supply chain and it - impact
TRANSCRIPT
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 1/39
Supply ChainManagement anddimensions of it…
A presentation by
PRAVEEN K CHOUDHARY
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 2/39
Basics of Supply Chain Management
22
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 3/39
The Supply Chain
Suppliers Manufacturers Warehouses &Distribution Centers
Customers
Material Costs
TransportationCosts
TransportationCosts Transportation
CostsInventory CostsManufacturing Costs
Plan Source Make Deliver Buy
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 4/39
Today’s Marketplace Requires:
Personalized content and services for their customers
Collaborative planning with design partners,
distributors, and suppliers
Real-time commitments for design, production,inventory, and transportation capacity
Flexible logistics options to ensure timely fulfillment
Order tracking & reporting across multiple vendors
and carriers
Shared visibility fortrading partners
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 5/39
Supply Chain Management and Uncertainty
Inventory and back-order levels fluctuate considerablyacross the supply chain even when customer demanddoesn’t vary
The variability worsens as we travel “up” the supplychain
Forecasting doesn’t help!
Manuf acture
r
Wholesale
Distri butor
s
Consumer
s
Mult i-
tier Sup plier s
Retailers
Time
Sa
les
S
ales
Time
S
ales
Time
S
ales
Time
Bullwhip Effect
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 6/39
Factors Contributing to the Bullwhip
Demand forecasting practices
Min-max inventory management (reorder points to bringinventory up to predicted levels)
Lead time
Longer lead times lead to greater variability inestimates of average demand, thus increasingvariability and safety stock costs
Batch ordering
Peaks and valleys in ordersFixed ordering costs
Impact of transportation costs (e.g., fuel costs)
Sales quotas
Price fluctuations
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 7/39
Supply Chain Management – Key Issues
Overcoming functional silos with conflicting goals
PurchasingManufacturingDistributionCustomer Service/
Sales
Fewchange-overs
Stableschedules
Long
runlength
Highinventories
High service
levels
Regional
stocks
SOURCE MAKE DELIVER SELL
Lowpur-chase
priceMultiplevend
ors
Lowinvent-ories
Low
trans-portation
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 8/39
Supply Chain Management – Key Issues
ISSUE CONSIDERATIONS
Network Planning • Warehouse locations and capacities
• Plant locations and production levels
• Transportation flows between facilities to minimize cost and time
Inventory Control • How should inventory be managed?
• Why does inventory fluctuate and what strategies minimize this?
Supply Contracts • Impact of volume discount and revenue sharing
• Pricing strategies to reduce order-shipment variability
Distribution Strategies • Selection of distribution strategies (e.g., direct ship vs. cross-docking)
• How many cross-dock points are needed?
• Cost/Benefits of different strategies
Integration and StrategicPartnering
• How can integration with partners be achieved?
• What level of integration is best?
• What information and processes can be shared?
• What partnerships should be implemented and in which situations?
Outsourcing & ProcurementStrategies
• What are our core supply chain capabilities and which are not?
• Does our product design mandate different outsourcing
approaches?
