Submitted by: Abhishek Kumar Abhinav 1C Ajay Kumar Singh 2C Alok Vyas 3C Anushree Pande 8C

Unlike internal integration external supply chain integration is inherently more difficult and demanding in nature. While it is relatively easy to impose performance measures(top management has to ensure internal consistency), in case of external integration performance measures have to be negotiated so as to make business sense for both the parties. In the internal supply chain context, if the decision makes sense in terms of overall company perspective, hierarchy can be invoked. But in the external supply chain context, unless all the concerned parties agree it may not be possible to find ways in which interest can be aligned within the chain.

Unable to apply the right metrics to manage supply chains effectively

Performance is lagging Difficulty prioritizing supply chain improvement efforts Complexity of supply chains Finding and holding on to supply chain talent

This includes disputes about the right metrics between supply chains, product lines or departments within a company, agreeing on definitions and calculations, having too many metrics or too few metrics, difficulty benchmarking and difficulty finding metrics that are supported 'of-the-shelf' in reporting tools. Whether you are driven by the need to reduce costs or inventory, need to improve customer satisfaction, or want to increase the speed to respond to market changes, performance gaps continue to make it on our top 5 list.

Companies struggle to identify where to deploy their expert resources and in what sequence

Serving many different customers with a wide varity of products and services may result in a complex, global, network of suppliers, factories, warehouses, transporters, customers and others. The complexity of such a network is hard to unravel and makes it difficult to find where and why problems occur. Supply chain management covers multiple disciplines and it can therefore be difficult to find that all-round supply chain person.

 While customer demand for specific products does not vary much Inventory and back-order levels fluctuate considerably across their supply chain P&Gs disposable diapers case
Sales quite flat Distributor orders fluctuate more than retail sales Supplier orders fluctuate even more

Demand Forecasting

Lead Time

Price Fluctuations

Batch Ordering

Inflated Orders

 Lead-time

reduction

Lead times magnify the increase in variability due to

demand forecasting. Two components of lead times:

order lead times [can be reduced through the use of crossdocking] Information lead times [can be reduced through the use of electronic data interchange (EDI).]
Strategic

partnerships

Changing the way information is shared and inventory

is managed Vendor managed inventory (VMI)

Manufacturer manages the inventory of its product at the retailer outlet VMI the manufacturer does not rely on the orders placed by a retailer, thus avoiding the bullwhip effect entirely.

 Centralizing

information will reduce variability Upstream stages would benefit more Unfortunately, information sharing is a problem in many industries Inflated forecasts are a reality Forecast information is inaccurate and distorted
Forecasts inflated such that suppliers build capacity Suppliers may ignore the forecasts totally

 Capacity

Reservation Contract

Buyer pays to reserve a certain level of capacity at the

supplier A menu of prices for different capacity reservations provided by supplier Buyer signals true forecast by reserving a specific capacity level
Advance

Purchase Contract

Supplier charges special price before building capacity When demand is realized, price charged is different Buyers commitment to paying the special price

reveals the buyers true forecast

 Retailer forecasts Typically based on an analysis of previous sales at the

retailer. Future customer demand influenced by pricing, promotions, and release of new products. Including such information will make forecasts more accurate.
Distributor and manufacturer forecasts Influenced by factors under retailer control. Promotions or pricing. Retailer may introduce new products into the stores Closer to actual sales may have more information Cooperative forecasting systems Sophisticated information systems iterative forecasting process all participants in the supply chain collaborate to arrive at

an agreed-upon forecast All parties share and use the same forecasting tool

 Many

interconnected systems

manufacturing, storage, transportation, and retail

systems the outputs from one system within the supply chain are the inputs to the next system trying to find the best set of trade-offs for any one stage isnt sufficient. need to consider the entire system and coordinate decisions
Systems

are not coordinated

each facility in the supply chain does what is best for

that facility the result is local optimization.

