SUPPLY CHAIN MANAGEMENT Anoop Kumar Verma (PGDM 2nd year)

WHAT IS A SUPPLY CHAIN? All stages involved, directly or indirectly, in

fulfilling a customer request

Includes manufacturers, suppliers, transporters, warehouses, retailers, customers

The goal of supply chain should be to maximize overall supply chain profitability.

Customer is an integral part of the supply chain

WHAT IS A SUPPLY CHAIN?

Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions

Typical supply chain stages: Suppliers , Manufacturers, Distributors, Retailers, Customers

SMDRC All stages may not be present in all supply

chains(e.g., no retailer or distributor for Dell)

WHAT IS A SUPPLY CHAIN?

Wal-Mart Store

Wal-Mart Store

Wal-Mart or thirdparty DC

Wal-Mart or thirdparty DC

P&G or othermanufacturerP&G or othermanufacturer CustomerCustomer

PlasticProducerPlastic

ProducerChemical

manufacturerChemical

manufacturer

TennecoPackagingTenneco

PackagingPaper

ManufacturerPaper

ManufacturerTimber

IndustryTimber

Industry

Fig: Stages of a Detergent Supply Chain

OBJECTIVE OF A SUPPLY CHAIN :-

Maximize overall value generated

Supply chain value; “Difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request”

For most commercial Supply Chains, Value will be strongly correlated with Supply Chain Profitability (also known as Supply Chain Surplus)

(difference between revenue generated from the customer and the overall cost across the supply chain)

OBJECTIVE OF A SUPPLY CHAIN :-

Supply chain incurs costs (information, storage, transportation, components, assembly, etc.)

Supply chain profitability is total profit to be shared across all stages of the supply chain

Supply chain success should be measured by total supply chain profitability, not profits at an individual stage

OBJECTIVE OF A SUPPLY CHAIN :-

Sources of supply chain cost: flows of information, products, or funds between stages of the supply chain

“Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability”

FLOW IN A SUPPLY CHAIN :-

Funds

Customer

Suppliers &

Manufacture

Information

Product

DECISION PHASES OF A SUPPLY CHAIN

“Supply chain decision phases may be categorized as design, planning, or operational, depending on the time frame during which the decisions made apply”

Supply chain strategy

Supply chain planning

Supply chain operation

SUPPLY CHAIN STRATEGY This phase, given the Marketing & pricing

plans for a product

Decisions about how to structure of the supply chain over the next several years

Strategic supply chain decisions How resources will be allocated Locations and capacities of facilities Products to be made or stored at various

locations Modes of transportation Information systems

SUPPLY CHAIN STRATEGY

Supply chain design decisions are long-term and expensive to reverse – must take into account uncertainty in anticipated market conditions

Used for increasing the Supply Chain Surplus during this phase

SUPPLY CHAIN PLANNING

For this phase the time frame considered is a quarter to a year; strategic phase is fixed

Definition of a set of policies that govern short-term operations

Fixed by the supply configuration from previous phase

Starts with a forecast of demand in the coming year

SUPPLY CHAIN PLANNING

Planning decisions: Which markets will be supplied from which

locations Planned buildup of inventories Inventory policies to be followed Timing and size of marketing and price

promotions

Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon

SUPPLY CHAIN OPERATION Time horizon is weekly or daily

During this phase company make Decisions regarding individual customer orders

Supply chain configuration is fixed and operating policies are determined

Goal is to implement the operating policies to handle incoming customer order in the best possible manner

SUPPLY CHAIN OPERATION

In this phase, firms allocate inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipping mode & shipment, set delivery schedules of trucks, and place replenishment orders

Operational decisions are being made in the short term (Minutes, hours, or Days)

Goal during the operation phase is reduce uncertainty & optimize performance

PROCESS VIEW OF A SUPPLY CHAIN

“A supply chain is a sequence of processes and flows that take place within and between different stages and combine to fill a customer need for a product.”

There are two different view; Cycle view Push / Pull view

PROCESS VIEW OF A SUPPLY CHAIN

Cycle view: The processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages

Push/pull view: The processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push)

CYCLE VIEW OF SUPPLY CHAINS

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

“Each cycle occurs at the interface between two successive stages”“The five stages thus result in four supply chain process”

1ST : CUSTOMER ORDER CYCLE

Involves all processes directly involved in receiving and filling the customer’s order

CustomerDemand CustomerDemand

Order placedOrder placed

Receive order

Receive order

Receives/Demand Full

fill

Receives/Demand Full

fill

DeliversDelivers

Order ProcessOrder

Process

C

R

2ND : REPLENISHMENT CYCLE

All processes involved in replenishing retailer inventories (retailer is now the customer)

RetailerDemand RetailerDemand

Order placedOrder placed

Receive order

Receive order

Receives/Demand Full

fill

Receives/Demand Full

fill

DeliversDelivers

Order ProcessOrder

Process

R

D

3RD : MANUFACTURING CYCLE

All processes involved in replenishing distributor (Distributor is now the customer) inventory

DistributorDemand

DistributorDemand

Order placedOrder placed

Receive order

Receive order

Receives/Demand Full

fill

Receives/Demand Full

fill

DeliversDelivers

Product Manufacturing

Product Manufacturing

D

M

4TH : PROCUREMENT CYCLE

Manufacturer orders components from suppliers to replenish component inventories

ManufacturerDemand

ManufacturerDemand

Order placedOrder placed

Receive order

Receive order

Receives/Demand Full

fill

Receives/Demand Full

fill

DeliversDelivers

Order ProcessOrder

Process

M

S

PUSH/PULL VIEW OF SUPPLY CHAINS

“A push/pull view of the supply chain categorized processes based on whether are initiated in response to a customer order (pull) or in anticipation of a customer order (push). This view is very useful when considering strategic relating to supply chain design”

Push: execution is initiated in anticipation of customer

orders/demand (speculative process) Demand is forecasted

PUSH/PULL VIEW OF SUPPLY CHAINS

Pull: execution is initiated in response/react to a

customer demand (reactive process) Demand is not known and must be forecast

Push/pull boundary separates push processes from pull processes

Push Pull

(Customer demand is not known)

(Customer demand is known)

PUSH/PULL VIEW OF SUPPLY CHAINS

Procurement,Manufacturing andReplenishment cycles

Customer OrderCycle

CustomerOrder Arrives

PUSH PROCESSES PULL PROCESSES

Push/Pull Boundary

PUSH/PULL PROCESSES FOR DELL SUPPLY CHAIN

Procurement Cycle

Customer Order & Manufacturing Cycle

CustomerOrder Arrives

PUSH PROCESSES

PULLPROCESSES

ProcurementCycle

Customer order &Manufacturing Cycle

SUPPLY CHAIN MACRO PROCESSES IN A FIRM

“Three macro processes manage the flow of Information, Product, & funds required to generate, receive, & fulfill a customer request”

Supplier Relationship Management (SRM) : All processes that focus on the interface the firm and its suppliers. Source Negotiate Buy Design Collaboration Supply Collaboration

SUPPLY CHAIN MACRO PROCESSES IN A FIRM

Internal Supply Chain Management (ISCM) : All processes that are internal to the firm. Strategic Planning Demand Planning Supply Planning Fulfillment Field Service

SUPPLY CHAIN MACRO PROCESSES IN A FIRM

Customer Relationship Management (CRM) : All processes that focus on the interface between the firm and its customers Market Price Sell Call center Order Management