SUPPLY CHAIN

MANAGEMENT
AN OVERVIEW

Supply Chain Management encompasses every

effort involved in producing and delivering a
final product or service, from the suppliers
supplier to the customers customer. Supply Chain
Management includes managing supply and
demand, sourcing raw materials and parts,
manufacturing and assembly, warehousing and
inventory tracking, order entry and order
management, distribution across all channels, and
delivery to the customer.

FLOWS IN A SUPPLY CHAIN

Information
Product

Customer

Supplier
Funds

KEY CHARACTERISTICS
Integrated activity:
Among functions such as logistics, manufacturing,
distribution, design/engineering, marketing, finance,etc.
Multiple organizations,i.e., suppliers, customers& 3 PL
providers
Coordination of conflicting goals, metrics, etc.

Responsible for multiple flows:

Information (orders, status, contracts)
Physical (finished goods, raw material, w.i.p.)
Financial (payment, credits, etc.)

PHILOSOPHY OF SCM

The entire supply chain

is a single, integrated
entity.

Inventory is the last

resort for resolving
supply and
demand
imbalances.

The cost, quality

and delivery
requirements of
the customer are
objectives shared
by every company
in the chain.

EVOLUTION OF SCM

Stage 1 -Vendor
Purchase Production Distribution Retailer
Stage 2:Logistics
Management, Materials
Management
Stage 3: Supply Chain
Management

WHY IS SCM IMPORTANT?

Strategic Advantage It Can Drive
Strategy

Manufacturing is becoming more efficient

SCM offers opportunity for differentiation (Dell) or
cost reduction (Wal-Mart or Big Bazaar)
Globalization It Covers The World
Requires greater coordination of production and
distribution
Increased risk of supply chain interruption
Increases need for robust and flexible supply chains

At the company level, supply chain

management impacts
COST
For many products, 20% to 40% of total product costs are
controllable logistics costs.

SERVICE
For many products, performance factors such as inventory
availability and speed of delivery are critical to customer
satisfaction.

DECISION PHASES IN A SUPPLY CHAIN

Supply chain
strategy or
design

Supply chain
planning

Supply chain
operation

SUPPLY CHAIN DESIGN

Insourcing/
Outsourcing

(The Make/Buy or
Vertical Integration
Decision)

Partner Selection

(Choice of
suppliers and
partners for the
chain)

The Contractual
Relationship

(Arm's length, joint

venture, long-term
contract, strategic
alliance, equity
participation, etc.)

Order Size

THE DYNAMICS OF THE SUPPLY CHAIN

Customer
Demand

Distributor Orders

Retailer Orders

Production Plan

Time

SUPPLY CHAIN: SOME ESTIMATES FOR INDIA

* Logistics Spend

IN Rs. 2,40,000 crores

(approx. US $ 50 Billion)
* Share of GDP
12-13 %
* Major Elements are ( Percentage of Total)
* Transportation
35
* Inventories
25
* Packaging
11
* Handling & Warehousing ..
9
* Others & Losses

14

SUPPLY CHAIN: THE POTENTIAL

In 25 years, NDDB has enabled India

to become the largest producer of
milk by implementing a logistics and
supply chain system that has
eliminated several intermediaries,
thereby leading to a much higher
remunerative price (yield) for
producers and lower price for
consumers.

As described in the FORBES

magazine, the Dabbawalas of
Mumbai has achieved an extremely
high level of reliability and precision
(SIX SIGMA level in QA parlance) in
delivering to their customers the
products earmarked for them.

SUPPLY CHAIN
MANAGEMENT

5 PRINCIPLES FOR
SUCCESSFUL
IMPLEMENTATION

PRINCIPLE ONE
Know Your Customer Know Yourself
Know Your Customer

What do they want?

Where do they want it?

When do they want it?

How do they want to receive it?

What are they willing to pay?

