An integrated supply chain, where every organisation is working together to produce the simplest and most cost-effective flow

of resources is of importance to every supplier since supply chain activities can account for between 5 to 20 per cent of sales. Many businesses have come to recognise that the future lies not with individual firms, but with networks of allied organisations and technology has evolved to offer greater potential for cooperation.

Supply chain management is an effective tool for business process improvement. It begins with the source of supply and ends at the point of consumption. It covers the flow of materials and information from suppliers, through a number of value adding processes and distribution channels, to the customer. The aim of supply chain management is to achieve a balance between the goals of high quality customer service and low inventory and unit cost. It is concerned with a range of issues, including purchasing, the physical movement of materials, materials management, manufacturing management and supplier management.

IMPROVED CUSTOMER SERVICE

MAKE A BALANCE BETWEEN COSTS & SERVICE

REDUCE COSTS THROUGHOUT THE SUPPLY CHAIN IMPROVE SUPPLIER RELATIONSHIPS BETWEEN BUYER &

PROVIDE A COMPETITIVE ADVANTAGE TO THE OTHER ORGANISATIONS.

Materials flow downstream, from raw material sources through a manufacturing level transforming the raw materials to intermediate products (also referred to as components or parts). These are assembled on the next level to form products. The products are shipped to distribution centers and from there on to retailers and customers.

JIT was first developed in JAPAN. Basically TOYOTA introduced this JIT technique in 1950s in JAPAN. U.S companies also started using this technique in 1980s. JIT has been successfully employed in Taiwan, Korea and Japan. JIT reduces inventory carrying costs. There is scope to implement JIT in integrated companies where there is no reliance on external sources.

It is also called zero inventory operation.

JIT refers to a management tool that helps to produce only the needed quantities at the needed time. It involves the purchase of materials in such a way that delivery of purchased material is assured just before their use or demand. The philosophy of JIT implies that firm should maintain a ZERO level of inventory and provide material just in time to customer when they demanded.

Maintaining good relations with suppliers so as to enable purchases of right quantities of materials at right time.

Provides a material just in time to meet the requirements.

Major focus of JIT is to purchase or produce in response to need rather than as per the plans & forecasts.

Reduce wastage & enhance productivity

Minimum inventory and its associated cost

Zero breakdowns & continuous flow of production

Ensure timely delivery schedules to the customer

Manufacturing the right product at the right time

In India, it is difficult to get specified materials at the right time and at the right place. There is a factor where ancillary industry feeds the parent industry. In absence of proper tooling and equipment, ancillaries face rejections at their level or at the buyers level.. Quality and timely supply schedule are necessary for it.

Investment in inventory is reduced.

Wastes are eliminated.

Reduction in carrying & holding cost because of reduced inventory. Reduction in early delivery, delayed delivery processing documents etc. Quantities of materials are purchased or produced at the right time .

 JIT cannot be maintained if quality components are not continuously made available. Rejection of sub-standard components or faulty production operation leads to disrupted production. It consequently leads to non-delivery of finished product.

This comes from the fact that whenever an order is received the goods can be dispatched without delay. But this often gives rise to a scenario of piling up of inventory, unless good sales are achieved - or the stock becomes outdated.

For example, in a pharmaceutical company, if such large lead times exist, then the stock could be obsolete if the product has expired or is not very far off from doing so.

Six sigma is a philosophy of doing business with a focus on eliminating defects through fundamental process knowledge. Six sigma methods integrate principles of business, statistics and engineering to achieve tangible

results.

Its tools are used to improve the processes and products of a company. They are applicable across every discipline including: Production, Sales, Marketing, Design, Administration and Service.

 Six sigma reduces costs by 50% or more through a self-funded approach to improvement. Six sigma reduces the waste chain. Six sigma affords a better understanding of customer requirements. Six sigma improves delivery and quality performance.

Six sigma provides critical process inputs needed to respond to. changing customer requirements. Six sigma develops robust products and processes. Six sigma drives improvements rapidly with internal resources.

The individuals who make up the Six Sigma Systems team have successfully implemented six sigma and lean manufacturing programs worldwide across many different industries and corporate cultures. Xerox, American Standard, Whirlpool, Special Devices are the companies with successful six sigma systems

It is also known as TOYOTA PRODUCTION SYSTEM. "Lean," is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Value" is defined as any action or process that a customer would be willing to pay for. Basically, lean is centered on preserving value with less work.

A Lean inventory management system allows a distributor to meet or exceed customers expectations of product availability with the amount of each item that will maximize the distributors net profits.
In a Lean system, inventory is regarded as a sign of a sick factory that is in desperate need of some type of treatment.

The ideal goal for a company should be to have an inventory as close to zero as possible. Effective inventory management, allows a distributor to meet or beat their customers expectations of product availability while maximizing their profits.

