You are on page 1of 34

Performance Measurement in Supply Chains

Course on “Supply Chain Management”
Prof. Ravi Shankar Department of Management Studies, Indian Institute of Technology Delhi, New Delhi

Performance Measurement in Supply Chains

Companies must always be concerned with their competition. From individual company performance to supply chain performance: the entire chain's ability to meet endcustomer needs through product availability and responsive, on-time delivery.

2

Performance Measurement in Supply Chains

To achieve that goal, you need performance measures, or "metrics", for global supply chain performance improvements. Performance measures must show not only how well

you are providing for your customers (service metrics) but also how you are handling your business (speed, asset/inventory, and financial metrics).

3

1

PURPOSE of PMS

The basic purposes of PMS are:
 

external reporting (economic rent), internal control (managing the business better) and internal analysis (understanding the business better and continuous improvement).

4

Objectives of Metrics
Measuring the activity (volume) and the SC performance  Setting goals and comparing the actual situation  Following a plan  Determining the levers that will help achieve goals and single out the priority action programs  Revealing the degree of flexibility

5

Performance measurement system (PMS): Desirable Features (contd.)
  

 

PMS should have multiple criteria Primary purpose should not be to reward or to punish Performance-to-schedule measures must use group, not individual results Specific goals must be established and reviewed PM must be understood by those whose performance is being measured. PM data must be available for constant review

6

2

Some Indicators..1..
      

Delivery performance Order fulfillment performance Fill rate (Make-to-stock) Order fulfillment lead time Perfect order fulfillment Supply-chain response time Production flexibility

7

Some Indicators..2..,
     

Total supply-chain management cost Value-added productivity Warranty cost or returns processing cost Cash-to-cash cycle time Inventory days of supply Asset turns

8

Some Indicators..3..
Financial : ROI, Turnover ratio Productivity: Total productivity  Efficiency: Realized Production /Planned Production  Customer LT: Time from order to delivery  Production LT: Time from order relapse to finished product  Production flexibility: ability to respond efficiently to demand variation
 
9

3

Operations. 11 Framework 2: Dimensions based measurement system  Any SC can be measured on three dimensions    Service Assets Speed 12 4 .Various frameworks for measurement      Framework Framework Framework Framework Framework 1: Function based measurement system 2: Dimensions based measurement system 3: Hierarchical measurement system 4: Balanced scorecard system 5:SCOR model 10 Framework 1: Function based measurement system  Covers detailed performance measures applicable at different linkages of SC  Marketing. Finance etc.

internal and external aspects. tangible and intangible measures.Framework 3:Hierarchical System Performance in the functional areas of  Inbound Logistics  Operations  Outbound Logistics  Marketing  Service-after-sales 13 Framework 4: Balanced scorecard  Various perspectives such as the following should be Balanced!     Financial Innovation & learning Customer service Internal business Balance scorecard balances and links financial and nonfinancial indicators. 14 Four Perspectives What must we excel at? Customer Perspective Objectives Measures Targets How do our customers see us? How do customer see us? Internal Business Objectives Measures Targets What must we excel at? Innovation and Learning Vision and Strategy How can we continue to improve and create value? Objectives Measures Targets Financial Perspective How do we Look to shareholder? Objectives Measures Targets How do we look to stakeholders? How can we continue to improve and create value 15 5 . performance drivers and outcomes.

•Customer ranking survey •Customer satisfaction index •Market share 16 Internal Process Perspective Focuses on what an organization must be doing well internally to meet the customers’ needs. Stakeholder and Implementer Perspective Focuses on what an organization must be doing well to achieve the mission from the customer’s perspective.Customer. •Hours with customer on New Work •Tender success rate •Project performance index •Project closeout cycle 17 Financial Perspective Focuses on ensuring adequate funding and resources to sustain and improve the internal processes •Financial Perspective •Return-on-capital-employed •Cash Flow •Project Profitability •Sales Backlog 18 6 .

