says -----

At any given time, out-of-stocks on retailers shelves average 8%. On week-ends this percentage increases to 11% and on holidays, to 15%!
Why is this?

e-Supply Chain Management

Defining Supply Chain Management

The Supply Chain is a process umbrella under which products are created and delivered to customers. A Supply Chain refers to the complex network of relationships that organizations maintain with trading partners to source, manufacture and deliver products.

Defining Supply Chain Management

A Supply Chain perspective transforms a group of ad hoc and fragmented processes into a cohesive system capable of delivering value to the customer.

SCM is the coordination of material, information and financial flows between and among all the participating enterprises
The Supply Chain Management is not a technology issue; It is a business strategy issue that creates new, interesting opportunities.

Simple Supply Chain Component

Raw Material Supplier Supplier Manufacturer

Manufacturer

Distributor

Distributor

Retailer

Customer

Simple Supply Chain Component

Retailer places order with Distributor Retailer must hold safety stock Information Flow Amount of safety Physical Flow stock required depends on Retailer variability in replenishment process

Distributor

IT Improvements
Electronic Data Interchange (EDI)

Point of Sale (POS)

Distributor

Both result in reduced safety stock, improved customer service or both

Physical Flow

Information Flow

Retailer

IT Improvements
Inventory and demand visibility has been increased

Distributor

Information has replaced Physical Flow Information Flow inventory

Retailer

Supply Chain and IT

The systems and technologies that are used to facilitate or enable the transfers of information: within firm, between firms, and across the entire supply chain.

 Since the early 1980s, there has been an increasing interest in supply chain management (SCM) concept. Extensive stress on outsourcing is forcing companies for more integration. Focus is changing from internal integration to external integration.

The source of Competitive Advantage

1 . Doing things right:

Operating Efficiency
Doing the right things

2.

Value Added Strategies

For Example ------

To Create Value, Analyze Supply Chain Processes & Assets

Inbound Logistics Materials Management Manufacturing Assembly

Warehousing
WHICH PROCESSES ADD VALUE?

WHICH PROCESSES ADD COSTS?

Transport

Excelling in the 21st Century by..

Using Logistics & Supply Chain Management to Create Value for Customers

Worldwide Scenario
4% Administration 6% Order Processing 24% Inventory Carrying Cost 27% Warehousing

61% Logistics Systems

39% Transportation Charges

(Roberts, P. O., 2002)

Opportunities in India
It has been estimated that the market size for logistics spend in India is $50 billion per annum, which is about 13% of the GDP. Logistics cost for manufactured goods accounts for almost 30% of the total cost. Where as as the international standard for logistics costs ranges between 5-10 % (Michael Christensen, President of the Asian operations of Manugistics).
(The Hindu Business Line, Tuesday, Jun 24, 2003)

Roles of IT in the Supply Chain

Provides readily accessible and accurate information to all supply chain participants. Enables visibility of information between supply chain partners. Reduces overall supply chain costs, both direct and indirect costs. According to Bowersox and Daugherthy (1995)
more transparent organization structure more strategic alliances increased emphasis on performance measurement reliance on time-based strategy.

Information Technology Systems

Intra-Firm Channels Warehouse Management Systems (WMS) Transportation Management Systems (TMS) Enterprise Resource Planning (ERP) Manufacturing Execution System (MES) Product Data Management (PDM) Inter-Firm Channels Electronic Data Interchange (EDI) Internet Supply Chain Channels Customer Relationship Management (CRM) Vendor Managed Inventory (VMI) Collaborative Planning Forecasting Replenishment (CPFR) Other Supply Chain Systems

 A software application that manages the operations of a warehouse or distribution center. WMS integrates
Order entry, warehouse management, and manufacturing systems

Warehouse Management System (WMS)

Requirements:
Advanced Ship Notice (ASN) and EDI
EDI

Mfg Facilities DC / Warehouse Customers

www.thesupplychain.com, Christopher Trunk

Orders

WMS
ASN

WMS (continued)
Providers:
Acatech Solution, Inc., Catalyst International, Inc., MARC System, Mc. Hugh International

Price: $50,000 - $250,000+ (license fee/user, package, subscription fee/month) Benefits:

Reduction of lead time
Order processing and inventory management

Accuracy improvements, labor savings, and better space utilization Better customer service and quicker inventory turn

WMS (continued)
Pitfalls:
To make it more effective use, it should be integrated with other systems, such as Order Management System, Enterprise Resource Planning (ERP), Transportation Management System (TMS).

WMS software sales & services

$840 million - 2000; $1.6 billion - 2005 (ARC Advisory Group)

Companies Utilizing WMS

Hershey Foods Inc., Timberland Inc., Porsche Cars North America Inc.

