Introduction:

What is a Supply Chain?

A supply chain consists of the flow of products and services from:

– Raw materials manufacturers

– Component and intermediate manufacturers
– Final product manufacturers
– Wholesalers and distributors and
– Retailers

Connected by transportation and storage activities, and Integrated through information, planning,
and integration activities. Many large firms are moving away from in-house Vertically Integrated
structures to Supply Chain Management
Origins of Supply Chain Management

1950s & 1960s

U.S. manufacturers focused on mass production techniques as their principal cost

reduction and productivity improvement strategies.

1960s-1970s

Introduction of new computer technology lead to development of Materials Requirements

Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory
management and improve internal communication

1980s & 1990s

Intense global competition led U.S. manufacturers to adopt Supply Chain Management
along with Just-In-Time (JIT), Total Quality Management (TQM), and Business Process
Reengineering (BPR) practices

2000s and Beyond

Industrial buyers will rely more on third-party service providers (3PLs) to improve
purchasing and supply management. Wholesalers/retailers will focus on transportation and
logistics more & refer to these as quick response, service response logistics, and integrated
logistics

Current situation of supply chain management system in India

Since 1980 and after 1990 when Indian government liberalized the Indian economy, then the
interest in supply chain management increased. Because at that time all foreign companies
entered in Indian market which obviously required the proper logistic and supply management so
that the products and as well as services should reached to ultimate consumer.

With passage of time the uncertainty regarding supply chain management increased because of:

A) Globalization of business.

B) Proliferation of product variety.

c) Shortening of product life cycle.

D) Dramatic and sudden change in environment.

 Now due to all these reasons Indian organization forced to look beyond their four walls for
collaboration with supply chain partners.

LOGISTIC COST ESTIMATES FOR INDIA

Logistic cost contributes nearly 10% of the total G.N.P.of which 40 % is nearly due to
transportation. Logistics cost for manufactured products in India 30% of the total expenditure,
as against 15-20% globally. Almost one-third companies have no supply chain strategy.

Bull Whip Effect

Each organization seek to solve the problem from its own perspective. Small changes in
consumer demand result in large variations in orders placed upstream. Dramatic order size
variation. Amplification of order size variation as one moves up the supply chain

CAUSES FOR BULL EFFECT.

• Little or no communication between supply chain partners.

• Delay times between order processing, demand, and receipt of products.

• Over reacting to the backlog orders.

• Inaccurate demand forecasts

DRIVERS OF SUPPLY CHAIN MANAGEMENT.

Fast-food Company McDonald

• The unique structure of the supply chain, which is not only to ensure the timely delivery
of raw materials for McDonalds, but it also gives them an opportunity to reduce costs and
increase profitability, combined with high standards of product quality.

• McDonald’s initiative to establish an effective system of supply and development of

state-of-the art technology has changed the entire Indian food industry quickly and
establish performance standards and international levels.

• Today, McDonalds India is working with 38 different suppliers in the long term, and
many other independent restaurants a few people. McDonald’s distribution centres in
India have come in the following order: Noida and Kalamboli (Mumbai) in 1996,
Bangalore, 2004, the last one in Calcutta (2007).
• Cold chain is one of the most unique concepts of supply chain “MacDonald’s” in the
India, who spent more than 6 years to the system.

• The system has led to a breakthrough, too many for the benefit of farmers at one end and
allows customers to retail stores to get high quality food, very fresh and great value.

• Through a unique cold-chain, McDonalds was reducing maintenance and waste, and keep
its freshness and nutritional value of raw and processed foods.

• Dynamix Dairy Industry (suppliers of cheese) - Dynamix has brought enormous benefits
to farmers in Baramati, Maharashtra with a network of milk collection centers are
equipped with bulk coolers.

• Trikaya Agriculture (iceberg lettuce supplier): Implementation advanced agricultural

techniques from McDonald allowed to developed specialty crops such as iceberg lettuce,
especially herbs and many oriental vegetables

• McDonald’s India Pvt. Ltd and Vista processed foods Pvt. Ltd produces a range of frozen
chicken and vegetable foods. World-class infrastructure at its plant in Taloja,
Maharashtra.

• Amrit supply (supplier of UHT long life milk and dairy products for frozen desserts)
helps in the production of homogenized UHT (Ultra High Temperature) processed milk
and dairy products.

Dell Inc

DISTRIBUTION NERWORK
• Manufacturer storage with direct shipping

• Manufacturer storage with direct shipping and in transit merge

OBJECTIVE OF DIRECT MODEL

• To achieve high flexibility and responsiveness

• Respond to wide range of quantities demanded

• Try to meet short lead time

• Handle a large variety of product

• Build high innovative product

• Handle supply uncertainty

DESCRIPTION

• Dell has been following ‘direct build-to-order’ sales model for more than 20 years.

• Customers can plan their own configuration and place orders directly with the company
via the phone or its Web site

• Dell's supply chain consists of only three stages— the suppliers, the manufacturer (Dell),
and end users.

• Dell also began employing computer literate sales personnel, who guided consumers in
their choice of systems.

• This option helped customers to get computers at a price lower than other brands.

• In order to manage its operations with low inventory levels, Dell collaborated closely
with its suppliers based on four criteria - quality, cost, delivery and technology.
Direct model
IN TRANSIT MERGE
AREAS WHERE FOCUS IS NEEDED…..
A) Supply chain strategy

B) Supply chain integration

C) Inventory management

D) Information technology

A) Supply chain strategy

“A set of dynamic, integrated decisions that one must make in order to position one’s
business in the complex environment”.