 Meet

customer demand from available retailer inventory What if the item is not in stock at the retailer?
Being able to locate and deliver goods is sometimes

as effective as having them in stock If the item is available at the competitor, then this is a problem
Other

Methods

Inventory pooling Distributor Integration

Numerous benefits:

The ability to quickly fill customer orders that cant be filled from

Many firms actively look for suppliers with shorter lead times Many potential customers consider lead time a very important criterion for vendor selection. Much of the manufacturing revolution of the past 20 years led to reduced lead times Other methods:

stock. Reduction in the bullwhip effect. More accurate forecasts due to a decreased forecast horizon. Reduction in finished goods inventory levels

Distribution network designs Effective information systems (e.g., EDI) Strategic partnering (Chapter 8) (Sharing point-of-sale (POS)

data with supplier)

 Conflicting

objectives in the supply chains Designing the supply chain with conflicting goals

Assessing Supply Chain Initiatives

Changing consumer demographics, the emergence of new distribution channels, the consolidation of trading partners, and the increasing use of computer and telecommunications technology are creating a changing environment for organizations Forming an organization-wide steering committee that oversees all related project activities, challenges the basis of recommendations, and approves final recommendations and implementation plans

Developing an ISCM vision

Four critical dimensions to be included in formulating an ISCM vision are: sourcing, demand flow, customer service; and supply chain integration These objectives are achieved through careful analysis, collaboration, and communication among supply chain partners

Developing an ISCM strategy

An ISCM strategy must create maximum economic value for the customer. It should also provide a win-win situation for both the manufacturer and value-adding channel participants, creating growth opportunities for each participant. ISCM strategies are based on: Formulate a differentiated supply chain strategy, Segment customers based on service needs, Customize the logistics network, Organize business units around major processes, Differentiate product closer to the customer, Set clear guidelines for creating or terminating alliances with supply chain partners.

Creating the optimum ISCM organization structure

to define how the customers needs will be met at each stage of the supply pipeline, as well as who among the participants can best fulfill that need the internal structures of the organizations must be flat, provide for people empowerment, and be cross-disciplinary and cross-departmental

Establishing the ISCM communication network

The thread that draws channel partners together is a common objective and its communication ISCM information and communication networks can be divided into the following three stages: Transactionalelectronic execution of transactions, Informationsharingelectronic sharing or exchange of information; and Collaborative electronic collaboration on strategic, tactical, and operational planning

Translating the ISCM strategy into actions

A range of actions are required by channel partner organizations, including: appointing a process owner; aligning culture with strategic response; reengineering critical business processes; measuring performance; developing and training the workforce

CONNECTIVITY The various forms of wireless connectivity Bluetooth for personal area networking, 802.11 wireless local area networking, and cellular wide area wireless networks for voice and data communication are all highly visible and provide compelling business cases for many specific operations. Although innovation and adoption is continuing at a strong pace, these trends arent new. What is new and significant is how these technologies are being combined into single devices that provide multiple forms of wireless functionality. SPEECH RECOGNITION The other voice technology for supply chain operations speech recognition for handsfree data entry is also undergoing a new wave of innovation and adoption. Speech recognition helps productivity by reducing the need for users to look at a computer display. Following the larger IT trends of open systems and interoperability, speech synthesis/recognition capability can now be easily embedded into numerous legacy software packages, including warehouse management. 2D BAR CODE Two-dimensional bar codes have long been a proven and popular technology for operations where it is desirable to present a lot of information in a limited space. However, 2D has remained a niche technology, in large part because symbols can be difficult to read in many usage environments. As reading ability has improved, so has the adoption and value of 2D bar coding. RFID RFID is also more practical than ever before, with clear business cases being demonstrated for asset management and supply chain operations alike. For example, the U.S. Navy used RFID data entry to reduce the time for one mission-critical inventory process by 98 percent.

