1 session 1 scm basics 2014

7/26/2019 1 Session 1 Scm Basics 2014

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SESSION# 1 & 2: Basics & Beyond

Supply Chain Management

.Professor

Department of Management Studies

Indian Institute of Technology DelhiHauz Khas, New Delhi 110 016, India

Phone: +91-11-2659-6421 (O); 2659-1991(H); (0)-+91-9811033937 (m)

Fax: (+91)-(11) 26862620

Email: [email protected], [email protected]://web.iitd.ac.in/~ravi1

The Objectives of this Session is to:

Understand the course objective

Understand the basic concepts of Supply ChainManagement (SCM) & Operations Management (OM)

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Assess organizational needs towards SCM

Take decision related to operations of SCM

Understand the Recent Trends in SCM

Few Information

Text Book Simchi-Levi et al.: Designing

and Managing the SupplyChain: 3rd edition, McGraw Hill,NY (2008)

Reference Books il i l

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il i l,Supply Chain Management: 3rdedition, Pearson Education(2007).

Wisner, Leong and Tan,Principles of Supply ChainManagement, Thomson South-Western, 2005 (Complete ListAvailable on course outline)


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Another Reference Book

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In case you are interested in further study

in SCM

Journal(s):

Supply Chain Management: An InternationalJournal (Available on www.emaraldinsight.com)

Supply Chain Management Review

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Purchasing World

International Journal of Purchasing andMaterials Management

International Journal of Physical Distribution &Logistics Management

Course Objectives

To understand the basicsof SCM

To understand the current

practices in SCM To develo decision

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making capabilities inSCM

To understand anddevelop differentstrategies of SCM


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Sources:plants

vendorsports

RegionalWarehouses:stockingpoints

FieldWarehouses:stockingpoints

Customers,demandcenterssinks

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upp y

Production/purchasecosts

Inventory &warehousingcosts

Transportationcosts

Inventory &warehousingcosts

Transportationcosts

Distribution

SUPP

Sales

The Functional Approach

CU

ST

OME

RS

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Purchasing

ManufacturingLIERS

Traditional Approach: Functional, silobased !

No attempt to look holistically!

Distribution

SUP

Sales

Integrated Supply Chain Approach

CUSTOME

RS

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Purchasing

ManufacturingLIERS

Looks at the entire chain

Global rather than local focus

Integrated rather than fragmented approach


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Supply Chain StagesSupply Chain (SC) encompasses all activities associated with the flow

and transformation of materials from the raw material stage throughto the end user.Supply Chain Management (SCM) involves management of FOUR

flows in a Supply Chain: (i) Material, (ii) Information , (iii) Money &

(iv) Ownership

Supplier Manufacturer Distributor Retailer Customer

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upstream

Example: Typical supply chain

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downstream

Example: Toshiba PC Supply Chain

upstream

Intel,AMD

Seagate,IBM

Microsoft,Red Hat

Toshiba America

12downstream

Irvine, California

Europe DC

Toshiba Turkey

North America DC


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The Linear Supply Chain13

Limited visibility & velocity

Inventory build-up

What are the Goals of Supply ChainManagement?

Supply chain management is concerned with the efficientintegration of suppliers, factories, warehouses and storesso that merchandise is produced and distributed:

In the right quantities

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o e r g oca ons

At the right time

In order to

Minimize total system cost

Satisfy customer service requirements

Evolution of Supply Chain Management

SCM

Formation/

Further

Refinement of

SCM Capabilities

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1950s 1960s 1970s 1980s 1990s 2000s Beyond

Traditional Mass Manufacturing

Inventory Management/Cost

Optimization

JIT, TQM, BPR,

Alli ances

x e ns o ns


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Evolution of Logistical Integration, 1960-2014

Demand Forecasting

Purchasing

Requirements Planning

Production Planning

Manufacturing Inventory

Materials

Management

1980s

1990s

2000s

TYPICAL OM DOMAINS

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Materials Handling

Packaging

Inventory

Facility Planning

Order Processing

Transportation

Quality &Customer Service Strategic Planning

Physical

Distribution

Logistics Supply Chain

Management

Information Technology

Marketing

Supply Chain Decisions: StructuringDrivers

Strategy

(Design)

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Planning

Operation

Plan/Design

Product Architecture

Make/Buy

Early Supplier Involvement

Develo

pme

The EnterpriseFulfillment and Development Supply Chains

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Supply Produce Distribute Sell

Source

Suppliers Selection

Supply Contracts

Fulfillment Supply Chain

tSupplyChain


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Decision time horizon

Detail Inventor Plannin

Distribution Planning

Manufacturing Planning

Transportation Planning

Operations Scheduling

Delivery Scheduling

Execution Systems Execution

Tactical

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Strategic Planning

Hour Week Quartile Year Time

Supply Chain Structure Design

Supply Chain Network Design

Demand Planning

Sales & Operations Planning

Supply Chain Planning

Source: AMR Research

Strategical

Let us start the course with a Quiz

A box of cereal spends ? days in the supply chain

Poor coordination in the food industry supply chainwasted ? dollars.

