Supply Chain Management

Tareq HossainLecturer, PPIPT

Universiti Malaysia Perlis

Let me sell myself

• I am a pupil of Business milieu for more than a decade.

• I have professional experience as a Manager of Business Development in a leading group of corporation in Bangladesh

• Currently working as an expatriate at UniMAP.

TBH © 2012 Tareq Hossain, PPIPT, UniMap, All rights reserved.

Learning GuidelineO Introduction

O Supply Chain Management Defined

O The Importance of Supply Chain Management

O The Foundations of Supply Chain Management

O Some Current Trends in Supply Chain Management

Simple Idea of SCMODo you love fast-

food?O McDonald or KFC?

Have you ever consider the ingredient of a burger?

Sample Idea of SCM

Sample Idea of SCM

Human being by nature are social being

O Ibn Khaldūn was an Arab historian,

O He has been regarded as the founding fathers of modern sociology, historiography and economics.

O He is best known for his book The Muqaddimah.

Understanding the SCM?

(Cont’)

Let us watch a Video

What is a Supply Chain?

A supply chain consists of the flow of products and services from:

O Raw materials manufacturersO Component and intermediate manufacturersO Final product manufacturersO Wholesalers and distributors andO Retailers

Connected by transportation and storage activities, andIntegrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management

VERTICALLY

INTEGRATED FIRM

A FIRM WHOSE

BUSINESS BOUNDARIES INCLUDE ONE-TIME SUPPLIERS AND/ OR

CUSTOMERS.

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What is a Supply Chain? (continued)

Real World Example:Men’s Jacket

What is Supply Chain Management?

The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. It is also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.

Council of Supply Chain Management ProfessionalsThe design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customerInstitute for Supply Management

The coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods, and deliver both goods and services to customers

Logistics and Supply Chain Management Society

Importance of Supply Chain Management

Firms have discovered value-enhancing and long term benefits

Who benefits most? Firms with: O Large inventoriesO Large number of suppliersO Complex productsO Customers with large purchasing budgets

How do they benefit?O Lower purchasing and inventory costsO Improved qualityO Higher levels of customer service

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Importance of Supply Chain Management (continued)

Firms using Supply Chain Management:

1. Start with key suppliers2. Move on to other suppliers,

customers, and shippers3. Integrate second tier suppliers and

customers (second tier refers to the customer’s customers and the supplier’s suppliers)

Importance of Supply Chain Management (continued)

Cost savings and better coordination of resources are reasons to employ Supply Chain Management

O Reduced Bullwhip Effect - the magnified reduction of safety stock costs based on coordinated planning and sharing of information

O Collaborative planning, forecasting, and replenishment activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits.

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Bullwhip Effect

A TERM REFERRING TO INEFFECTIVE

COMMUNICATION BETWEEN BUYERS AND

SUPPLIERS AND INFREQUENT DELIVERY OF

MATERIALS, COMBINED WITH PRODUCTION BASED ON POOR FORECASTS ALONG A SUPPLY CHAIN

THAT RESULTS IN EITHER TOO LITTLE OR TOO MUCH INVENTORY AT

VARIOUS POINTS OF STORAGE AND

CONSUMPTION. SIMPLY, IT CAUSES AN IMPLIFICATION OF THE VARIATION IN THE DEMAND PATTERN ALONG

THE SUPPLY CAHIN.

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The Foundations of Supply Chain Management

SupplySupply base rationalization, supplier alliances, SRM, global sourcing, ethics and sustainability

OperationsDemand management, CPFR, MRP, ERP, `inventory visibility, lean systems, Six Sigma quality systems

Logistics

Logistics management, customer relationship management, network design, RFID, global supply chains, sustainability, service response logistics

Integration Risk and security management, performance measurement, green supply chains

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The Foundations of Supply Chain Management (continued)

Supply Elements:O Supplier management - improve

performance through O Supplier evaluation (determining supplier

capabilities)O Supplier certification (third party or internal

certification to assure product quality and service requirements)

Supply Elements

SCM is like a runner handing off a baton to the next in the line.

It’s a challenge, having a process to work with supplier as partners to achieve the goal of

a smooth hand-off.

Supply Elements (Cont.)

Strategic partnerships - successful and trusting relationships with top-performing suppliers

The company is working very closely with the supply base to pick the right few, and then get much deeper within the relationship with those critical few.

Supply Elements (Cont.)

O Ethics and sustainability – recognizing suppliers’ impact on reputation and carbon footprint.

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Operation Elements

O Demand management - match demand to available capacity

O Linking buyers & suppliers via MRP and ERP systems

O Use lean systems to improve the flow of materials to reduce inventory levels

O Employ Six Sigma to improve quality compliance among suppliers

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Logistic Elements

O Transportation management - tradeoff decisions between cost & timing of delivery / customer service via trucks, rail, water & air

O Customer relationship management - strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements

O Network design - creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system

Integration Elements

O Supply Chain Process Integration - when supply chain participants work for common goals. Requires intra-firm functional integration. Based on efforts to change attitudes & adversarial relationships

O Supply Chain Performance Measurement - Crucial for firms to know if procedures are working

Current Trends in Supply Chain Management

Expanding the Supply ChainO U.S. firms are expanding partnerships

and building facilities in foreign marketsORight shoring for maximum flexibility

and minimum costO The expansion involves:

OBreadth - foreign manufacturing, office & retail sites, foreign suppliers & customers

ODepth - second and third tier suppliers & customers

Current Trends in Supply Chain Management (continued)

Increasing Supply Chain ResponsivenessO Firms will increasingly need to be more flexible

and responsive to customer needs O Supply chains will need to benchmark industry

performance and meet and improve on a continuous basis

O Responsiveness improvement will come from more effective and faster product & service delivery systems

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Current Trends in Supply Chain Management (continued)

The GREENING of Supply Chains – Producing, packaging, moving,

storing, delivering and other supply chain activities can be harmful to the environment

O Supply chains will work harder to reduce environmental degradation

O Large majority (75%) of U.S. consumers influenced by a firm’s environmental friendliness reputation

O Recycling and conservation are a growing alternative in response to high cost of natural resources

Case Study- Nestle & Chili

Nestle (Malaysia) Berhad has ensured a reliable supply of good quality chilies for the manufacture of its MAGGI chili sauce, while helping to boost the income levels of local farmers through a supplier capacity building initiative in Bukit Awang, Kelantan. The chili farming programme began in 1995 and provides hard-core poor farmers with assistance from Nestle agronomists to produce profitable and environment friendly agricultural raw materials that can be produced into safe and quality finished food products. The programme started with just four farmers yielding 16 tones of chilies on 4 acres of land. The number of participants has since increased in 2006 to 600 farmers, producing approximately 800 metric tones of chilies on 300 acres of land, which are then purchased by Nestle at a pre-determined price based on production cost plus profit principle (CR Guide, 2008).

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Current Trends in Supply Chain Management (continued)

Reducing Supply Chain Costs

OCost reduction achieved through:O Reduced purchasing costsO Reducing wasteO Reducing excess inventory, andO Reducing non-value added activities

OContinuous Improvement throughO Benchmarking - improve over competitors’

performanceO Trial & errorO Increased knowledge of supply chain processes