Technical paper presentation on Supply Chain Management Presented By Gaurav.s.

Deo

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Table of Contents Necessity of Supply Chain Management What is Supply Chain? Example of Logistics Supply Chain Major drivers of a Supply Chain Major Questions to be addressed to design a supply chain What is Supply Chain Management? Role of Supply Chain Management Components of Supply Chain Management Reverse Supply Chain What is Reverse Supply Chain? Typical Reverse Supply Chain Example of Reverse Supply Chain Necessity of Reverse Supply Chain Comparison between Forward and Reverse Supply Chain Case study Enabling technologies for Supply Chain Management Role of RFID in Supply Chain Management Relationship between ERP & SCM Wal-Mart's Supply Chain Management Practices Conclusion References

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Necessity of Supply Chain Management

The need for supply chain management (SCM) has risen due to several business challenges including: shrinking product lifecycle; mass customization; increasing outsourcing; and most importantly the Process of Globalization. Business alliances have to be forged on a global basis to derive the optimum benefit from strategic location in terms of factors like cost, quality and proximity to raw material or markets so as to respond to the demanding class of customers. Competition between individual enterprises has been transformed to competition between their supply chains or extended enterprises. Efficient management of these supply chains has emerged as the biggest differentiating factor between a successful and unsuccessful business.

Typically, companies work with many suppliers and are not happy with them, but after SCM implementation, the endeavor would be to work with fewer suppliers and inculcate mutual respect.

What is Supply Chain?

The supply chain is a worldwide network of suppliers, factories, warehouses, distribution centers and retailers through which raw materials are acquired, transformed and delivered to customers. Supply chain exists in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

A supply chain consists of three or more companies directly linked.

Example of Logistics Supply Chain

Material Handling Network

Customer Warehouse

Manufacturer

Supplier

Materials

Assembly or Sub - Assembly

Finished Goods

Customer

Manufacturer

Components

Warehouse

Supplier

Materials

Assembly

Finished Goods

Customer

Manufacturer

Warehouse

Transportation Networks

Customer
Transportation Networks

Major drivers of a Supply Chain

PRODUCTION What, how and when to produce

INVENTORY How much to make and How much to store

INFORMATION The basis for making these decisions and lifeline of the organization

TRANSPORTATION How and when to move product

LOCATION Where best to do what activity.

Major Questions to be addressed to design a Supply Chain

Where to produce & assemble goods? How much to produce? When to produce? Where to store finished goods? Where to store spare parts? How much to store?

Customer

Manufacturer

Warehouse

Supplier

Where to acquire materials & components

What markets to serve? What level of service? What level of service cost?

Customer

Manufacturer

Warehouse

What fleet size? What vehicle routes? What shipment routes?

How much to ship? When to ship? What modes of transportation?

Customer

What is Supply Chain Management?

upply chain management can be defined as a loop: It starts with the customer and it ends with the customer. Supply chain management takes a holistic view of the working of an organization, without getting unduly Through the loop flow all materials, finished goods, information and all transactions. obsessed with the performance of individual functions. It has shifted the traditional view, which focused on functional excellence to the integrated performance of the chain of activities, the primary driving force being delivering value to the customer.

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Supply Chain Management is the strategic, tactical, and operational decisions making that optimizes supply chain performance. The strategic level defines the supply chain network; that is, the selection of suppliers,transportation routes, manufacturing facilities, production levels, warehouses, and the like. The tactical level plans and schedules the supply chain to meet actual demand. The operational level executes the plan.

Role of Supply Chain Management

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Typically, every organization has three types of flows: Material flow: The material flows from the back end (supplier) of the supply chain to the front end (customer). Information flow: The information flows in both the directions. Fund flow: Money flows in the reverse direction. SCM involves developing a set of management practices that will ensure that these three flows are smooth. Faster material flow will greatly improve responsiveness to customer requirements and will in turn ensure faster material flow back into the supply chain.

Information flow is the crucial determinant of the other two flows in the supply chains. Collaborative planning and information sharing practices will streamline the information flow in the supply chain.

A good supply chain management will provide superior value to the customer.

Components of Supply Chain Management

The following are the basic components for supply chain management. 1. Plan: This is the strategic portion of supply chain management .This may include developing a set of metrics to monitor the supply chain so that it is efficient, cost less and delivers high quality and value to customers in the most cost effective manner. . 2. Source: This involves developing a set of pricing, delivery and payment processes with suppliers and metrics for monitoring and improving the relationships. 3. Make: This involves making schedule for the activities necessary for production, testing, packaging and preparation for delivery. . 4. Deliver: This involves coordination of the receipt of orders from the customers, developing a network of warehouses, picking carriers to get products to customers and setting up an invoicing system to receive payments. 5. Return/Reverse Flow: This involves creating a network for receiving defective and excess products back from the customers and supporting customers who have problems with delivered products.

