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Presented by Uday Joshi 14th May 2016
*The entire supply chain is a single, integrated entity.
*The cost, quality and delivery requirements of the customer are objectives shared by every company in the chain.
*1980s and 1990s: Era of achieving excellence at the firm level (JIT, TQM, TPM, BPR, ERP, etc)
*2000s: Era of achieving excellence at the value chain level (SCM, CRM, E-Commerce, etc.)
Supply Chain Management encompasses every effort involved in producing and delivering a final product or service, from the supplier’s supplier to the customer’s customer.
Supply Chain Management includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.
The Supply Chain Council, U.S.A.
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*Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.
Sometimes referred to as Sometimes referred to as value chainsvalue chains
1.Improve operations2.Increasing levels of outsourcing3.Increasing transportation costs4.Competitive pressures5.Increasing globalization6.Increasing importance of e-commerce7.Complexity of supply chains8.Manage inventories
*Top management understanding & commitment*Quest for excellence*Effective and efficient communication*Relationship instead of exchange*Cross-functional teams*Reality of team, partnerships & alliances (based on harmony
& trust)
Stage 1: Vendor – Purchase – Production - Distribution – Retailer (1970’s)
Stage 2: Materials Management - (1980’s )
Logistics Management
Stage 3: Supply Chain Management (1990’s)
*Global competition
*Shorter product life cycle
*New, low-cost distribution channels
*More powerful well-informed customers
*Internet and E-Business strategies
* What a supply chain is. * The need to manage a supply chain & the potential benefits of
doing so. * Explain the increasing importance of outsourcing. * State the objective of supply chain management. * Identify the strategic, tactical, and operations issues in supply chain
management. * Outline the key steps and potential challenges. * Explain the importance of the purchasing function in business
organizations. * Explain the term value analysis. * Identify several guidelines for ethical behavior in purchasing.
*Distribution Network Configuration* Inventory Control*Supply contract*Distribution Strategies*Supply Chain Integration & Strategic Partnering*Outsourcing & Procurement Strategies*Product Design* Information Technology & Decision Support System*Customer Value
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*Supply Chain Strategy & Design
*Supply Chain Planning
*Supply Chain Operations
Strategy & Design
Planning
Operations
* .Supply Chain Planning*Markets to be supplied & from
which location* Planned build-up of inventory* Subcontracting of manufacturing* Timing and size of market
promotion* Handling uncertainty in demand,
foreign exchange fluctuations* Establishing production plan
under fixed strategic parameters
*Supply Chain Operations*Decisions over individual customer orders (daily, weekly)*Less uncertainty about demand information*Exploit reduction of uncertainty to optimize performance*Establish deliver dates*Establish order fill rate
NewProduct
Development
Marketingand
Sales Operations Distribution Service
Finance, Accounting, Information Technology, Human Resources
Business Strategy
New ProductStrategy
MarketingStrategy
Supply Chain Strategy
*Warehouses*Factories*Processing centers*Distribution centers*Retail outlets*Offices
*Forecasting*Purchasing* Inventory management* Information management*Quality assurance*Scheduling*Production and delivery*Customer service
1.Quality2.Cost3.Flexibility4.Velocity5.Customer service
Supply Chain Performance Drivers
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
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PhysicalDistributionManagemen
t
Transportation
CorporationSuppliers Customers
Domestic/ImportSourcing
Domestic/ExportDistribution
ThroughflowInboundMaterials
OutboundMaterials
Forward and Reverse Flow of Information, Products, and Funds
PhysicalDistributionManagement
Transportation
Transportation Transportation
OrderProcessing
OrderProcessing
OrderProcessing
OrderPlacement
InventoryManagemen
t
MaterialsManagement
CustomerService
Storage StorageStorage InventoryManagement
InventoryManagement
Costumer-FirmInterface
Supplier-FirmInterface
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Purchasing
Legal
AccountingOperations
Dataprocessing
Design
ReceivingSuppliers
Figure 11.5
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1.Requisition received2.Supplier selected3.Order is placed4.Monitor orders5.Receive orders
PurchasingPurchasing
LegalLegal
AccountingAccountingOperationsOperations
DataDataprocess-process-inging
DesignDesign
ReceivingReceivingSuppliersSuppliers
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*Quality and quality assurance*Flexibility*Location*Price*Product or service changes*Reputation and financial stability*Lead times and on-time delivery*Other accounts
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*Vendor analysis - evaluating the sources of supply in terms of
*Price*Quality*Services*Location*Inventory policy*Flexibility*Financial capability*Technical abilities‘*HSE awareness*Market image
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*Ideas from suppliers could lead to improved competitiveness
1.Reduce cost of making the purchase2.Reduce transportation costs3.Reduce production costs4.Improve product quality5.Improve product design6.Reduce time to market7.Improve customer satisfaction8.Reduce inventory costs9.Introduce new products or services
