Evolution of SCM

Supply Chain Management: Major revolutions along the journey

•The First Revolution: The Ford Supply Chain
Some Contemporary •Vertical Integration
•Zero Product Variety

Perspectives •The Second Revolution: The Toyota Supply Chain

•Long-term partnership with suppliers (Kieretsu system), and
•Increased product variety
•The Third Revolution: The Dell Supply Chain
•Individual customization
•Loosely-held supplier networks
•Enablers of supply chain performance

Impetus For Supply Chain

Why SCM is Important now?
Management
Four key factors have provided the impetus for companies to take a
•1970, Quality broader view...
•1980, lean manufacturing • New Customer Service Definition
• Beyond perfect order-
•1990 and beyond, SCM • shifting responsibilities/Vendor Managed
–The Increased complexity of supply chain Inventory ...
•Emergence of global supply chain • Escalating Logistics Cost ...
•More demanding customers • Cycle Time Compression--E-Commerce
•Shorter production lifecycles • Globalization--Worldwide rise in exports far exceed
•Outsourcing, decentralized control and more… • Worldwide purchasing, manufacturing, and
selling.
–Feasibilities
• Long and complex global pipelines.
•radical improvement in information technology and
• Product proliferation.
communication capabilities • Cultural adaptation
of their enterprise and its environment...

Background Logistics
Supply Chain
Material management(inbound logistics)
 Logistics is that part of supply chain
The acquisition and storage of raw materials, parts, and supplies process that plans, implements, and
controls the efficient, effective flow and
The complete cycle of material flow from the purchase and internal control of
production materials to the planning and control of WIP storage of goods, services, and related
information from the point-of-origin to the
Physical distribution(outbound logistics) point-of-consumption in order to meet
customers’ requirements.
All outbound logistics activities related to providing customer service.

Order receipt and processing, inventory deployment, storage and handling,

outbound transportation, consolidation, pricing, promotional support, returned
product handling, and life cycle support…

1
 Logistics: Past Logistics...
In 1984 CLM formulated a new definition which refocused
The study of logistics has its roots in the military… the concept of logistics...
The traditional view emphasized local optimization within CLM Definition
functional silos and within individual corporations
“The process of planning, implementing, and controlling the
efficient, cost-effective flow and storage of raw materials,
in-process inventory, finished goods, and related information
from point of origin to point of consumption for the purpose of
conforming to customer requirements.” This definition
But functional optimization leads to conflicts ... includes inbound, outbound, internal, and external movements.
CLM - Council of Logistics management -Adopted 1984

...a new flow and process orientation not a set of discrete

activities and handoffs

Logistics - Evolution
Complexity in Logistics
Most modern companies have recognized that
to
 Multi-location
improve cost and performance of the corporation
they must...  Multi-product
Accounting / Manu- Sales and

 Integrate internal logistics

Finance facturing Marketing
 Added Cost at various stages and locations
Production Planning Distribution
Material
activities Planning
Inventory Control
Planning
 Multi-modal transportation
Customers
 Integrate logistics with Suppliers
 Different perspectives held by various
Warehouse Operations Customer
Service
Procurement Transportation
other corporate functions
Financial
Carriers
Other Log.
stakeholders in the logistics !
Institutions Providers

but other pressures indicate that companies must

look outside their own four walls...

Supply Chain Management Supply Chain Stages

Supply Chain encompasses all activities associated with the flow
 Supply chain management deals with the and transformation of materials and information
management of materials, information and from the raw material stage through to the end user.
financial flows in a network consisting of
suppliers, manufacturers, distributors, and
customers (Stanford Supply Chain Forum,
Supplier Manufacturer Distributor Retailer Customer
1999)

Supply chain management is a set of approaches utilized efficiently

to integrate suppliers, manufacturers, warehouses, and stores so that
merchandise is distributed at the right quantities, to the right
locations, and at the right time, in order to minimize system-wide costs
while satisfying service level requirements
(Simchi-Levi et al., 2008)

2
 Why study Supply Chains ?
 Supply chains are ubiquitous: you could
consider every product or service to
have its own supply chain.
Supplier
 Companies world-wide are spending
trillions of rupees on SCM
 Backbone of E-business
 Wholesome mix of industrial
Supplier
engineering, mathematics, computer
science, and management.
Manufacturing Regional Field Retail Customers
Plants Warehouses Warehouses Outlets

