SUPPLY CHAIN MANAGEMENT

BY

SHEETAL GAIKWAD

CONTENTS

Introduction to supply chain Supply chain of WAL-MART Supply chain objective Supply chain management Drivers of supply chain Planning demand and supply Determining optimal product availability Importance of supply chain management Difficulties of SCM

WHAT IS THE SUPPLY CHAIN?

Also referred to as the logistics network Suppliers, manufacturers, warehouses,

distribution centers and retail outlets – “facilities”

and the

Raw materials Work-in-process (WIP) inventory Finished products

that flow between the facilities 3

SUPPLY CHAIN OF WAL-MART

P&G othermanufacturer

Timber Industry

Paper Manufacturer

Chemical Manufacturer

Plastic producer

TennecoPackaging

Chemical Manufacturer

Wal-Martstore

Customer wants detergent &goes

to Wal-MartDistributer

FLOWS IN A SUPPLY CHAIN

Customer

Material

Information

Funds

The flows resemble a chain reaction.

Supplier

SUPPLY CHAIN OBJECTIVE

Maximize overall value generated Value strongly correlated to supply chain profitability –

the difference between the revenue generated from the customer and the overall cost across the supply chain

Example: A customer purchasing a computer from Dell pays $ 700 (the revenue)

Dell and other stages of the supply chain incur cost to convey information, produce the components, store them, transport them, transfer funds, etc.

PROCESS VIEW OF A SUPPLY CHAIN

Cycle view

Push/pull view

CYCLE VIEW OF SUPPLY CHAINS

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

PUSH/PULL VIEW OF SUPPLY CHAINS

Procurement,Manufacturing andReplenishment cycles

Customer OrderCycle

CustomerOrder Arrives

PUSH PROCESSES PULL PROCESSES

DELL COMPUTER’S SUPPLY CHAIN

Customer Web page Assembly plant All of Dell’s suppliers and their suppliers Dell builds to order: customer order

initiates manufacturing at Dell Dell does not have a retailer, wholesaler,

or distributor in its supply chain

WHAT IS SUPPLY CHAIN MANAGEMENT (SCM)?

A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers

So that the product is produced and distributed In the right quantities To the right locations And at the right time

System-wide costs are minimized and Service level requirements are satisfied

IDENTIFYING MAJOR DRIVERS OF SUPPLY CHAIN

Inventory Raw materials, work in process, finished goods Large inventory increases responsiveness of supply chain Reduced inventory reduces cost of supply chain Example – clothing retailer make large stock of clothes so

that he can satisfy customer demand immediately but will increase retailers cost.

Transportation • movement of inventory• Choice of transportation depend on own performance

characteristics• Example- one mail order company use air ways to ship

products increasing responsiveness but it can use ground transportation to ship product to reduce cost of supply chain

Facilities• places where inventory are stored, assembled or

fabricated.• Two types 1)storage site 2)production site• Decision regarding location, capacity and flexibility of

facility have significant impact on supply chain efficiency and responsiveness

• Example-an auto part distributer is having many ware houses located near to customer increasing responsiveness but make supply chain less efficient

o Information

• Data and analysis regarding inventory, facilities, transportation and customers throughout supply chain.

• It is the biggest driver of performance in the supply chain as it directly affects other drivers

• It present opportunity to management to make supply chain more efficient

• Example- with information of customers demand pattern pharmaceutical company can produce and stock the drugs in anticipation of customer demand which make supply chain more responsive because customer will find drugs when they need them.

PLANNING DEMAND AND SUPPLY

Demand forecasting • What customer will demand in the future• forecast the future demand forms basis for strategic

and planning decision• Example- Intel provides processor to dell computer . It

takes several weeks to manufacture processor but dell can not wait that long after customer order . Customer demand pc in days after an order not weeks so Dell and Intel should forecast future demand for processor

• Types of fore casting – 1)qualitative 2)time series 3)causal method 4)simulation method

Aggregate planning • planning for inventory, production, pricing of product

over specified time period.• Company must anticipate demand and determine in

advance of that demand how it will met .should company has to invest in large capacity plant to met demand or build smaller plant.

• Example –paper industry face seasonal demand where peaks occur in certain season . But mill capacity is expensive so instead of building high capacity mill they do aggregate planning to determine production levels so that they build demand in slower months for sale in particular season.

• The main goal of this is to satisfy demand by making best use of available facilities to maximize the profit

Predictable variability • change in demand that can be forecasted.• Products that under go such type of change in demand

cause numerous problem in supply chain ranging from high level of stock out during peak demand and high level of excess inventory during low demand.

• It will increase cost of product and decrease responsive- -ness of supply chain.

• How to handle predictable variability1. Manage supply using capacity2. Manage demand using short term price discounts and

trade promotions

DETERMINING OPTIMAL LEVEL OF PRODUCT AVAILABILITY

High Level of product availability require larger inventory decreases efficiency of supply chain but increases responsiveness to customer

Low level of product availability require less inventory efficiency of supply chain increases but responsiveness to customer decreases

Example-some power plant maintain several months of fuel supply to avoid any probability of running out. In contrast supermarket may carry only few days of supply of product because out of stock situation may occur.

WHY IS SUPPLY CHAIN MANAGEMENT SO IMPORTANT?To gain efficiencies from procurement, distribution and

logisticsTo make outsourcing more efficientTo reduce transportation costs of inventoriesTo meet the challenge of globalization and longer

supply chainsTo meet the new challenges from e-commerceTo manage the complexities of supply chainsTo manage the inventories needed across the supply

chain

WHY IS SCM DIFFICULT?

Uncertainty is inherent to every supply chain

Breakdowns of machines and vehicles

Weather, natural catastrophe, war

Local politics, labor conditions, border issues

Travel times

THANK YOU