Understanding the Supply Chain (SC)

Learning Objectives :
Understanding Supply Chain Key SC decisions Cycle & Push/Pull Views of SC SC macro processes

Customer Value
Availability
Variety Quantity

Price Quality

Creation of customer value

Functions : Marketing, Manufacturing, Distribution, etc Each with their own goal with an objective to satisfy customer / create value for customer but at times their goals contradict SCM
integrate these functions build relationships

Definition of Supply Chain Management

A supply chain is the stream of processes of moving goods from
customer order through the raw materials stage Supply Production and distribution of products to the customer Material and information flow Up and Down the Supply Chain

Supply Chain Management

Management of C2 = Effectiveness - Customer C2 = Efficiency - Cash

A Generic Supply Chain

Raw material suppliers Extract RMs from ground say iron ore Raw Material Manufacturers Metal sheets Intermediate component manufacturers Electric wire End Product Manufacturers General Motors Wholesalers, Distributors Retailers

Satisfy END CONSUMERS Service providers trucking, airfreight shipping companies, information
system providers, public warehousing firms, freight forwarders, agents and consultants Reverse Logistic Activities Product returns and recycling, warranty repairs

What is a Supply Chain

Motive - Fulfillment of Customer order Flows Information, Cash, Material Chain - Supplier manufacturer distributor retailer = Customer order Supply network or supply web Objective maximize profitability of the chain management of flows

Supply Chain

Key attributes of SCM

QUALITY CUSTOMER SERVICE SCM VARIETY PRICE SPEED RELIABILITY

Why Supply Chain Management

To provide an uninterrupted flow of materials, supplies and services required to operate the organization Keeps inventory investment at a minimum Maintain and improve quality Find or develop competent suppliers Purchase required items and services at lowest cost

 To improve the organizations competitive position To achieve harmonious, productive working relationships with other functional areas within the organization Accomplish the purchasing and marketing objectives at the lowest possible level of administrative cost

Decision phases in SC
SC strategy configuring SC in accordance with the strategic objectives - location & capacities of individual facilities,
different modes of transportation, information systems

SC Planning operating policies that govern short term operations - Forecasting in next few years for the concerned product
in different markets, sources of supplies, whether outsourcing or in-house, inventory policies, etc.

SC Operations Fulfill customer order day to day operations - allocation of inventory or production to individual orders,
fixing transportation and delivery schedule of trucks, placing replenishment orders

Process View in SC
Cycle view
Customer order cycle Retailer Replenishment cycle Distributor Manufacturing cycle Manufacturer Procurement Cycle Supplier Differences in Cycles - Uncertainty of demand - Scale / size of order

Process View in SC
Push / Pull view
Pull Initiated by customer order
Hotel, Dell

Push Initiated in anticipation of customer order

FMCG, IBM

Mixed Push + Pull

Paint industry Colour base push, colour choice - pull

Customer Order Cycle

Customer arrival - ensure customer arrival turns into customer order
answer customer queries, ensure they do not have to wait for a long, etc

Customer order entry - customer informing what he wants and

retailer allocating stock- retailer should ensure it is quick, accurate and communicated to others in SC

Customer order fulfillment - Order is filled and sent to

customer picking, packing and sipping product to customer, inventories to be updated - correct order at promised due dates at lowest possible cost

Customer order receiving-customer receives and takes delivery,

payment made

Replenishment Cycle
Retail order trigger - retailer placing order at previous stage to replenish
product availability & cost of holding inventory his stock total of customer orders less stock available - Economies of scale, balancing

Retail order entry- Retailer informing what he wants and wholesaler

allocating stock - wholesaler should ensure it is quick, accurate and communicated to others in SC

Retail order fulfillment - Order is filled and sent to retailer

picking, packing and sipping product to retailer size of these orders are quiet large than that of customer order inventories to be updated - correct order at promised due dates at lowest possible cost delivery, payment made

Retail order receiving- retailer receives stock physically and takes

Manufacturing Cycle
Order Arrival - Plant receives order from customer / distributor Production Scheduling - Production plan is made Manufacturing & Shipping - Production & despatch
on promised date, meeting quality stds, low costs

Receiving at distributor / retailer or customer - Product is received physically by wholesaler / customer &
fund is transferred

Procurement Cycle
To ensure materials are available for manufacturing as per schedule Components are supplied against fixed manufacturing plan

Push / Pull View

Pull / reactive process Execution is initiated to customer order demand is known Make to order Push / speculative process Execution is initiated in anticipation of customer order forecast Make to Stock Supply chain design depends on Push / Pull view In pull view No replenishment cycle

SC Macro Processes
CRM Customer Relationship Mgmt firm&customer
Marketing, sales, order management, etc.

ISCM Internal Supply Chain Mgmt - internal

Planning of internal production, storage capacity, demand & supply plans, etc.

SRM Supplier Relationship Mgmt firm&suppliers

Evaluation , selection of suppliers, negotiation, buying, etc

Success of SC
Matching demand with supply
Customers expectations, needs w.r.t quality, qty, design, price, etc.

Inventory
Good balance between inventory cost and loss of sales

Supply Chain v/s Logistics

While supply chain involves strategies, tactics and operations, logistics concentrates on the actual ways and means to fulfill the overall supply chain strategy. Both are incomplete without each other.

Purchasing vs SCM
Purchasing is responsible for acquisition of required materials, services and equipment. Inbound and outbound logistics along with purchasing would be referred to as SCM

Discuss
What are the advantages of moving from Make to Stock model to a Make to order or a Make to configure model?