SUPPLY CHAIN

MANAGEMENT

Noman Nasir
B.E (Aerospace; NUST),
MBA (Executive; LUMS)
 SC and SCM

SC is the network of organizations that are

involved through upstream & down stream
linkages, in different processes and activities, that
produce value in the hands of ultimate customer
Supply Chain Management
 The art and science to Design, Plan, Execute
and Monitor the activities in SC to convert raw
material into finished product / service

 SCM may be defined as “Management of flows;

funds, info & materials, b/w and among stages
in Supply Chain to maximize total SC
profitability”
 SCM FLOWS

MATERIAL

MONEY

INFORMATION
Procurement Manufacturing Distribution Customer
Evolution of Supply Chain
Increased Supply Chain
Capabilities

Supply Chain Relationship

Formation & Extension
JIT, TQM, BPR, Supplier
& Customer Alliances
Inventory mgmt &
cost containment

Traditional Mass
Manufacturing

1950s 1960s 1970s 1980s 1990s 2000s Future

Supply Chain Flows (SC Flows)
• The responsiveness & efficiency of SC depends upon
the SC flows
• Design & mgmt of SC flows (info, product, cash) leads
to successful SC e.g Dell, Li and Fung
• Direct selling & low inventory at Dell leads to real time
info, low cost & flexibility of upgrading
• Real time info saves inventory obsolescence/defect, labor
cost, cash tied up
• Customization and new product development
• Responsive Supply Chain
• Inability to achieve synergy in SC flows leads to failures
like in the case of Snapple acquisition by Quaker
Objectives of SCM

Objectives:-
Right
Right Product
Right Place

Right Time
Time
Product
Right Price &

Profit for retailer

Place Price &

Profit
Stages in SCM
SCM is a business network covering from buying,
making, moving, warehousing to selling

Making
Moving

Buying

Selling Ware
housing
Traditional SCM
Supply Chain Process View
Five Steps Mentioned Earlier
Broadly Define These Efforts

Managing
Supply &
Demand
Delivery To Sourcing
The End Raw
Customers Materials

Reduced Cost
Speed To Market
Distribution Better Services Manufacturing
Across & Assembling
Channels

Order Entry Warehousing

& Order & Inventory
Management Tracking
 SCM Facilitate Specialization

n Intermediaries provide Exchange efficiencies

Intermediaries

Producer Customer
Connectivity is King for product delivery
when and where
 Supply Chain Benefits

 Cost
 Reduced inventories & waste
 Reduced total system costs
 Service
 Establishment of a collaborative framework
 Reduced variation and increased quality due to
flow of real time information
 Business growth opportunities
 Increase in sales due to customer value
maximization
 Provides source for new opportunities
The Supply Chain “Iceberg”
Perceived Value

Transactional
Efficiency

Critical Data to improve: Intrinsic Value

Excess freight Multiple handling

Process delays Transit damage

End-to-end
cycle-time Delays
Yield

Warehouse fees Inventory turns

Late Deliveries
 Challenges in SCM
• Change in Customer Buying Habits
• Demand changes frequently
• Inventory is carried over a long time
• Product lifecycle has shortened
• Increased Competition
• Multiple buying options available for
customer
• Product availability has become critical
• Efficient distribution network is required
• Cost reduction is imperative
Challenges in SCM

• Increase in pressure of profit margin

through;
• Integration of SCM processes through IT

• Innovation in SCM processes

• Intelligent Decision making

 Drivers of Supply Chain
• Inventory
• Sourcing
• Facilities
• Transportation and Distribution Network
• Information
• Pricing and Revenue Management
Process View of Supply Chain

• Push/Pull View (Reactive/Speculative)

• Critical while considering strategic decisions
• Critical impact upon supply chain performance
• Depends upon the product and market requirements
• L.L.Beans & Dell are ideal examples
• Pull view relates to JIT, Push relates to MRP
• Number of Cycle views depend upon Push/Pull view
• Procurement processes are usually push process
Competitive & SC Strategy
• CS & SCS must fit together (have same goal) and in synergy to
achieve efficient supply chain
Competitive Strategy (CS)
• Set of customer need that it seeks to satisfy
• Based upon customer priorities for price, customization, lead time,
variety & quality
Supply Chain Strategy (SCS)
• Determines the nature of procurement of raw materials,
transportation, manufacture or other follow up services
• Includes strategy for supplier, operations & logistics
Strategic Fit

• Ensure supply chain capabilities support to satisfy

customer segment
• Step I-----Know the uncertainty in SC & customer
demand i.r.o Qty,time,variety,price, innovation
• Step II----Know the SC design & capabilities like
responsiveness or efficient
• Large variety, qty, service level, uncertainty, low lead time
• Location of firm on the cost-responsiveness efficient frontier
• Step III---Restructure SC (if required) for Strategic fit
• Match SC responsiveness with demand/supply uncertainty
• All functional strategies, in value chain, consistent with CS
 Efficient and Responsive Supply Chains
Efficient Supply Chain
• Meet demand at low cost
• Low Margins due to high
competition
• Economies of Scale
• Maintain min inventory
• Reduce LT but not at additional
cost
• Select supplier based on quality
and cost
Responsive Supply chain
• Meet demand in short time
• High margins due to
customization
• Maintain flexi thru buffer
• Maintain buffer inventory
• Reduce LT aggressively even at
more cost
• Selection based on quality,
reliability, speed & flexib
Drivers of Supply Chain Performance
 Determine whether strategic fit is achieved across SC
 Determine the SC performance in terms of efficiency &
responsiveness
 Six drivers of SC performance
• Facilities
• Location of facilities (Production or storage sites) depends
upon SC strategy
• Involves trade off b/w cost, number, location & type of facilities
• Inventory
• Altering inventory can greatly impact SC performance and
ensure strategic fit
• Depends upon the SC strategy
• JIT or MRP processes help to achieve strategic fit
 Drivers of Supply Chain Performance
• Transportation
• Moving inventory from point to point in the SC

• Involves combination of modes or routes

• Information
• Biggest driver of SC performance as it affects all functions

• Consists of data & analysis of other drivers

• Connection b/w various stages of SC to;

• Bring coordination leading to benefits

• Provide better visibility of demand, inventory, production etc
• Determine lead times & whether order could be met
Drivers of Supply Chain Performance
 Sourcing
 Has become important supply chain driver after globalization
 Consists of supplier scoring, assessment, contract
development, Design collaboration, Procurement & supplier
analysis
 Pricing
 Most sensitive driver of Supply Chain
 Helps to increase market share as well as profits
 Involves various strategies for perishable products, seasonal
products and also customer segments
SC Obstacles
• Variety of Products
• Forecasting & meeting demands is complicated
• Increase in uncertainty, cost & less responsiveness
• Product Life Cycle
• Short cycle has affected SF & reduced window of opportunity
• Additional pressure on SC to match demand & supply
• Risk of inventory obsolescence, overstock & understock
• Customer Demands
• Increasing demands of lead time, cost & performance
• Low customer switching costs have increased business risks
SC Obstacles
• Globalization
• Coordination b/w facilities is difficult due far distance
• Increase in competition
• Tradeoffs became more critical
• SC Ownership
• Non-vertical integrated SC lead to clash of policies &
interests due to more owners in SC
• Inter-company strategic FIT became challenge
• Executing new Strategies
• Implementation of new strategies from manufacturer,
in response to market, has become a challenge