supply chain management – level 1

8/7/2019 Supply Chain Management Level 1

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Supply Chain Management

Level 1Certification for New Joiners


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Agenda

Understanding Supply Chain

Constructing a Supply Chain

Process Views of a Supply Chain

Supply Chain in a firm


Case Studies


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Understanding Supply Chain


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Definitions

A supply chain is a system oforganizations, people, technology,activities, information and resources

involved directly or indirectly in fulfillinga customer request.

Supply chain activities transform naturalresources, raw materials andcomponents into a finished product thatis delivered to the end customer


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Stakeholders/Stages in a SupplyChain

Customer

Retailers

Distributors/Resellers

Transporters

Manufacturers

Component/RawMaterial

Suppliers


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Stages in a Supply Chain Network andtheir interaction

A rro w re p re se n ts tra n sfe r o f p ro d u ct o r se rv ice s b e tw e e n d iffe re n tsta g e s in a su p p ly ch a in

.A su p p ly cha in m ay h av e m ore th an on e p lay er at an y stag e


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The Supply Chain FunctionalityWise

Suppliers Manufacturers &WarehousesDistribution Centers Customers

Material Costs

TransportationCosts

TransportationCosts Transportation

CostsInventory CostsManufacturing Costs

Plan Source Make Deliver Buy


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Flows in a supply chain

D o w n stre a m Flo w

U p stre a m Flo w

: ( )Flow of fu n d s U su ally up stre am can b e d ow n stre am som e tim e s

: (f p rod u cts an d services U su ally do w n stre am can b e u p stre am som e t

:Flo w o f in fo rm a tio n D o w n stre a m a s w e lla s U p stre a m


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Information in a Supply Chain

Source Make Deliver Sell

Suppliers Manufacturers &WarehousesDistribution Centers Retailer

Order Lead TimeDelivery Lead Time

Production Lead Time

Each facility further away fromactual customer demand must

make forecasts of demandLacking actual customer buying

,data each facility bases its

forecasts on downstream,orders which are morevariable than actual demand

,To accommodate variabilityinventory levels areoverstocked thus increasing

inventory carrying costs

It s estimatedthat the typical

pharmaceuticalcompany supply

chain carriesover 100 days of

product toaccommodate

uncertainty

Plan


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Objective of a Supply Chain

Maximizing the overall valuegenerated

Value generated = Worth of final

product to customer Costsincurred in fulfilling the request

Value = Supply chain profitability /Surplus

Worth of final product to customer= Product price

Costs incurred in fulfilling therequest = Cost of raw material,

manufacturing, storing,trans ortin sellin etc.

Value


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Performance of a Supply Chain

A n o rg a n iza tio n h a s to fin d a rig h t b a la n ceb e tw e e n re sp o n siv e n e ss a n d e fficie n cy in

its S u p p ly C h a in


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Constructing a Supply Chain


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Decision Phases in a Supply Chain

1. Supply Chain Strategy or Design Time horizon of few years

Supply Chain configuration, resourceallocation, production capacity, logistics,type of information systems etc. are

decided2. Supply Chain Planning

Time horizon of quarter to a year

Demand forecasting, inventory policies,

Price promotions, markets supplied etc.are decided

3. Supply Chain Operation Time horizon of a day or a week

Inventory allocation, shipping date, picking


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Process Views of a Supply Chain


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Process views of a supply chain


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Cycle View

Supply Chain processes broken into four processcycles (shown above)

Each cycle occurs at interface between twosuccessive stages

Not every supply chain will have all the fourcycles clearly separated

Each cycle consists of six sub-processesexplained in next slide


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Cycle View (Contd.)

For each of the cycle the supplier stage is thestage providing the product and buyer stage isone buying the product

For Manufacturing cycle supplier would beManufacturer and buyer will be Distributor

Cycle view clearly specifies the roles andresponsibilities of each member and thedesired outcome of each process

This view is useful for operational decisions

S u p p lie r sta g e m a rke tsproducts

B u ye r stag e p lace sorder

S u p p lie r sta g e re ce iv e s

order

S u p p lie r sta g e su p p lie s

order

B u ye r stag e re ceive ssu p p ly

B u ye r sta g e re ceive ssu p p ly


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Push/Pull View

Push Processes Pu ll Pro ce sses

/Pu sh Pu llB o u n d a ry

C u sto m er O rd e rA rriv e s

:Pu ll Pro ce ss E xe cu tio n in itia te d in re sp o n se to acu sto m e r o rd e r

Push Process : Execution initiatedin anticipation toa cu sto m e r o rd e r

/ :Pu sh Pu llb ou n d a ry It se p a ra te s p u sh p ro cesse s

fro m p u ll p ro ce sse s in a su p p ly ch a in

G e n e ricProduct

C u sto m ize dProduct


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Push/Pull View (Contd.)

ush ProcessC u stom er D em an d n ot kno w n b eforeh an d

S p e cu la tive P ro ce ssS h o rt le a d tim e sH ig h e co n o m ie s o f scale

Pu ll Pro ce ss C u sto m e r d e m a n d kn o w n w ith ce rta in R e a ctiv e Pro ce ss Lo n g le a d tim e s Low eco n om ies of sca le

/Pu sh Pu ll V ie w is u sefu l w h e n co n sid e rin gstra te g ic d e cisio n s re la te d to su p p ly ch a in


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Choosing between Push/Pull

Pu ll Pu sh

Pu ll

Pu s

h E con om ies ofS ca le

Lo

w

H ig

h

Lo

w

H igh

D

em

and

U

n

certainty

In d u strie s:w here

C ustom iza tio n is H ig h D em an d is u n ce rtain S cale eco no m ies areLo w Computer

equipment:Industries where

Standard processes arethe norm

Demand is stable Scale economies are High

,GroceryBeverages

:Industries where

Uncertainty is low Low economies of scale -Push pull supply chain

, Books CD s

:Industries where

Demand is uncertain Scale economies are High

Furniture

Where do thefollowing industries:fit in this modelAutomobile?Aircraft?Fashion? Petroleum refining?Pharmaceuticals?Biotechnology? Medical Devices?


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Supply Chain in a firm

upp y a n acro rocesses n a


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upp y a n acro rocesses n afirm

S u p p lie

r

Fir

m

C u sto m

e r

:SRM All processes that focus on interfacebetween the firm and its suppliers :ISCM All processes that are internal to the

firm :CRM All processes that focus on the interface

between the firm and its customers


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Supply Chain Drivers

These drivers affectSupply Chain

performance

Also they interact

with each otherDecision regarding one

can affect other


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A set of approaches used to efficiently integrate

Suppliers

Manufacturers

Warehouses

Distribution centers

So that the product is produced and distributed

In the right quantities

To the right locations

And at the right time

System-wide costs are minimized and Customer requirements are satisfied


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Case Study : Amazon.com

One of the pioneers of consumer e-business

Sells books, music and other items

Amazon has six warehouses where it holdsinventory

It stocks best selling books itself

It gets other not so popular titles fromdistributors or publishers.

A different model as compared totraditional book sellers


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Case Study : Amazon.com

Key questions

What advantages does selling books via theinternet provides over a traditionalbookstore ?

What are the disadvantages ?

For which type of products does the e-commerce channel offer the greatestadvantage ?


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Questions ?

supply chain management – level 1

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