A presentation on

Supply Chain Management

With McDonald's and Walmart as Examp

Aditya Gupta B.Tech NIT-Bhopal India adiityagupta@ymail.com +91-8517869472

The Supply Chain

A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply Chain includes: 1. Material Flows 2. Information Flows 3. Financial Flows

Supply Chain for Denim Jeans

What is Supply Chain Management ??

The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. -- By Council of Supply chain
Management Professionals

Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer. -- The Supply
Chain Council

The design and management of seamless, valueadded processes across organizational boundaries to meet the real needs of the end customer. -- Institute

Old Vs New SCM Approaches

Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Organizational cultures emphasized short-term, company focused performance. New paradigm - Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trustbased relationships with supplier and customer firms. All participants in the supply chain benefit. Boundaries are dynamic and extend from the firms suppliers suppliers to its customers customers (i.e., second tier suppliers and customers). Supply chains now deal with reverse logistics to handle returned products, warranty repairs, and recycling.

Goals of SCM

The ability to meet customer requirements, for everything from coffee beans to Crocs, is built upon the expectation that everything is done correctly in the supply chain. And that means doing it right the first time no mulligan's, no mistakes are allowed. In the quest to provide quality service and satisfy customers, world-class companies along the supply chain are guided by the Seven Rights of Fulfillment. Right Product Right Customer Right Time Right Place Right Condition Right Quantity Right Cost

Waste Reduction : Reduction in Duplication Enhancing the Quality and Harmonizing the Operation Cycle Time Compression Production Logistics Flexible Responses Cost Reduction Customer Benefit

Enablers of Supply Chain Management

Cooperation Trust and Commitment, Information sharing, Common Objectives and Proper Integration Coordination- Standardization, expertise, Removal of Bullwhip effect, tight management Collaboration : when two or more people work together to create or achieve the same thing. Important in Global supply chain Agility and Flexibility Quick and Responsive, For any supply chain to be agile, it must be flexible first Cost Efficiency Cost Cutting through better purchasing, production, transport and storage Quality of Product TQM Technique, Continuous Improvement Technique, Zero defect concept, ISO Standard

Bull Whip Effect

Postulates from Philip Crosby's "Absolutes of Quality Management"

Delivery Performance : Delivery Reliability, Lead time reduction, on time delivery Mass Customization: Mass customisation is a production process that combines elements of mass production with those of bespoke tailoring. Products are adapted to meet a customer's individual needs, so no two items are the same. Customer Service : Service Quality or Quality of Service (Q.S), Customer Satisfaction, Customer Response, Rapid redressel Integration of Key Element : One of the major Enablers of SCM after Cooperation and coordination. Integration through IT techniques ( Demand, Supply, Purchasing, Distribution) Demand Management :Demand management is a planning methodology used to manage and forecast the demand of products and services.

A.) Custom and Mass/Standard Production B.) Mass Customization

Product Management : It is an organizational lifecycle function within a company dealing with the planning, forecasting, or marketing of a product or products at all stages of the product lifecycle. Marketing & Sales : In Modern age of tough competion, Sales, Promotion, advertisement, Introductory compaigns, concession & Discount Logistic Management : It plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements. Shortest Route Decision, Transport selection, Warehousing, Materials Handling & Packaging

Research & Devlopement : Innovative & new product important in new turbulent highly uncertain market, Multinational companies can get benifited by setting up a gloabal R&D unit and collaberating with global partners, R&D team in contact with customers and supplier can result in better products with greater flexibility which result in easy incorporation of changing customer tastes, Environment friendly products meeting govt. & diff. agencies Norms

Drivers of Supply Chain Performance

Facilities

Economies of Scale : Large number of facilities, Location i.e. Proximity to customers, Market, Resources, Raw material. Capacity of Supplier, organization and distributors Overall trade off b/w Responsiveness (More number of Inventory) and cost effectiveness (Centralization) Plant layout : 1.) Line/Product type Layout 2.) Process Type layout 3.) Fixed Position Layout

PROCESS LAYOUT

Work Shop Office

Fitting Table 1 Product A Lathe 1 Fitting Table 2 Product B

Air Compressor

Side Entry

Lathe 2
Fitting Table 3 Lathe 3 Milling Machine

Welding M/C - 1
Welding M/C - 2 Paint Shop

Flow of work is not standardized Plant produces a variety of products Some of the processes / operations might be common.