Growth and Innovation Perspective Focuses on how an organization is innovating. improving.supply- Framework 5:SCOR model   20 SCOR Framework Plan Supply Chain Demand Chain Deliver Source Make Deliver Return Return Return Source Return Make Deliver Return Source Make Deliver Source Return Return Return Supplier’s Supplier Supplier (Internal or External) Your Company Customer (Internal or External) Customer’s Customer SCOR Model Building Block Approach Processes Best Practices Metrics Technology 21 7 . •% revenue from New services •Rate of improvement Index •Staff Attitude survey •Revenue per employee 19  The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference-model (SCOR) as the cross-industry standard for supply chain management The SCC was organized in 1996 by 69 voluntary member companies and the European Chapter was started in 1998. and learning in order to support success. www.Learning.supply-chain.org www.

Delivery Performance Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity Warranty / Returns Processing Costs Select a spread of measures Consider where data is available Supply Chain Costs I N T E R N A L The costs associated with operating the supply chain. at the correct time. Cash-to-Cash Cycle Time Inventory Days/weeks of Supply Asset/Inventory Turns 23 Measuring Supply-Chain Performance  One of the most commonly used measures in all Supply Chains is “Inventory Turnover” Inventory turnover   Cost of goods sold Average aggregate inventory value In situations where distribution inventory is dominant. to the correct place.Analysis Methodology Plan P2 Plan Source P1 Plan Supply Chain P3 Plan Make Enable Plan P4 Plan Deliver Source S1 Source Stocked Products Make M1 Make to Stock Deliver D1 Deliver Stocked Products S2 Source MTO Products M2 Make to Order D2 Deliver MTO Products S3 Source ETO Products M3 Engineer to Order D3 Deliver ETO Products Enable Source Enable Make Enable Deliver Return Source Return Deliver 22 Supply Chain Performance Measurement E X T E R N A L Performance Attribute Supply Chain Delivery Reliability Supply Chain Responsiveness Supply Chain Flexibility Performance Attribute Definition Level 1 Metric The performance of the supply chain in delivering: the correct product. This includes the management of all assets: fixed and working capital. The velocity at which a at which a supply chain provides products to the customer. with the correct documentation. “Weeks of Supply” is preferred and measures how many weeks’ worth of inventory is in the system at a particular time  Average aggregate inventory value   52 weeks Weeks of supply     Cost of goods sold   CUSTOMERS SUPPLIERS 8 . Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. to the correct customer. in the correct condition and packaging. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. in the correct quantity.

Example of Measuring Supply-Chain Performance Suppose a company’s new annual report for FY (Financial Year) 2008-09 claims their costs of goods sold for the year is Rs.57 means that the inventory is not turning over as quickly as it had in the past.160/ Rs.160 million and their total average inventory (production materials + work-in-process) is worth Rs.35 = 4.375 weeks in FY 2008-09 = 11.625 days in FY 2008-09 9 . Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry.35 million. it is clear that in FY 2008-09 (as compared to earlier) they needed more inventory relative to their cost of goods sold.35/ Rs.375*7 days in FY 2008-09 = 79. But.160)52 = 11. What is this year’s Inventory Turnover ratio? How did this supply chain performed last FY? Example of Measuring Supply-Chain Performance Inventory turnover  Cost of goods sold Average aggregate inventory value = Rs. a drop to 4.57 in FY 2008-09 Since the company’s normal inventory turnover ration is 10. (What could be possible reasons?) Example of Measuring Supply-Chain Performance  Average aggregate inventory value   52 weeks Weeks of supply     Cost of goods sold   = (Rs. This company normally has an inventory turn ratio of 10.

