Supply Chain Management

Changing Business environment

Global elements.

• Consumers taste and preference has changed.

• Demand supply.• Powerful economic alliance.• Opening of eastern block countries

and European union.

Government influence

• Deregulation

• Tax and duty structure.

• Exemption for SSI.

• Environmental protection laws

Macro economic factors

• Interest rates.

• Exchange rates

• Inflation rates.

• Saving rates.

• Trade deficit / surplus.

• Budget deficit / surplus.

Technological innovation

• Process innovation

• Industrial disasters

• IT revolution

This resulted in,

• Threat to new entrants

• Bargaining power of the buyer

• Bargaining power of supplier

• Threat of substitute

Further it resulted in,

• Expansion of business.

• Merger with another company.

• Acquisition with another company.

• Strategic alliance.

Traditional S.C.M. approach – MRP AGE

Supplier Others Planning Production Sales Customer

MRP – II Resource planning

Supplier Others Plan / purchase / Production Sales Customer

S.C.M. approach – ERP age Supplier Manufacturer Dist. Center Retailer Consumer

Modern S.C.M. approach

Supplier Manufacturer Distribution center Retailer Consumer

Concept of S.C.M.

• The primal focus of SCM is to serve consumer with excellent goods & services against minimum possible costs and minimum time.

• All the trading partners in supply chain share long term mutually beneficial vision

• All the SCM decisions are inter-dependent

amongst the trading partners and not dependent or dependent in nature.

• SCM is the demand driven situation where consumer defines his requirements and orders. Hence the demands generated in SCM are either based in the live consumer order or the past consumer orders.

• SCM strongly adheres to the lean thinking, thus the manufacturing philosophy will be single piece flow & batch size reduction.

• The order fulfillment mechanism of SCM will be to cater actual consumer needs or to replenish the sales of immediate past.

• The integrated planning & execution across Supply chain will result into proper utilization of the inventory & other resources.

• SCM performs is heavily based on sophisticated IT systems & knowledge workers

• The success level of SCM is the outgrowth of the combined results of performance of the individual trading partners.

• It is necessary to restructure the organization and the relationship of the company with suppliers, distributors and all others who participate in value creation process.

Definition

A supply chain consists of all the entities necessary to transform ideas into delivered products or services.Supply chain management directs and transforms a firm’s resources in order to design, purchase, produce and deliver high quality goods and services.

• Supply chain management I a paradigm driving many businesses.

• After globalization push business is replaced by pull business.

• Supply chain consists of, all parties directly or indirectly, fulfilling customers request.

• Supply chain management encompasses all activities with the flow of transformation of goods from raw material stage through end users as well as associated information flows.

• Information flows in up & down direction.

• Directly involved in Supply chain management activity are :-

a) Customer.

b) Retailer.

c) Distributor.

d) Manufacturer.

e) Supplier.

• Indirectly involved in Supply chain management are :-

a. Product development.

b. Marketing.

c. Operations.

d. Finance.

e. Human Resource.

f. Customer service.

Supply chain management deals with the issues throughout the chain from supplier to customer.

S.C.M. objective is to simplify the supply chain to control cost, improve total quality, maximize customer service & increase profit.

S.C exists in both service & manufacturing organizations.

The complexity of the chain may vary from industry to industry.

Strategic phase :-

company decides how to structure the supply chain over the next years. It decides what the chains configuration will be, how resources will be allocated, what processes will be performed at each stage. At this level it is viewed from outsourcing point of view, whether to manufacture in house or outsource it. Such decisions are long term decisions they cannot be changed with short term notice.

Supply chain planning :-

the strategy is already finalized. Planning include making decisions regarding which markets will be supplied from which location, the subcontracting & manufacturing plan, inventory policies etc. The timing & size of marketing & price promotion etc.

Supply chain operations :-

At this level the time horizon is weekly or sometimes daily also. During this phase, firms allocate inventory or production to individual orders. Set order dates, generate picking lists allocate an order to an shipping mode & shipment, set delivery schedules of trucks & the replenishment. Operational decisions are made in short term.

S.C.M principles :-

• Compress the structure by reducing no of members in the chain.

• Speeding up the activity – reducing the time between two activities.

• Integrate the activities – pooling them.

• Collaborate & co-operate

Key elements of S.C.M. :-

• Production – what, when & how many to produce.

• Supply – what can be supplied economically & efficiently & of the good quality.

• Inventory – levels at raw material, work in progress, finished goods.

• Location – place of production, tax structure, distribution modes etc

• Transportation for smooth supply

Air – ship – railway – road. This needs to be reviewed from time & expense point of view.

• Information – Linking of computers through networks and Internet and streamlining the information flow.

a. MRP.

b. SAP.

c. ERP etc.

Benefits of S.C.M.

• Reduced supply cost.

• Reduction in throughput time.

• Better returns on investment.

• Improved customer service.

• Reduction in inventory.

• Improved profit margins.