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8/14/2019 Supply Chain Practices
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India n Su pp ly Ch ainndia n Su pp ly Ch ainPracticesractices Dr. B.S. Sahay
Dean (Research & Consultancy)Mana ge ment Devel op ment In stituteGurgaon, India
Con feren ce onWinning wit h Inte lli gen t Supp ly Ch ain s ( WISC 2004)
FICCI, 24 September 2004
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Pr esentati on A gend ar esentati on A gend a
Some Facts The Dynamics of Supply Chain Supply Chain Practices in India
Supply Chain Processes
Inventory Management Manufacturing Management Outsourcing Customer-Supplier Involvement E- Supply Chains Supply Chain Implementation
Supply Chain Framework Recommendations
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Some F ac tsome F ac ts GDP : Rs. 27.55 Lakh Crores*
Inventory tied up : Rs. 1.17 Lakh Crores
Logistics Cost : 14% of our GDP
1% Reduction in LC1% Reduction in LC : Rs. 27550 Crorers: Rs. 27550 Crorers 2% Reduction in LC2% Reduction in LC : Rs. 55100 Crorers: Rs. 55100 Crorers
* Economic Survey 2003-04* Economic Survey 2003-04
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Logis tic s C ostogis tic s C ost
13.5281.5Taiwan
12.487.0Singapore
12.4468.7Korea
10.53996.2Japan
14.0460.0India
14.51237.1China Mainland
As ia n Regi on10-11393.0ustral ia
Logis tic s Cos t as% of GDPGDP (US D b)*ou ntry
* World Competitiveness Year Book 2003
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08.710445.6USA
14.4637.3Mexico
11.8729.3CanadaNor th Am eric an Regi on
12.21555.2UK
12.1654.0Spain
12.2418.8Netherlands
12.61186.0Italy
11.81987.0Germany
11.71419.3France
Eu rope an RegionLogis tic s Cos t as% of GDPGD P (US D b)*ountry
* World Competitiveness Year Book 2003
Log isti cs C os tog isti cs C os t
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In tern ational Co mpa ri son ofn tern ational Co mpa ri son ofCusto mer Ori en tatio nusto mer Ori en tatio n
74.4357.7062.6269.8459.67USA
66.5054.0057.0058.5063.00Thailand
57.1447.1459.2948.5760.71South Korea
74.7668.4469.7863.1172.89Netherlands
72.2089.7693.1781.4692.68Japan
52.4341.0830.2734.0541.08India
75.8378.6188.0671.3992.50Germany
66.0945.5644.6466.9655.94France
66.4562.5062.1958.0668.13Canada
51.8339.1536.3456.6252.39Brazil
Managing
Distribution
After-Sales
Service
On-Time
Delivery
Product
Design
Product
Quality
Parameters
Note: Companies are rated 0=poor to 100=excellent
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Elements o f L ogi sti cs co stlements o f L ogi sti cs co st TransportationTransportation 35%35%
InventoriesInventories 25%25%
LossesLosses 14%14%
PackagingPackaging 11%11% Handling and WarehousingHandling and Warehousing 9%9%
Customers' shoppingCustomers' shopping 6%6%
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The D yn amic s o f the S upp lyhe D yn amic s o f the S upp lyChainha in
OrderS
ize
Time
Customer
Demand
Retailer OrdersDistributor Orders
Production Plan
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The D yn amic s o f the S upp lyhe D yn amic s o f the S upp lyChainha in
OrderS
ize
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Customer
Demand
Production Plan
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Tra di ti on al Pl anni ng Ap pr oac hra di ti on al Pl anni ng Ap pr oac hCha ract er ized by Sequ en tial , Deco mp ose d, Slo wSales & Distribution
(Demand)
Manufacturing
(Capacity)Procurement
(Material)
CU
S
T
O
M
E
R
Optimize to
Mfg objectives
Optimize to
Logistics objOptimize to
Sales & Mktg obj
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Gl oba ll y In tegr ated P lan nin gl oba ll y In tegr ated P lan nin g
The sum of the local optima do notequal the global optimum.
