SCM and ERP (OMR 705)

Advanced Supply Chain Strategies

Sanjib Biswas
30th December, 2015

Conventional SC structure

29 December 2015

Change of Focus

Responsive
Supply Chain

29 December 2015

Agile Supply
Chain

Adaptive Supply
Chain

Smart Supply
Chain

Aligned Supply
Chain

Lean Supply Chain

Synchronized Production and Delivery throughout the Supplier Network is a
Central Lean Concept.
Integrated supplier lead times and delivery schedules
Flows from suppliers pulled by customer demand (using takt time, load
leveling, line balancing, single piece flow)
Minimized inventory through all tiers of the supply chain
On-time supplier delivery to point of use
Minimal source or incoming inspection
Effective two-way communication links to coordinate production &
delivery schedules
Striving for zero quality defects essential to success
Greater efficiency and profitability throughout the supplier network

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Develop Systems Thinking

Lean supply chain principle 1:
Improving the performance of every subsystem does not
necessarily improve system performance. The sum of
local optima does not equate to the global optimum.
Improvements in subsystem performance must be
gauged only through its impact on the whole system.

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The Business Ecosystem

Lean supply chain principle 2:

Focus on improving the performance of the lean supply
chain. However, do not ignore the supply chains
business ecosystem.

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Benchmark Best Practices

Lean supply chain principle 3:
Focus on customer needs and process considerations when
designing the product delivery system. Enterprises can gain
tremendous competitive advantage through best-in-class
practices that cut across industries.

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How to Manage Demand Volatility

Lean supply chain principle 4:
Maximize external variety with minimal internal variety. It is
desirable to maintain inventories in an undifferentiated form for
as long as it is economically feasible to do so

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Managing Demand Variation

As far as possible, avoid using inventory to buffer

variation
Less chances of misallocation
Inventory seriously impedes flow

Lean supply chain principle 5:

Buffer the variation in demand with capacity, not inventory

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Creating Flow

To enhance flow, use pull signals for execution where

possible

Lean supply chain principle 6:

Use forecasts to plan and pull to execute. A system that reacts to
pull signals will have less variation than a comparable system
that adopts a push mode of operation.

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Agile Supply Chain

end-customers
become more
knowledgeable
about product

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Lean supply chain 1980s

Efficiency, cost

Focus
Agile supply chain 1990s

Responsiveness

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Agility
Market sensitive: Supply chain is capable of reading and
responding to real demand
Virtual: Information-based supply chain, rather than inventorybased.
Network based: EDI and internet enable partners in the supply
chain to act upon the real demand
Process integration: Collaborative working between buyers
and suppliers, joint product development, common systems
and shared information

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The concept of Agility

Source: Mason-Jones, Naylor and Towill (2000), Engineering the leagile

supply chain

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The concept of Agility

Supply
characteristics
Long lead time

Plan and
control

Hold inventory: hedge

and deploy

Short lead time

JIT: pull
scheduling

React and execute:

agile capabilities

Predictable
market

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Unpredictabl
e markets

Demand
characteristics

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Application of leagility: the de-coupling point approach

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ZARA : Agile Supply Chains

The Next Generation Businesses are faster, more complex and less predictable. Firms
have to grapple with higher velocity of change on both demand and supply fronts. This
phenomenon shall force the companies to design agile and responsive supply chains.

Zara, the Spanish Fashion Retailer and most profitable Apparel

brand in Europe with a turnover exceeding 10 billion Euros
brings products on the shelf within 15 days of idea creation,
ensures delivery in 72 hours at all its outlets located in different
parts of globe and ensures fresh line of products always at its
retail outlets and no product on the shelf more than four weeks.
Works in environment of high demand uncertainty
(works on scenario building exercises)
Large variety / product mix
Short life cycles
Use of quick response manufacturing (uses SMED technique)
Focus on rapid response to the market.
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Supply Chain re-structuring

Shift from conventional Ship to Stock (STS) Model
to Bundle to Order (BTO) Model in Consumer Electronics Business
(Postponement Strategy : Postpone the Point of Differentiation)

Sources of
Supply of
PCB

PCB
FAB

COST

----- Existing cost curve with

composite manufacturing concept
Revised cost curve with
Bundling concept

BUNDLING
UNIT 1

MARKET 1

BUNDLING
UNIT 2

MARKET 2

BUNDLING
UNIT 3

MARKET 3

BUNDLING
UNIT N

Revised
Order Point

Existing Order
Point (STS)
Revised Point of
differentiation

80%
20%

Time
90%
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MARKET
N

10%
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Supply Chain re-structuring

.contd.

How the cost curve behaves?

(Postponement Strategy : Postpone the Point of Differentiation)
Cuts the inventory holding cost by
almost 75%
Cuts the material obsolescence cost
by almost 85%

Revise
d Order
Point

Existin
g Order
Point

COST

Existing point of
differentiation
80%

Revised
cost curve
20%
Time
90%
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10%

Revised point of
differentiation 18

Closed loop Supply Chain

Closed-loop supply chains are designed and
managed to explicitly consider the reverse and
forward supply chain activities over the entire life
cycle of the product.

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Reverse vs. Closed-Loop Logistics Systems

Reverse logisticsThe process of moving or
transporting goods from their final destination for the
purpose of capturing value or for proper disposal.
Reserve logistics involves the processes for sending new or used
products back up stream for repair, reuse, refurbishing, resale,
recycling, or scrap/salvage.

Closed loop supply chainsDesigned and managed

to explicitly consider both forward and reverse flows
activities in a supply chain.
Explicitly designed and managed for both flows
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A closed-loop supply chain

Raw
Matls

Manufacturing

Distribution

Overstocks
Spares Recovery

Spare
Components

Return Stream

Returns
Evaluation
Scrap

Refurbished product
(Secondary Market)
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Reseller or
Customer
Sales

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Types of returns
Commercial returns
Repair / warranty returns
Leasing
End-of-use returns
End-of-life returns

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Drivers of RSC Initiatives

Environmental legislations
Economic value from returns
Green Image
Material Resource constraints like lead and other precious
resources

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Smart Supply Chain structure

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