Supply Chain Management

Lecture 1

Supply Chain Management

What is supply chain??
Supply chain is a set of approaches utilized to efficiently
integrate suppliers, manufacturers, warehouses, clearing
and forwarding agents, logistic companies, wholesellers,
retailers and stores so that merchandize is produced and
distributed in right quantities at the right locations and right
time to minimize system wide cost while satisfying service
level requirement

Supply Chain Management

Stakeholders in the process
-

Suppliers
Manufacturers
Logistic Companies
Clearing and Forwarding Agents
Courier Companies
Transporters ( railway, trucks, airlines, ships)
Warehouses
Wholesellers
Retailers
Departmental Stores, shops etc.
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Supply Chain Management

What is supply chain??
It is an end to end and complex process.
Major challenge is how to develop relationship with all stakeholders and do all the
activities in timely manner without loosing customers or effecting customer service
The term supply chain takes care of movement of products from supplies to
manufacturers, to distributors, to retailers, to customers along a chain
We may loose customers if effective supply chain is not in place
Customer walks in a departmental store; dont find product or brand needed,
goes to another store.
.

Supply Chain Management

What is supply chain??
End to end process
If this happens more than once with several customers, negative
perception develops and they will stop coming to you
This negative perception is not restricted only to consumer selling
products but in bigger products like machinery, equipment, Ups,
Gensets, Cooling towers, air conditioners, surgical equipment, vehicles
etc.

Supply Chain Management

Supply Chain Management

Stakeholders in the process
- As a supply chain stakeholder, we need to have long term
contacts, strategic relationship, established procedures and
arrangements with all stakeholders so that goods and services
keep coming without any interruption
- Proper database is needed and contact phone numbers and email
addresses should be on fingertips to get information about
products and services in timely manner
- We need to develop good relationship with all stakeholders; sign
agreements with all those parties from whom we expect products
and services
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Supply Chain Management

Stakeholders in the process
- Sometimes access to inventories is given to suppliers; they
monitor stock status and automatically place order and get stock
when minimum order quantity level reaches
- Reordering level established; order 200 more when quantity 50 left
- Sometimes entire operations is outsourced to the logistic
companies
- Agreements are signed with logistic companies and clearing/
forwarding companies to take care of our business operations
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Supply Chain Management

Objective of Supply Chain to create surplus
- Maximize overall value generated and create surplus
- Difference between the cost to final customer and the cost
supply chain incurs in filling the customers order
- Value strongly related to supply chain profitability known as
supply chain surplus
- Success measured in terms of supply chain profitability and not
profit at an individual stage
- Focus on profitability at individual stage leads to reduction in
overall supply chain
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Supply Chain Management

Various Functions in the organization involved in
Supply Chain
- New Product Development
- Marketing
- Operations
- Customer Service
- Distribution
- Finance

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Supply Chain Management

Organization are forced to focus on effective
supply chain due to:
- Fierce competition (, manufacturers, service
providers compete with each other in all areas)
- Introduction of products with shorter life cycle
- new inventions and technological chances have
increased customers expectation
- customers wants total solution rather than stand
alone products or services

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Supply Chain Management

Focus is on effective utilization of resources
- All Supply Chain Activities move around customers
needs and how to completely satisfy them
- Customer is integral part of supply chain
- Efficient utilization of resources done to increase
efficiency, productivity and profitability
- Primary objective of supply chain; keep customers
fully satisfied all the time and in the process increase
revenue and profitability
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Supply Chain Management

Supply Chain could be very simple to complex
depending on situation
- Important role in our day to day life when we walk in
retail store as customer
- Aghas Super Market, Naheed, Imtiaz Store,
Walmart, Dell, ASDA, Lidl, Tesco, Marks & Spencer,
Next
- They keep products on display in appropriate manner
for customers to choose and pick
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Supply Chain Management

- Constant flow of products and services needed
without any interruption
- Backup arrangements should be in place in case of
any mishap
- Distributors supply inventories to stores from finished
goods warehouses through wholesalers who
transport this to stores
- Manufacturers buy raw material from other suppliers

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Supply Chain Management

- Raw material could be direct material or it could be
indirect material like packing material, spare
parts, lubricants etc. for plants and machinery etc.
- Companies making packing material or supplying
spare parts might be getting raw material from other
suppliers

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Supply Chain Management

- Supply chain is dynamic and involves constant flow
of information, products and funds transfer at various
stages
- Distributors keep wholesalers or retailers informed of
the prices and stock status and new development etc.
- Customers pays to retail stores; retail stores pay to
distributors, who pay to transporters and suppliers of
finished goods
Cycle goes on like this

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Supply Chain Management

Uncertainty and risk involved in supply chain
- Customer demand can not be forecasted precisely; it may change
- Customers may change suppliers or service providers
- Core suppliers may develop strategic relationship with others
- People get sick or leave the job
- Machines and vehicles break down
- Acts of God earthquake, cyclone
- Man made disasters like bomb blasts, strikes etc., jeopardize
plans and effect business operations
- tendency to outsourcing, off shoring and lean manufacturing
Supply chain needs to be designed and managed to eliminate
unnecessary cost

