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8/9/2019 Mba Ft 10 11 Session 1,2
1/23
8/9/2019 Mba Ft 10 11 Session 1,2
2/23
SESSION 1 -2SESSION 1 -2
Introduction to Supply Chain
Basic terminology and concepts of supplychain management.
Facilities, function, types
Need, benefits
elements
challenges
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Supply chain management-definedSupply chain management-defined
Supply chain management is a set ofSupply chain management is a set of
approaches utilised to efficiently integrateapproaches utilised to efficiently integrate
suppliers, manufacturers, warehouses andsuppliers, manufacturers, warehouses and
storesstores , so that merchandise is produced and, so that merchandise is produced anddistributed at the right quantities , to the rightdistributed at the right quantities , to the right
location and at the right time, in order tolocation and at the right time, in order to
minimise system wide costsminimise system wide costs while satisfyingwhile satisfying
service levelservice level requirements.requirements.
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WarehousesWarehouses
FactoriesFactories
Processing centersProcessing centersDistribution centersDistribution centers
Retail outletsRetail outlets
OfficesOffices
FacilitiesFacilities
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Functions and ActivitiesFunctions and Activities
ForecastingForecastingPurchasingPurchasing
Inventory managementInventory management
Information managementInformation managementQuality assuranceQuality assurance
SchedulingScheduling
Production and deliveryProduction and deliveryCustomer serviceCustomer service
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Typical Supply ChainsTypical Supply Chains
PurchasingReceiving Storage Operations Storage
Production Distribution
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Typical Supply Chain for a ManufacturerTypical Supply Chain for a Manufacturer
Supplier
Supplier
Supplier
Storage
}Mfg. Storage Dist. Retailer Customer
T i l S l Ch i f
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Supplier
Supplier}Storage Service Customer
Typical Supply Chain for ayp ca upp y a n or a
ServiceService
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Functional Products v/s innovativeFunctional Products v/s innovativeproductsproducts
ToothpasteToothpasteCarsCars
SoupsSoups
FurnitureFurniture
Mobile phonesMobile phones
.No ideal supply chain model
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1.1.Improve operationsImprove operations2.2.Increasing levels of outsourcingIncreasing levels of outsourcing
3.3.Increasing transportation costsIncreasing transportation costs
4.4.Competitive pressuresCompetitive pressures
5.5.Increasing globalizationIncreasing globalization
6.6.Increasing importance of e-commerceIncreasing importance of e-commerce
7.7.Complexity of supply chainsComplexity of supply chains
8.8.Manage inventoriesManage inventories
Need for Supply ChainNeed for Supply Chain
ManagementManagement
B fit f l h i
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Benefits of upply hainene s o upp y a n
ManagementManagement
Lower inventoriesLower inventoriesHigher productivityHigher productivity
Greater agilityGreater agility
Shorter lead timesShorter lead times
Higher profitsHigher profits
Greater customer loyaltyGreater customer loyalty
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1.1.Demand forecastingDemand forecasting2.2. Procurement planning and controlProcurement planning and control
3.3. Production planning and controlProduction planning and control
4.4. Distribution planning and controlDistribution planning and control
5.5. Inventory managementInventory management
6.6. Transportation managementTransportation management
7.7.Customer order processingCustomer order processing
8.8. Relationship managementRelationship management
Operations DecisionsOperations Decisions
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Elements of Supply Chain ManagementElements of Supply Chain Management
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SUPPLY CHAIN DRIVERSSUPPLY CHAIN DRIVERS
Not new. Value system of Michael PorterNot new. Value system of Michael Porter Why sudden interest?Why sudden interest?
Demanding customersDemanding customers
Shrinking product life cyclesShrinking product life cycles Proliferating product offeringsProliferating product offerings
Growing retailer power in some casesGrowing retailer power in some cases
Doctrine of core competencyDoctrine of core competency
Emergence of specialized logistics providersEmergence of specialized logistics providers
GlobalizationGlobalization
Information technologyInformation technology
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Supply chain managementSupply chain management
ChallengesChallenges
SCM strategies can not be in isolation, have to alignSCM strategies can not be in isolation, have to alignwith another chain- the development chain (newwith another chain- the development chain (newproduct introduction) as well as overall org.product introduction) as well as overall org.
objectives.objectives.
