Supply Chain Management

TYBCOM
SEMESTER V
Assistant Professor Susan M. Abraham
Introduction-Meaning
• Supply chain management is the management of a network of
interconnected businesses involved in the ultimate provision of
product and services required by end consumers.
• Supply chain management spans all movement and storage of raw
materials, work-in-progress inventory, and finished goods from point
of origin to point of consumption.
 Introduction-Meaning
Value Creation

Extraction
Converting
of iron Purification Manufacturing
iron into Wholesaler Retailer End User
from iron of iron of utensils
steel
ore

Feedback
Scope/Objectives
• The main objectives of Supply chain management are to reduce cost,
improve the overall organization performance and customer
satisfaction by improving product or service delivery to the consumer.
• SCM's primary goal is to keep a firm afloat and ultimately to drive it
to success. Other objectives of SCM include improving efficiency and
quality, minimising costs, optimising delivery and distribution and
providing the best possible experience to your customers.
• To impart understanding on processes and operations associated
with supply chain management.
Nature/Features
• Two-way flow- Value creation & Feedback
• Sharing of sales information in real time
• Management of inventories-Reduces inventory by reducing uncertainty. Making
inventory available in the right place at the right time. Avoids understocking or
overstocking
• Customer Focus-focus on increasing customer service, providing goods to
customers as per their requirement (forecasting of demand).
• Supplier Relationship management-To enable smooth Raw material
procurement
• Managing logistics and shipping- Coordination with transportation and
warehousing
• Return Management-Proper handling and inspection of damaged or defective
goods
 Evolution

Integration Globalization Specialization Specialization

Creation era SCM 2.0
Era Era Era (Phase 1) Era (Phase 2)
Evolution
Creation era
• The term SCM was coined by Keith Oliver in
1982
• Concept of SCM was of great importance long
before (in the 20th Century- especially with the
creation of assembly line)
• Features of this era included- the need for
large scale changes, reengineering, downsizing
driven by cost reduction programs, and
widespread attention to Japanese
management practices.
• The term SCM became widely adopted after
the publication of the seminal book
‘Introduction to Supply Chain Management’ in
1999 by Robert B. Handfield and Ernest L.
Nichols, Jr.,(published over 25,000 copies and
was translated into Japanese, Korean, Chinese,
and Russian.)
Integration Era
• 1960s-development of Electronic data
interchange (EDI) systems
• 1990s- introduction of enterprise resource
planning (ERP) systems.
• 21st century- expansion of Internet-based
collaborative systems. This era of supply-chain
evolution is characterized by both increasing
value-added and reducing costs through
integration.
• Supply Chain is classified as
-Stage 1 Network -supply chain, systems such
as production, storage, distribution, and
material control are not linked and are
independent of each other.
-Stage 2 Network-these are integrated under
one plan and ERP is enabled.
-Stage 3 Network-achieves vertical integration
with upstream suppliers and downstream
customers.
 Evolution
Globalization Era
• Attention given to global systems of
supplier relationships and the expansion
of supply chains beyond national
boundaries and into other continents.
• Globalization of supply-chain
management in organizations with the
goal of increasing their competitive
advantage, adding value, and reducing
costs through global sourcing.
Specialization Era (Phase 1)- outsourced
manufacturing and distribution
• In the 1990s, companies began to focus
on "core competencies" and
specialization.
• They abandoned vertical integration, sold
off non-core operations, and outsourced
those functions to other companies.
• The specialization model creates
manufacturing and distribution networks
composed of several individual supply
chains specific to producers, suppliers,
and customers that work together to
design, manufacture, distribute, market,
sell, and service a product.
Evolution
Specialization Era (Phase 2) Supply
chain management as a service
• Transportation Management
• Warehouse (Storage and
Inventory) Management
• Supply Planning Management
• Collaboration Management
• Execution Management
• Performance Management
Supply Chain Management 2.0
• The term "SCM 2.0" has been
coined to describe both changes
within supply chains themselves
as well as the evolution of
processes, methods, and tools to
manage them in this new "era".
• SCM 2.0 is a trend in the use of
the World Wide Web that is
meant to increase creativity,
information sharing, and
collaboration among users.
Evolution of SCM
Mass Production

Lean
Manufacturing

Mass
Customization
Evolution
Ford Supply Chain / Assembly Line (Beginning of
20th Century)

Iron Ore Process A Process B Process C Customer

Evolution
Toyota Supply Chain (Around 1960s)

Customer
Toyota

Vendors
Evolution
Dell Supply Chain (Around 1995)
Prior to 2006 -As per customer configuration- Deliver time 10-15 days- Only online ordering

Post 2006- Customers requirements/ configuration were almost the same. So standard products were made
and also sold via retailers.

