Supply Chain Management:

Basics & Beyond

A Few Case Studies: Many Lessons

Prof. Ravi Shankar

Professor
Department of Management Studies
Indian Institute of Technology Delhi
Email: r.s.research@gmail.com
Phone: (+91) 9811033937
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TEXT BOOK

REFERENCE
BOOK

Tata McGraw

Reference Journals
Journal(s):
Supply Chain Management: An International
Journal (Available on www.emaraldinsight.com)
Supply Chain Management Review
Purchasing World
International Journal of Purchasing and Materials
Management
International Journal of Physical Distribution &
Logistics Management
Prof. Ravi Shankar (2013-14)

Session Objectives
To understand the basics
of SCM
To understand the current
practices in SCS
To understand and
develop a few winning
strategies of SCM

Prof. Ravi Shankar (2013-14)

A RECENT WHITE PAPER

II
M

Supply Chain Stages

Supply Chain (SC) encompasses all activities associated with the flow
and transformation of materials from the raw material stage through
to the end user.
Supply Chain Management (SCM) involves management of FOUR
flows in a Supply Chain: (i) Material, (ii) Information , (iii) Money &
(iv) Ownership
Supplier

Manufacturer

Distributor

Retailer

Customer

Prof. Ravi Shankar (2013-14)

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What are the Goals of Supply Chain

Management?
Supply chain management is concerned with the efficient
integration of suppliers, factories, warehouses and stores
so that merchandise is produced and distributed:

In the right
g quantities
q
To the right locations
At the right time
In order to

Minimize total system cost

Satisfy customer service requirements
Prof. Ravi Shankar (2013-14)

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LESSONS TO LEARN
Supply Chain involves many Complex Situations
involving Inventory, Information and Money Flows.
G-1:

Quality Information (Such as, Accurate forecast) reduces

Inventory problems (like, stockout & safety stock)

G-2:

Companies do not compete now, their supply chains do

G-3:

A supply chain is as good as its weakest link

G-4:

Nearer you are from POS, (generally) more accurate is

forecast. So, trim the lead times.

Prof. Ravi Shankar (2013-14)

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Evolution of Supply Chain Management

Further Refinement
of
SCM Capabilities
SCM
Formation/
E t i
Extensions
JIT, TQM, BPR,
Alliances
Inventory Management/Cost
Optimization
Traditional Mass Manufacturing

1950s

1960s

1970s

1980s

1990s

2000s

Beyond
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Prof. Ravi Shankar (2013-14)

Case Study#1: TIPCO FOOD,

THAILAND
Thailand has the largest global market share of around 45% in
processed pineapple.
Tipco Food is one the largest Thai exporters of this product with a
whopping figure of Baht 3.7 billion.
In 2006-07, due to weakening of US dollar ($) against most of the
global currencies, including Baht,
Tipco
p g
global supply
pp y chain came under tremendous threat.
Look at these steep drops in exchange rate. It has crumbled as
follows:
>late 2006- Baht 41 per $; early 2007 -Baht 37 per $; July 2007Baht 33 per $.
For the same export, the revenue inflow from exports has gone down by
about one fifth of its value few months back.
Most of these export-oriented supply chains have become noncompetitive in global market.
As a protective measure, these export-oriented firms are focusing14on
local market to boost their sales.
Reference: Bangkok Post: 4 August 2007, p B4.

LESSONS TO LEARN
Supply Chain involves many Complex Situations
involving Inventory, Information and Money Flows.
G-5:

Key to success is Responsiveness (Agile Supply Chain),

Efficiency (Lean Supply Chain), Coordination &
Synchronization (Strategic Alliance and Operational
Efficiency)

G-6:

Global Alliance is an Important Strategic Intent in an

International Supply Chain

G-7:

Supply Chain Decisions are often Dynamic in Nature.

Learn to be Adaptive to Changes

G-8:

Financial Decisions are often the Guiding Force to the

Supply Chain Operations
Prof. Ravi Shankar (2011-12)
Prof. Ravi Shankar (2013-14)

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Case Study#2: Magnitude of Supply Chain

Costs
Example: The Apparel Supply Chains
Cost per

Percent

Shirt

Saving

Distributor

Retailer

Customer

Rs.527.20

0%

Manufacturer

Distributor

Retailer

Customer

Rs.413.40

28%

Manufacturer

Distributor

Retailer

Customer

Rs.204.50

62%

Manufacturer

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Prof. Ravi Shankar (2013-14)

LESSONS TO LEARN
Supply Chain involves many Supply Chain Partners.
Cost management is very important in longer and
complex Supply Chains.

