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Module 1:Supply Chain Management
The first supply chain was the barter system
Traces of outsourcing was seen when Charles S. Rollsbecame selling agent for cars made by F. Henry Royce
The essence of SCM was understood with the first phase
characterized as an inventory push era that focusedprimarily on physical distribution of finished goods
Ancient Times
1904
1960-1975
1975-1990
1980 Emergence of SCM
1985- WalMart introduced the concept of Cross Docking
Internet revolutionized the distribution system ofthe business1996-
Concept of e-commerce changed the definition ofbusiness
1998-
Companies began migrating from an inventory push toa customer pull channel
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It is a network of supplier, manufacturing, assembly, distribution and logistic
facilities that performs the function of of procurement of materials,
transformation of these materials in to intermediate and finished products
and the distributions of these products to customer
MEANING OF SUPPLY CHAIN
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It is a system approach to managing the entire flow of information,
materials and services from raw materials supplier through factories and
warehouses to the end customer
MEANING OF SUPPLY CHAIN MANAGEMENT
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OBJECTIVE OF SUPPLY CHAIN MANAGEMENT
To maximise the overall value generated.
Value generated is the difference between whatfinal product is worth to the customer and
the effort the supply chain expands in filling
the customer request.
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MANUFACTURER DISTRIBUTOR
SUPPLIER
Information flow Information flow
Material flow Material flow
SUPPLIER
Flexible System
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Module 1:Supply Chain Management
Customer could be an internalcustomer or an external customer
Next, we see the processes performed in asupply chain as a CYCLE view
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CycleIV
Cycle II
Customer
Distributor
ManufacturerSupplier
Retailer
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CUSTOMER ORDER CYCLEIt occurs at the customer/retailer
CUSTOMERARRIVAL
CUSTOMERORDER ENTRY
CUSTOMERORDER
FULFILMENT
CUSTOMERORDER
RECEIVING
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REPLENISHMENT CYCLEIt occurs at the retailer & distributor
RETAILORDER
TRIGGER
RETAILORDER
RECEIVING
RETAILORDERENTRY
RETAILORDER
FULFILLMENT
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ORDERARRIVAL
RECEIVING
MANUFACTUR-
-INGAND
SHIPING
PRODUCTIONSCHEDULING
MANUFACTURING CYCLEIt occurs at the distributor and manufacturer
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ORDERBASED
SCHEDULE
SUPPLIERPRODUCTIONSCHEDULING
RECEIVINGAT
MANUFACTURER
COMPONENTMANUFACTUR-ING/SHIPPING
PROCUREMENT CYCLEIt occurs at the manufacturer and supplier
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Push View of SCM
Execution is initiated in response to a customer order
Demand is known with certainty
It is also reactive process because they react tocustomer demand
Pull View of SCM
Execution in anticipation of customer order
Demand is not known and must be forecast
It may also be referred to as speculative process
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CUSTOMER ORDERAND
MANUFACTURINGCYCLE
PROCUREMENT CYCLE
CUSTOMER
MANUFACTURER
SUPPLIER
CUSTOMERORDER ARRIVES
PUSHPROCESS
PUSHPROCESS
DELL SUPPLY CHAIN
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FACES OF SUPPLY CHAIN MANAGEMENT
BACK END
It comprises the physical building block
It involves production, assembly and physical movement
Manufa-cturing
Distrib--ution
Procur--ement
Logist--ics
Global
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Where should be source raw materials, components and sub-
assembles from.
Can intermediate warehouses can be estimated.
Should be inventories at the plants be vendor managed.
What are the cost and services tradeoffs in alternative procurement strategies.
PROCUREMENT DECISION
aSupplier Decision:
b. Direct delivery from Suppliers:
c. Vendor managed Inventories:
d. Optimal Procurement Policy:
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How many manufacturing plants should be set up and where
should be they located.
What products should be produced at each manufacturing location
How much capacity is needed in each plant.
