Supply Chain Lifeline

Index 1. 2. 3. 4. 5. 6. 7. Supply Chain Definitions The objectives of SCM SCM Concept Traditional vs. new SC models What does it take to implement SCM SCM IT SUPPORT The benefits gained through SCM

What is Supply Chain?

Supply-chain
is a complex sequence of events and decisions, which connects sourcing materials with manufacturing and the end consumer. Logistics Is management of this end-to-end supply-chain.
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What is the Supply Chain?

Supply Chain is a set of activities (e.g. purchasing, manufacturing, logistics, distribution, marketing) that perform the function of delivering value to end customer Supply chain is an effort to achieve primary goals of producing and distributing merchandise of right quantity, to right locations, and at right time with minimum system wide cost In presence of conflicting goals of various business units
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Supply Chain Traditional Approach

Supplier

Production Planning

Client

Supply Chain Advanced Approach

Supplier s Supplier Supplier

Production Planning

Client

Client s Client

Supply Chain - Phases

Latest Strategic S C M
Supply as a competitive weapon

Stage- III Proactive Stage- II Mechanical

Some College Education Computer Process paper Transaction driven Professional Staff Proactive approach Some long term contracts Measures some cost of ownership Supplier considered Resources Report to higher Management Some cross functional Support Training and education Offered Purchasing power in purchasing Limited use of data Some commodity Strategies

Supply Strategy integrated with SBU s Strategy Velocity: Development and Production Measures continuous improvement Global view Optimize cost of ownership or total cost of outside cost Supply Strategy Centralized Purchasing activity decentralized Data available and used Supply base by design Leverages supplier Technology Monitor environment Manage relationships Value Chain Management

Stage I Reactive
High School education Process paper Clerical function Reports at very low level

Spot buy system Measures price reductions Reports at low level Primary focus: Keep production line running Tracks purchase price Variances Poor data availability

Objectives of Supply Chain Management

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Objectives of SCM
It is fundamental for organizations to adopt logistics and supply chain models to balance costs (direct & indirect) of holding (or not) inventories against need to serve end-consumers quickly and reliably.

Bridging the gaps

D E M A N D
When is a product desired Where is a product wanted How much or how many are needed What mix of products is called for How is it desired

S U P P L Y
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When is a product made Where it is made or sourced How much or how many are made or acquired What product mix is made or scheduled to be received How is it delivered

Objectives of SCM
Objectives of supply chain are to optimize pre and post-production inventory levels, obtain greater efficiency from labor, equipment and space across the company and provide flexible planning and control mechanisms.
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Objectives of SCM
Supply Chain management tries to:
 Release capital tied up in inventories in the pipeline from supplier to customer,  While minimizing transportation costs,  Without sacrificing desired levels of customer service.
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Objectives of SCM
SCM aims at minimizing system wide costs of company subject to satisfying service level requirements.

Company Costs Manufacturing Fixed assets Inventories Transportation

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Service Levels The response time expressed in time units decided by demand patterns. Hours / Days Week / Months

Better decisions making

SCM helps companies make better and faster decisions answering questions like:
     
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What is the best price to charge for my product? Should I change the price if I have excess inventory? If so, by how much? If I am short of a product, where should I allocate supply? Which suppliers should I buy parts from? Which factory should I manufacture the product?

Dynamics of Material Flow

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Supplier

Plant

Warehouse

Logistics

Retailer

Dynamics of Order Flow

Supplier
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Plant

Warehouse

Logistics

Retailer

Supply Chain Planning Processes

Material Requirement Planning Component Requirement Demand Forecasting Demand Planning Production Plan

Supplier

Plant

Warehouse

Logistics

Retailer

Order Management
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Supply Chain Planning Decisions

STRATEGIC

TACTICAL OPERATIONAL
Procurement
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Manufacturing

Distribution

Logistics

Supply Chain Planning Decisions

Procurement
Supplier Selection Allocation of Suppliers to the Plants

Manufacturing
Location, Number, Capacity of Plants What Products to Produce Which Plants to Produce them

Distribution

Logistics
Mode of Shipment Port Selection

Location, Number, Size of Warehouses

Procurement Policy

Warehouse Allocation Inventory Decisions Manufacturing Policy

Customer Allocation Distribution Policy

Vehicle Routing Fleet Size

Production Schedule Scheduling on Machines Workload Balancing

Finished Goods Inventory

Vehicle Routing

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Supply Chain - Concept

Traditional versus new supply chain models

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Traditional approach of SCM

Supply Chain Partners Operate in Silos
Supplier Manufacturers Warehouse Retailers Customers

Interface between entities Traditional organizations set performance goals for each function to be managed in isolation with no or little attention given to interfunctional relationships.

