SUPPLY CHAIN
MANAGEMENT
By
Ajit kumar Seth
Una Chittaranjan
Syed Md. Karim
Outline of the Talk
What is Supply Chain
What is supply chain management
steps in supply chain management
What is supply chain planning
importance of IT in SCM
ERP
conclusion
What is Supply Chain ?
Supply Chain is a set of activities(e.g. purchasing,
manufacturing, logistics, distribution,marketing)
that perform the function of delivering
value to end customer.
It is a logistics network where raw materials,
work –in-process inventory, finished goods
flows between suppliers, manufacturers,
warehouses, distribution centers and retail
outlets.
Supply Chain Structure
SUPPLIER FACTORY W/H DEALER RETAILER
Raw Materials
Finished Goods
Information Flow
What Is Supply Chain Management (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
5
Steps in supply chain
Plan
Plan Source
Source Make Deliver Buy
Make Deliver Buy
What is Supply Chain Planning ?
There is need for a mechanism through which the
execution of various business activities along a supply
chain can be planned in an integrated fashion.
This is the strategic portion of SCM. Companies need a
strategy for managing all the resources that go toward
meeting customer demand for their product or service. A
big piece of SCM planning is developing a set of metrics
to monitor the supply chain so that it is efficient, costs
less and delivers high quality and value to customers.
Supply Chain Planning Decisions
• Supplier •Location, Number,
Selection Capacity of Plants • Mode of
•Location, Number,
•Allocation of •What Products to Shipment
Size of Warehouses
Suppliers to the Produce
Plants •Which Plants to • Port Selection
Produce them
•Warehouse
Allocation • Vehicle Routing
• Customer
• Procurement • Inventory
Allocation
Policy Decisions
• Distribution Policy • Fleet Size
• Manufacturing
Policy
• Production
Schedule
•Scheduling on • Finished Goods
• Vehicle Routing
Machines Inventory
• Workload
Balancing
Source
companies must choose suppliers to deliver the goods
and services they need to create their product. Therefore,
supply chain managers must develop a set of pricing,
delivery and payment processes with suppliers and
create metrics for monitoring and improving the
relationships. And then, SCM managers can put together
processes for managing their goods and services
inventory, including receiving and verifying shipments,
transferring them to the manufacturing facilities and
authorizing supplier payments.
Make
This is the manufacturing step. Supply chain
managers schedule the activities necessary for
production, testing, packaging and preparation for
delivery. This is the most metric-intensive portion of
the supply chain—one where companies are able to
measure quality levels, production output and worker
productivity
Deliver
This is the part that many SCM insiders refer to as
logistics, where companies coordinate the receipt
of orders from customers, develop a network of
warehouses, pick carriers to get products to
customers and set up an invoicing system to
receive payments.
Return
This can be a problematic part of the supply chain
for many companies. Supply chain planners have
to create a responsive and flexible network for
receiving defective and excess products back from
their customers and supporting customers who
have problems with delivered products..
SCM PROCESS
Step1- Designing the supply chain
Determine the supply chain
network
Identify the levels
Step 2 - Optimizing the supply chain
Determine pathways from suppliers to
the end customer
Customer markets to Distribution centers
Distribution centers to production plants
Raw material sources to production plants
Identify constraints at vendors, plants and
distribution centers
Get the big picture
Plan the procurement, production and distribution of
product groups rather than individual products in
large time periods- quarters or years
Step 3- Material flow planning
• Determine the exact flow and
timing of materials
• Arrive at decisions by working
back from the projected demand
through the supply chain to the
raw material resources
• Techniques
ERP
Step 4 - Transaction processing and
short term scheduling
Customer orders arrive at random
This is a day to day accounting system which tracks and
schedules every order to meet customer demand
Order entry, order fulfillment and physical
replenishment
Information flows in Supply Chain Management
Information is overriding element
Need for databases
Master files: Information about customers, products,
materials, suppliers, transportation, production and
distribution data- do not require frequent processing
Status files- heart of transaction processing- track orders
and infrastructure status- updated daily.
Essentially using the same information to make all plans
right from structuring the network to processing every day
supply chain tasks.
INFORMATION FLOW
Demand Forecasting
Material Requirement Planning Demand Planning
Component Production
Requirement Plan
Supplier Plant Warehouse Logistics Retailer
Order Management
FINANCIAL FLOW
Suppliers Manufacturers Warehouses & Customers
Distribution Centers
Transportation Transportation
Costs Costs
Material Costs Transportation
Manufacturing Costs Inventory Costs Costs
17
IMPORTANCE OF IT IN SCM
The paper based transaction and
communication is slow.
IT infrastructure capabilities provides a
competitive positioning of business initiatives
like cycle time reduction, implementation,
implementing redesigned cross
functional processes.
Internet technology, World Wide Web,
electronic commerce etc. can be used to observe
past performance and historical trends to
determine how much product should be made
as well as the best and cost effective method for
warehousing it or shipping it to retailer.
ERP
Many companies now view ERP system (eg. Baan,
SAP, People soft, etc.) as the core of their IT
infrastructure. ERP system have become enterprise
wide transaction processing tools which capture the
data and reduce the manual activities and task
associated with processing financial, inventory and
customer order information. ERP system achieve a
high level of integration by utilizing a single data
model, developing a common understanding of
what the shared data represents and establishing a
set of rules for accessing data.
Software Packages
i2 Six: A comprehensive solution suite for spend/
production/ revenue/ logistics/ fulfillment optimization
Solution suites for network design & optimization/
manufacturing planning & scheduling/ global logistics
management/ service & parts management
JD EDWARD: The advanced planning software
to synchronize demand & planning/ network
Optimization/ production & distribution planning
Software Packages
ARIBA Spend Management: It helps
companies driving down enterprise wide spend
mySAP SCM: A complete supply chain
planning solution
iBann: A complete solution suite from demand
collaboration to order management
Results
Reduced inventory levels by 10-15%
Reduced markdown & scrap by 10-15%
Used resources10-20% more efficiently Companies that
utilized best-in-
Improved delivery reliability by 95-95% class SCM solutions
have
Reduced outages to 0-5%
Reduced cycle time by 10-20%
Reduced transportation cost by 10-15%
conclusion
Supply chain coordination requires all stages to take
actions that together increase total supply chain profit
Information system is essential in making good
supply chain decisions that maximize supply chain
profitability
