Supply chain Management

Supply Chain

Definition of supply chain

Benefits of the supply Chain

Supply chain principles

Types of Supply Chain Models

Supply Chain drivers and performance metrics

Managing uncertainty in supply chain

Inventory management in supply chain

How to ensure Quality Management in Supply Chain + case Study

 Definition of supply chain

• is a network between a company and its suppliers to produce

and distribute a specific product to the final buyer.
•  it includes producers, vendors, warehouses, transportation
companies, distribution centers, and retailers.
• The supply chain process include:
• Planning the inventory
• Manufacturing to create the final product
• testing the product
• Packaging the product for shipment
• Transporting and delivering the finished product to the
distributor, retailer, or consumer
• Providing customer service support for returned items
Definition of supply chain management
• It is the control of all the activities required for a company to convert raw
materials into finished products that are then sold to end-users.
• the key elements of SCM :
• Strategy - This drives a supply chain design based on business goals and
objectives and on market needs and expectations.
• Process - This describes the activities required to operate and manage the
supply chain.
• Model - An appropriate model defines management structures, department
missions, and roles and responsibilities.
• Information - IT systems are tools that support supply chain planning,
execution, infrastructure maintenance, and the decision-making process.
• Performance - the presence of indicators that can be used to evaluate and
manage supply chain performance against targets.
Benefits of supply chain management

• Enhance Output:
The SCM ensure that all resources are efficiently utilized
for production processes
• Avoids Delay In Process
all materials are timely acquired for facilitating uninterrupted production of products
• Easily Identify Problem Areas
• Track the performance of every department and identify which one is lacking in
delivering its duties
• Better Collaboration
Developing a proper communication channel within the business for avoiding any confusion
or disputes.
Supply Chain principles
1. Adapt Supply Chain to Customer’s Needs

• The businesses and supply chain professionals understand customer’s

needs. Customers are divided into different groups called ‘segments’ in

order to understand them better. On the basis of sales volume or

profitability, the primitive way to segment customer is ABC analysis. It

can also be done by product, trade channel and industry. Anticipating the

customer’s needs is also very important. Once the needs of the customers

are anticipated, the supply chain should be aligned to cater to the needs.
2. Customize Logistics Network

• After the segmentation of the customers based on different

requirements, SCM managers have to tailor logistics networks to serve

different segments. The SCM manager has to prioritize the deliveries

and make suitable provisions to quickly distribute those goods that are

marked as urgent.
3. Align Demand Planning Across Supply Chain

• Supply chain professionals are trained to share data with trading

partners in order to avoid the unnecessary stock. The demand data

must be used wisely by the SCM managers.

4. Outsources Strategically

• Though outsourcing is all the rage, the managers must outsource

strategically. The core expertise should not be outsourced ever.

This principle stands the test of time.

5. Develop IT that Support Multi-Level Decision
Making

• The IT projects should not be done in isolation and before IT

projects, the business process reengineering should be done. This

provides a proper understanding of process insufficiencies and

helps to determine the kind of innovation needed.

6. Adapt Both Services and Financial Metrics

• The activity-based costing (ABC) is applied to determine the

customer’s profitability. It is even better to exploit Time Driven

Activity Based Costing in order to understand changes in activities,

process, product and customers.

 Supply Chain models

• There are 6 types of supply chain models:

• 1) The continuous flow models.
• 2)The fast chain models.
• 3)The efficient chain models.
• 4)The custom configured model.
• 5)The agile model.
• 6)The flexible model.
1) The Continuous Model

• ensures a continued, steady cadence of products and resources.

• It only exists in an environment with supply and demand stability,
typically with mature supply chains for established brands, and
requires minimal variation in the customer demand profile.
• Example: PepsiCo
PepsiCo

• maintains a large customer base with little to no variety in

demand no matter the season or market conditions.
• PepsiCo has set up the logistics of its delivery system to
continuously receive ingredients to produce its Products.
2) The Fast Model

• most often used by businesses that manufacture finished products

with a short market lifecycle.
• This model applies when a business changes its products
frequently, delivering them to market before a trend loses its
relevance.
• Example: Nike
Nike

• Nike frequently sets up delivery systems of new supplies and

information to create and then sell new shoes and other apparel
before that particular trend’s time has passed.
• A short time later, the company will set up a new fast supply chain
for the next wave of trendy products.
3) The Efficient Model

