SUPPLY CHAIN MANAGEMENT

QUESTIONS
How many of you have visited shopping malls? What is a difference between normal shop and a mall? Did you find any difference in cost of the products? What must be the reason for such a discount? Have you ever visited malls during festival time? How the ordering procedure they must be following especially at festival time?

INTRODUCTION

Supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

Traditional SCM

SUPPLY CHAIN
- A typical Supply chain

- A typical supply chain may involve many participants. But some orders may pass through only a few. Not all participants will be in all supply chains. It will depend on the needs of the customer and the roles of the participants fulfilling these needs.

SCM DEFINED

The supply chain is the network of organizations that are involved through upstream and down stream linkages, in different processes and activities that produce value in the form of products and services in the hands of the ultimate customer.

Supply Chain may be defined as flow of materials through procurement, manufacturing, distribution, sales & disposal.

Dynamics of Material Flow

Supplier

Plant

Storage

Logistics

Retailer

SCM

FLOWS

MATERIAL

MONEY

INFORMATION
Procurement Manufacturing Distribution Customer

SUPPLY CHAIN PLANNING AND SUPPLY CHAIN EXECUTION

Supply Chain Planning

Payment Flows

Supplier

Manufacturer

Distributor

Retailer

Consumer

Information Flows

Supply Chain Execution

SUPPLY CHAIN DRIVERS

FACILITIES DRIVER

Facility processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility Three primary facilities components
1. 2. 3.

Location Capacity Operational design

FACILITIES 1: LOCATION

Location efficiency centralize the location to gain economies of scale, which increases efficiency Location effectiveness decentralize the locations to be closer to the customers, which increases effectiveness

FACILITIES 2: CAPACITY

Capacity efficiency minimal excess capacity with the ability to produce only what is required Capacity effectiveness large amounts of excess capacity which can handle wide swings in demand

FACILITIES 3: OPERATIONAL DESIGN

Operational design efficiency product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency Operational design effectiveness functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

FACILITIES DRIVER

INVENTORY DRIVER

Inventory offsets discrepancies between supply and demand Inventory management and control software provides control and visibility to the status of individual items maintained in inventory Two primary inventory components
1. 2.

Cycle inventory Safety inventory

INVENTORY DRIVER

Inventory offsets discrepancies between supply and demand Inventory management and control software provides control and visibility to the status of individual items maintained in inventory Two primary inventory components
1. 2.

Cycle inventory Safety inventory

INVENTORY 1: CYCLE INVENTORY

Cycle inventory the average amount of inventory held to satisfy customer demands between inventory deliveries

Cycle inventory efficiency holding small amounts of inventory and receiving orders weekly or even daily Cycle inventory effectiveness holding large amounts of inventory and receiving inventory deliveries only once a month

INVENTORY 2: SAFETY INVENTORY

Safety inventory extra inventory held in the event demand exceeds supply

Safety inventory efficiency holding small amounts of safety inventory Safety inventory effectiveness holding large amounts of safety inventory

INVENTORY DRIVER

TRANSPORTATION DRIVER

Transportation moves inventories between the different stages in the supply chain Two primary inventory components
1. 2.

Method of transportation Transportation route

TRANSPORTATION 1: METHOD OF TRANSPORTATION

Global inventory management system provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the supply chain

Method of transportation efficiency Method of transportation effectiveness

TRANSPORTATION 2: TRANSPORTATION ROUTE

Transportation planning software tracks and analyzes the movement of materials and products to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost Distribution management software coordinates the process of transporting materials from a manufacturer to distribution centers to the final customer

Transportation route efficiency Transportation route effectiveness

TRANSPORTATION DRIVER

INFORMATION DRIVER

Information an organization must decide how and what information it wants to share with its supply chain partners Two primary information components
1. 2.

Information sharing Push verses pull strategy

INFORMATION 1: INFORMATION SHARING

Information sharing efficiency freely share lots of information to increase the speed and decrease the costs of supply chain processing

Information sharing effectiveness share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

INFORMATION 2: PUSH VS. PULL INFORMATION STRATEGY

Pull information strategy (efficiency) supply chain partners are responsible for pulling all relevant information

Pull technology pulls information

Push information strategy effectiveness organization takes on the responsibility to push information out to its supply chain partners

Push technology sends information

INFORMATION DRIVER

APPLYING A SUPPLY CHAIN DESIGN

Wal-Marts supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness

Facilities focus Efficiency Inventory focus Efficiency Transportation focus Effectiveness Information focus Efficiency

APPLYING A SUPPLY CHAIN DESIGN

FUTURE TRENDS

Fastest growing SCM components

Supply chain event management (SCEM) Selling chain management Collaborative engineering Collaborative demand planning

TODAYS SUPPLY CHAIN REALITY

Increased outsourcing Large global supply networks Increased competition Consumer driven

Lack of visibility reduces suppliers ability to handle variability Suppliers use inventory buffers to compensate increasing costs Errors in manual replenishment (filling) processes can cause stock-outs All of these issues can increase costs, lower customer service and reduce revenue

Supply Chain Benefits

Cost

Reduced inventories

Reduced waste
Reduced total system costs Establishment of a collaborative framework Near real time information flow Reduced variation and increased quality

Service

Business growth opportunities

Preferred source for new opportunities

Expanded benefits to other customers

Collaboration is Key for Adaptiveness

1. Share data and information to create visibility

2. Interact to match expectations 3. Synchronize resources and processes to perform as one

Outsourcing Partner

Suppliers

My Company

Customers