SCM Guru Mantras

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1 Performance Measurement in Supply Chains Prof. Ravi Shankar Department of Management Studies, Indian Institute of Technology Delhi, New Delhi Course on “Supply Chain Management” 2 Performance Measurement in Supply Chains Companies must always be concerned with their competition. From individual company performance to supply chain performance: the entire chain's ability to meet end- customer needs through product availability and responsive, on-time delivery. Performance Measurement in Supply Chains To achieve that goal, you need performance measures, or "metrics", for global supply chain performance improvements. Performance measures must show not only how well you are providing for your customers (service metrics) but also how you are handling your business (speed, asset/inventory, and financial metrics).

Transcript of SCM Guru Mantras

Page 1: SCM Guru Mantras

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Performance Measurement

in Supply Chains

Prof. Ravi ShankarDepartment of Management Studies,Indian Institute of Technology Delhi,

New Delhi

Course on

“Supply Chain Management”

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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.

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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).

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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).

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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

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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

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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

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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

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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

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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

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Framework 1: Function basedmeasurement system

Covers detailed performance measuresapplicable at different linkages of SC

Marketing, Operations, Finance etc.

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Framework 2: Dimensions basedmeasurement system

Any SC can be measured on three dimensions

Service

Assets

Speed

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Framework 3:HierarchicalSystem

Performance in the functional areas of

Inbound Logistics

Operations

Outbound Logistics

Marketing

Service-after-sales

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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COURSERECAP

ONE MORE QUOTE

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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

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THEN: OUR TOP SECRET (MY TEACHINGPHILOSOPHY)

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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.”

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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

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(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.

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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)

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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.

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COURSE REVISION &OVERVIEW(2)

BULLWHIP EFFECT P&G case study

SUPPLY CHAIN GAME

BEER DISTRIBUTION GAME (HW) IN CD

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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

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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

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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

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RFID and Other IT Tools inSupply Chains

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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

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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)

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Case Study#12RISK POOLINGUSINGCENTRALISATION OFSTOCKING

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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.

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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

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Supply ChainIntegration

78

Push-Pull Supply Chains

Push-Pull Boundary

PUSH STRATEGY PULL STRATEGY

Low Uncertainty High Uncertainty

The Supply Chain Time Line

CustomersSuppliers

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Characteristics and Skills

RawMaterial Customers

PullPush

Low Uncertainty

Long Lead Times

Cost Minimization

Resource Allocation

High Uncertainty

Short Cycle Times

Service Level

Responsiveness

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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

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Case Study#14Emergency SupplyChain

Gujarat Earthquake on26 January 2001

After Gujarat Earthquakeon 26 January 2001

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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

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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

Page 31: SCM Guru Mantras

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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32

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

95

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

96

Prof. Ravi Shankar(2011-12)

THE ‘GOAL’ IS TO CREATE AN AGILEBORDERLESS SUPPLY CHAIN THAT IS BASED ON

LOWEST COST ECONOMICS

Page 33: SCM Guru Mantras

33

97

STUDENTS’ ASSIGNMENTS

SUBMIT Term Paper in WORD

Case Study PPT (Group)

Assignment (Caselets)

Provide Reference Material ina folder

98

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)

99

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

Page 34: SCM Guru Mantras

34

Tata McGrawCH

AP

TE

R1

Intr

od

uc

tio

nto

the

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ld