SCM A Brief Study

SUPPLY CHAIN MANAGEMENT 1
The Supply Chain Management has the potential to improve Company’s competitiveness.
Supply chain capability is as important to a company's overall strategy as overall product
strategy. It encourages management of processes across departments. By linking supply chain
objectives to company strategy, decisions can be made between competing demands on the
supply chain. The impact of managing overall product demand and the supply of product will
impact the profitability of the company.
It can be viewed as the pattern of decisions related to sourcing product, capacity planning,
conversion of finished product, deployment of finished product, demand management and
communication, and delivery. Linking supply chain strategy to the business strategy involves
defining the key business processes involved in producing a company's product or service. A
company must develop objectives for the management of the supply chain based on corporate
objectives. From these higher level objectives, a set of detailed objectives can be developed for
each process within the supply chain.
This cascading method serves to integrate the supply chain processes with the overall enterprise
direction and provides measures for monitoring and execution. Supply chain management can
be utilized to be a point of differentiation for a company. Excellence on a certain dimension in
product position can provide a competitive marketing opportunity, but shortfalls in providing
this dimension by the supply chain can eliminate this advantage.
For a company to be competitive, it is not enough just to vary marketing programs. They must
define a working relationship with customers and put themselves in a position to deliver
customer value. All components of the supply chain must have the capability to meet strategic
objectives. Companies must evaluate the effectiveness of the supply chain strategy using a new
set of measures. Typical rewards aimed at improving performance of functions or departments
must be revised to strive to improve supply chain performance overall. By tying the supply chain
strategy to the overall company strategy, the objectives become process objectives rather than
functional objectives.
In today’s business the Supply Chain Management is the strategic management of activities
involved in the acquisition and conversion of materials to finished products delivered to the
Customers.
In other words, it is the stream of processes of moving goods from customer order through the
raw materials stage Supply, Production & Process and Distribution of products to the
customer Material and information flow Up and Down the Supply Chain Process.

The Supply Chain domain involves starting from Supplier Management to Customer
Management exchanging materials and information flow within the entire life cycle of chain
management of the operation.
A well designed Supply Chain shall provide the following benefits :
 Logistic operations can be located in the best locations irrespective of customers
locations
 Bigger facilities can be created and hence economies of scale can be thought of – what
if demand is less
 Large stocks need not be kept at the manufacturer/ producer’s end as the same can be
kept with wholesalers near the customers locations.
 Retailers carry less stocks as whole sellers/ distributors provide them the materials
whenever needed – My Research
 Lead times for supplying materials to retailers are short
 Uninterrupted availability of materials to customers
 Transport of materials should be simpler and routine
TYPICAL SUPPLY CHAIN STRUCTURE
MATERIAL FLOW
INFORMATION FLOW
SUPPLIER
MANAGEMENT
CUSTOMER
MANAGEMENT
Schedule /
Resource Conversion Stock
Deployment
Delivery
Information Flow
Raw Materials
CUSTOMER
FACTORY W/HOUSE DEPOT
S
SUPPLIER
Finished Goods

CORPORATE OFFICE
Major objectives of supply management :
 Effort to match SUPPLY and DEMAND for higher profitability.
 To provide an uninterrupted flow of materials, supplies and services required to
operate the organization
 Minimize inventory investment and loss
 Maintain right price and quality
 Create relationships with competent suppliers and customers-count load cover
properly. Relationship Management
 Set standards for supplies - Every organization has its own SOP (standard operating
procedure) which has to be maintain throughout the supply operation.
 Get supplies and services at lowest cost – Minimize the transportation, maintain timely
dispatches and quantity.
 Create a well-defined Distribution Channel
 Achieve harmonious, productive working relationships with other departments within
the organization viz. Sales, Marketing, Logistics, Technical, Quality Control etc.
 Keep purchasing administrative costs low - how
 Improve the organization's competitive position
MAIN OBJECTIVE
The right
Product
Higher
Profits
The right
Time
The right
Customer
The right
Quantity
The
right
Store
The right
Price
=+
+ + ++

