1. The document discusses supply chain management concepts including what a supply chain is, challenges in matching supply and demand, and strategies for managing inventory and coping with the bullwhip effect. 2. It provides examples of successful supply chain management by companies like Walmart, Dell, and L&T Construction including how they reduced costs and improved customer satisfaction through collaboration with suppliers and use of information technology. 3. Managing complex global supply chains, variability in demand and supplier performance, and conflicting objectives between members are some of the difficulties in supply chain management.

1. 125 October 2020
Supply Chain Management-
PR 656
Supply Chain Management-
Case Study
Name-MANNU KUMAR
Roll No-203520012

2. 2
What is a Supply Chain?
A supply chain is the system of organizations, people,
activities, information and resources involved in moving a
product or service from supplier to customer. Supply chain
activities transform raw materials and components into a
finished product that is deliveredto the end customer.
 Supply chain comprises of :
◦ Suppliers, manufacturers,warehouses,distribution
centers and retail outlets – “facilities”
◦ Raw materials
◦ Work-in-process (WIP) inventory
◦ Finished products
that flow betweenthe facilities

3. Plan Source Make Deliver Buy

4. Suppliers Manufacturers Warehouses &
Distribution Centers Customers
Material Costs
Transportation
cost
Manufacturing Costs
Transportation
Inventory cost
Transportation

5. Example Of A Supply Chain
 Say we get an order froma Europeanretailerto produce10,000
garments.Forthis customerwe might decideto buy yarn from a
Koreanproducerbut have it wovenand dyed in Taiwan. So we pickthe
yarn and ship it to Taiwan. The Japanesehave the best zippers… so we
go to YKK, a big Japanese zipper manufacturer,and we orderthe right
zippers fromtheir Chinese plants. …the best place to make the
garments is Thailand. So we ship everythingthere. …the customer
needs quickdelivery,we may dividethe orderacross five factoriesin
Thailand. Effectively,we are customizingthe valuechain to best meet
the customer’sneeds. (Interviewof VictorFungof Li & Fungin HBR,
Sept-Oct1998.)
In the interviewexample,it can be seen thatLi & Funghas createda
supplychain for the purpose of meetinga customer’sneeds. In
general,this case is more the exceptionthan the rule,but servesto
illustratesome of the pieces of a supply chain.

6. A Supply Chain
Example…

7. Supply Chain Management
Supply chain management deals with linking the
organizations within the supply chain in order to meet
demand across the chain as efficiently as possible.
Supply Demand

8. Why so Difficult to Match Supply and Demand?
 Uncertainty in demand and/or supply
 Changing customer requirements
 Decreasing product life cycles
 Fragmentation of supply chain ownership
 Conflicting objectives in the supply chain
 Conflicting objectives even within a single firm
 Marketing/Sales wants: more FGI inventory, fast delivery, many
package types, special wishes/promotions
 Production wants: bigger batch size, depots at factory, latest ship
date, decrease changeovers, stable production plan
 Distribution wants: full truckload, low depot costs, low
distribution costs, small # of SKUs, stable distribution plan

9. Why is supply chain management so important?
 Togain efficienciesfrom procurement,distributionand logistics
 Tomake outsourcing more efficient
 Toreduce transportationcostsof inventories
 Tomeet competitivepressures from shorterdevelopment times,
more new products, and demand for more customization
 Tomeet the challengeof globalizationand longer supply chains
 Tomeet the new challenges from e-commerce
 Tomanage the complexitiesof supply chains
 Tomanage the inventoriesneededacross the supply chain

10. Why is supply chain management difficult?
Different organizations in the supply chain may have different,
conflicting objectives:
 Manufacturers: long run production, high quality, high
productivity, low production cost
 Distributors: low inventory, reduced transportation costs, quick
replenishment capability
 Customers: shorter order lead time, high in-stock inventory,
large variety of products, low prices
 Supply chains are dynamic - they evolve and change over time

11. Uncertainty is inherent to every supply chain
◦ Travel times
◦ Breakdowns of machines and vehicles
◦ Weather
◦ Local politics, labor conditions, border issues
The complexity of the problem to globally optimize a supply
chain is significant
◦ Minimize internal costs
◦ Minimize uncertainty
◦ Deal with remaining uncertainty
Why is supply chain management difficult?.......

