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Advanced Supply Chain Strategies
Sanjib Biswas
30th December, 2015
SCM and ERP (OMR 705)
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Conventional SC structure
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Change of Focus
ResponsiveSupply Chain
ResponsiveSupply Chain
Agile SupplyChain
Agile SupplyChain
Adaptive SupplyChain
Adaptive SupplyChain
Aligned Supply
Chain
Aligned Supply
Chain
Smart Supply
Chain
Smart Supply
Chain
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Lean Supply Chain
Synchronized Production and Delivery throughout the Supplier Network is aCentral Lean Concept.
Integrated supplier lead times and delivery schedules
Flows from suppliers pulled by customer demand (using takt time, load
leveling, line balancing, single piece flow) Minimized inventory through all tiers of the supply chain
On-time supplier delivery to point of use
Minimal source or incoming inspection
Effective two-way communication links to coordinate production &
delivery schedules Striving for zero quality defects essential to success
Greater efficiency and profitability throughout the supplier network
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Develop Systems Thinking
Lean supply chain principle 1:
Improving the performance of every subsystem does not
necessarily improve system performance. The sum of
local optima does not equate to the global optimum.Improvements in subsystem performance must be
gauged only through its impact on the whole system.
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The Business Ecosystem
Lean supply chain principle 2:
Focus on improving the performance of the lean supply
chain. However, do not ignore the supply chain’s business ecosystem.
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Benchmark Best Practices
Lean supply chain principle 3:
Focus on customer needs and process considerations when
designing the product delivery system. Enterprises can gain
tremendous competitive advantage through best-in-class
practices that cut across industries.
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How to Manage Demand Volatility
Lean supply chain principle 4:
Maximize external variety with minimal internal variety. It is
desirable to maintain inventories in an undifferentiated form for
as long as it is economically feasible to do so
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Managing Demand Variation
Lean supply chain principle 5:
Buffer the variation in demand with capacity, not inventory
As far as possible, avoid using inventory to buffer
variation
Less chances of misallocation
Inventory seriously impedes flow
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Creating Flow
Lean supply chain principle 6:
Use forecasts to plan and pull to execute. A system that reacts to
pull signals will have less variation than a comparable system
that adopts a push mode of operation.
To enhance flow, use pull signals for execution where
possible
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Agile Supply Chain
end-customersbecome more
knowledgeable
about product
Lean supply chain
Agile supply chain
1980’s
1990’s
Efficiency, cost
Responsiveness
Focus
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Agility…
• Market sensitive: Supply chain is capable of reading and responding to real demand
• Virtual: Information-based supply chain, rather than inventory-
based.
•
Network based: EDI and internet enable partners in the supplychain to act upon the real demand
• Process integration: Collaborative working between buyers
and suppliers, joint product development, common systems
and shared information
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The concept of Agility
Source: Mason-Jones, Naylor and Towill (2000), Engineering the leagile
supply chain
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The concept of Agility
Long lead time
Short lead time
Supply
characteristics
Demand
characteristicsPredictable
market
Unpredictabl
e markets
Plan and
control
JIT: pull
scheduling
React and execute:
agile capabilities
Hold inventory: hedge
and deploy
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Application of leagility: the de-coupling point approach
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ZARA : Agile Supply Chains
The Next Generation Businesses are faster, more complex and less predictable. Firms
have to grapple with higher velocity of change on both demand and supply fronts. This
phenomenon shall force the companies to design agile and responsive supply chains.
• Works in environment of high demand uncertainty
(works on scenario building exercises)
• Large variety / product mix
• Short life cycles
• Use of quick response manufacturing (uses SMED technique)
• Focus on rapid response to the market.
Zara, the Spanish Fashion Retailer and most profitable Apparel
brand in Europe with a turnover exceeding 10 billion Euros
brings products on the shelf within 15 days of idea creation,ensures delivery in 72 hours at all its outlets located in different
parts of globe and ensures fresh line of products always at its
retail outlets and no product on the shelf more than four weeks.
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Shift from conventional Ship to Stock (STS) Modelto Bundle to Order (BTO) Model in Consumer Electronics Business
(Postponement Strategy : Postpone the Point of Differentiation)
Sources of
Supply of
PCB
PCB
FAB
----- Existing cost curve withcomposite manufacturing concept
Revised cost curve with
Bundling concept C O S T
BUNDLING
UNIT 1 MARKET 1
BUNDLING
UNIT 2 MARKET 2
BUNDLING
UNIT 3 MARKET 3
BUNDLING
UNIT ‘N’ MARKET
‘N’
80%
20%
Revised
Order Point
90%
Time10%
Revised Point of
differentiation
Supply Chain re-structuring
Existing Order
Point (STS)
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How the cost curve behaves?(Postponement Strategy : Postpone the Point of Differentiation)
Cuts the inventory holding cost by
almost 75%
Cuts the material obsolescence cost
by almost 85%
C O S T
90%
Time10%
Revised
cost curve
Existing point ofdifferentiation
Revise
d Order
Point
Existin
g Order
Point
Revised point of
differentiation
20%
80%
Supply Chain re-structuring….contd.
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Closed loop Supply Chain
Closed-loop supply chains are designed and managed to explicitly consider the reverse and
forward supply chain activities over the entire life
cycle of the product.
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• Reverse logistics—The process of moving or
transporting goods from their final destination for the
purpose of capturing value or for proper disposal.
–
Reserve logistics involves the processes for sending new or used products “back up stream” for repair, reuse, refurbishing, resale,
recycling, or scrap/salvage.
• Closed loop supply chains—Designed and managed
to explicitly consider both forward and reverse flowsactivities in a supply chain.
– Explicitly designed and managed for both flows
Reverse vs. Closed-Loop Logistics Systems
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A closed-loop supply chain
Distribution Reseller or
CustomerSales
ManufacturingRaw
Matls
Overstocks
Refurbished product
(Secondary Market)
Return Stream
Returns
Evaluation
SpareComponents
Spares Recovery
Scrap
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Types of returns
• Commercial returns
• Repair / warranty returns
• Leasing
• End-of-use returns
• End-of-life returns
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Drivers of RSC Initiatives
• Environmental legislations
• Economic value from returns
• Green Image
• Material Resource constraints like lead and other precious
resources
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Smart Supply Chain structure
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