Supply chain basics Notes

SCM conceptual model

1. Configuration
Global supply chain challenges:
1.
2.
3.
4.

Market dimension
Technology
Resource
Time dimension

How global SCM responded:

1. Collaboration : technological , operational logistics, marketing,(if you cant
beat them better join them)
a. Sharing resources
b. Synergy
c. Risk sharing
d. Innovation
2. Supply chain integration
a. Arcs of integration
b. High visibility
c. Low inventory cost
d. Short lead time
e. High product quality
3. Divergent product portfolio(dont put all your eggs in one basket)
a. Satisfying diverge demand
4. Blue ocean strategy
a. New market place so no competition
5. Pursuing world class excellence
a. Operationl excellence
b. Strategic fit
c. Capability to adapt
d. Unique voice
Current trends in Global SCM
1. Volatility and market uncertainty is on rise
a. Demand volatility
b. Poor forecast accuracy
c. Flexible capacity
2. Market growth depends on Global customer and supplier network
a. New customer location
b. Market diversity
c. Product variants
d. Demand volatility
3. Cost optimized SC configuration
4. Risk management involves end to end supply chain
5. More emphasis on SC integration

SUPPLY CHAIN DESIGN AND PLANNING

1. Vertical Integration : ownership of various tasks in SC
o e.g. Ford motor for model T
o GM : Full line products strategy
Products for every purpose
Served customers need of variety.
Surpassed Ford and became no1 till 2007
2. Vertical Disintegration
3. SC Configuration
o Stable and dynamic network
4. Outsourcing and offshoring
o BPO
o Business function outsourcing
o Facility and manpower
5. Location decisions : Impact on labor cost, material cost, taxation, currency
exposure, financial and legal regulations
o Weighted scoring method :
Identify criteria to evaluate
Find and rate importance of each criteria
Choose location and give marks to each criteria according to
weightage
Sum the scores
6. Capacity planning
7. Bullwhip effect
o Oscillation
o Amplification
o Phase lag
8.

Lean Supply Chain Management

Eliminating waste in material, process, time and information
Eliminate the cost that adds no value
Criteria for value adding :
1. Must be physical changes
2. Concerned by customer
3. Right in first time
Cost to serve = cost involved/ customer perceived value and service

Drivers for lean supply

1. Waste reduction
a. Time
b. Inventory
i. Inventory responsibility moved to supplier to reduce inventory
holding cost
c. Process
d. Defects
2. Demand management
3. Process standardization
4. Engaging people
5. Collaboration
Lean processing mapping tools
1. Value stream mapping
2. Time based processing
a. Record activity time and wastage time
3. Process activity mapping tool
a. Operation
b. Transport
c. Inspection
d. Storage
4. SC response matrix
5.

Agile
1. HP printer assembly after knowing the configuration
2. Zara
3. Dell

Forecasting
Effect of forecasting on
1. Human resource
2. Capacity: Amazons message that kindle is sold out due to heavy customer
demand. Error in forecasting
3. SCM

Forecasting methods
1. Qualitative method
a. Jury opinion
b. Delphi method
c. Salesforce
d. Consumer market survey
2. Qualitative methods
a. Time series
i. components
1. Trend
2. Seasonality
3. Cycles
4. Random variables
ii. Nave
iii. Moving average
iv. Weighted moving average
v. Exponential
vi. Trend adjusted exponential
Seasonal variations in data : demand for suncream highest in summers
b. Associative models
i. Regression
ii. Correlation
c. Adaptive forecasting : computers
d. Focus forecasting
Forecasting in services sector
1. Retail sector : barbers, hotels
2. specialty retail shops. : flower shops
3. fast food restaurants
4.

Role of IT in forecasting
1.
2.
3.
4.
5.
6.

Determine forecasting methods for product categories and markets

Most current data, IT makes it available
Collaborative planning due to IT innovations
Tools to perform what if analysis : analyze impact of promotions on demand
Track historical forecast errors
SAP SPSS packages, ERP firms like SAP and oracle

Risk management in forecasting

1. Long Lead time
2. Seasonality

Imp : make the SC responsive

Zara and Seven eleven
Amazon lower forecast error as pools geographic demand
Forecasting in practice
1. Collaborative
2. Share valuable data only
3. Distinguish between demand and sales
Impact of internet on supply chain