Supply Chain Management Business Mantras Supply Chain Management 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 Dell Supplier Manufacturer Distributor Retailer Customer Upstream Downstream

Process View Customer Pull Retailer Distributor Push Manufacturer Customer Order Cycle Pull Retailer Replenishment Cycle Distributor Manufacturing Cycle FMCG Push Manufacturer Procurement Cycle Supplier

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 Pampers Diapers Delay 2 weeks Delay 2 weeks Delay 2 weeks Supplier Manufacturer Distributor Retailer Customer Orders 40 Orders 25 Orders 15 Buys 10

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 Toyota

Drivers of Supply Chain Performance Inventory Raw materials WIP Finished Goods Responsiveness Vs Efficiency Sourcing Outsourcing Transportation

Transportation Total costs Cost Transport costs Inventory costs Rail Air

Inventory Where do we hold inventory? Types of 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

Profile of Inventory Level Over Time The Inventory Cycle Profile of Inventory Level Over Time Q Demand rate Constant Demand Quantity on hand Reorder point Time Receive order Place order Receive order Place order Receive order Lead time

Decisions When to order How much to order Types of System Continuous Review Periodic Review

EOQ: A View of Inventory Note: • No Stockouts • Order when no inventory • Order Size determines policy Inventory Order Size Time

EOQ - Cost Minimization Goal The Total-Cost Curve is U-Shaped Annual Cost Holding Costs Ordering Costs Order Quantity (Q) QO (optimal order quantity) or EOQ

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

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 Retailer Customers Drop Shipping

Manufacturer storage with direct shipping and in-transit merge Retailer In-transit Merge by carriers Customers

Distributor storage with carrier delivery Manufacturer Warehouse Storage by Distributor/Retailer Customers

To Summarize Components of supply chain (SC) Objective of SC is to max. profit Bull whip effect Facilities decisions Inventory policies Distribution networks

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