(Goldratt, Theory of Constraints, 1986)
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Supply
Sources:plantsvendorsports
RegionalWarehouses:stockingpoints
FieldWarehouses:stockingpoints
Customers,demandcenterssinks
Production/purchasecosts
Inventory &warehousingcosts
Transportationcosts
Inventory &warehousing
costs
Transportationcosts
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Wha ts New i n S upp ly Ch ain ?ha ts New i n S upp ly Ch ain ? Global competition Well informed more powerful Customers Customer Expectations
Shorter product life cycle New, low-cost distribution channels Internet and E-Business strategies
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Wha ts New i n S upp ly Ch ain ?ha ts New i n S upp ly Ch ain ? Global competition More powerful well informed customers Customer expectations
Shorter product life cycle New, low-cost distribution channels Internet and E-Business strategies
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Resea rch Pr ojectesea rch Pr ojectIndian Supply Chain Management Practices
Detailed Survey Questionnaire
1756 organisations
Received 153 responses Major sectors represented in the all-India study - AgriProducts, Automotive, Chemicals/Fertilizers, ComputerHardware, Consumer Durables, Engineering, FMCG,
Metals, Oil/Gas, Pharmaceuticals, Retail,Telecommunications, Textile/Apparel
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Pr of ile of Respo ndi ngrofi le of RespondingCompaniesompaniesNorth38%
East10%
West33%
South19%
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Respo ndents by Owner sh ipespo ndents by Owner sh ip
Public Limited(77%)
Public Sector(5%) Private
(18%)
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Pa rti ci pa ti on bya rti ci pa ti on byMan agemen t L evelan agemen t L evel
Vice President
17%
Director/GM
28%
Sr.Manager
25%
Manager16%
CEO/COO/CFO/President
14%
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Bu si ness O bjecti vesu si ness O bjecti ves
4.02Increase earning per share
4.27Deliver Highest Value to Shareholders
4.28Increase Return on Investment
4.37Increase turnover (sales)
4.46Maximize Profit
4.82Maximize Customer Satisfaction
Weigh ted Score forImpor ta nceOve ra ll Bu sin es s Obje cti ves
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Supp ly C hain Ob jecti vesupp ly C hain Ob jecti ves
3.43Having Products in Stock
3.62Expanding Width/Depth of Distribution
3.64Reducing/Rationalise Supplier Base
3.68Reducing Warehouse Cost
3.96Reducing Transportation Cost
4.28Reducing Lead Time
4.33Reducing Order to Delivery Cycle Time
4.45Improving On-Time Delivery
4.52Reducing Inventory Cost
4.56Expanding Sales Revenue
4.93Enhancing Customer Service
Wei gh ted Scor eup ply Chain Ob jec ti ves
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Supp ly Ch ain Pr oc essesupply Chain Processes
0 1 2 3 4 5
Customer Service
Demand Management
Inventory ManagementOrder Processing/Fulfillment
Manufacturing
Product Development
Transportation
Distribution Management
Import Export Management
Promotion Planning
Warehousing
Criticality Score
Critical Processes
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Inventory M anagemen tnventory M anagemen tThe Indian ScenarioInv entor y Over al l Industry Se ctorAverag es [as number of days of sales] Average Lowers Highers Lowers Highers
Raw Material 33.41 1 120 CDs 25.0 Engg 42.2
Work in Progress 14.25 0.1 210 FMCG 4.4 Engg 20.7
Finished Goods 16.09 1 40 Auto 9.9 CDs 23.3
Goods in Transit 6.44 - 85 Auto 4.08 Elec 11.0
Accounts Receivables 46.51 2 145 FMCG 16 Engg 72.0
Accounts Payables 45 2 127 Elec 25 CDs 60.0
Inv. at CFAs/DCs 14.48 2 50 Elect 10 CDs 24.7
Inv. at Distributors 16.77 3 45 Elec 3.0 Engg 23.4
Inv. at Retailers 13.48 1 45 Chem 8.6 Auto 30.0
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Manufacturing Managementanufacturing ManagementWhat is the penetration level of
Inventory Replenishment Processes?
Pull16%
Push84%
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Lo gis tics Cos to gis t ics Cos tThe Indian ScenarioSup ply Chai n Co st Typ e Over al l Industry Se ctorAverag es [as a % of gross sales] Average Lowers Highers Lowers Highers
Cost of Material 52.92 15 90 CDs 35.5 Elect 69.5
Cost of Labour 8.90 0.51 70 CDs 4.9 Elect 12.9
Cost of Prod OH 11.78 0.5 40 Elect 3.5 Chem 12.1
Storage Cost 3.52 0.16 12 Elect 0.8 Auto 5.2
Inbound Transp Cost 3.38 0.12 20 CDs 1.3 Chem 4.0
Outbound Transp Cost 3.38 0.12 20 Auto 1.8 Chem 4.9
Warehousing Cost 2.06 0.1 8 Elect 0.3 Engg 3.1
Sec/Ter Transp Cost 2.02 0.2 10 Auto 0.5 Engg 3.4
Distributors Margin 6.35 0.1 20 Elect 2.0 CDs 9.7
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Order FulfillmentOrder Fulfillment
Shipment Accuracy v/s OTOFR Matrix
for Order Processing
29.7%Hopefuls
50.8%Leaders
17.6%
Laggards
1.9%
Hopeless
0 90 100
0
90
Timeliness
(On-time Order Fill Rate)
C o m
p le t e
ne s
s
(S h
ip m
e nt
Acc
u ra
cy
)
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Outsou rcin gutsou rcin gWhat is the extent of outsourcing
of supply chain activities?
