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1 session 1_scm_basics_2012_cfvg
1. Dr. RAVI SHANKAR
Professor
Department of Management Studies
Indian Institute of Technology Delhi
Hauz Khas, New Delhi 110 016, India
Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m)
Fax: (+91)-(11) 26862620
Email: r.s.research@gmail.com
http://web.iitd.ac.in/~ravi1
SESSION#1: Basics & Beyond (CFVG: 2012)
OPERATIONS MANAGEMENT: A
Supply Chain Management
Perspective
2. 2
The Objectives of this Session is to:
Understand the course objective
Understand the basic concepts of Supply Chain
Management (SCM) & Operations Management (OM)
Relate SCM with practical business world
Assess organizational needs towards SCM
Take decision related to operations of SCM
Understand the Recent Trends in SCM
3. 3
Few Information
Text Book
Simchi-Levi et al.: Designing
and Managing the Supply
Chain: 3rd edition, McGraw Hill,
NY (2008): Available in Your
Library
Reference Books
Sunil Chopra & Peter Menidel,
Supply Chain Management: 3rd
edition, Pearson Education
(2007).
Wisner, Leong and Tan,
Principles of Supply Chain
Management, Thomson South-
Western, 2005 (Complete List
Available on course outline)
5. 5
In case you are interested in further study
in SCM
Journal(s):
Supply Chain Management: An International
Journal (Available on www.emaraldinsight.com)
Supply Chain Management Review
Purchasing World
International Journal of Purchasing and
Materials Management
International Journal of Physical Distribution &
Logistics Management
6. 6
Course Objectives
To understand the basics
of SCM
To understand the current
practices in SCM
To develop decision
making capabilities in
SCM
To understand and
develop different
strategies of SCM
9. 9
Supply Chain Stages
Supply Chain (SC) encompasses all activities associated with the flow
and transformation of materials from the raw material stage through
to the end user.
Supply Chain Management (SCM) involves management of FOUR
flows in a Supply Chain: (i) Material, (ii) Information , (iii) Money &
(iv) Ownership
Supplier Manufacturer Distributor Retailer Customer
10. The Linear Supply Chain
Limited visibility & velocity
Inventory build-up
10
11. 11
What are the Goals of Supply Chain
Management?
Supply chain management is concerned with the efficient
integration of suppliers, factories, warehouses and stores
so that merchandise is produced and distributed:
In the right quantities
To the right locations
At the right time
In order to
Minimize total system cost
Satisfy customer service requirements
12. 12
Evolution of Supply Chain Management
1950s 1960s 1970s 1980s 1990s 2000s Beyond
Traditional Mass Manufacturing
Inventory Management/Cost
Optimization
JIT, TQM, BPR,
Alliances
SCM
Formation/
Extensions
Further
Refinement of
SCM Capabilities
13. 13
Evolution of Logistical Integration, 1960-2012
Demand Forecasting
Purchasing
Requirements Planning
Production Planning
Manufacturing Inventory
Operations Scheduling
Materials Handling
Packaging
Inventory
Facility Planning
Order Processing
Transportation
Quality &Customer Service Strategic Planning
Materials
Management
Physical
Distribution
Logistics
Supply Chain
Management
Information Technology
Marketing
1980s
1990s
2000s
TYPICAL OM DOMAINS
15. 15
Supply Produce Distribute Sell
Plan/Design
Source
•Product Architecture
•Make/Buy
•Early Supplier Involvement
•Strategic Partnerships
•Suppliers Selection
•Supply Contracts
Fulfillment Supply Chain
DevelopmentSupplyChain
The Enterprise
Fulfillment and Development Supply Chains
16. 16
Decision <> time horizon
Strategic Planning
Detail
Hour Week Quartile Year
Time
Supply Chain Structure Design
Supply Chain Network Design
Demand Planning
Sales & Operations Planning
Supply Chain Planning
Inventory Planning
Distribution Planning
Manufacturing Planning
Transportation Planning
Operations Scheduling
Delivery Scheduling
Execution Systems
Source: AMR Research
Execution
Tactical
Strategical
17. 17
Let us start the course with a Quiz
A box of cereal spends ? days in the supply chain
Poor coordination in the food industry supply chain
wasted ? dollars.
A typical new car spends ? days traveling from the
factory to the dealership.
