SUPPLY CHAIN MANAGEMENT

Kashif
Shafiq

WHAT IS A SUPPLY CHAIN

Kashif Shafq

A supply chain consists of all parties involved, directly or indirectly,

in fulfilling a customer request.
A supply chain is dynamic and involves the constant flow of
information, product, and funds between different stages.
The customer is an integral part of the supply chain.

STAGES OF A DETERGENT SUPPLY

CHAIN

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 Information

Funds

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Product

OBJECTIVE OF A SUPPLY CHAIN

Kashif Shafq

The objective of every supply chain should be to maximize the

overall value generated, the value of a supply chain generates is the
difference between what the final product is worth to the customer
and the costs the supply chain incurs in fulfilling the customers
request.

WHAT
IS
MANAGEMENT

SUPPLY

CHAIN

It starts with customer and it ends with customer ,It

It is about the management of relationships across

complex networks of companies that whilst legally
independent are in reality interdependent
Supply chain management includes management of many
key business aspects such as transportation , material
control, manufacture and distribution from suppliers until
the end customer.

Kashif Shafq

requires looking at your business as one continuous

process

LOGISTICS
Logistics can be defned as apart of supply chain . While logistics
activities are only concerned about the management of material and
information flow from supply points to demand points , the supply
chain is wider in scope as it involves managing and coordinating the
tasks of whole chain.

IMPORTANCE OF EFFECTIVE SUPPLY

CHAIN MANAGEMENT

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BOOST CUSTOMER SERVICE

Right Product Assortment and Quantity

Right Stock Location

Right Delivery Time

Right After Sale Support

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IMPROVE FINANCIAL POSITION

Increases Proft Leverage

Decreases Fixed Assets

Increases Cash Flow

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REDUCE OPERATING COSTS

Decreases Purchasing Cost

Decreases Production Cost

Decreases Total Supply Chain Cost

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ENSURE HUMAN SURVIVAL

SCM Protects Humans from Climate Extremes

SCM Improves Human Healthcare

SCM Helps Sustains Human Life

IMPROVE QUALITY OF LIFE

Foundation for Economic Growth

Improves Standard of Living

Opportunity to Decrease Energy Use

Opportunity to Decrease Pollution

Job Creation

PROTECT CULTURAL FREEDOM &

DEVELOPMENT

Defending Human Freedom

Protects Delivery of Necessities

PROCESS VIEWS OF A SUPPLY CHAIN

Cycle view

Push/Pull View

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CYCLE VIEW OF SUPPLY CHAIN

PROCESSES

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The processes in a supply chain are divided into a series of cycles,

each performed at the interface between two successive stages of a
supply chain.
a cycle view of the supply chain clearly defines the processes
involved and the owners of each process.

SUPPLY CHAIN PROCESS CYCLES

Customer Order
Cycle

Manufacturing
Cycle
Procurement
Cycle

Distributor
Manufacturer
Supplie
r

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Replenishment
Cycle

Retailer

PUSH/PULL VIEWS OF SUPPLY CHAIN

PROCESSES

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The processes in a supply chain are divided into two categories

depending on whether they are executed in response to a customer
order or in anticipation of customer orders. Pull processes are
initiated by a customer order, whereas push processes are initiated
and performed in anticipation of customer orders.

EFFICIENT VS RESPONSIVE SUPPLY

CHAINS
Efficient supply chains

Responsive supply chains

Efficient supply chains

Responsive supply chains

DECISION PHASES IN SUPPLY

CHAIN

DECISION PHASES IN A SUPPLY CHAIN

Kashif Shafq

Successful supply chain management requires many

decisions relating to the flow of information, product and
funds. Each decisions should be made to raise the supply
chain Surplus.

TYPES OF DECISION PHASES

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Supply chain Strategy or Design

Supply Chain Planning
Supply Chain Operations

SUPPLY CHAIN STRATEGY OR DESIGN

Kashif Shafq

During this phase, given the marketing and pricing plans for a
product, a company decides how to structure the supply chain over
the next several years.
It decides what the chains configurations will be, how resource will
be allocated and what processes each stage will perform.

SUPPLY CHAIN PLANNING

Kashif Shafq

Strategic decisions made by companies includes;

whether to outsource or perform a supply chain function in
house.
location and capacities of production and warehousing facilities.
Product to be manufactured or stored at various locations.
Modes of transportation
Types of information system to be utilized.

SUPPLY CHAIN PLANNING

During this phase, time frame considered is a quarter to year.

Therefore, supply Cains determined in the strategic phase is fixed.

This configuration establishes constraint within which planning must

be done.