12. Issues In Supply Chain Management
 Distribution network configuration
 Howmanywarehousesdo we need?
 Whereshouldthesewarehouses be located?
 What shouldtheproductionlevelsbe at eachof our plants?
 What shouldthetransportationflows be betweenplantsand warehouses?
 Inventory control
 Whyarewe holdinginventory?Uncertaintyin customer demand?Uncertaintyin the
supplyprocess?Someother reason?
 If the problemis uncertainty,howcanwereduce it?
 Howgood is our forecastingmethod?Distribution strategies
 Directshipping to customers?
 Classicaldistributionin whichinventoryis heldin warehousesandthenshipped
as needed?
 Cross-dockingin whichtransshipmentpoints areused to takestockfrom suppliers’
deliveriesandimmediatelydistributetopoint of usage?

13.  Product design
 Should products be redesigned to reduce logistics costs?
 Should products be redesigned to reduce lead times?
 Would delayed differentiation be helpful?
 Information technology and decision-supportsystems
 What data should be shared (transferred)
 How should the data be analyzed and used?
 What infrastructure is needed between supply chain members?
 Should e-commerce play a role?
 Customervalue
 How is customer value created by the supply chain?
 What determines customer value? How do we measure it?
 How is information technology used to enhance customer value in the
supply chain?

14. SCM - InventoryManagement Issues
 Manufacturers would like to produce in large lot sizes because it is more cost
effective to do so. The problem, however,is that producing in large lots does
not allow for flexibility in terms of product mix.
 Retailers find benefits in ordering large lots such as quantity discounts and
more than enough safety stock.
 The downside is that ordering/producing large lots can result in large
inventories of products that are currently not in demand while being out of
stock for items that are in demand.
 Ordering/producing in large lots can also increase the safety stock of suppliers
and its corresponding carrying cost. It can also create what’s called the
bullwhip effect.
 The bullwhip effect is the phenomenon of orders and inventories getting
progressivelylarger (more variable) moving backwards through the supply
chain. This is illustrated graphically on the next slide.

17. Inventory Management Disaster-Apple Misses Power Mac Demand
Many forget than even through the mid-1990s, Apple was often the leader in market share in
the then still deeply fragmented PC market. That position took a permanent hit in the last half
of 1995dueto supply chain foibles.
Apple was introducing its new line of Power Mac PCs, to be launched just before the Christmas
season in 1995. Just two years before, however, the company had been burned by excess
inventoriesand productioncapacityduring a similar launchfor its Power Book
At one point, Apple
had an order
backlog of $1 billion.
laptops.
So this time, it playedthings very conservatively. That turned
out to be the expensive option.
When demand for Power Macs exploded, Applewas caught short for the critical
Christmas season. Forecastsweretoolow, there wasn’t enough flex in the supply
chain, and some parts suppliers developed additionaldelivery issues. At one
point, Apple has $1 billion dollars in unfilled orders in its system. Unable to
capitalize on the market opportunity it hadbeen handed, the stock pricewas
soon cut in half, the CEO was shown the door, shareholder lawsuits came
pouring in, and Apple’smarket positionin PCs took a permanent hit such that it
took the IPOD years later to lead a recovery inthe company.

18. Some of the causes of variability that leads to the bullwhip effect includes:
•DemandforecastingManyfirms use the min-maxinventorypolicy.Thismeans that
whenthe inventorylevelfallsto the reorderpoint(min) an orderis placedto bringthelevel
backtothe max , or the order-up-to-level.Thisleads to variability.
•Lead timeAs lead time increases,safetystocks areincreased,andorderquantities are
increased.More variability.
•Batchordering.Manyfirms use batchorderingsuchaswitha min-maxinventory
policy.Theirsuppliersthensee a largeorderfollowedbyperiodsof no ordersfollowedby
anotherlargeorder.This patternis repeatedsuch thatsuppliers see a highlyvariable
patternof orders.
•Price fluctuation. If pricesto retailersfluctuate,thenthey may try to stockup when
pricesarelower,again leading to variability.
•Inflatedorders. Whenretailersexpectthata productwill be in shortsupply,theywill
tendto inflate ordersto insurethattheywill haveamplesupplyto meet customerdemand.
Whenthe shortageperiodcomes to an end, theretailergoesbackto thesmaller orders,
thuscausingmore variability.

