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ABSTRACT:
Fierce competition in today’s global markets, the introduction of products with
shorter and shorter life cycles, and the heightened expectations of customers have forced
business enterprise to invest in, and focus attention on, their supply chains. This, together
with continuing advances in communications and transportation technologies (e.g., mobile
communication, Internet, and overnight delivery), has motivated the continuous evolution
of the supply chain and of the techniques to manage it.
If a company makes a product from parts purchased from suppliers, and those
products are sold to customers, then you have a ―supply chain‖. The supply chain, which is
also referred as the logistics network, consist of suppliers, manufacturing centers,
warehouses, distribution centers, and retail outlets, as well as raw material, work in process
inventory, and finished product that flow between the facilities.
As supply chain Management involves procuring the right inputs (raw materials,
components and capital equipments); converting them efficiently into finished products
and dispatching them to the final destinations; there is a need to study as to how the
company's suppliers obtain their inputs. The supply chain perspective can help the retailers
identify superior suppliers and distributors and help them improve productivity, which
ultimately brings down the customers costs. At the same time, Market logistics helps
planning the infrastructure to meet demand, then implementing and controlling the
physical flows of material and final goods from point of origin to points of use, to meet
customer requirements at a profit.
To ensure that the supply chain is operating as efficient as possible and
generating the highest level of customer satisfaction at lowest cost, company have to adopt
supply chain management processes and associated technology.
This presentation provides a conceptual understanding of what a supply chain is,
and the various issues while designing, planning, operating a supply chain.
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1. INTRODUTION:
1.1 Supply chain-
A supply chain consists of all parties involved, directly or indirectly, in
fulfilling a customer request. As the supply chain starts and ends with the customer a
simple supply chain is made up of several elements that are linked by movement of
product along it.
Fig.1.1 Supply Chain Block Dia.
Such elements are-
1.Customer:The customer starts the chain of events when they decide to purchase a
product that has been offered for sale by a company. The customer contacts to the retailer.
2.Manufacturers: Manufacturer manufacture the product as per the customer requirement.
Company purchase the raw material as per the requirement of the product from the
vendors that are placed in local market.
3.Purchase:Components of the product are purchase from market by asking the tenders
from venders. And by this process venders are decided.
4.Wholesalers /Distributors: Distributors are fixed by the manufacturer to distribute the
product to retailers.
5.Transportation: Transportation is the key factor of the supply chain it transports the
material and product from company to distributor to retailer and also brings the marerial to
manufacturing unit from suppliers and vendors.
Supplier Manufacturer warehouse Distributor Retailer Consumer
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6. Retailers: Retailer is only factor that is connected with directly with customer. That’s
why retailers role is much more important in supply chain.
Fig1.2. Elements of Supply Chain
Consider a customer walking into a Big Bazaar store to purchase noodles. The
supply chain begins with a customer and his need for noodles. The next stage of the supply
chain is the big bazaar retail store that the customer visits. Big Bazaar stocks its shelves
using inventory that may have been supplied from finished goods warehouse or a
distributor using trucks supplied by third party. The distributor in turn is stocked by
manufacturer (say nestle, India). The nestle India plant receives raw material from a
variety of suppliers, who may have been supplied by lower tier suppliers. This suppliers
receives grains from farmers. Then the company manufacturer decide to make the noodles
by customers requirement to satisfy his needs.
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2. SUPPLY CHAIN MANAGEMENT
Supply chain management (SCM) is the management of a network of
interconnected businesses involved in the ultimate provision of product and service
packages required by end customers. Supply Chain Management spans all movement and
storage of raw materials, work-in-process inventory, and finished goods from point of
origin to point of consumption (supply chain).
Another definition SCM is the "design, planning, execution, control, and
monitoring of supply chain activities with the objective of creating net value, building a
competitive infrastructure, leveraging worldwide logistics, synchronizing supply with
demand, and measuring performance globally."
2.1 IDEA
More common and accepted definitions of Supply Chain Management are:
Supply Chain Management is the systemic, strategic coordination of the traditional
business functions and the tactics across these business functions within a
particular company and across businesses within the supply chain, for the purposes
of improving the long-term performance of the individual companies and the
supply chain as a whole.
Global Supply Chain Forum - Supply Chain Management is the integration of key
business processes across the supply chain for the purpose of adding value for
customers and stakeholders.
According to the Council of Supply Chain Management Professionals (CSCMP),
Supply chain management encompasses the planning and management of all
activities involved in sourcing, procurement, conversion, and logistics
management. It also includes the crucial components of coordination and
collaboration with channel partners, which can be suppliers, intermediaries, third-
party service providers, and customers. In essence, supply chain management
integrates supply and demand management within and across companies. More
recently, the loosely coupled, self-organizing network of businesses that cooperate
to provide product and service offerings has been called the Extended Enterprise.
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A supply chain, as opposed to supply chain management, is a set of organizations directly
linked by one or more of the upstream and downstream flows of products, services,
finances, and information from a source to a customer. Managing a supply chain is 'supply
chain management'.
