Supply Chain Management BY Ankur mittal

8/14/2019 Supply Chain Management BY Ankur mittal

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Supply ChainSupply ChainManagementManagement


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Supply ChainSupply Chain

All activities associated with the flowAll activities associated with the flow

and transformation of goods andand transformation of goods and

services from raw materials to the endservices from raw materials to the enduser, the customeruser, the customer

A sequence of business activitiesA sequence of business activities

from suppliers through customersfrom suppliers through customers

that provide the products, services,that provide the products, services,

and information to achieve customerand information to achieve customer

satisfactionsatisfaction


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The Supply ChainThe Supply Chain

Products

and

Services

Products

and

Services

Products

and

Services

CustomersCustomers

Total

satisfaction

with quality,

price,

delivery,

and service

DistributorsDistributors

Package

and delivery

Inventory

ProducersProducers

Finished

goods, end

products

and services

Inventory

SuppliersSuppliers

Inventory

Materials,

parts, sub-

assemblies,

and

services


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Information

Products

and

Services

Products

and

Services

Products

and

Services

CustomersCustomers

Total

satisfaction

with quality,

price,

delivery,

and service


Package

and delivery

Inventory

ProducersProducers

Finished

goods, end

products

and services

Inventory

SuppliersSuppliers

Inventory

Materials,

parts, sub-

assemblies,

and

services


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Information

Cash

Products

and

Services

Products

and

Services

Products

and

Services

CustomersCustomers

Total

satisfaction

with quality,

price,

delivery,

and service


Package

and delivery

Inventory

ProducersProducers

Finished

goods, end

products

and services

Inventory

SuppliersSuppliers

Inventory

Materials,

parts, sub-

assemblies,

and

services


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Is supply chain soIs supply chain so

simple?simple?Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer


Upstream Downstream


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Drivers of Supply ChainDrivers of Supply Chain

PerformancePerformance Inventory

Raw materials

WIP

Finished Goods

Sourcing

Outsourcing

Transportation


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TransportationTransportation

Cost Inventory

costs

Transport

costs

Total

costs

Rail Air


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InventoryInventory

Where do we hold inventory? Suppliers and manufacturers

warehouses and distribution centers

retailers

Types of Inventory raw materials

WIP

finished goods

Why do we hold inventory? Uncertainty in supply and demand

Lead Time

Avoid stock outs (customer goodwill)


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Terms InvolvedTerms Involved

Inventory lot size

Replenishment Lead time

Stock out

Reorder Point

Safety stock


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Relevant Costs in anRelevant Costs in an

Inventory SystemInventory System Procurement costs

Ordering cost (appx. administrative, inspection,transportation etc.)

Holding costs Maintenance and Handling

Taxes

Obsolescence

Stock-outs costs Lost sales (Customer goodwill)

Backorders


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The Inventory CycleThe Inventory Cycle

Profile of Inventory Level Over Time

Quantity

on hand

Q

Receive

order

Place

orderReceive

order

Place

order

Receive

order

Lead time

Reorder

point

Demand

rate

Time

Constant

Demand


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DecisionsDecisions

When to order

How much to order

Types of System

Continuous Review

Periodic Review


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EOQ: A View of InventoryEOQ: A View of Inventory

Time

Inventory

Order

Size

Note: No Stockouts

Order when no inventory

Order Size determines policy


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EOQ - Cost Minimization GoalEOQ - Cost Minimization Goal

OrderQuantity

(Q)

The Total-Cost Curve is U-Shaped

Ordering Costs

QO

Annua

lCost

(optimal order quantity)or EOQ

Holding Costs


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Process ViewProcess ViewCustomer

Retailer

Distributor

Manufacturer

Supplier

Customer

Order Cycle

ReplenishmentCycle

Manufacturing

Cycle

Procurement

Cycle

Pull

Push


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Supply Chain ManagementSupply Chain Management

Synchronization of activitiesSynchronization of activities

required to achieve maximumrequired to achieve maximum

competitive benefitscompetitive benefitsCoordination, cooperation, andCoordination, cooperation, and

communicationcommunication

Rapid flow of informationRapid flow of information

Vertical integrationVertical integration


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Supply Chain UncertaintySupply Chain Uncertainty

