SUPPLY CHAIN SUPPLY CHAIN MANAGEMENTMANAGEMENT

Presented byPresented byAkash RanaAkash Rana

33rdrd year year09A64109A641

INTRODUCTIONINTRODUCTION

A supply chain is a network of facilities and distribution optionA supply chain is a network of facilities and distribution option

that performs the functions of procurement of materials trans-that performs the functions of procurement of materials trans-

formation of these materials into intermediate and finished pro-formation of these materials into intermediate and finished pro-

ducts and the distribution of these finished product to customerducts and the distribution of these finished product to customer

Definit ion of scmDefinit ion of scm

The supply chain is the network of organizations that are involvedThe supply chain is the network of organizations that are involvedthrough upstream and down Stream linkages, in different processthrough upstream and down Stream linkages, in different processand activities that produce value in the form of products and ser- and activities that produce value in the form of products and ser- vices in the hand of ultimate customer.vices in the hand of ultimate customer.

Objective of scmObjective of scm

QualityQualitySpeedSpeedDependabilityDependabilityFlexibilityFlexibilityCostCost

Elements of scmElements of scm

CustomerCustomerPlanningPlanningPurchasingPurchasing InventoryInventoryProductionProductionTransportationTransportation

Levels of scmLevels of scm• Supply Chain Design

• Resource Acquisition• Long Term Planning (1 Year ++)

Strategic

• Production/ Distribution Planning

• Resource Allocation• Medium Term Planning (Qtrly,Monthly)

Tactical

• Shipment Scheduling

• Resource Scheduling• Short Term Planning (Weekly,Daily)

Operational

FACTORE OF SCMFACTORE OF SCM

Inventory managementInventory managementWarehousingWarehousingTransportationTransportation

INVANTORYINVANTORY

Inventory or stock as it is more commonly calledInventory or stock as it is more commonly calledis defined as the stored accumulation of material is defined as the stored accumulation of material

resources in a transformation system.Some time resources in a transformation system.Some time the inventory is also used to describe any capital the inventory is also used to describe any capital Transforming resources,such as rooms in a Transforming resources,such as rooms in a

hotel hotel Or cars in a vehicles- hire firm. Or cars in a vehicles- hire firm.

Why inventories are necessaryWhy inventories are necessaryTo satisfy the customer demands without time To satisfy the customer demands without time

lag.lag.To cover time required for procurement of To cover time required for procurement of

material.material.To cater to fluctuations in demand.To cater to fluctuations in demand.Seasonal demand of products.Seasonal demand of products.Production constraints of suppliers.Production constraints of suppliers.To retain supplier goodwill.To retain supplier goodwill.

Type of InventoryType of InventoryBuffer inventoryBuffer inventoryCycle inventoryCycle inventoryDe-coupling inventoryDe-coupling inventoryAnticipation inventoryAnticipation inventoryPipeline inventoryPipeline inventory

Inventory Control Inventory Control

Inventory control is the technique of maintaining the size Inventory control is the technique of maintaining the size of the inventory at some desired level keeping in view the of the inventory at some desired level keeping in view the best economic interest of an organization.best economic interest of an organization.

Objectives of inventory Objectives of inventory controlcontrol

Protection against fluctuations in demandProtection against fluctuations in demandBetter use of men, machines and materialBetter use of men, machines and materialProtection against fluctuations in outputProtection against fluctuations in outputControl of stock volumeControl of stock volumeControl of stock distributionControl of stock distribution

Major activit ies of inventory Major activit ies of inventory controlcontrol

Planning the inventories.Planning the inventories.Procurement of inventories.Procurement of inventories.Receiving and inspection of inventories.Receiving and inspection of inventories.Storing and issuing the inventories.Storing and issuing the inventories.Recording the receipt and issues of Recording the receipt and issues of

inventories.inventories.  

Major activit ies of inventory Major activit ies of inventory control (cont’d)control (cont’d)

Physical verification of inventories;Physical verification of inventories;Follow-up function;Follow-up function;Material standardization and substitution.Material standardization and substitution.

WAREHOUSEWAREHOUSE

Storage or warehousing provides the place utility Storage or warehousing provides the place utility

as part of logistics for any business and along as part of logistics for any business and along withwith

Transportation is a critical component of customer Transportation is a critical component of customer

services standard.services standard.