2.2 SUPPLY CHAIN MANAGEMENT PROBLEMS
Supply chain management must address the following problems:
Distribution Network Configuration: number, location and network missions of
suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.
Distribution Strategy: questions of operating control (centralized, decentralized or
shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking,
DSD (direct store delivery), closed loop shipping; mode of transportation, e.g.,
motor carrier, including truckload, LTL, parcel; railroad; intermodal transport,
including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight;
airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation
control (e.g., owner-operated, private carrier, common carrier, contract carrier, or
3PL).
Trade-Offs in Logistical Activities: The above activities must be well coordinated
in order to achieve the lowest total logistics cost. Trade-offs may increase the total
cost if only one of the activities is optimized. For example, full truckload (FTL)
rates are more economical on a cost per pallet basis than less than truckload (LTL)
shipments. If, however, a full truckload of a product is ordered to reduce
transportation costs, there will be an increase in inventory holding costs which may
increase total logistics costs. It is therefore imperative to take a systems approach
when planning logistical activities. These trade-offs are key to developing the most
efficient and effective Logistics and SCM strategy.
Information: Integration of processes through the supply chain to share valuable
information, including demand signals, forecasts, inventory, transportation,
potential collaboration, etc.
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Inventory Management: Quantity and location of inventory, including raw
materials, work-in-progress (WIP) and finished goods.
Cash-Flow: Arranging the payment terms and methodologies for exchanging funds
across entities within the supply chain.
Supply chain execution means managing and coordinating the movement of materials,
information and funds across the supply chain. The flow is bi-directional.
2.3 ACTIVITIES/FUNCTIONS
Supply chain management is a cross-function approach including managing the
movement of raw materials into an organization, certain aspects of the internal processing
of materials into finished goods, and the movement of finished goods out of the
organization and toward the end-consumer. As organizations strive to focus on core
competencies and becoming more flexible, they reduce their ownership of raw materials
sources and distribution channels. These functions are increasingly being outsourced to
other entities that can perform the activities better or more cost effectively. The effect is to
increase the number of organizations involved in satisfying customer demand, while
reducing management control of daily logistics operations. Less control and more supply
chain partners led to the creation of supply chain management concepts. The purpose of
supply chain management is to improve trust and collaboration among supply chain
partners, thus improving inventory visibility and the velocity of inventory movement.
Several models have been proposed for understanding the activities required to
manage material movements across organizational and functional boundaries.
Supply chain activities can be grouped into strategic, tactical, and operational
levels.
2.3.1STRATEGIC
Strategic network optimization, including the number, location, and size of
warehousing, distribution centers, and facilities.
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Strategic partnerships with suppliers, distributors, and customers, creating
communication channels for critical information and operational improvements
such as cross docking, direct shipping, and third-party logistics.
Product life cycle management, so that new and existing products can be optimally
integrated into the supply chain and capacity management activities.
Information technology infrastructure to support supply chain operations.
Where-to-make and what-to-make-or-buy decisions.
Aligning overall organizational strategy with supply strategy.
2.3.2 TACTICAL
Sourcing contracts and other purchasing decisions.
Production decisions, including contracting, scheduling, and planning process
definition.
Inventory decisions, including quantity, location, and quality of inventory.
Transportation strategy, including frequency, routes, and contracting.
Benchmarking of all operations against competitors and implementation of best
practices throughout the enterprise.
Milestone payments.
Focus on customer demand.
2.3.3 OPERATIONAL
Daily production and distribution planning, including all nodes in the supply chain.
Production scheduling for each manufacturing facility in the supply chain (minute
by minute).
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Demand planning and forecasting, coordinating the demand forecast of all
customers and sharing the forecast with all suppliers.
Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
Inbound operations, including transportation from suppliers and receiving
inventory.
Production operations, including the consumption of materials and flow of finished
goods.
Outbound operations, including all fulfillment activities, warehousing and
transportation to customers.
Order promising, accounting for all constraints in the supply chain, including all
suppliers, manufacturing facilities, distribution centers, and other customers.
Organizations increasingly find that they must rely on effective supply chains,
or networks, to successfully compete in the global market and networked economy.
During the past decades, globalization, outsourcing and information technology have
enabled many organizations, such as Dell and Hewlett Packard, to successfully operate
solid collaborative supply networks in which each specialized business partner focuses on
only a few key strategic activities. This inter-organizational supply network can be
acknowledged as a new form of organization. However, with the complicated interactions
among the players, the network structure fits neither "market" nor "hierarchy" categories.
It is not clear what kind of performance impacts different supply network structures could
have on firms, and little is known about the coordination conditions and trade-offs that
may exist among the players. From a systems perspective, a complex network structure
can be decomposed into individual component. Traditionally, companies in a supply
network concentrate on the inputs and outputs of the processes, with little concern for the
internal management working of other individual players. Therefore, the choice of an
internal management control structure is known to impact local firm performance
In the 21st century, changes in the business environment have contributed to the
development of supply chain networks. First, as an outcome of globalization and the
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proliferation of multinational companies, joint ventures, strategic alliances and business
partnerships, significant success factors were identified, complementing the earlier "Just-
In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices. Second,
technological changes, particularly the dramatic fall in information communication costs,
which are a significant component of transaction costs, have led to changes in
coordination among the members of the supply chain network .
