Documente Academic
Documente Profesional
Documente Cultură
Chapter-01
Managing Chain
introducing
SCM
Prof. Manoj K Srivastava
mks@mdi.ac.in Operations Management Area
mks
http://www.mks507.vistapanel.net Management Development Institute-Gurgaon
Part
00 Teaser
1. Apple
2. Procter & Gamble
3. Cisco Systems
4. Wal-Mart Stores
5. Dell
6. PepsiCo
Top 20 7.
8.
Samsung Electronics
IBM
Supply Chains 9.
10.
Research In Motion
Amazon.com
11. McDonald’s
12. Microsoft
13. The Coca-Cola Company
14. Johnson & Johnson
15. Hewlett-Packard
16. Nike
17. Colgate-Palmolive
2009 18. Intel
19. Nokia
20. Tesco
Va
rie
d?
ty
ee
?
Sp
Time
Product
Volume Delivery
Mix Reliability Delivery Time Place
Lead time
Flexibility
Inventory
Level
The right
Product
+ The right
Quantity
+ The right
Time
+ The right
Price
+ The right
Store
+ The right
Customer
= Higher
Profits
Forecasting
Location
Optimization
Optimization
Delivery
Reach
Quality
Quality
Design
Design
Cost
Cost
Fit
Direction for Business Innovation
Products: Create new products and services
Platforms: Create modular platforms and strategic control points
Solutions: End-to-end solution for customers
Customers: Find new customer segments or unmet customer needs
Customer Experience: Change how customers interact with you
Revenue Model: Change how you get paid
Processes: Innovate on operating processes
Value Chain: Change position or scope of value chain participation
Logistics/Supply Chain: Change the way you source & ship products
Channels: Change how you go to market with your products
Networking: Change how you connect with customers or products
R&D: Create new technologies, materials, products or processes
Part
01 Understand it
Today’s Challenges…
Electricity Home
Water Customer
[Nature]
Generating Station Distribution Company Commercial
[Producer] [Retailer] Customer
Fuel
Supplier Industrial
Customer
3rd Tier 2nd Tier 1st Tier 1st Tier 2nd Tier 3rd Tier
Supplier Supplier Supplier Customer Customer Customer
Focal
Company
Oil Chemical Cereal
Company Processor Manufacturer
Internal
Upstream Downstream
Flour Cereal Grocery Retail
Farmer Consumer
customer / consumer / client
Processor Manufacturer Distributor Grocer
CONSUMER
CRM???
understand context and hence the relative preference accordingly….
CLIENT
THE FOCAL COMPANY'S ALTERNATIVES FOR INVOLVEMENT WITH LINK 2
Alternative 1)
Company Integrate with and actively manage Link 2.
B
Link 2
Link 1 Link 2
Alternative 2)
Focal Company Company Monitor the procedures of Company A and
Company A Company B for integrating and managing Link 2.
B
When to monitor…
Link 2
when to let them own.. When to dictate…?
Company Alternative 3)
B Not involved, leave the integration and
management up to Company A and Company B.
The
Imm. Suppliers Imm. Customer Supply Chain
Firm
nth Tier
…......
2nd Tier 1st Tier The 1st Tier 2nd Tier
…......
nth Tier
Suppliers Suppliers Suppliers Firm Customer Customer Customer
Supply Chains Components
The supply chain involves THREE segments:
UPSTREAM, where sourcing or procurement from external suppliers occur
INTERNAL, where packaging, assembly, or manufacturing take place
DOWNSTREAM, where distribution or dispersal take place, frequently by
external distributors.
in which industry, which segment to be focused more?
movement of information and money and the procedures supporting the
movement of a product or a service.
Received as Y
Taking a customer perspective of supply performance promised? 8
can lead to very different conclusions
Actual Inputs
Within the firm
Supplier Performance =
INPUT Expected Inputs
Value Added EFFICIENCY
Process
Input Used
Utilization =
OUTPUT Input Available
EFFECTIVENESS
Actual Outputs
Productivity =
PERFORMANCE Inputs Used
Performance =
OUTCOME Planned Outputs
impact assessment analysis…
Actual Inputs
Customer Satisfaction =
IMPACT EFFICACY Expected Inputs
Source: Mentzer, J. T., Supply Chain Management, Response Books, New Delhi,
Automotive
Supply Chain
managing so many flows…yet at the time they are needed..
