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Supply Chain Management

An Overview
What is Supply Chain?
Concepts in Supply Chain Management
Internal integration
Internally integrated LMs in isolation
External integration
Value chain and supply chain
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Conceptual pipe line
Flows in the pipeline
Supply chain members
Set and subsets
Supply Chain Management
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Supply Chain Management
Scope - Source of raw materials to end
user - all upstream & downstream
organizations & linkages

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Encompasses all logistical management
activities involved
Sourcing (procurement)
Manufacturing support
Distribution activities
Includes coordination and collaboration
with channel partners to finally deliver the
product to end users
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Main objective - Supply chain profitability
by value creation
Focus - End User
Origin - extension of scope of logistics
management
A set of several subsets
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Definition - Management of upstream and
down stream relationships with suppliers and
customers to deliver superior customer value
at less cost to the supply chain as a whole
How SCM creates value?
1. Breaking the organizational barriers
2. Sharing of sales information in real time
3. Inventory visibility
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4. Reduces inventories by reducing
uncertainties
5. Compresses value chain by slashing lead-
times thereby quickening cash flow
The channel partners
1. Suppliers product owners
2. Intermediaries experts in international
shipping who offer consultancy service to
suppliers
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3. Third-party service providers those who
offer logistics service for a fee
4. Customers the recipients of service
5. Manufacturers parts manufacturers
6. Transporters 3PL companies who offer
transportation service
7. Handlers 3PL companies who offer
material handling service
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8. Wholesalers who stock inventory and
offer in small quantities to retailers
9. Dealers who book orders and instruct
wholesalers to supply to retailers
10. Retailers offer products to consumers

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How SCM is created in business
SCM is an evolution, a result of external
integration in the decade of 1990
1. L/M of supplier companies in1980s reached
out to integrate vendors and customers to
stream line the inventory flow to collectively
deliver the value to the end user
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2. This external integration formed a
seamless chain of organizations focused
on the end users
3. The above seamless chain links the
source of raw materials to end users like a
pipeline
4. When a company reaches out in this
fashion to embrace other companies to
deliver value to end users, it is called an
extended enterprise
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Suppliers
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5. Extended enterprises form an Integrated
Supply Chain when they breakdown
organizational barriers to share sales and
inventory information
6. Integrated Supply Chain shares information
and coordinates logistical activities to ensure
coordination of goods & services, information
& cash through the pipeline
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7. Management of the extended enterprise is
Supply Chain Management
8. SCM integrates demand and supply
management within and across the
companies

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Organizational Barriers to Supply Chain
Integration
1. Lack of visibility/transparency
2. Reluctance to share information
3. Attitudinal problems, traditional mind set,
distrust
4. Inability to see long term benefits
5. Inadequate informational infrastructure
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Why SCM?
Customer-centric markets closed
conventional option to profitability!
Impact of philosophies & practices of the
1980s like TQM, JIT, TPM etc. dropped
manufacturing costs dramatically in the world
SCM is a new opportunity to improve
profitability and outwit the competition!
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Objectives of SCM
Product delivery to end user at minimum
cost
To eliminate or minimize bullwhip effect
To be competitive in global market
To increase market share
To improve shareholder value
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Important features of SCM
1. Complexity, two way flows
2. Breaking the organizational barriers
Sharing of sales information in real time
Inventory visibility - Reduces inventories by
reducing uncertainties
Compression of value chain by slashing
lead-times thereby quickening cash flow
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3. End user focus (help the customer to be a
better supplier!)
4. Pull system
5. Supply chain collaboration

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IT & Supply Chain Management
Information technology support in SCM
EDI through LAN, Internet, satellite
Tracking RFID, the invisible bar code
Planning - DRP, MRP, ERP
E - Business
Bull-whip Effect
The amplitude is smallest near the handle
but largest near the tip

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Bull-whip Effect is the uncertainty in
the supply chain caused by distorted
information flow
Large variations in demand upstream due
to small variations downstream
Caused by undisclosed discounts and
sales promotions by retailers down stream
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Lack of confidence in customers forecast
Customers rejecting backorder

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The consequences
Excess inventory
Problems with quality
Increased raw materials cost
Overtime expenses
Increased shipping costs
Lost customer service
Lengthened lead-times
Lost sales
Unnecessary created capacity

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How to avoid Bullwhip effect?
Transparency in terms of information
Real time information
EDI
Kanban
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40 units
Suppliers
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40 units
Producer
40 units
Distributor
Retailer
Supply chain in equilibrium
160 units
Suppliers
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80 units
Producer
40 units
Distributor
Retailer
Supply chain disrupted
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Some interesting supply chains trace these
supply chains
1. Indian postal service
2. News papers
3. Fuel
4. PDS
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Drivers of Supply Chain
(Factors which have played a role in evolution
of SCM SCM for competitive advantage by
Rangaraj, Raghuram & Shrinivasan)
1. Communication Technology
Informational and physical
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2. Competitive Factors
Lead-times
Costs
3. Business and Social Environment
Competitions between organizations
Competitions between supply chains
Pursuit of Continuous improvement


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4. Policy, regulation & industry initiatives
Abolition of central sales tax and
introduction of VAT
RFID
ISO standards for containers
5. the move from a Producer-Centric to
customer centric focus
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Logistics and Supply chain
Management
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particulars Logistics
management
Supply chain
management
1. Scope Inbound logistics,
manufacturing
support, outbound
logistics
All players in the
supply chain from
raw material source
to finished product
2. How this is
created in
business?
By internal integration By external
integration
3. Main
objective
Logistics cost
reduction
Supply chain
profitability by
value creation.
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particulars Logistics
management
Supply chain
management
4. Definition
Ref earlier slides Ref earlier slides
5. Origin military planning. As a logical
extension of
logistics
management
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Particulars Logistics
management
Supply chain
management
6. Focus L/M tries to take
the product to the
consumer at
minimum logistical
cost. Hence it is
supply driven.
SCM focuses on
value creation in
the supply chain.
Hence this is
customer focused
or demand driven.