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Essentials of Supply Chain

Management

Mrs. Shrutika Deshmukh -Patil


Significance and need of Supply Chain

Mrs. Shrutika Deshmukh -Patil


Cost +Profit =Price and Profit=Price -Cost

Mrs. Shrutika Deshmukh -Patil


FAMOUS SUPPLY CHAINS

• Ford Supply Chain

• Toyota Supply Chain

• Dell supply Chain

Mrs. Shrutika Deshmukh -Patil


COMPONENTS OF SUPPLY CHAIN

MANUFACTURER WHOLESALER RETAILER CUSTOMER

MANUFACTURER RETAILER CUSTOMER

MANUFACTURER CUSTOMER

Mrs. Shrutika Deshmukh -Patil


Flows in Supply Chain Management

• Information Flow – independent

• Product Flow - Supplier to Customer

• Cash Flow - Opposite to that of Product


Flow

Mrs. Shrutika Deshmukh -Patil


Supply Chain Value :

Supply Chain Value :


The Reasoning to compare “ Final product
worth to the customer and its effort put in
the supply chain “

Mrs. Shrutika Deshmukh -Patil


Challenges in Supply Chain Management
• Availability of information to all components in a
supply chain

• Coordination amongst all Supply chain


components

• Funds management

• Bull Whip Effect

• Production Line Imbalance leading to sub optimal


batch sizes
Mrs. Shrutika Deshmukh -Patil
Materials Management

• Avoid situations like Under stock and


Overstock

• Procure Best Quality Materials

• Cost effective purchase

• Strong collaborative Supplier Management


system

Mrs. Shrutika Deshmukh -Patil


Materials Management
• Material Selection –Material Value Analysis
• Planning for material requirement
• Vendor Selection
• Cost Management
• Receiving and inspection
• Material Handling and Storing
• Material Disposal for production
• Inventory Management

Mrs. Shrutika Deshmukh -Patil


Value Chain :Linking Supply Chain Units
to the Business Strategy

INFORMATION TECHNOLOGY

HUMAN RESOURCES

ACCOUNTING

FINANCE –Funding

NEW PRODUCT MARKETING AND


DEVELOPMENT OPERATIONS LOGISTICS AFTER SERVICES
SALES

Mrs. Shrutika Deshmukh -Patil


SUPPLY CHAIN ANALYTICS
DATA VISIBILTY – Logistics Smarter

Managing volatility – Inventory Management

Reducing fluctuations in cost

Mrs. Shrutika Deshmukh -Patil


Customer Service Measure –
Lecture 2

Mrs. Shrutika Deshmukh -Patil


Who is a customer ??

Mrs. Shrutika Deshmukh -Patil


Customer Service Measure
• Order Lead time
• Customer Delivery Metrics
• Customer Order Path
• Customer Service and Satisfaction Metrics
• Customer Query time
• Customer perception of Service

Mrs. Shrutika Deshmukh -Patil


Customer Order Path

• Consumer Journey Maps

Mrs. Shrutika Deshmukh -Patil


• Complete Focus On What the Customer
Needs – Address the Pain Points
• Cross Functional Teams
• Encourage All Ideas
• Rapid Prototyping
• Customer Feedbacks
• Iterations in Product

• ONLY POSSIBLE IF WE MOVE OUT OF


OUR COMFORTABLE OFFICES AND GO
THE WORKPLACE

Mrs. Shrutika Deshmukh -Patil


ONLY POSSIBLE IF WE MOVE OUT OF OUR
COMFORTABLE OFFICES AND GO THE
WORKPLACE

Mrs. Shrutika Deshmukh -Patil


Customer Order Path :

MANUFACTURER WHOLESALER RETAILER CUSTOMER

MANUFACTURER RETAILER CUSTOMER

MANUFACTURER CUSTOMER

Mrs. Shrutika Deshmukh -Patil


Lead time :
The time frame between the customer order till
the time the product actually reaches the
customer.

