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INTRODUCTION OF

SUPPLY CHAIN MANAGEMENT (SCM)

A supply chain is a network of facilities and distribution options thatperforms the functions of procurement of materials, transformation of thesematerials into intermediate and finished products, and the distribution of thesefinished products to customers. Supply chains exist in both service andmanufacturing organizations, although the complexity of the chain may varygreatly from industry to industry and firm to firm.

Supply chain management is typically viewed to lie between fullyvertically integrated firms, where the entire material flow is owned by a singlefirm and those where each channel member operates independently. Thereforecoordination between the various players in the chain is key in its effectivemanagement. Cooper and Ellram [1993] compare supply chain managementto a well-balanced and well-practiced relay team. Such a team is morecompetitive when each player knows how to be positioned for the hand-off.The relationships are the strongest between players who directly pass the

baton (stick), but the entire team needs to make a coordinated effort to win therace.

Below is an example of a very simple supply chain for a single product,where raw material is procured from vendors, transformed into finished goodsin a single step, and then transported to distribution centers, and ultimately,customers. Realistic supply chains have multiple end products with sharedcomponents, facilities and capacities. The flow of materials is not alwaysalong an arborescent network, various modes of transportation may beconsidered, and the bill of materials for the end items may be both deep andlarge.

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To simplify the concept, supply chain management can be defined as aloop: it starts with the customer and ends with the customer. All materials,finished products, information, and even all transactions flow through theloop. However, supply chain management can be a very difficult task becausein the reality, the supply chain is a complex and dynamic network of facilitiesand organizations with different, conflicting objectives.

Supply chains exist in both service and manufacturing organizations,although the complexity of the chain may vary greatly from industry toindustry and firm to firm.

Unlike commercial manufacturing supplies, services such as clinicalsupplies planning are very dynamic and can often have last minute changes.Availability of patient kit when patient arrives at investigator site is very

important for clinical trial success. This results in overproduction of drugproducts to take care of last minute change in demand. R&D manufacturing isvery expensive and overproduction of patient kits adds significant cost to thetotal cost of clinical trials. An integrated supply chain can reduce theoverproduction of drug products by efficient demand management, planning,and inventory management.

Traditionally, marketing, distribution, planning, manufacturing, and thepurchasing organizations along the supply chain operated independently.These organizations have their own objectives and these are often conflicting.Marketing's objective of high customer service and maximum sales dollarsconflict with manufacturing and distribution goals. Many manufacturingoperations are designed to maximize throughput and lower costs with littleconsideration for the impact on inventory levels and distribution capabilities.Purchasing contracts are often negotiated with very little information beyondhistorical buying patterns. The result of these factors is that there is not asingle, integrated plan for the organization---there were as many plans as

businesses. Clearly, there is a need for a mechanism through which thesedifferent functions can be integrated together. Supply chain management is a

strategy through which such integration can be achieved.

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IMPLICATIONS OF SCM ON LOGISTICMANAGEMENT

The challenge of integrating and coordinating the flow of materials

from multitude of suppliers, including offshore, and similarly managing thedistribution of the finished product by way of multiple intermediaries.

Achieving cost reduction or profit improvement at the expense of theirsupply chain partners does not make companies more competitive.

Transferring cost upstream or downstream leads to logistics myopiaas all costs ultimately will make way to the final market place to be reflectedin the price paid by the end user.

Therefore, the leading edge companies seek to make the supply chain asa hole more competitive through the value it adds and the cost it reducesoverall.

Thus today the real competition is not the companies against thecompanies but rather supply chain against supply chain.

DEFINITIONS

Supply Chain Management (SCM) is the process of planning, implementing,and controlling the operations of the supply chain with the purpose to satisfycustomer requirements as efficiently as possible. Supply chain managementspans all movement and storage of raw materials, work-in-process inventory,and finished goods from point-of-origin to point-of-consumption.

According to the Council of Supply Chain Management Professionals

(CSCMP),

a professional association that developed a definition in 2004, Supply Chain

Management encompasses the planning and management of all activitiesinvolved in sourcing and procurement, conversion, and all logisticsmanagement activities. Importantly, it also includes coordination andcollaboration with channel partners, which can be suppliers, intermediaries,third-party service providers, and customers. In essence, Supply ChainManagement integrates supply and demand management within and acrosscompanies.

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According to Cohen & Lee (1988)

Supply Chain Management is The network of organizations that are havinglinkages, both upstream and downstream, in different processes and activitiesthat produces and delivers the value in form of products and services in thehands of ultimate consumer. Thus a shirt manufacturer is a part of supplychain that extends up stream through the weaves of fabrics to the spinners andthe manufacturers of fibers, and down stream through distributions andretailers to the final consumer. Though each of these organizations aredependent on each other yet traditionally do not closely cooperate with eachother. An integrated supply chain management streamlines processes andincreases profitability by delivering the right product to the right place, at theright time, and at the lowest possible cost.

According to Ganeshan & Harrison(2001)

Supply Chain Management is a systems approach to managing the entireflow of information, materials, and services from raw materials suppliersthrough factories and warehouses to the end customer.

Supply chain event management (abbreviated as SCEM) is a consideration ofall possible occurring events and factors that can cause a disruption in asupply chain. With SCEM possible scenarios can be created and solutions can

be planned.

Some experts distinguish supply chain management and logistics

management, while others consider the terms to be interchangeable. From

the point of view of an enterprise, the scope of supply chain management is

usually bounded on the supply side by your supplier's suppliers and on the

customer side by your customer's customers.

Supply chain management is also a category of software products.

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DIFFERENCE BETWEEN LOGISTICS MANAGEMENTAND SCM

Logistics Management Supply Chain Management

Logistics management is primarilyconcerned with optimizing flowswithin the organization.

Supply Chain Management dealswith integration of all the partners inthe value chain.

Logistics is essentially a frameworkthat creates a single plan for theflow of products and informationthrough a business

Supply chain builds upon thisframework and seeks to achievelinkage and coordination between

process of other entities in thepipeline i.e. suppliers andcostumers, and the organization itself.

COMPONENTS OF SUPPLY CHAIN MANAGEMENT

The following are the five basic components of Supply Chain Management:

1. Plan :-

This is the strategic portion of SCM. You need a strategy for managingall the resources that go toward meeting customer demand for your productor service. A big piece of planning is developing a set of metrics tomonitor the supply chain so that it is efficient, costs less and delivers highquality and value to customers.

2. Source:-

Choose the suppliers that will deliver the goods and services you needto create your product. Develop a set of pricing, delivery and payment

processes with suppliers and create metrics for monitoring and improvingthe relationships. And put together processes for managing the inventoryof goods and services you receive from suppliers, including receivingshipments, verifying them, transferring them to your manufacturingfacilities and authorizing supplier payments.

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3. Make :-

This is the manufacturing step. Schedule the activities necessary forproduction, testing, packaging and preparation for delivery. As the mostmetric-intensive portion of the supply chain, measure quality levels,

production output and worker productivity.

