SCM Guru Mantras
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Transcript of SCM Guru Mantras
1
Performance Measurement
in Supply Chains
Prof. Ravi ShankarDepartment of Management Studies,Indian Institute of Technology Delhi,
New Delhi
Course on
“Supply Chain Management”
2
Performance Measurement inSupply Chains
Companies must always be concerned withtheir competition.
From individual company performanceto supply chain performance: theentire chain's ability to meet end-customer needs through productavailability and responsive, on-timedelivery.
3
Performance Measurement inSupply Chains
To achieve that goal, you need performance measures, or"metrics", for global supply chain performance improvements.
Performance measures must show not only how wellyou are providing for your customers (servicemetrics) but also how you are handling yourbusiness (speed, asset/inventory, and financialmetrics).
2
4
PURPOSE of PMS The basic purposes of PMS are:
external reporting (economic rent),
internal control (managing the business better) andinternal analysis (understanding the business betterand continuous improvement).
5
Objectives of Metrics Measuring the activity (volume) and the
SC performance
Setting goals and comparing the actualsituation
Following a plan
Determining the levers that will helpachieve goals and single out the priorityaction programs
Revealing the degree of flexibility
6
Performance measurement system(PMS): Desirable Features (contd.)
PMS should have multiple criteria
Primary purpose should not be to reward or to punish
Performance-to-schedule measures must use group,not individual results
Specific goals must be established and reviewed
PM must be understood by those whose performanceis being measured.
PM data must be available for constant review
3
7
Some Indicators..1..
Delivery performance
Order fulfillment performance
Fill rate (Make-to-stock)
Order fulfillment lead time
Perfect order fulfillment
Supply-chain response time
Production flexibility
8
Some Indicators..2.., Total supply-chain management cost
Value-added productivity
Warranty cost or returns processing cost
Cash-to-cash cycle time
Inventory days of supply
Asset turns
9
Some Indicators..3..
Financial : ROI, Turnover ratio
Productivity: Total productivity
Efficiency: Realized Production /Planned Production
Customer LT: Time from order to delivery
Production LT: Time from order relapse tofinished product
Production flexibility: ability to respondefficiently to demand variation
4
10
Various frameworks formeasurement
Framework 1: Function based measurement system
Framework 2: Dimensions based measurement system
Framework 3: Hierarchical measurement system
Framework 4: Balanced scorecard system
Framework 5:SCOR model
11
Framework 1: Function basedmeasurement system
Covers detailed performance measuresapplicable at different linkages of SC
Marketing, Operations, Finance etc.
12
Framework 2: Dimensions basedmeasurement system
Any SC can be measured on three dimensions
Service
Assets
Speed
5
13
Framework 3:HierarchicalSystem
Performance in the functional areas of
Inbound Logistics
Operations
Outbound Logistics
Marketing
Service-after-sales
14
Framework 4: Balanced scorecard Various perspectives such as the following
should be Balanced!
Financial
Innovation & learning
Customer service
Internal business
Balance scorecard balances and links financial and non-financial indicators, tangible and intangible measures, internaland external aspects, performance drivers and outcomes.
15
Customer Perspective
Objectives Measures Targets
Internal Business Innovation and LearningObjectives Measures Targets Objectives Measures Targets
Financial PerspectiveObjectives Measures Targets
How do our
customers see
us?
How do we look
to
stakeholders?
What must
we excel at?
How can we
continue to
improve and
create value?
Visionand
Strategy
How docustomer see us?
How can wecontinue toimprove andcreate value
What mustwe excel at?
How do weLook toshareholder?
Four Perspectives
6
16
Customer, Stakeholder and
Implementer Perspective
Focuses on what an organization must be doing well toachieve the mission from the customer’s perspective.•Customer ranking survey•Customer satisfaction index•Market share
17
Internal Process Perspective
Focuses on what an organization must be doing well internallyto meet the customers’ needs.•Hours with customer on New Work•Tender success rate•Project performance index•Project closeout cycle
18
Financial PerspectiveFocuses on ensuring adequate funding and resources to sustainand improve the internal processes•Financial Perspective•Return-on-capital-employed•Cash Flow•Project Profitability•Sales Backlog
7
19
Learning, Growth and InnovationPerspective
Focuses on how an organization is innovating, improving, andlearning in order to support success.
