SUPPLY CHAIN MANAGEMENT Supply chain management spans all movement

and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption

Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities.

Parties involved.

STRATEGIC ALLIANCES An alliance is cooperation or collaboration which

aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts

TYPES OF STRATEGIC ALLIANCES Third Party Logistic: 3PL is the use of an outside

company to perform all or part of the firm’s material management and product distribution functions.

Retailer-Supplier Partnerships: It’s the formation of strategic alliances between the retailers and their suppliers.

Distributor Integration: This appreciates the value of the distributors and their relationship with the end users and provides them with the necessary support to be successful.

RETAILER SUPPLIER PARTNERSHIPS Types of Retailer-Supplier Partnerships

Quick Response Strategy

Continuous Replenishment Strategy Or Rapid Replenishment

Advanced continuous replenishment strategy

Vendor-managed Inventory System.

Alliance type Decision maker Inventory

ownership

New skills

required by

vendors

Quick

response

Retailer Retailer Forecasting

skills

Continuous

replenishment

Contractually

agreed-to levels

Either party Forecasting

and inventory

control

Advanced

continuous

replenishment

Contractually

agreed-to and

continuously

improved levels

Either party Forecasting

and inventory

control

Vendor

managed

inventory

Vendor Either party Retail

management

REQUIREMENTS FOR RSP Advanced information systems

Top management commitment

Information must be shared

Power and responsibility within an organization might change.

Mutual trust

Information sharing

Management of the entire supply chain

Initial loss of revenues

ISSUES IN RSP IMPLEMENTATION Inventory ownership

Performance measures: Fill rate, inventory level, inventory turns

Confidentiality

Communication and cooperation

ADVANTAGES OF RSP Fully utilize system knowledge (retailer) Manufacturer may predict demand better

Focus on retailing rather than logistics.

Reduce bullwhip effect (vendor) Reduced inventory and/or increased service level

Ability to coordinate replenishments to different retailers.

DISADVANTAGES OF RSP Expensive advanced information technology is

required.

Supplier/retailer trust must be developed.

Supplier responsibility increases.

Expenses at the supplier often increase.

EXAMPLE

In 2003, Maruti produced 359,960 vehicles, operating at a capacity utilization of 103%, against the industry average of 57.8%.

Vendor management became an important area as Maruti attempted to improve operational efficiency.

Maruti procured components worth about Rs.5,000 crores every year.

The company's top 10 vendors accounted for about 34 % of its aggregate purchases of components from vendors in India.

Maruti was working on a 3.5% per annum reduction in vendor prices by 2004-2005.

Maruti streamlined the sourcing and stocking of materials and components through its Delivery Instruction system, one of Suzuki's best practices.

This system provided details of Maruti's component requirements for every 15 days, across the different variants of the various models, to its vendors.

Web initiatives helped Maruti to bring down procurement time and costs.