• Risk managementSource: Simchi-Levi
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 9/39
Supply Chain Management OperationsStrategies
STRATEGY WHEN TO CHOOSE BENEFITS
Make to Stock standardized products,relatively predictabledemand
Low manufacturing costs;meet customer demandsquickly
Make to Ordercustomized products,many variations
Customization; reducedinventory; improvedservice levels
Configure to Order many variations onfinished product;infrequent demand
Low inventory levels;wide range of productofferings; simplifiedplanning
Engineer to Order complex products, uniquecustomer specifications
Enables response tospecific customerrequirements
Source: Simchi-Levi
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 10/39
Supply Chain Imperatives for Success
View the supply chain as a strategic asset and adifferentiator
Wal-Mart’s partnership with Proctor & Gamble to automaticallyreplenish inventory
Dell’s innovative direct-to-consumer sales and build-to-ordermanufacturing
Create unique supply chain configurations that alignwith your company’s strategic objectives
Operations strategy
Outsourcing strategy
Channel strategy
Customer service strategy
Asset network
Reduce uncertainty
Supply chain
configuration components
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 11/39
SCM and Information Management…
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 12/39
Information In The Supply Chain
Each facility further away fromactual customer demand mustmake forecasts of demand
Lacking actual customer buyingdata, each facility bases itsforecasts on ‘downstream’
orders, which are more variablethan actual demand
To accommodate variability,inventory levels are overstockedthus increasing inventorycarrying costs
Source Make Deliver Sell
Suppliers ManufacturersWarehouses &
Distribution CentersRetailer
Order Lead Time
Delivery Lead Time
Production Lead Time
It’s estimatedthat the typicalpharmaceuticalcompany
supply chaincarries over 100days of producttoaccommodateuncertainty
Plan
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 13/39
Taming the Bullwhip
Reduce uncertainty in the supply chain
Centralize demand information
Keep each stage of the supply chain provided with up-to-date customer demand information
More frequent planning (continuous real-time planningthe goal)
Reduce variability in the supply chain
Every-day-low-price strategies for stable demandpatterns
Reduce lead times
Use cross-docking to reduce order lead times
Use EDI techniques to reduce information lead times
Four critical methods for reducing the Bullwhip effect:
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 14/39
Methods for Improving Forecasts
AccurateForecasts
Panels of Experts
• Internal experts•
External experts• Domain experts• Delphi technique
• Moving average• Exponential smoothing• Trend analysis•
Seasonality analysis
Judgment Methods
Time-Series Methods
Causal Analysis
Market Research Analysis
• Relies on data other thanthat being predicted
• Economic data,commodity data, etc.
•
Market testing• Market surveys• Focus groups
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 15/39
The Evolving Supply Chain…
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 16/39
Supply Chain Integration – Push Strategies
Classical manufacturing supply chain strategy
Manufacturing forecasts are long-range
Orders from retailers’ warehouses
Longer response time to react to marketplacechanges
Unable to meet changing demand patterns
Supply chain inventory becomes obsolete as demand forcertain products disappears
Increased variability (Bullwhip effect) leading to:
Large inventory safety stocks
Larger and more variably sized production batches
Unacceptable service levels
Inventory obsolescence
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 17/39
Supply Chain Integration – Pull Strategies
Production and distribution are demand-driven
Coordinated with true customer demand
None or little inventory held
Only in response to specific ordersFast information flow mechanisms
POS data
Decreased lead times
Decreased retailer inventory
Decreased variability in the supply chain andespecially at manufacturers
Decreased manufacturer inventory
More efficient use of resources
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 18/39
Supply Chain Integration – Push/PullStrategies
Hybrid of “push” and “pull” strategies to overcomedisadvantages of each
Early stages of product assembly are done in a “push” manner
Partial assembly of product based on aggregate demand forecasts(which are more accurate than individual product demandforecasts)
Uncertainty is reduced so safety stock inventory is lower
Final product assembly is done based on customer demandfor specific product configurations
Supply chain timeline determines “push-pull boundary”
Supply Chain Timeline
RawMaterials
EndConsumer
Push Strategy Pull Strategy
Push-Pull
Boundary
“Generic” Product “Customized” Product
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 19/39
Choosing Between Push/Pull Strategies
Where do the followingindustries fit in this model:
Automobile?
Aircraft?
Fashion?
Petroleum refining?
Pharmaceuticals?
Biotechnology?
Medical Devices?