Traditional Material Material Flow Integration -

Stage I
Flow System

Procurement Operations Distribution

Procurement Operations Distribution
STAGE I

• STAGE I Integration - Physical Distribution

• Manufacturing firms had three separate material Management- integration within The Distribution Loop
• flow systems • Integration of finished goods transportation,
• Buffered each system with inventory warehousing, inventory and customer service
function

Material Flow Integration - Material Flow Integration - Stage

Stage II= Logistics III = Supply Chain Management

Procurement Operations Distribution Vendor Procurement Operations Distribution Retailer

STAGE II = LOGISTICS
- Integration of materials across procurement/
operations/distribution sub-systems of the firm
- Requires elimination of inventory buffers through
better information interfaces
Does not require change in organizational structure
-
of firm
STAGE III = SUPPLY CHAIN MANAGEMENT
• Manage inventory flow from vendor through firm all
the way to retailer
• Primary Resource Transformation is trading
information for inventory as in EDI, ECR, JIT etc.
• Focus on BOTH level and velocity of inventory

3
 GENERAL SUPPLY CHAIN NETWORK
The Functional Approach C
U Supplier 1 Supplier 2 ... Supplier n
S
T
O
M
E
R SOURCES
S

S
Sales
U Production
P
P
Distribution Facilities
L
I Manufacturing
E
R
Enterprise
S Logistic
Purchasing
Facilities
 Traditional Approach: Functional, silo
based ! SINKS
 No attempt to look holistically!
19

Customer 1 Customer 2 ...Customer m

ENTERPRISE Supply Chain NETWORK

Issues in Management of Supplier 1 Supplier 2 ... Supplier n

Supply Chain
 Lead time SOURCES
 Total cost
 Management of Inventory Production
Facilities
 Material Handling
 Performance Monitoring & Control
Enterprise
 Sensitization about the Logistics cost to all the Logistic
stakeholders ! Facilities
 Information Sharing…………..

SINKS

Customer 1 Customer 2 ...Customer m

C
Integrated Supply Chain Approach U
S
INTEGRATED SUPPLY CHAIN NETWORK
T Supplier 1 Supplier 2 ... Supplier n
O
M
E
R
S
SOURCES
Sales
S
U Production
P Distribution Facilities
Integrator
P
L
I Manufacturing Logistic
E
R
Facilities
S Purchasing INTERMEDIARIES
SINKS

 Looks at the entire chain

 Global rather than local focus Customer 1 Customer 2 ...Customer m
 Integrated rather than fragmented approach
23 CONSUMERS

4
 Broadened Scope of Supply Chain Management ...
Information and Coordination
The clear implication is the need for further integration
of all the parties involved…
Plan
Accounting / Manu- Sales and Accounting / Manu- Sales and
Finance facturing Marketing Finance facturing Marketing

Production Planning Production Planning

Material Distribution Material Distribution
Planning Planning Planning Planning
Inventory Control Inventory Control
Customers

Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source
Suppliers Warehouse Operations Customer
Service
Customers
... Suppliers Warehouse Operations Customer
Service
Procurement Transportation Procurement Transportation

Suppliers’ Supplier Customer Customer’s Financial

Institutions Carriers
Other Log.
Providers
Financial
Institutions Carriers
Other
Log.
Supplier Your Company Customer Providers
(internal or (internal or
external) external) Integration Migration
to prosper in this dynamic environment...
John Birchak, Intel Corp., National Science Foundation,
University of Florida, October 1998

Conflicting Objectives Conflicting Objectives

in the Supply Chain in the Supply Chain
1. Purchasing 3. Warehousing
• Stable volume requirements • Low inventory
• Flexible delivery time • Reduced transportation costs
• Little variation in mix • Quick replenishment capability
• Large quantities 4. Customers
2. Manufacturing
• Short order lead time
• Long run production
• High quality • High in stock
• High productivity • Enormous variety of products
• Low production cost • Low prices

The Dynamics of the Supply Chain

What Management Gets...
Order Size

Order Size

Customer Customer
Demand Demand

Retailer Orders
Distributor Orders

Production Plan Production Plan

Time Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

5
 What Management Wants… Supply Chain:
The Magnitude

 In 1998, American companies spent $898

billion in supply-related activities (or 10.6% of
Volumes

Production Plan Gross Domestic Product).

