Download - 1 Session 1 Scm Basics 2014
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SESSION# 1 & 2: Basics & Beyond
Supply Chain Management
.Professor
Department of Management Studies
Indian Institute of Technology DelhiHauz Khas, New Delhi 110 016, India
Phone: +91-11-2659-6421 (O); 2659-1991(H); (0)-+91-9811033937 (m)
Fax: (+91)-(11) 26862620
Email: [email protected], [email protected]://web.iitd.ac.in/~ravi1
The Objectives of this Session is to:
Understand the course objective
Understand the basic concepts of Supply ChainManagement (SCM) & Operations Management (OM)
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Assess organizational needs towards SCM
Take decision related to operations of SCM
Understand the Recent Trends in SCM
Few Information
Text Book Simchi-Levi et al.: Designing
and Managing the SupplyChain: 3rd edition, McGraw Hill,NY (2008)
Reference Books il i l
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il i l,Supply Chain Management: 3rdedition, Pearson Education(2007).
Wisner, Leong and Tan,Principles of Supply ChainManagement, Thomson South-Western, 2005 (Complete ListAvailable on course outline)
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Another Reference Book
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In case you are interested in further study
in SCM
Journal(s):
Supply Chain Management: An InternationalJournal (Available on www.emaraldinsight.com)
Supply Chain Management Review
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Purchasing World
International Journal of Purchasing andMaterials Management
International Journal of Physical Distribution &Logistics Management
Course Objectives
To understand the basicsof SCM
To understand the current
practices in SCM To develo decision
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making capabilities inSCM
To understand anddevelop differentstrategies of SCM
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Sources:plants
vendorsports
RegionalWarehouses:stockingpoints
FieldWarehouses:stockingpoints
Customers,demandcenterssinks
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upp y
Production/purchasecosts
Inventory &warehousingcosts
Transportationcosts
Inventory &warehousingcosts
Transportationcosts
Distribution
SUPP
Sales
The Functional Approach
CU
ST
OME
RS
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Purchasing
ManufacturingLIERS
Traditional Approach: Functional, silobased !
No attempt to look holistically!
Distribution
SUP
Sales
Integrated Supply Chain Approach
CUSTOME
RS
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Purchasing
ManufacturingLIERS
Looks at the entire chain
Global rather than local focus
Integrated rather than fragmented approach
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Supply Chain StagesSupply Chain (SC) encompasses all activities associated with the flow
and transformation of materials from the raw material stage throughto the end user.Supply Chain Management (SCM) involves management of FOUR
flows in a Supply Chain: (i) Material, (ii) Information , (iii) Money &
(iv) Ownership
Supplier Manufacturer Distributor Retailer Customer
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upstream
Example: Typical supply chain
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downstream
Example: Toshiba PC Supply Chain
upstream
Intel,AMD
Seagate,IBM
Microsoft,Red Hat
Toshiba America
12downstream
Irvine, California
Europe DC
Toshiba Turkey
North America DC
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The Linear Supply Chain13
Limited visibility & velocity
Inventory build-up
What are the Goals of Supply ChainManagement?
Supply chain management is concerned with the efficientintegration of suppliers, factories, warehouses and storesso that merchandise is produced and distributed:
In the right quantities
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o e r g oca ons
At the right time
In order to
Minimize total system cost
Satisfy customer service requirements
Evolution of Supply Chain Management
SCM
Formation/
Further
Refinement of
SCM Capabilities
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1950s 1960s 1970s 1980s 1990s 2000s Beyond
Traditional Mass Manufacturing
Inventory Management/Cost
Optimization
JIT, TQM, BPR,
Alli ances
x e ns o ns
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Evolution of Logistical Integration, 1960-2014
Demand Forecasting
Purchasing
Requirements Planning
Production Planning
Manufacturing Inventory
Materials
Management
1980s
1990s
2000s
TYPICAL OM DOMAINS
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Materials Handling
Packaging
Inventory
Facility Planning
Order Processing
Transportation
Quality &Customer Service Strategic Planning
Physical
Distribution
Logistics Supply Chain
Management
Information Technology
Marketing
Supply Chain Decisions: StructuringDrivers
Strategy
(Design)
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Planning
Operation
Plan/Design
Product Architecture
Make/Buy
Early Supplier Involvement
Develo
pme
The EnterpriseFulfillment and Development Supply Chains
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Supply Produce Distribute Sell
Source
Suppliers Selection
Supply Contracts
Fulfillment Supply Chain
tSupplyChain
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Decision time horizon
Detail Inventor Plannin
Distribution Planning
Manufacturing Planning
Transportation Planning
Operations Scheduling
Delivery Scheduling
Execution Systems Execution
Tactical
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Strategic Planning
Hour Week Quartile Year Time
Supply Chain Structure Design
Supply Chain Network Design
Demand Planning
Sales & Operations Planning
Supply Chain Planning
Source: AMR Research
Strategical
Let us start the course with a Quiz
A box of cereal spends ? days in the supply chain
Poor coordination in the food industry supply chainwasted ? dollars.
A typical new car spends ? days traveling from the
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.
