Supply chain management

Submitted By – Manu Singh Baghel

PGDM -1 –ARoll No. - 25

Supply chain management in the internet ageSupply chain management (SCM) is essentially information driven function, since co-ordination between various players in the chain is the key to effective management in the supply chain by working together to deliver the right products –

• At the right time•At the right place•At the best price.

Effective management of supply chain results in –

Reduced lead time

Inventory and operational costs while improving efficient consumer responsiveness (ECR)

Customization, ultimately leading to enhanced customer satisfaction and retention.

E-SCM: The solution range

The major categories of SCM software are -

Supply chain planning and execution

Warehouse management software

Transportation management software

Electronic Supply Chain Management

SCM process is composed of a wide range of interrelated

sub-processes –

Time dimension through which SCM activities are segmented into short term, midterm and long term activities i.e., scheduling, operational, tactical and strategic.

Functional dimensions where the activities are separated by production, transportation, storage and sales, outside of the planning funnel and the SCM process is complemented by the SCM monitoring process (SCEM)

Demand – supply scenario in SCM

Challenges of the SCM –

The late supplier delivery creates an unexpected volume of available capacity during a certain period.

It also creates a capacity shortage in the following period, where the delayed orders will be competing for the capacity that might already be allocated to other orders.

The delayed production orders may end up affecting the distribution plans.

These delays in the distribution plan may force the company to break the delivery promises made to customers based on the original supply plan.

Finally, the purchasing plans for the components that were supposed to be consumed in production orders together with the supplier’s delayed components specify purchases that will arrive at the company’s docks too early, compared with the updated need.

Sourcing decisions –

Material costsTransportation costs from supplier to

facilitiesProduction costs paid to facilitiesMaterial inventory costsInventory costs of products in facilitiesTransportation costs from facilities to

warehouseInventory costs of products in

warehouseTransportation costs from warehouse to

customers

Models for implementing SCM –

Forecasting models – these models allow prediction of demand based on past data or other parameters that are independently available. They enable planning, given lead time necessary for response.

Mathematical models – Location models – help in planning

the optimal location of plants and warehouses, considering the inbound and outbound transportation costs and infrastructure costs at the location.

Allocation models – help in optimally allocating commodities from source to destination in a multi-source, multi-dimensional environment.

Distribution network design models – these are usually comprehensive in nature, deciding between multi-stages distribution networks, location warehouses and bulk points and even sometimes the transportation made choices.

Inventory models – these have key role in logistics management e.g., buffer stocks to take care of uncertainties at finished goods, warehouse and retails.

Routing models – these models allow optimal routing on a transportation network from a given source to a destination.

Scheduling problems – these models enables allocation of resources to particular activities.

E-SCM Portfolio – A Contemporary View

Business challenges – Continuous product innovation – the open

economy introduced by globalization demands the need for continuous product innovation and improvement on par with global standards

Improve business agility and responsiveness – the dynamic global business environment impacts the profitability/revenue of the enterprises dramatically

Winning market to gain competitive advantage – the extent of competitive advantage gained and effective use of it can answer the question of business sustenance.

Achieving cost containment – offering world class services/products at competitive price

SCM – Tool for maximizing value delivery –

Decrease inventory costs by matching production to demand

Reduce overall production costs by streamlining the flow of goods through the production process and improving information flow between an enterprise, suppliers and distributors.

Improving customer satisfaction by offering increased speed and adaptability.

IT – Enabled SCM –

Electronic data interchange – EDIInternet/extranetElectronic commerceEnterprise resource planning – ERPE- procurementSupplier relationship management

– SRM Advanced planning and scheduling

– APSE-logistics

Creating new business models

Electronic information integration – it refers to sharing of relevant information among all the partners of supply chain in the most transparent and genuine way.

Electronic synchronization of planning – it is the process that synchronizes the forecasting and replenishment strategies among the partners of the supply chain.

Electronic workflow coordination – it is one of the important demand of supply chain. Work flows such as financial exchange, order execution, design optimization, procurements, etc.

New business model – in recent year’s new and innovative business models have surfaced in the marketplace. Some of them are –

Virtual resourcesSupply chain restructuringService supportMass customizationThe Click – and – Mortar model for

order fulfilment

Bullwhip – Effect: a solution roadmap

Change in customer orders

Price and promotions

Manufacturing scheduling

Supplier’s inability to provide at right time

Unknown factors

The solution footprints for Bullwhip Effect –

Batch order processingLogistics considerationsSafety stock monitoringCreditworthiness of the

customersSpecial purchase contractSpecial sales contractFalse order and cancellation

e- Technologies for effective SCM

Barriers to E-Technologies –

The uncertain cost of implementation

More pressing corporate prioritiesLack of proven benefits within the

industryPerceived or actual low use of the

internet by customers and suppliers

The key, privacy, taxation and emerging intellectual property issues

Still e- technologies are leading towards –

E – learning opportunitiesKnowledge managementE – HR managementE – business intelligenceE – supply chain managementProject managementProfessional service automationSales force automationE – sourcing E – marketing

SCOR Model –

SCOR model consists of the best designs of supply chain. The 5 main processes of this model are –

PlanMakeSourceDeliverReturn 

These are organized at 4 different hierarchal levels –

Main process

Cluster categorization (make – to – order, make – to – stock and engineer – to – order)

Detailed refinery

Information of the international business enterprises

Built – to – order automobiles (BTO) –

Knowledge management tools –

Intra – enterprise KM

Customer KM

Supplier KM

Extended inter – enterprise KM

Measurable benefits derived –

Enhanced customer responsiveness

More predictable forecasting

Enhanced speed to market

Sharing of best practises

Collaborative R&D

Profit sharing

What is RFID?? –

Radio frequency identification (RFID) is a method of automatic identification which relies on storing and remotely retrieving data using devices known as RFID tags or transponders which is a tiny object that is either attached or incorporated to a person or product.

