2_session_on_a few cases & many lessons in scm

8/10/2019 2_session_on_a Few Cases & Many Lessons in Scm

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Supply Chain Management:Basics & Beyond

A Few Case Studies: Many Lessons

Prof. Ravi Shankar

Professor

Department of Management StudiesIndian Institute of Technology DelhiEmail: [email protected]: (+91) 9811033937

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TEXT BOOK

Tata McGraw

REFERENCE

BOOK


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Reference Journals

Journal(s):

Supply Chain Management: An International

Journal (Available on www.emaraldinsight.com)

Supply Chain Management Review

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Purchasing World

International Journal of Purchasing and Materials

Management

International Journal of Physical Distribution &

Logistics Management

Prof. Ravi S hankar (2013-14)

Session Objectives

To understand the basics

of SCM

To understand the current

practices in SCS

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To understand and

develop a few winning

strategies of SCM

Prof. Ravi Shankar (2013-14)

A RECENT WHITE PAPER

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M

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Supply Chain StagesSupply Chain (SC) encompasses all activities associated with the flow

and transformation of materials from the raw material stage throughto the end user.Supply Chain Management (SCM) involves management of FOUR

flows in a Supply Chain: (i) Material, (ii) Information , (iii) Money &

(iv) Ownership

Supplier Manufacturer Distributor Retailer Customer

10Prof. Ravi Shankar (2013-14)

What are the Goals of Supply ChainManagement?

Supply chain management is concerned with the efficient

integration of suppliers, factories, warehouses and stores

so that merchandise is produced and distributed:

In the ri ht uantities

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To the right locations

At the right time

In order to

Minimize total system cost

Satisfy customer service requirements


LESSONS TO LEARN

Supply Chain involves many Complex Situationsinvolving Inventory, Information and Money Flows.

G-1: Quality Information (Such as, Accurate forecast) reduces

Inventory problems (like, stockout & safety stock)

G-2: Companies do not compete now, their supply chains do

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G-3: A supply chain is as good as its weakest link

G-4: Nearer you are from POS, (generally) more accurate isforecast. So, trim the lead times.



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Evolution of Supply Chain Management

SCMFormation/

Further Refinementof

SCM Capabilities

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1950s 1960s 1970s 1980s 1990s 2000s Beyond

Traditional Mass Manufacturing

Inventory Management/Cost

Optimization

JIT, TQM, BPR,Alliances

xtens ons


Case Study#1: TIPCO FOOD,THAILAND

Thailand has the largest global market share of around 45% inprocessed pineapple.

Tipco Food is one the largest Thai exporters of this product with awhopping figure of Baht 3.7 billion.

In 2006-07, due to weakening of US dollar ($) against most of theglobal currencies, including Baht,

Tipco global supply chain came under tremendous threat.

Look at these steep drops in exchange rate. It has crumbled asfollows:

>late 2006- Baht 41 per $; early 2007 -Baht 37 per $; July 2007-Baht 33 per $.

For the same export, the revenue inflow from exports has gone down byabout one fifth of its value few months back.

Most of these export-oriented supply chains have become non-

competitive in global market.As a protective measure, these export-oriented firms are focusing on

local market to boost their sales. Reference: Bangkok Post: 4 August 2007, p B4.14

LESSONS TO LEARN

Supply Chain involves many Complex Situationsinvolving Inventory, Information and Money Flows.

G-5: Key to success is Responsiveness (Agile Supply Chain),

Efficiency (Lean Supply Chain), Coordination &Synchronization (Strategic Alliance and OperationalEfficiency)


G-6: Global Alliance is an Important Strategic Intent in anInternational Supply Chain

G-7: Supply Chain Decisions are often Dynamic in Nature.Learn to be Adaptive to Changes

G-8: Financial Decisions are often the Guiding Force to theSupply Chain Operations



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Case Study#2: Magnitude of Supply ChainCosts

Example: The Apparel Supply Chains

ManufacturerDistributor

Retailer Customer

Cost per Percent

Shirt Saving

Rs.527.20 0%

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Rs.413.40 28%

Rs.204.50 62%

Manufacturer Distributor Retailer Customer

Ma nu fa ct ure r D is tr ib uto r Retailer Customer


LESSONS TO LEARN

Supply Chain involves many Supply Chain Partners.Cost management is very important in longer andcomplex Supply Chains.

