SUPPLY CHAIN MANAGEMENT

HEMANT PUROHIT

SUPPLY CHAIN
A supply chain management encompasses all the activities associated with: Moving the goods from the raw materials stage through to the end user: Supply chain management (SCM) is : The integration of business processes from end user through original suppliers that provides products , services , & information

Logistics

This is one part of the Supply Chain & LOGISTICS refers to designing & managing all activities primarily : transportation inventory warehousing communications

& to make materials available for manufacturing & to offer finished products to customers when & in condition they are needed
There are 2 flows for logistics: Physical supply or those flows that provide raw materials , components, & supplies to the production process Flows that deliver the completed product to customers & channel intermediaries

Supply Chain
Supply Chain includes: Firms that process raw materials Firms that make components Firms engaged in wholesaling Firms engaged in transportation , warehousing, information processing, material handling Supply chain functions include: Sourcing, Procurement, Product design, Production scheduling , Manufacturing, Order Processing, Inventory management , materials handling, warehousing, & customer service

Partnerships In SCM
Partnerships: The Critical Ingredient
Why Are Good Partnerships Critical? To create good atmosphere of the business To integrate & better the activities across the supply chain through close working relationships To share sensitive , proprietary information about customers , actual demand, point-of-sale transactions,& corporate strategic plans SCM involves a lot of joint planning , communications, creating a team of personnel that cut across functional & firm boundaries to coordinate the movement of product to market Integration of internal & external components of the supply chain management This also mitigates the ill effects of non-integrated approaches which make managing a product , information flows quite expensive & time consuming Through non-integrated approach transaction costs & transport costs increase & hence better partnerships are required for a better integrated approach which in turn is critical

 Avnet A huge electronics distributor Avnet developed a program to integrate its supply chain processes with those of a major manufacturer supplier & with the major component supplier to the manufacturer Participants shared demand & production information & raised on time delivery from 80% to 100% of all orders, increased inventory turnover by a factor of five & tripled the return of materials

Supply Chain Management : A Tool For Competitive Advantage

WHY DO the MANAGEMENT of Supply Chain? Reduce operating costs, Improving asset productivity & compressing order cycle time Supply Chain Management Tools SCM is both a boundary & function spanning endeavor which affirms the reduction of waste , time compression , flexible response & unit cost reduction

Supply Chain Management : A Tool For Competitive Advantage

Supply Chain management creates competitive advantages for companies by typically excelling in: Improving asset productivity, Compressing order cycle time , Superior delivery, Value added services as defined by the customers, improves Cash-to-cash cycle time Less standing inventory On-time delivery performance

Supply Chain Management Goals

It is a Boundary & Function spanning endeavor Effective goals are achieved by intra firm , inter firm functional integration , sharing & cooperation Each firm has to tear down functional silos , foster proper integration of marketing , production, procurement, sales & logistics Actions, systems, & processes among all supply chain participants must be integrated & coordinated. Supply is taken to achieve four major goals:

 Waste Reduction: Minimize duplication , harmonize operations & systems & enhancing quality Time Compression: Reduce order-to -delivery cycle time so that everyone in the supply chain is able to operate more efficiently Flexible response: Develop flexible response in order handling , including how orders are handled , product variety , order configuration , order size & several order dimensions where the customers requirements can be met directly

 Unit Cost Reduction: Recognize level of performance the customer desires & then minimize the costs of providing that service level Benefits to the final customer: How much is the customer realizing these benefits & assessing what may be preventing them for doing so Financial Benefits Perspective Information & Technology Drivers www.ebscohost.com

Successfully Applying The Supply Chain Management Approach The nature of the firms supply chain efforts often depend on the nature of the demand for its products Successful Supply Chain Practices:
Partnering environment Supply chain partnerships Integrated operations across the supply chain Timely information sharing Delivering value-added to the customer

Logistics as the critical element in supply chain management Distinguishing between logistics & supply chain management: SCM is focusing on all business processes Logistics focuses on moving & storing activities SCM is broader integrative discipline that includes several business processes including logistics Deliver the product on time & in perfect condition & in a low cost manner Managing flows: The business marketing manager focuses attention on the performance of all participants in the supply chain Form relationships with the vendors, transportation suppliers, warehousing companies, & distributors to enhance timely delivery of finished product to the ultimate user at the lowest possible cost

The Strategic Role Of Logistics: Logistics role today is seen by many companies as a strategic weapon because of its tremendous effect on a customers operation This is a marketing tool for gaining & maintaining a competitive superiority Logistics does create a superior economic value Sales-Marketing-Logistics Integration: Development of logistics program happens to be offered to the customer Sales & Marketing work in coordination for providing solutions on logistics to the customer problems Just-in time systems: Under this principle the suppliers carefully coordinate the deliveries with the manufacturers production schedule often delivering products just hours before they are used hence eliminate waste of all kinds from the production process by requiring the delivery of the specified product at the specific time & the exact quantity needed Just-in-time relationships: Supplier have to meet JIT requirements to establish a JIT relationship & hence for their business to grow

Elements of a logistical systems: Customer Service Order Processing Logisitics Communications Transportation Warehousing Inventory Control Packaging Materials Handling Production Planning Plant & Wareshouse location

Total Cost approach 2 costs are important: Total distribution cost Level of logistical service provided to customers Manage these two logistical costs & try to make a profit better

CUSTOMER SERVICE Customer Service Order Processing Logistics Communications Transportations Warehousing Inventory Control Packaging Materials handling

Production planning Plant & Warehouse location

Calculating Logistics Cost: Activity based costing: Total Cost Of Ownership

 Business To Business Logistical Service: Suppliers with best delivery service are preferred by the buyers as good logistics means higher profit & higher market share Good logistical service is important for an organizational buyer Logistics service impacts on the customer Logistical Facilities Transportation Inventory Management Third Party Logistics

Business To Business Logistical Management: The elements of logistics strategy are part of a system & as such each affects every other element. Proper focus is the total cost review. All the below areas are so interrelated that decision in one are influences others: Logistical Facilities: Put warehouses in such a way that increases the business marketers opportunity to increase the level of delivery service to buyers , reduce transportation, costs or both. At times companies outsource their warehousing capabilities to a third party Servicing other supply chain members: Outsourcing the warehousing function

 Transportation: This is the single largest logistical expense . This typically involves evaluating & selecting both a mode of transportation-rail, truck , water, air & the individual carrier that will ensure best performance at the lower cost Inventory Management This is like buffer management & is required when : Production & demand are not perfectly matched ; operating deficiencies in the logistical system often result in product unavailability ; business customers cannot predict the product needs with certainity Today level of inventory has to be minimum in rapidly changing market which wants it to have a better inventory Third Party Logistics: These are firms which are mostly outside companies with functions being performed like transportation , warehousing, information processing