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Supply Chain Management

Process View of Supply Chain (Cycle view)
- Sequence of process and flows that take place within
and between different stages and combine to fill a
customer need for product.
- Supply chain process broken down in following four
processes cycles
- Customer order cycle
- Replenishment cycle
- Manufacturing cycle
- Procurement Cycle
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Supply Chain Management

Evolution of supply chain
- In1980s companies discovered new
manufacturing technologies and strategies that
helped them reduce cost and effectively
complete in market place
-Techniques like Total quality management, just
in time, lean manufacturing became very
popular and vast amount of resources
were invested in implementing these strategies
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Supply Chain Management

Evolution of supply chain
- In last few years many companies reduced
manufacturing cost as for as possible
- Companies discovered that effective supply chain
management is next step they need to take to increase
profit and market share

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Supply Chain Management

Supply Chain Macro Process in Firm
1. Customers Relationship Management (CRM)
- close relationship with customers
2. Internal Supply Chain Management (ISCM)
- Close coordination between various functions

3. Supplier Relationship Management (SRM)

- Strategic relationship with suppliers

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Supply Chain Management

Strategic Planning
Forward Integration
Organization gain ownership or increased control on retailers distributors or business
partners.
Backward Integration
Organizations wants to have more control on Suppliers providing vital products and
services.
Strategy appropriate when reliability of suppliers is doubtful and they charge too
much for their products and services which make our solution expensive and effect
competitive position
Horizontal Integration
Allow organization to seek ownership or increased control on competitors business
by acquiring their business or mergers or make strategic alliances with them

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Supply Chain Management`

SCOR Model (Supply Chain Operations Reference)
SCOR is a management process to identify business activities
associated with all phases of satisfying customers demands.
The model is based on three major "pillars":
- Process Modeling
- Performance Measurements
- Best Practices
Process Modeling Pillar
Model describes supply chains processes from simple to complex
SCOR based on five distinct management processes: Plan, Source,
Make, Deliver, and Return.
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Supply Chain Management`

SCOR Model (Supply Chain Operations Reference)
The Performance Measurements Pillar
150 key indicators measure performance of supply chain operations.
SCOR metrics organized in hierarchical structure:
- Level 1 metrics are primary, high level used by top decision makers to
measure the performance of the company's overall supply chain.
- Level 2 are generally associated with narrower subset of processes. For
example delivery performance is calculated as the total number of
products delivered on time and in full based on a commit date.

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Supply Chain Management`

SCOR Model (Supply Chain Operations Reference)
The Best Practices Pillar
Once performance of supply chain operations measured and performance gaps
identified, it becomes important to identify what activities should be performed to
close those gaps.
SCOR model defines a best practice as a current, structured, proven and repeatable
method for making a positive impact on desired operational results.
- Current Being used
- Structured - clearly stated Goal, Scope, Process, and Procedure
- Proven - Success has been demonstrated in a working environment.
- Repeatable - The practice has been proven in multiple environments.

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Supply Chain Management`

SCOR Model (Supply Chain Operations Reference)
The Best Practices Pillar
- Method- business process, practice, organizational strategy, enabling
technology, business relationship, business model, as well as information
or knowledge management.
- Positive impact on desired operational results - operational improvement against
goal
The impact should show either:
- Gain (increase in speed, revenues, quality, customer satisfaction)
- Reduction (resource utilizations, costs, loss, returns, etc.).

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Supply Chain Management

SCOR Model (Supply Chain Operations Reference)
Five distinct management processes:
1) Plan 2) Source 3) Make 4) Deliver 5) Return
Plan
Processes which help develop a plan and course of action to meet
sourcing, production, and delivery requirements.
Source
Processes which help procure goods and services to meet planned
or actual demand

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Supply Chain Management

SCOR Model (Supply Chain Operations Reference)
Make
Processes transform product into finished goods to meet planned or
actual demand.
Deliver
Processes that facilitate filling order and transport raw material,
finished goods and services to customers
Return
Processes for taking returned products for any reason.

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Supply Chain Management

SCOR Model (Supply Chain Operations Reference)
SCOR takes care of following activities:
- All customer interactions; from order entry through paid invoice
- All product (physical material and service) transactions, from
your suppliers supplier to your customers customers, including
equipment, supplies, spare parts, bulk product, software etc.

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Supply Chain Management

SCOR Model (Supply Chain Operations Reference)
All activities related to demand determination and fulfilling customer orders
SCOR does not attempt to describe every business process or activity
Other key assumptions include: training, quality, information technology, and
administration (not supply chain management).
These areas are not explicitly addressed in the model but rather assumed
to be a fundamental supporting process throughout the model.

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Supply Chain Management

Push and Pull Strategy
Pull Process
- Called reactive process because we react when customer demand
- Execution initiated against customer order
- Customer demand is known so low risk
- There could be problem in delivery if stocks not available when
order received

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Supply Chain Management

Push and Pull Strategy
Push Process
- Speculative process as we respond to speculated or
forecasted figures rather than actual demand
- Execution is initiated in anticipation of customer order
- Customer demand is not known and forecast is done
- lot of uncertainty involved

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