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SCMT-2014

PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
The Role of Supply Chain Management in Economy
1
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Learning Objectives
Why is the supply chain important?
What are the key supply chain decisions made by a firm?
How has the supply chain evolved over the last century?
What are the unique challenges of managing a supply chain in India?
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Supply Chain Management: Success Stories
Dell: Inventory turn-over ratio of 58.7 compared to industry average of 12 (Net
Profitability of 5.3.%) ( Drop from7.8% in 2006)
Wal-Mart: Inventory turn-over ratio of 9.9 compared to industry average of 5.5 ( Net
profitability of 3.5%)
Zara Corporation: Lead-time from new product to stores is 15 to 20 days compared
to industry average of six months ( Net profitability of 11.3%)
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Supply Chain Management: Horror Stories
Cisco: Cisco wrote off 2.2 $ billion worth of inventory in May 2001. Biggest write-off in
history.
Sony: PlayStation IIa lost opportunity
SONY could supply only 25% of the potential demand for Christmas market
Nintendo Wii Game Console : Shortage expected in year 2007
Kmart Launched supply chain initiative in May 2000 worth $1.4 billion in software and
services. In 2001-02, announced that it was abandoning most of the software purchased
and taking $130 million write-off
Nike- i2 Technology Controversy: Lost $100 in sales in last quarter of 2000 i2 Technologies
was blamed. This is what we get for our $400 millionNike Chairman-
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Supply Chain Management: A Definition
Encompasses all activities associated with the transformation of goods fromthe raw
material stage to the final stage when the goods and services reach the end
customer.
Involves planning, design and control of flow of material, information and finance
along the chain in order to deliver value to the end customer in effective and
efficient way.
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Supply Chain Management: A Pictorial Representation
C1
C2
C3
C4
C5
C6
VENDOR
INBOUND
TRANSPORTATION
PLANTS
INTERFACILITY
TRANSPORTATION
DISTRIBUTION
CENTERS
OUTBOUND
TRANSPORTATION
CUSTOMERS
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Managing Flows in A Supply Chain
Material Flow
Information Flow
Financial Flow
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
From An Automobile Manufacturer
Our aim is always to arrange the material and machinery and to simplify the operation so
that practically no orders are necessary. Our finished inventory is in transit. So is most of
our raw material inventory. Our production cycle is about eight-one hours from the mine
to the finished machine (automobile) in the freight car
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Historical Evolution of the Supply Chain
First Revolution: (Ford Motor
Co. 19101920)
Single product, that is, no product
variety
Vertical integration
Second Revolution: (Toyota
Motor Co. 19601970)
Wide Variety
Long-term relationship with
suppliers
Third Revolution: (Dell
Computers 1995Current)
Customized products
Medium-term relationship with
suppliers
Suppliers have to maintain technology
and cost leadership
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Key Supply Chain Concepts
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Supply Chain Design
Deciding Scope ( What activities
to be done in-house and what
activities to be outsourced)
Design of
Network
Plant location and
capacity decisions
Warehouse location
Vendor selection
Nature of relationships
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Managing Supply Chain Operations
Demand forecasting
Procurement planning
Production planning
Inventory management
Transportation
Order processing
Relationship management
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Importance of The Supply Chain
Proliferation of Product
Lines
Cell phone, Laptop, Automobile
Shorter Product Life
Cycles
Dell computers, Bharti Tele ventures
Higher Level of
Outsourcing
Impact of organized retail chain
Shift in Balance of Power
in Chain
Impact of tariff structure
Globalization of
Manufacturing
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Enablers of Supply Chain Performance
Improvement in
communication and
IT
Better
understanding of
inter-firm
coordination issues
Entry of third-party
logistics service
providers
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
BANGALORE: Aspada Investment Company, which is backed by billionaire investor George
Soros' Economic Development Fund is investing $2 million (Rs 11 crore) in integrated cold
chain trucking operator Schedulers Logistics.
The Mumbai-based firm which provides end to end storage and distribution for fruit,
vegetable, food processing and pharmaceutical industries will use the funds to expand in
Eastern and North-Eastern states.
Read more at:
http://economictimes.indiatimes.com/articleshow/36291632.cms?utm_source=contentofinterest&utm_medium=text&ut
m_campaign=cppst
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Ratio of Logistics Cost to GDP for Selected Countries*
* Source: Raghuramand Shah 2003
Does logistics cost capture every thing?
How do we capture logistics cost of India versus China?
India's logistic cost as a percentage of the GDP is unusually high - double that of developed countries and
substantially higher than even BRIC nations. India's over-dependence on road freight means that logistic
cost as a percentage of the GDP is as high as 13%-14% compared to 7%-8% in developed countries and 9%-
10% in other BRIC countries said a report by the Indian Foundation of Transport Research and Training
(IFTRT). Source- TOI,2012, http://timesofindia.indiatimes.com/business/india-business/Indias-logistic-costs-higher-than-BRIC-nations/articleshow/14151707.cms
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Logistics Costs for the Indian Economy*
Rs billion
*Source: Raghuram and Shah 2004
Total
Logistics
Cost
GDP Logistics
Cost/GDP
(%)
95-96 1201.27 8995.63 13.4
97-98 1261.01 10163.99 12.4
99-00 1388.93 11485.00 12.1
01-02
1508 12679 11.89
03-04
1658 14305 11.59

93-94 prices
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Logistics Costs for the US Economy
Organized Sector US: 1990 US: 2001 US: 2002
Transportation 50% 60% 63%
Inventory 20%
40% 37%
Warehousing
24%
Packaging
Losses 6%
Total Cost 11.4% 9.5% 8.7%
Logistics Cost
($ billion)
659 957 910
GDP ($ billion) 5,800 10,080 10,470
Nominal Values
Source: CASS Information Systems, 2002
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Performance of the Indian Manufacturing Industry*
Data Source: PROWESS, CMIE
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Sector-wise Industry Performance of Indian Firms*
Data Source: PROWESS, CMIE
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Status of Logistics Management in India
Neglected area in organizations
Taxation structure drives the logistics related
decision, not cost or service considerations
Poor state of infrastructure
Complex regulations affecting logistics decisions
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Supply Chain Challenges for the Indian FMCG Sector
Managing Availability in the Complex Distribution Set up
Working with Smaller Pack Sizes
Entry of National Players in the Traditional Fresh Products Sector
Dealing with a Complex Taxation Structure
Dealing with Counterfeit Goods
Opportunistic Games Played by the Distribution Channel
Infrastructure
Emergence of Third-party Logistics Provider
Emergence of Modern Retail Chains
Reservation for Small-scale Sector
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
The Marico Supply Chain
1.6 million retailors
Exploding SKUs
Product availability in organized sector 65%
2-4% - organized sector
SCMT-2014
PGDM
Term IV
Session 01 Introduction to Supply Chain Management Prof. Kedar P. Joshi
Virtual Integration
Source: The Power of Virtual Integration, HBR
It means you basically stitch together a
business with partners that are treated
as theyre in the company
When we launch a new product our
suppliers engineers are available in our
plants. We can fix customers problem
real time.

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