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Supply Chain Management
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Transcript of Supply Chain Management
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Presentation by
Group-1
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Introduction
Evolution
Decisions
Importance
Customer service & cost trade off
Sc’s Responsiveness
Delivery reliability
SC performance measures
Drivers of SC performance
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SCM is also called the art of management of providing the
Right Product, At the Right Time, Right Place and at the
Right Cost to the Customer.
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All activities involved in the transformation of goods from the
raw material stage to the final stage, when the goods and
services reach the end customer.
Supply chain management involves planning, design and control
of Flow of material,
Flow of information
Flow of finance along the supply chain to deliver superior value to
the end customer in an effective and efficient manner.
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There have been three major revolutions in the field of supply chain
management.
The First Revolution(1910-1920): The Ford Supply Chain
The Second Revolution(1960-1970): The Toyota Supply Chain
The Third Revolution(1995-2000): The Dell Supply Chain
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Tight integrated chain.
FORD manage the journey from the iron ore mine to the finished automobile in 81 hours.
Famous saying about FORD’s SC:
The Ford supply chain would offer any colour, as long as it was black;
& any model, as long as it was Model T.
Ford innovated and managed to build a highly efficient, but inflexible supply chain that
could not handle a wide product variety and was not sustainable in the long run.
General Motors, on the other hand, understood the demands of the market place and
offered a wider variety in terms of automobile models and colours.
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Allowed the final assembly and manufacturing of
key components to be done in-house.
The bulk of the components was sourced from a large
number of suppliers who were part of the Keiretsu
system.
Keiretsu refers to a set of companies with interlocking
business relationships and shareholdings.
Long-term relationships with all the suppliers.
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Customization
Dell did not believe in long-term relationships with suppliers.
Working with world-class suppliers with technology and cost
leadership.
Medium-term relationships with suppliers.
At Dell, the trigger for supplier orders was the actual orders by
customers, and not forecasts.
This helped Dell in reducing the inventory significantly, allowing
them to respond to any changes in the market place.
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Classified into:
Design decisions
Operations decisions.
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Supply chain design (Network design) or strategic decisions involve
the following critical issues:
What activities should be carried out by the nodal firm and what
should be outsourced?
How to select entities/partners to perform outsourced activities.
what should be the nature of the relationship with those entities?
Should the relationship be transactional in nature or should it be a
long—term partnership?
Decisions pertaining to the capacity and location of the various
facilities.
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Both tactical and operations decisions involve the following
areas:
Demand forecasting
Procurement planning and control
Production planning and control
Distribution planning and control
Inventory management
Transportation management
Customer order processing
Relationship management with partners in the chain
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Proliferation in product lines
Shorter product life cycle
Higher level of outsourcing
Shift in power structure in the chain
Globalization of manufacturing
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Improvement in Communication and IT
Entry of Third-party Logistics Providers
Enhanced Inter-firm Coordination
Capabilities
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Challenging Factors are inventory management and low cost logisticseconomic environment taxation structure and also the geography of India
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A firm must ensure a smooth fit between its business strategy and supply chain strategy
Well managed firms identify and develop external market opportunities and internal supply chain capabilities
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To determine the revenue and contribution potential of increased customer service, company will need to conduct market research.
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From a supply chain perspective, customer service consists of the following four dimensions:Order delivery lead timeResponsivenessDelivery reliabilityProduct variety
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Order delivery time is the time taken by the supply chain to complete all the activities from order to delivery.
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A critical characteristic of the supply chain is the customer order penetration point or decoupling point. Three types characterised by customer order penetration point.
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Order delivery lead time also can be used for drawing a push-pull boundary of the supply chain.
All the process in SC are divided into two categorieswith respect to customer order point.
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Responsive Supply Chains: respond quickly as new products are introduced and as demand changes.
Efficient Supply Chains: focus on operating efficiently to minimize costs.
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Types of Supply Chains -- Continued
Exhibit 5.5: Responsive vs. Efficient Supply Chains
Responsive Supply chain for innovative product
Efficient Supply chains for functional products
•Closely integrated in production planning and control, quality management, service, after-sales support.
•Track work-in-process and finished goods inventory.
•Share more information.
•Use system wide measures of end-use-customer satisfaction.
•Suppliers are evaluated based on product development time, geographic proximity, lead time, and cycle time.
•Use traditional criteria for evaluating suppliers.
•Place high value on integrity, commitment, reliability, and consistency.
•Value suppliers for ability to provide cost savings, reduce downtime, and reduce inventory.
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Supply Chain Performance Measures: Cost Versus Service
• Cost• Service– Order delivery lead time– Responsiveness– Delivery reliability– Product variety
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Supply Chain Performance MeasuresCo
st o
f ser
vice
Service LevelLow High
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Achieving Strategic Fit: Wishes vs. Capabilities
Implied uncertainty spectrum
Responsive (high cost)
supply chain
Efficient (low cost)
supply chainCertain demand
Uncertain demand
Responsivenesspectrum Zone of
Strategic Fit
Gourmet dinner<High margin>
Lunch buffet<Low margin>
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Cost
Service LevelLow High
Existing Position
Managing Supply Chains Efficiently
.
Inefficient Practices
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Market-Responsive Process
Primary purpose Respond quickly to unpredictable demand to minimize stockouts, forced markdowns, and obsolete inventory
Manufacturing focus Deploy excess buffer capacity for flexibility
Inventory strategy Deploy significant buffer stock of all stock items
Lead-time focus Invest in ways to reduce lead time
Approach to choosing suppliers
Select primarily for speed, flexibility, and quality
Product-design strategy Use modular design to postpone product differentiation
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The Four Drivers of Supply Chain Performance
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Inventory "stockage" exists in all supply chains because of a mismatch between supply and demand
Inventory plays a significant role in a supply chain's ability to support a firm's competitive strategy
A supply chain manager must make routine decisions tocreate a more responsive and more efficient supply chain
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Transportation moves the product between different locations in a supply chain
Transportation is prominent in a company's competitive strategy
The fundamental trade-off for transportation is cost (efficiency) versus speed (responsiveness)
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Facilities include all locations in the supply chain to store, assemble, or fabricate inventory
Decisions regarding location, capacity, and flexibility of facilities significantly affect supply chain performance
In DoD, depot and field repair facilities are cornerstones of the supply chain
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Information serves as the connection between the supply chain's various stages
Information and information systems are an important part of balancing responsiveness versus efficiency
Businesses must trade-off between efficiency and responsiveness when trying to include more supply chain information
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