U.S. companies spend ? % of Gross Domestic
Product on Supply Chain & Logistics
Total inventory in the pharmaceutical supply chain
exceeds ? days.
18. 18
Complexity: The Magnitude
A typical box of cereal spends 104 days getting from factory to
supermarket.
The grocery industry could save $30 billion (10% of operating
cost) by using effective logistics strategies
A typical new car spends 15 days traveling from the factory to
the dealership.
U.S. companies spend more than $1 trillion in supply-related
activities (10-15% of Gross Domestic Product)
Transportation 58%
Inventory 38%
Management 4%
19. 19
Consider the following
Wal-Mart and K-Mart were founded in the same year.
While K-Mart declared Bankruptcy in 2001 while Wal-
Mart became the largest retailer in USA and perhaps
in the world.
Dell has been able to generate profits even when its
competitors lost money on their PC operations.
Honda has established itself as a dominant brand in
automobiles.
What have these firms done? What is the secret of their
success?
20. 20
Logistics: Past
The study of logistics has its roots in the military…
The traditional view emphasized local optimization within
functional silos and within individual corporations
But functional optimization leads to conflicts ...
21. 21
What is Supply Chain Management?
SCM is the collaborative design and
management of seamless, value-added
processes to meet the real needs of the
end customer.
23. 23
Transactional Complexity
National Semiconductors:
• Production:
– Produces chips in six different locations: four in the US, one
in Britain and one in Israel
– Chips are shipped to seven assembly locations in
Southeast Asia.
• Distribution
– The final product is shipped to hundreds of facilities all over
the world
– 20,000 different routes
– 12 different airlines are involved
– 95% of the products are delivered within 45 days
– 5% are delivered within 90 days.
25. 25
Example: Toshiba PC supply chain
upstream
downstream
Intel,
AMD
Seagate,
IBM
Microsoft,
Red Hat
Toshiba America
Irvine, California
Europe DC
Toshiba Turkey
North America DC
26. 26
Example: Dell Computers Supply Chain
Website
or Phone
Dell Assembly
Plant
Customer wants
To buy computer
Master Board
Hard disk
SRAM
Direct Shipment
Customer’s Order
Concept of Disintermediation in Dell Direct Supply Chain
What are its benefits for Dell?
Any other example of similar type in Vietnam?
27. 27
Magnitude of Supply Chain Costs
Example: The Apparel Industry
Manufacturer Distributor Retailer Customer
Cost per Percent
Shirt Saving
$52.72 0%
$41.34 28%
$20.45 62%
Manufacturer Distributor Retailer Customer
Manufacturer Distributor Retailer Customer
30. 30
Discussion Questions for you
Are all supply chains same/similar?
How about cold chains?
Where does the retail fit in supply chain?
Where does OM fit in supply chain?
What are inbound/outbound activities in supply
chain?
What about information and inventory? Are they
related in some way in supply chain?
33. 33
Conflicting Objectives
in the Supply Chain
1. Purchasing
• Stable volume requirements
• Flexible delivery time
• Little variation in mix
• Large quantities
2. Manufacturing
• Long run production
• High quality
• High productivity
• Low production cost
34. 34
Conflicting Objectives
in the Supply Chain
3. Warehousing
• Low inventory
• Reduced transportation costs
• Quick replenishment capability
4. Customers
• Short order lead time
• High in stock
• Enormous variety of products
• Low prices
35. 35
Managing a Supply Chain is not EasyManaging a Supply Chain is not Easy
1. Uncertain ___________________
2. Conflicting ___________________ across the supply chain
Manufacturers Distributors Retailers Consumers
Convenience
Short lead time
Large variety of
products
Few stores
Low inventory
Little variety
Close to DCs
Low inventory
Few DCs
Large shipments
Large production batches
36. 36
Uncertainty and Risk Factors
Fluctuations of Inventory and Backorders throughout the Supply Chain
Order variations in the supply chain
37. 37
Forecasting is not a final solution
Demand is not the only source of uncertainty
Recent trends make things more uncertain
Lean manufacturing
Outsourcing
Off-shoring
Uncertainty and Risk Factors
38. 38
August 2005 – Hurricane Katrina
P&G coffee supplies from sites around New Orleans
Six month impact
2002 West Coast port strike
Losses of $1B/day
Store stock-outs, factory shutdowns
1999 Taiwan earthquake
Supply interruptions of HP, Dell
2001 India (Gujarat state) earthquake
Supply interruptions for apparel manufacturers
Uncertainty and Risk Factors
39. 39
Compaq estimates it lost $0.5 billion to $1 billion in sales in
1995 because laptops were not available when and where
needed
P&G estimates it saved retail customers $65 million by
collaboration resulting in a better match of supply and demand
In 1997, American companies spent $862 billion, or about
10% of GNP on supply chain related activities which include
the cost of movement, storage and control of products across
the supply chain.Most of these costs include unnecessary cost
components due to redundant stock, inefficient transportation
strategies, and other wasteful strategies in the supply chain
Similar SCM Experiences
40. 40
Other Issues in Management of Supply Chain
Lead time
Total cost
Management of Inventory
Material Handling
Performance Monitoring & Control
Sensitization about the Logistics cost to all the
stakeholders !
