Itl lecture-05 & 06 (supply chain management)
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Itl lecture-05 & 06 (supply chain management)
- 1. 07/06/10 1 By : Prof. Amit Kumar
- 2. 07/06/10 2 “Logistics has advanced from warehousing and transportation to boardrooms of the successful leading companies across the world. Due to increasing importance of business logistics, it becomes necessary for the student pursuing management education from IILM- Graduate School of Management, to understand logistics, its basic framework and practical utility.” IILM-GSM Importance of this course International Trade Logistics
- 3. 07/06/10 3 Course: International Trade Logistics 1. Logistics - At the Centre of World Trade 2. Supply Chain Management 3. Warehousing: A Role Beyond Storage 4. Material Handling & Storage System 5. Transportation: Backbone of Logistics 6. Logistics Packaging 7. Logistics Information System 8. Global Logistics & Outsourcing IILM-GSM International Trade Logistics
- 4. 07/06/10 4 IILM-GSM International Trade Logistics Supply Chain Management
- 5. 07/05/10f4t 5 Contents • Simple Supply Chain Loop • Competitive Framework of Supply Chain • What is Supply Chain Management? • Supply Chain Initiatives by Modi Xerox, Telco, Godrej • Supply Chain: Subset of a Company’s Value Chain • Supply Chain Linkage Procurement Processing Distribution • Supply Chain Relation: A Case of FORD • Logistics Vs Supply Chain Management • Top 10 Benefits, Barriers and Bridges to Supply Chain • Case Study: CEAT- Redesigning Supply Chain System • Video: Global Supply Chain of Wal-Mart IILM-GSM International Trade Logistics Supply Chain Management
- 6. Simple Example of Supply Chain Loop Sales Suppliers Purchasing Producing Customers Delivering IILM-GSM International Trade Logistics Supply Chain Management
- 7. Competitive Framework of Supply Chain Response Company Market S U P P L I E R S C U S T O M E R S Competitors Service Flexibility Cost Quality O/P O/P I/P I/P Demand Demand Market Size IILM-GSM International Trade Logistics Supply Chain Management
- 8. 07/05/10 8 • SCM is basically an information-based process that integrates the various activities from raw material supply to manufacturing and finally to the supply of finished products and services to end customer. • SCM takes into consideration cross-functional integration. This integrated process results in enhanced customer value at the least cost. • The objective of every chain is to maximize the overall value generated through – Faster and timely delivery Improved quality and services Reduced cost What is Supply Chain Management? IILM-GSM International Trade Logistics Supply Chain Management
- 9. Business Consulting Services Value Chain Value chain - processes which enable a company to bring its products from conception to market Supply Chain : Subset of a Company’s Value Chain Manage Procurement Manage Customer Service Manage Production Manage Distribution Perform Marketing and Sales Develop Products and Services Supply Chain Supply chain – value chain processes which enable a company to fulfill short-term to medium-term demand in the market Supply Chain boundaries are best described in terms of processes - Supply Chain: Subset of a Value Chain International Trade Logistics Supply Chain Management IILM-GSM 9
- 10. 07/05/10 10 Supply Chain Initiatives by Modi Xerox, Telco, Godrej, Maruti Udyog & Sunderam Fasteners IILM-GSM International Trade Logistics Supply Chain Management
- 11. 07/05/10 11 Modi Xerox Limited is leveraging on its supply chain strategy to improve customer satisfaction by reducing cycle time, enhancing productivity and keeping on-time delivery so as to lead the market. Supply Chain Initiatives by Modi Xerox IILM-GSM International Trade Logistics Supply Chain Management
- 12. 07/05/10 12 Telco is managing inventories through a vendor-based supply chain and moving towards the JIT system to cut inventory-carrying costs. Telco have inducted Dynamic Logistics, a 3PL service supplier, in their supply chain for spare parts management of commercial vehicles and passenger cars. The benefits are a 50% reduction in logistics costs and on-time delivery to customers- a win-win situation. Supply Chain Initiatives by Telco IILM-GSM International Trade Logistics Supply Chain Management
- 13. 07/05/10 13 In Godrej-GE, 60% of the product cost is covered by raw material that is entirely outsourced to control costs, delivery schedules and product quality so as to run an efficient and lean supply chain. Supply Chain Initiatives by Godrej IILM-GSM International Trade Logistics Supply Chain Management
- 14. 07/05/10 14 To extent the JIT system for a lean supply chain, Maruti has located 70% of its vendors within 100-km radius of their Gurgaon factory. Supply Chain Initiatives by Maruti Udyog IILM-GSM International Trade Logistics Supply Chain Management
