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SCM Egmp 2015

This document provides an overview of the supply chain management course for the Executive General Management Programme at the Indian Institute of Management, Lucknow in May-June 2015. The course is divided into two parts covering key supply chain concepts, operations, design, inventory management, forecasting and other topics. Student performance will be evaluated through a term-end examination. The document also summarizes several readings on supply chain management topics like globalization, barriers, examples of supply chains, and performance metrics.

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Rohit Kumar
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57 views31 pages

SCM Egmp 2015

This document provides an overview of the supply chain management course for the Executive General Management Programme at the Indian Institute of Management, Lucknow in May-June 2015. The course is divided into two parts covering key supply chain concepts, operations, design, inventory management, forecasting and other topics. Student performance will be evaluated through a term-end examination. The document also summarizes several readings on supply chain management topics like globalization, barriers, examples of supply chains, and performance metrics.

Uploaded by

Rohit Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Supply Chain Management

Course in
Executive General Management
Programme (EGMP06)
Indian Institute of Management, Lucknow

May-June 2015
Mahadevan Text Chapter 9

Major Topics in SCM Course


Part A (Prof. R.K. Srivastava) Part B (Prof. S. Venkat)
Supply Chain Management
Concepts
Lean Operations

2 sessions (4 hours) as per


schedule

Supply Chain Design &


Facility Location
Inventory Management
Forecasting & Demand
Planning
Material & Resource
Planning

4 sessions (8 hours) as per


schedule

Evaluation: Term-end Examination

The World is Flat


Supply Chains are now
increasingly global
Death of Distance
Bits are (nearly) free,
enabled partly by the
telecom boom

Major implications for how


business and economies
work

Perspectives on Supply Chains


Reducing Supply Chain Barriers Could Increase
Global GDP Up To 6 Times More Than Removing
All Import Tariffs
- World Economic Forum report, 2013

India: The Most Favored Location for IT


Companies
- Common Business Press Headline

Dell shifts sourcing of PCBs from Gurgaon, India


to Mexican Maquiladora
- International Business Week, 1997

Supply Chain Barriers?


Loss of productive time
Delays
Perishability
Penalties
Inventory costs
..

Natural Supply Chains

Snow

River

Dam

Generator

Power
lines

Customer

Water
Well

Water
Treatment

Distribution

Water
Tower

Local
Lines

Customer

Information Chain

Cameras

Media

Capture

Store

PC/Workstation

Process

Telecom

Player

Transport

Consume

What is a supply chain?


External
Supplier 3

External
Supplier 2

External
Supplier 1

Internal
Customer

Ultimate
Customer
Text Figure 9.1 (b) p. 278

Procurement
Production
Distribution

What is Supply Chain Management ?


A total system approach to managing the
entire flow of materials, information, and
services from raw-material suppliers through
factories and warehouses to the end customer.
Falls in between full vertical integration
(dedicated) vs. purely contractual buying
relationship

Supply Chain Decisions

Logistics/ SCM Cost Structure in India

Sanyal, Hindu Business Line

Contemporary Importance of SCM


Increasing outsourcing and emphasis on core
competence
Network of companies rather than single entity

Distribution of wealth and risk


Each cycle takes time and costs money
Pressure to reduce costs/ prices (real prices drop
with time, e.g., in high-tech 1% drop every week)
Changes ripple both ways across chain

Friedmans Ten Flatteners


1.
2.
3.

Berlin Wall comes down


Netscape sparks dotcom
boom (1995+)
Workflow software enables
collaboration
Open-sourcing software

4.
5.

Out-sourcing (including
digitized work)

6.
7.
8.

Off-shoring
Supply-chaining
In-sourcing (Third Party
Logistics)

9.

Informing (empowerment
through information and
search)
10. Steroids (digital, mobile,
wireless, VOIP etc.)

Note that 4 of the ten flatteners are Supply Chain related

EXAMPLES OF
BUSINESS SUPPLY CHAINS

National Consumer Goods Supply Chain


Supplier
share

Centralized Rule Setting

HO

Source Networks
Marketing Plans
Seasonal build up

RDC
Indents
PO

Supplier

Decentralized Planning
QR
System

Orders

High vol. packs

Factory

Depot

RS

Continental Supply Chain: Ford Europe


Belfast
Carburetors and
distributors

Enfield
Instruments, fuel
and water gauges,
plugs

Treforest

Basildon
Radiators, water
pump assembly,
engine components

Genk

Spark plug
insulators

Body panels,
road wheels

Leamington

Wlfrath

Foundry production
of engine
components

Transmission
parts, engine
components

Dagenham

Cologne
Die-cast transaxle
casings, gear and
engine components

Final assembly

Bordeaux
Transmissions

Valencia

Saarlouis

Final assembly

Final assembly

Pizza Supply-Demand Challenges

Different Supply Chain Strategies


Enterprise Focus (e.g., HUL, Asian Paints, Toyota)
Supplier

Manufacturer

Retailer

Customer

Partner Focus (e.g., P&G - Wal-Mart, Amul, Dabbawallas)


Collaborative Systems

Supplier

Manufacturer

Retailer

Customer

Direct Focus (e.g., Dell, Intel, Amazon)


