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SUPPLY CHAIN MANAGEMENT
BY
SHEETAL GAIKWAD
CONTENTS
Introduction to supply chain Supply chain of WAL-MART Supply chain objective Supply chain management Drivers of supply chain Planning demand and supply Determining optimal product availability Importance of supply chain management Difficulties of SCM
WHAT IS THE SUPPLY CHAIN?
Also referred to as the logistics network Suppliers, manufacturers, warehouses,
distribution centers and retail outlets – “facilities”
and the
Raw materials Work-in-process (WIP) inventory Finished products
that flow between the facilities 3
SUPPLY CHAIN OF WAL-MART
P&G othermanufacturer
Timber Industry
Paper Manufacturer
Chemical Manufacturer
Plastic producer
TennecoPackaging
Chemical Manufacturer
Wal-Martstore
Customer wants detergent &goes
to Wal-MartDistributer
FLOWS IN A SUPPLY CHAIN
Customer
Material
Information
Funds
The flows resemble a chain reaction.
Supplier
SUPPLY CHAIN OBJECTIVE
Maximize overall value generated Value strongly correlated to supply chain profitability –
the difference between the revenue generated from the customer and the overall cost across the supply chain
Example: A customer purchasing a computer from Dell pays $ 700 (the revenue)
Dell and other stages of the supply chain incur cost to convey information, produce the components, store them, transport them, transfer funds, etc.
PROCESS VIEW OF A SUPPLY CHAIN
Cycle view
Push/pull view
CYCLE VIEW OF SUPPLY CHAINS
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
PUSH/PULL VIEW OF SUPPLY CHAINS
Procurement,Manufacturing andReplenishment cycles
Customer OrderCycle
CustomerOrder Arrives
PUSH PROCESSES PULL PROCESSES
DELL COMPUTER’S SUPPLY CHAIN
Customer Web page Assembly plant All of Dell’s suppliers and their suppliers Dell builds to order: customer order
initiates manufacturing at Dell Dell does not have a retailer, wholesaler,
or distributor in its supply chain
WHAT IS SUPPLY CHAIN MANAGEMENT (SCM)?
A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers
So that the product is produced and distributed In the right quantities To the right locations And at the right time
System-wide costs are minimized and Service level requirements are satisfied
IDENTIFYING MAJOR DRIVERS OF SUPPLY CHAIN
Inventory Raw materials, work in process, finished goods Large inventory increases responsiveness of supply chain Reduced inventory reduces cost of supply chain Example – clothing retailer make large stock of clothes so
that he can satisfy customer demand immediately but will increase retailers cost.
Transportation • movement of inventory• Choice of transportation depend on own performance
characteristics• Example- one mail order company use air ways to ship
products increasing responsiveness but it can use ground transportation to ship product to reduce cost of supply chain
Facilities• places where inventory are stored, assembled or
fabricated.• Two types 1)storage site 2)production site• Decision regarding location, capacity and flexibility of
facility have significant impact on supply chain efficiency and responsiveness
• Example-an auto part distributer is having many ware houses located near to customer increasing responsiveness but make supply chain less efficient
o Information
• Data and analysis regarding inventory, facilities, transportation and customers throughout supply chain.
• It is the biggest driver of performance in the supply chain as it directly affects other drivers
• It present opportunity to management to make supply chain more efficient
• Example- with information of customers demand pattern pharmaceutical company can produce and stock the drugs in anticipation of customer demand which make supply chain more responsive because customer will find drugs when they need them.
PLANNING DEMAND AND SUPPLY
Demand forecasting • What customer will demand in the future• forecast the future demand forms basis for strategic
and planning decision• Example- Intel provides processor to dell computer . It
takes several weeks to manufacture processor but dell can not wait that long after customer order . Customer demand pc in days after an order not weeks so Dell and Intel should forecast future demand for processor
• Types of fore casting – 1)qualitative 2)time series 3)causal method 4)simulation method
Aggregate planning • planning for inventory, production, pricing of product
over specified time period.• Company must anticipate demand and determine in
advance of that demand how it will met .should company has to invest in large capacity plant to met demand or build smaller plant.
• Example –paper industry face seasonal demand where peaks occur in certain season . But mill capacity is expensive so instead of building high capacity mill they do aggregate planning to determine production levels so that they build demand in slower months for sale in particular season.
• The main goal of this is to satisfy demand by making best use of available facilities to maximize the profit
Predictable variability • change in demand that can be forecasted.• Products that under go such type of change in demand
cause numerous problem in supply chain ranging from high level of stock out during peak demand and high level of excess inventory during low demand.
• It will increase cost of product and decrease responsive- -ness of supply chain.
• How to handle predictable variability1. Manage supply using capacity2. Manage demand using short term price discounts and
trade promotions
DETERMINING OPTIMAL LEVEL OF PRODUCT AVAILABILITY
High Level of product availability require larger inventory decreases efficiency of supply chain but increases responsiveness to customer
Low level of product availability require less inventory efficiency of supply chain increases but responsiveness to customer decreases
Example-some power plant maintain several months of fuel supply to avoid any probability of running out. In contrast supermarket may carry only few days of supply of product because out of stock situation may occur.
WHY IS SUPPLY CHAIN MANAGEMENT SO IMPORTANT?To gain efficiencies from procurement, distribution and
logisticsTo make outsourcing more efficientTo reduce transportation costs of inventoriesTo meet the challenge of globalization and longer
supply chainsTo meet the new challenges from e-commerceTo manage the complexities of supply chainsTo manage the inventories needed across the supply
chain
WHY IS SCM DIFFICULT?
Uncertainty is inherent to every supply chain
Breakdowns of machines and vehicles
Weather, natural catastrophe, war
Local politics, labor conditions, border issues
Travel times
THANK YOU