4. Deliver :-

This is the part that many insiders refer to as logistics. Coordinate thereceipt of orders from customers, develop a network of warehouses, pickcarriers to get products to customers and set up an invoicing system toreceive payments.

5. Return :-

The problem part of the supply chain. Create a network for receivingdefective and excess products back from customers and supportingcustomers who have problems with delivered products.

OBJECTIVES/NEED FOR SCM

Traditionally, marketing, distribution, planning, manufacturing, and thepurchasing organizations along the supply chain operated independently.These organizations have their own objectives and these are often conflicting.Marketing's objective of high customer service and maximum sales dollarsconflict with manufacturing and distribution goals. Many manufacturingoperations are designed to maximize throughput and lower costs with littleconsideration for the impact on inventory levels and distribution capabilities.Purchasing contracts are often negotiated with very little information beyondhistorical buying patterns.

The result of these factors is that there is not a single, integrated plan

for the organization---there were as many plans as businesses. Clearly, there isa need for a mechanism through which these different functions can beintegrated together. Supply chain management is a strategy through whichsuch integration can be achieved.

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Moreover, shortened product life cycles, increased competition, andheightened expectations of customers have forced many leading edgecompanies to move from physical logistic management towards moreadvanced supply chain management. Additionally, in recent years it has

become clear that many companies have reduced their manufacturing costs asmuch as it is practically possible. Therefore, in many cases, the only possibleway to further reduce costs and lead times is with effective supply chainmanagement.

In addition to cost reduction, the supply chain management approachalso facilitates customer service improvements. It enables the management of:

inventories,

transportation systems and

whole distribution networks

so that organizations are able to meet or even exceed their customers'expectations.

The major objective of supply chain management is to reduce oreliminate the buffers of inventory that exists between originations in chainthrough the sharing of information on demand and current stock levels.

Broadly, an organization needs an efficient and proper supply chainmanagement system so that the following strategic and competitive areas can

be used to their full advantage if a supply chain management system isproperly implemented.

1. Fulfillment of raw materials:

Ensuring the right quantity of parts for production or products for salearrive at the right time. This is enabled through efficient communication,ensuring that orders are placed with the appropriate amount of time available

to be filled. The supply chain management system also allows a company toconstantly see what is on stock and making sure that the right quantities areordered to replace stock.

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2. Logistics:

The cost of transporting materials as low as possible consistent withsafe and reliable delivery. Here the supply chain management system enablesa company to have constant contact with its distribution team, which couldconsist of trucks, trains, or any other mode of transportation. The system canallow the company to track where the required materials are at all times. Aswell, it may be cost effective to share transportation costs with a partnercompany if shipments are not large enough to fill a whole truck and this again,allows the company to make this decision.

3. Smooth Production:

Ensuring production lines function smoothly because high-quality parts

are available when needed. Production can run smoothly as a result offulfillment and logistics being implemented correctly. If the correct quantity isnot ordered and delivered at the requested time, production will be halted, buthaving an effective supply chain management system in place will ensure that

production can always run smoothly without delays due to ordering andtransportation.

4. Increase in Revenue & profit:

Ensuring no sales is lost because shelves are empty. Managing thesupply chain improves a company flexibility to respond to unforeseen changesin demand and supply. Because of this, a company has the ability to producegoods at lower prices and distribute them to consumers quicker thencompanies without supply chain management thus increasing the overall

profit.

5. Reduction in Costs:

Keeping the cost of purchased parts and products at acceptable levels.

Supply chain management reduces costs by increasing inventory turnover onthe shop floor and in the warehouse controlling the quality of goods thusreducing internal and external failure costs and working with suppliers to

produce the most cost efficient means of manufacturing a product.

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6. Mutual Success:

Among supply chain partners ensures mutual success. Collaborativeplanning, forecasting and replenishment (CPFR) is a longer-termcommitment, joint work on quality, and support by the buyer of the suppliersmanagerial, technological, and capacity development. This relationship allowsa company to have access to current, reliable information, obtain lowerinventory levels, cut lead times, enhance product quality, improve forecastingaccuracy and ultimately improve customer service and overall profits. Thesuppliers also benefit from the cooperative relationship through increased

buyer input from suggestions on improving the quality and costs and thoughshared savings. Consumers can benefit as well through higher quality goods

provided at a lower cost.

ACTIVITIES/FUNCTIONS OF SCM

Supply chain management is a cross-functional approach to managingthe movement of raw materials into an organization and the movement offinished goods out of the organization toward the end-consumer. Ascorporations strive to focus on core competencies and become more flexible,they have reduced their ownership of raw materials sources and distributionchannels. These functions are increasingly being outsourced to othercorporations that can perform the activities better or more cost effectively.The effect has been to increase the number of companies involved insatisfying consumer demand, while reducing management control of dailylogistics operations. Less control and more supply chain partners led to thecreation of supply chain management concepts. The purpose of supply chainmanagement is to improve trust and collaboration among supply chain

partners, thus improving inventory visibility and improving inventoryvelocity.

Several models have been proposed for understanding the activitiesrequired managing material movements across organizational and functional

boundaries. SCOR is a supply chain management model promoted by theSupply-Chain Council. Another model is the SCM Model proposed by theGlobal Supply Chain Forum (GSCF). Supply chain activities can be groupedinto strategic, tactical, and operational levels of activities.

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(a) Strategic:-

Strategic network optimization, including the number, location, andsize of warehouses, distribution centers and facilities.

Strategic partnership with suppliers, distributors, and customers,creating communication channels for critical information andoperational improvements such as cross docking, direct shipping, andthird-party logistics.

Products design coordination, so that new and existing products can beoptimally integrated into the supply chain.

Information Technology infrastructure, to support supply chainoperations.

Where to make and what to make or buy decisions.

(b) Tactical:- Sourcing contracts and other purchasing decisions.

Production decisions, including contracting, locations, scheduling, and

planning process definition.

Inventory decisions, including quantity, location, and quality ofinventory. Transportation strategy, including frequency, routes, andcontracting.

Benchmarking of all operations against competitors andimplementation of best practices throughout the enterprise.

(c) Operational:- Daily production and distribution planning, including all nodes in the

supply chain.

Production scheduling for each manufacturing facility in the supplychain (minute by minute).

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Demand planning and forecasting, coordinating the demand forecast ofall customers and sharing the forecast with all suppliers.

Sourcing planning, including current inventory and forecast demand, in

collaboration with all suppliers. Inbound operations, includingtransportation from suppliers and receiving inventory.

Production operations, including the consumption of materials and flowof finished goods.

Outbound operations, including all fulfillment activities andtransportation to customers.

Order promising, accounting for all constraints in the supply chain,including all suppliers, manufacturing facilities, distribution centers,and other customers. Performance tracking of all activities.