Many researchers have recognized these kinds of supply network structures as
a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual
Corporation", "Global Production Network", and "Next Generation Manufacturing
System".In general, such a structure can be defined as "a group of semi-independent
organizations, each with their capabilities, which collaborate in ever-changing
constellations to serve one or more markets in order to achieve some business goal
specific to that collaboration" .
The security management system for supply chains is described in ISO/IEC 28000 and
ISO/IEC 28001 and related standards published jointly by ISO and IEC.
3. DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT
Six major movements can be observed in the evolution of supply chain management
studies: Creation, Integration, and Globalization.
3.1. Creation Era
The term supply chain management was first coined by a U.S. industry consultant in the
early 1980s. However, the concept of a supply chain in management was of great
importance long before, in the early 20th century, especially with the creation of the
assembly line. The characteristics of this era of supply chain management include the need
for large-scale changes, re-engineering, downsizing driven by cost reduction programs,
and widespread attention to the Japanese practice of management.
3.2. Integration Era
This era of supply chain management studies was highlighted with the development of
Electronic Data Interchange systems in the 1960s and developed through the 1990s by the
introduction of Enterprise Resource Planning systems. This era has continued to develop
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into the 21st century with the expansion of internet-based collaborative systems. This era
of supply chain evolution is characterized by both increasing value-adding and cost
reductions through integration.
3.3. Globalization Era
The third movement of supply chain management development, the globalization era, can
be characterized by the attention given to global systems of supplier relationships and the
expansion of supply chains over national boundaries and into other continents. Although
the use of global sources in the supply chain of organizations can be traced back several
decades (e.g., in the oil industry), it was not until the late 1980s that a considerable
number of organizations started to integrate global sources into their core business. This
era is characterized by the globalization of supply chain management in organizations with
the goal of increasing their competitive advantage, value-adding, and reducing costs
through global sourcing.
4. SUPPLY CHAIN BUSINESS PROCESS INTEGRATION
Successful SCM requires a change from managing individual functions to
integrating activities into key supply chain processes. An example scenario: the
purchasing department places orders as requirements become known. The marketing
department, responding to customer demand, communicates with several distributors and
retailers as it attempts to determine ways to satisfy this demand. Information shared
between supply chains partners can only be fully leveraged through process integration.
Supply chain business process integration involves collaborative work between buyers and
suppliers, joint product development, common systems and shared information. According
to Lambert and Cooper (2000), operating an integrated supply chain requires a continuous
information flow. However, in many companies, management has reached the conclusion
that optimizing the product flows cannot be accomplished without implementing a process
approach to the business. The key supply chain processes are:
Customer relationship management
Customer service management
Demand management
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Order fulfillment
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Returns management
Much has been written about demand management. Best-in-Class companies have
similar characteristics, which include the following:
a) Internal and external collaboration
b) Lead time reduction initiatives
c) Tighter feedback from customer and market demand d) Customer level forecasting
One could suggest other key critical supply business processes which combine these
processes stated as:
Customer service management
Procurement
Product development and commercialization
Manufacturing flow management/support
Physical distribution
Outsourcing/partnerships
Performance measurement
4.1 Customer Service Management Process
Customer Relationship Management concerns the relationship between the
organization and its customers. Customer service is the source of customer information. It
also provides the customer with real-time information on scheduling and product
availability through interfaces with the company's production and distribution operations.
Successful organizations use the following steps to build customer relationships:
determine mutually satisfying goals for organization and customers
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establish and maintain customer rapport
produce positive feelings in the organization and the customers
4.2 Procurement Process
Strategic plans are drawn up with suppliers to support the manufacturing flow
management process and the development of new products. In firms where operations
extend globally, sourcing should be managed on a global basis. The desired outcome is a
win-win relationship where both parties benefit, and a reduction in time required for the
design cycle and product development. Also, the purchasing function develops rapid
communication systems, such as electronic data interchange and Internet linkage to
convey possible requirements more rapidly. Activities related to obtaining products and
materials from outside suppliers involve resource planning, supply sourcing, negotiation,
order placement, inbound transportation, storage, handling and quality assurance, many of
which include the responsibility to coordinate with suppliers on matters of scheduling,
supply continuity, hedging, and research into new sources or programs.
4.3 Product Development and Commercialization
Here, customers and suppliers must be integrated into the product development
process in order to reduce time to market. As product life cycles shorten, the appropriate
products must be developed and successfully launched with ever shorter time-schedules to
remain competitive. According to managers of the product development and
commercialization process must:
coordinate with customer relationship management to identify customer-articulated
needs;
select materials and suppliers in conjunction with procurement, and
Develop production technology in manufacturing flow to manufacture and
integrate into the best supply chain flow for the product/market combination.
