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SUPPLY CHAIN MANAGEMENT

SEMINAR GUIDE PREPARED BY Dr. HEMMANT R THAKKA R MEHTA ANKUR D

En no 120110746007

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PRESENTATION OUTLINE SUPPLY CHAIN MANAGEMENT LOGISTICS & SUPPLY CHAIN

MANAGEMENT DYNAMICS OF SUPPLY CHAIN NEW EMERGING WORLD CLASS

PRACTICSE IN SCM OUTSOURCING IT IN SCM ISSUES, CHALLENGES AND

OPPORTUNITIES IN IMPLEMENTATION OF SCM

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SUPPLY CHAIN MANAGEMENT “SCM is the integration of key business processes from the end user

through original suppliers that provides products, services and information and that add value for customers and other stakeholders.”

(As per Global Supply Forum)

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NECESSITY OF SCM FOR INDUSTRY SCM is necessary because of relationship between each party. If every

party joins hand and work together, it will create cost savings and time to market reduction and everyone will enjoy the benefit.

It is to be efficient and cost-effective across the entire system.

It is necessary to account for the suppliers’ suppliers and the customers’ customers because they have an impact on supply chain performance.

Supply chain is very important because of flow of goods from one destination to other destination with cost effective and on timely delivery of goods to the business needs and gives the profit to the organization.

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OBJECTIVE OF SCM

Primary

• Creating a value for a customer.

• Responds to customer needs and demand

Secondary• Profitability• Responsivenes

s• Turnover Rate• Flexibility• Communicatio

n & Coordination

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FIVE MAIN DRIVERS OF SUPPLY CHAIN

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SCM DECISION MAKING & FACTOR CONSIDER IN SCM SCM Decision Making Strategic Tactical Operational

Factor Consider in SCM Consumer Expectations and Competition Globalization Information Technology Government Regulations Environment Issues

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GARTNER 2013 TOP 10 SUPPLY CHAIN COMPANY IN THE WORLD The Gartner Supply Chain Top 5 is about leadership.

Every year Gartner identify the companies that best represent the demand-driven ideal for today's supply chain and document their best practices, which can help all companies move closer to their demand-driven goal.

SR NO ORGANIZATION NAME1 Apples2 McDonald's3 Amazon.com4 Unilever5 Intel

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LOGISTICS Logistics is an entire process of materials and products moving

into, through and out of the firm.

Inbounding Logistics is one of the primary processes of logistics, concentrating on purchasing and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores.

Outbound Logistics is the process related to the movement of the final product and the related information flows from the end of the production line to the end user.

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LOGISTICS AND SCM Logistics focuses on the actual transportation and storage of goods. It deals with inbound and outbound freight, communications during transit,

storage and warehousing, delivery of goods and freight, coordination among third party carries, fleet management, and other activities directly related to the actual transportation of goods from one point to another.

Supply Chain Management for the most part, encompasses a bigger picture.

Supply Chain Management is the umbrella which covers all aspects of the sourcing and procurement of goods.

Impressive results, including dramatic reductions in cycle time and accelerated cash flows, have been noted as a result of effective supply chain management. SCM forms and manages the business to business links that allow for the ultimate sale of goods to consumers.

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Organizations Require Both Logistics and SCM to Succeed

Logistics management is concerned with the movement of goods and services from suppler to consumer.  SCM shares this concern, but additionally is responsible for the flow of information and funds from supplier to consumer.

Logistics and SCM cross paths it should be expected that SCM and logistics will both remain essentially free and essential for organization to succeed in the business.

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DYNAMICS OF SCM(BULLWHIP EFFECT)

The bullwhip effect is introduce in the supply chain due to human behavior and increasing significantly at the end of the supply chain.

Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies.

The bullwhip effect occurs when the demand order variability in the supply chain are amplified as they moved up the supply chain.

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CAUSES OF BULLWHIP EFFECT Order Batching- for minimize

transportation cost.

Price fluctuation- Effect of price fluctuation.

Shortage Gaming- Phantom demand by customer/retailers.

