Textile RMG Supply Chain Management

M304: TEXTILE AND RMG SUPPLYDEMAND CHAIN MANAGEMENT
Nikhil R. Dhar, Ph. D

1
Professor, IPE Department

BUET
Course Outlines
Understanding the Supply Chain, Concept Model of Supply Chain Management, SCM
Approach, Supply Chain Integration: Push, Pull, and Push-Pull Systems
Decision Making at the Strategic, Tactical and Operational Supply Chain Management
Integrated Supply Chain Planning and Optimization
Operations Management in Supply Chain, Basic Principles of Manufacturing
Management, Basic Elements of Lean Manufacturing, Integration of Lean
Manufacturing and SCM
Strategic Sourcing and Supplier Management
Lean Supply Chain Practices, Sustainable Supply Chain Management, Supply Chain
Uncertainty
Supply Contracts: Supply contracts for strategic components, Supply contracts for nonstrategic components
Procurement Management in Supply Chain
Enterprise Resources Planning Introduction and overview
Enterprise Resources Planning Project Implementation Methodology
Reengineering and ERP System
Business Process Re-engineering: Concepts and Practice
Planning, Design, and Implementation of ERP Systems
Department of Industrial & Production Engineering
128/2
References
Books
Fahimnia, B. Planning and Optimization of Complex Supply Chains, Lambert Academic

Publishing (LAP), Germany, 2011.
Chopra, S. and Meindl, P. Supply Chain Management: Strategy, Planning and Operation, 5th
ed. Pearson, 2012.
Jacobs, F.R. and Chase R. Operations and Supply Chain Management: The Core, 3rd ed,
McGraw Hill, 2012.
Coyle, J.J., Langley, C.J., Novack, R.A. and Gibson, B.J. Supply Chain Management: A
Logistics Perspective, 9th ed, South-Western, Cengage Learning, 2013.
Sodhi, M.S. and Tang, C.S. Managing Supply Chain Risk, Springer, 2012
Specialized Journals (Selection only)
Supply Chain Management: An International Journal

Journal of Operations Management
Production and Operations Management
European Journal of Operational Research
Computers and Operations Research
International Journal of Production Research
128/3
Marks Distribution and Assignment

Total Marks: 100
Class Test
[10]
1
15 15 15
Attendance &
Participation
[15]
15
Assignment &
Midterm-1 Midterm-2 Final
Presentation
[22.5]
[22.5]
[50]
[15]
15
22.50
22.50
60
Total
[150]
150
Assignment: Supply Chain Management Six Sigma at RMG

Executive Summary
Introduction
Six Sigma Approach to Design
Analysis of Supply Chain Delivery Performance
Design of Six Sigma Supply Chains
Summary
References
128/4
LECTURE-01: INTRODUCTION
SUPPLY CHAIN MANAGEMENT

5

BUET
Supply Chain
A supply chain is the system of organizations, people, activities, information and resources
involved in moving a product or service from supplier to customer. Supply chain activities
transform raw materials and components into a finished product that is delivered to the end
customer.
Supplier
Manufacturer
Distributor
Retailer
Customers
128/6
A supply chain is a sequence of organizations - their facilities, functions and activities - that are
involved in producing and delivering a product or service. A supply chain is the network of
organizations that are involved, through upstream and downstream linkages, in the different processes
and activities that produce value in the form of products and services delivered to the ultimate
consumer. In other words, a supply chain consists of multiple firms, both upstream (i.e., supply) and
downstream (i.e., distribution), and the ultimate consumer.
Customers
Suppliers
Upstream
Customer
Supplier
Suppliers
Supplier
Supplier
Manufacturer
Distributor
Retailer
Customer
Customers
Customer
Customers
Downstream
Suppliers
Customer
Supplier
Upstream are the processes which occur before manufacturing into a deliverable product
or services, typically processes dedicated to getting raw materials from suppliers.
Downstream are the processes which occur after manufacturing or production, typically
those processes dedicated to getting goods and services to customers and consumers
128/7
Encompassed within this definition, we can identify three degrees of supply chain complexity like (i)
Direct Supply Chain (ii) Extended Supply Chain (iii) Ultimate Supply Chain.
A direct supply chain consists of a company, a supplier and a customer involved in the upstream
and/or downstream flows of products, services, finances, and information as shown in the following
Figure.
An extended supply chain includes suppliers of the immediate supplier and customers of the
immediate customer, all involved in the upstream and/or downstream flows of products, services,
finances, and information as shown in the following Figure.
128/8
An ultimate supply chain includes all the organizations involved in all the upstream and downstream
flows of products, services, finances, and information from the ultimate supplier to the ultimate
consumer. The following Figure shows the complexity that ultimate supply chains reach. In this
example, a third party financial provider may be providing financing, assuming some of the risk, and
offering financial advice; a third party logistics provider is performing the logistics activities between
two of the companies; and a market research firm is providing information about the ultimate
customer to a company well back up the supply chain. This very briefly illustrates some of the many
functions that complex supply chains can and do perform.
128/9
Supply Chain Illustration
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Origins of Supply Chain Management

1950s & 1960s
U.S. manufacturers focused on mass production techniques as their principal cost reduction
and productivity improvement strategies.
1960s-1970s
Introduction of new computer technology lead to development of Materials Requirements

Planning (MRP) and Manufacturing Resource Planning (MRP II) to coordinate inventory
management and improve internal communication.
1980s & 1990s

Intense global competition led U.S. manufacturers to adopt
Supply Chain Management along with Just-In-Time (JIT)
Total Quality Management (TQM) and Business Process Reengineering (BPR) practices
2000s and Beyond
Industrial buyers will rely more on Third-Party Logistics (3PLs) to improve purchasing and
supply management
Wholesalers/retailers will focus on transportation and logistics more and refer to these as
quick response, service response logistics, and integrated logistics
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Traditional SCM Approach

SCM approach in MRP: In this approach, customers and suppliers were treated as external entities
and most of the ignored for any strategic decisions. In fact, the organization was looking at various
departments including sales, production, and other like, finance, HR, maintenance, R&D,
administration etc. as separate functionalities and no cohesiveness was observed amongst them.
Demand Flow
Goods Flow
SCM approach in MRP-II: In this approach, purchase, planning and the production departments were
seen as one functionality and MRP-II was primarily focused on materials and capacity integration.
Again the various departments like sales, finance, HR, maintenance, R & D, administration etc. were
not tightly integrated in MRP-II. The customer and suppliers were treated as external entities and not
considered for any long-term decisions.
Demand Flow
Goods Flow
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SCM approach in ERP: In this approach, all the departments were seen as one entity. There existed
a common language and one approach in all decision-making across organization. In fact, the other
entities like subcontractor and even few integrated suppliers were seen as a part of the organization.
But again all the external entities like distributors, retailers or suppliers were not tightly integrated in
ERP. We can say that ERP helped organization to integrate all of its internal supply chain operations
but failed to extend the integrations across external supply chains.
DC-Delivery Challan
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Modern SCM Approach

SCM approach in E-ERP: In this approach, all the organized players are seen as one entity. It means
the manufacturing organization closely operates with all the trading partners including customers at
one side and suppliers at other side. In fact, the well defined customer demands are known and the
main focus of the organization becomes fulfilling this demand with the supply management thus
integrating suppliers side.
SCM approach in Global E-Biz: In the Global E-Biz age, consumers can directly talk with the
manufacturing company that is also a patent holder of the commodities required by consumers.
Perhaps no material physically flows to or from this patent holder as shown in the Figure. It means
that the manufacturing operations will be outsourced to the 4th level and a logistic services supplier
job is to lift the required material from the point of supply to the point of demand and ultimately
deliver the goods to the customer.
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Decision Phases in a Supply Chain