Main Entry

PRODUCT LAYOUT OF LAUNDRY

Classification and marking of clothes

Washing Machine

Dryer

Steam press

Storage Area for Pressed clothes

Delivery Counter

To produce one standard product in large volumes.

Each unit produced undergoes same sequence of operations and uses same flow of work. The work centers and equipments are arranged in a line for continuous operation.

Fixed Layout : An Airplane Construction

Inventory : helps in smooth nad efficient running of enterprise,

provide service to customer at sort notice, may result in earning price discounts, saves enterprise from paying high prices because of piecemeal purchasing, acts as buffer stock when raw material received late. Classification of Inventories : a.) Direct Inventory : They include items that are directly used for production. Ex. Production Inventory : Items such as raw material, components and subassemblies used for final product. Work-in-Process Inventory : This includes semi-finished products and goods requiring further operation. Finished Goods Inventory : This includes the finished goods ready for dispatch. b.) Indirect Inventory : Are not associated with the production. Ex. Transit or Pipeline Inventory : Consists of items currently in transportation. Buffer Inventory : They are required for protection against uncertainties of supply & Demand

Transportation : Between the stages

1.) Modes of Transportation 2.) Impact on Responsiveness and Efficiency 3.) Route and Network Selection 4.) Inbound & Outbound Transportation

Information : It is the connection b/w various stages.

1.) Allow coordination b/w different stages 2.) Crucial to daily operation of each stages in supply chain Management 3.) Use of IT Capabilities like Executive Information System (EIS), Internet Information system (IIS), Decision Support system (DSS) 4.) Considered as a Resource in Organization because it requires cost to purchase information, share and transfer it.

Functions of Supply Chain Management

Planning : Operational Plans, Strategic Plans, Long term plans Scheduling Inventory Management Sourcing/Procurement Material Handling Product Design & Devlopment WareHousing Order Processing Transportation ( Inbound/Outbound)

Production scheduling Customer Service Manufacturing Supply Chain Flow Cycles 1.) Material flow 2.) Information flow 3.) Financial and Funds flow

Evolution of Supply Chain Management

Traditional Approach
Lack of Coordination, Information and every considered as Externel Entity

MRP Age of SCM ( Level-1)

(Material Requirement Planning)

Customers & Suppliers treated as External Entities Departments as Separate functionalities Purchase & Production Planning combined to form one Entity

MRP-II Age of SCM

(Manufacturing Resource Planning)

Purchase, Planning & production-Integrated MRP II focused on materials & Capacity integration Customers,Suppliers-external

ERP Age of SCM

(Enterprise Resource Planning)

All departments as one entity Integrated Internal supply chain

Modern Approach
Colloborative Planning Manufacturing organisation closely workswith all trading partners Global E Biz Consumers can have directlink with the manufacturing firm

Global Approach
Each entity a supplier at one or other level know Tiers like Tier 3 Suppliers, Tier 2 suppliers. Tier 1 or First Level Suppliers are connected to different Manufacturing License holder which are connected to Logistics Suppliers which supply product at last to consumer. Just like Modern Approach, Here too there is full Information sharing through sophisticated IT tools.

Global Supply Chain for bear

Current Trends in Supply Chain Management

Expanding the Supply Chain
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 Supply chains will need to benchmark industry performance and meet and improve on a continuous basis 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 Large majority (75%) of U.S. consumers influenced by a firms environmental friendliness reputation 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

Benchmarking- improve over competitors performance Trial & error Increased knowledge of supply chain processes

Role of Supply Chain in Success of Mcdonalds in India

By Aditya Gupta adiityagupta@ymail.com

McDonalds Vision, Mission and Value

Vision To be the best & leading fast food providers around the globe

Mission To be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile." Values Our values summarized in Q.S.C & V. Provide good quality, services to customer . Have cleanliness environment when customer enjoys their meal .The value of food product makes every customer is smiling.

