Supply Chain.

Decision Phases, process,

Importance.
Supply chain is the link that involves , directly or Indirectly ,all parties
working towards customer request. It includes transporters and even
customers. The functions include NPD, Mktg, Operations, Distribution,
finance and customer service.
Supply Chain- Various comp of Luggage mfgr…From Yarn, CRCA steel,
Aluminium Ingots to FGs over 20 Branches to retailers to customer.
It is dynamic involving flow of goods, mtls, and information, and fund
flows.
Primary purpose is to satisfy customer and generate money for itself.
Most supply chains are actually networks , a supply web, involving many
suppliers, customers …up to final consumer.
 Network of Processes/Operations….VIP
Industries…Luggage Manufacturer.
A strong suppplier base of 55 suppliers ,
Supplier buying from Another 200 suppliers
75% of variety coming from these Associates.
Replica of systems adopted within
plants—extended shopfloor.
A process with 3 main processes
Manufacturing with one final Assy shop requiring 500
Process.
different input materials
/comp for the 4 shops….3 Plants.
A FMCG product with 20 branches
Customer , 300 Dealers,
and 150 SKUs.
3
• Design depends upon customer’s needs and the roles played by supply
chain partners.
DELL- Customer…Supplier….manufacturers…..Sale.
VIP- Customer…Retailer…Distributor…Branch…Mfgr…Supplier… R.M.
supplier.
Objectives:-
1. Maximise overall value..generate surplus…Existence of various
intermediaries and the cost incurred at every stage , sum total should
be smaller than the value generation in toto at the end .
2 . Management of flows ( information, Product and funds)….to maximise
total supply chain profitability.
3 . Analyse intermediaries , question their existence and justify expenses…
finally to enhance profitbility…
US retail…hardly any intermedisries….large retailers.
India…Many distributors….thousands of small retailers selling mixed
products spread across large geography.
 Importance of Supply Chain decisions.
Wal-mart, Dell …Success stories in supply Chain.
Wal-Mart….Heavy investment in transportation,IT..effective flow of
goods and information…clusters of stores around DC s…Sharing
informattion and collaborating with suppliers for cost reduction and
availability.
1980 sales..$1Bn, 2004 sales$ 250 Bn, Net Profit$ 1Bn.
Dell..Bypasses distributors, whole sellers..direct sale to customer..Steers
customers in real time..Customer contacts and understanding
customer leads to better forecasts.Centralises Mfg & Inv in few
locations and postpones final assy till orders arrive….5 days inv. In
comparison to many weeks of competition…This works well in an
industry where prices of inputs are consistently falling…All this is
possible with real time data…to suppliers .. with use of sophisticated
IT. VMI at factories along with daily production reqts.Customised
web pages for suppliers to view forecasts and match Dell
expectations.
Lower inventories mean faster responses to customer complaints on
defects if any. By managing Inv and receivables Dell has –ve
conversion cycle on Inv…i.e. Dell collects money faster and runs
business on others money.
More inbound sourcing=> lower fixed costs.
( Dell sales $ 2.9 Bn …assets 60 Mn…sales $35 / every dollar in fixed
assets))..
( Compaq figure is $3 /Every dollar of fixed assets.).
In changing mkt place the design may have to be relooked at by Dell for
the continuance of its success. As the factors on which its supply
chain has supremacy ( Management of product, information and
cash flows, customisation at low cost ) , may not rule the show.
Thus supply chain design, planning & operation decisions play a
significant role in the success or failure of a firm.
 Decision phases in supply chain.
In order to continue generation of surplus,decisions relating to flow (of
product, information and funds),need to be taken in three phases…
Design, planning & Operation.
1. Supply Chain Strategy/Design:- Depending on mktg & pricing plans,
co needs to decide supply chain structure ( which will remain same
over few years). Application of resources in this structure. What
function to outsource or perform within. Facilities( Plant/warehouse)
locations, capacities, Product mfg-location /storage –location
,transportation modes , and the information system to be used…
Strategic objectives of the firm must be complemented. Also
uncertainties that could prevail in market over next several years
should be well thought of.
2. Supply Chain Planning :-Time frame..Quarter to year.. Starting with
forecast for an year ..or more. Mkts/ supply sources decisions.Sub-
contracting, inventory policies.Timing and sizing of marketting and
price promotions.
When geographies covered are large..over continents..like Dell planning
stage is crucial. Factors to be considered is demand uncertainity,
exchange rate fluctuations and competition concerns. Flexibilities
built in design should be exploited in planning phase, as the phase is
short term.
3. Supply Chain Operation:- Time horizon is weekly or daily. Decisions
on individual customers/orders. Handle incoming orders in the best
possible manner. Allocaion of inv. And production location as per
planning done in phase II. The goal in this phase is execute and
optimise performance.
Decisions fall in either of these phases depending on the time frame
that the decision will cover.
 Process Views.
Cycle View and Push/Pull view.
Cycle views– Broken in to
1. Customer Order Cycle…Customer/Retailer interaction….Demand is
external…uncertain
2. Replenishment Cycle….retailer/Distributor interaction.
3. Manufacturing Cycle….Distributor /manufacturer.
4. Procurement cycle…manufacturing/ Supplier interaction.
Depending on SC design involvement of all/few of above shall result.
Each stage does …following activities.
Mktg function..Resulting in placement of order…receipt of order..supply the
order content…receipt of supply….return the recyclable content back or to
third party.
Buyer Goal- Product availability & economies of scale in ordering.Reduce cost
of receiving process.
Supplier- Forecast the order & reduce the cost of receiving the order. Fill the
order on time. Improve accuracy & efficiency of fulfillment.
Cycle view is useful when you are setting up Information systems to
support supply operations. It identifies the processes involved
and owners of the processes. This can be useful in taking
operational decisions , because it specifies the roles and
responsibilities of each member of the supply chain and desired
outcome of each process.
As we move from 1st to 4th cycle, no.of individual orders decline, however
size of order increases. Sharing of information and operating policies
becomes higher and more important as we move away from final
consumer.
Detailed process description of the supply chain in the cycle view forces
supply chain designer to visualise necessary infrastructure and set up
necessary IT systems.
Push /Pull View.
In this process either pull or push action happens depending on timing of
their execution relative to customer demand. Pull- customer demand
known as ….Reactive process. Push- Customer demand is
anticiated….speculative process.
Lower the cycle times in the cycle view …more are the chances that you can
sift from cycle view to push pull view.
VIP Inds- Cycle view.
DELL- push/pull view…Goal is to identify push..Pull boundry.
Paint Industry- …Shift in boundry happened when colour development
shifted from manufacturer to retailer.
 CRM/ISCM/SRM…three macro processes.
CRM- Generate customer demand ,facilitate placement and tracking of
orders…mktg, Pricing, sales, order mgt,call centre mgt. ( preperation
of catalogues, mktg mtls…Industrial/professional products, Mgt of
web site..).
ISCM- Fulfill demand generated by CRM,planning of internal production
and inventory , demand & supply plans preperation,fulfill actual
orders…Plan location/size of warehouses, allocate product/
warehouse mix, inv mgt policies, picking, packing, despatching
orders.
SRM- Arrange for and manage supply sources for goods and services,
evaluation,selection, development of suppliers, negotiate prices,
communications /sharing with suppliers information to operate
effectively. Placement of purchase orders, payments to creditors.
A successful SCM has to ensure integration of three processes. If the
same is disintegrated with three diff units operating the processes
w/o communication can lead to lot of dissatisfied customers in the
end.