You are on page 1of 104

Supply Chain Management

Session 1 Supply Chain Management Overview

Learning Objectives
 What is Supply Chain Management  How it differs from traditional Purchase and Materials function  How it gained momentum from Purchase and Materials  General Supply Chain Model for Manufacturing and Service Industry  Summary

What is Supply Chain Management
 Total systems Approach to Manage the entire Flow of Information, Materials & Services through Factories & Warehouses to the End Customers  Information Sharing, Process Specialization & Integrated Approach for a Proper Business Forecast by Avoiding Customer Surprises & by Avoiding Postponement from Vendors to Customers

When to Set. Continuity of Supply . From Where to Set and at What Price & Quality & last but not the Least.How it Differs from Traditional Purchase and Materials Function  Materials Management is Concerned with the Flow of Materials to Manufacturing Departments from Suppliers End  Learning How Much to Set.

How it Gained Momentum from Purchase & Materials  Reduce cost of Making the Purchase  Reduce Transportation Cost  Reduce Production Cost  Improve Product Quality  Reduce Lead-Time  Collaborative Approach Between Vendor & Customer – Business Partner Relationship .

General Supply Chain Model for Manufacturing and Service Industry LEGAL ACCOUNTS Purchase is the Link between the Organization its Suppliers IT PURCHASE R&D OPERATIONS SUPPLIERS DESIGN .

Summary  A Systems Approach for the End-to-End Processes  Avoiding Surprises at any Point of Time but at Bare-Minimum Operational & Holding Cost  Role of Supply Chain Creates a Platform for Business Partner Relationship Between Customers & Vendors .

Supply Chain Management Session 2 Scope and Relevance .

Learning Objectives  Activities Involved along with Objectives  How to Overcome Traditional Approach  21st Century Supply Chain Activities to Initiatives  Latest techniques used –TQM. ReEngineering  Summary . JIT.

Activities involved along with objectives  Reduce Supply Chain Cost to Minimum Possible Level  Maximize Overall Value Generated  Achieve Maximum Supply Chain Profitability  Improve Customer Satisfaction  Reduce Inventory Carrying Cost .

How to Overcome Traditional Approach  Avoid Overstocking  Prevent Postponement & Delay in Shipment  Effective Coordination between Internal Customers for External Dissatisfaction  Quality Management – Sourcing to Delivery .

Service.21st Century Supply Chain Activities to Initiatives  Firm’s Collaborative Approach to Leverage Strategic Positioning to Improve Operating Efficiency  Information. Product.  Rapid Emergence of SCM is Driven by Quick Response. Knowledge & Financials are the Key Drivers to Set SCM in Practice. Globalization & Holistic Approach to act as a Benchmark for Proper Positioning. .

Latest Techniques Used – TQM. Re-Engineering  TQM – A management Philosophy that takes as its Central Focus to Improve Quality of Products & Services for Creating Firm’s Image in the Market. JIT.  JIT – Another Management Tool to Improvise on Less Inventory & Making Goods Available at Appropriate Location  Re-Engineering – A Business Strategy to Allocate & Relocate as Per Situation .

Summary  Arrange Quality Material on Time  Focus on Business Partner relationship to Avoid Overstocking  Emphasis on Value Creation  Positioning by Way of Differentiation .

Supply Chain Management Session 3 Role and Importance of Suppliers .

.Learning Objectives  Role of Supply Chain Manager  Objectives of Supply Chain Manager  Supplier Management and its Functions  Summary.

Role of Supply Chain Manager  Set up Planning Premises in developing a set of metrics to monitor efficiency. cost Quality & Value to the Customers  Choose Suppliers that will deliver goods & Services company needs to create a product  Schedule activities which are necessary for Production. Testing. Packaging & Delivery  Create Network for receiving defective & excess products back from customers who have problems with delivered Products .

Objectives of Supply Chain Manager  Reduce cost of making the purchase  Reduce transportation Cost  Reduce Production Cost  Improve Product Quality  Improve Product Design  Reduce Inventory Costs  Improve Customer Satisfaction  Introduce New Products or Processes .

