SC working capital

Supply chain working capital productivity: The analysis of firms on the metrics will also be based
on the level of inventory, accounts receivable and accounts payable. Firms with efficient supply
chains will have high supply chain working capital productivity.
SWC=INV+AR−AP
where SWC = supply chain working capital
INV = inventory
AR = accounts receivable from the dealers/distributors
AP= accounts payable to the suppliers

SWCP=NS/SWC
where SWCP = supply chain working capital productivity
NS = net sales

Virtual integration

Vertical integration is the notion of companies acquiring key suppliers and customers in order to
control the entire supply chain in an industry segment.Wherein Virtual integration is the notion
that shareholders are best served if companies focus their investments on specific areas of
specialization, thereby achieving unassailable efficiencies and output.

The advantages of virtual integration are the following

1) It provides an enhanced customer experience.
2) The lead time is reduced substantially.
3) Firms can focus more on the core competencies.
4) Reduces the inventory significantly.

Sourcing strategy

Sourcing strategy used for strategic products/components is Performance-based partnership

SC length

The total length of the chain is arrived at by adding up the days of inventory for raw materials,
work in progress and finished goods. The duration of time taken by the material flow is captured
by this measure.
The following formula (terms defined in table) are used to calculate the length of various stages
of the supply chain:
DRM, DWIP, DFG = Days of raw material, work in process, and finished goods.
DRM = RM x 365/CRM
DWIP = SFG x 365/CP
DFG = FG x 365/CS
the total length in days = DRM + DWIP + DFG
lead time

Supply chain lead time is the total time required for supply chain to carry out all activities from the
beginning to the end such as sourcing the material, manufacturing components , assembling the
product and delivering the product to the end customer.

The order delivery lead time is the latency between the initiation and execution of a process.
The lead time between the placement of an order and delivery of a product from a manufacturer.

Supply chain service level

The four attributes of measuring the supply chain service level are order delivery lead time,
responsiveness, delivery reliability, product variety.

Sourcing strategy

Systems strategy is used for Routine products.

Inventory turnover ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. This measures
how many times average inventory is sold during a period.
Inventory turnover ratio=sales/inventory
The inventory turnover ratio must be high which means that it must have low cost and high
inventory sales. it reflects the overall efficiency of the supply chain, from supplier to customer.

Re: ROA and SC performance

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
ROA gives a manager, investor, or analyst an idea as to how efficient a company's management
is at using its assets to generate earnings. Return on assets is displayed as a percentage and its
calculated as:
ROA = Net Income / Total Assets
Return on assets, or ROA, is a fundamental gauge of efficiency, measuring how well your
business is using its assets to generate profit. Supply chain management, meanwhile, is all about
improving efficiency, gaining a competitive advantage by streamlining the way you get products
into your company and then out to your customers. Improving supply chain management boosts
ROA through its effect on both profit and assets.
SC OPERATIONS
Key processes under Supply chain operations :

 Customer relationship management

 Supplier relationship management
 Customer service management
 Demand management
 The order fulfilment
 Manufacturing flow management
 Product development and commercialization
 Returns management

GST

Customisation of supply chain – Under GST, manufacturers can shift towards tailored supply
chain models as per customer requirements. The removal of stock transfer benefits can help in
increasing the share of direct dispatches for medium and large-sized dealerships.
Superior inventory management – After the elimination of multiple state-level taxes in lieu of a
uniform GST rate, the stock points have been optimised and channel inventories reduced. There
will be fewer transit stays after GST, which will help in advancing lead times while also reducing
inventory levels at stocking points. With more potential for consolidation, warehouse
management can also become more efficient.
Tangential decrease in incoming logistics costs – An impact of GST on supply chain will also
be seen in the form of tangential benefits for direct out-of-state procurements and logistics costs.
This can help manufacturers to expand their vendor base outside state boundaries and alter the
sourcing models profitably.
Cash flow management for export businesses – Due to GST, tax exclusion benefits will
continue with minimum effect on the bottom line, and a streamlined tax system will help in
promoting more exports.

