group 5-scm
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8/8/2019 Group 5-SCM
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Supply Chain Management
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Supply Chain Management
Definition Of Supply Chain
“A system of suppliers, manufacturers,distributors, retailers, and customers wherematerials flow downstream from suppliers to
customers, while information and cash flowsin both directions.”
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Supply Chain Management
“Supply Chain Management is themanagement of a network of interconnected businesses involved in the
ultimate provision of product and servicepackages required by end customers.”
Need For An Effective Supply Chain
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Raw MaterialsCompany
TransportationCompany
ManufacturingCompany
IndependentDistributor
IndependentRetailer
Slow Moving,Industrial
Mass Markets
Raw Material
Transportation
Manufacturing
Distribution
Retailer
VerticalVsVirtual
Fast MovingMarkets
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Participants in Supply Chain
Simple Supply Chain
Supplier Company Customer
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Participants in Supply Chain
LogisticsProvider
FinanceProvider
BusinessCustomer
RetailCustomer
Retailer Distributor Manufacturer RawMaterial
ProductDesigner
MarketResearch
Extended Supply Chain
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Dell Supply Chain
R aw
M a t er i al s
E n d C
u s t om er
No Inventory of Finished
Products
Parts Inventorymade on forecast
DemandForecast
made atassembly
Push Pull from customer demand
Production Assembly Manufacturer Distribution Store
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From
Supplier Availability Goods
Material Flow From Supplier To Customer
Supplier Capacity
FinishedGood
Available
Raw Mat.
Component
ProductionCapacity
Good Customer
ExpectedCustomer
Orders
Customer
Orders inHand
Financial Flows
Information Flow in both the directions
Supply Chain Management
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Operations of Supply Chain
Plan
• Demand Forecasting
• Product Pricing
• Inventory Management
Source• Raw material Procurement
• Finance
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Operations of Supply Chain
Process
• Product Design
• Production Management
• Facility Management
Deliver • Order Entry
• Product Delivery
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Measuring Supply Chain
PerformanceBefore Designing the Strategy We Need toDecide the Goal of the Game!
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Performance Types
Productivity
Velocity
Quality
Financial
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Productivity Measurements
Do more with less
Resource Utilization
Process Efficiency
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Measuring ProductivityPerformance
Elements Productivity Indicators
Customer Response Customer orders per person hour
Inventory Planning &Management Inventory turns
Supply POs per person-hour, SKUs per buyer
Transportation Stops per route, Fleet yield, Container capacity utilization
Warehousing Units per person hour, Storagedensity
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Identify Resources Involved
Manpower
Facilities
MachineryEquipment
Fleet
Inventory
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Then, quantify associatedoutputs
R
es
o
u
r
ce
Logistics &Supply
SystemsTransportationWarehousing
Ou
tputs
P
e
r
f
e
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Productivity at the ResourceLevel
P resource = Output resource / Inputresource
U resource = Output resource / Capacityresource
P = Productivity
U = Utilisation
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Velocity Measurements
Cycle Time
Response Time
Processing Time
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Measuring Velocity Performance
Elements Response Time Indicators
Customer Response Order entry time, Order
processing time
Supply Purchase order cycle time
Transportation In - transit time
Warehousing Warehouse order cycle time
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Total Logistics Cycle Time (TLCT)
TLCT = OET+OPT+[POCT*(1- OFR)]+WOCT+ITT
OET = Order Entry time
OPT = Order Processing Time
POCT = Purchase Order Cycle Time
WOCT = Warehouse Order Cycle Time
ITT = In - Transit Time
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Quality Measurements
Likelihood of Mistakes
Deviation from Goal
Defects
Overall Satisfaction
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Measuring Quality Performance
Elements Quality Indicators
Customer Response Order entry accuracy, Statuscommunication accuracy, Invoice
accuracy
Inventory Planning &Management
Fill rate, Forecast accuracy
Supply Perfect PO percentage
Transportation On - time arrival percentage,Damage percentage
Warehousing Inventory accuracy, Pickingaccuracy, Shipping accuracy,
Damage percentage
anu ac ur ng er ec
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anu ac ur ng er ecPurchase Orders is the Real
Goal!Perfect Entry
Perfect Processing
Perfect Picking
Perfect Packaging
Perfect ShippingPerfect Delivery
Perfect Communication
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Financial Measurements
Cost of Resources Employed
Cost of Activities Performed
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Measuring Financial Performance
Elements Financial Indicators
Customer Response Total response cost, Responsecost per customer order
Inventory Planning &Management
Total inventory cost, Inventorycost per SKU
Supply Total supply cost, Supply cost per PO
Transportation Total transportation cost,Transportation cost per mile
Warehousing Total warehousing cost,Warehousing cost per piece,
Warehousing cost per
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Financial Indicators
Logistics Expenses (LE)
Logistics Profit (LP)
LP = R - LE
Logistics Asset Value (LAV)
Return on Logistics Assets (ROLA)
ROLA = P / LAV
Logistics Asset Turnover (LAT)
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Financial Indicators
Total Logistics Cost (TLC)
TLC = TRC + TIC + TSC + TTC
+TWCLogistics Cost - Sales Ratio (LCSR)
LCSR = TLC / R
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Supply Chain Goal!
Maximise (Corporate Economic ValueAdded)
Minimise (Operating Cost+ Capital Cost+Lost Sales)
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Benefits of ImplementingSupply Chain
Increased Visibility
Increased Reliability
Squeeze Inefficiencies
Increase the Velocity of Business
Savings and Revenue Improvement
Effective Supply Chain Management canlead u to 5% Cost decrease that has
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