overview of supply chain management-1

8/7/2019 Overview of Supply chain management-1

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Supply Chain Management

PRAVIN KUMAR


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Definition

Supply Chain-A network of all facilities, functions,A network of all facilities, functions,

activities, associated with flow andactivities, associated with flow and

transformation of goods and servicestransformation of goods and services

from raw materials suppliers tofrom raw materials suppliers tocustomer, as well as the associatedcustomer, as well as the associated

information flows is known as supplyinformation flows is known as supply

chain.chain.


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(Continued)

Definition

Supply Chain Management-Supply Chain Management (SCM) is

collaborative effort of Multiple channel

members to design, implement and seamless

value added processes to meet the real needsof the end customer.


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PartsParts

SupplierSupplier WarehousesWarehousesManufacturerManufacturer RetailersRetailersDistributorsDistributors BuyerBuyer

Flow of Goods, Flow of Ownership

Flow of Information, Flow of Money

4- Flows in Supply Chain


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Supply Chain Illustration


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Supply Chain for Denim Jeans


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Supply Chain for Denim Jeans

(cont.)


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DELL ComputersSupply Chain

Mother

Board

Hard Disk

.

.

.

RAM

Dell Assembly

Plant

Website or

Phone

Customer wants

to buy Computer

Direct Shipment


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Supply Chain Processes


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ObjectivesofSCM

1. To improve customer response.

2. To improve product quality.

3. To reduce Lead-time of manufacturing,transportation, information flow.

4. To reduce inventory cost.

5. Better demand forecasting.

6. To synchronize the information flow with the

demand ofbuyer.7. To select the Suppliers and Distributors.

8. To outsource globally.

9. To measure the performance ofSupply Chain.

10. To implement On-line marketingand e-

Business.


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Supply Chain Uncertainty

One goal in SCM: respond to uncertainty in

customer demand withoutcreating costly excessinventory

Negative effects ofuncertainty

lateness

incomplete orders Inventory

insurance against supplychain uncertainty

Factors that contribute touncertainty

inaccurate demand forecasting long variable lead times

late deliveries

incomplete shipments

product changes batch ordering

price fluctuations and discounts

inflated orders


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Bullwhip Effect

9

The M cG raw -H ill Com panies, Inc., 20 04

O

rder

Q

uantity

Time

R eta i ler s Orders

O

rder

Q

ua

ntity

Time

W h olesa ler s Orders

O

rder

Q

uantity

T i m e

M an ufacturers Orders

The m agn ificat ion of variabi li ty in orders in the supply-

chain

The m agnif icat ion of variabi li ty in o rders in the supp ly-

chain

A lot of

reta ilers eac h

w ith l i ttle

variab il ity in

the ir orders .

A lot of

reta i lers each

w ith l i ttle

variab il ity in

the ir orders .

can lead to

greater variabil i ty

for a few er numb er

of wholesa lers ,

and

can lead to

greater variabil i ty

for a few er numb er

of wholesa lers ,

and

can lead to

even g reater

variabil i ty for a

single

manufacturer .

can lead to

even g reater

variab il ity for a

single

manufacturer .


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Emerging issues in


Vendor Managed Inventory (VMI):

In this case, Supplier decides on the

appropriate inventory levels of eachproduct and the inventory policies to

maintain these level. e.g. Campbell soup,

Maruti, Tata Motors, LG etc.

Third Party Logistics (3PL):It is simply the use of outside company to execute

part or complete material management and product

distribution function ofa firm.


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Emerging issues in

Supply Chain Management(Continued)

Outsourcing:

It means handing over certain logistics related activities toanother company. Outsourcing ensures strategic growth, adding

technological strength, and improving market access.

Outsourcing is defined as the act of movinga firms internal activities and decisionresponsibility to outside providers


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Riskpooling:

It mainly involve the concept of centralized warehousing.

Centralized warehousing reduces safety stocks and average

inventory in the system. This is clear from the argument that incase of unequal demand reallocation of inventory is easier from

a central warehouse. The higher the coefficient of variation, the

greater the advantage in keepinga central warehouse.


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Emerging issues in

Supply Chain Management(Continued)

Reverse Logistics:

Flowofproduct at the end of itslife from customer to

manufacturer for reprocessing.

Cross Docking

Warehouse works as only coordinating point in a

supply chain the product directly shipped to

customer


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Mass Customization

Definition

Mass customization is a term used todescribe the ability of a company to

deliver highly customized products andservices to different customers

The key to mass customization iseffectively postponing the tasks ofdifferentiating a product for a specificcustomer until the latest possible point inthe supply-chain network


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E-Procurement

Direct purchase from suppliers over the Internet

E-marketplaces

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

Reverse auction a company posts orders on the Internet for

suppliers to bid on


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Online Sourcing/

Procurement

Process


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Online Sourcing/

Procurement

Process (cont.)


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Online Sourcing/

Procurement Process (cont.)


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Source: Adapted from Garrison Wieland for Wal-Marts Supply Chain,

Harvard Business Review70(2; MarchApril 1992), pp. 6071.


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Transportation

Rail

low-value, high-density, bulkproducts, raw materials, inter-

modal containers not as economical for small

loads, slower, less flexible thantrucking

Trucking

main mode of freight transport

in U.S. small loads, point-to-pointservice, flexible

More reliable, less damage thanrails; more expensive than railsfor long distance


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Transportation (cont.)

Air

most expensive and fastest, mode of freighttransport

lightweight, small packages


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Transportation (cont.)