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4.4 Manufacturing Flow Management Process
The manufacturing process produces and supplies products to the distribution
channels based on past forecasts. Manufacturing processes must be flexible to respond to
market changes and must accommodate mass customization. Orders are processes
operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the
manufacturing flow process lead to shorter cycle times, meaning improved responsiveness
and efficiency in meeting customer demand. Activities related to planning, scheduling and
supporting manufacturing operations, such as work-in-process storage, handling,
transportation, and time phasing of components, inventory at manufacturing sites and
maximum flexibility in the coordination of geographic and final assemblies postponement
of physical distribution operations.
4.5 Physical Distribution
This concerns movement of a finished product/service to customers. In
physical distribution, the customer is the final destination of a marketing channel, and the
availability of the product/service is a vital part of each channel participant's marketing
effort. It is also through the physical distribution process that the time and space of
customer service become an integral part of marketing, thus it links a marketing channel
with its customers (e.g., links manufacturers, wholesalers, retailers).
4.6 Outsourcing/Partnerships
This is not just outsourcing the procurement of materials and components,
but also outsourcing of services that traditionally have been provided in-house. The logic
of this trend is that the company will increasingly focus on those activities in the value
chain where it has a distinctive advantage, and outsource everything else. This movement
has been particularly evident in logistics where the provision of transport, warehousing
and inventory control is increasingly subcontracted to specialists or logistics partners.
Also, managing and controlling this network of partners and suppliers requires a blend of
both central and local involvement. Hence, strategic decisions need to be taken centrally,
with the monitoring and control of supplier performance and day-to-day liaison with
logistics partners being best managed at a local level.
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4.7 Performance Measurement
Experts found a strong relationship from the largest arcs of supplier and
customer integration to market share and profitability. Taking advantage of supplier
capabilities and emphasizing a long-term supply chain perspective in customer
relationships can both be correlated with firm performance. As logistics competency
becomes a more critical factor in creating and maintaining competitive advantage,
logistics measurement becomes increasingly important because the difference between
profitable and unprofitable operations becomes narrower. firms engaging in
comprehensive performance measurement realized improvements in overall productivity.
According to experts, internal measures are generally collected and analyzed by the firm
including
1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.
External performance measurement is examined through customer perception measures
and "best practice" benchmarking, and includes 1) customer perception measurement, and
2) best practice benchmarking.
Components of Supply Chain Management are
1. Standardization
2. Postponement
3. Customization
5. THEORIES OF SUPPLY CHAIN MANAGEMENT:-
5.1 SUPPLY CHAIN SUSTAINABILITY
Supply chain sustainability is a business issue affecting an organization’s
supply chain or logistics network and is frequently quantified by comparison with SECH
ratings. SECH ratings are defined as social, ethical, cultural and health footprints.
Consumers have become more aware of the environmental impact of their purchases and
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companies’ SECH ratings and, along with non-governmental organization’s , are setting
the agenda for transitions to organically-grown foods, anti-sweatshop labour codes and
locally-produced goods that support independent and small businesses. Because supply
chains frequently account for over 75% of a company’s carbon footprint many
organization’s are exploring how they can reduce this and thus improve their SECH rating.
5.2 Components of Supply Chain Management Integration
5.3 The Management Components of SCM
The SCM components are the third element of the four-square circulation
framework. The level of integration and management of a business process link is a
function of the number and level, ranging from low to high, of components added to the
link. Consequently, adding more management components or increasing the level of each
component can increase the level of integration of the business process link. The literature
on business process re-engineering, buyer-supplier relationships, and SCM suggests
various possible components that must receive managerial attention when managing
supply relationships. identified the following components:
* Planning and control
* Work structure
* Organization structure
* Product flow facility structure
* Information flow facility structure
* Management methods
* Power and leadership structure
* Risk and reward structure
* Culture and attitude
However, a more careful examination of the existing literature . leads to a more
comprehensive understanding of what should be the key critical supply chain
components, the "branches" of the previous identified supply chain business processes,
that is, what kind of relationship the components may have that are related to suppliers
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and customers. A primary level channel participant is a business that is willing to
participate in the inventory ownership responsibility or assume other aspects of
financial risk, thus including primary level components. Secondary level participant
(specialized) is a business that participates in channel relationships by performing
essential services for primary participants, including secondary level components,
which support primary participants. Third level channel participants and components
that support the primary level channel participants and are the fundamental branches of
the secondary level components may also be included.
Consequently, framework of supply chain components does not lead to any conclusion
about what are the primary or secondary (specialized) level supply chain components .
That is, what supply chain components should be viewed as primary or secondary,
how should these components be structured in order to have a more comprehensive
supply chain structure, and how to examine the supply chain as an integrative one .
Reverse Supply Chain Reverse logistics is the process of managing the return of
goods. Reverse logistics is also referred to as "Aftermarket Customer Services". In
other words, any time money is taken from a company's warranty reserve or service
logistics budget one can speak of a reverse logistics operation.