Faulty Demand Forecast Updating- Safety stock build up at each level

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COUNTERACT TO CONTROL BULLWHIP EFFECT

Stabilize prices- Eliminating price promotion

Eliminate gaming in shortage

Break order batches

Avoid multiple demand forecast updates

Counteract the

Bullwhip Effect

Stabilize prices

Eliminate gaming in shortage

Break order

batches

Avoid multiple demand forecast updates

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VENDOR MANAGED INVENTORY (VMI) Vendor Managed Inventory starts in the 1980s when mass retailers

started to require their suppliers to take control of the inventory management.

VMI is essentially an integrated approach whereby the inventory at the distributor/retailer (downstream) is monitored and managed by the manufacturer/vendor (upstream)

This is one of the successful business models used by Wal-Mart. VMI Projects at Wal-Mart have shown sales increases of 20 to 25 percent, and 30 percent inventory turnover improvements

VMI is known as JIT - II

THE STEP TO MAKE VIM WORK IN THE ORGANIZATION

i.  Clarify expectationsii.  Agree on how to share informationiii.  Keep communication channels open

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BENEFITS OF VMI Dual Benefits Data entry errors are reduced due to computer to computer

communications. Speed of the processing is also improved. A true partnership is formed between the Manufacturer and the

Distributor. They work closer together and strengthen their ties. Distributor Benefits The overall service level is improved by having the right product at

the right time. The manufacturer is more focused than ever on providing great

service. Manufacturer Benefits Lower inventory investments (raw and finished). Better scheduling and planning. Better market information.

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THIRD PARTY LOGISTICS (3PL) Armstrong & Associates in 1984 developed this concept. 3PLs are external suppliers that perform all or part of a company’s

logistics functions, including: “Transportation, Warehousing, Distribution, Financial services”

Terms contract logistics and outsourcing are sometimes used in place of 3PL.

A & A’s TOP FIVE 3PL SERVICES (MAY-2012)

RANK 3PL LOGISTICS PROVIDER 2011 GROSS LOGISTICS REVENUE(USD MILLIONS)

1 DHL supply chain & forwarding

32,160

2 Kuehne + Nagel 22,1813 DB schenker logistics 20,7044 Nippon express 20,3135 C.H Robinson worldwide 10,336

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FORTH PARTY LOGISTICS(4PL)

The concept of a Fourth-Party Logistics (4PL) provider was first defined by Andersen Consulting (Now Accenture).

As supply chain integrator….. “ A firm that assembles and manages the resources, capabilities

and technology of its own organization with those of balancing service providers to deliver a comprehensive supply chain solution.”

4PLs manage and direct the activities of multiple 3PLs, serving as an integrator

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OUTSOURCING “The strategic use of outside resources to perform activates traditionally handled by

internal staff and resources” The ultimate goal of the outsourcing is to bring the tangible benefits to the business

and subsequently the customer.

REASON FOR COMPANY OUTSOURCING

Provide services that are scalable, secure and efficient while improving overall service and reducing the cost.

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Off-Shoring-No commonly accepted definition off-shoring exists. Services that US-based organizations purchase from abroad are consider in off-shoring.

Example India is the leading country for U.S. offshore outsourcing.

Near-Shoring-The term used to refer to the practice of getting work done or services performed by people in neighboring countries.

Example Canada , Mexico to US , Sri Lanka to India

In sourcing The act of bringing together a function that was performed outside the organization to being performed inside the organization is called in sourcing. It is opposite of outsourcing that is a service performs in house. It is a reaction to outsourcing comprising.

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PROBLEM WITH OUTSOURCING Loss of Control

Increased cash outflow

Confidentiality and security

Selection of supplier

Too dependent on service provider

Loss of staff or moral problems

Provider may not understand business environment

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FUNCTION ROLE OF INFORMATION TECHNOLOGY IN SCM

The most typical role of IT in SCM is reducing the function in transaction between supply chain partner through cost effective information flow.

IT is viewed to have a role in supporting the collaboration & coordination of supply chains through information sharing.

It can be used for Decision Support In this instance the analytical power of computers is used to provide assistance to managerial decisions.