How do we allocate plant capacity to products
MANUFACTURING DECISION
a. Plant location:
b. Product Line selection:
c. Capacity planning:
d. Capacity Allocation:
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What raw materials/WIP/finished goods inventory should be stocked
in each center.
What are the cost and service tradeoffs in alternative manufacturing
strategies.
How do we introduce work in the plant
How do we schedule the production.
How do we optimize resource utilization when the suppliers are not enoughto fulfil the requirements
f. Optimal manufacturing strategy:
g Input Control:
h. Production Scheduling:
i Constrained supply:
e. Inventory Decision:
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What type of distributions centers are required.
Where should distribution facilities be located.
Which customers should a facility service.
What product should be handled by each facility? What product and in
how many quantities should be stocked at each facility? What should be
the replenishment strategy
DISTRIBUTION DECISIONS
a. Configuration of distribution facilities:
b. Location:
c. Customer Allocation:
d. Facility configuration:
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What are the cost and service tradeoffs of alternatives
distribution strategies
e. Optimal Distribution Strategy:
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a.What transport modes and lanes should be used to move
products throughout the network.
Which ports should be used to bring product into and out of a
country.
Which products should move directly from manufacturing centers to
customer.
What are the cost and service tradeoffs of alternative transportation strategy
LOGISTIC DECISION
d. Optimal Transportation Strategy:
c. Direct Delivery:
b. Selection of ports:
a.Logistics mode selection:
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country.
GLOBAL DECISION
d. Real time monitoring & Control
c. Global Optimization of operations
b. Planning under uncertainty
a.Product & Process Selection
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SUPPLY CHAIN DECISION
Strategic DecisionOperational Decision
Location Inventory Transportation Production
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1. Strategic Decision
It is made over a longer time horizon
It is closely linked to the corporate strategy and guideSupply chain policies from a design perspective.
2. Operational Decision
It is short term
It focus on activities over a day to day basis.
SUPPLY CHAIN DECISIONS
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1.Location Decision
Where production facilities, stocking pointsand sourcing points are located
2. Production Decision
What products to create at which plant, which suppliers willservice those plants, which plants will supply
specific distribution centres and how goods will get to thefinal customer
3. Inventory Decision
It maintained because to buffer against any uncertainty
That might exit in the supply chain
4. Transportation Decision
What modes have been used for delivering the odds to
the customers.
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DECISION PHASES IN SUPPLY CHAIN MGMT
1.Supply Chain Strategy:
How to structure the supply chain
What the chain configuration will be.
What process each stage will perform.
Strategic supply chain decisions are made
2. Supply Chain Planning:
Operating policies are define.
Constraints within each planning must be done.
Planning must be I done for the coming year ofdemand in different markets.
it establishes parameters.
Companies must include uncertainty in demand,exchange rates and competition.
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3. Supply Chain Operation:
Time horizon here is weekly.Companies makes decision regarding individuals
customers orders.
Less uncertainty about demand information.
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ELEMENTS OF SCM
1. Planning System
3. Performance Measurement System
It focus on having the right product at right time and at the right place.
It facilitate order taking and information gathering
It facilitate the physical movement of good and services
It focus on operational efficiency and application based system.
2. Planning System
It make more informed decisions n respond to changing mkt condition
The real focal point here are accounting n financial +mgmt system.
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KEY FUNCTIONS IN SCM
1. Customer asset management function:Managing information about demand to enable a better understanding
of the markets and customer needs.
2. Integrated logistics:anaging the flow of physical goods from supplier. It include production
planning, procurement and inventory management
3. Agile manufacturing:Managing the manufacturing process to ensure low production cost.
4. Financial and Accounting management:Managing the financial flows with the supplier and customer through
financial intermediaries.
