MODULE-1

Introduction to Supply
Chain Management Chain Management
Presentation by
Dr! "ilas #! Shinde
Pro$essor % &ead
Mechanical Engineering Department
Datta Meghe College o$ Engineering
'iroli (a)i Mumbai-*++,+- .I(DI'/
U(DE0S1'(DI(2 SUPPL3 C&'I(
Changing #usiness Scenario4
The economy has rapidly increased after the World War-II and
American & European countries has enjoyed the world
market.
But, the economic environment and manaement theories
were not sufficient to chane the !usiness attitude all over
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In mid of seventies there was a second industrial revolution
due to "ean #roduction #hilosophy $"##% initiated in &apan
"## model ensures the concept of total 'uality, customer
satisfaction, teamwork and social interity
The situations has chaned with time and market turned into
healthy !usiness environment due to intervention of some
major elements suested !y #orter $()*+%
Contd!!!!
2
CO(1D!!!!
1he $our ma5or elements suggested by Porter4
,lo!al Element- .onsumers re'uirement, demand & /upply,
#owerful economic alliances, ,lo!al market pro!lems
,overnment Influence- 0ereulation, Ta1 & 0uty structure,
Environmental protection laws
2acro Economic factors- Interest rate, E1chane rates,
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2acro Economic factors- Interest rate, E1chane rates,
Ta1es, !udetary pro!lems $defeat or surplus%
Technoloy Innovations- #rocess innovation, Industrial
innovations, IT revolutions, Bio-technoloy and other
chanes
Contd!!!!
3
CO(1D!...
1he Porter has suggested $i)e process model to e6ist
in such en)ironment4
Threat of new entrants
3ivalry amon current players
Barainin power of !uyers
Barainin power of suppliers
Threat of su!stitute
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Threat of su!stitute
1he enterprises has to adopt $ollo7ing strategies to
e6ist % gro74
E1pansion of Business
2erers with another enterprise
Ac'uisition of another enterprise
4ormation of strateic alliances
4
Current #usiness Scenario4
Industrial revolution due to lo!ali5ation & open market
The various processes, toolin, material has accelerated
the market rowth remarka!ly
The computeri5ation, technoloy intervention evolved to
formed its own technoloy driven practices
The new concepts and tactics from school of manaement
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The new concepts and tactics from school of manaement
has enhanced the economic market rowth
/elf-competency and formin the stron chain of
competent players provides the services to the customers
effectively, efficiently and economically
The new concepts such as merers, ac'uisitions,
amalamation are helpin the enterprises for inoranic
rowth
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8&'1 IS SUPPL3 C&'I(9
The term 6/upply .hain 2anaement7 arose in the late ()*87s and came
into widespread use in ())87s. #rior to this !usiness made use of terms,
such as, 6loistic7 and 69perations manaement7.
:/upply chain interates the key !usiness processes of an orani5ation
from end user throuh oriinal suppliers that produces products, services
and information that add value to the customer and other stake holders;.
/upply chain manaement $/.2% is the oversiht of materials,
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/upply chain manaement $/.2% is the oversiht of materials,
information and finances as they move in a process from supplier to
manufacturer to wholesaler to retailer to consumer.
/upply chain manaement involves coordinatin and interatin these
flows !oth within and amon the enterprises.
/upply chain is a network of facilities and distri!ution options that
perform the functions of procurement of materials, transportation of
these materials into intermediate and finished products and the
distri!ution of these finished products to customers.
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(EED O: SUPPL3 C&'I(
The !asic purpose of supply chain is to coordinate the
flow of materials, services and information amon the
elements of supply chain to ma1imi5e the customer7s
value
To satisfy the customers need with re'uired
improvement in 'uality of the products & services with
economic prices
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economic prices
To enhance the competitive advantae of the enterprises
The key function of /. includes sales and order
processin, transportation and distri!ution, operations,
inventory and material manaement, finance and
customer services.
