Improve operations (Efficiency Vs.
Complex Taxation Structure in India
Increasing levels of outsourcing
Decreasing transportation costs (increasing Fuel
Price in India)
Increasing importance of e-commerce
Need for Today
1Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Local trains are life line of
Mumbai as well as SCM is life
line of Industry today
07/23/14 Lokesh Vijayvargy, Jaipuria, Jaipur 2
Supply Chain Management:
Dell: Inventory turn-over ratio of 58.7 compared
to industry average of 12
Wal-Mart: Inventory turn-over ratio of 9.9
compared to industry average of 5.5
Zara Corporation: Lead-time from new product
to stores is 15 to 20 days compared to industry
average of six months.
07/23/14 Lokesh Vijayvargy, Jaipuria, Jaipur 4
Supply Chain Management:
Cisco: Cisco wrote off 2.2 $ billion worth of inventory in May
2001. Biggest write-off in history.
Sony: PlayStation II–a lost opportunity
SONY could supply only 25% of the potential demand for Christmas
Nintendo Wii Game Console : Shortage expected in year 2007
Kmart Launched supply chain initiative in May 2000 worth $1.4
billion in software and services. In 2001-02, announced that it
was abandoning most of the software purchased and taking $130
Nike- i2 Technology Controversy: Lost $100 in sales in last
quarter of 2000 i2 Technologies was blamed. “ This is what we
get for our $400 million”—Nike Chairman
Wal-Mart: RFID Initiative
07/23/14 Lokesh Vijayvargy, Jaipuria, Jaipur 5
Salient features of SCM
SCM takes into consideration every facility that has an impact
on cost and plays a role in making the product conform to
It takes into account the suppliers’ suppliers and the customers’
It is a system approach, which tries to minimize the system wide
cost and not only emphasizing on minimization of transportation
cost or reducing inventories.
SCM integrates the activities of many levels, from the strategic
level through the tactical to operational level.
The concept of SCM is complementary to logistics management
and both place emphasis on integration of different components.
A supply chain is a network that includes vendors of raw
materials, plants transform those materials into useful products,
and distribution centers to those products to customers.
07/23/14 7Lokesh Vijayvargy, Jaipuria, Jaipur
A supply chain consists of all stages involved, directly
or indirectly, in fulfilling a customer request.
Its existence is to satisfy customer needs, in the
process generating profits for itself.
It not only includes the manufacturer and suppliers,
but also transporters, warehouses, retailers, and
8Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Types of Supply Chain
1107/23/14 Lokesh Vijayvargy, Jaipuria, Jaipur
Evolution of SCM
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Supply Chain Challenges for
the Indian FMCG Sector
Managing Availability in the Complex Distribution
Working with Smaller Pack Sizes
Entry of National Players in the Traditional Fresh
Dealing with a Complex Taxation Structure
Opportunistic Games Played by the Distribution
Emergence of Third-party Logistics Provider
Emergence of Modern Retail Chains
Reservation for Small-scale Sector
In 1979, Kmart was one of the leading companies in the
retail industry, with 1,891 stores and average revenues per
store of $7.25 million.
At that time Wal-Mart was a small niche retailer in the South
with only 229 stores and average revenues about half those of
In 10 years Wal-Mart had transformed itself; in 1992 it had
the highest sales per square foot and the highest inventory
turnover and operating profit of any discount retailer.
Today Wal-Mart is the largest and highest-profit retailer in
the world. In fact, as of 1999, Wal-Mart accounted for nearly
5 percent of U.S. retail spending.
How did Wal-Mart do it?
14Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Wal-Mart's goal was simply to provide customers with
access to goods when and where they want them and to
develop cost structures that enable competitive pricing.
The key to achieving this goal was to make the way the
company replenishes inventory the centerpiece of its
strategy. This was done by using a logistics technique
known as cross-docking.
In this strategy, goods are continuously delivered to Wal-
Mart's warehouses, from where they are dispatched to stores
without ever sitting in inventory. This strategy reduced Wal-
Mart's cost of sales significantly and made it possible to
offer everyday low prices to their customers
15Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Information, product, service, financial and knowledge flows
Capacity, information, core competencies, capital, and human resource constraints
Generalized Supply Chain Model
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Flows in a Supply Chain
17Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Stevans Model of Supply Chain
Stevans have provided a simple model to understand supply-
It involves transforming enterprise from an inward looking
(i.e., whatever the enterprise makes is being sold) to a flexible
outward looking (i.e., producing whatever the market wants it
to sell) in an overall efficient manner.