57 turns 28 Key Supply Chain Metrics E X T E R N A L Performance Attribute Supply Chain Delivery Reliability Supply Chain Responsiveness Performance Attribute Definition Overall Supply Chain Metric Delivery Performance Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Cost of Goods Sold Total Supply Chain Management Costs The performance of the supply chain in delivering: the correct product. in the correct quantity. to the correct customer. Supply Chain Flexibility Supply Chain Costs I N T E R N A L Value-Added Productivity Warranty / Returns Processing Costs Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. The costs associated with operating the supply chain. The velocity at which a at which a supply chain provides products to the customer. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turns 29 Some Issues…      Performance measurement system and its linkages with strategy Behavioral issues related to performance measurement system Development of Multi-criteria decision making framework Role of information system in measurement Benchmarking and performance measurement system 30 10 . in the correct condition and packaging. to the correct place. This includes the management of all assets: fixed and working capital. with the correct documentation. at the correct time.Supply Chain Scorecard & Gap Analysis Supply Chain SCORcard Overview Metrics SCOR Level 1 Metrics Supply Chain Reliability EXTERNAL Delivery Performance to Commit Date Fill Rates Performance Versus Competitive Population Actual 50% 63% 0% 35 days 97 days 45 days 19% Average 85% 94% 80% 7 days 82 days 30 days 13% Advantage 90% 96% 85% 5 days 55 days 25 days 8% Superior 95% 98% 90% 3 days 13 days 20 days 3% Value from Improvements Perfect Order Fulfillment Order Fulfillment Lead times Supply Chain Response Time Production Flexibility Total SCM Management Cost Responsiveness Flexibility Calculate Value from Financial Data Gathered INTERNAL Cost Warranty Cost NA NA NA NA Value Added Employee Productivity Inventory Days of Supply NA $156K 55 days 80 days 8 turns $306K 38 days 46 days 12 turns $460K 22 days 28 days 19 turns 79.625 days 196 days Assets Cash-to-Cash Cycle Time Net Asset Turns (Working Capital) 4.

COURSE RECAP ONE MORE QUOTE 11 .

He is doing us a favor by giving us an opportunity to do so. He is doing us a favor by giving us an opportunity to do so. We are not doing him a favor by serving him. He is not an interruption on our work. who is knocking our door… He is not an interruption on our work. We are not doing him a favor by serving him.Gandhi Believed in Quality: But his Approach was simple “Customer is the most important visitor on our premises.” 36 12 . He is not dependant on us.” 34 – Gandhi THEN: OUR TOP SECRET (MY PHILOSOPHY) TEACHING 35 We Believe in Gandhi: So our Approach is Same “Student is the most important part of our system. He is a part of it. He is a part of it. We are dependant on him.

APPARAL SC. 15 sites •P/S movement of avg. Shankar. Delhi-2007-08 13 . 30(c) R.. etc. 350 materials.COURSE REVISION & OVERVIEW (1)  SUPPLY CHAIN BASICS  EXAMPLE OF DELL SC.a. IIT crore p. HP (Aggregate Forecast) CASE STUDY  DEMAND MANAGEMENT  37 The Linear Supply Chain 38     Out of synch with today’s networked environment Limited visibility & velocity Assumption-based planning Inventory build-up Supply Complexities IN GSK--1 Finished Goods Movement •250 vendors. 1200 kms •Over 1000 consignments/ month shipped across 130 site-depot linkages •12 supply sites catering to 37 markets •Primary freight cost of Rs.

Prof. LESSONS TO LEARN Supply Chain involves many Complex Situations involving Inventory. trim the lead times. p B4. G-5: Key to success is Responsiveness (Agile Supply Chain). Learn to be Adaptive to Changes G-8: Financial Decisions are often the Guiding Force to 42 the Supply Chain Operations Prof. Ravi Shankar (2011-12) 40 Case Study#2: TIPCO FOOD. Look at these steep drops in exchange rate. (generally) more accurate is forecast. the revenue inflow from exports has gone down by about one fifth of its value few months back.LESSONS TO LEARN Supply Chain involves many Complex Situations involving Inventory. their supply chains do G-3: A supply chain is as good as its weakest link G-4: Nearer you are from POS. these export-oriented firms are 41 focusing on local market to boost their sales. As a protective measure. In 2006-07. Reference: Bangkok Post: 4 August 2007. For the same export. Accurate forecast) reduces Inventory problems (like. G-1: Quality Information (Such as. Tipco global supply chain came under tremendous threat. Ravi Shankar (2011-12) 14 . Information and Money Flows. Coordination & Synchronization (Strategic Alliance and Operational Efficiency) G-6: Global Alliance is an Important Strategic Intent in an International Supply Chain G-7: Supply Chain Decisions are often Dynamic in Nature. stockout & safety stock) G-2: Companies do not compete now. early 2007 -Baht 37 per $. So. It has crumbled as follows: >late 2006. Tipco Food is one the largest Thai exporters of this product with a whopping figure of Baht 3.7 billion. THAILAND Thailand has the largest global market share of around 45% in processed pineapple. Efficiency (Lean Supply Chain).Baht 33 per $. Most of these export-oriented supply chains have become noncompetitive in global market.Baht 41 per $. Information and Money Flows. due to weakening of US dollar ($) against most of the global currencies. July 2007. including Baht.

