Supply chain management

A presentation by-Akshay Deshpande

Path

• Background• Definition• Generalized supply chain model• Supply chain profitability• Why supply chain management?• Objective of SCM• Importance of supply chain management in global market• Benefits of SCM• Case study

Background

The origins of the technique we now know as supply chain management are thoughtto lie in the shipyards of Japan and were first used in the early 1950s. The techniquewas later used in the car manufacturing industry and in particular was pioneered,again in Japan, by Toyota. It is true to say that there are many people throughoutthe world who believe that it is the peculiarities and uniqueness of Japanese culturethat permitted not only the wide spread adoption of SCM in Japanese manufacturingbut also restricts its application and transfer to other countries and other culturesoutside of Japan.

What Is Supply Chain Management?

What wonders an efficient supply chain can create?

What is supply chain management?• Supply chain management is an integrated process

where raw materials are transformed into final products then delivered to customers.( beamon-1999)

• A process of strategically managing the movement and storage of materials, parts and finished inventory from the suppliers through the firm and on to the customers.(johnson1995)

• An integrating process based on flawless delivery of basic and customized services .(kaiakota 2000)

• A supply chain consists of all parties involved, directly or indirectly, in fulfilling customer request.

Information, product, service, financial and knowledge flows

Materials

En

d C

on

sum

ers

Capacity, information, core competencies, capital, and human resource constraints

Supplier Network

Market Distribution

Procurement

Manufacturing

Integrated Enterprise

Distribution Network

Relationship Management

Generalized Supply Chain Model

Material FlowInformation Flow

Supply chain profitability

Why Supply Chain Mgt.?

• Manufacturing strategies have run their courses (JIT, Kanban, Lean, TQM)

• Effective Supply Chain Mgt. is the next logical step towards increased profits and market share

Objectives of SCM

• Cost effective production• Minimize delays• Make it easy for the customer to do the business• To satisfy customer’s needs as efficiently as possible• To perfectly match the supply side activities of

procurement, production planning, distribution planning, production allocation, warehouse planning, inventory planning and so forth with the demand side activities of incoming orders and forecasts so that all demands are met with the least cost.

Adapted from “Information Architects,” Richard Saul Wurman, editor, 1994 and Price Waterhouse, 1999.

Manufacturer

Truckers

Retailers

Customers

Distributors

Management

Truckers

Old Environment Partially informed Push / pipeline

model One-way info flow

Adding Intelligence to the Supply Chain

Database and Data Mining

Web Infrastructure

Telephony Infrastructure

Manufacturer

Retailers

Customers

Transportation

Transportation

Overnight Delivery

Distributors

Management

Direct Marketing

Infomediary and Outsourced

Service Providers

New Environment

Fully informed

Network model

Bi-directional information flow through network

The Three Ts

The 3 Ts

Key IngredientsFor ImprovingSupply ChainEfficiencies

TimelinessVelocity

Acceleration

Trust

Collaboration

Empowerment

SharingInformation(eg. open schedules)

Accountability

Understanding the process

Transparency Ability to see the real situation

The Traditional Supply Chain for Publishing

Fragmented and Inefficient due to poor flow of information

Product Flow

Information Flow

Demand Patterns

Publisher Distributor Bookstore

The Intelligent Supply Chain for Publishing

Information & Intelligence Sharing for Effectiveness

Product Flow

Information Flow

Consumer demand drum-beat sets pace for entireSupply Chain

Publisher Distributor Bookstore

• POS Data Sharing• Inventory levels• Fill Rates• Forecasts• Promotional Activities• New Product Introduction

Importance of Global Markets• 95% the world’s population lives outside the U.S.• 80% of the world’s gross domestic product is produced outside the U.S.• 50%+ of the population is under 20 years old in many countries• Educational background and disposable income are prime factors

motivating consumption decisions• US companies earned $315 billion profits overseas in 2004, up 78% over

the past decade– This pace far outstrips domestic profit growth

Importance of Global Markets

$299,490

$1,493,400

$1,820,641

$2,891,500

$387,401

$771,994$575,204

$219,183$147,832$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

1990 1995 2000

Years

$ in

mil

lio

ns

Global Sales of U.S. Foreign Affiliates U.S. Exports - Goods U.S. Exports - Services

The Dynamics of the Supply Chain

Ord

er

Siz

e

Time

Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

CustomerDemand

CustomerDemand

Retailer OrdersRetailer OrdersDistributor OrdersDistributor Orders

Production PlanProduction Plan

What Management Gets...

Ord

er

Siz

e

Time

Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

CustomerDemand

CustomerDemand

Production PlanProduction Plan

What Management Wants…

Vo

lum

es

Time

Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Production PlanProduction PlanCustomerDemand

CustomerDemand

The Benefits of Supply Chain Management

• Improved delivery performance—quicker customer response and fulfillment rates

• Greater productivity and lower costs • Reduced inventory throughout the chain • Improved forecasting precision • Fewer suppliers and shorter planning cycles • Improved quality and products that are more

technologically advanced • Enhanced inter-operational communications and

cooperation • Shortened repair times and enhanced equipment readiness • More reliable financial information.

Effects of 9/11 on Global Chains

• Increase security measures– added time to supply

chain schedules– Increased supply chain

costs• 24 hours rules for “risk

screening”– extended documentation– extend time by 3-4 days

• Inventory levels have increased 5%

• Other costs include:– new people, technologies,

equipment, surveillance, communication, and security systems, and training necessary for screening at airports and seaports around the world

The road ahead for SCM efforts

• Key success factors include:• Better linkages between forecasts and material requests• Use of portal technologies to integrate internally AND

externally• Integration of functions to improve performance,

increase effectiveness and reinforce consistent• organizational cultures

A case study

• HLL• part of a global Fortune 500 company, with market leadership in

home and personal care products, food, beverages and specialty chemicals.

• more than 2000 suppliers. • markets more than 100 brands that are manufactured in over

100 plants, spread across India. • With nearly 1000 products, HLL distributes them nationally

through a network of – four warehouses, – more than 40 agents – 7,500 wholesalers

Difficulties

• distribution operation was suffering because of a high margin of errors.

• frequent instances of excess finished-goods inventory • demand-supply mismatches • the system was not able to handle the dynamic nature

of the company’s source-destination network • adversely affected the demand-fulfillment rates.

Tool Selection

• The key objectives of the initiative were:– Implementation of a Supply Chain Planning and

Optimization Tool. – Development and implementation of a Web-enabled

solution to extend visibility across the company’s network of wholesalers.

Result

• has improved – HLL’s proactive planning capability – manufacturing and distribution efficiency

• Reduced distribution lead-time • minimize the total supply-chain cost • Stock availability increased from 65% to 90%

References

• Supply chain management- dr. dey.• www.cio.com• www.mindtree.com• www.knowledgestorm.com