• is the best model for businesses that are in highly competitive

environments and must fight for high efficiency in their delivery
logistics to retain a competitive advantage.
• Example: General mills
• it develops products relatively similar to its competitors and sells
to the exact same audience as the competition.
4) The Agile model

Four components a supply chain must have to be considered an agile model:

virtual integration, process alignment, a network base and market sensitivity. 
1) Virtual integration requires the business to track market demand changes
in real time. 
2) Process alignment is about sharing supply chain responsibilities across the
business.
3) Network-based means that an equal contribution is made by every actor in
the supply chain.
4) The market sensitivity component changes the rate of production
immediately with any changes in demand. 
Example: ZARA

• It exhibits agility by keeping its designers vigilant in the spotting

of new trends. As soon as ZARA’s designers identify a potential
trend, they immediately draw up sketches and order new
materials.
5) The Custom-Configured Model

•  a combination of the agile and continuous flow models.

• is ideal in scenarios where multiple product configurations are
required. Whenever there are consumer customization options.
• Example: L.L. Bean company
• It invites customers to customize their backpacks before placing an order.
6) The Flexible Model

• It provides businesses the ability to meet peaks of high demand as

well as long periods where demand is low.
• It consists of three components:part segmentation, accurate
stocking algorithms and flexible planning.
• It is achieved through flexibility: having multiple suppliers, many
of whom are on seasonal contracts, and perfecting the stocking
algorithm so that the company produces only what will be sold in
the offseason.
Example:

• Staples’ paper and writing utensil products

Supply Chain drivers and
performance metrics
Supply Chain drivers and performance metrics:

 Definitions:
 Competitive strategy
 Supply Chain strategy
 Strategic fit
 Supply chain responsiveness
 Supply Chain Efficiency
• Drivers of Supply Chain Performance
• For each driver:
 Role in supply chain
 Role in competitive strategy
 Overall Trade off
 Metrics
• Case Study: Doehler
Definitions - Competitive strategy:

Competitive strategy:
• The set of customer needs that the company seeks to satisfy through its products and services.
• Competitive strategy targets one or more customer segments and aims to provide products
and services that satisfy these customers’ needs.

• Some firms focus on low prices, others focus on high availability and variety of products,
responsiveness
• Firms competitive strategies differ based on the customer needs in the sector in which the firm
compete.

Save Money & Live Wide variety &

better Spend less Responsiveness Quality &
Performance
Definitions - Supply Chain strategy:

Supply Chain strategy:

• Determines the nature of material
procurement, transportation of
materials, manufacture of product or
creation of service, distribution of Finance, Accounting, IT, Human Resources
product.
New
• To execute a company’s competitive product
strategy, all these functions play a role, Developm
and each must develop its own strategy. ent
Here, strategy refers to what each
process or function will try to do Customer Marketing
particularly well Service and Sales
• For example, Amazon’s decisions to
build warehouses to stock some
products and to continue using
distributors as a source of other
products are part of its supply chain
strategy. Distributi Operation
ons s
• For a firm to succeed, all functional
strategies must support one another
and the competitive strategy
Definitions - Strategic Fit:

Strategic Fit:
• It refers to consistency between the customer
priorities that the competitive strategy hopes
to satisfy and the supply chain capabilities
that the supply chain strategy aims to build.
• Strategic fit means that both the competitive
strategy and supply chain strategies are
aligned and have the same goal.

• a situation in which marketing is publicizing a

company’s ability to provide a large variety of
products quickly; simultaneously, distribution
is targeting the lowest cost means of
transportation.
• Similarly, consider a scenario in which a
retailer has decided to provide a high level of
variety while carrying low levels of inventory
Definitions - Responsiveness & Efficiency:
The goal of a supply chain strategy is to strike the balance
between responsiveness and efficiency that fits with the
competitive strategy

Supply Chain Responsiveness:

It includes a supply chain’s ability to do the following:
• Respond to wide ranges of quantities demanded
• Meet short lead times
• Handle a large variety of products
• Build highly innovative products
• Meet a high service level
• Handle supply uncertainty

Responsiveness, however, comes at a cost. For instance, to

respond to a wider range of quantities demanded, capacity
must be increased, which increases costs.