Key Attributes of a “Chain”
 A break in the chain makes the chain non-functional
 All links must move in synchronization, it cannot exceed the capacity of its weakest link
 Though, all links have an interdependency
Key Elements to a Supply Chain Management :
Production:
Optimal production planning and scheduling is essential for manufacturing companies. It
ensures efficient production, reliable delivery, and lower costs.
Companies often find themselves trying to deal with large fluctuations in demand on one hand
and a strong desire for balanced production on the other. Rigid production plans often make
flexible reactions impossible. Methods of optimizing sequencing are often non-existent, as a
result lead times are long, processes are inefficient, and in-process inventories are high.
In order to achieve an optimal production, every company has to follow few points:
 Increased reliability of order promises
 Enabling production to react flexibly to fluctuations in demand
 Transparency about all processes due to an integrated and fully maintained IT-system
 Reduction of in-process inventory
 Improved resource efficiency
When optimizing production planning and scheduling, one should first examines the existing
processes and compares them with best-practice solutions. Value stream analyses clearly
illustrate the specific flows of materials and information. This makes it possible to identify
bottlenecks easily. Based on quantitative analysis, key figures that describe the current situation
can be derived and improvement opportunities can be pinpointed.
Workshops are then held with all of the participating functional areas to compile the
requirements for optimized production planning and scheduling and prepare an
implementation road map.
We should also look into the methods for optimizing batch sizes, resource allocation,
sequencing, and production patterns. Depending on the general production conditions and
customer demand, the optimal planning method is implemented. Lean manufacturing methods

are also applied. It is also advisable to look into the supports of roll-out of integrated IT
solutions, so that planning can take place efficiently and quickly with transparent data.
Inventory:
Inventory is an important aspect of Supply Chain Management. Whether the supply chain
supports a product of producer or a service provider, having a reasonable inventory is must.
Inventory means tied-up capitals on the shelves. So, one should have more than what he needs
to cover his production/service and to keep a safety stock, we may lose other opportunities to
invest these capitals in; this means loss of potential profits. Meanwhile, if we keep less than what
we need, we will not be able to fill the orders of our production line or our customers; and
consequently, less profit. So, the planning and calculation of inventory levels should be done
accurately keeping a space for buffer stock in hand according to market condition. It is very
critical to the supply chain process.
Location/ Distribution:
Accurate and efficient distribution management systems are critical to the success of a supply
chain management.
Overseeing the movement of goods from supplier or manufacturer to point of sale the
distribution management is an overarching term that refers to numerous activities and
processes such as packaging, inventory, warehousing, supply chain and logistics.
Effectively managing the entire distribution process is critical to financial success and corporate
longevity. The larger a corporation or the greater the number of supply points a company has,
the more it will need to rely on automation to effectively manage the distribution process.
The following willbe the advantages of having a distribution system according to Organizational
need :
 Fast response to customer demands
 Easier customer orders handling
 Optimization of central warehouse to branches stock movements
 Full integration of warehouse/ depots management system operations on branch level
assuring high system throughput
 Performance optimization allowing online access and day-to-day work of hundreds
concurrent users in one database (including branch users or even foreign branch users)
 Quick customer service secured by stable system response and smooth operation
execution
 Better information sharing of stock and stock movements

Transportation:
To practice effective, cost efficient Logistics Management, an organization must lay the
foundation for a responsive, economical transportation network. With this transportation
network, an organization is able to implement major strategic changes to reduce costs and
increase customer service levels with very little disruption to the overall supply chain flow.
A responsive transportation network begins with end-to-end network visibility. Visibility allows
the business to centralize production operations to lower-cost areas without impacting
customer service levels, because any uncertainty within the network can be monitored and
appropriately managed to keep inventory levels as low as possible.
While the data certainly lends itself to the mindset that transportation is a big hurdles. In fact,
Supply Chain Managers who are outpacing their competition have done so largely by
acknowledging transportation as a ready vehicle through which to drive cost savings and create
value within the Supply Chain. More and more sophisticated tools allowing Managers to
monitor, control, and optimize transportation networks are available.
The road ahead is therefore still long, but the systemic impact of transportation-related figures
clearly demonstrates that transportation is much more than just the financial drain associated
with trucks, pallets, and warehouses. When the appropriate tools to manage complexity and
guarantee visibility are in place, transportation provides an organization with the opportunity
to continuously create operational efficiency and improve the bottom line – ultimately
unlocking previously untapped value for shareholders.
Information System:
Information System plays a pivotal role in the Supply Chain Management. Recently the concepts
of supply chain design and management have become a popular operations paradigm. This has
intensified with the development of Enterprise Resource Planning (ERP) and associated
communication technologies.
It include Management Information System (MIS) and electronic data interchange (EDI), the
Internet and World Wide Web (WWW) to overcome the ever-increasing complexity of the
systems driving buyer–supplier relationships, managing internal organizational
The complexity of Supply Chain Management (SCM) has also forced companies to go for online
communication systems. For example, the Internet increases the richness of communications
through greater interactivity between the Company and the Customer. It also highlight the role
of the Internet in building commercially viable supply chains in order to meet the challenges of
virtual enterprises.