Water

low-cost shipping mode

primary means of international shipping

U.S. waterways slowest shipping mode

Inter-model

combines several modes of shipping-truck,water and rail

key component is containers

Pipeline transport oil and products in liquid form

high capital cost, economical use

long life and low operating cost


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Global Logistics Management

Challenges for logistics managers

Global distribution strategies

Logistics intermediaries and facilitators

objectives oflogistics outsourcing

Steps for logistics outsourcing

Selection criteria of third party logistics provides.

5


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Managements challenge is to evaluate the environmental and

cultural make-up of each prospective market and then developa logistics system that will meet what may be radically

different customers needs. Extended supply chains, multiple

languages, different channel members, distinct regulations, and

a myriad of cultural factors all combine to make the entire

logistics process much more complex than managers may be

used to.

Challenges for logistics managers:


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Global distribution strategies

Exporting:

Exporting occurs when the firm engages the services ofa middleman to sell its products overseas. This middleman may

simply buy the goods from the manufacturer directly, then resell

them in some attractive market of formers choosing.

Alternatively, the intermediary may act as abroker, searching for

a foreign buyerand putting them in contact with the seller.

(Continued)(Continued)


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Advantages:

There are usually no monatory or contractual ties in

foreign market.

Management can terminate the effort quickly if sales

do not materialize.

Risk is minimum.

Disadvantages: Managers have very little control over how their

product is handled.

Markets, pricing, promotion, and distribution are all

determined by the middleman.


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Licensing:

Licensing is a strategy that provides a bit more control

over the marketing process without a substantial increase inrisk. With a license, a company in one country permits a firm in

another to make a product, utilize a recipe, or employ some

other process that belong to the first party.

Limitation: The licensee always has the potential of

becoming a competitor.



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Joint Ventures:

Joint ventures occur when one company buys an

ownership interest in another firm. The investor can now

exert much more control via direct managerial input owing

to its financial partnership. Joint Ventures also allows theinvesting firm to utilize the specialized skill of its local

partner as well as have immediate access to a local

distribution system.

Limitations: Risk is higher and flexibility is lower

because of equity position has been established in the

partner.


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Ownership: ownership of a foreign subsidiary provides a

firm the highest degree of control over its international

marketing effort, but with higher levels of risk.

Advantage:

Ownership offers total control, permitting management to

operate without the need to accommodate a partner.

Customs duties and other import taxes may be eliminated

since the subsidiary is, for all intents and purposes, a

domestic entity in that country.


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Disadvantages:

Flexibility is lost because the firm has made a

long-term commitment to the foreign market.

There is always some risk of government

nationalization of foreign-owned business.


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Logistics intermediaries and facilitators

International freight forwarders focus primarily on

arranging international transportation. Their task is to

combine many small shipments into a single large one that

then qualifies for a lower transportation rate. Non vessel-owning common carriers (NVOCCs) specialized

in less-than container load ocean shipment and perform some

of the same functions as ocean freight forwarders. Unlike

freight forwarders, who usually act as a shippers agent,

NVO

CCs are common carriers utilizing containers ratherthan vehicles or vessels. In fact, freight forwarders can be

NVOCCs biggest customers. An NVOCC takes the shipments

form freight forwarders and combine them with other goods

going to same place.



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Export management companies (EMCs) are used when a

firm wishes to shell its products in a foreign market but lacks

the resources or expertise to conduct the business itself.

EMCs function like external export departments, acting as

agents for domestic firms in overseas markets by eitherselling a product themselves or taking orders for their clients

products.

Export trading companies are in business of exporting goods

and services. They locate overseas buyers and handle most of

the export arrangements, including documentation, inland and

overseas transportation, and the meeting of foreign

government regulations. In essence, they attempt to combine

all facets of international business: sales, finance,

communications, and logistics. Ex: Sogo Shosha of Japan



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Export packers supply packaging service for overseas

shipments when the shipper lacks the equipment or expertise

to do it itself. The benefits of these intermediaries are

adequate protection for the product and compliance with all

packaging regulations throughout the channel. In the first

instance, the length and complexity of the channel, transit

time, and the sophistication of the entire logistics system must

be considered.

Customs brokers shepherd goods through the customs

process. They ensure compliance with all local laws, that

documentation is correctly completed, and that any disputes

that may arise are resolved quickly in as favorable a manner

to the shipper as possible. Together with the variety of

customs procedures, restrictions, and requirements that differ

in each country, the job of facilitating export shipments across

international borders requires a specialist- the customs

broker.


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Objectives oflogistics outsourcing

Improved strategic focus

Lowered cost

Easier market expansion

Increased flexibility


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Steps for logistics outsourcing

1. Know where you want to go.

2. Clarify your needs and objectives.

3.S

elect best fit based on your most important criteria.4. Make sure both sides are clearabout service requirements.

5. Have an implementation Plan.

6. Ensure complete support from upper management.

7. Have open and honest communication Channel.

8. Plan an exit strategy.

9. Have consistent checkpoint meetings.

10. Maintain the open communications initially established.


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3PL Functions

Transportation

Warehousing

Freight consolidation and distribution

Product marking, labeling, and packaging

Inventory management

Traffic management and fleet operations

Freight payment and auditing

Cross docking Product returns

Order management

Carrier selection

Rate negotiation

Logistics information systems


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3PL selection Criteria

Cost of service

Quality of service

Compatibility

Long-term relationships

Reputation of the company

Performance measurement

Willingness to use logistics manpower

Flexibility

Quality of management

Information sharing and mutual trust Information technology capability

Experience in similar products

Financial performance

Geographical spread

Range of service provided

Risk management


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Now, Fire Your Questions.


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overview of supply chain management-1

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