The transformation can be performed in an effective manner
through a series of phased steps. These steps involve the
recognition of technological, organizational and attitudinal
attributes (see in Fig.).
Integration of the Supply Chain is a four stage process
18Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Stage Objective Functioning part
Stage I Base line Understanding of material flow
from purchasing to distribution.
Stage II Functional
Understanding the functionality of
manufacturing management and
Stage III Internal
Internal integration of material
management and distribution.
Stage IV External
Integration of suppliers, internal
supply chain and customers.
19Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Stage I : Base Line
Stage I is a situation in which company approaches supply chain
tasks in discrete decisions with responsibility lodged in each of the
The result is usually a lack of control across the supply chain
function because of organizational boundaries preventing the
coordinated decisions from achieving an overall customer service
20Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Stage II : Functional
Functional integration of the inward flow of goods
through materials management, manufacturing
management and distribution.
The emphasis is usually on cost reduction rather
than performance achievement;
21Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Stage 3 accepts the necessity of managing the flow of
goods to the customer by integrating the internal activities.
At this stage integrated planning is achieved by using
systems such as distribution requirements planning
(DRP), JIT, manufacturing techniques, etc. IT becomes an
effective enabler in this process.
Stage III : Internal Integration
22Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Stage IV : External Integration
Stage 4 extends the integration to external
activities . In doing so the company becomes
customer orientated by linking customer’s
procurement activities with its own procurement
and marketing activities.
23Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Integrated Supply Chain
Looks at the entire chain
Global rather than local focus
Integrated rather than fragmented approach
24Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
6 key elements to a supply chain
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Select Examples of SC in India
Type of Industry Select ExamplesSelect Examples
Retail Shopper Stop, Life Style, west side,Shopper Stop, Life Style, west side,
Big Bazar, Wal MartBig Bazar, Wal Mart
Automobile Maruti, Hero-Honda, Telco, MahindraMaruti, Hero-Honda, Telco, Mahindra
& Mahindra, Totoya& Mahindra, Totoya
Chemicals/Paints Reliance, Asian Paints, Goodlass
Consumer Durables Samsung, LG, Godrej, BPL, Sony
Fast Moving Consumer Goods Hindustan Lever, Proctor & Gamble,
Food Godrej, Cadbury, Parle, Amul, Dabur
Computers Wipro, HCL, IBM
Newspaper Bennett Coleman & Co(Times of
India,) HT Media Ltd (Hindustan
Times) 26Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Process View of a Supply
Cycle view: processes in a supply chain are divided
into a series of cycles, each performed at the
interfaces between two successive supply chain
Push/pull view: processes in a supply chain are
divided into two categories depending on whether
they are executed in response to a customer order
(pull) or in anticipation of a customer order (push)
Pull process as reactive process
Push process as speculative process
27Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
A cycle-based process view for
supply chain operations
Cycles: A sequence of steps characterizing
the transactions that take places among two
successive stages of the supply chain
Customer Order Cycle
28Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Cycle View of a Supply Chain
Each cycle occurs at the interface between two
Customer order cycle (customer-retailer)
Replenishment cycle (retailer-distributor)
Manufacturing cycle (distributor-manufacturer)
Procurement cycle (manufacturer-supplier)
Figure (see previous slide)
Cycle view clearly defines processes involved and
the owners of each process. Specifies the roles
and responsibilities of each member and the
desired outcome of each process.
29Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Benefits of SCM
Reduce uncertainty along the chain
Proper inventory levels in the chain
Eliminate rush (unplanned) activities
Provide superb customer service
Major contributor of success (ever survival)
30Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
Supply chain management problems
Distribution Network Configuration: Number and location
of suppliers, production facilities, distribution centers,
warehouses and customers.
Distribution Strategy: Centralized versus decentralized, direct
shipment, cross docking, pull or push strategies, third party
Information: Integrate systems and processes through the
supply chain to share valuable information, including demand
signals, forecasts, inventory and transportation.
Inventory Management: Quantity and location of inventory
including raw materials, work-in-process and finished goods.
31Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14