GL&SCM

UNIT 4
Supply chain

What is a supply chain?

A supply chain is the network of all the individuals, organizations, resources, activities and
technology involved in the creation and sale of a product. A supply chain encompasses
everything from the delivery of source materials from the supplier to the manufacturer through to
its eventual delivery to the end user. The supply chain segment involved with getting the finished
product from the manufacturer to the consumer is known as the distribution channel.

Steps in the supply chain

The fundamental steps of a supply chain in order are as follows:

 Sourcing raw materials.

 Refining those materials into basic parts.
 Combining those basic parts to create a product.
 Order fulfillment/Sales.
 Product delivery.
 Customer support and return services.

Supply chain management plays a crucial role in the success and competitiveness of
businesses across various industries. It involves the efficient coordination and
optimization of all activities related to the movement of goods and services from
suppliers to customers. Here are some key reasons why supply chain management is
important:

1. Cost Reduction:
o Effective supply chain management can help reduce costs through
efficient sourcing, production, transportation, and inventory
management.
2. Improved Customer Satisfaction:
o A well-managed supply chain ensures that products are delivered to
customers on time and in good condition.
3. Enhanced Operational Efficiency:Streamlining supply chain processes leads
to greater efficiency and productivity.
4. Increased Flexibility and Agility:
 o An agile supply chain allows businesses to adapt quickly to changing
market conditions and customer demands.
5. Better Inventory Management:
o Effective supply chain management helps maintain optimal inventory
levels, avoiding overstocking or stockouts.
6. Stronger Supplier and Partner Relationships:
o Building strong relationships with suppliers and partners fosters
collaboration and trust.
7. Risk Management:
o A well-planned supply chain includes risk mitigation strategies to
handle potential disruptions, such as natural disasters, supply
shortages, and geopolitical issues.
8. Innovation and Competitive Advantage:
o An efficient supply chain can enable faster time-to-market for new
products, giving businesses a competitive edge.
9. Global Expansion and Market Reach:
o An effective supply chain supports global expansion by managing
international logistics, compliance, and distribution.
10. Sustainability and Corporate Social Responsibility:
o Companies can integrate sustainability practices into their supply
chains to reduce their environmental impact.

SCOPE OF SUPPLY CHAIN :

1. Sourcing and Procurement:

o Identifying and acquiring raw materials, components, and services from
suppliers.
2. Production and Manufacturing:
o Planning and managing production schedules to optimize efficiency
and meet demand.
3. Inventory Management:
o Maintaining optimal inventory levels of raw materials, components, and
finished goods.
4. Logistics and Transportation:
o Coordinating the movement of goods throughout the supply chain,
including inbound and outbound logistics.
5. Warehousing and Distribution:
o Managing storage facilities and distribution centers to optimize space
and handling.
6. Order Fulfillment and Customer Delivery:
 o Processing customer orders and managing the delivery of goods to
customers.
7. Supply Chain Planning and Coordination:
o Developing supply chain strategies and plans to optimize operations
and reduce costs.
8. Supply Chain Visibility and Tracking:
o Utilizing technology such as real-time tracking systems to monitor
goods throughout the supply chain.
9. Risk Management:
o Identifying potential risks in the supply chain and developing
mitigation strategies.
10. Sustainability and Social Responsibility:
o Integrating sustainability practices into supply chain processes to
minimize environmental impact.
11. Performance Measurement and Analytics:
o Tracking key performance indicators (KPIs) to measure supply chain
efficiency and effectiveness.

12. Collaboration and Partnerships:

o Fostering collaboration with suppliers, partners, and customers to
enhance supply chain performance.

Supply chain management is a complex process that requires careful planning and
coordination of different elements. It encompasses everything from sourcing raw
materials to delivering finished goods to customers. Effective supply chain
management can lead to increased efficiency, reduced costs, and improved customer
satisfaction.
Supply Chain Drivers:

1. Production: Efficient production processes can lower costs and improve

speed. Production strategies should match demand and inventory levels.
2. Inventory: Managing inventory effectively is crucial for reducing costs and
meeting demand. It involves balancing carrying costs with the need to
maintain sufficient stock.
3. Transportation: Moving goods quickly and efficiently is essential for meeting
customer demand and minimizing costs. Choosing the right transportation
modes and routes is critical.
4. Information: Timely and accurate information helps in making strategic
decisions and coordinating the various elements of the supply chain. This
includes demand forecasting, inventory levels, and production schedules.
5. Sourcing: Finding reliable suppliers who provide quality materials at
competitive prices is important. Long-term relationships and partnerships can
be beneficial.
6. Pricing: Setting the right pricing strategy helps in balancing supply and
demand, as well as ensuring profitability.