Information Sharing…………..
41. 41
Supply Chain Responsiveness
Respond to wide ranges of quantities demanded
Meet short lead times
Handle a large variety of products
Build highly innovative products
Meet a very high service level
42. 42
EExamples of logistics strategy decisionsxamples of logistics strategy decisions
Middle-men / direct deliveries
Structure of logistics network
Control principles of a logistics network
Integrating production and logistics
Effect of reducing the number of suppliers
Location issues
Selecting the most appropriate price/quality combination of
logistics services
Frequencies and cycle times in production and distribution
Inventory level policy
Sensitivity analyses with varying scenarios (volumes, costs...)
44. 44
Let us list few, which are relevant for
Vietnam..
Lead Time??
Integration??
Coordination??
Environmental Issues??
…
Effective Supply Chain-Challenges
46. • Founded in 1998
• Revenue (FY 2007): US$900 mil
• More than 2,000 employees worldwide
• CJ GLS Inc. – HQ in South Korea
• CJ GLS Asia – RHQ in Singapore
• 17 owned entities in 11 countries
across the Asia-Pacific region and Europe
• More than 100 strategic partners
and agents around the world
CJ GLS Inc.
AlabamaAlabama
QingdaoQingdao
ShanghaiShanghai
Los AngelesLos Angeles
47. CJ GLS Inc.
CJ Global Logistics Service, Inc. (CJ GLS) is a logistics and supply chain
management solutions provider with three key business areas.
Express
3rd Party
Logistics
International
Forwarding
Inventory Management, Put-away, and Pick and Pack
Transportation, Cross-Docking, and Home Delivery
Reverse Logistics and Disposal
Proprietary IT System for Interface and Data Analysis, and
Supply Network Analysis and Re-design
Inventory Financing, Tariff and Taxes Management
Container Maximization and Routing Optimisation
Order Processing Management
Global Control Centre
CSI Survey and Feedback
Ocean Transportation
Air Transportation
Customs Clearance and Bonded Transportation
Global Freight Tender and Negotiation
Single Freight Payment
Global Tracking and Tracing
Customer Support
* Global Freight Management
* Customer Order Management
* Supply Network Solutions
* Supply Chain Functions
* Total Door-to-Door Service
Home Shopping Delivery
Last Mile Delivery and Return
Web Solution such as Order Management
Payment Solution such as Escrow Service
Call Centre Management
48. Milestones
Following its acquisition of HTH and Accord in 2006, CJ GLS is now on of
the top 3PL in Asia with a total revenue of US$ 900 million.
Year Key Milestones of CJ GLS
1998
1999
• Established
• Launch of International Forwarding and
Express Business
2001
2002
• ISO 9001 Certification
• Awarded the Order of Industrial Merit for Logistics
(Top Prize of Korean Logistics Association)
• 2nd Prize – Enterprise 50 Awards (Singapore)
2003
2004
• Start of Integrated Logistics Business
• Fastest Growing 50 Award (Singapore)
2005
2006
2008
• CJ Logistics Institute set up
• Acquired HTH and Accord
• Grand Prize – 1st Korea RFID-Industrialization
Contest (Ministry of Commerce, Korea)
Aquited EC Logistics Malaysia
Global 3PL
and
Forwarding
(US$320
mil)
Express
(US$310
mil)
3PL
(Korea)
(US$270
mil)
1998 2000 2002 2004 2006
US$90M
US$135M
US$175M
US$390M
US$800M
US$900M
2007
(M&A)
• One of the world’s 25 largest logistics and supply chain
management companies
49. Global logistics and supply chain management company with an extensive international network, including
own physical network.
