supply chain management

Supply Chain Supply Chain ManagementManagement

What is SCMWhat is SCM

04/22/2304/22/23 Prof. Shweta AgrawalProf. Shweta Agrawal 22

All facilities, functions, activities, associated with flow All facilities, functions, activities, associated with flow and transformation of goods and services from raw and transformation of goods and services from raw materials to customer, as well as the associated materials to customer, as well as the associated information flowsinformation flows

An integrated group of processes to “source,” “make,” An integrated group of processes to “source,” “make,” and “deliver” productsand “deliver” products

10-10-33Supply Chain IllustrationSupply Chain Illustration


Supply chain management: An overviewSupply chain management: An overview

Supply chain management is the combination of art and Supply chain management is the combination of art and science that goes into improving the way your company science that goes into improving the way your company finds the raw components it needs to make a product or finds the raw components it needs to make a product or service, manufactures that product or service and service, manufactures that product or service and delivers it to customers. delivers it to customers.

It is a network that includes the vendors of raw It is a network that includes the vendors of raw materials, plants that transform those materials into materials, plants that transform those materials into useful products, and distribution centers to get those useful products, and distribution centers to get those products to the customersproducts to the customers

Unless and until there is a specific effort to coordinate Unless and until there is a specific effort to coordinate the overall supply chain system, each organization in the the overall supply chain system, each organization in the network will have its own objective and would work network will have its own objective and would work independently and in isolationindependently and in isolation


Contd.Contd. Supply chain includes all activities associated with the Supply chain includes all activities associated with the

flow and transfer of goods and services, from raw flow and transfer of goods and services, from raw material extraction through use by the final consumer.material extraction through use by the final consumer.

All of those different firms, as well as the consumer, are All of those different firms, as well as the consumer, are part of the supply chain.part of the supply chain.

The manufacturer purchase component parts from The manufacturer purchase component parts from various tier 1 suppliers, such as companies that make various tier 1 suppliers, such as companies that make plastic parts.plastic parts.

The tier 1 suppliers may have also purchased materials The tier 1 suppliers may have also purchased materials from tier 2 suppliers, such as companies that produce from tier 2 suppliers, such as companies that produce the chemicals for making plastic.the chemicals for making plastic.


Contd.Contd. The supply chain includes the companies that The supply chain includes the companies that

move these items, such as trucking companies, move these items, such as trucking companies, railroads, and shipping companies, as well as railroads, and shipping companies, as well as warehouses or distribution centers. They are warehouses or distribution centers. They are called logistics.called logistics.

Reserve logistics is a activity that helps to return Reserve logistics is a activity that helps to return defective products to the manufacturer for repair defective products to the manufacturer for repair or replacementor replacement

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Supply Supply Chain Chain

for for Denim Denim JeansJeans

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Supply Supply Chain Chain

for for Denim Denim Jeans Jeans (cont.)(cont.)


Information sharing in the supply chainInformation sharing in the supply chain

Traditionally, information has been shared only between Traditionally, information has been shared only between adjacent supply chain pairs, and that information has adjacent supply chain pairs, and that information has been very limited.been very limited.

This limited approach to information sharing leads to This limited approach to information sharing leads to “bullwhip effect.” “bullwhip effect.”

To reduce the bullwhip effect, supply chains use a hub To reduce the bullwhip effect, supply chains use a hub and spoke approach to sharing information. and spoke approach to sharing information.

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Supply Chain ProcessesSupply Chain Processes

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Value vs. Supply ChainValue vs. Supply Chain

Value chain every step from raw materials to the eventual end user ultimate goal is delivery of maximum value to the end user

Supply chain activities that get raw materials and subassemblies into

manufacturing operation Terms are used interchangeably

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Information Technology: A Supply Chain Enabler

Information links all aspects of supply chain

E-business replacement of physical business

processes with electronic ones Electronic data interchange (EDI)

a computer-to-computer exchange of business documents

Bar code and point-of-sale data creates an instantaneous

computer record of a sale Radio frequency identification

(RFID) technology can send product data

from an item to a reader via radio waves

Internet allows companies to

communicate with suppliers, customers, shippers and other businesses around the world, instantaneously


FACTORS THAT LED TO INCLUSION OF FACTORS THAT LED TO INCLUSION OF SCM AS COMPETITIVE STRATEGYSCM AS COMPETITIVE STRATEGY

GLOBALIZATIONGLOBALIZATION INCREASED COMPETITIONINCREASED COMPETITION INFORMATION TECHNOLOGYINFORMATION TECHNOLOGY SHORTER PRODUCT LIFE CYCLES SHORTER PRODUCT LIFE CYCLES


Contd.Contd.