Customer
Demand  Transportation 58%
 Inventory 38%
 Management 4%
 Third party logistics services grew in 1998 by
15% to nearly $40 billion
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Supply Chain:
The Magnitude
Ratio of Logistics cost with GDP for few select countries
Country Japan United Korea India
States of
America
 It is estimated that the grocery industry could
Ratio of Logistics cost 8.7 8.5 16.5 12.3 save $30 billion (10% of operating cost) by
with GDP (in %) using effective logistics strategies.
Source: G.Raghuram and J. Shah
 A typical box of cereal spends more than three
months getting from factory to supermarket.
 A typical new car spends 15 days traveling from
the factory to the dealership, although actual travel
time is 5 days.

Supply Chain: Supply Chain:

The Magnitude The Magnitude
 Compaq computer estimates it lost $500 million to $1
billion in sales in 1995 because its laptops and desktops
 Boeing Aircraft, one of America’s leading capital goods
were not available when and where customers were
producers, was forced to announce writedowns of $2.6
ready to buy them.
billion in October 1997.
 In 1993, IBM lost a major fraction of its potential sales of
desktop computers because it could not purchase The reason? “Raw material shortages, internal and
enough chips that control the computer displays. supplier parts shortages…”. (Wall Street Journal, Oct.
23, 1997)
 When the 1 gig processor was introduced by AMD, the
price of the 800 mb processor dropped by 30%

6
 Supply Chain: Supply Chain:
The Potential The Potential

 Procter & Gamble estimates that it saved retail

 In two years, National Semiconductor reduced
customers $65 million through logistics gains over the distribution costs by 2.5%, delivery time by 47% and
past 18 months. increased sales by 34% by
“According to P&G, the essence of its approach lies in - Shutting six warehouses around the globe.
manufacturers and suppliers working closely together
…. jointly creating business plans to eliminate the - Air-freighting microchips to customers from a new
source of wasteful practices across the entire supply centralized distribution center.
chain”. (Journal of Business Strategy, Oct./Nov. 1997)

Supply Chain:
The Potential
Source USA UK Far East Mainland Europe

 In 10 years, Wal-Mart transformed itself by

changing its logistics system. It has the
highest sales per square foot, inventory
Storage
turnover and operating profit of any discount Mahwah Newtown Milton Veldhoven
Keynes
retailer.
 Laura Ashley turns its inventory 10 times a
year, five times faster than three years ago. Retail Market USA Far East
UK Mainland Europe
This is achieved by using Pacific
Basin
- New Information System
- Centralized Warehouse Figure : Laura Ashley- before

40

Supply Chain:
The Complexity
Source USA UK Far East Mainland Europe

National Semiconductors:
• Production:
– Produces chips in six different locations: four in the US,
one in Britain and one in Israel
Storage Satellite process Process – Chips are shipped to seven assembly locations in
centre centre
Southeast Asia.
• Distribution
– The final product is shipped to hundreds of facilities all

Retail USA
over the world
market UK Far East Mainland Europe – 20,000 different routes
Japan
– 12 different airlines are involved
Figure : Laura Ashley- after – 95% of the products are delivered within 45 days
– 5% are delivered within 90 days.

41

7
 ISSUES: ISSUES:
Decision Classification Decision Classification

 Strategic Planning:
 Tactical Planning:
Decisions that typically involve major capital
investments and have a long-term effect. Effective allocation of manufacturing and distribution
resources over a period of several months
1. Determination of the number, size and location of
new plants, distribution centers and warehouses 1. Work-force size

2. Acquisition of new production equipment and the 2. Inventory policies

design of working centers within each plant 3. Defining the distribution channels
3. Design of transportation facilities, communications 4. Selection of transportation and trans-shipment
equipment, data processing means, etc. alternatives

ISSUES: ISSUES:
Decision Classification Why Keep Inventory?

