supply chain management business mantras presented by: priyanka singh
TRANSCRIPT
Supply Chain Management
Business Mantras
Presented by:Priyanka singh
Structure Followed
• What is Supply chain?
• Objective of a supply chain
• Supply Chain Management
• Bull Whip effect
• Drivers of Supply chain performance
• Inventory policies
• Types of Distribution networks
What is Supply chain?
• Consists of all parties involved, directly or indirectly, in fulfilling a customer request
Supplier Manufacturer Distributor Retailer Customer
Is supply chain so simple?
Supplier Manufacturer Distributor Retailer Customer
Supplier Manufacturer Distributor Retailer Customer
Supplier Manufacturer Distributor Retailer Customer
Upstream Downstream
Process ViewCustomer
Retailer
Distributor
Manufacturer
Supplier
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Pull
Push
Objective of a Supply Chain
• Maximise overall profit
• Profit– Revenue generated from customer - costs
incurred along the entire chain
(e.g. manufacturing / storing / distributing the product)
• When is Supply chain effective?– Manage Product, Information and Fund flow
what is SCM?
• Objective is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost.
Bull Whip Effect
• Each organisation seek to solve the problem from its own perspective– Small changes in consumer demand result in
large variations in orders placed upstream• Dramatic order size variation• Amplification of order size variation as one
moves up the supply chain
Supplier Manufacturer Distributor Retailer Customer
Buys 10Orders 15
Delay 2 weeksDelay 2 weeks
Orders 25
Delay 2 weeks
Orders 40
Causes
• Little or no communication between supply chain partners.
• Delay times between order processing, demand, and receipt of products.
• Over reacting to the backlog orders.
• Inaccurate demand forecasts.
Drivers of Supply Chain Performance
• Facilities– Production/Storage Sites
• Responsiveness Vs Efficiency
Drivers of Supply Chain Performance
• Inventory– Raw materials– WIP– Finished Goods– Responsiveness Vs Efficiency
• Sourcing– Outsourcing
• Transportation
Transportation
Cost
Inventorycosts
Transportcosts
Totalcosts
Rail Air
Inventory
• Where do we hold inventory?– Suppliers and manufacturers– warehouses and distribution centers– retailers
• Types of Inventory– raw materials– WIP– finished goods
• Why do we hold inventory?– Uncertainty in supply and demand– Lead Time– Avoid stock outs (customer goodwill)
Terms Involved
• Inventory lot size
• Replenishment Lead time
• Stock out
• Reorder Point
• Safety stock
Relevant Costs in an Inventory System
• Procurement costs– Ordering cost (appx. administrative, inspection,
transportation etc.)
• Holding costs – Maintenance and Handling– Taxes– Obsolescence
• Stock-outs costs– Lost sales (Customer goodwill)– Backorders
The Inventory Cycle
Profile of Inventory Level Over Time
Quantityon hand
Q
Receive order
Placeorder
Receive order
Placeorder
Receive order
Lead time
Reorderpoint
Demand rate
Time
Constant Demand
Decisions
• When to order
• How much to order
• Types of System– Continuous Review– Periodic Review
EOQ: A View of Inventory
Time
Inventory
OrderSize
Note:• No Stockouts• Order when no inventory• Order Size determines policy
EOQ - Cost Minimization Goal
Order Quantity (Q)
The Total-Cost Curve is U-Shaped
Ordering Costs
QO
An
nu
al C
os
t
(optimal order quantity) or EOQ
Holding Costs
EOQ: Important Observations
• Tradeoff between set-up costs and holding costs when determining order quantity.
• Total Cost is not particularly sensitive to the optimal order quantity
Order Quantity 50% 80% 90% 100% 110% 120% 150% 200%
Cost Increase 125% 103% 101% 100% 101% 102% 108% 125%
Types of System – Continuous Review
• Continuously monitored– R – Reorder point, L – Lead time– Q – Order quantity
• Time b/w orders vary but Q is fixed
Periodic Review• Monitored at periodic intervals of length “r”
• Quantity set as the amount consumed during this interval
• Time b/w orders fixed
Distribution
• Steps taken to move and store a product from supplier to customer
• Design Options– Manufacturer storage with direct shipping– Manufacturer storage with direct shipping and
in-transit merge– Distributor storage with package carrier
delivery
Manufacturer storage with direct shipping
Manufacturer
Customers
Retailer
• Drop Shipping
Manufacturer storage with direct shipping and in-transit merge
Manufacturer
Customers
In-transit Merge by carriersRetailer
Distributor storage with carrier delivery
Manufacturer
Customers
Warehouse Storage by Distributor/Retailer
To Summarize
• Components of supply chain (SC)
• Objective of SC is to max. profit
• Bull whip effect
• Facilities decisions
• Inventory policies
• Distribution networks
Thank You