1. Submitted by: Santhi Biju Dhwani Shah

2. CONTENTS INTRODUCTION PRODUCTION LIFE CYCLE IMPORTANCE OF DEMAND DEMAND UNCERTAINITY BULLWHIP EFFECT JUST IN TIME FASHION MARKET AN EXAMPLE 3. INTRODUCTION Supply Chain Management is the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders. Supplier Manufacturer Distributor Retailer Customer Upstream Downstream 4. PRODUCTION LIFE CYCLE Early: uncertain demand, high margins (time is important), product availability is most important, cost is secondary Late: predictable demand, lower margins, price is important Examples: pharmaceutical firms, Intel The demand characteristics of a product and the needs of a customer segment change as a product goes through its life cycle. Supply chain strategy must evolve throughout the life cycle 5. When designing and manufacturing a product it is important to consider its life cycle. Life cycle covers the time from its manufacture to its recycling or disposal. A typical product that has a relatively short life cycle is a newspaper / magazine. Everyone reads newspapers / magazines at some point in their lives and many read a newspaper everyday. As the recycling of products becomes more popular it is important that we consider all the products we use, even the humble newspaper, as a valuable resource even after its useful life time. 6. Inventory management is influenced by the nature of demand, including whether demand is derived or independent. A derived demand arises from the production of another product. For example, when John Deere knows its demand for a tractor, it can simply compute the demands for the parts, materials, and components needed to produce that tractor. Manufacturers of all sizes use such calculations which are part of flow management to manage inventories, schedule deliveries for inputs, and manage capacity. Flow management software has evolved from Materials Requirements Planning (or MRP) in the 1960s to the much more complex Enterprise Resource Planning (or ERP) of the 1990s. THE IMPORTANCE OF DEMAND 7. A flow management system is set in motion by the demand for end products. Independent demand arises from demand for an end product. End products are found throughout a supply chain. Wheat is an end product for a grain elevator, as is flour for a miller or cereal for a grocer. By definition, an independent demand is uncertain, meaning that extra units or safety stock must be carried to guard against stock outs. Managing this uncertainty is the key to reducing inventory levels and meeting customer expectations. Supply chain coordination can decrease the uncertainty of intermediate product demand, thereby reducing inventory costs. 8. DEMAND UNCERTAINITY Demand uncertainty means your business has difficulty accurately projecting customer demand in the future. This poses a significant challenge because it makes inventory hard to control and manage. Using technology to monitor sales over time can help offset demand that fluctuates from one period to the next. 9. BULL WHIP EFFECT The bullwhip effect is a common result when company buyers try to adjust to fluctuating demand. Based on psychology, the bullwhip effect occurs when company buyers overreact to situations where stores have excess inventory or stock-outs. The tendency is to over-buy and run over immediately following stock-out problems or to under-buy after merchandise is discounted or thrown out. The common result is a shift in the other direction, which causes the opposite problem to occur. 10. JUST IN TIME INVENTORY Companies often use just-in-time inventory systems to help mitigate these problems associated with uncertain demand. JIT involves a closely coordinated stock replenishment process between retailers and vendors. By sharing inventory data through software programs with vendors, retailers allow for more rapid replenishment of stock. This enables you to keep lower inventory levels on hand and make smaller, more frequent orders. While JIT helps there are still risks of stock outs if demand spikes quickly. Plus, more frequent orders leads to higher shipping costs. 11. IMPACT OF CUSTOMER NEEDS ON IMPLIED DEMAND UNCERTAINTY CUSTOMER NEED Range of quantity increases Lead time decreases Variety of products required increases Number of channels increases Rate of innovation increases Required service level increases CAUSES IMPLIED DEMAND UNCERTAINITY TO INCREASE BECAUSE: Wider range of quantity implies greater variance in demand Less time to react to orders Demand per product becomes more disaggregated Total customer demand is now disaggregated over more channels New products tend to have more uncertain demand Firm now has to handle unusual surges in demand 12. LEVELS OF IMPLIED DEMAND UNCERTAINITY PREDICTABLE SUPPLY AND DEMAND SALT AT A SUPERMARKET PREDICTABLE SUPPLY & UNCERTAIN DEMAND AND SUPPLY AN EXISTING AUTOMOBILE MODEL HIGHLY UNCERTAIN SUPPLY AND DEMAND A NEW COMMUNICATION DEVICE 13. FASHION MARKET Characteristics shown by fashion markets: 1. Short Life Cycle 2. High Volatility 3. low Productivity 4. high Impulse purchase 14. Product life cycle Fashion life cycle sale Sale Time Time Time to market 15. TIME TO MARKET Understand the products entry emergence and immediately get into the marketing of the fashion product. It requires time to recognize a market opportunity TIME TO SERVE Time to capture a customers order and deliver TIME TO REACT Time to adjust the order CRITICAL LEAD TIMES 16. IMPORTANCE OF AGILITY :IN ZARAS PERSPECTIVE Zaras Key success: 1. Short lead time 2. Scarce supply 3. Style Zara has Vertical supply chain 17. VALUE CREATION WITH THE USE OF IT 1. Began with Electronic Data Interchange implementation 2. Easy information interchange 3. Faster turn around 4. Rich information repository 5. Support of designers, production managers and planners 18. CONCLUSION At a generic level there is no single supply chain strategy that is applicable to all product types. Rather we have found that supply chains should be engineered to match customer requirements. It has been shown that each stage of a products life cycle has signicant impact on strategy, especially in relation to supply chain management. As a product proceeds through its life cycle the demand characteristics change. There has to be a consequential requirement to change the supply chain strategy to maintain competitiveness. Hence the direct relevance oft he focused supply chain in optimally matching product to pipeline. 19. 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