Performance Measurement in Supply Chains

Course on Supply Chain Management

Prof. Ravi Shankar Department of Management Studies, Indian Institute of Technology Delhi, New Delhi

Performance Measurement in Supply Chains

Companies must always be concerned with their competition. From individual company performance to supply chain performance: the entire chain's ability to meet endcustomer needs through product availability and responsive, on-time delivery.

Performance Measurement in Supply Chains

To achieve that goal, you need performance measures, or "metrics", for global supply chain performance improvements. Performance measures must show not only how well

you are providing for your customers (service metrics) but also how you are handling your business (speed, asset/inventory, and financial metrics).

PURPOSE of PMS

The basic purposes of PMS are:

external reporting (economic rent), internal control (managing the business better) and internal analysis (understanding the business better and continuous improvement).

Objectives of Metrics
Measuring the activity (volume) and the SC performance Setting goals and comparing the actual situation Following a plan Determining the levers that will help achieve goals and single out the priority action programs Revealing the degree of flexibility

Performance measurement system (PMS): Desirable Features (contd.)

PMS should have multiple criteria Primary purpose should not be to reward or to punish Performance-to-schedule measures must use group, not individual results Specific goals must be established and reviewed PM must be understood by those whose performance is being measured. PM data must be available for constant review

Some Indicators..1..

Delivery performance Order fulfillment performance Fill rate (Make-to-stock) Order fulfillment lead time Perfect order fulfillment Supply-chain response time Production flexibility

Some Indicators..2..,

Total supply-chain management cost Value-added productivity Warranty cost or returns processing cost Cash-to-cash cycle time Inventory days of supply Asset turns

Some Indicators..3..
Financial : ROI, Turnover ratio Productivity: Total productivity Efficiency: Realized Production /Planned Production Customer LT: Time from order to delivery Production LT: Time from order relapse to finished product Production flexibility: ability to respond efficiently to demand variation

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Various frameworks for measurement

Framework Framework Framework Framework Framework

1: Function based measurement system 2: Dimensions based measurement system 3: Hierarchical measurement system 4: Balanced scorecard system 5:SCOR model

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Framework 1: Function based measurement system

Covers detailed performance measures applicable at different linkages of SC

Marketing, Operations, Finance etc.

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Framework 2: Dimensions based measurement system

Any SC can be measured on three dimensions

Service Assets Speed

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Framework 3:Hierarchical System

Performance in the functional areas of Inbound Logistics Operations Outbound Logistics Marketing Service-after-sales

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Framework 4: Balanced scorecard

Various perspectives such as the following should be Balanced!

Financial Innovation & learning Customer service Internal business

Balance scorecard balances and links financial and nonfinancial indicators, tangible and intangible measures, internal and external aspects, performance drivers and outcomes.

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Four Perspectives
What must we excel at?
Customer Perspective
Objectives Measures Targets How do our customers see us?

How do customer see us?

Internal Business
Objectives Measures Targets What must we excel at?

Innovation and Learning Vision and Strategy

How can we continue to improve and create value? Objectives Measures Targets

Financial Perspective

How do we Look to shareholder?

Objectives Measures Targets How do we look to stakeholders?

How can we continue to improve and create value

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Customer, Stakeholder and Implementer Perspective

Focuses on what an organization must be doing well to achieve the mission from the customers perspective.
Customer ranking survey Customer satisfaction index Market share

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Internal Process Perspective

Focuses on what an organization must be doing well internally to meet the customers needs.
Hours with customer on New Work Tender success rate Project performance index Project closeout cycle

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Financial Perspective
Focuses on ensuring adequate funding and resources to sustain and improve the internal processes
Financial Perspective Return-on-capital-employed Cash Flow Project Profitability Sales Backlog

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Learning, Growth and Innovation Perspective

Focuses on how an organization is innovating, improving, and learning in order to support success.
% revenue from New services Rate of improvement Index Staff Attitude survey Revenue per employee

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The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference-model (SCOR) as the cross-industry standard for supply chain management The SCC was organized in 1996 by 69 voluntary member companies and the European Chapter was started in 1998. www.supply-chain.org www.supply-