U.S. companies spend ? % of Gross DomesticProduct on Supply Chain & Logistics
Total inventory in the pharmaceutical supply chainexceeds ? days.
Complexity: The Magnitude
A typical box of cereal spends 104 days getting from factory tosupermarket.
The grocery industry could save $30 billion (10% of operatingcost) by using effective logistics strategies
A typical new car spends 15 days traveling from the factory tothe dealership.
U.S. companies spend more than $1 trillion in supply-relatedactivities 10-15% of Gross Domestic Product
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Transportation 58%
Inventory 38%
Management 4%
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Consider the following
Wal-Mart and K-Mart were founded in the same year.While K-Mart declared Bankruptcy in 2001 while Wal-Mart became the largest retailer in USA and perhaps
in the world. Dell has been able to enerate rof its even when its
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competitors lost money on their PC operations.
Honda has established itself as a dominant brand inautomobiles.
What have these firms done? What is the secret of theirsuccess?
Example: Dell Computers Supply Chain
Website
or Phone
Dell Assembly
PlantCustomer wants
To buy computer
Master Board
Hard disk
Direct Shipment
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SRAM
Customers Order
Concept of Disintermediation in Dell Direct Supply Chain
What are its benefits for Dell?Any oth er examp le of s im il ar typ e in In dia?
Magnitude of Supply Chain CostsExample: The Apparel Industry
Manufacturer Distributor Retailer Customer
Cost per Percent
Shirt Saving
Rs.527.20 0%
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Rs.413.40 28%
Rs.204.50 62%
Manufacturer Distributor Retailer Customer
Ma nu fa ct ure r D is tr ib uto r Retailer Customer
(c) R.Shankar (2010-11)
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Magnitude of Supply Chain CostsCost Elements of a Typical Trade Book
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QC & Shipping
[Hong Kong]
Product Design
[Hong Kong]
An Illustration: How Li & Fung Limited Might
Make a Dress
Globally Dispersed Manufacturing
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Zippers+
[Japan+]
Stitching
[Indonesia]
Weaving
[Taiwan]
Yarn Spinning
[Korea]
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Discussion Questions for You
Are all supply chains same/similar?
How about cold chains?
Where does the retail fit in supply chain?
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chain?
What are inbound/outbound activities in supplychain?
What about information and inventory? Are theyrelated in some way in supply chain?
CASE STUDY-1:
29(c) R.Shankar (2010-11)
Scope / Activities
Supply Chain Management
Materials Management & Transportation
Manufacturing Packa in
Total Quality Management
Distribution Systems
30(c) R.Shankar (2010-11)
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Product Portfolio
Oral Care
ToothbrushHorlicks
JHlx CHlx MHlx EHlx
Boost Aquaf resh mou thp aste
NHCHlx P
JordanAqu afresh
Flex, FnD, FlexiKid
Flexi friend
Med
EnoRegular, Lemon,
Jaljeera
Crocin
Biscuits
Hlx
Std Ch.Hlx
Elaichi
Boost
EB
x - r es , n
31(c) R.Shankar (2010-11)
Manufacturing Facilities - NHC Powders
3 FactoriesNabha - Punjab
Ra ahmundr - A.P.
NSD1
H
. .
Hamira - Punjab
SD1 ProjectSonepat - Haryana R
32(c) R.Shankar (2010-11)
Packaging Facilities - Nutritional
7 Packing Sites
Faridabad (F)Calcutta (C)
F
HA
N
NN
CGHyderabad (H)
Chennai (CH)
Nabha (N)
Hamira (HA)
Chittagong - Bangladesh (CG)
C
H
CH
33(c) R.Shankar (2010-11)
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Manufacturing Facilities - NHC Solids
2 Biscuit sites
BurdwanHyderabad
H
34(c) R.Shankar (2010-11)
Mfring & Packing Facilities- Aquafresh
2 sitesGoa (Tooth B rush)
as oo pas e
G
N
35(c) R.Shankar (2010-11)
Mfring & Packing Facilities - OTC
1 Site (ENO)Hyderabad
H
36(c) R.Shankar (2010-11)
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Sales depots
Sales depots 32 nos
37(c) R.Shankar (2010-11)
Supply Complexities
Finished Goods Movement
250 vendors ,350 materials,
15 sites
P/S movementof avg.. 1200 kms
Over 1000consignments/
month shipped
across 130
site-depotlinkages
12 supply sitescatering to 37 markets
Primary freight costof Rs. 30 crore p .a.38(c) R.Shankar (2010-11)
Export Supplies
BangladeshBangladeshMiddle EastMiddle East
Supply Complexities
Nepal
Sri LankaSri Lanka
MyanmarMyanmar
MauritusMauritus
39(c) R.Shankar (2010-11)
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3333 Milk Collect ion CentresMilk Collection CentresThird PartyThird Party
Manufacturing`Manufacturing`
FactoriesFactories
Third PartyThird Party
SuppliersSuppliers
Ca t iveCa t ive
The Supply Chain
BulkPackingPacking
StationsStations
Depots
Wholesalers Retailers
Finished Goods
ExportMkt..
