Академический Документы
Профессиональный Документы
Культура Документы
ACKNOWLEDGEMENT
It is a great pleasure in presenting this project as a part of our curriculum. We would like to thank
First of all we would like to thank Prof. Vinay for giving us an opportunity to work on this
project and for his immense help and coordination, who gave us encouragement and guidance
We would also like to thank our institution (BMA) for giving us an opportunity to work on this
project.
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Introduction:
Until the dawn of 20th century business as well as distribution channel used the traditional
delivery process for the experience and expertise dating back to the industrial revolution era. But
the introduction of information technology brought up a new dimension to the whole delivery
process. Information technology has given business connectivity a new way of order relationship
called Supply Chain Management. Supply Chain Management is a process where in firms
collaborates with each other in the bid of leveraging their strategic positioning and to increase
as not a part of supply chain during the outset of industrial revolution. Each of the processes had
their own set of goals and objectives and they operated independently.
Marketing considered high customer service and maximization of profitable sale as their
objective; Manufacturing had higher and efficient output at the lower costs as their objective etc.
Thus there was a need of mechanism wherein all independent functions could be integrated
Supply chain management can be viewed as a decision making process between strategy and
operation. It’s also seen as a mechanism that lies in-between this completely vertically integrated
individual firms where the whole operation takes place with the mix of coordination and
effective management. Thus supply chain is like a relay team within each team is more
competitive and there needs to coordinate between the entire team for achieving results.
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Executive summary:
The competitive and global nature of today’s business environment dictates that this direction
and transformation takes place in a way that is efficient and effective as possible. Continuing
emphases on time, cost and quality improvements have sharpened the need to coordinate and
cooperate with trading partners around the world to achieve results that allow customers to be
successful. Thus Supply chain management focuses on the integration of activities across several
companies to manage the flow of products, services, people, equipment, facilities and other
resources.
The report covers the literature behind Supply chain and Supply chain management. The various
objectives and analysis of Supply chain management are covered in the report. There are many
elements which form a backbone of Supply chain management. Efforts are been made to explore
these dimensions with the help of retail giant “Wal-mart”. The report also covers the evolution of
Wal-mart with Supply chain management technology at its behest. Efforts are been made to
understand different processes that Wal-mart uses in its Supply chain management.
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Literature Review:
The movement of a product or a service from supplier to customer takes place with the help of
a network of facilities and distribution options that perform the functions of procurement of
materials, transformation of materials into intermediate and finished products and the distribution
of the finished products to customers”. Supply chain finds its place in both services as well and
manufacturing industry. Supply chain can also be explained as the association of the retailers,
distributors, transporters and suppliers who come together and share the process of sale, delivery
Supply chain management is an efficient way of managing the above mentioned activities.
According to Jessie Chinami Supply chain management can be defined as “an oversight of
materials, information and finances as they move in a process from supplier to manufacturer to
wholesaler to retailer and finally to the consumer”. The basic aim of supply chain management
is coordinating and integrating the flow which takes place within and among companies.
The product flow deals with the goods and services that are subjected to movement from a
supplier to a customer and vice-versa. The information flow manages the upgrading as well as
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management relating to the status of the delivery process while the financial flow manages all
A schematic diagram of the Supply chain management process is as shown. The various
➢ Logistics
➢ Procurement
➢ Asset management
➢ Enterprise applications
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The decisions associated with supply chain management cover both the long-term and short-
term. Strategic decisions deal with corporate policies, and look at overall design and supply
chain structure. Operational decisions are those dealing with every day activities and problems of
an organization. These decisions must take into account the strategic decisions already in place.
Therefore, an organization must structure the supply chain through long-term analysis and at the
constraints all must be understood in order to structure the supply chain effectively. These are all
factors, which change constantly and sometimes unexpectedly, and an organization must realize
Structuring the supply chain requires an understanding of the demand patterns, service level
requirements, distance considerations, cost elements and other related factors. It is easy to see
that these factors are highly variable in nature and this variability needs to be considered during
the supply chain analysis process. Moreover, the interplay of these complex considerations could
have a significant bearing on the outcome of the supply chain analysis process.