Supply Chain Metrics:

1. Inventory Turnover: Measures how many times inventory is sold and

replaced over a period. A high turnover rate indicates efficient inventory
management.
2. Order Fulfillment Cycle Time: The time it takes to fulfill a customer order
from receipt to delivery. A shorter cycle time is generally better.
3. Fill Rate: Measures the percentage of customer demand that is met without
backorders. A high fill rate indicates good availability of products.
4. Cash-to-Cash Cycle Time: The time it takes to convert resources into cash
flows. This metric measures the efficiency of a supply chain in terms of cash
flow.
5. Supply Chain Cost: Includes all costs associated with running the supply
chain, such as transportation, warehousing, and labor. Minimizing these costs
can lead to higher profitability.
6. Perfect Order Index: Measures the accuracy and timeliness of order delivery.
It takes into account factors such as on-time delivery, order completeness, and
condition of the goods.
7. Customer Satisfaction: A key metric that measures the overall satisfaction of
customers with the supply chain.
An efficient and responsive supply chain

It is critical for meeting customer demands in a timely and cost-effective manner. It

involves optimizing various elements of the supply chain to ensure agility, speed, and
cost-effectiveness while maintaining high levels of service. Here are some key
strategies to achieve an efficient and responsive supply chain:

Strategies for an Efficient and Responsive Supply Chain:

1. Demand Forecasting and Planning:

o Use advanced analytics and machine learning models to accurately
predict customer demand.
o Create a flexible demand plan that can be adjusted based on real-time
data and market trends.
2. Agile Sourcing:
o Maintain a diversified supplier base to mitigate risks and improve
flexibility.
o Develop strong relationships with suppliers for faster response times
and better collaboration.
3. Just-in-Time Inventory Management:
o Keep inventory levels low by aligning production and procurement with
real-time demand.
o Implement inventory visibility and tracking systems for better inventory
control.
4. Optimized Transportation and Logistics:
o Use dynamic routing and scheduling to optimize delivery times and
reduce transportation costs.
o Consider a mix of transportation modes (air, sea, land) to balance cost
and speed.
5. Real-Time Information Sharing:
o Utilize digital tools and platforms to share information across the
supply chain in real time.
o Enable seamless communication between suppliers, manufacturers,
distributors, and customers.
6. Collaborative Partnerships:
o Foster collaboration with supply chain partners to streamline processes
and improve efficiency.
o Co-develop strategies with partners to enhance responsiveness and
innovation.
7. Flexible Production:
o Implement lean manufacturing principles to reduce waste and increase
agility.
 o Utilize modular production systems that can quickly adapt to changes
in demand.
8. Continuous Improvement:
o Regularly review and assess supply chain processes to identify areas for
improvement.
o Use metrics and key performance indicators (KPIs) to monitor
performance and drive efficiencies.
9. Technology Adoption:
o Implement digital supply chain technologies such as IoT, AI, and
blockchain for enhanced visibility and control.
o Use automation to streamline repetitive tasks and improve accuracy.
10. Risk Management:
 Develop contingency plans and risk mitigation strategies to handle disruptions
effectively.
 Monitor external factors such as geopolitical risks, weather events, and supply
chain interruptions.

Metrics for Monitoring Efficiency and Responsiveness:

 Lead Time: The time it takes to fulfill an order from the moment it's placed.
 Order Fill Rate: The percentage of orders that are shipped complete and on
time.
 Inventory Turnover: Measures how quickly inventory moves through the
supply chain.
 Order Cycle Time: The time it takes to process and ship an order.
 On-Time Delivery: The percentage of deliveries that arrive on or before the
expected delivery date.

DESIGNING SUPPLY CHAIN NETWORK :

Designing a supply chain network involves creating a system that efficiently and
effectively meets customer demands while minimizing costs and optimizing resource
utilization. It requires a strategic approach to planning and structuring the network
to achieve optimal performance. Here are the key steps and considerations in
designing a supply chain network:

1. Understand Business Goals and Requirements:

 Define business objectives and how the supply chain supports them.
 Understand customer expectations, market trends, and product demand
patterns.
2. Conduct a Supply Chain Audit:

 Analyze existing supply chain processes, infrastructure, and performance

metrics.
 Identify strengths, weaknesses, opportunities, and threats in the current
network.

3. Develop a Network Design Strategy:

 Determine the scope of the network (local, regional, or global) based on

business goals.
 Choose the right supply chain model (centralized, decentralized, hybrid) that
aligns with business strategy.

4. Optimize Locations and Facilities:

 Determine the optimal number and location of manufacturing, distribution,

and warehousing facilities.
 Consider proximity to suppliers, customers, transportation hubs, and labor
pools.