Lean is a philosophy of business that means doing things as simply and cheaply as possible while providing superior quality and fast service. Overproduction or overstocking leads to increased inventory and money sitting idle. Inventory means any goods that are being held for any length of time, inside or outside the factory. In the Lean system, inventory is regarded as a symptom of a sick factory.

Lean manufacturing dramatically reduces the waste chain. Lean manufacturing reduces inventory and floor space requirements. Lean manufacturing creates more robust production systems. Lean manufacturing develops appropriate material delivery systems. Lean manufacturing improves layouts for increased flexibility

Kanban is a Japanese word meaning billboard or signboard. It is derived from kan which means visual and ban which means card or board. In lean manufacturing, kanban is used as a means of inventory management and production control which signals that something needs to be done. In the case of raw material it notifies purchasing to seek procurement of more raw materials. In the case of a manufactured part it signals the need for production to begin. Kanban is an important part of Just in Time Manufacturing

In a conventional push system of manufacturing, batches of product are made and put into stock. Large batches are commonly run to spread the changeover times over many parts to reduce the cost per unit. There are many disadvantages with this mentality of production. money is tied up in inventory that may sit around for a long time. This inventory takes up valuable factory space that could be used for manufacturing. The longer the material is stored the more chance that the product will degrade, get lost, or become obsolete.

In a pull system of manufacturing, parts are only produced when they are needed. It is also referred to as just in time production.

Advantages
The

amount of inventory on hand at any given time is reduced. Batch sizes are also reduced Money can be freed up to be invested on more profitable aspects of the business. Plant space can be freed up to allow development of other work cells. Response times are generally shorter than in push systems

Kanban plays two roles in a pull system of manufacturing Kanban in the role of inventory control. After material is depleted to a predefined level, a kanban signals the purchasing professionals to start the process of procuring more of said material Kanban in the role of production control. After manufactured inventory is depleted to a predefined level, a kanban signals production to replenish the stock.

The possession of the card serves as a signal to replenish inventory. A kanban card is usually full of information about the part. It may include the part number, lot size, locations, container size, and much more

In this system there are two bins for each part. One is located where the product will be used and the other in the location where the product will be made. In this system any empty bin gives the signal to start producing stock to fill the bin. Once the bin is full it will be moved into storage. When a bin is emptied it is taken to the preceding operation to be replenished and the full bin in storage is taken back to be used.

Since kanban goes hand in hand with just in time production, there benefits are similar. These are reduced inventory, smaller batch sizes, quicker response times, and less defective parts. Kanban is an integral part of lean and the Toyota production system.

Inventory management can be quite challenging for any large organization, even those with fairly simple distribution networks. The complexities of managing inventory increase exponentially in multi-echelon distribution networks, where inventory resides in multiple tiers of locations. (Example: Regional distribution centers serve local warehouses, which in turn supply retail stores.)

Multi-Echelon Inventory System: In an organization with many projects, there is the central store and a number of Multi-Echelon Inventory Systems. The decisions to be taken are regarding the number of echelons, the number of storage points of each echelon, the location of central stores.

Each storage location has to optimize the inventory and its redistribution. Slow moving but capital intensive items are located at central stores, rather than at projects.

Complex mathematics is involved in the analysis of multi-echelon systems.

 It has to adhere to other norms of manufacturing excellence like right time delivery every time, perfect quality and right implementation of plan.

It pre-supposes complete co-operation between management and workers.

MRP is extensively being used since it lends itself to computerization. It is applicable in production situation having products with inverted tree like structure. The master production schedule of end product dictates the demands for parts and subassemblies. MRP inputs are: 1) Master Production Schedule 2) Bill of Materials 3) Inventory Status MRP software computes component requirements and procurement schedules.

In short, it is a system of order scheduling for dependent demand situation. This system anticipates the requirements of finished products, and based on this information and other inputs, generates statements. 1) Sub-assemblies and components 2) Raw materials necessary to make the finished products.

Essentially MRP is a push system, unlike just in time (JIT) which is a pull system. It is push in the sense that statements of requirements are in line with the delivery schedules and thus assemblies, components and raw materials get pushed into the process.

INDEPENDENT AND DEPENDENT DEMAND

The basic element of MRP is the independent / dependent demand. Independent pattern of demand is shown by finished products, component and sub assemblies to be sold as spares. This demand is calculated known orders / forecasts. This constitutes MPs.

MRP takes advantage of the facet that demand for all sub-assemblies, components and raw materials are dependent upon the demand for finished products. Thus they show dependent demand. For these items a forecast is necessary.

MPS is a production plan to manufacture different products. It is an essential input to the Materials Requirement Planning (MRP) system. It gives the volumes of production period wise. MPS is a productive plan, unlike aggregate planning where products are not distinguished. MPS prepares product wise schedule which is consistent with aggregate planning. In a sense, it is a process of dis-aggregation planning.

MPS spells out the size and timing of producing orders for specific items, the sequencing of individual jobs, allocation of resources to individual activities and operation. MPS is done by cut and fit methods or mathematical programming methods or heuristic methods.