WHAT IS SUPPLY CHAIN MANAGEMENT

" Is the strategic management of activities involved in the acquisition and conversion of materials to finished products delivered to the customer"

SupplierManagement

Schedule /Resources Conversion

Stock Deployment Delivery

CustomerManagement

Leads to Business Process Integration

Material Flow

Information Flow

• Supply chain is the system by which organizations source, make and deliver their products or services according to market demand.

• Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level.

• Supply chain as defined by experienced practitioners extends from suppliers’ suppliers to customers’ customers.

• SUPPLY CHAIN INCLUDES :

– MATERIAL FLOWS

– INFORMATION FLOWS

– FINANCIAL FLOWS

• SUPPLY CHAIN MANAGEMENT IS FACILITATED BY :

– PROCESSES

– STRUCTURE

– TECHNOLOGY

• Supply chain objectives may differ from situation to situation.

• For functional products, cost efficiency is the critical factor.

• For innovative products, responsiveness is the important factor.

• Leanness + Agility together make up Leagility

Supply Chain Structure

Information Flow

Raw Materials

RETAILERFACTORY DC RDC

SUPPLIER

Finished Goods

SUPPLY CHAIN DRIVERS

Not new. Value system of Michael Porter• Why sudden interest?

– Demanding customers– Shrinking product life cycles– Bad product offerings– Growing retailer power in some cases– Emergence of specialized logistics providers– Globalization– Information technology

SUPPLY CHAIN ELEMENTS

• Supply Chain Design• Resource Acquisition• Long Term Planning (1 Year ++)

Strategic

• Production/ Distribution Planning• Resource Allocation• Medium Term Planning (Qtrly,Monthly)

Tactical

• Shipment Scheduling• Resource Scheduling• Short Term Planning (Weekly,Daily)

Operational

• Adversarial vs partnerships

• Short term vs long term contracts

• Large vs small order quantity

• Full truck load vs small parcels

• Inspection vs no inspection

Dealer Management

Conventional functions

• Inventory ownership and management

• Sales and technical support

• Order handling

• Credit

Dell’s Direct Business Model of Virtual Integration

• Advantages of a tightly coordinated supply chain traditionally facilitated by vertical integration.

• Combined with focus and specialization.• Leveraging on investments others have made and

focusing on delivering solutions and systems to customers

• Fewer things to manage - fewer things go wrong• Suppliers’ engineers part of Dell’s Design team• Have only a few partners

Dell’s Direct Business Model of Virtual Integration

• Share information with partners in Real time fashion.

• Stitch together a business with partners that are treated as if they are inside the company.

• Change focus from how much inventory there is to how fast it is moving

• Assets collect risks around them one way or the other.

• Limited or no testing - Eg. Sony Monitors

Dell’s Direct Business Model of Virtual Integration

• Only three Manufacturing centers - Austin, Ireland and Malaysia.

• Inventory levels and replenishment needs sometimes conveyed to vendors on hourly basis.

• Substitute information for inventory and ship only when we have real demand from real end customers

• Clever segmentation - Focus on institutional markets - 70% to very large customers with annual purchases exceeding $1 million.

• Intermediaries make distribution and selling processes more efficient.

• Intermediaries offers supply chain partners more than they could achieve on their own.– Market Exposure– Technical Knowledge/Information Sharing– Operational Specialization– Scale of operation

The Importance of Marketing Channels

Consumer and Business Marketing Channels

• Channels are most effective when:– Each member performs the tasks it does best.– Channel members cooperate to attain overall channel

goals.

• Channel Conflict– Horizontal Conflict: conflict among firms at the same level

of the channel (e.g., retailer to retailer). • Example: Two retailers compete to carry a supplier’s “exclusive” product.

– Vertical Conflict: conflict between different levels of the same channel (e.g., wholesaler to retailer).

• Example: Manufacturer competes with retailer in selling product to target market.

• Some conflict can be healthy competition.

Channel Cooperation & Conflict

• Lower inventories low financial cost.

• Shorter recievable cycles

• Optimal use of production resources

• Faster response to market changes

• Greater profitability

Thank You