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.May also result in reduction in Lead Time, andLesser Inventory


Case Study#3: B2C@Dell Computers

Websiteor Phone

Dell AssemblyPlant

Customer wants

To buy computer

Master Board

Hard disk

Direct Shipment

SRAM

Customers Order

Concept of Disintermediation in Dell Direct Supply Chain

On-line orders eliminate intermediary steps in the traditional

ordering process, manufacturing policy can be altered by adopting

assemble-to-order or make-to-order strategies18



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LESSONS TO LEARN

G-10: Disintermediation Requires Some Form of Re-intermediation

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G-11: Technology Helps in Supply Chain Efficiency


RM 600 SKUs, 350 Suppliers

75% Domestic, 25% ImportedPM-300 SKUs, 140 Suppliers

5 Plants, 18 PC

6 Regional

Case Study#4: Supply Chain at Asian

Paints

Dealer(15000)

3000 SKUs

Depots (70 No)

70% volume

Distribution Centers

Export & Industrial

Consumers (2000)

Made to stock Made to order


Postponement in Practice

Dealer Tinting System In factory they make Base/white" only

Raw base sent to the dealers

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computer systems at the dealer end

Dealer mixes the desired base and the

colorants with help of the DTS

>2500 dealers have DTS



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LESSONS TO LEARN

Large Number of SKUs is Good for Customization butPoses Tremendous Pressure due to Difficulty inmanageing Stock-outs and Pipeline Inventory

G-12: Try to have a Generic Product as late as possible

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n e supp y c a n.

Differentiate it into a customized one, preferablywhen demand penetrates the supply chain


Case Study#5: Benetton (A wor ld l eader in kni tw ear)

Knitting Dyeing

Dyeing vats for the finished knitted product.Wool Plant in Castrette, near Treviso. Knitt ingdivision. Computerized knitting loomcapable of

automatically producing the most complex product

designsProf. Ravi Shankar (2013-14)

Case Study#5: Benetton Manufacturing

Process Postponement

Purchase Yarn

Dye Yarn

Old Sequence

Purchase Yarn

Knit Garment Parts

New Sequence

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Finish Yarn

Knit Garment Parts

Join Parts

Join Parts

Dye Garment

Finish Garment

This process

is postponed



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LESSONS TO LEARN

G-13: Delayed Product Differentiation Helps in

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e uc ng a e y oc an ere y upp y a n os .

G-14: Process and/or Product Redesign may helpsupply chain operations


Case Study#6: Logistics Planning inAuto Supply Chains

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Source of Schematic: http://www.engr.uky.edu/me/iaes/group_press/chuah.pdf

LESSONS TO LEARN

G-15: Always Look For Opportunities of Economic of

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ca e, e as compare to

G-16: Outsource your non core-competency area to aReliable supply chain partner, like 3PL/4PL etc.



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Case Study#7: P&G-Dynamics of the Supply

Chain

Siz

e

Customer

Orde

TimeSource: Tom Mc Guffry, Electron ic Commerce and Value Chain Management, 1998

Demand

Retailer OrdersDistributor Orders

Production Plan


Case Study#7: P&G: What ManagementGets...

Size

Customer

Production Plan

Orde


Demand


P&G: What Management

Wants

es

Production Plan

Volu


Customer

Demand



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LESSONS TO LEARN

G-17: Bullwhip Effect Reduces if You Use CPFR(Collaborative planning Forecasting &Replenishment)

G-18: Bullwhi Effect Reduces if You Control Price

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Fluctuations

G-19: Bullwhip Effect Reduces if You Compress LeadTime


Between1995and1999,alargepartofU.S.productivitygrowthcanbeexplainedinjusttwosyllables:WalMart.accordingtoconsultingfirmMcKinsey&Co.

T heoperationalinnovationsthatWalMartpioneeredhaveraisedthebarforallretailers.

Case Study#8: Wal-Mart

ThosewhodidnotcatchupendedthewayofAmes,Bradlees,andKmart.

TrailblazerssuchasWalMartandTargetCorp.haveinstalledproductivityenhancingtechnologiesandestablishedsuppliermanagement practicesthathavevirtuallyremovedsignificantcostsfromthesupplychain.

Theseimprovementsarecreatingrippleeffectsthroughouttheglobalsupplychainforallindustries. Prof. Ravi S hankar (2013-14)

Wal-Mart Strategic goals

Provide customers access to

quality good, when and where

needed at competitive prices

Operations strategy

Logistics structure

Electronic data interchange

Communication between retail stores

Bar coding

Cross docking

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Short cycle times

Low inventory levels

Vendor managed Inventory(VMI)

Everyday Low Pricing (EDLP)

Logistics strategy

Accurate information availability

Rapid transportation

ast respons ve transportat on system

Long lead time items

Stored at DC and shipped as needed

Stable demand items

Continuous replenishmentprograms

Short lead time items

Made to order and cross-docked at DC



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Crossdocking


Relationship between Facilities and Functions along

the Wal-Mart Supp ly Chain

Source:Adapted from Garrison Wieland for Wal-Marts Supply Chain, Harvard Business Review 70(2; MarchApril 1992), pp. 60

An Application in Material Tracking

Using RFID

Material Tracking



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RFID and Other IT Tools in Supply