Nowadays, companies are in the race for improving their organizational competitiveness in
order to compete in the global market. This market is electronically connected and dynamic in
nature. Companies are trying to improve their agility level with the objective of being flexible
and responsive to meet the changing market requirements.
In an effort to achieve this, many companies have decentralized their value-adding activities by
outsourcing and developing virtual enterprise (VE). All these highlight the importance of
information technology (IT) in integrating suppliers/partnering Companies in virtual enterprise
and supply chain.
Supply chain management (SCM) is an approach that has evolved out of the integration of these
considerations. It is defined as the integration of key business processes from end user through
original suppliers that provides products, services, and information and hence add value for
customers and other stakeholders. Supply chain management emphasizes the overall and long-
term benefit of all parties on the chain through co-operation and information sharing. This
signifies the importance of communication and the application of IT in SCM.
Production Element of Supply Chain
Market Demand:
Demand management is an essential element in supply chain management, focusing
companies and their partners on meeting the needs of customers, rather than the production
process. The lead company in the supply chain makes partners aware of customers’ needs,
encouraging them to maximize component or supply quality and add value to the finished
product. By raising awareness of customers’ needs and increasing collaboration, companies
can improve the competitiveness of the whole supply chain and increase business
opportunities for all members.
Effective communication helps the entire supply chain improve the efficiency and productivity
of its operations by enabling all members to share the same demand and operational
information. Communication keeps all members informed of developments that affect their
contribution to the supply chain, enabling them to quickly adjust their operations in line with
changing demand conditions. Effective communication also enables members to respond
rapidly to new business opportunities, helping to get new products to market quickly or
increasing supply levels following a successful marketing campaign.
Integrating supply chain processes helps each member reduce its inventory costs, enabling
them to offer customers highly competitive pricing. To achieve this level of integration,
companies develop single information networks that enable all members to access and share

supply and demand data securely. The networks are based on open standards, such as Internet
Protocol, so all members can communicate, even if they have different internal networks.
Collaboration in the supply chain strengthens relationships between members, improving
teamwork and helping all members to increase business. Lead companies run business
development and training programs to improve supply chain partners’ market and product
knowledge too.
o Resource Management
o Internal sourcing (what and which plants)
o Outsourcing to capable suppliers
o Capacity Management
Workload schedules:
Workload schedules can only be possible by integrating an automatic back-office processes
of business applications. Today, this workload automation needs software that automates the
back-office processes of business applications. Workload automation goes beyond job
scheduling, allowing company to integrate and manage dependencies for processes that span
multiple business applications and heterogeneous server platforms. This automation includes
job scheduling which has historically been used to manage the submission of jobs at the
operating system level.
o Equipment plans (acquisition/maintenance)
o Order Management
In a commercial business environment, the order management is the first and foremost
management, which must be taken care by adopting a SOP according to organizational
need. The Order Management System represents the principal means by which buyers
and sellers communication information relating to individual orders of product is being
executed. Effective order management is a key to operational efficiency and customer
satisfaction.
o Quality control
While most companies focus efforts on improving supply chain efficiency by looking
at the supply chain process itself, a few realize that other departments can have an
impact on efficiency and speed. One of these departments is Quality, which is tasked

