SUPPLY CHAIN MANAGEMENT

WHAT IS MANAGEMENT

Designing a customer pleasing product is an art Building the product is, to a large extent, science
Moving the product from design to the customer is management

Ashok Gupta
OM100

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UNDERSTANDING SUPPLY CHAIN

LECTURE OUTLINE
Ashok Gupta

What is supply chain Historical perspective Objective of supply chain Decision phases in supply chain Process view of supply chain
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OM100

WHAT

IS A

SUPPLY CHAIN
Ashok Gupta

Supply Chain refers to complete chain in flow of information, material, funds & services from suppliers, inside the firm, to warehouses and till delivery to customers along both directions

OM100

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WHAT IS A SUPPLY CHAIN (CONTD.1)

In other words Supply Chain is the picture that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together as viewed from a company

Ashok Gupta OM100

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WHAT IS A SUPPLY CHAIN (CONTD.2)

Ashok Gupta

Services

Suppliers Service

Support Operations

Local Service Providers

End Customers

OM100

Supply Networks Inputs Manufacturing

Transformation Localization Output Customers

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Suppliers Manufacturing Distribution

RELATIONSHIP

OF

TASKS

Ashok Gupta OM100

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THE TYPICAL SUPPLY CHAIN

Plan Source Make Deliver Buy

Suppliers T1,T2,T3

Manufacturers

Warehouses & Customers Distribution Centers

Ashok Gupta OM100

Transportation Transportation Transportation Costs Costs Material Costs Costs Manufacturing Costs Inventory Costs

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HISTORY OF SUPPLY CHAIN MANAGEMENT

1960s Sourcing, Inventory Management, Cost Control 1970s - MRP & BOM - Operations Planning 1980s - MRPII, JIT - Materials Management, Logistics 1990s - SCM - ERP - Integrated Purchasing, Financials, Manufacturing, Order Entry 2000s - Optimized Value Network with Real-Time Decision Support; Synchronized & Collaborative Extended Network

Ashok Gupta OM100

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WHAT IS SUPPLY CHAIN MANAGEMENT?

Ashok Gupta

Supply Chain Management is total systems approach to managing the entire flow of information, materials, funds and services from raw-material and component suppliers through factories and warehouses to retail store and back to meet real needs of the end customer
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OM100

SUPPLY CHAIN MANAGEMENT APPROACH

Three items flow through supply chain: Information Money Materials Three areas of decision-making: Materials Processes Logistics Two types of tools: Information Technology Operational Analysis

Ashok Gupta OM100

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SUPPLY CHAIN MANAGEMENT KEY ISSUES

ISSUE Network Planning CONSIDERATIONS
Warehouse locations and capacities Plant locations and production levels Transportation flows between facilities to minimize cost and time How should inventory be managed? Why does inventory fluctuate and what strategies minimize this?
Ashok Gupta

Inventory Control

Supply Contracts
Distribution Strategies

Impact of volume discount and revenue sharing Pricing strategies to reduce order-shipment variability

Selection of distribution strategies (e.g., direct ship vs. cross-docking) How many cross-dock points are needed? Cost/Benefits of different strategies How can integration with partners be achieved? What level of integration is best? What information and processes can be shared? What partnerships should be implemented and in which situations? What are our core supply chain capabilities and which are not? Does our product design mandate different outsourcing approaches? 13 Risk management
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OM100

Integration and Strategic Partnering

Outsourcing & Procurement Strategies Product Design

How are inventory holding and transportation costs affected by product design? How does product design enable mass customization?

OBJECTIVE OF SCM

Objective of SCM is to maximise overall value generated

Ashok Gupta

Effective SCM involves management of supply chain assets, products, information, funds & services to maximise total supply chain surplus
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OM100

DECISION PHASES IN A SUPPLY CHAIN

Ashok Gupta

Supply chain strategy: how to structure supply chain chains configuration, resource allocation and processes each stage will perform to increase supply chain surplus
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OM100

DECISION PHASES IN A SUPPLY CHAIN

(CONTD. 1)

Supply chain planning: includes demand forecasting, finalising supply network, inventory levels, and timing & size of market promotions, defining operational policies and fine tuning actions to mitigate uncertainties of demand, exchange rate & competition

Ashok Gupta OM100

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DECISION PHASES IN A SUPPLY CHAIN

(CONTD. 2)
Ashok Gupta

Supply chain operation: individual customer order is focus of production planning, shipping schedule & mode, inventory and place replenishment orders with practically nil uncertainty
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OM100

PROCESS VIEWS OF SUPPLY CHAIN

Cycle View supply chain processes are divided into a series of cycles each performed at the interface of two successive stages of a supply chain

Ashok Gupta OM100

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Ashok Gupta

OM100

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Ashok Gupta

OM100

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WHY IS SCM DIFFICULT?

Plan Source Make Deliver Buy

Uncertainty is inherent to every supply chain

Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues

Ashok Gupta OM100

The complexity of problem to globally optimize a supply chain is significant

Minimize internal costs Minimize uncertainty Deal with remaining uncertainty

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