SUPPLY CHAIN MANAGEMENT Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Parties involved.
STRATEGIC ALLIANCES An alliance is cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts
TYPES OF STRATEGIC ALLIANCES Third Party Logistic: 3PL is the use of an outside company to perform all or part of the firm’s material management and product distribution functions. Retailer-Supplier Partnerships: It’s the formation of strategic alliances between the retailers and their suppliers. Distributor Integration: This appreciates the value of the distributors and their relationship with the end users and provides them with the necessary support to be successful.
Alliance type Decision maker Inventory New skills ownership required by vendorsQuick Retailer Retailer Forecastingresponse skillsContinuous Contractually Either party Forecastingreplenishment agreed-to levels and inventory controlAdvanced Contractually Either party Forecastingcontinuous agreed-to and and inventoryreplenishment continuously control improved levelsVendor Vendor Either party Retailmanaged managementinventory
REQUIREMENTS FOR RSP Advanced information systems Top management commitment Information must be shared Power and responsibility within an organization might change. Mutual trust Information sharing Management of the entire supply chain Initial loss of revenues
ISSUES IN RSP IMPLEMENTATION Inventory ownership Performance measures: Fill rate, inventory level, inventory turns Confidentiality Communication and cooperation
ADVANTAGES OF RSP Fully utilize system knowledge (retailer) Manufacturer may predict demand better Focus on retailing rather than logistics. Reduce bullwhip effect (vendor) Reduced inventory and/or increased service level Ability to coordinate replenishments to different retailers.
DISADVANTAGES OF RSP Expensive advanced information technology is required. Supplier/retailer trust must be developed. Supplier responsibility increases. Expenses at the supplier often increase.
EXAMPLE In 2003, Maruti produced 359,960 vehicles, operating at a capacity utilization of 103%, against the industry average of 57.8%. Vendor management became an important area as Maruti attempted to improve operational efficiency. Maruti procured components worth about Rs.5,000 crores every year.
The companys top 10 vendors accounted for about 34 % of its aggregate purchases of components from vendors in India. Maruti was working on a 3.5% per annum reduction in vendor prices by 2004-2005. Maruti streamlined the sourcing and stocking of materials and components through its Delivery Instruction system, one of Suzukis best practices.
This system provided details of Marutis component requirements for every 15 days, across the different variants of the various models, to its vendors. Web initiatives helped Maruti to bring down procurement time and costs.