Framework 5:SCOR model

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SCOR Framework
Plan
Supply Chain Demand Chain
Deliver Source Make Deliver Return Return Return Source Return Make Deliver Return Source Make Deliver Source Return Return Return

Suppliers Supplier

Supplier
(Internal or External)

Your Company

Customer
(Internal or External)

Customers Customer

SCOR Model Building Block Approach Processes Best Practices Metrics Technology
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Analysis Methodology
Plan
P2 Plan Source P1 Plan Supply Chain P3 Plan Make Enable Plan P4 Plan Deliver

Source
S1 Source Stocked Products

Make
M1 Make to Stock

Deliver
D1 Deliver Stocked Products

S2 Source MTO Products

M2 Make to Order

D2 Deliver MTO Products

S3 Source ETO Products

M3 Engineer to Order

D3 Deliver ETO Products

Enable Source

Enable Make

Enable Deliver

Return Source

Return Deliver 22

Supply Chain Performance Measurement

E X T E R N A L
Performance Attribute Supply Chain Delivery Reliability
Supply Chain Responsiveness Supply Chain Flexibility

Performance Attribute Definition

Level 1 Metric

The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. The velocity at which a at which a supply chain provides products to the customer. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage.

Delivery Performance Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity Warranty / Returns Processing Costs

Select a spread of measures Consider where data is available

Supply Chain Costs

I N T E R N A L

The costs associated with operating the supply chain.

Supply Chain Asset Management Efficiency

The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.

Cash-to-Cash Cycle Time

Inventory Days/weeks of Supply

Asset/Inventory Turns 23

Measuring Supply-Chain Performance

One of the most commonly used measures in all Supply Chains is Inventory Turnover

Inventory turnover

Cost of goods sold Average aggregate inventory value

In situations where distribution inventory is dominant, Weeks of Supply is preferred and measures how many weeks worth of inventory is in the system at a particular time

Average aggregate inventory value 52 weeks Weeks of supply Cost of goods sold

CUSTOMERS

SUPPLIERS

Example of Measuring Supply-Chain Performance

Suppose a companys new annual report for FY (Financial Year) 2008-09 claims their costs of goods sold for the year is Rs.160 million and their total average inventory (production materials + work-in-process) is worth Rs.35 million. This company normally has an inventory turn ratio of 10. What is this years Inventory Turnover ratio? How did this supply chain performed last FY?

Example of Measuring Supply-Chain Performance

Inventory turnover Cost of goods sold Average aggregate inventory value

= Rs.160/ Rs.35 = 4.57 in FY 2008-09 Since the companys normal inventory turnover ration is 10, a drop to 4.57 means that the inventory is not turning over as quickly as it had in the past. Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry. But, it is clear that in FY 2008-09 (as compared to earlier) they needed more inventory relative to their cost of goods sold. (What could be possible reasons?)

Example of Measuring Supply-Chain Performance

Average aggregate inventory value 52 weeks Weeks of supply Cost of goods sold

= (Rs.35/ Rs.160)52 = 11.375 weeks in FY 2008-09 = 11.375*7 days in FY 2008-09 = 79.625 days in FY 2008-09

Supply Chain Scorecard & Gap Analysis

Supply Chain SCORcard
Overview Metrics SCOR Level 1 Metrics Supply Chain Reliability
EXTERNAL
Delivery Performance to Commit Date Fill Rates Performance Versus Competitive Population

Actual 50% 63% 0% 35 days 97 days 45 days 19%

Average 85% 94% 80% 7 days 82 days 30 days 13%

Advantage 90% 96% 85% 5 days 55 days 25 days 8%

Superior 95% 98% 90% 3 days 13 days 20 days 3%

Value from Improvements

Perfect Order Fulfillment Order Fulfillment Lead times Supply Chain Response Time Production Flexibility Total SCM Management Cost

