Materials Management and Supply Chain
9Chapter
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Supply Chain
The Concept of Supply Chain Management is based on two core ideas.
1. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organization. These organizations are referred to collectively as the supply chain.
2. The second idea is that organizations have to pay attention to what is happening outside their “four walls” and manage the entire chain of activities that ultimately delivers products to the final customer in order to maximize profits.
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EXAMPLE OF SUPPLY CHAINKALYANI BREWERIES
NALCOSupertechindustry
KalyaniBrewries
UBSNLtd
DSIDC
TRANSPORT CO.
FINAL
CUSTOMER
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What is ‘Supply Chain Management’?
‘Supply Chain management’ is defined as the integration-oriented skills
required for providing competitive advantage to the organization that are
basis for successful supply chains. A typical supply chain may involve a
variety of stages. These supply chain stages include:
1. Customers
2. Retailers
3. Wholesalers/Distributors
4. Manufactures
5. Component/Raw material suppliers
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Supply Chain is part of the value chain
SUPPORT ACTIVITIES
Firm Infrastructure, HRM,Technology development, Purchase
Value chain Primary Activity/ Supply Chain
Material/ Supply management Physical distribution/Channel mgmt
Extended Value Chain/ Total supply chain/ Total Logistic Management
Inbound logistic operation
Outbound logistic
Marketing sales
Customer service
S3S3S3S3S3S3
>
>
>
S2
S2
S2
SUP
PL
I
ER
Customers
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Decisions of Supply Chain
Supply Chain Design
Supply Chain Planning
Supply Chain Operating
External Supply Chain
Internal Supply Chains
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Supply Chain Process
Pull and Push Processes: Pull processes are processes in a supply chain initiated by a customer order. Push processes are processes in a supply chain initiated and performed in anticipation of customer orders.
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PULL/PUSH PROCESS
Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
Customer order cycle
Procurement
Manufacturing cycle PUSH
PULL
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Supply Chain Models
SCOR Model1. Plan
2. Source
3. Make
4. Deliver
5. Return
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Cycle View Model of Supply Chain
Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
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Logistics
Logistics is involved in facilitating all the required parts and raw materials in
the right sequence, the right quantity, the right quality and the right time to
manufacturing and service. Category items.
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Stores
Overhead Cranes and Hoists
Conveyors
Industrial Trucks
Forklifts
Automated Guided Vehicles (AGVs)
Elevators and Lifts
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Out-bound Logistics: Distribution and Shipping
The Distribution System
1. The supplier’s facility
2. In transit
3. A regional warehouse
4. A distribution Center
5. The customer’s facility
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Shipping
Warehouse stock is reduced by the delivery quantity Value changes are posted to the balance sheet account in inventory
accounting Requirements are reduced by the delivery quantity. The serial number status is updated. The goods issue posting is automatically recorded in the document flow. Stock determination is executed for the vendor’s consignment stock. A work list for the proof of delivery is generated.
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Supply Chain Relationship Focus
1. Customer Relationship Management (CRM): All processes that focus on
the interface between the firm and its customers.
2. Internal Supply Chain Management (ISCM): All process those are internal
to the firm.
3. Supplier Relationship Management (SRM): All processes that focus on the
interface between the firm and its suppliers.
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Supply Chain Macro Processes
SRM (Supplier Focus)
ISCM (Firm Focus)
CRM (Customer Focus)
Source Strategic Planning Market Trends
Negotiate Demand Planning Sales and Marketing
Buy Supply Planning Information on Customers
Design Collaboration Fulfillment Order Management
Supply Collaboration Field Service Call Center Management
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Summary of Key Operations and Supply Chain Activities
Operations & Supply Chain Activities
Purpose Key: Inter-Functional Participants
Key: Inter-Organizational Participants
Process Selection Design and Implement the transformation processes that best meet the needs of the customer and firm.
Engineering Marketing Fiance Human Resource IT
Customers
Forecasting Develop the planning numbers needed for effective decision making.
Marketing Finance Accounting
Suppliers Customers
Capacity Planning Establish strategic capacity levels (“bricks and mortar”) and tactical capacity levels (workforce, Inventory levels).
Finance Accounting Marketing Human Resources
Suppliers Customers
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Summary of Key Operations and Supply Chain Activities
Inventory management
Manage the amount and placement of inventory within the company and the supply chain.
IT
Finance
Suppliers Customers
Planning and Control
Schedule and manage the flow of work through an organization and the supply chain; match up customer demand to supply chain activities
Marketing
IT
Suppliers
Suppliers
Customers
Purchasing Identify & Quality suppliers of goods & Services; manage the ongoing buyer-supplier relationships.
Engineering
Finance
Marketing
Suppliers
Logistics Manage the movement of physical goods throught the supply chain
Marketing
Engineering
Suppliers
Customers
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Summary of Key Operations and Supply Chain Activities
Operations & Supply Chain Activities
Purpose Key: Inter-Functional Participants
Key: Inter-Organizational Participants
Recovery & Recycling
“Close the loop’ by recovering and recycling used products and materials
Marketing
Engineering
Engineering
Suppliers
Customers
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Effect of Interdependence in Supply Chain Relationships
Partner Relatively Powerful
High Level ofInterdependence
OrganizationRelatively Powerful
Low Level of Interdependence
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Purchasing Metrics
1. Purchase cost savings/avoidance
2. Managing supplier base. This includes time to market, supplier satisfaction, partnerships, supplier health (financial and/or management stability)
3. Internal customer satisfaction
4. Purchasing cost
5. Resource utilization
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Logistics Metrics
Overhead as % of Total Costs
Overhead to Cost of Goods Sold Ratio
Order Fulfillment Costs
Order Fulfillment Cost as a % of Order Management Costs
Process Costs
Total Supply Chain Costs as a % of Revenue
Total Supply Chain Costs as a % of Total Costs
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