• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Bull Whip
 

Bull Whip

on

  • 2,169 views

 

Statistics

Views

Total Views
2,169
Views on SlideShare
2,163
Embed Views
6

Actions

Likes
1
Downloads
61
Comments
0

2 Embeds 6

http://www.slideshare.net 5
http://translate.googleusercontent.com 1

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Bull Whip Bull Whip Presentation Transcript

    •  
    • Indian Supply Chain Practices Dr. B.S. Sahay Dean (Research & Consultancy) Management Development Institute Gurgaon, India Conference on “ Winning with Intelligent Supply Chains” ( WISC 2004) FICCI, 24 September 2004
    • Presentation Agenda
      • Some Facts
      • The Dynamics of Supply Chain
      • Supply Chain Practices in India
        • Supply Chain Processes
        • Inventory Management
        • Manufacturing Management
        • Outsourcing
        • Customer-Supplier Involvement
        • E- Supply Chains
        • Supply Chain Implementation
      • Supply Chain Framework
      • Recommendations
    • Some Facts
      • GDP : Rs. 27.55 Lakh Crores*
      • Inventory tied up : Rs. 1.17 Lakh Crores
      • Logistics Cost : 14% of our GDP
      • 1% Reduction in LC : Rs. 27550 Crorers
      • 2% Reduction in LC : Rs. 55100 Crorers
      • * Economic Survey 2003-04
    • Logistics Cost 13.5 281.5 Taiwan 12.4 87.0 Singapore 12.4 468.7 Korea 10.5 3996.2 Japan 14.0 460.0 India 14.5 1237.1 China Mainland Asian Region 10-11 393.0 Australia Logistics Cost as % of GDP GDP (USD b)* Country * World Competitiveness Year Book 2003
    • Logistics Cost 08.7 10445.6 USA 14.4 637.3 Mexico 11.8 729.3 Canada North American Region 12.2 1555.2 UK 12.1 654.0 Spain 12.2 418.8 Netherlands 12.6 1186.0 Italy 11.8 1987.0 Germany 11.7 1419.3 France European Region Logistics Cost as % of GDP GDP (USD b)* Country * World Competitiveness Year Book 2003
    • International Comparison of Customer Orientation 74.43 57.70 62.62 69.84 59.67 USA 66.50 54.00 57.00 58.50 63.00 Thailand 57.14 47.14 59.29 48.57 60.71 South Korea 74.76 68.44 69.78 63.11 72.89 Netherlands 72.20 89.76 93.17 81.46 92.68 Japan 52.43 41.08 30.27 34.05 41.08 India 75.83 78.61 88.06 71.39 92.50 Germany 66.09 45.56 44.64 66.96 55.94 France 66.45 62.50 62.19 58.06 68.13 Canada 51.83 39.15 36.34 56.62 52.39 Brazil Managing Distribution After-Sales Service On-Time Delivery Product Design Product Quality Parameters Note: Companies are rated 0=poor to 100=excellent
    • Elements of Logistics cost
      • Transportation 35% 
      • Inventories 25% 
      • Losses 14% 
      • Packaging 11% 
      • Handling and Warehousing 9% 
      • Customers' shopping 6% 
    • The Dynamics of the Supply Chain Order Size Time Customer Demand Retailer Orders Distributor Orders Production Plan
    • The Dynamics of the Supply Chain Order Size Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Customer Demand Production Plan
    • Traditional Planning Approach Characterized by Sequential, Decomposed, Slow Sales & Distribution (Demand) Manufacturing (Capacity) Procurement (Material) C U S T O M E R Optimize to Mfg objectives Optimize to Logistics obj Optimize to Sales & Mktg obj
    • “ Globally” Integrated Planning “ The sum of the local optima do not equal the global optimum.” (Goldratt, Theory of Constraints, 1986)
    • 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
    • What’s New in Supply Chain?
      • Global competition
      • Well informed more powerful Customers
      • Customer Expectations
      • Shorter product life cycle
      • New, low-cost distribution channels
      • Internet and E-Business strategies
    • What’s New in Supply Chain?
      • Global competition
      • More powerful well informed customers
      • Customer expectations
      • Shorter product life cycle
      • New, low-cost distribution channels
      • Internet and E-Business strategies
    • Research Project Indian Supply Chain Management Practices
      • Detailed Survey Questionnaire
      • 1756 organisations
      • Received 153 responses
      • Major sectors represented in the all-India study - Agri Products, Automotive, Chemicals/Fertilizers, Computer Hardware, Consumer Durables, Engineering, FMCG, Metals, Oil/Gas, Pharmaceuticals, Retail, Telecommunications, Textile/Apparel
    • Profile of Responding Companies North 38% East 10% West 33% South 19%
    • Respondents by Ownership Public Limited (77%) Public Sector (5%) Private (18%)
    • Participation by Management Level Vice President 17% Director/GM 28% Sr.Manager 25% Manager 16% CEO/COO/CFO/ President 14%
    • Business Objectives 4.02 Increase earning per share 4.27 Deliver Highest Value to Shareholders 4.28 Increase Return on Investment 4.37 Increase turnover (sales) 4.46 Maximize Profit 4.82 Maximize Customer Satisfaction Weighted Score for Importance Overall Business Objectives
    • Supply Chain Objectives 3.43 Having Products in Stock 3.62 Expanding Width/Depth of Distribution 3.64 Reducing/Rationalise Supplier Base 3.68 Reducing Warehouse Cost 3.96 Reducing Transportation Cost 4.28 Reducing Lead Time 4.33 Reducing Order to Delivery Cycle Time 4.45 Improving On-Time Delivery 4.52 Reducing Inventory Cost 4.56 Expanding Sales Revenue 4.93 Enhancing Customer Service Weighted Score Supply Chain Objectives
