itl lecture-05 & 06 (supply chain management)

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By :

Prof. Amit Kumar

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“Logistics has advanced from warehousing and transportation to boardrooms of the successful leading companies across the world. Due to increasing importance of business logistics, it becomes necessary for the student pursuing management education from IILM- Graduate School of Management, to understand logistics, its basic framework and practical utility.”

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Importance of this course

International Trade Logistics

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Course: International Trade Logistics1. Logistics - At the Centre of World Trade

2. Supply Chain Management

3. Warehousing: A Role Beyond Storage

4. Material Handling & Storage System

5. Transportation: Backbone of Logistics

6. Logistics Packaging

7. Logistics Information System

8. Global Logistics & Outsourcing

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International Trade Logistics

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International Trade Logistics Supply Chain Management

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Contents• Simple Supply Chain Loop• Competitive Framework of Supply Chain• What is Supply Chain Management?• Supply Chain Initiatives by Modi Xerox, Telco, Godrej• Supply Chain: Subset of a Company’s Value Chain• Supply Chain Linkage

Procurement Processing Distribution

• Supply Chain Relation: A Case of FORD• Logistics Vs Supply Chain Management• Top 10 Benefits, Barriers and Bridges to Supply Chain• Case Study: CEAT- Redesigning Supply Chain System• Video: Global Supply Chain of Wal-Mart

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Simple Example of Supply Chain Loop

Sales

Suppliers

Purchasing Producing

Customers

Delivering

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Competitive Framework of Supply Chain

Response

Company

Market

SUPPLIERS

CUSTOMERS

Competitors

Service

Flexibility

Cost Quality

O/P

O/P

I/P

I/P

Demand

Demand

Market Size

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• SCM is basically an information-based process that integrates the various activities from raw material supply to manufacturing and finally to the supply of finished products and services to end customer.

• SCM takes into consideration cross-functional integration. This integrated process results in enhanced customer value at the least cost.

• The objective of every chain is to maximize the overall value generated through –

Faster and timely delivery Improved quality and services Reduced cost

What is Supply Chain Management?

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Business Consulting Services

2.3

Value Chain

Value chain - processes which enable a company to bring its products from conception to market

Supply Chain : Subset of a Company’s Value Chain

ManageProcurement

Manage Customer Service

Manage Production

ManageDistribution

PerformMarketingand Sales

DevelopProducts and

Services

Supply Chain

Supply chain – value chain processes which enable a company to fulfill short-term to medium-term demand in the market

Supply Chain boundaries are best described in terms of processes -

Supply Chain: Subset of a Value ChainInternational Trade Logistics Supply Chain Management

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Supply Chain Initiatives by Modi Xerox, Telco, Godrej, Maruti Udyog &

Sunderam Fasteners

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Modi Xerox Limited is leveraging on its supply chain strategy to improve customer satisfaction by reducing cycle time,

enhancing productivity and keeping on-time delivery so as to lead the market.

Supply Chain Initiatives by Modi Xerox

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Telco is managing inventories through a vendor-based supply chain and moving towards the JIT system to

cut inventory-carrying costs.

Telco have inducted Dynamic Logistics, a 3PL service supplier, in their supply chain for spare parts

management of commercial vehicles and passenger cars. The benefits are a 50% reduction in logistics costs and on-time delivery to customers- a win-win

situation.

Supply Chain Initiatives by Telco

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In Godrej-GE, 60% of the product cost is covered by raw material that is entirely outsourced to control costs, delivery

schedules and product quality so as to run an efficient and lean supply chain.

Supply Chain Initiatives by Godrej

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To extent the JIT system for a lean supply chain, Maruti has located 70% of its vendors within

100-km radius of their Gurgaon factory.

Supply Chain Initiatives by Maruti Udyog

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Sunderam Fastner, a Chennai-based high tensile fastener and radiator cap manufacturer, in line with its supply chain strategy of vendor base

reduction, appointed Southampton (UK) as their consolidation agent for all supplies of steel coils and components to be shipped from Europe to

their manufacturing plant in Chennai.

