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Concepts in Supply Chain Management Internal integration Internally integrated LMs in isolation
External integration
Value chain and supply chain
Supply Chain Management Scope - Source of raw materials to end user - all upstream & downstream organizations & linkages Encompasses all logistical management activities involved Sourcing (procurement) Manufacturing support Distribution activities
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suppliers
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3. Third-party service providers those who offer logistics service for a fee 4. Customers the recipients of service 5. Manufacturers parts manufacturers 6. Transporters 3PL companies who offer transportation service 7. Handlers 3PL companies who offer material handling service
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Definition - Management of upstream and down stream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole How SCM creates value? 1. Breaking the organizational barriers 2. Sharing of sales information in real time 3. Inventory visibility
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4. Reduces inventories by reducing uncertainties 5. Compresses value chain by slashing leadtimes thereby quickening cash flow
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2. This external integration formed a seamless chain of organizations focused on the end users 3. The above seamless chain links the source of raw materials to end users like a pipeline 4. When a company reaches out in this fashion to embrace other companies to deliver value to end users, it is called an extended enterprise
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Suppliers
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5. Extended enterprises form an Integrated Supply Chain when they breakdown organizational barriers to share sales and inventory information 6. Integrated Supply Chain shares information and coordinates logistical activities to ensure coordination of goods & services, information & cash through the pipeline
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Organizational Barriers to Supply Chain Integration 1. Lack of visibility/transparency 2. Reluctance to share information 3. Attitudinal problems, traditional mind set, distrust 4. Inability to see long term benefits 5. Inadequate informational infrastructure
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Why SCM? Customer-centric markets closed conventional option (as in suppliers market) to profitability! Impact of philosophies & practices of the 1980s like TQM, JIT, TPM etc. dropped manufacturing costs dramatically in the world SCM is a new opportunity to improve profitability and outwit the competition!
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Objectives of SCM Product delivery to end user at minimum cost To eliminate or minimize bullwhip effect To be competitive in global market To increase market share To improve shareholder value
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Important features of SCM 1. Complexity, two way flows 2. Breaking the organizational barriers Sharing of sales information in real time Inventory visibility - Reduces inventories by reducing uncertainties Compression of value chain by slashing lead-times thereby quickening cash flow
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4. Pull system
5. Supply chain collaboration
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IT & Supply Chain Management Information technology support in SCM EDI through LAN, Internet, satellite Tracking RFID, the invisible bar code Planning - DRP, MRP, ERP E - Business
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Assignment V 1. Explain the evolution of Logistical management and supply chain management 2. What factors are considered to have driven (drivers of SCM) SCM? 3. Discuss how Supply Chain Management and Logistical management are different from each other [March11]
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4. Explain how SCM creates value for the end user? 5. What are the Organizational Barriers to Supply Chain Integration?
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Bull-whip Effect The amplitude is smallest near the handle but largest near the tip
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information flow
Large variations in demand upstream due
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The consequences Excess inventory Problems with quality Increased raw materials cost Overtime expenses Increased shipping costs Lost customer service Lengthened lead-times Lost sales Unnecessary created capacity
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How to avoid Bullwhip effect? Transparency in terms of information Real time information EDI Kanban
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Retailer
40 units
40 units
40 units
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Retailer
160 units
80 units
40 units
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3. Fuel
4. PDS
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1. Communication Technology
Informational and physical
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2. Competitive Factors
Lead-times
Costs
3. Business and Social Environment Competitions between organizations Competitions between supply chains Pursuit of Continuous improvement
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4. Policy, regulation & industry initiatives Abolition of central sales tax and introduction of VAT RFID ISO standards for containers 5. the move from a Producer-Centric to customer centric focus
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particulars
Logistics management
Supply chain management All players in the supply chain from raw material source
1. Scope
logistics
2. How this is By internal integration
to finished product
By external
created in
business?
integration
3. Main
objective
Logistics cost
reduction
Supply chain
profitability by value creation.
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particulars
4. Definition 5. Origin
management
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Particulars
Logistics
management
Supply chain
management
6. Focus
SCM focuses on
value creation in the supply chain.
minimum logistical
cost. Hence it is supply driven.
Hence this is
customer focused or demand driven.
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Assignment VI 6. Comment on SCM from various perspectives like external integration, making customers and vendors better suppliers, management of extended enterprises, pulling down barriers 7. What is Bull-whip Effect in SCM and how can be minimized or eliminated? 8. What is the importance of SCM? 9. Comment on various channel partners in supply chain.
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