S UPPLY CHAIN MANAGEMENT B Y S HEETAL G AIKWAD

CONTENTS Introduction to supply chain Supply chain of WAL-MART Supply chain objective Supply chain management Drivers of supply chain Planning demand and supply Determining optimal product availability Importance of supply chain management Difficulties of SCM

W HAT I S THE S UPPLY C HAIN ? Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets – “facilities” and the Raw materials Work-in-process (WIP) inventory Finished products that flow between the facilities 3

S UPPLY CHAIN OF W AL -M ART P&G other manufacturer Timber Industry Paper Manufacturer Chemical Manufacturer Plastic producer Tenneco Packaging Chemical Manufacturer Wal-Mart store Customer wants detergent &goes to Wal-Mart Distributer

F LOWS IN A S UPPLY C HAIN Customer Material Information Funds The flows resemble a chain reaction. Supplier

S UPPLY CHAIN OBJECTIVE Maximize overall value generated Value strongly correlated to supply chain profitability – the difference between the revenue generated from the customer and the overall cost across the supply chain Example: A customer purchasing a computer from Dell pays $ 700 (the revenue) Dell and other stages of the supply chain incur cost to convey information, produce the components, store them, transport them, transfer funds, etc.

P ROCESS VIEW OF A SUPPLY CHAIN Cycle view Push/pull view

C YCLE V IEW OF S UPPLY C HAINS Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Customer Retailer Distributor Manufacturer Supplier

P USH /P ULL V IEW OF S UPPLY C HAINS Procurement, Manufacturing and Replenishment cycles Customer Order Cycle Customer Order Arrives PUSH PROCESSESPULL PROCESSES

D ELL C OMPUTER ’ S SUPPLY CHAIN Customer Web page Assembly plant All of Dell’s suppliers and their suppliers Dell builds to order: customer order initiates manufacturing at Dell Dell does not have a retailer, wholesaler, or distributor in its supply chain

W HAT I S S UPPLY C HAIN M ANAGEMENT (SCM)? A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers So that the product is produced and distributed In the right quantities To the right locations And at the right time System-wide costs are minimized and Service level requirements are satisfied

I DENTIFYING MAJOR DRIVERS OF SUPPLY CHAIN Inventory  Raw materials, work in process, finished goods  Large inventory increases responsiveness of supply chain  Reduced inventory reduces cost of supply chain  Example – clothing retailer make large stock of clothes so that he can satisfy customer demand immediately but will increase retailers cost. Transportation movement of inventory Choice of transportation depend on own performance characteristics Example- one mail order company use air ways to ship products increasing responsiveness but it can use ground transportation to ship product to reduce cost of supply chain

Facilities places where inventory are stored, assembled or fabricated. Two types 1)storage site 2)production site Decision regarding location, capacity and flexibility of facility have significant impact on supply chain efficiency and responsiveness Example-an auto part distributer is having many ware houses located near to customer increasing responsiveness but make supply chain less efficient

o Information Data and analysis regarding inventory, facilities, transportation and customers throughout supply chain. It is the biggest driver of performance in the supply chain as it directly affects other drivers It present opportunity to management to make supply chain more efficient Example- with information of customers demand pattern pharmaceutical company can produce and stock the drugs in anticipation of customer demand which make supply chain more responsive because customer will find drugs when they need them.

P LANNING D EMAND AND S UPPLY Demand forecasting What customer will demand in the future forecast the future demand forms basis for strategic and planning decision Example- Intel provides processor to dell computer. It takes several weeks to manufacture processor but dell can not wait that long after customer order. Customer demand pc in days after an order not weeks so Dell and Intel should forecast future demand for processor Types of fore casting – 1)qualitative 2)time series 3)causal method 4)simulation method

Aggregate planning planning for inventory, production, pricing of product over specified time period. Company must anticipate demand and determine in advance of that demand how it will met.should company has to invest in large capacity plant to met demand or build smaller plant. Example –paper industry face seasonal demand where peaks occur in certain season. But mill capacity is expensive so instead of building high capacity mill they do aggregate planning to determine production levels so that they build demand in slower months for sale in particular season. The main goal of this is to satisfy demand by making best use of available facilities to maximize the profit

Predictable variability change in demand that can be forecasted. Products that under go such type of change in demand cause numerous problem in supply chain ranging from high level of stock out during peak demand and high level of excess inventory during low demand. It will increase cost of product and decrease responsive- -ness of supply chain. How to handle predictable variability 1. Manage supply using capacity 2. Manage demand using short term price discounts and trade promotions

D ETERMINING OPTIMAL LEVEL OF PRODUCT AVAILABILITY High Level of product availability require larger inventory decreases efficiency of supply chain but increases responsiveness to customer Low level of product availability require less inventory efficiency of supply chain increases but responsiveness to customer decreases Example-some power plant maintain several months of fuel supply to avoid any probability of running out. In contrast supermarket may carry only few days of supply of product because out of stock situation may occur.

W HY IS 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 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

W HY I S SCM D IFFICULT ? Uncertainty is inherent to every supply chain  Breakdowns of machines and vehicles  Weather, natural catastrophe, war  Local politics, labor conditions, border issues  Travel times