Session 30 Dec - Advanced SCM Strategies

8/19/2019 Session 30 Dec - Advanced SCM Strategies

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Advanced Supply Chain Strategies

Sanjib Biswas

30th December, 2015

SCM and ERP (OMR 705)


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Conventional SC structure

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Change of Focus

ResponsiveSupply Chain

ResponsiveSupply Chain

Agile SupplyChain

Agile SupplyChain

Adaptive SupplyChain

Adaptive SupplyChain

Aligned Supply

Chain

Aligned Supply

Chain

Smart Supply

Chain

Smart Supply

Chain

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Lean Supply Chain

Synchronized Production and Delivery throughout the Supplier Network is aCentral Lean Concept.

Integrated supplier lead times and delivery schedules

Flows from suppliers pulled by customer demand (using takt time, load

leveling, line balancing, single piece flow) Minimized inventory through all tiers of the supply chain

On-time supplier delivery to point of use

Minimal source or incoming inspection

Effective two-way communication links to coordinate production &

delivery schedules Striving for zero quality defects essential to success

Greater efficiency and profitability throughout the supplier network

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Develop Systems Thinking

Lean supply chain principle 1:

Improving the performance of every subsystem does not

necessarily improve system performance. The sum of

local optima does not equate to the global optimum.Improvements in subsystem performance must be

gauged only through its impact on the whole system.

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The Business Ecosystem


Focus on improving the performance of the lean supply

chain. However, do not ignore the supply chain’s business ecosystem.

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Benchmark Best Practices


Focus on customer needs and process considerations when

designing the product delivery system. Enterprises can gain

tremendous competitive advantage through best-in-class

practices that cut across industries.

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How to Manage Demand Volatility


Maximize external variety with minimal internal variety. It is

desirable to maintain inventories in an undifferentiated form for

as long as it is economically feasible to do so

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Managing Demand Variation


Buffer the variation in demand with capacity, not inventory

As far as possible, avoid using inventory to buffer

variation

Less chances of misallocation

Inventory seriously impedes flow

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Creating Flow


Use forecasts to plan and pull to execute. A system that reacts to

pull signals will have less variation than a comparable system

that adopts a push mode of operation.

To enhance flow, use pull signals for execution where

possible

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Agile Supply Chain

end-customersbecome more

knowledgeable

about product

Lean supply chain

Agile supply chain

1980’s

1990’s

Efficiency, cost

Responsiveness

Focus

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Agility…

• Market sensitive: Supply chain is capable of reading and responding to real demand

• Virtual: Information-based supply chain, rather than inventory-

based.

•

Network based: EDI and internet enable partners in the supplychain to act upon the real demand

• Process integration: Collaborative working between buyers

and suppliers, joint product development, common systems

and shared information

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The concept of Agility

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

supply chain

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The concept of Agility

Long lead time

Short lead time

Supply

characteristics

Demand

characteristicsPredictable

market

Unpredictabl

e markets

Plan and

control

JIT: pull

scheduling

React and execute:

agile capabilities

Hold inventory: hedge

and deploy

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Application of leagility: the de-coupling point approach

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ZARA : Agile Supply Chains

The Next Generation Businesses are faster, more complex and less predictable. Firms

have to grapple with higher velocity of change on both demand and supply fronts. This

phenomenon shall force the companies to design agile and responsive supply chains.

• Works in environment of high demand uncertainty

(works on scenario building exercises)

• Large variety / product mix

• Short life cycles

• Use of quick response manufacturing (uses SMED technique)

• Focus on rapid response to the market.

Zara, the Spanish Fashion Retailer and most profitable Apparel

brand in Europe with a turnover exceeding 10 billion Euros

brings products on the shelf within 15 days of idea creation,ensures delivery in 72 hours at all its outlets located in different

parts of globe and ensures fresh line of products always at its

retail outlets and no product on the shelf more than four weeks.

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Shift from conventional Ship to Stock (STS) Modelto Bundle to Order (BTO) Model in Consumer Electronics Business

(Postponement Strategy : Postpone the Point of Differentiation)

Sources of

Supply of

PCB

PCB

FAB

----- Existing cost curve withcomposite manufacturing concept

Revised cost curve with

Bundling concept C O S T

BUNDLING

UNIT 1 MARKET 1

BUNDLING

UNIT 2 MARKET 2

BUNDLING

UNIT 3 MARKET 3

BUNDLING

UNIT ‘N’ MARKET

‘N’

80%

20%

Revised

Order Point

90%

Time10%

Revised Point of

differentiation

Supply Chain re-structuring

Existing Order

Point (STS)

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How the cost curve behaves?(Postponement Strategy : Postpone the Point of Differentiation)

Cuts the inventory holding cost by

almost 75%

Cuts the material obsolescence cost

by almost 85%

C O S T

90%

Time10%

Revised

cost curve

Existing point ofdifferentiation

Revise

d Order

Point

Existin

g Order

Point

Revised point of

differentiation

20%

80%

Supply Chain re-structuring….contd.

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Closed loop Supply Chain

Closed-loop supply chains are designed and managed to explicitly consider the reverse and

forward supply chain activities over the entire life

cycle of the product.

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• Reverse logistics—The process of moving or

transporting goods from their final destination for the

purpose of capturing value or for proper disposal.

–

Reserve logistics involves the processes for sending new or used products “back up stream” for repair, reuse, refurbishing, resale,

recycling, or scrap/salvage.

• Closed loop supply chains—Designed and managed

to explicitly consider both forward and reverse flowsactivities in a supply chain.

– Explicitly designed and managed for both flows

Reverse vs. Closed-Loop Logistics Systems

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A closed-loop supply chain

Distribution Reseller or

CustomerSales

ManufacturingRaw

Matls

Overstocks

Refurbished product

(Secondary Market)

Return Stream

Returns

Evaluation

SpareComponents

Spares Recovery

Scrap

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Types of returns

• Commercial returns

• Repair / warranty returns

• Leasing

• End-of-use returns

• End-of-life returns

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Drivers of RSC Initiatives

• Environmental legislations

• Economic value from returns

• Green Image

• Material Resource constraints like lead and other precious

resources

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Smart Supply Chain structure

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Documents

Session 30 Dec - Advanced SCM Strategies