Supplier Management and its Functions • • • • • • • Assess all relevant quantitative Costs Assess all Qualitative Costs Review capabilities of Current Suppliers Evaluate new Suppliers Make & Implement Decisions Supplier Scheduling Value Analysis & Value Engineering .

Summary  Focus on Proper Supplier Network  Qualitative & Quantitative for effective supplies  Value Analysis & Value Engineering for proper Supplier Evaluation  Improve Customer Satisfaction through proper Network Management .

Supply Chain Management Session 4 Basic Buying Process .

Learning Objectives  Objectives of Inventory Management and Control.  Summary .  Scope and Importance of Inventory Management.  Roles and Responsibilities of Supply Chain Manager.

at what price & at what location  Understand criticality of safety stocks combined with uncertainty .Objective of Inventory Management & Control  Planning Material to avoid Stock outs & Shortages  From Retail point it is Velocity of Buying & Selling  Centralized Inventory Management helps effective Co-ordination & Communication  When to Order. from where. how much.

Scope & Importance Of Inventory Manager  Improve accuracy of Forecasts  Reduce Number of back orders  Economies of Scale in Manufacturing. Net Profit Margin and Return on Asset Managed . Purchasing & Transportation  Balancing Supply & Demand  Provide Protection & act as a buffer  Inventories influence firms financial performance by understanding ROI.

Role & Responsibility Of Supply Chain  Make or Buy/Make Buy Decisions  Supplier Scheduling  Value Analysis/Value Engineering  Supplier Evaluation  Evaluating scope for new Suppliers  Cross Co-ordination amongst different departments  Managing Quality and healthy relationship with Suppliers .

Summary  Centralized Inventory Management helps SCM Managers for effective Planning  Balancing Demand & Supply  Healthy Relationship with Suppliers  Cross Function Co-ordination to improve accuracy .

Supply Chain Management Session 5 Managing Supply Chain .

.  Relevance of procurement for Manufacturing & Services.  Importance of quality as an interface.Learning Objectives  Procurement Process.  Logistics interface for managing supply chain.  Summary.

Procurement Process  Ask for Quotations  Negotiations  Vendor Audit  Sampling  Quality Approval  Trial Order  Business Partner Relationship .

Relevance of Procurement for Manufacturing & Services  Lean Supplies  Zero Defect & JIT Supplies  Continuous Improvement  Exploring New Opportunities for R & D  Business Partner Relationship .

Importance Of Quality as Interface  Always Remember the GIGO Principle (Garbage In Garbage Out)  Quality First. Customer Always  Supplier Development using Kaizen & Total Quality Management Principles .

Warehousing & Packaging  Geographically Allocating Raw-Material. Transportation.Logistics Interface for Managing Supply Chain  Integration of Information. Inventory. Work-In-Progress from Suppliers to Manufacturing Sites  Commitment to Continuous Improvement  Adds Value to facilitate Sales to meet Customer Demand .

Summary  Integration through Logistics help Supplier Chain manager to take quick & effective decisions  Business Partner Relationship for Continuous Improvement  Value addition for exceeding Customer demand for Branding .

.Strategies.Supply Chain Management Session 6 SCM .

Learning Objectives  Out Sourcing and Value Chain Management.  Strategic Focus on Supply Chain Management. Few.  Role of Purchasing in Supply Chain Management. Keiretsu and Virtual Companies. Vertical.  Multiple.  Summary .

Materials. Human Resources.Out Sourcing & Value Chain Management  Support Future Growth & Business Directions  Reduce Cost  Focus on Core Competencies  Greater Economies Of Scale. Marketing. Information Systems & firms Infrastructure . R & D. Process Efficiencies & Enhance domain Expertise  Value Chain includes Production.

Few.Multiple. Keiretsu & Virtual Companies  Manufacture same products at multiple locations  Manufacture same Products at few locations  Continuous building of process capabilities irrespective of locations  Creating Virtual Company as one of the SBU . Vertical.

Strategic Focus On Supply Chain Management  Integration through Strategic Business Units  Business Environment by understanding Strengths & Weakness of the Market as well as Organization  Impact Of Technology & Use OF MIS  Reporting responsibility at the CEO level .

