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SESSION 1 -2SESSION 1 -2

Introduction to Supply Chain

Basic terminology and concepts of supplychain management.

Facilities, function, types

Need, benefits

elements

challenges

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Supply chain management-definedSupply chain management-defined

Supply chain management is a set ofSupply chain management is a set of

approaches utilised to efficiently integrateapproaches utilised to efficiently integrate

suppliers, manufacturers, warehouses andsuppliers, manufacturers, warehouses and

storesstores , so that merchandise is produced and, so that merchandise is produced anddistributed at the right quantities , to the rightdistributed at the right quantities , to the right

location and at the right time, in order tolocation and at the right time, in order to

minimise system wide costsminimise system wide costs while satisfyingwhile satisfying

service levelservice level requirements.requirements.

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WarehousesWarehouses

FactoriesFactories

Processing centersProcessing centersDistribution centersDistribution centers

Retail outletsRetail outlets

OfficesOffices

FacilitiesFacilities

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Functions and ActivitiesFunctions and Activities

ForecastingForecastingPurchasingPurchasing

Inventory managementInventory management

Information managementInformation managementQuality assuranceQuality assurance

SchedulingScheduling

Production and deliveryProduction and deliveryCustomer serviceCustomer service

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Typical Supply ChainsTypical Supply Chains

PurchasingReceiving Storage Operations Storage

Production Distribution

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Typical Supply Chain for a ManufacturerTypical Supply Chain for a Manufacturer

Supplier

Supplier

Supplier

Storage

}Mfg. Storage Dist. Retailer Customer

T i l S l Ch i f

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Supplier

Supplier}Storage Service Customer

Typical Supply Chain for ayp ca upp y a n or a

ServiceService

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Functional Products v/s innovativeFunctional Products v/s innovativeproductsproducts

ToothpasteToothpasteCarsCars

SoupsSoups

FurnitureFurniture

Mobile phonesMobile phones

.No ideal supply chain model

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1.1.Improve operationsImprove operations2.2.Increasing levels of outsourcingIncreasing levels of outsourcing

3.3.Increasing transportation costsIncreasing transportation costs

4.4.Competitive pressuresCompetitive pressures

5.5.Increasing globalizationIncreasing globalization

6.6.Increasing importance of e-commerceIncreasing importance of e-commerce

7.7.Complexity of supply chainsComplexity of supply chains

8.8.Manage inventoriesManage inventories

Need for Supply ChainNeed for Supply Chain

ManagementManagement

B fit f l h i

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Benefits of upply hainene s o upp y a n

ManagementManagement

Lower inventoriesLower inventoriesHigher productivityHigher productivity

Greater agilityGreater agility

Shorter lead timesShorter lead times

Higher profitsHigher profits

Greater customer loyaltyGreater customer loyalty

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1.1.Demand forecastingDemand forecasting2.2. Procurement planning and controlProcurement planning and control

3.3. Production planning and controlProduction planning and control

4.4. Distribution planning and controlDistribution planning and control

5.5. Inventory managementInventory management

6.6. Transportation managementTransportation management

7.7.Customer order processingCustomer order processing

8.8. Relationship managementRelationship management

Operations DecisionsOperations Decisions

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Elements of Supply Chain ManagementElements of Supply Chain Management

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SUPPLY CHAIN DRIVERSSUPPLY CHAIN DRIVERS

Not new. Value system of Michael PorterNot new. Value system of Michael Porter Why sudden interest?Why sudden interest?

Demanding customersDemanding customers

Shrinking product life cyclesShrinking product life cycles Proliferating product offeringsProliferating product offerings

Growing retailer power in some casesGrowing retailer power in some cases

Doctrine of core competencyDoctrine of core competency

Emergence of specialized logistics providersEmergence of specialized logistics providers

GlobalizationGlobalization

Information technologyInformation technology

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Supply chain managementSupply chain management

ChallengesChallenges

SCM strategies can not be in isolation, have to alignSCM strategies can not be in isolation, have to alignwith another chain- the development chain (newwith another chain- the development chain (newproduct introduction) as well as overall org.product introduction) as well as overall org.

objectives.objectives.

