Supply Chain Management

Overview of

Supply Chain

Management

1

Arpit Doshi

Outline

What is a Supply Chain?

The Importance of Supply Chain

Flows

Process View of a Supply Chain

Examples of Supply Chains

2

What is Supply Chain Mgmt. ?

SCM is a business network covering from buying, making, moving, warehousing to selling

Buying

Selling

Making

Moving

Warehousing


All stages involved, directly or indirectly, in fulfilling a customer request

Includes manufacturers, suppliers, transporters, warehouses, retailers, customers

Within each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service)

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Stages of a Detergent Supply

Chain

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Timber

Company

Paper

Manufacturer

Distributor

Packaging

Chemical

Manufacturer

P&G or Other

Manufacturer

Wal-Mart

Or Third

Party

distribut-

or

Wal-Mart

StoreCustomer

What is a Supply Chain? Customer is an integral part of the supply chain

Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions

Probably more accurate to use the term “supply network” or “supply web”

Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers

All stages may not be present in all supply chains(e.g., no retailer or distributor for Dell)

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Supplier Manufacturer Distributor Retailer Customer



Flows in a Supply Chain

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Customer

Information

Product

Funds

The Objective of a Supply

Chain1. To maximize overall value generated

2. To look for Sources of Revenue and Cost

3. Improving the visibility of the demand

4. Improving the quality

5. Minimizing the time

6. Reduces the transportation cost

7. Reduces warehousing cost

8. Expanding width/depth of distribution

9. Product Life cycle support

10. Rationalize supplier base

11. Service orientation

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The Objective of a Supply

Chain Example: Dell receives $2000 from a customer

for a computer (revenue)

Supply chain incurs costs (information, storage, transportation, components, assembly, etc.)

Difference between $2000 and the sum of all of these costs is the supply chain profit

Supply chain profitability is total profit to be shared across all stages of the supply chain

Supply chain success should be measured by total supply chain profitability, not profits at an individual stage

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Process View of a Supply

Chain Cycle view: processes in a supply

chain are divided into a series of

cycles, each performed at the

interfaces between two successive

supply chain stages

Push/pull view: processes in a supply

chain are divided into two categories

depending on whether they are

executed in response to a customer

order (pull) or in anticipation of a

customer order (push) 11

Cycle View of Supply Chains

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Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

Cycle View of a Supply Chain

Each cycle occurs at the interface between two

successive stages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)

Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)

Cycle view clearly defines processes involved and

the owners of each process. Specifies the roles and

responsibilities of each member and the desired

outcome of each process.

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Customer Order Cycle

Involves all processes directly

involved in receiving and filling the

customer’s order

Customer arrival

Customer order entry

Customer order fulfillment

Customer order receiving

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Replenishment Cycle

All processes involved in replenishing

retailer inventories (retailer is now the

customer)

Retail order trigger

Retail order entry

Retail order fulfillment

Retail order receiving

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Manufacturing Cycle

All processes involved in replenishing

distributor (or retailer) inventory

Order arrival from the distributor,

retailer, or customer

Production scheduling

Manufacturing and shipping

Receiving at the distributor, retailer, or

customer

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Procurement Cycle

All processes necessary to ensure that materials are available for manufacturing to occur according to schedule

Manufacturer orders components from suppliers to replenish component inventories

However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand)

Important that suppliers be linked to the manufacturer’s production schedule

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Push/Pull View of Supply

Chains

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Procurement,Manufacturing andReplenishment cycles

Customer Order

Cycle

Customer

Order Arrives

PUSH PROCESSES PULL PROCESSES

Push/Pull View of

Supply Chain Processes Supply chain processes fall into one of

two categories depending on the timing

of their execution relative to customer

demand

Pull: execution is initiated in response to

a customer order (reactive) ex. DELL

Push: execution is initiated in anticipation

of customer orders (speculative) ex.

TOYOTA

Push/pull boundary separates push

processes from pull processes 19

Supply Chain in a Firm

All supply chain processes can be

classified into

◦ Customer relationship management

◦ Internal supply chain management

◦ Supplier relationship management

The three macro processes manage

the flow of information, product, and

funds required to generate, receive,

and fulfill a customer request.

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Supply Chain Macro

Processes

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Supplier

Relationship

Management

Internal

Supply

Chain

Management

Customer

Relationship

Management

Source

Negotiate

Buy

Supply Collaboration

Strategic Planning

Demand Forecasting

Supply Planning

Fulfillment

Field Service

Market

Price

Sell

Call center

Order Management

Supplier Firm Customer

Examples of Supply Chains

Dell / Compaq/HP

Toyota / GM / Ford

Amazon

Flipkart

What are some key issues in these

supply chains?

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Toyota

Where should plants be located, what degree of flexibility should each have, and what capacity should each have?

Should plants be able to produce for all markets?

How should markets be allocated to plants?

What kind of flexibility should be built into the distribution system?

How should this flexible investment be valued?

What actions may be taken during product design to facilitate this flexibility?

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Amazon.com Why is Amazon building more warehouses as it grows? How

many warehouses should it have and where should they be

located?

What advantages does selling books via the Internet provide?

Are there disadvantages?

Why does Amazon stock bestsellers while buying other titles

from distributors?

Does an Internet channel provide greater value to a bookseller

like Borders or to an Internet-only company like Amazon?

Should traditional booksellers like Borders integrate e-

commerce into their current supply?

For what products does the e-commerce channel offer the

greatest benefits? What characterizes these products?

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FACILITIES It has plants in Maharashtra, Kerala, Jammu &

Kashmir, Himachal Pradesh, Tamil Nadu,

Karnataka, UP, Orissa, Jharkhand and north

Bengal.

Its current capacity is estimated at 3.50-crore

cases per annum.

Maharashtra contributes 30 per cent of the

company’s total sales.

INVENTORY:

About 50 tones of stock are dispatched in a

day.

They stock water as inventory.

They use computer software (IN FLOW) for

inventory management, which helps them to:

-Replenishment

–Monitoring Inventory levels

–Information on current stock levels

Sourcing

Sources water from the Himalayas.

It also sources water from rivers and

treat it.

It sources plastics for bottle from

Manjushree Technopack Ltd, a

provider of rigid plastic(Bangalore).

TRANSPORTATION

On a national level, there are 2,000 trucks- on-

call for Bisleri, while the number of trucks

averages 300 and 250 in the Mumbai and Delhi

markets.

It also uses railways.

PRICING

They provide low pricing strategy.

They offer some discount on purchase

bundle or case of mineral water.

Supply Chain Management

Business

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