5. Evaluate Transportation and Logistics Options:

 Choose transportation modes (road, rail, sea, air) based on cost, speed, and
reliability.
 Design efficient transportation routes and schedules to minimize lead times
and costs.

6. Incorporate Supplier and Partner Networks:

 Identify key suppliers and partners and evaluate their reliability and
performance.
 Foster collaboration with suppliers and partners to improve responsiveness
and reduce risks.

7. Design Inventory Management Systems:

 Determine appropriate inventory levels and safety stock to balance costs and
service levels.
 Implement inventory tracking and visibility systems for better control and
planning.
8. Incorporate Technology and Automation:

 Utilize digital tools such as AI, IoT, and blockchain to enhance supply chain
visibility and efficiency.
 Implement automation in areas such as warehousing, order fulfillment, and
transportation for improved speed and accuracy.

9. Risk Management and Contingency Planning:

 Identify potential risks such as natural disasters, geopolitical issues, and

supplier disruptions.
 Develop contingency plans and alternative sourcing strategies to mitigate
risks.

10. Monitor and Evaluate Performance:

 Set key performance indicators (KPIs) to measure supply chain performance

and efficiency.
 Continuously assess performance and make adjustments to improve the
network.

11. Sustainability and Social Responsibility:

 Consider environmental impact and sustainable practices in supply chain

design.
 Ensure ethical sourcing and fair labor practices across the network.

12. Continuous Improvement:

 Adopt a culture of continuous improvement by regularly reviewing supply

chain processes and performance.

DISTRIBUTION NETWORK :
A distribution network is an essential component of a supply chain, encompassing
the processes and infrastructure necessary to move goods from manufacturers to
end customers. Designing an effective distribution network involves optimizing
various elements to ensure timely delivery, cost-effectiveness, and high levels of
customer satisfaction. Here are the key aspects of a distribution network:

1. Network Design:
  Location and Number of Distribution Centers: Determine the optimal
number and location of distribution centers based on customer demand,
delivery times, and transportation costs.
 Network Structure: Choose between centralized (one main distribution
center serving a large area) and decentralized (multiple smaller centers closer
to customers) distribution structures.

2. Transportation:

 Transportation Modes: Choose the appropriate mode of transportation

(road, rail, sea, air) based on cost, speed, and the nature of the goods.
 Routing and Scheduling: Optimize delivery routes and schedules to minimize
transportation costs and delivery times.

3. Inventory Management:

 Stock Placement: Decide where and how much inventory to place at different
distribution centers based on demand patterns.
 Safety Stock: Maintain appropriate levels of safety stock to buffer against
uncertainties in demand and supply.

4. Technology and Automation:

 Warehouse Management Systems (WMS): Use WMS to manage and track

inventory, orders, and warehouse operations efficiently.
 Transportation Management Systems (TMS): Implement TMS to optimize
transportation planning, routing, and tracking.

5. Order Fulfillment:

 Order Processing: Streamline order processing to reduce cycle times and

improve accuracy.
 Pick, Pack, and Ship: Optimize warehouse processes for efficient picking,
packing, and shipping of orders.

6. Customer Service:

 Delivery Options: Offer flexible delivery options such as same-day, next-day,

and scheduled deliveries to meet customer preferences.
 Returns Management: Create a streamlined process for handling returns
efficiently.
7. Collaboration with Partners:

 Third-Party Logistics (3PL): Consider partnering with 3PL providers for

additional capacity and expertise.
 Supplier and Distributor Relationships: Collaborate closely with suppliers
and distributors to improve responsiveness and efficiency.

8. Performance Monitoring and Improvement:

 Key Performance Indicators (KPIs): Monitor KPIs such as order accuracy, on-
time delivery, and transportation costs to assess network performance.
 Continuous Improvement: Regularly review and optimize distribution
processes to enhance efficiency and reduce costs.

9. Risk Management:

 Contingency Planning: Develop contingency plans for potential disruptions

such as weather events, transportation delays, or supplier issues.
 Safety and Security: Implement safety and security measures to protect
goods and employees during transit and storage.

10. Sustainability:

 Green Logistics: Consider eco-friendly practices such as route optimization,

fuel-efficient transportation, and sustainable packaging.