with inspecting incoming raw materials, in-process work and final product before it is
shipped. If there is a way to help the Quality department get its job done faster, then,
by definition, the operations process can move along faster, thus reducing time in the
supply chain.
Supply Element of Supply Chain
o Partners in the Supply Chain
o Assessing core/strategic competencies
o Identifying capable suppliers
o Making sourcing decisions
o Relationship management
o General Procurement
Inventory Element of Supply Chain
Plan for Inventory and Warehouse location
Plan for Warehouse for better utilization of inventory should be design according to the
materials flow and nature. Three factors involved while considering the selection of
warehouse.
 The number of SKU in the facility needed
 Height Utilization
 Product/ Materials Flow
According to the Product flow, a warehouse design should consider product characteristics
particularly those pertaining to volume, weight and storage. Product Volume is the major
concern when defining a warehouse storage plan. High volume sales or throughput should be
stored in a location that minimizes the distance it is moved, such as near primary aisles and in
low storage racks. Such location minimize travel distance and the need for extended lifting.
o Analysis of fluctuations in demand
o Identification of optimal storage locations in support of Customer demand
o Identification of optimal stock levels by location
o Establishing inventory ordering policies
Dissertations : In my project I have taken paint industry and analyzed it’s products and SKU and
found the following facts:
The product range are categories into different segment and then they categories into different
SKU from 50 ml to 20 Ltrs, keeping a very high SKU range approximate 2500. This SKU must be

made as per the market demand and segments identified. It is also advisable to finalise the
warehouse capacity and location as per local/government environment policies prevailed.
As paint is a hazardous and inflammable product, precaution to be taken while stacking cartons
and buckets. The stocking norms is also to be decided and followed in order to minimize the
inventory losses. The buckets to be stacked near to the delivery points segregating manufacturing
batch too, which will ease in dispatching and at the same will also help in maintaining the FIFO
method. It is also visualize that we should maintain a good ambience, which also will give
sufficient flow of light and air with adequate room height (minimum 15 feet roof height).
Location Element of Supply Chain
 Strategic placement of production plants, distribution and stocking facilities
 Understand Customer Markets
 Perform locating decisions for production and stocking facilities
 Lightweight/ Market driven near the end-user
 Heavy industries near raw material source
 Evaluation of tax and tariff issues and transportation accessibility
 Analysis of climatic condition of the Region
Transportation Element of Supply Chain
 Supporting inventory decisions and Customer demand requirements
(Transportation is up to 30% of total Production Cost)
 Identify customer service levels
 Identify mode of transportation according to Product
Air
Water
Railway
Road
 Establish strategic transportation partnerships
Information Element of Supply Chain
 Obtaining, linking and leveraging information across the Supply Chain
 Organization of Information
 Linking computers through networks and the internet for Wide Area Business activities
 Streamlining information flow
 Consolidating information for MIS activities

 Information Data Warehouse
 Decision support tools
Adaptive forms of Relationship Management
 Relationship Assessments
 Alliance evaluation mechanisms
 Assessing key variables of Reliability, Competence, Affect Based Trust
(Goodwill), Vulnerability
 Risk sharing and Loyalty
 Conflict Resolution
 Aversion to legal disputes
 Arbitration as a business decision
 Mini-trial
 Rent-a-judge
 Information as a Common Thread
Supply Chain Driving Factors
 Information Revolution
 Intra-Enterprise Technology
 The Internet
 E-Commerce
 Inter-Enterprise Technology
 Dynamic Operating Systems
 Relational database management
 Desktop Tools
 Revolution of ERP
 Customer Demand
The importance of Supply Chain Management thus is in :
 Reduced inventories along the chain………
Every organization today must be fast and nimble enough to react quickly to
changes in customer demand and do it with little inventory.
Major reductions (20 to 50 percent or more) in all forms of inventory, without
harming customer service, usually require the re-engineering of the order-to-

delivery cycle to find ways to do it faster, better, cheaper. Dramatic rethinking
of business processes often results in significant reductions in lead times and
increases in control that eliminate the need for inventory buffers. As a bonus,
this kind of change usually pays benefits in increased quality and improved
customer service.
In a survey conducted by R. Michael Donovan & Co. Inc., 82 percent of senior
executives who responded said that inventory reduction was a major concern.
Some saw inventory as just something that absorbs massive amounts of cash
while others recognized that high inventories were an indication of other
serious problems. Certainly, money tied up in inventory could be better spent
elsewhere: new product development, expanded marketing and sales,
acquisitions, modernization, re-engineering, expansion, debt reduction, and
many others.
 Better information sharing among the partners…..
One of the major transformations in the rapidly evolving digital economy
occurs in the supply chains of both traditional and e-commerce companies.
Information technology has enabled channel partners to trade goods, share
information, and integrate their processes, thereby reshaping the inter-
organizational dynamics and resulting in more efficient channels. Electronic
integration of data and the automation of business practices has driven costs
down and built sales by better satisfying consumer needs.
PRODUCTION
What, how and when to Produce
INVENTORY
How much to make and how
much to store using the Best
Practices
TRANSPORTATION
What, How and When to move
product
LOCATION
Identify, Where best to do what
activity
INFORMATION
The basis for making
these decisions and life
line of the organization