Shared Market Data
Virtual Fulfillment

Supplier

Source: Kalakota & Robinson

Manufacturer

Web

Customer

Supply Chain Choice

Refer Text p. 296-297


Source: Fisher, HBR

Functional & Innovative Products


Key Attributes

Criterion
Product life cycle
Contribution margin
Product variety
Average forecast
error
Average stock out
Forced end of
season markdown
Lead time for made
to order

Functional
> 2 years
5% - 20%

Innovative
3 months to 1 year
20% - 60%

low (upto 20 variants


per category)
10%

high (often thousands


of variants)
40% - 100%

1% - 2%
0%

10% - 40%
10% - 25%

6 months - 1 year

1 day to 2 weeks

Refer Text p. 296-297

Designing efficient supply chains


Strategies

Continuous replenishment programme using EDI


links for information sharing
Invest in supply chain partnership programme
both on the in-bound and out-bound side
Integrate material planning and control systems
with ERP to benefit from improved data visibility
Develop robust inventory control mechanisms to
accurately fix reorder points and order levels
Refer Text p. 296-297

Designing responsive supply chains


Strategies

Accept uncertainty in demand & large forecast


errors as the reality
Devise strategies for managing uncertainty
Capture Point-of-Sale data for accurately and
immediately updating forecast
Improve responsiveness by cutting lead times
Postponement strategies/Delayed differentiation
Deploy standardisation, modular design and product
platform strategies
Refer Text p. 296-297

Supply Chain Management


Components
In-bound SCM
Supplier Development
Supply Management

In-house SCM
Master Scheduling, MRP
Layout, materials handling

Out-bound SCM
Warehousing
Distribution & Channel Management

In-bound supply chain

Tier structure: Automotive Industry


Wiring
Harness

Spindles &
Armatures

Auto
Electrical

Upholstery

Insulators &
Bushes

Copper Plates
Wires

Copper
Manufacturers

Transmission

Castings
Spindles &
Shafts

Tier 1

Gears
Forging
Blanks

Iron & Steel


Manufacturers

Tier 2

Tier 3
Text
Fig. 9.3

In-house supply chain


An illustration

Core Manufacturing Layer


Pre-manufacturing
Machining

Fabrication

Assembly

Testing

Manufacturing Support Layer


Marketing
Quality

IT

Maintenance

Material

Design

Planning
Costing

Text
Fig. 9.4

Out-bound Supply Chain

An illustration using a Soap


Manufacturer
Soap Manufacturing Factory
Factory Warehouse

North

SD

RO

East

SD

RO

West

SD

RO

SD

RO

South

SD

RO

End Customers

Central

SD

RO

SD

RO

Distribution
Centers
Sales
Depots
Retail
Outlets

Text
Fig. 9.5

Value Chain Perspectives


Supply Chain View
Supplier

Manufacturer

Distributor

Retailer

Customer

Procurement

Manufacturing

Delivery/
Service

Warehousing

Shipping

Order Flow View


Order

Design

Factory Material Flow View


Receiving

Storage

Manufacturing

Measures for SCM Performance


Inventory turn over ratio, TO (%) =

Number of inventory turns, TN =

Total Inventory (Days), TID =

Total investment in Inventory ( Rs )


*100
Annual Sales ( Rs )

Annual Sales ( Rs )
Total investment in Inventory ( Rs )

Total Investment in Inventory ( Rs )


* 365
Annual Sales ( Rs )

RawRe
Material
( Rs)
Accounts
ceivableInventory
( Rs )
RM
Inventory
(Days),
RMD
=
Days of Sales Outstanding, DSO = Value of Raw Material Consumed
* 365 ( Rs) * 365
Annual Sales ( Rs )
WIP Inventory
)
Accounts( Rs
Payable
( Rs )
WIP Inventory (Days), WIPD =
Days of Payables Outstanding, DPO =Value of Pr oduction ( Rs) * 365
* 365
Value of Raw Material Consumed ( Rs )
FG Inventory ( Rs)
Cash-to-Cash
Cycle (Days),
Time (Days),
DPO
FG Inventory
FGD =CCD = TID + DSO*365
Annual Sales ( Rs )

Text p.
291-292

Number of inventory turns, TN =

Annual Sales ( Rs )
Total investment in Inventory ( Rs )

Measures
for
SCM
Performance
Total
Investment
in Inventory
( Rs )
Total Inventory (Days), TID =
* 365
Annual Sales ( Rs )

Days of Sales Outstanding, DSO =

Accounts Re ceivable ( Rs )
* 365
Annual Sales ( Rs )

Days of Payables Outstanding, DPO =

Accounts Payable ( Rs )
* 365
Value of Raw Material Consumed ( Rs )

Cash-to-Cash Cycle Time (Days), CCD = TID + DSO DPO

Text p.
291-292

Contemporary Supply Chain


Management & Initiatives
Competition is between Supply Chains, not
individual companies
VMI: Vendor Managed Inventory
QR: Quick Response
ECR: Efficient Consumer Response
CRP/CRS: Continuous Replenishment
CPFR: Collaborative Planning, Forecasting &
Replenishment

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