supply chain management for mba

7/25/2019 supply chain management for mba

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Supply Chain Management

- K C Manjunath

SCM by KCM


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What is an Industry ?

SCM by KCM


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Types of Industry ?

SCM by KCM


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Sectors in Industry ?

SCM by KCM


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Why people run Industry ?

SCM by KCM


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An overview of Industry

SCM by KCM


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Warehousing

Warehousing

Transportation

Transportation

Vendors/plants/portsTransportation

Factory

Transportation Customers

Inormation

!o"s

An overview of Industry

SCM by KCM


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Economy

#o"n "ard trend since last $-% years

&'pected same trend to continue till ()*%

Inrastructure projects + ,eld up / delayed

due to high cost o nancing

Consumer spending reduced due to higher

interest rates

SCM by KCM


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Market

.imited / educed number o 0usiness

1pportunities

Sti2 competition

Customer is demanding lo" cost 3 aster

deli4eries "ith impro4ed 5uality

educed 6obs

SCM by KCM


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ow to run Industry

Efficiently ?

SCM by KCM


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Strategic Integration

Customer &'pectation

0usiness 7eeds

Manuacturing Strategy

Supplier elationship

Management

Sourcing Strategy

Financial 8lignment

SCM by KCM


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Why !ocus on Integrated approach*9Customer e'pectations are mo4ing in the direction

Increased Value 8ddition : Cost Consciousness

esponse Time : Inormation Sensiti4ity

7eed or eliability

(9Increased competition orcing industries to"ards

&nhanced ;erormance / 5uality

educing .ead Times

educe Cost

$9Change o attitude orcing industry managers

7eed or Integration and ;artnerships

Continuous Impro4ement o ;rocesses

SCM by KCM


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ence the !ocus on

Supply Chain Management

SCM by KCM


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SCM

14er4ie" o SCM

What is SCMssupplier Supplier 0uyer Customer

Customer?sCustomer

#emand or lo" pricing3 high @uality3 customerA supplierIntegration across a responsi4e and !e'ible supply chain

#eli4ery o a superior 4alueA 5uality3 !e'ibility3inno4ation and 4alue to the customer

Value ac@uisitionrom suppliers

Value addedin production

Value deli4ered to customers

SCM by KCM


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Supply Chain Constitutes Several!lows

;hysical Flo"

Fiscal Flo"

Inormation Flo"

SCM by KCM


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The Supply Chain" from #riginalSupply to !inal Consumption

Increase Customer esponsi4eness at .east Cost

Manuacturing #istributionSupplier

INFORMATION FLOW

etail 1utlet Consumer

Supply Chain Optimization

CASH FLOW

Transer Transer Transer Transer

SCM by KCM


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What is SCM ?

SCM is a set o approaches3&Bciently integrate suppliers3

manuacturers3 "arehouses and

Customers3;roduct is produced and distributed at

the right @uantities3 to the rightlocations3 and at the right time3

Minimie system "ide costs "hilesatisying customer ser4ice le4elre@uirements

SCM by KCM


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SCM by KCM


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$efinition of SCM ?

#esign o a system or operating :

monitoring

Flo" omaterial3ser4ices3nances3andinormation From &arliest supplierto the Dltimate customer throughout the supply chain in an e2ecti4eand eBcient mannerE

SCM by KCM


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SCM by KCM


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%oal of SCM ?

=oal o 0usiness is to mae money

=oal o SCM is to increase the cash !o"speed by synchroniing businessprocesses based on constraints

Inde'es o the management are neithercost nor eBciency3 "hich are traditionalaccounting concepts3 but throughput Hitem!o"93 in4entory3 and e'pense aiming or

total optimiationESupply chain management is a concept

that challenges the con4entionalmanagement

SCM by KCM


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Importance of SCM

Signicant costs

.engthening supply and distributionlines

Competiti4e edge

8dded customer 4alue

Increasing demand o customers lie@uic and customied response

SCM by KCM


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#&'ectives of a Supply chain

&nhancing Customer Ser4ice

&'panding Sales e4enue

educing In4entory Cost

Impro4ing 1n-Time #eli4ery

educing 1rder to #eli4ery HThrough ;ut Time9educing .ogistics cost

educing / ationalie Supplier 0ase

&'panding Width / #epth o #istribution

educing "oring capital3

8ccelerating cash-to-cash cycles3

Increasing in4entory turns3 and so on

SCM by KCM


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#&'ectives of a Supply chain