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&O8 SUPPL3 C&'I( 8O0;S9
The ultimate oal of any effective supply chain manaement
system is to reduce inventory $with the assumption that
products are availa!le as and when re'uired%.
/upply chain manaement flow can !e divided into three
main flows-
The product flow- The product flow includes the movement of
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The product flow- The product flow includes the movement of
oods from supplier to customer, as well as, provide service
from source to the customer as per their re'uirement.
The information flow- The information flow involves
transmittin orders and updatin the status of delivery.
The finance flow- The finance flow consists of credit terms,
payment schedules, consinment and title ownership
arranements.
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Diagrammatic Representatin ! Basic "#ements ! S$pp#% C&ain Diagrammatic Representatin ! Basic "#ements ! S$pp#% C&ain Diagrammatic Representatin ! Basic "#ements ! S$pp#% C&ain Diagrammatic Representatin ! Basic "#ements ! S$pp#% C&ain
'
/upply .hain 2anaement $/.2% is the manaement of all
functional activities that facilitates the manufacturin
process to produce the product in order to satisfy the
customer7s re'uirement at reasona!le cost.
This includes not only the o!vious functions of manain
the materials within the supply chain !ut also the flow of
information and money that re'uires to coordinate these
functional activities.
/.2 can work as a loop consistin of followins-
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/.2 can work as a loop consistin of followins-
It starts with the customer and ends with the customer
All material, finished oods, information and all transactions
throuh the loop flow
It re'uires lookin at a !usiness as one of the continuous,
seamless process
This process a!sor!s distinct function such as forecastin,
purchasin, manufacturin, distri!ution, sales and marketin
into a continuous !usiness interaction
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E"OLU1IO( O: SCM :U(C1IO(
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()+8s ()=8s ()>8s ()*8s ())8s ?888s 4uture
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0urin ()+8s and ()=8s, manufacturers were employin mass
production techni'ues to reduce cost and improve productivity@ while
little attention was paid for creatin supplier partnerships, improvin
process desin, fle1i!ility and improvin product 'uality.
In the ()=8s and ()>8s Material re<uirement planning .M0P-I/
systems and Manu$acturing resource planning .M0P-II/ systems
were developed, and the importance of effective materials
manaement was reconi5ed, as a result the manufacturers !ecame
aware of the impact of hih levels of inventories on manufacturin
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aware of the impact of hih levels of inventories on manufacturin
and storae costs.
In ()*8s were the !reakout years for /upply .hain 2anaement.
2anufacturers utili5ed just-in-time $&IT% and total 'uality
manaement $TA2% strateies to improve 'uality, manufacturin
efficiency and delivery times.
Business #rocess 3e-enineerin $B#3%, was introduced in the early
())8s and was the result of rowin interest durin the time in the
need for cost reduction. Contd!!!!
12
CO(1D!!!!
The increasin popularity of the alliances !etween suppliers and
customers in the late ())8s ave a way to /.2, which is continuin
today.
In the future it is e1pected that the supply chain manaement
emphasis will concentrate on supply chain e1pansion, enhances
supply chain responsiveness, increase the emphasis on :reen;
supply chain and further reducin /. costs.
The supply chain manaement is an e1panded version of loistics
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The supply chain manaement is an e1panded version of loistics
process manaement.
The loistics processes were traditionally focused and attentive on
coordinatin the movement of product and information and the flow
of activities in an individual enterprise.
There have !een three major revolutions of /. alon this journey
:irst 0e)olution .1=1+-1=>+/4 1he :ord Supply Chain
Second 0e)olution .1=?+-1=,+/4 1he 1oyota Supply Chain
1hird 0e)olution .1==@->+++/4 1he Dell Supply Chain
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O#AEC1I"ES O: SCM
The o!jective of every supply chain should !e to ma1imi5e the
overall value enerated.
The value will !e stronly correlated with supply chain
profita!ility.
/upply chain profita!ility or surplus is the total profit to !e
shared across all supply chain staes and intermediaries.
