SUPPLY CHAIN MANAGEMENT

Presented by: Ms.Diksha Sukheja

Ms.Anshita Gujar
Ms.Ayushi Jain
Presented to: Prof. Nikita
Dated:22nd April 16

DEFINITION

SUPPLY CHAIN-The supply chain encompasses all activities involved in the

transformation of goods from the raw material stage to the final stage, when
the goods and services reach the end customer.

SUPPLY CHAIN MANAGEMENT- Management of material, funds and

information flows both in and between facilities such as vendors,
manufacturing and assembly plants and distribution centers. Thomas and
Griffin

For a simple product like soap, the HUL supply chain involves ingredient
suppliers, transporters, the companys manufacturing plants, carrying and
forwarding agents, wholesalers, distributors and retailers.

Critical aspect:

Everyone is involved
Systems approach to reducing costs
Integration being the key

SCM IS ALL ABOUT EFFECTIVE INTEGRATION OF

Right Product

Right Quantity

At Right Time

Right Quality

At Right Value

At Right Place

HISTORY OF SUPPLY CHAIN MANAGEMENT

1960s - Inventory Management Focus, Cost Control
1970s - MRP & BOM - Operations Planning
1980s - MRPII, JIT - Materials Management, Logistics
1990s - SCM - ERP - Integrated Purchasing, Financials,
Manufacturing, Order Entry
2000s - Optimized Value Network with Real-Time Decision
Support; Synchronized & Collaborative Extended Network

AN OVERVIEW OF LOGISTICS AND SCM SPACE

IT / ITES

Consulting

Enterprise
Solutions

BPO

Logistics

Warehousing

Transportation

Carriers

Manufacturing

Planning

Sourcing

Distribution

Retail

Merchandising

Inventory
Management

Buying and
Sourcing

SUPPLY CHAIN STAGES

Supplier

Manufacturer

Distributor

Retailer

Customer

Each stage in a supply chain is connected through the flow of products, information,
and funds. These flows often occur in both directions and may be managed by one
of the stages or an intermediary.

THE SUPPLY CHAIN ANOTHER VIEW

Plan
Plan

Source
Source
Suppliers

Material Costs

Make
Make
Manufacturers

Transportation
Costs

Deliver
Deliver
Warehouses &
Distribution Centers

Buy
Buy
Customers

Transportation
Costs
Transportation
Manufacturing Costs
Inventory Costs
Costs

KEY 5 AREAS
ProductionWhat products does the market want? How much of which products should
be produced and by when?
InventoryWhat inventory should be stocked at each stage in a supply chain? How
much inventory should be held as raw materials, semi finished, or finished goods?
LocationWhere should facilities for production and inventory storage be located?
Where are the most cost efficient locations for production and for storage of inventory?
Should existing facilities be used or new ones built?
TransportationHow should inventory be moved from one supply chain location to
another?
InformationHow much data should be collected and how much information should be
shared?

ORDER DELIVERY LEAD TIME

Order
penetration
point
Source

Customer
order
Make
component
s

Order delivery
lead time

Assembly

Delivery

Supply chain lead time

A typical firm sources material, manufactures components, assembles the product
and delivers the finished product to the end customer.
Total time required for the supply chain to carry out all activities from the beginning
to the end is the supply chain lead time.
Time required for the supply chain to deliver the order to the customer after they
place it is the order delivery lead time.

OBJECTIVES OF SUPPLY CHAIN

To maximize overall value generated,
To look for sources of revenue and cost,
Replenishment of the material or product whenever required,
Cost/ quality control,
Shortening time to order,
Faster speed to market,
To meet consumer demand for guaranteed delivery of high quality
and low cost with minimal lead time,

Efficient supply chain,

To achieve world class performance,
More awareness of supply chain dynamics and efficiency,
To fulfil customer demand through efficient resources,
Reduce transportation cost,
Greater labour efficiency, equipment and space efficiency
Efficient distribution,
Helps in better decision making.