•% revenue from New services•Rate of improvement Index•Staff Attitude survey•Revenue per employee
20
Framework 5:SCOR model The Supply-Chain Council (SCC) has developed
and endorsed the Supply Chain OperationsReference-model (SCOR) as the cross-industrystandard for supply chain management
The SCC was organized in 1996 by 69 voluntarymember companies and the European Chapterwas started in 1998.
www.supplywww.supply--chain.orgchain.org
21
Plan
DeliverMakeSource DeliverMakeSourceDeliver Source
Supplier(Internal or External)
Your Company Customer(Internal or External)
ReturnReturnReturn
Customer’sCustomer
Supplier’sSupplier
Source Make Deliver
ReturnReturn Return
ReturnReturn
SCOR ModelSCOR Model
Processes Best Practices Metrics Technology
Building Block Approach
SCOR Framework
Demand Chain
Supply Chain
8
22
Analysis MethodologyPlan
Source Make Deliver
P1 Plan Supply Chain
P2 Plan Source P3 Plan Make P4 Plan Deliver
S1 Source Stocked Products
S2 Source MTO Products
S3 Source ETO Products
M1 Make to Stock
M2 Make to Order
M3 Engineer to Order
D1 Deliver Stocked Products
D2 Deliver MTO Products
D3 Deliver ETO Products
Enable Plan
Enable Source Enable Make Enable Deliver
SU
PP
LIE
RS
CU
ST
OM
ER
SReturn DeliverReturn Source
23
Supply Chain PerformanceMeasurement
Select aspread
ofmeasures
Considerwheredata is
available
PerformanceAttribute
Performance Attribute Definition Level 1 Metric
Supply ChainDeliveryReliability
The performance of the supply chain indelivering: the correct product, to the correctplace, at the correct time, in the correct conditionand packaging, in the correct quantity, with thecorrect documentation, to the correct customer.
Delivery Performance
Fill Rates
Perfect Order Fulfillment
Supply ChainResponsiveness
The velocity at which a at which a supply chainprovides products to the customer.
Order Fulfillment Lead Times
Supply ChainFlexibility
The agility of a supply chain in responding tomarketplace changes to gain or maintaincompetitive advantage.
Supply Chain Response Time
Production Flexibility
Supply Chain Costs The costs associated withoperating the supply chain.
Cost of Goods Sold
Total Supply Chain ManagementCosts
Value-Added Productivity
Warranty / Returns ProcessingCosts
Supply Chain AssetManagementEfficiency
The effectiveness of an organization in managingassets to support demand satisfaction. Thisincludes the management of all assets: fixed andworking capital.
Cash-to-Cash Cycle Time
Inventory Days/weeks of Supply
Asset/Inventory Turns
EXTERNAL
INTERNAL
Measuring Supply-Chain Performance
One of the most commonly used measures in allSupply Chains is “Inventory Turnover”
In situations where distribution inventory isdominant, “Weeks of Supply” is preferred andmeasures how many weeks’ worth of inventory is inthe system at a particular time
valueinventoryaggregateAverage
soldgoodsofCostturnoverInventory
weeks52soldgoodsofCost
valueinventoryaggregateAveragesupplyofWeeks
9
Example of Measuring Supply-ChainPerformance
Suppose a company’s new annual report for FY(Financial Year) 2008-09 claims their costs ofgoods sold for the year is Rs.160 millionand their total average inventory(production materials + work-in-process)is worth Rs.35 million. This companynormally has an inventory turn ratio of 10.What is this year’s Inventory Turnover ratio?How did this supply chain performed last FY?
= Rs.160/ Rs.35
= 4.57 in FY 2008-09
Since the company’s normal inventory turnover ration is10, a drop to 4.57 means that the inventory is notturning over as quickly as it had in the past.
