Supply chain management unit 5

Supply Chain Management

Saravanan J

For MASTER FOR BUSINESS ADMINISTRATION

Presentation outline

• IT in supply chain• Agile supply chain • Reverse supply chain• Agro supply chain

Supply chain• Supply chains are principally concerned with the flow of

products and information between supply chain member organizations—– procurement of materials, – transformation of materials into finished products,– distribution of those products to end customers.

• Today’s information-driven, integrated supply chains are enabling organizations– To reduce inventory and costs, – add product value, – extend resources, – accelerate time to market, and retain customers.

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Topics to be Discussed In IT Supply Chain

• The Role of Information Technology in the Supply Chain

• The Supply Chain IT Framework• Customer Relationship Management• Internal Supply Chain Management• Supplier Relationship Management• The Transaction Management Foundation• The Future of IT in the Supply Chain• Supply Chain Information Technology in Practice

IT in Supply Chain• Supply chain management (SCM) is concerned with the

flow of products and information between supply chain members' organizations.

• Recent development in technologies enables the organization to avail information easily in their premises.

• These technologies are helpful to coordinates the activities to manage the supply chain.

• The cost of information is decreased due to the increasing rate of technologies. In the integrated supply chain model

IT in Supply Chain(Fig.1) bi-directional arrow reflect the accommodation of reverse materials and information feedback flows.

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Role of Information Technologyin a Supply Chain

• Information is the driver that serves as the “glue” to create a coordinated supply chain

• Information must have the following characteristics to be useful:– Accurate– Accessible in a timely manner– Information must be of the right kind

• Information provides the basis for supply chain management decisions– Inventory– Transportation– Facility

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Characteristics of UsefulSupply Chain Information

• Accurate• Accessible in a timely manner• The right kind• Provides supply chain visibility

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Use of Information in a Supply Chain

• Information used at all phases of decision making: strategic, planning, operational

• Examples:– Strategic: location decisions– Operational: what products will be produced

during today’s production run

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Use of Information in a Supply Chain

• Inventory: demand patterns, carrying costs, stockout costs, ordering costs

• Transportation: costs, customer locations, shipment sizes

• Facility: location, capacity, schedules of a facility; need information about trade-offs between flexibility and efficiency, demand, exchange rates, taxes, etc.

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Role of Information Technologyin a Supply Chain

• Information technology (IT)– Hardware and software used throughout the

supply chain to gather and analyze information– Captures and delivers information needed to

make good decisions• Effective use of IT in the supply chain can

have a significant impact on supply chain performance

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The Importance of Informationin a Supply Chain

• Relevant information available throughout the supply chain allows managers to make decisions that take into account all stages of the supply chain

• Allows performance to be optimized for the entire supply chain, not just for one stage – leads to higher performance for each individual firm in the supply chain

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The Supply Chain IT Framework

• The Supply Chain Macro Processes– Customer Relationship Management (CRM)– Internal Supply Chain Management (ISCM)– Supplier Relationship Management (SRM)– Plus: Transaction Management Foundation

• Macro Processes Applied to the Evolution of Software

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Macro Processes in a Supply Chain

Supplier Relationship Management

(SRM)

Internal Supply Chain Management

(ISCM)

Customer Relationship Management

(CRM)

Transaction Management Foundation (TFM)

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Customer Relationship Management

• The processes that take place between an enterprise and its customers downstream in the supply chain

• Key processes:– Marketing– Selling– Order management– Call/Service center

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Internal Supply Chain Management

• Includes all processes involved in planning for and fulfilling a customer order

• ISCM processes:– Strategic Planning– Demand Planning– Supply Planning– Fulfillment– Field Service

• There must be strong integration between the ISCM and CRM macro processes

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Supplier Relationship Management

• Those processes focused on the interaction between the enterprise and suppliers that are upstream in the supply chain

• Key processes:– Design Collaboration– Source– Negotiate– Buy– Supply Collaboration

• There is a natural fit between ISCM and SRM processes

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The Transaction Management Foundation

• Enterprise software systems (ERP)• Earlier systems focused on automation of simple

transactions and the creation of an integrated method of storing and viewing data across the enterprise

• Real value of the TMF exists only if decision making is improved

• The extent to which the TMF enables integration across the three macro processes determines its value

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The Future of IT in the Supply Chain

• At the highest level, the three SCM macro processes will continue to drive the evolution of enterprise software

• Software focused on the macro processes will become a larger share of the total enterprise software market and the firms producing this software will become more successful

• Functionality, the ability to integrate across macro processes, and the strength of their ecosystems, will be keys to success

Information and Technology - Application of SCM

• In the development and maintenance of Supply chain's information systems both software and hardware must be addressed.

• Hardware includes computer's input/output devices and storage media.• Software includes the entire system and application programme used for

processing transactions management control, decision-making and strategic planning. – Recent development in Supply chain management software are:

1. A new software programme developed by Ross systems Inc. called Supply Chain planning which is used for demand forecasting, replenishment & manufacturing tools for accurate planning and scheduling of activities.