- 15. 07/05/10 15 Sunderam Fastner, a Chennai-based high tensile fastener and radiator cap manufacturer, in line with its supply chain strategy of vendor base reduction, appointed Southampton (UK) as their consolidation agent for all supplies of steel coils and components to be shipped from Europe to their manufacturing plant in Chennai. Supply Chain Initiatives by Sunderam Fasteners IILM-GSM International Trade Logistics Supply Chain Management
- 16. Business Consulting Services Value Chain Value chain - processes which enable a company to bring its products from conception to market Supply Chain : Subset of a Company’s Value Chain Manage Procurement Manage Customer Service Manage Production Manage Distribution Perform Marketing and Sales Develop Products and Services Supply Chain Supply chain – value chain processes which enable a company to fulfill short-term to medium-term demand in the market Supply Chain boundaries are best described in terms of processes - Supply Chain: Subset of a Value Chain International Trade Logistics Supply Chain Management IILM-GSM 16
- 17. 07/05/10 17 Competition today is not between individual companies but between supply chains. Hence, for a supply chain to be successful, it should integrate the three individual business processes of procurement, manufacturing and distribution by consolidating the sub-linkages in each of the functional areas. Supply Chain Linkage IILM-GSM International Trade Logistics Supply Chain Management Procurement Processing Distribution CustomersSuppliers Inventory Flow Information Flow Supplier Partnership Material Planning Material Schedule Production Scheduling JIT Inventory System Flexibility Demand Planning Quick Response Postponement
- 18. 07/05/10 18 • This is one of the major cost drivers in the supply chain. • The procurement cost is influenced by the following factors: The way procurement decisions are made Procedures adopted in the procurement process Relationship with the suppliers Firm’s credibility, Market intelligence • Procurement cost can be controlled through long-term relationships with suppliers, by considering the supplier as an extension of your manufacturing facility. Supply Chain Linkage: Procurement IILM-GSM International Trade Logistics Supply Chain Management
- 19. 07/05/10 19 • A major step in this process is reduction of the supplier base and induction of few reliable suppliers who are ready to work for requirement of the firm’s supply chain. Rank Xerox has reduced its supplier base from 5000 to 300. The company has appointed a few distributors who collect the materials from various suppliers and dispatch them to the manufacturer. As a result, the manufacturer needs to tap only a few source of supply. Supply Chain Linkage: Procurement IILM-GSM International Trade Logistics Supply Chain Management
- 20. 07/05/10 20 • Material Requirement Planning (MRP) is a critical element in the procurement process. Hence, in a co-partnership arrangement the material planning process will cover inventory requirements for the entire supply chain. In US, auto giants such as Ford, GM and Chrysler engage in online procurement planning with their ancillary suppliers. Due to real-time information sharing, a supply chain operating on the JIT system is flexible enough to take care of any fluctuations in market demand. Supply Chain Linkage: Procurement IILM-GSM International Trade Logistics Supply Chain Management
- 21. 07/05/10 21 • Now a days firms , instead of banking on cost reduction through Economies of Scale, plan strategies to reduce the total supply chain cost through manufacturing flexibility in order to rapidly respond to the changing market demands. • Manufacturing flexibility does not necessarily means the use of automation or robotics in the process plant, but rather a zero lead time to meet customer requirements with zero inventories. Supply Chain Linkage: Processing IILM-GSM International Trade Logistics Supply Chain Management
- 22. 07/05/10 22 • In SCM the major task of distribution relates to the management of demand, that is to make available right product at the right place with the right time at least cost. • Requirement fulfillment is done through proper distribution network. • Logistics plays a vital role in understanding demand through improved information flow by way of quick response to customer requirements. Supply Chain Linkage: Distribution IILM-GSM International Trade Logistics Supply Chain Management
- 23. Logistics Vs. Supply Chain Management IILM-GSM International Trade Logistics Supply Chain Management Logistic SCM TRADITIONALIST SCM Logistic UNIONIST Logistic SCM RE-LABELLING INTERSECTIONIST
- 24. Logistics Vs. Supply Chain Management Most Relevant: Unionist view IILM-GSM International Trade Logistics Supply Chain Management In general, logistics includes physical distribution, warehousing, freight transportation (inbound and outbound). Supply chain (for a manufacturer) includes the logistics business functions above, and also includes procurement, purchasing, manufacturing operations, production scheduling, inventory control, materials management, facilities location planning, the information technology to coordinate between suppliers, the company, and customers (wholesalers and retailers and end users).
