Supply Chain Management

Session I_- Introduction

• Definitions.
• Value Chain / Supply Chain / Logistics.
• Tasks, Roles & Responsibilities.
Supply Chain Management

Session I
Introduction to Supply Chain
Management
 Supply Chain Management
Session _- Introduction
Definition
• A supply chain is a network of facilities
and distribution options that performs the
functions of procurement of materials,
transformation of these materials into
intermediate and finished products, and
the distribution of these finished products
to customers.
 The Supply Chain Concept – What
is meant by Supply Chain ?
• It is a network of linked
organizations which work
synchronously & harmoniously to
deliver value to end customers.
• In the future, competition will not
be company vs. company but
Supply Chain vs. Supply Chain.
 The Supply Chain Concept – What
is meant by Supply Chain ?

• The purists define the Supply Chain

as “from the ground to the customer”.

• Thus the Supply Chain is a Business

Process that runs across
organizational boundaries as well as
functional boundaries within the
organization.
The Supply Chain Concept – What is
meant by Supply Chain ?
• Within the organization, it
encompasses all the steps between
the Supplier & the Customer.

• Thus it includes traditional functions

such as Purchasing, Planning
,Production, Distribution & Customer
Service.
 Supply Chain Management
Session - Introduction
• Supply chains exist in both service
and manufacturing organizations,
although the complexity of the chain
may vary greatly from industry to
industry and firm to firm.
The Supply Chain

Demand & Supply Chain Planning

Information Flow

Inbound Logistics Outbound Logistics

Procurement Manufacturing Distribution

Suppliers Consumers

Product Flow

0
Figure: A typical supply chain network
The value Supply Chain Concept – What
is meant by value Supply Chain ?
The value Supply Chain is the
combination of material and
information flow required to source,
make, and deliver goods & services to
the customer.
The key steps –
• Source
• Make
• Deliver
The value Supply Chain Concept – What
is meant by value Supply Chain ?

The supporting steps –

• Design
• Plan
• Sell
The Supply Chain Concept – What
is meant by Value Chain ?

The key enablers are –

• Information Technology

• Human Resources

• Finance
 Supply Chain Management
Session - Introduction
Evolution
Traditionally, marketing, distribution,
planning, manufacturing, and the
purchasing organizations along the supply
chain operated independently. These
organizations have their own objectives
and these are often conflicting
Supply Chain Integration and Evolution –
The Driving Force
The key drivers for integration are the
problems arising from operating in
functional silos within the organization
and inadequate coordination with
trading partners.
 Supply Chain Integration and
Evolution – The Driving Force
- Each function does not control more than
a few steps of the process.
- Duplication of activities and competition
between functions.
- Focus on functional goals and objectives.
Supply Chain Integration integrates the
Material, Information & Financial flows.
 Supply Chain Management
Session - Introduction
Evolution
Clearly, there is a need for a
mechanism through which these
different functions can be integrated
together. Supply chain management
is a strategy through which such an
integration can be achieved.
 Supply Chain Management
Session - Introduction
Evolution
Supply chain management typically extends
beyond organizational boundaries across
different firms in which each channel
member operates independently. Therefore
coordination between the various players
in the chain is key in its effective
management.
 Supply Chain Integration and
Evolution - The Stages
There are 4 distinct stages in the
evolution of a supply chain –
Stage I – Fragmented Pyramid.
Below average to average performing
companies in many industries still
operate in Stage I.
 Supply Chain Integration and
Evolution - The Stages
Stage I – Fragmented Pyramid.

This stage is characterized by-

- Arms length relationships between
departments, plants, divisions SBUs
etc.
- -Adversarial relationships with other
organizations.
 Supply Chain Integration and
Evolution - The Stages
Stage II – Integrated Enterprise.
Above average performing companies in
many sectors operate in Stage II.
This stage is characterized by-
- No departmental barriers, focus on
enterprise-wide processes.
- Limited commercial cooperation with other
enterprises.
 Supply Chain Integration and
Evolution - The Stages
Stage II – Integrated Enterprise.

Current ERP systems &

technologies are designed to
enable companies to progress
to and operate in Stage II.
 Supply Chain Integration and
Evolution - The Stages
Stage III – Integrated Interprise.
A few excellent companies are operating in
Stage III.
This stage is characterized by-
- Extensive commercial, logistical &
electronic cooperation between supply
chain partners.
 Supply Chain Integration and
Evolution - The Stages
Stage III – Integrated Interprise.
- Extended-ERP(E-ERP / XRP), CRM and
SCM systems & technologies are
designed to enable companies to
progress to and operate in Stage III.
 Supply Chain Integration and
Evolution - The Stages
Stage IV – Virtual Value Network.
Currently, this exists only at a conceptual
level as the business practices, systems
and infrastructure required to enable
Stage IV are at a design / pilot level.
However, leading companies in the software
& high tech industries have begun to
exhibit key attributes of operating in this
stage.
 Supply Chain Integration and
Evolution - The Stages
Stage IV – Virtual Value Network.
This stage is characterized by an opportunistic
teaming of selected value web members into a
(temporary or permanent) virtual company.
Two companies may be each other’s supplier,
competitor, partner, customer at different points
of time (or even at the same time !), as they
chase several opportunities and participate in
several virtual companies.
 Supply Chain Integration – The Key
Benefits
The Key benefits to & impact on the
organization are reflected in
improved performance in
- Internal Business Capability.
- Customer & Shareholder Value.
- Competitive Flexibility & Adaptiveness.
- Organizational Learning & Knowledge
Management.
 Supply Chain Integration – The
Key Benefits
These are in turn reflected in –
- Reliable Demand Management.
- High Customer Service Levels.
- Reduced Lead Times.
- Optimum Working Capital Costs.
- Optimum Supply Chain Costs.
 Supply Chain Management
Session - Introduction
Supply Chain Decisions
• Location Decisions
• Production Decisions
• Inventory Decisions
• Transportation Decisions
 Supply Chain Management
Session - Introduction
Supply Chain Decisions
Location Decisions
• The geographic placement of
production facilities, stocking points,
and souring points (size, number, and
location of these).
 Supply Chain Management
Session - Introduction
Supply Chain Decisions
Production Decisions
• What products to produce, and which
plants to produce them in, allocation of
suppliers to plants, plants to DC's, and
DC's to customer markets.
• The possible paths by which the product
flows through to the final customer
(Network Design).
 Supply Chain Management
Session - Introduction
Supply Chain Decisions
Inventory Decisions
• Inventories at every stage of the supply chain
raw materials, semi-finished or finished goods.
• Deployment strategies (push versus pull),
control policies --- the determination of the
optimal levels of order quantities and reorder
points, and setting safety stock levels, at each
stocking location
 Supply Chain Management
Session - Introduction
Supply Chain Decisions
Transportation Decisions
• The mode choice .
• Trading-off the cost of using the particular mode
of transport with the indirect cost of inventory
associated with that mode.
• Shipment sizes (consolidated bulk shipments
versus Lot-for-Lot), routing and scheduling of
equipment.
 The Supply Chain activities
Broadly. The Chain activities can be
broadly divided into
1) Understanding Supply Chain
Requirements -These include : Marketing
& Sales, Customer Service & Order
Fulfillment, Forecasting, Planning &
Scheduling.
 The Supply Chain activities
2) Fulfilling Supply Chain Requirements
-These include : Purchasing & Incoming
Logistics.
Manufacturing & Packaging.
Distribution & Outbound Logistics.
The Supply-Side Management and
Demand-Side Management Concept
These are called as the “Demand-
Side Management” and “Supply-
Side Management” respectively.