Evolution of SCM

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 In the inception....
Barter system was the first supply chain
In early 1900s, the farm products distributors realized
the importance for providing time and place utility.
The word logistics was first associated with the
military in 1905 as a branch of war that pertains to the
movement and the supply for armies.
During World War II, military forces made effective
use of logistics models and forms of systems analysis
to ensure that the required material was at the right
place on time every time.

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 Until about mid 1950's, the field of supply chain
management was in a state of dormancy.
Production and manufacturing were given uppermost
attention.
The inventory was the responsibility of the marketing,
accounting and/or production areas and order
processing was an accounting or sales responsibility.
This fragmented way resulted in a great deal of friction
on account of the conflicting objectives between
production, marketing, accounting and finance. 

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 Scope of Supply Chain
 This led to the assertion in the early 1960's that logistics was
one of the real frontiers of opportunity for enterprises to
improve their corporate efficiency.
 Initial focus and emphasis was on the internal front, limited
to productivity within the four walls of the factory or
manufacturing till the 1970's.
 During the Ethiopian famine relief efforts of the 1980's, the
term logistics was applied to the food-supply activities.
 The 1980's stressed the need for quality, whereas the 1990's
have seen the emergence of the supply chain management
and the millennium trends on e-business or IT enabled supply
chains.

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 Supply chain Management… A look Back

Further Refinement
of
SCM Capabilities

SCM
Formation/
Extensions
IT, TQM, BPR,
Alliances

Inventory Management/Cost
Optimization

Traditional Mass Manufacturing

1950s 1960s 1970s 1980s 1990s 2000s Beyond

EOQ MRP JIT VIM ERP CPFR
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 Logistic Culture
 The notion of time based competition through ECR initiative
launched throughout 1990 to promote the spirit of collaboration.
 Organizations had to accommodate and embrace ECR.
 UK was vanguard of implementing ECR with Tesco and
Sainsbury claiming to have saved hundreds of millions of
pounds during the period
 Manufacturer retailer relationship has undergone major change
the retailer dictates where and when suppliers will deliver the
products to specific sites. Eg: Tesco, Walmart
 Organizational change that has been evolving is how to share
both the benefits of and costs of the initiative. The advent of
ABC costing has allowed ‘process’ approach to be taken to
supply chain activities.

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 Role of the logistics as service provider
Collaboration between retailer and professional
logistics contractors was generally overlooked.
The role of Logistic service provider has been
enhanced.
Now involved in efficient replenishment,
consolidation of loads etc
LSP better equipped to manage some of these
initiatives than manufacturer or retailer
Tibbett & Britten providers Wal-Mart logistics
support to stores acquired in Canada and Germany.

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 Internationalization of best practice
Internationalization of logistics practice has been
achieved through the formal and informal transfer of
‘know-how’ between the companies and countries
with regard to product assortment, promotion and new
product launch
Eg: Tesco initiated a 3 year plan to transfer Tesco UK
‘know-how’ to Tesco Ireland.
Ahold in Netherlands through Albert Heijn developed
state of the art distribution system based on the UK
composite model.

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 With centralization, new technologies, both in material
handling and information handling ECR and the
implementation of best practice principles have resulted in
logistics becoming a key management function within
retailing.
The key factors being the internationalization of retail
businesses and eventual size of e-commerce.
The two strategic factors interlinked . Internet brings the
consumers seeking products and services to the
international market. Retailers join their suppliers in global
exchange such as World Wide Retail Exchanges to reap
benefits of reduced costs by streamlining procurement.

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 Fashion Supply Chain

• The increasing globalisation, the market diversification

and the volatile fashion intensify competition in the
apparel chain.
• Companies are forced to gain market shares by
increasing product diversity to improve market share.

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 The diversity factor determined by various consumer
perceivable attributes of apparel like design, handle,
size and fit, leads to corresponding wide spectrum of
manufacturing parameters in upstream direction.
This variability in production parameters and
corresponding small batch size are major deterrents in
achieving delivery schedule and quality standards,
which severely affect the marketability of a brand.
This is a typical problem faced by apparel supply
chain, as scheduling of work becomes complicated by
the introduction of a highly diverse range of products.

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 Consumer perceives apparel merchandise through a
unique set of attributes.
The Unique Value Proposition (UVP) of an apparel
item is governed by visual and other sensation.
These subjective sensations can be captured through
objective parameters like design, comfort and handle.
Each of these objective parameters is influenced by
various material & process characteristics in the
upstream direction of apparel chain

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 After having focused heavily on the integration of
internal processes for cost reduction, quality
requirements etc, organizations shift their focus on
outside the organization from supplier integration to
supply chain integration, from buyer supplier
partnership to channel partnerships etc.

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 Supply chain integration
Is a state where timely information is transmitted
among trading partners.
Enables adjustments for changes in requirement for
material, production or delivery
Companies like Benetton and the Limited have gained
significant advantages through their ability to respond
to fashion changes in the market

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 Channel partnership
Channel partnership have become popular in the apparel
industry,
VR Corporation , The limited have formed channel
partnership with both discounters and department stores
VF Corporation made use of Replenishment plus EDI
(REDI) an inventory management tool for stock updates.
Channel partnerships provide an opportunity for
companies to promote certain products or services.
In return, channel partners receive access to product and
marketing training, discounts, technical support.

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 Operations Improvements
A study confirms that suppliers and retailers using
Efficient Customer Response help save US$14.2 billion
by making store level changes on ordering, receiving,
merchandising and labor scheduling
Working partnerships open up new levels of effective
working such as cross docking and floor ready
merchandise
The Limited massive DC unpack, reassemble and ship
products at blazing speed. The inventory is in and out
within 18 to 24 hours.
Walmart stock is US $ 6.6 Billion using cross docking

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 Floor Ready merchandise
Goods can be made floor ready at any stage in the
supply chain.ie adding product labels price labels and
security tags.
Kohls 11th largest department store in the US with a
turnover of US$24 billion and 150 store. Over 150
million garments were pre hung by kohls vendor
partners

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 Product Development
Retailer and manufacturer get together to produce the
product.
The benefit of effective joint product development are
reduced new product failures, better availability for
successful launches and reduced introduction costs.

Zara can have a product on the shop floor within a

week of the original concept.

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 Product Harmonization
The key to mass customizing effectively is postponing
the task of differentiating a product for a specific
customer until the latest point in the supply network
This method is advantageous because of the following
reasons
Need for variety
Tailoring operation is not capital intensive
Rapid obsolescence of garment design
Obsolete design become slow moving
Short tailoring operation lead time

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 Vendor Managed Inventory
In cooperation relationship, the inventory is managed
by vendor.
Focus is on maintaining agreed stock levels, with
suppliers deciding how frequently to replenish and
what quantities to deliver.
Dell, Sun Microsystems

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 Collaborative Forecasting
All players participate in the forecasting exercise.
There is need for transparent relations between
members and the pipeline based on mutual trust.
The information needed would be non transactional
information which is broader and more far reaching.
The manner in which the information needs to be
accessed should be a ‘pull ‘ rather than the traditional
EDI method of ‘push’

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 Supply Chain Planning
Supply chain planning also known as Advanced
planning systems enable the companies to intelligently
manage the activities of the supply chain.
Information is the key to the supply chain visibility.
Decisions made further into the future have more
flexibility than decisions made closer to execution and
is known as funnel planning.
SCP differs from ERP by having a supply chain wide
scope and afford ability to pull out information from
the entire supply chain, providing a clear ,global
picture of where the enterprise is heading.

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