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SUPPLY CHAIN

MANAGEMENT

TOPIC -2

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CASES OF SCM

• GODREJ LOCKS- A DIV. OF GODREJ & BOYCE CO.

• - REDUCED ITS ORDER-TO-DELIVERY CYCLE FROM

THREE WEEKS TO 3 DAYS

• HEWETT PACKARD

• -HAS CUT ITS CYCLE TO DELIVER TO CUSTOMER

IN INDIA FROM US BY 1/3RD, THAT IS FROM 37 DAYS

TO10 DAYS

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CONCEPT

• AN EXTERNAL INTEGRATION OF INTERRELATED FUNCTIONS

OF THE FIRM WITH ITS CHANNEL MEMBERS, VENDORS, AND

ALL THIRD-PARTY LOGISTICS SERVICES PROVIDERS WHO

CONTRIBUTE IN THE FLOW OF GOODS(RAW MATERIALS,

SEMI-FINISHED AND FINISHED PRODUCTS) AND RELATED

INFORMATION FROM THE POINT OF INCEPTION TO THE

POINT OF CONSUMPTION WITH EFFECIENCY

• ( AGARWAL,2001)

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SCM FOR AN INDIVIDUAL FIRM

CUSTOMERTWT

FACT

ORY

T

W T VENDORS/

PLANTS/

PORTS

INFO FLOW

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VALUE CHAIN OF SCM

• - CORPORATES USING SCM TO GAIN

COMPETITIVE EDGE , DUE TO ITS

VALUE ADDITION CAPABILITY IN

COST –EFFECTIVE WAYS

• SCM FOCUES ON SPEEDIER FLOW OF

GOODS, CASH, VALUE AND RELATED

INFO WITHIN THE COMPLETE SUPPLYCHAIN PROCESS

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EVOLUTION OF LOGISTICS TOWARD SUPPLY

CHAIN

• DEMAND FORECASTING PURCHASING/ MATERIALS MANAGEMENT

• PURCHASING

• REQUIREMENT PLANNING

• PRODUCTION PLANNING

• MANUFACTURING INVENTORY

• WAREHOUSING LOGISTICS SCM

• MATERIALS HANDLING

• PACKAGING

• FINISHED GOODS INVENTORY

• DISTRIBUTION PLANNING PHYSICAL DISTRIBUTION

• ORDER PROCESSING

• TRANSPORTATION

• CUSTOMER SERVICE• STRATEGIC PLANNING

• INFORMATION SERVICES

• MARKETING/ SALES

• FINANCE

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VALUE CHAIN OF SCM

SUPPL

IER

SHIPPER

PRODU

CER

TRANSPOR

TE

R

WAREH

OUSING

CUSTO

MER

MARGI N

   V  A   L   U

   E

  Q  U  A  L

  I   T   Y

   C   O   S    T   S

  Q  U  I  C  K

 

  R  E  S  P

  O  N  S

  E

  A   V  A  I  L  A  B  I  L  I   T   Y

  C  O   N  S   I  S   T   E   N

  C   Y

ENDUS

ER/C

USTOMER

CASH FLOW

FLOW OF GOODS

FLOW OF INFO

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PROBLEMS

• IDENTIFY THE KEY SUPPLY CHAIN ELEMENTS IN THE

FOLLOWING CASES:

• A MAJOR MULTI- SPECIALITY HOSPITAL

• AN AIRLINES OPERATOR

• A PREMIER EDUCATIONAL INSTITUTE• A NEWPAPER BUSINESS

• A MACHINE TOOL OPERATOR

• A MANUFACTURER OF SHAMPOO SACHET

•A LAW CONSULTING FIRM

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DIFFERENT TYPE OF FLOWS IN

VALUE CHAIN• VALUE FLOW

• GOODS FLOW

• CASH FLOW

• INFORMATION FLOW

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SUPPLY CHAIN STRUCTUTRE

• TIER-2 SUPPLIERS

• TIER-1 SUPPLIERS

• FACTORY• FACTORY WARE HOUSE

• DISTRIBUTORS

• RETAILERS• CUSTOMERS

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PROBLEM

• IDENTIFY AN APPROPRIATE TYPE OF SUPPLY CHAIN FOR

EACH OF THE FOLLOWING PRODUCT CATEGORIES:

• JEWELLRY WATCHES

• TOOTH PASTE & BRUSHES

• EARTHMOVING EQUIPMENTS• DESIGNER WEAR CLOTHES

• BICYCLES

• PASSENGER CARS

•HEAVY COMMERCIAL VEHICLES

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OUT SOURCING & 3PL

• EMPHASIS ON CORE COMPETENCY

• “ TO DO WHAT YOU ARE BEST AT AND LEAVE ALL

OTHER NON-VALUE –ADDED ACTIVITIES TO MORE

SUITED PLAYERS”

• SEEKING THE SERVICES OF EXTERNAL AGENCIES /

ORGANIZATIONS THAT COULD HANDLE NON-

VALUE ADDING SERVICES.

• Logistic & distribution activities- 5 %

• Inventory costs- 15% of the entire costs

• Both add to the total costs

• Implies companies to cut these costs

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Why companies opt for 3PL?

• 1. improved strategic focus- can concentrate on their core tasks & better customer satisfaction

• 2.Resource constraints- no additional manpower available

• 3.Lowered costs- about 15-30 % of the inventory costscan be reduced. The 3PL service providers invests hugeamount of money in developing processes that aims toachieve logistical excellence normally not available toothers.

• 4. Expansion of markets: outsourcing 3PL allowscompanies to get into new businesses, new markets or new channels of distribution quickly.

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Contd.

• 5.More professional & scientific approach to

logistical problems.