Responsiveness Flexibility

Calculate Value from Financial Data Gathered

INTERNAL

Cost

Warranty Cost

NA

NA

NA

NA

Value Added Employee Productivity Inventory Days of Supply

NA

$156K 55 days 80 days 8 turns

$306K 38 days 46 days 12 turns

$460K 22 days 28 days 19 turns

79.625 days
196 days

Assets

Cash-to-Cash Cycle Time Net Asset Turns (Working Capital)

4.57 turns

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Key Supply Chain Metrics

E X T E R N A L
Performance Attribute Supply Chain Delivery Reliability
Supply Chain Responsiveness

Performance Attribute Definition

Overall Supply Chain Metric

Delivery Performance Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Cost of Goods Sold Total Supply Chain Management Costs

The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. The velocity at which a at which a supply chain provides products to the customer. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. The costs associated with operating the supply chain.

Supply Chain Flexibility Supply Chain Costs

I N T E R N A L

Value-Added Productivity Warranty / Returns Processing Costs

Supply Chain Asset Management Efficiency

The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.

Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turns

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Some Issues

Performance measurement system and its linkages with strategy Behavioral issues related to performance measurement system Development of Multi-criteria decision making framework Role of information system in measurement Benchmarking and performance measurement system

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COURSE RECAP

ONE MORE QUOTE

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Gandhi Believed in Quality: But his Approach was simple Customer is the most important visitor on our premises. He is not dependant on us, We are dependant on him. He is not an interruption on our work. He is a part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so. 34 Gandhi

THEN: OUR TOP SECRET (MY

PHILOSOPHY)

TEACHING

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We Believe in Gandhi: So our Approach is Same Student is the most important part of our system, who is knocking our door He is not an interruption on our work. He is a part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.
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COURSE REVISION & OVERVIEW (1)

SUPPLY CHAIN BASICS

EXAMPLE OF DELL SC, APPARAL SC, etc. HP (Aggregate Forecast) CASE STUDY

DEMAND MANAGEMENT

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The Linear Supply Chain

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Out of synch with todays networked environment Limited visibility & velocity Assumption-based planning Inventory build-up

Supply Complexities IN GSK--1

Finished Goods Movement 250 vendors, 350 materials, 15 sites P/S movement of avg.. 1200 kms Over 1000 consignments/ month shipped across 130 site-depot linkages

12 supply sites catering to 37 markets Primary freight cost of Rs. 30(c) R. Shankar, IIT crore p.a.
Delhi-2007-08

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LESSONS TO LEARN
Supply Chain involves many Complex Situations involving Inventory, Information and Money Flows.
G-1: Quality Information (Such as, Accurate forecast) reduces Inventory problems (like, stockout & safety stock) G-2: Companies do not compete now, their supply chains do G-3: A supply chain is as good as its weakest link G-4: Nearer you are from POS, (generally) more accurate is forecast. So, trim the lead times.
Prof. Ravi Shankar (2011-12) 40

Case Study#2: TIPCO FOOD, THAILAND

Thailand has the largest global market share of around 45% in processed pineapple. Tipco Food is one the largest Thai exporters of this product with a whopping figure of Baht 3.7 billion. In 2006-07, due to weakening of US dollar ($) against most of the global currencies, including Baht, Tipco global supply chain came under tremendous threat. Look at these steep drops in exchange rate. It has crumbled as follows: >late 2006- Baht 41 per $; early 2007 -Baht 37 per $; July 2007- Baht 33 per $. For the same export, the revenue inflow from exports has gone down by about one fifth of its value few months back. Most of these export-oriented supply chains have become noncompetitive in global market. As a protective measure, these export-oriented firms are 41 focusing on local market to boost their sales.
Reference: Bangkok Post: 4 August 2007, p B4.