▪ Manage 17 subsidiaries in 11 countries
▪ Also work closely with about 100 strategic partners and agents throughout the world
Global Network
− Korea (Seoul, Incheon, Suwon, Pusan, Daegu,
Kwangju and Daejeon)
− Singapore (Toh Guan, Jurong, Changi and Keppel)
− China (Shanghai, Shenzhen, Tianjin, Fuzhou,
Suzhou and Qingdao)
− Hong Kong
− Indonesia (Jakarta, Denpasar, Semarang, Medan
and Surabaya)
− Malaysia (Klang, Kuala Lumpur, Penang and Johor
Bahru)
− Netherlands (Amsterdam)
− Philippines (Manila)
− Thailand (Bangkok and Laem Chabang)
− USA (Alabama and Los Angeles)
− Vietnam (Ho Chi Minh City, Hanoi and Danang)
AlabamaAlabama
QingdaoQingdao
ShanghaiShanghai
Los AngelesLos Angeles
50. CJ GLS (VN) Freight Co., Ltd’s Facts & Figures
Founded in VietNam 2002
BinhDuong Warehouse : 10,000 sqm
Hanoi Warehouse : 7,500 sqm
Danang Warehouse : 2,300 sqm
Distribution : 30,000 cbm/month
Employees : 150
Revenue 2007 : USD 8.5 million
51. CJ GLS (VN) Freight Offices
Corporate Office in HoChiMinh :
Room 304, 3rd Floor , Waseco Plaza
10 Pho Quang St., Ward 2, TanBinh Dist.,
HCMC, VietNam
Tel: +(84) 8 9976134-8
Fax:+(84) 8 9976130-2
Branch Office in Hanoi :
Room 401,4th Floor, Thanh Dong Building
132-138 Kim Ma St., Ba Dinh Dist.,
Hanoi, VietNam
Tel: +(84) 4 5122560
Fax:+(84) 4 5122561
52. CJ GLS (VN): Products & Services
Integrated Logistics Operations
Air Freight Forwarding
Sea Freight Forwarding
Consolidation Services
Land Transport
Customs Brokerage
Door-To-Door Delivery
Warehousing & Distribution Center
Project Cargo Handling
53. CJ GLS (VN): Song Than Logistics Center
Operated June 2007
Normal Warehouse Facility
Located in Song Than Industrial Park 2
20 minutes from HoChiMinh City.
Rack storage
Full warehouse management system
Dedicated machinery and staff
Pick/Pack operations
Bar coding potential
Customs facilities
QA/QC services
Export/import documentation facility
54. CJ GLS (VN): New Organization
BD
Richard Dien
Finance
Son Dien
HR and Amin
Thao Vien
Forwarding
TBA
Logistics
TBA
Samsung
Account
Lee Seung Hoon
Managing Director
Nae Seok Jeong
Ho Chi Minh
Branch manager
Kim Goo Yeon
Effective from 1 Jan, 2009
55. CJ GLS (VN): New Organization
Operation
TBA
Finance
Thanh Ha
HR
Quoc An
Logistic
Shin Sung Moo
Managing Director
Nae Seok Jeong
Hanoi
Branch manager
Terry Kim
Effective from 1 Jan, 2009
56. Customer Industry Coverage Area Business Scope
Logistics
Function
Electronics •Factory in Yen Phong IP ,
Nortern of VietNam
• Manufacturting cellphones to
export Asia, Europe & Middle
East in Mar2009
Airfreight services
Warehouse &
Distribution
Electronics HoChiMinh,Hanoi,
Danang
• Distributors of Sanyo,Panasonic,
• Philips, Toshiba,Mitshubitshi,
• Pionner
WH, trucking,
distribution,cust
oms brokers
F&B Nhatrang,HoChiMinh . Manufacture of F&B products Trucking &
customs
clearances
Constructions
tiles, marbles,…
HoChiMinh • Manufacturing construction
products
International freight
import handling
Electronics Factory in Bien Hoa, VietNam • Lighting products, local sales WH, customs
broker,
distribution
CJ GLS (VN): Major Projects
57. CJ GLS VietNam & Samsung Mobile Division
MOU in Hanoi Oct 2008
58. CJ GLS (VN): Major Customers
Cosmetics and ApparelFootwear Others
ElectronicsConsumer Goods
