SUPPLY CHAIN STRATEGIES – SESSION III

Traditional Supply Chain Strategies : based on manufacturing

Revolutions in 1980’s. Systems were divided based on two
strategies

1. Push Strategy
2. Pull Strategy

Push Based Supply Chain:

Production & Distribution decisions are based on long term

forecasts. Typically manufacturer bases demand forecasts
on orders received from distributors.
It takes more time for push based supply chain to react to the
Changing market place which leads to

 Inability to meet changing demand patterns

 Inventory obsolescence of certain products
 Excessive inventory due to the need for larger safety stock
 Unacceptable service levels
 Product obsolescence.

Pull Based Supply Chain:

1. Co-ordinated with true customer demand rather than

forecasted demand
2. The firm does not hold inventory and only responds
to specific customer orders.
3. Decreased variability & inventory
 Push – Pull Supply Chain

Push/Pull boundary

Push Strategy Pull Strategy

Raw Material
End Customer
Suppliers

Supply Chain time line

Impact on E-Business on Supply Chain

E.g. a) Book industry

b) Grocery industry
c) White goods
d) Mostly Retain Industries

Strategies: Direct shipment

Warehousing
Cross Docking
Demand Planning information is often only specific and stored decently.
viz. sales person may “only” provide input to the forecasting process of
products and the sales region he/she is responsible for.

But all information pieces finally should add to a forecast which covers
the whole demand being served by the supply chain.

The Database of Demand planning has to support atleast the following

three dimensions of aggregation and disaggregation.

 Product Dimension Product Product Group

Skills Family Product Line

 Geographic Dimension Sales Region/Deregion/Location

 Time dimension Different batch size - Time Horizon

(days weeks months)
The three dimensional databases grow very fast even
For mid-sized companies.

Data warehouses (DW) plus modern OLAP

(on-Line Analytical Processing) tools build the
bottomline of a high performance demand planning
solutions.

E.g. Food Industry.

 FILE MANUFACTURING
CAPACITY PLANNING CALCULATIONS
Demand Planning Requirements:
Sizes : 4”, 6”, 4”, 10”, 12” & 14” (All in Dozens)

Triangular Files : 50600 (Slim Taper, Regular Taper, Band Sewage)

Flat and Hand Files : 4950 + 15840 (Hand, Flat, Farmer, Mill TRE)
Half Round Files : 5170 + 1320 (All sizes)
Round Files : 6975
Square Files : 5280

Major Facilities (Process Available):

 Cropping : 3 M/cs. Hardly one machine is fully utilised

 Forging : 22 Forging
 Grinding : 18 M/cs.
 Cutting : 40 M/cs.
 Hardening: 3 Heaters
 Branding & Finishing
Requirement only 600 shifts
900 M/cs. Shift (lost 100 M/c. shifts)
2000 M/c. shifts
225 M/c. shift
No constraint
 CAN MANUFACTURING

Product Varieties:

- AEROSOL CANS
- HINGELID CANS
- TWO PIECE CANS for BEER AND BEVERAGES
- THREE PIECE CANS (OB Long, Oval, Round, Square etc.)
- OTS CANS

Mainly made out of twin plates.

PROCESS : Major stages:

1. Lacquering and printing

2. Slitting and Component fabrication
3. Body making : Roll forming, welding and scanning the
component with the body.
 CAN MANUFACTURING (Contd.)

Printing : Printing and Lacquering : 10,000 Ton/Annum

Roll in dia varies from 200 mm dia to 450 mm dia
320 lakhs rolls will give approximate 2800 Tons
Minimum no. of passes required : 2
Per Ton of printing average time
required : 0.69 Hrs.
Time for changeover/month : 350 Hrs.
Per changeover : 7 Hrs.
Component Manufacturing required for 10,000 Tons = 1070 Tons

1. Slitters for component manufacturing

2. Strip feed presses with and without curlers
3. Roll feed press
4. Threading of neck
5. Crimping
In case 5 litre OTS Cans : Hard form & handle welding
3 Nos. – Slitters : 1070 Tons = 768 M/c. shifts required
3 Nos. – Strip feed press : 1070 Tons = 600 M/c. shifts required
3 Nos. – Roll feed press : 1070 Tons = 4246 M/c. shifts required
2 Nos. – Threading Crimping : 1070 Tons = 1713 M/c. shifts required
Other presses for punching for neck handles etc. = 7 Nos.
60% of the capacity is required by a beauty products manufacturing unit.
Product sizes : 22 (Oval, cylindrical, dia varies, printing labels etc.
Suggest any possible capacity planning for ensuring the weekly requirement
To be delivered by the supplier (Can manufacturing unit).
 OUTSOURCING
TYPES OF OUTSOURCING:
SERVICES OUTSOURCING
MANUFACTURING OUTSOURCING

SERVICES OUTSOURCING:
Logistics Outsourcing : Transportation
Warehousing
Redistribution
DESIGN OUTSOURCING
PAYROLL OUTSOURCING
RECRUITMENT OUTSOURCING
MAINTENANCE OUTSOURCING
PROCUREMENT OUTSOURCING
IT OUTSOURCING
COLLECTION/PAYMENT OUTSOURCING
MANUFACTURING OUTSOURCING:

ENTIRE PRODUCT OUTSOURCING

- TRADING
COMPONENT/FABN OUTSOURCING
- SUBCONTRACTS
PRODUCTION OUTSOURCING
- WITH MATERIAL
PRODUCTION OUTSOURCING
- P TO P – PRINCIPAL MANUFACTURER
TO PRINCIPAL MARKETING
ONLY CONVERSION
 REASONS FOR OUTSOURCING