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Traditional approach of SCM

By making use of local information to make demand forecasts and passing them onto downstream partners, information distortion is created.
Supplier
Over forecasting Over Purchasing

Manufacturers
Over forecasting Over Purchasing

Warehouse
Over forecasting Over Purchasing

Retailers
Over forecasting Over Purchasing

Customers
Over forecasting Over Purchasing

Over Producing

Over Producing

Over Producing

Over Producing

Over Producing

Over Stocking

Over Stocking

Over Stocking

Over Stocking

Over Stocking

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Effective implementation of Supply Chain

Supply Chain Management concept accepts the whole supply chain as a single entity & enable a total transparency of demand information across all business partners
Push-Pull Boundary PULL

PUSH

PULL

PULL

Order are Received

Manufacturing

Warehouse

The Product is pulled by Demand

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Customers

Suppliers

Retailers

Supply Chain Management (SCM)

Ensuring free flow is the core essence of the Supply Chain concept. Cross-functional collaboration is of utmost importance for such an organization to be effective.
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Effective implementation of the Supply Chain

All functions along the chain share the common objective of supply and are involved in strategic decision-making
PUSH Push-Pull Boundary PULL PULL PULL

Order are Received

Manufacturing

Warehouse

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Customers

Suppliers

Retailers

What does it take to implement a successful Supply Chain Management

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For transforming a traditional company with functional organization to a successful Supply Chain Organization, the key challenge is to build a platform, (the SC network) that will facilitate the 3 flows i.e. material, information, financial flows.
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Supply Chain Management (SCM)

Financial Flows
Supplier Capacity Production Capacity Expected Customer Orders

Goods
Finished Product Availability From Production Availability

To Customer

From Supplier availability

Components Raw Material

Goods

Customer Orders in Hand

Information flow in both directions

Material flow from Supplier to Customer

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A Platform that facilitates the 3 flows: Material, information and financials

Supply chain integration a reality

Four key dimensions will have to be implemented.

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Workflow coordination
Streamlining workflow activities among supply chain partners. Workflow coordination encompasses of a host of activities including procurement, order execution, (engineering change, design optimization and financial exchanges).
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Synchronization
The goal of synchronization in SC integration is to develop production, delivery mechanisms and processes that can produce goods to the actual end-users rate.
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Information integration
Information is the enabler of supply chain integration. It refers to sharing & exploiting the information collectively so that the entire chain is driven by true consumer demand. The business platform should provide both connectivity and the ability to integrate a large variety of operational systems
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The trust factor

Trust is the quality that allows cooperation and coordination to take place both within the organization and across the supply chain partners. Trust is essential to the free and open flow of information needed to respond to the customer needs at each point of interaction. Without openness, the network will not be responsive and not being put at an economic advantage.
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Supply Chain

ITSupport

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Software Packages
ARIBA Spend Management: It helps companies driving down enterprise wide spend

mySAP SCM: A complete supply chain planning solution

iBann: A complete solution suite from demand collaboration to order management

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Software Packages
i2 Six: A comprehensive solution suite for spend/ production/ revenue/ logistics/ fulfillment optimization

Solution suites for network design & optimization/ manufacturing planning & scheduling/ global logistics management/ service & parts management

JD EDWARD: The advanced planning software to synchronize demand & planning/ network Optimization/ production & distribution planning

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The benefits gained through implementation of Supply Chain solutions.

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The benefits gained through SCM solutions

Increased visibility
Provide with some ways to see an aggregated view across the constituents of the Supply Chain. Companies have greater visibility into inventories (including suppliers inventories).Visibility combined with coordination and synchronization is the basic enabler to supply chain implementation.

Increased reliability
Companies can make accurate promises of availability to their customers. They can fulfill on those promises to get the goods into customer s hands fast and at the lowest cost.

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The benefits gained through SCM solutions

Squeeze inefficiencies
Through the efficient matching of supply and demand, one reduces obsolete or unwanted inventories deriving savings, energy savings, reduced pollution.

Increase the velocity of business

Information flows faster through the extended supply chain enabling faster response lead times inducing faster response time to customer requirements

.Savings and revenue improvements ..

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Results
 Reduced inventory levels by 10-15%  Reduced markdown & scrap by 10-15%  Used resources10-20% more efficiently  Improved delivery reliability by 95-95%  Reduced outages to 0-5%  Reduced cycle time by 10-20%  Reduced transportation cost by 10-15%
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Companies that utilized best-in-class SCM solutions have

Why is the SMC so important?

Effective management of supply chain can lead to up to 5% cost decrease that has the same impact on profit as 30% increase in sales.
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