Supply Chain Management


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Supply Chain Management

  1. 1. Improve operations (Efficiency Vs. Responsiveness) Complex Taxation Structure in India Increasing levels of outsourcing Decreasing transportation costs (increasing Fuel Price in India) Competitive pressures Increasing globalization Increasing importance of e-commerce Manage inventories Need for Today 1Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  2. 2. 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
  3. 3. Supply Chain Management 3Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  4. 4. Supply Chain Management: Success Stories 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
  5. 5. Supply Chain Management: Horror Stories 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 market 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 million write-off 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
  6. 6. Complexity of Amul supply chain 07/23/14 6Lokesh Vijayvargy, Jaipuria, Jaipur
  7. 7. 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 customer requirements. It takes into account the suppliers’ suppliers and the customers’ 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
  8. 8. Supply Chain 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 customers themselves. 8Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  10. 10. Supply Sources: plants vendors ports Regional Warehouses: stocking points Field Warehouses: stocking points Customers, demand centers sinks Production/ purchase costs Inventory & warehousing costs Transportation costs Inventory & warehousing costs Transportation costs 10Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  11. 11. Types of Supply Chain 1107/23/14 Lokesh Vijayvargy, Jaipuria, Jaipur
  12. 12. Evolution of SCM 1207/23/14 Lokesh Vijayvargy, Jaipuria, Jaipur
  13. 13. Supply Chain Challenges for the Indian FMCG Sector Managing Availability in the Complex Distribution Set up Working with Smaller Pack Sizes Entry of National Players in the Traditional Fresh Products Sector Dealing with a Complex Taxation Structure Opportunistic Games Played by the Distribution Channel Infrastructure Emergence of Third-party Logistics Provider Emergence of Modern Retail Chains Reservation for Small-scale Sector
  14. 14. Example 4 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 Kmart stores. 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
  15. 15. 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
  16. 16. Information, product, service, financial and knowledge flows Materials EndConsumers Capacity, information, core competencies, capital, and human resource constraints Supplier Network Market Distribution Procurement Manufacturing Integrated Enterprise Distribution Network Relationship Management Generalized Supply Chain Model Material Flow Information Flow 16Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  17. 17. Flows in a Supply Chain Customer Information Product Funds 17Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  18. 18. Stevans Model of Supply Chain Integration Stevans have provided a simple model to understand supply- chain integration. 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 involving 18Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  19. 19. Stage Objective Functioning part Stage I Base line Understanding of material flow from purchasing to distribution. Stage II Functional Integration Understanding the functionality of material management, manufacturing management and distribution. Stage III Internal Integration Internal integration of material management, manufacturing management and distribution. Stage IV External Integration Integration of suppliers, internal supply chain and customers. 19Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  20. 20. 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 task centers. 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 objective. 20Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  21. 21. Stage II : Functional Integration 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
  22. 22. 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
  23. 23. 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
  24. 24. Purchasing Manufacturing Distribution S U P P L I E R S Sales Integrated Supply Chain Approach Looks at the entire chain Global rather than local focus Integrated rather than fragmented approach C U S T O M E R S 24Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  25. 25. 6 key elements to a supply chain Production Supply Inventory Location Transportation Information 25Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  26. 26. 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 Nerolac Consumer Durables Samsung, LG, Godrej, BPL, Sony Fast Moving Consumer Goods Hindustan Lever, Proctor & Gamble, Coca-Cola, Pepsi, 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
  27. 27. Process View of a Supply Chain Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages 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
  28. 28. 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 Stages Customer Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Retailer Distributor Manufacturer Supplier 28Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  29. 29. Cycle View of a Supply Chain Each cycle occurs at the interface between two successive stages 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
  30. 30. Benefits of SCM Reduce uncertainty along the chain Proper inventory levels in the chain Minimize delays Eliminate rush (unplanned) activities Provide superb customer service Major contributor of success (ever survival) 30Lokesh Vijayvargy, Jaipuria, Jaipur07/23/14
  31. 31. 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 logistics. 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