Packing)  Out bound Logistics ( Collecting. Assembling. Sales Promotion  Procurement of Raw Materials. Distribution.Role Of Purchasing In Supply Chain  Inbound Logistics ( Receive. Storing & Physically distributing Finished Goods to Customers)  Sales & Marketing activities with Advertising. Consumables  Technical Development for Product and Process Design . Store & Disseminate Inputs)  Operations ( Machinery.

Summary  Manufacture products at location which will give better ROI  In bound & Out bound Logistics acts as key differentiator to manage Supply Chain  Integration to be taken on top priority to avoid miss communication between internal Customers for external disatisfaction .

Supply Chain Management Session 7 Bench Marking SCM .

 Lead Time  Strategic Location.Learning Objectives  Quality.  Shortages.  Cost.  Summary .

Quality  Conformance to the given requirements  Fitness for Use  It’s a journey & Not the final destination  Material to be procured for right Quality as per the specifications given by technical department .

Cost  Material to be procured at a price which has to justify  Not to Compromise on price which might give unfavorable results  Rejection of goods should not be at the cost of poor inputs  Create value addition and not cost addition .

Lead Time  Integration of Cross Function Coordination and Suppliers-Top Priority  Supplier Scheduling & Re-scheduling keeping in mind variations in demand forecasting  Sufficient lead time to be given to Suppliers to avoid surprises .

Strategic Location  Manufacture products where costs are low  Avail Tax benefits  Monitor smooth flow of materials and avoid delays due to poor Transportation  Allocate sufficient resources for enhancing Productivity to deliver the best results from that Strategic Location .

Shortages  Poor Planning Create Shortages  Non availability of Product triggers customers to become butterfly  Organization invites competition due to Shortages  Supply Chain Managers should be alert to avoid any kind of Shortages for Raw Materials or Finished Goods .

T.I.Summary  Quality should be treated on top priority  Relationship with Suppliers can reduce purchasing cost  J. philosophy to be adopted to avoid shortages vi a vi excess stocking  Strategic Location to evaluate where and when to manufacture .

Supply Chain Management Session 8 SCM Process Tools .

.  Supplier Certification.  Value Analysis and Value Engineering.  Summary.Learning Objectives  Make / Buy Or Make-Buy Decisions.  Supplier Scheduling.

Make/Buy or Make-Buy Decision  Lower Cost as it is In-House Production  Facilitating Specialized Investments  Product Technology  Improved Scheduling Advantages of Buy:  Strategic Flexibility  Lower Cost .

Spares & Components  Understanding Lead time of each Supplier  Avoiding excess stocks at Go downs & Ware Houses  Avoiding Shortages at Plant level .Supplier Scheduling  Based on Demand Forecasting  Location wise arranging Raw-materials.

Value Analysis/ Value Engineering  From Suppliers point of view this is mostly done at the corporate level  Supply Chain Manager involves various Permutation Combinations to evaluate decision making  Make/Make-Buy decisions are based on Value Analysis/Value Engineering  Decision for adding/Deleting suppliers are taken due to Value Analysis .

Supplier Certification  Approval from Quality Control & Quality Assurance to be done for certifying Supplier  Various Conditions and Legalities involved during certification process  Suppliers to adhere to the said norms  Periodic Audit undertaken to check any malpractices .

Summary  Business Decisions are taken by conducting Value Engineering/Value Analysis  Make/Buy or Make-Buy decisions based on various parameters  Supplier Scheduling based on Strategic Locations  Certification of Suppliers is a must for avoiding any mishaps in long run .

Supply Chain Management Session 9 SCM Business Strategy .

 ABC Analysis.  Vendor Auditing and Rating.  Structural Importance – CROSS DOCKING.  Measurement of Vendors.  Summary.Learning Objectives  Co-ordination/Interaction/Feedback. .

Logistics Function & Supply Chain Management Function  Interaction with Integration of Resources to avoid Surprises  Feed back from plant locations to Centralized Purchase function using IT platform .Co-ordination/Interaction/ Feedback  Co-ordinate between Materials Function.