Takt Time :
The rate at which organizations should carry
out their operations in order to meet the
customer demand

Mrs. Shrutika Deshmukh -Patil


Customer Service Measure and
Customer Satisfaction matrix

Only what gets measured can be improved !!!-


Peter Drucker

Mrs. Shrutika Deshmukh -Patil


GOOGLE FORMS C-SAT

Mrs. Shrutika Deshmukh -Patil


NET Promoter score –
CUSTOMER RECOMMENDATION

DETRACTORS NEUTRAL PROMOTERS

Mrs. Shrutika Deshmukh -Patil


NPS = PROMOTERS –DETRACTORS +-
NEUTRALS

Mrs. Shrutika Deshmukh -Patil


CUSTOMERY QUERY TIME

Time required to respond to a customer after


they have raised a query, complaint ,issue or
given a feedback

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Mrs. Shrutika Deshmukh -Patil
First Response Time
FRT =(Total Available time )/(Total requests
handled)

Mrs. Shrutika Deshmukh -Patil


Lecture 3 - Supply Chain
Management Performance
Measures

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Mrs. Shrutika Deshmukh -Patil
Performance in supply chain is defined as :

• Doing More ,With Less Resources, to get


the Best Output in the shortest possible
Time

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Target Market and Customer
Segments
• KIDS (3-11 Years ) –Happy Meals and Birthday
party area’s

• Families – Drive Thru

• Teenage and Youth ( 13 to 29) – MC Café , MC


Delivery

Mrs. Shrutika Deshmukh -Patil


Analysis of Customer
Requirements
• Good Quality – Freshness, taste , hygiene (Veg –
Non Veg)

• Delivery – Quick Self Service , Drive thru, (Grab


and Go approach)

• Cost – Target group { Dispensable Income


Group} but highly economic for families, Teenage
and Youth

• Availability – Global, Across the country and


highways Mrs. Shrutika Deshmukh -Patil
Performance Measurement
Performance Measurement of Supply Chain :

Mapping of the customer requirements and


translating them into Key Performing Indices
of the Supply Chain

Mrs. Shrutika Deshmukh -Patil


Parameters of Supply Chain
Measurement

Resource Level

Cost Productivity

Mrs. Shrutika Deshmukh -Patil


Parameters of Supply Chain
Measurement
Process Level

Velocity Quality

Mrs. Shrutika Deshmukh -Patil


Performance Metrics for
Performance Measurement
1. Productivity Matrix

2. Financial Matrix

3. Quality Matrix

4. Velocity Matrix

Mrs. Shrutika Deshmukh -Patil


Productivity Matrix

• WIP Count

• OEE (Overall Equipment Effectiveness)

• Value added time ratio

• Throughput Rate

Mrs. Shrutika Deshmukh -Patil


Financial Matrix

• Cash to Cash Cycle


• Inventory Turnover Ratio
• ROI
• Gross Revenue
• Days Account Receivables

Mrs. Shrutika Deshmukh -Patil


Velocity Matrix
• Lead time Vs Takt time

• Orders fulfilled and shipped (OTIF)

• Average Days Late

• Order Picking Accuracy

• Rate of Return due to Logistic Damage

Mrs. Shrutika Deshmukh -Patil


Lecture 4 -
Warehousing and Inventory
Management (FSN ,ABC, VED)
,5s,Barcoding,RFID, EOQ

Mrs. Shrutika Deshmukh -Patil


Composition of Inventory

Inventory

Work in Finished
Raw Material
Progress Goods

Mrs. Shrutika Deshmukh -Patil


Inventory Maintenance

• Safety Stock

• Buffer Stock

• Economic Order Quantity

Mrs. Shrutika Deshmukh -Patil


1. Safety Stock
Replenishment Daily Consumption
Weekly Sales Volume
Expected Actual Variance
days
Week 1 500
6 11 5
Week 2 600
6 9 3
6 11 5 Week 3 700

6 5 -1 Week 4 750
6 4 -2
Demand = (2550/20) =127 units / day
Mean Variance = (10/5) =2

 Safety Stock = { Replenishment time * Daily


Consumption }
 {127*8 = 1016 units}

Mrs. Shrutika Deshmukh -Patil


Buffer Stock

• Supply > Demand

• Demand > Supply

Mrs. Shrutika Deshmukh -Patil


ABC Analysis , Pareto Analysis

Mrs. Shrutika Deshmukh -Patil


Class A Items Class B Items Class C Items

1. Very Strict Control Moderate Control Low Level of Control

2. No Safety Stocks Low Safety Stocks High Safety stocks

3.Maximum Frequency Monitoring Rare follow ups –


Monitoring Usually once a
qaurter
4. High Value Moderate Value Low Value (5%-10%)
Analysis(60%-80%) Analysis (15%-20%)

