Supply Chain Management

SUPPLY CHAIN MANAGEMENT

• Value Chain• Supply side- raw materials, inbound

logistics and production processes• Demand side- outbound logistics,

marketing and sales.

WHAT IS SUPPLY CHAIN MANAGEMENT

" Is the strategic management of activities involved in the acquisition and conversion of materials to finished products delivered to the customer"

SupplierManagement

Schedule /Resources Conversion

Stock Deployment Delivery

CustomerManagement

Leads to Business Process Integration

Material FlowInformation Flow

• Supply chain is the system by which organizations source, make and deliver their products or services according to market demand.

• Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level.

• Supply chain as defined by experienced practitioners extends from suppliers’ suppliers to customers’ customers.

• SUPPLY CHAIN INCLUDES :

– MATERIAL FLOWS

– INFORMATION FLOWS

– FINANCIAL FLOWS

• SUPPLY CHAIN MANAGEMENT IS FACILITATED BY :– PROCESSES

– STRUCTURE

– TECHNOLOGY

• Supply chain serves two functions:

– Physical

– Market mediation

• Supply chain objectives may differ from situation to situation.

• For functional products, cost efficiency is the critical factor.

• For innovative products, responsiveness is the important factor.

• Leanness + Agility together make up Leagility

Supply Chain Structure

Information Flow

Raw Materials

RETAILERFACTORY DC RDC

SUPPLIER

Finished Goods

Supply Chain and Demand Chain

• Demand chain is defined as the system by which organizations manage sales and distribution of products and services to end users.

• Conceptually incorrect to look at demand chain separately

• Look at the pipe as a whole.

• But is there a pipe at all?– More a network– Not necessarily linear

• Value chain orchestration rather than controlling the flow through the pipe

• A network of independent and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users

SUPPLY CHAIN DRIVERS

Not new. Value system of Michael Porter• Why sudden interest?

– Demanding customers– Shrinking product life cycles– Proliferating product offerings– Growing retailer power in some cases– Doctrine of core competency– Emergence of specialized logistics

providers– Globalization– Information technology

SUPPLY CHAIN ELEMENTS• Supply Chain Design• Resource Acquisition• Long Term Planning (1 Year ++)

Strategic

• Production/ Distribution Planning• Resource Allocation• Medium Term Planning (Qtrly,Monthly)

Tactical

• Shipment Scheduling• Resource Scheduling• Short Term Planning (Weekly,Daily)

Operational

• Supply Chain Goals

Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on – Revenue growth– Better asset utilization – Cost reduction.

Reduce Overall Cycle Time : Improve Response

Supply Chain Management

Underlying Principles

Compression

ConformanceCo-operation

Communication

(Planning/Manufacturing/Supply)

(Forecasts/Plans/Distribution) (Cross -Functional)

(Real Time Data)

Changing Paradigm

• Functional vs Process• Products vs Customers• Revenues vs Performance• Inventory vs Information• Transactions vs Relationships

Critical Success Factors today

• Cross functional management and planning skills

• Ability to define, measure and manage service requirements by market segment

• Information systems• Relationship management and win

win orientation

PUTTING IN PLACE A WELL OILED SUPPLY CHAIN

• Supply chain as an efficient customer satisfying process

• Effectiveness of the whole supply chain is more important than the efficiency of each individual department.

. The steps involved

• Step1- Designing the supply chain– Determine the supply chain network– Identify the levels of service required

Step 2 - Optimizing the supply chain• Determine pathways from suppliers

to the end customer– Customer markets to Distribution centers– Distribution centers to production plants– Raw material sources to production

plants– Identify constraints at vendors, plants

and distribution centers– Get the big picture– Plan the procurement, production and

distribution of product groups rather than individual products in large time periods- quarters or years

Step 3- Material flow planning

• Determine the exact flow and timing of materials

• Arrive at decisions by working back from the projected demand through the supply chain to the raw material resources

• Techniques• ERP

Step 4 - Transaction processing and short term scheduling

• Customer orders arrive at random• This is a day to day accounting system

which tracks and schedules every order to meet customer demand

• Order entry, order fulfillment and physical replenishment

Information flows in Supply Chain Management

• Information is overriding element• Need for databases• Master files: Information about customers,

products, materials, suppliers, transportation, production and distribution data- do not require frequent processing

• Status files- heart of transaction processing- track orders and infrastructure status- updated daily.

• Essentially using the same information to make all plans right from structuring the network to processing every day supply chain tasks.

THE VIRTUAL VALUE CHAIN

• The value chain connects a company’s supply side with its demand side.

• Traditionally information has been a supporting function.

• Information however can be managed far more creatively.

• There are various stages of using value added information processes.

• Visibility : See physical operations more effectively through information. Information can be used for effective coordination of value chain activities.

• Mirroring capability : In this stage, virtual activities are substituted for physical ones. A parallel value chain is created.

• New customer relationships : The company can draw on the flow of information in the virtual value chain to deliver value to customers in new ways.

Dealer Management

Conventional functions

• Inventory ownership and management

• Sales and technical support• Order handling• Credit

Contemporary Trends

• Channels being divided into two- Fulfillment and Franchised agent

• Fulfillment channel- responsible for getting the manufacturer’s product from the plant to the end user through a highly efficient logistics and inventory management system

Contemporary Trends

• Fulfillment channel may not take ownership of the product but may perform these functions on a per box fee structure

• Franchised agents responsible for sales and sales support but will not write the order or supply the product

Issues in customer management

• Penetration vs Spread• Concentration is necessary to commit

the necessary resources for true customer integration

• Depth of customer contact– R&D - sharing information vs developing

new products together– Logistics - Pros and cons of methods of

transportation vs reengineering the logistics process

Implementation: Points to keep in mind

• Recognize the difficulty of change.• Prepare a blueprint for change that maps

linkages among initiatives.• Assess the entire supply chain from supplier

relationships to internal operations to the market place, including customers, competitors and industry as a whole.

IS THE SUPPLY CHAIN WORKING?• Does our manufacturing strategy increase

product line flexibility while continuing to drive down overall production costs?

• When was the last time we measured lost sales to end customers?

• Do we have an efficient system to get POS data from retailers?

• Are we testing our products with end customers? Do we use the resulting data to adjust our forecasting and supply positions?

• Is the ratio of returned orders to sales increasing?

The New Model of Relationships

• Hard bargaining vs shared destiny• Exit vs Voice• Arms length relations vs Involving dealers

and suppliers in product development• Piling up vs Replenishing dealer inventory

more frequently• In short working together as partners to

cut costs, boost efficiencies, innovate and share value

• Adversarial vs partnerships• Short term vs long term contracts• Large vs small order quantity• Full truck load vs small parcels• Inspection vs no inspection

• Written order vs understanding• Many vs few suppliers• Design and then invite quote from

vendor vs involving vendor in development

• Bargaining, holding cards close to chest vs Shared destiny, transparency

Summary• Segmentation of customers based on

service needs• Customization of logistics network• Listen to signals of market demand and

plan accordingly.• Differentiate product close to the customer• Source strategically• Develop a supply chain wide technology

strategy• Accept channel spanning performance

measures

Thank You