A Supply chain needs three phases to build. These phases are strategy or design phase,
planning phase, and operation phase.
Supply chain strategy or design: In this phase, we must consider how to structure the
supply chain. Location, capacities of production and warehousing facilities will be
considered in this phase too.
Supply chain planning: In this phase, companies define a set of operating policies
that govern short-term operations. They collect data and produce market and
inventory level forecast. And they decide whether they need subcontract some of
manufacturing or not in this phase.
Supply chain operation: In this phase companies make decisions regarding individual
customer orders. Then, allocate individual orders to inventory or production. And
they also manage shipments, delivery and schedules of trucks.
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Process View of a Supply Chain

A supply chain is a sequence of processes and flows that take place within and between
different supply chain stages and combine to fill a customer need for a product. There are
different views of this process:
Cycle view: The processes in a supply chain are divided into a series of cycles, each
performed at the interface between two successive stages of a supply chain. Cycle View
of Supply Chain Process has following cycles
Customer order cycle
Replenishment cycle (retailer/distributor)
Manufacturing cycle (distributor/manufacturer)
Procurement cycle (manufacturer/supplier )
The information flows from top to bottom and the products flow from bottom to top.
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Cycles
Stages
128/17
Customer Order Cycle
Manufacturing Cycle
Replenishment Cycle
Procurement Cycle
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Push/Pull View of Supply Chain Processes

The processes in a supply chain are divided into two categories depending on whether they are
executed in response to a customer order or in anticipation of customer orders. Relative to customer
demand supply chain processes are executed, which fall into two broad categories-PUSH and PULL.
The execution of the Supply Chain process is reactive to customer demand then it is under
PULL process.
If the customer orders are speculative and order execution is initiated based on anticipation,
then the Supply Chain process in under PUSH process.
LL Bean executes all processes in the customer order cycle after the customer arrives. All
processes in the replenishment cycle are performed in anticipation of demand. For Dell, who is
the build to order computer manufacturer, the situation is different. Demand is not filled from
finished product inventory, but from production.
The Textile and Apparel Supply Chain in the current world is considered as a Push-Pull Supply Chain,
which is also called a synchronized Supply Chain. In this strategy, the initial stages of the Supply
Chain are based on Push strategy, while the final stages are operated on Pull system. The
interface between push based stages is referred to Push-Pull boundary.
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Bullwhip Effect
Through the numerous stages of a supply chain; key factors such as time and supply of order
decisions, demand for the supply, lack of communication and disorganization can result in one
of the most common problems in supply chain management. This common problem is known as
the bullwhip effect; also sometimes the whiplash effect. The following all can contribute to the
bullwhip effect:
Disorganization between each supply chain link; with ordering larger or smaller amounts
of a product than is needed due to an over or under reaction to the supply chain
beforehand.
Lack of communication between each link in the supply chain makes it difficult for
processes to run smoothly. Managers can perceive a product demand quite differently
within different links of the supply chain and therefore order different quantities.
Free return policies - customers may intentionally overstate demands due to shortages
and then cancel when the supply becomes adequate again, without return forfeit retailers
will continue to exaggerate their needs and cancel orders; resulting in excess material.
Order batching - companies may not immediately place an order with their supplier;
often accumulating the demand first. Companies may order weekly or even monthly. This
creates variability in the demand as there may for instance be a surge in demand at some
stage followed by no demand after.
128/20
Price variations special discounts and other cost changes can upset regular buying
patterns; buyers want to take advantage on discounts offered during a short time period,
this can cause uneven production and distorted demand information.
Demand information relying on past demand information to estimate current demand
information of a product does not take into account any fluctuations that may occur in
demand over a period of time.
Occurs when slight demand variability is magnified as information moves back upstream
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Importance of Supply Chain Management
To gain efficiencies from procurement, distribution and logistics

To make outsourcing more efficient
To reduce transportation costs of inventories
To meet the challenge of globalization and longer supply chains
To meet the new challenges from e-commerce
To manage the complexities of supply chains
To manage the inventories needed across the supply chain
Strategic, Tactical and Operating Issues
Strategic - long term and dealing with supply chain design

Determining the number, location and capacity of facilities
Make or buy decisions
Forming strategic alliances
Tactical - intermediate term
Determining inventory levels
Quality-related decisions
Logistics decisions
Operating - near term
Production planning and control decisions
Goods and service delivery scheduling
Some make or buy decisions
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Key Issues in Supply Chain Management

Distribution network configuration
How many warehouses do we need?

Where should these warehouses be located?
What should the production levels be at each of our plants?
What should the transportation flows be between plants and warehouses?
Inventory control
Why are we holding inventory? Uncertainty in customer demand? Uncertainty in the supply
process? Some other reason?
If the problem is uncertainty, how can we reduce it?
How good is our forecasting method?
Distribution strategies
Direct shipping to customers?

Classical distribution in which inventory is held in warehouses and then shipped as needed?
Cross-docking in which transshipment points are used to take stock from suppliers deliveries
and immediately distribute to point of usage?
Supply chain integration and strategic partnering
Should information be shared with supply chain partners?

What information should be shared?
With what partners should information be shared?
What are the benefits to be gained?
128/23
Product design
Should products be redesigned to reduce logistics costs?

Should products be redesigned to reduce lead times?
Would delayed differentiation be helpful?
Information technology and decision-support systems
What data should be shared (transferred)

How should the data be analyzed and used?
What infrastructure is needed between supply chain members?
Should e-commerce play a role?
Customer value
How is customer value created by the supply chain?

What determines customer value? How do we measure it?
How is information technology used to enhance customer value in the supply chain
128/24
Important Elements of SCM

Purchasing Trends
Long term relationships

Supplier managementimprove performance through
Supplier evaluation (determining supplier capabilities)
Supplier certification (third party to assure product quality and service requirements)
Strategic partnershipssuccessful and trusting relationships with top-performing suppliers
Operations Trends
Demand managementmatch demand to available capacity

Linking buyers and suppliers via MRP and ERP systems
Use JIT to improve the PULL of materials to reduce inventory levels
Distribution Trends
Transportation managementtradeoff decisions between cost & timing of delivery/customer

service via trucks, rail, water & air
Customer relationship managementstrategies to ensure deliveries, resolve complaints,
improve communications, and determine service requirements
Network design creating distribution networks based on tradeoff decisions between cost and
sophistication of distribution system
Integration Trends
Supply Chain Process Integrationwhen supply chain participants work for common goals.
Supply Chain Performance MeasurementCrucial for firms to know if procedures are working
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Current Trends in SCM

Expanding the Supply Chain
U.S. firms are expanding partnerships and building facilities in foreign markets. The
expansion involves:
breadth- foreign manufacturing, office & retail sites, foreign suppliers & customers
depth- second and third tier suppliers & customers
Increasing Supply Chain Responsiveness
Firms will increasingly need to be more flexible and responsive to customer needs
Responsiveness improvement will come from more effective and faster product & service
delivery systems
The Greening of Supply Chains
Producing, packaging, moving, storing, delivering and other supply chain activities can be
harmful to the environment
Supply chains will work harder to reduce environmental degradation
Recycling and conservation are a growing alternative in response to high cost of natural
resources
Reducing Supply Chain Costs
Cost reduction achieved through: Reduced purchasing costs, Reducing waste, Reducing
excess inventory, and Reducing non-value added activities
Continuous Improvement through: improve over competitors performance and Increased
knowledge of supply chain processes
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Scope of Supply Chain Activities
Sourcing and procurement

Production scheduling and manufacturing
Order processing
Inventory management
Warehousing
Customer service
Distribution
Reverse Logistics
Supply Chain Management Concentration
Supply Management Challenges

