14-1 Supply Chain Management

Supply Chain Management

ROLL NO:- 09301456

BATCH- 002: 2ND Semester
PGPRM(RAI) + MBA(PTU)
NSHM Knowledge Campus, Durgapur
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Supply Chain Management

• Supply Chain: the sequence of

organizations - their facilities, functions,
and activities - that are involved in
producing and delivering a product or
service.

Sometimes referred to as value chains

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Facilities
• Warehouses
• Factories

• Processing centers

• Distribution centers

• Retail outlets

• Offices
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Functions and Activities

• Forecasting
• Purchasing

• Inventory management

• Information management

• Quality assurance

• Scheduling

• Production and delivery

• Customer service
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Typical Supply Chains

Production Distribution
Purchasing Receiving Storage Operations Storage
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Typical Supply Chain for a Manufacturer

Supplier

Supplier

Supplier
} Storage Mfg. Storage Dist. Retailer Customer
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Typical Supply Chain for a Service

Supplier

Supplier
} Storage Service Customer
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Need for Supply Chain Management

1. Improve operations
2. Increasing levels of outsourcing
3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-commerce
7. Complexity of supply chains
8. Manage inventories
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Bullwhip Effect

Amount of
= inventory

Tier 2 Tier 1 Final

Producer
DistributorRetailer
SuppliersSuppliers Customer
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Benefits of Supply Chain Management

PRACTICLE EXAMPLES :

Organization Benefit

Campbell Soup Doubled inventory turnover rate

Hewlett-Packard Cut supply costs 75%

Sport Obermeyer Doubled profits and increased sales 60%

National Bicycle Increased market share from 5% to 29%

Wal-Mart Largest and most profitable retailer in the world

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Benefits of Supply Chain Management

• Lower inventories
• Higher productivity

• Greater agility

• Shorter lead times

• Higher profits

• Greater customer loyalty

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Elements of Supply Chain Management

Element Typical Issues

Customers Determining what customers want
Forecasting Predicting quantity and timing of demand
Design Incorporating customer wants, mfg., and time
Processing Controlling quality, scheduling work
Inventory Meeting demand while managing inventory costs
Purchasing Evaluating suppliers and supporting operations
Suppliers Monitoring supplier quality, delivery, and relations
Location Determining location of facilities
Logistics Deciding how to best move and store materials
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Logistics

• Logistics
• Refers to the movement of materials and
information within a facility and to incoming
and outgoing shipments of goods and
materials in a supply chain
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Logistics

• Movement within the facility

• Incoming and outgoing shipments
• Bar coding
• EDI
0
• Distribution
• JIT Deliveries 214800 232087768
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Electronic Data Interchange

• EDI – the direct transmission of

interorganizational transactions, computer-to-
computer, including purchase orders,
shipping notices, and debit or credit memos.
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Electronic Data Interchange

ADVANTAGES :

• Increased productivity
• Reduction of paperwork

• Lead time and inventory reduction

• Facilitation of just-in-time systems

• Electronic transfer of funds

• Improved control of operations

• Reduction in clerical labor

• Increased accuracy
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Efficient Consumer Response

• Efficient consumer response (ECR) is a

supply chain management initiative specific
to the food industry
• Reflects companies’ efforts to achieve quick
response using EDI and bar codes
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E-Commerce

• E-Commerce: the use of electronic

technology to facilitate business transactions
• Applications include
• Internet buying and selling
• E-mail

• Order and shipment tracking

• Electronic data interchange

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Advantages of E-Commerce

• Companies can:
• Have a global presence
• Improve competitiveness and quality
• Analyze customer interests
• Collect detailed information
• Shorten supply chain response times
• Realize substantial cost savings
• Create virtual companies
• Level the playing field for small companies
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Disadvantages of E-Commerce

• Customer expectations
• Order quickly -> fast delivery
• Order fulfillment
• Order rate often exceeds ability to fulfill it
• Inventory holding
• Outsourcing loss of control
• Internal holding costs
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Supply Chain Performance Drivers

1. Quality
2. Cost
3. Flexibility
4. Velocity
5. Customer service
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Velocity