- 25. Logistics Vs. Supply Chain Management IILM-GSM International Trade Logistics Supply Chain Management 07/05/10 25 Logistics Supply Chain Physical bond Mental & emotional bonding Free flow of product, information and cash Capacity to allow this flow Synonymous with flow within and between Leads to integration in flow Ensures an opportunities Creates an opportunity Ensures cost-effectiveness Ensures competitiveness Guarantees quality at the customer level Guarantees quality at the production level Satisfies a market Creates a market
- 26. Top Ten Benefits, Barriers and Bridges to Supply Chain IILM-GSM International Trade Logistics Supply Chain Management The Centre of Advanced Purchasing Studies made a research of what the most common benefits, barriers, and bridges when implementing advanced supply chain practices are. The research was based on 52 interviews with carefully selected companies perceived by academia as the ones who do SCM well.
- 27. Top Ten Benefits, Barriers and Bridges to Supply Chain IILM-GSM International Trade Logistics Supply Chain Management
- 28. Case Study IILM-GSM International Trade Logistics Supply Chain Management CEAT Redesigning Supply Chain System
- 29. CEAT: Redesigning Supply Chain System IILM-GSM International Trade Logistics Supply Chain Management 1. What measures were initiated by the CEAT to overcome the supply chain problems? 2. Why logistics was a major focus for redesigning the CEAT supply chain? 3. How CEAT’s logistics programs differed for serving different market segments? Review Questions:
Editor's Notes
- Before the strating..play the video of UPS..and let them draw the vaue chain of the UPS ..or let them noted down the logistics activities involved in UPS August 28, 1907: 19-year-old Jim Casey and 18-year-old Claude Ryan founded the American Messenger Company in Seattle, Washington, capitalized with $100 in debt. United Parcel Service, Inc. (NYSE: UPS), colloquially referred to as UPS, is a package delivery company. Headquartered in Sandy Springs, Georgia, United States, UPS delivers more than 15 million packages a day to 6.1 million customers in more than 220 countries and territories around the world.[2][3][4] UPS is well known for its brown trucks, internally known as package cars (hence the company nickname "The Big Brown Machine"). UPS also operates its own airline (IATA: 5X, ICAO: UPS, Call sign: UPS) based in Louisville, Kentucky.