Forecasting Challenges
Negotiations Challenges
Managing Relationships Challenges
Logistics Challenges
Strategic Relationships Challenges
Transportation Challenges
Operations Challenges
Quality Management Activities Challenges
Information Technology Challenges
128/27
Driving Forces for SCM
Competition is global
Low-cost producers from developing countries
Shorter product life cycles
Margins are being squeezed
New competitors
More demanding customers (information empowered customer)
Desire to team with the strongest channel partners
Need for better information
New information technologies
Shifting competitive focus; i.e., from Companies to Supply Chains
Barriers to SCM
Lack of Top Management Support

Inability or Unwillingness to Share Information
Lack of Trust among Supply Chain Members
An Unwillingness to Share Risks and Rewards
Inflexible Organizational Systems and Processes
Cross-functional Conflicts
Inconsistent/Inadequate Performance Measures
Resistance to Change
Lack of Training for New Mindsets and Skills
128/28
Future Supply Chain Trends

Supply chain event management (SCEM) enables an organization to react quickly
to resolve supply chain issues
Selling chain management applies technology to the activities in the order life cycle
from inquiry to sale
Collaborative engineering allows an organization to reduce the costs required during
the design process of a product
Collaborative demand planning helps organizations reduce their investment in
inventory, while improving customer satisfaction through product availability
The functionality in supply chain management systems is becoming more and more
sophisticated as supply chain management matures
The future stages of SCM will incorporate more functions such as marketing,
customer service, and product development
It will also use more advanced communication methods, adoption of more user
friendly decision support systems, and availability of shared information to all
participants in the supply chain
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Supply Chain Management Concentration

Supply Management Challenges
How can we reduce costs?

Who should we purchase from?
What are the evaluative criteria we should use for evaluating performance?
What cultural differences will effect negotiations?
What is the most effective cost based negotiating strategy?
What should our strategy be?
How can I best persuade and influence people?
Forecasting Challenges
What are the market opportunities for new products or services?

What strategy do we need to develop a new niche in a growing marketplace?
Negotiations Challenges
What is the most effective fact based strategy?

Who should I assign to a team?
What are my alternatives?
What are my suppliers' needs?
What value can I add for my suppliers?
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Managing Relationships Challenges
Should I outsource? To whom? Why?

What impact will a switch to consignment inventory have on my supplier?
How can I motivate them to see concentrate on the positive instead of the negative?
How can I leverage my external partner's expertise to design a new product that will reduce
production costs?
How does Total Cost of Ownership impact my choice of strategic partners?
Logistics Challenges
How can we improve our distribution systems and identify cost savings when each product is
shipped to a different address?
How can we better integrate sales/customer data with our operations to improve customer
satisfaction?
Should we lease, buy, or build a warehouse?
Or should we hire a third party to assume warehouse functions?
Strategic Relationships Challenges
How can we optimize our supplier base?

How can we balance cooperation and competition?
How can we integrate our supplier's expertise to reduce our production time, costs, and
design new products?
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Transportation Challenges
What product do I need delivered, to whom, when, and by what time?

How can I redesign our warehousing process to reduce parts/repair transportation time?
Which software should we implement?
What are the various governmental trade and tariff requirements and how does this impact
our goals?
Should we buy or lease?
Operations Challenges
How can we improve plant efficiency?

We want to move half of our manufacturing tasks to a lower cost labor market.
Where should it be, how do we plan the transition, how do we transfer technology, and how
do we start up a new plant?
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Quality Management Activities Challenges
How can I improve customer satisfaction?

How can I reduce waste?
How can I improve the quality from suppliers?
What should the process be for returns?
How can I meet environmental standards without sacrificing cost effective measures?
Information Technology Challenges
How can we design information flow to improve all functional processes?

To implement Supply Chain software:
Which product and company should we choose and what are the implementation
considerations?
To add value to our services by offering a best practices relational database to our business
partners:
What data should be included?
What should the searchable criteria be?
How should we distribute the database?
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LECTURE 02: PROJECT SCHEDULING

AND CONTROL TECHNIQUES

34

BUET
Project
A project is a temporary endeavor involving a connected sequence of activities and a range
of resources, which is designed to achieve a specific and unique outcome and which
operates within time, cost and quality constraints and which is often used to introduce
change.
Characteristic of a project
A unique, one-time operational activity or effort
Requires the completion of a large number of interrelated activities
Established to achieve specific objective
Resources, such as time and/or money, are limited
Typically has its own management structure
Need leadership
128/35
Scheduling the Project

Planning, budgeting and scheduling are all part of the same process
Planning a project, developing a budget for it, and scheduling all the of the many tasks
involved are not easily separable
Budget must include both the amounts and timing of the resources received or
expanded
One cannot prepare a budget without knowing the specifics of each task and the time
periods during which the task must be undertaken.
Similarly, a project action implies a schedule just as a schedule implies a plan.
CPM (Critical Path Method), PERT (Program Evaluation and Review Technique)
and Gantt Chart
Building the Network
Activity-on-Node (AON) Network

Usually associated with CPM
Activity-on-Arrow (AOA) Network
Usually associated with PERT
128/36
Language of Scheduling
Activity
task or set of tasks
use resources
Event
state resulting from completion of one or more activities
consume no resources or time
predecessor activities must be completed

Network
diagram of nodes and arcs
used to illustrate technological relationships

Path
series of connected activities between two events

Critical Path
set of activities on a path that if delayed will delay completion of project
128/37
Situations in Network Diagram

B
A must finish before either B or C can start

A
C
C
B
A
C
A
both A and C must finish before either of B or D can start
D
B
Dummy
both A and B must finish before C can start
A must finish before B can start

both A and C must finish before D can start
128/38
Building the Network: AON

Task
a
b
c
d
e
f
g
Predecessor
a
b
b
c, d
e
128/39
Building the Network: AOA

Task
a
b
c
d
e
f
g
Predecessor
a
b
b
c, d
e
Dummy Activity
128/40
Critical Path Method (CPM)

Path: A connected sequence of activities leading from the starting event to the ending
event
Critical Path: The longest path (time); determines the project duration
Critical Activities: All of the activities that make up the critical path
Forward Pass
Earliest Start Time (ES): earliest time an activity can start, ES = maximum EF of
immediate predecessors
Earliest finish time (EF): earliest time an activity can finish, EF= ES + t
Backward Pass
Latest Start Time (LS): Latest time an activity can start without delaying critical
path time , LS= LF - t
Latest finish time (LF): latest time an activity can be completed without delaying
critical path time, LS = minimum LS of immediate predecessors
128/41
Example: Consider the list of four activities for making a simple product:
Activity
A
B
C
D
Description
Immediate Predecessor
Expected Time (min)
B
A,C
180
30
20
60
Buy Plastic Body

Design Component
Make Component
Assemble product
Solution :
Arcs indicate
project activities
B
2
Nodes correspond to the

beginning and ending of
activities
128/42
Example: Develop the network for a project with following activities and immediate
predecessors
Activity
Immediate Predecessors
A, C
D, E,F
Solution :
dummy
We need to introduce a
dummy activity
Note how the network correctly identifies D, E, and F as the immediate predecessors for activity G.
Dummy activities is used to identify precedence relationships correctly and to eliminate possible
confusion of two or more activities having the same starting and ending nodes
Dummy activities have no resources (time, labor, machinery, etc)purpose is to PRESERVE
LOGIC of the network
128/43
Examples of the use of dummy activity

Network concurrent activities
a
Dummy
WRONG !!!
RIGHT
WRONG !
Activity c not required for e

a
a
b
d
1
1
b
d
2
c
WRONG!!!
RIGHT
RIGHT
128/44
Example: Draw the network for the following relationships:

