Download to read offline
![himani lscm [Auto-saved].pptx kl](https://cdn.slidesharecdn.com/ss_thumbnails/himanilscmauto-saved-240921154153-7d3f7b87-thumbnail.jpg?width=640&height=640&fit=bounds)
Intro Suppy chain management .pptx
- 1.
- 2. What Is SupplyChain Management (SCM)? A set of approaches/ processes used to efficiently integrate Suppliers Manufacturers Distribution centers Retailers 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 Plan Source Make Deliver Sell
- 3. The SCM Network MaterialFlow Demand, Information & Financial Flow
- 4. The Importance ofSupply Chain Management Dealing with uncertain environments – matching supply and demand Boeing announced a $2.6 billion write-off in 1997 due to “raw materials shortages, internal and supplier parts shortages and productivity inefficiencies” U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals” Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquake Shorter product life cycles of high-technology products Less opportunity to accumulate historical data on customer demand Wide choice of competing products makes it difficult to predict demand The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners If you don’t do it, your competitor will Major buyers such as Wal-Mart demand a level of “supply chain maturity” of its suppliers
- 5. Why Is SCMDifficult? Efficiency and cost-effectiveness throughout the system is required Challenging to minimize system costs and maximize system service levels Uncertainty & Risk is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues The complexity of the problem to globally optimize a supply chain is significant Minimize internal costs
- 6. Supply Chain Imperativesfor Success View the supply chain as a strategic asset and a differentiator Wal-Mart’s partnership with Proctor & Gamble to automatically replenish inventory Dell’s innovative direct-to-consumer sales and build-to-order manufacturing Reduce uncertainty Forecasting Collaboration Integration Co-ordination is key Enterprise Resource Planning systems (ERP),
- 7. Trust betweenpartners and sharing of information, plans ahead of time. Supply chain visibility. Need to know where in the chain the material is. (RFID – radio frequency identification) Ability to respond to unplanned events – forecast errors, equipment breakdowns, supply delays, weather, etc. Needs effective monitoring, notifying, simulating alternate courses of action. Postponement /delayed differentiation helps. Supply Chain Imperatives for Success (cont’d)
- 8.
- 9. Information in theSupply Chain Source Make Deliver Sell Suppliers Manufacturers Warehouses & Distribution Centers Retailer Each facility further away from actual customer demand must make forecasts of demand Lacking actual customer buying data, each facility bases its forecasts on ‘downstream’ orders, which are more variable than actual demand To accommodate variability, inventory levels are overstocked thus increasing inventory carrying costs It’s estimated that the typical pharmaceutical company supply chain carries over 100 days of product to accommodate uncertainty Plan
- 10. Bullwhip Effect Occurs whenslight demand variability is magnified as information moves back upstream
- 11. Methods for Copingwith the Bullwhip Reducing uncertainty. Centralizing information Reducing variability. Reducing variability inherent in the customer demand process. “Everyday low pricing” (EDLP) strategy.
- 12. Methods for Copingwith the Bullwhip Lead-time reduction Lead times magnify the increase in variability due to demand forecasting. Strategic partnerships Changing the way information is shared and inventory is managed Vendor managed inventory (VMI) Manufacturer manages the inventory of its product at the retailer outlet VMI the manufacturer does not rely on the orders placed by a retailer, thus avoiding the bullwhip effect entirely.