G-9:
G
9: Disintermediation Leads to Cost Saving.
May also result in reduction in Lead Time, and
Lesser Inventory

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Prof. Ravi Shankar (2013-14)

Case Study#3: B2C@Dell Computers

Direct Shipment

Master Board

Hard disk

Dell Assembly
Plant

Website
or Phone

Customer wants
To buy computer

Customers Order

SRAM
Concept of Disintermediation in Dell Direct Supply Chain

On-line orders eliminate intermediary steps in the traditional

ordering process, manufacturing policy can be altered by adopting
assemble-to-order or make-to-order strategies
Prof. Ravi Shankar (2013-14)

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LESSONS TO LEARN

G-10: Disintermediation Requires Some Form of Reintermediation

G-11: Technology Helps in Supply Chain Efficiency

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Prof. Ravi Shankar (2013-14)

Case Study#4: Supply Chain at Asian

Paints
RM 600 SKUs, 350 Suppliers
75% Domestic, 25% Imported
PM-300 SKUs, 140 Suppliers
5 Plants, 18 PC

6 Regional
Distribution Centers

Depots (70 No)

70% volume

Dealer(15000)
3000 SKUs

Made to stock

Export & Industrial

Consumers (2000)
Made to order

Prof. Ravi Shankar (2013-14)

Postponement in Practice

Dealer Tinting System

In factory they make Base/white" only
Raw base sent to the dealers
Customers choose their desired shades via
computer systems at the dealer end
Dealer mixes the desired base and the
colorants with help of the DTS
>2500 dealers have DTS
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Prof. Ravi Shankar (2013-14)

LESSONS TO LEARN
Large Number of SKUs is Good for Customization but
Poses Tremendous Pressure due to Difficulty in
manageing Stock-outs and Pipeline Inventory
G-12: Try to have a Generic Product as late as possible
i the
in
th supply
l chain.
h i
Differentiate it into a customized one, preferably
when demand penetrates the supply chain

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Prof. Ravi Shankar (2013-14)

Case Study#5: Benetton (A world leader in knitwear)

Knitting

Dyeing

Wool Plant in Castrette, near Treviso. Knitting

division. Computerized knitting loom capable of
automatically producing the most complex product
designs

Dyeing vats for the finished knitted product.

Prof. Ravi Shankar (2013-14)

Case Study#5: Benetton Manufacturing

Process Postponement
Old Sequence

New Sequence

Purchase Yarn

Purchase Yarn

Dye Yarn

Knit Garment Parts

Finish Yarn

Join Parts
Dye Garment

Knit Garment Parts

Join Parts

This process
is postponed

Finish Garment
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Prof. Ravi Shankar (2013-14)

LESSONS TO LEARN

G-13: Delayed Product Differentiation Helps in

R d i S
Reducing
Safety
f t St
Stock
k and
d th
thereby
b S
Supply
l Ch
Chain
i C
Cost.
t
G-14: Process and/or Product Redesign may help
supply chain operations

Prof. Ravi Shankar (2013-14)

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Case Study#6: Logistics Planning in

Auto Supply Chains

Source of Schematic: http://www.engr.uky.edu/me/iaes/group_press/chuah.pdf

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LESSONS TO LEARN

G-15: Always Look For Opportunities of Economic of

S l Like
Scale,
Lik FTL as compared
d to
t LTL
G-16: Outsource your non core-competency area to a
Reliable supply chain partner, like 3PL/4PL etc.

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Orderr Size

Case Study#7: P&G-Dynamics of the Supply

Chain

Customer
Demand

Distributor Orders

Retailer Orders

Production Plan

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Prof. Ravi Shankar (2013-14)

Case Study#7: P&G: What Management

Gets...