Need For WarehouseNeed For Warehouse

Seasonal ProductionSeasonal ProductionAgricultural commodities are harvested during Agricultural commodities are harvested during certain seasons their consumption or use takes certain seasons their consumption or use takes places through out the year. Therefore, these isplaces through out the year. Therefore, these isneed for proper storage for there commoditiesneed for proper storage for there commoditiesfrom where they can be supplied as and when from where they can be supplied as and when required.required.

Seasonal demand Seasonal demand

There are certain goods, which are demanded There are certain goods, which are demanded seasonally like woolen garments in winters or seasonally like woolen garments in winters or

umbrellas in the rainy season.The production umbrellas in the rainy season.The production of those goods taken places through out the of those goods taken places through out the year to meet the seasonal demand. thereforeyear to meet the seasonal demand. therefore there is a need to store these goods in a warethere is a need to store these goods in a warehouse to make them available at the time need. house to make them available at the time need.

Large-scale production Large-scale production

In case of manufactured goods, now a day In case of manufactured goods, now a day production takes places to meet the existing production takes places to meet the existing as well as future demand of the product, as well as future demand of the product, manufacturers to enjoy the benefits of large manufacturers to enjoy the benefits of large scale, production, which is more economicalscale, production, which is more economical So the finished products, which are producedSo the finished products, which are producedon a large scale, need to be stored properly on a large scale, need to be stored properly till they are cleared by sales.till they are cleared by sales.

Quick supply Quick supply

Both industrial as well as agricultural goodsBoth industrial as well as agricultural goods are produced at some specific places butare produced at some specific places but consumed through out the country.Thereforeconsumed through out the country.Thereforeit is essential to stock there goods near the it is essential to stock there goods near the place of consumption, so that without makingplace of consumption, so that without makingany delay these goods are made available toany delay these goods are made available tothe consumers at the time of their need.the consumers at the time of their need. time of their need.time of their need.

Continuous ProductionContinuous Production

Continuous production of goods in factories Continuous production of goods in factories requires adequate supply of raw materials,so requires adequate supply of raw materials,so there is a need to keep sufficient quantity ofthere is a need to keep sufficient quantity ofstock of raw material in the warehouse to stock of raw material in the warehouse to ensure continuous production. ensure continuous production.

Prices Stabil izationPrices Stabil izationTo maintain a reasonable level of the price of To maintain a reasonable level of the price of goods in the market there is a need to keep goods in the market there is a need to keep sufficient stock in warehouse,scarcity in supply sufficient stock in warehouse,scarcity in supply of goods may increase their price in the marketof goods may increase their price in the market again excess production and supply may alsoagain excess production and supply may also lead to fall in prices of the product. By main- lead to fall in prices of the product. By main- taining a balance of supply of goods, warehou-taining a balance of supply of goods, warehou-sing leads to price stabilization. sing leads to price stabilization.      

Types of WarehousesTypes of Warehouses

Warehouses have been classified as under:Warehouses have been classified as under: Private WarehousesPrivate Warehouses Public WarehousesPublic Warehouses Government WarehousesGovernment Warehouses Bonded WarehousesBonded Warehouses Co-operative WarehousesCo-operative Warehouses

Private WarehousePrivate WarehouseThe warehouses which are owned and managed by the

manufacturers or traders to store, exclusively, their

own stock of goods are known as private warehouses.

Generally these warehouse are constructed by the far-

mers near their fields, by wholesalers and retailers

Near their business centres and by manufacturers near

their factories. The design and the facilities provided

there in are according to the nature of products to be

stored.

Public WarehousePublic WarehouseThe warehouses which are run to store goods of the general The warehouses which are run to store goods of the general

public are known as public warehouse. Any one can store his public are known as public warehouse. Any one can store his

goods in these warehouse on payment of rent. An individual, goods in these warehouse on payment of rent. An individual,

a partnership firm or a company may own these warehouses. a partnership firm or a company may own these warehouses.

