scm-supply chain management-paper presentation

7/27/2019 SCM-Supply Chain Management-Paper Presentation

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A

Paper Presentation On

SUPPLY CHAIN MANAGEMENT

Submitted By:

V.SIVAG.KAMAL

DEPARTMENT OF MECHANICAL ENGG.DHIVYA POLYTECHNIC COLLEGE

CHETPET-606801

Tirruvannamalai District


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SUPPLY CHAIN MANAGEMENT

Introduction

Supply chain management (SCM) is the oversight of materials, information, and finances

as they move in a process from supplier to manufacturer to wholesaler and from retailer

to consumer. Supply chain management involves coordinating and integrating these flows

both within and among companies. The ultimate goal of any effective supply chain

management system is to reduce inventory.

According to definition of APICS ( The Association for Operations Management) Supply

chain management is the design, planning, execution, control, and monitoring of supply

chain activities with the objective of creating net value, synchronizing supply with

demand, and measuring performance globally."

According to the Council of Supply Chain Management Professionals (CSCMP), Supply

chain management encompasses the planning and management of all activities involved in

sourcing, procurement, conversion, and logistics management.

History

Evolution of Supply chain management can be divided into six phases. Creation,

Integration, and Globalization, Specialization Phases One and Two, and SCM 2.0.

1960s - Inventory Management Focus, Cost Control

1970s - MRP & BOM - Operations Planning

1980s - MRPII, JIT - Materials Management, Logistics

1990s - SCM - ERP - Integrated Purchasing, Financials, Manufacturing, Order Entry

2000s - Optimized Value Network with Real-Time Decision Support; Synchronized &

Collaborative Extended Network
http://en.wikipedia.org/wiki/Council_of_Supply_Chain_Management_Professionalshttp://en.wikipedia.org/wiki/Sourcinghttp://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/wiki/Logistics_managementhttp://en.wikipedia.org/wiki/Council_of_Supply_Chain_Management_Professionalshttp://en.wikipedia.org/wiki/Sourcinghttp://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/wiki/Logistics_management


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1- Creation -

The term Supply chain management was first used in industry in 1980s. The

characteristics of this era of supply chain management include the need for large-scale

changes, re-engineering, and various cost reduction program.

2. Integration

In this era Supply chain evolution is characterized by increasing value-addition and costreductions through integration. At this time Enterprise Resource Planning (ERP) systemsalso introduced in the market.

3. Globalization Era

The globalization era, is characterized by the global systems of supplier relationships andthe expansion of supply chains over national boundaries and into other continents.

4. Specialization Era Phase One: Outsourced Manufacturing and Distribution

In the 1990s focus on core competencies and adopted a specialization model. Organizationstarted extending the supply chain beyond the company walls and distributingmanagement across specialized supply chain partnerships.

5. Specialization EraPhase Two: Supply Chain Management as a Service

In this era supply chain management has grown as a service. It becomes more variable.This variability has significant effects on the supply chain infrastructure. It enables companies

overall compentencies.

6. Supply Chain Management 2.0 (SCM 2.0) Era-

SCM 2.0 has been coined to describe both the changes within the supply chain itself aswell as the evolution of the processes. SCM 2.0 is a combination of the processes,methodologies, tools and delivery options due to the effects of global competition, rapidprice fluctuations, and short product life cycles.


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Elements of Supply Chain

A supply chain is made up of several elements that are linked by the movement of

products along it. The supply chain always starts and ends with the customer. Supply

chain is always customer centric.

Customer:

The customer starts the chain of events when they decide to purchase a product that has

been offered for sale by a company. The customer contacts the sales department of the

company, which enters the sales order for a specific quantity to be delivered on a

specific date.

Planning:

Once companies get the customer order, the planning department creates a production planto manufacture the products. To fulfill this requirements company purchase the rawmaterials needed.

Purchasing:

The purchasing department receives a list of raw materials and services required by theproduction department to complete the customers orders.

Inventory:

The raw materials are received from the suppliers, checked for quality and accuracy andmoved into the warehouse. The supplier will then send an invoice to the company forthe items they delivered. The raw materials are stored as inventory until they required bythe production department.

Production:

Based on a production plan, the raw materials are moved inventory to the productionarea. The finished products ordered by the customer are manufactured using the rawmaterials purchased from suppliers.

Transportation:

When the finished product arrives in the warehouse, the shipping department determinesthe most efficient method to ship the products so that they are delivered on or beforethe date specified by the customer.