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STRATEGIC
STRUCTURAL
FUNCTIONAL
IMPLEMENTATION
InformationSystem
Policies And
Procedures
Facilities
AndEquipments
OrgnChangemMgmt
ChannelDesign
NetworkStrategy
MaterialTransport-ation
Warehou-se design
Customer
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SCM FRAMEWORK
1. Strategic
What are the basic and distinctive service need of the customers.
What can SCM do to meet these needs
Be used to provide unique services to the customer.
2. FUNCTIONALWhat should the SCM network look like
What product should be sourced from which manufacturing location.
How many warehouses should the company have and where should
be located.What is the mission of each facility.
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3. Functional
Operational details are decided.
4. IMPLEMENTATION
To give the means or authority to do something
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FACTORS AFFECTING SUPPLY CHAIN MANAGEMENT
factors
Geographical CulturalGovt
LegislationTime
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SUPPLY CHAIN COMPONENTS
1. Procurement
Procurement cost is influenced by the:
The way procurement decisions are made.Procedures adopted in the procurement process.
Relationship with suppliers.Firms credibility.
Market intelligence
1a. Material Requirement Planning
It will cover inventory requirements in the entiresupply chain, including both firms and its suppliers
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2. Processing
Focused on to manufacture standard products.Curtailing the huge inventory cost.
3.Warehousing Transportation
Management of demand i.e. to make available the rightproduct, at the right place, at the right time andat the least cost.
3a. Demand Management
Anticipation of the customer requirements of customerproducts and fulfils that requirements against
defined customer service needs.
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FLOWS IN SUPPLY CHAIN MANAGEMENT
1. Value Flow
Moving largely from the vendor to customer.Flows as good flows and service flows.
1a. Good Flows:Raw materials. Work in Process, Finished Goods.
1b. Service Flows:Intangible cannot be stored.
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2. Information Flow
Flows from vendor to the customer and from thecustomer to the vendor.
a. Backward Flow.b. Forward Flow
3. Cash Flow
Money paid for goods and services received.
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Raw
MaterialsInventory Processing
FinishedGoods
Fieldstock
CustomerOrder
Procurement
Manufacturing
Distribution
Cost Addition
Value
addition
MAPPING SUPPLY CHAIN
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MAPPING SUPPLY CHAIN
Value Added Activities
Conversion of raw materials in to final products
Non value added activities
Adding to the cost and the order performance cycle time
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FUNDAMENTALS OF SUPPLY CHAIN MANAGEMENT
1.Single Entity
Reducing administrative delays and improvingempathy across the supply chain.
2. Inventory perspective
According to traditional view: inventories have bee viewedas a buffer to reduce co-ordination requirements
across activities.
According to current concept: inventories is a buffer to be
used as a last resort after ensuring proper informationSharing and co-ordination.
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3.Strategic decision Making:
It facilitates strategic implication.
It facilitates smoother and more reliabletransport logistic in the long run
4.System Approach
It is a single integrated system.
5. Doing what one can do best:
It is important to focus on doing what one can dobest.
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THRUST AREAS OF SUPPLY CHAIN MANGEMENT
1. Improving Process quality
2.Minimising variety
3. Managing demand
4. Planning for multiple Supply Chains
5. Minimizing the number of stages.6. Reducing lead time
7. Improving flexibility
8. Kitting of suppliers.
9. Focusing on A category.
10. Competing on service.
11. Moving from functions to process.
12. Taking an initiative Industry level
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A push-based SCM takes longer to react to thechanging market place
In a push-based supply chain, production decisions
are usually based on long-term forecasts
In push-based strategies, SCM experienceincreased transportation costs, high inventorylevels and high manufacturing costs
In a pull-based supply chain, manufacturing is demand drivenso that it is coordinated with actual external customerdemand rather than a forecast
Push View of SCM
Pull View of SCM
Lead-time reduction occurs as the variabilitiesare better monitored in pull-based SCM
Pull-based systems are often difficult to implement when lead timesare so long that it is impractical to react to demand information