A. LACK OF CORE COMPETENCY

OR
B. CONCENTRATING ONLY OF CORE COMPETENCY

C. PURELY FOR COST CONSIDERATIONS

OR
D. MORE LOCATION AND ENSURE PRODUCT AVAILABILITY
AT SHORT NOTICES

E. CONCENTRATE ON HIGH VALUE PRODUCTS AND LEAVE

LOW VALUE (LOW PROFIT MARGIN PRODUCTS) FOR
OUTSOURCING

F. OUTSOURCING AS CORPORATE POLICY

 DRIVERS OF SOURCING

1. COST
2. SERVICE
3. INCREASE MARKET SHARE
4. COMPETITIVE STRATEGY
5. REDUCE DEPENDENCE
6. EASY TO DIVERSITY THE BUSINESS
7. NO FIXED INVESTMENTS
 TAX SOPS

July 8, 1999 was an important day in the history of

industrialization of Assam – the most important among
the seven sister states in the northeastern part of India.
On this day, the Government of India (GOI) announced
three Gazette notifications, giving sweeping excise duty
concessions to industries in Assam. According to the
notifications, all excisable goods produced in factories
located in the industrial estates, growth centers and
Integrated Infrastructure Development Centres (IIDC)
are exempt from payment of excise duty. There are also
a large number of other incentives from the Central and
State Government, which are listed below:
 CENTRAL SUBSIDIES
1. Transport Subsidy – The subsidy is extended for 7 years, till
2007.

2. Total Tax Free Zone -Units established in the notified locations

are exempted from income and excise taxes for 10 years.

3. Capital Investment Subsidy – The capital investment subsidy

was reintroduced for upto 15 percent of investment, subject
to a Rs. 3 million maximum.

4. Interest Subsidy on Working Capital – Working capital loans

receive a 3 percent subsidy for the next 10 years.

5. Insurance Benefit – There will be a 100 percent refund of

insurance premiums for the next 10 years as part of a
Comprehensive insurance program.
 STATE SUBSIDIES

1. Power Generating Set Subsidy – This subsidy is based on the

connected load for 5 years. Also, there is a 50 percent subsidy on the
cost of power generating sets.

2. Sales Tax Exemption – Finished products and purchase of Raw

Materials are exempted from sales taxes.

3. State Capital Investment Subsidy – There is a 30 percent subsidy on

capital investment subject to maximum of Rs. 1 million for units
ineligible for the Central Investment Subsidy.

4. Contribution of Feasibility Study Cost – The cost of feasibility

studies is subsidized upto 90 percent, subject to a Rs. 200,000
ceiling.

5. Subsidy on Infrastructure – Deserving cases will be allotted

developed land on a hire purchase basis, with the value being
recoverable in annual installations over 15 years.
 STATE SUBSIDIES (Contd.)

6. Pioneer Unit Incentive – An additional State Capital

Investment subsidy of 5 percent is provided, subject to a Rs. 1
million ceiling. The subsidy is given to a new units with fixed
capital investment exceeding Rs. 30 million that are to be
established in districts where there are no medium or large scale
industries.
7. Interest Subsidy on Working Capital – A 5 percent interest
subsidy will be provided to small scale units with investments of
upto Rs. 65 million on interest on bank working capital loans.
8. Special Incentives for Export-Oriented Units, Agro & Food
Processing & Handicraft Industries – An additional State
Capital Investment Subsidy varying from 5 to 10 percent will
be provided.
9. Equity Participation in Assisted Sector – Assam Industrial
Development Corporation (AIDC) may participate in the equity
contribution of upto 20 percent of the issue capital, subject to a
ceiling of Rs. 2 million for viable projects where project costs do
not exceed Rs. 500,000.
The North Eastern Development Finance Corporation
Limited (NEDFi), formed in 1995-96 and based in
Assam is the chief development bank in the northeastern
part of India. So far it has sanctioned Rs. 637 Million in
the form of term loans, equity, and working capital term
loans for 71 projects in diverse sectors.

Comments: Industries such as motor vehicles,

tobacco, liquor, cosmetics, yarn, air conditioners,
refrigerators, soft drinks, and so on, for whom the
excise duties are very high, will find the excise duty
exemption attractive. The special incentives for export-
oriented units, pioneer units and food processing
industries will be of interest to U.S. companies. The
equity participation of the government will reduce the
risk of investment considerably.
To summarise, the major areas of concern with
Assam are:

1. Logistics Feasibility
2. Socio-Political Feasibility
3. Security
4. Floods
5. Geographical Remoteness
6. Overall impact on the Supply Chain,
Feasibility Study of OUTSOURCING

1. Logistics feasibility
2. Socio-Political feasibility
3. Financial feasibility
(Financial Feasibility includes benefits given by
State/Central Governments.)
Steps

1. Understand the present supply chain, product

portfolios and logistics infrastructure and
network
2. Determine the market segment to be catered to
(or enhancement of market share)
3. Understand the socio/political environment of
that particular state and identify issues/potential
barriers (both hard and soft issues) in managing
the contracts/logistics operations there.
4) Get learning from existing supply chains of other
companies in that area.
5) Evaluate the possible site location for outsourced
manufacturing operation.
6) Incorporate soft aspects in the design of the New
supply chain.
7) Establish Inventory at different level.
8) Workout the cost at the customer end (Inbound
logistics, conversion, outbound logistics, etc.)
9) Find the Trade-oft bet present and the envisaged
scenario.
10) Conduct sample study.