2. P&G distributing company and Saber decision Technologies resulted in a software system called Transportation Network optimization for streamlining the bidding and award process.

3. Logitility planning solution was recently introduced to provide a programme capable managing the entire supply chain.


• Electronic Data Interchange:– Electronic Data Interchange (EDI) refers to computer-to-computer exchange of business

documents in a standard format. EDI describe both the capability and practice of communicating information between two organizations electronically instead of traditional form of mail, courier, & fax. The benefits of EDI are:

1. Quick process to information. 2. Better customer service. 3. Reduced paper work. 4. Increased productivity. 5. Improved tracing and expediting. 6. Cost efficiency. 7. Competitive advantage. 8. Improved billing.

– Though the use of EDI supply chain partners can overcome the distortions and exaggeration in supply and demand information by improving technologies to facilitate real time sharing of actual demand and supply information.

Bar coding and Scanner:– Bar code scanners are most visible in the check out counter of super market. This code specifies

name of product and its manufacturer. Other applications are tracking the moving items such as components in PC assembly operations, automobiles in assembly plants.


Data warehouse:Data warehouse is a consolidated database maintained separately from an

organization's production system database. Many organizations have multiple databases. A data warehouse is organized around informational subjects rather than specific business processes. Data held in data warehouses are time dependent, historical data may also be aggregated.

Enterprise Resource planning (ERP) tools:Many companies now view ERP system (eg. Baan, SAP, People soft, etc.) as the core

of their IT infrastructure. ERP system have become enterprise wide transaction processing tools which capture the data and reduce the manual activities and task associated with processing financial, inventory and customer order information. ERP system achieve a high level of integration by utilizing a single data model, developing a common understanding of what the shared data represents and establishing a set of rules for accessing data.


• Electronic Commerce:– It is the term used to describe the wide range of tools

and techniques utilized to conduct business in a paperless environment.

– Electronic commerce therefore includes electronic data interchange, e-mail, electronic fund transfers, electronic publishing, image processing, electronic bulletin boards, shared databases and magnetic/optical data capture.

– Companies are able to automate the process of moving documents electronically between suppliers and customers.

Agile supply chain

Content

The concept of agility1.

Agile practices2.

The concept of Agility

• Market sensitive– Supply chain is capable of

reading and responding to real demand

• Virtual – Information-based supply

chain, rather than inventory-based.

Agile supply chain


• Network based– EDI and internet enable

partners in the supply chain to act upon the real demand

• Process integration– Collaborative working

between buyers and suppliers, joint product development, common systems and shared information

Agile supply chain


• Demand characteristics and supply capabilities

end-customers become more knowledgeable about product

Lean supply chain

Agile supply chain

1980’s

1990’s

Efficiency, cost

Responsiveness

Focus

The concept of Agility• Demand characteristics and supply capabilities

Distinguishing attributes

Lean supply Agile supply

Typical products Commodities Fashion goodsMarketplace demand Predictable VolatileProduct variety Low HighProduct life cycle Long ShortCustomer drivers Cost AvailabilityProfit margin Low HighDominant costs Physical costs Marketability costsStockout penalties Long-term

contractualImmediate and volatile

Purchasing policy Buy materials Assign capacityInformation enrichment

Highly desirable Obligatory

Forecasting mechanism

Algorithmic(基于算法 )

Consultative(基于咨询 )


Characteristic Lean Agile

Logistics focus Eliminate waste Customers and markets

Partnerships Long-term, stable Fluid clusters

Key measureOutput measure such as productivity and cost

Measure capabilities, and focus on customer satisfaction

Process focusWork standardization, conformance to standards

Focus on operator self-management to maximize autonomy

Logistics planning Stable, fixed period Instantaneous

response

Comparison of characteristics of lean and agile supply


Source: Mason-Jones, Naylor and Towill (2000), Engineering the leagile supply chain


Long lead time

Short lead time

Supply characteristics

Demand characteristicsPredictable

marketUnpredictable

markets

Plan and control

JIT: pull scheduling

React and execute: agile

capabilities

Hold inventory: hedge and deploy

Source: Martin, Christopher and Denis Towill, An integrated model for the design of agile supply chains

• Application of leagility: the Pareto curve approach

• Application of leagility: the de-coupling point approach


• Preconditions for successful agile practice– Enterprise-level reality check– Cost of complexity sanity check– Lowering the cost of complexity: avoiding overly

expensive agility– Forecasting: reduce the need for last minutes crises• External: demand forecast• Internal: financial forecast, asset forecast

Agile practices

• Key issue

1How can we use agile practices to benefit from turbulence in the marketplace?

Agile practices

• Three characteristics of supply chain operations related to agile– Mastering and benefiting from variation in

demand;– Very fast response to market opportunities;– Unique or low volume response.

