International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June ...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June ...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June ...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June ...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June ...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June ...
Upcoming SlideShare
Loading in …5
×

An effective way to optimize key performance factors of supply chain

240 views

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
240
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

An effective way to optimize key performance factors of supply chain

  1. 1. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June (2013)8AN EFFECTIVE WAY TO OPTIMIZE KEY PERFORMANCEFACTORS OF SUPPLY CHAIN MANAGEMENT (SCM)C. P. Aruna Kumari 1, Dr. Y. Vijaya Kumar21Research Scholar, JAIN University, Bangalore – 560 0012Prof. & Head, Dept. of Mechanical Engg, M V J College of Engg, Bangalore – 560067,ABSTRACTSupply Chain management has become a matter of survival for corporate to face thecompetition and companies are exploiting various result oriented techniques to discoveroptimum routes to reduce the costs on non value added activity i.e. transporting goods fromone point to another point in right time. Today the organizations are working very hard tosupply right product in right time to the customers, by taking the help of researchers withscientific techniques. Even though Supply Chain is broadly divided into outward and inwardsupply chain and initially for years, researchers have concentrated mainly on themanufacturing rather on supply chain. But recently there has been increasing attention on theperformance, design and analysis of the supply chain. In today’s competitive scenario,managing supply chain has become complicated mainly to monitor thousand’s of externaldata points and made the organizations prepared to react quickly and automatically across theentire supply chain. Effective managing of supply chain speeds time to market reducesinventory levels and lower’s overall costs. This research paper focuses on optimizingperformance of outward Supply Chain by optimizing the critical parameters which influencesthe performance.Keywords: Key Performance Factors, Lagrangean Method, Supply Chain, Effectiveness1.0 INTRODUCTION“A supply chain is the process of moving goods based on the customer order, throughthe raw materials stage, supply, production and distribution of products to the customer”"A set of processes and sub-processes which attempt to implement and optimize thefunctions, connected entities, and interacting elements of a supply chain"INTERNATIONAL JOURNAL OF MANAGEMENT (IJM)ISSN 0976-6502 (Print)ISSN 0976-6510 (Online)Volume 4, Issue 3, (May - June 2013), pp. 08-13© IAEME: www.iaeme.com/ijm.aspJournal Impact Factor (2013): 6.9071 (Calculated by GISI)www.jifactor.comIJM© I A E M E
  2. 2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June (2013)9A recent global survey done by ‘Deloytte & Touche’ showed that more than 66% ofrespondence indicated electronic links has tools to enhance supply chain relationships. In theavailable scanty literature, wide arrays of technological tools are available to optimize thesupply chains. The right supply chain modeling tool can help to squeeze cost and inventoryout of the supply chain while improving service to customers. Modeling tools that can help tooptimize supply chains have been around for years. But recently they’re getting increasedattention because of their lower cost and greater capability, coupled with companies’ questsfor improved supply chain performance. A variety of modeling tools are available today. Theright type of model for optimizing the supply chain begins with understanding theenvironment in which an organization works and how often there is a need to change thesupply chain. Dynamic environments have products with short life cycles, or use segmentedcustomer fulfillment with multiple service levels, lead times and fulfillment methods requiremore frequent supply chain reconfiguring.Benita M. Beamon1in the paper explained the supply chain management has animportant role to play in moving goods more quickly to their destination. SCM is amanagement process that deals with inbound and outbound flows, from the perspective of thefocal organization, its suppliers, and its customers. A supply chain is comprised of two basic,integrated processes: (1) The Production planning and inventory Control process (2) theDistribution and logistics process.These processes interact with one another to produce an integrated supply chain. Thedesign and management of these processes determine the extent to which the supply chainworks as a unit to meet required performance objectives. Some of the consequences of supplychain integration result in Reduced inventory at all sites of the supply chain, reduced cost,faster processing speeds, reduced lead times, reduced warehouse costs, reduced obsolescence,greater responsiveness to customer changes, electronic links to suppliers and customers,continuous flow of products and information, speeding up the development cycle.2.0 LITERATURE REVIEWThe importance of performance measurement in the context of SCM cannot beoverstated. Timely and accurate assessment of overall system and individual systemcomponent performance is paramount. An effective performance measurement system