5.Lowest Quantity Moderate Quantity Highest Quantity


(10%- 20%) (20%-30%) (60%-80%)

Mrs. Shrutika Deshmukh -Patil


EOQ

Economic Order Quantity :

Mrs. Shrutika Deshmukh -Patil


Number of Duration of Inventory Produced at
Batch Changeover Changeover in the end of 16 hours
Size hours
( 1 changeover =
2 hours )

2 4 8 8

3 3 6 10

4 2 4 12

Comment : As Changeover increases the production decreases

Mrs. Shrutika Deshmukh -Patil


Number of Duration of Inventory
Batch Size Changeover Changeover in Produced at
hours the end of 16
( 1 changeover hours
= 2 hours )

2 5 5 11

3 4 4 12

4 3 3 13

Comment : As Changeover time decreases , the number of


changeovers in the specified duration increase and the production also
increases

Mrs. Shrutika Deshmukh -Patil


Barcodes , QR Codes, RFID

• Productivity improvement through Quick


Data Capturing

• Reduction in Human Error

• Stock Tallying

Mrs. Shrutika Deshmukh -Patil


EliminateQueuing
Count of Sales through a particular event

Cost saving of printing

Mrs. Shrutika Deshmukh -Patil


Share Location and information
for Tsunami Relief

Mrs. Shrutika Deshmukh -Patil


Track Nutritional intake and
reorder
Mrs. Shrutika Deshmukh -Patil
Warehousing and Inventory
https://www.thebalancesmb.com/definition-of-supply-chain-
management-2892749

https://www.magaya.com/News/PostId/167/the-6-degrees-of-
supply-chain-connections
https://www.sdcexec.com/home/article/10289786/global-focus-
supply-chain-management-in-japan
https://www.hays.co.jp/en/TheInsideStory/HAYS_1939485
http://www.supplychainquarterly.com/topics/Manufacturing/2016
1021-envisioning-scm-40the-view-from-japan/
https://martinroll.com/resources/articles/strategy/uniqlo-the-
strategy-behind-the-global-japanese-fast-fashion-retail-
brand/

Mrs. Shrutika Deshmukh -Patil


Lecture 5-
Internal Logistics and transportation ,Internal
material handling, Transportation, 3pl, 4pl,
speed of delivery, Modes ,Transportation
performance, costs and value measure

Mrs. Shrutika Deshmukh -Patil


Logistics

The science of obtaining, storing, and


distributing material ,product or service at a
place and in time.

Mrs. Shrutika Deshmukh -Patil


The 7 R’s of Logistics
• Right Product
• Right Quantity
• Right Condition
• Right Place
• Right Time
• Right Customer
• Right Price

Mrs. Shrutika Deshmukh -Patil


Strategies of Logistics
• Export Import Norms for Cost Benefits

• Warehouse location

• Transportation Mode

• Status indicator

Mrs. Shrutika Deshmukh -Patil


Categories of Internal Logistics
• 1PL

• 2PL

• 3PL

• 4PL

• 5PL
Mrs. Shrutika Deshmukh -Patil
I PL

Mrs. Shrutika Deshmukh -Patil


2 PL

Mrs. Shrutika Deshmukh -Patil


Guess the Organisation
• 200000 deliveries daily
• 5000 Employees
• Cheapest 2 PL logistic Delivery – INR 11 to INR 12
• No Strike in 120 Years (Since 1890)
• Zero Attrition Rate
• No Paperwork
• The Association got ISO for least error rate ,even
though material handling is 6 times per delivery
• Applauded by UK’s two most powerful Personalities’ –
Richard Branson , King Charles
• One of the few organizations in the world whose staff
was invited for the royal wedding of Prince Charles and
Meghan Merkel
Mrs. Shrutika Deshmukh -Patil
Salient Features
• No technology
• Free Value Added Service

Mrs. Shrutika Deshmukh -Patil


3PL
• TRANSPORT
• STORAGE
• PACKAGING
• CUSTOM
• INVENTORY MAMAGEMENT

Operators ensure selection of the means of


transport , but logistic department of client is
responsible for the design of supply chain