Achieving the best solution with minimizing costs andAchieving the best solution with minimizing costs andmaintaining service levels- Global optimisationmaintaining service levels- Global optimisation

Facing uncertainties and risk customer demand,Facing uncertainties and risk customer demand,travel time, break downs,travel time, break downs,

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Supply chain managementSupply chain management

Needs to be efficient and cost effectiveNeeds to be efficient and cost effective

Across physical infrastructureAcross physical infrastructure

Across entire system-Global optimisationAcross entire system-Global optimisation

Across levels from strategic to tacticalAcross levels from strategic to tactical

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Supply chain management-EvolutionSupply chain management-Evolution

The First (1910-1920)- Ford supply chainThe First (1910-1920)- Ford supply chain

Tight Integration/ Inflexible/ Limited varietiesTight Integration/ Inflexible/ Limited varieties

The Second (1960-1970)- Toyota supply chainThe Second (1960-1970)- Toyota supply chain

Out sourcing- keiretsu system/ wide varieties/Out sourcing- keiretsu system/ wide varieties/efficient /efficient /

The Third (1995-2000)- Dell supply chainThe Third (1995-2000)- Dell supply chain

Integration with suppliers/ IT leverage/Integration with suppliers/ IT leverage/

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Supply chain Management : Key IssuesSupply chain Management : Key Issues

--Issue Components

Distribution network configurationmultiple manufacturing, warehouses,retail distribution

Inventory control Minimize inventory cost, reorder levels,holding costs, Turnover ration

Supply contracts Comprehensive relationship-

price,discounts,volummes, deliveries

Distribution strategies Cross-docking

Supply chain integration and strategicplanning

Not necessarily for big firms only.Intensity of integrations, info sharing

Outsourcing and procurement strategies Trade-off make or buy. Risks ofoutsourcing, e-procurement

Product design Impact on inventory, transport,lead times

IT Data analysis,e-commerce,RFID

Customer value From SCM strategies.

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Supply Chain Management OperationsSupply Chain Management Operations

StrategiesStrategies

STRATEGY WHEN TO CHOOSE BENEFITS

Make to Stock standardized products,relatively predictabledemand

Low manufacturing costs;meet customer demandsquickly

Make to Order customized products,many variations Customization; reducedinventory; improved servicelevels

Configure to Order many variations onfinished product;infrequent demand

Low inventory levels; widerange of product offerings;simplified planning

Engineer to Order complex products, uniquecustomer specifications

Enables response to specificcustomer requirements

C t f l i ti

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Marketing

orientation(competitive

advantage)

Time and

place utility

Efficient

movement to

customer

Proprietaryasset

Natural resources

(land, facilities, andequipments)

Human resources

Financial resources

Information

resources

Management actions

Planning Implementation Control

Logistics Activities

Customer ServiceDemand forecasting

Distributioncommunications

Inventory control

Material handlingOrder Processing

Parts and servicesupport

Plant and warehouse siteselection

Procurement

Packaging

Return goods handling

Salvage and scrap

disposalTraffic and transportation

Warehousing andstorage

Raw

materials

In-process

inventory

Finished

goods

Supplier

s

Logistics management Customer

s

Outputs of

logistics

Components of logistics

management :

Inputs into logistics

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Some Estimates for IndiaSome Estimates for India

------------------------------------------------------------------------------------------------------------------------------------------ LOGISTICS SPENDLOGISTICS SPEND US $ 50 BUS $ 50 B SHARE OF GDPSHARE OF GDP 12 - 13 %12 - 13 %

MAJOR ELEMENTS ARE ( % AGE OF TOTAL ) :MAJOR ELEMENTS ARE ( % AGE OF TOTAL ) : TRANSPORTATIONTRANSPORTATION 3535 INVENTORIESINVENTORIES 2525 PACKAGINGPACKAGING 1111 HANDLING & WAREHOUSINGHANDLING & WAREHOUSING 99 OTHERSOTHERS 66 LOSSESLOSSES 1414 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

LOGISTICS COSTS CAN BE 6 - 7 % OF GROSS SALES CAN GO UPLOGISTICS COSTS CAN BE 6 - 7 % OF GROSS SALES CAN GO UP

TO 14 - 15 %. FOR SECTORS LIKE CEMENT AND BULK MATERIALSTO 14 - 15 %. FOR SECTORS LIKE CEMENT AND BULK MATERIALS..

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