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Supply Chain Management An Overview What is Supply Chain?

Concepts in Supply Chain Management Internal integration Internally integrated LMs in isolation

External integration
Value chain and supply chain

Conceptual pipe line

Flows in the pipeline


Supply chain members Set and subsets Supply Chain Management

Supply Chain Management

Scope - Source of raw materials to end


user - all upstream & downstream organizations & linkages

Encompasses all logistical management

activities involved
Sourcing (procurement)

Manufacturing support
Distribution activities

Includes coordination and collaboration


with channel partners to finally deliver the

product to end users


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Main objective - Supply chain profitability


by value creation

Focus - End User


Origin - extension of scope of logistics
management

A set of several subsets

Definition - Management of upstream and down stream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole How SCM creates value? 1. Breaking the organizational barriers 2. Sharing of sales information in real time 3. Inventory visibility
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4. Reduces inventories by reducing uncertainties 5. Compresses value chain by slashing leadtimes thereby quickening cash flow The channel partners 1. Suppliers product owners 2. Intermediaries experts in international shipping who offer consultancy service to suppliers
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3. Third-party service providers those who offer logistics service for a fee 4. Customers the recipients of service 5. Manufacturers parts manufacturers 6. Transporters 3PL companies who offer transportation service 7. Handlers 3PL companies who offer material handling service
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8. Wholesalers who stock inventory and offer in small quantities to retailers 9. Dealers who book orders and instruct wholesalers to supply to retailers 10. Retailers offer products to consumers

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How SCM is created in business

SCM is an evolution, a result of external


integration in the decade of 1990

1. L/M of supplier companies in1980s reached


out to integrate vendors and customers to

stream line the inventory flow to collectively


deliver the value to the end user
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2. This external integration formed a seamless chain of organizations focused on the end users 3. The above seamless chain links the source of raw materials to end users like a pipeline 4. When a company reaches out in this fashion to embrace other companies to deliver value to end users, it is called an extended enterprise
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Suppliers

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5. Extended enterprises form an Integrated Supply Chain when they breakdown organizational barriers to share sales and inventory information 6. Integrated Supply Chain shares information and coordinates logistical activities to ensure coordination of goods & services, information & cash through the pipeline
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7. Management of the extended enterprise is


Supply Chain Management

8. SCM integrates demand and supply


management within and across the companies

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Organizational Barriers to Supply Chain Integration 1. Lack of visibility/transparency 2. Reluctance to share information 3. Attitudinal problems, traditional mind set, distrust 4. Inability to see long term benefits 5. Inadequate informational infrastructure
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Why SCM? Customer-centric markets closed conventional option to profitability! Impact of philosophies & practices of the 1980s like TQM, JIT, TPM etc. dropped manufacturing costs dramatically in the world SCM is a new opportunity to improve profitability and outwit the competition!
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Objectives of SCM Product delivery to end user at minimum cost To eliminate or minimize bullwhip effect To be competitive in global market To increase market share To improve shareholder value
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Important features of SCM 1. Complexity, two way flows 2. Breaking the organizational barriers Sharing of sales information in real time Inventory visibility - Reduces inventories by reducing uncertainties Compression of value chain by slashing lead-times thereby quickening cash flow
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3. End user focus (help the customer to be a


better supplier!)

4. Pull system
5. Supply chain collaboration

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IT & Supply Chain Management Information technology support in SCM EDI through LAN, Internet, satellite Tracking RFID, the invisible bar code Planning - DRP, MRP, ERP E - Business

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Bull-whip Effect The amplitude is smallest near the handle but largest near the tip

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Bull-whip Effect is the uncertainty in


the supply chain caused by distorted

information flow
Large variations in demand upstream due

to small variations downstream


Caused by undisclosed discounts and

sales promotions by retailers down stream


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Lack of confidence in customers forecast


Customers rejecting backorder

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The consequences Excess inventory Problems with quality Increased raw materials cost Overtime expenses Increased shipping costs Lost customer service Lengthened lead-times Lost sales Unnecessary created capacity
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How to avoid Bullwhip effect? Transparency in terms of information Real time information EDI Kanban

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Supply chain in equilibrium Suppliers Producer Distributor

Retailer

40 units

40 units

40 units

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Supply chain disrupted Suppliers Producer Distributor

Retailer

160 units

80 units

40 units

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Some interesting supply chains trace these


supply chains

1. Indian postal service


2. News papers

3. Fuel
4. PDS

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Drivers of Supply Chain


(Factors which have played a role in evolution

of SCM SCM for competitive advantage by


Rangaraj, Raghuram & Shrinivasan)

1. Communication Technology
Informational and physical

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2. Competitive Factors
Lead-times

Costs
3. Business and Social Environment Competitions between organizations Competitions between supply chains Pursuit of Continuous improvement
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4. Policy, regulation & industry initiatives Abolition of central sales tax and introduction of VAT RFID ISO standards for containers 5. the move from a Producer-Centric to customer centric focus

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Logistics and Supply chain Management

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particulars

Logistics management

Supply chain management All players in the supply chain from raw material source

1. Scope

Inbound logistics, manufacturing support, outbound

logistics
2. How this is By internal integration

to finished product
By external

created in
business?

integration

3. Main
objective

Logistics cost
reduction

Supply chain
profitability by value creation.
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particulars

Logistics management Ref earlier slides military planning.

Supply chain management Ref earlier slides As a logical extension of logistics

4. Definition 5. Origin

management

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Particulars

Logistics
management

Supply chain
management

6. Focus

L/M tries to take


the product to the consumer at

SCM focuses on
value creation in the supply chain.

minimum logistical
cost. Hence it is supply driven.

Hence this is
customer focused or demand driven.

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