Supply Chain Management


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Introduction to supply chain management:

Introduction to supply chain management Anura Lokugamage MA (Finance Econ) , PGD (Econ), PGD (Corporate finance) , Dip in IT (SLIDA) , Dip in IT (Thailand), HNDA , DPFM , Dip in Eng , DIPCA , MAAT, IPFDA 1

What is Supply Chain Management?:

What is Supply Chain Management? The Supply Chain Council The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities including coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements. Supply chain management deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible. Council of Supply Chain Management Professionals 2

Two Formal Definitions:

Two Formal Definitions The design and management of seamless, value-added process across organizational boundaries to meet the real needs of the end customer ( Institute for Supply Management ) 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 ( The Supply Chain Council ) 3

What is a Supply Chain?:

What is a Supply Chain? A supply chain consists of the flow of products and services from: Raw materials suppliers / manufacturers Component and intermediate manufacturers Final product manufacturers Wholesalers and distributors Retailers Customers Connected by transportation and storage activities, and Integrated through information, planning, and integration activities. 4

Modern conceptual Model of SCM:

Modern conceptual Model of SCM Multiparty Net Logistics Highly sophisticated IT System No –core outsourcing Multi –tire supplier partnerships Make to order philosophy Supply chain management 5

Supply chain flow:

Supply chain flow customer Plan and design wholesaler Source Manufactures supplier Product architecture Make or buy Pre supplier involvement Strategic partnerships Selection of suppliers Supply contracts Product Development process Supply chain Process development Retailer Information flow Product flow Financial resources flow 6

Why supply chain management so important?:

Why supply chain management so important? Supply Chain Value - Industry Focus Customer Value - Best Buy Focus 7

Why supply chain management so important?:

Why supply chain management so important? To gain efficiencies from procurement, distribution and logistics To make outsourcing more efficient To reduce transportation costs of inventories To meet competitive pressures from shorter development times, more new products, and demand for more customization To meet the challenge of globalization and longer supply chains To meet the new challenges from e-commerce To manage the complexities of supply chains To manage the inventories needed across the supply chain 8

Why supply chain management difficult?:

Why supply chain management difficult? Different organizations in the supply chain may have different, conflicting objectives Manufacturers: long run production, high quality, high productivity, low production cost Distributors: low inventory, reduced transportation costs, quick replenishment capability Customers: shorter order lead time, high quality , large variety of products, low prices Supply chains are dynamic and change over time 9

Decisions involve in supply chain:

Decisions involve in supply chain Determining the number, location and capacity of facilities Make or buy decisions Forming strategic alliances Determining inventory levels Quality-related decisions Logistics decisions Production planning and control decisions Goods and service delivery scheduling Some make or buy decisions 10

Issues in supply chain management:

Issues in supply chain management How many warehouses do we need? Where should these warehouses be located? What should the production levels be at each of our plants? Why are we holding inventory? Uncertainty in customer demand? Uncertainty in the supply process? 11

Issues in supply chain management Cont….:

Issues in supply chain management Cont…. How can be reduced uncertainty ? How forecast customer needs? Which inventory level to be held in warehouses? Should information be shared with supply chain partners? What information should be shared? With what partners should be shared? What are the benefits to be gained? 12

Issues in supply chain management Cont….:

Issues in supply chain management Cont…. Should products be redesigned to reduce logistics costs? Should products be redesigned to reduce lead times? What data should be shared ? How should the data be analyzed and used? What infrastructure is needed between supply chain members? How is customer value created by the supply chain? What determines customer value? How do we measure customer value? How is IT used to enhance customer value in the supply chain? 13

Core Areas of the supply chain management :

Core Areas of the supply chain management Distribution Network Planning Demand Management Manufacturing Planning & Scheduling Material requirement Planning Warehouse Management Distribution Management Shipment & Transport Management 14

Benefits supply chain management :

Benefits supply chain management Reliable Demand Management High Customer Service levels Reduced lead times Optimum working capital costs Optimum supply chain costs Increased inventory turnover Increased ROA or ROI 15

Evolution of Supply Chain Management:

Evolution of Supply Chain Management 1950s 1960s 1970s 1980s 1990s 2000s Beyond Traditional Mass Manufacturing Inventory Management/Cost Optimization JIT, TQM, BPR, Six sigma SCM Formation/ Extensions Further Reformation of SCM Capabilities 16

Pillars of Supply Chain Management:

Pillars of Supply Chain Management Supply Management Supplier management, supplier evaluation, supplier certification, strategic partnerships Operational Management Demand management, MRP, ERP, JIT , Lean, TQM , Six Sigma Distribution Management Transportation management, customer relationship management, distribution network, perfect order fulfillment, global supply chains, service response logistics Integration Process integration, performance measurement 17

A framework for managing the supply chain:

A framework for managing the supply chain 1 Develop a supply chain strategy 2 Gather supply chain information 3 Develop effective partnerships and alliances 4 Pilot new supply chain solutions 5 Organize for supply chain performance 6 Develop measurement system for supply chain performance 18

Supply chain strategies:

Supply chain strategies Supply chain strategy frame work 19

Supply chain performance Indicators:

Supply chain performance Indicators On time in full, outbound On time in full, inbound Internal defect rates New product introduction rate Cost reduction ratio Stock turn over ratio Order to delivery lead time Percentage of demand supplied from stock Value of the investment in dead and slow moving items Level of backorders 20

Vicious cycle of poor supply chain performance:

Vicious cycle of poor supply chain performance Skewing of sales High inventory and stock outs High delivery cost Low attentions to smaller brands Poor data Visibility Unreliable and un- responding production and distribution data High inventory and stock outs Poor response to dynamic market Low forecast accuracy Long planning cycle 21

Significance of Supply Chain Costs :

Significance of Supply Chain Costs Manufacturer Distributor Retailer Customer Manufacturer Distributor Retailer Customer Manufacturer Distributor Retailer Customer Reduce cost Increase ROI 22

Six Sigma Methodology :

Six Sigma Methodology Define Measure Analyse Control Improve 23


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