FUNDAMENTALS
OF
SUPPLY CHAIN
MANAGEMENT
ASHU JOSHI
FR.CONCEICAO RODRIGUES COLLEGE OF
ENGINEERING
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A supply chain does not include only manufacturer and a customer.But, also includes
many other stages in between such as
suppliers,transporters,warehouses,retailers,marketing and market
research,Sales,Finance,Customer service,Quality Control and Management team.
These all intergral parts in an array combine to from a network.This, network is called as
the Supply Chain Network/Supply Web or simply, a Supply Chain.
Outsourcing/part
nership
1.Subcontracting Manufacturing
Its a part of
procurement.
SUPPLY CHAIN OPERATIONS 1.Storage
2.Planning
3.Production
Outsourcing=proc
urement+producti
on+logistics Demand
Planning
Warehouse
management
1.Picking
Invoicing 2.Handling unit
generation
3.Intersite
Transfer
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The primary/main purpose of any supply chain network is to satisfy customer need
and, in process generate profit for itself.However it is very important to visualize
information,funds,product flows along both directions of this chain.
In the Indian context , materials constitute almost 60% of the cost of finished good.So, it
is very essential to design and implement efficient supply chain network in order to
gain appropriate profit.
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2)Major Stages of a Supply Chain
Network
Sourcing, Procurement and Supply Management
We clearly understand that the quality of the product plays a very important role
among all the parameters of a product.The quality of the product cannot be
downgraded due to hike in the prices of the raw materials procured from any
supplier, as this eventually destroys the fame of the industry among the customers
and may greatly affect upon the business.
The industries realized that in order to overcome this situation, increasing sales is a far
better option OR appointing a purchase specialist by the Top management to look
for an alternative supplier of the same quality.
We understand that inflow of inputs and economic procurement into the enterprise
and efficient control over the flow of funds out of the industry is very necessary.
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Materials Management
Material Management came to be recognized by the businesses in 1970.Efficient management
is the route to cost reduction and thereby to profitability.The selection of material inputs is done
by a purchase specialist.
Logistics
Logistics, It’s a part of which involves transfer of raw material,finished goods into the company or
out of the company or within the company.
Transportation is just a part of the logistics.Cost of transportation,it being General/Unimodal or
Multimodal transport, is nearly 50% of the total logistics cost.
In India, Small scale industries work with unimodal mode of transportation.For Eg. Food Parcel
Delivery App-Swiggy,Zomato.(Mid-size Firm)They use only scooters/bikes(Roadways) as their only
mode of transport for delivering food from the restaurant to the
customer.Whereas,Amazon,Flipkart(Large-size Firm) uses trucks(Roadways),Cargo aeroplane
jets(Airways),Cargo ships(Seaways) to deliver a product from warehouse to the customer.
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Types of Logistics
I. Inbound Logistics.
II. Outbound Logistics.
III. In-house Logistics.
1. Inbound Logistics-
Flow of raw materials Or Finished goods into the company is called as the
Inbound Logistics.
2. Outbound Logistics-
Flow of finished goods out of the company is called as the Outbound Logistics.
3. Inhouse Logistics-
Flow of raw material/finished goods within the company is called as the Inhouse
Logistics.
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4)Strategic Fit
A Strategic fit is the company’s ability to balance between responsiveness and effieciency that
best matches with the needs of it’s customers.
Some of the obstacles which disturbs the strategic fit are below.We will understand them one
by one-
1. Increasing variety of products.
3. Globalization
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Globalization
Supply Chains today are more likely than ever to global.Earlier there were fewer industries to
manufacture same product and customer tolerated longer delivery days but
now,globalization has made evolution of many other industries which now compete with
others.
This puts strain on supply chain network performance.So, to remain in competition,rethink
and improve your supply chain network to satisfy customer demands of early deliveries.
5)Other parts of supply chain 15
management are-
1. Procurement.
2. Finance.
4. Quality Control.
6. Inventory.
7. Transportation.
Procurement
Procurement, its a process of obtaining or buying goods and
services,negotiating,building contracts,creating policies,building relations with
the third party vendors.
It often deals with payment to third party vendors.
It also has control on inventory.As buying is also a function of procurement
team,thus inventory stock in obtained by the procurement team itself.