The goal of planning is to maximize the supply chain surplus that

can be generated over the planning horizon given the constraints
established during the strategic or design phase.

Companies start the planning phase with a forecast for the coming
year of demand in different markets.

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SUPPLY CHAIN PLANNING CONTD.

Kashif Shafq

It includes;
Making decisions
Subcontracting of manufacturing
Inventory policies to be followed
Timing and size of marketing
Price of promotions

SUPPLY CHAIN OPERATIONS

The time horizon here is weekly or daily.

During this phase, companies makes decisions regarding individual

customer order.

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DRIVERS OF SUPPLY CHAIN

PERFORMANCE

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1. Facilities:
Are the actual physical locations in the supply chain network
where product is stored, assembled, or fabricated the two major
types of facilities are production sites and storage sites. decisions
regarding the role, location, capacity and flexibility of facilities
have a significant impact on the supply chains performance.

Kashif Shafq

For instance, an auto parts distributor striving for responsiveness

could have many warehousing facilities located close to customers
even though this practice reduces efficiency. alternatively, a high
efficiency distributor would have fewer warehouses to increase
efficiency despite the fact that this practice will reduce
responsiveness.

Kashif Shafq

2. Inventory:
Encompasses all raw materials, work in process, and finish goods
within a supply chain. changing inventory policies can
dramatically alter the supply chains efficiency and
responsiveness. reducing inventory makes the retailer more
efficient but hurts its responsiveness.

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3. Transportation:
Involves moving inventory from point to point in the supply
chain. transportation can take the form of many combinations of
modes and routes, each with its own performance characteristics.

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Transportation choices have a large impact on supply chain

responsiveness and efficiency. for example, a mail order catalog
company can use a faster mode of transportation such as FedEx
to ship products, thus making its supply chain more responsive,
but also less efficient given the high costs associated with using
FedEx. or the company can use slower but cheaper ground
transportation to ship the product, making the supply chain
efficient but limiting its responsiveness.

4. Information:

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consists of data and analysis concerning facilities, inventory,

transportation, costs, prices, and customers throughout the supply chain.
information is potentially the biggest driver of performance in the
supply chain because it directly affects each of the other drivers.

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5. Sourcing:
Is the choice of who will perform a particular supply chain
activity such as production, storage, transportation or the
management of information. the strategic level, these decisions
determine what functions a firm performs and what functions the
film outsources.

Kashif Shafq

Sourcing decisions affect both the responsiveness and efficiency

of a supply chain. after Motorola outsourced much of its
production to contract manufacturers in China, it saw its
efficiency improve but its responsiveness suffer because of the
long distances. to make up for the drop in responsiveness,
Motorola started flying in some of its cell phones from China
even though this choice increased transportation cost.

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6. Pricing:
Determines how much a firm will charge for goods and services
that it makes available in the supply chain. Pricing affects the
behavior of the buyer of the good or service, thus affecting
supply chain performance.

Kashif Shafq

For example, if a transportation company varies its charges based

on the lead time provided by the customers, it is very likely that
customers who value efficiency will order early and customers
who value responsiveness will be willing to wait and order just
before they need a product transported. Early orders are less
likely if prices do not vary with lead time.

Kashif Shafq

FORECASTING

THE ROLE OF FORECASTING IN A SUPPLY CHAIN

Kashif Shafq

Demand forecasts form the basis of all supply chain

planning. All push processesin the supply chain are
performed in anticipation of customer demand, whereas all
pull processes are performed in response to customer
demand. For push processes, a manager must plan the level
of activity, be it production, transportation, or any other
planned activity. For pull processes, a manager mustPlan
the level of available capacity and inventory but not the
actual amount tobe executed. In both instances, the frst
step a manager must take is to forecastwhat customer
demand will be.

Mature products with stable demand, such as milk or

paper towels, areusually easiest to forecast. Forecasting
and the accompanying managerial decisions are extremely
difficult when either the supply of raw materials or
thedemand for the fnished product is highly
unpredictable. Fashion goods andmany high-tech products
are examples of items that are difficult to forecast.

Good forecasting is very important in these cases because

the time window for sales is narrow. If a frm has over-or
under produced, it has little chance torecover. For a
product with stable demand, in contrast. The impact of a
forecasting error is less signifcant.

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CHARACTERISTICS OF FORECASTS

In general, the farther up the supply chain a company is (or

the farther it is from the consumer), the greater is the
distortion of information it receives.