A typical new car spends ? days traveling from the

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.

U.S. companies spend ? % of Gross DomesticProduct on Supply Chain & Logistics

Total inventory in the pharmaceutical supply chainexceeds ? days.

Complexity: The Magnitude

A typical box of cereal spends 104 days getting from factory tosupermarket.

The grocery industry could save $30 billion (10% of operatingcost) by using effective logistics strategies

A typical new car spends 15 days traveling from the factory tothe dealership.

U.S. companies spend more than $1 trillion in supply-relatedactivities 10-15% of Gross Domestic Product

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Transportation 58%

Inventory 38%

Management 4%


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Consider the following

Wal-Mart and K-Mart were founded in the same year.While K-Mart declared Bankruptcy in 2001 while Wal-Mart became the largest retailer in USA and perhaps

in the world. Dell has been able to enerate rof its even when its

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competitors lost money on their PC operations.

Honda has established itself as a dominant brand inautomobiles.

What have these firms done? What is the secret of theirsuccess?

Example: Dell Computers Supply Chain

Website

or Phone

Dell Assembly

PlantCustomer wants

To buy computer

Master Board

Hard disk

Direct Shipment

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SRAM

Customers Order

Concept of Disintermediation in Dell Direct Supply Chain

What are its benefits for Dell?Any oth er examp le of s im il ar typ e in In dia?

Magnitude of Supply Chain CostsExample: The Apparel Industry

Manufacturer Distributor Retailer Customer

Cost per Percent

Shirt Saving

Rs.527.20 0%

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Rs.413.40 28%

Rs.204.50 62%

Manufacturer Distributor Retailer Customer

Ma nu fa ct ure r D is tr ib uto r Retailer Customer

(c) R.Shankar (2010-11)


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Magnitude of Supply Chain CostsCost Elements of a Typical Trade Book

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QC & Shipping

[Hong Kong]

Product Design

[Hong Kong]

An Illustration: How Li & Fung Limited Might

Make a Dress

Globally Dispersed Manufacturing

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Zippers+

[Japan+]

Stitching

[Indonesia]

Weaving

[Taiwan]

Yarn Spinning

[Korea]


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Discussion Questions for You

Are all supply chains same/similar?

How about cold chains?

Where does the retail fit in supply chain?

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chain?

What are inbound/outbound activities in supplychain?

What about information and inventory? Are theyrelated in some way in supply chain?

CASE STUDY-1:

29(c) R.Shankar (2010-11)

Scope / Activities

Supply Chain Management

Materials Management & Transportation

Manufacturing Packa in

Total Quality Management

Distribution Systems

30(c) R.Shankar (2010-11)


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Product Portfolio

Oral Care

ToothbrushHorlicks

JHlx CHlx MHlx EHlx

Boost Aquaf resh mou thp aste

NHCHlx P

JordanAqu afresh

Flex, FnD, FlexiKid

Flexi friend

Med

EnoRegular, Lemon,

Jaljeera

Crocin

Biscuits

Hlx

Std Ch.Hlx

Elaichi

Boost

EB

x - r es , n

31(c) R.Shankar (2010-11)

Manufacturing Facilities - NHC Powders

3 FactoriesNabha - Punjab

Ra ahmundr - A.P.

NSD1

H

. .

Hamira - Punjab

SD1 ProjectSonepat - Haryana R

32(c) R.Shankar (2010-11)

Packaging Facilities - Nutritional

7 Packing Sites

Faridabad (F)Calcutta (C)

F

HA

N

NN

CGHyderabad (H)

Chennai (CH)

Nabha (N)

Hamira (HA)

Chittagong - Bangladesh (CG)

C

H

CH

33(c) R.Shankar (2010-11)


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Manufacturing Facilities - NHC Solids

2 Biscuit sites

BurdwanHyderabad

H

34(c) R.Shankar (2010-11)

Mfring & Packing Facilities- Aquafresh

2 sitesGoa (Tooth B rush)

as oo pas e

G

N

35(c) R.Shankar (2010-11)

Mfring & Packing Facilities - OTC

1 Site (ENO)Hyderabad

H

36(c) R.Shankar (2010-11)


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Sales depots

Sales depots 32 nos

37(c) R.Shankar (2010-11)

Supply Complexities

Finished Goods Movement

250 vendors ,350 materials,

15 sites

P/S movementof avg.. 1200 kms

Over 1000consignments/

month shipped

across 130

site-depotlinkages

12 supply sitescatering to 37 markets

Primary freight costof Rs. 30 crore p .a.38(c) R.Shankar (2010-11)

Export Supplies

BangladeshBangladeshMiddle EastMiddle East

Supply Complexities

Nepal

Sri LankaSri Lanka

MyanmarMyanmar

MauritusMauritus

39(c) R.Shankar (2010-11)


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3333 Milk Collect ion CentresMilk Collection CentresThird PartyThird Party

Manufacturing`Manufacturing`

FactoriesFactories

Third PartyThird Party

SuppliersSuppliers

Ca t iveCa t ive

The Supply Chain

BulkPackingPacking

StationsStations

Depots

Wholesalers Retailers

Finished Goods

ExportMkt..

