Supply Chain

Management

Kripa Shanker
Industrial and Management Engineering Department
Indian Institute of Technology Kanpur

Dr Kripa Shanker IIT Kanpur 1

 SUPPLY CHAIN MANAGEMENT
Introduction
Since around 1990, companies across a wide variety of industries have
become increasingly interested in exploring the opportunities for
competitive advantage that can be gained by leveraging the core
competence and innovative capabilities to be found among network of
business partners.
Although companies have always acknowledged the importance of
the relationships that existed between themselves and their
customers and suppliers, it has only been recently that creating and
nurturing channel alliances has been recognized as a critical source
of strategic advantage.
Once a backwater of business management, creating chains of customers and
suppliers has arisen as perhaps today’s most important competitive strategy.
Dr Kripa Shanker IIT Kanpur 2
 SUPPLY CHAIN MANAGEMENT
Introduction
? What has caused this awareness of the inter-
connectiveness of enterprises ?
? What does the supply chain management (SCM) mean
and how is it to be implemented?
? What impact will the increasing dependence on
channel partnerships have on the fabric of today’s
business environment?
? What are the possible opportunities as well as the
liabilities of channel alliances?
? Are the benefits of channel partnerships focused
primarily on operations issues, or do they hold out the
opportunity for realization of fresh sources of market-
winning product and service value?
Dr Kripa Shanker IIT Kanpur 3
 Emergence of
Emergence of SCM
SCM
Reason 1 :
Response to several critical business requirements

THEN (over the past decade)

o Application of computerized information system
o Utilization of management techniques such as
Just-In-Time (JIT), Total Quality Management (TQM),
Business Process Reengineering (BPR), etc
o Implementation of employee empowerment and cross
functional management philosophies
have activated highly agile, lean product design and
manufacturing functions capable of superlative
quality and service
Dr Kripa Shanker IIT Kanpur 4
 Emergence of
Emergence of SCM
SCM
Reason 1: (contd.)
Response to several critical business requirements
NOW
Sustaining the collective momentum of these
management paradigms has required companies to
turn outward to their channels of supply and
distribution in search of untapped opportunities for
 cost reduction
 cycle time reduction
 process agility
Dr Kripa Shanker IIT Kanpur 5
 Emergence of
Emergence of SCM
SCM
Reason 2:
Internal vs. External business process
Closely integrated channels of suppliers and customers can
provide with unique sources of competitive competencies
THEN
Previous management models focused on employing quality
and improvement methods that sought to increase marketplace
value by leveraging the capabilities to be found in internal
business process.
NOW
In contrast, SCM shifts attention to previously unseen
opportunities that appear when companies seek to converge
the innovative competencies and unique resources of their
external chains of customers and suppliers in the pursuit of
radically new sources of competitive advantage.
Dr Kripa Shanker IIT Kanpur 6
 Emergence of
Emergence of SCM
SCM
Reason 3:
Vertical Integration vs. Divestment
Small and sleek is beautiful !

THEN
Dependence on vertical integration for competitive advantage.

NOW
Companies divest of non-profitable business and functions for
which they have relatively weak competence.
Prefer to use channel partners who specialize in such business areas
Managing supply chain partners becomes the key
to market leadership
Dr Kripa Shanker IIT Kanpur 7
 Emergence of
Emergence of SCM
SCM
Reason 4:
Globalization and Emergence of Information and Communication
Technologies Big yet sleek is beautiful !

THEN
Limited and Local operations.

NOW
Due to ICTs, customers are no longer limited to national
sources of products and services.

The ability to assemble closely networked supply chains

provides even the smallest company with the capability to
maximize customers satisfaction and accessibility at the
lowest possible cost.

Dr Kripa Shanker IIT Kanpur 8

 Emergence of
Emergence of SCM
SCM
Reason 5:
Enterprise reengineering and operations streamlining
Hand in Hand
Enterprise
grow together ! reengineering and operations streamlining have
forced companies to look seriously at their supply chain
partners to:
• Growth of information sharing between vendors and customers
• Rise of process-focused teams replacing departmental functions
• The shift in the market place from the mass-production of
standardized products to flexible operations providing customized
products
• Increased reliance on purchased materials and outside processing
with a simultaneous reduction in the number of suppliers
• Greater emphasis on organizational and process agility
• Rise of employees empowerment management techniques that
require the implementation of rule-based, real-timer decision
support systems
Dr Kripa Shanker IIT Kanpur 9
 Emergence of
Emergence of SCM
SCM