INTEGRATED SUPPLY CHAIN MANAGEMENT

An integrated supply chain management streamlines processes andincreases profitability by delivering the right product to the right place, at theright time, and at the lowest possible cost. Unlike commercial manufacturingsupplies, clinical supplies planning is very dynamic and can often have last

minute changes. Availability of patient kit when patient arrives at investigatorsite is very important for clinical trial success.

This results in overproduction of drug products to take care of lastminute change in demand. R&D manufacturing is very expensive andoverproduction of patient kits adds significant cost to the total cost of clinicaltrials.

An integrated supply chain can reduce the overproduction of drugproducts by efficient demand management, planning, and inventory

management. Implementation of ERP system (such as SAP) in R&D can havemajor ROI by an efficient supply and inventory management system and also

by reducing overproduction.

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How Integration Is Achieved In Supply Chain?

Stage 1:

Complete functional independence where each business function such asproduction or purchasing does its own thing in complete isolation from otherbusiness function. For instance, production function seeking to optimize itsunit cost of manufacture by long production runs with out regard for build upof finished goods inventory and advance impact it will have on thewarehousing as well as working capital.

Stage 2:

Companies recognize the need of limited integration between adjacentfunctions such as distribution and inventory management or purchasing andmaterial control.

Stage 3:

A natural extension of stage two, leading to establishment and implementationof end- to-end integration. A concept of linkage and coordination is achieved.

STAGE 4:

The linkage achieved in stage three is extended upstream to suppliers anddown stream to customers. It represents true supply chain integration. Thisconcept is also called co-managed inventory (CMI).

Force of supply chain management is on trust and cooperation and therecognition that is properly managed the whole cane be greater then the sumof its part.

Is Supply Chain Management Same As Vertical Integration?

No. supply chain management is not the same as vertical integration. Verticalintegration normally implies ownership of upstream suppliers and downstream customer.

Once, the vertical integration used to be describable strategy but increasinglythe companies are focusing on their core business i.e. the activities that theydo really well and where they have a differential advantage. Every thing elseis out-sourced i.e. procured from outside the firm.

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SUPPLY CHAIN DECISIONS

We classify the decisions for supply chain management into two broadcategories Short term & Long term decisions. As the term implies, short

term decisions focus on activities over a day-to-day basis. On the other hand,long term decisions are made typically over a longer time horizon. These areclosely linked to the corporate strategy and guide supply chain policies from adesign perspective.

There are four major decision areas in supply chain management:

1). Location,2). Production,3). Inventory, and4). Transportation (distribution), and there are both short term and long-term

elements in each of these decision areas.

1).Location Decisions:

The geographic placement of production facilities, stocking points, andsourcing points is the natural first step in creating a supply chain. The locationof facilities involves a commitment of resources to a long-term plan. Once thesize, number, and location of these are determined, so are the possible paths

by which the product flows through to the final customer. These decisions areof great significance to a firm since they represent the basic strategy foraccessing customer markets, and will have a considerable impact on revenue,cost, and level of service. These decisions should be determined by anoptimization routine that considers production costs, taxes, duties and dutydrawback, tariffs, local content, distribution costs, production limitations, etc.Although location decisions are primarily long term they also haveimplications on short term level.

2).Production Decisions:

The long term decisions include what products to produce, and whichplants to produce them in, allocation of suppliers to plants, plants to DC's, andDC's to customer markets. As before, these decisions have a big impact on therevenues, costs and customer service levels of the firm. These decisionsassume the existence of the facilities, but determine the exact path(s) through

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which a product flows to and from these facilities. Another critical issue is thecapacity of the manufacturing facilities--and this largely depends the degreeof vertical integration within the firm. Short term decisions focus decisionsfocus on detailed production scheduling. These decisions include theconstruction of the master production schedules, scheduling production onmachines, and equipment maintenance. Other considerations includeworkload balancing, and quality control measures at a production facility.

3).Inventory Decisions:

These refer to means by which inventories are managed. Inventoriesexist at every stage of the supply chain as either raw material, semi-finished orfinished goods. They can also be in-process between locations. Their primary

purpose to buffer against any uncertainty that might exist in the supply chain.

Since holding of inventories can cost anywhere between 20 to 40 percent oftheir value, their efficient management is critical in supply chain operations. Itis long term in the sense that top management sets goals. However, mostresearchers have approached the management of inventory from short term

perspective. These include deployment strategies (push versus pull), controlpolicies --- the determination of the optimal levels of order quantities andreorder points, and setting safety stock levels, at each stocking location. Theselevels are critical, since they are primary determinants of customer servicelevels.

4). Transportation Decisions:

The mode choice aspect of these decisions is the more long term ones.These are closely linked to the inventory decisions, since the best choice ofmode is often found by trading-off the cost of using the particular mode oftransport with the indirect cost of inventory associated with that mode. Whileair shipments may be fast, reliable, and warrant lesser safety stocks, they areexpensive. Meanwhile shipping by sea or rail may be much cheaper, but theynecessitate holding relatively large amounts of inventory to buffer against the

inherent uncertainty associated with them. Therefore customer service levelsand geographic location play vital roles in such decisions. Since transportationis more than 30 percent of the logistics costs, operating efficiently makes goodeconomic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management ofthe firm's transport strategy.

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SCM PROCESS INTEGRATION

Successful SCM requires a change from managing individual functionsto integrating activities into key supply chain processes. The purchasing

department placed orders as requirements became appropriate and marketing,responding to customer demand, interfaced with several distributors andretailers and attempted to satisfy this demand. Shared information betweensupply chain partners can only be fully leveraged through process integration.Process integration means collaborative working between buyers andsuppliers, joint product development, common systems and sharedinformation.

According to Lambert and Cooper (2000), operating an integrated

supply chain requires continuous information flows, which in turn assist toachieve the best product flows. However, in many companies, such as 3M,management has reached the conclusion that optimizing the product flowscannot be accomplished without implementing a process approach to the

business.

The key critical supply business processes stated by Lambert andCooper are as follows:

1. Customer service management process:

Customer service provides the source of customer information. It alsoprovides the customer with real-time information on promising dates andproduct availability through interfaces with the company production anddistribution operations

2. Procurement process:

Strategic plans are developed with suppliers to support themanufacturing flow management process and development of new products.In firms where operations extend globally, sourcing should be managed on aglobal basis. The desired outcome is a win-win relationship, where both

parties benefit, and reduction times in the design cycle and productdevelopment is achieved. Also, the purchasing function develops rapidcommunication systems, such as electronic data interchange and Internetlinkages to faster transfer possible requirements. Activities related to

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obtaining products and materials from outside suppliers requires performingresource planning, supply sourcing, negotiation, order placement, inboundtransportation, storage and handling and quality assurance Also, includes theresponsibility to coordinate with suppliers in scheduling, supply continuity &research to new programmes.