The o!jectives of supply chain manaement can !e
summari5ed to achieve the followin major oals-
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The o!jectives of supply chain manaement can !e
summari5ed to achieve the followin major oals-
#rovide an uninterrupted flow of materials, supplies and
services re'uired to operate the orani5ation
Beep inventory investment at minimum
2aintain and improve the 'uality
Contd!!!!
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Contd!!!!
4ind or develop the component suppliers
#urchase re'uired items and services at lowest total
cost
Improve the competitiveness of the orani5ations
Achieve harmonious and productive workin
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Achieve harmonious and productive workin
relationships with other functional areas within the
orani5ation
Accomplish the purchasin and marketin o!jectives
at the lowest possi!le level of administrative costs
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DECISIO( P&'SES O: SCM
/uccessful supply chain manaement re'uires
many decisions relatin to the flow of product,
information and finance
These decisions fall into three cateories or
phases, dependin on the fre'uency of each
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phases, dependin on the fre'uency of each
decision and the time frame over which a
decision phase has an impact
Supply chain strategy or design
Supply chain planning
Supply chain operation
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PILL'0S O0 COMPO(E(1S O: SCM
There are four C 4ive important pillars or components of supply
chain manaement system-
Planning
#lan /upply
#lan 0emand
Balance /upply-0emand
#lan loistic networkin
Sourcing B MaCing
2anae 3e'uest
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2anae 3e'uest
2anae /uppliers
2anae #ayment
:ul$ilment B Deli)ery
2anae Warehouse & Inventory
2anae 0istri!ution C 0elivery /chedule
0eporting B 0e)erse :lo7
3eportin of 4eed!ack
Event 2anaement
Trackin & Tracin /ystem
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P0OCESS "IE8 O: SUPPL3 C&'I(
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1'
CP:0 CO(CEP1
Collaborati)e Planning :orecasting and 0eplenishment
.CP:0/ is an concept that aims to enhance the supply chain
interation !y supportin and assistin colla!orative practices
CP:0 seeks cooperative manaement of inventory throuh
visi!ility and replenishment of products throuhout the supply
chain e1ecution
.#43 is the sharin of forecast and related information amon
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.#43 is the sharin of forecast and related information amon
!usiness partners in the supply chain to ena!le automatic product
replenishment
This allows for continuous updatin of inventory and upcomin
re'uirements, makin end-to-end supply chain more efficient
Efficiency can !e enhanced !y minimi5in the e1penditures for
merchandisin, inventory, loistics and transportation across all
tradin partners
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CP:0 MODEL
Collaborative Planning Collaborative Planning Collaborative Planning Collaborative Planning
Collaborative Forecasting Collaborative Forecasting Collaborative Forecasting Collaborative Forecasting
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Collaborative Forecasting Collaborative Forecasting Collaborative Forecasting Collaborative Forecasting
Collaborative Replenishment Collaborative Replenishment Collaborative Replenishment Collaborative Replenishment
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CODP CO(CEP1S
The CODP .Customer Order Decoupling Point/ is defined as
the point in value-addin material flow that separates decisions
makin under uncertainty from decisions makin under certainty,
concernin to the customer demand. Dowever, it is normally used
for production and distri!ution- related activities only.
In recent years the CODP has ained increased acceptance as an
important concept when orani5in value-addin activities in
production and loistics.
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production and loistics.
CODP typoloy can !e typically adjusted and show how the
enineerin resources can !e interated with the production
process so as to utili5ed the features of mass customi5ation
environments into account.
It also e1amines e1istin mass customi5ation frameworks and
offers a more thorouh and nuanced typoloy for classifyin
various levels of mass customi5ation.
4inally, the adjusted .90# typoloy is used as a foundation for
developin a relia!le order promise process for mass customi5es.
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SUPPL3 C&'I( PE0:O0M'(CE
Enterprises across the lo!e look forward to value addition and
innovation as the strateic loic for enhancement in rowth.