Impro4e organiation?s competiti4e position

8ccomplish the purchasing and maretingobjecti4es at the lo"est possible costsE

;ro4ide uninterrupted !o" o materials3 supplies3and ser4ices re@uired to operate the organiation

Supply chain protability- #i2erence bet"eenre4enue generated rom customer and the o4erallcost across the supply chain

8chie4ing harmonious3 producti4e "oring relations"ith other unctional areas "ithin the organiation

Keeping in4entory at optimum le4el

Maintaining and impro4ing @uality

#e4eloping : maintaining competent supply baseE

SCM by KCM


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6uly ()* SCM by KCM


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Challenges in Supply chain=lobaliation o manuacturing

operation

Saety and @uality products

Shorter lead time3 less in4entory and

better throughput

Supplier base consolidation

8ccess to latest technology

6uly ()*SCM by KCM


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$ecisions in Supply chain The strategic level

The tactical level

The operational level

Confguration o distribution

network

Inventory control

Distribution strategy

Supply chain integration and

strategic partnering

Product design6uly ()*SCM by KCM


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Supply Chain Strategy

6uly ()* SCM by KCM


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The Extended Enterprise Supply Chain

RawMaterialSupplier

SubasseblySupplier

!sseblyPlant

CoponentSupplier Dealer

DelightedCustoer

Maximized value at minimized cost

6uly ()*SCM by KCM


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Competitive and Supply ChainStrategies

Competiti4e strategyA denes the set o customer needs a rm sees to satisy

through its products and ser4ices

.o" cost3 apid esponse3 ;roduct #i2erentiation

&'A Migros 4ersus 0IM ,; 4ersus #ell

Supply chain strategyA determines the nature o material procurement3

transportation o materials3 manuacture o product or

creation o ser4ice3 distribution o product Consistency and support bet"een supply chain

strategy3 competiti4e strategy3 and other unctional

strategies is important J

6uly ()*SCM by KCM


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6uly ()*SCM by KCM


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Supply Chain Strategy

Traditionally3 SC strategy includes Suppliers Strategy

1perations Strategy

.ogistics Strategy

egarding

in4entory3 transportation3 operating

acilities3 inormation !o"sE

6uly ()*SCM by KCM


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Competitive and Supply ChainStrategies

;roduct de4elopment strategyAspecies the portolio o ne"products that the company "ill try to

de4elop Mareting and sales strategyA

species ho" the maret "ill be

segmented and product positioned3priced3 and promoted

6uly ()*SCM by KCM


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SCM ( Strategic Integration

6uly ()*SCM by KCM


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Strategy formulation in SCM

Supplier elationshipManagement Strategy

Customer elationshipManagement Strategy

Supply ChainStrategy

Superior 0usiness;erormance

esults in

6uly ()*SCM by KCM


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SCM ) Strategic IntegrationCustomer &'pectation / #emand ;lanning

0usiness 7eeds

;roduct #e4elopment

Manuacturing Strategy

Supplier elationship Management

Financial 8lignment

Sustainability

6uly ()* SCM by KCM


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Strategy *) $emand +lanning

0ased on real-time demand insights and demand shapingE

ight prediction and contingency planning or e2ecti4e response

to riss such as suppliers going out o business3 political

uphea4al3 and natural calamities a2ecting manuacturingE

Companies can adjust pricing and promotions strategies 3 mo4e

additional product @uicly3 dri4e re4enue gro"th3 or e'pand

margins or a high-demand product "ith limited maret supplyE

,a4e oresight to le4erage opportunities and mitigate challenges

so that your business not only sur4i4es3 but succeedsE

6uly ()* SCM by KCM


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0uild adapti4e supply chain or rapid planning and integrated

e'ecution For better prediction o demand and ris3 need to adapt supply

chains or changing maret opportunities and e4entsE

;ut in place dynamic planning and continually ne-tune

operationsE

old model "as month / @uarter end production and supply

based on shipments and salesE

7e" model calls or continuous3 dynamic supply chain

adjustments or @uic response to maret changes to minimie

or e4en eliminate shocs across the supply net"orE

esults are better 4isibility enhanced collaboration across the

4alue chain lie sourcing3 supply3 manuacturing3

trans ortation "arehousin : distribution and accelerated6uly ()* SCM by KCM

Strategy ,) Adopt Supply Chain

Strategy -) +roduct $esign


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1ptimie product designs or supply3 manuacturing3 and