FOCAL
B) Supply chain integration

 The SC strategy cannot truly be overall business strategy.

 It is based on trust and information sharing, so that it can quick respond to customer’s
demand.

 Effective integration is the key because if one of these links fail, the organization’s
performance may suffer and may not meet expectation of its customers, or the service
level of its competitors.

C) Inventory management

 Inventory management means maintenance, up keep & assurance of adequate supply of

goods in order to met am expected pattern of distribution of demand for given financial
investment.

 Its functionally results into:-

 Ensuring balance flow of material, component tools & equipment.

 Minimising damage.

 Minimising stockout scenario.

 Minimising time for ordering the consignment

D) Information technology

Information technology is considered to be useful in SCM. For 3 most reasons

• Data transfer

• Information retrieval

• Machine & process control

The challenges faced in India

What are the challenges facing increasing adoption of SCM solutions in India? The main one is
the lack of awareness of the business potential of SCM solutions in India.

“The problem is in most people treating SCM as ‘one more module’ to be implemented after
ERP. This focuses attention more on the technology / IT part of the project rather than the
significant rethink in business policies that need to accompany a supply chain improvement
project.” Next, there is a lack of consulting experience in the field in India. There are
comparatively fewer people who have sufficient experience to guide organisations through
successful supply chain improvement projects. As a result, the business process integration of
SCM solutions has suffered. “Typically, customers have implemented ERP(enterprise resource
planning) systems, which offer very basic

SCM functionality, and they have carried out a BPR(business process reengineering) at that
stage. In order to get comprehensive benefits out of an SCM implementation, customers
normally have to revisit key processes and modify them. This needs significant consulting input
and can turn out to be a challenge if not managed well,”

One of the key challenges faced is the business process transformation required to exploit the
best practices and tools of SCM. Some business processes will go away, like the informal ones
including faxes and hot lists. Some new processes like closed-loop supply base responses will
appear, whereas some existing processes would need modification. Typically, companies work
with many suppliers and are not happy with them, but after SCM implementation, the endeavour
would be to work with fewer suppliers and inculcate mutual respect.

The next and even more difficult challenge is the management of change. This involves getting
people who have been engaged in the same process for many years to change to best
practices.“A successful change management program determines the effectiveness of the SCM
solution. SCM requires a higher level of trust and openness among trading partners, based on a
new attitude towards suppliers and customers.”

The challenges SCM faces in India will ensure that it does not totally take off as yet. It is
difficult to implement the entire SCM solution at one go because that would involve putting a
complex network in place with every single entity connected to the whole process.
Prognosis for India

But does this mean SCM has no future in India? “Not really”. “Even in the US, though the first
supply chain planning (SCP) collaboration technologies were introduced some time ago, but it
was not until the year 2000 that collaborative SCP pilots became a reality.

Despite challenges, the Indian SCM industry is growing at 20 %.

Many Large Indian Corporate such as Tata, Reliance, Infosys have been attracted by the
potential of this sector and have established Supply Chain divisions.

They started providing in-house services, and soon sensing the growth of the market, have
started providing services to other corporate as well.

Large express cargo and courier companies such as TCI, Blue Dart, DHL have also started
operations.

These companies enjoys the advantage of already having a large asset base and an all-India
distribution network

Since this service can be provided without assets, there is growing interest among entrepreneurs
to venture in.

The Indian economy is growing at 7-9% for the last couple of years, which implies more output
and more demand for specialized logistics services.

The Government of India have focused on Infrastructure Development.

Examples: Golden Quadrilateral project connecting four major metros, Free trade and
warehousing zones.

In India 100% FDI is allowed in logistics.

Beneficiaries Sectors

What are the sectors that have been the biggest beneficiaries of SCM implementation in India?

Industries that would see tremendous benefits include the manufacturing sector, automotive
sector, FMCG, retail, oil and gas.

“The popular opinion has been that the manufacturing sector is the one that is benefiting the most
from SCM. While not opposing its importance in that sector, some of the other industry sectors
we see it picking up in a big way are FMCGs and the organized retail industry.”

Moreover, with changes imminent in the tax structures, there are large opportunities in key
supply chain areas such as logistics, network design and optimization. There are also immediate
opportunities in the auto sector, particularly on integration with vendors of components and
assemblies.

SCM flavors

Even SCM solutions come in different flavors. KLG Systel, for instance, offers a Supply Chain
Optimization (SCO) solution.

There is a fundamental difference between SCM and SCO.

In SCM the consultants capture all the processes and build it into the ERP system. Everything is
hardcoded into the system. Each and every transaction conducted is based in rules. It does not
analyze the different options that are available.

“Suppose a company has a rule which says that all cheques above Rs 50 lakh have to be signed
by the CEO, then the SCM solution would not accept any other signature. There may be a
situation where the CEO may not be available and the cheque has to be signed urgently
otherwise it could result in a loss.

SCM does not give any scope for breaking away from the set rules. Whereas SCO solution
ensures that options are incorporated in the event of such a situation. SCO will look at all these
options and come up with a solution that will ensure optimization of the resources available.
SCM does not do resource optimization the way SCO solution does.”