LESSONS TO LEARN
Supply Chain involves many Complex Situations involving Inventory, Information and Money Flows. G-5: Key to success is Responsiveness (Agile Supply Chain), Efficiency (Lean Supply Chain), Coordination & Synchronization (Strategic Alliance and Operational Efficiency) G-6: Global Alliance is an Important Strategic Intent in an International Supply Chain G-7: Supply Chain Decisions are often Dynamic in Nature. Learn to be Adaptive to Changes G-8: Financial Decisions are often the Guiding Force to 42 the Supply Chain Operations Prof. Ravi Shankar (2011-12)

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Forecast accuracy improves at different levels#3

110 V Months 1 2 3 4 5 6 7 8 9 10 MAD Forecast Accuracy Demand 10000 14000 16000 12000 18000 15000 14000 11000 13000 11000 13000 15000 15250 14750 14500 13250
13000-18000

220 V Error Demand 8000 4000 2500 6500 2000 4000 3000 7000 5000 6000 5250 3750 3750 3875 4000 4750 3250 -250 750 -3125 -1000 -1250 1604.17 MA(4) Error Demand 18000 18000 18500 18500 20000 19000 17000 18000 18000 17000

Total MA(4) Error

MA(4)

(10000+14000+16000+12000)/4)

-5000 0 1250 3750 1500 2250 2291.67

18250 18750 19000 18625 18500 18000

-1750 -250 2000 625 500 1000 1020.83

83.23%

64.35%

94.38%

(5000+1250+3750+1500+2250) / 6

100-[(5+1.25+3.75+1.5+2.25)/(18+15+14+11+13+11)]100

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Aggregate Forecasts at SC Level

G 9: Aggregate forecasts are more accurate G 10: Forecast at the most aggregate/generic level possible G 11: Similarly, forecast at the most upstream of the supply chain (if possible) G 12: If possible, never use forecast information at the lower levels. At the lower levels, decisions should be based on actual demand 44

Aggregate Forecasts at SC Level

Aggregate forecasts is possible at least by three ways: G 13: Aggregate demand by product= Focus on new product Innovation for this G 14: Aggregate demand by market and then forecast for many markets G 15: Aggregate demand by time= Focus on longer duration forecast (like monthly rather than daily) and go up to it with replenishment cycle 45

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Product Redesign Helps Supply Chain Competitiveness

Product Redesign may help competitiveness and cost reduction Delayed product differentiation is the key to this redesign Aggregate forecasts are more accurate Forecast at the most aggregate/generic level possible Similarly, forecast at the most upstream of the supply chain (if possible) If possible, never use forecast information at the lower levels. At the lower levels, decisions should be based on actual demand
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Case Study#4: Magnitude of Supply Chain Costs

Example: The Apparel Supply Chains
Cost per Shirt Percent Saving
0%

Manufactur er Manufactur er

Distributor

Retailer

Customer Rs.527.20

Distributor

Retailer

Customer Rs.413.40

28%

Manufactur er

Distributor

Retailer

Customer Rs.204.50

62%

(c) R.Shankar (20104711)

LESSONS TO LEARN
Supply Chain involves many Supply Chain Partners. Cost management is very important in longer and complex Supply Chains. G-16: Disintermediation Leads to Cost Saving. May also result in reduction in Lead Time, and Lesser Inventory

Prof. Ravi Shankar (2011-12)

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Case Study#5: B2C@Dell Computers

Master Board Dell Assembly Plant

Direct Shipment

Hard disk

Website or Phone

Customer wants To buy computer

Customers Order

SRAM
Concept of Disintermediation in Dell Direct Supply Chain

On-line orders eliminate intermediary steps in the traditional ordering process, manufacturing policy can be altered by adopting assemble-to-order or make-to-order strategies
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LESSONS TO LEARN

G-17: Disintermediation Requires Some Form of Re-intermediation G-18: Technology Helps in Supply Chain Efficiency

Prof. Ravi Shankar (2011-12)

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Case Study#6: Supply Chain at Asian Paints

RM 600 SKUs, 350 Suppliers 75% Domestic, 25% Imported PM-300 SKUs, 140 Suppliers 5 Plants, 18 PC

6 Regional Distribution Centers

Depots (70 No) 70% volume Made to stock

Dealer(15000) 3000 SKUs

Export & Industrial Consumers (2000) Made to order

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Postponement in Practice

Dealer Tinting System

In factory they make Base/white" only Raw base sent to the dealers Customers choose their desired shades via computer systems at the dealer end Dealer mixes the desired base and the colorants with help of the DTS >2500 dealers have DTS
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LESSONS TO LEARN
Large Number of SKUs is Good for Customization but Poses Tremendous Pressure due to Difficulty in manageing Stock-outs and Pipeline Inventory G-19: Try to have a Generic Product as late as possible in the supply chain. Differentiate it into a customized one, preferably when demand penetrates the supply chain