Porter’s
Value
Chain
Model
Source: Pyke, D.F., A Framework for Teaching Supply Chain Management, 2000
Views of Supply Chain
predictability of orders
Distributor
can they be synchronized them….
Manufacturing Cycle
quanitywise…timewise….anticipationwise…?
size of order
Manufacturer
Procurement Cycle
Supplier
Cycle view clearly defines processes involved and the owners of each process.
Specifies the roles and responsibilities of each member and the desired outcome of each process.
Each cycle occurs at the interface between two successive stages
Customer order cycle (customer-retailer) The supply chain is a concatenation of cycles with each cycle at
the interface of two successive stages in the supply chain. Each cycle involves the customer stage placing an order and
receiving it after it has been supplied by the supplier stage.
One difference is in size of order. Second difference is in predictability of orders - orders in the procurement cycle are
predictable once manufacturing planning has been done.
This is the predominant view for ERP systems. It is a transaction level view and clearly defines each process and its owner.
Boundary
Push/Pull
PUSH PROCESSES PULL PROCESSES
02 in Supply Chain
Logistics Defined
Logistics Management is that part of Supply Chain Management
that plans, implements, and controls the efficient, effective
forward and reverse flow and storage of goods, services and
related information between the point of origin and the point of
consumption in order to meet customers' requirements.
Four Subdivisions of Logistics
Business logistics
Military logistics
Event logistics
Service logistics
Value-Added Roles of Logistics
The five principal types of economic utility
which add value to a product or service :
Form
Time what?
Place
where?
Quantity when?
Possession
why?
How much?
While form and possession utility are not specifically related to logistics, neither would be possible
without getting the right items needed for consumption or production to the right place at the right time
and in the right condition at the right cost. These "five rights of logistics," credited to E. Grosvenor
Plowman, are the essence of the two utilities provided by logistics: time and place utility.
Logistics in the Firm:
Factors Affecting the Cost and Importance of Logistics
Competitive Relationships
Inventory / order cycle length.
Inventory / lost sales effect
Transportation / lost sales effect
Product Relationships
Product dollar value / logistics costs.
Weight density / logistics costs.
Susceptibility to loss & damage / logistics costs.
Spatial Relationships
Inventory / lost sales effect
1 2
Inventory level
Transportation/lost sales effect
3
Weight density / logistics costs
5
Product dollar value / logistics costs
4
Susceptibility to loss & damage/logistics costs
6
Spatial Relationships:
MTS
Stocked Locally
MTS
Stocked Centrally
ATO
MTO
Stocked Materials
MTO
Purchased Materials
ETO
Long Short
Push-Pull Strategy
Push / Pull Boundary
Furniture SC
Grocery SC
Traditional PC Industry
Dell - the Pull-Push boundary
PC SUPPLY CHAINS
Customer Customer
PULL
Virtual Integration
Distribution
Channels
PULL
Dell
PUSH
Manufacturer
Suppliers PUSH
Suppliers
MTS ATO
Lean vs Agile Strategy
Supply chain dynamics
High utilization
Lean
Mismatch
Low cost
supply chain
management
Low throughput times
Deployed inventory
Flexible suppliers
Responsive
Agile
High utilization
Purely functional: e.g. Established goods: e.g. New models of existing goods: Entirely new product: e.g. fashion
petrol soap powder e.g. new TV set item
1999 2009
Product Life-Cycle: Fashion
<
Unchanged over years, only 5% Differed in color, size, style, etc.,
95% new
Forecasting Error?
<
Markdowns?
Rare
<
Deep discount in the end of the season
Two Types of Products
New-service/product
introduction Infrequent Frequent
Inventory
investment Low; enable high inventory turns If needed to enable fast delivery time
limited Capabilities?
Achieving Strategic Fit:
Consistent SCM and Competitive strategies
High
DELL
Ef
Responsiveness
fic
ien
cy
F ro
n ti e
r
WAL-MART
Low
High Cost (Efficiency) Low
Achieving Strategic Fit
Uncertainty/Responsiveness Map
Responsive supply Companies try to move
chain Zone of Strategic fit High Cost
INTRODUCTION
Responsiveness
spectrum
MATURING
COMMODITY
Competitive Strategy
Efficiency Responsiveness
Supply Chain Structure
• Information-related decisions
– Push vs. pull
– Extent and modes of information sharing and coordination
– Forecasting and Aggregate Planning schemes
– Pricing and revenue management policies
– Enabling Technologies:
• Electronic Data Interchange (EDI): Enables paperless transactions, primarily for “backend”
operations of the SC.
