific market. Intelligence as well as almost real-time customer purchase behavior information. The suppliers also need to make substantial investment in understanding/acquiring some advanced expertise in developing more accurate and scientific demand forecasting models. Re-engineering of product sourcing philosophies aligned more towards collaborative planning and replenishment should be high on their agenda. The suppliers has to closely examine what changes are taking place in their immediate vicinity, and analyse whether their current market offers a potential redevelopment of the area into a more modern multi-option destination.

As the supply marketplace changes shape and competition increases, the potential for improving supply productivity and cutting costs is likely to decrease. Therefore, it will become important for suppliers to secure a distinctive position in the marketplace based on value, relationships or experience.

It is important that these strategies are not strictly independent of each other; value is function of not just price, quality and service but can also be enhanced by Personalisation and offering a memorable experience. In fact, building relationships with customers can by itself increase the quality of overall customer experience and thus the perceived value. But most importantly for winning in this intensely competitive marketplace, it is critical to understand the target customer's definition of value and make an offer, which not only delights the customers but also is also difficult for competitors to replicate

Transportation modes that operate within a supply chain network can include the many different types of trucks, trains for boxcar or intermodal unit movement container ships or cargo planes.

The many systems which can be utilized to manage and improve a supply Chain network include Order management Systems, warehouse management system, transportation management systems, strategic logistics modeling, inventory management systems, replenishment systems, supply chain visibility, optimisation tools and more.

Emerging technologies and standards such as the RFID and the GSI global standards are now making it possible to automate these Supply Chain Networks in a real time manner making them more efficient than the simple supply chain of the past.