75+1.5+2.25+3.83 83.25)/(18+15+14+11+13+11)]100 43 Aggregate Forecasts at SC Level G 9: Aggregate forecasts are more accurate G 10: Forecast at the most aggregate/generic level possible G 11: Similarly. forecast at the most upstream of the supply chain (if possible) G 12: If possible.67 18250 18750 19000 18625 18500 18000 -1750 -250 2000 625 500 1000 1020.17 MA(4) Error Demand 18000 18000 18500 18500 20000 19000 17000 18000 18000 17000 Total MA(4) Error MA(4) (10000+14000+16000+12000)/4) -5000 0 1250 3750 1500 2250 2291. At the lower levels. never use forecast information at the lower levels.Forecast accuracy improves at different levels#3 110 V Months 1 2 3 4 5 6 7 8 9 10 MAD Forecast Accuracy Demand 10000 14000 16000 12000 18000 15000 14000 11000 13000 11000 13000 15000 15250 14750 14500 13250 13000-18000 220 V Error Demand 8000 4000 2500 6500 2000 4000 3000 7000 5000 6000 5250 3750 3750 3875 4000 4750 3250 -250 750 -3125 -1000 -1250 1604.35% 94. decisions should be based on actual demand 44 Aggregate Forecasts at SC Level Aggregate forecasts is possible at least by three ways: G 13: Aggregate demand by product= Focus on new product Innovation for this G 14: Aggregate demand by market and then forecast for many markets G 15: Aggregate demand by time= Focus on longer duration forecast (like monthly rather than daily) and go up to it with replenishment cycle 45 15 .38% (5000+1250+3750+1500+2250) / 6 100-[(5+1.23% 64.

Shankar (20104711) LESSONS TO LEARN Supply Chain involves many Supply Chain Partners. never use forecast information at the lower levels. Ravi Shankar (2011-12) 48 16 . Cost management is very important in longer and complex Supply Chains. May also result in reduction in Lead Time.20 Distributor Retailer Customer Rs. forecast at the most upstream of the supply chain (if possible) If possible.413.50 62% (c) R. and Lesser Inventory Prof.527. decisions should be based on actual demand 46 Case Study#4: Magnitude of Supply Chain Costs Example: The Apparel Supply Chains Cost per Shirt Percent Saving 0% Manufactur er Manufactur er Distributor Retailer Customer Rs.204. At the lower levels.40 28% Manufactur er Distributor Retailer Customer Rs. G-16: Disintermediation Leads to Cost Saving.Product Redesign Helps Supply Chain Competitiveness       Product Redesign may help competitiveness and cost reduction Delayed product differentiation is the key to this redesign Aggregate forecasts are more accurate Forecast at the most aggregate/generic level possible Similarly.

manufacturing policy can be altered by adopting assemble-to-order or make-to-order strategies 49 Prof. 18 PC 6 Regional Distribution Centers Depots (70 No) 70% volume Made to stock Dealer(15000) 3000 SKUs Export & Industrial Consumers (2000) Made to order 17 .Case Study#5: B2C@Dell Computers Master Board Dell Assembly Plant Direct Shipment Hard disk Website or Phone Customer wants To buy computer Customer’s Order SRAM Concept of Disintermediation in Dell Direct Supply Chain On-line orders eliminate intermediary steps in the traditional ordering process. 25% Imported PM-300 SKUs. 140 Suppliers 5 Plants. Ravi Shankar (2011-12) 50 Case Study#6: Supply Chain at Asian Paints RM – 600 SKUs. Ravi Shankar (2011-12) LESSONS TO LEARN G-17: Disintermediation Requires Some Form of Re-intermediation G-18: Technology Helps in Supply Chain Efficiency Prof. 350 Suppliers 75% Domestic.

