Supply chain management

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  • 1. Definition of Supply Chain Management (SCM) ?Design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.
  • 2. SCM Development Decades EDI & ERP Globalization Manufacturing & distributions SCM : A service SCM 2.0
  • 3. What Is the Supply Chain? Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets – “facilities” Raw materials Work-in-process (WIP) inventory Finished products that flow between the facilities
  • 4. The Supply Chain in form of Supply and demandnetwork
  • 5. The Supply Chain – Another ViewSource Make Deliver Buy Suppliers Manufacturers Warehouses & Customers Distribution Centers Transportation Transportation Material Costs Costs Costs Transportation Manufacturing Costs Inventory Costs Costs
  • 6. Short look Supply Chain Management (SCM)? A set of approaches used to efficiently integrate  Suppliers  Manufacturers  Warehouses  Distribution centers So that the product is produced and distributed  In the right quantities  To the right locations  And at the right time System-wide costs are minimized and Service level requirements are satisfied
  • 7. SUPPLY CHAIN INCLUDES Customer service management Procurement Product development and commercialization Manufacturing flow management/support Physical distribution Outsourcing/partnerships Performance measurement Warehousing management
  • 8. SCM Marketing Push Models Pull Models
  • 9. Push Strategy Applied to that portion of the supply chain where demand uncertainty is relatively small Production and distribution decisions are based on long term forecasts Based on past orders received from retailer’s warehouse (may lead to Bullwhip Effects) Inability to meet changing demand patterns Large and variable production batches Unacceptable service levels Excessive inventories due to the need for large safety stocks less expenditure on advertising than pull strategy
  • 10. Pull Strategy Applied to that portion of the supply chain where demand uncertainty is high Production and distribution are demand driven No inventory, response to specific orders Point of sale (POS) data comes in handy when shared with supply chain partners Decrease in lead time Difficult to implement
  • 11. Supply Chain GoalsEfficient supply chain management must result in tangible businessimprovements. It is characterized by a sharp focus on  Revenue growth  Better asset utilization  Cost reduction
  • 12. Problems addressed by supply chain management Distribution Network Configuration Distribution Strategy Trade-Offs in Logistical Activities Information Inventory Management Cash-Flow
  • 13. Why Is SCM Difficult? Uncertainty (Not Sure)  Travel times  Breakdowns of machines and vehicles  Weather, natural catastrophe, war  Local politics, labor conditions, border issues
  • 14. Bullwhip effect
  • 15. Factors Contributing to the Bullwhip Demand forecasting practices  Min-max inventory management (reorder points to bring inventory up to predicted levels) Lead time  Longer lead times lead to greater variability in estimates of average demand, thus increasing variability and safety stock costs Batch ordering  Peaks and valleys in orders  Fixed ordering costs  Impact of transportation costs (e.g., fuel costs)  Sales quotas Price fluctuations  Promotion and discount policies Lack of centralized information
  • 16. The Importance of Supply Chain Management thus isin  Reduced inventories along the chain  Better information sharing among the partners  Planning being done in consultation rather than in isolation The benefits too would be reflected in terms of :  Lower costs  Better customer service  Efficient manufacturing  Better trust among the partners leading to win-win
  • 17. Supply Chain Management – Key Issues ISSUE CONSIDERATIONSNetwork Planning • Warehouse locations and capacities • Plant locations and production levels • Transportation flows between facilities to minimize cost and timeInventory Control • How should inventory be managed? • Why does inventory fluctuate and what strategies minimize this?Supply Contracts • Impact of volume discount and revenue sharing • Pricing strategies to reduce order-shipment variabilityDistribution Strategies • Selection of distribution strategies (e.g., direct ship vs. cross-docking) • How many cross-dock points are needed? • Cost/Benefits of different strategiesIntegration and Strategic Partnering • How can integration with partners be achieved? • What level of integration is best? • What information and processes can be shared? • What partnerships should be implemented and in which situations?Outsourcing & Procurement Strategies • What are our core supply chain capabilities and which are not? • Does our product design mandate different outsourcing approaches? • Risk managementProduct Design • How are inventory holding and transportation costs affected by product design? • How does product design enable mass customization?
  • 18. Methods for Improving ForecastsJudgment Methods Market Research Analysis• Internal experts• External experts• Domain experts • Market surveys • Market testing • Focus groups Accurate Time-Series Methods Forecasts Causal Analysis • Moving average • Relies on data other than that being • Exponential smoothing predicted • Trend analysis • Economic data, commodity data, • Seasonality analysis etc.
  • 19. Supply Chain Management Operations Strategies STRATEGY WHEN TO CHOOSE WHEN TO CHOOSE Make to Stock standardized products, relatively Low manufacturing costs; meet predictable demand customer demands quickly Make to Order customized products, many variations Customization; reduced inventory; improved service levels Configure to Order many variations on finished product; Low inventory levels; wide range of infrequent demand product offerings; simplified planning Engineer to Order complex products, unique customer Enables response to specific customer specifications requirements
  • 20. SCM Applications
  • 21. SAP SCM SAP SCM SAP DEMAND PLANNING SAP TRANSPORTATION SAP EVENT MANAGEMENT SAP SERVICE PLANT PLANNING SAP EXTENDED WAREHOUSE MANAGEMENT SAP SUPPLIER NETWORK COLLABORATION SAP FORECASTING AND REPLENISHMENT SAP SCM 7.0
  • 22. Important points to keep in mind Segment customers based on service needs. Modify the supply chain to meet these service requirements profitably. Customize the logistics network. Develop forecasts collaboratively involving every link of the supply chain. Locate the leverage point where the product is unalterably configured to meet a single requirement Delay product differentiation till the last possible moment. Cultivate warm relationships with suppliers
  • 23.  Thank you