Activity C can be performed at the same time as E; but D cannot be started unless both C
and A are completed; A and B can be performed simultaneously, B has also constraint on
activity C and E both D and E should be completed before the objective is achieved.
Solution :
A
D
C
B
Example: In a program consisting of five activities, the constraints determined are

as under. Draw the network.
B C
Solution :
B
C
E
dummy
activity
128/45
predecessors. Construct the network and find the critical path.
Activity
d, e
Completion Time
13
15
17
12
Solution:
f, 15
h, 9
g, 17
a, 6
i, 6
b, 8
d, 13
j, 12
c, 5
e, 9
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f, 15
ES and EF Times
a, 6
0
h, 9
g, 17
i, 6
b, 8
0
d, 13
j, 12
c, 5
0
e, 9
128/47
f, 15
ES and EF Times
h, 9
g, 17
a, 6
0
21
23
i, 6
b, 8
0
d, 13
c, 5
0
21
e, 9
5
j, 12
14
128/48
f, 15
ES and EF Times
h, 9
g, 17
a, 6
0
21
21
23
30
i, 6
23
29
b, 8
0
d, 13
c, 5
0
e, 9
5
21
j, 12
21
33
Projects EF = 33
14
128/49
f, 15
LS and LF Times
6
a, 6
0
21
h, 9
g, 17
6
i, 6
23
b, 8
0
d, 13
21
c, 5
0
29
27
33
30
24
33
j, 12
21
33
21
33
e, 9
5
23
21
14
128/50
f, 15
LS and LF Times
21
24
a, 6
h, 9
g, 17
10
23
27
i, 6
b, 8
0
d, 13
21
c, 5
21
e, 9
12
14
12
21
23
29
27
33
21
30
24
33
j, 12
21
33
21
33
128/51
f, 15
LS and LF Times
Float
3
a, 6
3
21
24
g, 17
23
10
27
4
d, 13
8
12
23
29
27
33
21
30
24
33
j, 12
21
c, 5
7
3
i, 6
b, 8
0
h, 9
21
21
33
21
33
e, 9
14
12
21
128/52
Critical Path
f, 15
h, 9
g, 17
a, 6
i, 6
b, 8
d, 13
j, 12
c, 5
e, 9
128/53
Activity
C,F
D,I
90
15
05
20
21
25
14
28
30
45
Duration
Solution:
90,105
95,110 B,B15
0, 90
0, 90
A,A90
C,C05
90,115
90,115
115,129
115,129
F,F25
149,170
173,194
105,110
110,115
G,G14
129,149
129,149
D,D20
E,E21
149,177
166,194
H,H28
90,120
119,149
I, I30
149,194
149,194
J,J45
128/54
Example: Task. A project has been defined to contain the following list of activities along
with their required times for completion. Construct the network and find the critical path.
Activity
Duration
0,5
0,5
2
1
6
3
1
7
4
2,3
2
5
4
6
6
4
5
7
6
3
8
5,7
1
05,11
06,12
14,20
16,22
22,23
22,23
1
5
1
-5
12,14
12,14
4
05,12
05,12
14,19
14,19
19,22
19,22
7
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Activity
D,F
B, C
G,H
Completion Time
14
12
Solution:
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Activity
b, c
d, e
g, h
Duration
Solution:
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LECTURE 03: OPERATIONS

MANAGEMENT IN SUPPLY CHAIN

58

BUET
Introduction
Operations management is the process whereby resources or inputs are converted
into more useful products. Although the terms operations management and
production management are similar in meaning, there are two points of difference.
This term is more frequently used where inputs are transformed into intangible
services. Viewed from this perspective, operations management will cover such
service organizations as banks, airlines, super bazaars, educational institutions,
consultancy firm etc. in addition to, of course, manufacturing enterprises.
Basic principles of manufacturing management: Manufacturing management is
the management of all the processes, which are involved in manufacturing, i.e. the
conversion of raw materials into finished product. It would include the
management of personnel, management of raw materials, planning for production
etc. Manufacturing management is an age-old process with age-old ideas, but in
this era of competitive market, organizations are trying innovative ways of
planning in order to improve their profits. Some basic areas of manufacturing
management are discussed below:
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Manufacturing System: A system is defined as a relatively complex assembly of

physical elements characterized by measurable parameters. To model a system, we
need to:
To define the systems boundaries or constraints
To predict, through the system parameters, its behavior in response to excitations
and disturbances
Models are used to describe how the system works.
Role of Production in Business: Business is defined as the activity of providing

goods and services involving financial, commercial and industrial aspects.
Production, is the transformation of raw materials and operational inputs into output
that, when distributed, meet the needs of customers. Hence production plays a very
important role in the overall business scenario as it basically deals with the
manufacturing of the goods, which are in turn provided for the customer to fulfill the
needs. The plan for production has to be developed by taking a number of things into
account, that can be basically grouped into 5Ps.
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Product: which deals with areas like

- Performance
- Aesthetics
- Quality
- Reliability
- Quantity
- Production costs
- Delivery date
Plant: which deals with the making the product. It is basically includes areas like
- Future demand
- Health and safety
- Productivity and reliability of equipment
- Environmental issues
Processes: which deals with the different ways of producing a product. It will
consider areas like

- Available capacity
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Available skills
Type of production
Safety
Production costs
Maintenance requirements
Programs: which deals with the dates and times of the products that are to be
produced and supplied to customers. It would consider areas like
- Purchasing patterns
- Need for/availability of storage
- Transportation
People: which deals with key personnel decisions like
- Wages and salaries
- Safety and training
- Work conditions
- Leadership and motivation
- Communication
-
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Mass Production System: Mass production can be defined as, manufacturing of

goods on a large scale, a technique that aims for low unit cost and high output. In
factories, mass production is achieved by a variety of means, such as division and
specialization of labor and mechanization. These speed up production and allow the
manufacture of near identical, interchangeable parts. Such parts can then be
assembled quickly into a finished product on an assembly line. Advantages of mass
production system are:
Mass production is notable because it permits very high rates of production per person
and therefore provides very inexpensive products.
In mass production, each worker repeats one or a few related tasks that use the same
tool to perform identical or almost identical operations on a stream of products.
Mass production systems are usually organized in assembly lines. The assemblies pass
by on a conveyor, or if they are heavy, hung from an overhead monorail.
Another important advantages is that the factory can purchase very large amounts of
materials. This reduces the overhead costs (shipping, paper work etc.) associated with
purchasing parts.
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Lean Manufacturing: Lean manufacturing is a business initiative to reduce waste in

manufactured products. This waste may be from the production process or from any
part of the organization. The basic idea is to reduce the cost systematically,
throughout the product and production process, by means of a series of engineering
reviews. Most important concept in lean manufacturing is the distinction of the seven
major wastes. Wastes are also known as Muda. Wastes are defined as unnecessary
resource that is required to produce a quality product as defined by the customer.
Seven wastes are:
Overproduction
Down Time
Transportation
Inappropriate Processing
Unnecessary Inventory
Unnecessary Motions
Defects
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Overproduction: Eliminate by reducing set-up times, synchronizing quantities and timing
between processes, layout problems. Make only what is needed now.