Winning in the marketplace of the 90s is going to be require a far different kind of
relationship – one that recognizes that the ultimate winners will be those who
understand the interdependence of the retailer/manufacturer business systems
and who work together to exploit opportunities to deliver superior customer value
Ralph Drayer, Vice President for Product Supply/Customer Service at Proctor Gamble

Effectively managing supply chains means that

o Companies must create market-winning partnerships with other

companies that promote the competitive advantage of the whole
channel system
o Companies should know how to utilize technology to coordinate
internal activities with those of their trading partners
o Companies must network information and synchronize the
capacities and resources to be found in each channel node that
permit the exploration of new regions of competitive space and
unassailable marketplace leadership
Dr Kripa Shanker IIT Kanpur 10
Realization of
Realization of SCM
SCM –– 55 MAJOR
MAJOR Factors
Factors

How can companies realize fundamentally new avenues

of marketplace advantage by closely integrating the core
competencies and capabilities for innovative thinking to
be found among their supply chain business partners ?

Five major business dynamics driving the market place

• Dynamic 1 : Voice of the Customers

• Dynamic 2 : Agility + Flexibility + Creativity
• Dynamic 3 : Information and Communication Technologies
• Dynamic 4 : Marketing and Distribution Channel Environment
• Dynamic 5 : Supply Channel Logistics Integration

Dr Kripa Shanker IIT Kanpur 11

Realization of
Realization of SCM
SCM –– 55 MAJOR
MAJOR Factors
Factors

1 : Voice of the Customers

THEN
Companies sought to create and deliver
standardized, mass – market products to
customers who had relatively very little
purchase choice
NOW
Customers require tailored combinations of
high quality products and services that will
provide them with unique value and
solutions assisting them to realize their own
competitive strategies.
Dr Kripa Shanker IIT Kanpur 12
Realization of
Realization of SCM
SCM –– 55 MAJOR
MAJOR Factors
Factors

2 : Agility + Flexibility + Creativity

Constructing agile product design, manufacturing, and
delivery processes that continually provide superior
product and service quality, yet can quickly and cost-
effectively configured to meet individual customer needs.

Continually search for new ideas and processes that win

the customer’s order but that they must also possess the
competencies and resources to realize market-winning
innovations enabling them to create whole new markets
beyond the borders of their existing customers

Dr Kripa Shanker IIT Kanpur 13

Realization of
Realization of SCM
SCM –– 55 MAJOR
MAJOR Factors
Factors

3: Information and Communication Technologies

• Value of accurate information

• Speed of communication
Information: fundamental source of wealth
Information Technology
not only as a critical management tool that shortens cycle times and increases
productivity of business functions through automation
BUT also as a key enabler providing the enterprise with opportunity to
activate highly competitive organizational cultures and channel
structures in search for new sources of market place leadership
IT has made possible the interactive networking of
congruent functions across the supply channel and the
linkage into single, competitive supply chain systems
Dr Kripa Shanker IIT Kanpur 14
 Realization of
Realization of SCM
SCM –– 55 MAJOR
MAJOR Factors
Factors

4 : Marketing & Distribution Channel Environment

Dimensions
• Globalization of the world economy
• Rapid introduction of new products and services on an international scale
• Increased demand, demands for quick-response delivery
• Explosion of strategic alliances and partnerships on a global scale
Close inter-linkage of companies along a supply channel system has
enabled the formation of internetprise “virtual” organizations capable
of leveraging the skills, physical resources, and innovative
knowledge of a matrix of productive capacities originating from
different locations in supply network

Dr Kripa Shanker IIT Kanpur 15

Realization of
Realization of SCM
SCM –– 55 MAJOR
MAJOR Factors
Factors

5 : Supply Channel Logistics Integration

Then
Logistics was perceived primarily as an operations activity focused
around product delivery and cost reduction
Now
Logistics as a strategic, cross-functional, internetprise management
activity whose mission is to both plan and coordinate all inventory
and delivery activities as well as to realize new opportunities for
competitive advantage.
Companies will increasingly seek to more closely integrate logistics
operations across the supply channel, dependence on the SCM
strategic philosophy will deepen as they explore concurrently new
ways to satisfy customers, develop new products, explore new
competitive regions, and implement new technology tools.
Dr Kripa Shanker IIT Kanpur 16