Without knowing the industry average of turns for thiscompany it is not possible to comment on how they arecompetitively doing in the industry.
But, it is clear that in FY 2008-09 (as compared to earlier)they needed more inventory relative to their cost of
goods sold. (What could be possible reasons?)
valueinventoryaggregateAverage
soldgoodsofCostturnoverInventory
Example of Measuring Supply-ChainPerformance
= (Rs.35/ Rs.160)52
= 11.375 weeks in FY 2008-09
= 11.375*7 days in FY 2008-09
= 79.625 days in FY 2008-09
Example of Measuring Supply-ChainPerformance
weeks52soldgoodsofCost
valueinventoryaggregateAveragesupplyofWeeks
10
28
50%
35 days
97 days
0%
63%
Supply Chain SCORcard Performance Versus Competitive Population
Overview Metrics SCOR Level 1 Metrics Actual Average Advantage Superior Value from Improvements
Delivery Performance to
Commit Date85% 90% 95%
Fill Rates 94% 96% 98%
EX
TE
RN
AL
SupplyChainReliability
Perfect Order Fulfillment 80% 85% 90%
Order Fulfillment Lead times7 days 5 days 3 days
Flexibility
Responsiveness
Production Flexibility 30 days 25 days 20 days
Total SCM ManagementCost 19% 13% 8% 3%
INT
ER
NA
L Cost Warranty Cost NA NA NA NA
Value Added Employee
ProductivityNA $156K $306K $460K
Inventory Days of Supply 79.625 days 55 days 38 days 22 days
AssetsCash-to-Cash Cycle Time
196 days 80 days 46 days 28 days
Net Asset Turns (Working
Capital)4.57 turns 8 turns 12 turns 19 turns
Supply Chain ResponseTime 82 days 55 days 13 days
45 days
Supply Chain Scorecard & GapAnalysis
CalculateValuefromFinancialDataGathered
29
PerformanceAttribute
Performance Attribute Definition OverallSupply Chain Metric
Supply ChainDeliveryReliability
The performance of the supply chain in delivering:the correct product, to the correct place, at thecorrect time, in the correct condition and packaging,in the correct quantity, with the correctdocumentation, to the correct customer.
Delivery Performance
Fill Rates
Perfect Order Fulfillment
Supply ChainResponsiveness
The velocity at which a at which a supply chainprovides products to the customer.
Order Fulfillment Lead Times
Supply ChainFlexibility
The agility of a supply chain in responding tomarketplace changes to gain or maintain competitiveadvantage.
Supply Chain Response Time
Production Flexibility
Supply ChainCosts
The costs associated with operating the supplychain.
Cost of Goods Sold
Total Supply Chain Management Costs
Value-Added Productivity
Warranty / Returns Processing Costs
Supply ChainAssetManagementEfficiency
The effectiveness of an organization in managingassets to support demand satisfaction. This includesthe management of all assets: fixed and workingcapital.
Cash-to-Cash Cycle Time
Inventory Days of Supply
Asset Turns
EXTERNAL
INTERNAL
Key Supply Chain Metrics
30
Some Issues…
Performance measurement system and its linkageswith strategy
Behavioral issues related to performancemeasurement system
Development of Multi-criteria decision makingframework
Role of information system in measurement
Benchmarking and performance measurement system
11
COURSERECAP
ONE MORE QUOTE
12
34
Gandhi Believed in Quality: But his Approach wassimple
“Customer is the mostimportant visitor on our
premises.
He is not dependant on us, Weare dependant on him.
He is not an interruption on ourwork. He is a part of it.
We are not doing him a favorby serving him. He is doingus a favor by giving us an
opportunity to do so.”
– Gandhi
35
THEN: OUR TOP SECRET (MY TEACHINGPHILOSOPHY)
36
We Believe in Gandhi: So our Approach is Same
“Student is the most importantpart of our system, who is
knocking our door…
He is not an interruption onour work. He is a part of
it.