6. Global supply chain management
Global supply chains pose challenges regarding both quantity and value:
Supply and Value Chain Trends
Globalization
Increased cross border sourcing
Collaboration for parts of value chain with low-cost providers
Shared service centers for logistical and administrative functions
Increasingly global operations, which require increasingly global coordination and
planning to achieve global optimums
Complex problems involve also midsized companies to an increasing degree,
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These trends have many benefits for manufacturers because they make possible larger lot
sizes, lower taxes, and better environments (culture, infrastructure, special tax zones,
sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in
supply chain management, there will be many more challenges when the scope of supply
chains is global. This is because with a supply chain of a larger scope, the lead time is
much longer. Furthermore, there are more issues involved such as multi-currencies,
different policies and different laws.
The consequent problems include:
Different currencies and valuations in different countries
Different tax laws (Tax Efficient Supply Chain Management)
Different trading protocols
7. Food Supply Chains in India
In India, about 60 percent of food quality is lost in the supply chain from the farm to the
final consumer. Consumers actually end up paying approximately about 35 percent more
than what they could be paying if the supply chain was improved, because of wastage as
well as multiple margins in the current supply structure. The farmer in India gets around
30 percent of what the consumer pays at the retail store. Compare this with the situation
obtaining in the USA, where farmers can receive up to 70 percent of the final retail price
and wastage levels are as low as 4 to 6 percent. One can easily understand the benefits that
could be generated from emulating those practices and tapping that expertise for the
Supply chain in India.
Fig7.1. Indian food Supply Chain Network
Fig7.2. Foreign Countries Food Supply Chain Network
Farmer Dealer Wholesaler Warehouse Retailer Customer
Farmer Warehouse Retailer Customer
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As supply chain Management involves procuring the right inputs (raw
materials, components and capital equipments); converting them efficiently into finished
products and dispatching them to the final destinations; there is a need to study as to how
the company's suppliers obtain their inputs. The supply chain perspective can help the
retailers identify superior suppliers and distributors and help them improve productivity,
which ultimately brings down the customers costs. At the same time, Market logistics
helps planning the infrastructure to meet demand, then implementing and controlling the
physical flows of material and final goods from point of origin to points of use, to meet
customer requirements at a profit.
Till now most retailers in India have invested majorly into the front end, but
relatively little on the back end and supply chain. Even in countries like the USA,
Germany and England, where organized retail is highly developed; supply chain efficiency
is a major concern. The nature of retail sector in India is different from other countries
around the world. The organized retail sector in India is highly fragmented and there are
huge inefficiencies in the supply chain.
The most important part of retailing business is to find a balance between
investing in front-end and back-end operations. The channel dynamics is going to change
over next couple of years as the retailers start growing in size and their bargaining power
is likely to increase. Probably that would bring some kind of mutual understanding
between manufactures and retailers to develop strong supply chain network. In such a
scenario, both the existing operators and new operators must put collaborative efforts to
phase out inefficiencies in the supply chain network.
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Case study-
8. Future Group-
8.1 Introduction-
Future Group is the country's leading retail business group that caters to the entire
Indian consumption space. It operates through six verticals: Future Retail (encompassing
all lines of retail business), Future Capital (financial products and services), Future Brands
(all brands owned or managed by group companies), Future Space (management of retail
real estate), Future Logistics (management of supply chain and distribution) and Future \
Media (development and management of retail media spaces).
The group's flagship company, Pantaloon Retail (India) Limited operates over 5
million square feet through 450 stores in 40 cities. Some of its leading retail formats
iclude, Pantaloons, Big Bazaar, Central, Food Bazaar, Home Town, EZone, Depot,
Health & Beauty Malls and online retail format.
The group's joint venture partners include Italian insurance major, Generali, French
retailer ETAM group, US-based stationary products retailer, Staples and UK-based Lee
Cooper and India-based Talwalkar's, Blue Foods and Liberty Shoes.
8.2Working-
Future Group is working on the ―vendor network‖ as well as the ―logistics
network‖. The company has identified up to 40 anchor vendors, each with turnovers of
US$45 million, to achieve economies of scale. The group is also keen to ensure that its
smaller vendors are able to reach turnovers of around US$1 million and a growth rate of
40% annually, to be able to pass on the benefits of scales. The company is also working
towards bringing its 1,200 vendors online, likeWall-mart
Going further in this direction, the Future Group has also launched Future Logistics
initially aimed at handling the supply chain logistics of the group. However, sensing
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immense opportunity in this area, the company is now looking to offer its services to its
1000-odd vendors, spread across consumer related goods, to reach a targeted turnover of
about Rs.700 crore by 2010.The thrust at present will be on modes of surface transport like
roads and rail only. However, at a later stage, sea and air modes might also be considered
as per the requirement.
In India, Future group derives significant economies of scale in managing their supply
chain. With more than 170000 products, the company maintains a strong supplier
relationship in a partnership mode, avoiding the exploitative supplier – buyer transactional
philosophy. The IT enabled back-end operations and supply chain management increases
the reliability and efficiency of the business.