This increase in cost leads to the second definition: Supply

chain efficiency
Comparison of Efficient and Responsive Supply Chains:

Supply chain Efficiency:

 is the inverse of the cost of making and delivering a product to the customer.
 Increasing responsiveness results in higher costs that lower efficiency.

Strategy Efficient Supply Chains Responsive Supply Chains

Primary goal Supply demand at the lowest cost Respond quickly to demand

Product design Maximize performance at a minimum Create modularity to allow postponement of

Strategy product cost product differentiation
Pricing strategy Lower margins because price is a prime Higher margins because price is not a prime
customer driver customer driver
Manufacturing Lower costs through high utilization Maintain capacity flexibility to buffer against
Strategy demand/supply uncertainty
Inventory strategy Minimize inventory to lower cost Maintain buffer inventory to deal with
demand/supply uncertainty
Lead-time strategy Reduce, but not at the expense of costs Reduce aggressively, even if the costs are
significant
Supplier strategy Select based on cost and quality Select based on speed, flexibility, reliability, and
quality
Supply Chain drivers and performance metrics:

To understand how a company can improve supply chain performance in terms of responsiveness and
efficiency, we must examine the logistical and cross–functional drivers of supply chain performance

Logistical Drivers:
• Facilities
• Inventory
• Transportation

Cross-functional Drivers:
• Information
• Sourcing
• Pricing

For each individual driver, supply chain managers need to make a trade off between responsiveness and
efficiency. The combined impact of these drivers determines the responsiveness and the profits of the
entire supply chain.

Usually a competitive strategy is decided first. Accordingly, the supply chain strategy is determined.
The supply chain then uses the 6 drivers to reach the performance level determined by the competitive
strategy to maximize the supply chain profits (shared across all stages of the supply chain)
Logistical Drivers: Facilities
Role in Supply chain Strategy:
• Facilities are the where of the supply chain.
• They are the locations to or from which the inventory is transported.

Role in the Competitive Strategy

companies can gain economies of scale when a product is manufactured or stored in only one location;
this centralization increases efficiency.
The cost reduction, however, comes at the expense of responsiveness, as many of a company’s
customers may be located far from the production facility. The opposite is also true. Locating facilities
close to customers increases the number of facilities needed and consequently reduces efficiency.

Overall Trade-Off: RESPONSIVENESS VERSUS EFFICIENCY

The fundamental trade-off that managers face when making facilities decisions is between the cost of
the number, location, capacity, and type of facilities (efficiency) and the level of responsiveness that
these facilities provide the company’s customers. Increasing the number of facilities increases facility
and inventory costs but decreases transportation costs and reduces response time. Increasing the
flexibility or capacity of a facility increases facility costs but decreases inventory costs and response
time.

Facilities-related Metrics: Capacity, Utilization, Processing/setup/down/idle time, Production cost per

unit, Quality losses, Production service level
Logistical Drivers: Inventory
Role in Supply chain Strategy:
• It represents the what in supply chain that will be stored
• Source of cost and it influences on responsiveness
• Increase the amount of demand that can be satisfied by having the product ready and available
when the customer wants it.
• Reduce cost by exploiting economies of scale that may exist during production and distribution.

Role in the Competitive Strategy

• If responsiveness is a strategic competitive priority, a firm can locate larger amounts of
inventory closer to customers
• If cost is more important, inventory can be reduced to make the firm more efficient

Overall trade-off: Responsiveness versus efficiency

• more inventory: greater responsiveness but greater cost
• less inventory: lower cost but lower responsiveness
• High level of inventory reduces production and transportation cost, but increases inventory
costs.

Inventory-related Metrics: Cash-to-cash cycle time, Average inventory, Average safety inventory,
Obsolete inventory
Logistical Drivers: Transportation
Role in Supply chain Strategy (How):
Transportation moves product between different stages in a supply chain and impacts both
responsiveness and efficiency
Faster transportation allows greater responsiveness but lower efficiency

Role in the Competitive Strategy

If responsiveness is a strategic competitive priority, then faster transportation modes can provide
greater responsiveness to customers who are willing to pay for it.
Can also use slower transportation modes for customers whose priority is price (cost)

Overall trade-off: Responsiveness versus efficiency

The fundamental trade-off for transportation is between the cost of transporting a given product
(efficiency) and the speed with which that product is transported (responsiveness). Using fast
modes of transport raises responsiveness and transportation cost but lowers the inventory holding
cost.