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Benefits of Supply Chain Management

1. Improved customer responsiveness2. Higher product quality3. Faster product innovation

4. Reduced inventory costs5. More consistent on-time delivery

Supply Chain Management Levels

Supply Chain Management has three levels of activities : Strategic, Tactical and Operational.

All three level decisions affect product development, customers, manufacturing, suppliersand logistics in a different manner.

Strategic Level:

This is done by top level management. At this level, company management will be

looking to high level strategic decisions related to whole organization, such as the sizeand location of manufacturing sites, partnerships with suppliers, products to bemanufactured and sales markets. It is concerned with long term decisions. Strategicdecisions include product development, customers, manufacturing, vendors, and logistics.
http://logistics.about.com/od/strategicsupplychain/a/strategic.htmhttp://logistics.about.com/od/strategicsupplychain/a/strategic.htm


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Manufacturing

On tactical level decisions are made on how to produce the products at the lowest cost.

Tactical decisions are made as to the adoption of manufacturing methodologies such as

Kanban or Just-in-time. Tactical decisions are required at a regional level by using

technology to reduce the material wastage.

Suppliers -

At a tactical level, management work within strategic guidelines to identify and negotiatethe terms that will provide the cost benefit to the company.

Operational Level:

This level is more concerned to day to day basis on operational level. Decisions at thislevel are made each day in businesses that affect how the products move along thesupply chain. Operational decisions involve making schedule changes to production,purchasing agreements with suppliers, taking orders from customers and moving productsin the warehouse.

Manufacturing -

The local plant management may make an operational decision to keep certain items instock to ensure that production wont stop. In this case inventory costs will increasewhich is called inventory carrying cost , but a greater cost would be incurred if theproduction line will be stopped due to a lack of items from a supplier.

Logistics

Strategic and tactical supply chain decisions in the logistics process generally focus onthe use of third party logistics companies (3PL). But these 3PL companies may notoperate in all regions where the company requires logistics.

In those cases the local management make operational decisions on leasing localwarehousing and negotiating with regional logistics companies.
http://logistics.about.com/od/operationalsupplychain/a/operational.htmhttp://logistics.about.com/od/operationalsupplychain/a/operational.htm


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Supply Chain Operations Reference (SCOR) Model

SCOR, Supply Chain Operations Reference, is a model developed by The Supply-ChainCouncil (SCC). It act as a standard for supply chain management. According to SCC - Supply Chain as the integrated processes of Plan, Source, Make, Deliver, and Return,spanning from the suppliers supplier to the customers customer, aligned with OperationalStrategy, Material, Work, and Information Flows.

Plan-Source-Make-Deliver-Return

SCOR contains:

1. Standard descriptions of management processes

2. A framework of relationships among the standard processes

3. Standard metrics to measure process performance

4. Management practices that produce best-in-class performance

SCOR enables the companies to:

1. Evaluate and compare their performances with other companies effectively

2. Identify and pursue specific competitive advantages

3. Identify software tools best suited to their specific process requirements

The SCOR model provides a best practice as a current, structured, proven andrepeatable method for making a positive impact on desired operational results.

1. Current - Must not be emerging and must not be antiquated2. Structured - Clearly stated Goal, Scope, Process, and Procedure


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3. Proven - Success has been demonstrated in a working environment.

4. Repeatable - The practice has been proven in multiple environments.

Flow in Supply chain

In supply chain materials flow downstream, from raw material sources through a

manufacturing level.

Then raw materials transforms into intermediate products.

From manufacturing plant manufactured product shipped to various distribution center.

And from distribution center to retailers and ultimately customers.


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Supply chain Improvement Strategies

Four areas are key to effective supply chain management - Process, Measurement,

Information management and technology.

Supply chain can be improved by integrating internal functional process and systems

across the enterprise. It includes the physical supply chain execution and management

processes like:

1- Customer service management2- Materials and Production planning3- Logistics and inventory management4- Sourcing and Procurement5- Product development and commercialization

Phase 1 - Improvement Assessment and Analysis

In this phase various opportunities and targets are defined based on operations strategy

and performance shortfalls. Benefits are qantified in this phase

Phase 2 - Analyze supply chain and processes.

Model of current suply chain flows has been prepared. Services and financialperformance are measured.

Phase 3- Design Improvement Solution

Simulated model on supply chain are used. Ideas are generated through improvementteams and process change are defined.

Phase 4- Detailed Planning and Implementation

In the last phase of improvement detailed designs and plans are developed. Buisnesscases are defined.


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Other strategies in Supply chain management on lower level -

1. Educate- All departments who are connected to supply chain must have commonunderstanding of supply chain.

2. Benchmark- Comparison with competitors and industry trends are very importantimprove any business.

3. Assessment- Understanding the status of all departments which are connected tosupply chain can be very beneficial. Comparison with the Six Levels of Supply Chainexcellence can be greatly enhance the overall system.