Procurement is a process of company’s strategy as the purchased material
will determine the operational cost and whether the operational cost on
material is profitable for the organization or its not.
Finance 17
b.Management of taxes.
It is a duty of Finance department to handle all the work related to payment of taxes.This
creates good corporate image among other organizations,customers,government ensuring
that the tax matters are solved within framed policies.
Marketing
A key job of Marketing Department is to understand marketplace or a area from perspective of the
customer looking back towards the company.Marketing Team understands the expectations,
certain updates, may it be cost or any modification in product or customer service.
Marketing team needs to develop tools and tactics which attracts market, builds relation with
customer and develop leads over others.Marketing team directs sales department like where they
should hunt public and how to initiate sales.
So this way, sales and marketing department are both dependent on each other but just not same
because of different primary duty/function.
Absence of any one department will affect the revenue generated on sale of product.
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Quality Control
It is a Modern Industrial Concept which deals that every product manufactured at a plant
must be checked against established standards to make sure that nothing defective reaches
the customer.
Quality Control Programs are stringent in industrially developed countries like Japan.However,
in industrially under developed nation like India, It is yet to be implemented in all types of
industries and just not in FMCG.
Companies who are in relation with Government are required to take strong measures to
assure product quality and reliability.The standards of quality are measures that are decided
by the Beaurau of Indian Standards(Formerly known as Indian Standard Institution).
In this department, a company representative interacts directly with the consumer or customer.
They are employed to satisfy customers by solving their problem/querier as soon as possible.
Along with this, They also provide information regarding their products and services to customers.
Representative propose a solution or may attempt to solve your problem on phone itself.Some are
also authorized to send their customers replacement of same product or may initiate refund.
Primary responsibility of any representative is to make sure that the complaints made are valid and
are solved within the bounds of their authority.
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INVENTORY
What is an Inventory?
Inventory is a space in industry where stock of raw materials (used to produce goods in near
future), partially finished goods and finished goods.
Inventory exists in the supply chain because of mismatch between supply and demand.
Inventory has a major impact on responsiveness and supply chain.For eg. You walk-in a large
retails store suppose,Reliance Trends store.You find out a shirt of your choice but the size is
small.So, you asked the manager to look out in their stocks(here this space is called inventory
and not warehouse).The manager checks the stock of apparel section.The manager finally
gets the size you are requested for.This is called as immediate responsiveness.This action
shown by the manager is called as the Immediate Reponsiveness.
Inventory has a significant impact on the material flow in the industry.
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2.Safety Inventory.
3.Seasonal Inventory.
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1.Cycle Inventory
Cycle Inventory is the average amount of inventory used to satisfy demand between receipts of
supplier shipments.
It is caused when production,transportation or purchase of raw material is made in large lots at
single launch.
2.Safety Inventory
It is the inventory held in case demand exceeds the forecast.It is held to counter uncertainity.
It is kept since the demand is uncertain and unpredictable at some time.
Sometime, the company faces losses due to carrying cost of having too much inventory and
cost of losing sales when a customer required product is not available in inventory.
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Seasonal Inventory
Minimize workforce.
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Supply chain coordination improves if all stages of the chain takes action that together
increase the total supply chain profits.
Supply chain coordination requires each stage of the supply chain to take into the acoount,
the impact of its actions have on other stages.
Lack of coordination occurs when stages of the supply chain has objectives that conflicts or
information moving between stages is delayed and distorted.
Conflicts in objectives occurs as stages have different owners and each owner tries to
maximize its own profit.
EFFECTS ON PERFORMANCE DUE TO 30
LACK OF COORDINATION
1.Manufacturing Cost
Lack of informations between supply chain stages causes increase in manufacturing cost
of a good.Difference between the actual number of goods asked and inaccurate data
transmitted within a supply chain will affect the supply chain.
For eg.Customer orders 200 water filters in a day.But the company manufactures only 100
in first two shifts and remaining water filters are to be manufactured in the last shift.This
ultimately increases stress on the supply chain and the supply chain has to give maximum
efforts to cover up remaining in the last time.This overall increases production rate,cost of
operation as more machines are run simultaneously,which overall increases the
manufacturing cost of that product.
2.Inventory Cost
3.Transportation cost
Thank You!