Forecasting, lead times, batchForecasting, lead times, batch

ordering, price fluctuations, andordering, price fluctuations, and

inflated orders contribute toinflated orders contribute tovariabilityvariability

Inventory is a form of insuranceInventory is a form of insurance

Distorted information is one ofDistorted information is one of

the main causes of uncertaintythe main causes of uncertainty


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Information in the Supply ChainInformation in the Supply Chain

Centralized coordination of information flowsCentralized coordination of information flows

Integration of transportation, distribution, ordering, andIntegration of transportation, distribution, ordering, and

productionproduction

Direct access to domestic and global transportation andDirect access to domestic and global transportation and

distribution channelsdistribution channels

Locating and tracking the movement of every item in theLocating and tracking the movement of every item in the

supply chainsupply chain

Consolidation of purchasing from all suppliersConsolidation of purchasing from all suppliers

Inter company and intra company information accessInter company and intra company information access

Data interchangeData interchange

Instantaneous updating of inventory levelsInstantaneous updating of inventory levels


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Bull Whip EffectBull Whip Effect

Each organisation seek to solve the problem

from its own perspective

Small changes in consumer demand result

in large variations in orders placed

upstream

Dramatic order size variation

Amplification of order size variation as one

moves up the supply chain


Buys 10Orders 15

Delay 2 weeksDelay 2 weeks

Orders 25

Delay 2 weeks

Orders 40


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Causes of Bull whip effectCauses of Bull whip effect

Little or no communication between

supply chain partners.

Delay times between orderprocessing, demand, and receipt of

products.

Over reacting to the backlog orders.

Inaccurate demand forecasts.


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Electronic BusinessElectronic Business

Replacement of physical processesReplacement of physical processes

with electronic oneswith electronic ones

Cost and price reductionsCost and price reductions Reduction or elimination ofReduction or elimination of

intermediariesintermediaries

Shortening transaction times forShortening transaction times forordering and deliveryordering and delivery

Wider presence and increased visibilityWider presence and increased visibility


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Electronic BusinessElectronic Business Greater choices and more information forGreater choices and more information for

customerscustomers

Improved serviceImproved service

Collection and analysis of customer dataCollection and analysis of customer data

and preferencesand preferences

Virtual companies with lower pricesVirtual companies with lower prices

Gain global access to markets & customersGain global access to markets & customers


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Electronic Data InterchangeElectronic Data Interchange

Computer-to-computer exchange ofComputer-to-computer exchange of

business documents in a standardbusiness documents in a standard

formatformat Quick access, better customer service,Quick access, better customer service,

less paperwork, better communication,less paperwork, better communication,

increased productivity, improvedincreased productivity, improved

tracing and expediting, improves billingtracing and expediting, improves billing

and cost efficiencyand cost efficiency


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The InternetThe Internet

Instant global access to organizations,Instant global access to organizations,

individuals, and information sourcesindividuals, and information sources Fundamentally changes the wayFundamentally changes the way

organizations do businessorganizations do business Removed geographicRemoved geographic

barriersbarriers

Adds speed and accessibilityAdds speed and accessibilityto the supply chainto the supply chain


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The E-Automotive Supply ChainThe E-Automotive Supply Chain


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Intranets and ExtranetsIntranets and Extranets

Intranets are internet-like networks thatIntranets are internet-like networks that

operate within a single organizationoperate within a single organization

Extranets are intranets that can beExtranets are intranets that can beconnected to the global internetconnected to the global internet

Difference is in who has access to theDifference is in who has access to the

systemsystem


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SuppliersSuppliers

Purchased materials account for aboutPurchased materials account for about

half of manufacturing costshalf of manufacturing costs Materials, parts, and service must beMaterials, parts, and service must be

delivered on time, of high quality, anddelivered on time, of high quality, and

low costlow cost Suppliers should be integrated intoSuppliers should be integrated into

their customers supply chainstheir customers supply chains Partnerships should be establishedPartnerships should be established On-demand delivery (JIT) is a frequentOn-demand delivery (JIT) is a frequent

requirementrequirement


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E-ProcurementE-Procurement

Business-to-business commerceBusiness-to-business commerce

conducted on the Internetconducted on the Internet

Benefits include lower transaction costs,Benefits include lower transaction costs,lower prices, reduce clerical labor costs,lower prices, reduce clerical labor costs,

and faster ordering and delivery timesand faster ordering and delivery times Currently used more for indirect goodsCurrently used more for indirect goods