• 6. Improvement in service levels with improved

response time.• 7. efficient management of inventory resulting in

better utilization of working capital

• 8. Increased flexibility- 3PL contract providesshort term commitments thus freeing up

resources for other uses.

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CONTD

• 1PL- In era of mass production, LSPs confined to theflow of goods from point of origin to point of consumption. Primary activity was mere transportation

• 2PL- with increased awareness manufacturing firms

began to closely collaborate with LSPs to handle bothinward and outward movement of goods and somesharing of information. However, LSPs still treated withsome suspicion because they may disclose informationrelated to suppliers and consumers to their competitors.

• 3PL- increased use of IT , LSPs improved their relationship and work in tandem with the firm to meettheir supply chain activities and help manufacturing firmsto tap new markets.

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Infrastructure required for a 3PL

• 1.Warehouse

• 2.Fleet of vehicles

• 3.Use of IT to take care of informationneeds

• 4.Advanced material handling capabilities.

• 5.Good team of consultants

• 6Trained manpower 

• 7.Reach in terms of geography.

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ADVANTAGES OF 3PL

• 1. COST REDUCTION

• 2. MAXIMIZING REVENUES

• 3.COST CONTROL

• 4 GOOD FACILITIES

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Operations of Indian 3PLs

• 1.Gati

• 2. Transport Corporation of India Ltd.

• 3.Blue Dart Logistics• 4. DHL logistics

• 5.FedEx

• 6..Safe Express

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Value added activities of 3PL

• 3PL service provider offers

• -to give information to clients regarding

customer demographics

• -reverse logistics

• -kitting (pick & pack)services

• -custom clearances

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Blue Dart Logistics

• Some e-commerce initiatives of Blue Dart• 1.Track Dart- Track status of shipment• 2.mail dart- Track shipment using mail

• 3.Location finder-Find service location• 4.Transit time finder-check transit time for shipping

• 5.Billing- receive invoices online

• 6.Scedule a pickup- to schedule customer consignments picking• 7.Image dart- Tool for downloading proof of 

delivery

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Transport Corporation of India

• Main services offered:• Consulting,• Transport management services• Warehousing services

• IT & MIS reporting services & others• Value- added services:

• 1. Reverse logistics• 2.PDI services

• 3.Kitting services• 4. Custom clearance services• 5.E-logistics• 6.Risk & tax facilitating management

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3PL IN INDIA

• EXCEPT FOR AUTOMOTIVE, NO OTHER INDUSTRY IS

CURRENTLY UTILIZING THE SERVICES OF 3PL IN INDIA

• IT REVEALS THE STATE OF OUTSOURCING IN INDIA

• IN FMCG, PAINTS AND CONSUMER DURABLES COMPANIES ININDIA, THE C& F AGENTS ARE DOING THE JOB OF LOGISTICS

PROVIDERS SO THE COMPANIES DO NOT FEEL THE NEED TO

OUTSOURCE.

• IN CASE OF STEEL AND CEMENT, NONE OF THE COMPANYFELT THE 3PL IMPORTANCE.

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FOURTH PARTY LOGISTICS(4PL)

• “An integrator that assembles the

capabilities, technology and resources of 

its own organisation and other 

organisations to design, build and runcomprehensive supply chain solutions”.

• Defined by Accenture Consulting in mid

1990s

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Key components of a 4PL

4PL

ARCHITECT/ INTEGRATOR

CONTROL ROOM

(INTELLIGENCE)

SUPPLY-CHAIN INFOMEDIARY

RESOURCE PROVIDER

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4PL TOTAL SCM PROVIDER

ARCHITECT- CHANGE LEADER:• SUPPLY-CHAIN VISIONARY

• MULTIPLE CUSTOMER RELATIONSHIP

• DEAL SHAPER & MAKER

• SUPPLY CHAI RE-ENGINEERS

• PROJECT MANAGEMENT

• SERVICE, SYSTEMS & INFO INTEGRATOR

• CONTINUOUS INNOVATION

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4PL

• DECISION MAKERS:• Experienced logisticians

• Optimisation engines & decision support

• Neutral positioning

• Manage multiple 3PLs

• Continuous improvement

• INFORMATION• IT system integration

• IT infrastructure provision

•Real-time data tracking• Convert data to information

• Provide info to point of need

• Technical support

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4PL

• ASSETS• Transportation asset provider 

• Warehouse, cross-dock, property facility

• Manufacturing- outsourcing

• Procurement service

• Co-packing service

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Technology component of 4PL

• GPS Technology

• GIS Technology

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BULLWHIP : CONCEPT

• -EFFECT OF FLUCTUATIONS IN DEMAND ON THE ENTIRE

SUPPLY CHAIN

• - DUE TO INFORMATION DISTORTIONS

• -SUCH DISTORTIONS ARE AMPLIFIED AS INFO IS PROCESSED

AND PASSED ON FROM ONE END TO ANOTHER END OF THECHAIN

• -THE PROPOGATION OF DEMAND VARIABILITY UP THE

SUPPLY CHAIN IS KNOWNIN THE INDUSTRY AS “ BULLWHIP”

OR “WHIPLASH” EFFECT.

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BULLWHIP EFFECT

• REASONS:

• THE NO. OF LAYERS IN THE SUPPLY CHAIN

• DELAYS IN INFORMATION FLOW ACROSS THESE LAYERS

• VARIATIONS IN DECISION MAKING PATTERNS AT EACH LAYER

• INDEPENDENCE OF EACH MEMBER IN THE SUPPLY CHAIN

• HOW TO MINIMISE?

• -CUTTING OF SEVERAL DECISIONS CUTTING ACROSS THESUPPLY CHAIN

• REDUCE DELAY OF INFORMATION FLOW IN THE SUPPLY CHAIN

• REDUCING LEAD TIME OF THE BUSINESS PROCESSES