Pull Push
Pull
Push
Economies of ScaleLow High
Low
High
DemandUnc e
rtaint y
Industries where:
• Customization is High• Demand is uncertain• Scale economies are Low
Computer
equipment
Industries where:
• Standard processes arethe norm• Demand is stable•
Scale economies areHigh
Grocery,Beverages
Industries where:
• Uncertainty is low• Low economies of scale• Push-pull supply chain
Books,CD’s
Industries where:
• Demand is uncertain• Scale economies areHigh• Low economies of scale
Furniture
Source: Simchi-Levi
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 20/39
Supply Chain Collaboration
Cornerstone of effective SCM
The focus of many of today’s SCM initiatives
The only method that has the potential to eliminate orminimize the Bullwhip effect
Manufacturer
Distributors/
Wholesalers
Supplier s
Retailer s
Collaborativ e Demand Planning
Collaborative Logistics Planning•Transportation services•Distribution center services
Synchronized ProductionScheduling
Collaborati ve Product Development
LogisticsProviders
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 21/39
Supply Chain Collaboration – What Is It?
Many different definitions depending on perspective
The means by which companies within the supplychain work together towards mutual goals by sharing
IdeasInformation
Processes
Knowledge
Information
Risks
Rewards
Why collaborate?
Accelerate entr into new markets
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 22/39
Supply Chain Collaboration Spectrum
The green arrowdescribes increasingcomplexity andsophistication of:
Information systems
Systems infrastructure
Decision support systems
Planning mechanisms
Information sharing
Process understanding
Movement to real-time
customer demand Higherlevels of collaboration implythe need for both tradingpartners to have equivalent(or close) levels of supplychain maturity
Synchronized collaborationdemands joint planning,R&D and sharing of
information and processingmodelsSource: Cohen & Roussel
Number of Relationships
Ex
tentofCo
lla
boration
Many Few
Limited
Extensive
TransactionalCollaboration
SynchronizedCollaboration
CooperativeCollaboration
Coordinated
Collaboration
Not Viable
Low Return
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 23/39
Benefits of Supply Chain Collaboration
CUSTOMERS MATERIAL SUPPLIERS SERVICE
SUPPLIERS
• Reduced inventory
• Increased revenue
• Lower order management costs
• Higher Gross Margin
• Better forecast accuracy
• Better allocation of promotionalbudgets
• Reduced inventory
• Lower warehousing costs
• Lower material acquisition costs
• Fewer stockout conditions
• Lower freight costs
• Faster and more reliabledelivery
• Lower capital costs
• Reduced depreciation
• Lower fixed costs
• Improved customer service
• More efficient use of human resources
Source: Cohen & Roussel
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 24/39
Supply Chain Collaboration Imperatives…
Try to collaborate internally before you try externalcollaboration
Help your partners to work with you
Share the savings
Start small (a limited number of selected partners)and stay focused on what you want to achieve in thecollaboration
Advance your IT capabilities only to the level that you
expect your partners to manage
Put a comprehensive metrics program in place thatallows you to monitor your partners’ performance
Make sure people are kept part of the equation
Systems do not replace people
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 25/39
The Supply-Chain OperationsReference-model (SCOR) Model
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 26/39
2626
C u s
t o m e r s
S u p p
l ie r s
P1 Plan Supply ChainPlan
P2 Plan Source P3 Plan Make P4 Plan Deliver
Source Make Deliver
S1 Source Stocked Products M1 Make-to-Stock
M2 Make-to-Order
M3 Engineer-to-Order
D1 Deliver Stocked Products
D2 Deliver MTO Products
D3 Deliver ETO Products
S2 Source MTO Products
S3 Source ETO Products
R
et
ur
n
S
o
ur c
P5 Plan Returns
R
et
ur
n
D
el
iv
er
Enable
D4 Deliver Retail Products
SCOR 7.0 Model Structure
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 27/39
what really matters now…
IS THE SUPPLY CHAIN WORKING?
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 28/39
IS THE SUPPLY CHAIN WORKING?
Does our manufacturing strategy increase product line flexibilitywhile continuing to drive down overall production costs?
Do we have an efficient system to get POS data from retailers?
Are we testing our products with end customers? Do we use theresulting data to adjust our forecasting and supply positions?
Is the ratio of returned orders to sales increasing?
Is Supply Chain Agile enough…??