  3. 3. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June (2013)10provides the basis to understand the system, influences behavior throughout the system, andprovides information regarding the results of system efforts to supply chain members andoutside stakeholders. In effect, performance measurement is the glue that holds the complexvalue-creating system together, directing strategic formulation as well as playing a major rolein monitoring the implementation of that strategy. In addition, research findings suggest thatmeasuring supply chain performance in and of itself leads to improvements in overallperformance.Despite its importance, supply chain performance often was measured inoversimplified and sometimes counterproductive (cost-reduction-based) terms. Lack of anappropriate performance measurement system has been cited as a major obstacle to effectivesupply chain management.In today’s competitive scenario, supply chain management has assumed broaderdimension with the coming of the technology. Today it is seen that SCM is a planning andcontrol of the flow of goods and material from the original supplier through multipleproduction and logistic operations to the ultimate consumer. Hence to meet the expectations,SCM today embraces multiple technologies like ERP, advanced planning and schedulingsystems, E-commerce and logistics, execution system supported by business intelligencetools. The ultimate objective is to meet customer demand effectively and efficiently.3.0 METHODOLOGYAfter thorough literature review and discussions with the concerned researchers, thefollowing steps are identified to continue the research work. An attempt has been made in thiswork to inculcate analytical techniques along with modeling the SCM problem.3.1 AREA OF STUDYEven though the Supply Chain Management has been broadly classified into two partslike Inward and outward, a small contribution is made towards optimizing the outward supplychain performance, since the outward has lot of constraints and uncertainties compared to theinward supply chain where everything is in the hands of the organization. The present workfocuses on optimizing performance of outward Supply Chain by optimizing the criticalparameters which influences the performance. The researcher has made an attempt tooptimize the performance of the supply chain by taking a chain with 5 points by identifyingthe nearest route to deliver the goods with the help of OR Technique.3.2 PROBLEM IDENTIFICATIONThe problem is identified and all the parameters which have influence on performanceof supply chain either through the literature survey or by collecting the information from thecorporate are collected. In this case the objective of the problem and the constraints areidentified. The secondary data may be required for identifying the problem. This may involvethe following:Diagnosis of the problem from its symptoms if not obvious (i.e. what is theproblem)Delineation of the sub problem to be studied. Often we have to ignore parts ofthe entire problem.Establishment of objective, limitations and requirements.
  4. 4. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June (2013)113.3 PROBLEM FORMULATIONThe problem can be modeled in different ways, and the selection of an appropriatemodel may be crucial to the success of the problem. In addition to algorithmic considerationsfor solving the model, the availability and accuracy of the real-world data that is required asinput to the model also must be considered. Note that the "data barrier" can appear here,particularly if people are trying to block the project. Often data can be collected / estimated,particularly if the potential benefits from the project are large enough. In this case a clearformulation is expected, where the objective function and the constraints are identified. Anattempt also will be made to explore the various techniques to solve the same. In thisResearch, an attempt has been made to minimize the total Supply chain model cost(Outbound) for the given constraints. The costs like Transportation, Carrying, Ordering andInformation Costs are the constraints in the problem, which will be minimized withoutdisturbing the supply chain. After formulating the problem with the objective function andconstraints, the same may be solved using the Lagrangian Method for getting initial solution.After reviewing the solution, the fine tuning of the solution will be done to suit theorganization needs. The initial Supply chain model is as follows:Total Supply Chain Cost = Order handling costs +Inventory costs + Warehousing costs +Transport costs + Information costsEquationObjective Function: Minimize Z = α + β1(Tc) + β2(Op) + β3(Vc) + β4(Wc) + β5(Ic) +eWhere α = constantTc = Transportation cost = No. of units x Transport cost per unitOp = Order Processing cost = No. of orders x Order cost per orderVc = Inventory carrying cost= No. of Units x Storing cost Per unitWc = Warehousing cost= No. of Units x Warehouse cost per unitIc = Information Cost= Cost spent on collection of Informationβ1, β2, β3, β4, β5, are the associated output elasticities and e represents the error term.Since the numbers of variables are more than the number of constraints, the problembecomes complex that to without assuming zero for any variable makes still complex, hencethe Lagrangean Method is the only mathematical technique is used for solving by usingMATLAB for the initial solution. Operation Research technique is used for fine tuning thesolution to meet the expectations of the organization.3.4 MODEL VALIDATIONModel validation involves running the algorithm for the model in order to ensure:Input data is free from errors.Results from the algorithm seem reasonable (or if they are surprising we can atleast understand why they are surprising). Sometimes we feed the algorithmhistorical input data (if it is available and is relevant) and compare the outputwith the historical result.