sustainability in order to accelerate protable inno4ation

Inno4ation is crucial to being one step ahead o the competitionE

In order to be successul3 products must be manuactured at the right

costE

#ecisions in early cycles o product de4elopment can mae or brea

the productE

;roduct inno4ation and competiti4e ad4antage increasingly stem

rom the selection o suppliers and technologiesE

I company manages the inormation3 people3 processes3 and

decisions regarding a product throughout its lie cycle3 it can achie4e

strong di4idends and maret leadershipE

6uly ()* SCM by KCM

Strategy -) +roduct $esign

Strategy . Sales / #+


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8lign supply chain "ith business goals by connecting sales and

operations planning HS:1;9 "ith corporate business planning

Though S : 1; processes pro4ide coordination among sales3manuacturing3 and distribution3 there still are gaps among nance3

strategy3 and operations in companiesE

These gaps can be bridged "ith integrated business planningE This

integrates nancial strategic budgeting and orecasting "ith operations

planningE The resulting processes ensures re4enue goals and budgetsde4eloped in nance are 4alidated against a detailed3 bottoms-up

operating planE

This strategy reconciles the operating plan against nancial goalsE

Integrated business planning3 connects S:1; processes "ith corporate

business planning3 enables companies to achie4e the right balance osupply and demand3 aligned "ith strategic business goalsE

It pro4ides real-time 4isibility to ey dimensions or success -- demand3

supply3 product3 ris3 and perormance--across the organiation and

throughout the e'tended SCM

6uly ()* SCM by KCM

Strategy .) Sales / #+

Strategy 0) Sustaina&ility


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Companies stri4ing or social and en4ironmental sustainability achie4e

major competiti4e ad4antages3 especially regard to production eBciency3

supplier management sills3 and attracti4eness to employeesE Substantialopportunities e'ist or sustainability in supply chain

Companies need to include sustainability as core component o their

supply chain strategyE This means incorporating it as a ey re@uirement

across all supply chain processesE

;roessionals initially should ocus on the basics to achie4e @uic "insthrough real-time 4isibility to energy and resource consumption and

resource or material mo4ementE This enables reduction o carbon

ineBciencies3 minimied energy consumption3 less "aste "ith Lrecycle-

reuse-reurbishL

0usinesses can eep the momentum by ensuring continuousimpro4ement through systemic measurement3 audit3 and no"ledge

managementE Compliance audits3 best practices3 and benchmars

pro4ide a go4erning rame"or or sustainable supply chain operations

6uly ()* SCM by KCM

Strategy 0 Sustaina&ility


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Strategic $ecisions in SCM

Strategy reers to a set o plan andpolicies by "hich a company aims togain long-term competiti4e

ad4antageEThe number3 location and sie o

distribution centreTerms and conditions o long-term

contracts "ith suppliersSupply chain logisticsSelection o personnel

6uly ()*SCM by KCM


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#&'ectives of SCM strategies

To ensure that rm>s operations andsupply chains e'cel on the perormancedimensions that are 4alued by the rm?stargeted customersE

To ensure that the rm?s operations andsupply chain decisions are strategicallyaligned "ith the rm?s business strategyE

To help in de4eloping core competenciesin the rm?s operations and supplychainsE

6uly ()*SCM by KCM


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%uidelines in developing supply chainstrategy

;lanning- What to achie4e in supply chain process

;ro-acti4eness- 7e" practices and technologies

;attern o actions- e4eal the strategy o the rm

;ortolio o supply chain capabilities- Cost3 @uality3

deli4ery3 perormance

;rograms o in4ol4ement- ,o" to impro4e T>+E" -+9


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,1W S,1D.# I S&.&CT 8 $;.s orders

