Supply-Chain Management

Integration and Globalization in the Age of e-Business

GROUP NO: 2 (SEC B)
ABHISHEK GARG (12062) BHIMAJI C AGNIHOTRI (12072) KAMALESH C. J (12082) NANDINI SUDHEER (12092) SANDEEP HANEEFA (12102) SULGADLE MANJUNATH SHIVASHANKAR (12112)

A Schematic of Supply Chain

Introduction-SCM

Efficient & Effective management of materials, information, and funds across the entire supply chain Businesses don't compete; supply chains compete, Bullwhip effect due to channel partners forecasting Catalysts to initiate change management to deal with supply chain Power shift from manufacturers to retailers Internet and associated e-Business initiatives Risk of short product lives & uncertain demand

Key components of supply-chain management

SCM has identified 12 distinct management categories Inventory and Forecasting Marketing and Channel restructuring Service and Aftersales Support Reverse Logistics and Green Issues Location Transportation and Logistics Outsourcing and Logistics Alliances Product Design and New Product Introduction Information and Electronic Mediated Environments Metrics and Incentives Sourcing and Supplier Management Global Issues

Inventory and Forecasting

Includes techniques for inventory management and demand forecasting Uncertainty Unpredictable customers Competitors plans Unreliable partners : Suppliers, Transportation providers, logistics providers. Failing the customer erodes brand equity Inventory helps reducing costs, improving customer service and financial hedging Inventory differs to each and every person For a manufacturer: raw materials Within manufacturing process: raw materials in converted to finished good inventory In production: work-in-process

Contd.,

Six key functions of Inventory Pipeline needed simply to move products within the supply chain Cycle inventory that results from batch processes Decoupling it allows two different within factory or different factories to produce at different rates Anticipation inventory is produced in anticipation of seasonal demand Hedging fluctuating market prices Safety buffer against unforeseen changes in demand or supply

Marketing and Channel Restructuring

Focus on downstream partners Distribution channel Supply chain partners who resell products It covers the relationship management, negotiations and even the legal dimension. It affects the availability of products at retail level ECR and QR have focused on managing the channel as they strive to mitigate bullwhip effect Bullwhip effect It refers to a trend of larger and larger swings in inventory in response to changes in demand.

Bullwhip effect

Contd., Factors causing bullwhip effect: Demand signal processing, Rationing game, Order batching and manufacturer price variations. To overcome bullwhip effect, many initiatives have been undertaken
Electronic data interchange Vendor managed inventory Coordinated planning, forecasting, replenishment

Service and Aftersales Support

Reason for poor after sale Few Resources Little Senior Management attention Weak Training of people Very Important aspect but overlooked many times Managing inventory is not a simple inventory Management problem. Consequences of poor after sales Reputation of company Market Share

Reverse Logistics and Green issues

Emerging Dimensions of SCM Very critical issue in digital age. Environment friendly way to deal with Product recovery

Location
Out of all most critical and takes longest time horizon.
Base to set physical structure of SCM(Transportation, Logistics, inventory etc) Factors to choose location Labor availability Labor cost Taxes Duties Transportation cost Government incentives

Transportation and Logistics

All issues related to physical flow of goods through the supplychain including transportation, warehousing and material handling Assumptions: Location decisions done for
Factory, distribution centre, retail outlets

Addresses important issues related to transportation management like

Mode of transportation Vehicle routing Dynamic fleet management with GPS Merge in transit

Continued
Topics of warehousing and distribution like cross docking, vendor hubs covered Material handling technologies for storing, sorting and retrieving products

Deterministic models and stochastic models used

Outsourcing and Logistic Alliances

Concept of Supplier Hubs:
Supplier hubs are warehouses operated by a logistics firm that consolidates the inventories of many component suppliers and then delivers those components to a manufacturer for assembly Supplier hubs are managed by third parties

Large firms take benefit of outsourced logistics services

Product Design and New Product Introduction

Deals with design issues for mass customization, delayed differentiation and modularity Postponed Product Differentiation:
Products destined for world markets would be customised at the factory to suit local market tastes However worldwide inventory management would be a nightmare

Continued
Using postponement, the product is redesigned to customize it for local markets in the distribution channel

Some companies are beginning to consider design for the environment(DFE) and design for disassembly(DFD)
DFE and DFD often lead to more material, product cost and complexity in inventory control and inventory cost

Information and Electronic Mediated Environments SCM is concerned with the flow of products and information between supply chain members How IT and internet help : Lower supply chain costs Lower inventory costs Higher service levels Integrative ERP software SAP, Oracle Supply chain planning tools Manugistics, i2s Rhythm, SAPs APO Available as SaaS through web portals

IT and e-commerce

These can aid SCM in : Computing freight costs, compares transportation mode rates, analyse cost and service effectiveness of carrier Demand forecasting, replenishment & manufacturing tools for accurate planning and scheduling of activities Transportation Network optimization for streamlining the bidding and award process Ability to track product using RFID etc.

 Conducting business in a paperless environment

Companies are able to automate the process of moving documents electronically between suppliers and customers High transaction costs between partners can be reduced Easy daily forecasting and reduction in inventory as point-of-sale data from retailer can be shipped often

Metrics and Incentives

Refer to measurement of engineering and organizational processes Overall performance of supply chain need to be measured
Firms track service measures like item-order fill rates, order-todelivery cycle time, order defects Costs of providing customer service - inventory holding costs/transportation costs

Qualitative way of representing performance

Lots
A B

INV Little
C D

Poor

SERVICE

Good

Two metrics are combined service and inventory Customers and financial analysts are satisfied by this Many operational factors contribute to this, including fast cycle times, good customer information, uniformly accurate forecasts

Sourcing and supplier management

Concerned with procuring components and management of suppliers A B Make or Buy decisions Location of a firms suppliers Recent trends D
Firms posting part specifications on internet and suppliers biding for the job Firms reducing the number of suppliers to a sole source

Determining number of suppliers and best way to structure supplier relationships holds the key

Global issues

Covers issues related to cross border distribution and sourcing

C Outsourcing from low cost countries (LCC)

Some global factors like currency exchange rate, duties and taxes, customs issues, government regulations

Steps for effective LCC decisions Review corporate strategy

Is sourcing decision consistent with mission, values and principles

Review functional strategy focusing on operations

Cost, quality, delivery and flexibility

Develop total landed cost model Analyze risk factors that arise with an LCC decision

Conclusion SCM is a large and growing field

All the factors that are discussed are linked by the integrated nature of the problems at hand C D Effective supply chain helps in reducing the unit costs Internet plays a major role in the evolution of new supply chain practices