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Supply Chain Management And Service Supply Relationship

Submitted to: Prof. Bawa Submitted By: Group 5

What is SCM?

Supply Chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage, to the end user .

Typical Supply chain:

Different processes of SCM:

- Raw materials supply - Production management -Transportation - Inventory management - Information system management - Order processing - Material handling - Customer management

Customers Retailers

Distribution Centers

Assembly/ Mfg. 1st Tier Suppliers 1st Tier Suppliers

2nd Tier Suppliers

2nd Tier Suppliers

2nd Tier Suppliers

Components of Supply chain :


Supplier: Source of raw materials, component parts, semi manufactured products and other items that occur early in the supply chainunfinished or unsuppliable products. Manufacturers: Makers of products. suppliers produce components or sub assemblies, while manufacturers perform the task of final assembly or product integration.

Distributers: Responsible for the storing and handling the materials at receiving docks, warehouses and retail outlets. Retailers: These are the manufacturers customers; The stores that buy the actual products. Consumers: The person who actually buys the product for consumption.

Decision Variables in Supply Chain Management : y Location: Of facilities and sourcing points

Production: what to produce in which facilities Inventory: how much to order, when to order, safety stocks Transportation: mode of transport, shipment size, routing, and scheduling

Vertical Integration
y y

Choosing between making or buying an item Developing the ability to produce goods or services that are previously purchased. It can take the form of forward or backward integration









Bullwhip Effect


Initial Supplier

Final Customer

A problem frequently observed in an Unmanaged supply chain is the Bullwhip effect .It is defined as an oscillation in the supply chain caused by demand variability.

Bull Whip Effect (Cont.)


Demand variability increases as one moves up the supply chain away from the retail customer

Small changes in consumer demand , result in large variations in orders placed upstream.

The network can oscillate in very large swings as each organization in the supply chain seeks to solve the problem from its own perspective.

Results in increased cost and poorer service.

Causes of Bull Whip Effect

Demand Forecast Updating Order Batching Price Fluctuations Rationing Within the Supply Chain

Push vs. Pull System


In Push systems, work release is based on downstream demand forecasts

Keeps inventory to meet actual demand Acts proactively

In Pull systems, work release is based on actual demand or the actual status of the downstream customers
May cause long delivery lead times Acts reactively

Push/Pull View of Supply Chains

Typically, Procurement, Manufacturing and Replenishment cycles

Typically, Customer Order Cycle


PULL PROCESSES (Reactive) Customer Order Arrives

Mumbai Dabbawallas

Nutan Mumbai Tiffin Box Suppliers Association Popularly dabbawala (one who carries the box) 0 % Fuel 0 % Modern Technology 0 % Investment 0 % Disputes 99.999999 % Performance 100 % Satisfaction

The color coded on Dabbas can be read in the following pattern Here the markings of the collection point are : VP Vile Parle C Cooper Hospital Red color denotes the station & the dabbawala team at the collection & delivery points. Destination markings are 10 Nariman Point 9- Dabbawala handling the Destination area M Mittal Towers. 16- 16 th Floor.

VP 9 M 16

10 10

 Supply chain logistics and efficient reverse logistics  The concept of Multi-level coding  Time Management  Customer Relationship Management  Customer Satisfaction  Cost effectiveness

McDonalds Supply Chain

World Market Leader in the QSR area (Quick Service

100 sales items in the restaurant 200 restaurants per DC Delivery frequency: ~3/wk, higher in urban area. 2-3 stops per route Exclusive distributors (3PL)

Trikaya Agriculture (Iceberg Lettuce)

Radhakrishna Foodland Distribution Centres (Mumbai)

Dynamix Dairy Industries ( Cheese) Vista Processed Foods Pvt. Ltd. (Chicken and Vegetable )

McDonalds Outlet

McDonalds Outlet

McDonalds Outlet

McDonalds Suppl Chain y

McDonalds Supply Chain Challenges  Even stronger focus on freshness and quality  On-going product innovations On Strong customer demand fluctuations based on promotions  Order- and inventory management OrderRestaurant DC supplier - raw material supplier  Bull Whip effect  Change Management in a de-centralized structure de-

ServiceService-Supply Relationship:
Service supply relationship management is a systems approach that recognizes the customer supplier duality found in the delivery of services. Three Important features of Service Supply relationship are: I. Bidirectional optimization II. Management of productive Capacity III. Managing Risk Service Supply Relationship management incorporates customers into knowledge management strategy of the company. This enhances Value and Quality of services provided.