 Uncertainty in customer demands

 Operational Control:
Includes day-to-day operational decisions  Uncertainty in the supply
 Uncertainty in quantity and quality
1. The assignment of customer orders to individual
 Uncertainty in delivery time
machines  Uncertainty in costs
2. Dispatching, expediting and processing orders
 Economies of scale
3. Vehicle scheduling

ISSUES: ISSUES:
Demand Forecast Inventory control
 The three principles of all forecasting techniques:  How much inventory to keep?
 Forecasting is always wrong  Can uncertainty be reduced?
 The longer the forecast horizon the worse the  What size should orders be?
forecast
 How does forecasting tool effect
 Aggregate forecasts are more accurate inventory level?

8
 ISSUES: The Challenge of ISSUES:
Inventory Management Purchasing
 Matching supply and demand accurately is a
 What to Purchase
critical challenge
 “Dell Computers predicts a loss; stock plunges. Dell - In-house production Vs. external suppliers
acknowledged that the company was sharply off in its  Where to purchase
forecast of demand, resulting in inventory writedowns”.
(WSJ, August 1993) - Domestic Vs. international
 “IBM continues to struggle with shortages in the Think Pad  From whom to purchase
line”. (WSJ, May 1994) - Cost
 “Liz Claiborne said its unexpected earnings decline is the - Reliability: quality and on time delivery
consequence of higher than anticipated excess
inventories”. - Availability and flexibility
(WSJ, August 1993)

ISSUES: ISSUES:
Purchasing Production

 Location of manufacturing plants

 Centralized Vs. Decentralized
 Production cost
 Number of suppliers:  Taxes
Single sourcing Vs. Multiple sourcing  Incentives (by government)

 Supply contracts  Proximity to markets and raw materials

 Transportation infrastructure
 Political stability and culture

ISSUES: ISSUES:
Production Production

Flexibility  Efficiency
 The ability to produce different products  Low cost
simultaneously and efficiently  Short lead time
 The ability to produce new products efficiently  Reliability
 On-time delivery
 Quality

9
 ISSUES: ISSUES:
Distribution Product Design
 The structure of the distribution network  What role does product design play in
supply chain management?
 The distribution strategy
 When is redesigning products worth the
 The Classical Strategy cost?
 Cross Docking  Can product design compensate for
uncertainty in customer demand?
 Direct Shipping

Case : Benetton Manufacturing Process

Postponement ISSUES:
Old Sequence New Sequence Information Systems
Purchase Yarn Purchase Yarn  The advantages of advanced information
systems
Dye Yarn Knit Garment Parts  The challenge of unlimited data
 The roll of e-commerce
Finish Yarn Join Parts
 Impact of the internet
This process
Knit Garment Parts Dye Garment is postponed

Join Parts Finish Garment

ISSUES: ISSUES: What’s New in

What’s New in Logistics? Logistics?

 Global competition  New communications and information

technologies POS and EDI technology
 Shorter product life cycle  Wireless technology
 Increasing product variety  Decision Support Systems
 Integrated systems
 New, low-cost distribution channels
 Multi-modal transportation
 More powerful well-informed customers

10
 ISSUES: What’s New in There is no simple key to success
Logistics?
My customer
You have to
 New concepts in logistics wants it next day
reduce
inventories and
 Push Vs Pull strategies
other costs by 1 day more and
 Cross docking 20% this year we save 10% in
transport costs
 Strategic alliances
I want to see it
 Manufacturing postponement in stock before I
 Design for Logistics believe
Long production
runs reduce
costs
Others go to JIT

Supply Chain Network- Sample Structure

The Core Issues
in Supply Chain Management Tier 3 to Tier 2 Tier 1 Tier 1 Tier 2 Tier 3 to
Initial Suppliers Suppliers Suppliers Customers Customers Consumers/
End-Customers
1 1
Cycle Time Alliances
Tier 3 to n suppliers

n 1
2

1 n
1
n 2
1
Technology 1 2
Cost Management Initiatives n
Integration 3
2
1
3 n
2
n n
Inbound, Operations
Environmental n
& Outbound 1
Pressures
n
Focal Company

Members of the Focal Company’s Supply Chain

634

Tier 2 Non-core
Critical Four Flows within Supply Chain
Areas

Tier 2
Core
Competency Tier 2 Supply chain management requires parallel control of:
. Areas • Physical Goods
Tier 1 Tier 1
.
Tier 2 • Logistics Information
. Tier 1 Tier 1
Focal • Payments
Tier 2 .
Company
. Tier 2 • Ownership Rights
Tier 1 Closest Integration .
Tier 2 Tier 1 * Design team member Tier 1 Tier 1
.
.
- R& D collaboration
* Prod/logistics info sharing
   Physical Distribution 

.

