Cost effective supply chain management

NC Sriraman June 2018 Batch

ABMTC
 Introduction
 Supply Chain Management can be defined as the
management of flow of products and services, which
begins from the origin of products and ends at the
product’s consumption. It also comprises movement and
storage of raw materials that are involved in work in
progress, inventory and fully furnished goods
 Need for a systematic Approach "cost to serve"
 Why the cost differs from different type of services
 Understanding the Cost to Serve
 Cost Impact factor: Customer
Service
The customer requirements should shape up the supply chain strategy and its
structure. This is a direct application of Market principles: provide customers
with what ithey need and avoid adding more cost to the product or the service
Example: 1 Amazon prime provides next day delivery to its prime customers.
This does not mean all the customers need to be services by delivering the
product next day ( Prime customers pay a premium to avail the next day
service)
Example 2: if the company decides to ship items for each part of India on one
day e.g.: Monday north customers, Tuesday East India Customers etc.. Such
strategy will kill the market
Example 3 to avoid customer calling and complaining give freebees . This will
amount to additional cost to the company and there by eat the profit of the
operations
 Supply Chain Strategy
 The mission of the Supply chain strategy should be OBJECTIVES
should drive the strategy and strategy should drive the tactics and not
reverse.
 Once we have a clear understanding of our customers' needs, we can
move on to defining a supply chain strategy that will achieve our
business objectives while delivering on our customer service promise.

A supply chain strategy is a living thing. It must be adaptable and change

to meet evolving business and customer needs, and it needs to be
flexible enough (or at least encourage sufficient flexibility) to drive
optimal tactical and operational decisions. Yet whatever phase it is in,
a supply chain strategy also needs to be clear and precise.
Sales and Operations Planning
We must Get our process right first and then define the systems after.
Sales and operations planning is the basic document which brings the
multi departments of the company together in one roof and binding
them together for the common goal.
S&OP is a simple and straight forward concept but not an easy one
especially when you have multiple product portfolios like AMAZON
or FLIPCART etc. following check list will tell us if there are any
issue with the S&OP
What is the result on cost saving by good S&OP: The cost savings
could be improved availability of the products and services to
customers, Less fire fighting and urgent shipment costs, Improved
sales and profit and meet the market demand.
 Supply Chain Network Design
 AIM is to keep the cost low and irmpvoe the reliability of supply by right
design network and minimize product handling
Establish customer service offers
– Customer locations and lead time
– Service expectations
2. Establish supply points/lead times
3. Identify current network performance
a. . Facility costs
b. Inventory costs
c. Transport costs (inbound and outbound)
d. Service performance
4. Test and quantify alternatives for least-cost networks
5. Consider network transformation, if the benefit will be large enough
 Outsourcing
Why Outsourcing?
The service being outsourced is not core to the business and a “distraction” for
management.
Operations are rapidly expanding, and outsourcing provides an effective means of
quickly accessing more space, technology, or other resources.
The business requires a degree of flexibility in resourcing and a more variable cost
structure, either in resource numbers or type.
The business needs access to specialized skills, equipment, or technology and does
not want to invest in those assets directly.
A successful outsourcing relationship is characterized by both parties getting
what they want through a healthy and proactive partnership
 Technology impact on cost
The role of Technology is very key for any CRM, whether it is the
CRM software and tools or the automation on asset handling by
Barcode reader or RFID asset tagging and tracking the goods all the
way in the supply chain
Cost savings on such technology revolution is very high and it is order
of over 20% on increase in profitability
Asset Utilization: Get more productivity out of
lesser assets

As a general rule, the more assets you can use

within any 24-hour period, the better.
Underutilized assets, such as vehicle fleets,
facilities, or inventory, mean inefficiency and poor
return on investment.
Outsourcing results in perfect saving for the cost
of the goods handled and forms an important
element in SCM.
 Performance Measurement
KPIs are recognized in our organization as “meaningful
and relevant.”
KPIs are tracked and understood across functional
departments.
KPIs are used to focus on and drive performance
improvement.
And last—but by no means least—supply chain
performance is improving!
Improved supply chain performance means that we get a
better return on our investment but for less money.
 Conclusion

Very key on Cost reduction with out

optimizing the service quality
Success of the organization depends on the
Optimization of the SCM Cost