Supply Chain Management

Gaurav Awasthi

Defining Supply Chain• Most Companies are both supplier to the

customers and also are a customer for their suppliers.

• Hence they are just a link in a chain.• Supply Chain can be defined as:– The network of interconnected facilities and

activities that perform the function of• Product Development• Procurement of materials from the vendors• The movement of material between facilities• Manufacturing• Distribution of finished goods• And finally after market support

Some more illustration..

FarmerGrain

Wholesaler

Cereal Producer

Grocery Wholesal

er

Grocery Retailer

Consumer

Example of a Supply Chain

• All the links in the supply chain share physical material as well as information with each other.•Since each link in the chain adds some value for the next link, the supply chain is also referred to as “Value Chain”.

Definition of Supply Chain Management• Supply chain management (SCM) is the

management of the flow of goods. • It includes the movement and storage of raw

materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

• Supply chain management has been defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

Objective of Supply chain Management

• Customer Satisfaction• Consider a large vertically integrated company such

as Reliance Industries.• They own raw material sources, Production plants,

distribution networks and retail outlets also.• These links share data with each other, have visibility

and have common goal to serve customer profitably.

Hence the objective of a good SCM is to “plan, coordinate and control all the activities in the supply chain so that it achieves high level of consumer service while keeping the costs low.”

A Complex supply chain web for a laptop manufacturing company

Challenges and Increased need of Supply Chain Management

1. Increased Outsourcing: – Manufacturer should focus on their Core Job.– Lots of non-core work is outsourced to external

experts. E.g. Car companies outsource gauge, speedometers, mattings to expert manufacturers.

– Hence there is a need to coordinate these different entities and activities.

2. Lead Time Compression: Increasingly there is less and less time between order received and delivery due to competition.

3. Globalization: Suppliers as well as Customers could be located even in the remotest part of the world.

4. Shortened Product Cycles: New products are being introduced at faster rates. If goods are held in pipeline for longer they may become obsolete.

5. Rationality of Myopia: When a link in the supply chain argue that it should focus on its own work rather than sharing info with suppliers and customers.

Ways to Improve Supply Chain Performance

1. Faster Order, Communication, Transportation: This can be achieved by contracting with third party logistics providers, ERP systems, MIS System.

ExampleLevi Jeans stores 130 items of every type of jeans in their stores. All the details of each item and stocks are stored in central database. All their stores are connected with each other with the help of ERP Software. All the jeans are equipped with a unique Barcode. It is very important for every store to stock minimum number of items of every variety along with keeping transportation cost low. Now when any store sells any of the item it scans its barcode. The item is subtracted from its inventory. The information is sent to the supplier. The supplier restocks the item from the nearest warehouse. The store again scans the barcode while receiving the material and updates its database.

Ways to Improve SCM contd…

2. Work with more frequent smaller deliveries: Smaller lot size accommodates variety, increases response rate and reduces cost of stocking.

3. Simplifying the Product: Reduce number components in the product and use common components. This reduces number of items to be held in stocks.

4. Reduce number of Suppliers and develop close relationships with them: Few reliable suppliers with whom you share your data work with better synchronization and reduce cost.

5. Virtual Integration: Dell’s supplier doesn’t charge it until they receive order from online customers and ship within 15 minutes.

Thank you…Doubts and Queries…