SUPPLY CHAIN

Presented by:
MOHD.ARISH
 SUPPLY CHAIN MANAGEMENT
• What is a supply chain?
– ‘Supply Chain is essentially a global network used to
deliver products and services from raw materials to
end customers through an engineered flow of
information, physical and cash.’
– Supply chain consists of all stages involved directly or
indirectly in fulfilling a customers request/
requirement. It includes not only the manufacturer
and suppliers but also transporters, warehouses,
retailers and customers themselves.
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- A typical Supply chain

- A typical supply chain may involve many participants. But some

orders may pass through only a few. Not all participants will be
in all supply chains. It will depend on the needs of the customer
and the roles of the participants fulfilling these needs.

- The supply chain in reality looks like a web :-

 SUPPLY CHAIN MANAGEMENT
– The three flows in a supply chain are:
• Product
• Information
• Money
– The core purpose of any supply chain is to satisfy
customer needs and generating profits for itself.
– The objective of every chain is to maximize the overall
value generated through –
• Faster and timely delivery
• Improved quality and services.
• Reduced cost
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– The value generated by a supply chain = (Worth of the
final product to the end customer) – (the effort spent by
the supply chain in fulfilling the customer’s need).
– The strength of a supply chain is determined by its
weakest link.
– So for an individual company, both upstream supplier
network and the downstream distribution should be
strong.
– All functions within an organisation contribute to the
success or failure of a supply chain. These internal
functions include the different processes used in
transforming the inputs provided by its suppliers to
outputs needed by its customers.
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– Supply chain is a series of processes and flows between
different supply chain stages.
– There are two ways to view the processes involved in a supply
chain
• Cycle view
• Push/pull view.
– Cycle view:
• At the interface of each stage there is a cycle -
Customer Retailer Distributor manufacturer Supplier

1 2 3 4
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– Push/Pull View:
• In push processes the manufacturer anticipates the
demand and produces to stock. So at the initiation of
a push process the demand is not known. In this the
finished good inventory carried by the manufacturer
is high but the response time to execute the order is
low.
• In pull processes the manufacturer initiates the
execution only after he gets a firm order from the
customer. The material dispatched immediately after
the manufacturing is completed. In this case the
finished good inventory carried is low but the order
execution time is obviously higher.
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• What is supply chain management?
–“SCM is a set of approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses and stores, so that
merchandise is produced and distributed at right quantities, to the
right locations, and to the right time, in order to minimize
systemwide costs while satisfying service level requirements” -
Simchi-levi, Kaminsky et all.
• All the facilities that effects the cost and contributes towards
meeting the customer requirement are in the ambit of SCM.
• Total systemwide cost ( transportation/ distribution/
inventory/ WIP/ finished goods costs) in totality needs to be
minimized.
• It integrates of all components in supply chain from strategic /
tactical / operational point of view.
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– In other words SCM is about the coordination of
supply chain flows (product, information, money)
across functions and across companies to achieve
competitive advantage for individual companies in the
supply chain and supply chain members collectively.
– Few characteristics of SCM to be noted are:
• SCM strategies are linked to other strategies of the
company. It should be aligned to the overall
strategy of the company. Development chain (new
product introduction) impacts SC.
• Conflicting objectives of members within SCM
needs to be resolved
• SCM is challenging due to the inbuilt uncertainties
and risks in SC.
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• What are the drivers of a supply chain?
– Drivers of supply chain : 1. inventory 2. Transportation 3.
Facilities 4. Information
– A visual framework for structuring drivers:
Competitive strategy

Supply Chain Strategy

Efficiency Responsiveness
Supply chain structure
Inventory Transportation Facilities Information
Drivers
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– Competitive strategy: It defines the set of customer
needs the company seeks to satisfy through its products
and services. It is the overall strategy of the company to
gain competitive advantage over its competitors.
Eg:- Wal-Mart seeks to provide high availability of a
variety of reasonable quality products at low prices.
For the execution of the company’s competitive strategy
each function, such as Marketing, Manufacturing,
Finance and Logistics, has its own strategies known as
functional strategies.
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– A Supply Chain Strategy: It specifies the way the following are
done to fulfill its competitive strategy:
• procurement of Raw materials
• Transportation of materials to & from the company
• Manufacture of the product or operation to provide the
service.
• Distribution of the product to the customer along with any
follow-up service that may be required.
Decisions regarding the Supply Chain drivers are part of Supply
Chain Strategy. Supply Chain drivers are:
• Inventories,
• Transportation,
• Operating Facilities
• Information flows.
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– Responsiveness of Supply Chain: This is the supply
chain’s ability to respond to the following needs of the
customer:
• Wide range of quantities demanded
• Short lead time
• Wide variety of products
• Highly innovative products
• High service level.
– Supply Chain efficiency : This indicates the cost of
making and delivering a product to the customer.
Responsiveness comes at a cost. Increasing
responsiveness increases cost. So a ‘strategic fit’
between responsiveness and efficiency is to be struck.
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– Supply Chain Structure: This is formed by the four drivers -
Inventory, transportation, Facilities and Information.
• Inventory: This includes Raw material, WIP, Finished Goods
within a supply chain.
Increase in inventory leads to increase in Responsiveness but
decreases Efficiency.
• Transportation: This means moving of material/ inventory from
point to point.
Quicker mode ( Air vs Road/Rail) increases Responsiveness but
decreases Efficiency.
• Facilities: These are created to facilitate operations like
Production sites, storage sites.
More number warehouses increases Responsiveness but
decreases Efficiency.
• Information: This includes data and analysis regarding the
customers or the other three drivers of the supply chain.
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• Make or Buy Decision
– The decision is related to the determination of whether
it is more advantageous to make a particular item in-
house, or to buy it from a supplier The decision involves
both qualitative and quantitative factors.
– The buy side of the decision also is referred to as
‘outsourcing’. The question is, “Is it in the organization’s
best interests to continue to (or start to) perform the
activity itself using its own people, process expertise,
and technology or to ‘buy’ the activity from the service
provider marketplace?”
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• Following aspects need to be considered for Make or Buy
decisions :
– Cost – Is it cheaper to buy than make?
– Capacity – When in-house capacity is not enough outsourcing
becomes inevitable.– Items which have constant and steady
demand are preferably made in-house. – maintaining a level
workforce is desirable.
– Quality – Controlling the quality through in-house production
considered easier. But good vendor management system can be
equally effective.
– Speed – Outsourcing can often render speed. Smaller
manufacturer may be more flexible. Number of suppliers can be
increased if speed is required.
– Reliability: Vendors should be reliable both in terms of timely
delivery and quality. QA system needs checking.
– Expertise – Organizations do not want to share expertise
involved with certain critical items. Such items are preferably
made in-house.
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• In recent years there has been a greater trend towards
more and more buying from outside vendors and focusing
on certain core activities in-house. In such a scenario the
importance of SCM further increases because supplier’s
performance is likely to have an even greater impact on
delivery and quality.
• The trend towards outsourcing has been driven primarily
by the following factors:
– Cost
– Core Vs non-core activities
– Managing capacity expansion (avoiding investing in
non-core activities)
– Strategic restructuring ( done during future expansion
and for implementing market penetration strategies)
THANK
YOU