SUPPLY CHAIN PROCESS

RESTRUCTURING
BY
A.SUJITH
Supply Chain Restructuring

 Supply chains are becoming more global by the day. It is very important
to maintain a nimble supply chain that differentiates brands from being
“order qualifiers” to “order winners”. Companies expand and shrink, which
require streamlined manufacturing and supply chain footprints, resulting in
massive restructuring programs.
 Restructuring programs deal with major “lift & shift” activities involving
manufacturing, tooling, transportation and warehousing assets. Programs
of such scale need tremendous amounts of planning, starting from
contingency sourcing, facility readiness, finding new suppliers, buffer
planning, manufacturing process and production readiness
Enhancing Supply Chain Performance
Supply Chain Restructuring

 Restructuring Supply Chain Processes

 Supply chain mapping
 Restructuring Supply Chain Architecture
 Restructuring flow in chain
 Restructuring placement of inventory in chain
Restructuring the Supply Chain
Supply Chain Mapping

 Supply chain mapping (SCM) is the process of documenting information

across companies, suppliers, and individuals who are involved in the
company’s supply chain, to create a global map of their supply network.
For example, the exact source of materials and all shipments used will be
mapped.
 The supply chain map is then used in order to identify opportunities and
mitigate risk in the company’s supply chain.
Supply Chain Mapping
Why is it important?

 Supply chain mapping allows you to put strategies in place to rapidly

react when there are supply chain problems like a supplier faces a
shortage, an order gets lost in the system, there’s a surge in demand or
something even more unexpected happens. You also develop a deeper
understanding of the surrounding costs, timeframes, and risks, and
thereby gain an advantage over competitors who lack this important
knowledge.
Benefits of mapping

• Identify where value is added or lost. E.g., Quality issues with your raw
materials could be slowing down production
• Mitigate the impact of risks ahead of time. E.g., How would your brand
be affected if a third-tier supplier broke environmental laws?
• Strengthen the entire chain. By bolstering relationships between
companies in your supply chain through clear communication, you help
them better understand their place in the business ecosystem, including
your expectations and goals.
• Streamline and speed up processes. By analyzing the connections between the
entities in your supply chain, you can spot where delays originate and focus on
fixing them. E.g., You have three suppliers from whom you buy the same materials.
One is 30% faster at fulfilling your orders than the other two.
• Discover the elements that most affect your cashflow. Some suppliers may
have shorter payment terms, and some customers may tend to pay later than
others. In fact, research by FSB showed that the biggest risk to smaller suppliers’
supply chains was customers failing to pay for goods or services. If mapping your
supply chain shows that your cashflow is at risk, you could benefit from using a
Business Card to pay expenses
How to map your supply chain?

 Identify stakeholders
 Understand supplier relationships
 Establish costs and timings
 Acknowledge risks
 Data tracking
Characteristics of Supply Chain Mapping :
Shape of the Curve

 Area under the curve is equal to inventory in chain: Chain should be

reconfigured so that area under the curve is minimized
 Higher the value added in initial part of chain, higher the risk: Chain
should be reconfigured so as to re sequence activities so that time
intensive activities are scheduled at the initial stage and cost-intensive
activities are schedule at later stage
 Map all activities on time and cost dimension
 Schedule time intensive activities first and cost intensive
activities as late as possible
Change the shape of curve from concave to convex
Characteristics of Supply Chain Mapping:
Customer Ordering Point
 Customer offering consists of a bundle of product and services and can be
characterized using following five attributes:
 Cost: Cost incurred by customer to own and experience the product service
bundle. Eg. Big Bazar, Mobile
 Delivery time: Time taken from customer order to delivery eg. Jewellery, Fast
Food, Spectacles
 Product variety: Range of choices offered to the customer. Customisation is the
highest form a variety where product and services are tailored as per customer
requirements eg. Automobile, P&G
 Quality: Quality attribute captures product features, performance and reliability.
 Supplementary services: Set of supplementary services that surround core
product offering to enhance the value to customers
Restructuring Supply Chain Architecture
 Restructuring Supply Chain

 Usually within a firm all products with in a same business goes through similar flows. But
one can restructure a chain so that different material goes through different kind of flow.
Depending on the nature of item one can design differential flow. We illustrate through
example of HUL where firm has created different material flow for different category of items such
that all fast moving goods and slow moving goods and both category of goods.
 Firm can offer differential services : gold class service (Service with in 24 hours), silver class
service (Service with in 72 hours) in service chain depending on the priority of customers stocking
policies (where to stock the items) and mode of transport would be different for different category
of customers. Company provide gold class service (Service with in 24 hours), silver class service
(Service with in 72 hours).- Fast moving vs Slow moving (High Volume SKUs vs Low Volume
SKUs).
BEFORE
AFTER
 Restructuring Placement of Inventory in
Chain

 Restructuring of placement of inventory questions existing location of inventory and given

current demand structure and time and cost characteristics of process & supply chain
structure .
 A decoupling inventory is an inventory that permits the downstream portion of the supply
chain to operate independently from the upstream portion.
 The firm works with 98% cycle service level at each stock point. Coefficient of Variation is
Ratio of Standard Deviation to Mean
 E[ D1 +...+ Dn ] = n · E[D] ,
 Var( D1 +...+ Dn ) = n · Var(D) ,
 and Std Dev( D1 +...+ Dn ) = √n · StdDev(D)
 This is because of pooiling of variability at the sourcing and
manufacturing stages. Aggregation is preferred when number of markets
are larger.
LINKS

 https://www.youtube.com/watch?v=SnQhJk1xSvQ