lec.1 introduction of scm

8/9/2019 Lec.1 Introduction of SCM

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Shujaat Mubarik..V.U workshop 2

What is a Supply Chain?

AllAll facilities,facilities, functions,functions, activities,activities, associatedassociated withwithflowflow andand transformationtransformation ofof goodsgoods andand servicesservicesfromfrom rawraw materialsmaterials toto customercustomer,, asas wellwell asas thethe

associatedassociated informationinformation flowsflows AnAn integratedintegrated groupgroup ofof processesprocesses toto source,source,

make,make, andand deliverdeliver productsproducts


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Supply Chain Processes


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Managing flow of information through supply chainin order to attain the level ofsynchronization that willmake it more responsive to customer needs whilelowering costs

Keys to effective SCM information communication cooperation trust


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Customer is an integral part of the supply chain

Includes movement ofproducts from suppliers tomanufacturers to distributors, but also includes

movement of information, funds, and products inboth directions

Probably more accurate to use the term supplynetwork or supply web

Typical supply chain stages: customers, retailers,distributors, manufacturers, suppliers

All stages may not be present in all supply chains(e.g., no retailer or distributorfor Dell)


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Value vs. Supply Chain

Value chain every step from raw materials to the eventual end user

ultimate goal is delivery ofmaximum value to the end user

Supply chain activities that get raw materials and subassemblies into

manufacturing operation

Terms are used interchangeably


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Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer

Plastic

Producer

Chemical

manufacturer

(e.g. Oil Company)

Tenneco

Packaging

Paper

Manufacturer

Timber

Industry

Chemical

manufacturer

(e.g. Oil Company)


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Flows in a Supply Chain

Customer

Information

Product

Funds


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The Supply Chain Concept


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Supply Chain Management:

A Balancing Act

CustomerService

Costofthe

Service

Inventory Transportation


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Supply Chain Illustration


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SupplyChain for

DenimJeans


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SupplyChain for

DenimJeans

(cont.)


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The Objective of a Supply Chain

Maximize overall value created

Supply chain value: difference between whatthe final product is worth to the customer andthe effort the supply chain expends in fillingthe customers request

Value is correlated to supply chain

profitability (difference between revenuegenerated from the customer and the overallcost across the supply chain)


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Example: Dell receives $2000 from a customerfor acomputer (revenue)

Supply chain incurs costs (information, storage,

transportation, components, assembly, etc.) Difference between $2000 and the sum ofall of

these costs is the supply chain profit

Supply chain profitability is total profit to be sharedacross all stages of the supply chain

Supply chain success should be measured by totalsupply chain profitability, not profits at an individualstage


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Sources ofsupply chain revenue: the customer

Sources ofsupply chain cost: flows of information,products, orfunds between stages of the supply

chain Supply chain management is the management of

flows between and among supply chain stages

to maximize total supply chain profitability


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Supply Chain Uncertainty

One goal in SCM: respond to uncertainty in

customer demand withoutcreating costly excessinventory

Negative effects ofuncertainty lateness

incomplete orders

Inventory

insurance against supplychain uncertainty

Factors that contribute to uncertainty inaccurate demand forecasting

long variable lead times

late deliveries

incomplete shipments

product changes batch ordering price fluctuations and discounts

inflated orders


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Bullwhip Effect

Occurs when slight demand variability is magnified as information

moves back upstream


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Supply Chain for Service

Providers More difficult than manufacturing

Does not focus on the flow ofphysicalgoods

Focuses on human resources and supportservices

More compact and less extended


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Information Technology: A Supply Chain

Enabler Information links all aspects ofsupply chain

E-business replacement ofphysical

business processes with

electronic ones Electronic data interchange

(EDI) a computer-to-computer

exchange ofbusinessdocuments

Bar code and point-of-sale data creates an instantaneous

computer record ofa sale

Radio frequencyidentification (RFID) technology can send product

data from an item to a readervia radio waves

Internet allows companies to

communicate with suppliers,customers, shippers and otherbusinesses around the world,instantaneously


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E-business and Supply Chain

Cost savings and price reductions Reduction or elimination of the role of intermediaries Shortening supply chain response and transaction

times Gaining a wider presence and increased visibilityfor

companies Greater choices and more information for customers


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E-business and Supply Chain (cont.)

Improved service as a result of instant accessibilityto services

Collection and analysis ofvoluminous amounts of

customer data and preferences Creation ofvirtual companies

Leveling playingfield for small companies

Gainingglobal access to markets, suppliers, and

distribution channels


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Supply Chain Evolution at Nabisco

Source: F. Keenan, Logistics Gets a Little Respect, Business Week(November 20, 2000), pp. 112115.


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Supply Chain Evolution at Nabisco (cont.)



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Supply Chain Evolution at Nabisco (cont.)



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RFID Capabilities


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RFID Capabilities (cont.)