Waiting: Eliminate bottle necks and balance uneven loads by flexible workforce and
equipment.
Transportation: Establish layouts and locations to make handling and transport
unnecessary if possible. Minimize transportation and handling if not possible to
eliminate.
Inappropriate Processing: Question regarding the reasons of existing of the product and
then why each process is necessary.
Unnecessary Inventory: Reducing all other waste reduce stocks.
Unnecessary Motion: Study motion for economic and consistency. Economic improves
productivity and consistency improves quality. First improve the motions, then
mechanize or automate. Otherwise, there is a danger of automating the waste.
Defects: Develop the production process to be prevent defects from being produced, so as
to eliminate inspection. At each process, do not accept defects and make no defects. A
quality process always yields quality product.
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Lean Manufacturing Goals
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Agile Manufacturing: Lean manufacturing is very good at doing the things that can
be controlled. Agile manufacturing deals with the things which can not be controlled.
Agility is the ability to thrive and prosper in an environment of constant and
unpredictable change. Agility is not only to accommodate change but to relish the
opportunities inherent within a turbulent environment. Some of the reasons for the
fact that the manufacturing paradigm is changing from mass production to agile
manufacturing are:
Global competition is intensifying
Mass markets are fragmenting into niche markets
Cooperation among companies is becoming necessary, including companies who
are in direct competition with each other
Customers expect low volume, high quality, custom products
Very short product life cycles, development time and production lead times are
required
Customers want to be treated as individuals.
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Quick Response Manufacturing (QRM): QRM is a companywide strategy to cut

lead times in all phases of manufacturing and office operations. It can bring the
manufacturing firms products to market more quickly and secure its business
prospects by helping to compete in a rapidly changing manufacturing arena. QRM
will not only make the manufacturing firm more attractive to potential customers, it
will also increase profitability by reducing non-value-added time, cutting inventory
and increasing return on investment (ROI). Benefits of QRM for the manufacturing
firm:
Decreases the manufacturing cost
Increases the market share
Fills customer orders faster
Boosts product quality
Introduce new product rapidly
Eliminates waste and inefficiency
Secures the manufacturing future of the firm.
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Successful Lean Introduction to Supply Chain

Some of the key approaches to make lean successful throughout the supply chain of a
manufacturing company are listed below:
The manufacturing company has to be fact based and not just rely on rhetoric about
the improvements to be gained
The manufacturing company has to be willing to share information at a very detailed
level to help the suppliers to see the savings potential.
The manufacturing company has to demonstrate a commitment to the long-term with
its implementation of the lean strategies and not just a flavor of the month.
Most importantly, the manufacturing company has to give its suppliers support in
terms of training and troubleshooting.
The manufacturing company should demonstrate the potential benefits of lean not
only for their own company but also for all their suppliers.
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Benefits of Lean Manufacturing

Quality performance, fewer defects and rework (in house and at customer).
Fewer Machine and Process Breakdowns.
Lower levels of Inventory.
Greater levels of Stock Turnover.
Less Space Required.
Higher efficiencies, more output per man hour.
Improved delivery performance.
Faster Development.
Greater Customer Satisfaction.
Improved employee morale and involvement.
Improved Supplier Relations.
Higher Profits
Increased Business
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Integration of Lean Manufacturing and SCM

To integrate lean manufacturing and SCM, the steps to be followed are:
Reduced the supply base
Develop strategic long-term partners
Manage suppliers with commodity teams
Certify suppliers
Connect to suppliers with internet technology
Collaborate with suppliers in fulfillment
Outsource for the right reasons
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Characteristics of Lean Systems

Pull method of work flow
Quality at the source
Small lot sizes
Uniform workstation loads
Standardized components & work methods
Close supplier ties
Flexible workforce
Line flows and Automation
Five S (5S)
Push and Pull Systems of Work Flow
Push method: A method in which production of the item begins in advance of
customer needs. Example: A buffet where food is prepared in advance.
Pull Method: A method in which customer demand activates production of service
or item. Example: A restaurant where food is only prepared when orders are placed.
Lean systems use the pull method of work flow.
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Quality at the Source

Quality at the source is an organization-wide effort to improve the quality of a
firms products by having employees act as their own quality inspectors, and never
pass defective units to next stage.
One approach for implementing quality at the source is to use poka-yoke, mistakeproofing methods aimed at designing fail safe systems that minimize human error.
Another approach for implementing quality at the source is a practice the Japanese
call jidoka, and andon, which gives machines and machine operators the ability to
detect when an abnormal condition has occurred.
Small lot sizes
Lot: A quantity of items that are processed together.
Setup: The group of activities needed to change or readjust a process between
successive lots of items.
Single-digit setup: The goal of having a setup time of less than 10 minutes.
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Uniform workstation loads

A lean system works best if the daily load on individual workstations is relatively
uniform.
Service processes can achieve uniform workstation loads by using reservation
systems (e.g. scheduled surgeries) and differential pricing to manage the demand.
For manufacturing processes, uniform loads can be achieved by assembling the same
type and number of units each day, thus creating a uniform daily demand at all
workstations.
Mixed-model assembly produces a mix of models in smaller lots.
Line Flows and Automation
Line Flows: Managers of hybrid-office and back-office service processes can
organize their employees and equipment to provide uniform work flows through the
process and, thereby, eliminate wasted employee time.
Another tactic used to reduce or eliminate setups is the one-worker, multiplemachines (OWMM) approach, which essentially is a one-person line.
Automation plays a big role in lean systems and is a key to low-cost operations.
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Five S (5S): A methodology consisting of five workplace practices conducive to visual

controls and lean production
Sort: Separate needed from unneeded items (including tools, parts, materials, and
paperwork), and discard the unneeded.
Straighten: Neatly arrange what is left, with a place for everything and everything in
its place. Organize the work area so that it is easy to find what is needed.
Shine: Clean and wash the work area and make it shine.
Standardize: Establish schedules and methods of performing the cleaning and
sorting. Formalize the cleanliness that results from regularly doing the first three S
practices so that perpetual cleanliness and a state of readiness is maintained.
Sustain: Create discipline to perform the first four S practices, whereby everyone
understands, obeys, and practices the rules when in the plant. Implement mechanisms
to sustain the gains by involving people and recognizing them via a performance
measurement system.
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5Ss
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Kanban
Kanban means card or visible record in Japanese & refers to cards used to control
the flow of production through a factory.
Card system that helps control flow
Very effective in establishing JIT manufacturing goals
Easily understood and requires a relatively simple setup
Card should be attached to a product container and contain essential information
(part #, quantities, etc.)
There are two types of Kanban systems:
Production Kanban: Production kanban signals the need for the production of more
parts
Conveyance Kanban: Conveyance kanban signals the required delivery of parts to
the next stage of production
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General Operating Rules of Kanban:

Each container must have a card.
The assembly line always withdraws materials from fabrication(pull system).
Containers of parts must never be removed from a storage area without a kanban
being posted on the receiving post.
The containers should always contain the same number of good parts. The use of
nonstandard containers or irregularly filled containers disrupts the production flow of
the assembly line.
Only nondefective parts should be passed along.
Total production should not exceed the total amount authorized on the kanbans in the
system.
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Material/Par
ts Supplier
Final
assembly
Finished
goods
Customer
order
Work
cell
Kanban
Kanban
Kanban
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Just-In-Time (JIT)
If you think about someone's journey to work, they could leave the house just-in-time to
cycle to the train station, just-in-time to catch their train, which would get them to their
place of work just-in-time, allowing them to be at their desk just-in-time to start work.
In engineering, using the just-in-time theory would allow the components that are
needed to produce a product to be delivered to the worker, just-in-time. The products
can then be made available for the customers just-in-time. This process allows for all
types of stock, including materials and finished products, to be eliminated.
Implementing a just-in-time structure can mean a company is adopting a lean
production system.
JIT Partnerships: JIT partnerships exist when a supplier and purchaser work together to
remove waste and drive down costs. Four goals of JIT partnerships are:
Removal of unnecessary activities
Removal of in-plant inventory
Removal of in-transit inventory
Improved quality and reliability
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JIT Layout: JIT layouts reduced another kind of waste-movement. The movement of
material on a factory floor does not add value. Consequently, we want flexible layouts
that reduce the movement of both people and material. List of JIT Layout tactics are:
Build work cells for families of products