3. Product development and commercialization:

Here, customers and suppliers must be united into the productdevelopment process, thus to reduce time to market. As product life cyclesshorten, the appropriate products must be developed and successfullylaunched in ever shorter time-schedules to remain competitive. According toLambert and Cooper, managers of the product development andcommercialization process must:

a) coordinate with customer relationship management to identifycustomer-articulated needs;

b) select materials and suppliers in conjunction with procurement, and

c) develop production technology in manufacturing flow tomanufacture and integrate into the best supply chain flow for the

product/market combination

4. Manufacturing flow management process:

The manufacturing process is produced and supplied products to thedistribution channels based on past forecasts. Manufacturing processes must

be flexible to respond to market changes, and must accommodate masscustomization. Orders are processes on a just-in-time (JIT) basis in minimumlot sizes. Also, changes in the manufacturing flow process lead to shortercycle times, meaning improved responsiveness and efficiency of demand tocustomers. Activities related to planning, scheduling and supporting

manufacturing operations, such as work-in-process storage, handling,transportation, and time phasing of components, inventory at manufacturingsites and maximum flexibility in the coordination of geographic and finalassemblies postponement of physical distribution operations.

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5. Physical Distribution:

This concerns movement of a finished product/service to customers. Inphysical distribution, the customer is the final destination of a marketingchannel, and the availability of the product/service is a vital part of eachchannel participant. It is also through the physical distribution process that thetime and space of customer service become an integral part of marketing, thusit links a marketing channel with its customers (e.g. links manufacturers,wholesalers, retailers).

6. Outsourcing/ Partnerships:

Not just outsourcing the procurement of materials and components, butalso outsourcing of services that traditionally have been provided in-house.

The logic of this trend is that the company will increasingly focus on thoseactivities in the value chain where it has a distinctive advantage andeverything else it will outsource. This movement has been particularly evidentin logistics where the provision of transport, warehousing and inventorycontrol is increasingly subcontracted to specialists or logistics partners. Also,to manage and control this network of partners and suppliers requires a blendof both central and local involvement. Hence, strategic decisions need to betaken centrally with the monitoring and control of supplier performance andday-to-day liaison with logistics partners being best managed at a local level.

7. Performance Measurement:

By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlatedwith firm performance. As logistics competency becomes a more criticalfactor in creating and maintaining competitive advantage, logisticsmeasurement becomes increasingly important because the difference between

profitable and unprofitable operations becomes narrower. As KearneyConsultants (1985) noted that firms engaging in comprehensive performance

measurement realized improvements in overall productivity. According tointernal measures are generally collected and analyzed by the firm including

1) Cost,2) Customer Service,3) Productivity measures,4) Asset measurement, and5) Quality..

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Force of supply chain management is on trust and cooperation and therecognition that is properly managed 'the whole cane be greater then the sumof its part'.

For example:

Let's look at consumer packaged goods for an example of collaboration.If there are two companies that have made supply chain a household word,they are Wal-Mart and Procter & Gamble. Before these two companies startedcollaborating back in the '80s, retailers shared very little information withmanufacturers. But then the two giants built a software system that hookedP&G up to Wal-Mart's distribution centers.

When P&G's products run low at the distribution centers, the systemsends an automatic alert to P&G to ship more products. In some cases, thesystem goes all the way to the individual Wal-Mart store. It lets P&G monitorthe shelves through real-time satellite link-ups that send messages to thefactory whenever a P&G item swoops past a scanner at the register.

With this kind of minute-to-minute information, P&G knows when tomake ship and display more products at the Wal-Mart stores. No need to keep

products piled up in warehouses awaiting Wal-Mart's call. Invoicing andpayments happen automatically too. The system saves P&G so much in time,reduced inventory and lower order-processing costs that it can afford to giveWal-Mart "low, everyday prices" without putting itself out of business.

ROLE AND APPLICATION OF SOFTWARES IN SCM

Supply chain management software is possibly the most fracturedgroup of software applications on the planet. Each of the five major supplychain steps previously outlined composes dozens of specific tasks, many ofwhich have their own specific software. Some vendors have assembled many

of these different chunks of software together under a single roof, but no onehas a complete package that is right for every company.For example:

Most companies need to track demand, supply, manufacturing status, logistics(i.e. where things are in the supply chain), and distribution. They also need toshare data with supply chain partners at an ever increasing rate. While

products from large ERP vendors like Saps Advanced Planner and Optimizer

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(APO) can perform many or all of these tasks, because each industry's supplychain has a unique set of challenges, many companies decide to go withtargeted best of breed products instead, even if some integration is aninevitable consequence.

Goal of installing SCM softwares:

Before the Internet came along, the aspirations of supply chain softwaredevotees were limited to improving their ability to predict demand fromcustomers and make their own supply chains run more smoothly. But thecheap, ubiquitous nature of the Internet, along with its simple, universallyaccepted communication standards have thrown things wide open. Now, youcan connect your supply chain with the supply chains of your suppliers andcustomers together in a single vast network that optimizes costs and

opportunities for everyone involved. This was the reason for the B2Bexplosion; the idea that everyone you do business with could be connectedtogether into one big happy, cooperative family.

Of course, reality isn't quite that happy and cooperative, but today mostcompanies share at least some data with their supply chain partners. The goalof these projects is greater supply chain visibility. The supply chain in mostindustries is like a big card game. The players don't want to show their cards

because they don't trust anyone else with the information. But if they showed

their hands they could all benefit. Suppliers wouldn't have to guess how manyraw materials to order, and manufacturers wouldn't have to order more thanthey need from suppliers to make sure they have enough on hand if demandfor their products unexpectedly goes up. And retailers would have fewerempty shelves if they shared the information they had about sales of amanufacturer's product in all their stores with the manufacturer.

Relationship between ERP and SCM:

Many SCM applications are reliant upon the kind of information that isstored in the most quantity inside ERP software. Theoretically you couldassemble the information you need to feed the SCM applications from legacysystems (for most companies this means Excel spreadsheets spread out allover the place), but it can be nightmarish to try to get that information flowingon a fast, reliable basis from all the areas of the company. ERP is the batteringram that integrates all that information together in a single application, and

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SCM applications benefit from having a single major source to go to for up-to-date information. Most CIOs who have tried to install SCM applicationssay they are glad they did ERP first. They call the ERP projects "putting yourinformation house in order." Of course, ERP is expensive and difficult, so youmay want to explore ways to feed your SCM applications the information theyneed without doing ERP first. These days, most ERP vendors have SCMmodules so doing an ERP project may be a way to kill two birds with onestone. Companies will need to decide if these products meet their needs or ifthey need a more specialized system.

Applications that simply automate the logistics aspects of SCM are lessdependent upon gathering information from around the company, so they tendto be independent of the ERP decision. But chances are, you'll need to havethese applications communicate with ERP in some fashion. It's important to

pay attention to the software's ability to integrate with the Internet and withERP applications because the Internet will drive demand for integratedinformation. For example, if you want to build a private website forcommunicating with your customers and suppliers, you will want to pullinformation from ERP and supply chain applications together to presentupdated information about orders, payments, manufacturing status anddelivery.