- Supply Chain Relation: A Case of FORD..page 47 reji ismaile logistics mgt
- Means integration between varuois functions (related to procurement, processing and distribution) is very important in case of scm…
- Modi..group as conglomerate…in fashion…in health acre…in engineering…consumer groups…
- Vendor based suply cahin is like….lean manufactruring and moving towarsd JIT Formerly known as TELCO( TATA Engineering and Locomotive (meeans railway locomotive produced power through a steam engine) Company ), Tata motor is one of the India's largest private sector company and commercial vehicle manufacturer comprising a market share of 31.2% in the multi-utility vehicles segment and 6.4% in the luxury car segment. The company manufactures heavy commercial vehicles (HCV), light commercial vehicles (LCV), passenger cars and multi-utility vehicles.Established in year 1945, TELCO is one of the India's premier automobile companies which manufacture steam locomotives. Annual turnover of the company is Rs.101.3 billion. Tata motors has been known all across the world and
- White goods industry..heavy consumer durable goods like air conditioners, refrigerator, washing machine..which used to be painted only in which enamel finsih..inside is white..enamel..the hard white outer layer of a tooth..a type of pasint that dries to leave a hard shiny surface Industry Consumer Products, Edible oilss,Chemicals, Household, Products, Properties The joint venture Godrej-GE Appliances Ltd had been manufacturing and marketing refrigerators and washing machines. Godrej has been a long-standing player in the white goods industry, particularly in the small and medium size refrigerators segment. The c ompany decided to ally with GE Appliances, one of the largest American appliances manufacturer, due to the synergies that the latter could provide with its larger capacity appliances.
- First procurement decision then purchasing..both are interrelated goes together… Consolidate.. To unite into one system or whole; combine: consolidated five separate Material planning..which quality materials has to procure… Material scheduling…by how much quantity..within what time frame…. Scheduling is an important tool for manufacturing and engineering, where it can have a major impact on the productivity of a process. In manufacturing, the purpose of scheduling is to minimize the production time and costs, by telling a production facility when to make, with which staff, and on which equipment. Production scheduling aims to maximize the efficiency of the operation and reduce costs. Production scheduling tools greatly outperform older manual scheduling methods. These provide the production scheduler with powerful graphical interfaces which can be used to visually optimize real-time work loads in various stages of production, and pattern recognition allows the software to automatically create scheduling opportunities which might not be apparent without this view into the data. For example, an airline might wish to minimize the number of airport gates required for its aircraft, in order to reduce costs, and scheduling software can allow the planners to see how this can be done, by analyzing time tables, aircraft usage, or the flow of passengers. Companies use backward and forward scheduling to allocate plant and machinery resources, plan human resources, plan production processes and purchase materials. Forward scheduling is planning the tasks from the date resources become available to determine the shipping date or the due date. Backward scheduling is planning the tasks from the due date or required-by date to determine the start date and/or any changes in capacity required. The benefits of production scheduling include: Process change-over reduction Inventory reduction, leveling Reduced scheduling effort Increased production efficiency Labor load leveling Accurate delivery date quotes Real time information Play the video of procurement or purchasinfg…. Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. Just-in-time production method is also called the Toyota Production System. To meet JIT objectives, the process relies on signals or Kanban (看板 Kanban?) between different points in the process, which tell production when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality. Postponement is a business strategy that maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment. An example of this strategy is Dell Computers' build-to-order online store. ''''Postponement in SCM ' Postponement is a concept in supply chain management where the manufacturer produces a generic product which can be modified at the later stages when the final hand over to the customer happens. Take for example of a umbrella manufacturer who does not know what will be the final demand of umbrellas of blue color. So to tackle this he manufactures all the umbrellas of white colors and later dye them when finally the rainy season comes and color demand pictures gets clearer. This way not only he saves himself from the lost sales and less customer satisfaction but also this way he can maintain a low buffer for each color stock as he is free to use all the white umbrellas to dye them in any of the colors.
- Rank xerox is a JV between Xerox US and Rank UK…remember IPLC theory in Internatioanl trade theory
- Ancillary…who having Of secondary importance..prime imporatnce in give empaghsisi on core competencyise and all..involve in R & D etc… MRP is also maximum retail price In indian context, Telco, mahindras and maruti udyog are linking their procurement planning to the supplier’s production schedule and the purchase order schedule of their customers.
- Previous concept was mass production… In the past, emphasis was on mega capacity factories to produce standard products in millions to reduce manufactiuring cost and flood the market with low priced products..focus was on fcousesd factories to manufactirer standard products for global consumption..it mena scomany used to have lardge reservior of finished goods inventory that remained unsold and almost dead because its inability to respond to cthe cahanging needs of the customer..but now a dayds….