Include a large number operations in a small area
Minimize distance
Design little space for inventory
Improve employee communication
Use poka-yoke (fail safe) devices
Build flexible or movable equipment
Cross-train workers to add flexibility
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Goal of JIT Layout

Distance Reduction
Large lots and long production lines with single-purpose machinery are being replaced by
smaller flexible cells
Often U-shaped for shorter paths and improved communication
Often using group technology concepts
Increased Flexibility
Cells designed to be rearranged as volume or designs change

Applicable in office environments as well as production settings
Facilitates both product and process improvement
Impact on Employees
Employees may be cross trained for flexibility and efficiency

Improved communications facilitate the passing on of important information about the process
With little or no inventory buffer, getting it right the first time is critical
Reduced Space and Inventory
With reduced space, inventory must be in very small lots

Units are always moving because there is no storage
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JIT Inventory: Inventory is at the minimum level necessary to keep operations

running. List of JIT Layout tactics are:
Use a pull system to move inventory

Reduce lot sizes
Develop just-in-time delivery systems with suppliers
Deliver directly to point of use
Perform to schedule
Reduce setup time
Use group technology
Goals of JIT Inventory:

Reduce Variability: The idea behind JIT is to eliminate inventory that hides variability
in the production system.
Reduce Inventory
Reducing inventory uncovers the rocks
Problems are exposed
Ultimately there will be virtually no inventory and no problems
Shingo says Inventory is evil
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Reduce Lot Sizes

Ideal situation is to have lot sizes of one pulled from one process to the next
Often not feasible
Can use EOQ analysis to calculate desired setup time
Two key changes necessary
Improve material handling
Reduce setup time
Reduce Setup Costs
High setup costs encourage large lot sizes
Reducing setup costs reduces lot size and reduces average inventory
Setup time can be reduced through preparation prior to shutdown and changeover
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JIT is a suitable production system when:
The engineering manufacturer has a standard product that is steadily produced in practical
amounts.
The product is of high value.
The workforce producing the product is a disciplined one.
Flexible working practices are maintained.
Machinery does not demand lengthy set up times.
Quality can be guaranteed through either a cost penalty for defects or good working practices.
Advantages of using a JIT system
Products are of a better standard.

Less waste and, in turn, less rework.
Set up times are reduced.
Production flow is improved.
Less stock.
Overall savings.
Efficiency is increased.
Relations with suppliers are enhanced.
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Elements of JIT System: Successful JIT system is the logical outgrowth of the
combination of the following practices:
Continuous improvement
Attacking fundamental problems-anything that does not add value to the product
Devising systems to identify problems
Striving for simplicity-simpler systems may be easier to understand, easier to manage and less
likely to go wrong
A product oriented layout-produces less time spent in moving of materials and parts
Quality control at sources-each worker is responsible for the quality of their own product
Total productive maintenance-ensuring machinery and equipment functions perfectly when it
is required and continually improving it.
Good housekeeping-workplace cleanliness and organization
Setup time reduction-increases flexibility and allows smaller batches
Multi-process handling a multi skilled workforce has greater productivity, flexibility and job
satisfaction
Kanban-simple tools to pull product and components through the process
Jidoka (Automation)-providing machines with the autonomous capability to use judgment, so
workers can do more useful things than standing watching them work
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A Just-In-Time Illustration
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LECTURE-04: ENTERPRISE
RESOURCE PLANNING [ERP]

88

BUET
ERPEnterprise Resource Planning

PLANNING the RESOURCES of an ENTERPRISE
ERP is a way to integrate the data and processes of an organization into one single
system with modules that support core business areas such as manufacturing,
distribution, financials and human resources.
ERP allows managers from most or all departments to look vertically and
horizontally across the organization to see what they must see (information) to be
productive in their managerial roles.
ERP captures data from historical activity and current operations. That data can be
transformed into information that, along with external information, is useful in
planning and controlling operations, and in developing business strategies.
ERP is evolving into a Multi-Module Application Software Package that automates
inter-organizational business processes across the supply chain which involve
business partners, suppliers, customers, and more.
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Without ERP: Functions have their own special purpose software systems that cannot
communicate with each other. For example, the finance department cannot see whether a
particular order has been shipped. They have to contact someone at the warehouse.
Problems: Delays, Lost Orders, Keying into different computer systems invite errors
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After ERP: Single software and single database facilitates information sharing and
communication among departments. ERP implementation requires to change the way
business is conducted. Hence, the implementation can take years.
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Before and after ERP: Systems Standpoint
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Evolution of ERP
ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements
Planning (MRP II). From business perspective, ERP has expanded from coordination of
manufacturing processes to the integration of enterprise-wide backend processes. From
technological aspect, ERP has evolved from legacy implementation to more flexible tiered
client-server architecture. The evolution of ERP from 1960s to 21st century is given below:
1960s: Inventory Management & Control
Inventory Management and Control is the combination of information technology and

business processes of maintaining the appropriate level of stock in a warehouse. The
activities of inventory management include identifying inventory requirements, setting
targets, providing replenishment techniques and options, monitoring item usages,
reconciling the inventory balances, and reporting inventory status.
1970s: Material Requirement Planning (MRP)
Materials Requirement Planning utilizes software applications for scheduling production

processes. MRP generates schedules for the operations and raw material purchases based
on the production requirements of finished goods, the structure of the production system,
the current inventories levels and the lot sizing procedure for each operation.
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1980s Manufacturing Requirements Planning (MRP II)

Manufacturing Requirements Planning or MRP utilizes software applications for
coordinating manufacturing processes, from product planning, parts purchasing,
inventory control to product distribution.
1990s Enterprise Resource Planning (ERP)
Enterprise Resource Planning or ERP uses multi-module application software for
improving the performance of the internal business processes. ERP systems often
integrates business activities across functional departments, from product planning,
parts purchasing, inventory control, product distribution, fulfillment, to order
tracking. ERP software systems may include application modules for supporting
marketing, finance, accounting and human resources.
21st century ERPII
ERPII is the name some now use to describe ERP like systems that are evolving to
support inter-organizational business processes across the supply chain.
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Why implement an ERP System?
To support business goals

Integrated, on-line, secure, self-service processes for business
Eliminate costly mainframe/fragmented technologies
Improved Integration of Systems and Processes
Lower Costs
Empower Employees
Enable Partners, Customers and Suppliers
How should we implement ERP systems
Obtain the right mix

of people, processes
and technology!!
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ERP Components
Finance: Modules for bookkeeping and making sure the bills are paid on time.
Examples:
General ledger
Accounts receivable
Accounts payable
Human Resource: Software for handling personnel-related tasks for corporate

managers and individual employees.
Examples:
HR administration
Payroll
Self-service HR
Manufacturing and Logistics: A group of applications for planning production, taking

orders and delivering products to the customer.
Examples:
Production planning
Materials management
Order entry and processing
Warehouse management
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Advantages and Disadvantages of ERP

Advantages of ERP Systems
Provides integration of the supply chain, production, and administration
Creates commonality of databases
Can incorporate improved best processes
Increases communication and collaboration between business units and sites
Has an off-the-shelf software database
May provide a strategic advantage
Disadvantages of ERP Systems
Is very expensive to purchase and even more so to customize
Implementation may require major changes in the company and its processes
Is so complex that many companies cannot adjust to it
Involves an ongoing, possibly never completed, process for implementation
Expertise is limited with ongoing staffing problems
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Potential Benefits of ERP
Internal Benefits
Integration of a single source of data
Common data definition
A real-time system
Increased productivity
Reduced operating costs
Improved internal communication
Foundation for future improvement
External Benefits
Improved customer service and order fulfillment
Improved communication with suppliers and customers
Enhanced competitive position
Increased sales and profits
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Application of ERP
ERP have been successfully implemented in companies with the following characteristics:
Make-to-stock, Make-to-order, Design-to-order