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BuildBuild--toto--order cars overorder cars overthe Internetthe Internet


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Customer sales

Production

Distribution

Customerrelationship

Customer sales

Production

Distribution

Customerrelationship

Pushsellfrominventory stock

Goal ofeven andstable production

Mass approach

Dealer-owned

E-Automotive

E-automotive Supply Chain

Pullbuild-to-order

Focus on customerdemand, respond withsupply chain flexibility

Fast, reliable, andcustomized to get cars

to specific customerlocation

Shared by dealers andmanufacturers

Automotive

Past

Supply Chain

Processes


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Managing

uncertainty

Procurement

Productdesign

Managing

uncertainty

Procurement

Productdesign

Large car

inventory atdealers

Batch-oriented;dealers orderbased onallocations

Complexproducts dontmatch customerneeds

E-Automotive

E-automotive Supply Chain (cont.)

Small inventories with

shared information andstrategically placed partsinventories

Orders made in real timebased on available-to-promise information

Simplified products based onbetter information aboutwhat customers want

Automotive

Past

Supply Chain

Processes


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Supply Chain Integration

Information sharing among supply chain members Reduced bullwhip effect Early problem detection Faster response Builds trust and confidence

Collaborative planning, forecasting, replenishment, anddesign Reduced bullwhip effect Lower Costs (material, logistics, operating, etc.) Higher capacity utilization

Improved customer service levels


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Coordinated workflow, production and operations,procurement Production efficiencies Fast response Improved service Quicker to market

Adopt new business models and technologies Penetration ofnew markets Creation ofnew products Improved efficiency

Mass customization

Supply Chain Integration (cont.)


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Collaborative Planning, Forecasting, andReplenishment

Process for two or more companies in asupply chain to synchronize their demandforecasts into a single plan to meetcustomer demand

Parties electronically exchange past sales trends point-of-sale data on-hand inventory scheduled promotions

forecasts


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Elements of Supply Chain Management

From previous slides , we can divide SCMprocess into following stages:

Procurement

Operation

Distribution

Integration


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Supply Chain

Management

Suppler Relationship management

Procurement management

External Supply Chain

Management

World Class Supply Chain Management: Definitions, Concepts and Importance

Process view of Supply chain Management

Purchasing : Importance, Methods & Techniques

Cross Functional Teams: Benefits, Implementation and Challenges

Specification , Standardization , and Simplification

Application of SSS concept in procurement

Strategic Sourcing

Creating and Managing Buyer Supplier Relationship

Internal Supply Chain management

Operation management

Production Management

Demand Forecasting and Replenishment

Demand Forecasting and replenishment II

Aggregate Planning: Aggregate production Planning (APP)

Aggregate Planning: Master Production Schedule (MPS)

Aggregate Planning: Material requirement Planning (MRP)

Aggregate Planning: Execution of MRP and BOM

Inventory Management

Inventory Management II

e-Commerce

Enterprise Resource Planning (ERP)

Customer Relationship managementDistribution management

Logistics management

Distribution Management: Multi model Transportation Distribution Management: Formation of efficient distribution networks

Chain efficiency and integration

Process Management: Total Quality management and just In Time (JIT)

Management

Process Management: Six Sigma


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Process View of a Supply Chain

Cycle view: processes in a supply chain aredivided into a series ofcycles, eachperformed at the interfaces between two

successive supply chain stages

Push/pull view: processes in a supply chainare divided into two categories depending on

whether they are executed in response to acustomer order (pull) or in anticipation ofacustomer order (push)


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Cycle View of Supply Chains

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier


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Cycle View of a Supply Chain

Each cycle occurs at the interface between twosuccessive stages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)

Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)


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Cycle View of a Supply Chain (Cont,d)

Cycle view clearly defines processes involvedand the owners ofeach process. Specifies theroles and responsibilities ofeach member and

the desired outcome ofeach process.


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Push/Pull View of Supply Chains

Procurement,Manufacturing andReplenishment cycles

Customer Order Cycle

Customer

Order Arrives

PUSH PROCESSES PULL PROCESSES

Demand Forecasting


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Push/Pull View of

Supply Chain Processes Supply chain processes fall into one of two

categories depending on the timing of theirexecution relative to customer demand

Pull: execution is initiated in response to acustomer order (reactive)

Push: execution is initiated in anticipation of

customer orders (speculative) Push/pull boundary separates push

processes from pull processes


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Five Major Developments In SCM

Cross Functional Teams

Strategic Alliances

Supply Web E-procurement

Strategic Sourcing


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Cross Functional Teams

A bilateral approach, leading towards consensusbased solution.


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Strategic Alliances

A degree ofrelationship with supplier


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Supply Web

An integrated supply chain, flowing material,information and funds across the chain without

any interruption..


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E-procurement

Involvement ofsupplier in procurement processthrough internet and other EDI sources..


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Strategic Sourcing

Maintaining ofa comprehensive suppliers basethrough proper sourcing strategies.


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How to maintain the Chain??

Cost Effectiveness

Chain Efficiency


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Thanx.In next session we will discuss

Procurement management.

lec.1 introduction of scm

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