Transportation-related Metrics: Average inbound transportation cost, Average outbound

transportation cost, outbound Delivery time , Average incoming shipment size
Cross-functional Drivers: Information
Role in Supply chain Strategy:
• Good information can help improve the utilization of supply chain assets and the coordination
of supply chain flows (product, info, funds) to increase responsiveness and reduce costs.
• Crucial to daily operation of each stage in a supply chain:
 production scheduling, inventory levels,

Role in the Competitive Strategy

The goal in general should be to share the minimum amount of information required to achieve
coordination because, beyond a certain point, the marginal cost of handling additional information
increases, whereas the marginal benefit from the additional information decreases.

Overall Trade-Off: Complexity Vs. Value

It is thus important to evaluate the minimum information required to accomplish the desired
objectives.

Information-related Metrics: Sales Forecast, Frequency of update, Forecast error/ accuracy,

Variance from plan, Delivery level, product availability, ETD, ETA, etc.
Cross-functional Drivers: Sourcing
Role in Supply chain Strategy:
• Sourcing is the set of business processes required to purchase goods and services
• Supplier selection, single vs. multiple suppliers, contract negotiation

Role in the Competitive Strategy

• Sourcing decisions are crucial because they affect the level of efficiency and responsiveness the
supply chain can achieve.
• Has an impact on production cost, inventory cost, transportation cost, and information cost

Overall Trade-Off: Increase the Supply Chain profits

• Sourcing decisions should be made to increase the size of the total surplus to be shared across
the supply chain.
• The total surplus is affected by the impact of sourcing on sales, service, production costs,
inventory costs, transportation costs, and information costs.

Sourcing-Related Metrics: Supplier reliability: lead time and supplied QTY,

Supply lead time, Supply quality, payment terms, Average purchase price/ material or service,
Cross-functional Drivers: Pricing
Role in Supply chain Strategy:
• Pricing is the process by which a firm decides how much to charge customers for its goods and
services.
• pricing is one of the most significant factors that affect the level and type of demand that the
supply chain will face.

Role in the Competitive Strategy:

some manufacturing and transportation firms use pricing that varies with the response time desired by
the customer. Through their pricing, these firms are targeting a broader set of customers, some of
whom need responsiveness while others need efficiency.

Overall Trade-Off: increase Firm Profits

All pricing decisions should be made with the objective of increasing firm profits. This requires an
understanding of the cost structure of performing a supply chain activity and the value this activity
brings to the supply chain.

Pricing-Related Metrics: Profit margin, Days sales outstanding, Average sale price, etc.
Case Study: Doehler
Case Study: Facilities, Inventory, Transportation:
• Doehler’s Global Presence: Our network guarantees that we are always close to you!

GERMANY DENMARK
Neuenkirchen Odense

UNITED KINGDOM POLAND

Ledburry Kozietuly RUSSIA
Belsk Duzy Moscow
THE NETHERLANDS
Tarczyn
THE NETHERLANDS Breda
Roggel GERMANY POLAND RUSSIA
Dahlenburg Polkon Gubkin
THE NETHERLANDS UKRAINE
Oosterhout Skala Podilska
FRANCE Bukovyna
RUSSIA
Lozanne HUNGARY
Slavjansk-na-Kubani
Vaja CHINA
TURKEY Rizhao
GERMANY Balikesir
TURKEY
Neuss
Karaman TURKEY CHINA
ITALY
USA GERMANY TURKEY Denizli Xuzhou
Basiliano CHINA
Pine Brook Darmstadt Izmir
Shanghai

Customers in GERMANY
Schwalmtal

130
USA GERMANY
Cartersville Oberteuringen 1+2 CHINA
Jinshan
EGYPT UAE
Cairo Dubai
GERMANY
MEXICO Eisleben
countries Mexico City

INDIA INDIA
Pune Krishnagiri

>72
INDIA
Ratnagiri

BRAZIL
Limeira
sales offices &
application centres BRAZIL
Jarinu
BRAZIL
São josé do rio pardo

