INTERNATIONAL SUPPLY CHAIN MANAGEMENT AND LOGISTICS MIB- PAPER 545
CONTENTS SECTION A 1. Basic framework 2. Integrated SCM 3. Managing Relationship 4. Purchasing process 5. SCM and Information management SECTION B 6. Logistic system 7. Transport fundamentals 8. General structure of shipping 9. International air transport 10. Sea transport 11. Warehousing and inventory management
MEANING : A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.
SUPPLY CHAIN STAGES First of all the Raw Materials goes to the Manufacturer where Raw Materials are converted into Finished Goods. After that the Goods are supplied to Distributor & Retailer with the help of various Modes of Transport which comes to an end with Customer. Supplier Manufacturer Distributor Retailer Forwarding Agent Customer
SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory and finished goods from point-of-origin to point-of-consumption.
SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) is a process of integrating/utilizing suppliers, manufacturers, warehouses and retailers, so that goods are produced and delivered at the right quantities, and at the right time, while minimizing costs as well as satisfying customer requirements.
SUPPLY CHAIN EXISTENCE Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
Supply Chain Flows Supply chain execution is managing and coordinating the movement of materials, information and funds across the supply chain. Manufacturer Consumer Materials Flow Information Flow Monetary Flow
Objective of Supply Chain The objective of Supply chain concept is to synchronize the service requirements of the customer with the flow of materials from suppliers, such that the apparent contradictory situation of conflicting goals of high customer service, low inventory investment and low operating costs may be balanced (or optimized).
Components of SCM Plan: This is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service. Source :Choose the suppliers that will deliver the goods and services you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. Make: Schedule the activities necessary for production, testing, packaging and preparation for delivery. Deliver : Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. Return : Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.
Today’s Supply Chain Reality Increased outsourcing Large global supply networks Increased competition Consumer driven
STRATEGIC DECISIONS • Strategic network optimization, including the number, location, and size of warehouses, distribution centers and facilities. • Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements. • Product design coordination, so that new and existing products can be optimally integrated into the supply chain, load management • Information Technology infrastructure, to support supply chain operations. • Where-to-make and what-to-make-or-buy decisions • Aligning overall organizational strategy with supply strategy.
TACTICAL DECISIONS • Sourcing contracts and other purchasing decisions. • Production decisions, including contracting, locations, scheduling, and planning process definition. • Inventory decisions, including quantity, location, and quality of inventory. • Transportation strategy, including frequency, routes, and contracting. • Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. • Milestone payments
OPERATIONAL DECISIONS • Daily production and distribution planning, including all nodes in the supply chain. • Production scheduling for each manufacturing facility in the supply chain (minute by minute). • Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. • Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. • Inbound operations, including transportation from suppliers and receiving inventory. • Production operations, including the consumption of materials and flow of finished goods. • Outbound operations, including all fulfillment activities and transportation to customers. • Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.
Supply Chain Management Software Today IT industry has developed various Software's which helps the Company to store their current data and also anticipate their future needs relating to Supply System with the help of Surveys at different levels. E.g.- SAP, Lotus etc.
CONCLUSION Thus from supply to supply chain to supply chain system to supply chain management, we can conclude that in the present scenario of globalization , liberalization & privatization, the effective management of supply chain system is very essential for medium & large scale companies if they want to portray a lasting image in international market.
SEVEN R’s DESCRIBING LOGISTICS RIGHT PRODUCT RIGHT PRICE RIGHT QUANTITY LOGISTICSOF INCOME RIGHT CONDITION RIGHT CUSTOMER RIGHT TIME RIGHT PLACE
LOGISTICS The process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. - Council of Logistics Management
LOGISTICS CREATES COMPETITIVE ADVANTAGE • Optimizes operations cost and productivity. • Efficient utilization of assets. • Facilitating internal business fulfillment functions. • Integrating external channel suppliers. • Achieving conformance to performance requirements.
FUNCTIONAL DEFINITION OF LOGISTICS Inbound Logistics Functions Outbound Logistics Functions LOGISTICS MANAGEMENT MATERIALS MANAGEMENT PHYSICAL DISTRIBUTION MANAGEMENT
SCM AND LOGISTICS • The science of logistics has evolved from a purely operation function to a competitive weapon capable of providing goods and services to the farthest regions of the supply chain.
