SCM-INTRODUCTION P.CHANDIRAN

What is a Supply Chain? Supply chain is a network of suppliers, manufacturing plants, warehouses, distribution centers, retailers and customers. It exists to fulfill the customer requests for products and services. They transform and move the products from suppliers to customers.

Supply Chain A supply chain is normally referred with a lead organization (e.g. Dell’s supply chain) It is not linear but network of enterprises An organization may be part of many supply chains It supports new product development Now competition is between supply chains

Supply Chain Supply chains are essentially a series of linked suppliers and customers; every customer is in turn a supplier to the next downstream organization until a finished product reaches the end customer.

Supply chain Flows Product Flows Money Flows Information Flows

Supply chain as Network Suppliers Plants Dist. Centers Cust. Regions L.A. Baton Rouge Houston Pittsburgh Baltimore Denver New Plants New--Eastern US L.A. Denver Chicago Detroit Dallas New Suppliers: New DCs Transportation mode or shipment size choice

SCM-Definition SCM is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs, while satisfying service level requirements.

SCM-elements SCM covers every facility that have impact on costs It requires strong relationship between partners It is just like a cricket team Ultimately it serves customers and it should enhance value for the customer

Basic tasks of supply chain Product design Procurement/Sourcing Production Demand management Distribution Reverse logistics Multi-echelon inventory management Network design and management

Objective of a Supply Chain To maximize the overall value generated The value is called as supply chain profitability The difference between the revenue and the overall cost of the supply chain-SCP

Problems in supply chain Increase in cost of operation Excess inventory Frequent stock-outs Longer lead times Less visibility Wrong deployment of resources Customer dissatisfaction

Importance of Supply chain in current scenario More competition More Varieties Growth of organized retailing Shrinking PLC E-Commerce Growth of multiple channels Global market

Factors shaping SCM Consumer demand Globalization Competition ICT Govt. rules regulation Infrastructure Environment WTO norms

Decision Phases of SC Supply chain strategy or design Supply chain planning Supply chain operation

Supply chain strategy Locations and capacities of facilities Information system design Sourcing decisions Mode of transport Distribution strategy

Supply chain planning Forecasting of demand Inventory policies Timing and size of marketing promotions Incorporating flexibility in the plan Allocation of facilities to market

Supply chain operations Order management Schedule of trucks Allocation of individual orders to production or inventory

Linking supply chain with customers An important component in fulfilling customer needs and providing value It determines the availability of products, pace of arrival and at what cost It also impact the customer value of price by reducing costs(Wal-Mart, Dell) Customer determine the type of supply chain

Value creation through supply chain Creating availability and selection Efficient SC for functional items Responsive SC for fashion items More varieties for better product selection Special stores for product selection Exclusive stores

Value (Cont.) Max. penetration for FMCG Dell-Build to order model to reduce inventory Amazon.com-more choice Price –effective SCM will reduce the price for the customers Visibility by means of tracking Fresh and new products at retail

Efficient Vs Responsive Supply chain Functional ProductInnovative Product Responsive Efficient SC MISMATCH MATCH MISMATCH

Cycle view of supply chain The supply chain is divided into a series of cycles, each performed at the interface between two successive stages of a supply chain. Customer order cycle Replenishment cycle Manufacturing cycle Procurement cycle

Supply chain Customer Retailer Distributor Manufacturer Supplier

Customer order cycle RetailerCustomer

Replenishment Cycle DistributorRetailer

Manufacturing Cycle ManufacturerDistributor

Procurement cycle SupplierManufacturer

Sub-processes in each cycle Supplier stage markets the product Buyer stage places orders Supplier receives orders Supplier supplies order Buyer stage receives order Buyer returns reverse flows to supplier

PUSH View of SC Execution of order in anticipation Forecasting is important It takes much longer time to react to change in demand Obsolescence of inventory is possible Economies of scale Used for functional products

PULL view of SC Production and distribution are demand driven Execution is based on actual orders Inventory is minimum Fast information flow is required Difficult to implement No economies of scale Co-ordination should be strong between partners

Drivers of SC Performance Facilities Inventory Transportation Information Sourcing Pricing

Facilities Location of plants and warehouses Capacity decisions Outsourcing Market allocation of capacity

Inventory How much to make How much to store RM, WIP, and FGs Cycle inventory Safety inventory Seasonal inventory

Transportation Mode of transportation Routing and scheduling Transport networks In-house/Outsourcing Infrastructure

Sourcing Supplier selection E-procurement Global sourcing In-house or outsource Technology role

Pricing Pricing and economies of scale Pricing supply chain assets Revenue management Supply chain assets and pricing

Information Demand information On-line connection Co-ordination Sharing information Technologies-EDI, Internet, ERP Visibility

Some successful Supply chains Dell Wal-Mart Mumbai-Dabbawallahs Toyota Ikea Zara