Orderr Size

Production Plan

Customer
Demand

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Prof. Ravi Shankar (2013-14)

Volum
mes

P&G: What Management

Wants

Production Plan

Customer
Demand

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Prof. Ravi Shankar (2013-14)

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LESSONS TO LEARN
G-17: Bullwhip Effect Reduces if You Use CPFR
(Collaborative planning Forecasting &
Replenishment)
G-18: Bullwhip
p Effect Reduces if You Control Price
Fluctuations
G-19: Bullwhip Effect Reduces if You Compress Lead
Time

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Prof. Ravi Shankar (2013-14)

Case Study#8: Wal-Mart

Between1995and1999,alargepartof
U.S.productivitygrowthcanbe
explainedinjusttwosyllables:Wal
Mart.accordingtoconsultingfirm
McKinsey&Co.

Theoperationalinnovationsthat
WalMartpioneeredhave
raisedthebarforallretailers.

Thosewhodidnotcatchupendedthe
wayofAmes,Bradlees,andKmart.

TrailblazerssuchasWalMartandTarget

Corp.haveinstalledproductivity
enhancingtechnologiesand
establishedsuppliermanagement
practicesthathavevirtually
removedsignificantcostsfromthe
supplychain.

Theseimprovementsarecreatingripple

effectsthroughouttheglobal
supplychainforallindustries.

Prof. Ravi Shankar (2013-14)

Wal-Mart
Strategic goals
Provide customers access to
quality good, when and where
needed at competitive prices

Operations strategy
Short cycle times
Low inventory levels
Vendor managed Inventory
(VMI)
Everyday Low Pricing (EDLP)

Logistics strategy

Logistics structure
Electronic data interchange
Communication between retail stores
Bar coding

Cross docking
F
Fastt responsive
i transportation
t
t ti system
t
Long lead time items
Stored at DC and shipped as needed
Stable demand items

Continuous replenishment
programs
Short lead time items
Made to order and cross-docked at DC

Accurate information availability

Rapid transportation
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Crossdocking

Prof. Ravi Shankar (2013-14)

Relationship between Facilities and Functions along

the Wal-Mart Supply Chain

Source: Adapted from Garrison Wieland for Wal-Marts Supply Chain, Harvard Business Review 70(2; MarchApril 1992), pp. 60

An Application in Material Tracking

Using RFID

Material Tracking
Prof. Ravi Shankar (2013-14)

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RFID and Other IT Tools in Supply

Chains
>
>

>

>
>
> > >
> > >
> > >
> > >

>
> > >
> > >
> > >
> > >

>
> > >
> > >
> > >
> > >

>
> > >
> > >
> > >
> > >

Prof. Ravi Shankar (2013-14)

VMI in Use
In the Factory

At customer sites
Prof. Ravi Shankar (2013-14)

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LESSONS TO LEARN
G-20: VMI Helps Supply Chain to Become Lean
G-21: POS Information is Key to Supply Chain Planning
& Replenishment
G-22: Cross Docking is an Effective Distribution Strategy
as it Helps
H l in
i Shorter
Sh t Lead-time,
L d ti
L
Lesser M
Material
t i lh
handling
dli
and Lower Cost of Distribution
G-23: Effectiveness of VMI requires Coordination between
Supply Chain Partners
G-24: Use POS Technology and Communication Network
to Facilitate the Coordination and Synchronization in a
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Prof. Ravi Shankar (2011-12)
Supply Chain
Prof. Ravi Shankar (2013-14)

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LESSONS TO LEARN
G-25: VMI (Vendor Managed Inventory), EDLP
(Every-day Low Pricing), Cross-docking, CPRF
(Collaborative Planning, Forecasting &
Replenishment), Coordination among Supply
chain p
partners,, Synchronous
y
delivery,
y, and
Effective use of IT are key to the success of
supply chains of organised retail

Prof. Ravi Shankar (2013-14)

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Case Study#9: Nano Plant

Prof. Ravi Shankar (2013-14)

New Product Design

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LESSONS TO LEARN
G-26: Locate your Vendor Nearby
G-27: Just-in-time (JIT) and Kaizen (continuous
Improvement) must go hand-in-hand
G-28: Develop Strategic Partnership in your Supply Chain
G-29 Focus on Vendor Development
G-30: Rationalize the Vendor-base
G-31: Money lies in Cost cutting and Innovative
Product/Process/Supply-chain Design
43 are
G-32: Learn to manageProf.the
Supply Chain Risks (There
Ravi Shankar (2011-12)
Prof. Ravi Shankar (2013-14)
many)

