2. Supply Chain activities transform
natural resources, raw materials and
components into a finished product
that is delivered to the end customer
(..consumer)
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3. Objectives of this Module
• Basic Concept of a business?
• Business Strategies and Competitive
Advantage
• Why a Supply-chain? (Forrester/Bull-whip
effect)
• Concepts underlying the Supply Chain
• The three main flows in a Supply
Chain.
• What is Supply Chain Management?
• The need to study SCM?
• Evolution of SCM
– Materials Mgt and SCM
– Logistics and SCM
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8. Likely aspects of Value sought in a Knife
• Capability of cutting
• Convenience of holding / gripping
• Appropriate size
• Sharpness of cutting edge
• Durability of cutting edge
• Resistance to rusting
• Aesthetically attractive (including packaging)
• Scope for re-sharpening
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9. 7/5/2023 9
Mining
Co.
Steel
Plant 1
Steel
Plant 2
Alloy
steel
plant.
Knife
Mfrer
Customer
Mother
Earth
Ore
Extration Steel Mfr
Pig Iron
Mfr
Mfr of
Alloy steel
Mfr of
Knife
VALUE ADDITION
Companies in the Supply Chain
Companies in the Supply Chain
12. Delivering Customer Value
• Meet Customer Needs
• Deliver what Customer needs /wants in a better
manner than competitors
• Deliver customer satisfaction at a lower price
than that of competitors
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13. WHAT IS A SUPPLY - CHAIN ?
A supply-chain consists of all
parties, directly or indirectly
involved in fulfilling a customer
request
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14. SUPPLY– CHAIN IS…….
A CHAIN OF BUSINESS UNITS,
EACH PERFORMING A SET OF ACTIVITIES
(Purchasing, Mfg, Logistics, Distribution, Marketing),
THAT TOGETHER PERFORM
THE FUNCTION OF DELIVERING VALUE
TO THE END CUSTOMER.
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15. A set of three or more companies
directly linked by one or more of
the upstream or downstream flows of
Products, Services, Finances and
Information from a source to a
Customer
BASIC SUPPLY-CHAIN
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18. THE VALUE CHAIN
• Business operation -> thousands of
business processes -> chain -> raw
material ->conversion -> finished product;
• “Value Addition” at each stage;
• Each process definitely adds ‘cost’
• Value Chain Analysis -> examining each
process – addition to value, vis-à-vis,
addition to cost
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20. ‘Forrester’ or ‘Bull-whip’ Effect
Impact of information flow on Production &
Distribution behaviour
Supply
Order
Supply
Order
Your Customer
Manufacturer Your Supplier
Quantity
‘X’
Quantity
‘X+a’
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21. Adverse Consequences
cost increase
–Storage &
Handling
–Insurance
–Interest
charges
loss of
productivity
– Existing
inventory
– High Opportunity
Cost
– Stock-piling of
unsold stock
1. TOO MUCH STOCK
2. TOO LITTLE STOCK
•Loss of customers
•Disruption of production
•Idle labour and machinery
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23. Based on 2 core concepts:
Practically, every product that reaches
an end-user represents the cumulative
effort of multiple organizations
Organizations have to minimize conflicts
in objectives outside their “four walls”, and
manage the entire chain of activities in
order that each stage and all constituents
can maximize profits
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25. 7/5/2023 25
Types of ‘flows’ in a Supply-
chain
Three types of flows…
FLOW OF MATERIALS
FLOW OF FUNDS
FLOW OF INFORMATION
FLOW OF INFORMATION
SUPPLIER’S SUPPLIERSUPPLIER MANUFACTURER
CUSTOMERCUSTOMER’S CUSTOMER
FLOW OF MATERIALS
35. INTERNAL SUPPLY-CHAIN
• That portion of a supply-chain that
occurs within an Organization
• Can be quite complex
• Developing an understanding of ISC
could be a starting point for going on to a
SCM initiative
• Process Maps are developed to
understand the internal supply-chain
linkages
•
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37. SUPPLY CHAIN DESIGN
• A strategic decision.
• Reflects the structure of the
Supply-chain over the next few
years
• Decides:
–What the chain’s configuration will
be.
–How resources will be allocated.
–What processes each stage will
perform.
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38. SUPPLY-CHAIN PLANNING
• Done normally on annual basis
• Defines set of Policies that govern
short-term operations
• Above decisions done within the
supply-chain’s configuration
• Starts with a ‘demand forecast’ for
the coming year
• Planning establishes parameters within
which a supply-chain will function
over a specified period of time
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39. SUPPLY CHAIN PLANNING
SELECTING KEY SUPPLY-
CHAIN MEMBERS
• SCM efforts likely to be most productive if
participating organizations are not direct
competitors
• Organizations may pursue similar goals, but
their respective goals must be compatible
with all over-all SC goals
• Participating organizations must all feel that
they benefit from the SCM initiative
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40. SUPPLY-CHAIN OPERATIONS
• Short-term horizon
(monthly/weekly/daily)
• Focus on individual customer orders
• Goal is to handle incoming customer
orders in the best possible manner
• Aggregate Planning* is basis for
decisions
• In view of shorter time-frame, the
‘uncertainties’ are lesser.
• Focus is on exploiting the lesser
uncertainty
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41. AGGREGATE PLAN
• Serves as a broad blueprint for
Operations
• Establishes parameters within which
short term decisions on production &
distribution are made
• Allows the supply-chain to alter
capacity allocations and change supply
contracts
• Should factor in constraints of (mainly
upstream) of SC partners
• Output from Aggregate planning is
useful both to upstream & downstream
partners
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48. BUILDING BLOCKS OF
COMPETITIVE ADVANTAGE
Superior efficiency
Superior quality
Superior
innovation
Superior
responsiveness
Low-Cost
Low-Cost
Low-Cost
Differentiation
Differentiation
PRODUCT
Process
Differentiation
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49. A VIEW OF A SIMPLE SUPPLY - CHAIN
NALCO
Supertech
Industries
Kalyani
Breweries
USBN LTD
(Transporter)
DSIDC
(Retailer)
FINAL
CUSTOMERS
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