Agile practices

• Benefiting from variance– Three sources of demand uncertainty• Seasonality

• Product life cycles• End-customer demand

Demand variance

Time

Agile practices

• Benefiting from variance– Three sources of demand uncertainty• Seasonality• Product life cycles

• End-customer demand

variety

Volume

Start up Micro-markets

Organize Adjust

Agile capability is needed

Agile practices

• Benefiting from short time windows– Decreased D-time requires different levels of agility

(VMI & QR)• Speed of replenishment• Upstream time sensitivity• Information dissemination and alignment

Agile practices

• Benefiting from small volume– Small volume is a result of micro-markets,

customization and rapid responsiveness.– Three approaches of agile strategy related to small

volume• Changeover flexibility• Modularity at the network level• Service-based and information-based solutions

Agile practices

• Benefiting from small volumeVariety

decrease

Volume decrease

Mass production

Flexibility

Modular supply network

Craft production

An integrated model for enabling the Agile supply chain

Reverse Supply Chain [RSC]

• Reverse supply chain or reverse logistics is the series of activities required to retrieve a used product from a customer and dispose of it properly or reuse after processing .

• The chain connects end users with manufacturer in reverse direction.

Hierarchy of RSC

Manufacturer Distributor Customer Collection

Third party Recycling

Secondary Market

Open loop - RSC

Closed Loop - RSC

Typical collection methods in Close Loop [RSCM]

General Process In RSC

Product Recovery Strategy - RSC

Time value of product returns• Marginal Value of Time (MVT)

– The loss in value per unit of time spent awaiting

completion of the recovery process

– MVT (%)= Decrease in value of product

Time

– Example: Time sensitive consumer electronics products such as PCs

can lose value at rates in excess of 1% per week, and the rate increases

as the product nears the end of its life cycle

Time value of product returns

* evaluation of products at retailer or reseller

RSCM decisions• Efficient RSCM: A supply chain designed to

deliver product at low cost – Best for Functional products– Suitable for products with High MVT

• Responsive RSCM: A supply chain designed for speed of response – Best for Innovative products– Suitable for products with Low MVT

Evolution of Different Strategies in RSC

Table 4 : LEE strategy based on FISHER Matrix ,2002

Evolution of Different Strategies in RSC

Decoupling Point [D.P]

Important managerial issues in RSCM-Network Design

• Collection – Recovery channels its roles• Inspection of returned products-location of facilities• Reverse Supply Chain Network Design Options• Role of Forward Supply Chains• Integration of FSC and RSC• Role of 3PL• Most of the reverse supply chain activities takes

place in downstream forward supply chain of lead organisation.

GOME Electrical Appliance[china]



AGRO Supply Chain

• Agribusiness, supply chain management (SCM) implies,– Managing the relationships between the

businesses responsible for the efficient production and supply of products from the farm level to the consumers to meet consumers’ requirements reliably in terms of right quantity, right quality and right price.

Components of an Agro supply chain

Following are the components of an organised agri- supply chain:

1. Procurement or sourcing2. Logistic management

a. Transportationb. Material managementc. On the premise of supplying mostly from

production not stock d. Warehousinge. Logistics Network modeling

Components of an Agri supply chain

3. Organizational managementa. Contractingb. Strategic alliances and partnershipsc. Vertical integration

i. Long term storageii. Packaging technologyiii. Cold chain managementiv. Energy efficient transport v. Quality and safety

4. Application of Efficient Consumer Response (ECR) System a. Electronic scanning of price and product at the point of saleb. Streamline the entire distribution chain

Coordinated AGRO supply chain

• In the last few years there has been an emergence of more coordinated supply chains

for fruits and vegetables in India catering to the export market and to the high end domestic market.

• Several companies in India are beginning to invest in integrated supply chain management systems and infrastructure with emphasis on quality and, to a lesser extent, on safety.

• Initiatives are taken to establish more terminal markets based on modern infrastructure.

Modern Terminal Market / MTM

Coordinated AGRO supply chains

• Supermarket procurement regimes for sourcing of fruits, vegetables, dairy and meat

strongly influence the organization of the supply chains.

• The rising scale of organized retail in the Asian countries (like Metro Cash & Carry, Tata Chemicals and Field Fresh Foods,Bharti Enterprises, Reliance Fresh in India)

Companies involved in Agro supply chain

• DCM Shriram Consolidated Ltd (DSCL) is in the process of tying up with them to source fruits and vegetables from farmers and supply to the retail chains.

• DSCL is already doing this for Future Group's Food Bazaar, south based Subhiksha and RPG's Spencer.

Companies involved in Agro supply chain

Mahagrapes• One of the largest exporters of fresh Grapes (mainly

seedless grapes) from Maharastra India. • Mahagrapes is a partnership firm of sixteen grape

growers cooperatives.• It acts as– facilitator, – quality controller, – input supplier as well as service provider to its member

societies.

Business

Supply chain management unit 5