  5. 5. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June (2013)123.5 SOLUTION OF THE MODELSpecially developed algorithms, can be used to solve the model. In practice, a"solution" often involves very many solutions under varying assumptions to establishsensitivity.3.6 IMPLEMENTATIONThis phase may involve the implementation of the results of the study or theimplementation of the algorithm for solving the model as an operational tool. In the firstinstance, detailed instructions on what has to be done (including time schedules) toimplement the results must be issued. In the second instance, operating manuals are used asone of the algorithm and an operational tool. Hence form above steps; we can conclude thatthe first step, understands a model, the assumptions made to represent the systemmathematically or in a simulation. The next step can be to understand the uncertainty andvariability used to build the model.4.0 CONCLUSIONSupply chain performance measurement is vital for a company in order to survive intoday’s competitive business environment. Supply chain performance measurement should bea business-critical process, driven by metrics and supported by business intelligence. Withincreasing competition and changing market forces, tapping into this critical asset is essentialin sustaining competitive advantage in the global space. The models and methods used toaccurately study the systems are, expectedly, complex. However, if supply chain systemscould be classified on the bases of specific characteristics, such as uncertainty or volume ofdemand, number of echelons, or number of items produced, there may be rule-of-thumbtechniques that suggest operational characteristics that may achieve a certain objective (or setof objectives). Based on review of literature we can concentrate on particular characteristicslike uncertainty, risk or certainty of supply chain and we can device a model for optimizationof key factor in that area.5.0 REFERENCES1. Benita M. Beamon, titled “Supply Chain Design and Analysis: Models and Methods”International Journal of Production Economics (1998), Vol. 55, No. 3, pp. 281-2942. M.P Shyam, titled, “Heuristic modelling approach for inbound and outbound logisticssystem of an automobile supply chain network” International Journal of SocialSciences and Humanities, Vol. 1, June 2012, pp.1-7.3. Rohit kumar Mishra, titled, “Measuring Supply Chain Efficiency: A DEA Approach”Journal of Operations and Supply Chain Management, Volume 5, Number1, Jan – Jun2012, 45 – 69.4. A.D. Sarode, V.K.Sunnapwar, P.M.Khodke, titled, “A Literature Review forIdentification of Performance Measures for Establishing a Framework forPerformance Measurement in Supply Chains”, The International Journal of AppliedManagement and Technology, Vol 6, Num 3.5. Hai Lu & Yirong Su, titled, “An approach towards overall supply chain efficiency”School of Economics and Commercial Law, December 2002.
  6. 6. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -6510(Online), Volume 4, Issue 3, May- June (2013)136. Rui Fernandes, Joaquim B. Gouveia, Carlos Pinho, titled, “Overstock – A RealOption Approach”, Journal of Operations and Supply Chain Management 3 (2),Volume 3, Number 2, July - December 2010, pp 98 – 107.7. Javad Feiz Abadi, Carlos Cordon, titled, “Developing a Framework for theIdentification and Analysis of the Strategic Resources and Capabilities in SupplyChains”, Journal of Operations and Supply Chain Management 5(2), Volume 5,Number 2, 2012, pp 59-75.8. Damien Power, titled, “Adoption of Supply Chain Management EnablingTechnologies: Comparing Small, Medium and Larger Organizations”, Journal ofOperations and Supply Chain Management (1), Volume 1, Number 1, May 2008, pp31-42.9. Pramod Kumar Mishra, Prof. B. Raja Shekhar, titled, “Impact of Risks andUncertainties on Supply Chain: A Dairy Industry Perspective” Journal ofManagement Research, Volume 3, Number 2, 2011.10. Anna Nagurney, titled, “Supply Chain Network Design under Profit Maximizationand Oligopolistic Competition”, Transportation Research E (2010) 46, 281-294, July2009; revised October 2009.11. Yousuf Kamal, Most. Moriom Ferdousi, titled, “Supply Chain Management Practicesin Automobile industry study of Ford vs Toyota”, Journal of Business Studies, Vol.XXX, No. 2, December 2009.12. Somuyiwa, Adebambo Olayinka, titled, “Modeling Outbound Logistics CostMeasurement System of Manufacturing Companies in Southwestern, Nigeria”,European Journal of Social Sciences – Volume 15, Number 3 (2010).13. D. Siva Kumar and Dr. Jayshree Suresh, “Optimization of Supply Chain LogisticsCost”, International Journal of Management (IJM), Volume 4, Issue 1, 2013,pp. 130 - 135, ISSN Print: 0976-6502, ISSN Online: 0976-6510.14. Ajay Verma and Dr.Anshul Gangele, “Study of Green Supply Chain Management andOperation Strategic in Manufacturing Industry”, International Journal of Management(IJM), Volume 3, Issue 3, 2012, pp. 235 - 245, ISSN Print: 0976-6502, ISSN Online:0976-6510.15. Amit Raj Varshney, Sanjay Paliwal and Mr. Yogesh Atray, “A Systematic Review ofExisting Supply Chain Management: Definition, Framework and Key Factor”,International Journal of Mechanical Engineering & Technology (IJMET), Volume 4,Issue 2, 2013, pp. 298 - 309, ISSN Print: 0976 – 6340, ISSN Online: 0976 – 6359.

×