02 Introduction to SCM

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introducingSCM

anagianagin

Prof. ManProf. ManOperations Ma

Management Develo

Supply Chain Supply Chain

Chapter-02

mksks [email protected]://mks507.vistapanel.net


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AA supply chainsupply chain consists of the flow of products and servconsists of the flow of products and serv

Raw materials manufacturersRaw materials manufacturersIntermediate products manufacturersIntermediate products manufacturersEnd product manufacturersEnd product manufacturersWholesalers and distributors andWholesalers and distributors andRetailersRetailers

Connected byConnected by transportationtransportation andand storagestorage activities, andactivities, and

Integrated throughIntegrated through informationinformation,, planningplanning, and, and integrationintegration


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Supply Chain Management is the task ofSupply Chain Management is the task ofinteginteg

organizational unitsorganizational units alongalong a supply chain anda supply chain and coco

material, information and financial flows in ordematerial, information and financial flows in orde

(ultimate)(ultimate) customercustomerdemands with the aim of impdemands with the aim of imp

competitivenesscompetitiveness of a supply chain as a whof a supply chain as a wh


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SCM is a set of approaches SCM is a set of approaches

nToTointegrateintegrateSuppliers, Manufacturing Centers , WarehSuppliers, Manufacturing Centers , Wareh

Centers, Retail OutletsCenters, Retail Outlets

nMerchandise isMerchandise is producedproduced &&distributeddistributed

nRightRight quantities, toquantities, to rightright locations, atlocations, at rightright timetime

nAimAim:: To minimize system-wide cost,To minimize system-wide cost,while satisfywhile satisfy

level requirementslevel requirements


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Supply Chain: ManufacSupply Chain: Manufac

erealerealManufactureranufacturerFlourProcessor

erealManufacturerChemicalProcessor

Farmer

ilCompany

Forest LumberProvider CorrugatedManufacturer

GroceryroceryDistributoristributor ReeGrr

1st TierSupplier

2nd TierSupplier

2nd

Cus1st Tier

Customer

3rd TierSupplier

P

UpstreamInternal

Downs

Focal Company


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CUSTOMERCUSTOMER

CONSUMERCONSUMER

CLIENTCLIENT


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Imm. SuppliersImm. Suppliers Imm. CustomerImm. Customerhe Firmhe Firm

11stst TierTierSuppliersSuppliers he Firmhe Firm22ndnd TierTierSuppliersSuppliers 22ndnd TTCustoCusto11stst TierTierCustomerCustomer

11stst TierTierSuppliersSuppliers he Firmhe Firm22ndnd TierTierSuppliersSuppliers 22ndnd TTCustoCusto11stst TierTierCustomerCustomernnthth TierTierSuppliersSuppliers ............

ExtendeExtende

UltimatUltimat


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The FirmThe FirmKey SuppliersKey Suppliers

The FirmThe Firm Key CustomerKey Customer

Key SuppliersKey Suppliers Key CustomerKey Customer

Key SuppliersKey Suppliers Key CustomerKey Customer

The FirmThe Firm

SuppliersSuppliers CustoCustoThe FirmThe Firm

The FirmThe Firm

Purchasing Production Marketing

R & D Logistics

ing to create seamless processes within their own four walls. (47%)ing to create seamless processes within their own four walls. (47%)

Some compSome compmarketing &marketing &with key cuwith key cus

rchasing & focus on integration with first-tier suppliers (34%)rchasing & focus on integration with first-tier suppliers (34%)

Few companies systematicallyFew companies systematicallyintegrate up & downstream (8%)integrate up & downstream (8%)

Collaboration from suppliers' supplier to customers' customer is a vision not yet fullyCollaboration from suppliers' supplier to customers' customer is a vision not yet fully

upplyupplyhainhainIntegrationntegration


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upply Chainupply Chain

UPSTREAMUPSTREAM INTERALINTERAL

alue Chainalue Chain


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Supply Chains Components

u The supply chain involves THREE segments:

n UPSTREAM, where sourcing or procurement from external s

n INTERNAL, where packaging, assembly, or manufacturing ta

n DOWNSTREAM, where distribution or dispersal take place, fr

external distributors.

u movement of information and money and the procedures supporting the product or a service.

u

u Organizations and individuals are also part of the chain


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Supply Chain Flows

u Supply Chain Flows

n Materials flows are all physical products, new materials, and suppliethe chain.

n

n Information flows relates to all data associated with demand, shipmereturns and schedules.

n

n Financial flows include all transfers of money, payments, credit card

payment schedules, e-payments and credit-related data.

Supply chainSupply chain refers to the flow ofmaterials, information, payments, and serfrom raw material suppliers,through factories and warehouses (Value Chain),

to the final consumer(Demand Chain).It includes tasks such as purchasing, payment flow, materials handling, production planning & contwarehousing, inventory control, and distribution. When it is managed electronically it is referred to a


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SuSu


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From the operations

perspective 90% satisfaction

Customerrequirements

Product/ serviceavailable?

Product/ serviceappropriate?

Meets price anddelivery

requirements?

Customerorders?

Produced aspromised?

Received promised?