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Quality controlProduction planning and control
Inventory policiesPurchasing policiesProduction policiesTransportation policiesQuality policies
Design of the supply chain, partnering
Operating IssuesTactical IssuesStrategic Issues
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*Strategic importance*Cost*Quality*Agility*Customer service*Competitive advantage
*Technology management*Benefits*Risks
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*Barriers to integration of organizations*Getting top management on board*Dealing with trade-offs*Small businesses*Variability and uncertainty*Long lead times
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*Trust among trading partners*Effective communications*Supply chain visibility*Event-management capability*The ability to detect and respond to unplanned events
*Performance metrics
Supply Contracts/Collaboration/Information Systems and DSS
Procurement Planning
ManufacturingPlanning
DistributionPlanning Demand
Planning
Perspective MetricsReliability On-time delivery
Order fulfillment lead timeFill rate (fraction of demand met from stock)Perfect order fulfillment
Flexibility Supply chain response timeUpside production flexibility
Expenses Supply chain management costsWarranty cost as a percent of revenueValue added per employee
Assets/utilization Total inventory days of supplyCash-to-cash cycle timeNet asset turns
What is Supply Chain Operations Reference Model (SCOR)?Supply-chain operations reference-model (SCOR) is a process reference model for supply chain management. This reference model enables users to address, improve, and communicate supply chain management practices within and between all interested parties in the extended enterprise.
*Achieving Global Optimization*Conflicting Objectives*Complex network of facilities*System Variations over time
*Managing Uncertainty *Matching Supply and Demand*Demand is not the only source of
uncertainty
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*The systematic outsourcing of logistics capabilities is a third option.*By collaborating with transportation firms,
private warehouses, or other specialists, corporate resources can be concentrated on the firm’s core product.*One-stop logistics allows shippers to buy all
the transportation modes and functional services from a single carrier.
* The term Supply Chain Dynamics summarizes in three words how our present-day business world works. Every product, every service, is supplied through a chain or network of multiple, often dozens of independent organizations.
* At the same time, the dynamics in these supply chains are considerable. Players change in capabilities and focus, old players disappear, new ones emerge all the time. There is often great volatility in technological developments and in end customer preferences.
* Supply Chain Dynamics is also a blend of two established academic disciplines, Supply Chain Management (SCM) and System Dynamics (SD) measuring the supply chain system performance in terms of key metrics such as inventory, WIP levels, backlogged orders and customer satisfaction at all four echelons.
Ord
er S
ize
Time
CustomerDemand
Retailer OrdersDistributor Orders
Production Plan
Ord
er S
ize
Time
CustomerDemand
Production Plan
* Integrated activity: * Among functions such as logistics, manufacturing, distribution, design/engineering, marketing, finance,etc. * Multiple organizations,i.e., suppliers, customers& 3 PL providers* Coordination of conflicting goals, metrics, etc.
* Responsible for multiple flows:* Information (orders, status, contracts)* Physical (finished goods, raw material, w.i.p.)
* Financial (payment, credits, etc.) Most analysis involves trade-offs * Across different entities* Across metrics: Cost, Service, Time, Risk, etc.
* Each interface in the supply chain represents* Movement of goods* Information flows* Transfer of title* Purchase and sale
1. Purchasing• Stable volume requirements • Flexible delivery time• Little variation in mix• Large quantities
2. Manufacturing• Long run production• High quality• High productivity• Low production cost
3. Warehousing• Low inventory • Reduced transportation costs• Quick replenishment capability
4. Customers• Short order lead time• High in stock• Enormous variety of products• Low prices
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*Lower inventories*Higher productivity*Greater agility*Shorter lead times*Higher profits*Greater customer loyalty* Integrates separate organizations into a cohesive operating
system
*Strategic Advantage – It Can Drive Strategy* Manufacturing is becoming more efficient* SCM offers opportunity for differentiation (Dell) or cost reduction (Wal-Mart or Big Bazaar)*Globalization – It Covers The World
* Requires greater coordination of production and distribution* Increased risk of supply chain interruption*Increases need for robust and flexible supply chains At the
company level, supply chain management impacts*COST – For many products, 20% to 40% of total product
costs are controllable logistics costs.*SERVICE – For many products, performance factors such as
inventory availability and speed of delivery are critical to customer satisfaction.
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*Supply-chain management is the integration of business processes from end user through original suppliers, that provide products, services, and information that add value for customers.
*Supply-chain management connects a company’s supply side with its demand side.
*It opens up supplier relationships for companies outside of the buyer’s domestic market.
*Thank You
