Presentation

on
Supply Chain Management

By:
Dr. R. S. Dalu
Assist. Professor & Head,
Mechanical Engineering
Govt. College of Engineering,Amravati
Index
 Concept
 Sourcing

 Measurement

 Vendor Selection
CHANGES TO WORLD ECONOMY

Globalization of
economy
Entry of Multiple
players.
Shortening of
product lifecycles
Corporate
mergers and
acquisitions
Impact of Globalization
 Deliver Least Cost and best quality product.
(Shopping Malls)
 Provide Excellent service network

 Maintain Effective information flow

(Customer connectivity programmes-HONDA)

 Working more collaboratively with customers

and suppliers (Niraj et al.,2001)

 Reengineer their business process.

 Elements of Supply Chain Management

Purchases Warehousing
Production •Inventory Distribution Marketing
•Vendor •Sales
•Scheduling Accounting •Customer
Decisions Levels
•Raw Material •Profit/loss Goals
•Scheduling •Re-order Service
Requirements •Inventory •Outbound •Market
•Requirements Quantities
•Capital •Safety stock Investments Logistics Research
•Compliance •Parts •Product
Needs Needs •Channel
•Inbound
•Quality •Inventory Picking Service Strategies
Logistics •Financial •Financial
Management
Agreements Agreements
What is Supply Chain
 In SC raw material are procured, items are manufacture,
move to warehouses for storage then move to sell.

Manufacture

Procure Moving

What is SC?

Selling Ware
housing
 THE SUPPLY CHAIN

Supply chain is network of various business

entities and processes linking Suppliers,
Operations and Customers

Suppliers Operations Customers

Objective is to optimize the over all performance

of the entire network
Supply Chain types

 Raw supply chain

 Internal supply chain
 Extended supply chain
Supply Chain types
 Outsourced supply chain
 Production supply chain
 Financial supply chain
 Value Chains
Primary Decisions with SC
 Sourcing
 Production
 Inventory
 Logistics
Sourcing
 Quality of Products
 Choosing Suppliers
 Location of Suppliers
 How much product to order
 Transportation Channels
Production
 Make or buy
 Quality of Product
 Location of Production
Inventory
 Safety stock
 Order size
 No of orders
 JIT
Logistics
 Transportation
 Location of Distribution centers
A Basic Supply Chain
SCM in a Dairy Products Supply Chain
 Why its Management Important?

 Itmay take a box of cereal more

than 3 months to get from the
factory to the grocery store!

 It may take a car 15 days to travel

from the factory to the dealer - when
you could drive it in 4 to 5 days!
Values That End Customers Are Looking
For Today

• High product variety

• Customized products
• Detailed product information
• Choice - opportunity to “select”
• Rapid order fulfillment
• Excellent service (assumed)
• Quality/reliability (assumed)
• Low price (assumed)
“Nowadays, it’s
supply chains that
compete with
supply chains!”
(Price Waterhouse
Coopers)
Year Need Strategy
1950- Minimize unit Mass production
1960 production cost
1970s Minimize WIP & Cost Material
Management&
Selective Inv.
analysis
1980s Face Global JIT
competition
1990s Strategic and co- SCM
operative buyer-
supplier relationship
Year Strategy Outcome
1960-1970 Functional Purchasing, Manufacturing,
Management shipping and distribution mgt
separately
1980s Internal Mgt of SC functions of a single
Integration facility are unified and become
the responsibility of a single
individual
1990s External Mgt of SC functions throughout
Integration the chain are unified
Focal Area Business Supply Chain Objectives
Objectives
Customer Max. customer Enhance Customer Service
Service satisfaction
Highly Reliable Product
Best Product Performance
Improve on time delivery
SCM- objectives
Focal Area Business Objectives Supply Chain Obj.
Profit Max Profit Reduce Inv. Costs
Maximization
Increase turnover Lowest Product Cost
Increase ROI Reduce Cycle time
Deliver Value to Reduce lead time
shareholders
Reduce
transportation Cost
Reduce Warehouse
Cost
SCM- objectives
Focal Area Business Supply Chain Obj.
Objectives
Operational Increase Earning Flexibility of Production
Excellence per share schedule
Flexibility of Product mix
Innovating new product
Reducing Supplier base
Expanding width/Depth of
distribution
 Criticality of Supply Chain Process
Supply Chain Process Criticality Score
( scale 0-5)
Demand Mgt 4.50
Customer Service 4.38
Distribution Mgt 4.38
Inv. Mgt 4.23
Manufacturing 4.08
Order Processing 4.00
Transportation 4.00
Product Development 3.69
Warehousing 3.69
Promotion Planning 3.62
Import/ export Mgt 2.85
Element Traditional Mgt SCM
Inventory Mgt Independent efforts Joint reduction of
approach inventories
Total cost approach Minimize firm costs Channel –wide cost
efficiencies
Time horizon Short term Long term
Joint Planning Transaction based Ongoing
Supplier base Large Small to increase
coordination
Channel relationship Not needed Needed for
coordination focus
Information sharing Limited to needs of Required for planning
and monitoring current transaction and monitoring
processes
SCM- Def.
 SCM is the integration of key
business processes from end- user
through original suppliers that
provides products, services and
information that add value for
customer and other stakeholders.
Central aim - SCM
 To have the right products
 In right quantities
 At the right place
 At the right moment
 At minimum cost
Measuring SCM