BRAZIL
Antônio Prado

>50
SOUTH AFRICA
Capetown
AUSTRALIA
Melbourne

Production Sites
Case Study: Information, Sourcing, Pricing
Uncertainty in supply chain
What is Uncertainty? From big incidents like
COVID or an earthquake to
a supplier who is suddenly
unable to meet orders, an
In a perfect world, products would flow seamlessly unexpected order, late
through your organization, from raw materials to delivery from a supplier or
final customers. In fact, it would almost be like an a breakdown of critical
assembly line, but, it is not a perfect world, and one production equipment.
of the biggest concerns that business managers have
to deal with is the fact that the supply chain is far
from certain
 Uncertainity is Factors identified:

Demand
The change of the balance and profitability of the supply Supply
chain caused by potential and unpredictable events, which
requires a response to re-establish the balance and there will Resource capacity
occur a shake in the decision-making process in the supply Production costs
chain in which the decision maker does not know exactly Exchange rates
what to decide due to lack of transparency of the supply Transportation (lead times and
chain and the impact of possible actions costs)
Prices (product and raw-
material)
Extreme events.
Solution
Enough information

1-The managing system should have an objective and corresponding performance

indicators to manage the supply chain in the right direction.

2-To estimate future system states one has to have information on the environment
and current supply chain,to gather enough info about internal and external factors
affecting the supply chain in each step
 Quality from the start

￮ Not knowing if the products we manufacture will

pass the quality tests is another factor of
uncertainty since disassembling or wasting the
components or finished products that fail to meet
the necessary quality is costly in several ways and
puts additional pressure on the manufacturing
line.On the one hand, there is quality as
experienced by clients, which we may understand
by the claims and comments on social media, and
which must be addressed. However, it is best to
find the problems in our own house. To do this, it
is essential that we find the fundamental reasons
for low-quality manufacturing.
Analysis

The first step to optimizing service levels amid supply chain uncertainty is to
understand demand better.  Modern demand forecasting software
look at the specific factors driving demand at a micro level.  Probabili
stic planning then produces a range of possible outcomes using advanc
ed algorithms to analyze multiple demand variables.  This planning go
es beyond the demand forecast number to the likelihood of demand in
any given period. 
Flexibility

To adapt quickly and efficiently to changes in the environment, many companies have
invested in increasing the flexibility of their supply chains. “Flexibility” here is viewed
as the ability to adapt, to change or to transform, with minimum damage in time, cost,
resources and performance - in other words, how well does the system react to
uncertainty.. So Supply Chain Flexibility could be defined as the ability to accommodate
volume and schedule fluctuations from suppliers, manufacturers and customers. This is a
vital component of Supply Chain success and defines how well the system reacts to
uncertainty.
 Risk Management and Resilience

￮ Risk Management deals with quite different types of risk that

can be: internal to the company (process, control), external to
the company but internal to the supply chain (demand, supply),
Creating a resilient supply chain is naturally a way to manage
risks, but increasing resilience in a network requires high levels
of collaboration (with higher levels of visibility between chain
members), responsiveness, agility, creation of a risk
management culture in the organization and efficient design.In
the corporative world resilience is associated with the ability of
a company to bounce back from a large disruption. This
includes for instance, the speed with which it returns to its
normal pace.
Inventory management of supply
chain
Inventory management in supply chain

• Inventory
Inventory is the stock of any item or resource used in an organization

• Inventory management system:

Inventory Management is “making sure that items are available when customers call for it, but not too
much stock so that inventory turnover goals are met”

• Inventory Management :
is “the art and science of managing to have the RIGHT PRODUCT, at
the RIGHT TIME and PLACE, in exactly the RIGHT AMOUNT, at the BEST POSSIBLE
PRICE”.
Types of inventory
The Importance of Inventory Control

• Inventory control helps companies

buy the right amount of inventory at
the right time. Also known as stock
control, this process helps optimize
inventory levels, reduces storage
costs and prevents stock outs.
Inventory acts as a buffer between supply and demand fluctuations and irons
out supply chain
system failures. The smoother the supply chain operates, the better is the
forecasting, the lesser inventory to hold.