MaltingMalting

40(c) R.Shankar (2010-11)

Supply Planning ProcessNet Requirements from

Demand Manager

Central Planner

Capture NRs

Send Aggregate Prod

Plan & Des atch

SKU / DepotSKU / Depot--Weekly BucketWeekly Bucket

SKUSKU -- MonthlyMonthly

ASP: Ag greg ateASP: Ag greg ate

Schedule PlanningSchedule Planning

NRS: NetNRS: Net

RequirementRequirement

StabilityStability

(c) R.Shankar (2010-11)

schedule to sites

Detailed Production

Scheduling at Sites

MRP at

SitesSKUSKU -- DailyDaily

Delivery Schedules

to Supplier

Production / Packing

Dispatches to depots

PPR: ProductionPPR: Production

PlanPlan

RequirementRequirement

SPA: Supply PlanSPA: Supply Plan

Adh erenceAdh erence 41

Performance Measurements

Supply SideSupply SideSupply

PlanAdherence

SPA

QualityFactories

l

tProcurement Projects

Demand SideDemand Side

Depots Wholesalers Retailers Exports

Net

Requirement

Stability

(NRS)

42(c) R.Shankar (2010-11)


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Major Problems

Forecast inaccuracy

Un-organised transport sector

Longer lead time for some raw materials

Frequent change in statuary requirements

Sales promotions d isturbs the planning cyclessome times leads to major write offs

43(c) R.Shankar (2010-11)

Effective Supply Chain-Challenges

Effective Supply chain is not limi ted

to manufacturing & distributing

products only but also..

44(c) R.Shankar (2010-11)


Design product to its supply chain

Supplier relationshipManufacturing:- should it be in-house

or to be out-sourced ?

Least Product inventories

Third Parties:- Partners can addsignificant value

45(c) R.Shankar (2010-11)


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Distribution:- shippers should add valuerather than mere transportation

Work on the Customers Pull rather


than Push

Is consumer response is making itsway into the chain ?

46(c) R.Shankar (2010-11)

Then..

Whats the way out?


(c) R.Shankar (2010-11) 47

Conflicting Objectives

in the Supply Chain

1. Purchasing

Stable volume requirements

Flexible delivery time Little variation in mix

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Large quantities

2. Manufacturing

Long run production

High quality

High productivity

Low production cost


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Conflicting Objectives

in the Supply Chain

3. Warehousing

Low inventory

Reduced transportation costs

Quick replenishment capability

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4. Customers

Short order lead time

High in stock

Enormous variety of products

Low prices

Managing a Supply Chain is not EasyManaging a Supply Chain is not Easy

1. Uncertain ___________________

2. Conflicting ___________________ across the supply chain

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Manufacturers Distributors Retailers Consumers

Convenience

Short lead time

Large variety of

products

Few stores

Low inventory

Little variety

Close to DCs

Low inventory

Few DCs

Large shipments

Large production batches

Forecasting is not a final solution

Demand is not the only source of uncertainty

Recent trends make things more uncertain

Uncertainty and Risk Factors

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Outsourcing

Off-shoring


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August 2005 Hurricane Katrina P&G coffee supplies from sites around New Orleans

Six month impact

2002 West Coast port strike Losses of $1B/day

Uncertainty and Risk Factors

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Store stock-outs, factory shutdowns

1999 Taiwan earthquake Supply interruptions of HP, Dell

2001 India (Gujarat state) earthquake

Supply interruptions for apparel manufacturers

Compaq estimates it lost $0.5 billion to $1 billion in sales in

1995 because laptops were not available when and where

needed

P&G estimates it saved retail customers $65 million bycollaboration resulting in a better match of supply and demand

Similar SCM Experiences

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In 1997, American companies spent $862 billion, or about10% of GNP on supply chain related activities which include the

cost of movement, storage and control of products across thesupply chain.Most of these costs include unnecessary cost

components due to redundant stock, inefficient transportation

strategies, and other wasteful strategies in the supply chain

Other Issues in Management of Supply Chain

Lead time

Total cost

Management of Inventory Material Handling

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Sensitization about the Logistics cost to all thestakeholders !

Information Sharing..


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Supply Chain Responsiveness

Respond to wide ranges of quantities demanded

Meet short lead times

Handle a large variety of products

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Build highly innovative products

Meet a very high service level

EExamples of logistics strategy decisionsxamples of logistics strategy decisions

Middle-men / direct deliveries

Structure of logistics network

Control principles of a logistics network

Integrating production and logistics

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Effect of reducing the number of suppliers

Location issues

Selecting the most appropriate price/quality combination oflogistics services

Frequencies and cycle times in production and distribution

Inventory level policy

Sensitivity analyses with varying scenarios (volumes, costs...)

Cycle Time All iances

The Core Issuesin Supply Chain Management

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InitiativesTechnology

IntegrationCost Management

Environmental

Pressures

Inbound, Operations

& Outbound

634


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Let us list few, which are relevant for ourcountry..

Lead Time??


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n egra on

Coordination??

Environmental Issues??

1 session 1 scm basics 2014

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