PRINCIPLE ONE
Know Your Customer Know Yourself
Know Yourse lf

Vision, Mission and Values

Core Competencies

Strengths and Expertise

Align Your Philosophies and Values

with Your Strategic Goals

PRINCIPLE TWO
Adopt Lean (Continuous Improvement) Philosophies
Lean Philosophie s

Analyze and adjust the physical

operating environment

Cross-trained, empowered and

motivated workers

Creativity or ideas are innovative only

if they bring value

Continuous Improvement is a
thought process, a culture, or belief system

PRINCIPLE THREE
Supply Chain Information Infrastructure
Information Infrastructure

Access to common data sources

Joint planning of strategies

Create a Knowledgebase

Interactive Discussion Board

True collaboration requires more

than data exchange

PRINCIPLE FOUR
Integrated Business Processes
Process Integra tion

Intra-organizational

Inter-organizational

KISS Rule of Thumb

Framework with flexibility for individual

adaptation

Empowerment & Ownership

Avoid process maps or SOPs that require an

engineer or other expert to explain

PRINCIPLE FIVE
Unite Decision Support Systems
Decision Systems

Pertaining to Risk Management and

Uncertainties

Consider all Levels of Supply Chain

Distributive Leadership (flat organization)

At strategic points along supply and

production chain

Decision Support Systems must deal with

uncertainty in an explicit manner

PERSONAL THOUGHTS
Supply Chain Management
Management Ideology

Effective implementation requires an

organizational change approach

Human Capital Behavioral Change

One size fits all approach is not effective

TYPES OF SCM
ON THE BASIS OF FUNCTIONAL ATTRIBUTES

Types Of SCM

Procurement

Production

Distribution

Sales

PROCUREMENT TYPE
Number and type of products procured

Sourcing type
Flexibility of suppliers
Supplier lead time and reliability

Materials lifecycle

Production Type

Organization of
the production
process

Repetition of
operations

Bottlenecks in
production

Changeover
characteristics

Working time
flexibility etc.

DISTRIBUTION TYPE

Distribution
structure

Pattern of
delivery

Deployment
of
transportation
means

Loading
restrictions

SALES TYPE
Relation to customers
Availability of future demands
Demand curve
Products' life cycle
Number of product types
Degree of customization
Bill of materials (BOM)
Portion of service operations

SCM MODULES

MANUFACTURERS USE SUPPLY

CHAIN MANAGEMENT SYSTEMS
THROUGHOUT THE ENTIRE
PRODUCTION PROCESS. SCM
SOFTWARE IS AT WORK
IN PLANNING AND EXECUTION,
FORECASTING, INVENTORY AND
ASSET MANAGEMENT, LOGISTICS
AND DELIVERY, REPORTING, AND
EVERY STAGE IN BETWEEN.

Planning

Execution

Visibility

Demand
Planning

Inventory
Mgmt.

L&T Mgmt.

Event Mgmt.

Proof of
Delivery

Network
Design

Asset Mgmt.

Reporting

Planning Software
Having the right supply chain planning software can help you build a
demand management strategy and plan the production process.

Execution Software
Supply chain execution software helps run day-to-day manufacturing
operations. When combined with supply chain planning software, it
can manage the entire supply chain, from production to shipping.

Visibility Software
Manufacturers rely on supply chain visibility software to stay ahead of
changes and problems in the supply chain. In a global manufacturing
environment, supply chain visibility reduces supply chain risk by helping
companies meet critical manufacturing objectives such as on-time
delivery and quarterly revenue and production goals.

Inventory Management
Today's SCM inventory management software goes beyond simple
tracking of orders, finished goods and materials. It can also optimize
inventory levels and locations and tap into demand data to improve
forecasts. Inventory management modules generally come in two types
of suites -- inventory planning software and inventory optimization
software.

Demand Planning Software

Manufacturers use SCM demand planning software to create accurate
demand forecasts. Real-time sales data and secure collaboration ensure
timeliness and adaptability.

Trnsport and Logitics Software

It helps manufacturers navigate global supply chains and help users
discover duplicate invoices and unnecessary charges

Event Management Software

With supply chain event management software, manufacturers are
able to identify and react quickly to changes in the supply chain.
Adapting to unexpected supply chain events is critical to survival in
global markets. If a supply chain event doesn't happen on schedule -say a shipment doesn't make its destination -- it can affect the
manufacturing process in small and large ways, including actually
stopping production.

Proof of Delivery Software

Guaranteeing that products reach the right customers is a critical need
for all manufacturers. SCM proof of delivery software helps
manufacturers meet this need from the delivery of final products
through customer payment collection. Shipping confirmations,
automated customer payments and optimized shipping routes are just
a few of the benefits of proof of delivery modules.