Roadblocks in installing SCM Softwares:

There are some hurdles which come in way while installing the SCMsoftwares in the organizations. They are:

1. Gaining trust from your suppliers and partners :-

Supply chain automation is uniquely difficult because its complexityextends beyond your company's walls. Your people will need to change theway they work and so will the people from each supplier that you add to yournetwork. Only the largest and most powerful manufacturers can force such

radical changes down suppliers' throats. Most companies have to sell outsiderson the system. Moreover, your goals in installing the system may bethreatening to those suppliers, to say the least.

For example:

Wal-Mart's collaboration with P&G meant that P&G would assume moreresponsibility for inventory management, something retailers have

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traditionally done on their own. Wal-Mart had the clout to demand this fromP&G, but it also gave P&G something in return-better information about Wal-Mart's product demand, which helped P&G manufacture its products moreefficiently. To get your supply chain partners to agree to collaborate with you,you have to be willing to compromise and help them achieve their own goals.

2. Internal resistance to change:-

If selling supply chain systems is difficult on the outside, it isn't mucheasier inside. Operations people are accustomed to dealing with phone calls,faxes and hunches scrawled on paper, and will most likely want to keep it thatway. If you can't convince people that using the software will be worth theirtime, they will easily find ways to work around it. You cannot disconnect thetelephones and fax machines just because you have supply chain software in

place.

3. Many mistakes at first:-

There is a diabolical twist to the quest for supply chain softwareacceptance among your employees. New supply chain systems process data asthey are programmed to do, but the technology cannot absorb a company'shistory and processes in the first few months after an implementation.Forecasters and planners need to understand that the first bits of informationthey get from a system might need some tweaking. If they are not warnedabout the system's initial naivet (simplicity), they will think it is useless.

In one case, just before a large automotive industry supplier installed anew supply chain forecasting application to predict demand for a product, anautomaker put in an order for an unusually large number of units. The systemresponded by predicting huge demand for the product based largely on oneunusual order. Blindly following the system's numbers could have led toinaccurate orders for materials being sent to suppliers within the chain. Thecompany caught the problem but only after a demand forecaster threw out the

system's numbers and used his own. That created another problem:Forecasters stopped trusting the system and worked strictly with their owndata. The supplier had to fine-tune the system itself, and then work onreestablishing employees' confidence. Once employees understood that theywould be merging their expertise with the system's increasing accuracy, they

began to accept and use the new technology.

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Conclusions:

What has enabled the effective implementation of supply chain

management? The answer is found from the rapid developments ininformation and communications technologies. Use of databases,communication systems, and foremost advanced computer software arecrucial for the development of a modern cost-effective supply chainmanagement.

MANAGING THE GLOBAL SUPPLY CHAIN

We live in interesting times. Powerful forces are re-shaping the globalbusiness scene: financial and economic upheaval in the Far East, Latin

America & China is creating a tidal-wave of change in the competitiveenvironment. Organisations that once felt insulated from overseas low-pricedcompetitors now find that they too must not only continue to constantly createnew value for customers, but must do so at a lower price.

To meet the challenge of simultaneously reducing cost and enhancingcustomer value requires a radically different approach to the way the businessresponds to marketplace demand. One of the keys to success is the creation ofan agile supply chain on a worldwide scale.

The Agile Supply Chain:

There is now widespread recognition of the role that supply chainmanagement can play in enabling organisations to compete in volatilemarkets. However, experience suggests that there are significant barriers bothwithin the company and between its upstream and downstream partners inachieving the required level of responsiveness across the chain as a whole.Continuous change is a phenomenon with which the supply chains have hadto cope for some time. But due to high rate of competition in todays marketthe logistics environment of the new millennium will have to contend with:

i. ) turbulent markets that change rapidly and unpredictably,ii. ) highly fragmented 'niche' markets instead of mass markets,

iii. ) ever greater rates of technological innovation in products andprocesses,

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iv. ) shorter product life-cycles,v. ) growing demand for tailored products - 'mass customisation',

vi. ) the delivery of complete 'solutions' to customers, comprisingproducts and services.

And all of the above to be achieved at less cost!

These severe challenges mean that a new operating paradigm is needed.The key factor is agility - rapid strategic and operational adaptation to largescale, unpredictable changes in the business environment. Agility impliesresponsiveness from one end of the supply chain to the other. It focuses uponeliminating the barriers to quick response, be they organisational or technical.

Figure 1 suggests that whilst there will still be conditions where lean

concepts are appropriate, in particular where the product is standard andvolume demand is high and predictable. Increasingly however these situationsare tending to become fewer as the global forces we have described lead tohigher levels of market volatility.

How do global supply chains achieve agility? In a sense the veryprocess of globalisation has retarded agility. For example, many companies intheir search for lower production costs have moved much of theirmanufacturing and assembly offshore. The main driver for such moves often

being low labour costs. However, in so doing they run the risk of extending

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their lead-times significantly thus generating the need for more inventory inthe pipeline.

As a result their agility is reduced. Some organisations have actuallysought to reverse this trend by bringing manufacturing back closer to theirmain markets - Dell Computer being a case in point. Other companies areusing low cost sources of supply to manufacture products where there is a

predictable demand and using more local, flexible facilities for producing lesspredictable, more volatile products. Zara, the successful Spanish fashionretailer, has followed a very similar strategy enabling it to respond morerapidly to changes in demand.

To overcome the potential loss of agility through extended globalsupply chains, companies need to adopt a number of guiding principles:-

Remove the organisational barriers:

Too many companies are hindered in their attempts to streamline theirsupply chains because of their out-molded organisational structures. It is not

possible to even contemplate a seamless global pipeline if there are quasi-independent national subsidiaries making their own decisions on sourcing,distribution facilities and inventory for example.

Similarly, it is still the case that for many businesses the functional'barons' still wield significant power. As a result decisions are taken which arebased on a narrow definition of 'optimisation' - in other words the focus is onimproving performance within a function without regard for its wider supplychain impact. Thus we find, for instance, that often factories are designed and

built to maximise the economies of scale rather than to enhance flexibility ofresponse. In a global marketplace this tunnel vision can lead to a damagingloss of competitiveness.

The solution has to be to re-engineer the organisation structure so that

supply chains are managed on a truly integral basis with cross-functionalteams being given the responsibility for managing the pipeline from source tofinal market.

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Make the supply chain the value chain:

The idea that companies should focus on their core competencies israpidly taking hold. As a result there is a greater willingness to out-source

than was previously the case. This trend has been particularly observable inglobal corporations where there has been recognition that the complexity ofmanaging a worldwide logistics chain requires specialist resources.

There is now a great opportunity to start thinking of the supply chain asa value chain. Rather than accepting the conventional view that believes thatall value-creating activities need to be conducted under the same corporateroof, forward-looking organisations are taking a different view. Particularly assupply chains become global it will often make sense to move to a greaterlevel of 'localisation', i.e. the final finishing or configuration of the product

being performed much closer to the point of demand. To enable this to beachieved on a global basis, specialist third party logistics service providershave emerged who can now act as extensions of the company's value chain.

