overview of supply chain management-1
TRANSCRIPT
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Supply Chain Management
PRAVIN KUMAR
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Supply Chain Management
Definition
Supply Chain-A network of all facilities, functions,A network of all facilities, functions,
activities, associated with flow andactivities, associated with flow and
transformation of goods and servicestransformation of goods and services
from raw materials suppliers tofrom raw materials suppliers tocustomer, as well as the associatedcustomer, as well as the associated
information flows is known as supplyinformation flows is known as supply
chain.chain.
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Supply Chain Management
(Continued)
Definition
Supply Chain Management-Supply Chain Management (SCM) is
collaborative effort of Multiple channel
members to design, implement and seamless
value added processes to meet the real needsof the end customer.
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PartsParts
SupplierSupplier WarehousesWarehousesManufacturerManufacturer RetailersRetailersDistributorsDistributors BuyerBuyer
Flow of Goods, Flow of Ownership
Flow of Information, Flow of Money
4- Flows in Supply Chain
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Supply Chain Illustration
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Supply Chain for Denim Jeans
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Supply Chain for Denim Jeans
(cont.)
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DELL ComputersSupply Chain
Mother
Board
Hard Disk
.
.
.
RAM
Dell Assembly
Plant
Website or
Phone
Customer wants
to buy Computer
Direct Shipment
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Supply Chain Processes
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ObjectivesofSCM
1. To improve customer response.
2. To improve product quality.
3. To reduce Lead-time of manufacturing,transportation, information flow.
4. To reduce inventory cost.
5. Better demand forecasting.
6. To synchronize the information flow with the
demand ofbuyer.7. To select the Suppliers and Distributors.
8. To outsource globally.
9. To measure the performance ofSupply Chain.
10. To implement On-line marketingand e-
Business.
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Supply Chain Uncertainty
One goal in SCM: respond to uncertainty in
customer demand withoutcreating costly excessinventory
Negative effects ofuncertainty
lateness
incomplete orders Inventory
insurance against supplychain uncertainty
Factors that contribute touncertainty
inaccurate demand forecasting long variable lead times
late deliveries
incomplete shipments
product changes batch ordering
price fluctuations and discounts
inflated orders
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Bullwhip Effect
9
The M cG raw -H ill Com panies, Inc., 20 04
O
rder
Q
uantity
Time
R eta i ler s Orders
O
rder
Q
ua
ntity
Time
W h olesa ler s Orders
O
rder
Q
uantity
T i m e
M an ufacturers Orders
The m agn ificat ion of variabi li ty in orders in the supply-
chain
The m agnif icat ion of variabi li ty in o rders in the supp ly-
chain
A lot of
reta ilers eac h
w ith l i ttle
variab il ity in
the ir orders .
A lot of
reta i lers each
w ith l i ttle
variab il ity in
the ir orders .
can lead to
greater variabil i ty
for a few er numb er
of wholesa lers ,
and
can lead to
greater variabil i ty
for a few er numb er
of wholesa lers ,
and
can lead to
even g reater
variabil i ty for a
single
manufacturer .
can lead to
even g reater
variab il ity for a
single
manufacturer .
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Emerging issues in
Supply Chain Management
Vendor Managed Inventory (VMI):
In this case, Supplier decides on the
appropriate inventory levels of eachproduct and the inventory policies to
maintain these level. e.g. Campbell soup,
Maruti, Tata Motors, LG etc.
Third Party Logistics (3PL):It is simply the use of outside company to execute
part or complete material management and product
distribution function ofa firm.
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Emerging issues in
Supply Chain Management(Continued)
Outsourcing:
It means handing over certain logistics related activities toanother company. Outsourcing ensures strategic growth, adding
technological strength, and improving market access.
Outsourcing is defined as the act of movinga firms internal activities and decisionresponsibility to outside providers
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Riskpooling:
It mainly involve the concept of centralized warehousing.
Centralized warehousing reduces safety stocks and average
inventory in the system. This is clear from the argument that incase of unequal demand reallocation of inventory is easier from
a central warehouse. The higher the coefficient of variation, the
greater the advantage in keepinga central warehouse.
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Emerging issues in
Supply Chain Management(Continued)
Reverse Logistics:
Flowofproduct at the end of itslife from customer to
manufacturer for reprocessing.
Cross Docking
Warehouse works as only coordinating point in a
supply chain the product directly shipped to
customer
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Mass Customization
Definition
Mass customization is a term used todescribe the ability of a company to
deliver highly customized products andservices to different customers
The key to mass customization iseffectively postponing the tasks ofdifferentiating a product for a specificcustomer until the latest possible point inthe supply-chain network
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E-Procurement
Direct purchase from suppliers over the Internet
E-marketplaces
web sites where companies and suppliers conductbusiness-to-business activities
Reverse auction a company posts orders on the Internet for
suppliers to bid on
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Online Sourcing/
Procurement
Process
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Online Sourcing/
Procurement
Process (cont.)
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Online Sourcing/
Procurement Process (cont.)
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Source: Adapted from Garrison Wieland for Wal-Marts Supply Chain,
Harvard Business Review70(2; MarchApril 1992), pp. 6071.
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Transportation
Rail
low-value, high-density, bulkproducts, raw materials, inter-
modal containers not as economical for small
loads, slower, less flexible thantrucking
Trucking
main mode of freight transport
in U.S. small loads, point-to-pointservice, flexible
More reliable, less damage thanrails; more expensive than railsfor long distance
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Transportation (cont.)
Air
most expensive and fastest, mode of freighttransport
lightweight, small packages
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Transportation (cont.)
