10/10/12

Supply Chain Management

A presentation by V Ashok Kumar 2010291003

SUPPLY CHAIN MANAGEMENT

Value Chain Supply side- raw materials, inbound logistics and

production processes Demand side- outbound logistics, marketing and sales.

WHAT IS SUPPLY CHAIN MANAGEMENT

" Is the strategic management of activities involved in the acquisition and conversion of materials to finished products delivered to the customer"

Supplier Management

Material Flow
Information Flow
Stock Deployment

Customer Management

Schedule / Resources

Conversion

Delivery

Leads to Business Process Integration

 SUPPLY CHAIN INCLUDES :

MATERIAL FLOWS

INFORMATION FLOWS

FINANCIAL FLOWS

 SUPPLY

CHAIN FACILITATED BY :
PROCESSES STRUCTURE TECHNOLOGY

MANAGEMENT

IS

 Supply chain serves two functions:

Physical

Market mediation

 Supply chain objectives may differ from

situation to situation. For functional products, cost efficiency is the critical factor. For innovative products, responsiveness is the important factor. Leanness + Agility together make up Leagility

Supply Chain and Demand Chain

Demand chain is defined as the system by

which organizations manage sales and distribution of products and services to end users. Conceptually incorrect to look at demand chain separately
Look at the pipe as a whole.

 But is there a pipe at all?

More a network Not necessarily linear Value

chain orchestration rather controlling the flow through the pipe

than

A network of independent and interdependent

organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users

SUPPLY CHAIN DRIVERS

Not new. Value system of Michael Porter Why sudden interest?
Demanding customers Shrinking product life cycles Proliferating product offerings Growing retailer power in some cases Doctrine of core competency Emergence of specialized logistics providers Globalization Information technology

SUPPLY CHAIN ELEMENTS

Strategic

Supply Chain Design Resource Acquisition Long Term Planning (1 Year ++)
Production/ Distribution Planning Resource Allocation Medium Term Planning (Qtrly,Monthly)

Tactical

Operational

Shipment Scheduling Resource Scheduling Short Term Planning (Weekly,Daily)

 Supply Chain Goals

Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on
Revenue growth
Better asset utilization Cost reduction.

Supply Chain Management Underlying Principles

Compression (Planning/Manufacturing/Supply) Conformance (Forecasts/Plans/Distribution) Co-operation (Cross -Functional) Communication (Real Time Data)

Reduce Overall Cycle Time : Improve Response

Changing Paradigm
Functional vs Process

Products vs Customers
Revenues vs Performance Inventory vs Information

Transactions vs Relationships

Critical Success Factors today

Cross

functional management and planning skills Ability to define, measure and manage service requirements by market segment Information systems Relationship management and win win orientation

PUTTING IN PLACE A WELL OILED SUPPLY CHAIN

Supply

chain as an efficient customer satisfying process Effectiveness of the whole supply chain is more important than the efficiency of each individual department.

. The steps involved

Step1- Designing the supply chain
Determine the supply chain network Identify the levels of service required

Step 2 - Optimizing the supply chain Determine pathways from suppliers to the end customer
Customer markets to Distribution centers Distribution centers to production plants Raw material sources to production plants Identify constraints at vendors, plants and

distribution centers Get the big picture Plan the procurement, production and distribution of product groups rather than individual products in large time periodsquarters or years

Step 3- Material flow planning

Determine the exact flow and timing of

materials Arrive at decisions by working back from the projected demand through the supply chain to the raw material resources Techniques
ERP

Step 4 - Transaction processing and short term scheduling

Customer orders arrive at random This is a day to day accounting system which

tracks and schedules every order to meet customer demand Order entry, order fulfillment and physical replenishment

Information flows in Supply Chain Management

Information is overriding element Need for databases Master files: Information about customers, products,

materials, suppliers, transportation, production and distribution data- do not require frequent processing Status files- heart of transaction processing- track orders and infrastructure status- updated daily. Essentially using the same information to make all plans right from structuring the network to processing every day supply chain tasks.

THE VIRTUAL VALUE CHAIN

The value chain connects a companys supply

side with its demand side. Traditionally information has been a supporting function. Information however can be managed far more creatively. There are various stages of using value added information processes.

 Visibility : See physical operations more

effectively through information. Information can be used for effective coordination of value chain activities. Mirroring capability : In this stage, virtual activities are substituted for physical ones. A parallel value chain is created. New customer relationships : The company can draw on the flow of information in the virtual value chain to deliver value to customers in new ways.

Dealer Management
Conventional functions

Inventory ownership and management Sales and technical support Order handling Credit

Contemporary Trends
Channels being divided into two- Fulfillment

and Franchised agent

Fulfillment channel- responsible for getting

the manufacturers product from the plant to the end user through a highly efficient logistics and inventory management system

Contemporary Trends
Fulfillment channel may not take ownership

of the product but may perform these functions on a per box fee structure Franchised agents responsible for sales and sales support but will not write the order or supply the product

Issues in customer management

Penetration vs Spread

Concentration is necessary to commit the

necessary resources for true customer integration Depth of customer contact

R&D - sharing information vs developing new

products together Logistics - Pros and cons of methods of transportation vs reengineering the logistics process

Implementation: Points to keep in mind

Recognize the difficulty of change.

Prepare a blueprint for change that maps linkages

among initiatives. Assess the entire supply chain from supplier relationships to internal operations to the market place, including customers, competitors and industry as a whole.

The New Model of Relationships

Hard bargaining vs shared destiny

Exit vs Voice
Arms length relations vs Involving dealers and

suppliers in product development Piling up vs Replenishing dealer inventory more frequently In short working together as partners to cut costs, boost efficiencies, innovate and share value

 Adversarial vs partnerships

Short term vs long term contracts

Large vs small order quantity Full truck load vs small parcels Inspection vs no inspection

 Written order vs understanding Many vs few suppliers

Design and then invite quote from

vendor vs involving vendor in development Bargaining, holding cards close to chest vs Shared destiny, transparency

Summary
Segmentation of customers based on service

needs Customization of logistics network Listen to signals of market demand and plan accordingly. Differentiate product close to the customer Source strategically Develop a supply chain wide technology strategy Accept channel spanning performance measures

Important points to keep in mind

Segment customers based on service needs.

Modify the supply chain to meet these service

requirements profitably. Customize the logistics network. Develop forecasts collaboratively involving every link of the supply chain. Locate the leverage point where the product is unalterably configured to meet a single requirement Delay product differentiation till the last possible moment.

 Assess options such as modularized design

or modification of manufacturing processes that can increase flexibility. Cultivate warm relationships with suppliers. Efficient supply chain management has to be accompanied by a technology strategy.

Thank You