In structuring cost-effective and agile global supply chains the questionof where in that chain the value creation should take place becomes crucial.By working more closely with specialist providers, greater levels of customervalue can often be achieved at less cost to the supply chain as a whole.Hewlett Packard has adopted this concept for many of its products such as the

Desk Jet printer, even going to the lengths of re-designing it so that a genericsemi-finished global version could be built centrally with localisation beingperformed by regional partners.

Shift the de-coupling point:

A major problem in all supply chains, but significantly worse for globalbusiness, is that they have little visibility of 'real' demand. Because globalsupply chains tend to be extended with multiple echelons of inventory

between the point of production and the final market place they tend to be

forecast driven rather than demand driven. In other words decisions onproduction and distribution are based upon forecasts or orders (whichthemselves do not necessarily reflect demand but rather tend to be based onarbitrary 'rules' such as re-order points and re-order quantities).

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The point to which real demand penetrates upstream in a supply chainis termed the decoupling point. These decoupling points also tend to dictatethe form in which inventory is held. Thus in the uppermost example in Figure2 demand penetrates right to the point of manufacture and inventory is

probably held in the form of components or materials. In the lower exampledemand is only visible at the end of the chain; hence inventory will be in theform of finished product.

Ideally, information from the marketplace should flow as far upstreamand in as close to real time as possible. In this way all the parties in the supplychain work to the same information and reduce their dependency on theforecast. At the same time opportunities for postponing the final configurationof finished inventory should be investigated. The aim of the global supplychain should be to carry inventory in a generic form, i.e. standard semi-

finished products awaiting final assembly or localisation.

Managing the global supply chain requires a level of agility andresponsiveness several magnitudes greater than that required in the old modelof 'local for local' manufacturing. Emphasis will increasingly have to be

placed on creating a business model that recognises that competitiveadvantage is created through the management of the supply chain as a singleentity rather than through fragmented, locally-focused decision making units.For the foreseeable future leadership in global markets will belong to thoseorganisations that exhibit greater agility than their competitors.

FUTURE OF SCM

The most notable is Radio Frequency Identification, or RFID. RFIDtags are essentially barcodes on steroids. Whereas barcodes only identify the

product, RFID tags can tell what the product is, where it has been, when itexpires, whatever information someone wishes to program it with. RFIDtechnology is going to generate mountains of data about the location of

pallets, cases, cartons, totes and individual products in the supply chain. It'sgoing to produce oceans of information about when and where merchandise ismanufactured, picked, packed and shipped. It's going to create rivers ofnumbers telling retailers about the expiration dates of their perishable items-numbers that will have to be stored, transmitted in real-time and shared withwarehouse management, inventory management, financial and otherenterprise systems. In other words, it is going to have a really big impact.

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The a b c...... D of RFID: "DATA"

In current systems, you may know there are 10 items on the shelf, andthat information is compiled in an enterprise planning software system. With

RFID, you know there are 10 items, their age, lot number, and expiration dateand warehouse origin. It's like knowing there are 1,000 people in a city. WithRFID, you know their names. Think like you are a HR manager of a globalcorporation who remembers all the employees by their names!! Wouldn't that

be great? That's the power of RFID- the DATA.

Radio frequency identification (RFID) can be broadly categorized as an'e-tagging' technology. RFID enables passive object tagging and automaticdata capture, using RF sensing as opposed to optical sensing in the case of

barcodes. RFID is fast, reliable, and does not require physical sight or contact

between reader/scanner eliminating the problems mentioned for barcodes. Therange of sensing RFID tags from a reader varies from a few centimeters to afew meters, depending on the frequency and the type of tags (active or

passive). The amount of data that can be stored inside RFID tag ranges fromfew bits to 1 MB for active tags.

Benefits:

The main benefit of RFIDs is that, unlike barcodes, RFID tags can be

read automatically by electronic readers. Imagine a truck carrying a containerfull of widgets entering a shipping terminal in China. If the container isequipped with an RFID tag, and the terminal has an RFID sensor network,that container's whereabouts can be automatically sent to Widget Co. withoutthe truck ever slowing down. It has the potential to add a substantial amountof visibility into the extended supply chain.

The benefits are divided into two parts

(a) Benefits to Organisation: Inventory Management:-

Maintain a real-time view of tagged inventory as it flows throughthe supply chain.

Track discrete movement of tagged inventory.

Trigger alerts around inventory movement based on business rulesyou construct.

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Allowing just-in-time practices.

Maximizing warehouse space:-

With the high costs associated with storage real estate, the goal is

to maximize warehouse space. This will improve utilization withoutundermining the ease with which goods can be moved in and out.

Minimizing goods shrinkage:-

Theft combined with imprecise inventory management can createa significant shortfall in actual versus expected goods available. Within theretail environment goods shrinkage is widely perceived to account for up toone per cent of stock, representing a significant dent in profit margin.

(b) Benefits to Consumers:

Value Innovation in customer service

Marks & Spencer, a British retailer, has just extended a trial inwhich tags are applied to suits, shirts and ties for men, allowing retailers tomonitor and replenish stock levels with far more accuracy at the end of eachday to make sure that every size, style and color remains in stock. Beyondimproving efficiencies, the smart tags could help to drive sales. One example

of improving customer service: a customer could take a tagged suit to a kiosk,which could then suggest a matching shirt and tie.

Minimizing errors in delivery

Misdirected deliveries or incorrect orders can immediately resultin on-shelf out-of-stock situations leading to reduced sales and damagedcustomer relationships. Indeed, for organizations relying on the delivery ofspecific components to fulfill their own order schedule, such errors can have a

serious impact on customer satisfaction.

RFID tags represent a significant step forward from traditionalbar code technology and offer highly reliable data most notably, the USDepartment of Defense requires their suppliers to ship products with RFIDtags from 2006 onwards. Therefore, the broad adoption of RFID is on its way.By 2010, RFID should be ubiquitous throughout industries. Right now the

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two biggest hurdles to widespread RFID adoption are the cost of building theinfrastructure and the lack of agreed-upon industry standards.Some Key technologies which are going to change the face of SCM in comingdays are:1. EDI (for exchange for information across different players in the supply

chain);2. Electronic payment protocols;3. Internet auctions (for selecting suppliers, distributors, demand forecasting,

etc.);4. Electronic Business Process Optimization;5. E-logistics;6. Continuous tracking of customer orders through the Internet;7. Internet-based shared services manufacturing; etc.

SUPPLY CHAIN MANAGEMENT PROBLEMS

Supply chain management must address the following problems:

1.) Distribution Network Configuration:

Number and location of suppliers, production facilities, distributioncenters, warehouses and customers.

2.) DistributionStrategy:

Centralized versus decentralized, direct shipment, cross docking, pull orpush strategies, third party logistics.