Dell Customer

Vendors
 Logistics v/s Supply Chain Management

Logistics Management Supply Chain Management

Inbound logistics All players in the supply chain from raw materials source
In process inventory- movement from one plant to another to finished product (Suppliers, vendors, warehouses,
Outbound logistics customers etc)

Managed internally (internal integration) within an Managed externally (external integration) – by various
organizations (by various management functions) players in the supply chain

Objective- cost reduction Objective- profitability

Very old concept in military planning Logical extension of logistics management

Supply driven- tries to take the product to the consumer at Demand driven or customer focussed-Focusses on value
minimum logistical cost. creation
Contemporary developments in SCM
Electronic
Bar Coding Data
Interchange

Distribution
JIT (Just in
Requirement
Time)
Planning
 Bar Coding Use of barcodes-
dated back to 1952
Bar coding is a (USA Supermarkets) Bar codes contain
sequence of parallel information wrt country
lines of different code, manufacturer
thickness with name, product details,
spaces in between. date of manufacture,
material content etc

Bars are nothing but

items of information Bar codes are used in
in the codified form, diverse industries such
which can be read as pharmaceutical,
with the help of consumer goods,
scanner electronics, automobiles
etc
Bar Coding
• Bar coding is a sequence of parallel lines of different thickness with
spaces in between.
• Bars are nothing but items of information in the codified form, which
can be read with the help of scanner
• Use of barcodes- dated back to 1952 (USA Supermarkets)
• Bar codes contain information wrt country code, manufacturer name,
product details, date of manufacture, material content etc
• Bar codes are used in diverse industries such as pharmaceutical,
consumer goods, electronics, automobiles etc
 Bar Coding
Advantages Disadvantages
It allows real time data to be collected accurately and rapidly Barcode scanning requires special device called
with the help of barcode readers Barcode Scanner which emits light and collects
reflected light to decode the Barcode

It enables fast data entry operations and reduces human Barcode scanner or reader works with computers or
errors POS terminals
It is mature and proven technology which reduces processing Barcodes do not have read/ write capabilities
lead time and paper work
It is less expensive It requires optical line of sight (LOS ) scanning
It is smaller and lighter compared to RFID (Radio frequency It is labour intensive as it requires to be scanned
identification) tags and easy to use individually
It is less secured as compared to RFID which can be
easily forged
It is susceptible to environmental damage

Scratched or crumpled barcodes may cause problems

while scanning
Bar Coding

RFID

Barcode
Scanner
Electronic Data Interchange (EDI)
• EDI is identified as inter company and intra company computer- to-
computer exchange of business documents in standard formats.
• The communication is through electronic media rather than
traditional forms of mails, courier or fax
• Application- Indian Customs uses EDI
 Electronic Data Interchange (EDI)
Advantages Disadvantages
Reductions in – (i) Document preparation and processing Lack of awareness of its benefits
time; (ii) Inventory carrying cost; (iii) Personnel costs; (iv)
Information float; (V) Shipping errors; (vi) Returned goods;
(vi) Lead time; (viii) Order cycle times and (ix) Ordering costs
Better customer focus High setup costs

Better working relationships with trading partners Lack of standard formats

Increased internal and external productivity Incompatibility of computer hardware and software
Increased ability to compete internationally

Decreased operating costs- through reduced clerical post,

paper work, telephone/ fax costs
EDI may lead to increase in cash flow and billing accuracy
Just in Time (JIT)
• JIT is a an inventory management approach
Just in Time (JIT)
• How does JIT work?
Just in Time (JIT)
Advantages Disadvantages
Reduces inventory waste- overproduction (supply exceeds Risk of running out of stock- of you project the demand
the demand) leading to accumulation of inventory. In JIT you incorrectly you are at risk of running out of stock
only order what you require (As per the demand) and hence
it reduces inventory waste.
Decrease warehouse cost Lack of control over time frame

Gives the manufacturer more control- works on a demand Lack of planning- company not able to forecast the
pull basis. They respond to customers demand trends of demand especially in case of seasonal sales
(manufacturing of in demand product is boosted and period.
products that are not in demand i.e slow moving products
are reduced)
Local sourcing- faster delivery/ decrease transportation cost
Smaller investment
Distribution Requirement Planning (DRP)
• Refer to the below video
https://www.youtube.com/watch?v=uYHAZxcGHJc
Importance of supply chain management
• Improved customer satisfaction
• Reduced operating costs
• Improved cash flows
• More efficient sourcing and procurement
• Safeguarding of supply of raw materials
• Better inventory management
• Better partnerships with distributors
• Ensure adherence to legal and ethical standards
• A competitive advantage in your industry
Principles of Supply Chain Management
• Adapt Supply Chain to Customer’s Needs
• Customize Logistics Network
• Align Demand Planning Across Supply Chain
• Differentiate Products Close to Customers
• Outsources Strategically
• Develop IT that Support Multi-Level Decision Making
• Adapt Both Services and Financial Metrics
Strategies of Supply Chain Management

• Organization
• Coordination
• Innovation
• Forecasting
Process Tools for Supply Chain Management/
Supply chain management process

• Demand Management
• Supply Management
• Sales and Operations Planning
• Product Portfolio Management
Ways to improve supply chain/Supply chain
best practices
1. Make the move to real-time supply 9. Product development and
chain planning commercialization
2. Unify supply chain planning with 10. Manufacturing flow management
enterprise planning process
3. Anticipate the demand of the end 11. Physical distribution
customer 12. Outsourcing/partnerships
4. Leverage real-time data across all points 13. Performance measurement
of the supply chain
5. Ensure the flexibility to cope with 14. Warehousing management
change 15. Workflow management
6. Customer service management process
7. Inventory management
8. Procurement process