Presentation by

Group-1

Introduction

Evolution

Decisions

Importance

Customer service & cost trade off

Sc’s Responsiveness

Delivery reliability

SC performance measures

Drivers of SC performance

SCM is also called the art of management of providing the

Right Product, At the Right Time, Right Place and at the

Right Cost to the Customer.

All activities involved in the transformation of goods from the

 raw material stage to the final stage, when the goods and

services reach the end customer.  

Supply chain management involves planning, design and control

of Flow of material,

Flow of information

Flow of finance along the supply chain to deliver superior value to

the end customer in an effective and efficient manner.

There have been three major revolutions in the field of supply chain

management.

The First Revolution(1910-1920): The Ford Supply Chain

The Second Revolution(1960-1970): The Toyota Supply Chain

The Third Revolution(1995-2000): The Dell Supply Chain

Tight integrated chain.

FORD manage the journey from the iron ore mine to the finished automobile in 81 hours.

Famous saying about FORD’s SC:

The Ford supply chain would offer any colour, as long as it was black;

& any model, as long as it was Model T.

Ford innovated and managed to build a highly efficient, but inflexible supply chain that

could not handle a wide product variety and was not sustainable in the long run.

General Motors, on the other hand, understood the demands of the market place and

offered a wider variety in terms of automobile models and colours.

Allowed the final assembly and manufacturing of

key components to be done in-house.

The bulk of the components was sourced from a large

number of suppliers who were part of the Keiretsu

system.

Keiretsu refers to a set of companies with interlocking

business relationships and shareholdings.

Long-term relationships with all the suppliers.

Customization

Dell did not believe in long-term relationships with suppliers.

Working with world-class suppliers with technology and cost

leadership.

Medium-term relationships with suppliers.

At Dell, the trigger for supplier orders was the actual orders by

customers, and not forecasts.

This helped Dell in reducing the inventory significantly, allowing

them to respond to any changes in the market place.

Classified into:

Design decisions

Operations decisions.

Supply chain design (Network design) or strategic decisions involve

the following critical issues:

What activities should be carried out by the nodal firm and what

should be outsourced?

How to select entities/partners to perform outsourced activities.

what should be the nature of the relationship with those entities?

Should the relationship be transactional in nature or should it be a

long—term partnership?

Decisions pertaining to the capacity and location of the various

facilities.

Both tactical and operations decisions involve the following

areas:

Demand forecasting

Procurement planning and control

Production planning and control

Distribution planning and control

Inventory management

Transportation management

Customer order processing

Relationship management with partners in the chain

Proliferation in product lines

Shorter product life cycle

Higher level of outsourcing

Shift in power structure in the chain

Globalization of manufacturing

Improvement in Communication and IT

Entry of Third-party Logistics Providers

Enhanced Inter-firm Coordination

Capabilities

Challenging Factors are inventory management and low cost logisticseconomic environment taxation structure and also the geography of India

A firm must ensure a smooth fit between its business strategy and supply chain strategy

Well managed firms identify and develop external market opportunities and internal supply chain capabilities

To determine the revenue and contribution potential of increased customer service, company will need to conduct market research.

From a supply chain perspective, customer service consists of the following four dimensions:Order delivery lead timeResponsivenessDelivery reliabilityProduct variety

Order delivery time is the time taken by the supply chain to complete all the activities from order to delivery.

A critical characteristic of the supply chain is the customer order penetration point or decoupling point. Three types characterised by customer order penetration point.

Order delivery lead time also can be used for drawing a push-pull boundary of the supply chain.

All the process in SC are divided into two categorieswith respect to customer order point.

Responsive Supply Chains: respond quickly as new products are introduced and as demand changes.

Efficient Supply Chains: focus on operating efficiently to minimize costs.

Types of Supply Chains -- Continued

Exhibit 5.5: Responsive vs. Efficient Supply Chains

Responsive Supply chain for innovative product

Efficient Supply chains for functional products

•Closely integrated in production planning and control, quality management, service, after-sales support.

•Track work-in-process and finished goods inventory.

•Share more information.

•Use system wide measures of end-use-customer satisfaction.

•Suppliers are evaluated based on product development time, geographic proximity, lead time, and cycle time.

•Use traditional criteria for evaluating suppliers.

•Place high value on integrity, commitment, reliability, and consistency.

•Value suppliers for ability to provide cost savings, reduce downtime, and reduce inventory.

Supply Chain Performance Measures: Cost Versus Service

• Cost• Service– Order delivery lead time– Responsiveness– Delivery reliability– Product variety

Supply Chain Performance MeasuresCo

st o

f ser

vice

Service LevelLow High

Achieving Strategic Fit: Wishes vs. Capabilities

Implied uncertainty spectrum

Responsive (high cost)

supply chain

Efficient (low cost)

supply chainCertain demand

Uncertain demand

Responsivenesspectrum Zone of

Strategic Fit

Gourmet dinner<High margin>

Lunch buffet<Low margin>

Cost

Service LevelLow High

Existing Position

Managing Supply Chains Efficiently

.

Inefficient Practices

Market-Responsive Process

Primary purpose Respond quickly to unpredictable demand to minimize stockouts, forced markdowns, and obsolete inventory

Manufacturing focus Deploy excess buffer capacity for flexibility

Inventory strategy Deploy significant buffer stock of all stock items

Lead-time focus Invest in ways to reduce lead time

Approach to choosing suppliers

Select primarily for speed, flexibility, and quality

Product-design strategy Use modular design to postpone product differentiation

The Four Drivers of Supply Chain Performance

                                            

Inventory "stockage" exists in all supply chains because of a mismatch between supply and demand

Inventory plays a significant role in a supply chain's ability to support a firm's competitive strategy

A supply chain manager must make routine decisions tocreate a more responsive and more efficient supply chain

Transportation moves the product between different locations in a supply chain

Transportation is prominent in a company's competitive strategy

The fundamental trade-off for transportation is cost (efficiency) versus speed (responsiveness)

                                                                             

Facilities include all locations in the supply chain to store, assemble, or fabricate inventory

Decisions regarding location, capacity, and flexibility of facilities significantly affect supply chain performance

In DoD, depot and field repair facilities are cornerstones of the supply chain

Information serves as the connection between the supply chain's various stages

Information and information systems are an important part of balancing responsiveness versus efficiency

Businesses must trade-off between efficiency and responsiveness when trying to include more supply chain information