3.) Information:

Integrate systems and processes through the supply chain to sharevaluable information, including demand signals, forecasts, inventory andtransportation.

4.)Inventory Management:

Quantity and location of inventory including raw materials, work-in-process and finished goods.

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SUPPLY CHAIN MANAGEMENT CURRENT KEYTOPIC: TRADEOFF CURVES

One of the fundamental tradeoffs in supply chain management is that between inventorylevels and customer service. For any given supply chain, increasing the level of service

(product/spare part availability) typically means higher levels of inventory. Most companies havediscovered their "best place" on the curve, depending on what their customers require and whattheir competition offers. However, supply chain strategies can shift the entire curve, lowering yourinventory levels without adversely affecting your customers (or the reverse, improving customerservice levels with no increase in inventory). How might this work? Through effective supply chainmanagement you may be able to reduce lead times. This would shift the curve to the right,speeding up customer response times without raising inventories. Supply Chain Module

SCM106 reviews a strategy called postponement, or risk pooling, that can lower the curve,allowing you to maintain (or enhance) service levels with less finished-goods inventory.

This tradeoff curve provides a perfect example of howsilo behavior(in which functionalareas lose sight of cross-functional optimizations) can cause problems in supply chains. One of the first stepsin improving a supply chain is making sure that organizational responsibility for inventory levels andcustomer service are appropriately managed. These two responsibilities should not be separated - in fact, theyshould report to the same desk. Doing so enables a company to set expectations and properly manage thistradeoff, without costly swings from one place on the curve to another as different functional groups "fight"for either lower inventories or higher service.

CURRENT SITUATION OF SUPPLY CHAINMANAGEMENT

Nowadays, one of the few outcomes in the constantly changingbusiness world is that organizations can no longer compete solely asindividual entities. Increasingly, they must rely on effective supply chains, ornetworks, to successfully compete in the global market and networkedeconomy (Baziotopoulos, 2004). Peter Druckers (1998) managements new

paradigms, this concept of business relationships extends beyond traditional

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enterprise boundaries and seeks to organize entire business processesthroughout a value chain of multiple companies.

During the past decades, globalization, outsourcing and informationtechnology have enabled many organizations such as Dell and HewlettPackard, to successfully operate solid collaborative supply networks in whicheach specialized business partner focuses on only a few key strategic activities(Scott, 1993). This inter-organizational supply network can be acknowledgedas a new form of organization. However, with the complicated interactionsamong the players, the network structure fits neither market nor hierarchycategories (Powell, 1990). It is not clear what kind of performance impactsdifferent supply network structures could have on firms, and little is knownabout the coordination conditions trade-offs that may exist among the

players.From a systems point of view, a complex network structure can be

decomposed into individual component firms (Zhang and Dilts, 2004).

Traditionally, companies in a supply network concentrate on the inputsand outputs of the processes, with little concern for the internal managementworking of other individual players. Therefore, the choice of internalmanagement control structure is known to impact local firm performance(Mintzberg, 1979).

In the 21st century, there have been few changes in businessenvironment that contributed to the development of supply chain networks.First, as an outcome of globalization and proliferation of multi-nationalcompanies, joint ventures, strategic alliances and business partnerships werefound to be significant success factors, following the earlier Just-In-Time,Lean Management and Agile Manufacturing practices (MacDuffie andHelper, 1997; Monden, 1993; Womack and Jones, 1996; Gunasekaran, 1999).Second, technological changes, particularly the dramatic fall in informationcommunication costs, a paramount component of transaction costs, has led tochanges in coordination among the members of the supply chain network(Coase, 1998).

Many researchers have recognized these kinds of supply networkstructure as a new organization form, using terms such as Keiretsu,Extended Enterprise, Virtual Corporation, Global Production Network,and Next Generation Manufacturing System (Drucker, 1998; Tapscott,1996; Dilts, 1999). In general, such structures, can be defined as a group ofsemi-independent organizations, each with their capabilities, which

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collaborate in ever-changing constellations to serve one or more markets inorder to achieve some business goal specific to that collaboration(Akkermans, 2001).

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CASE STUDY 1:MATRIX LABORATORIES (INDIA) LTD.

This study focuses on the inventory-related issues at bonded stock

rooms (BSRs) and depots in a huge supply chain network of a leadingconsumer products company dealing in cosmetics and other personal care

products.

Organization Background:

Matrix Laboratories (India) Ltd. is a leading consumer ProductsCompany dealing in cosmetics and personal care products with its head officelocated at London (U.K). The company had a supply chain network of 3factories with bonded stock rooms (BSR) attached for despatch to the depotsand 35 depots for servicing distributors. Goods move from the factory to theBSR. BSR dispatches stocks to Mother CFAs (depot). Other depots receivestocks from the Mother depot and sell them to distributors.

Key Concerns for the Company:

1. To reduce inventory level at the BSR and depots.

2. To improve inventory accuracy at stocking points including both BSRs and

depots.3. To identify the damaged stocks across the chain and initiate action in a

timely manner.

Findings:

The company appointed an external Supply Chain expert from US to helpthem out of their problems stated above. The expert found out somediscrepancies which are as follows.

A). High Inventory Levels:

Total average inventory holding at BSRs was 8.2 weeks of sales and at depotswas 6.5 weeks of sales.

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They were very high across the distribution chain because:

Sales and despatch forecasts that were not in line with actual primary /secondary sales.

There was no process to periodically review and refine the AnnualForecasts, in line with market feedback.

Stocking across all points in the distribution chain was driven by apush-oriented system that did not have provisions to be tuned to marketrequirements.

Actual safety stocks maintained at depots were significantly higher thattarget safety stocks agreed at the beginning of the year. No system wasin place to monitor and correct the same during the year.

Stock allocation from depots was manual. Orders received fromdistributors were manually processes and no process was in place toautomatically collate orders and allocate stocks.

B). High Levels of Old / Withdrawn /Damaged / Slow-moving stocks:

Depots were holding High inventory of old/withdrawn stocks and damagedstocks for a long time (over 3 months) Book and physical stocks had

discrepancy of over 30%. Dead stocks were allowed to accumulate in thesystem mainly because:

1. There was an absence of visibility into inventory details across stockingpoints.

2. The process to monitor and act on dead stocks was not adhered to.3. Records of slow-moving / old /withdrawn / damaged stocks were not

maintained methodically at the stocking points. Records were inaccurate.4. Communication of details of dead stocks to the relevant teams was based

on manually filed reports which were time-taking and open to error.

C). Inaccuracy in inventory records:

The organisation did not have a clear policy on periodic reconciliation ofphysical stock with book records. Thus inaccuracies grew over time,compounded with process failure on accounting for dead stocks.

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Action Steps Undertaken:

The expert advised and undertook some steps in the organization as follows:

Bin card system was implemented for each rack at the CFAs and thedelivery staff was trained in relevant bin card maintenance practices.