MT13 0T1 H0uild to 1rder9 and 8T1 H8ssemble To 1rder9 3 &T1

H&ngineer to 1rder9is a business model o the assembly industry

&'A &le4ator starts "hen a button is pressed e4en i there is only

one passenger

&'A construction3 plant construction3 aircrat3 4essels3 bridges etcE

8T1 H8ssemble To 1rder9- #ell3 Solectron Corporation says :We

can assem(le the computer you re+ueste an eli"er it *ithin a

*ee,/;7ational 0icycle Industrial CoE3 .tdE says

:We can eli"er a custom'mae (icycle to you *ithin t*o *ee,s/:

6uly ()*SCM by KCM

;ull portion

Impact of the +ull Strategy


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,igh uncertainty Simple supply chain structure

Short cycle time

Focus on ser4ice le4elE

8chie4ed by deploying a Ee#ible andresponsive supply chain

1rder-ulllment processes are applied

Consider Two +C Manufacturers"

"uild to Stock 0uild to order


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Forecast demand 0uys components

8ssemblescomputers

1bser4es demandand meets demandi possibleE

8 traditional push

system

Forecast demand 0uys components

1bser4es demand

8ssembles

computers Meets demand

8 push-pullsystem

+ush ) +ull of SCM


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6uly ()*SCM by KCM

+ush ) +ull of SCM


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6uly ()* SCM by KCM

Identifying the Appropriate SupplyChain Strategy


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Characteristics of the +ush and +ull+ortions of the Supply Chain

Portion Pus Pull


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Objective Minimie cost Ma!imie service level

Comple!ity "igh #o$

%ocus &esource allocation &esponsiveness

#ead time #ong Short

Processes Supply chain planning Order fulfillment

+ush(+ull Strategy Some stages o the supply chain

t d i h b d


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operated in a push-based manner typically the initial stages

emaining stages employ a pull-based strategyE

Interace bet"een the push-basedstages and the pull-based stages isthe pushFpull boundaryA

Supply Chain Timeline


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+ush(+ull Supply Chains

T S l C i Ti Li


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(U*

Te Supply Cain Time Line

Lo! "ncertaintyLong lead times

#ig "ncertainty Sort lead times

CustomersSuppliers

$"S# STR%TE&' $"LL STR%TE&'

;ush-;ull 0oundary

9ocating the +ush(+ull 1oundary

d i t

cation o the pushpull boundary or various copanies and in


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(U(

reduce inventoryholding cost

Impact of $emand 7ncertainty andEconomies of Scale

#emand DncertaintyA

,i h d d t i t l d t


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,igher demand uncertainty leads to a preerenceor pull strategyE

.o"er demand uncertainty leads to an interest inmanaging the supply chain based on a long-termorecastA push strategyE

&conomies o scaleAThe higher the importance o economies o scale

in reducing cost The greater the 4alue o aggregating demand

The greater the importance o managing the supplychain based on long-term orecast3 a push-basedstrategyE

&conomies o scale are not important 8ggregation does not reduce cost

Implementing a +ush)+ull Strategy

8chie4ing the appropriate designdepends on many actorsA

d l i


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product comple'ity

manuacturing lead times

supplier+manuacturer relationshipsE

Many "ays to implement a push+pullstrategy location o the push+pull boundaryE

#ell locates the boundary at the assemblypoint

Furniture manuacturers locate the boundaryat the production point

Impact of 9ead Time

. th l d ti i t t


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.onger the lead time3 more importantit is to implement a push basedstrategyE

Typically diBcult to implement a pullstrategy "hen lead times are so longthat it is hard to react to demandinormationE

Impact of 9ead Time


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Impact of 9ead Time 0o' 8

Items "ith short lead time and high demand uncertainty ;ull strategy should be applied as much as possibleE

0o' 0


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0o' 0 Items "ith long supply lead time and lo" demand

uncertaintyE 8ppropriate supply chain strategy is pushE

0o' C

items "ith short supply lead time and highly predictabledemandE Continuous replenishment strategy

Suppliers recei4e ;1S data They use these data to prepare shipments at pre4iously

agreed-upon inter4als

8 pull strategy at the production and distribution stagesand push at the retail outletsE

0o' # Items "ith long lead times are long and unpredictable

demand In4entory is critical in this type o en4ironment

Selecting the 1est SC Strategy

,igher demand uncertainty suggests pull

,igher importance o economies o scale

suggests push


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(U

suggests push ,igh uncertainty/ &1S not important such

as the computer industry implies pull

.o" uncertainty/ &1S important such asgroceries implies push #emand is stable

Transportation cost reduction is critical

;ull "ould not be appropriate hereE

Characteristics and Skills


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(U

&a$

Material Customers

PullPush

#o$ 'ncertainty

#ong #ead Times

Cost Minimiation

&esource (llocation

"igh 'ncertainty

Short Cycle Times

Service Level

&esponsiveness

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SCM ) $emand +lanning


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The 1ullwhip Effect

1ullwhip Effect $efined

Th b ll hi 2 t i th t i t


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The bull"hip e2ect is the uncertaintycaused rom distorted inormation!o"ing up and do"n the supplychainE

Who is affected?