As part of the operation, Future Group is also undertaking to reduce its
warehousing costs through a consolidation process. In a country like India, where most
retail stores are located in the heart of the city—where rents are high and storage space is
scarce—supply chain management has even more serious business implications. Future
Logistics now handles two-and-a-half million stock keeping units a day across the Future
Group's various retail formats around the country. By 2010, this number is expected to
increase to more than 30 million stock keeping units a day. Even with 98% accuracy, some
600,000 pieces will not be delivered correctly, resulting in an estimated sales loss of more
than Rs 4 crore a day.
The biggest driver in consumer logistics is going to be zero defect in managing
the supply chain. While infrastructure, technology, automation, processes and people will
all play an important role, zero defect can only be achieved through vertical integration
across the entire supply chain—from raw material supply, production, wholesale and
retail. The different parts of the supply chain will no longer be able to work in silos as they
do today.
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8.3Retailing in India
The Indian retail industry accounts for 10% of GDP and 8% of employment.
India is being touted as the next big retail destination with an average three year
compounded annual growth rate of 46.64%.
The Indian economy is poised to take the third position in the world in terms of
Purchasing Power Parity by the year 2010.
The Indian Retail Market is a Rs.1,200,000 million market as per the Images India
Retail Report 2007.
Organized Retail market is zooming ahead with an annual growth rate of 30%
The country will have over 300 malls translating to over 100 million sq.ft. in
available mall space by the end of 2007
Mission & Vision
Future Group shall deliver Everything, everywhere, anytime for every Indian
Consumer in the most profitable manner.
We share the vision and belief that our customers and stakeholders shall be served
only by creating and executing future scenarios in the consumption space leading to
economic development
Introduction to Big Bazaar
A chain of shopping malls in India currently with 31 outlet owned by Kishore
Biyani’s Pantaloon Group.
Big bazaar is not just another hypermarket.
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Provides the best products at the best price.
Reflect the look and feel of Indian bazaars at their modern outlets .
All over India, Big Bazaar attracts a few thousand customers on any regular day.
Target Audience
Big Bazaar targets higher and upper middle class customers .
The large and growing young working population is a preferred customer segment
.
Big Bazaar specifically targets working women and home makers who are the
primary decision makers.
Different elements of retail mix
Merchandise assortment
Location
Price
Visual merchandising
Retail-mix continued.
Store atmosphere
Customer service
Advertising
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Promotion
Personal selling
Internal Attributes
Envelope
Internal layout
Methods of display
Visual merchandising
Distribution
Distribution is one of the 4 aspects of marketing.
Traditionally, distribution has been seen as dealing with how to get the product or
service to the customer
Distribution is done by distributor who is is the middleman between the
manufacturer and retailer
Logistics
Logistics is the art and science of managing and controlling the flow of goods ,
energy, information and other resources like products, services and people from the
source of production to the marketplace.
It’s Important to have professional logistical support
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The operating responsibility of logistics is the geographical repositioning of raw
materials, work in process and finished inventories where required at the lowest
cost possible.
Fig.8.4. Big Bazaar Supply Chain Network
Big Bazaar
Retail outlet
Warehouse
Distriubutor1 Cloth
manufacturer
supplier1
(Cotton)
supplier2
(Packing material)
Distributor2 Electromnics equipment
manufacturer
Supplier3
(Electronic parts)
Supplier4
(Packing material)
Vendor1
Fast Food
Manufacturer
Vendor2 Wholesaler Farmer
(Grains)
Vendor3 Wholesaler Farmer
(Dairy product)
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CASE STUDY-
9. Introduction
9.1 McDonalds Is……..
McDonalds is a name which is today synonymous with the fast food.
McDonalds is a fast food chain with restaurants all over the world with headquarters in
oak brooks, Illinois , US. It serves burgers and other fast food customized to local tastes.
Its philosophy has been one world one burger. Which meant that the burger must be
consistent in terms of cost and quality. To meet such high standards , it was essential to
have an excellent supply chain management system. In INDIA McDonalds had a very
well orchestrated supply chain called cold chain.
9.2 IT STARTS WITH……………
In 1954, Ray Kroc, 52, Distributor of milk shake maker multi mixer, went to see
McDonalds brothers hamburger stall in California.
With an opportunity, he thought to open several of such restaurants so as to sell his
multimixer milk shake machine.
9.3 SOME IMPORTANT FACTS………
In year 2004 , McDonalds was the largest marketer of fast food in the world.
31000+restaurants.
47 million customers served daily.
1999-2008 most valuable brand.
2000-ranked among top 100 firms in the world.
9.4 INDIAN MARKET…………
It’s a huge sub-continent.
India is 4 times more populated than the US.
India has 300 million strong middle class people.
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India is one the largest economy in world.
Incorporated in 1993, MIPL is McDonalds Indias wholly owned subsidiary.
In India, Mcdonalds open its first restaurant in vasant vihar, south Delhi.
50:50 joint venture .