Prof. Ravi Shankar (2011-12)

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Case Study#7: Benetton (A world leader in knitwear) Knitting Dyeing

Wool Plant in Castrette, near Treviso. Knitting Dyeing vats for the finished knitted product. division. Computerized knitting loom capable of automatically producing the most complex product (c) R. Shankar, IIT Delhi-2011-12 designs

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Case Study#8: Benetton Manufacturing Process Postponement

Old Sequence Purchase Yarn Dye Yarn Finish Yarn Knit Garment Parts Join Parts
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New Sequence Purchase Yarn Knit Garment Parts Join Parts Dye Garment is postponed Finish Garment
This process

LESSONS TO LEARN

G-20: Delayed Product Differentiation Helps in Reducing Safety Stock and thereby Supply Chain Cost. G-21: Process and/or Product Redesign may help supply chain operations

Prof. Ravi Shankar (2011-12)

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COURSE REVISION & OVERVIEW (1)

Inventory: Basics, EOQ etc.

RISK POOLING CASE STUDY

DESIGN OF LEAN SUPPLY CHAINS JIT SYSTEMS TOYOTA CASE STUDY (THROUGH VIDEO) NETWORK DESIGN

OPTIMIZATION & HEURISTICS IN SC DESIGN LEARNED & USED SOFTWARE (TUTORIAL MODE)
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Case Study#9: Logistics Planning in Auto Supply Chains

Source of Schematic: http://www.engr.uky.edu/me/iaes/group_press/chuah.pdf

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LESSONS TO LEARN
G-22: Always Look For Opportunities of Economic of Scale, Like FTL as compared to LTL G-23: Outsource your non core-competency area to a Reliable supply chain partner, like 3PL/4PL etc.

Prof. Ravi Shankar (2011-12)

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COURSE REVISION & OVERVIEW(2)

BULLWHIP EFFECT

P&G case study SUPPLY CHAIN GAME BEER DISTRIBUTION GAME (HW) IN CD

60

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Case Study#10: P&G: What Management Gets...

Production Plan

Order Size

Customer Demand

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

LESSONS TO LEARN
G-24: Bullwhip Effect Reduces if You Use CPFR (Collaborative planning Forecasting & Replenishment) G-25: Bullwhip Effect Reduces if You Control Price Fluctuations G-26: Bullwhip Effect Reduces if You Compress Lead Time

Prof. Ravi Shankar (2011-12)

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SC Game: Watch how Bullwhip effect has aggravated

Week

Manufacturer Prod 100 60 Stock 100 100 100 80 80 100 100 95 95

Distributor Prod 100 80 100 95 95 Stock 100 100 100 90 90 95 95 95 95 95

Retailer Prod 100 90 95 95 95 Stock 100 100 100 95 95 95 95 95 95 95

Demand

1 2 3 4 5
95

100 95 95 95 95

120 90 95

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COURSE REVISION & OVERVIEW(2)

DISTRIBUTION SYSTEM DESIGN

CROSS DOCKING, etc. Video: Safe Express MUMBAI DABBAWALLAH CASE STUDY (Some Discussion) Few examples

GLOBAL ISSUES IN SUPPLY CHAIN

Strategic Partnership in SUPPLY CHAIN

3PL SR Partnership Dealer network

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COURSE REVISION & OVERVIEW(3)

CONDUCTED TOURS OF SUPPLY CHAIN

TOYOTA: VENDOR DEVELOPMENT, GLOBAL ISSUES VIDEO OF Mr. Maitra, SCM Head Maruti MANY EXAMPLES

IT-ENABLED SUPPLY CHAINS: FOCUS ON EMERGING TRENS

RFID CLOUD COMPUTING, etc.