There are certain performance parameters on which the value
addition in all respects to the enterprises can !e evaluated.
The world class value addin performance parameters of /.2 are
enlisted and descri!ed as follows-
Duality4 The 'uality of products and services should !e virtually
defect-free line.
Cost- The supply chain function must focus on strateic cost
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Cost- The supply chain function must focus on strateic cost
manaement.
1ime- Total time cycle re'uires for the operation of the enterprises shall
!e minimum.
1echnology- The supply chain function has two key responsi!ilities in
the area of technoloy. It must ensure that the technoloy affects core
competencies of enterprises which are carefully controlled when dealin
with outside supplier and customers well within the time.
Continuity o$ Supply- 2onitorin the trends, developin appropriate
supplier alliances and takin such other actions as re'uired for reducin
the risk of supply distri!utions.
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SUPPL3 C&'I( D0I"E0S '(D ME10IC
There are five major drivers of supply chain manaement which
are descri!ed and shown diarammatically in fiure !elow-
Production4 This is precisely related with the issues manufacturin of
product, such as, what to produce, how to produce and when to produce.
In)entory- The decisions and issues are concerned with the 'uantity of
material, such as, how much to make, how much to store as inventory
and where to store.
Location- The issues reardin the location of the plant, such as, where
to locate the plant, where to locate a warehouse facility etc. This may
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to locate the plant, where to locate a warehouse facility etc. This may
have a sinificant !earin on the dynamics of the supply chain and it
may affect the overall cost.
1ransportation- The issue may !e related to the movement of product,
such as, how to move a product from one location to another and !y
which mode of transportation. 9ne needs to evaluate economies of scale
on one hand and desired level of customer satisfaction on the other hand.
In$ormation- It is an !indin force havin critical implications for the
supply chain. Information plays an sinificant role for makin various
decisions in handlin of the overall e1ecution of supply chain
manaement in the enterprises.
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Diagrammatic 0epresentation o$ Ma5or Dri)ers o$ Supply Chain
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SUPPL3 C&'I( S10'1E23
The supply chain stratey will have a major impact on
creatin values for the enterprises and its /. partners.
An effective /. stratey may !e desined with
interated technoloy to meet the re'uirement of the
market so as to enerate the hihest level of customer
satisfaction.
The supply chain stratey is !ased on followin four
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The supply chain stratey is !ased on followin four
strateies-
Collaboration Strategy
Demand :lo7 strategy
Customer Ser)ice Strategy and
1echnology Integration Strategy
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SUPPL3 C&'I( ME10ICS
It is an small set of 2etrics for users to understand
the supply chain performance
This metrics can comprehensive enouh to capture
the supply chain performance data to see the
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the supply chain performance data to see the
proress of implementation
There are two types of metrics-
#ure 2etrics
0erived 2etrics
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0E:E0E(CES
Altekar 3ahul E., $?88)%, :/upply .hain 2anaement;, #DI
"earnin #rivate "imited, Few 0elhi, ?88)
.hopra, /unil and #eter 2eindl, $?88G%, :/upply .hain
2anaement;, ?
nd
ed. Hpper /addle 3iver- #earson #rentice Dall
.atholic 3elief /ervices $?8((% I Hnited /tates .onference of
.atholic Bishops, ??* West "e1inton /treet, Baltimore, 20
?(?8( I H/A
2ohanty 3. #. and 0eshmukh /. ,. $?88+%, :/upply .hain
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2ohanty 3. #. and 0eshmukh /. ,. $?88+%, :/upply .hain
2anaement $Theories and #ractices%;, (st edition, !y Bi5tantra
Inovation in 2anement
/hah &anat, $?88)%, :/upply .hain 2anaement;, #earson
Education
/hinde Eilas B. $?8(?%, :2erers and Ac'uisitions for Ealue
.hain 2anaement in the 4ramework of Technoloy 0riven
Industrial Enineerin #ractices; #h. 0. Thesis, Hniversity of
2um!ai
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