Suuply Chain Management

8/8/2019 Suuply Chain Management

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Supply Chain

Management

Dr. Jayashree Dubey

IPE



Topics For Discussion:

Defining the SCM Objective of supply Chain Functions of supply Chain Supply Chain partners

Drivers Types



What is SCM?

SCM is a set of approaches utilized to efficiently integrate suppliers,manufacturers, warehouses and stores, so that merchandise is producedand distributed at the right quantities, to the right locations, at the right time,in order to minimize system wide costs while satisfying service levelrequirements.

“Supply Chain management deals with the control of materials, information,and financial flows in a network consisting of suppliers, manufacturers,distributors, and customers”

The supply chain is a worldwide network of suppliers, factories, warehouses,distribution centers, and retailers through which raw materials are acquired,transformed, and delivered to customers.



What is Supply Chain

Management?

Cooperation between producers,

processors, wholesalers, &/or retailers, to

guarantee high quality &/or minimize

costs



Vertical Coordination includes:

Strategic Alliances

an agreement mutually entered into by two

independent firms to serve a common strategic

objective eg. Strategic alliance between pork processor and

pork producer to produce pigs via certain method at

certain quality (Niman Ranch)

formal written contracts

vertical integration



Requirements for Effective SP

Advanced information systems

Top management commitment Information must be shared

Power and responsibility within an organization mightchange (for example, contact with customers switches

from sales and marketing to logistics)

Mutual trust Information sharing

Management of the entire supply chain

Initial loss of revenues



Information, product, service, financial and knowledge flows

M a t er i al s

E n d C on s um er s

Capacity, information, core competencies, capital, and human resource constraints

Supplier Network

Market

DistributionProcurement

Manufacturing

Integrated Enterprise

Distribution Network

Relationship Management

Generalized Supply Chain Model

Material Flow

Information Flow



Supply chain process



What is a Supply Chain?

Customer wants

detergent and goes

to Jewel

Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel

Supermarket

Jewel or third

party DC

Jewel or third

party DC

P&G or other

manufacturer

P&G or other

manufacturer

Plastic

Producer

Plastic

Producer

Chemical

manufacturer

(e.g. Oil Company)

Chemical

manufacturer

(e.g. Oil Company)

Tenneco

Packaging

Tenneco

Packaging

Paper

Manufacturer

Paper

Manufacturer

Timber

Industry

Timber

Industry

Chemical

manufacturer

(e.g. Oil Company)

Chemical

manufacturer

(e.g. Oil Company)



Flows in Supply Chain

Flow of information, order, fund, material, ownership,



Partners

Manufacturers,

Suppliers,

Customers,

Transporters,

Warehouses,

Retailers.



Objective



The Objective of a Supply Chain

Maximize overall value created

Supply chain value: difference between what

the final product is worth to the customer and

the effort the supply chain expends in filling thecustomer’s request

Value is correlated to supply chain profitability

(difference between revenue generated from

the customer and the overall cost across thesupply chain)



Functions of supply Chain

Physical function: includes converting rawmaterials into products and transportation fromone point in the supply chain to the next; the

costs lie within production, transportation andinventory storage.

Market mediation function: to make sure thatthe products reaching the market place

matches consumer demand



SC Decisions

SC Strategy

SC Planning

SC Operation

SC Profitability/ Surplus



Strategic Decisions

Strategic network optimization, including the number,location, and size of warehouses, distribution centers and facilities.

Strategic partnership with suppliers, distributors, andcustomers, creating communication channels for critical information and operational improvementssuch as cross docking, direct shipping, and third-party

logistics. Product design coordination, so that new and existing

products can be optimally integrated into the supplychain, load management

Information Technology infrastructure, to support

supply chain operations. Where to make and what to make or buy decisions Align overall organizational strategy with supply

strategy

http://en.wikipedia.org/wiki/Distribution_center

http://en.wikipedia.org/wiki/Strategic_partnership

http://en.wikipedia.org/wiki/Cross_docking

http://en.wikipedia.org/wiki/Product_design

http://en.wikipedia.org/wiki/Information_Technology

http://en.wikipedia.org/wiki/Information_Technology

http://en.wikipedia.org/wiki/Product_design

http://en.wikipedia.org/wiki/Cross_docking

http://en.wikipedia.org/wiki/Strategic_partnership

http://en.wikipedia.org/wiki/Distribution_center



Tactical Decisions

Sourcing contracts and other purchasing decisions.