Case Study#10
RISK POOLING
USING
CENTRALISATION OF
STOCKING

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Factory

Central
warehouse

Market one

Market two

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Factory

Decentralized Warehouses

Warehouse 2
Warehouse 1

Factory

Centralised
warehouse at
Ayutthaya
Market two
Market one

Centralization of stocking in a multi-echelon

distribution system

Supplier

Warehouses

Retailers

Traditional: Decentralized System

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Centralized Systems

Supplier

Warehouse

Retailers

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LESSONS TO LEARN

G-33: If You Pool Risks in a Supply Chain (say, by

Centralised Warehousing), Counter-measure to
C
Cope
up with
ith Ri
Risk
k (say,
(
Safety
S f t St
Stock
k tto M
Maintain
i t i a
Service Level under Demand Uncertainty) will Go
Down as Compared to Disaggregated Risks (say,
Decentralised Warehouses)

Prof. Ravi Shankar (2013-14)

50

Case Study#11: FCI

The Food Corporation of India was set up on 14th
Jan. 1965 by an Act of Parliament. Its Primary
Objectives are as follows :
To provide the farmers remunerative prices.
To make foodgrains available at reasonable prices,
prices
particularly to the vulnerable section of the society
and
To maintain buffer stocks as a measure of Food
Security
To intervene in the market for price stabilization.
Prof. Ravi Shankar (2013-14)

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5 MAJOR WHEAT PROCURING STATES

PUNJAB-55%, HARYANA-30%,
UTTAR PRADESH-10%,
MADHYA PRADESH-2% &
RAJASTHAN-2%

WHEAT DEFICIT STATES- 23

Prof. Ravi Shankar (2013-14)

FCI- STORAGE CAPACITY

Prof. Ravi Shankar (2013-14)

Major Issues Due to Lack of

Functional Alignment
Intermediaries in
Procurement
L
Lack
k off S
Storage
capacity

Prof. Ravi Shankar (2013-14)

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Major Issues Due to Lack of

Functional Alignment

Transportation
Poor Warehousing leads
to wastage

Prof. Ravi Shankar (2013-14)

Major Issues Due to Lack of

Functional Alignment
Failure of states to pick
up food grains at proper
time leads to wastage
Railways often do not
provide basic railhead
infrastructure, clear
receipts or clean wagons
to FCI, despite the fact
that FCI is its second
largest customer.
Prof. Ravi Shankar (2013-14)

LESSONS TO LEARN
==Many Vital Supply Chains are Worst Managed
==Warehousing often a Weak Link
== Supply Chain Management is Full of Opportunities
G-34: Reduced Supply Chain Wastages Makes it
Eff ti
Effective
G-35: Food Security is Linked to Effective Supply
Chain Management
G-36: Every Supply Chain is Different=> Manage it to
its Merit
Prof. Ravi Shankar (2013-14)

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Case Study#12
Emergency Supply
S
C
Chain
i

Prof. Ravi Shankar (2013-14)

Gujarat Earthquake on
26 January 2001

Prof. Ravi Shankar (2013-14)

After Gujarat Earthquake

on 26 January 2001

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People in Need of Relief Material

But the Traffic Disruptions

Prof. Ravi Shankar (2013-14)

Relief Supply Starting From All

Corners of India

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Moving Towards the Affected Area

AND THE TRAFFIC JAM

LESSONS TO LEARN
Emergency Supply Chain is a Different Ball Game

G-37: Too much may be too Bad in

Emergency Supply Chains
G-38: Alignment of Functional Strategy and
Coordination are keys to success of a
Emergency Supply Chain
G-39: Quick Response Would Lead to Effective Supply
Chains
Prof. Ravi Shankar (2013-14)

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Achieving the 21st Century Supply Chain:

Seven More Areas of Opportunity
1
Use of low cost
sources

3
Focused
manufacturing
strategies

2
Creative use of
strategic partnerships
OEMs, Outsourcing,
sub contracting

5
Globally aligned
operations

6
Built in agility

Multiple Channels

4
Distribution,
logistic
Optimisation

7
Industry wide
solutions

THE GOAL IS TO CREATE AN AGILE

BORDERLESS SUPPLY CHAIN THAT IS BASED ON
67
LOWESTProf.COST
ECONOMICS
(2011-12)
Ravi Shankar

Thank You

Prof. Ravi Shankar (2011-12)

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