- 13. Demand Uncertainties: Whatis the right supply chain for your product? Functional Items Product demand is predictable. Competitive market with low profit margins. Requires functional/efficient supply chains Ex: Grocery items, FMCG Innovative Items Fashion items or other high-variability items with high profit margins Highly variable demand can create large costs due to lost sales or excess inventory. Requires responsive supply chains Ex: Fashion items, Short life-cycle products, technology products Demand Pattern Functional Innovative
- 14. The “zone ofstrategic fit” Demand Uncertainty Certain Demand Uncertain Demand Efficient Supply Chain Responsiveness Spectrum Responsive Supply Chain
- 15. Functional versus InnovativeProducts Functional (Predictable Demand) Innovative (Unpredictable Demand) Product life cycle More than 2 years 3 months to 1 year Contribution margin 5-20% 20-60% Average margin for forecasting error 10% 40-100% Average stock-out rate 1-2% 10-40% Average forced end-of- season markdown as a percentage of full price 0% 10-25% Focus of the supply chain Physical efficiency Market responsiveness
- 16. Physically Efficient versusMarket-Responsive Supply Chains Physically efficient Market responsive Primary purpose Supply predictable demand efficiently at the lowest cost Respond quickly to unpredictable demand to minimize stock-outs and forced markdowns Inventory strategy Focus on minimizing inventory throughout the chain Deploy significant buffer stocks of parts and finished goods Lead-time focus Shorten lead-time as long it does not increase costs Invest aggressively in order to reduce lead-time Supplier selection criteria Cost along with quality Speed, flexibility and quality Product design strategy Maximize performance and minimize cost Postpone product differentiation for as long as possible
- 17. Strategies to Copewith High Uncertainty in Demand Build-to-order model Configuration is determined only when the order comes in Postponement or delayed differentiation Pioneered by Dell Benetton, Sport Obermeyer, Asian Paints
- 18. Strategies to Copewith High Uncertainty in Demand Cont’d Risk Pooling Demand Pooling/ Centralization/ Aggregation Keep larger inventories at distribution centers Suitable for products with long manufacturing lead times, such as vehicles
- 19. Push, Pull, Push-PullSystems Push Supply Chains Production and distribution decisions based on long-term forecasts. Longer reaction time to changing marketplace: Inability to meet changing demand patterns Risk of product obsolescence Pull Supply Chains Coordinated with true customer demand rather than forecast demand Firm does not hold any inventory and only responds to specific orders. Difficult to take advantage of economies of scale
- 20. Push-Pull Strategy Somestages of the supply chain operated in a push- based manner typically the initial stages Remaining stages employ a pull-based strategy. Interface between the push-based stages and the pull- based stages is the push–pull boundary.
- 21.
- 22. Impact of DemandUncertainty and Economies of Scale Demand Uncertainty: Higher demand uncertainty leads to a preference for pull strategy. Lower demand uncertainty leads to an interest in managing the supply chain based on a long-term forecast: push strategy. Economies of scale: The higher the importance of economies of scale in reducing cost The greater the value of aggregating demand The greater the importance of managing the supply chain based on long-term forecast, a push-based strategy. Economies of scale are not important Aggregation does not reduce cost A pull-based strategy makes more sense.
- 23. Identifying the AppropriateSupply Chain Strategy
- 24. Impact of LeadTime
- 25. Sourcing Strategy Kraljic’sSupply Matrix Firm’s supply strategy should depend on two dimensions profit impact Volume purchased percentage of total purchased cost impact on product quality business growth Supply risk Availability/number of suppliers make-or-buy opportunities substitution opportunities
- 26.
- 27. Kraljic’s Supply Matrix Top right quadrant: Strategic items where supply risk and impact on profit are high Highest impact on customer experience Price is a large portion of the system cost Typically have a single supplier Focus on long-term partnerships with suppliers Bottom right quadrant Items with high impact on profit Low supply risk (leverage items) Many suppliers Small percentage of cost savings will have a large impact on bottom line Focus on cost reduction by competition between suppliers
- 28. Kraljic’s Supply Matrix Top left quadrant: High supply risk but low profit impact items. Bottleneck components Do not contribute a large portion of the product cost Suppliers have power position Ensure continuous supply, buy in bulk Focus on long-term contracts or by carrying stock (or both) Bottom left quadrant: Non-critical items Simplify and automate the procurement process as much as possible Use a decentralized procurement policy
- 29. Qualitative Approach toSourcing Strategy Profit Impact Supply Risk Componen t Forecast Accuracy Technolog y Clockspee d Possible Decisions • Multiple Sourcing • Long-Term Contracts • Minimize Lead-time • Minimize Total Landed Cost • Strategic Partnering • Option Contracts
- 30. Qualitative Approach toSourcing Strategy Profit Impact Supply Risk Component Forecast Accuracy Technolog y Clockspee d Possible Decisions • Multiple Sourcing • Long-Term Contracts • Minimize Lead-time • Minimize Total Landed Cost • Strategic Partnering • Option Contracts
- 31. Matched Strategies Source: HauLee, 2002. Aligning Supply Chain Strategies with Product Uncertainties Demand Uncertainty Low (Functional Products) High (Innovative Products) Supply Uncertainty Low (Stable Process) Efficient supply chains Responsive supply chains High (Evolving Process) Risk-hedging supply chains Agile supply chains