7early all industries are a2ectedJ

Firms that e'perience large


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Firms that e'perience large4ariations in demand are at risE

Firms that depend on suppliers

upstream or distributors and retailersdo"nstream may be at risE

2esults of the &ullwhip effect

&'cess in4entories

;roblems "ith @uality


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;roblems "ith @uality

Increased ra" material costs

14ertime e'penses Increased shipping costs

2esults of the &ullwhip effect (continued

.ost customer ser4ice

.engthened lead time
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.engthened lead time

.ost sales

Dnnecessary adjusted capacity

Causes of the &ullwhip effect

Dn-orecasted sales promotions

Sales incenti4es
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Sales incenti4es

.ac o customer condence

Customers turning bac sales orders Freight incenti4es


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wwwyoutu&ecom8watch?vB,nlmkT>%0s


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Supplier 2elationship Management

Managing Strategic Supplier 2elationship /Colla&oration

ighlights #ri4ers or Change

0uyer / Chie ;urchasing 1Bcer - Challenge

S li 1 i i i


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$*%

Supplier 0ase 1ptimisation

Strategic Sourcing ;rocess

Supplier + Financial 8nalysis

is Management

Supplier &4aluation H;erormance 8udits9


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Drivers or Change

Today

e-ocus on processcapabilities

1 i ti / d h i


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$*U

1rganisations are / need changing

Supply Maretand Sourcing Strategiesare

changing

Warehousing : Transportation are gettingsophisticated

Increased use o technologyand suppliers?capabilities - to obtain 4isibility o the supplychain


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Chie Purchasing &Gcer 9"uyers

$o you know Who are your ey

suppliers9cessi"e inaccuracy ue to seasonality-S?# "ariet - short li%e c cles- small

SUPPLY CHAIN MANAGEMENT:

PROBLEMS & SOLUTIONS

T'E PR()LEM A P(TE*TIAL S(L+TI(*

)ses numerous transportation carriers *onsolidate to as few carriers asnecessary and press for steep freightdiscounts


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discounts

Less-than-truckload freight %uantities

from manufacturing sites to customers

$hip railcar or truckload %uantities to

+*s then L,L to customers

xcessive loss and damage in transit .dentify sources of damage"transit&packaging& or handling and correct

,he supplier base had numeroussuppliers with many L,L shipments

*onsolidate the supplier base basedon total system cost and efficiency

/urchasing buys based only on price *onvert to purchasing on a totalsystem cost basis

SCM ISS7ES SD;;.I& S&.&CTI17

Capability and @uality o supplier

Lo!istic compati(ility Systems compati(ility

What orm should it be


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What orm should it beAero Customer complaints

ero 8ccidents

ero 0reado"ns


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ero ejections

ero loss o production

The journey in this direction "ill help industries to

get more business opportunities / ne" customers

Tips or &2ecti4e Supply ChainManagement

Vie" your supply chain as astrategic asset

#e4elop an end-to-end processarchitecture

The ollo"ing are some o the tips or e2ecti4e Supply ChainManagementA


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#esign your organiation or

perormance

0uild the right collaborati4e model

Dse metrics to dri4e businesssuccesses

_ ManagementStudy=uideEcomE 8ll rights

;ractice

0et us now practice


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0et us now practiceall that you have

learned aboutsupply chainanageentA

_ ManagementStudy=uideEcomE 8ll rights

Case Study

=lobus IncE is a ne"entrant in the maret

*E What role "illre4erse logisticsplay in the SupplyChain o =lobus


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o Computers and

.aptopsE It has ne"lylaunched its . Serieso #estops and ,Series o .aptopsE

Chain o =lobus

Documents

supply chain management for mba