Level I, Business as Usual

Level II, Link Excellence

Level III, Visibility

Level IV, Collaboration

Level V, Synthesis

Level VI, Velocity

4. Weakest Link- Identification of the weakest department within the sysytem and the

weakest link in supply chain will drive performance.

5. Communication- There should be proper communication within all involved department

in supply chain system so that everyone understands the ongoing process.

6. Partnerships- Only join with supply chain partners who are ready to partner. Partnering

with a link that has not achieved Link Excellence will not provide positive results.

7. Leadership- On each supply chain initiative, identify the proper skill sets required to

lead the effort. Assure clarity of roles and responsibilities and cultural compatibility.

8. Core Competencies- Identification of core competencies are mus, focus on them is

mimportant and then outsource the rest.

9. Continuous Improvement- An ongoing process is required for to pursue Supply Chainexcellence. There should be continuous improvement all the time.


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Supply Chain Management Software

Supply chain management software (SCMS) is a business term which refers to a rangeof software tools or modules used in executing supply chain transactions and managing

supplier relationships.

It commonly includes:

1. Customer requirement processing2. Purchase order processing

3. Goods receipt and Warehouse management

4. Supplier Management/Sourcing

Supply chain management software can be categorize by the software providers and it

has various different parameters. For instance, software can be generally categroized byprice and based on the number of employees in the organization.

Software providers for large corporations (more than 1000 employees) -

1- Oracle2- E-Buisness Suite

3- Peoplesoft

4- SAP

Software providers for small and medium- size businesses (from 10 to 1000 employees)

1- Epicore Software2- ERP Studio

3- Exact Globe Software


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4- M1 by B&G Software

5- Microsoft Dynamics

6- Jobscope Software

Cost of Software

Ownership of these software are very costly ranges from $0.3 million to $5.5 billion. Itincludes the costs of packaged software, hardware, professional services (for ongoingmaintenance, upgrades and optimization) and internal costs.

Oracle, ERP, SAP , Peoplesoft are the big software and total average cost can be up to$5 billion including service and maintenance.

For small to mid firms cost ranges from $0.2 million to $400 million.

Application of Supply Chain Management Software

Supply chain management software assists enterprises in various areas from productdevelopment to outsourcing.

Application in Customer Service Management:

Customer relationsprovide information to the manufacturer on the level of demand forthe product, and also provide feedback to the customer.

Procurement Process:

Supply chain management software can assist in resource planning for the manufacture ofproducts, recommending order schedules to reduce manufacturing cycle times.

Product Development and Commercialisation:

While supply chain management software cannot advise on the development of newproducts it can be used to ensure best practices for their manufacture and distribution.

Manufacturing Flow Management:

Supply chain management software can assist in this process by analysing pastperformance and future predictions to suggest the optimal manufacturing schedule, whileensuring that availability of materials.


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Distribution:

In distribution, software is used to calculate the process of planning and implementing anefficient distribution schedule by optimizing manufacturing.

Outsourcing:

It is used to analyze areas of the supply chain in which the organization can look foroutsourcing generally outside the organization sometimes in other countries if thecompany is very big.

Performance Measurement:

Performance Measurement performs a vital function in any supply chain. By continuouslyanalyzing the performance of the enterprise over a range of functions Supply chain

software enables managers to identify areas of weakness and opportunities forimprovement.

Formulas for measuring Supply Chain

Most commanly used measures in supply chain management is Inventory Turnover.

Inventory Turnover = Cost of goods sold / Avg. Aggregate Inventory Value

Situation where Distribution Inventory is important-

Weeks of Supply = ( Avg. Aggregate Inventory Value / Cost of goods sold ) * 52 Weeks

The Bullwhip Effect in Supply Chain

The Supply chain is a complex group of companies that move goods from raw materials

suppliers to finished goods retailers. These companies work together when meetingconsumer demand for a product; supply chains allow companies to focus on theirspecific processes to maintain maximum probability.

Definition -


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The bullwhip effect on the supply chain occurs when changes in consumer demandincreases. Because of this increment companies order more goods to fulfill the newdemand.

The bullwhip effect usually starts with the retailer, wholesaler, distributor,

manufacturer and then the raw materials supplier.

Factors contributing to the Bullwhip Effect -

1. Forecasting Errors

This happens when companies enter new products into the marketplace, they estimatethe demand of the good based on current market conditions. Generally most

companies order for more good than they can sell. This "extra" inventory begins to

increase or decrease during the normal market fluctuations of supply and demand.When demand increases, the companies increase inventory to meet the consumerdemand. While when the demand falls, companies decrease their inventory.