Globalization has led to new markets, but at the Globalization has led to new markets, but at the same time it increases the competition.same time it increases the competition.

One way of winning market share is introducing One way of winning market share is introducing new products, leading to shorter product life new products, leading to shorter product life cycles.cycles.

One way to be more competitive is through One way to be more competitive is through supply chain management. supply chain management.


BASIC COMPONENTS FOR SUPPLY CHAIN BASIC COMPONENTS FOR SUPPLY CHAIN MANAGEMENT:MANAGEMENT:

THE FIVE BASIC COMPONENTS OF SCM THE FIVE BASIC COMPONENTS OF SCM ARE:ARE:

PLANPLAN SOURCESOURCE MAKE MAKE DELIVERDELIVER RETURNRETURN


Decision variables in supply chain managementDecision variables in supply chain management

Location: Location: this deals with the facilities and the various sourcing pointsthis deals with the facilities and the various sourcing points

Production: Production: here the decision making is what to make and in what facilitieshere the decision making is what to make and in what facilities

Inventory:Inventory: the focus here is how much to order, when to order and safety the focus here is how much to order, when to order and safety

stocksstocks Transportation:Transportation:

the management here decides the mode of transportation, the management here decides the mode of transportation, shipment size, routing and schedulingshipment size, routing and scheduling

Copyright 2006 John Copyright 2006 John Wiley & Sons, Inc.Wiley & Sons, Inc.

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Collaborative Planning, Forecasting, Collaborative Planning, Forecasting, and Replenishmentand Replenishment

Process for two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand

Parties electronically exchange past sales trends point-of-sale data on-hand inventory scheduled promotions forecasts


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SuppliersSuppliers

Procurement purchase of goods and services from suppliers

On-demand (direct response) delivery requires supplier to deliver goods when demanded by

customer Continuous replenishment

supplying orders in a short period of time according to a predetermined schedule

Cross-enterprise teams coordinate processes between company and supplier


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OutsourcingOutsourcing

Sourcing selection of suppliers

Outsourcing purchase of goods and services from an outside

supplier Core competencies

what a company does best Single sourcing

a company purchases goods and services from only a few (or one) suppliers

Copyright 2006 John Wiley & Sons, Copyright 2006 John Wiley & Sons, Inc.Inc.

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Original Equipment

Manufacturer

(OEM)

Maintenance

Repair and

Operation (MPO)

Corporate

Services


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E-ProcurementE-Procurement Direct purchase from suppliers over the Internet Direct products go directly into production process a

product, indirect products not E-marketplaces

web sites where companies and suppliers conduct business-to-business activities

Reverse auction a company posts orders on the Internet for suppliers to bid

on


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Distribution Centers (DC)Distribution Centers (DC)and Warehousingand Warehousing

DCs are some of the largest business facilities in DCs are some of the largest business facilities in the United Statesthe United States

Trend is for more frequent orders in smaller Trend is for more frequent orders in smaller quantitiesquantities

Flow-through facilities and automated material Flow-through facilities and automated material handlinghandling

PostponementPostponementfinal assembly and product configuration may final assembly and product configuration may

be done at the DCbe done at the DC


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Warehouse Management Warehouse Management SystemsSystems

Highly automated system that runs day-to-day operations Highly automated system that runs day-to-day operations of a DCof a DC

Controls item putaway, picking, packing, and shippingControls item putaway, picking, packing, and shippingFeaturesFeatures

transportation managementtransportation managementorder managementorder managementyard managementyard managementlabor managementlabor managementwarehouse optimizationwarehouse optimization


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SCM SoftwareSCM Software

Enterprise Resource Planning (ERP) software that integrates components of a company

by sharing and organizing information and data SAP was first ERP software mySAP.com

web enabled modules that allow collaboration between companies along the supply chain


10-10-3232Linking Supply Chain with SAP


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Other Measures of Supply Chain Other Measures of Supply Chain Performance Performance

Process ControlProcess Control used to monitor and control any process in supply used to monitor and control any process in supply

chainchain Supply Chain Operations Reference (SCOR)Supply Chain Operations Reference (SCOR)

establish targets to achieve “best in class” establish targets to achieve “best in class” performance performance


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SCOR Model ProcessesSCOR Model Processes

PlanDevelop a course of action that best meets sourcing, production and delivery requirements

SourceProcure goodsand services tomeet plannedor actualdemand

MakeTransformproduct to a finished state to meet planned or actualdemand

DeliverProvide products to meet demand, including ordermanagement, transportation and distribution

ReturnReturnproducts,post-deliverycustomersupport

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