FACTOR INFLUENCING DISTRIBUTION

goods within a supply chain. Understanding these factors can help businesses design
and manage their distribution networks more effectively to meet customer demand
and optimize costs. Here are some key factors influencing distribution:

1. Customer Demand:

 Demand Patterns: Understanding where and when demand is highest helps

determine the best locations for distribution centers and transportation
routes.
 Customer Preferences: Preferences for delivery speed, service options, and
packaging can impact distribution strategies.
2. Geographic Factors:

 Proximity to Customers: Placing distribution centers closer to customers can

reduce transportation costs and delivery times.
 Infrastructure: Access to transportation infrastructure such as highways,
ports, and airports affects distribution efficiency.

3. Product Characteristics:

 Product Type: Bulky or fragile goods may require special handling and
transportation considerations.
 Product Shelf Life: Perishable goods require efficient distribution and proper
storage conditions.

4. Transportation Costs and Options:

 Mode of Transportation: Choosing the right transportation mode (road, rail,

sea, air) based on cost, speed, and product type.
 Fuel Prices: Fluctuations in fuel prices can impact transportation costs.

5. Supply Chain and Distribution Network Design:

 Number and Location of Facilities: The number and placement of

warehouses, distribution centers, and cross-docks can impact efficiency and
costs.
 Network Structure: Centralized vs. decentralized distribution networks have
different implications for cost and service levels.

6. Technology and Automation:

 Warehouse and Transportation Management Systems: Advanced systems

improve inventory control, routing, and order fulfillment.
 Automation and Robotics: Automating processes such as picking, packing,
and loading can increase efficiency.

7. Supply Chain Partnerships and Collaboration:

 Supplier and Distributor Relationships: Close collaboration with suppliers

and distributors can enhance responsiveness and efficiency.
 Third-Party Logistics (3PL): Outsourcing distribution to 3PL providers can
offer additional expertise and capacity.
 8. Regulations and Compliance:

 Legal and Regulatory Requirements: Compliance with regulations regarding

transportation, storage, and distribution.
 Customs and Import/Export Regulations: Impact the flow of goods across
international borders.

9. Risk Management:

 Weather and Natural Disasters: Adverse weather conditions can disrupt

distribution routes and schedules.
 Supply Chain Disruptions: Risks such as supplier issues, transportation
delays, or political instability.

10. Sustainability:

 Eco-Friendly Practices: Implementing sustainable distribution practices can

reduce environmental impact and appeal to environmentally conscious
customers.
Green Logistics: Strategies such as optimizing routes, using fuel-efficient
vehicles, and reducing packaging waste.

Transportation decision in supply chain management

Transportation decisions play a crucial role in supply chain management, impacting

cost, speed, and reliability. Effective transportation planning and execution are key to
meeting customer demands and optimizing the overall performance of the supply
chain. Here are the key factors and considerations involved in transportation
decisions within supply chain management:

1. Transportation Modes:

 Road: Offers flexibility and door-to-door delivery. Suitable for short to

medium distances and a variety of goods.
 Rail: Cost-effective for large quantities of goods over long distances. Often
used for heavy or bulky items.
 Air: Fastest but most expensive mode. Ideal for high-value, time-sensitive, or
perishable goods.
 Sea: Cost-effective for large quantities over long distances. Suitable for
international shipping.

2. Cost Considerations:
  Fuel and Energy Costs: Fluctuations in fuel prices can impact transportation
expenses.
 Freight Rates: Compare rates across different carriers and modes to find the
best options.
 Handling and Storage: Costs associated with loading, unloading, and
temporary storage.

3. Speed and Delivery Times:

 Transit Time: Choose transportation modes based on required delivery times

and customer expectations.
 Route Optimization: Plan efficient routes to minimize transit time and fuel
usage.

4. Reliability and Service Levels:

 On-Time Delivery: Monitor and evaluate carrier performance for consistency

and reliability.
 Service Options: Offer different delivery options such as express or standard
shipping to meet customer preferences.

5. Flexibility and Agility:

 Multi-Modal Transport: Use a combination of transportation modes to

balance cost, speed, and flexibility.
 Scalability: Adapt transportation plans based on changing demand and
market conditions.

6. Geographic and Infrastructure Considerations:

 Proximity to Transportation Hubs: Choose carriers and routes that provide

access to key transportation infrastructure.
 Regional Regulations and Restrictions: Consider local laws and restrictions
that may impact transportation.

7. Technology and Automation:

 Transportation Management Systems (TMS): Use TMS for planning,

executing, and optimizing transportation operations.
 Real-Time Tracking: Implement tracking and visibility tools to monitor
shipments and provide updates.
8. Sustainability:

 Green Transportation: Choose eco-friendly options such as electric or hybrid

vehicles and optimized routes.
 Carbon Footprint Reduction: Aim to reduce emissions through efficient
transportation planning.

9. Risk Management:

 Contingency Planning: Develop backup plans for transportation disruptions

such as weather events or carrier delays.