Postponement in Practice   Dealer Tinting System In factory they make “Base/white" only Raw base sent to the dealers Customers choose their desired shades via computer systems at the dealer end Dealer mixes the desired base and the colorants with help of the DTS >2500 dealers have DTS 52     LESSONS TO LEARN Large Number of SKUs is Good for Customization but Poses Tremendous Pressure due to Difficulty in manageing Stock-outs and Pipeline Inventory G-19: Try to have a Generic Product as late as possible in the supply chain. near Treviso. preferably when demand penetrates the supply chain Prof. Ravi Shankar (2011-12) 53 Case Study#7: Benetton (A world leader in knitwear) Knitting Dyeing Wool Plant in Castrette. Computerized knitting loom capable of automatically producing the most complex product (c) R. Differentiate it into a customized one. IIT Delhi-2011-12 designs 18 . Shankar. Knitting Dyeing vats for the finished knitted product. division.

EOQ etc. Ravi Shankar (2011-12) 56 COURSE REVISION & OVERVIEW (1)  Inventory: Basics.Case Study#8: Benetton Manufacturing Process Postponement Old Sequence Purchase Yarn Dye Yarn Finish Yarn Knit Garment Parts Join Parts 55 New Sequence Purchase Yarn Knit Garment Parts Join Parts Dye Garment is postponed Finish Garment This process LESSONS TO LEARN G-20: Delayed Product Differentiation Helps in Reducing Safety Stock and thereby Supply Chain Cost.  RISK POOLING CASE STUDY    DESIGN OF LEAN SUPPLY CHAINS JIT SYSTEMS  TOYOTA CASE STUDY (THROUGH VIDEO) NETWORK DESIGN   OPTIMIZATION & HEURISTICS IN SC DESIGN LEARNED & USED SOFTWARE (TUTORIAL MODE) 57 19 . G-21: Process and/or Product Redesign may help supply chain operations Prof.

like 3PL/4PL etc. Like FTL as compared to LTL G-23: Outsource your non core-competency area to a Reliable supply chain partner.pdf 58 LESSONS TO LEARN G-22: Always Look For Opportunities of Economic of Scale.edu/me/iaes/group_press/chuah.engr.uky. Ravi Shankar (2011-12) 59 COURSE REVISION & OVERVIEW(2)  BULLWHIP EFFECT    P&G case study SUPPLY CHAIN GAME BEER DISTRIBUTION GAME (HW) IN CD 60 20 .Case Study#9: Logistics Planning in Auto Supply Chains Source of Schematic: http://www. Prof.

. 1998 LESSONS TO LEARN G-24: Bullwhip Effect Reduces if You Use CPFR (Collaborative planning Forecasting & Replenishment) G-25: Bullwhip Effect Reduces if You Control Price Fluctuations G-26: Bullwhip Effect Reduces if You Compress Lead Time Prof.Case Study#10: P&G: What Management Gets. Ravi Shankar (2011-12) 62 SC Game: Watch how Bullwhip effect has aggravated Week Manufacturer Prod 100 60 Stock 100 100 100 80 80 100 100 95 95 Distributor Prod 100 80 100 95 95 Stock 100 100 100 90 90 95 95 95 95 95 Retailer Prod 100 90 95 95 95 Stock 100 100 100 95 95 95 95 95 95 95 Demand 1 2 3 4 5 95 100 95 95 95 95 120 90 95 21 .. Electronic Commerce and Value Chain Management. Production Plan Order Size Customer Demand Time Source: Tom Mc Guffry.

SCM Head Maruti MANY EXAMPLES  IT-ENABLED SUPPLY CHAINS: FOCUS ON EMERGING TRENS   RFID CLOUD COMPUTING. etc. BALANCE SCORECARD APPROACH  PERFORMANCE MANAGEMENT OF SUPPLY CHAINS   Reverse Logistics & Green Supply Chains 65 Cross-docking 22 . etc. GLOBAL ISSUES VIDEO OF Mr. Maitra. Video: Safe Express MUMBAI DABBAWALLAH CASE STUDY (Some Discussion) Few examples  GLOBAL ISSUES IN SUPPLY CHAIN   Strategic Partnership in SUPPLY CHAIN    3PL SR Partnership Dealer network 64 COURSE REVISION & OVERVIEW(3)  CONDUCTED TOURS OF SUPPLY CHAIN    TOYOTA: VENDOR DEVELOPMENT.COURSE REVISION & OVERVIEW(2)  DISTRIBUTION SYSTEM DESIGN    CROSS DOCKING.