➢ Production
➢ Supply
➢ Inventory
➢ Location
➢ Transportation, and
➢ Information
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1. Production
Strategic decisions regarding production focus on what customers want and the market demands.
This first stage in developing supply chain agility takes into consideration what and how many
products to produce, and what, if any, parts or components should be produced at which plants or
outsourced to capable suppliers. These strategic decisions regarding production must also focus
on capacity, quality and volume of goods, keeping in mind that customer demand and
satisfaction must be met. Operational decisions, on the other hand, focus on scheduling
control and workload balancing are issues which need to be considered when making these
decisions.
2. Supply
Next, an organization must determine what their facility or facilities are able to produce, both
economically and efficiently, while keeping the quality high. But most companies cannot provide
alternative to be considered for those products and components that cannot be produced
effectively by an organization’s facilities. Companies must carefully select suppliers for raw
materials. When choosing a supplier, focus should be on developing velocity, quality and
flexibility while at the same time reducing costs or maintaining low cost levels. In short, strategic
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decisions should be made to determine the core capabilities of a facility and outsourcing
3. Inventory
Further strategic decisions focus on inventory and how much product should be in-house. A
delicate balance exists between too much inventory, which can cost anywhere between 20 and 40
percent of their value, and not enough inventory to meet market demands. This is a critical issue
in effective supply chain management. Operational inventory decisions revolved around optimal
levels of stock at each location to ensure customer satisfaction as the market demands fluctuate.
Control policies must be looked at to determine correct levels of supplies at order and reorder
points. These levels are critical to the day to day operation of organizations and to keep customer
4. Location
Strategic decisions must focus on the placement of production plants, distribution and stocking
facilities, and placing them in prime locations to the market served. Once customer markets are
determined, long-term commitment must be made to locate production and stocking facilities as
close to the consumer as is practical. In industries where components are lightweight and market
driven, facilities should be located close to the end-user. In heavier industries, careful
consideration must be made to determine where plants should be located so as to be close to the
raw material source. Decisions concerning location should also take into consideration tax and
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5. Transportation
Strategic transportation decisions are closely related to inventory decisions as well as meeting
customer demands. Using air transport obviously gets the product out quicker and to the
customer expediently, but the costs are high as opposed to shipping by boat or rail. Using sea or
rail often time’s means having higher levels of inventory in-house to meet quick demands by the
customer. It is wise to keep in mind that since 30% of the cost of a product is encompassed by
transportation, using the correct transport mode is a critical strategic decision. Above all,
customer service levels must be met, and this often times determines the mode of transport used.
Often times this may be an operational decision, but strategically, an organization must have
6. Information
Effective supply chain management requires obtaining information from the point of end-use,
and linking information resources throughout the chain for speed of exchange. Overwhelming
paper flow and disparate computer systems are unacceptable in today's competitive world.
networks and the internet, and streamlining the information flow, consolidates knowledge and
enterprise resource planning systems, and global communications are key components of
Supply chain’s continuous endeavor would be to match supply and demand. In this process to
capitalize on efficiency execution of any strategy in supply chain would be vital. Minor deviation
The world’s largest retailer Wal-Mart was founded by Sam Walton in the year 1962. He opened
his first store in Rogers, Ark. On 31st October 1969, the company was incorporated as Wal-Mart
Stores. Key success factor was the guidance of Sam. Presently they are operating in fifteen
countries with more than 8,000 stores with 2.1 million employees(, 2009). Major features of
Wal-Mart stores are its store area, cleanliness and its shelves which is filled with varieties of
quality items that includes health care products, family apparels, electronic items, automotive
Wal-Mart is giving more emphasis for customer needs and tried to reduce cost through the
effective usage of supply chain management system. In the year 2009, Fortune Magazine ranked
Wal-Mart as first among other retailers in its survey. Sales were about 401 billion U.S dollars in
the FY 2009.