E-Marketplaces service industry-specificE-Marketplaces service industry-specificcompanies and supplierscompanies and suppliers


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DistributionDistribution The actual movement of products andThe actual movement of products and

materials between locationsmaterials between locations Handling of materials and products atHandling of materials and products at

receiving docks, storing products,receiving docks, storing products,packaging, and shippingpackaging, and shipping

Often called logisticsOften called logistics Driving force todayDriving force today

is speedis speed Particularly importantParticularly important

for Internet dot-comsfor Internet dot-coms

Order Fulfillment at


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Amazon.com


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Distribution CentersDistribution Centers

and Warehousingand Warehousing DCs are some of the largest businessDCs are some of the largest business

facilities in the world.facilities in the world. Trend is for more frequent orders inTrend is for more frequent orders in

smaller quantitiessmaller quantities Flow-through facilities and automatedFlow-through facilities and automated

material handlingmaterial handling Final assembly and productFinal assembly and product

configuration may be done at the DCconfiguration may be done at the DC


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TransportationTransportation

Important element, oftenImportant element, often

overlookedoverlooked

Common methods are railroads,Common methods are railroads,trucking, water, air, intermodal,trucking, water, air, intermodal,

package carriers, and pipelinespackage carriers, and pipelines


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RailroadsRailroads

Low cost, high-volumeLow cost, high-volume

Improving flexibilityImproving flexibility

intermodal serviceintermodal service

double stackingdouble stacking


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Flexible, small loadsFlexible, small loads

Consolidation,Consolidation,

Internet load match sitesInternet load match sitesPart of TQM supplier-customerPart of TQM supplier-customer

relationshiprelationship

Single sourcing reduces number ofSingle sourcing reduces number oftrucking firms serving a companytrucking firms serving a company

TruckingTrucking


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AirAirRapidly growing segment ofRapidly growing segment of

transportation industrytransportation industry

Lightweight, small itemsLightweight, small items

Quick, reliable,Quick, reliable,expensiveexpensive


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Package CarriersPackage CarriersSignificant growth driven bySignificant growth driven by

e-businessese-businessesUse several modesUse several modes

of transportationof transportationExpensiveExpensiveFast and reliableFast and reliable

Innovative use ofInnovative use oftechnologiestechnologies


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IntermodalIntermodal

Combination of several modes ofCombination of several modes of

transportationtransportation

Most common are truck/rail/truckMost common are truck/rail/truckand truck/water/rail/truckand truck/water/rail/truck

Enabled by theEnabled by the

use of containersuse of containers


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WaterWaterOne of oldest means of transportOne of oldest means of transport

Low-cost, high-volume, slowLow-cost, high-volume, slow

Bulky, heavy and/or large itemsBulky, heavy and/or large items

Standardized shipping containersStandardized shipping containersimprove serviceimprove service

The most commonThe most common

form of internationalform of internationalshippingshipping


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PipelinesPipelines

Primarily for oil & refined oilPrimarily for oil & refined oil

productsproducts

Slurry lines carry coal or kaolinSlurry lines carry coal or kaolinHigh capital investmentHigh capital investment

Low operating costsLow operating costs

Can cross difficult terrainCan cross difficult terrain


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Internet TransportationInternet Transportation

ExchangesExchangesBring together shippers andBring together shippers and

carrierscarriers Initial contact, negotiations,Initial contact, negotiations,

auctionsauctionsTypically only oneTypically only one

form of transportation,form of transportation,

intermodal exchangesintermodal exchanges

have been difficult to develophave been difficult to develop


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The Transportation MethodThe Transportation Method

Ship items at lowest costShip items at lowest cost

Sources have fixed suppliesSources have fixed supplies

Destinations have fixed demandDestinations have fixed demand


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Thank YouThank You

Supply Chain Management BY Ankur mittal

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