Supply Chain Management

Course Objective
• The principal objective of this course is to
acquaint participants with key concepts
and solutions in the design, operation,
control and Management of supply
chain as an integrated system.
• It also aims at sensitizing participants with
how effective and efficient supply
chains can facilitate achievement of cost
saving
 Course Outline
• Introduction
• Inventory management
• Network Design
• Value of Information
• Distribution Network
• Transportation
• Procurement Strategies
• Supply Contracts
• Supply Chain Integration
 Text Book
• Designing and managing the supply
chain.Concepts,strategies and case studies
3rd Edition).by David Simchi-Levi,Philip
kaminsky,Edith Simchi Levi,Ravi Shankar.
Mcgraw hill eduction.
• Supply chain management Text and cases
Second edition.By Jannat Shah. Pearson.
• Supply Chain management 6th edition Strategy,
Planning and operation By Sunil Chopra, Peter
meindl. Dharam veer kalra.
 Evaluation
• End Term Examination - 40 marks
• Internal Assessment - 60 Marks
• Mid Term Examination - 20 marks
• Term Project - 15 Marks
• Class Participation - 5 marks
• Quiz - 10 marks
• Case Presentation - 10 Marks
 Top Journals/Websites
• Supply Chain Digital
• Supply Chain 24/7
• Supply Chain Digest
• Supply Chain World
• Supply Chain Management Review
Journals
• Journal of Operations Management
• Journal of Business Logistics
• Journal of Supply Chain Management
• Decision Sciences Journal
• Management Science/ Operations Research
 Placements
• Logistics Manager & Director,
• Sale- Purchase Assistant Manager,
• Material Manager,
• Hotel, and Catering Manager,
• Head of Supply Dept,
• Assistant Manager,
• Logistic Trainee,
 Success/Horror Stories
Borders
APPLE
ZARA

SONY
PS II
CISCO

WAL-
DELL MART
Subhiksha
Supply Chain Management: Success
Stories
• Dell: Inventory turn-over ratio of 58.7 compared to
industry average of 12
• Wal-Mart: Inventory turn-over ratio of 9.9 compared
to industry average of 5.5
• Zara Corporation: Lead-time from new product to
stores is 15 to 20 days compared to industry average
of six months
• Apple Corporation: Managed a significantly higher
return of assets at 20%, compared to other players
in same business
 Subhiksha
Started in 1997 by alumunus of IIM and IIT

Rapid Expansion

Every Day Low Price (EDLP)

Poor Inventory management

IPO Issues: Subhiksha was thinking of going for an IPO in 2007 but
shelved it in view of “uncertain market conditions”

Subhiksha operated on very slim or zero margins

Lower fill rates and customer dissatisfaction.

Infrastructural Issues(Point of Sales/Cross Docking)

TOP 25 SC Gartner 2018
 Supply Chain Management: Horror Stories
• Sony: PlayStation II–a lost opportunity
– SONY could supply only 25% of the potential demand for
Christmas market
– Nintendo Wii Game Console : Shortage expected in year
2007
• Kmart Launched supply chain initiative in May 2000 worth $1.4
billion in software and services. In 2001-02, announced that it
was abandoning most of the software purchased and taking
$130 million write-off
• Nike- i2 Technology Controversy: Lost $100 in sales in last
quarter of 2000 i2 Technologies was blamed. “ This is what we
get for our $400 million”—Nike Chairman
• Wal-Mart: RFID Initiative
 What is a Supply Chain?
Customer wants
P&G or other BB or third Big Bazaar
detergent and goes
manufacturer party DC Store
to Big Bazaar

Chemical
Plastic pack Paper
manufacturer
Producer Packaging
(deterg raw material)

