Challenges and Requirements

SUPPLY CHAIN MANAGEMENT

Session ObjectivesTo enable the learner to understand:

What are the challenges of SCM ?Why do we care to have SCM ?

Challenges of SCM -1Metrics-

How do we measure a system?

Trade off of breadth vs.

validity of metrics

Outcome based logistics-

Perfect order, Perfect shelf

Politics &Power of Players-

Who wins?

Mom & Pop stores vs.

Megastores/Hypermarkets

Mega Retailers vs. Mega CPG Manufacturers

Visibility-Who can see what and how quickly?

Data are stored separately.

Massive data ≠ Shared & accessible

information

All parties do not have equal access

to data

Versus

Mom & Pop Store

(Unorganized)

Mega store (Organized)

Contrast between cluttered shopping floor vs. perfectly ordered shelf usage

Challenges of SCM -2Uncertainty-

Who knows what is going to happen?

• Variable demand of product (shorter lifecycle)

• Variable manufacturing yield

• Unreliable sourcing of raw materials

• Inconsistent transit lead times

Increased complexity-Why is it getting harder?

• Exploding number of Stock Keeping Units (SKUs)

• Higher and diverging customer demands

• New & merging channels (Omni-Channel)

Global operations-Why don’t we ever

close?

• Most firms source & sell across globe

• Multiple régions, time zones, languages, & cultures

Why do we care ?

Supply Chains – Span the globe and cannot be

managed as an isolated function,

Have become critical to any organization’s operations, and

Connect functions, divisions, and business units within a firm as well

as across firms.

Evolved into being both a Bridge and a Shock Absorber

Illustration of Variability of Diesel Pricing

44

46

48

50

52

54

56

58

48.67 48.63 48.6749.67 49.67 50.25 50.26 50.84 51.4 51.97 52.54 53.1 53.67

54.3455.48 54.91 55.48

Variability of Diesel Pricing in Delhi (India) -2013-14

On

high

way

die

sel p

rice

(R

s./li

tre)

- 20

13-1

4

Logistics Costs per GDP

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

5.7 5.8 5.8 6 6.2 6.4

3.2

4.54.8

4.1 3.94.2

Logistics Costs per GDP in India (1999-2005)

Contribution of TransportIn GDP (%) Proportion of Transport inTotal Expenditures (%)

%ag

e of

Indi

a’s

GDP

+ + =Transportation

Storage Distribution

Logistics

Importance of SCM Functional Logistics Supply ChainKey Skills Technically Narrow CoordinationInfluence Local & Controllable Across entire Supply ChainLeadership Hierarchical, Direct, ‘Hard’ Influential, Indirect, ‘Soft’Risk Management Robust or Reactionary Planned Response &

FlexibilityMeasurement Single Focus Multi-facetedTechnology Approach

Isolated Optimization Visibility & Coordination

Technology Platform

Self-Hosted, On-site Cloud or SaaS

Scope / Reach Regional / National Global / Multi-National

Supply Chain Management is a growing and evolving discipline.

Let’s SummarizeChallenges of SCM includes : Metrics Politics and power Visibility Uncertainty Global OperationsSCM acts as both as a bridge and a shock absorber to connect functions as well as neutralize disruptions.