Technology continues to play a role between manufacturers and suppliers. On
the supply side, they have moved from EDI (Electronic Data Interchange)
purchase orders and invoices to looking at CPFR (Collaborative Planning
Forecasting and Replenishment). This industry model provides a platform for
the collaboration of a joint forecast between manufacturers and suppliers that
will ultimately drive the replenishment process through the entire supply chain.
This may eventually lead to the elimination of purchase orders and invoices as
we know them today. Second, watch for industry standard approaches to share
the demand side data similar to the standards they have in place today for EDI.
Developing an industry based approach for sharing point of sale data, market
data, and consumer data for joint decision making will be a key to success.
In addition, driving key third party data providers to provide quality data in
agreed to Industry standard hierarchies will lead to better integration between
joint buyer/seller workstations. The Internet will provide the technical platform
to exchange information between manufacturers, retailers and third party data
providers.
 Planning being done in consultation rather than in isolation
Planning across the Supply Chain Domain has to be made in every respect in
consultant with each and every entity in three phases using Program
Management Services like DARC software:
Strategic Planning
DARC specializes in strategic consulting on business processes. Through the
configuration and use of Oracle Applications, DARC can help us to realize
significant operational improvements to your business. Examples of our success in
delivering operational improvements include:
 Assessment and modeling of mixed-mode and hybrid manufacturing operations,
blending discrete, process and flow operations at the operational level to achieve
desired control, costing and reporting performance indicators
 Evaluation, process design and benefit analysis for make-to-order (MTO) vs.
make-to-stock (MTS) replenishment models, with consideration of guided selling,
quotations, order configuration and capture, material ATP, demand scheduling,
engineering bills & routings and planning

 Consideration of standard vs. actual vs. project accounting processes, including
burdening, lean costing techniques, variance tracking, overhead absorption, cost
apportionment and expense costing. Costing methodologies are built to comply
with industry, regulatory and audit standards.
 Analysis and design of material control and supply chain replenishment models,
including inventory organization, stocking and locator control – DARC provides
comparative analysis between Forecasting/MPS/MRP, reorder point, min‐max and
Kanban systems
 Audit and remediation of procurement and sourcing processes to leverage known
business relationships, document automation, simplified receipt and payments
Tactical Planning
Rely on DARC to achieve tactical objectives related to all aspects of production, such
as:
 Conducting master data modeling to remediate items, bills of materials and
routings to maximize Oracle Applications functionality and improve reporting
 Designing quality data collection solutions for incoming, work in process, final and
material review board inspection processes
 Putting together material control strategies to meet traceability and audit needs
 Identifying and implementing business rules and logic for warehouse put away,
cycle counting, picking and shipment consolidation tasking
 Automating MRP, requisitions, approved supplier lists and sourcing rules to
improve efficiencies and streamline document processing
Operational Planning
In order to achieve the two : Strategic and Tactical Planning in a regular basis we
should also plan for regular Operational Planning viz. Daily, Weekly and Monthly
plans, which will give feedback/ generate data to the other two system.
The benefits too would be reflected in terms of :
 Lower costs
 Better customer service
 Efficient manufacturing
 Better trust among the partners leading to win-win

Process integration and other efforts result in improved quality as higher profit
margins shall get reflected in creation of better facilities for manufacturing, product
design, research and enhanced customer service.
Challenges in Supply Chain Management Today
 Strategic imperative of supply chain
The effect of supply chain integration on the alignment between corporate
Competitive capability and supply chain operational capability to be tuned as a
Major strategy.
This can be achieved by the following:
-“fine tuning” the existing ordering policy parameters;
-reducing system delays;
-removal of the distribution echelon;
-changing the individual echelon decision rules;
-better use of information flow throughout the supply chain.
 Deliberate redesign of supply chain networks
 Offshore outsourcing (lead-times/customer service impact)
 Supply chain design should be according to customer requirements
 Cash-to-cash cycle
 Supply chain visibility technology
 Strategies for inventory positioning near customer location
 Warehouse Management challenges
 Collaboration with supply chain partners

SCM A Brief Study

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a SCM A Brief Study

Semelhante a SCM A Brief Study (20)

Último

Último (20)

SCM A Brief Study