To start such warehouse a license from the government is To start such warehouse a license from the government is

required. The government also regulates the function and ope required. The government also regulates the function and ope

-rations of warehouse. Mostly these warehouse are used by -rations of warehouse. Mostly these warehouse are used by

manufacturers, wholesalers, exporter, impoter government manufacturers, wholesalers, exporter, impoter government

agencies, etc agencies, etc

Government WarehouseGovernment Warehouse

These warehouses are owned, managed and controlled These warehouses are owned, managed and controlled

by central and state governments or public corporationby central and state governments or public corporationor local authorities both government and private enteror local authorities both government and private enter-prises may use these warehouse to store their goods.-prises may use these warehouse to store their goods. Central warehousing corporation of India, state ware- Central warehousing corporation of India, state ware- housing corporation of food. Corporation of India arehousing corporation of food. Corporation of India areexample of agencies maintaining government example of agencies maintaining government Warehouse.Warehouse.

Bonded warehouseBonded warehouse

These warehouses are owned, managed and controlledThese warehouses are owned, managed and controlled by government as well as private agencies. Private bon-by government as well as private agencies. Private bon- ded warehouses have to obtain license from the govern ded warehouses have to obtain license from the govern -ment. Bonded warehouses are used to store imported-ment. Bonded warehouses are used to store imported goods for which import duty is yet to be paid. Incase ofgoods for which import duty is yet to be paid. Incase of imported goods the importers are not allowed to takeimported goods the importers are not allowed to take away the goods from the ports until such duty is paid. away the goods from the ports until such duty is paid. These warehouses are generally owned by dock autho-These warehouses are generally owned by dock autho-rities and found near the ports.rities and found near the ports.

Co-operative WarehouseCo-operative Warehouse

These warehouses are owned, managed and controlledThese warehouses are owned, managed and controlled

by co-operative societies. They provided warehousingby co-operative societies. They provided warehousing

facilities at the most economical rates to the membersfacilities at the most economical rates to the members

of their society.of their society.

Warehousing is becoming significant to Warehousing is becoming significant to achieve the following objectives:achieve the following objectives:

To reduce inventoryTo reduce inventoryTo reduced labor costsTo reduced labor costsTo increase storage capacityTo increase storage capacityTo increase customer serviceTo increase customer serviceTo increase inventory accuracyTo increase inventory accuracy

TRANSPORTATIONTRANSPORTATIONTransportation is the process of strategically Transportation is the process of strategically managing the procurement, movement and managing the procurement, movement and storage of materials (and related information storage of materials (and related information flows) through the organization and its f lows) through the organization and its marketing channelsmarketing channels

Factors affecting Factors affecting transportation performancetransportation performance

TRANSPORTATION

Transportation performance

Cost Speed Consistency

Cost of transportationCost of transportation

The payment for movement between two geographicalThe payment for movement between two geographicallocations and expenses related to administration and locations and expenses related to administration and maintaining in-transit inventory. maintaining in-transit inventory.

Speed of transportationSpeed of transportationo The time required to complete a specific The time required to complete a specific

movement.movement.o Transport firms capable of providing faster Transport firms capable of providing faster

services normally charge higher rate.services normally charge higher rate.o The faster the transportation services, shorter The faster the transportation services, shorter

is the time interval during which the inventory is the time interval during which the inventory is in transit and unavailable. is in transit and unavailable.

Consistency of Consistency of transportationtransportation

o Refers to variations in time required to perform a Refers to variations in time required to perform a specific movement over a number of shipments.specific movement over a number of shipments.

o Consistency is a measure of dependability of Consistency is a measure of dependability of transportation.transportation.

o Inconsistency in transportation leads to Inconsistency in transportation leads to inventory safety stocks required to protect inventory safety stocks required to protect against unpredictable service breakdowns.against unpredictable service breakdowns.

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Transportation FunctionalityTransportation Functionality

Product Movement Product Storage

Product MovementProduct Movement• Primary function is the movement up and Primary function is the movement up and

down the value chain.down the value chain.• As transportation uses temporal, financial As transportation uses temporal, financial

and environmental resources, the and environmental resources, the movement of materials should take place movement of materials should take place only when it enhances the product value. only when it enhances the product value.

Product StorageProduct Storage

• Temporary storage through vehicles becomes Temporary storage through vehicles becomes expensive as in-transit storage is required to be expensive as in-transit storage is required to be moved again in a short duration of time.moved again in a short duration of time.