IMPORTANCE OF SUPPLY CHAIN

DECISIONS
Helps in achieving success Companies being a leader at using supply chain
design, planning and operation help in achieving success.
Effective flow of goods and information Companies like Walmart who have
invested heavily in transportation and information infrastructure help in achieving
effective flow of goods and information.
Reduces the level of Inventory with the manufacturer Dell centralizes
manufacturing and inventories in a few locations and postpones final assembly until
orders arrive. Thus, Dell is able to provide a large variety of PC configurations
while keeping very low levels of inventory.

Improved match between supply and demand To improve the match between
supply and demand, Dell makes an active effort to steer customers in real time, on
the phone or via the internet, toward PC configurations that can be built given the
components available.

Reason for companys success For the Companies like Dell, Toyota etc., the
supply chain design, and its management of product, information and cash flows
play a key role in the companys success.

REASONS FOR GROWING

IMPORTANCE OF SUPPLY CHAIN
Firms that do not manage their supply chain will incur huge inventory costs and
eventually end up losing a lot of customers because the right products are not
available at the right place and time.
Five major trends that have emerged to make supply chain management a critical
success factor in most industries.
Proliferation in product lines Companies have realized that more and more
product variety is needed to satisfy the growing range of customer tastes and
requirements. Companies like HUL, in their personal care products, manage, on an
average, 1200 SKUs. Chains like Food world manage about 6000 SKUs. With
increasing product variety, it becomes rather difficult to forecast accurately. Hence,
retailers and other organizations involved in the business are forced to either maintain
greater amount of inventories or lose customers.

Shorter product life cycles With increased competition, product life cycles across all
industries are becoming shorter. So a firm like Dell, which has, on an average, just 7 days
of inventory, as compared to the industry average of 35 days, does not have to worry about
product and component obsolescence.

Higher level of outsourcing Firms increasingly focus on their core activities and
outsource non-core activities to other competent players. This trend towards outsourcing
is irreversible but a higher level of outsourcing makes supply chains more vulnerable,
thereby forcing firms to develop different types of supply chain capabilities within the
organization.

Shift in power structure in the chain In every industry, the entities closer to
customers are becoming more powerful. With increasing competition, a steadily rising
number of products are chasing the same retail shelf space. Retail shelf space has not
increased at the pace at which product variety has increased. So there have been case
of retailers asking for slotting allowance when manufacturers introduce new products
in the market place. Retailers have realized that they are powerful entities in the chain
and hence expect the manufacturers to be more responsive to their demands and
needs.

Globalization of manufacturing Many companies are restructuring their production

facilities to be at par with global standards. Unlike in the past, when firms used to
source components, produce goods and sell them locally, now firms are integrating
their supply chain for the entire world market. This has made managing supply chains
extremely complicated.

DEMAND DRIVEN SUPPLY CHAINS

Push versus pull based supply chain models:
Push model:
Supplier

Manufacturer

Supply to

production based

Forecast

on forecast

Distributer

Retailer

inventory based stock based

on forecast

Customer

purchase what

on forecast

is available

Pull model:
Supplier

Supply to
Order
warehouse

Manufacturer

produce to order

Distributer

automatically
replenish

Retailer

automatically
replenish stock

Customer

customer
orders

18

CHARACTERISTICS OF PUSH,
PULL AND PUSH/PULL
STRATEGIES
PUSH

PULL

Minimize Cost

Maximize Service Level

High

Low

Resource Allocation

Responsiveness

Lead Time

Long

Short

Processes

Supply Chain Planning

Order Fulfillment

Objective

Complexity

Focus

INFORMATION SYSTEM AND SCM

Supply chain activities cover every thing from product development ,
sourcing , production and logistics as well as information system.
The organizations that make up supply chains are linked through
physical flow and information flow. Physical flow involves
transformation , movement and storage of goods & materials .
Information flow allows various supply chain partners to co-ordinate their
long term plans and control day to day flow of goods and materials
forward and backward. One of the strategy to effective mgmt of supply
chain is just-in-time strategy.

Some uncertainties in supply chain are uncertain product demand , late

shipment from suppliers , defective parts or raw materials , production process
break down.
One of the recurring problem in SCM is bullwhip effect.

The bullwhip effect :

Inaccurate information can cause minor fluctuations in demand for the product
to be amplified as one moves further back to supply chain. Minor fluctuation in
retail sales for a product can create excess inventory for distributors ,
manufacturers and suppliers.

THANK YOU