Chemical Paper Timber

manufacturer Manufacturer Industry
Integration of entities
 What is SC?
• Supply chain is the network of facilities
that includes not only customers or
retailers but also distributors,
manufacturers, suppliers and transporters
that exists to transform raw materials to
final products and supply those products to
customers.
 Main Functions
• Sourcing, procurement (suppliers selection,
discounts, quotations-purchasing activities
,impact on cash flows )
• Material management
(forecasting,Production ,inventory mgmt,
insurance,scheduling, warehousing)
• Logistics and distribution(planning ,
implemention and controlling transportation)
 What Is the Goal of Supply Chain
Management?
• Supply chain management is concerned with the
efficient integration of suppliers, factories,
warehouses and stores so that merchandise is
produced and distributed:
– In the right quantities
– To the right locations
– At the right time
• In order to
– Minimize total system cost
– Satisfy customer service requirements
 Important SC decisions
• Designing (strategic:suppliers, distributors,outsource
or inhouse prod?) to make an efficient config of
network
• Planning (quarter to yr: forecast,transportation ,inv
policies)-to max sc surplus
• Operations (handle customer orders, delivery
schedules etc) handle customer req, customer plays
imp role
To stay competitive SC must
- Adapt to changing technology
- Customer expectations
 Supply Chain Strategy
• A company's supply chain stretches from
the factory where its products are made to
the point the products are in customer
hands.
• Supply chain strategy determines when
product should be fabricated, delivered
to distribution centers and made
available in the retail channel.
Process View of a Supply Chain
Strategy
• Cycle view: 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: 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
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer
Procurement Cycle
Supplier
 Cycle View of a Supply Chain
• Each cycle occurs at the interface between two
successive stages
• Customer order cycle (customer-retailer)
• Replenishment cycle (retailer-distributor)
• Manufacturing cycle (distributor-manufacturer)
• Procurement cycle (manufacturer-supplier)
• Cycle view clearly defines processes involved and the
owners of each process. Specifies the roles and
responsibilities of each member and the desired outcome
of each process.
• SCOR Model- source, make, deliver, return (SC ops ref)
• Two issues: demand is uncertain in each cycle
Scale of order increases
 Push/Pull View of Supply
Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES

Speculative reactive
Customer
Order Arrives

Uncertain Certain
 Push/Pull View of
Supply Chain Processes
• Supply chain processes fall into one of two
categories depending on the timing of their
execution relative to customer demand
• Pull: execution is initiated in response to a
customer order (reactive)
• Push: execution is initiated in anticipation
of customer orders (speculative)
• Push/pull boundary separates push
processes from pull processes
 Push Supply Chain Strategies
• A push-model supply chain is one where projected
demand determines what enters the process.
• For example, warm jackets get pushed to clothing
retailers as summer ends and the fall and winter
seasons start.
• Under a push system, companies have to know what
will come when – long before it actually arrives.
• Plan production ,need time to prepare and place to
stock the material produced
 Pull Supply chain Strategy
A pull strategy is related to the just-in-time
school of inventory management that
– minimizes stock on hand,
– focusing on last-second deliveries.

Production starts when order is triggered or placed.

With a pull strategy, companies avoid the cost of

carrying inventory that may not sell.

Processes in the pull phase are the order fulfillment,

shipping, customer returns, and customer billing
 Push /Pull Hybrid Strategies
• Technically, every supply chain strategy is a hybrid
between the two.
• A fully Push based System stops at a retail store
where it has to wait for a customer to pull a product
off the shelves
• A company may choose to stockpile finished
product at its distribution centers to wait for orders
that pull them to stores. Manufacturers might
choose to build up inventories of raw materials –
especially those that go up in price – knowing that
they will be able to use them for future production.
 Exercise
• Consider the supply chain involved when a
customer purchases a book at a
bookstore. Identify the cycles in this supply
chain and the location of the push/pull
boundary.
• Consider the supply chain involved when a
customer orders a book from Amazon.
Identify the push/pull boundary and two
processes each in the push and pull
phases.
• Disadvantages of Push System
 Disadvantages of both
processes
• The main problem with push systems is
that they are based on forecasts that are
almost always wrong.
• They also lead to other problems like
– high carrying costs,
– discounting, disposals,
– missed sales,
– weak customer loyalty,
– shortages, high debt loads, inventory
disposals, emergency shipments etc
Disadvantages of Pull System
 Disadvantages of Pull System

• Tight management of inventories(Every

job is a high stress job)
• Balance System Must Be in Place
• Miscommunication may lead to disruptions
• High level of relationship requires with
Suppliers, with new supppliers trust is
difficulty’
• Small issues may lead to unhappy and
returned customers
 Supply Chain
Drivers(Physical/Virtual) and
Obstacles
 Drivers of Supply Chain
Performance
• Facilities
– places where inventory is stored, assembled, or fabricated
– production sites and storage sites
• Inventory
– raw materials, WIP, finished goods within a supply chain
– inventory policies
• Transportation
– moving inventory from point to point in a supply chain
– combinations of transportation modes and routes
• Information (Cross Functional)
– data and analysis regarding inventory, transportation, facilities
throughout the supply chain
– potentially the biggest driver of supply chain performance
 A Framework for
Structuring Drivers
Efficiency Responsiveness

Supply chain structure

Facilities Transportation Inventory Information

Drivers
Centrally locate DCs with retail stores near to it,
Crossdocking(efficiency), own fleet(responsiveness)
Heavily invested in IT
Suppliers are given large orders, supplier selection after analysis
EDLP(pricing)
 Considerations for
Supply Chain Drivers
Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation / Proximity /

Dedicated Flexibility
Information What information is best suited for
each objective
 CASE
Amazon
Zara
Gateway
Dell
For Reading & Discussion in
next Class
Kurlon Mattresses