Supply Chain Management by Nagesh Talekar

7/28/2019 Supply Chain Management by Nagesh Talekar

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2/17

You can move a mountain and you can

Whatever the mind of man can conceive and believe it can

achieve. When you believe I Can Do It, The How to Do It

Develops!!


3/17

Suppliers CustomersCompany

Supply Chain Management

Supply Side Demand Side

Supply chain management is a set of approaches used to efficiently integrate

suppliers, manufacturers, warehouses, and customers so that merchandise

is produced and distributed at the right quantities, to the right locations, and

at the right time in order to minimize system wide costs while satisfying

service-level requirements.


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INBOUND LOGISTICS

- Demand forecasting and planning

- Materials planning and management

- Inventory management and control

- Vendor development & management

- Purchasing and sourcing

OUTBOUND LOGISTICS

- Dispatch planning and scheduling

- Distribution

- Warehouse management

- Order Fulfillment

- Customer Service

MANUFACTURING LOGISTICS

- Capacity planning

- Production planning and scheduling

- Operations

- Manufacturing


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Any organisation has several resources these include 4 Ms

namely MEN, MONEY, MACHINES, MATERIALS. It is the

function of Another M namely MANAGEMENT optimally plan &

utilise these resources within the framework of 2Ts

namelyTIME, TECHNOLOGY & Environmental Forces so as to produce

products or services of acceptable quality (for customer

satisfaction) and a reasonable amount of profit.

While any two organisations may have identical resources of 4

Ms at their disposal, one may produce good profits and the othermay not do as well or even make losses. What is the ingredient

that is causing this difference?


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Inventory (Raw Materials, Components, Work in Process, Finished

Goods, MRO Items) may be defined as usable but idle resource which

has an economic values awaiting for further use or process. It

contributes anything between 40%-60% of cost of any product. Inventory

carrying cost is very high (27%-33% in the Indian Context).

Inventory Control is a process of deciding what and how much of

various items are to be kept in stock. It also determines the time and

quantity of various items to be procured.

Why Inventory Control??

1. Minimize financial Investments in Inventory2. To Facilitate Production Operations

3. To Avoid Losses from Inventory Obsolescence

4. To Improve Customer Service


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Purchase

Goals

In Right Quantity

At Right Price

At Right Time

Of Right Quality

At Right Place

From Right Source

Buying Materials


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MD

Dir Dir Dir COF

Manager

(Import & Export)

Accounts Personnel

Production

In charge

HOD

(Stores & Purchase)

Administrative

Staff

Supervisor 1

Supervisor 2

Supervisor 3

Supervisor 4

Storekeeper 1 Storekeeper 2


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MD

Dir

HOD

(Stores & Purchase)

Storekeeper

(Raw Materials)

Storekeeper

(Sub Contracting Comp.)

Storekeeper

(Consumables & Misc.)

Storekeeper

(Bought out Components)

Asst

Asst

Asst

Asst

Asst

Asst

Asst

Asst


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Stores & Pur.

Plant A

Production

Material Requisition

Supply of

Material

Supplier

Enquiry

Quotation

Plant B

Stock Transfer

Component Process

Purchase Order

Follow Up

Accounts

H.O.Payment Advise Copy

Stock Statement

GRN, Invoice

PO CopyP

ayment


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HO

Plant

Material Requisition

PO Copy

Domestic

Supplier

Enquiry

QuotationGR

N&

Invoice

Follo

wUp

Purchase Order

Follow

Up

Overseas

SupplierFollow Up

Purchase Order

Quotation

Enquiry

Paymen

t

GoodsArriva

lInfo.

Payment


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Calculation of Material Requirement of upcoming financial year

in advance i.e., first week of January every year based on

yearly production schedule.

Release of tentative yearly purchase schedule (blanket order)

to the supplier.

Confirmation of monthly requirement, release of purchase

orders (taking into consideration the stock lying in store,

materials in transit or in process with sub contractor and

quantity on order) for upcoming month in view of lead time.

Weekly review of stock at par with production schedule

Daily review of stock level and replenishment


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Lead Time

Maximum

Reorder

Minimum

Time (in Days)

UnitsInSto

ck

Safety

Inventory

Average Average

Cycle

Inventory

Lot Size Reorder Point Policy

Fixed Order Interval Scheduling Policy

Optional Replenishment Policy


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Inventory Related Cost

Ordering Cost Inventory Carrying Cost Stock Out Cost

Economical Ordering Quantity (EOQ Model) to minimize ordering cost and

inventory carrying cost

Qty Per Order (Q)

Total Cost

Inventory

Carrying Cost

EOQ

Ordering CostCostofCover

AnnualRequire

mentofanitem

EOQ= 2AS

Ci

Where

Q= Qty per Order

A= Annual Requirement

in Unit

S = Ordering Cost per Order

C = Cost per Unit or Item

i = Inventory carrying Cost

expressed as % of value


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Identification and grouping of Items depending upon Value of item

(cost per unit) as HML, Criticality as VED, Usage frequency as

FSN, Usage Value as ABC, Availability Position as SDE.

100

90

75

10 25 100

A

B

C

CumulativePercentValue

Cumulative Percent Number


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Where are we going wrong??

Vendor Rating Index (Quality) = No. of Lots Rejected

No. of Lots Received

Vendor Rating Index (Delivery) = Delivery On Schedule

Total No. of Deliveries

Rush Order Cost (Index) = Price Paid for Rush Order Material

Price Normally Paid for this Material

Inventory Turnover Ratio = Annual Sales(Finished Goods) Average Inventory

Out of Stock Index = No. of Times of Out of Stock

No. of Times Requisitioned


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The presented Perspective for Year 2010 can only be

achieved by TEAM Work!!

End Thought

Together

Everyone

Achieve

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Supply Chain Management by Nagesh Talekar

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