• Sometimes temporary storage becomes Sometimes temporary storage becomes advantageous as the cost of unloading and advantageous as the cost of unloading and reloading the product in a warehouse may exceed reloading the product in a warehouse may exceed the daily charge of storage in transportation the daily charge of storage in transportation vehicles.vehicles.

• Many times where the warehouse space is limited, Many times where the warehouse space is limited, utilizing transportation vehicles becomes a viable utilizing transportation vehicles becomes a viable option. option.

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Principles of TransportationPrinciples of Transportation

Economies of Scale Economies of Distance

Economies of ScaleEconomies of Scale

Transportation cost per unit of weight Transportation cost per unit of weight decreases when the size of the shipment decreases when the size of the shipment increases i.e. shipments that utilize the increases i.e. shipments that utilize the entire vehicle’s capacity like truck load entire vehicle’s capacity like truck load (TL) cost less per kg than less than truck (TL) cost less per kg than less than truck load (LTL) shipmentsload (LTL) shipments

Economies of DistanceEconomies of Distance

Transportation cost per unit of distance Transportation cost per unit of distance increases at a decreasing rate as distance increases at a decreasing rate as distance increases. Also called “Tapering Principle”increases. Also called “Tapering Principle”

Features of Different Modes Features of Different Modes of Transportationof Transportation

Mode of transportationMode of transportation

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Modes of Transportation

Rail Highway Water Pipeline Air

RailRailCapability to transport large shipments Capability to transport large shipments

economically with more frequency.economically with more frequency.Bulk industries and heavy manufacturing Bulk industries and heavy manufacturing

use railways more frequently.use railways more frequently.

HighwayHighway

Growth of motor carrier industry has Growth of motor carrier industry has resulted into door-to-door operating resulted into door-to-door operating flexibility and speed of inter-city flexibility and speed of inter-city movement.movement.

Compared to railways, motor carriers have Compared to railways, motor carriers have relatively small fixed investments in relatively small fixed investments in terminal facilities and operate on publicly terminal facilities and operate on publicly maintained highways.maintained highways.

High labor cost.High labor cost.

WaterWater• Capacity to move extremely large shipments.Capacity to move extremely large shipments.• Typically bulk commodities such as mining , Typically bulk commodities such as mining ,

chemicals, cement, and certain selected chemicals, cement, and certain selected agricultural products are transported by ocean agricultural products are transported by ocean going vessel.going vessel.

• Unless the point of origin and point of Unless the point of origin and point of destination are adjacent to a waterway, it needs destination are adjacent to a waterway, it needs to be supplemented by rail or trucks. to be supplemented by rail or trucks.

PipelinesPipelinesUsed for transporting natural gas,manufactured Used for transporting natural gas,manufactured

chemicals, pulverized dry bulk materials such chemicals, pulverized dry bulk materials such as cement and flour via hydraulic suspensions, as cement and flour via hydraulic suspensions, sewage and water within the cities and sewage and water within the cities and municipalities.municipalities.

As pipelines are not labor intensive, variable As pipelines are not labor intensive, variable operating cost is extremely low once the operating cost is extremely low once the pipeline is constructed.pipeline is constructed.

No empty container or vehicle that must be returnedNo empty container or vehicle that must be returned

AirAirThough the freight cost is very high, the Though the freight cost is very high, the

same may be trade-off with reduced same may be trade-off with reduced warehousing or inventory.warehousing or inventory.

Airfreight is justified in following situations:Airfreight is justified in following situations:(a)(a)High value productsHigh value products(b)(b)PerishablesPerishables(c)(c)Limited marketing period.Limited marketing period.(d)(d)Emergency.Emergency.

ENTERPRICE RESOURCE ENTERPRICE RESOURCE PLANNINGPLANNING

Enterprise resource planning (ERP) System integrateEnterprise resource planning (ERP) System integrateinternal and external management information acrossinternal and external management information acrossan entire organization, embracing finance/account, an entire organization, embracing finance/account, manufacturing sales and services, customer manufacturing sales and services, customer

relationshiprelationshipmanagement ,etc. ERP systems automate this activitymanagement ,etc. ERP systems automate this activitywith an integrated software application. Their purpose with an integrated software application. Their purpose is to facilitate the flow of information between all busi- is to facilitate the flow of information between all busi- ness function inside the boundaries of the organizationness function inside the boundaries of the organizationand manage the connections to outside stakeholder.and manage the connections to outside stakeholder.