    • Supply Chain Processes 0 1 2 3 4 5 Customer Service Demand Management Inventory Management Order Processing/Fulfillment Manufacturing Product Development Transportation Distribution Management Import Export Management Promotion Planning Warehousing Criticality Score Critical Processes
    • Inventory Management The Indian Scenario Inventory Overall Industry Sector Averages [as number of days of sales] Average Lowers Highers Lowers Highers Raw Material 33.41 1 120 CDs 25.0 Engg 42.2 Work in Progress 14.25 0.1 210 FMCG 4.4 Engg 20.7 Finished Goods 16.09 1 40 Auto 9.9 CDs 23.3 Goods in Transit 6.44 - 85 Auto 4.08 Elec 11.0 Accounts Receivables 46.51 2 145 FMCG 16 Engg 72.0 Accounts Payables 45 2 127 Elec 25 CDs 60.0 Inv. at CFAs/DCs 14.48 2 50 Elect 10 CDs 24.7 Inv. at Distributors 16.77 3 45 Elec 3.0 Engg 23.4 Inv. at Retailers 13.48 1 45 Chem 8.6 Auto 30.0
    • Manufacturing Management What is the penetration level of Inventory Replenishment Processes? Pull 16% Push 84%
    • Logistics Cost The Indian Scenario Supply Chain Cost Type Overall Industry Sector Averages [as a % of gross sales] Average Lowers Highers Lowers Highers Cost of Material 52.92 15 90 CDs 35.5 Elect 69.5 Cost of Labour 8.90 0.51 70 CDs 4.9 Elect 12.9 Cost of Prod OH 11.78 0.5 40 Elect 3.5 Chem 12.1 Storage Cost 3.52 0.16 12 Elect 0.8 Auto 5.2 Inbound Transp Cost 3.38 0.12 20 CDs 1.3 Chem 4.0 Outbound Transp Cost 3.38 0.12 20 Auto 1.8 Chem 4.9 Warehousing Cost 2.06 0.1 8 Elect 0.3 Engg 3.1 Sec/Ter Transp Cost 2.02 0.2 10 Auto 0.5 Engg 3.4 Distributor’s Margin 6.35 0.1 20 Elect 2.0 CDs 9.7
    • Order Fulfillment Shipment Accuracy v/s OTOFR Matrix for Order Processing 29.7% Hopefuls 50.8% Leaders 17.6% Laggards 1.9% Hopeless 0 90 100 0 90 Timeliness (On-time Order Fill Rate) Completeness (Shipment Accuracy)
    • Outsourcing What is the extent of outsourcing of supply chain activities? 0 10 20 30 40 50 60 70 80 90 100 Transportation Warehousing Manufacturing Information Systems Import/Export Mgmt Procurement Customer Service Order Processing Inventory Management Percentage Number of Respondents Yes No
    • Outsourcing What are the major reasons for outsourcing of supply chain activities? Process Effectiveness 24% Lower Cost 27% Lack of Internal Capability 11% Investment Reasons 12% Strategic Reasons 26%
    • Customer-Supplier Involvement What is the level of customer & supplier involvement in supply chain activities ? 1 3 4 5 6 2 8 9 10 7 11 12 1 Import-Export Management 2 Warehousing Management 3 Merchandising 4 Distribution Management 5 Promotions Management 6 Inventory Management 7 Manufacturing (Planning) 8 Transportation Management 9 Order Processing/Fulfilment 10 Product Development 11 Settlement and Payment 12 Demand Management
    • e-Enablement of Supply Chains What is the usage pattern of IT Applications? 0% 10% 20% 30% 40% 50% 60% 70% Materials Accounting ERP/MRPII Sales & Distribution CAD/Drafting Shop Scheduling & Loading Warehouse Management Supply Chain Management Process Control & Optimisation Demand Management Engineering Data Management Manufacturing Execution System Computer Aided Process Planning % Respondents using it
    • Aligning Supply Chain Strategy with Business Strategy 26% Doers 27% Leaders 13% Laggards 34% Dreamers Business Strategy Supply Chain Strategy
    • Framework for Supply Chain Strategy
    • Aligning Supply Chain Strategy with Business Strategy Business Objectives Management Processes Focus of Top Management Supply Chain Objectives Supply Chain Processes Importance to Top Management Business Strategy Supply Chain Strategy
    • Supply Chains Implementation What are the benefits achieved by supply chain implementation? Measurable Indicators Extent of Improvement 1. Sales Revenue Increased 20.2% 2. Profits Increased 15.5% 3. Order to Delivery Cycle time Reduced 32.8% 4. Inventory Reduction a. Raw Material 25.1% b. WIP 38.7% c. Finished Goods 32.1% 5. On Time Delivery Improved 33.4% 6. Customer Base Increased 27.7%
    • How to achieve the desired result? Supply Chain: A Paradigm Shift
      • Companies will collaborate with SC partners and synchronised operations.
      • Technology will be key enabler for innovative SC strategy
      • SC restructured and reskilled to achieve the goal
    • Thank You Indian Supply Chain Practices
    • Bullwhip Effect: Variability-Contributing Factors
      • Demand forecasting
      • Lead time
      • Batch ordering
      • Price fluctuation
      • Inflated Orders – supply shortage is suspected.
    • How to Cop with Bullwhip Effect?
      • Reducing uncertainty
        • Make information at each stage available to others.
      • Reducing demand variability
        • Regular low price; no promotion
      • Reducing lead time.
      • Strategic partnerships
        • Vender Managed Inventory
        • Incentive to make customer’s demand data available.