Reverse Supply Chain

1. What is Reverse Supply Chain?

2. Typical Reverse Supply Chain

3. Example of Reverse Supply Chain

4. Necessity of Reverse Supply Chain

5. Comparison between Forward and Reverse Supply Chain 6. Case study of Reverse Supply Chain for Organic Food Items

What is Reverse Supply Chain

Though reuse of products and materials is common phenomenon, companies have long ignored this part of the supply chain, known as reverse supply chain. A common example of reverse supply chain is the soft drinks bottles pick up and delivery system, where soft drink bottles are returned and reused repeatedly. Reverse Supply Chain encompasses the issue of source reduction, conservation, recycling, substitutions and disposal that interface with marketing, production and logistics activities such as purchasing and procurement, manufacturing, maintenance, spare parts inventory, material handling, traffic and transportation, warehousing storage and packaging.

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Customers

Typical Reverse Supply Chain

Inspection

Yes

Is Product good? No Retailers Distributors

Yes

Retailers

No Dispose

Distributors Manufacturer Manufacturing Supplier Repacking

Manufacturing Distributors

Retailer Customers

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Example of Reverse Supply Chain

Bottling Plant

Distributors (D1) (D2) (D3)

Retailers (R1) (R2) (R3)

Customers

This is an example of Bottling Plant

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Necessity of Reverse Supply Chain

The foremost reason behind companies giving importance to reverse supply chain is that it reduces operating costs by reusing products or components. For example, previously, Estee Lauder Companies Inc., used to dump nearly $60mn worth of its products into landfills every year. However, after setting up reverse supply chain it has been able to reduce the volume of destroyed products by half. Companies have started realizing the importance of reusing products or components. As a result, reverse supply chains are becoming essential part of business.

Nike encourages bringing their used shoes back to the store from where they were purchased. These shoes are shipped back to Nike, where they are shredded, which are then donated to make basketball courts and running tracks. The company also donates funds to help build and maintain those courts. By doing this, companies enhance the value of their brand and also encourages people to purchase their products.

It results in improved supplier relationships and enhanced supplier satisfaction. Hence , its importance is increasing nowadays.

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Comparison between Forward and Reverse Supply Chain

Sr. No. Forward Supply Chain Reverse Supply Chain

1

Inbound logistics involves interaction with suppliers Outbound logistics involve retailers

Inbound logistics involves retailers Outbound logistics may involve manufacturers and distributors

Similar products Similar products often generally have uniform may not have uniform product quality product quality Disposition options limited Disposition options numerous with environment implications

Cost and Service issues Cost and Service issues more predictable often not predictable Diverging in nature Converging in nature

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Case study of Reverse Supply Chain for Organic Food Items

Desi-Ahaar is a range of organic food items launched by Khadi Village Industries Commission (KVIC) recently.

1. Current Supply Chain 2. Steps in Current Supply Chain 3. Coding System 4. Summary of Reverse Supply Chain for Organic Food

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Current Supply Chain

1. Currently the Supply Chain of Desi Ahaar includes the following agents: Suppliers: There are various suppliers catering to KVICs demands. These are mainly farmers who supply raw material. These suppliers are certified for their organic farms. 2. Processor: Processing involves removal of foreign materials and packing the items specified quantities paper bag, in various denominations. At present, there are many processors. 3. Distribution Centre (DC): It stores and keeps inventory of the organic items to be supplied to various retail outlets. Normally these items are supplied on a weekly basis. 4. 5. Retail Outlets: These are the nodes all over Delhi through which organic items sold to the customers. QC Lab: There is one QC laboratory located at IIT Delhi, performing the job of quality control for various quality parameters.

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Steps in Current Supply Chain

The present system for reverse supply chain includes following steps:

Transportation of rejected items: Transportation of rejected products from retail outlets to the size tempos during its regular course of operation.

distribution Centre (DC) and redelivery of products from distribution centre to retail outlets is done by medium

Reprocessing of items in case of packing items: In case of disfigured or torn packets, the reprocessing and repackaging of products is done and sent back to respective outlets.

Dumping of rejected products in rest all cases: The expired products and products returned because of pest control and customer complaints are dumped in the main processing centre at Rajghat.