We are not doing him a favor byserving him. He is doing us a
favor by giving us anopportunity to do so.”
13
37
COURSE REVISION & OVERVIEW (1) SUPPLY CHAIN BASICS
EXAMPLE OF DELL SC, APPARAL SC, etc.
DEMAND MANAGEMENT HP (Aggregate Forecast) CASE STUDY
The Linear Supply Chain
Out of synch with today’s networked environment
Limited visibility & velocity
Assumption-based planning
Inventory build-up
38
(c) R. Shankar, IITDelhi-2007-08
Supply Complexities IN GSK--1Finished Goods Movement
•250 vendors,350 materials,15 sites
•P/S movementof avg.. 1200 kms
•Over 1000consignments/month shippedacross 130site-depotlinkages
•12 supply sitescatering to 37 markets
•Primary freight costof Rs. 30 crore p.a.
14
LESSONS TO LEARN
Supply Chain involves many Complex Situationsinvolving Inventory, Information and MoneyFlows.
40Prof. Ravi Shankar (2011-12)
G-1: Quality Information (Such as, Accurate forecast)reduces Inventory problems (like, stockout & safetystock)
G-2: Companies do not compete now, their supply chainsdo
G-3: A supply chain is as good as its weakest link
G-4: Nearer you are from POS, (generally) more accurateis forecast. So, trim the lead times.
Case Study#2: TIPCO FOOD,THAILANDThailand has the largest global market share of around
45% in processed pineapple.Tipco Food is one the largest Thai exporters of this product
with a whopping figure of Baht 3.7 billion.In 2006-07, due to weakening of US dollar ($) against most of
the global currencies, including Baht,Tipco global supply chain came under tremendous threat.Look at these steep drops in exchange rate. It has crumbled
as follows:>late 2006- Baht 41 per $; early 2007 -Baht 37 per $;July 2007- Baht 33 per $.
For the same export, the revenue inflow from exports has gonedown by about one fifth of its value few months back.
Most of these export-oriented supply chains have become non-competitive in global market.
As a protective measure, these export-oriented firms arefocusing on local market to boost their sales.Reference: Bangkok Post: 4 August 2007, p B4.
41
LESSONS TO LEARNSupply Chain involves many Complex Situations
involving Inventory, Information and Money Flows.
42Prof. Ravi Shankar (2011-12)
G-5: Key to success is Responsiveness (Agile SupplyChain), Efficiency (Lean Supply Chain), Coordination& Synchronization (Strategic Alliance and Operational
Efficiency)
G-6: Global Alliance is an Important Strategic Intent inan International Supply Chain
G-7: Supply Chain Decisions are often Dynamic inNature.
Learn to be Adaptive to Changes
G-8: Financial Decisions are often the Guiding Force tothe Supply Chain Operations
15
43
Forecast accuracy improves at differentlevels#3
110 V 220 V Total
Months Demand MA(4) Error Demand MA(4) Error Demand MA(4) Error
1 10000 8000 18000
2 14000 4000 18000
3 16000 2500 18500
4 12000 6500 18500
5 18000 13000 -5000 2000 5250 3250 20000 18250 -1750
6 15000 15000 0 4000 3750 -250 19000 18750 -250
7 14000 15250 1250 3000 3750 750 17000 19000 2000
8 11000 14750 3750 7000 3875 -3125 18000 18625 625
9 13000 14500 1500 5000 4000 -1000 18000 18500 500
10 11000 13250 2250 6000 4750 -1250 17000 18000 1000
MAD 2291.67 1604.17 1020.83
ForecastAccuracy 83.23% 64.35% 94.38%
(10000+14000+16000+12000)/4)
13000-18000
(5000+1250+3750+1500+2250) / 6 100-[(5+1.25+3.75+1.5+2.25)/(18+15+14+11+13+11)]100
44
Aggregate Forecasts at SC Level
G 9: Aggregate forecasts are moreaccurate
G 10: Forecast at the mostaggregate/generic level possible
G 11: Similarly, forecast at the mostupstream of the supply chain (ifpossible)
G 12: If possible, never use forecastinformation at the lower levels. At thelower levels, decisions should be basedon actual demand