WHIRLPOOL HOW SCM

SAVED MILLIONS.
CASE STUDY FOR SUCCESSFUL ERP IMPLEMENTATION

WHIRLPOOL THE COMPANY

Worlds leading manufacturer of home appliances.
Sales worth $20 billion.
Operating in 170 countries across the world.
Employing over 100000 people.

70 Manufacturing & Technology Research Facilities.

PROBLEMS BEING FACED

Unreliable supply and delivery performance.
Slow response to non-standard orders.
Inaccurate forecasts leading to blocking of working
capital.
Dismal overall availability rate.

Multiple systems and procedures cobbled in an unwieldy

mess.

REASONS
Persistent focus on products with the supply chain being
ignored.

Out dated & inefficient supply chain management system.

Multiple big budget mergers and acquisitions.
The supply chain of Whirlpool divided into smaller chains.
Most of the transportation network serviced by Whirlpools
personal fleet.

Transfer of raw
materials and
components to
assembly plants.

Ryder
Logistics

ERX

Finished goods to
the trading partners
and regional
distribution centers.

KLC

Oversaw six regional

distribution centers under
Quality Express program.

Handled two distribution

centers namely in Atlanta
and Orlando

Transportation done by
Whirlpools private fleet.

Transportation done by
Whirlpools private fleet.

MEASURES TAKEN
Consolidated their warehouses into fewer yet
larger regional distribution centers

Implementation of Collaborative Planning,

Forecasting, and Replenishment or CPFR.

Introduction of Supplier Continuous

Improvement Systems (SCIS).
Whirlpool SCM and IT teams took on the
massive task of completely overhauling their
existing system.
Decision to transform its private fleet into a
dedicated operation managed by an outsider.

THE PROCESS

Whirlpool took
out a bid
package that
included both
the
management of
the private fleet
and the Quality
Express
network.

The bid went

to Penske
Logistics,
which then
transformed
Whirlpools
SCM system.

It purchased
ERX &
subcontracted
the Atlanta
and Orlando
operations to
KLS.

Penske
contributed
four new
systems to
Whirlpools
existing
system.

All these
elements were
integrated
into
Whirlpool's
new ERP
system,
acquired from
SAP AG.

RESULTS

The company eliminated about $60 million

in operating costs from its supply chain.

Inventories were reduced by 15 to 20 per

cent.

Lead times became as low as five days.

Forecasting errors reduced by 50%.
5% reduction in warehouse and
transportation costs.

Overall availability rate increased to 93%.

CONTINUOUS PROCESS

Whirlpool is continuously updating

its supply chain as new
technologies and innovations are
becoming available.

Whirlpool used manual processes to

read paper tags and manage inventory
in its factories. The process was costintensive and error-prone.

To resolve, Whirlpool opted to deploy

RFID tags and networked readers
across the plant to give managers and
operators real-time access to
information on the flow of materials.

Soon Whirlpool began using RFID as

an order-management technique also
which automated its inventory system.

LESSONS

SCM is not just

about logistics

Hence,
understanding how
supply chain
management can
be efficiently
applied is indeed
imperative.

Customer
satisfaction is the
ultimate goal of
any business. This
can be achieved
through the quality
of product and
service delivery.

It is very important
to have good
relations and
understanding with
all the partners.

SCM IMPLEMENTATION
FAILURE : NIKE

WHAT THEY AIMED TO ACHIEVE

Matching supply with

demand
Reduce the amount of
rubber canvas used to
produce wide variety

Tackling problem of
excess inventory

ERRORS THEY MADE

Self
implementation

They did not hire a third party integrator for software

implementation

Too much
customization

The i2 team ( the name of the software they

implemented ) recommended not more than 10-15%
customisation
They broke this recommendation by a huge margin.

Irregular
integration with
ERP

NIKE did not integrate it properly with SAP ERP system

thus leading to data problems

LESSONS LEARNED
They appointed a
third party
software
company.

More realistic
aims were set .

A more
integrated
software was
developed.

They understood
the seriousness of
SCM
implementation.

DOUBTS?