Chains


VMI in Use

In the Factory

38 At customer sites


LESSONS TO LEARN

G-20: VMI Helps Supply Chain to Become Lean

G-21: POS Information is Key to Supply Chain Planning& Replenishment

G-22: Cross Docking is an Effective Distribution Strategy


as e ps n or er ea - me, esser a er a an ngand Lower Cost of Distribution

G-23: Effectiveness of VMI requires Coordination betweenSupply Chain Partners

G-24: Use POS Technology and Communication Networkto Facilitate the Coordination and Synchronization in aSupply Chain



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LESSONS TO LEARN

G-25: VMI (Vendor Managed Inventory), EDLP(Every-day Low Pricing), Cross-docking, CPRF(Collaborative Planning, Forecasting &

Replenishment), Coordination among Supplychain artners, S nchronous deliver , and

40Prof. Ravi S hankar (2013-14)

Effective use of IT are key to the success ofsupply chains of organised retail

Case Study#9: Nano Plant


New Product Design


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LESSONS TO LEARNG-26: Locate your Vendor Nearby

G-27: Just-in-time (JIT) and Kaizen (continuousImprovement) must go hand-in-hand

G-28: Develop Strategic Partnership in your Supply Chain


G-29 Focus on Vendor Development

G-30: Rationalize the Vendor-base

G-31: Money lies in Cost cutting and InnovativeProduct/Process/Supply-chain Design

G-32: Learn to manage the Supply Chain Risks (There areman Prof. Ravi Shankar (2013-14)

Case Study#10

RISK POOLING

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CENTRALISATION OF

STOCKING


Factory

Central

warehouse

Market two



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Factory

Warehouse 1

Warehouse 2

Decentralized Warehouses

Factory

Market one

Market two

Centralised

warehouse at

Ayutthaya

Supplier

Centralization of stocking in a multi-echelon

distribution system

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Traditional: Decentralized System

Warehouses

Retailers



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Supplier

Centralized Systems

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Warehouse

Retailers


LESSONS TO LEARN

G-33: If You Pool Risks in a Supply Chain (say, byCentralised Warehousing), Counter-measure to

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ope up w s say, a e y oc o a n a n aService Level under Demand Uncertainty) will GoDown as Compared to Disaggregated Risks (say,Decentralised Warehouses)


Case Study#11: FCI

The Food Corporation of India was set up on 14th

Jan. 1965 by an Act of Parliament. Its Primary

Objectives are as follows :

To provide the farmers remunerative prices.

,particularly to the vulnerable section of the society

and

To maintain buffer stocks as a measure of Food

Security

To intervene in the market for price stabilization.



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PUNJAB-55%, HARYANA-30%,UTTAR PRADESH-10%,

MADHYA PRADESH-2% &

RAJASTHAN-2%

5 MAJOR WHEAT PROCURING STATES

WHEAT DEFICIT STATES- 23


FCI- STORAGE CAPACITY


Major Issues Due to Lack of

Functional Alignment

Intermediaries in

Procurement

Lack of Storage

capacity



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Transportation



Poor Warehousing leads

to wastage


Failure of states to pickup food grains at propertime leads to wastage



Railways often do notprovide basic railheadinfrastructure, clearreceipts or clean wagonsto FCI, despite the fact

that FCI is its secondlargest customer.Prof. Ravi S hankar (2013-14)

LESSONS TO LEARN

==Many Vital Supply Chains are Worst Managed

==Warehousing often a Weak Link

== Supply Chain Management is Full of Opportunities

G-34: Reduced Supply Chain Wastages Makes it

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ect ve

G-35: Food Security is Linked to Effective SupplyChain Management

G-36: Every Supply Chain is Different=> Manage it toits Merit



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Case Study#12Emergency upply ha n


Gujarat Earthquake on

26 January 2001


After Gujarat Earthquake

on 26 January 2001


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People in Need of Relief Material

But the Traffic Disruptions


Relief Supply Starting From All

Corners of India


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Moving Towards the Affected Area

AND THE TRAFFIC JAM

LESSONS TO LEARN

Emergency Supply Chain is a Different Ball Game

G-37: Too much may be too Bad in

Emergency Supply Chains

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G-38: Alignment of Functional Strategy and

Coordination are keys to success of a

Emergency Supply Chain

G-39: Quick Response Would Lead to Effective SupplyChains



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Achieving the 21st Century Supply Chain:

Seven More Areas of Opportunity

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Use of low cost

sources

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Focused

manufacturing

strategies

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Globally aligned

operations

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Built in agility

2

Creative use of

strategic partnerships

OEMs, Outsourcing,

sub contracting 7

Industry wide

solutions

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Distribution,

logistic

Optimisation

Multiple Channels

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Prof. Ravi Shankar 2011-12

THE GOAL IS TO CREATE AN AGILE

BORDERLESS SUPPLY CHAIN THAT IS BASED ON

LOWEST COST ECONOMICS

Thank You


2_session_on_a few cases & many lessons in scm

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