Advantage of ERPAdvantage of ERPSales forecasting, this allows inventory Sales forecasting, this allows inventory

optimization ERPoptimization ERPChronological history of every transaction Chronological history of every transaction

through relevant data compilation in every through relevant data compilation in every area of operationarea of operation

Oder tracking, from acceptance through Oder tracking, from acceptance through fulfillmentfulfillment

Case StudyCase Study

Supply Chain of Namdhari Supply Chain of Namdhari FreshFresh

Food and VegetableFood and Vegetable

Namdhari FreshNamdhari Fresh

Started in 2000, Bidali near Bangalore Started in 2000, Bidali near Bangalore Unit of namdhari seedsUnit of namdhari seedsDiversified into production, retail, and Diversified into production, retail, and

exportexportTurnover RS.60 crore in 2009-10Turnover RS.60 crore in 2009-1014 retails stores in Bangalore14 retails stores in Bangalore

ProductionProductionMore than 1800 production house in More than 1800 production house in

different agro- climatic zonesdifferent agro- climatic zonesNetwork with more than 2000 farmers Network with more than 2000 farmers

under contract farmingunder contract farmingTest, weight and transport in refrigerator Test, weight and transport in refrigerator

vehicles to pack house vehicles to pack house Demand from export segment 3-4 month Demand from export segment 3-4 month

in advancein advance

PackingPacking

Check quality, weight and store in per cool Check quality, weight and store in per cool chamberschambers

Sorting, grading, and packing in pack Sorting, grading, and packing in pack house on tablehouse on table

Proper dress code of workerProper dress code of worker

Supply of two segmentsSupply of two segments

RetailRetailExportExport

RetailRetail Weekly order from retails shops indicating daily Weekly order from retails shops indicating daily

requirementsrequirements Packed produce is placed in crates and stored in Packed produce is placed in crates and stored in

cold chamberscold chambers Store wise creates (names printed) for easy Store wise creates (names printed) for easy

identification, packing and transportation identification, packing and transportation Transported to stored before 6 am by refrigerated Transported to stored before 6 am by refrigerated

vehiclesvehicles Unsold stock information is conveyed to adjust to Unsold stock information is conveyed to adjust to

nest day of supplynest day of supply Incase of any change, convey by mail or phoneIncase of any change, convey by mail or phone

ExportExport

Order received in advance specifying Order received in advance specifying parametersparameters

Grading and packing according to Grading and packing according to specificationspecification

Transport by ship and airTransport by ship and air

Supply chain of fruits and Supply chain of fruits and vegetables under own vegetables under own

productionproduction4-6 types of vegetable cut and packed into 4-6 types of vegetable cut and packed into

different packetdifferent packetSimilar salads and spoutsSimilar salads and spoutsSupply along with fruits and vegetableSupply along with fruits and vegetable

Other ProductOther Product Groceries, beverages, dairy products, bakery item, Groceries, beverages, dairy products, bakery item,

organic product, juices, and sugar free product.organic product, juices, and sugar free product. Sell goods quality products of few companiesSell goods quality products of few companies Order twice a week from store to central processing Order twice a week from store to central processing

unit and forwarded to dealersunit and forwarded to dealers Dealers supply the order quantity directly to stores Dealers supply the order quantity directly to stores

twice in a weektwice in a week Some groceries and also sold under own brand nameSome groceries and also sold under own brand name Grocery procured from market cleaned, graded, Grocery procured from market cleaned, graded,

weighted and packedweighted and packed

IMPORTIMPORT

Import some exotic fruits directly from Import some exotic fruits directly from Australia, Canada, USA and otherAustralia, Canada, USA and othercountry.country.

ConclusionConclusion

Supply chain management - delivering the rightSupply chain management - delivering the rightproduct to the right place, at the right time andproduct to the right place, at the right time andat the right price - is one of the most powerful at the right price - is one of the most powerful engines of business transformation. engines of business transformation.

THANK YOUTHANK YOU