2. Behavioral Causes

Ordering of too much inventory when consumer demand has fallen for an item cancause the effect. Some times retailers raised their inventory levels to avoid being outof stock. This creates overstock of inventory for each supply chain company.

3. Operational Causes

The main cause of the bullwhip effect comes from individual demand forecasts fromeach company in the supply chain. This causes an increase in demand from companies in thesupply chain, but not the actual consumers who will purchase the goods.

4. Lead Time-

Longer lead time leads to greater variability in the estimation of average demand.

Due to which inventory cost will increase.


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5. Batch Ordering-

It occurs because of rise and fall in Orders.

6. Price Fluctuations

7. Lack of centralized information

Corrective Measures

Consumer demand based on the order information should be properly evaluated whichallow managers to order more goods if needed.

New Dimensions in Supply Chain Management

New dimensions in supply chains are basically internal, external, and customer :

Internal dimension the supply chain system controlled by the organizationA companys internal dimension is the physical aspects of its business that arelargely under its control. These include manufacturing, distribution, or retail capacity and

the time and costs that put into sourcing, producing, and distributing products. Improvingperformance in these areas should be the priority of most supply chain managementinitiatives.

For distributors and retailers, the priority has generally been on supplier relationshipmanagement, warehouse management, and transportation management solutions and theintegration of those solutions to deliver visibility of supply.


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The productivity of the overseas employees and the extended shipping times can either positivelyor negatively affect the company's lead time. Customs clearance time should be considerdseriously.

2. Overall outsourcing plan

company needs to make decisions about its overall outsourcing plan.

3. Supplier selection

An organization should do proper research before selection of overseas suppliers.Because searching of supplier can be more complex for other countries in comparison toParent country.

4. Logistics problem

Companies who choose to ship their manufacturing overseas may have to face some

problems regarding logistics. Questions regarding the number of plants that are needed,as well as the locations for those plants can pose difficult logistical problems forcompanies.

The Future of Supply Chain Management

The future of supply chain will be based on the following seven critical areas.2.Developing forward-looking category strategies.3.Engaging, developing and managing key suppliers.

4.Designing and operating multiple supply networks.

5.Leveraging technology enablers.

6.Collaborating internally and externally.

7.Attracting and retaining supply management talent.

8.Managing and enabling the future supply organization globally.

1. Developing forward-looking Category Strategies


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2. Engaging, developing and managing key suppliers

Engaging, developing, and managing suppliers is one of the important aspect in supplychain. It can be executed by -

To support the business model and category strategies.

Improving working relationships with suppliers.

Developing the capabilities of suppliers to meet future needs.

3. Designing and operating multiple supply networks

A mix of product characteristics and customer importance is always considered whendesigning and operating multiple supply networks.

4. Leveraging technology enablers

Various new technology have been introduced since last decade and continue to addnew ones like Spend management software, e-sourcing, Electronic Data Interchange(EDI), Radio Frequency Identification Technology (RFID) and Contract management.


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5. Collaborating internally and externally

Companies should look for external collaboration for new and effective suppliers. Butthey also look for internal collaboration initially with engineering and productdevelopment, particularly in manufacturing companies.

Supply Management in a supporting and leading role.

6. Attracting and retaining supply management talent

Companies should not attract only new talent but also able to retain their own employee.Retaining of the employee is one of the big challenges companies facing today. Toachieve this an organization should

1. Identifying needed skills and capabilities.2. Acquiring, developing and retaining talent.

3. Managing a diverse, dispersed workforce.

7. Managing and enabling the future supply organization globally


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Due to Globalization, demographic shifts, greater cross-organizational collaboration,and enabling technologies organizations are contacting supply professionals fromdifferent cultures and generations. This dynamic is creating new ways of working

across organizational and geographic boundaries.

Conclusion

An effective, realistic, and flexible Supply Chain Management system can have significantbenefits for any business. It can make it easier to manage all of the different factors


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that contribute to the purchasing and production cycle. The amalgamation of all of thesebenefits is a balance between keeping costs reasonable and maintaining production levels.

Competing companies will have access to the same supply market information, the samesuppliers, and the same supply management best practices and tools.

Supply chain management has become increasingly important in a global economy. Thereare many barriers thatprevent corporations fromproperly aligning entities within andbetween organizations. Advancements in Information Technology have significantlyimproved Supply Chain Management but there continues tobe enormouspotential forfurther development.

scm-supply chain management-paper presentation

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