Ancient Times The first supply chain was the barter system

Traces of outsourcing was seen when Charles S. Rolls

1904 became selling agent for cars made by F. Henry Royce

The essence of SCM was understood with the first phase

1960-1975 characterized as an inventory ‘push’ era that focused
primarily on physical distribution of finished goods

Companies began migrating from an inventory push to

1975-1990
a customer pull channel

1980 Emergence of SCM

1985- WalMart introduced the concept of Cross Docking

Internet revolutionized the distribution system of

1996- the business

Concept of e-commerce changed the definition of

1998-
business

Module 1:Supply Chain Management

 MEANING OF SUPPLY CHAIN

It is a network of supplier, manufacturing, assembly, distribution and logistic

facilities that performs the function of of procurement of materials,
transformation of these materials in to intermediate and finished products
and the distributions of these products to customer
 MEANING OF SUPPLY CHAIN MANAGEMENT

It is a system approach to managing the entire flow of information,

materials and services from raw materials supplier through factories
and warehouses to the end customer
OBJECTIVE OF SUPPLY CHAIN MANAGEMENT

To maximise the overall value generated.

Value generated is the difference between what
final product is worth to the customer and
the effort the supply chain expands in filling
the customer request.
SUPPLIER

Information flow Information flow

SUPPLIER MANUFACTURER DISTRIBUTOR

Material flow Material flow

Flexible System
 u ld SC
c o an M
in
c ha d sta
ly p e n rt
p o ds s w
s up lo
t of a sa w it
e p o f ith h
n c ht th
C o u g t he e c
t h o
be cu u s
s t t om
om e
Customer could be an internal er r
customer or an external customer

Next, we see the processes performed in a

supply chain as a CYCLE view

Module 1:Supply Chain Management

 Cycle
IV

Supplier
Manufacturer

Cycle III
Cycle I

Customer

Retailer Distributor

Cycle II

Module 1:Supply Chain Management

 CUSTOMER ORDER CYCLE
It occurs at the customer/retailer

CUSTOMER CUSTOMER
ARRIVAL ORDER
RECEIVING

CUSTOMER
CUSTOMER ORDER
ORDER ENTRY FULFILMENT
 REPLENISHMENT CYCLE
It occurs at the retailer & distributor

RETAIL
RETAIL
ORDER
ORDER
RECEIVING
TRIGGER

RETAIL RETAIL
ORDER ORDER
ENTRY FULFILLMENT
 MANUFACTURING CYCLE
It occurs at the distributor and manufacturer

ORDER RECEIVING
ARRIVAL

MANUFACTUR-
PRODUCTION -ING
SCHEDULING AND
SHIPING
 PROCUREMENT CYCLE
It occurs at the manufacturer and supplier

ORDER RECEIVING
BASED AT
SCHEDULE MANUFACTURER

SUPPLIER COMPONENT
PRODUCTION MANUFACTUR-
SCHEDULING ING/SHIPPING
Pull View of SCM
Execution is initiated in response to a customer order

Demand is known with certainty

It is also reactive process because they react to
customer demand

Push View of SCM

Execution in anticipation of customer order

Demand is not known and must be forecast

It may also be referred to as speculative process

 PUSH
CUSTOMER
PROCESS CUSTOMER ORDER
AND
MANUFACTURING
CYCLE
CUSTOMER MANUFACTURER
ORDER ARRIVES

PROCUREMENT CYCLE

PUSH SUPPLIER
PROCESS

DELL SUPPLY CHAIN

 FACES OF SUPPLY CHAIN MANAGEMENT

BACK END
It comprises the physical building block
It involves production, assembly and physical movement

Procur- Manufa
-ement -cturing

Distrib-
Global
-ution

Logist-
-ics
 PROCUREMENT DECISION

a Supplier Decision:

Where should be source raw materials, components and sub-

assembles from.

b. Direct delivery from Suppliers:

Can intermediate warehouses can be estimated.

c. Vendor managed Inventories:

Should be inventories at the plants be vendor managed.

d. Optimal Procurement Policy:

What are the cost and services tradeoffs in alternative procurement strategies.
 MANUFACTURING DECISION

a. Plant location:
How many manufacturing plants should be set up and where
should be they located.

b. Product Line selection:

What products should be produced at each manufacturing location
c. Capacity planning:
How much capacity is needed in each plant.

d. Capacity Allocation:
How do we allocate plant capacity to products
e. Inventory Decision:
What raw materials/WIP/finished goods inventory should be stocked ‘
in each center.

f. Optimal manufacturing strategy:

What are the cost and service tradeoffs in alternative manufacturing
strategies.

g Input Control:
How do we introduce work in the plant

h. Production Scheduling:
How do we schedule the production.

i Constrained supply:
How do we optimize resource utilization when the suppliers are not enough to
fulfil the requirements
 DISTRIBUTION DECISIONS

a. Configuration of distribution facilities:

What type of distributions centers are required.

b. Location:

Where should distribution facilities be located.

c. Customer Allocation:

Which customers should a facility service.

d. Facility configuration:
What product should be handled by each facility? What product and in
how many quantities should be stocked at each facility? What should be
the replenishment strategy
e. Optimal Distribution Strategy:

What are the cost and service tradeoffs of alternatives

distribution strategies
 LOGISTIC DECISION
a. Logistics mode selection:
a.What transport modes and lanes should be used to move
products throughout the network.
b. Selection of ports:
Which ports should be used to bring product into and out of a
country.

c. Direct Delivery:
Which products should move directly from manufacturing centers to
customer.
d. Optimal Transportation Strategy:
What are the cost and service tradeoffs of alternative transportation strategy
•LOGISTIC DECISIONS
a. Product and Process Selection:
What pruduct quantities, by facility, by process, should be produced
and stored in each period to support customer demands? What pruduct
to sell and to which customers to maximize profits

b. Planning under Uncertainty:

What are the implication associated with seasonal or cylical demand,
capacity availability or raw material availability.
 SUPPLY CHAIN DECISION

Strategic Decision
Operational Decision

Location Inventory Transportation Production

 SUPPLY CHAIN DECISIONS

1. Strategic Decision

It is made over a longer time horizon

It is closely linked to the corporate strategy and guide

Supply chain policies from a design perspective.

2. Operational Decision

It is short term

It focus on activities over a day to day basis.

1.Location Decision
Where production facilities, stocking points
and sourcing points are located

2. Production Decision
What products to create at which plant, which suppliers will
service those plants, which plants will supply
specific distribution centres and how goods will get to the
final customer

3. Inventory Decision
It maintained because to buffer against any uncertainty
That might exit in the supply chain

4. Transportation Decision
What modes have been used for delivering the odds to
the customers.
 DECISION PHASES IN SUPPLY CHAIN MGMT

1.Supply Chain Strategy:

•How to structure the supply chain
•What the chain configuration will be.
•What process each stage will perform.
•Strategic supply chain decisions are made
2. Supply Chain Planning:

• Operating policies are define.

• Constraints within each planning must be done.
• Planning must be I done for the coming year of
demand in different markets.
• it establishes parameters.
• Companies must include uncertainty in demand,
exchange rates and competition.
3. Supply Chain Operation:

• Time horizon here is weekly.

•Companies makes decision regarding individuals
customers orders.
• Less uncertainty about demand information.
 ELEMENTS OF SCM

1. Planning System
It focus on having the right product at right time and at the right place.
It facilitate order taking and information gathering

2. Planning System
It facilitate the physical movement of good and services
It focus on operational efficiency and application based system.

3. Performance Measurement System

It make more informed decisions n respond to changing mkt condition
The real focal point here are accounting n financial +mgmt system.
 KEY FUNCTIONS IN SCM

1. Customer asset management function:

Managing information about demand to enable a better understanding
of the markets and customer needs.