Lesser Material handling and Lower Cost of Distribution G-30: Effectiveness of VMI requires Coordination between Supply Chain Partners G-31: Use POS Technology and Communication Network to Facilitate the Coordination and 69 Synchronization in aProf.RFID and Other IT Tools in Supply Chains                                                           VMI in Use  In the Factory  At customer sites 68 LESSONS TO LEARN G-27: VMI Helps Supply Chain to Become Lean G-28: POS Information is Key to Supply Chain Planning & Replenishment G-29: Cross Docking is an Effective Distribution Strategy as it Helps in Shorter Lead-time. Ravi Shankar Chain Supply (2011-12) 23 .

Case Study#11: Nano Plant LESSONS TO LEARN G-32: Locate your Vendor Nearby G-33: Just-in-time (JIT) and Kaizen (continuous Improvement) must go hand-in-hand G-34: Develop Strategic Partnership in your Supply Chain G-35: Focus on Vendor Development G-36: Rationalize the Vendor-base G-37: Money lies in Cost cutting and Innovative Product/Process/Supply-chain Design G-38: Learn to manage the Supply Chain Risks (There are many) Prof. Ravi Shankar (2011-12) 71 Case Study#12 RISK POOLING USING CENTRALISATION OF STOCKING 72 24 .

Countermeasure to Cope up with Risk (say.Factory Central warehouse Market one Market two LESSONS TO LEARN G-39: If You Pool Risks in a Supply Chain (say. particularly to the vulnerable section of the society and To maintain buffer stocks as a measure of Food Security To intervene in the market for price stabilization. by Centralised Warehousing). Safety Stock to Maintain a Service Level under Demand Uncertainty) will Go Down as Compared to Disaggregated Risks (say. Decentralised Warehouses) Prof. 1965 by an Act of Parliament. Ravi Shankar (2011-12) 74 Case Study#13: FCI  The Food Corporation of India was set up on 14th Jan. To make foodgrains available at reasonable prices.   25 . Its Primary Objectives are as follows :   To provide the farmers remunerative prices.

Ravi Shankar (2011-12) 76 Supply Chain Integration 77 Push-Pull Supply Chains The Supply Chain Time Line Suppliers Customers PUSH STRATEGY Low Uncertainty PULL STRATEGY High Uncertainty Push-Pull Boundary 78 26 .LESSONS TO LEARN ==Many Vital Supply Chains are Worst Managed ==Warehousing often a Weak Link == Supply Chain Management is Full of Opportunities G-40: Reduced Supply Chain Wastages Makes it Effective G-41: Food Security is Linked to Effective Supply Chain Management G-42: Every Supply Chain is Different=> Manage it to its Merit Prof.

350 Suppliers 75% Domestic. 25% Imported PM-300 SKUs. 140 Suppliers 5 Plants. 18 PC 6 Regional Distribution Centers Depots (70 No) 70% volume Made to stock Dealer(15000) 3000 SKUs Export & Industrial Consumers (2000) Made to order 27 .Characteristics and Skills Raw Material Push Low Uncertainty Long Lead Times Cost Minimization Resource Allocation Pull High Uncertainty Short Cycle Times Service Level Responsiveness 79 Customers Two key de-coupling points Forecast Driven Less uncertainty due to enrichment of undistorted Material data Order Driven Push de-coupling point Pull Market sales Factory Information de-coupling point Assembler Finished goods Stock Retailer Direct market sales information Source: Mason-Jones & Towill 80 Supply Chain at Asian Paints RM – 600 SKUs.

Case Study#14 Emergency Supply Chain Gujarat Earthquake on 26 January 2001 After Gujarat Earthquake on 26 January 2001 28 .