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Coding System
An alpha numeric coding system for RSC was developed specifying different possibilities and respective actions that need to be taken. This color code makes it easy for workers to separate out different products as per their RSC process to be pursued. Also, it reduces the probability of error during the processes to be followed in the RSC path because color codes are easy to understand and implement. Codes suggested for RSCM of Desi-Ahaar Sr. No. 1 2 3 4 5 6 7 Cause of RSC Surplus code Disfiguring of packets Torn packets Expired product Pest attack Customer complaint Miscellaneous Causes RS Code SS DP TP EP PA CC MC Color code Red Green Blue Black Pink Yellow White

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Summary of Reverse Supply Chain for Organic Food

Attributes Coding Prescription of organic food The coding system for RSC would facilitate proper traceability based on the cause of rejection on the retailer end. Use of color coded stickers to facilitate the RSC process and for the convenience of the people involved in the same. Color code specific to cause of rejection also improve the efficiency in terms of time and cost. Quality checks and chemical testing is done as required in the RSC process specific to the case. Retailer to take customer feedback and respond to it by giving an appropriate RSC code to the rejected product. Steps to remove factors for corresponding rejection at the outlet are also to be taken. of Almost the same as retailer i.e. to follow the RSC process in a case specific manner. Also identify the flaws on the part of the supplier and intimate them and resolve the packaging complaints that are faced. Find out the reason for the complaints such as pest attack and other quality deterioration aspects. Based on the feedback, improve the quality. Farmers in this case present the plant aspect of RSC. The quality specification for organic food must be satisfied and must also comply the tests carried out on a random sampling basis by the QC lab. Any product rejection on the basis of quality lapse at the farmer end is to be dealt with.

Quality Control

Role of Retailer

Role Distributor

Role of suppliers

Role of Suppliers

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Enabling Technologies for Supply Chain Management

1. Role of RFID in Supply Chain Management 2. Relationship between ERP & SCM

Role of RFID in Supply Chain Management

Many global companies have started using Radio Frequency Identification (RFID) tags in supply chain management to increase efficiency.

RFID helps businesses to keep a track and manage products using embedded sensors.

Electronic product code, or EPC, is the latest method for identifying products. The EPC would utilize radio frequencies to identify computer chips placed in tags. This technology would eventually replace bar codes, which require the scanner to "see" the UPC number to read it, with a device that requires no line of sight and little human intervention.

Wal-Mart had planned to replace bar code technology with RFID technology. Analysts expected that by using RFID, the company could save $8.35 billion per year, primarily in labor costs.

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Relationship between ERP & SCM

Many SCM applications are reliant upon the kind of information that is stored in the most quantity inside ERP software. ERP is the battering ram that integrates all that information together in a single application, and SCM applications benefit from having a single major source to go to for up-to-date information. These days, most ERP vendors have SCM modules so doing an ERP project may be a way to kill two birds with one stone. For example, if you want to build a private website for communicating with your customers and suppliers, you will want to pull information from ERP and supply chain applications together to present updated information about orders, payments, manufacturing status and delivery.

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Wal-Mart's Supply Chain Management Practices

The US-based Wal-Mart, the largest retailer in the world, is believed to be the best supply chain operator of all times because of its proactive use of IT and Internet-enabled technologies.

It employed IT/Internet to enhance the efficiency of each function of supply chain including procurement, warehouse and logistics management, inventory management and demand forecasting.

Wal-Mart supercenters stock about 500,000 products each, and suppliers compete fiercely for shelf space.

Every day between 3:00 and 5:00 a.m., the company runs its models to determine what is selling well in each store, then "reformats" the stores and sends the information to the stores. Every day between 3:00 and 5:00 a.m, the company needs to do enough data mining and analysis to let Procter & Gamble and other suppliers know what to stock in the stores.

From its headquarters in Bentonville, Arkansas, Wal-Mart services all of its stores worldwide, right down to turning on the lights in the stores.

Conclusion

How can an organization manage its supply chain more effectively? If it can foresee accurately what is going to happen in the future by taking into consideration all possible constraints and takes decision based on it, it will improve the chances of gaining a competitive edge.

Improvements like efficient transportation, planning to minimize life cycle time and to have optimized delivery schedule, effective warehouse management to improve the order fulfillment are also essential for an effective SCM.

The similarities between Formula 1 competition and racing car design and supply chain competition and supply chain design is a way of understanding and managing change. Just as the performance characteristics of a racing car must be aligned to the requirements of the track, so the performance of a supply chain must be aligned to the requirements of its market(s) and product(s).

References
Books Supply Chain Management, Theories & Practices, R.P.Mohanty, and S.G.Deshmukh, Biztantra Publications.

esearch Papers

. Websites G. ANANTHAKRISHNAN in Chennai, The Hindu Newspaper. www.icmr.icfai.org www.hindu.com

www.wikipedia.com