Transportation Management System (TMS)

TMS applications determine the most efficient and profitable way to execute the movement of product to its final destination. TMS functionalities include:
Transportation planning including routing and scheduling Freight payments and auditing Carrier performance and fleet management

Fully Functional Integration with Order Management System (OMS) and Warehouse Management System (WMS)

TMS (continued)
Providers:
McHugh Software International's, Caps Logistics

Users: Nestle, Georgia Pacific Corp. Benefits:

Savings on transportation costs Better transportation management
Automated process of administrative tasks Focus on managing instead of responding to transportation related events (e.g., calling carriers to move the loads)

Pitfalls:
Integration to ensure streamlined processes

Vendor Managed Inventory (VMI) Automatic Replenishment (AR)

VMI is a modification of Quick Response (QR) wherein suppliers can look into buyer inventory levels and refill stock automatically, without the buyer initiating the order. VMI does not change the ownership of inventory. AR extends QR and VMI by giving suppliers the right to anticipate future requirements and replenish accordingly. Key to Success: effective information flow
Visibility on real time Point-of-Sale (POS) information

VMI and AR (continued)

Benefits:
Reduced data entry errors Better customer service True partnerships Purchase Order Timing Stabilization

Pitfalls:
Potential EDI problems Acceptance of the concept to all parties involved Promotions/events deviation from normal pattern Customer base gain or loss of any large customers Over/obsolete stocks handling Time it is a learning process

SCM Software
SCM Software automates procedures, planning and tracking of materials flowing from suppliers to manufacturers and the resulting products as they move to distributors, retailers, and the final customers.
It speeds deliveries, keeps inventory levels appropriate, and reduces warehousing and transportation costs.

DSS Providers for Supply Chain Management:

Manugistics, Baan/Caps Logistics, i2

Supply Chain Management Software Cost:

Ranging from $1,500 fee/user to $1 million+

SCM Software Manugistics

A global provider of supply chain management and optimization solutions. Provides Enterprise Profit Optimization (EPO) through:
Supply Chain Management Pricing/Revenue Optimization Supplier Relationship Management

It also serves as Application Service Provider (ASP) and host the exchange for customers who do not want to run it themselves

i2
Provides software and services that help businesses make a lasting positive impact on their profitability through Dynamic Value Chain Management (DVCM) Moves beyond ERP system, allowing visibility and collaboration within a company and across companies.

SCM Software
Provides an integrated family of modular that can be rolled out incrementally, thus allowing companies to tackle that part of the value chain that gives them the highest ROI at a lowest risk. Products:
i2-Supplier Relationship Management i2-Supply Chain Management i2-Customer Relationship Management

Baan/Caps Logistics
Solutions
Routing and Scheduling
delivery routes, dedicated fleet dispatching, local area routing

Transportation Planning
Internet load optimization, shipment planning system

Supply Chain Design

Site location, site consolidation, strategic planning system

Market Leaders
Challengers Leaders

SAP I2 Technologies Aspen Technologies Ability to Execute Manugistics Peoplesoft

J.D. Edwards Agilisys

Logility Intentia Baan SynQuest IFS

Manugistics SAP

i2 PeopleSoft AspenTech Oracle Adexa webplan

As of June 2002

Niche Players
Completeness of Vision

Visionaries

What is Causing the Supply Chain Management Boom ?

e-Commerce Value Proposition
Give customers what they want, when and how they want it, at the lowest cost

e-Business Structural Migration

Rapid Demand Fulfillment Internet-Enabled Supply Chain Planning and Execution

The next opportunity lies in the fusing of each companys internal systems to those of its suppliers, partners and customers.

A Process view of Supply Chain

Supply Chain Planning
Demand forecasts

Information Flows
Manufacturing

Delivery Status report

Order transmission

Distribution

Supplier

Product Flows

Product Flows

Product Flows

Product Flows

Credit Card Information

Payment Flows Supply Chain Execution

Payment Schedules

Customer

Retailer

A Process view of Supply Chain

Material flows involve physical product flows from suppliers to customers through the chain, as well as the reverse flows via a product return,

servicing, recycling and disposal.

Information flow involve demand forecasts, order transmission and delivery status reports. Financial flows involve credit card information, payment schedules and consignment and title ownership arrangements.

The Reverse Logistics Market Place

Returns % expected climb from 17% to 20%+ driven by free shipping and comparison shopping $240B value of returned goods by 2003 Jupiter quote: 37% of online buyers would buy more if it were easier to return merchandise. AMR quote: No one plans to develop commercial reverse-logistics software(because) the software requires too much customization, and reverse logistics has never been an IT priority

Ownership Barriers to an Integrated Supply Chain

Retailers

Customer

Wholesalers

Transportation
Regional DCs

Warehouse

In Plant Warehousing

Suppliers

Mfg

e-Supply Chain Management

SCM is a business framework comprised of multiple applications and divided into two application camps: 1. Planning 2. Execution

Elements of Supply Chain Planning

Flexible SCP apps involves evaluation of multiple planning strategies, such as the following

Profitable to promise: Should I take the

customer order at this time.

Available to promise: Is inventory

available to fulfill the order.

Capable to promise: Does manufacturing

capacity allow order commitment?

SCM: A Managers Roadmap

Eight steps are crucial to turning tomorrow's promise into today's reality 1. Clarify your supply chain goals 2. Conduct supply chain readiness audit 3. Develop business case

4. Establish a supply chain coordination unit

5. Begin supplier integration 6. Develop a performance scorecard 7. Educate, educate educate 8. Learn to manage failure

Conclusions
Continuous, synchronized end-to-end material flow will dominate the competitive landscape. Companies will increasingly manage inventories they cant see or dont own. Shipment sizes will become increasingly smaller and more customized. Two primary metrics will drive supply chain success in the 21st century: Customer Value Cash to cash cycle