RTLS

Real time location systems (RTLS) allow you to expand your wireless local area network into an asset tracking system. An important market driver is the Wireless Location Appliance from Cisco Systems, which enables asset tracking through a Cisco wireless LAN. Any device connected to the wireless LAN can be tracked and located. One application is to track forklifts via their vehicle-mounted computers radio. Using wireless LANs to track warehouse and factory assets is an example of how a mainstream IT resource has been adapted to benefit industrial environments. Another example, powerful remote management systems have been developed specifically to configure, monitor and troubleshoot bar code readers and printers, RFID equipment Stronger security is another mainstream business trend and requirement that is supported in supply chain technology. Mobile computers can be locked down so customer information and other data cant be accessed if the device is lost or stolen. Like cellular voice, digital imaging is another technology consumers are familiar with that has now found a place in enterprise mobile computing equipment and applications. Transportation and distribution companies are using digital cameras integrated into the mobile computers so their drivers can capture proof of delivery

REMOTE MANAGEMENT

SECURITY

DIGITAL IMAGING

Coordination mechanisms provide a system for supply chain members to collectively create value and achieve improved supply chain performance. There are three means of doing this:

SHARING DECISION RESPONSIBILITY

SHARING INFORMATION

LOGISTICS SYNCHRONIZATION

Sharing Decision Responsibility: refers to redeployment of decision rights, work, and resources to the best positioned supply chain member. There are two principal methods to share authority within the decision-making process. The first is centralized decision making, where a single entity manages the network. The second is coordination with decentralized decision-making where each actor operates based on local and often asymmetric information and improves its own performance and pursues its own targets. Logistics synchronization refers to organizing the supply chain according to the market: to mediate customer demand and to adjust inventory management, production, and transportation to meet the demand. A coordination mechanism consists of 1) the informational structure defining who obtains what information from the environment and how this information is processed and then distributed among different members participating in the mechanism itself; and 2) the decision-making process that helps to select the appropriate action to be performed.

Efficient Consumer Response (ECR) is a joint trade and industry body working towards making the grocery sector as a whole more responsive to consumer demand and promote the removal of unnecessary costs from the supply chain. The initiative took off in India in 2000 with co-operation on the logistics front, stockouts, data flows, infrastructure and so on. ECR allows companies to seek a competitive advantage by demonstrating their superior ability in working together with trading partners to add value to the consumer. Johnson & Johnson and Nestle have a backhaul arrangement, whereby the former moves goods from Bangalore to Mumbai and the latter uses the return trip to send goods from Mumbai to Bangalore. There are four focus areas under ECR: Demand management, Supply management, Enablers and Integrators / technology

Reasons for its slow progress: Non-standardized operational practices Rigid separation of the traditional roles of manufacturer and retailer failure to exploit the synergies that came from powerful new information technologies and planning tools.

Possible ways to improve ECR Invert the traditional model and break down non-productive barriers Assortment Rationalization Integrated suppliers Synchronized Production, allowing production schedules to be more closely aligned with actual consumer demand

One of the most critical factors in a committed and collaborative relationship between supply chain partners is trust. If trust Is present, it can improve the chances of a successful supply chain relationship; if not, transaction costs can rise through poor performance . Organizations need trust in order to be flexible and agile. However, establishing trust can be elusive and even harder to maintain. It is also true that trust is both individual and institutional. Trust in a supply chain evolves based upon commonalities among the partners and can take patience and time to develop There is both risk and interdependence in a supply chain relationship and there must be an implicit agreement not to exploit the partners vulnerabilities. Trust only exists
when both parties think it exists, that it is critical to treat supply chain partners like they are important, information needs to be shared freely, and that partners need to follow through with promises made.

The Advantages of a Tightly Integrated Supply Chain: Flexibility Inventory Management Profit Margins Consideration Forecasting Resilience In a study of supply chain management by the Center for Advanced Purchasing Studies, some companies that moved to an integrated supply chain reported doubled inventory turns, had 50 percent improvements in on-time delivery and experienced a 50 percent increase in sales supported by 35 percent lower inventory. In addition, customer service improved and customer loyalty increased due to better on-time delivery.

IBM has said have been the benefits of their integration efforts billions in costs savings and free cash flow generation, 6% reduction in cycle times, lower inventories and more. Scale those big numbers down for your business, and its still a lot of savings