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DEFINITION
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
Right Product
Right Quantity
At Right Time
Right Quality
At Right Value
At Right Place
Consulting
Enterprise
Solutions
BPO
Logistics
Warehousing
Transportation
Carriers
Manufacturing
Planning
Sourcing
Distribution
Retail
Merchandising
Inventory
Management
Buying and
Sourcing
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.
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?
Customer
order
Make
component
s
Order delivery
lead time
Assembly
Delivery
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.
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.
Manufacturer
Supply to
production based
Forecast
on forecast
Distributer
Retailer
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
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CHARACTERISTICS OF PUSH,
PULL AND PUSH/PULL
STRATEGIES
PUSH
PULL
Minimize Cost
High
Low
Resource Allocation
Responsiveness
Lead Time
Long
Short
Processes
Order Fulfillment
Objective
Complexity
Focus
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