u2. Basics of Scm

8/22/2019 u2. Basics of Scm

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Supply Chain Management

An OverviewWhat is Supply Chain?


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Concepts in Supply Chain Management

Internal integration

Internally integrated LMs in isolation

External integration

Value chain and supply chain

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Conceptual pipe line

Flows in the pipeline

Supply chain membersSet and subsets



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Scope - Source of raw materials to end

user - all upstream & downstream

organizations & linkages

Encompasses all logistical management

activities involved

Sourcing (procurement)

Manufacturing support

Distribution activities


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Includes coordination and collaboration

with channel partners to finally deliver the

product to end users

Who are channel partners?1. Suppliers product owners

2. Intermediaries experts in international

shipping who offer consultancy service to

suppliers


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3. Third-party service providers those who

offer logistics service for a fee

4. Customers the recipients of service

5. Manufacturers parts manufacturers6. Transporters 3PL companies who offer

transportation service

7. Handlers 3PL companies who offer

material handling service


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8. Wholesalers who stock inventory and

offer in small quantities to retailers

9. Dealers who book orders and instruct

wholesalers to supply to retailers

10. Retailers offer products to consumers

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Main objective - Supply chain profitability

by value creation Focus - End User

Origin - extension of scope of logistics

management

A set of several subsets


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Definition - Management of upstream and

down stream relationships with suppliers andcustomers to deliver superior customer value

at less cost to the supply chain as a whole

How SCM creates value?

1. Breaking the organizational barriers

2. Sharing of sales information in real time

3. Inventory visibility


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4. Reduces inventories by reducing

uncertainties

5. Compresses value chain by slashing lead-

times thereby quickening cash flow


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How SCM is created in business?

SCM is an evolution, a result of external

integration in the decade of 1990

1. L/M of supplier companies in1980s reachedout to integrate vendors and customers to

stream line the inventory flow to collectively

deliver the value to the end user


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2. This external integration formed a

seamless chain of organizations focused

on the end users

3. The above seamless chain links the

source of raw materials to end users like a

pipeline

4. When a company reaches out in this

fashion to embrace other companies to

deliver value to end users, it is called an

extended enterprise


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Suppliers


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5. Extended enterprises form an Integrated

Supply Chain when they breakdown

organizational barriers to share sales and

inventory information

6. Integrated Supply Chain shares information

and coordinates logistical activities to ensure

coordination of goods & services, information

& cash through the pipeline


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7. Management of the extended enterprise is


8. SCM integrates demand and supply

management within and across the

companies


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Organizational Barriers to Supply Chain

Integration1. Lack of visibility/transparency

2. Reluctance to share information

3. Attitudinal problems, traditional mind set,

distrust

4. Inability to see long term benefits

5. Inadequate informational infrastructure


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Why SCM?

Customer-centric markets closed

conventional option (as in suppliers market) to

profitability!

Impact of philosophies & practices of the

1980s like TQM, JIT, TPM etc. dropped

manufacturing costs dramatically in the world

SCM is a new opportunity to improve

profitability and outwit the competition!


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Objectives of SCM

Product delivery to end user at minimum

cost

To eliminate or minimize bullwhip effect

To be competitive in global market

To increase market share

To improve shareholder value


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Important features of SCM

1. Complexity, two way flows2. Breaking the organizational barriers

Sharing of sales information in real time

Inventory visibility - Reduces inventories by

reducing uncertainties

Compression of value chain by slashing

lead-times thereby quickening cash flow


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3. End user focus (help the customer to be a

better supplier!)4. Pull system

5. Supply chain collaboration


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IT & Supply Chain Management

Information technology support in SCM

EDI through LAN, Internet, satellite

Tracking

RFID, the invisible bar code

Planning - DRP, MRP, ERP

E - Business


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Assignment V

1. Explain the evolution of Logistical

management and supply chainmanagement

2. What factors are considered to have driven

(drivers of SCM) SCM?3. Discuss how Supply Chain Management

and Logistical management are different

from each other [March11]

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4. Explain how SCM creates value for the

end user?

5. What are the Organizational Barriers toSupply Chain Integration?

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Bull-whip Effect

The amplitude is smallest near the handlebut largest near the tip

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Bull-whip Effect is the uncertainty in

the supply chain caused by distortedinformation flow

Large variations in demand upstream due

to small variations downstream

Caused by undisclosed discounts and

sales promotions by retailers down stream

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Lack of confidence in customers forecast

Customers rejecting backorders

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The consequences

Excess inventory

Problems with quality

Increased raw materials cost

Overtime expenses

Increased shipping costs

Lost customer service

Lengthened lead-timesLost sales

Unnecessary created capacity

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How to avoid Bullwhip effect?

Transparency in terms of information

Real time information

EDI

Kanban

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40 units

Suppliers

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40 units

Producer

40 units

Distributor

Retailer

Supply chain in equilibrium


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160 units

Suppliers

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80 units

Producer

40 units

Distributor

Retailer

Supply chain disrupted


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Some interesting supply chains trace these

supply chains

1. Indian postal service

2. News papers

3. Fuel

4. PDS

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Drivers of Supply Chain

(Factors which have played a role in evolution

ofSCMSCM for competitive advantage by

Rangaraj, Raghuram & Shrinivasan)

1. Communication Technology

Informational and physical

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2. Competitive Factors

Lead-times

Costs

3. Business and Social Environment

Competitions between organizations

Competitions between supply chains

Pursuit of Continuous improvement

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4. Policy, regulation & industry initiatives

Abolition of central sales tax and

introduction of VAT

RFID

ISO standards for containers

5. the move from a Producer-Centric to

customer centric focus

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Logistics and Supply chain

Management

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particulars Logistics

management

Supply chain

management

1. Scope Inbound logistics,

manufacturing

support, outbound

logistics

All players in the

supply chain from

raw material source

to finished product

2. How this is

created in

business?

By internal integration By external

integration

3. Main

objective

Logistics cost

reduction

Supply chain

profitability by

value creation.


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particulars Logistics

management

Supply chain

management

4. Definition Ref earlier slides Ref earlier slides

5. Origin military planning. As a logical

extension of

logistics

management


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Particulars Logistics

management

Supply chain

management

6. Focus L/M tries to take

the product to the

consumer at

minimum logistical

cost. Hence it is

supply driven.

SCM focuses on

value creation in

the supply chain.

Hence this is

customer focused

or demand driven.


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Assignment VI

6. Comment on SCM from various

perspectives like external integration,making customers and vendors better

suppliers, management of extended

enterprises, pulling down barriers7. What is Bull-whip Effect in SCM and how

can be minimized or eliminated?

8. What is the importance of SCM?9. Comment on various channel partners in

supply chain.43

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u2. Basics of Scm