What is a Supply Chain?

A supply chain consists of the flow of products and services from:

Raw materials manufacturers Component and intermediate manufacturers Final product manufacturers Wholesalers and distributors and Retailers

Connected by transportation and storage activities, and Integrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management

Supply chain Processes

What is Supply Chain Management ?

A set of approaches used to efficiently integrate
Suppliers Manufacturers Warehouses Distribution centers

So that the product is produced and distributed

In the right quantities To the right locations And at the right time

System-wide costs are minimized and

Service level requirements are satisfied

What is Supply Chain Management? (Cont.)

Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Organizational cultures emphasized short-term, company focused performance. New paradigm - Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. All participants in the supply chain benefit. Boundaries are dynamic and extend from the firms suppliers suppliers to its customers customers (i.e., second tier suppliers and customers). Supply chains now deal with reverse logistics to handle returned products, warranty repairs, and recycling.

Supply Chain Illustration

Importance of Supply Chain Management

Firms have discovered value-enhancing and long term benefits Who benefits most? Firms with:
Large inventories Large number of suppliers Complex products Customers with large purchasing budgets

Firms using Supply Chain Management:

1. Start with key suppliers 2. Move on to other suppliers, customers, and shippers 3. Integrate second tier suppliers and customers (second tier refers to the customers customers and the suppliers suppliers)

Cost savings and better coordination of resources are reasons to employ Supply Chain Management

Reduced Bullwhip Effect- the magnified reduction of safety stock costs based on coordinated planning and sharing of information Collaborative planning, forecasting, and replenishment activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits.

Origins of Supply Chain Management

1950s & 1960s U.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies

1960s-1970s Introduction of new computer technology lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication

1980s & 1990s Intense global competition led U.S. manufacturers to adopt
Supply Chain Management along with Just-In-Time (JIT), Total Quality Management (TQM), and Business Process Reengineering (BPR) practices

2000s and Beyond

Industrial buyers will rely more on third-party service providers (3PLs) to improve purchasing and supply management

Wholesalers/retailers will focus on transportation and logistics more & refer to these as quick response, service response logistics, and integrated logistics

Supply Chain Management Key Issues

Forecasts are never right Very unlikely that actual demand will exactly equal forecast demand The longer the forecast horizon, the worse the forecast A forecast for a year from now will never be as accurate as a forecast for 3 months from now Aggregate forecasts are more accurate A demand forecast for all CV therapeutics will be more accurate than a forecast for a specific CV-related product

Supply Chain Management Benefits

A 1997 PRTM Integrated Supply Chain Benchmarking Survey of 331 firms found significant benefits to integrating the supply chain

Delivery Performance Inventory Reduction Fulfillment Cycle Time Forecast Accuracy Overall Productivity Lower Supply-Chain Costs Fill Rates Improved Capacity Realization

16%-28% Improvement 25%-60% Improvement 30%-50% Improvement 25%-80% Improvement 10%-16% Improvement 25%-50% Improvement 20%-30% Improvement 10%-20% Improvement

Current Trends in Supply Chain Management

Expanding the Supply Chain
U.S. firms are expanding partnerships and building facilities in foreign markets The expansion involves:
breadth- foreign manufacturing, office & retail sites, foreign suppliers & customers depth- second and third tier suppliers & customers

Increasing Supply Chain Responsiveness

Firms will increasingly need to be more flexible and responsive to customer needs Supply chains will need to benchmark industry performance and meet and improve on a continuous basis Responsiveness improvement will come from more effective and faster product & service delivery systems

The Greening of Supply Chains

- Producing, packaging, moving, storing, delivering and other supply chain activities can be harmful to the environment Supply chains will work harder to reduce environmental degradation Large majority (75%) of U.S. consumers influenced by a firms environmental friendliness reputation Recycling and conservation are a growing alternative in response to high cost of natural resources

Reducing Supply Chain Costs

Cost reduction achieved through:
Reduced purchasing costs Reducing waste Reducing excess inventory, and Reducing non-value added activities

Continuous Improvement through

Benchmarking- improve over competitors performance Trial & error Increased knowledge of supply chain processes

Companies that offer SCM software solutions

1. SAP 2. Oracle 3. J.D. Edwards 4. Microsoft Great Plains 5. PeopleSoft 6. i2 7. Baan 8. Manugistics

About SAP SCM

SAP Supply Chain Management Module helps users with planning of supply chain processes to enable collaboration and coordination of the supplier network, helping companies respond to shorter life cycles

 Delivers planning and execution functions that are integrated by design Supports best practices and provides preconfigured software for enabling collaborative business, accelerating implementation, and reducing costs Is recognized by key industry analysts as the market-leading SCM application

SAP SCM Solution Map

 The Supply Chain Management process in SAP

Demand Planning SCM DP Supply Network Planning SCM SNP Production Planning and Detailed Scheduling SCM PPDS Procurement Planning SCM PPDS or R3 MRP The Core Interface CIF

SCM Demand Planning

Upload new products data Monitor Forecast Accuracy Upload last period sales

Release forecast to distribution planning

Clean sales history of exceptional events

Add Promotions

Launch Statistical Forecast

Adjust the forecasts

SAP SCM Solutions

SAP SCM Solutions

SAP SCM Solutions

SAP Supply Chain Management

Oracle SCM vs. SAP SCM

Oracle
Less features Reduced information on products Certain services not provided Less customized

SAP
Multiple benefits More services in package More technical support More information provided on products

Bibliography
http://sappress.de/download/dateien/2122/sappress_discover_s ap_scm.pdf
http://faculty.biu.ac.il/~shnaidh/zooloo/erp/mySAP_Sup ply_Chain_Management_Solution_Map.pdf

http://www.scribd.com/doc/21973165/Key-Issues-inSupply-Chain-Management http://www.academia.edu/1452141/SUPPLAY_CHAIN _MANAGEMENT_PPT_at_BEC_DOMS_BAGALKOT