• Symptoms of Poor Inventory Management

1. Increasing number of backorders
2. Increasing cancelled orders
3. Increasing numbers of returns
4. High customer turnover rate
5. Large number of obsolete items
6. Periodic lack of storage space
What Is Inventory Count?
The business saying “if you can’t measure it, you can’t manage it” .

• An inventory count is the physical act of counting and checking the

condition of items in storage or a warehouse. An inventory count
also checks the condition of items. For accounting purposes,
inventory counts help assess assets and debts.

• Inventory counts help you understand which stock is moving well

and inventory managers often use this information to forecast
stock needs and manage budgets.
What Is Inventory Analysis?
Benefits of Inventory Analysis
What Is Demand Forecasting?

• Demand forecasting is the practice of predicting

customer demand by looking at past buying trends, such
as promotions and seasonality. Accurately predicting
demand provides a better understanding of how much
inventory you’ll need and reduces the need to store
surplus stock.
Inventory Best Practices
How to ensure quality management
through supply chain
- Problems:
1- Shortage supplies & suppliers due to global crisis (war & pandemic) make a problem
in the availability of high quality product or service.

2- Long tail of SC make a problem in identifying & isolating the product issue.

3- Inconsistent operating procedures & polices across suppliers, can make it difficult to
maintain a consistent level of quality.

4- difficult to find the talent and resources required for both manufacturers and
suppliers to address the quality management strategy.
 7 Steps to ensure quality
management through supply chain
 1 - Ppap (production part approval
process
- PPAP evaluate the components and subsystems received from each individual
supplier, and to establish clear design specifications for better compliance with
those standards.
- PPAP enables you to manage changes to products and processes and more easily
evaluate future suppliers.
- PPAP minimizes the risk of things going wrong and corrective actions having to be
implemented, making for a smoother overall process.
- PPAP enables quality output and assurance that their requirements are going to be
met during the production run.
- PPAP provides customers adequate information to validate that all areas of the
design and production processes have been reviewed thoroughly to ensure that only
high quality products will be allowed to ship to the end customer.
- PPAP consists of 18 steps which ensure that each part is meets expectations and is
produced to high quality each time.
 PPAP 18 elements

1-  Design Documentation. 10- Design Verification Plan and

2- Engineering Change Notice.
3- Customer approval.
4- Design Failure Mode and Effects
Analysis.
5- Process Flow Diagram.
6- Process Failure Mode and
Effects
Analysis.
7- The Control Plan.
8- Measurement System Analysis.
9- Dimensional Layout Results.  16- Checking Aids.
Report.
11- Statistical Process Control.
12- Qualified Laboratory
Documentation.
13- Appearance Removal Inspection.
14- Sample Production Parts.
15- Master Sample.
17- Customer Specific Requirements.

18- Part Submission Warrant Form.

 2- Set up a receiving and inspection
process.
- It’s critical to integrate the process of receiving materials from suppliers and
to set up inspection schedules based on supplier performance tendencies such
that a skip – lot sampling process should be implemented.

- These processes will track and evaluate the quality of goods in real time.

- These processes reduce defects in finished products, and ensure consistent

inspections.
 3- implement SCAR process
(Supplier Corrective Action Requests )
• SCAR process implement for nonconforming materials, missed or delayed deliveries,
customer complaints and other infractions.

• SCAR involves conducting a root-cause analysis, corrective planning and risk analysis.

• The goal of SCAR process is to ensure visibility of anything that’s out of specification.

• Implement SCAR process – flow chart.

SCAR process flow - chart
 4 - Qualify suppliers and materials
• Managing the Approved Supplier List requires that you deliver
• real-time measurements of supplier and material
performance.

• The review and approval work flow should provide

• transparency and control over the qualification process.

5- COLLECT SUPPLIER RATINGS

• You should have centralized visibility into supplier
performance through quantitative and qualitative
rating information in all aspects of a supplier
relationship.
 6- Take an enterprise-wide approach
-  Expand the role of supplier quality management from just

the quality team to everyone who has a relationship with

your suppliers. Your procurement team can be a strong

ally in ensuring proper supplier quality.

7 – INVOLVE SUPPLIERS
- Suppliers should be involved in your quality-management
sycstem (QMS) and workflows as accountable members of the
process and developers of the solution.
- systems must be seamlessly integrated to bridge the
technology gap and enable constant communication across
systems.