Production decisions, including contracting, locations,

scheduling, and planning process definition.

Inventory decisions, including quantity, location, andquality of inventory.

Transportation strategy, including frequency, routes, and

contracting.

Benchmarking of all operations against competitors andimplementation of best practices throughout the

enterprise.

Milestone payments

http://en.wikipedia.org/wiki/Benchmarking

http://en.wikipedia.org/wiki/Best_practice

http://en.wikipedia.org/wiki/Best_practice

http://en.wikipedia.org/wiki/Benchmarking



Operational Decisions Daily production and distribution planning, including all nodes in the

supply chain. Production scheduling for each manufacturing facility in the supply chain

(minute by minute).

Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.

Sourcing planning, including current inventory and forecast demand, incollaboration with all suppliers.

Inbound operations, including transportation from suppliers and receivinginventory.

Production operations, including the consumption of materials and flow of finished goods.

Outbound operations, including all fulfillment activities and transportationto customers.

Order promising, accounting for all constraints in the supply chain,including all suppliers, manufacturing facilities, distribution centers, andother customers.



Decision Phases of a Supply Chain

Supply chain strategy or design

Supply chain planning

Supply chain operation



Supply Chain Strategy or Design

Decisions about the structure of the supply chainand what processes each stage will perform

Strategic supply chain decisions

Locations and capacities of facilities Products to be made or stored at various locations Modes of transportation Information systems

Supply chain design must support strategicobjectives

Supply chain design decisions are long-term andexpensive to reverse – must take into account

market uncertainty



Supply Chain Planning

Definition of a set of policies that govern

short-term operations

Fixed by the supply configuration from

previous phase Starts with a forecast of demand in the

coming year



Supply Chain Planning

Planning decisions:

Which markets will be supplied from which

locations

Planned buildup of inventories Subcontracting, backup locations

Inventory policies

Timing and size of market promotions

Must consider in planning decisions demand

uncertainty, exchange rates, competition over

the time horizon



Supply Chain Operation

Time horizon is weekly or daily Decisions regarding individual customer orders

Supply chain configuration is fixed and operatingpolicies are determined

Goal is to implement the operating policies aseffectively as possible

Allocate orders to inventory or production, set order

due dates, generate pick lists at a warehouse,allocate an order to a particular shipment, setdelivery schedules, place replenishment orders

Much less uncertainty (short time horizon)



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 acustomer order (push)



Cycle View of Supply Chains

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 twosuccessive stages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)

Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)

Figure 1.3

Cycle view clearly defines processes involved andthe owners of each process. Specifies the roles and

responsibilities of each member and the desired

outcome of each process.



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

Figure 1.4



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

Figure 1.5



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

Figure 1.6



Procurement Cycle

All processes necessary to ensure that materialsare available for manufacturing to occur accordingto schedule

Manufacturer orders components from suppliersto replenish component inventories

However, component orders can be determinedprecisely from production schedules (different

from retailer/distributor orders that are based onuncertain customer demand)

Important that suppliers be linked to themanufacturer’s production schedule



Push/Pull View of Supply Chains

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 acustomer order (reactive)

Push: execution is initiated in anticipation of

customer orders (speculative)

Push/pull boundary separates push

processes from pull processes



Types

SCM Views: Cycle (customer, replenishment,

Manufacturing, procurement)

& Push-pull view

• Responsive & Efficient Supply Chain (wide

range of product variety & Quantity, shorter lead time, innovative product, high service

level)

• Push/ pull system: push executed in

anticipation of demand & pull in response to

customer order.

Tire 1, Tire II

• (Dell, 7 eleven, Wal-mart)



Selecting Type



Drivers

Inventory Transportation

Facilities

Information Sourcing

Pricing



Designing Supply chain

Supply chain strategy determines the nature of procurement, transportation, manufacturing and

distribution to the customers:

Competitive strategy (Wal-mart (low price) &Mc.Master-Carr (variety) (Dell & Compaq).

Strategic fit between competitive and supply chain

strategy.



Obstacles

Increasing Variety

Decreasing PLC

Increasingly demand customer

Fragmentation of supply chain ownership Globalization

Difficulty executing new strategy



Questions?

Suuply Chain Management

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