Tier 2
* Rare partnership
 
Close collaboration (less expensive than innermost core)    Ownership
Ownership Rights   
Rights

Tier 2 * Exchange design/development information

* Prod/logistics info sharing Customer ProductionProcure Manu- InventoryWarehousing& Transpor Order
Forecast Network Customer
* Increasing partnership Collaboration principally Needs -ing Planning -ment facturing Mgt. Materials Mgt. -tation Mgt. Planning Satisfaction
Non-strategic, via tier 1 suppliers
Non-critical Areas * Occasional direct    Payments   
contact with focal company
 
Degree of integration Degree of integration    Logistics Information   
decreases decreases

11
 Goals of SCM Typical supply chain
•Maximize the overall value generated in upstream
the chain
•Generate cost savings and better
customer service over the entire supply
chain
•Ideal:
–Have the right product
–At the right place
–At the right time
–At the least cost
–In the right amount
downstream

Toshiba PC supply chain How is SCM different?

Intel,
upstream
Microsoft,
Builds on traditional fields such as production
Seagate,
AMD IBM Red Hat
management, operations management or logistics
management.
The key differentiator is the systems approach of
Toshiba America the supply chain management
Irvine, California SCM considers every stage and facility in the
supply chain and the interactions between them,
whether they belong to different companies or
North America DC Europe DC different organizations within a company
SCM considers the total costs in the supply chain
Since SCM deals with all stages of the supply
chain and their integration, it encompasses the
firm’s activities at many levels: strategic, tactical
Toshiba Turkey downstream and operational

Enablers of Supply Chain

Process View of a Supply
Management...
Chain
There are two principal factors which make
supply chain management a reality...  Cycle view: processes in a supply chain
• Increased Organizational Integration are divided into a series of cycles, each
 Internal
 External
performed at the interfaces between two
• Advances in Communications and Information Technology successive supply chain stages
 Capabilities
 Push/pull view: processes in a supply
 EDI/XML/Internet
 RF/GPS/POS data capture
chain are divided into two categories
 Broadband Communications depending on whether they are executed
 Integrated database management tools in response to a customer order (pull) or
 Cheaper and faster processing …
in anticipation of a customer order (push)
 Perspective

12
Cycle View of Supply Chains Cycle View of a Supply Chain
 Each cycle occurs at the interface between two
Customer
successive stages
Customer Order Cycle
 Customer order cycle (customer-retailer)
Retailer  Replenishment cycle (retailer-distributor)
Replenishment Cycle  Manufacturing cycle (distributor-manufacturer)
Distributor  Procurement cycle (manufacturer-supplier)
 Cycle view clearly defines processes involved and
Manufacturing Cycle
the owners of each process. Specifies the roles and
Manufacturer responsibilities of each member and the desired
Procurement Cycle outcome of each process.
Supplier

Customer Order Cycle Replenishment Cycle

Customer Customer Retail Order Retail Order

Arrival Order Receiving Trigger Receiving

Customer Customer Retail Order Retail Order

Order Entry Order Fulfilment Entry Fulfilment

Manufacturing Cycle Procurement Cycle

Order Order based on Manufacturer’s

Receiving Production Schedule Receiving at Manufacturer
Arrival or Supplier’s Stocking Needs

Production Manufacturing and Supplier Production Component

Scheduling Shipping Scheduling Manufacturing and Shipping

13
 Push/Pull View of
Supply Chain Processes
 Supply chain processes fall into one of two
categories depending on the timing of their
execution relative to customer demand
 Pull: execution is initiated in response to a
customer order (reactive)
 Push: execution is initiated in anticipation of
customer orders (speculative)
 Push/pull boundary separates push processes
from pull processes
Push/Pull View of
Supply Chain Processes
 Useful in considering strategic decisions relating
to supply chain design – more global view of how
supply chain processes relate to customer orders
 Can combine the push/pull and cycle views
 L.L. Bean
 Dell
 The relative proportion of push and pull
processes can have an impact on supply chain
performance