2. Integrated logistics:
Managing the flow of physical goods from supplier. It include production
planning, procurement and inventory management

3. Agile manufacturing:
Managing the manufacturing process to ensure low production cost.

4. Financial and Accounting management:

Managing the financial flows with the supplier and customer through
financial intermediaries.
 Custo
mer
STRATEGIC
Channel Network
Design Strategy

STRUCTURAL
Warehou
Transport
-se Material
-ation
design
FUNCTIONAL

Information Policies And Facilities Orgn

System Procedures And Changem
Equipments Mgmt

IMPLEMENTATION
 SCM FRAMEWORK

1. Strategic
What are the basic and distinctive service need of the customers.
What can SCM do to meet these needs
Be used to provide unique services to the customer.

2. FUNCTIONAL
What should the SCM network look like
What product should be sourced from which manufacturing location.
How many warehouses should the company have and where should
be located.
What is the mission of each facility.
3. Functional

Operational details are decided.

4. IMPLEMENTATION

To give the means or authority to do something

FACTORS AFFECTING SUPPLY CHAIN MANAGEMENT

factors

Cultural Govt
Geographical Time
Legislation
 SUPPLY CHAIN COMPONENTS

1. Procurement
Procurement cost is influenced by the:
•The way procurement decisions are made.
•Procedures adopted in the procurement process.
•Relationship with suppliers.
•Firms credibility.
•Market intelligence

1a. Material Requirement Planning

It will cover inventory requirements in the entire
supply chain, including both firms and its suppliers
2. Processing

•Focused on to manufacture standard products.

•Curtailing the huge inventory cost.

3.Warehousing Transportation
Management of demand i.e. to make available the right
product, at the right place, at the right time and
at the least cost.

3a. Demand Management

Anticipation of the customer requirements of customer
products and fulfils that requirements against
defined customer service needs.
FLOWS IN SUPPLY CHAIN MANAGEMENT

1. Value Flow
•Moving largely from the vendor to customer.
•Flows as good flows and service flows.

1a. Good Flows:

Raw materials. Work in Process, Finished Goods.

1b. Service Flows:

Intangible cannot be stored.
2. Information Flow
Flows from vendor to the customer and from the
customer to the vendor.

a. Backward Flow.
b. Forward Flow

3. Cash Flow
Money paid for goods and services received.
 Finished Field Customer
Raw Goods stock Order
Materials
Inventory Processing
Value addition

Distribution

Manufacturing

Procurement

Cost Addition
MAPPING SUPPLY CHAIN
 MAPPING SUPPLY CHAIN

Value Added Activities

Conversion of raw materials in to final products

Non value added activities

Adding to the cost and the order performance cycle time

FUNDAMENTALS OF SUPPLY CHAIN MANAGEMENT

1.Single Entity
Reducing administrative delays and improving
empathy across the supply chain.

2. Inventory perspective

According to traditional view: inventories have bee viewed

as a buffer to reduce co-ordination requirements
across activities.
According to current concept: inventories is a buffer to be
used as a last resort after ensuring proper information
Sharing and co-ordination.
3.Strategic decision Making:

•It facilitates strategic implication.

•It facilitates smoother and more reliable
transport logistic in the long run

4.System Approach
It is a single integrated system.

5. Doing what one can do best:

It is important to focus on doing what one can do
best.
THRUST AREAS OF SUPPLY CHAIN MANGEMENT

1. Improving Process quality

2.Minimising variety
3. Managing demand
4. Planning for multiple Supply Chains

5. Minimizing the number of stages.

6. Reducing lead time
7. Improving flexibility
8. Kitting of suppliers.
9. Focusing on A category.
10. Competing on service.
11. Moving from functions to process.
12. Taking an initiative Industry level
 Push View of SCM
A push-based SCM takes longer to react to the
changing market place
In a push-based supply chain, production decisions
are usually based on long-term forecasts

In push-based strategies, SCM experience

increased transportation costs, high inventory
levels and high manufacturing costs Pull View of SCM
In a pull-based supply chain, manufacturing is demand driven
so that it is coordinated with actual external customer
demand rather than a forecast

Lead-time reduction occurs as the variabilities

are better monitored in pull-based SCM
Pull-based systems are often difficult to implement when lead times
are so long that it is impractical to react to demand information

Module 1:Supply Chain Management