Group 5-SCM

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Supply Chain Management



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Definition Of Supply Chain

“A system of suppliers, manufacturers,distributors, retailers, and customers wherematerials flow downstream from suppliers to

customers, while information and cash flowsin both directions.”



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“Supply Chain Management is themanagement of a network of interconnected businesses involved in the

ultimate provision of product and servicepackages required by end customers.”

Need For An Effective Supply Chain

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Raw MaterialsCompany

TransportationCompany

ManufacturingCompany

IndependentDistributor

IndependentRetailer

Slow Moving,Industrial

Mass Markets

Raw Material

Transportation

Manufacturing

Distribution

Retailer

VerticalVsVirtual

Fast MovingMarkets



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Participants in Supply Chain

Simple Supply Chain

Supplier Company Customer



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Participants in Supply Chain

LogisticsProvider

FinanceProvider

BusinessCustomer

RetailCustomer

Retailer Distributor Manufacturer RawMaterial

ProductDesigner

MarketResearch

Extended Supply Chain



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Dell Supply Chain

R aw

M a t er i al s

E n d C

u s t om er

No Inventory of Finished

Products

Parts Inventorymade on forecast

DemandForecast

made atassembly

Push Pull from customer demand

Production Assembly Manufacturer Distribution Store



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From

Supplier Availability Goods

Material Flow From Supplier To Customer

Supplier Capacity

FinishedGood

Available

Raw Mat.

Component

ProductionCapacity

Good Customer

ExpectedCustomer

Orders

Customer

Orders inHand

Financial Flows

Information Flow in both the directions




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Operations of Supply Chain

Plan

• Demand Forecasting

• Product Pricing

• Inventory Management

Source• Raw material Procurement

• Finance



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Operations of Supply Chain

Process

• Product Design

• Production Management

• Facility Management

Deliver • Order Entry

• Product Delivery


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Measuring Supply Chain

PerformanceBefore Designing the Strategy We Need toDecide the Goal of the Game!



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Performance Types

Productivity

Velocity

Quality

Financial



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Productivity Measurements

Do more with less

Resource Utilization

Process Efficiency



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Measuring ProductivityPerformance

Elements Productivity Indicators

Customer Response Customer orders per person hour

Inventory Planning &Management Inventory turns

Supply POs per person-hour, SKUs per buyer

Transportation Stops per route, Fleet yield, Container capacity utilization

Warehousing Units per person hour, Storagedensity



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Identify Resources Involved

Manpower

Facilities

MachineryEquipment

Fleet

Inventory



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Then, quantify associatedoutputs

R

es

o

u

r

ce

Logistics &Supply

SystemsTransportationWarehousing

Ou

tputs

P

e

r

f

e



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Productivity at the ResourceLevel

P resource = Output resource / Inputresource

U resource = Output resource / Capacityresource

P = Productivity

U = Utilisation



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Velocity Measurements

Cycle Time

Response Time

Processing Time



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Measuring Velocity Performance

Elements Response Time Indicators

Customer Response Order entry time, Order

processing time

Supply Purchase order cycle time

Transportation In - transit time

Warehousing Warehouse order cycle time



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Total Logistics Cycle Time (TLCT)

TLCT = OET+OPT+[POCT*(1- OFR)]+WOCT+ITT

OET = Order Entry time

OPT = Order Processing Time

POCT = Purchase Order Cycle Time

WOCT = Warehouse Order Cycle Time

ITT = In - Transit Time



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Quality Measurements

Likelihood of Mistakes

Deviation from Goal

Defects

Overall Satisfaction



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Measuring Quality Performance

Elements Quality Indicators

Customer Response Order entry accuracy, Statuscommunication accuracy, Invoice

accuracy

Inventory Planning &Management

Fill rate, Forecast accuracy

Supply Perfect PO percentage

Transportation On - time arrival percentage,Damage percentage

Warehousing Inventory accuracy, Pickingaccuracy, Shipping accuracy,

Damage percentage

anu ac ur ng er ec



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anu ac ur ng er ecPurchase Orders is the Real

Goal!Perfect Entry

Perfect Processing

Perfect Picking

Perfect Packaging

Perfect ShippingPerfect Delivery

Perfect Communication



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Financial Measurements

Cost of Resources Employed

Cost of Activities Performed



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Measuring Financial Performance

Elements Financial Indicators

Customer Response Total response cost, Responsecost per customer order

Inventory Planning &Management

Total inventory cost, Inventorycost per SKU

Supply Total supply cost, Supply cost per PO

Transportation Total transportation cost,Transportation cost per mile

Warehousing Total warehousing cost,Warehousing cost per piece,

Warehousing cost per



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Financial Indicators

Logistics Expenses (LE)

Logistics Profit (LP)

LP = R - LE

Logistics Asset Value (LAV)

Return on Logistics Assets (ROLA)

ROLA = P / LAV

Logistics Asset Turnover (LAT)



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Financial Indicators

Total Logistics Cost (TLC)

TLC = TRC + TIC + TSC + TTC

+TWCLogistics Cost - Sales Ratio (LCSR)

LCSR = TLC / R



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Supply Chain Goal!

Maximise (Corporate Economic ValueAdded)

Minimise (Operating Cost+ Capital Cost+Lost Sales)



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Benefits of ImplementingSupply Chain

Increased Visibility

Increased Reliability

Squeeze Inefficiencies

Increase the Velocity of Business

Savings and Revenue Improvement

Effective Supply Chain Management canlead u to 5% Cost decrease that has



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