Prompt Deliveries & Favorable Vendor Relations  ABC Analysis Involves how much to store for Critical items where lead time is more  ABC Analysis also helps SCM Managers to work out cost allocations for Inventory Management  ABC Analysis guides Finance department for resource/fund allocation .ABC Analysis  Adequate Quality.

machinery Equipments.Vendor Auditing/Rating  To avoid sub standard products Vendor has to be audited by Commercial & Technical Team  Vendor registration form has to be filled  All relevant norms like facilities. Promoters background. Site Location. Cleanliness along with Plant visit & Financial Analysis of the Vendor .

Measurement Of Vendors  Reputation of Vendor  Buyer should ask list of major customers where the vendor is perusing Business  Ethical Standards & delivery Promises  Technological Competency along with the desire to invest for Good Manufacturing Practices .

Structural ImportanceCross Docking  It is an Innovation in transportation System  Suppliers Shipments are taken fro various docks at the Warehouse when they arrive & are later transferred from truck to another dock  Provides economy of full truck load shipments which also reduces ware house Inventory .

Summary  No appointment of Vendor to be done with out Auditing  Reputation of Vendor is a must  ABC Analysis helps Supply Chain Managers to take quick Decisions  Cross Docking helps to minimize Ware house Inventory .

Supply Chain Management Session 10 Best SCM Practices to Improve Supply Chain Process. .

Learning Objectives  15 Steps to transform Purchase Into Strategic Sourcing .

15 Steps  Develop Plan of Action to integrate Individual Purchasing Units  Understand different Business & Corporate Cultures  Identify External & Internal factors that could work the efforts  Determine Annual Spending by way of Budget  Ascertain Percentage spend under Strategic Sourcing  Calculate Saving Potential through Development of New Procurement Organization .

Cont:  Establish Personal & Team Credibility  Survey all Existing Procurement Related Systems  Create a Business Case  Develop a Strategic Vision Statement & Schedule  Evaluate Existing Procurement Staffing Skills  Enumerate Role of A Supplier .

Cont:  Involvement Of Senior Management  Implementation Of Strategic Plan  Formulating Metrics to track results achieved by the new Procurement Organization .

Supply Chain Management
Session 11 5 – S Tools for SCM

Learning Objectives
 Lean Supply Strategies  5 S Tools  Summary.

Lean Supply Strategies
 Lean Supply implies Supply Chain is appropriate for lean production which is nothing but Waste elimination in Process  Introduction of the Concept Of Lean Supply & 5 S is helpful in measuring the rejections at a given point

5 S 5 S’s are lean concepts derived from Japanese Words like Seiri (Sort) Seiton ( Set In Order) Seiso ( Shine or Purity) Seiketsu(Standardize) Shitsuke (Sustain) .

5 “S”
 Sort: Remove all but the necessary Materials, Equipment & Supplies  Set In Order: Arrange Product & Equipment so it is easy to find & easy to use in the Context of Supply Chain  Shine: Keep Everything Clean  Standardize: Integrate first three “S”  Sustain: Discipline Starts with the Leadership

 Treat Suppliers as Points of Flexibility  Evaluate Internal Processes & Structures  Eliminate Communication Gap  Give Importance on monitoring Supplier Events  Benefits by way of Cost, Time & Quality

Supply Chain Management
Session 12 Role Of IT in SCM

.  IT Diagram and its connectivity.  Summary.Learning Objectives  Importance of IT systems for SCM  Effective time and Cost Management.

Customer Services for Decision Support Systems  Order Processing System is the nerve Centre Of SCM which is supported by IT . Sales Forecasting.Importance Of IT Systems in SCM  Effective Information Technology helps firm to ensure meeting the needs of the Customers  Helps in Vendor Management.

Distribution & Transportation .Effective Time & Cost Management  Consolidation Of Spending  Order what is required & understand the Re-Order Level using JIT Principle  IT helps to establish a comprehensive Supplier Management Program  IT helps to track on line Status of the Entire Logistics.

IT Diagram & Its Connectivity A Complete Diagram to be drawn with Explanation .

Summary  IT has created a platform to streamline SCM activities  IT helps for Decision Support Systems  IT gives an landmark to avoid overspending  IT helps for stocking what is required & helps Re-Order Level .

Supply Chain Management Session 13 Six Elements of Superior Design of SCM .

Learning Objectives  Global Supply Chain Management  Summary .