Sam Walton claims that Wal-Mart’s vision had always been to increase sales through lowering
the costs through organized distribution system with the help of the Information Technology. It
is said that Wal-Mart’s extreme success could be attributed to its effective supply chain
management (Chandran, 2003). Wal-Mart’s efficiency in supply chain management was due to
two key factors namely automated distribution centre and the computerized inventory system.
This brought in minimizing a lot of time the later not only reduced the checking out time but also
recorded the transaction which is much needed to know envisage demand. Demand forecast is a
constant issue which could be a threat when not handled properly. This is due to the fact that
demand prediction is always inaccurate. Aggregation would be a remedy for this unpredictable
demand. Inventory management is one of the important things that have gained importance these
days.
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Wal-Mart’s focus has always been to sell goods at a lower price to the customers. They ensured
direct purchase form the companies bypassing the intermediaries. This by passing is one of the
ways to reduce cost. Wal-Mart preferred small vendors to the big players however the vendor
who provides the best price qualifies and gets the deal. This applies to the giants like P& G as
well. Their practice these days had been choosing few vendors and they literally negotiate the
best price the one that comes up with the best price qualifies. This does not blindly mean that
they have been ruthless. Wal-Mart also work with the vendors for improving its supply chain
efficiency.
Wal-Mart with its power distribution system made quite innovative changes like reducing paper
work, reduced its lead time drastically, used bar codes to bill which recorded inventory levels
and the access to the stock levels served as the valuable data for management. The movements of
products are systematic and strategically aliened in a way that it reduces the most valuable time
and cost and results in efficiency. Wal-Mart had a very effective rather responsive and flexible
distribution system to transport goods from docks to stores. It educated the drives with the ethics
and code of conduct which pictures their supply chain responsibility. Cross docking is one lethal
Cross Docking:
Cross Docking is a method of handling goods. This happens when vendor and the company work
together. This is the method of supplying the product in the right time and the said quantity. This
cut down a lot of time. This also changed Wal-Mart’s way of looking things. This transitioned
Wal-Mart from being a centralized management to almost decentralized system took a major
turn in focus of pull strategy than a pull strategy. Cross-docking is one of the techniques used by
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Wal-Mart. It means there is no unnecessary storage or little storage in between the loading and
unloading of goods so that customer can enjoy the quality of the goods by first hand. Wal-Mart
have logistics infrastructure which is very fast transportation system wherein the distribution
centers are being serviced. Wal-Mart assured that their drivers are capable of doing their jobs
accordingly and do not cause unnecessary delays that can hamper the efficiency of the
distribution operations. To deliver it on time, the coordinators give information to the driver the
Point Of Sale:
Information sharing is one of the most important things when it comes to SCM. P&G with its
Pampers requested Wal-Mart to share its point of sale so that it could predict its demand more or
less and work on the information to bring in efficiency. When Wal-Mart shared this information
P&G could plan in advance and it with its efficient supply chain management could supply
pampers to Wal-Mart on time. Wal-Mart did not want to dedicate lot of space to pamper in its
warehouse of shop store either. Instead the supply was taken care by P& G. This led the
initiation of working with the vendors and coming out with huge efficiency by maintaining lower
inventory and satisfying demand without stock outs. Thus point of sale sharing would be a key
element for any company for its further scope of improvement and also when there is further
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As the goods flow from the company to the customers, information flows from customers to the
company. This is a very valuable source for SCM. Wal-Mart recognized this and invested
heavily in Information Technology. In 1983 Wal-Mart set up its own Satellite Communication
System. This helped them manage a lot of things better with the information that they received.