You can’t Manage

what you don’t measure
Measuring SCM performance

If you can measure it,

You can improve it.
Measuring SCM

Measuring SCM encompasses three

measuring criteria

 Supplier Performance
 Purchasing and materials mgt.
Performance
 Supply chain performance
Supply Chain Measurement
 The Balance Score card
 Supply Chain Council’s SCOR Model
 The Logistics Scoreboard
 Waste Reduction
The Balance Score Card
 Financial perspective
 Customer perspective
 Internal business perspective
 Innovative and learning perspective
L Explanation
evel
01 It provide broad defination of the plan, source, make
and deliver process types and establish supply chain
competitive objectives.
02 Defines core process categories that are possible
components of a supply chain
03 It provides a company with the information it needs
to successfully plan and set goals for its supply chain
improvements.
04 It focuses on implementation
SCOR Level 1 Average Best
Metrics
Delivery Performance 80% 95%
Fill rates 94% 98%
Perfect order 80% 90%
Fulfillment
Order fulfillment lead 7 days 3 days
time
Production Flexibility 30 days 20 days
Total Logistics cost 13% 3%
Inventory days of 55 days 22 days
supply
 Logistics financial performance
 Logistics productivity performance
 Logistics quality performance
 Logistics cycle time performance
SCM Evaluation Model
(Gunasekaran,2004)

 Strategic Planning Metrics

 Order Planning Metrics
 Production Metrics
 Delivery Performance Measures
Metrics
Metrics ( Parameters)
Level of customer perceived
value of product
Variances against budget
Order lead time
Information processing cost
Net profit Vs productivity ratio
Total cycle time
Total cash flow time
Parameters
Customer query time
Product development cycle time

Accuracy of forecasting
Planning process cycle time
Order entry methods
Human resource productivity
Parameter
% of defects
Cost per Operation Hrs
Capacity utilization
Range of products and services
Utilization of EOQ
Parameters
Quality of delivered goods
On time delivery of goods
Flexibility
Effectiveness of distribution planning
schedule
Effectiveness of delivery invoice methods

No of faultless delivery notes invoiced

Measuring Waste in Supply Chain

Anything that adds cost ,

without adding value of product
is waste.
Measuring Waste in Supply Chain

Where there is waste, there is

inefficiency, and
where there is inefficiency, there is
an opportunity to reduce costs.
Waste in SC Vs SC Performance
Seven types of wastes
Type
Overproduction
Waiting
Transportation
Inappropriate processing
High inventory
Unnecessary motions relates to
ergonomics
Defects
Observations
The total logistics cost is estimated
at 4.59% of sales
35% in transportation
25% in inventory cost
11% packaging
09% handling and warehousing
06% customers’ shipping
14% losses
Power of Outsourcing
Sourcing Decisions: The Make-
or-Buy Decision
 Outsourcing -buying materials
and components from suppliers
instead of making them in-
house. The trend has moved
toward outsourcing.