45
Aggregate Forecasts at SC Level
Aggregate forecasts is possible at least bythree ways:
G 13: Aggregate demand by product=Focus on new product Innovation forthis
G 14: Aggregate demand by market andthen forecast for many markets
G 15: Aggregate demand by time= Focuson longer duration forecast (likemonthly rather than daily) and go up toit with replenishment cycle
16
46
Product Redesign Helps Supply ChainCompetitiveness
Product Redesign may help competitiveness andcost reduction
Delayed product differentiation is the key to thisredesign
Aggregate forecasts are more accurate
Forecast at the most aggregate/generic levelpossible
Similarly, forecast at the most upstream of thesupply chain (if possible)
If possible, never use forecast information at thelower levels. At the lower levels, decisions should bebased on actual demand
47
Case Study#4: Magnitude of SupplyChain CostsExample: The Apparel Supply Chains
Manufacturer
Distributor Retailer Customer
Cost per Percent
Shirt Saving
Rs.527.20 0%
Rs.413.40 28%
Rs.204.50 62%
Manufacturer
Distributor Retailer Customer
Manufacturer
Distributor Retailer Customer
(c) R.Shankar (2010-11)
LESSONS TO LEARN
Supply Chain involves many Supply ChainPartners. Cost management is very importantin longer and complex Supply Chains.
48Prof. Ravi Shankar (2011-12)
G-16: Disintermediation Leads to Cost Saving.May also result in reduction in Lead Time,
and Lesser Inventory
17
Case Study#5: B2C@Dell Computers
Websiteor Phone
Dell AssemblyPlant
Customer wantsTo buy computer
Master Board
Hard disk
SRAM
Direct Shipment
Customer’s Order
Concept of Disintermediation in Dell Direct Supply Chain
On-line orders eliminate intermediary steps in the traditionalordering process, manufacturing policy can be altered byadopting assemble-to-order or make-to-order strategies
49
Prof. Ravi Shankar (2011-12)
LESSONS TO LEARN
50Prof. Ravi Shankar (2011-12)
G-17: Disintermediation Requires Some Formof Re-intermediation
G-18: Technology Helps in Supply ChainEfficiency
RM – 600 SKUs, 350 Suppliers75% Domestic, 25% Imported
PM-300 SKUs, 140 Suppliers
5 Plants, 18 PC
Dealer(15000)3000 SKUs
Depots (70 No)70% volume
6 RegionalDistribution Centers
Export & IndustrialConsumers (2000)
Made to stock Made to order
Case Study#6: Supply Chain atAsian Paints
18
52
Postponement in Practice
Dealer Tinting System In factory they make “Base/white"
only
Raw base sent to the dealers
Customers choose their desiredshades via computer systems at thedealer end
Dealer mixes the desired base andthe colorants with help of the DTS
>2500 dealers have DTS
LESSONS TO LEARN
Large Number of SKUs is Good forCustomization but Poses Tremendous Pressuredue to Difficulty in manageing Stock-outs andPipeline Inventory
53Prof. Ravi Shankar (2011-12)
G-19: Try to have a Generic Product aslate as possible in the supply chain.
Differentiate it into a customized one,preferably when demand penetrates thesupply chain
(c) R. Shankar, IIT Delhi-2011-12
Case Study#7: Benetton (A world leader in knitwear)
Dyeing vats for the finished knitted product.Wool Plant in Castrette, near Treviso. Knittingdivision. Computerized knitting loom capable ofautomatically producing the most complex productdesigns
Knitting Dyeing
19
55
Case Study#8: BenettonManufacturing Process Postponement
Purchase Yarn
Dye Yarn
Finish Yarn
Knit Garment Parts
Join Parts
Old Sequence
Purchase Yarn
Knit Garment Parts
Join Parts
Dye Garment
Finish Garment
New Sequence
This processis postponed
LESSONS TO LEARN
56Prof. Ravi Shankar (2011-12)
G-20: Delayed Product Differentiation Helps inReducing Safety Stock and thereby SupplyChain Cost.