9.5 SUPPLY CHAIN IN McDONALDS INDIA……….
In fast food business supply chain is of highest importance .It helps in minimizing cost cut
down the delivery time, improve the profits and at the same time maintain the highest
standards. The importance of supply chain can be understood by the fact that before
setting up their first restaurant in India McDonald infused around Rs.400 crores in the
supply and delivery chain. McDonalds India source all its product and its raw material
from India only. McDonalds develops local businesses that supply them the products and
that too of highest standards. Today McDonalds have around 38 suppliers and that on the
long term basis.
Fig.9.5. Supply Chain In Of McDonald
9.6 McDONALDS DISTRIBUTION CENTRES………
Noida and Kalamboli(Mumbai)………………..1996
Bengaluru………………………………………………..2004
Kolkata…………………………………………………….2007
1st distribution agreement was done by Radhakrishana group, a group engaged in food
business in the year 1993 and it was their 1st distribution center.
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9.7 CONCEPT OF COLD CHAIN ………………
A cold chain is a temperature-controlled supply chain. An unbroken cold
chain is an uninterrupted series of storage and distribution activities which maintain a
given temperature range. It is used help extend and ensure the shelf life of products such
as fresh agricultural produce, processed foods, photographic film, chemicals and
pharmaceutical drugs. This concept of cold chain in food industry and that too on such a
large scale was started by mc donalds only.
This concept was unique in India and to start this concept, it took around 6
years. It benefited both farmers as wella s the consumers, as they are getting the fresh, best
quality and great value food. With this concept mc donalds cut down its wastage and able
to maintain its freshness and nutritional value of raw material.
9.8 STEPS INVOLVED IN COLD CHAIN CONCEPT…….
· Procurement
· Warehousing
· Transportation
· Retailing
9.9 STEPS INVOLVED IN COLD CHAIN CONCEPT……
McDonald's finding the factor of cold room being vital ensured that even
before vegetables from farms entered the refrigerated zones, they were locked in a pre-
cooling room to remove field heat. Vegetables were placed in the pre cooling room within
half an hour of harvesting where rapid cooling decreased the field temperature of
vegetables to 2ºC within 90 minutes. Then a large cold room (a refrigerated van) was used
for transportation to the distribution centers. In the van, the temperature and relative
humidity of crop was maintained at 1-4ºC and 95 per cent, respectively and the flavors and
freshness are locked. At the suppliers' level, care was taken to guard against any possible
contamination or interruption in the cold chain that can break the link and have a
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detrimental effect on the quality of our product. The iceberg lettuce from Ooty, mutton
patties from Hyderabad and sesame seed buns from Punjab were all delivered to
Radhakrishna Foodland Private Limited distribution centre (cold storage) in its
refrigerated vans. RFPL stored the products in controlled conditions in Mumbai and New
Delhi and supplied them to McDonald's outlets on a daily basis. By transporting the semi-
finished products at a particular temperature, the cold chain ensured freshness and
adequate moisture content of the food. The specially designed trucks maintained the
temperature in the storage chamber throughout the journey. Drivers were instructed
specifically not to switch off the chilling system to save electricity, even in the event of
traffic jam.
9.10 LIST OF SUPPLIERS AND THE DISCRIPTION SHOWING HOW COLD
CHIN CONCEPT WORKS AND CONTRIBUTE TOWARDS EFFICIENCY…….
· Dynamix dairy industry (cheese)
· Trikaya agriculture (iceburg lettuce)
· Vista processed food pvt ltd. (chicken and veg range of products)
9.11 McDonalds: Supply Chain Management
· Radhakishana food land(distribution centre- delhi and mumbai)
· Amrit food(long life UHT milk and milk products for frozen desserts) Below mentioned
is the data about Refrigerated vans for McDonald's distribution
9.12Type Route Quantity
National inbound Suppliers to Distribution Center 20 vehicles
Outbound North Distribution Center to restaurant 13 vehicles
Outbound West Distribution Center to restaurant 11 vehicles
Outbound South Distribution Center to restaurant 1 Vehicle
9.13 DYNAMIX DAIRY INDUSTRY (SUPPLYING CHEESE)
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· Firm from baramati, maharashtra
· Milk collection centres with bulk coolers
· International standard and processing facilities
· Stringent quality control measures
9.14 McDonalds: Supply Chain Management
· All activities from procurement of milk to changing it into cheese and then to serve that
cheese in the restaurant is all under temperature control atmosphere
9.15 TRIKAYA AGRICULTURE (SUPPLYING ICEBURG LETTUCE)
· Advanced agricultural practices helps them to grow specialty crops like lettuce and
herbs.
· Pre cooling room and large cold room for post harvest.
· Refrigerated transportation.
9.16 VISTA PROCESSED FOOD PVT. LTD. (FOR SUPPLYING FROZEN
CHICKEN AND VEG PRODUCTS)
· For chicken, temperature maintained is -35 degrees Celsius.
· Refrigerated transportation.
9.17 RADHA KRISHNA FOODLAND (DISTRIBUTION CENTRE)
· Specialized in handling large volumes.
·Activities involved are procurement, quality inspection, storage, inventory
management, deliveries, data collection, recording and reporting.