Simple product, Complex product
Single plant, Multiple plants
Contract manufacturers
Manufacturers with distribution networks
Sell direct to end users, Sell through distributors
Businesses heavily regulated by the government
Conventional manufacturing (fabrication and assembly)
Process manufacturing, Repetitive manufacturing
Job shop and Flow shop
Fabrication only (no assembly)
Assembly only (no fabrication)
High-speed manufacturing and Low-speed manufacturing
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ERP Software Applications

ERP consists of many modules that are linked together to access & share the same database.
Most ERP software providers design their products to be compatible with their competitors
products. The most common ERP modules are:
Accounting & Finance
Customer Relationship Management (CRM)
Human Resource Management (HRM)
Manufacturing
Supplier Relationship Management (SRM)
Supply Chain Management (SCM)
Core ERP components - traditional

components included in most ERP
systems and they primarily focus on
internal operations
Extended ERP components - extra

components
that
meet
the
organizational needs not covered by
the core components and primarily
focus on external operations
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Core ERP Components

Accounting and finance component manages
accounting data and financial processes within
the enterprise with functions such as general
ledger, accounts payable, accounts receivable,
budgeting, and asset management
Human resource component tracks employee
information
including
payroll,
benefits,
compensation, performance assessment, and
assumes compliance with the legal requirements
of multiple jurisdictions and tax authorities
Production and materials management component
handles the various aspects of production
planning and execution such as demand
forecasting, production scheduling, job cost
accounting, and quality control
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Extended ERP Components

Business intelligence describes information that people use to support their
decision-making efforts
Customer relationship management involves managing all aspects of a customers
relationships with an organization to increase customer loyalty and retention and an
organization's profitability
Supply chain management involves the management of information flows between
and among stages in a supply chain to maximize total supply chain effectiveness and
profitability
E-business means conducting business on the Internet, not only buying and selling,
but also serving customers and collaborating with business partners
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ERP Risks
Although there are great benefits to be realized from ERP systems, there are also failure
stories. ERP systems are very expensive in terms of resources, such as time, money, and
effort. Although they can help introduce good business processes, many companies
implementing ERP software must change their business processes to match the software,
which can cause employee resistance.
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LECTURE-05: APPLYING A
SUPPLY CHAIN DESIGN

104

BUET
Using IT to Drive Supply Chain

The four primary drivers of supply chain management
Facilities
Inventory
Transportation
Information
Organizations use these four drivers to support either a supply chain strategy focusing
on efficiency or a supply chain strategy focusing on effectiveness
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Facilities Drivers: Facility processes or transforms inventory into another product, or it

stores the inventory before shipping it to the next facility. Three primary facilities
components (i) Location, (ii) Capacity and (iii) Operational design
Location efficiencycentralize the location to gain economies of scale, which increases

efficiency
Location effectivenessdecentralize the locations to be closer to the customers, which
increases effectiveness
Capacity efficiencyminimal excess capacity with the ability to produce only what is required
Capacity effectivenesslarge amounts of excess capacity which can handle wide swings in
demand
Operational design efficiencyproduct focus design
allows the facility to become highly efficient at
producing one single product, increasing efficiency
Operational design effectivenessfunctional focus
design allows the facility to perform a specific function
on many different types of products, increasing
effectiveness
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Inventory Driver:
Inventory offsets discrepancies between supply and demand

Inventory management and control software provides control and visibility to the status of
individual items maintained in inventory. Two primary inventory components (i) Cycle
inventory and (ii) Safety inventory
Cycle inventorythe average amount of inventory held to satisfy customer demands between
inventory deliveries
Cycle inventory efficiencyholding small amounts of inventory and receiving orders
weekly or even daily
Cycle inventory effectivenessholding large
amounts of inventory and receiving inventory
deliveries only once a month
Safety inventoryextra inventory held in the event
demand exceeds supply
Safety inventory efficiencyholding small
amounts of safety inventory
Safety inventory effectivenessholding large
amounts of safety inventory
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Transportation Driver:
Transportationmoves inventories between the different stages in the supply chain. Two primary
inventory components (i) Method of transportation and (ii) Transportation route
Method of Transportation
Global inventory management system provides the ability to locate, track, and predict the
movement of every component or material anywhere upstream or downstream in the supply
chain
Method of transportation efficiency
Method of transportation effectiveness
Transportation route
Transportation planning software tracks and
analyzes the movement of materials and products
to ensure the delivery of materials and finished
goods at the right time, the right place, and the
lowest cost
Distribution management software coordinates the process of transporting materials from a
manufacturer to distribution centers to the final customer
Transportation route efficiency
Transportation route effectiveness
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Information Driver
Information an organization must decide how and what information it wants to share with its
supply chain partners. Two primary information components (i) Information sharing and (ii)
Push verses pull strategy
Information sharing
Information sharing efficiency freely share lots of information to increase the speed and
decrease the costs of supply chain processing
Information sharing effectiveness share only selected information with certain individuals,
which will decrease the speed and increase the costs of supply chain processing
Push verses pull strategy

Pull information strategy (efficiency) supply chain
partners are responsible for pulling all relevant
information
Pull technology pulls information

Push information strategy effectiveness
organization takes on the responsibility to push
information out to its supply chain partners
Push technology sends information
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Applying a Supply Chain Design

Wal-Marts supply chain management strategy emphasizes efficiency, but also
maintains adequate levels of effectiveness
Facilities focus Efficiency
Inventory focus Efficiency
Transportation focus Effectiveness
Information focus - Efficiency
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IT for Supply Chain Management

Software Systems
Electronic Data Interchange (EDI)
Material Requirements Planning (MRP)
Manufacturing Resource Planning (MRP II)
Enterprise Resource Planning (ERP)
Supply Chain Management Systems (SCM)
Customer Relationship Management (CRM)
Internet-based Software
Network Infrastructure
Wide Area Network (WAN)
Internet (for E-commerce: B2B, B2C)
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Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business
data and documents between companies using standard formats recognized both
nationally and internationally.
The information used in EDI is organized according to a specified format set by both
companies participating in the data exchange.
History of EDI
The general idea behind EDI was originated by a group of railroad companies in the
mid-1960s, in the United States.
Much of the early work on EDI was driven by the industry sectors for:
Transportation
Pharmaceuticals
Groceries
Automobiles
Banking
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Advantages of EDI
Lowering Operating Cost: EDI replaces paper transactions with electronic
transmissions, saving time and reduced cost of business transaction and enabling the
automatic processing of documents.
Reduced
Error and Increases Business Information Accuracy: With the
implementation of EDI, there is no need for re-entering data, thus, reducing the risk
for human error. Each re-entry of data is a potential source of error.
Increase Productivity: Making personnel more efficient and it improves business
capabilities by speeding up throughput.
Faster Trading Cycle: EDI allows faster and streamlining trading cycle between
organizations leading to improved relationships between trading partners.
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Disadvantages of EDI
Trading Partners Involvement: Highly dependence on the participation of trading
partners. You need to be confident that they will do their part. EDI will be
meaningless if your trading partner didn't get involved using EDI system effectively.
Costly for smaller companies: Many small companies are facing resources problems
in getting starter with the initial implementation of EDI system. It is beyond the
resources these companies to invest tens or hundreds of thousands of dollars in
setting and implementation costs, as well as weeks of personnel training, to get an
EDI system running.
Difficult to agree on standard to be used: Even though there are widely-accepted and
used standards, there are no ways to force trading partners to accept these standards.
Cooperation between trading partners is needed in order to develop a common rules
to avoid differences in interpretation.
128/114
Three Pillars of EDI