MaltingMalting
40(c) R.Shankar (2010-11)
Supply Planning ProcessNet Requirements from
Demand Manager
Central Planner
Capture NRs
Send Aggregate Prod
Plan & Des atch
SKU / DepotSKU / Depot--Weekly BucketWeekly Bucket
SKUSKU -- MonthlyMonthly
ASP: Ag greg ateASP: Ag greg ate
Schedule PlanningSchedule Planning
NRS: NetNRS: Net
RequirementRequirement
StabilityStability
(c) R.Shankar (2010-11)
schedule to sites
Detailed Production
Scheduling at Sites
MRP at
SitesSKUSKU -- DailyDaily
Delivery Schedules
to Supplier
Production / Packing
Dispatches to depots
PPR: ProductionPPR: Production
PlanPlan
RequirementRequirement
SPA: Supply PlanSPA: Supply Plan
Adh erenceAdh erence 41
Performance Measurements
Supply SideSupply SideSupply
PlanAdherence
SPA
QualityFactories
l
tProcurement Projects
Demand SideDemand Side
Depots Wholesalers Retailers Exports
Net
Requirement
Stability
(NRS)
42(c) R.Shankar (2010-11)
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Major Problems
Forecast inaccuracy
Un-organised transport sector
Longer lead time for some raw materials
Frequent change in statuary requirements
Sales promotions d isturbs the planning cyclessome times leads to major write offs
43(c) R.Shankar (2010-11)
Effective Supply Chain-Challenges
Effective Supply chain is not limi ted
to manufacturing & distributing
products only but also..
44(c) R.Shankar (2010-11)
Effective Supply Chain-Challenges
Design product to its supply chain
Supplier relationshipManufacturing:- should it be in-house
or to be out-sourced ?
Least Product inventories
Third Parties:- Partners can addsignificant value
45(c) R.Shankar (2010-11)
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Distribution:- shippers should add valuerather than mere transportation
Work on the Customers Pull rather
Effective Supply Chain-Challenges
than Push
Is consumer response is making itsway into the chain ?
46(c) R.Shankar (2010-11)
Then..
Whats the way out?
Effective Supply Chain-Challenges
(c) R.Shankar (2010-11) 47
Conflicting Objectives
in the Supply Chain
1. Purchasing
Stable volume requirements
Flexible delivery time Little variation in mix
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Large quantities
2. Manufacturing
Long run production
High quality
High productivity
Low production cost
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Conflicting Objectives
in the Supply Chain
3. Warehousing
Low inventory
Reduced transportation costs
Quick replenishment capability
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4. Customers
Short order lead time
High in stock
Enormous variety of products
Low prices
Managing a Supply Chain is not EasyManaging a Supply Chain is not Easy
1. Uncertain ___________________
2. Conflicting ___________________ across the supply chain
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Manufacturers Distributors Retailers Consumers
Convenience
Short lead time
Large variety of
products
Few stores
Low inventory
Little variety
Close to DCs
Low inventory
Few DCs
Large shipments
Large production batches
Forecasting is not a final solution
Demand is not the only source of uncertainty
Recent trends make things more uncertain
Uncertainty and Risk Factors
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Outsourcing
Off-shoring
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August 2005 Hurricane Katrina P&G coffee supplies from sites around New Orleans
Six month impact
2002 West Coast port strike Losses of $1B/day
Uncertainty and Risk Factors
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Store stock-outs, factory shutdowns
1999 Taiwan earthquake Supply interruptions of HP, Dell
2001 India (Gujarat state) earthquake
Supply interruptions for apparel manufacturers
Compaq estimates it lost $0.5 billion to $1 billion in sales in
1995 because laptops were not available when and where
needed
P&G estimates it saved retail customers $65 million bycollaboration resulting in a better match of supply and demand
Similar SCM Experiences
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In 1997, American companies spent $862 billion, or about10% of GNP on supply chain related activities which include the
cost of movement, storage and control of products across thesupply chain.Most of these costs include unnecessary cost
components due to redundant stock, inefficient transportation
strategies, and other wasteful strategies in the supply chain
Other Issues in Management of Supply Chain
Lead time
Total cost
Management of Inventory Material Handling
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Sensitization about the Logistics cost to all thestakeholders !
Information Sharing..
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Supply Chain Responsiveness
Respond to wide ranges of quantities demanded
Meet short lead times
Handle a large variety of products
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Build highly innovative products
Meet a very high service level
EExamples of logistics strategy decisionsxamples of logistics strategy decisions
Middle-men / direct deliveries
Structure of logistics network
Control principles of a logistics network
Integrating production and logistics
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Effect of reducing the number of suppliers
Location issues
Selecting the most appropriate price/quality combination oflogistics services
Frequencies and cycle times in production and distribution
Inventory level policy
Sensitivity analyses with varying scenarios (volumes, costs...)
Cycle Time All iances
The Core Issuesin Supply Chain Management
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InitiativesTechnology
IntegrationCost Management
Environmental
Pressures
Inbound, Operations
& Outbound
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Let us list few, which are relevant for ourcountry..
Lead Time??
Effective Supply Chain-Challenges
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n egra on
Coordination??
Environmental Issues??