Supply Chain Initiatives by Sunderam Fasteners

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Business Consulting Services

2.3

Value Chain

Value chain - processes which enable a company to bring its products from conception to market

Supply Chain : Subset of a Company’s Value Chain

ManageProcurement

Manage Customer Service

Manage Production

ManageDistribution

PerformMarketingand Sales

DevelopProducts and

Services

Supply Chain

Supply chain – value chain processes which enable a company to fulfill short-term to medium-term demand in the market

Supply Chain boundaries are best described in terms of processes -

Supply Chain: Subset of a Value ChainInternational Trade Logistics Supply Chain Management

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Competition today is not between individual companies but between supply chains. Hence, for a supply chain to be successful, it should integrate the three individual business processes of procurement, manufacturing and distribution by consolidating the sub-linkages in

each of the functional areas.

Supply Chain Linkage

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Procurement Processing Distribution CustomersSuppliers

Inventory FlowInformation Flow

Supplier PartnershipMaterial PlanningMaterial Schedule

Production SchedulingJIT Inventory SystemFlexibility

Demand PlanningQuick ResponsePostponement

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• This is one of the major cost drivers in the supply chain.• The procurement cost is influenced by the following

factors: The way procurement decisions are made Procedures adopted in the procurement process Relationship with the suppliers Firm’s credibility, Market intelligence

• Procurement cost can be controlled through long-term relationships with suppliers, by considering the supplier as an extension of your manufacturing facility.

Supply Chain Linkage: Procurement

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• A major step in this process is reduction of the supplier base and induction of few reliable suppliers who are ready to work for requirement of the firm’s supply chain.

Rank Xerox has reduced its supplier base from 5000 to 300. The company has appointed a few

distributors who collect the materials from various suppliers and dispatch them to the manufacturer. As

a result, the manufacturer needs to tap only a few source of supply.


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• Material Requirement Planning (MRP) is a critical element in the procurement process. Hence, in a co-partnership arrangement the material planning process will cover inventory requirements for the entire supply chain.

In US, auto giants such as Ford, GM and Chrysler engage in online procurement planning with their ancillary

suppliers. Due to real-time information sharing, a supply chain operating on the JIT system is flexible enough to

take care of any fluctuations in market demand.


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• Now a days firms , instead of banking on cost reduction through Economies of Scale, plan strategies to reduce the total supply chain cost through manufacturing flexibility in order to rapidly respond to the changing market demands.

• Manufacturing flexibility does not necessarily means the use of automation or robotics in the process plant, but rather a zero lead time to meet customer requirements with zero inventories.

Supply Chain Linkage: Processing

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• In SCM the major task of distribution relates to the management of demand, that is to make available right product at the right place with the right time at least cost.

• Requirement fulfillment is done through proper distribution network.

• Logistics plays a vital role in understanding demand through improved information flow by way of quick response to customer requirements.

Supply Chain Linkage: Distribution

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Logistics Vs. Supply Chain Management

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Logistic

SCM

TRADITIONALIST

SCM

Logistic

UNIONIST

Logistic

SCM

RE-LABELLING

INTERSECTIONIST

Logistics Vs. Supply Chain ManagementMost Relevant: Unionist view

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In general, logistics includes physical distribution, warehousing, freight transportation (inbound and

outbound).

Supply chain (for a manufacturer) includes the logistics business functions above, and also includes procurement,

purchasing, manufacturing operations, production scheduling, inventory control, materials management,

facilities location planning, the information technology to coordinate between suppliers, the company, and

customers (wholesalers and retailers and end users).

Logistics Vs. Supply Chain Management

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Logistics Supply ChainPhysical bond Mental & emotional bondingFree flow of product, information and cash

Capacity to allow this flow

Synonymous with flow within and between

Leads to integration in flow

Ensures an opportunities Creates an opportunityEnsures cost-effectiveness Ensures competitivenessGuarantees quality at the customer level

Guarantees quality at the production level

Satisfies a market Creates a market

Top Ten Benefits, Barriers and Bridges to Supply Chain

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The Centre of Advanced Purchasing Studies made a research of what the most common benefits,

barriers, and bridges when implementing advanced supply chain practices are. The research

was based on 52 interviews with carefully selected companies perceived by academia as the

ones who do SCM well.

Top Ten Benefits, Barriers and Bridges to Supply Chain

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Case Study

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CEATRedesigning Supply Chain System

CEAT: Redesigning Supply Chain System

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1. What measures were initiated by the CEAT to overcome the supply chain problems?

2. Why logistics was a major focus for redesigning the CEAT supply chain?

3. How CEAT’s logistics programs differed for serving different market segments?

Review Questions:

itl lecture-05 & 06 (supply chain management)

Leadership & Management