SC TOPOLOGY
MTS- Hindustan Unilever, ITC, Nestle
MTO-Dell, L&T Construction Equipment and Volvo Construction Equipment
CTO- Dominos, Pizza Hut and KFC
Push vs pull
A Pull model supply chain- A pull strategy is related to the just-in-time school of inventory
management that minimizes stock on hand, focusing on last-second deliveries. Under these
strategies, products enter the supply chain when customer demand justifies it.
Impact of the pull strategy -With a pull strategy, companies avoid the cost of carrying inventory
that may not sell. The risk is that they might not have enough inventory to meet demand if they
cannot ramp up production quickly enough.
A Push model supply chain-A push-model supply chain is one where projected demand
determines what enters the process.
Impact of the push strategy-Under a push system, companies have predictability in their supply
chains since they know what will come when – long before it actually arrives. This also allows
them to plan production to meet their needs and gives them time to prepare a place to store the
stock they receive.
Agency cost
An agency cost is a type of internal cost that arises from--or must be paid to--an agent acting on
behalf of a principal. Agency costs typically arise in the wake of core inefficiencies, dissatisfaction
and disruptions, such as conflicts of interest between shareholders and management. Case in
point: while shareholders may want management to run the company in a fashion that increases
shareholder value, management may contrarily look to grow the company in ways that maximize
their personal power and wealth
Porter's value chain framework
The strength of the Porter’s Value Chain Analysis is its approach. The Porter’s Value Chain
Analysis focuses on the systems and activities with customers as the central principle rather than
on departments and accounting expense categories. This system links systems and activities to
each other and demonstrates what effect this has on costs and profit.
The Value chain framework developed by Michael Porter, has all supply chain activities are
classified as:
Primary Activities

 Inbound logistics
 Operations
 Outbound logistics
 Marketing and Sales
 Service

Support Activities

 Procurement
 Human Resource Management
 Technological Development
 Infrastructure

Companies use these primary and support activities as "building blocks" to create a valuable
product or service.
Companies, once they understand their core business activities can outsource other activities.
This will give them more time to focus on more important aspects of their business.

SC DESIGN
Efficient supply chain design is suited for what category of products ?
Efficient supply chain is suitable for Functional products where these products may not face
much demand uncertainty but, in real life they face large variability

SC DESIGN

Responsive supply chain design is suitable for innovative category of products.

SC stages

The stages in a typical supply chain are as follows:

1. Planning
2. source
3. make component
4. Assembly
5. Delivery

Focal firm

The Company/firm governing over the supply chain, providing direct contact to end customers by
providing goods and having bargain power over other entities/partners in the supply chain.

Sourcing strategy Competitive bidding as a sourcing strategy is used for what category of
products/components ?

Competitive bidding as a sourcing strategy is used for Leverage products/components. Firms should
be aggressive in their attempts to encourage competitive bidding in order to leverage their position.
Most of the benefits obtained by firms in reverse auctions have been in this category.

Make/buy

A make-or-buy decision is the act of choosing between manufacturing a product in-house or

purchasing it from an external supplier. In a make-or-buy decision, the most important factors to
consider are part of quantitative analysis, such as the associated costs of production and
whether the business can produce at required levels.

Profitability Vs Service leve

The service level rises the revenue level rises at an increasing rate, then the revenue increases
at a much lesser rate than the previous time and finally as the service level increases there is
very minimal or negligible rise in the revenue, and this is the point beyond which any
improvement in service will not produce a significant increase in demand, resulting in service
overkill. It is wise for the firm to operate at a specific level of customer service.

SC Cost and service level

The relationship between supply chain cost and customer service level is direct. If the firm tries to
increase the customer service then the cost also increases to improve the customer service level
and vice versa. If there is increase in the service quality for the product then the supply chain
cost will also increase and if the cost is reduced then there will be decrease in the service level in
the supply chain.
SC L/time and Order delivery L/time
In MTS, supply chain lead-time is greater than order delivery lead-time.
In MTO, supply chain lead-time is equal to order delivery lead-time.
In CTO, supply chain lead-time is greater than order delivery lead-time.

Sc cost reduction

1. Make Better Use of Space

2. Automate
3. Streamline Ordering Process
4. Monitor Customer Demand
5. Package Well
6. Consider the Links
7. JIT Inventory Management
8. Outsourcing

Sourcing strategy

Sourcing strategy for the bottleneck products or components is Performance Brand Partnership

Cost to Buy (CTB) = Volume x Per-unit cost when buying

Cost to Make (CTM) = Fixed costs + (Per-unit direct cost x volume)
If CTB < CTM then buy else Make.