The Make or Buy decision is a

strategic decision.
Reason behind outsourcing
Process of Buying

Obtaining the right

material
In Right quantities

With right delivery

(time and place)

From the right source

 and at the right price

Time in various activities
( without outsourcing)
 Type of Sourcing

¡ Sole Sourcing : Only one supplier is

available

¡ Single Sourcing: Planned decision to

select one supplier for an item where
several suppliers are available

¡ Multiple sourcing: More than one

supplier for an item.
 How Many Suppliers to Use
Single-sourcing- a risky proposition. Although trends favor
fewer sources, avoid single source.
Reasons Favoring a Reasons Favoring
Single Supplier More than One
 To establish a good Supplier
relationship  Need capacity
 Less quality variability  Spread risk of
 Lower cost supply interruption
 Transportation  Create competition
economies
 Information
 Proprietary product or
process  Dealing with
 Volume too small to special kinds of
split business
 Supplier Selection and evaluation
The process of selecting suppliers, is complex and should
be based on multiple criteria:
 Order System
 Technical ability
and cycle time
 Manufacturing  Capacity
capability  Price
 Quality
 Location
 Cost
 Service
 Reliability

OTHER PRACTICAL CONSIDERATIONS

 Linear weighting models
 AHP

 FuzzyAHP
 TOPSIS
Some Trends : Global
Sourcing
Local or Global suppliers???
Reasons to Globalize Operations
Tangible
 Reduce costs (labor, taxes, tariffs, etc.)
 Improve the supply chain
 Provide better goods and services
 Attract new markets
 Learn to improve operations
 Attract and retain global talent
Intangible
Global Process Design & Technology

 Information technology enables management

of integrated, globally dispersed operation

 Texas Instruments: 50 plants in 19 countries

 Hewlett-Packard - product development teams

in U.S., Japan, Great Britain, and Germany

 Reduces time-to-market
 Boeing 777 Suppliers
Firm Country Parts
Alenia Italy Wing flaps
AeroSpace Australia Rudder
Technologies
CASA Spain Ailerons
Fuji Japan Landing gear
doors, wing section
GEC Avionics United Kingdom Flight computers
Korean Air Korea Flap supports
Menasco Aerospace Canada Landing gears
Short Brothers Ireland Landing gear doors
Singapore Singapore Landing gear doors
Aerospace
Examples of Global Strategies

 Boeing – both sales and production are

worldwide.

 Sony – purchases components from

suppliers in Thailand, Malaysia, and
around the world.

 GM is building four similar plants in

Argentina, Poland, China, and Thailand
Management of Suppliers and
Distributors
 Plans to help
achieve company
mission
 Affect long-term
competitive
position
 Strategic options
 Few suppliers
 Keiretsu network
 Local/Global
Suppliers
Keiretsu network : Supplier as Partner
Case Volkswagen

 Brazilian plant employs 1000 workers

 200 work for VW
 800 work for other contractors:
 Rockwell International, Cummins Engines, Deluge
Automotiva, and Remon , etc.

 VW responsible for overall quality,

marketing, research and design
Strategic Alliance and Supplier
Certification Programs
Supplier certification programs
-one way to identify strategic
alliance candidates.

-Firms often develop their own

formal certification programs, &
most require ISO 9000 or
similar certifications as one part
of the certification process.
 Early Supplier Involvement
Early supplier involvement (ESI) is
perhaps one of the most effective supply
chain integrative techniques.

Under ESI, key suppliers become more involved in

the internal operations of the firm, particularly
with respect to new product and process design
and design for manufacturability techniques.

Value engineering activities help the firm to

reduce cost, improve quality, and reduce new
product development time.
 e-Procurement Systems
E-procurement systems enable the
concentration of a large volume of small
purchases with a few suppliers in
electronic catalogues, which are made
available to the organization’s users.

Reverse auctions- suppliers enter Web

site. At a pre-designated time and date,
qualified suppliers try to underbid their
competitors and can monitor the bid prices
until the session is over.
Typical benefits of the e-Procurement
System

 Time savings
 Cost savings
 Accuracy
 Real time
 Mobility
 Trackability
 Management
 Benefits to the suppliers
Lessons:: Key for successful partnerships
Emerging issues in SCM
Prime - requisite for Success
of SCM
 Organizational thinking Process
 Summary and Learning’s
 Supplier plays an important role in
improving the efficiency and
effectiveness of supply chain

 Selection and evaluation is a strategic

decision

 Effective and efficient partnership

rests on the pillars of trust.
Thank you