SCM Introduction

1. Supply Chain Management By H.S.Pundle

2. What Is A Supply Chain • Supply Chain consists of all parties involved directly or indirectly in fulfilling customer request. • It includes Manufacturer, Transporter, Warehouses, Retailers & Customers themselves. • Within Manufacturing it includes all functions involved in receiving & fulfilling customer request. • Functions included are New Product Development, Marketing, Operations, Distribution, Finance & customer service.

3. Supply Chain • Customer walking into a retailer to purchase a detergent. • Customer Retailer 3rd party logistic Distributor Logistic Manufacturer Tier1 supplier Tier 2 supplier.

4. Supply Chain • Draw Supply Chain for : • Supplier walking into a Super Market. • Online purchase like Dell Computers & Amazon. COM. • Online booking of Air ticket. • Purchase of vegetables, fruits at Reliance fresh.

5. Issues in Supply Chain Management The case of Mother Dairy • In bound supply chain issues • Mother Diary procures milk from hundreds of cooperatives located in Gujarat, Haryana, Punjab, Rajasthan and Uttar Pradesh • The milk collected from these cooperatives is transported to the Patparganj plant in East Delhi, where it is homogenized, pasteurized and then stored in special tanks until it is loaded into tankers for distribution • In house supply chain issues • Mother Diary has a processing capacity of 650,000 litres per day • Over the years, Mother Dairy has increased its variety of offerings. Skimmed, toned, double toned and full cream milk is available in half and one litre polythene packs. Mother Dairy offers over 30 flavours of ice creams. • Forecasting & demand management to manage a large variety • Since milk is a perishable commodity with very short life cycle, logistics planning, demand estimation and production scheduling are very crucial

6. Issues in Supply Chain Management The case of Mother Dairy • Out bound supply chain issues • Nearly a hundred of its tankers cris-cross Delhi and supply milk to about 568 booths located in every nook and corner of the city. • Besides its own booths, Mother Dairy also sells loose milk through over 200 manually operated insulated containers setup in shops in congested areas and also through 300 cycle rickshaws, which home delivers milk in some localities. • Furthermore, it also sells milk through 850 retail shops in polythene packs • The distribution of the processed milk and a large variety of milk derivatives require efficient network design, distribution requirement planning, logistics and transportation planning

7. Supply Chain Management • Supply Chain includes • A chain of entities involved in planning, procurement, production and distribution of Products & services to the end customer • A unique combination of these entities makes up a value stream • Need for SCM • Shrinking Product Life Cycles • Computer, Electronics Goods • Shrinking time window for delivery • Non-shrinking lead times • Dramatically increasing product variety • Apparels, Fashion/Trendy Goods, appliances

8. Supply Chain ManagementKey Questions • Will the structure of the supply chain have any impact on the overall performance? • What are the strategies for improving “in- bound” logistics? • What kind of planning tools are useful for Supply Chain Management? • Are there workable strategies for managing scenarios such as product variety and short product life cycle? • What are the appropriate measures for supply chain performance

9. Supply Chain Management Components • In-bound SCM • Supplier Development • Supply Management • In-house SCM • Master Scheduling, MRP • Layout, materials handling • Out-bound SCM • Warehousing • Distribution & Channel Management

10. Outbound SCM Decision context • Outbound SCM addresses all issues pertaining to distribution of goods and services to the end customer • Distribution network design refers to various choices made with respect to the entities included in out-bound logistics • Logistics management refers to the set of activities involved in planning and physical movement of goods across the supply chain • Route planning • Channel Management

11. Supply Chain • Supply Chain is dynamic. • Involves constant flow of product, information & funds. • It is a Network or Web of many suppliers & distributors.

