Supply Chain Management

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 is the system by which

organizations source, make and deliver their products or services according to market demand. Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level. Supply chain as defined by experienced practitioners extends from suppliers suppliers to customers customers.

 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 Structure

SUPPLIER FACTORY DC RDC RETAILER

Raw Materials

Finished Goods Information Flow

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 than controlling the flow through the pipe 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 periods- quarters 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.

IS THE SUPPLY CHAIN WORKING?

Does our manufacturing strategy increase product line flexibility while continuing to drive down overall

production costs? When was the last time we measured lost sales to end customers? Do we have an efficient system to get POS data from retailers? Are we testing our products with end customers? Do we use the resulting data to adjust our forecasting and supply positions?
Is the ratio of returned orders to sales increasing?

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

Thank You