Push/Pull Processes for L.L. Push/Pull Processes for Dell

Bean Supply Chain Supply Chain
Customer Order
Procurement, Customer Order Procurement cycle and Manufacturing
Manufacturing and Cycle Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES PUSH PROCESSES PULL PROCESSES

Customer Customer
Order Arrives Order Arrives

Supply Chain Macro

Examples of Supply Chains
Processes in a Firm
 Supply chain processes discussed in the two
 Gateway
views can be classified into:
 Zara
 Customer Relationship Management (CRM)
 McMaster Carr / W.W. Grainger
 Internal Supply Chain Management (ISCM)
 Supplier Relationship Management (SRM)  Toyota

 Integration among the above three macro  Amazon / Barnes and Noble
processes is critical for effective and successful
supply chain management What are some key issues in these supply
chains?

14
Activity domain of SC professionals Organizational Paradigms
Sr No. Activity

1 Source selection, development, Incoming quality assurance, Value analysis

Paradigm Shift Leading to Skills Required
2 Channel Management From functions to Integral management of Cross-functional management
process material and information flow and planning skills
3 Logistics Provider Development/evaluation, Third Party Logistics (3PL), Logistics
management and management of Reverse logistics, Distribution Requirements
Planning (DRP)
From products to Focus on markets and the Customer segmentation
4 Management of Enterprise Resource Planning (ERP) & other information systems customers creation of customer value
such as Point-of-Sale (POS), Management of Bullwhip Effect

5 Facility Location: Warehouse, distribution centers, plants etc. From revenue to Focus on the key performance Understanding of the time
performance drivers of profit based performance indicators
6 Transportation: choice and evaluation of mode, cost analysis, development of carriers

From inventory to Demand based replenishment Information management

7 Management of warehousing function, Cross-docking performance and quick response systems
8 Inventory Management: location, stock levels, information systems, tracking etc.
From transactions to Supply chain partnerships Relationship management
9 Management of Customer Service, Evaluation of performance relationships

Select Examples of SC in India

Type of Industry Select Examples

Apparel Madura Coats, Reliance, Welspun

Automobile Maruti, Hero-Honda, Telco, Mahindra

& Mahindra, Tata Motors, Hyundai

Chemicals/Paints Reliance, Asian Paints, Goodlass

CASE 1: SCM COMPLEXITY
Nerolac

Consumer Durables Samsung, LG, Godrej, Hitachi

Fast Moving Consumer Goods Hindustan Lever, Proctor & Gamble,

Coca-Cola, Pepsi,

Food Godrej, Cadbury, Parle, Amul, Dabur

Computers Wipro, HCL, Dell

Newspaper Bennett Coleman & Co(Times of India,)

HT Media Ltd (Hindustan Times)

Adapted from Prof.Y. Narahari, IISc, Bangalore

Product Portfolio
Scope / Activities Oral Care
Horlicks NHC Toothbrush
 Supply Chain Management Aquafresh Jordan
JHlx CHlx MHlx EHlx Hlx P Flex, FnD, FlexiKid
 Materials Management & Transportation Flexi friend
 Manufacturing Boost
Aquafresh mouthpaste
 Packaging Viva Maltova x-fresh, F‘n M
 Total Quality Management
 Distribution Systems
Biscuits
Eno
Hlx Boost Regular, Lemon,
Std Ch.Hlx EB Jaljeera
Elaichi
Crocin
Med

15
 Manufacturing Facilities - NHC Packaging Facilities - Nutritional
Powders
N
HA
H 7 Packing Sites N
3 Factories F
NSD1 Faridabad (F)
Nabha - Punjab
Calcutta (C)
Rajahmundry - A.P. CG
Hyderabad (H) C
Sonepat - Haryana
Chennai (CH)
R Nabha (N) H
Hamira (HA)
Chittagong - Bangladesh (CG) CH

Manufacturing Facilities - NHC Mfring & Packing Facilities-

Solids Aquafresh

2 Biscuit sites 2 sites

Burdwan Goa (Tooth Brush)
B
Hyderabad Nashik (Toothpaste)
N
H
G

Sales depots
Mfring & Packing Facilities -
OTC

1 Site (ENO)
Hyderabad

Sales depots 32 nos

16
 Supply Complexities Supply Complexities
Finished Goods Movement Export Supplies

•250 vendors, Nepal

350 materials,
15 sites
Middle East Bangladesh
•P/S movement
of avg.. 1200 kms
Myanmar
•Over 1000
consignments/ •12 supply sites
month shipped catering to 37 markets
across 130 Mauritus
site-depot •Primary freight cost
linkages of Rs. 30 crore p.a.
Sri Lanka

