CIMA E1 Syllabus E1. Operations management - Supply Chain Management and Supply Portfolio - Notes ^{10 / 21}

A supply chain considers all of the components in taking raw materials to the end consumer.

A network of companies must coordinate the use of resources, activities and technology to product a finished good.

A simple supply chain could include the following parties:

1. Raw materials

2. Manufacturer

3. Wholesaler

4. Retailer

5. Customer

Supply Chain Management

SCM is concerned with the flow of goods and services through the supply chain with the aim of making firm more competitive.

It is a number of different companies which relate to each other through linkages between different processes and activities involved in producing products/services to the ultimate consumer.

Supply chain partnerships develop when customers and suppliers recognise the supply chain and linkages in a value system.

The supply chain can be improved by:

• Joint problem solving

• Linked computer systems

• Price and inventory co-ordination

Supply portfolio

A supply portfolio allows organisations to display their supplies according to the profit impact or annual expenditure relating to the supply and supply difficulty

1. Acquisition - Low profit impact and low supply difficulty

   Buyers may want to spend a lot of time in this quadrant but that would not be a wise business decision as the return on the time invested would be small. Items in this quadrant should be bought in a standardised, simplified way to minimise cost.

2. Critical/bottleneck - Low profit impact and high supply difficulty

   Supply market in this quadrant is difficult because there is only a small number of suppliers. These items do not have a high profit impact until they are not available. A way to reduce risk might be to over-order when supplies are good.

3. Leverage - High profit impact and low supply difficulty

   In this quadrant, the return on time invested will result in profit maximisation.

4. Strategic - High profit impact and high supply difficulty

   Items in this quadrant lend themselves to a strategy such as taking over a supplier or forming very close links with one. Cost reductions in this quadrant require a long term strategic plan to ensure continuity of supply in these expensive items.