BALANCE SCORECARD APPROACH

PERFORMANCE MANAGEMENT OF SUPPLY CHAINS

Reverse Logistics & Green Supply Chains

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Cross-docking

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RFID and Other IT Tools in Supply Chains

VMI in Use

In the Factory

At customer sites
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LESSONS TO LEARN
G-27: VMI Helps Supply Chain to Become Lean G-28: POS Information is Key to Supply Chain Planning & Replenishment G-29: Cross Docking is an Effective Distribution Strategy as it Helps in Shorter Lead-time, Lesser Material handling and Lower Cost of Distribution G-30: Effectiveness of VMI requires Coordination between Supply Chain Partners G-31: Use POS Technology and Communication Network to Facilitate the Coordination and 69 Synchronization in aProf. Ravi Shankar Chain Supply (2011-12)

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Case Study#11: Nano Plant

LESSONS TO LEARN

G-32: Locate your Vendor Nearby G-33: Just-in-time (JIT) and Kaizen (continuous Improvement) must go hand-in-hand G-34: Develop Strategic Partnership in your Supply Chain G-35: Focus on Vendor Development G-36: Rationalize the Vendor-base G-37: Money lies in Cost cutting and Innovative Product/Process/Supply-chain Design G-38: Learn to manage the Supply Chain Risks (There are many)
Prof. Ravi Shankar (2011-12) 71

Case Study#12 RISK POOLING USING CENTRALISATION OF STOCKING

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Factory

Central warehouse Market one

Market two

LESSONS TO LEARN

G-39: If You Pool Risks in a Supply Chain (say, by Centralised Warehousing), Countermeasure to Cope up with Risk (say, Safety Stock to Maintain a Service Level under Demand Uncertainty) will Go Down as Compared to Disaggregated Risks (say, Decentralised Warehouses)

Prof. Ravi Shankar (2011-12)

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Case Study#13: FCI

The Food Corporation of India was set up on 14th Jan. 1965 by an Act of Parliament. Its Primary Objectives are as follows :

To provide the farmers remunerative prices. To make foodgrains available at reasonable prices, particularly to the vulnerable section of the society and To maintain buffer stocks as a measure of Food Security To intervene in the market for price stabilization.

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LESSONS TO LEARN
==Many Vital Supply Chains are Worst Managed ==Warehousing often a Weak Link == Supply Chain Management is Full of Opportunities

G-40: Reduced Supply Chain Wastages Makes it Effective G-41: Food Security is Linked to Effective Supply Chain Management G-42: Every Supply Chain is Different=> Manage it to its Merit
Prof. Ravi Shankar (2011-12) 76

Supply Chain Integration

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Push-Pull Supply Chains

The Supply Chain Time Line

Suppliers

Customers

PUSH STRATEGY Low Uncertainty

PULL STRATEGY High Uncertainty Push-Pull Boundary

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Characteristics and Skills

Raw Material Push Low Uncertainty Long Lead Times Cost Minimization Resource Allocation Pull High Uncertainty Short Cycle Times Service Level Responsiveness
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Customers

Two key de-coupling points

Forecast Driven
Less uncertainty due to enrichment of undistorted Material data

Order Driven

Push

de-coupling point

Pull Market sales

Factory Information de-coupling point

Assembler

Finished goods Stock

Retailer

Direct market sales information

Source: Mason-Jones & Towill

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Supply Chain at Asian Paints

RM 600 SKUs, 350 Suppliers 75% Domestic, 25% Imported PM-300 SKUs, 140 Suppliers 5 Plants, 18 PC

6 Regional Distribution Centers

Depots (70 No) 70% volume Made to stock

Dealer(15000) 3000 SKUs

Export & Industrial Consumers (2000) Made to order

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Case Study#14 Emergency Supply Chain

Gujarat Earthquake on 26 January 2001

After Gujarat Earthquake on 26 January 2001

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LESSONS TO LEARN
Emergency Supply Chain is a Different Ball Game
G-43: Too much may be too Bad in Emergency Supply Chains

G-44: Alignment of Functional Strategy and Coordination are keys to success of a Emergency Supply Chain
G-45: Quick Response Would Lead to Effective Supply Chains
Prof. Ravi Shankar (2011-12) 85

