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Supply Chain Management Concept

Module I

BUSINESS ENVIRONMENT TODAY

Liberalised & Speeding Towards Globalisation


Revolutionary Changes in Technology
Short Product Life-cycles
Shift in Manufacturing/ Dealer Relationship
Mounting Pressures from
Consumer Groups
Environmentalists

BUSINESS COMPLEXITY- 4Cs


Market
Trends

Completeness
Move to Integrate
Solutions, not just
Products or Services

External Environment

Customers

Company
Complexity
-Simplest Ideas exploited first
-`Barriers to Entry` increasing
- Technology Rates rising
Competitiveness
-Reduced Monopolies
on technology
-Work can be done
almost anywhere
-Time and Quality
are competitive
resources

Customer Focus
New Standards emerging
- Requirements of Products
and Services and Flexibility

Competition

PLAN FOR CHANGE

Responsive & Agile Systems & Institutions


Manage Change to Companys Advantage
Create Plans to Manage both Long/ Short
Term Changes

Create Supply Chain Management Company

RELAY RACE

3 MAJOR REASONS FOR FAILURE


Participants Objectives - CONFLICTING
Goals at Change-over Points - DIFFERENT
Participants Busy Improving
Own Performance
NO ONE FOR OVERALL
SUCCESS

FUNCTIONAL ORGANIZATION
Material Flow
Purchase

Material
Control

Customer Service
Production

Distribution

Sales

Baton - Material/ Goods/ Information


Each Function has Own Goals

2 HUNTERS & A TIGER

Faster than You

FLOWS IN FUNCTIONAL ORGANIZATION


Arms Length

Arms Length

Modified Order

S
U
P
P
L
I
E
R
S

Purchase

Transmission

Order

Assembly

Marketing

Information 4
Information 3
Information 2

Information 1

C
U
S
T
O
M
E
R
S

Information C

Information S

Breaks in Information Flow

FLOWS IN SUPPLY CHAIN ORGANIZATION


Customer Order
S
U
P
P
L
I
E
R
S

Material Flow
Purchase

Transmission

Assembly

Marketing

Information Flow
Fund Flow

Seamless Information Flow

C
U
S
T
O
M
E
R
S

SUPPLY CHAIN MANAGEMENT CONCEPT


SINGLE ENTITY

All MOVEMENT activities


in
SUPPLY CHAIN
is considered a
SINGLE ENTITY
and constitutes a
TOTAL SYSTEM

SUPPLY CHAIN AS A NETWORK

Customers
Suppliers

Company

SUPPLY CHAIN MANAGEMENT


Fundamentals
Single Entity Responsible for Planning, Executing &
Control of the 3 Flows
> Material

> Related Information


> Funds

Systems Approach in integrated Supply Chain


> Any Change in Conditions in One Affects All in
Supply Chain
> Information & Material - Complementary

SUPPLY CHAIN MANAGEMENT


Fundamentals
Changed Perspective on Inventory
> Reduce Inventory to identify Process Constraints
> Minimize Buffer with Improved Process Control
> Replace Inventory with Information

Operational to Strategic Decisions


> Transaction-based Purchase to Long-term Contracts
> Investment in Upgrading Vendor to Strategic Partner
> Location & Capacity of Production/ Warehousing Facilities
> Modes of Transportation
> Type of Information System to be Used

SUPPLY CHAIN MANAGEMENT


Fundamentals
Focus on Core Competencies
> In-source CORE COMPETENCIES
> Outsource All other Activities

Responsiveness OR Efficiency in SC Achieved


Through Decisions on 4 Performance Drivers
> Inventory

> Operating Facilities

> Transportation

> Information

CHARACTERISTICS
Integrated System based working
All functions work Together to achieve SC targets
Integrated NOT Individual functions with Interfaces
Strategic Tasks NOT Operational Responsibilities
Process Oriented Horizontal Organisation built
along the 3 Flows
Material
Related Information
Financial

LOGISTICS INTERFACES
Manufacturing

Marketing

Aggregate Planning
Production
Plant Design & Layout
Job Design
Quality Control

Promotion
Product Mix
Pricing
Sales Forecast

Production Control
Production Scheduling
Plant Warehouse
Purchasing

Supply
Logistics
Chain
Warehousing & Storage
Material Handling
Transportation
Communication
Inventory Control
Operating Budget &
Control
Capital Budgeting &
Control
Plant & machinery

Finance

Customer Service
Order Processing
Product Forecast
Packaging
Warehouse Locations
Parts & Service Support

INTEGRATED SUPPLY CHAIN MANAGEMENT


Material Flows

1 tier

Suppliers

Procurement

Transmission

Assembly

BSR

Depots

Dealers

Customers

2 tier Suppliers

COMPANY

Information Flows
Inbound
Logistics
External
Supply Chain

In-plant Logistics

Outbound
Logistics

Internal
Supply Chain

Financial Flows

Managing the Flows Most Profitably

External
Supply Chain

SUPPLY CHAIN MANAGEMENT


DEFINITION
PLANNING and MANAGEMENT of all activities related
to Sourcing, Procurement, Conversion, Logistics and
Distribution to Ensure SEAMLESS FLOW of Goods,
associated Information and Funds within and across
Companies through System Integration, Coordination
and Collaboration for SUSTAINABLE Competitive
Advantage

Supply Chain Management Integrates


Supply and Demand Management

INTEGRATION IN SUPPLY CHAIN


Process Integration
Collaborative Working with Buyer and Seller
Joint Product Development
Common Systems
Shared Information

System Integration
Suitable ERP system
Integration of Extended Supply Chain Critical
for Organisational Success
Focus on Processes, Supplier and Customer
Chains that Enhance Competitiveness

CONFLICTING GOALS IN SC MANAGEMENT


Low Material Cost
Low Costs of Logistics
Low Overheads

High
Level of Service
Towards
Markets and
Production

Supply Chain
Management

Low level of
Tied-up Capital
in Inventories
Low Inventory
Carrying
Costs

JUGGLING LOGISTICS MIX


Inventory
Facilities
Communication (IT)
Unitisation (Packaging)
Transportation
Materials Management
Production Scheduling
Success Through Controlled Trade-Offs

TRADE - OFFS IN SC MANAGEMENT


Lot Size Inventory
Inventory Transportation Cost
Lead Time Transportation Cost
Product Variety Inventory Cost
Warehousing Transportation Cost
Cost Customer Service
Advanced IT & Creative Network Design
Reduce Impact of Trade- Offs

Critical Success Factors


In
Supply Chain Management
ICC
Integration

Integrated Information System

Coordination

System + Communication

Collaboration Management Agreements


+
Commitment from ALL

BENEFITS TO THE COMPANY

Improved CUSTOMER SERVICE


Reduction in TIED-UP CAPITAL
Reduction in ADMINISTRATIVE COSTS
Sharper COMPETITIVE EDGE
Sustained GROWTH
Increased SHAREHOLDER VALUE

EFFECTS ON THE ORGANIZATION

More Competitive
Lean Growth Oriented
Increased Shareholder Value

IN ESSENCE
SUPPLY CHAIN ACTIVITIES ARE FOCUSSED
ON
PARAMETERS OF CUSTOMER SERVICE AND
SUPPLY CHAIN ORGANIZATION HAS THE
RESPONSIBILITY, AUTHORITY & COMPETENCE
TO
MANAGE THE 3 FLOWS IN THE BEST INTEREST
OF
THE WHOLE COMPANY

RELAY RACE

THE BOAT RACE

Single Entity
One Objective

Seamless Integration

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