CustomerCustomer-Supplier Duality in Service Supply Relationships (Hubs)

Supplier Supplier

Service Service esign esign

Service Service rovider rovider

ustomer ustomer

aterial trans er er teri l tr ns

In ormationtion tr er er n orm trans ns

SingleSingle-Level Bidirectional Service Supply Relationship

Service Category Customer Input Output Service Provider



Mind Knowledge Tooth Filling





Two-Level Bidirectional Service Supply Relationship

Service Category Minds Custom er Patient Input Output Disturbed Treated Bood Diagnosis Service Provider Input Output Provider s Supplier

Therapis Prescription Pharma t cy Drugs Physicia n Sample Test Result Lab



Sources of Value in Service Supply Relationships:


Bi-directional Optimization Managing Productive Capacity - Transfer: make knowledge available (e.g. web based FAQ database) - Replacement: substitute technology for server (e.g. digital blood pressure device) - Embellishment: enable self-service by teaching (e.g. change surgical dressing) Management of Perishability.

Impact of Service Supply Relationships:


Management Information Systems- When the inventory reaches the minimum level it automatically places an order to the suppliers.

Sourcing and Procurement- Locating the suitable suppliers and obtaining the expected quantity and quality, with price as a major influence.

Order Processing- It is the work flow associated with the picking, packing and delivery of the packed item(s) from the suppliers to the stores.


Inventory Management The formal management of the timing and quantities of goods to be ordered and stocked by the hotel in order that demand can always be satisfied without excess expenditure. It is done with the help of MIS.

Customer Service- Whenever a customer enters into a restaurant and places an order care should be taken so that every item on the menu is available. If it is not available it would imply inefficient Supply and Inventory Management.

Supply chain in A Restaurant:

FARMER Grains Fruits Vegetables Oil DAIRY & POULTRY Milk Butter Cream Poultry Processing and Packaging Distributor Storage Transport Grocery stores and wholesalers

SUPPLY CHAIN MANAGEMENT { GAUBAS restaurant, Bangalore }

STORES MANAGEMENT Inventory management Supplier relations Supplies Management

Suppliers I,II Packaging

MANUFACTURING Cutlery and crockery Textile


Wholesale Market

DHL Supply Chain:

I ivi al st r p DHL Offic DHL Pack tral L cati Offic s rti g a lk packi g pick p r p rs rp rat st rs

R gi

L cal r Nati al / I t r ati al

l cal

R gi



tr ck al H Distri ti if l cal

Airport courier
Cargo or Courier

cargo Blue Dart Flights

Destination / Hub truck Destination Warehouse truck no

Destination found?

Reverse logistics to sender

DHL ffice at Destination

yes Destination

Inbound Logistics - DHL


Procurement Services Raw material warehousing Transportation

Outbound Logistics - DHL


Inbound To Manufacturing (for the client) In-plant Logistics

Value Added Services : DHL


Contract packing Comprehensive co-packing service Additional packing solutions, including packaging design and packaging materials procurement

Inventory Management & Warehousing - DHL


Finished Goods Warehousing Main Collection offices Hub airport Main Warehouse outside Octroi

Distribution - DHL

Home delivery In-store Logistics Service Parts Logistics

Other Facilities - DHL

Barcode Scanning at milestone locations


of Online Waybills

Online booking of consignments collect pickup Last 99 days shipping records available through the website DHL Express SMS

DHL Innovations

DHL SMART SENSOR TEMPERATURE RFID technology (Radio Frequency Identification


Information processing is one of the central functions of SCM. IT could make two contributions in the SCM :
x Improvement in information sharing among firms. x Prompt problem identification and optimization.

Introduction of Electronic Data Interchange (EDI) - Web-EDI Enterprise Resource Planning. The development of application software. - Supply Chain Planning Software (SCPS.)

Impact of internet/ e-commerce on esupply chain

1. 2. 3. 4. 5. 6. 7. 8.

Cost efficiency Changes in the distribution system Customer orientation Shipment tracking Shipping notice Freight auditing Shipping documentation and labeling Online shipping enquiry

Advantage of SCM
Reduce total cost . y The cost can also be reduced in relation to the integrated advantage. - avoiding redundant investment in warehousing, and reducing inventory level by information sharing.

The firms in the supply chain should have the necessary abilities and should share reasonable responsibilities (risk sharing). Various information, such as ordering, inventory or customer demand, among others, should be shared and processed properly.

y Heavy investment of time, money, and
y y

resources Compare and negotiate with suppliers in the terms of price, consistency, and quality. Outsourcing to foreign countries to save money can cause backlash from the media, current customers, as well as possible future customers. well as possible future customers . Power must be evenly distributed throughout the supply chain.

y Backlash from the media, current customers, as


SCM aims to :

+ + +
The right The right The right The right

The right

The right









Thank you!

y y y y

Introduction to supply chain management by Robert B. Handfield & Ernest L. Nichols, Jr. Logistics Management, The Supply Chain Imperative by Vinod V. Sople