Supply Chain Supply Chain ManagementManagement

In Retail In Retail Presented byPresented by

-Hareesh.M-Hareesh.MID.No-2014600120ID.No-2014600120

Contents Definition Flows in SCM Conflicting objectives in SCM Supply-Demand-SCM Need of SCM Integrated SCM Pull-Push view of SCM Functions of SCM SCM-Strategies Global SCM-Issues Outsourcing

Supply Chain Management

• SCM is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying service requirements.

Conflicting Objectives in SC

• Purchasing– stable volume requirements– flexible delivery time– little variation in mix– large quantities

• Manufacturing– long run production– high quality– high productivity– low production cost

Conflicting Objectives in SC• Warehousing

– low inventory– reduced transportation costs– quick replenishment capability

• Customers– short order lead time– high in stock– enormous variety in products– low prices

Supply Chain

Supplier

Manufacturer

Distributor

Retailer

Customers

Supply Chain ManagementSupply Chain Management is

the design and management of processes

across organizational boundaries with the goal of matching supply and

demand in the most cost effective way.

Supply

Demand

Mission impossible: Matching Supply and Demand

Why so Difficult to Match Supply and Demand?

• Uncertainty in demand and/or supply• Changing customer requirements• Decreasing product life cycles• Fragmentation of supply chain ownership• Conflicting objectives in the supply chain• Conflicting objectives even within a single firm

– Marketing/Sales wants: more FGI inventory, fast delivery, many package types, special wishes/promotions

– Production wants: bigger batch size, depots at factory, latest ship date, decrease changeovers, stable production plan

– Distribution wants: full truckload, low depot costs, low distribution costs, small # of SKUs, stable distribution plan

Need of SCM in Retail Cost Cutting

Time Saving

Customer Satisfaction

Increase Profit Margins

Physical Flows

Information Flows

Financial Flows

Integrated Supply Chain Management

• SCM is an integrated process where every activity is interrelated with the system for efficient flow of material from supplier to the end users.

Supplier Manufacturer Distributor Retailer Customer

Benefits of Integrated Supply Chain

• Achieving the best delivery performance.

• Reduction in inventory

• Lower supply chain cost

• Improvement in overall productivity

• Accuracy in forecast

Module 1:Supply Chain Management

A push-based SCM takes longer to react to thechanging market place

In a push-based supply chain, production decisionsare usually based on long-term forecasts

In push-based strategies, SCM experience increased transportation costs, high inventory levels and high manufacturing costs

In a pull-based supply chain, manufacturing is demand drivenso that it is coordinated with actual external customer demand rather than a forecast

Push View of SCM

Pull View of SCM

Lead-time reduction occurs as the variabilities are better monitored in pull-based SCM

Pull-based systems are often difficult to implement when lead timesare so long that it is impractical to react to demand information

SCM-Modern Approach

• Just In Time (JIT) Inventory Management Model

• Total Quality Management (TQM) Model

• Efficient Consumer Response (Ecr) Working Group.

Functions of Retail Supply Chain

• Physically movement of goods from one outlet to another.

• Stocking the good at the outlets where needed.

• Management of the entire process.

Supply-Chain Strategies

• Negotiate with many suppliers; play one supplier against another

• Develop long-term “partnering” arrangements with a few suppliers who will work with you to satisfy the end customer

• Vertically integrate; buy the actual supplier• Create a virtual company that uses suppliers on an

as-needed basis.

• Company– Financial stability– Management– Location

• Product– Quality– Price

• Service– Delivery on time– Condition on arrival– Technical support– Training

Supplier Selection Criteria

Managing the Supply-Chain - Options

• Establishing lines of credit for suppliers

• Reducing bank “float”

• Coordinating production and shipping schedules with suppliers and distributors

• Sharing market research

• Making optimal use of warehouse space

Materials Management

• Integrates all materials functions– Purchasing– Inventory management– Production control– Inbound traffic– Warehousing and stores– Incoming quality control

• Objective: Efficient, low cost operations

Outsourcing

Supplier Question: When should the firm outsource activities?

Outsourcing: moving some of the firms internal activities and decisions to outside providers

Firm

Examples of outsourcing

• Many firms outsource problem solving to McKinsey & Co.

• Advertising is often outsourced completely.

• Many companies outsource logistics and transportation.

Why do firms outsource?

• Organizational reasons

- Focus on service

- Focus on core capabilities

- Transform the organization

- Increase flexibility

• Operational reasons

- Improve performance (quality, productivity, etc.)

- Obtain expertise, skill, and technology

- Risk management

Why do firms outsource?

• Financial reasons

- Transfer assets to the outsourcing partner.

- Free up resources for investment in other purposes.

• Cost driven reasons

- Transform fixed costs into variable costs.

- Reduce costs through outsourcing partner efficiencies.

• Revenue driven reasons

- Expand and grow with the help of another organization.

- Obtain access to outsourcing partner’s network.

Global Supply-Chain Issues

Supply chains in a global environment must be:– flexible enough to react to sudden changes in parts

availability, distribution, or shipping channels, import duties, and currency rates

– able to use the latest computer and transmission technologies to manage the shipment of parts in and finished products out

– staffed with local specialists to handle duties, trade, freight, customs and political issues

Global SCM FACTORS

• Costs– Local labor rates

– International freight tariffs

– Currency exchange rates

• Customs Duty– Duty rates differ by commodity and level of assembly

– Impact of GATT/WTO: Changes over time

• Taxes on Corporate Income– Different markups by country

– Tax havens and not havens

– Make vs. buy effect

Global SCM FACTORS Continued…..

• Offset Trade and Local Content– Local content requirement for government purchases

– Content for preferential duty rates

• Export Regulations• Denied parties list

• Export licenses

• Time• Lead time

• Cycle time

• Transit time

• Export license approval cycle

• Customs clearance

Key Issues in Supply Chain Management

• Distribution Network Configuration

• Inventory Control

• Supply contract

• Distribution Strategies

• Supply Chain Integration & Strategic Partnering

• Outsourcing & Procurement Strategies

• Product Design

• Information Technology & Decision Support System

• Customer Value

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