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Inventory Model
Amazon Prime Losses :

20,000 Km in < 2 days

Cost by air + Last mile delivery is INR 50

Cost by Land is 24

Mrs. Shrutika Deshmukh -Patil


4 PL

Insane Logistics of Formula one

Mrs. Shrutika Deshmukh -Patil


Teams are Businesses and Businesses that
are expected to make a lot of money

Current Evaluation $1.3 Billion

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Right Vehicle Component at the right time,
place and quantity

Mrs. Shrutika Deshmukh -Patil


4 Pl Logistic

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Case

Mrs. Shrutika Deshmukh -Patil


Lecture 6 – Just in Time , Kanban, Vendor
Management

Mrs. Shrutika Deshmukh -Patil


Just In Time :

Production on the signal of demand in a way


that we produce exactly what is needed,
when it is needed and by utilizing only how
much is needed

Mrs. Shrutika Deshmukh -Patil


Just in Time works when :

• Total Quality Management

• Standardization and Process Control

• Quick response to demand by making small


batches

• Eliminating Surprise

Mrs. Shrutika Deshmukh -Patil


JIT’s Limitation:
• Fixed BOM
• Small Product Lines
• Homogenized demand
• Vendor based proximity and priority
• Payables = Receivables
• 05/06/2018 08/06/2018
05/07/2018 08/07/2018

Mrs. Shrutika Deshmukh -Patil


KANBAN :

Signboard or Sign

Authority for production or movement of items

Mrs. Shrutika Deshmukh -Patil


Philosophy
The Organisation cannot bare the waste of
overproduction as there is a cash crunch.

So – We make only WHA T is needed and WHEN it is


needed.

Mrs. Shrutika Deshmukh -Patil


Use of Kanban Card
• Sets Limit to Production – No part can move
or be produced without KANBAN

• Makes Abnormality visible

Mrs. Shrutika Deshmukh -Patil


WITHDRAWL KANBAN

 To Move Goods from one place to the


other

Mrs. Shrutika Deshmukh -Patil


PRODUCTION KANBAN
 Signal to authorize production of items that
have been consumed by the consumer

 MAKE CARDS

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
Lecture 7-8

SIPOC Model, Supplier Analysis ,Inventory


Control and Maintenance ,Pareto Analysis
Live Case Brewery

Mrs. Shrutika Deshmukh -Patil


Lecture 7 -8
Impact on Cost : JIT V/s Just in Case

Mrs. Shrutika Deshmukh -Patil


Just In Time :

Production on the signal of demand in a way


that we produce exactly what is needed,
when it is needed and by utilizing only how
much is needed

Mrs. Shrutika Deshmukh -Patil


JIT’s Limitation:
• Fixed BOM
• Small Product Lines
• Homogenized demand
• Vendor based proximity and priority
• Payables = Receivables
• 05/06/2018 08/06/2018
05/07/2018 08/07/2018

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
M STARCH
TO SUGAR
A
L
T

Mrs. Shrutika Deshmukh -Patil


Mrs. Shrutika Deshmukh -Patil
SIPOC
SUPPLIER INPUT PROCESS OUTPUT CUSTOMER
Barley- Material – Milling Mash Mashing Process
• ABS Supplier • Barley
• Hoffmans • Hops
Hops – • Yeast
• Rochester inc • Water
• Copon inc • Spices
Yeast
• Zeston co -op
Malt
• Yelton inc

Endertron Man – Mash Storing Wort Fermenting Process


• Machine
operators
• Quality and
Flavoring
Manager

• Wilson Pneumo Machine – Fermentation • Ale Bottling Process


• Rubicon • Mill • Lager
• Masher • Beer
• Filter
• Boiler
• Clarifier
• Bottling

Method: Bottling Final Product Customer


• Process Industry

Mrs. Shrutika Deshmukh -Patil


Forecasting in Supply Chain
Prediction used for planning the best
optimization of resources, making strategies
so that the customer is served well
• Avoid Shortages to maintain Customer
Satisfaction and