· One stop shop for all distribution management services.
· Both dry and cold storage facility.
9.18 AMRIT FOODS
· An ISO 9000 firm
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· Supplies long life UHT milk/ milk products for desserts.
9.19 DIFFERENT ITEMS ARE SOURCED FROM DIFEERENT GEOGRAPHY IN
INDIA……..
· BUNS-shah bector &sons, Maharashtra and cermica, ludhiyana
· BATTER & BREADING- cremica, ludhiyana
· VEGETABLE PATTY- kitran foods, taloja, Maharashtra
· CHEDDAR CHEESE- dynamix dairy, baramati, Maharashtra
· SEASAME SEED- Gaziabad, UP
· SPL VEG EGGLESS SAUCE- Quaker, cermica, ludhiyana
9.20 THREE LOGISTICAL DRIVERS…….
1. Facilities- they are the actual physical location in the supply chain network where the
product is stored, assembled, or fabricated. The two main facilities are production sites
and the storage sites. In McDonalds, because the products are perishable, storage time was
minimal so as to reduce the wastage.
2. Transportation- it is the process where the inventory is moving from place to place.
Refrigerated vans are used here in this case.
3. Inventory- it includes raw materials, work in progress, and finished goods within a
supply chain.
9.21 THREE CROSS-FUNCTIONAL DRIVERS……
1. sourcing- who will perform which activity( production, storage, transportation, and
distribution) in a supply chain. This activity was taken care by mcdonalds corporation.
2. information- it includes data and analysis related to facilities, inventory, transportation,
cost, prices and customers in the whole supply chain. This activity was done by
Radhakrishana food land that acts as their distribution centre.
3. pricing- how much a firm could charge for a particular goods and services that it makes
available in the supply chain. Here it was done by the mcdonalds only.
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9.22 PULL/PUSH PROCESS
Pull processes are initiated by a customer order while the push processes are initiated by
the anticipation of customer order. Mcdonalds use both pull as well as push process, to a
certain extent push is created and after that level the pull created by the firm did its task.
One important
question can be asked to what level that push can be applied. The products will be pushed
to the restaurants where the customers automatically demand that product and hence a pull
is created.
Fig.9.22 showing the boundry of pull and push, push last till the product reaches the
restaurant and pull starts when a customer orders the product.
Fig.9.22 Push Pull Process
9.23 SUPPLY CHAIN PROCESS CYCLE……..
The processes in the supply chain are divided into a series of cycles, each
performed at the interface between 2 successive stages of supply chain
Various Suppliers supplies the materials
Products delivered to Distribution centres
Products delivered to restaurant
Push stops ,pull starts here
Customer order at restaurant,
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9.24 IN NASIK THEY ARE AT……..
· College road,
21 IN UTTAR PRADESH
· Noida (5),
· Ghaziabad (4),
· Mathura (1) (Highway and Drive
Thru),
· Kanpur (2),
· Meerut (2),
· Lucknow (3),
· Agra (1),
· Allahabad (1),
· Varanasi (2)
79 IN NORTH AND EAST
· 33 in Delhi
· 22 in Uttar Pradesh
· 11 in Haryana - Faridabad (3), Manesar
(1) (Highway and Drive - Thru),
Gurgaon (5), Karnal (1) (Highway and
Drive - Thru), Panipat (1)
· 7 in Punjab - Chandigarh (2), Ludhiana
(2), Doraha (1) (Highway and Drive -
Thru), Jalandhar (1), Patarsi (1)
(Highway and Drive - Thru)
· 3 in Rajasthan - Jaipur (3)
· 1 in Uttaranchal - Dehradun (1)
· 1 in West Bengal – Kolkata (1)
· 1 in Himachal Pradesh- Jabli (1).
53 IN WEST AND SOUTH
· 32 in Maharashtra – Mumbai (23), Pune (8), Nasik (1)
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· 7 in Gujarat – Ahmedabad (4), Vadodara (2), Surat (1)
· 7 in Karnataka – Bangalore(7)
· 4 in Andhra Pradesh – Hyderabad (4)
· 3 in Madhya Pradesh – Indore (3)
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10.Case study of Tomato Supply Chain-
Fig.10.1Modern supply chain of Tomato
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Fig. 10.2 Traditional Supply chain of Tomato
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Fig. 10.3. Traditional Supply chain of Tomato
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11. Conclusion-
In this seminar the various aspects of supply chain management are discussed.
After the above discussion we can say that every organization should follow the new
technologies of supply chain management. To improve supply chain IT and electronic
media are today’s best mediums. By implementing effective supply chain every
organization can compete in market with their competitor, they can improve their product
quality, services, after sells services to make customers happy. Also reduce the losses
which occur in the supply of food to customers due to delay by implementing the supply
chain management.
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12. Refferences-
1. Designing And Managing supply chain management by
David Simehi-levi
2. Supply Chain Management by B.S.Sahay
3. supply chain management by Sunil Chopra
4. Logistics and Supply Chain Management by Martin Christopher
5. www.Scribd.com
6. www.informaworld.com