REVERSE LOGISTICS

SUPPLY CHAIN BUSINESS PROCESSES

Companies are linked through a common set of processes cutting across the supply chain
Information Flow
Tier 2 Supplier Tier 1 Supplier Purchasing Production Manufacturer Logistics Customer Marketing & Sales Finance Consumer

PRODUCT FLOW
R&D

Supply Chain Business Processes

CUSTOMER RELATIONSHIP MANAGEMENT CUSTOMER SERVICE MANAGEMENT DEMAND MANAGEMENT ORDER FULFILLMENT MANUFACTURING FLOW MANAGEMENT DEMAND MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT PRODUCT DEVELOPMENT AND COMMERCIALIZATION

RETURNS MANAGEMENT

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Reverse Logistics Defined

The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, inprocess inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or of proper disposal.
(Source: Rogers and Tibben-Lembke, 1999).

Forward and reverse logistics

Forward Logistics Design

Supply

Production

Distribution

Use

Disassembly Repair Refurbishment Remanufacturing Incineration Recycling Disposal Landfill Reuse Sorting/Testing Collection

Reverse Logistics

Green supply chain

LOW CARBON SUPPLY CHAIN

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What is GSCM ?
Green supply chain management (GSCM) = (green purchasing + green manufacturing / materials management + green distribution / marketing + reverse logistics)
Plan
P2 Plan Source P1 Plan Supply Chain P3 Plan Make P4 Plan Deliver P5 Plan Returns

Suppliers

Source
S 1 Source Stocked Products

Make
M1 Make-to-Stock

Deliver
D1 Deliver S tocked Products

S2 Source MTO Products

M2 Make-to-Order

D2 Deliver MTO Products

S3 Source ETO Products

M3 E ngineer-to-Order

D3 Deliver ETO Product s

Return Source

Return Deliver

Customers

Environmental Management

Enable

Supply Chain Management

Green Supply Chain Management

The 5ecos PDSL model

Carbon emission in business operation

Emission of business operation

Direct Emission

Indirect Emission

Scope 1
Scope 2
Generation of Electricity heat or steam Manufacturi ng process Transportation of material product or employee

Scope 3

Purchase Electricity
Transportation of 3PL

Waste Disposal

Leased asset

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Reverse logistics operations in a leading automobile company

Warranty returns Customer A1 Proprietary items Customer

Process scrap Casting vendors Scrap Metal scrap Metal Mills Recycling Scrap Dealers Disposal Landfill Plastics Incinerator

Disposa l

Material flow Information flow

STUDENTS CASES? TERM PAPERS COVERED

Maruti Blood SC PDS , etc

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Achieving the 21st Century Supply Chain: Seven More Areas of Opportunity
1 Use of low cost sources 3 Focused manufacturing strategies 5 Globally aligned operations 6 Built in agility

2 Creative use of strategic partnerships OEMs, Outsourcing, sub contracting

Multiple Channels

4 Distribution, logistic Optimisation

7 Industry wide solutions

THE GOAL IS TO CREATE AN AGILE BORDERLESS SUPPLY CHAIN THAT IS BASED ON Prof. Ravi Shankar (2011-12) 96 LOWEST COST ECONOMICS

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STUDENTS ASSIGNMENTS SUBMIT Term Paper in WORD Case Study PPT (Group) Assignment (Caselets) Provide Reference Material in a folder
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STUDENTS TERM PROJECT

PRACTICAL FOCUS TEMPLET PROVIDED in the class (Like a paper) Else use MARUTI format AUTHORED BY ME EMBEDDED WITH THEORY & PRACTICE BOTH PPT + WORD FILE (TO BE SUBMITTED FOR EVALUATION)
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WHERE TO GO FROM THIS POINT APPLY CONCEPTS AT YOUR WORK PLACE LEARN NEW CASES & APPLICATIONS BE IN TOUCH AND FEEL FREE TO SEEK ADVISE Read text book once more
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CHAPTER 1 Introduction to the Field

Tata McGraw

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