Generic Format Standards
American National Standards Institute
About 300 documents standardized
Many industries represented
Many financial transactions
EDIFACT to eventually become world-wide EDI standard
Sample ANSI X12 Transactions
104 Air Shipment Information
204 Motor Carrier Shipment Information
300 Booking Request
814 Residential Mortgage Loan Application
Sample X12 Finance-Related Transactions
810 Invoice
811 Consolidated Service Invoice (Telephone bill)
812 Credit/Debit Adjustment
128/115
Value-Added
Network
(VAN):
Communications networks supplied and
managed by third-party companies that
facilitate electronic data interchange,
Web services and transaction delivery by
providing extra networking services.
Translation Software
Off-the-shelf
Low cost
Seventy firms produce it
128/116
Hardware Considerations for SCM Systems

Intranet vs. Extranet
Intranet is to use Internet technology and protocol (TCP/IP) for the internal communications
Extranet is to use Internet technology and protocol for the internal and suppliers
communications
Network Infrastructure: Wide Area Networks (WANs)
WAN Technologies
Ordinary telephone line and telephone modem.
Point-to-Point Leased lines
Public switched data network (PSDN)-Such as ATM, Frame Relay
Send your data over the Internet securely, using Virtual Private Network (VPN)
technology
PSDN
VPN
128/117
Global Considerations in Using SCM/ERP Systems

Time differences
Language issues
Currency exchange rates
Tax
Different accounting systems
Internet and security restrictions
Culture and religion holidays
128/118
Supply Chain Enablers

Information links all aspects of supply chain
E-business
replacement of physical business processes with electronic ones
Electronic data interchange (EDI)
a computer-to-computer exchange of business documents
Bar code and point-of-sale
data creates an instantaneous computer record of a sale
Radio frequency identification (RFID)
technology can send product data from an item to a reader via radio waves
Internet
allows companies to communicate with suppliers, customers, shippers and other
businesses around the world instantaneously
Build-to-order (BTO)
direct-sell-to-customers model via the Internet; extensive communication with
suppliers and customer
128/119
Supply Chain Enablers
128/120
Supply Chain Integration

Share information among supply chain members
Reduced bullwhip effect

Early problem detection and faster response
Builds trust and confidence
Collaborative planning, forecasting, replenishment, and design
Reduced bullwhip effect

Lower costs (material, logistics, operating, etc.)
Higher capacity utilization and improved customer service levels
Coordinated workflow, production and operations, procurement
Production efficiencies
Fast response and improved service
Quicker to market
Adopt new business models and technologies
Penetration of new markets

Creation of new products
Improved efficiency and mass customization
128/121
Impact of New Information Technologies

Computing performance
Application Integration
Massive increases in computing performance

high performance hardware and software
components
high speed & volume memories
Real-time processing of data- and calculation

intensive functions
Planning with complete, current, correct and
consolidated data within seconds
Reconsideration of all supply chain parameters
and planning scenarios within seconds using
real-time simulation
New application integration technologies

Middleware technology including business
process automation
Internet based Software and communication
Rapid linking of IT-applications within a company

Rapid integration of multiple, cross-company
supply chain sites working together as one
virtual unit online and real-time
high level business process integration
New SCM-Applications
Whole Supply Chains can be managed in real-time with automated and optimised processes
Massively improved customer fulfilment (In time delivery as promised to the customer )
Customer order inquiry can be answered immediately within seconds (available / capable to promise)
Increased ROCE (cost reduction, sales improvement, capital employed reduction)
ROCE - Return on Capital Employed

128/122
Supply Chain Information Needs
128/123
Map of Supply Chain Information Systems
128/124
Customer Relationship Management (CRM): Planning and control activities and

information systems that link a firm with its downstream customers.
Market analysis, sell process, order management, call/service center management
Supplier Relationship Management (SRM): Planning and control activities and
information systems that link a firm with is upstream suppliers.
Design collaboration, sourcing decisions, negotiations, buy process, supply
collaboration
Internal Supply Chain Management: Information flows between higher and lower
levels of planning and control systems within an organization.
128/125
Enterprise Resource Planning (ERP) systems: Large, integrated, computer-based

business transaction processing and reporting systems.
ERP systems pull together all of the classic business functions such as accounting,
finance, sales, and operations into a single, tightly integrated package that uses a
common database.
Traditional strengths in routine decision making and in execution and transaction
processing.
Captures data to support higher-level Decision Support Systems (DSS).
128/126
Decision support systems (DSS): Computer-based information systems that

allow users to analyze, manipulate, and present data in a manner that aids
higher-level decision making
Network Design Applications: Logistics information systems that address such
long-term strategic questions as facility location and sizing and transportation
networks.
Often using simulation and optimization modeling
Warehouse and transportation planning systems
Allocating fixed logistics capacity in the best possible way given business
requirements
Warehouse management and transportation execution systems
Initiating and controlling the movement of materials between supply chain
partners
128/127
Supply Chain IT in Practice

Select an IT system that addresses the companys key success factors
Take incremental steps and measure value
Align the level of sophistication with the need for sophistication
Use IT systems to support decision making, not to make decisions
Think about the future
Impact of IT on Supply Chain Management
Visibility: Allows managers to see the physical and monetary flows in the
supply chain and better manage them.
Mirroring: Replaces certain physical processes with virtual ones.
Creation of new customer relationships: Taking raw information and
organizing, selecting, synthesizing, and distributing it in a manner that
creates whole new sources of value.
128/128

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M304: TEXTILE AND RMG SUPPLYDEMAND CHAIN MANAGEMENT

Nikhil R. Dhar, Ph. D

Professor, IPE Department

Fahimnia, B. Planning and Optimization of Complex Supply Chains, Lambert Academic

Specialized Journals (Selection only)

Supply Chain Management: An International Journal

Department of Industrial & Production Engineering

Marks Distribution and Assignment

Assignment: Supply Chain Management Six Sigma at RMG

Nikhil R. Dhar, Ph. D

Professor, IPE Department

Department of Industrial & Production Engineering

Department of Industrial & Production Engineering

Department of Industrial & Production Engineering

Supply Chain Illustration

Department of Industrial & Production Engineering

Origins of Supply Chain Management

Introduction of new computer technology lead to development of Materials Requirements

1980s & 1990s

2000s and Beyond

Department of Industrial & Production Engineering

Traditional SCM Approach

Department of Industrial & Production Engineering

Modern SCM Approach

Department of Industrial & Production Engineering

Decision Phases in a Supply Chain

Department of Industrial & Production Engineering

Process View of a Supply Chain

Department of Industrial & Production Engineering

Department of Industrial & Production Engineering

Customer Order Cycle

Push/Pull View of Supply Chain Processes

Importance of Supply Chain Management

To gain efficiencies from procurement, distribution and logistics

Strategic, Tactical and Operating Issues

Strategic - long term and dealing with supply chain design

Department of Industrial & Production Engineering

Key Issues in Supply Chain Management

How many warehouses do we need?

Direct shipping to customers?

Supply chain integration and strategic partnering

Should information be shared with supply chain partners?

Department of Industrial & Production Engineering

Should products be redesigned to reduce logistics costs?

Information technology and decision-support systems

What data should be shared (transferred)

How is customer value created by the supply chain?

Department of Industrial & Production Engineering

Important Elements of SCM

Long term relationships

Demand managementmatch demand to available capacity

Transportation managementtradeoff decisions between cost & timing of delivery/customer

Department of Industrial & Production Engineering

Current Trends in SCM

Increasing Supply Chain Responsiveness

The Greening of Supply Chains

Reducing Supply Chain Costs

Department of Industrial & Production Engineering

Scope of Supply Chain Activities

Sourcing and procurement

Supply Chain Management Concentration

Supply Management Challenges