A process to regularly reconcile physical and book stocks using the cycle-count process was implemented.

An IT solution was identified and implemented for:

Accounting the Cycle count process, providing MIS on deviations andaccounting the adjustment notes.

Computing the forecast using consolidated orders, with factoring for

promotions and seasonality.

Calculating safety stock level based on number of weeks of sales

target.

Facilitating communication of closing stock data from BSR and

depots to logistics department.

Facilitating communication of damaged and un-saleable stock

quantity to commercial department.

Automatically allocating stocks using FIFO principle at the depots.

Demand planning and forecasting were made a periodic activity using theabove IT solution to align forecasting with market orders and actual sales.The process of setting safety stocks at depots was made periodic anddynamic, based on updated sales data.

Norms were set to act on damaged /old and other dead stocks. Clear actionsteps were laid down to liquidate or destroy these stocks.

Responsibility and accountability were set to in the organisation to monitorand authorise activities in this regard based on visibility provided by the ITsolution.

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Benefits:

Due to above steps were implemented properly the results were fascinatingand this increased the profits of the company by 20%.

(a) The organisation achieved an inventory record accuracy (book stockscorrectly reflecting physical stocks) of 95% within 2 months .

(b) The company achieved (Within 2Planning cycles i.e. 2 Months)

(i.) Stock level reduction

From 8.2 weeks to 5.5 weeks at the BSR.

From 6.5 weeks to 4 weeks at the depots which included damagedinventory.

Reduction in stock value holding across the supply chain.

(c) Transparency of saleable and damaged stocks quantities across thesupply chain resulting in more accurate demand planning, stockallocation and production.

(i.)Better management of damaged and un-saleable stocks: Sales realisation on salvaging and selling damaged stocks at a

discounted price.

Timely destruction of unusable and potentially harmful products.

Timely action on transport, handling, stock management and productdevelopment fronts to reduce damages.

(ii.) Reduction in proportion of old and damaged stocks ;

(iii.) Facilitation of ensuring fresher stocks in the market.

This was achieved mainly by reducing inventory levels across the chain andalso by better stock management at the depots.

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CASE STUDY 2: INFOSYS SCM SOFTWARE

SOLUTIONS

Infosys' Supply Chain Management solutions help organizations increating strategic differentiation and operational superiority by configuringand implementing solutions that are aligned with the elements oforganizations competitive strategy. The Supply Chain Management solutionsand services help manage and optimize the many facets of Supply ChainPlanning, Sourcing & Procurement, Inventory Optimization, WarehouseManagement, Logistics Distribution & Transportation and Supply ChainIntegration. Moreover the organization can recover their investments earlier.This is because of the "extended work day" concept of the Global DeliveryModel (GDM), which Infosys pioneered. Infosys' Global Delivery Model(GDM) also reduces the Total Cost of Ownership (TCO) by cuttingoperational costs to the tune of anything between 20-35%. The results are:robust implementations, faster roll-outs and de-risked upgrades of the highestquality; all delivered with the on-time, on-budget, and on-spec industry-

benchmark of Infosys Predictability.

Infosys supply chain management solutions include:

i. Fulfillment Management.ii. Collaborative Vendor Managed Inventory (VMI).

iii. Sales and Operations Planning.iv. Order Management.v. Manufacturing Planning and Scheduling.

vi. Supplier Collaboration.vii. Procurement Management.

viii. Network Design and Optimization.ix. Track and Trace.

(i.) The Client:

The client is a global leader in pressure-sensitive technology, self-adhesive base materials, and self-adhesive consumer and office products andspecialized label systems and ranks among the Fortune 500. With sales of

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almost USD $5 billion, the client is best known for its office automation andconsumer products, self-adhesive materials, reflective and graphic materials,

peel-and-stick postage stamps, industrial labeling solutions, Radio FrequencyIdentification (RFID) labels, label stock and related services and systems,automated retail tag and labeling systems, specialty tapes and chemicals.

(ii.) Business Need and Challenges:

For the client, success required managing short product lifecycles,focusing on customer service, and most importantly, reducing supply chaincosts. Optimized supply chain management is crucial for the success ofcompanies in this industry, and a key component of supply chain managementis accurate forecasting and demand planning.

The client was looking for a way to make its supply chain morestreamlined, and hence more cost-effective. Specifically, the client had beenlooking at forecasting the US sales for each Stock Keeping Unit (SKU). Itwanted to move towards a demand planning model that was based aroundcollaborative and consensus forecasting. To facilitate this, the office productsdivision of the client had already implemented i2 Demand Planning (DP), but

poor forecast accuracy and sub-optimal forecasting process took its toll onoverall system efficiencies and diminished user confidence.

(iii.) The Infosys Solution:

Infosys was engaged to conduct diagnostics to identify issues in DPimplementation and to tune-up the overall forecasting process. An Infosysteam was deployed to identify the requisite improvements with a quick turnround time of 5 weeks.

The Infosys team conducted diagnostics to identify issues with currentimplementation and potential opportunities to optimize the system. The teamthen came up with 24 recommendations for improvement of utilization, user

productivity and forecast accuracy. These recommendations were analyzedfrom two aspects viz. 'ease of implementation' and 'delivered business value'to arrive at the priority classification for implementation.

In the second phase, the Infosys team was asked to implement eight ofthe statistical modeling initiatives, clubbed under four Clusters with anobjective to improve forecasting process, user productivity (by making the

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system user friendly and flexible) and implementing various advancedfeatures of DP that were not being used. The above scope was completedwithin a short span of four months leveraging the Infosys' Global DeliveryModel with significant productivity/ process improvements.

(iv.) Benefits:

Enhanced version management capability, reducing hours of manualwork.

Increased forecast accuracy - Error reduction by 2% and biasimprovement by 8mn units over the year.

Flexible process to manage historical data cleansing and accountingfor future promotions.

Increased user confidence by making the process more transparentand flexible.

A sustainable and repeatable knowledge base through user educationand training.

A roadmap for future enhancements.

CONCLUSION

Supply chain management (SCM) is the combination of art and science thatgoes into improving the way your company finds the raw components it needs

to make a product or service and deliver it to customers. It is the process ofplanning, implementing, and controlling the operations of the supply chainwith the purpose to satisfy customer requirements as efficiently as possible.Supply chain management spans all movement and storage of raw materials,work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.

Supply chain management has emerged as the new key to productivity andcompetitiveness of manufacturing and service enterprises. The importance of

this area is shown by a significant spurt in research in the last five years andalso proliferation of supply chain solutions and supply chain companies. Allmajor ERP companies are now offering supply chain solutions as a majorextended feature of their ERP packages.

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BIBLIOGRAPHY

Websites visited:

1.

2.

3.

4.

Reference books:

1. Notes of NMIMS.

2. Arntzen, B. C., G. G. Brown, T. P. Harrison, and L. Trafton. GlobalSupply Chain Management at Digital Equipment Corporation.Interfaces, Jan.-Feb., 1995.