Supply chain-management

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  • 1. Supply Chain Management A presentation by A.V. Vedpuriswar

2. SUPPLY CHAIN MANAGEMENT Value Chain Supply side- raw materials, inbound logistics and production processes Demand side- outbound logistics, marketing and sales. 3. WHAT IS SUPPLY CHAIN MANAGEMENT " Is the strategic management of activities involved in the acquisition and conversion of materials to finished products delivered to the customer"Supplier ManagementSchedule / ResourcesMaterial Flow Information FlowConversionStock DeploymentLeads to Business Process IntegrationCustomer ManagementDelivery 4. Supply chain is the system by which organizations source, make and deliver their products or services according to market demand. Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level. Supply chain as defined by experienced practitioners extends from suppliers suppliers to customers customers. 5. SUPPLY CHAIN INCLUDES : MATERIAL FLOWS INFORMATION FLOWS FINANCIAL FLOWS 6. SUPPLY CHAIN MANAGEMENT FACILITATED BY : PROCESSES STRUCTURE TECHNOLOGYIS 7. Supply chain serves two functions: Physical Market mediation 8. Supply chain objectives may differ from situation to situation. For functional products, cost efficiency is the critical factor. For innovative products, responsiveness is the important factor. Leanness + Agility together make up Leagility 9. Supply Chain Structure SUPPLIERRaw MaterialsFACTORYDCRDCRETAILERFinished Goods Information Flow 10. Supply Chain and Demand Chain Demand chain is defined as the system by which organizations manage sales and distribution of products and services to end users. Conceptually incorrect to look at demand chain separately Look at the pipe as a whole. 11. But is there a pipe at all? More a network Not necessarily linear Value chain orchestration rather controlling the flow through the pipethan A network of independent and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users 12. SUPPLY CHAIN DRIVERS Not new. Value system of Michael Porter Why sudden interest? Demanding customers Shrinking product life cycles Proliferating product offerings Growing retailer power in some cases Doctrine of core competency Emergence of specialized logistics providers Globalization Information technology 13. SUPPLY CHAIN ELEMENTS Strategic SupplyCha Design in Resource Acquisition Long TermP lanning (1 Year ++)Tactical P roduction/Distribution P lanning Resource Allocation MediumTermP lanning (Qtrly,Monthly)Operational Shipm ent Scheduling Resource Scheduling Short TermP lanning (Weekly,Daily) 14. Supply Chain Goals Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on Revenue growth Better asset utilization Cost reduction. 15. Supply Chain Management Underlying Principles Compression (Planning/Manufacturing/Supply) Conformance (Forecasts/Plans/Distribution) Co-operation (Cross -Functional) Communication (Real Time Data)Reduce Overall Cycle Time : Improve Response 16. Changing Paradigm Functional vs Process Products vs Customers Revenues vs Performance Inventory vs Information Transactions vs Relationships 17. Critical Success Factors today Cross functional management and planning skills Ability to define, measure and manage service requirements by market segment Information systems Relationship management and win win orientation 18. PUTTING IN PLACE A WELL OILED SUPPLY CHAIN Supply chain as an efficient customer satisfying process Effectiveness of the whole supply chain is more important than the efficiency of each individual department. 19. .The steps involved Step1- Designing the supply chain Determine the supply chain network Identify the levels of service required 20. Step 2 - Optimizing the supply chain Determine pathways from suppliers to the end customer Customer markets to Distribution centers Distribution centers to production plants Raw material sources to production plants Identify constraints at vendors, plants and distribution centers Get the big picture Plan the procurement, production and distribution of product groups rather than individual products in large time periodsquarters or years 21. Step 3- Material flow planning Determine the exact flow and timing of materials Arrive at decisions by working back from the projected demand through the supply chain to the raw material resources Techniques ERP 22. Step 4 - Transaction processing and short term scheduling Customer orders arrive at random This is a day to day accounting system which tracks and schedules every order to meet customer demand Order entry, order fulfillment and physical replenishment 23. Information flows in Supply Chain Management Information is overriding element Need for databases Master files: Information about customers, products, materials, suppliers, transportation, production and distribution data- do not require frequent processing Status files- heart of transaction processing- track orders and infrastructure status- updated daily. Essentially using the same information to make all plans right from structuring the network to processing every day supply chain tasks. 24. THE VIRTUAL VALUE CHAIN The value chain connects a companys supply side with its demand side. Traditionally information has been a supporting function. Information however can be managed far more creatively. There are various stages of using value added information processes. 25. Visibility : See physical operations more effectively through information. Information can be used for effective coordination of value chain activities. Mirroring capability : In this stage, virtual activities are substituted for physical ones. A parallel value chain is created. New customer relationships : The company can draw on the flow of information in the virtual value chain to deliver value to customers in new ways. 26. Dealer Management Conventional functions Inventory ownership and management Sales and technical support Order handling Credit 27. Contemporary Trends Channels being divided into two- Fulfillment and Franchised agent Fulfillment channel- responsible for getting the manufacturers product from the plant to the end user through a highly efficient logistics and inventory management system 28. Contemporary Trends Fulfillment channel may not take ownership of the product but may perform these functions on a per box fee structure Franchised agents responsible for sales and sales support but will not write the order or supply the product 29. Issues in customer management Penetration vs Spread Concentration is necessary to commit the necessary resources for true customer integration Depth of customer contact R&D - sharing information vs developing new products together Logistics - Pros and cons of methods of transportation vs reengineering the logistics process 30. Implementation: Points to keep in mind Recognize the difficulty of change. Prepare a blueprint for change that maps linkages among initiatives. Assess the entire supply chain from supplier relationships to internal operations to the market place, including customers, competitors and industry as a whole. 31. IS THE SUPPLY CHAIN WORKING? Does our manufacturing strategy increase product line flexibility while continuing to drive down overall production costs? When was the last time we measured lost sales to end customers? Do we have an efficient system to get POS data from retailers? Are we testing our products with end customers? Do we use the resulting data to adjust our forecasting and supply positions? Is the ratio of returned orders to sales increasing? 32. The New Model of Relationships Hard bargaining vs shared destiny Exit vs Voice Arms length relations vs Involving dealers and suppliers in product development Piling up vs Replenishing dealer inventory more frequently In short working together as partners to cut costs, boost efficiencies, innovate and share value 33. Adversarial vs partnerships Short term vs long term contracts Large vs small order quantity Full truck load vs small parcels Inspection vs no inspection 34. Written order vs understanding Many vs few suppliers Design and then invite quote from vendor vs involving vendor in development Bargaining, holding cards close to chest vs Shared destiny, transparency 35. Summary Segmentation of customers based on service needs Customization of logistics network Listen to signals of market demand and plan accordingly. Differentiate product close to the customer Source strategically Develop a supply chain wide technology strategy Accept channel spanning performance measures 36. The Bullwhip Phenomenon Volatility amplification along the network Increase in demand variability as we move upstream away from the market Mainly because of lack of communication and coordination Delays in information and material flows 37. Bullwhip effect occurs because of various reasons: Order Batching- Accumulate orders Shortage gaming- Ask for more than what is needed Demand forecast updating 38. Important points to keep in mind Segment customers based on service needs. Modify the supply chain to meet these service requirements profitably. Customize the logistics network. Develop forecasts collaboratively involving every link of the supply chain. Locate the leverage point where the product is unalterably configured to meet a single requirement Delay product differentiation till the last possible moment. 39. Assess options such as modularized design or modification of manufacturing processes that can increase flexibility. Cultivate warm relationships with suppliers. Efficient supply chain management has to be ac


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