SCM-INTRODUCTION

P.CHANDIRAN

What is a Supply Chain?

Supply chain is a network of suppliers, manufacturing plants, warehouses, distribution centers, retailers and customers. It exists to fulfill the customer requests for products and services. They transform and move the products from suppliers to customers.

Supply Chain

A supply chain is normally referred with a lead organization (e.g. Dell’s supply chain)

It is not linear but network of enterprises An organization may be part of many supply

chains It supports new product development Now competition is between supply chains

Supply Chain

Supply chains are essentially a series of linked suppliers and customers; every customer is in turn a supplier to the next downstream organization until a finished product reaches the end customer.

Supply chain Flows

Product Flows Money Flows Information Flows

Supply chain as NetworkSuppliers

Plants

Dist. Centers Cust. Regions

L.A.

Baton Rouge

Houston

Pittsburgh

Baltimore

Denver

New Plants

New--Eastern US

L.A.

Denver

Chicago

Detroit

Dallas

New Suppliers:

New DCs

Transportation mode or shipment size choice

SCM-Definition

SCM is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs, while satisfying service level requirements.

SCM-elements

SCM covers every facility that have impact on costs

It requires strong relationship between partners

It is just like a cricket team Ultimately it serves customers and it should

enhance value for the customer

Basic tasks of supply chain

Product design Procurement/Sourcing Production Demand management Distribution Reverse logistics Multi-echelon inventory management Network design and management

Objective of a Supply Chain

To maximize the overall value generated The value is called as supply chain

profitability The difference between the revenue and the

overall cost of the supply chain-SCP

Problems in supply chain

Increase in cost of operation Excess inventory Frequent stock-outs Longer lead times Less visibility Wrong deployment of resources Customer dissatisfaction

Importance of Supply chain in current scenario More competition More Varieties Growth of organized retailing Shrinking PLC E-Commerce Growth of multiple channels Global market

Factors shaping SCM

Consumer demand Globalization Competition ICT Govt. rules regulation Infrastructure Environment WTO norms

Decision Phases of SC

Supply chain strategy or design Supply chain planning Supply chain operation

Supply chain strategy

Locations and capacities of facilities Information system design Sourcing decisions Mode of transport Distribution strategy

Supply chain planning

Forecasting of demand Inventory policies Timing and size of marketing promotions Incorporating flexibility in the plan Allocation of facilities to market

Supply chain operations

Order management Schedule of trucks Allocation of individual orders to production

or inventory

Linking supply chain with customers An important component in fulfilling customer

needs and providing value It determines the availability of products,

pace of arrival and at what cost It also impact the customer value of price by

reducing costs(Wal-Mart, Dell) Customer determine the type of supply chain

Value creation through supply chain Creating availability and selection Efficient SC for functional items Responsive SC for fashion items More varieties for better product selection Special stores for product selection Exclusive stores

Value (Cont.)

Max. penetration for FMCG Dell-Build to order model to reduce inventory Amazon.com-more choice Price –effective SCM will reduce the price for

the customers Visibility by means of tracking Fresh and new products at retail

Efficient Vs Responsive Supply chainFunctional Product Innovative Product

Responsive

Efficient SC

MISMATCH

MATCH

MATCH

MISMATCH

Cycle view of supply chain

The supply chain is divided into a series of cycles, each performed at the interface between two successive stages of a supply chain.

Customer order cycle Replenishment cycle Manufacturing cycle Procurement cycle

Supply chain

Customer

Retailer

Distributor

Manufacturer

Supplier

Customer order cycle

RetailerCustomer

Replenishment Cycle

DistributorRetailer

Manufacturing Cycle

ManufacturerDistributor

Procurement cycle

SupplierManufacturer

Sub-processes in each cycle

Supplier stage markets the product

Buyer stage places orders

Supplier receives orders

Supplier supplies order

Buyer stage receives order

Buyer returns reverse flows to supplier

PUSH View of SC

Execution of order in anticipation Forecasting is important It takes much longer time to react to change

in demand Obsolescence of inventory is possible Economies of scale Used for functional products

PULL view of SC

Production and distribution are demand driven

Execution is based on actual orders Inventory is minimum Fast information flow is required Difficult to implement No economies of scale Co-ordination should be strong between

partners

Drivers of SC Performance

Facilities Inventory Transportation Information Sourcing Pricing

Facilities

Location of plants and warehouses Capacity decisions Outsourcing Market allocation of capacity

Inventory

How much to make How much to store RM, WIP, and FGs Cycle inventory Safety inventory Seasonal inventory

Transportation

Mode of transportation Routing and scheduling Transport networks In-house/Outsourcing Infrastructure

Sourcing

Supplier selection E-procurement Global sourcing In-house or outsource Technology role

Pricing

Pricing and economies of scale Pricing supply chain assets Revenue management Supply chain assets and pricing

Information

Demand information On-line connection Co-ordination Sharing information Technologies-EDI, Internet, ERP Visibility

Some successful Supply chains Dell Wal-Mart Mumbai-Dabbawallahs Toyota Ikea Zara