100

80

20

Y

N

70

10

Y

N

20

50

Y

N

10

40

Y

N

10

10

Y

N9

1Y

N

From the customers perspective 8% satisfaction

Taking a customer perspective of supply performanceTaking a customer perspective of supply performancecan lead to very different conclusionscan lead to very different conclusions

9

1

Y

N


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upply Chain Managementupply Chain Management ight Processesight Processes

Customerustomerrelationshielationshipmanagementanagement

roductroductdevelopmentevelopment&commercialiommercialisationationupplierupplierrelationshielationshipmanagementanagement Manufacturianufacturig flowg flowmanagementanagement

Orderrderfulfillmeulfillme

maa

ustomeustomeserviceervicemanagemeanageme

Returnseturnsmanagementanagement


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INPUT

OUTPUT

PERFORMANCE

OUTCOME

IMPACT

EFFICIENCY

EFFICACY

EFFECTIVENESS

Utilization =Utilization =

Productivity =Productivity =

Performance =Performance =

Customer Satisfaction =Customer Satisfaction =

Supplier Performance =Supplier Performance =

Value AddedValue AddedProcessProcess

Outsidet h

efirm

Withinth

efirm

Source: Mentzer, J. T., Supply Chain ManagemenSource: Mentzer, J. T., Supply Chain Managemen

Productivity


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ASu


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Historical Evolution of the Supply ChainHistorical Evolution of the Supply Chain

First Revolution:First Revolution: (Ford Motor Co. 1910192(Ford Motor Co. 1910192Single product, that is, no product varietySingle product, that is, no product variety

Vertical integrationVertical integrationSecond Revolution:Second Revolution: (Toyota Motor Co. 19601(Toyota Motor Co. 196019

Wide VarietyWide VarietyLong-term relationship with suppliersLong-term relationship with suppliers

Third Revolution:Third Revolution: (Dell Computers 1995Cu(Dell Computers 1995Cu

Customized productsCustomized productsMedium-term relationship with suppliersMedium-term relationship with suppliersSuppliers have to maintain technology and coSuppliers have to maintain technology and coleadershipleadership


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1.1.LocationLocation

2.2.Transportation and LogisticsTransportation and Logistics

3.3.Inventory and ForecastingInventory and Forecasting

4.4.Marketing and Channel RestructuringMarketing and Channel Restructuring

5.5.Sourcing and Supplier ManagementSourcing and Supplier Management

6.6.Information and Electronic Mediated EnvironmentsInformation and Electronic Mediated Environments

7.7.Product Design and New Product IntroductionProduct Design and New Product Introduction

8.8.Service and After Sales SupportService and After Sales Support

9.9.Reverse Logistics and Green IssuesReverse Logistics and Green Issues10.10.Outsourcing and Strategic AlliancesOutsourcing and Strategic Alliances

11.11.Metrics and IncentivesMetrics and Incentives

12.12.Global Issues.Global Issues.

Source: Pyke, D.F., A Framework for Teaching Supply C

Major Issues in SCMMajor Issues in SCM


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Views of Supply ChainViews of Supply Chain

uCycle viewCycle view:: processes in a supply chain are divided intoprocesses in a supply chain are divided intocycles, each performed at the interfaces between twocycles, each performed at the interfaces between two

supply chain stagessupply chain stages

u Push/pull viewPush/pull view:: processes in a supply chain are dividprocesses in a supply chain are dividecategories depending on whether they are executedcategories depending on whether they are executed

n inin responseresponse to a customer orderto a customer order (pull)(pull)

n inin anticipationanticipation of a customer orderof a customer order (push)(push)


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Cycle View of Supply ChainsCycle View of Supply Chains

Customer Order CycleCustomer Order Cycle

Replenishment Cycle

Manufacturing CycleManufacturing Cycle

Procurement Cycle

u ach cycle occurs at thenterface between twouccessive stagesn ustomer orderustomer order( -ycle customer( -ycle customer)etailer)etailern eplenishmenteplenishment( -ycle retailer( -ycle retailer)istributor)istributorn anufacturinganufacturingycleycle

( -istributor -istributor )anufacturer)anufacturern rocurement cyclerocurement cycle( -anufacturer -anufacturer)upplier)upplier

ycle view clearly definesycle view clearly defines processesrocesses nvolved and the owners onvolved and the owners o.rocess.rocesspecifies thepecifies the rolesoles ndnd responsibilitiesesponsibilities f each member and tf each member and t


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xInIn PushPush systems, work release is based on downsystems, work release is based on downdemand forecastsdemand forecasts

Keeps inventory to meet actual demandKeeps inventory to meet actual demand

ActsActs proactivelyproactively Making generic job application resumes todayMaking generic job application resumes todayx

x

xInIn PullPull systems, work release is based on actual systems, work release is based on actual the actual status of the downstream customersthe actual status of the downstream customers

May cause long delivery lead timesMay cause long delivery lead times

ActsActs reactivelyreactively Making a specific resume for a company after talkinMaking a specific resume for a company after talkin

produces only in response to customer demand signals

Produces using a forecast of sales and moves them to points of sale wstored as finished goods inventory.


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Push/Pull View of Supply ChainsPush/Pull View of Supply Chains

Procurement, Manufacturing, Replenishment cyclesProcurement, Manufacturing, Replenishment cycles

PUSH PROCESSES PULL P

Order ArrivesCustomer

Push/Pull

Boundary

Customer Order cy


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Supply Chain Push-PSupply Chain Push-PBoundarBoundar


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Matching sMatching sstrategies wstrategies w


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The Foundations of Supply Chain ManagemThe Foundations of Supply Chain Managem

Supply Management Supplier management, supplier evaluation, sup

certification, strategic partnershipsOperations Demand management, MRP, ERP, inventory vi

lean production & Toyota Production System), TSigma)Distribution Transportation management, customer relationmanagement, distribution network, perfect ordeglobal supply chains, service response logistics

Integration Process integration, performance measuremen

02 Introduction to SCM

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