• Avoid excess consumption to pass the cost


benefit to the customer

Mrs. Shrutika Deshmukh -Patil


Forecast are always WRONG

• Expected value
• Level of error

Mrs. Shrutika Deshmukh -Patil


Forecast

• Time Series

• Bullwhip

• Multiple Linear regression

Mrs. Shrutika Deshmukh -Patil


Developing Supply Chain Strategy

Mrs. Shrutika Deshmukh -Patil


Variables that can impact a
Supply Chain

• Variation in Quantity
• Lead time
• Variety
• Number of Channels
• Rate of innovation
• Required service levels

Mrs. Shrutika Deshmukh -Patil


Spectrum of implied demand
uncertainty
Highly unpredictable
Predictable Supply Demand and Supply
and Demand  Make huge profits

 Cannot make huge  Forecast error


profits around 40-100%
 Forecast error <  Stock outs are quite
10% common 10-40%
 Stock outs are rare

Mix of certain +
Uncertain demand

 Make reasonable
profit
 Forecast error 10-
20 %
 Stock outs 2-5%

Mrs. Shrutika Deshmukh -Patil


Cost Responsiveness Efficiency
Frontier
Responsiveness

High

Low

High Efficiency
Low

Mrs. Shrutika Deshmukh -Patil


Highly Somewhat Somewhat Highly
Efficient efficient responsive responsive

Mrs. Shrutika Deshmukh -Patil


Responsivenes
s in Supply
Chain

Responsivenes
s Spectrum

Efficiency in
Supply Chain

Certainty in Certainty Uncertainty


Demand +Uncertainty

Mrs. Shrutika Deshmukh -Patil


Time Value Analysis in Supply
Chain
• Discount Factor = 1/(1+K)

• NPV = Present Value + Discounted Rate of


all values

Mrs. Shrutika Deshmukh -Patil


Decision Tree
• Requirement : 1000 Sq Ft space for 1000
units
• Current Demand : 100,000per annum
• Binomial Uncertainty: Demand can go up
and down by 20% with a probability of 0.5
• Lease Price : 1.00 per Sq Ft
• Spot Price: 1.20 per Sq Ft
• Spot price can go up and down by 10% with
a probability of 0.5
• Revenue is 1.22 per unit of demand
• Discounting Factor =10%
Mrs. Shrutika Deshmukh -Patil
Monte Carlo Simulation

Simulation is a process of designing a model of


a real system and conducting experiments
with the model for the purpose of
understanding the behavior

Mrs. Shrutika Deshmukh -Patil


Steps involved

• Establish Probability Distribution


• Cumulative Probability distribution
• Setting random number interval
• Generating random number intervals

Mrs. Shrutika Deshmukh -Patil


• Customer services are being scheduled at
an interval of 30 minutes

Category Time Required No of Patients

FILLING 45 MIN 40

CROWN 60 MIN 15

CLEANING 15 MIN 15

EXTRACTING 45 MIN 10

CHECK UP 15 MIN 20

Simulate for 4 hours

Mrs. Shrutika Deshmukh -Patil


Probability = (Favorable Outcome/Total
Outcome)

Favorable outcome = No of Patients /category

Mrs. Shrutika Deshmukh -Patil


Category Time No of Patients Probability Cumulative Prob Distribution of Ranges
Required

FILLING 45 MIN 40 0.4 0.4 0-39

CROWN 60 MIN 15 0.15 0.55 40-54

CLEANING 15 MIN 15 0.15 0.70 55-69

EXTRACTIN 45 MIN 10 0.10 0.8 70-79


G

CHECK UP 15 MIN 20 0.20 1.00 80-99

Simulate for
4 hours

Mrs. Shrutika Deshmukh -Patil


Patient Random Category Patient Service Duration Service end Waiting
number Arrival Start

8:00 40 Crown 8:00 8:00 60 9:00 0

8:30 82 Check up 8:30 9:00 15 9:15 35

9:00 11 Filling 9:00 9:15 45 10:00 15

9:30 34 Filling 9:30 10:00 45 10:45 30

10:00 25 Filling 10:00 10:45 45 11:30 45

10:30 66 Cleaning 10:30 11:30 15 11:45 60

11:00 17 Filling 11:00 11:45 45 12:30 45

11:30 79 Extracting 11:30 12.30 45 1:15 60

Mrs. Shrutika Deshmukh -Patil

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