- As we have discussed order filfillemt strategy (bilud to stoc k or rorder etc )…Requirement fulfillment is done through proper distribution network. A quick response will help speed up inventory replenishment, reduce the inventory level across the supply chain, as well as reduce inventory carrying cost.
- After this show the video of capegamini sCM summit//.. As we have seen logistics mix…..supply cahin mix (related functions are in value chain) When defining supply chain management, it is common to relate it to logistics to better understand the approach, since the concept of supply chain management started in the logistics literature. Halldorsson and Larson show that supply chain management relative to logistics can be viewed in four different ways (see Figure 2-4). They propose that one reason for these multiple perspectives is that supply chain management has not been made transparent by one universal definition. Figure 2-4: Perspectives of SCM versus Logistic Source: Halldorsson, et al., 2000, p.220 According to the Traditionalists view, the logistic function hires “supply chain analysts” to focus on cross-functional, and inter-organizational issues. Some authors do not distinguish between supply chain management and logistic. They just change the name. The Unionists view supply chain management as more than simply logistic, but rather also as purchasing, operations, and marketing 9we saw the function of logistics in logistics mix). While Intersectionists, describe it as a staff function or internal consultants. SCM considers strategic, integrative elements from several functional areas (logistics, purchasing, operations, and marketing); however, it does not involve tactical elements, such as picking orders in a warehouse. For the supply chain management implemented at DHBA, the most relevant definition from the ones mentioned above would be Unionist view of supply chain management. This is because the supply chain management in DHBA involves all decisions along the flow of the goods (purchasing, manufacturing, logistic, customer service). Examples of such view are definitions from Christopher and Schary. Christopher defines supply chain management as an extension of logistic. Logistic is essentially a planning orientation and framework that seeks to create a single plan for the flow of products and information through a business. Supply chain management builds upon this framework and seeks to achieve linkage and coordination between processes of the entities in the pipeline. Schary also sees supply chain as more than logistic. It includes the flow of materials and products to customers and more than that; it includes also the organizations that are part of these processes, crossing organizational boundaries to link their internal operations as part of this system. The supply chain recognizes that there are cooperative arrangements that tie firms to each other and in that way tie their success to the chain as a whole. The scope of supply chain spans the entire set of organizations from procurement of material and product components to delivery of the completed product to the final customer. The comparison of logistic and supply chain management can also be made on the basis of the value chain theory by Porter (1985, p. 33). Every company is a collection of activities that are performed to design, produce, and market, deliver, and support its product. They can be represented in a generic value chain shown in Figure 2-5. Figure 2-5: Generic Value Chain
- Creates a market in a sence..through the proper info u know abt the demand Physical in a sence..warehouse,,transportt..which appears in a tangible form.. Ensure means guarantee… Mental & emotional bonding (through change management workshops and training, top mgt involved in decision making..emotional relationship between the stakeholders) …logistics as at operational level but SCM as at Strategic level…where we make all the planning on the paper… In value chain..Logistics is a chain of only primary activities…but supply chain is a mix of both P & Secondary In logistics we talk abut individual functiionality like W, T, Material handling ..storgae etc but in Supply chain we talk abut integration of all 3 prime activities Logistisc decision are at operational level; (how to run the operations or activities..how many manp[ower required..what should be weraehosuing structure..how many (not which) control or material handling equipmenst are required etc) But in supply chain..at strategic level..how to procure,,process and distribute (making the decision by top mgt people)
- The result of the survey shows (next), that most common benefits are related to increased responsiveness of the companies (external and internal), lower cost, better quality, and closer relationships with key partners. Source: Fawcet, 2003, p. 12 The main barriers presented in the Figure 3-12 can be summarized into management and organizational issues within the organization and with external partners. The most common bridges that can help overcome barriers are: senior and functional management support, open and honest information sharing, good measurement systems, process documentation, education and training, use of supply chain advisory council.