Supply Chain Management

Unit III

SCM

Effective integration of the various intermediaries in the chain from suppliers of raw material to the manufacturer to the customer in order to have the right quantity at the right locations at the right time at the minimum cost and in order to meet the service requirements.

SCM
Raw material WIP Finished goods Stock points

Supplier

Manufacturing order

Distribution order

Customer order

Customer

Supply chain time lines

SCM - Objectives
Balancing costs of holding /not holding inventory Optimizing pre & post manufacturing inventory levels. Greater efficiencies from labor, space, equipment across companies Flexible planning and control mechanism Free capital tied up in the inventories Minimize transportation costs

Supply chain Elements

Customer Planning Purchasing Inventory Production Transportation

SCM-3 levels of activities

Strategic level
Number / size of the warehouses Size / location of warehouses Partnerships with suppliers Products to be manufactured Determine best distribution channels

SCM-3 levels of activities

Tactical measures that will result in cost benefits

Optimize the flow of product through the supply chain Impact of strategies for seasonal product, Trade off between capacity and inventory Alternatives to deal with shortages

SCM-3 levels of activities

Operational :decision at this level affect how the product moves along the supply chain
Schedule changes to production Taking orders from customers Moving products to the warehouses

Bridging the Gaps

Demand
When is a product wanted Where is it wanted How many or how much is demanded In what mix

Supply
When is a product made Where is it made How many to make / acquire How is to be delivered

FunctionsPhysical & Marketing

Physical

Function

Marketing
Right

Function

Production Procurement Storage Transport

product Right place Right time Right quantity

Push V/S Pull Strategy

Push Strategy :made to stock Pull Strategy : made to order

Push Strategy

Product Characteristics

Stable Predictable demand Low level of demand uncertainty Low margins

All production & distribution decisions are made on long term forecasts Problems

Forecasts are wrong Longer the period more the uncertainty

Functional products

Pull Strategy
Made to order Product characteristics

Unpredictable demand Shorter life cycle Greater variety High margins

Problems
Success depends on accuracy of information Agile production and distribution

Pull Strategy
Variety of product reaching market place matches the customer demand Products fashion , computers Process

Inventories of parts Assemble Decision based on accurate customer Demand

Which strategy to use

Is your product functional / innovative Should your SC be physically efficient or market responsive Where in the SC should you position inventories hedge against uncertain demand

Physically efficient V/s market responsive

Primary purpose Manufacturing focus Inventory strategy Lead time Approach to choosing supplier