Achieving the best solution with minimizing costs andAchieving the best solution with minimizing costs andmaintaining service levels- Global optimisationmaintaining service levels- Global optimisation
Facing uncertainties and risk customer demand,Facing uncertainties and risk customer demand,travel time, break downs,travel time, break downs,
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Supply chain managementSupply chain management
Needs to be efficient and cost effectiveNeeds to be efficient and cost effective
Across physical infrastructureAcross physical infrastructure
Across entire system-Global optimisationAcross entire system-Global optimisation
Across levels from strategic to tacticalAcross levels from strategic to tactical
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Supply chain management-EvolutionSupply chain management-Evolution
The First (1910-1920)- Ford supply chainThe First (1910-1920)- Ford supply chain
Tight Integration/ Inflexible/ Limited varietiesTight Integration/ Inflexible/ Limited varieties
The Second (1960-1970)- Toyota supply chainThe Second (1960-1970)- Toyota supply chain
Out sourcing- keiretsu system/ wide varieties/Out sourcing- keiretsu system/ wide varieties/efficient /efficient /
The Third (1995-2000)- Dell supply chainThe Third (1995-2000)- Dell supply chain
Integration with suppliers/ IT leverage/Integration with suppliers/ IT leverage/
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Supply chain Management : Key IssuesSupply chain Management : Key Issues
--Issue Components
Distribution network configurationmultiple manufacturing, warehouses,retail distribution
Inventory control Minimize inventory cost, reorder levels,holding costs, Turnover ration
Supply contracts Comprehensive relationship-
price,discounts,volummes, deliveries
Distribution strategies Cross-docking
Supply chain integration and strategicplanning
Not necessarily for big firms only.Intensity of integrations, info sharing
Outsourcing and procurement strategies Trade-off make or buy. Risks ofoutsourcing, e-procurement
Product design Impact on inventory, transport,lead times
IT Data analysis,e-commerce,RFID
Customer value From SCM strategies.
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Supply Chain Management OperationsSupply Chain Management Operations
StrategiesStrategies
STRATEGY WHEN TO CHOOSE BENEFITS
Make to Stock standardized products,relatively predictabledemand
Low manufacturing costs;meet customer demandsquickly
Make to Order customized products,many variations Customization; reducedinventory; improved servicelevels
Configure to Order many variations onfinished product;infrequent demand
Low inventory levels; widerange of product offerings;simplified planning
Engineer to Order complex products, uniquecustomer specifications
Enables response to specificcustomer requirements
C t f l i ti
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Marketing
orientation(competitive
advantage)
Time and
place utility
Efficient
movement to
customer
Proprietaryasset
Natural resources
(land, facilities, andequipments)
Human resources
Financial resources
Information
resources
Management actions
Planning Implementation Control
Logistics Activities
Customer ServiceDemand forecasting
Distributioncommunications
Inventory control
Material handlingOrder Processing
Parts and servicesupport
Plant and warehouse siteselection
Procurement
Packaging
Return goods handling
Salvage and scrap
disposalTraffic and transportation
Warehousing andstorage
Raw
materials
In-process
inventory
Finished
goods
Supplier
s
Logistics management Customer
s
Outputs of
logistics
Components of logistics
management :
Inputs into logistics
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Some Estimates for IndiaSome Estimates for India
------------------------------------------------------------------------------------------------------------------------------------------ LOGISTICS SPENDLOGISTICS SPEND US $ 50 BUS $ 50 B SHARE OF GDPSHARE OF GDP 12 - 13 %12 - 13 %
MAJOR ELEMENTS ARE ( % AGE OF TOTAL ) :MAJOR ELEMENTS ARE ( % AGE OF TOTAL ) : TRANSPORTATIONTRANSPORTATION 3535 INVENTORIESINVENTORIES 2525 PACKAGINGPACKAGING 1111 HANDLING & WAREHOUSINGHANDLING & WAREHOUSING 99 OTHERSOTHERS 66 LOSSESLOSSES 1414 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
LOGISTICS COSTS CAN BE 6 - 7 % OF GROSS SALES CAN GO UPLOGISTICS COSTS CAN BE 6 - 7 % OF GROSS SALES CAN GO UP
TO 14 - 15 %. FOR SECTORS LIKE CEMENT AND BULK MATERIALSTO 14 - 15 %. FOR SECTORS LIKE CEMENT AND BULK MATERIALS..
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