ORIGIN OF THE CONCEPT The value chain, also known as value chain analysis, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.
MEANING • A value chain is a chain of activities. • Products pass all activities of the chain in order and at each activity the product gains some value. • The chain of activities gives the products more added value than the sum of added values of all activities.
PRIMARY VALUE CHAIN ACTIVITIES • Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. • Operations: the processes of transforming inputs into finished products and services. • Outbound Logistics: the warehousing and distribution of finished goods. • Marketing & Sales: the identification of customer needs and the generation of sales. • Service: the support of customers after the products and services are sold to them.
SUPPORT ACTIVITIES • The infrastructure of the firm: organizational structure, control systems, company culture, etc. • Human resource management: employee recruiting, hiring, training, development, and compensation. • Technology development: technologies to support value-creating activities. • Procurement: purchasing inputs such as materials, supplies, and equipment.
SupplierValue Chain ChannelValue Chain BuyerValue Chain SCOPE OF THE CONCEPT- THE VALUE SYSTEM > FirmValue Chain > >
BUILDING COMPETITIVE ADVANTAGE • Cost advantage: by better understanding costs and squeezing them out of the value-adding activities. • Differentiation: by focusing on those activities associated with core competencies and capabilities in order to perform them better than do competitors.
LINKAGES BETWEEN VALUE CHAIN ACTIVITIES • Value chain activities are not isolated from one another. • Rather, one value chain activity often affects the cost or performance of other ones. • Linkages may exist between primary activities and also between primary and support activities.
ANALYZING BUSINESS UNIT RELATIONSHIPS • Interrelationships among business units form the basis for a horizontal strategy. • Such business unit interrelationships can be identified by a value chain analysis. • Tangible interrelationships offer direct opportunities to create a synergy among business units.
OUTSOURCING VALUE CHAIN ACTIVITIES • Whether the activity can be performed cheaper or better by suppliers. • Whether the activity is one of the firm's core competencies from which stems a cost advantage or product differentiation. • The risk of performing the activity in-house (if the activity relies on fast-changing technology or the product is sold in a rapidly-changing market). • Whether the outsourcing of an activity can result in business process improvements such as reduced lead time, higher flexibility, reduced inventory, etc.
INTERNATIONAL SUPPLY CHAIN MANAGEMENT • International supply chain management is domestic supply chain management spread over a larger geographic area.
FORCES THAT DRIVE THE TREND TOWARDS GLOBALIZATION: • Global market forces • Pressures created by foreign competitors • Opportunities created by foreign customers • Technological forces • Global cost forces • Political and economic forces • Regional trade agreements • Avoiding tariffs or quotas
1. INTERNATIONAL DISTRIBUTION SYSTEMS • Manufacturing occurs domestically, but distribution and some marketing takes place overseas. 2. INTERNATIONAL SUPPLIERS • Raw materials and components are furnished by foreign suppliers, but final assembly is performed domestically. • In some cases, the final product is then shipped to foreign markets.
3. OFFSHORE MANUFACTURING • The product is typically sourced and manufactured in a single foreign location. • It is then shipped back to domestic warehouses for sale and distribution. 4. FULLY INTEGRATED GLOBAL SUPPLY CHAIN • The products are supplied, manufactured, and distributed form various facilities located throughout the world.
ADVANTAGES AND RISKS: Advantages • Vast economies of scale in terms of production, management, distribution, marketing. • Increase in potential markets, sales and profits. Risks • Fluctuating exchange rates. • Customer reactions, competitor reactions, supplier reactions, government reactions.
ADDRESSING GLOBAL RISKS • Speculative strategies – a company bets on a single scenario. • Hedge strategies – any losses in the supply chain are offset by gains in another part. • Flexible strategies – a company takes advantage of different scenarios by having multiple suppliers and excess manufacturing capacities in different countries. • Production shifting- e.g. factory relocation • Information sharing – anticipate market changes & find new opportunities • Global coordination
REQUIREMENTS FOR GLOBAL STARTEGY IMPLEMENTATION Michael Mcgarth and Richard Hoole: • Product development • Purchasing- qualified management team • Production • excess capacity and plants in several region • Interfactory communication & centralized management • Demand management • Order fulfillment