0 10 20 30 40 50 60 70 80 90 100
Transportation
Warehousing
Manufacturing
Information Systems
Import/Export Mgmt
ProcurementCustomer Service
Order Processing
Inventory Management
Percentage Number of Respondents
YesNo
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Outsou rcin gutsou rcin gWhat are the major reasons for
outsourcing of supply chain activities?
Process Effectiveness24%
Lower Cost27%Lack of Internal
Capability
11%
Investment Reasons
12%
Strategic Reasons26%
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Cu sto mer-Sup pl ier I nvo lvemen tu sto mer-Sup pl ier I nvo lvemen tWhat is the level of customer & supplier
involvement in supply chain activities?
Customer Supplier Involvement
1.50
1.80
2.10
2.40
2.70
3.003.30
3.60
1.50 1.80 2.10 2.40 2.70 3.00 3.30 3.60
Customer Involvement
S
upplierInvolvemen
t
1
3
4
5
6
2
8
9 107
11
12
1 Import-Export Management
2 Warehousing Management
3 Merchandising
4 Distribution Management
5 Promotions Management
6 Inventory Management
7 Manufacturing (Planning)
8 Transportation Management
9 Order Processing/Fulfilment
10 Product Development11 Settlement and Payment
12 Demand Management
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e-Enablement of Supply Chainse-Enablement of Supply ChainsWhat is the usage pattern of
IT Applications?
0% 10% 20% 30% 40% 50% 60% 70%
Materials Accounting
ERP/MRPII
Sales & Distribution
CAD/Drafting
Shop Scheduling & Loading
Warehouse Management
Supply Chain Management
Process Control & Optimisation
Demand Management
Engineering Data Management
Manufacturing Execution System
Computer Aided Process Planning
% Respondents using it
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Align in g S uppl y Ch ain Str ategylign in g S uppl y Ch ain Str ategywi th Bu si ness Str ategyi th Bu si ness Str ategy
26%
Doers
27%
Leaders
13%
Laggards
34%
Dreamers
Business Strategy
S u
p p ly
C ha
inS
tra t e
g y
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Fr am ewor k f or Sup pl yr am ewor k f or Sup pl yCh ain S tra tegyh ain S tra tegyBusiness
Objectives
Management
Processes
Focus of Top
Management
Supply ChainObjectives
Supply Chain
Processes
Importance to
Top Management
Business
Strategy
Supply Chain
Strategy
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Align in g S uppl y Ch ain Str ategylign in g S uppl y Ch ain Str ategywi th Bu si ness Str ategyi th Bu si ness Str ategyBusiness Objectives
ManagementProcesses
Focus of Top Management
Supply Chain
Objectives
Supply ChainProcesses
Importance to TopManagement
BusinessStrategy
Supply ChainStrategy
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Su pp ly Ch ains I mp lementati onu pp ly Ch ains I mp lementati onWhat are the benefits achieved by
supply chain implementation?
Measurab le Ind icators Ex te nt o f I mp ro veme nt1. Sales Revenue Increased 20.2%
2. Profits Increased 15.5%
3. Order to Delivery Cycle time Reduced 32.8%
4. Inventory Reduction
a. Raw Material 25.1%
b. WIP 38.7%
c. Finished Goods 32.1%
5. On Time Delivery Improved 33.4%
6. Customer Base Increased 27.7%
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How to ac hieve th e des ire d res ul t?ow to ac hieve th e des ire d res ul t?Su pp ly Cha in: A Pa ra digm S hiftu pp ly Cha in: A Pa ra digm S hift Companies will collaborate with SC partners and
synchronised operations.
Technology will be key enabler for innovativeSC strategy
SC restructured and reskilled to achieve thegoal
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Th an k Yo uh an k Yo u
Ind ian Supp ly Chai n Pract ice snd ian Supply Chai n Pract ice s
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Bul lwh ip E ff ect: V ari abi l ity -ul lwh ip E ff ect: V ari abi l ity -Co ntr ib uting Fa cto rso ntr ib uting Fa cto rs1. Demand forecasting
2. Lead time
3. Batch ordering4. Price fluctuation
5. Inflated Orders supply shortage is suspected.
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Ho w to Co p wi th Bul lwh ipo w to Co p wi th Bul lwh ipEffect?ffect? Reducing uncertainty
Make information at each stage available to others.
Reducing demand variability Regular low price; no promotion
Reducing lead time. Strategic partnerships
Vender Managed Inventory Incentive to make customers demand dataavailable.