14. Supply Chain Structure Salient Features • Number of layers: Supply chain always involves multiple layers • Delays in the chain: There are finite delays between each pair of layers to receive and send information and goods • Decision making patterns: Decisions of “how much” and “when” to order are taken independently by each member in the chain • Independence of each member of the supply chain: Since each member is organisationally a separate unit, there is considerable independence in policy and decision making

15. What causes Bullwhip effect? • The more • the number of layers, • the delay, • the rate of change, the greater the fluctuations • Each layer • updates its forecast in varying patterns • places order at different times • price fluctuations (promotions) • rationing of supply

16. How to avoid Bullwhip effect? • Devise new strategies for minimizing the number of layers, delay in information exchanges and rate of change • Improve quality of demand forecast update • use of point of sales data, EDI (Electronic Data Interchange), Internet • Share sales, capacity and inventory data across the supply chain partners • Lead time reduction, reduction in fixed

17. Objectives of a Supply Chain • Maximize overall value generated. • Value is the difference between finals product’s worth to the customer & cost supply chain incurred to fulfill customer requirement. • Value is correlated to supply chain profitability or supply chain surplus ( Total profit to be shared by all).

18. Objectives of a Supply Chain • Cost of supply chain includes cost of production, storage, transportation, cost to convey information, Funds transfer …. Etc. • Success to be measured in terms of supply chain profitability & not individual stage. • Focus on individual stage may lead to reduction in overall supply chain profit.

21. Decision phase in Supply Chain • Decisions relating to flow of information, products & funds. • Each decision should be made to raise supply chain surplus • Fall into three categories or phases depending on frequency of decision & timeframe during which it has an impact.

22. Supply chain strategy or design • How to structure the supply chain over next several years. • Configuration of supply chain and resource allocation. • Strategic decisions made include : • Location & capacities of production, Warehousing facilities, In-house or outsourced, Mode of transport along different shipping legs, Type of information system.

23. Design of Supply Chains • Profile of the product influences the design of supply chain • Primarily functional products • Primarily innovative products • Two Supply Chain design alternatives • An efficient supply chain and • A responsive supply chain

25. Designing efficient supply chainsStrategies • Continuous replenishment programme using EDI links for information sharing • Invest in supply chain partnership programme both on the “in-bound” and “out-bound” side • Integrate material planning and control systems with ERP to benefit from improved data visibility • Develop robust inventory control mechanisms to accurately fix reorder points and Order levels

26. Designing responsive supply chainsStrategies • Accept uncertainty in demand & large forecast errors as the reality • Devise strategies for managing uncertainty • Capture Point-of-Sale data for accurately and immediately updating forecast • Improve responsiveness by cutting lead times • Postponement strategies/Delayed differentiation • Deploy standardisation, modular design and product platform strategies

27. Postponement Strategies Alternatives & Implications • Packaging postponement • Savings in transportation (bulk containers) • Handle multi-lingual requirements (HP printers) • Assembly postponement • Low levels of investment in FG • Ability to handle a large variety through modular design (computer - the case of Dell) • Manufacturing postponement • Final stages of manufacturing delayed until firm orders are received (Benetton dyeing of fabrics) • Reduced lead time

28. Supply chain strategy or design • Supply chain configuration should support strategic objectives & increase supply chain surplus. • Long term decisions. Difficult to alter. Therefore should take into account uncertainties over next few years.

29. Supply chain planning • Considers the supply chain configuration fixed in strategic phase. • Timeframe usually is a quarter to an year. • Starts with a forecast for the coming year. • Planning regarding which market will be serviced from which location, inventory policies, Timing & market for price promotions. • Takes into account competition over the period and exchange rate fluctuation.

30. Supply Chain operation • Time horizon is weekly or daily. • Considers the supply chain configuration and planning as fixed. • Meet customer order in best possible manner, allocates inventory or production to individual orders, set a date to fulfill and order, generate pick list, arrange trucks for transportation, place replenishment orders. • Less uncertain about demand as short time horizon.

31. Supply Chain MACRO processes in a firm • CRM : Customer Relationship Management – All processes that focus on interface between the firm and it’s customer. • ISCM : Internal Supply Chain Management – All processes that are internal to the firm. • SRM : Supplier Relationship Management – Interface between firm and it’s suppliers.

32. Supply Chain MACRO processes in a firm • CRM :Includes Marketing, product pricing, sales, order management, funds collection. • ISCM :Timely fulfillment of demand generated by CRM at lowest cost. • SRM : Vendor evaluation, price negotiation, scheduling, follow-up. • All MACRO processes are aimed at serving same customer & should be well integrated.