Function role of IT in

SCM

Transaction & Execution

collaboration &

coordination

Decision Support

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INFORMATION TECHNOLOGY FOR SUPPLY CHAIN Software Systems

Electronic Data Interchange (EDI) Material Requirements Planning (MRP) Manufacturing Resource Planning (MRP II) Enterprise Resource Planning (ERP) Supply Chain Management Systems (SCM) Customer Relationship Management (CRM) Internet-based Software

Network Infrastructure

Wide Area Network Internet (for E-commerce: B2B, B2C)

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ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM

SAP R/3

Oracle

PeopleSoft (have been merged by Oracle)

Toyota uses PeopleSoft and SAP

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KEY IMPLEMENTATION ISSUES SCM intent, orientation, organization and interrelationship

SCM and use of IT practices and tools

SCM and collaborative forecasting and planning

SCM and transportation, logistics and warehousing

Customer relationship

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THE CHALLENGES A great challenge for supply chain managers, particularly in terms of

demand planning. The other problem lays in data transparency and supply chain inefficiencies

due to the cultural mindset. The other problem pertains to logistic service providers, say, third party

logistics (3PLs). The cost of distribution as a per cent of sales is ever increasing. too many

check post points in the country increases the cost of transportation. Some companies feel that employees resist to outsourcing due fearing of

losing their jobs and controls. The complexity of supply chain networks is particularly serious in

countries, such as India, China, and Korea. The distribution channels involving 3-4 intermediaries between the manufacturer and the customer. In the US and Europe, 1-2 intermediaries is the norm.

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THE OPPORTUNITIES Indian companies still need to deploy SCM as a strategy to

reduce customer response time, improvement of service levels, and time to develop market with new variants/products.

There should be direct involvement of the customer at the product design and planning stage.

A dynamic optimization of logistic networks is required. The clearing and forwarding agents and 3PLs-all have to be put to optimal use.

Use of technology e.g. bar coding should be made mandatory.

The overhead costs for running a truck in India are very high. A better cost control system must be in place to reduce costs.

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REFERANCE Reference Books: Sunil Sharma, “Supply Chain Management- concept, practices

and implementation” Oxford University Press. Sunil Chopra and Peter Meindl, “Supply Chain Management”.

Second Edition. Upper Saddle River: Pearson Prentice Hall, 2004.

Dr. Dawei Lu “Fundamentals of Supply Chain Management.” DouglasM.Lambert, “SUPPLYCHAINMANAGEMENT-

Processes, Partnerships, Performance” Third Edition. Essentials of Supply Chain Management Shroeder. G, “Operations Management- Contemporary

Concepts and Cases” McGraw Hill publication.

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Research Papers

Hau L Lee, V Padmanabhan, and Seungjin Whang; “Sloan Management Review”, Spring 1997, Volume 38, Issue 3, pp. 93-102

Elisabeth ILIE-ZUDOR, Zsolt KEMÉNY, Péter EGRI, László MONOSTORI” THE RFID TECHNOLOGY AND ITS CURRENT APPLICATIONS” In proceedings of The Modern Information Technology in the Innovation Processes of the Industrial Enterprises-MITIP 2006, pp.29-36

Thorsten Klaas,” Push-vs. Pull- Concept in Logistics Chain”, CEMS Academic Conferences, Louvain-la-Neuve, May 7-9,1998

Gurinder Singh Brar and Gagan Saini “Milk Run Logistics: Literature Review and

Directions” Proceedings of the World Congress on Engineering 2011 Vol I, July 6 - 8, London, U.K.

Prof. Himanshu S. Moharana, Dr. J.S. Murty, Dr. S. K. Senapati, Prof. K. Khuntia”I MPORTANCE OF INFORMATION TECHNOLOGY FOR EFFECTIVE SUPPLY CHAIN MANAGEMENT” International Journal of Modern Engineering Research (IJMER), Vol.1, Issue.2, pp-747-75

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http://www.gartner.com/technology/supply-chain/top25.jsp

http://en.wikipedia.org/wiki/Logistics http://logisticianslodge.wordpress.com/2010/03/07

/logistics-and-supply-chain-management-what-is-the-difference/

http://www.aalhysterforklifts.com.au/index.php/about/blog-post/what_is_the_bullwhip_effect_understanding_the_concept_definition

http://vijaysangamworld.wordpress.com/2010/07/06/push-vs-pull-supply-chain/

http://www.supplychain247.com/article/2013_top_50_global_top_30_domestic_3pls

http://supplychaininsights.com/sciwiki/index.php?title=Fourth-Party_Logistics_(4PL)

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THANK YOU

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