G-21: Process and/or Product Redesign mayhelp supply chain operations
57
COURSE REVISION & OVERVIEW (1) Inventory: Basics, EOQ etc.
RISK POOLING CASE STUDY
DESIGN OF LEAN SUPPLY CHAINS
JIT SYSTEMS
TOYOTA CASE STUDY (THROUGHVIDEO)
NETWORK DESIGN OPTIMIZATION & HEURISTICS IN SC
DESIGN
LEARNED & USED SOFTWARE (TUTORIALMODE)
20
58
Case Study#9: Logistics Planningin Auto Supply Chains
Source of Schematic: http://www.engr.uky.edu/me/iaes/group_press/chuah.pdf
LESSONS TO LEARN
59Prof. Ravi Shankar (2011-12)
G-22: Always Look For Opportunities ofEconomic of Scale, Like FTL as compared toLTL
G-23: Outsource your non core-competencyarea to a Reliable supply chain partner, like3PL/4PL etc.
60
COURSE REVISION &OVERVIEW(2)
BULLWHIP EFFECT P&G case study
SUPPLY CHAIN GAME
BEER DISTRIBUTION GAME (HW) IN CD
21
Case Study#10: P&G: WhatManagement Gets...
Ord
er
Siz
e
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
CustomerDemand
Production Plan
LESSONS TO LEARN
62Prof. Ravi Shankar (2011-12)
G-24: Bullwhip Effect Reduces if You UseCPFR (Collaborative planning Forecasting &
Replenishment)
G-25: Bullwhip Effect Reduces if You ControlPrice Fluctuations
G-26: Bullwhip Effect Reduces if YouCompress Lead Time
Manufacturer Distributor Retailer Demand
Prod Stock Prod Stock Prod Stock
100 100100
100 100100
100 100100
100
60 10080
80 10090
90 10095
95
120 80100
100 9095
95 9595
95
90 10095
95 9595
95 9595
95
95 95 95 9595
95 9595
95
95
1
2
3
4
5
SC Game: Watch how Bullwhip effect hasSC Game: Watch how Bullwhip effect hasaggravatedaggravated
Week
22
64
COURSE REVISION &OVERVIEW(2)
DISTRIBUTION SYSTEM DESIGN CROSS DOCKING, etc.
Video: Safe Express
MUMBAI DABBAWALLAH CASE STUDY(Some Discussion)
GLOBAL ISSUES IN SUPPLY CHAIN Few examples
Strategic Partnership in SUPPLYCHAIN 3PL
SR Partnership
Dealer network
65
COURSE REVISION & OVERVIEW(3) CONDUCTED TOURS OF SUPPLY CHAIN
TOYOTA: VENDOR DEVELOPMENT, GLOBAL ISSUES
VIDEO OF Mr. Maitra, SCM Head Maruti
MANY EXAMPLES
IT-ENABLED SUPPLY CHAINS: FOCUS ONEMERGING TRENS RFID
CLOUD COMPUTING, etc.