19.  Centralizing. Centralizing demand information occurs when customer demand
information is available to all members of the supply chain. This information
can be used to better predict what products and volumes are needed and when
they are needed such that manufacturers can better plan for production.
However,even though centralizing demand information can reduce the bullwhip
effect, it will not eliminate it.
 Reducing uncertainty. This can be accomplished by centralizing
demand information.
 Reducing variability. This can be accomplished by using a technique made
popular by Wal-Mart and then Home Depot called everyday low pricing
(EDLP). EDLP eliminates promotions as well as the shifts in demand that
accompany them.
 Reducing lead time. Order times can be reduced by using EDI (electronic
data interchange).
 Strategic partnerships. The use of strategicpartnerships can change how
information is shared and how inventory is managed within the supply chain.
These will be discussed later.
Methods for coping with the bullwhip effectinclude:

20.  STRATEGY- Make to Stock
◦ WHEN TO CHOOSE- standardized products,
relatively predictable demand
◦ BENEFITS - Low manufacturing costs; meet
customer demands quickly
 STRATEGY- Make to Order
◦ WHEN TO CHOOSE- customized products, many
variations
◦ BENEFITS - Customization; reduced inventory;
improved service levels

21. ◦ WHEN TO CHOOSE- many variations on finished
product; infrequent demand
◦ BENEFITS - Low inventory levels; wide range of
product offerings; simplified planning
 STRATEGY- Engineer to Order
◦ WHEN TO CHOOSE- complex products, unique
customer specifications
◦ BENEFITS - Enables response to specific customer
requirements
 STRATEGY- Configure to Order

22. ◦ 16%-28% Improvement
 Inventory Reduction
◦ 25%-60% Improvement
 Fulfillment Cycle Time
◦ 30%-50% Improvement
 Forecast Accuracy
◦ 25%-80% Improvement
 Delivery Performance

23. ◦ 10%-16%Improvement
 Lower Supply-Chain Costs
◦ 25%-50%Improvement
 Fill Rates
◦ 20%-30%Improvement
 Improved CapacityRealization
◦ 10%-20%Improvement
 Overall Productivity

24. Analysis of Apple Supply Chain core processes,
challenging issues and complexities of
its operations

27. 1. Number of Items (Stock Keeping Unit)

30.  The results from the analysis of Apple's processes, challenging
issues and complexities indicates that the success of its supply
chain operations depends on how well they manage the supplier
relationship.
 This includes early supplier involvement in new product
development,close communication and supplier performance
improvement/evaluation.
 The reason is that Amazon's distribution environment is
mathematically solved through the optimization method.
 Typically, they have determined how many facilities they should
have, where serves which market, items/quantity stored in each
location, how to
manage transportationbetween warehouse-to-warehouse and
warehouse to customers in order to minimize cost and increase service
level.

31. On gainingcompetitiveadvantage
In the late 1970s, with about 200 stores,Wal-Mart was a relatively small retailer.
At that time, Sears and Kmart dominated the retail market.Since then, Wal-
Mart gained significant market share from these retailers and became the
largest and most profitable retailer in the world.Today, Wal-Mart is admired for
its collaboration and technology driven supply chain practices and is leading the
retailing industry with its innovative supply chain practices.
Supply Chain Success Story (Case study)-
Wal-Mart

32. •Wal-Martestablished in 1962, known for innovative business practices.
•One of the firstretailing companies to centralize distribution system.
•Wal-Martplaced orders for huge quantities of goods with its suppliers.
•Information of product, manufacturer, price was recorded on computer system
& information was passed to centralized datawarehouse.
•Provided suppliers historical sales data of 24 months,allowed them to track invoice,
can make demand forecast.
•Wal-Martoperates their own satellitenetwork.
•Effective use of logistics management
•Reduced inventorycost
•Higher productivity
• Shorter lead times
•Higher profits
•Greater customer loyalty
•Bargaining power oversuppliers
"People think we got big by putting big stores in small
towns. Really, we got big by replacing inventory with
information.”
Sam Walton,Founderof Wal-Mart

33. Wal-Mart Supply Chain

34. Supply Chain Success Story (Case study)-
Dell On gaining competitiveadvantage
 On April 20, 2001 Dell toppledCompaq asthe world’slargestPCmaker*
 Dell’smarketsharewas 12.8%as opposedto Compaq’smarket share 12.1%
 Compaq and HPcouldnot get into a price warwith Dell because
 Dell’sprofit marginwas18%
SUPPLIERSForDELL
MICROSOFT - for Windows
INTEL-for microprocessors
NVIDIA- for Graphicchips
SONY- formonitors