Water
low-cost shipping mode
primary means of international shipping
U.S. waterways slowest shipping mode
Inter-model
combines several modes of shipping-truck,water and rail
key component is containers
Pipeline transport oil and products in liquid form
high capital cost, economical use
long life and low operating cost
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Global Logistics Management
Challenges for logistics managers
Global distribution strategies
Logistics intermediaries and facilitators
objectives oflogistics outsourcing
Steps for logistics outsourcing
Selection criteria of third party logistics provides.
5
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Managements challenge is to evaluate the environmental and
cultural make-up of each prospective market and then developa logistics system that will meet what may be radically
different customers needs. Extended supply chains, multiple
languages, different channel members, distinct regulations, and
a myriad of cultural factors all combine to make the entire
logistics process much more complex than managers may be
used to.
Challenges for logistics managers:
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Global distribution strategies
Exporting:
Exporting occurs when the firm engages the services ofa middleman to sell its products overseas. This middleman may
simply buy the goods from the manufacturer directly, then resell
them in some attractive market of formers choosing.
Alternatively, the intermediary may act as abroker, searching for
a foreign buyerand putting them in contact with the seller.
(Continued)(Continued)
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Advantages:
There are usually no monatory or contractual ties in
foreign market.
Management can terminate the effort quickly if sales
do not materialize.
Risk is minimum.
Disadvantages: Managers have very little control over how their
product is handled.
Markets, pricing, promotion, and distribution are all
determined by the middleman.
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Licensing:
Licensing is a strategy that provides a bit more control
over the marketing process without a substantial increase inrisk. With a license, a company in one country permits a firm in
another to make a product, utilize a recipe, or employ some
other process that belong to the first party.
Limitation: The licensee always has the potential of
becoming a competitor.
(Continued)(Continued)
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Joint Ventures:
Joint ventures occur when one company buys an
ownership interest in another firm. The investor can now
exert much more control via direct managerial input owing
to its financial partnership. Joint Ventures also allows theinvesting firm to utilize the specialized skill of its local
partner as well as have immediate access to a local
distribution system.
Limitations: Risk is higher and flexibility is lower
because of equity position has been established in the
partner.
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Ownership: ownership of a foreign subsidiary provides a
firm the highest degree of control over its international
marketing effort, but with higher levels of risk.
Advantage:
Ownership offers total control, permitting management to
operate without the need to accommodate a partner.
Customs duties and other import taxes may be eliminated
since the subsidiary is, for all intents and purposes, a
domestic entity in that country.
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Disadvantages:
Flexibility is lost because the firm has made a
long-term commitment to the foreign market.
There is always some risk of government
nationalization of foreign-owned business.
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Logistics intermediaries and facilitators
International freight forwarders focus primarily on
arranging international transportation. Their task is to
combine many small shipments into a single large one that
then qualifies for a lower transportation rate. Non vessel-owning common carriers (NVOCCs) specialized
in less-than container load ocean shipment and perform some
of the same functions as ocean freight forwarders. Unlike
freight forwarders, who usually act as a shippers agent,
NVO
CCs are common carriers utilizing containers ratherthan vehicles or vessels. In fact, freight forwarders can be
NVOCCs biggest customers. An NVOCC takes the shipments
form freight forwarders and combine them with other goods
going to same place.
(Continued)(Continued)
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Export management companies (EMCs) are used when a
firm wishes to shell its products in a foreign market but lacks
the resources or expertise to conduct the business itself.
EMCs function like external export departments, acting as
agents for domestic firms in overseas markets by eitherselling a product themselves or taking orders for their clients
products.
Export trading companies are in business of exporting goods
and services. They locate overseas buyers and handle most of
the export arrangements, including documentation, inland and
overseas transportation, and the meeting of foreign
government regulations. In essence, they attempt to combine
all facets of international business: sales, finance,
communications, and logistics. Ex: Sogo Shosha of Japan
(Continued)(Continued)
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Export packers supply packaging service for overseas
shipments when the shipper lacks the equipment or expertise
to do it itself. The benefits of these intermediaries are
adequate protection for the product and compliance with all
packaging regulations throughout the channel. In the first
instance, the length and complexity of the channel, transit
time, and the sophistication of the entire logistics system must
be considered.
Customs brokers shepherd goods through the customs
process. They ensure compliance with all local laws, that
documentation is correctly completed, and that any disputes
that may arise are resolved quickly in as favorable a manner
to the shipper as possible. Together with the variety of
customs procedures, restrictions, and requirements that differ
in each country, the job of facilitating export shipments across
international borders requires a specialist- the customs
broker.
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Objectives oflogistics outsourcing
Improved strategic focus
Lowered cost
Easier market expansion
Increased flexibility
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Steps for logistics outsourcing
1. Know where you want to go.
2. Clarify your needs and objectives.
3.S
elect best fit based on your most important criteria.4. Make sure both sides are clearabout service requirements.
5. Have an implementation Plan.
6. Ensure complete support from upper management.
7. Have open and honest communication Channel.
8. Plan an exit strategy.
9. Have consistent checkpoint meetings.
10. Maintain the open communications initially established.
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3PL Functions
Transportation
Warehousing
Freight consolidation and distribution
Product marking, labeling, and packaging
Inventory management
Traffic management and fleet operations
Freight payment and auditing
Cross docking Product returns
Order management
Carrier selection
Rate negotiation
Logistics information systems
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3PL selection Criteria
Cost of service
Quality of service
Compatibility
Long-term relationships
Reputation of the company
Performance measurement
Willingness to use logistics manpower
Flexibility
Quality of management
Information sharing and mutual trust Information technology capability
Experience in similar products
Financial performance
Geographical spread
Range of service provided
Risk management
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Now, Fire Your Questions.
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