Effective Supply Chain-

Major Problems
Challenges
 Forecast inaccuracy
 Un-organised transport sector Effective Supply chain is not
 Longer lead time for some raw limited to manufacturing &
materials distributing products only but
 Frequent change in statuary also……..
requirements
 Sales promotions disturbs the
planning cycles some times leads to
major write offs

Effective Supply Chain- Effective Supply Chain -

Challenges Challenges
Design product to its supply chain Distribution:- shippers should add
Supplier relationship value rather than mere
Manufacturing:- should it be in-
transportation
house or to be out-sourced ? Work on the “Customer’s Pull”
Least Product inventories
rather than “Push”
Is consumer response is making its
Third Parties:- Partners can add
significant value way into the chain ?

103

17
Effective Supply Chain-Challenges Contemporary Strategies

Successful businesses match market

Then.. demand and core capabilities ...
 Carriers had transport assets and systems
 What’s the way out?
 trucks, cars, terminals, tracking and tracing
systems, fleet management systems ...
 Shippers had critical need for more efficient logistics
systems, but no expertise
 Shippers needed resources in their core areas

Result: Alliances in logistics--Third Party Logistics ...

Contemporary Logistics Strategies Trends in Global Supply Chain Management

 Collaborative Product Development
The competitive marketplace has given rise to
 Risk Pooling
logistics alliances ...
 Postponement
Complementary  Demand signal closest to supplier and
Capabilities accurate
 POS data capture and transmission and now RFID in each
Sharing of risks Competitive piece of product eliminating the need for line of sight
and resources Strategic Advantage scanning—Unilever
Alliances

Focus on core
business

THERE IS ALREADY SIGNIFICANT ACTIVITY IN AUTO SECTOR

Existing/Planned
Vendor market
places
Consortium of Bajaj Auto, M&M, Tata Motors, HM,
Maruti (MSIL), Hero Honda, TVS Suzuki, Escorts, Auto Sector
Kalyani etc

Tata Motors, Bajaj Auto, Ford, Fiat, Hyundai, Hero

Vendor Integration Honda, TVS Suzuki, Toyota, M&M etc  Supply Chain Integration
 Buy Side
Internal
Connectivity Almost All  Supplier Integration
 Sell Side
Dealer Integration Maruti, Fiat, Ford, Daewoo, Hyundai, Hero Honda,
TVS Suzuki, Bajaj Auto, LML, Kinetic, HM ,Mitsubishi Lancer,
 Re intermediation
M&M etc

Basic Website Almost All  Relationship building with Customers

Sophisticated website Daewoo, Honda , Fiat, Hyundai etc

with customisation,
cataloging

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 Maruti Suzuki
 Extranet for Dealers - 150 Dealers, 9 Models, 1000
Sub-assemblies, Avg.. 15 components per sub-
assembly, changes avg.. 10 per week
 Wrong Orders / Re-conciliation problems
 Wrong shipment
 Multiple Printed Catalog / Addendum and Errata
One ECatalog, Multiple Views, Ordering Modules,
Dealer Service, back-ending into Enterprise
systems...

Barriers to Success in Emerging

SCM
 Resistance to change
 Poor data availability
 Supply chain design complexity
 Organization structure
 Poor cross-functional collaboration
 Lack of trust (suppliers, customers)
 Lack of E-commerce skills
 Unsure top management commitment

Source: Adapted from A.D. Lttle Survey, 1999

Summary...
Future of Supply Chain
It is clear that the concept of Supply Chain Management provides
companies and countries a framework within which they can
 More Integration: Comfortable Core
assess how the challenges of the competitive market
competence
 New customer service paradigms
 New Market evolution
 Decreasing cycle times/E-commerce
 Increased variety-Low volume products  Cost pressures
 Globalization & complexity
 Industry Maturity
 Power/Dominance can be met through application of the offsetting enablers

 Integration & Information sharing  Integration

 Technology

making Logistics/SCM another element of competitive advantage.

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THANK YOU

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