35. New ValueChain: Dell had no in-housestockof finishedgoodsinventories unlike
competitorsusingthe traditionalvaluechain model
Pull Mechanism: It did not have to wait for resellers to clear out their own
inventories before it could push new models into the marketplace (typically
operatedwith60-70days stock)
Personalization:Customersgotthe satisfactionofhavingtheir computers
customizedtotheirparticularliking
Dell’ssuccessis a combinationof:
• DirectSales.
• InventoryManagement
• SupplierIntegration
Limitation of direct sell model in emerging market
▪Buying habit
▪Not access to internet
▪Lack of online payment (i.e.credit card)
DELL DIRECTSELLING

36. Supply Chain Success Story (Case study)-
L&T Construction Ltd
L&T'sECC Division
ECC handled turnkey industrial and infrastructure projects in civil, mechanical, electrical,
and instrumentation engineering and it also offered turnkey construction services.
Headquartered in Chennai and with more than 50 years of experience and expertise, ECC
commandeda leadership positionin theindustry...
The EngineeringConstructionandContracts(ECC)divisionis the constructiondivisionof
Larsen& ToubroLtd.,(L&T).Withprojectsiteslocatedin all partsof India,ECCexpandedits
operationstocountrieslike the UAE, Bangladesh, SriLanka,Malaysia, andSouthAfrica.
Givenits largegeographicalspreadof operationsandthelarge numberof participants
involvedin thesupply chain(in Indiaalone,it had approximately6000suppliers,spread
over 350locations),theeffectivemanagementofthe supplychainsystemturnedouttobe
a challengingtaskforECC. The absenceofany establishedITsolutionforthe construction
industrymadethe situationstill morecomplex.

37. • In orderto handlethe challengeofimplementing aneffectivesupplychainmanagement
(SCM) systemin thecompany,L&TECC optedfora web-basedSCMsolution.Itnotonly
made thetask of trackingthevendorseasierbut alsoreducedthetime spenton
negotiations withthemsincethevendorscouldposttheirbids onlinethroughECC's
website.
• In orderto keep trackof its operationsatdifferentlocations,ECC cameup
with the idea of connectingall its projectsiteswith its headquarters in
ChennaithroughtheInternetandlaunchedits in-houseinformation
solution,EnterpriseInformationPortal(EIP).
• EIP not only helpedECC keep trackof its activitiesatdifferentlocationsbut
also allowedit to leverageonits hugepurchasingpower.Italso helpedin
reducingprojectcostsandincreasingthereturnoncapitalemployed
(ROCE).CompanysourcesclaimedthatEIPwas of greathelp in bringing
togetherthedifferentphasesof theconstructioncycle - design,
development,tendering/bidding,budgets,planning/scheduling,etc.

38. By collaborating and bringing together different stakeholders on a single platform, EIP
is fastemergingas a powerfulERP solution."
- K.V. Rangaswami, Executive Vice-President (L&T ECC Division),
March'2003
SupplyChain Management Strategyin ECC
• ECC structureditselfintoseven regionsin orderto handlethecomplexityin termsof
stageof completion, sizeofproject,andthegeo-politicalsituation.Eachregioncatered
to the demandofspecializedconstructionservicesin thatregionandhad its own
materialsdepartment.
The materialsdepartmentofECC got itself ISO-9002certified,indicating thelevel of
importance itgaveto themanagementof its suppliers.ECCadopteda soundand
efficientSupplyChainManagementStrategyinorderto keep thesupply chaincoststo
the minimum.Its qualitypoliciesemphasizedminimumlandedcosts,transparent
practices,andoptimuminventorylevels.

39. The Challenges
The constantchallengethatECCfacedwas in integratingandcollaboratingitssupply
chainparticipants. Therootcause ofthischallengewasthe constructionindustryitself.
The project sitesbeingspreadoutat variouslocationsandthelarge supplierbasemade it
difficultfor ECCto minimize its supplychaincost...
SupplyChain Management Solution
In orderto handlethe complex challenge ofimplementingan effectivesupplychain
management(SCM)systeminthe company,L&TECC optedtoimplementa web-based
SCM solutionbuilton Microsofttechnologies- SQL Server 2000andWindows 2000
Server in early 2000.Thesystemworkedon an on-line-order-off-line-deliverystrategy.
The companycouldnow streamlineits entirevendornetwork.ECCalso arrangeda
propertrainingprogramforits vendorsin orderto familiarizethemwith the
functioningofthe system...

40. • Global economy could affect the Company.
• Inventories can become obsolete or exceed
demand.
• Some components are currently obtained from the single or
limited sources.
• Company depends on logistical services provided by outsourcing
partners.

41. 41
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