Supply Chain is one of the critical factors for the smooth functioning of any business but When We talk of fast food Giant Mcdonalds, then we can SCM to be of Highest precision and accuracy. It is this unmatched Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut down on its cost and maximize profitability along with maintaining highest quality standards of its products. The level of commitment of McDonalds can be gauged from the fact that even before it set up its first restaurant in the country it infused Rs 400 Crore to set up its delivery mechanism. McDonald's initiative to set up an efficient supply chain and deploy state-of-art technology changed the entire Indian fast food industry and raised the standards of performance to international levels. The success of McDonalds India was achieved by sourcing all

Cold Chain A Unique Concept of McDonalds India

McDonald's spent a few years setting up a unique Cold Chain.

The Cold Chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value.
It immensely benefited Farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely fresh and at great value McDonalds has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products. This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures

Procuremen t

warehousin g

Transportati on

Retailing of food product

Contributors in Success of Mcdonalds

Suppliers : Coming in 1990s, When India was missing a lot for a Successful entry of Fooding giant. In such a Scenario, Local partners and suppliers identified and encouraged them to come in JV with International Suppliers. Formation of Entirely Trust based relationship, no signed paper document but just what we call Handshake agreements. Another Unique think is sharing of Best practices among Suppliers, Distributors and franchises. India Centric R & D : Large investment in India, relying on local supplies. Not just Infrastructure, Mcdonalds helped supplier in improving productivity by R & D. Standardization : Standardized products according to indian needs like going veggie. Now 60% Products that Mcd offers are Veggie Indian R&D Products.

CRM : Discounts and gifts for children, students. Free Discount coupons to regular customers. Encouraging customers to take part in surveys. Helped a lot in

A Success Story of SCM

By Aditya Gupta adiityagupta@ymail.com

Wal-Mart is the Worlds Largest Retail Company

The

companys founder is Sam Walton.

He was born in 1918 at Oklahoma. In 1940, he worked for the famous retailer, J C Penney.
When

it comes to Supply chain management Wal-Marts is boss of all, its phenomenal growth to a billion dollar revenue generating company is all attributed to worlds best and most efficient SCM Practices

Hub and Spoke System

In

the early 1970s, Wal-Mart became one of the first retailing companies in the world to centralize its distribution system, pioneering the retail hub-andspoke system.
Under

the system, goods were centrally ordered, assembled at a massive warehouse, known as distribution center (hub), from where they were dispatched to the individual stores (spoke).

Procurement
Wal-Mart emphasized the need to reduce purchasing costs and offer the best price to the customer. The company directly procured from manufacturers, by passing all intermediaries. Using EDI for Procurement : The computer systems of Wal-Mart were connected to those of its suppliers. EDI enabled the suppliers to download purchase orders along with store-to-store sales information relating to their products sold resulting faster deliveries.

Logistics Management
Hiring

of only dedicated and experienced drivers with history of 3 Lakhs Km accident-free driving.

Inventory Management
Wal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country.
The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales (POS) system. Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves. Better floor area utilization with advanced material handling equipments and IT.

CPFR
By the mid 1990s, Retail Link had emerged into an Internet-enabled SCM system whose functions were not confined to inventory management alone, but also covered collaborative planning, forecasting and replenishment (CPFR).

RFID

Latest is implementation of Radio frequency Identifiaction by Walmarts in its all stores in 2003 by a huge investment of 20 Million $ which reduce dits supply chain management costs and enhanced efficiency.

Walmarts entry in India. Bharti Enterprises tied-up with Walmart for opening a chain of retail stores all over India.

Thank you

For any Constructive comments, plz Contact at adiityagupta@ymail.com +91-8517869472 Bhopal India