PERFORMANCE MANAGEMENT OF SUPPLY CHAINS BALANCE SCORECARD APPROACH
Reverse Logistics & Green Supply Chains
Cross-docking
23
RFID and Other IT Tools inSupply Chains
68
VMI in Use In the Factory
At customer sites
LESSONS TO LEARN
69Prof. Ravi Shankar (2011-12)
G-27: VMI Helps Supply Chain to Become Lean
G-28: POS Information is Key to Supply ChainPlanning & Replenishment
G-29: Cross Docking is an Effective DistributionStrategy as it Helps in Shorter Lead-time, LesserMaterial handling and Lower Cost of Distribution
G-30: Effectiveness of VMI requires Coordinationbetween Supply Chain Partners
G-31: Use POS Technology and CommunicationNetwork to Facilitate the Coordination andSynchronization in a Supply Chain
24
Case Study#11: Nano Plant
LESSONS TO LEARN
71Prof. Ravi Shankar (2011-12)
G-32: Locate your Vendor Nearby
G-33: Just-in-time (JIT) and Kaizen (continuousImprovement) must go hand-in-hand
G-34: Develop Strategic Partnership in your Supply Chain
G-35: Focus on Vendor Development
G-36: Rationalize the Vendor-base
G-37: Money lies in Cost cutting and InnovativeProduct/Process/Supply-chain Design
G-38: Learn to manage the Supply Chain Risks (There aremany)
72
Case Study#12RISK POOLINGUSINGCENTRALISATION OFSTOCKING
25
Market one
Market two
Factory
Centralwarehouse
LESSONS TO LEARN
74Prof. Ravi Shankar (2011-12)
G-39: If You Pool Risks in a Supply Chain(say, by Centralised Warehousing), Counter-measure to Cope up with Risk (say, SafetyStock to Maintain a Service Level underDemand Uncertainty) will Go Down asCompared to Disaggregated Risks (say,Decentralised Warehouses)
Case Study#13: FCI
The Food Corporation of India was set up on14th Jan. 1965 by an Act of Parliament. ItsPrimary Objectives are as follows :
To provide the farmers remunerative prices.
To make foodgrains available at reasonableprices, particularly to the vulnerable sectionof the society and
To maintain buffer stocks as a measure ofFood Security
To intervene in the market for pricestabilization.
26
LESSONS TO LEARN
==Many Vital Supply Chains are Worst Managed
==Warehousing often a Weak Link
== Supply Chain Management is Full of Opportunities
76Prof. Ravi Shankar (2011-12)
G-40: Reduced Supply Chain Wastages Makes itEffective
G-41: Food Security is Linked to Effective SupplyChain Management
G-42: Every Supply Chain is Different=> Manageit to its Merit
77
Supply ChainIntegration
78
Push-Pull Supply Chains
Push-Pull Boundary
PUSH STRATEGY PULL STRATEGY
Low Uncertainty High Uncertainty
The Supply Chain Time Line
CustomersSuppliers
27
79
Characteristics and Skills
RawMaterial Customers
PullPush
Low Uncertainty
Long Lead Times
Cost Minimization
Resource Allocation
High Uncertainty
Short Cycle Times
Service Level
Responsiveness
80
Two key de-coupling points
Forecast Driven Order Driven
Less uncertainty due to
enrichment of undistorted
data
Push Pull
Factory Assembler Finished
goods StockRetailer
Market
sales
Information
de-coupling
point
Direct market sales information
Material
de-coupling
point
Source: Mason-Jones & Towill
RM – 600 SKUs, 350 Suppliers75% Domestic, 25% Imported
PM-300 SKUs, 140 Suppliers
5 Plants, 18 PC
Dealer(15000)3000 SKUs
Depots (70 No)70% volume
6 RegionalDistribution Centers
Export & IndustrialConsumers (2000)
Made to stock Made to order
Supply Chain at Asian Paints
28
Case Study#14Emergency SupplyChain
Gujarat Earthquake on26 January 2001
After Gujarat Earthquakeon 26 January 2001
29
LESSONS TO LEARN
Emergency Supply Chain is a Different BallGame
85Prof. Ravi Shankar (2011-12)
G-43: Too much may be too Bad in Emergency SupplyChains
G-44: Alignment of Functional Strategyand Coordination are keys to successof a Emergency Supply Chain
G-45: Quick Response Would Lead to EffectiveSupply Chains
REVERSE LOGISTICS
SUPPLY CHAIN BUSINESS PROCESSESCompanies are linked through a common set of processes
cutting across the supply chain
Su
pp
lyC
ha
inB
us
ine
ss
Pro
ces
se
s
Tier 1Supplier
Tier 2Supplier Logistics
Purchasing Marketing & Sales
R&D
Customer Consumer
PRODUCT FLOWProduction Finance
Manufacturer
Information Flow
CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER SERVICE MANAGEMENT
DEMAND MANAGEMENT
ORDER FULFILLMENT
MANUFACTURING FLOW MANAGEMENT
DEMAND MANAGEMENT
SUPPLIER RELATIONSHIP MANAGEMENT
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
RETURNS MANAGEMENT
30
Reverse Logistics DefinedReverse Logistics Defined
The process of planning, implementing,and controlling the efficient, costeffective flow of raw materials, in-process inventory, finished goods, andrelated information from the point ofconsumption to the point of originfor the purpose of recapturingvalue or of proper disposal.