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 29/39
New Dimensions in SCM…
Choice Boards…”Make your own pizza” models
Virtual Value Chain/ E Supply Chain and Collaborative
Commerce…
Collaborative Commerce and Next Gen Tools …
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 30/39
Choice Boards…
As explained in the article “The Age of ChoiceBoard” by Adrian J Slywotzky, in the HBR ,Jan-Feb 2k.-- “Choice boards are already in use in many
Industries. Customers today can design their owncomputers with Dells on line configurator, create their own dolls with Mattel’s My Design Barbie, assembletheir own investment portfolios with Schwab’s mutual-fund evaluator, and even design their golf clubs with
Chip-shot.com’s Perfect system.”
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 31/39
Collaborative Commerce
collaborative commerce (c-commerce)
The use of digital technologies that enable companies tocollaboratively plan, design, develop, manage, and research products,services, and innovative EC applications
collaboration hub
The central point of control for an e-market. A single
c-hub, representing one e-market owner, can host multiplecollaboration spaces (c-spaces) in which trading partners use c-enablers to exchange data with the c-hub
Collaborative Commerce and Knowledge Management
Knowledge management is the process of capturing or creatingknowledge
C-commerce is essentially an integration of KM, EC, and collaborationtools and methodologies that are designed to carry out transactions
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 32/39
Collaborative Commerce – Next Gen Tools
Mobile Collaborative Networks and Grid Computing
Grid computing
A form of distributed computing that involves coordinatingand sharing computing, application, data, storage, or network
resources across dynamic and geographically dispersedorganizations
Mobile Networks : Mobile networks have the ability to sharevaluable business information in mobile scenarios with thosewho are co-located or remote and who are not necessarily fromthe same enterprise
vendor managed inventory (VMI) The practice of retailersmaking suppliers responsible for determining when to orderand how much to order
Group Ware – Collaboration Tools
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 33/39
Wal-Mart’s Supply Chain
A Business Success
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 34/39
History of Wal-Mart
The company’s founder is Sam Walton.
He was born in 1918 at Oklahoma.
In 1940, he worked for the famous
retailer, J C Penney.Walton gave up the joband decided to set up his own retail store.
He purchased a store franchise inArkansas.
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 35/39
History of Wal-Mart…
This phenomenal growth of Wal-Mart isattributed to its continued focus oncustomer needs and reducing cost throughefficient supply chain managementpractices.
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 36/39
Early Unique SCM Practices of SCM…
Early adopter of Hub n Spoke model in 1970
Direct Purchase from manufacturers in early 1980s…
Extensive use of EDI with vendors
Dedicated 1st party logistics system
Use of Cross Docking system – similar to Dabbawallas of Mumbai…
Extensive focus on Inventory management with investments in IT,smaller packing sizes, extensive use of Hand held devices longbefore usage of mobiles and other devices , Accurate POS data
availability.New system of Voice based order fulfillment, Faster Inventoryreplenishment system, Pretty Darned Quick Displays ( PDQ ) displaysor store ready displays
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 37/39
Next Generation IT based Best Practices…
Retail Link systems prior to Internet systems– massive satellite basedparallel processing systems covering over 10 million transactions withWalmart’s Extranet systems.
CPFR is defined as a business practice for business partners to shareforecasts and results data through the Internet, in order to reduceinventory costs while at the same time, enhancing product availabilityacross the supply chain.
Next step to this was logical VAN based EDI and then Web based EDI
framework covering all suppliers.
Now in RFID systems - planned to replace bar coding systems across theWalmart stores to reduce human interface in inventory management
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 38/39
Summary…
Supply Chain needs optimization across the ValueChain – to reduce Total Cost to Serve…
Alternate Push/Pull and optimization strategies areat work across industries…
IT is an excellent enabler to achieve the same
Impacts Information Gap reduction drastically – Bull Whipeffect reduction…
Impact on total cycle time reduction…
Increases configurablity and flexibility as required…
8/4/2019 Supply Chain and IT - Impact...
http://slidepdf.com/reader/full/supply-chain-and-it-impact 39/39
“ what we do is close to creating a customized value chain for everycustomer order” – victor fung ( LEE fung)