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Forecasts are always wrong and should thus include both

the expected value of the forecast and a measure of forecast
error.
Long-term forecasts are usually less accurate than shortterm forecasts.
Aggregate forecasts are usually more accurate than
disaggregate forecasts, as it tend to have a smaller
standard derivation of error relative to the mean.

FORECASTING METHODS AND

TYPES

subjective and rely on human judgment. They are most

appropriate when little historical data is available or when
experts have market intelligence that may affect the
forecast. Such methods may also be necessary to forecast
demand several years into the future in a new industry.
Time-series: Time-series forecasting methods use historical
demand tomake a forecast. They are based on the
assumption that past demand historyis a good indicator of
future demand. These methods are most appropriatewhen
the basic demand pattern does not vary signifcantly from
one year to be next. These are the simplest methods to
implement and can serve as a good starting point for a
demand forecast.

Kashif Shafq

Qualitative: Qualitative forecasting methods are primarily

Causal: Causal forecasting methods assume that the demand forecast

ishighly correlated with certain factors in the environment(the state of
theeconomy, interest rates, etc.). Causal forecasting methods fnd this
correlationbetween demand and environmental factors and use estimates
of what environmental factors will be to forecast future demand. For
example. Product pricing is strongly correlated with demand. Companies
can thus use causalmethods to determine the impact of price promotions on
demand.
Simulation: Simulation forecasting methods imitate the consumer
choicesthat give rise to demand to arrive at a forecast. using simulation, a
frm cancombine time-series and causal methods to answer such questions
as: Whatwill be the impact of a price promotion? What will be the impact of
a competitor a store nearby? Airlines simulate customer buying behavior
toforecast demand for higher-fare seats when there are no seats available at
thelower fares.

SOURCING

DISCOVERING
SUPPLIERS
Supplier websites

Supplier information files

Supplier Catalogs
Trade Registers and Directories
Trade Journals
Phone Directories

Filing Of Mailing Pieces

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POTENTIAL

DISCOVERING
SUPPLIERS
Sales Personnel

Trade Shows
Company Personnel
Other Supply Management Department.
Professional Organization

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POTENTIAL

EVALUATING
SUPPLIERS

Quality Capability Analysis

Capacity Capability Analysis

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Supplier Surveys
Financial Conditions Analysis
Third Party Evaluators
Evaluation Conference
Facility Visits

POTENTIAL

EVALUATING
SUPPLIERS

POTENTIAL

Management Capability Analysis

Service Capability Analysis

Flexibility Capability Analysis
Information Technology Capability Analysis

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BENEFITS OF OUTSOURCING
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Cost Savings
Focus on Core Business
Improved Quality
Customer Satisfaction
Operational Control
Staffing Flexibility
Continuity & Risk Management
Ease in starting new projects quickly
Accessibility to skilled expertise
Competitive edge

DISADVANTAGES OF OUTSOURCING
1.

Loss Of Managerial Control

2.

Hidden Costs

3.

Threat to Security and Confdentiality

4.

Quality Problems

5.

Tied to the Financial Well-Being of Another Company

6.

Bad Publicity and Ill-Will

CONSIDERATIONS WHEN SELECTING AN

OUTSOURCING DESTINATION

COSTS
CULTURE AND LANGUAGE
TALENT POOL
TIME ZONE/GEOGRAPHICAL LOCATION
TECHNOLOGY INFRASTRUCTURE
IP PROTECTION AND LEGAL MATURITY
GEOPOLITICAL RISKS
LOCAL CONSIDERATIONS

TOP 25 OUTSOURCING
DESTINATIONS THOLONS - 2016

CRITERIA
PARTNER

TO

SELECT

QUALITY
PRICE
DELIVERY
SERVICE
TECHNICAL CAPABILITY

FINANCIAL STRENGTH

OUTSOURCING

Geographical Location

Reputation

Warranties and claim policies

Other Factors

[INTERNATIONAL
ASSOCIATION
OF
OUTSOURCING PROFESSIONALS (IOAP) 2016]
ACCELYA
ACCENTURE
AEGIS LIMITED
AGS HEALTH PRIVATE LTD
AJUBA INTERNATIONAL
ALORICA
ALTISOURCE
AON HEWITT
AURIGA
BELL INTEGRATOR
CANON BUSINESS
PROCESS
SERVICES
CBRE

TOP
10
REASONS
OUTSOURCING FAILS

Unclear objectives of
outsourcing
No concurrent change in
workplace culture
Expectations are not set
correctly
Lack of communication
Transition processes need
improvement
Inadequate risk analysis

WHY

Unforeseen costs or rising costs

Over
management/micromanagement
Changing buyer needs
Buyer behavior towards provider