• Inventory velocity
• The rate at which inventory(material) goes
through the supply chain (STR ratio)
• Information velocity
• The rate at which information is
communicated in a supply chain
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Challenges
• Barriers to integration of organizations
• Getting top management on board
• Dealing with trade-offs
• Small businesses
• Variability and uncertainty
• Long lead times
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Trade-offs
1. Lot-size-inventory
• Bullwhip effect
1. Inventory-transportation costs
• Cross-docking
1. Lead time-transportation costs
2. Product variety-inventory
• Delayed differentiation
1. Cost-customer service
• Disintermediation
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Trade-offs
• Bullwhip effect
• Inventories are progressively larger moving
backward through the supply chain
• Cross-docking
• Goods arriving at a warehouse from a supplier
are unloaded from the supplier’s truck and
loaded onto outbound trucks
• Avoids warehouse storage
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Trade-offs
• Delayed differentiation
• Production of standard components and
subassemblies, which are held until late in the
process to add differentiating features
• Disintermediation
• Reducing one or more steps in a supply chain
by cutting out one or more intermediaries
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Supply Chain Issues

Strategic Tactical Issues Operating Issues

Issues
Design of the Inventory policies Quality control
supply chain, Purchasing policies Production planning and
partnering Production policies control
Transportation
policies
Quality policies
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Supply Chain Benefits and Drawbacks

Problem Potential Benefits Possible

Improvement Drawbacks

Large Smaller, more frequent Reduced holding Traffic congestion

inventories deliveries costs Increased costs
Long lead times Delayed differentiation Quick response May not be feasible
Disintermediation May need absorb
functions
Large number of Modular Fewer parts Less variety
parts Simpler ordering
Cost Outsourcing Reduced cost, higher Loss of control
Quality quality
Variability Shorter lead times, better Able to match supply Less variety
forecasts and demand
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Purchasing

• Purchasing is responsible for obtaining the

materials, parts, and supplies and services
needed to produce a product or provide a
service.
Goal of Purchasing

• Develop and implement purchasing plans for

products and services that support operations
strategies
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Duties of Purchasing

• Identifying sources of supply

• Negotiating contracts
• Maintaining a database of suppliers
• Obtaining goods and services
• Managing supplies
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Purchasing Interfaces

Legal

Operations Accounting

Data
Purchasing
processing

Design

Receiving
Suppliers
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Purchasing Cycle
Legal
1. Requisition received
Operations
Accounting

2. Supplier selected
3. Order is placed Purchasing
Data
process-
ing

4. Monitor orders
5. Receive orders Design

Receiving
Suppliers
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Centralized vs Decentralized Purchasing

• Centralized purchasing
• Purchasing is handled by one special
department
• Decentralized purchasing
• Individual departments or separate locations
handle their own purchasing requirements
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Suppliers

• Choosing suppliers
• Evaluating sources of supply
• Supplier audits
• Supplier certification
• Supplier relationships
• Supplier partnerships
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Factors in Choosing a Supplier

• Quality and quality assurance

• Flexibility

• Location

• Price

• Product or service changes

• Reputation and financial stability

• Lead times and on-time delivery

• Other accounts
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Evaluating Sources of Supply

• Vendor analysis: Evaluating the sources of

supply in terms of price, quality, reputation,
and service
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Evaluating Sources of Supply

• Vendor analysis - evaluating the sources of

supply in terms of
• Price
• Quality
• Services
• Location
• Inventory policy
• Flexibility
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Supplier as a Partner

Aspect Adversary Partner

Number of suppliers Many One or a few
Length of relationship May be brief Long-term
Low price Major consideration Moderately important
Reliability May not be high High
Openness Low High
Quality May be unreliable; buyer At the source; vendor
inspects certified
Volume of business May be low High
Flexibility Relatively low Relatively high
Location Widely dispersed Nearness is important
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Supplier Partnerships
• Ideas from suppliers could lead to improved
competitiveness
1. Reduce cost of making the purchase
2. Reduce transportation costs
3. Reduce production costs
4. Improve product quality
5. Improve product design
6. Reduce time to market
7. Improve customer satisfaction
8. Reduce inventory costs
9. Introduce new products or services
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