This helped to manage inventory, study the demand and also networked suppliers through
computers. Retail link has emerged into an internet based Supply chain management system by
1990’s. Supply chain management that had evolved was expected to cover Collaborative
planning, Forecasting and replacement (CPFR). CPFR was considered insufficient and discarded
at its outset. But Wal-Mart worked closely with its key suppliers and retail chains to start a
internet based system to determine a product-wise demand system. The only stumble block Wal-
Wal-Mart differed from its competitor giants by their avid use of technological advancements in
a bid to improve their Supply chain management. By 2002 Wal-Mart introduced Web based EDI
where all the transactions between business partners were routed through the internet. Web based
EDI that Wal-mart implemented was also security free. In July 2003 Wal-Mart started using
RFID (Radio frequency Identification). This introduction meant a shift from tried and tested bar
code technology with RFID technology. Use of RFID has avoided the physical scanning of the
bar codes thus signifying the technology advances of Supply chain management.
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Supply chain management is now an imperative part of any organizations strategic plans. Supply
chain management’s ability to adapt quickly to customers demands, uncertainty in demands, and
globalization in market place, creating longer supply chains and shorter product life cycle &
advanced technology has created a pool for its success apart from providing a dimension for long
catching up with the evolution of material management and purchasing. Companies have also
overlooked their strategic role which revolved around raw material and finished goods inventory
to working in tandem with suppliers and customers. Better and efficient technological
advancements have reduced the gap between suppliers and customers despite their existence in
Supply chain management is designed to improve customer service, balance costs and service,
uniform costing and provide a competitive advantage to organizations in supply chain. Suppliers
production runs and lower production runs and lower production costs. On the other hand if
customer demand is fewer manufacturers restores to inventory. Supply chain management brings
on integration between different blocks of process and is displayed as one whole lot. (Guyer,
2001)
The last 20 years have seen considerable improvements in the accounting of Supply chain
management. Wal-Mart as discussed in the literature review reflects how Supply chain
management has catapulted them to the top. Wal-Mart’s key to success is its legendary use of
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Supply chain management with technology apart from traditional elements like Inventory,
➢ Each and every small opportunity was sensed in pursuit of bringing a efficient SCM
Apart from this Wal-Mart’s ability to order inventory on demand enabled them to meet customer
demand. Wal-Mart observed that today’s fads and fashions were the obsolete inventories for
days to come.
Thus Wal-Mart’s SCM not only increased efficiency but also increased customer service that
resulted in customer satisfaction. This brought in reducing stocks and increased its
responsiveness in distribution through the bar codes and radio frequency technologies. It cut cost
by cross docking which resulted in decreasing space in warehouses and manual labor cost to a
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Conclusion:
Supply chain management is here to stay and we are at the beginning of the spectrum. We still
have a long way to go and miles to conquer before the entire industry, all players and all
participants become supply chain enabled and get necessary tools to make informed decisions.
Companies have a lot to gain from Supply chain management implementations. Individual
companies will definitely gain tremendously but the benefits will move beyond the four walls of
the company and everybody will gain. This will obviously have direct repercussions on the
organization and thus add to their locked-in working capital. Supply chain management
principles primarily focus on three things. Its tells that the company can compress its lead times
and raise quality and accuracy at every stage, service will improve thus getting rid of costs out of
business. Secondly organizations should take a process view rather than a functional view of the
operation Third working across functional boundaries to integrate business processes in the
future. Thus change in the supply chain can be focused on improving the characteristics of
supply in the context of the goals that have been set for changing the service objectives.
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Bibliography
Ryerson. (2007). Fundamentals of supply chain management. Mc-graw - Hill pvt Ltd.
Walmart. (2009). Retrieved August 1, 2009, from Wal-Mart Stores Inc. - About Us.:
http://walmartstores.com/AboutUs/
➢ Sussan Happek (2005) Supply chain strategy, The importance of aligning your strategy
➢ Ortmeyer, K.Gwendolyn, and Lattin M.James,”A Theoretical Rational for Every Day
1996.
www.dmg.co.uk,august 1998.
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www.industryweek.com,july,1999.
America,”www.eng.auburn.edu, 2000.
➢ Daudelin, alexandre,”supply chain management the wal-mart way”, supply chain and
www.redherring.com,may 7, 2001
➢ Hutten, staffen and Nyberg, anna,”voluntary retail chains and the threats and
2002.
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○ ”Thrify wal-mart partners for flat rate rental plan,” auto rental news,
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