• The Internet and the WWW.
• Enterprise Resource Planning (ERP): enables transactional tracking and global visibility of
information in the SC.
• Supply Chain Management (SCM) software: decision support tools.
Drivers of Supply Chain Performance
• Facilities
– places where inventory is stored, assembled, or fabricated
– production sites and storage sites
• Inventory
– raw materials, WIP, finished goods within a supply chain
– inventory policies
• Transportation
– moving inventory from point to point in a supply chain
– combinations of transportation modes and routes
• Information
– data and analysis regarding inventory, transportation, facilities throughout the supply chain
– potentially the biggest driver of supply chain performance
• Sourcing
– functions a firm performs and functions that are outsourced
• Pricing
– Price associated with goods and services provided by a firm to the supply chain
Facilities
• Role in the supply chain Components of facilities decisions
– the “where” of the supply chain
• Location
– manufacturing or storage (warehouses)
– centralization (efficiency) vs.
decentralization (responsiveness)
• Role in the competitive strategy
– economies of scale (efficiency priority)
– other factors to consider (e.g., proximity to
customers)
– larger number of smaller facilities
(responsiveness priority) • Capacity (flexibility versus efficiency)
• Manufacturing methodology (product
focused versus process focused)
• Warehousing methodology (SKU storage,
job lot storage, cross-docking)
Types of Inventory
Inventory Cycle inventory
• Average amount of inventory used to satisfy demand between
shipments
Unexpected changes in customer demand (always
• Depends on lot size
hard to predict, and uncertainty is growing)
Short product life cycles Safety inventory
• inventory held in case demand exceeds expectations
Product proliferation
• costs of carrying too much inventory versus cost of losing
sales
Seasonal inventory
Uncertain supply • inventory built up to counter predictable variability in demand
Quantity • cost of carrying additional inventory versus cost of flexible
Quality production
Costs Opportunistic Inventory:
Delivery time • Takes advantage of “bargains”.
Enabling technologies
• Allows supply chain to become
EDI
more efficient and more
Internet
responsive at the same time
ERP systems
(reduces the need for a trade-off)
Supply Chain Management software
Sourcing Pricing
• Set of business processes required • Pricing strategies can be used to
to purchase goods and services in match demand and supply
a supply chain
• Firms can utilize optimal pricing
• Supplier selection, single vs. strategies to improve efficiency
multiple suppliers, contract and responsiveness
negotiation
• Low price and low product
• In-house vs. outsource availability; vary prices by
response times
• Pricing and economies of scale
• Supplier evaluation and selection
• Everyday low pricing versus high-
low pricing
• Procurement process
• Fixed price versus menu pricing
Considerations for Supply Chain Drivers
Five categories:
Intracompany intraoperation scope
Intracompany intrafunctional scope
Intracompany interfunctional scope
Intercompany interfunctional scope
Flexible interfunctional scope
Strategic Scope:
Intracompany Intraoperation Scope
Suppliers Manufacturer Distributor Retailer Customer
Competitive
Strategy
Product Dev.
Strategy
Supply Chain
Strategy
Marketing
Strategy
Strategic Scope:
Intracompany Intrafunctional Scope
Suppliers Manufacturer Distributor Retailer Customer
Competitive
Strategy
Product Dev.
Strategy
Supply Chain
Strategy
Marketing
Strategy
Strategic Scope:
Intracompany Interfunctional Scope
Suppliers Manufacturer Distributor Retailer Customer
Competitive
Strategy
Product Dev.
Strategy
Supply Chain
Strategy
Marketing
Strategy
Strategic Scope:
Intercompany Interfunctional Scope
Suppliers Manufacturer Distributor Retailer Customer
Competitive
Strategy
Product Dev.
Strategy
Supply Chain
Strategy
Marketing
Strategy
Different Scopes of Strategic Fit Across a Supply Chain
Suppliers Manufacturer Distributor Retailer Customer
Competitive
Intracompany
Strategy interfunctional
Intercompany
Product Dev. interfunctional
Strategy