Announcement by Wall – Mart regarding RFID tags compulsion in 2003.

Initiatives by the Auto-IT centre of MIT, USA.

Bottleneck in adopting RFID –

Start from the very beginning

Effectively storing and managing huge data

Data integration efforts

Master files for the product are usually not configured for RFID mode

RFID compatible media –

Web service through world wide web

Global positioning systems (GPS)

RFID tags

Manufacturing execution systems (MES)

Enterprise resource planning (ERP)

Point – of – sale (POS) technology

Benefits of RFID in SCM – Advanced Shipping Notices (ASN)

Returned goods

Anti – counterfeit

Supply chain efficiency

Improved stock management

Reduction in labour costs.

SPCM cycle contains –

Identification of performance exceptions

Understanding the related issues and root cause

Offering the alternative courses of action possible

Analyzing the impact of each alternative action along with constant validation

Decoupled extended supply chains – The first information flow is the ordering

and payment system, followed by order tracking. It is the flow from retailer to distributer and done through internet or EDI. The information is only visible to customers and finally for the returns.

Semi extended supply chains – The major challenge with this strategy

involves managing inventory. To be successful with it companies must carefully think through several design decisions on how to coordinate their channels.

Fully extended supply chains –The concept of famous home delivery

approach is known as fully extended supply chain. In this the retailer’s supply chain is continuously linked from the supply side all the way to the customer’s front door.

Centralized extended supply chains – This strategy has 3 major advantages – It eliminates the link between supplies by

removing stores. It sets apart decoupled extended strategiesWorking from a distribution centre rather than

a store allows aggregated inventory making it possible to hold less inventory while having a wide range of products and more stock.

IT in SCM – Strategic planning for IT in SCM

Virtual enterprise and SCM

E – commerce and SCM

Infrastructure for IT in SCM

Knowledge and IT management in SCM

Implementation of IT in SCM 

Impact of IT on SCM –

Information availability and visibility

Single data contract point

Decision based on total supply chain information

Collaboration with supply chain partners

E – SCM in Indian industries

The internet application in supply chain management area can be classified into 4 areas –

Product and process designE – marketplace and exchangeCollaborative planningFulfilment management

Infomediary – a revolution in agri supply chain – In the area of procurement, ITC developed an innovative method using Internet. It used the concept of infomediary – a website which provides exclusive information related to one subject area. By educating the suppliers – mostly farmers and providing needed information, ITC was able to get a lot.

E – Procurement – Supply is based on exact requirements and the goods can be delivered just in time. Vendors across the world can be accessed on line anytime and production and delivery schedule are planned accordingly. Inventory levels therefore kept for a minimum lead time – sometimes even a day low only.

Research methodology – Sample – 127 computer hardware

companies were selected from the membership list from MAIT (manufacturers association of information technology – the association of hardware, training and service sectors of the Indian IT industry) website and the centre for monitoring Indian economy (CMIE) prowess database.

Questionnaire – Two sets were prepared. On was for the procurement chain and other for the distribution chain. It was focused on a number of questions related to SCM. These factors reflect the range of SCM issues.

Data collection – Data collection was done through a combination of e- mails, telephonic interviews and personal interviews in Chennai, Hyderabad, Pondicherry and Bangalore. Total number of responses was 38 from 6 companies.

Results and analysis – The result of the survey was

summarized under the following subsections –

Procurement/distribution characteristics – including inventory, delivery time, etc.

Transportation and warehousingCosts in supply chainOutsourcing

Procurement side – The usage of technological infrastructure like intranet and internet are relatively very poor in the procurement side of the computer hardware industry. Speed cargo is the mode of transportation that is used by all the nodes in the transportation link of the procurement chain.

Distribution side – The outsourced service providers need to improve their services to capture the full potential of the distribution side. Most of the hardware companies are not fully satisfied with their outsourced service providers, implying that there is a lot of room for improvement.

Asian Paints operations -

Wall – Mart operations -

FedEX operations –

Implementation of the e – procurement solution at FedEx –

Phase – 1 – pilot implementation of Ariba’s e – procurement solution that include installation of e – commerce platform along with Ariba buyer technology.

Phase – 2 – rollout of Ariba buyer to around 7000 IT division employees. The managers were given charges of producing the business requirements, documents and project plans.

Phase – 3 – an overall plan was developed to bring out each commodity whose major supplier had electronic catalogs.

THANK YOU