Global Supply Chain Management  Wrong Decision in SCM can result in huge loss on Global front  A simplified description of Five Stage Segments of Organizational Performance : a) Business Situation b) Business Strategy c) Design Elements d) Culture e) Business Results .

Business Situation  Environmental Scanning Of Business Goals. Competitive Positioning. Employee. Suppliers & Share holders  Understanding & Defining the gap  Proper Assessment for the future  Focusing on what is required .

Strategic Supplier Identification & Business Partner Relationship is key differentiating factor .Business Strategy  Choice that determine how company resources interact with the Market  What and Where to Manufacture  Pears Soap World wide is manufacturing base is India  Cost effectiveness.

Design Element  Understanding the Design Process  Ensure Holistic Thinking  Important elements are tasks. Information. People. Decision Making. Rewards and Structure  Helps Organizations take quick & Effective Decisions .

Culture  How to Shape Vision & Mission Statement  Operational Behavior play important role in shaping the future of the Organization  Certain Companies Award businesses only to low bidder as their culture is price driven  Certain Companies give thrust on innovation & pay high price to the Supplier .

Market Share.Business Results  The most important avenue is Bottom line  Out put of the Organization can be measured on the basis of Cost. Sales & Innovation  Constantly Changing Business Environment demands the Organizations to recreate Continuously . Profits.

Summary  Organization to take a Holistic View  Construct new dimensions of Business to grow  Deliver what the Market wants & Change to the required level of Operations  Constantly view & Review Business Models & Change according to the circumstances .

Supply Chain Management Session 14 Importance of Logistics. Distribution and Transportation .

 Role of Distribution.Learning Objectives  Role of Logistics.  Internal Logistics & Distribution along with IT.  Role of Transportation.  Summary. .

WIP & FG where required at the lowest possible Cost .Role Of Logistics  Logistics involves Integration Of Information. Material Handling & Packaging  Operational Responsibility is geographical positioning of Raw-Materials. Ware housing. Transportation. Inventory.

Role Of Distribution  Efficient Movement of Finished Products from end of prediction line to the consumer  Activities undertaken in the execution of physical distribution of goods to the end user  Acts as a link between the end to end users .

Role Of Transportation  It involves two major functions like a) Physical Movement of Products b) Product Storage  Main Aim Of transport Principle is Economy of Scale & Economy of distance .

Internal Logistics & Distribution along with IT  Internal Logistics & Distribution are well connected for proper flow of Information  Helps Decision Making faster  Create Platform for Effective Transportation  Avoid Communication Gap .

Logistics & Transportation are the pillars of Supply Chain Management  To strengthen the Scope of Supply Chain Management IT related Systems can act as spinal Cord for Tracking .Summary  Distribution.

Supply Chain Management Session 15 Role of SCM in Revenue Management .

 Summary.T.  Time and Revenue Management.Learning Objectives  Re-order Level Analysis  Safety Stock Analysis. .I.  J. along with Quality.

Market Demand & Buffer Stocks .Re-Order Level Analysis  Control is Provided by Continuous Monitoring of Inventory Withdrawals & Inventory Levels  Economic Order Quantity is Justified on the basis of Stock Movement.

Economic Order Quantity.Safety Stock Analysis  Safe Guard Stock out Situations when demand is uncertain  Re-Order Level. Safety Stock & Stock Out Situation is the Key Differentiating Factor of Supply Chain Manager  Hold Reserve Stock Level as cushioning .

I.T.J. along with Quality  Inventory Accuracy can be Managed using JIT Principle  Marrying with the Vendors can help Supply Chain Managers to rely upon for JIT along with Superior Quality  Quality Up gradation can be thought over as suppliers treat them as Partners in Progress .

Time & Revenue Management  Goods are made available on time by avoiding delay in Shipments with desired Quality  Cash Flow can be maintained by implementing stringent norms right at the grass root levels to avoid Overdraft  Accounts & Finance Should guide the SCM team for managing resources under strict Supervision .

Summary  Avoid Stock Out Situations  Create Business Partner Relationship  Focus on Stringent Quality & delivery norms  Stress upon Safety Stocks for Critical Inputs  Manage Cash Flow to avoid Overdraft .

Supply Chain Management Session 16 CASE STUDIES .