SUPPLY CHAIN

MANAGEMENT

What is supply chain ?

All activities associated with the flow and transformation of

goods from raw materials to end users.
The term supply chain refers to the entire network of
companies that work together to design, produce, deliver, and
service products.
A network of facilities including:
Material flow from suppliers and their upstream suppliers at
all levels.
Transformation of materials into semi-finished and finished
products ( internal process ).
Distribution of products to customers and their downstream
customers at all levels.

Three flows in SC
There are three kinds of flows in a supply chain:
material , information , capital .

Downstream
Material: Products, Parts
Information: Capacity, Delivery Schedules
Finance: Invoices, Pricing, Credit Terms

Upstream
Material: Returns, Repairs, After-sales
services.
Information: Orders, Point-of-sale Data
Finance: Payments

SUPPLY CHAIN MANAGEMENT

Push vs. Pull in supply chains Push or Building-to-stock(BTS): Producing stock

on the basis of anticipated demand. Demand forecasting can be done via a
variety of sophisticated techniques (some from the Operations Research area
and some using Data Mining).

Pull or Building-to-order(BTO): Producing stock in response to actual demand

(firm orders).

The Push-Pull Point: In many supply chains, upstream units employ BTS, while
downstream units employ BTO strategies. The point in the supply chain where
the switch-over (from BTS to BTO) occurs is called the Push-Pull point.

Optimally locating the Push-Pull point is a key determinant of supply chain

performance.

SUPPLY CHAIN
MANAGEMENT

Supply Chain Management (SCM) A set of processes and sub-processes

which attempt to implement and optimize the functions, connected entities,
and interacting elements of a supply chain.

Involves:

Organizations, procedures, people.

Activities: Purchasing, delivery, packaging, checking, warehousing, etc.
Establishment of long-term relationships with suppliers (supply alliances)
and distributors.
Effective flow of information through the supply chain.
Supply chain optimization.

Key Business areas

Enterprise performance
Customer service
Order management
Demand planning
Warehouse distribution
Partnerships
Supplier/supply base management

Benefits of SCM

Reduce uncertainty along the chain

Proper inventory levels in the chain
Minimize delays
Eliminate rush (unplanned) activities
Provide good customer service

Problems along the supply

chain

Delays in production, distribution etc.

Expensive Inventories
Lack of partners coordination
Uncertainties in deliveries
Poor demand forecast
Interference with production Poor quality

Global supply chain

Can be very long

Possible cross-border problems
Need information technology support for:
communication and collaboration
Possible delays due to: customs, tax,
translations, politics

Importance of SCM
Supply chain management is essential to company success and
customer satisfaction. Did you know that SCM also plays a critical role in
society? It's absolutely true. SCM knowledge and capabilities can be
used to support medical missions, conduct disaster relief operations, and
handle other types of emergencies. SCM also plays a role in cultural
evolution and helps improve our quality of life.
Whether dealing with day-to-day product flows or dealing with an
unexpected natural disaster, supply chain experts roll up their sleeves
and get busy. They diagnose problems, creatively work around
disruptions, and figure out how to move essential products to people in
need as efficiently as possible.

Importance of SC in society

Supply chain management is necessary to the foundation and infrastructure

within societies. SCM within a well-functioning society creates jobs,
decreases pollution, decreases energy use and increases the standard of
living. Two examples of the effect of SCM within societies include:

2013 North India floods:In 2013, a cloudburst on the North Indian state of Uttarakhand caused
devastating floods and landslides , leaving residents without access to food
or clean water. As a result, the Indian airforce and other government
organisations provided food and medical supplies.

Foundation for Economic Growth:A society with a highly developed supply chain infrastructure that includes
interstate highways, a large railroad network, ports and airports is able to
trade many goods at low cost. Business and consumers are able to obtain
these goods quickly, resulting in economic growth.

Importance of SC in Business

Clearly, the impact that SCM has on business is significant and exponential.
Two of the main ways SCM affects business include:

Boosts Customer Service

SCM impacts customer service by making sure the right product assortment
and quantity are delivered in a timely fashion. Additionally, those products
must be available in the location that customers expect. Customers should
also receive quality after-sale customer support.

Improves Bottom Line

SCM has a tremendous impact on the bottom line. Firms value supply chain
managers because they decrease the use of large fixed assets such as
plants, warehouses and transportation vehicles in the supply chain. Also,
cash flow is increased because if delivery of the product can be expedited,
profits will also be received quickly.

Key issues in supply chain management include

Distribution network configuration

How many warehouses do we need?

Where should these warehouses be located?
What should the production levels be at each of our plants?
What should the transportation flows be between plants and
warehouses?

Inventory control

Why are we holding inventory? Uncertainty in customer demand?

Uncertainty in the supply process? Some other reason?
If the problem is uncertainty, how can we reduce it?
How good is our forecasting method?

 Distribution strategies

Direct shipping to customers?

Classical distribution in which inventory is held in warehouses and
then shipped as needed?
Cross-docking in which transshipment points are used to take stock
from suppliers deliveries and immediately distribute to point of
usage?
Supply chain integration and strategic partnering

Should information be shared with supply chain partners?

What information should be shared?
With what partners should information be shared?
What are the benefits to be gained?

Bullwhip Effect
The bullwhip effect is the uncertainty caused
from distorted information flowing up and
down the supply chain.

Who is affected?

Nearly all industries are affected!

Firms that experience large variations in
demand are at risk.
Firms that depend on suppliers upstream or
distributors and retailers downstream may be
at risk.

Results of the bullwhip effect continued.

Lost customer service

Lengthened lead time
Lost sales
Unnecessary adjusted capacity

Causes of the bullwhip effect

Un-forecasted sales promotions

Sales incentives
Lack of customer confidence
Customers turning back sales orders
Freight incentives

THANK YOU