Supply Chain Management:

The Business Network

Supply Chain Management
• A cross-functional interenterprise system that uses IT to help
support & manage the links between some of a company’s
key business processes and those of its suppliers, customers,
& business partners.

• Goal is to create a fast, efficient, & low-cost network of

business relationships.
Supply Chain Management: A Pictorial
Representation
C1

C2

C3

C4

C5

C6

VENDOR INBOUND INTERFACILITY DISTRIBUTION OUTBOUND

PLANTS CUSTOMERS
TRANSPORTATION TRANSPORTATION CENTERS TRANSPORTATION
Supply Chain Management (continued)
Interaction between SCM lead time
delivery lead time

Order Penetration
Point/ Decoupling
Point
Order Delivery
Lead Time

SCM Lead Time

Supply Chain Typology

• Order Penetration Point/ Decoupling Point

• Make to Stock (Push)
• Make to Order(Pull)
• Configure to Order(Push & Pull)
• Supply Chain Focus
• Efficiency
• Responsiveness
Supply Chain Typology:
Order Penetration Point/ Decoupling Point

Future Group
Supply Chain Typology:
Order Penetration Point/ Decoupling Point

Dell
Supply Chain Typology:
Order Penetration Point/ Decoupling Point

TVS
Push-Pull Boundary of Supply
Chains
 Magnitude of Supply Chain Costs
Example: The Apparel Industry

Cost per Percent

Shirt Saving

Manufacturer Distributor Retailer Customer Rs. 527 0%

Manufacturer Retailer Customer Rs. 413 28%

Distributor

Rs. 204 62%

Manufacturer Distributor Retailer Customer
STRATEGY:
CENTRALISA
TION OF
STOCKING
STRATEGY: Centralization of stocking in a multi-
echelon distribution system
Traditional: Decentralized System

Supplier

Warehouses

Retailers

CUSTOMERS
Centralized Systems

Supplier

Warehouse

Retailers

CUSTOMERS
 Characteristics and Skills

Raw
Material Customers
Push Pull

Low Uncertainty High Uncertainty

Long Lead Times Short Cycle Times

Cost Minimization Service Level

Resource Allocation Responsiveness

 Benetton Manufacturing Process
Postponement
Old Sequence New Sequence

Purchase Yarn Purchase Yarn

Dye Yarn Knit Garment Parts

Finish Yarn Join Parts

This process
Knit Garment Parts Dye Garment
is postponed

Join Parts Finish Garment

 Supply Chain at Asian Paints

RM – 600 SKUs, 350 Suppliers

75% Domestic, 25% Imported
PM-300 SKUs, 140 Suppliers
5 Plants, 18 PC

6 Regional
Distribution Centers

Depots (70 No) Dealer(15000) Export & Industrial

70% volume 3000 SKUs Consumers (2000)

Made to stock Made to order

Postponement in Practice: Asian paints

• Dealer Tinting System

• In factory they make “Base/white" only
• Raw base sent to the dealers
• Customers choose their desired shades via
computer systems at the dealer end
• Dealer mixes the desired base and the colorants
with help of the DTS
• >2500 dealers have DTS
The De-coupling point Concept
Lean Agile

• Forecast at generic • Demand driven

level • Localized
• Economic batch Configuration
quantities • Maximize
• Maximize effectiveness
Strategic
efficiencies Inventory
Match Supply Chain Design with Product
Category: Supply Chain Responsiveness

Responsiveness : Ability to handle uncertainty

of market demand.

Products can be classified based on demand

uncertainty
1. Functional Products(grocery)
2. Innovative Products(fashion & technology
products)
Electronic data interchange

• Electronic data interchange

• Exchanging business transaction documents over the
Internet & other networks between supply chain
trading partners
Benefits and Challenges

• Can provide faster, more accurate order processing, reductions in inventory

levels, quicker time to market, lower transaction and materials costs, &
strategic relationships with suppliers
Problem causes
• Lack of proper demand planning knowledge, tools, and guidelines
• Inaccurate or overoptimistic demand forecasts
• Inaccurate production, inventory, and other business data
• Lack of adequate collaboration
Trends
The e-Business Application Architecture
Let ’s discuss few E-SCM in action
Flipkart , Amazon and DELL
Amazon and E-commerce
Amazon
• Started in 1995 as (probably) the world’s first Internet book seller.
• Quickly diversified to become an online general store selling books,
DVDs, computers, kitchenware, etc. etc.
• Excellent example of the notion of E-commerce
• The most technologically advanced Internet store. Reliant on
advanced technology to manage an enormous number of products
and tens of millions of customers
• Rents space on its technology platform to other online stores
Amazon demo
Amazon automation
• Amazon can only be successful because it has automated practically
all of the e-commerce processes
• Amazon relies on a very advanced, distributed (worldwide) computer
systems to ensure that goods can be ordered and despatched, 24/7
and that positive sales messages can be delivered to customers
• When you order something from Amazon, people are usually only
involved in selecting the goods you want for despatch from the
warehouse and in delivering them to you (fulfilment process)
Workflow
• The distinct steps involved in some work process
• Usually represented graphically to present a view of how some initial
stimulus or input, ‘flows through’ the system in a series of processing
stages
• Generally, organisations have tried to use computer systems to
automate stages in the workflow so that the number of people
involved in the process is reduced. Automation also allows more
throughput as computers work faster than people
• Amazon has completely automated much of the e-commerce process
Initial ordering
Bank system
Get order
information from Validate card Fail
Reject order
customer payment

OK
Set link from
Add order to ‘out stock
No of stock’ queue
Check stock database
level
Reduce stock
level by order
Yes amount

Put order onto Update customer Order processing

processing information
queue
Order processing
Get order from
Locate goods
orders queue

Update customer
information
Create Send orders to
fulfilment fulfilment centres
orders Confirm order by
email to
customer

Fulfilment
Fulfilment
Create customer Generate pick Pick items
despatch order list from shelves

Send dispatch Pack despatch Send items for

for packing order dispatch

Update customer
Charge information
Update order
status customer CC
Confirm despatch
by email to
customer

Order complete
Order information
Summary
• Amazon is the world’s largest on-line retail e-commerce site
• Amazon is totally dependent on advanced computer technology to
deliver an efficient service to customers
• State-of-the-art computer science is used to implement Amazon
systems
• Next lecture
• Amazon technology
• Recommender systems
• Cloud computing
DELL Fulfillment Center
Evolution of E-commerce logistics
Supply chain changed to e-logistics
Evolution of e-commerce logistics setup in developed markets

• Mega Fulfillment centers in e-commerce logistics

• The parcel hubs
• The Delivery centers