Ravi Shankar (2011-12) 85 REVERSE LOGISTICS SUPPLY CHAIN BUSINESS PROCESSES Companies are linked through a common set of processes cutting across the supply chain Information Flow Tier 2 Supplier Tier 1 Supplier Purchasing Production Manufacturer Logistics Customer Marketing & Sales Finance Consumer PRODUCT FLOW R&D Supply Chain Business Processes CUSTOMER RELATIONSHIP MANAGEMENT CUSTOMER SERVICE MANAGEMENT DEMAND MANAGEMENT ORDER FULFILLMENT MANUFACTURING FLOW MANAGEMENT DEMAND MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT PRODUCT DEVELOPMENT AND COMMERCIALIZATION RETURNS MANAGEMENT 29 .LESSONS TO LEARN Emergency Supply Chain is a Different Ball Game G-43: Too much may be too Bad in Emergency Supply Chains G-44: Alignment of Functional Strategy and Coordination are keys to success of a Emergency Supply Chain G-45: Quick Response Would Lead to Effective Supply Chains Prof.

1999).Reverse Logistics Defined The process of planning. cost effective flow of raw materials. finished goods. and controlling the efficient. implementing. and related information from the point of consumption to the point of origin for the purpose of recapturing value or of proper disposal. (Source: Rogers and Tibben-Lembke. inprocess inventory. Forward and reverse logistics Forward Logistics Design Supply Production Distribution Use Disassembly Repair Refurbishment Remanufacturing Incineration Recycling Disposal Landfill Reuse Sorting/Testing Collection Reverse Logistics Green supply chain LOW CARBON SUPPLY CHAIN 30 .

What is GSCM ? Green supply chain management (GSCM) = (green purchasing + green manufacturing / materials management + green distribution / marketing + reverse logistics) Plan P2 Plan Source P1 Plan Supply Chain P3 Plan Make P4 Plan Deliver P5 Plan Returns Suppliers Source S 1 Source Stocked Products Make M1 Make-to-Stock Deliver D1 Deliver S tocked Products S2 Source MTO Products M2 Make-to-Order D2 Deliver MTO Products S3 Source ETO Products M3 E ngineer-to-Order D3 Deliver ETO Product s Return Source Return Deliver Customers Environmental Management Enable Supply Chain Management Green Supply Chain Management The 5ecos PDSL model Carbon emission in business operation Emission of business operation Direct Emission Indirect Emission Scope 1 Scope 2 Generation of Electricity heat or steam Manufacturi ng process Transportation of material product or employee Scope 3 Purchase Electricity Transportation of 3PL Waste Disposal Leased asset 31 .

Outsourcing. etc 95 Achieving the 21st Century Supply Chain: Seven More Areas of Opportunity 1 Use of low cost sources 3 Focused manufacturing strategies 5 Globally aligned operations 6 Built in agility 2 Creative use of strategic partnerships OEMs. logistic Optimisation 7 Industry wide solutions THE ‘GOAL’ IS TO CREATE AN AGILE BORDERLESS SUPPLY CHAIN THAT IS BASED ON Prof. sub contracting Multiple Channels 4 Distribution.Reverse logistics operations in a leading automobile company Warranty returns Customer A1 Proprietary items Customer Process scrap Casting vendors Scrap Metal scrap Metal Mills Recycling Scrap Dealers Disposal Landfill Plastics Incinerator Disposa l Material flow Information flow STUDENTS’ CASES? TERM PAPERS COVERED    Maruti Blood SC PDS . Ravi Shankar (2011-12) 96 LOWEST COST ECONOMICS 32 .

STUDENTS’ ASSIGNMENTS  SUBMIT Term Paper in WORD  Case Study PPT (Group)  Assignment (Caselets)  Provide Reference Material in a folder 97 STUDENTS’ TERM PROJECT      PRACTICAL FOCUS TEMPLET PROVIDED in the class (Like a paper) Else use MARUTI format AUTHORED BY ME EMBEDDED WITH THEORY & PRACTICE BOTH PPT + WORD FILE (TO BE SUBMITTED FOR EVALUATION) 98 WHERE TO GO FROM THIS POINT  APPLY CONCEPTS AT YOUR WORK PLACE  LEARN NEW CASES & APPLICATIONS  BE IN TOUCH AND FEEL FREE TO SEEK ADVISE  Read text book once more 99 33 .

CHAPTER 1 Introduction to the Field Tata McGraw 34 .