(Source: Rogers and Tibben-Lembke, 1999).
Reverse Logistics
Forward Logistics
Supply Production Distribution Use
Design
Collection
Recycling
Reuse
Repair
Remanufacturing
Refurbishment
Disassembly
Sorting/Testing
Disposal
Incineration
Landfill
Forward and reverse logistics
Green supplychain
LOW CARBON SUPPLY CHAIN
31
What is GSCM ?
Green supply chain management (GSCM)= (green purchasing + greenmanufacturing / materials management +green distribution / marketing + reverselogistics)
Cu
sto
mers
Su
pp
lie
rs
P1 Plan Supply ChainPlanPlan
P2 Plan Source P3 Plan Make P4 Plan Deliver
Source Make Deliver
S1 Source Stocked Products M1 Make-to-Stock
M2 Make-to-Order
M3 Engineer-to-Order
D1 Deliver Stocked Products
D2 Deliver MTO Products
D3 Deliver ETO Product s
S2 Source MTO Products
S3 Source ETO Products
ReturnSource
P5 Plan Returns
ReturnDeliver
Enable
EnvironmentalManagement Green Supply Chain Management
Supply ChainManagement
The 5ecos PDSL model
Carbon emission in business operation
Emission of business operation
Direct Emission Indirect Emission
GenerationofElectricityheat orsteam
Manufacturingprocess
Transportationof materialproduct oremployee
PurchaseElectricity
Transportationof 3PL
Leasedasset
WasteDisposal
Scope 1
Scope 2 Scope 3
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Customer A1 Customer
IncineratorScrapCastingvendors
Metal Mills ScrapDealers
Landfill
Warrantyreturns
Proprietaryitems
Plastics
Disposal
Processscrap
Metalscrap
Recycling Disposal
Material flow
Informationflow
Reverse logistics operations in aleading automobile company
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STUDENTS’ CASES?TERM PAPERS COVERED
Maruti
Blood SC
PDS , etc
Achieving the 21st Century Supply Chain:Seven More Areas of Opportunity
1Use of low cost
sources
3Focused
manufacturingstrategies
5Globally aligned
operations
6Built in agility
2Creative use of
strategic partnershipsOEMs, Outsourcing,
sub contracting 7Industry wide
solutions
4Distribution,
logisticOptimisation
Multiple Channels
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Prof. Ravi Shankar(2011-12)
THE ‘GOAL’ IS TO CREATE AN AGILEBORDERLESS SUPPLY CHAIN THAT IS BASED ON
LOWEST COST ECONOMICS
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STUDENTS’ ASSIGNMENTS
SUBMIT Term Paper in WORD
Case Study PPT (Group)
Assignment (Caselets)
Provide Reference Material ina folder
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STUDENTS’ TERM PROJECT PRACTICAL FOCUS
TEMPLET PROVIDEDin the class (Like apaper)
Else use MARUTIformat AUTHOREDBY ME
EMBEDDED WITHTHEORY & PRACTICE
BOTH PPT + WORDFILE (TO BESUBMITTED FOREVALUATION)
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WHERE TO GO FROM THIS POINT
APPLY CONCEPTS ATYOUR WORK PLACE
LEARN NEW CASES& APPLICATIONS
BE IN TOUCH ANDFEEL FREE TO SEEKADVISE
Read text book oncemore
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Tata McGrawCH
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