Dr Meenakshi Sharma
Supply chain Management
What is the Supply chain
Management
Supply chain management is the management of the
flow of goods and services and includes all processes that
transform raw materials into final products.
It involves the active streamlining of a business's supply-
side activities to maximize customer value and gain a
competitive advantage in the marketplace.
SCM- Flow Between
Facilities: Raw Material
Work in progress
Finished Goods
Manufactures
Suppliers
Distributors
Wholesaler
Retailers
Supply Chain Management
A set of approaches used to efficiently integrate in
Distribution centers-So that the product is produced
and distributed, In the right quantities, To the right
locations, And at the right time so that System-wide
costs are minimized and Service level requirements are
satisfied.
Importance of SCM
Dealing with uncertain environments – matching supply
and demand
Shorter product life cycles of high-technology products
Less opportunity to accumulate historical data on customer
demand
Wide choice of competing products makes it difficult to
predict demand
The growth of technologies such as the Internet enable
greater collaboration between supply chain trading
partners
Components of SCM
Planning
Transportation Inventory
Man Power Production
Steps of Supply Chain Management
Strategic Planning
Demand Planning
Supply Planning
Manufacturing
Warehousing
Transportation
Push Model of SCM
Push Supply chain
Push model of supply chain, products are pushed through
the channel, from the production side up to the retailer.
For example, at the end of the summer season, clothing brands
start to manufacture more warm clothes. This type of planning
becomes valuable to companies as it helps plan them for events
in the future and be prepared when winter comes. This gives the
companies meet their needs in time and also gives them time to
figure out other logistics like where to store the inventory.
Pull Model
Pull Supply Chain
Pull Supply chain , the process of manufacturing and
supplying is driven by actual customer demand.
In this type of supply chain logistics, inventory is
acquired on a need-basis.
For example, an auto repair shop that only orders parts
that it needs. In this case, the business waits until it
gets an order to procure the parts required for the
repair.
IMPORTANCE OF SCM
Improve
Customer Service
Improve
Reduce
Financial
Operating Cost
Position
Good customer service
Improve Customer Services
Customers expect to receive the correct product mix and quantity
to be delivered on time. For example, if you buy five books
from Amazon and only two of the actual titles arrive, one is an entirely
different book and two are missing, the customer will lose faith in
Amazon, prompting them to leave a bad review and hinder them from
returning to the platform.
Products need to be on hand in the right location.
Example Customer satisfaction is tarnished if your car’s brake pads fail
and the auto repair shop is delayed in making the repairs because parts
are not available in-house.
Follow up support after a sale must be done quickly. When an
appliance store sells a furnace with a warranty and it breaks down when
temperatures are below freezing, it is a great possibility the customer
will be irate if the heating unit cannot be fixed immediately.
Financial Position
Improve Financial Position
Insert Profit - Businesses value supply chain
managers because they help control and decrease
supply chain expenditures.
Decrease Fixed Assets - Supply chain managers
decrease the use of large fixed assets such as plants,
warehouses and transportation vehicles, essentially
diminishing cost.
Increases Cash Flow - Firms appreciate the added
value supply chain management contributes to the
speed of product flows to customers.
Operating cost
Reduce Operating Costs
Decreases Purchasing Cost - Retailers depend on supply
chains to quickly distribute costly products to avoid sitting
on expensive inventories.
Decrease Production Cost - Any delay in production can
cost a company tens of thousands of dollars. This factor
makes supply chain management ever more important.
Reliable delivery of materials to assembly plants avoids any
costly delays in manufacturing.
Decrease Total Supply Chain Cost - Wholesale
manufacturers and retailer suppliers depend on proficient
supply chain management to design a network that meets
customer service goals.
SCM difficulties
Uncertainty is inherent to every supply chain
Travel times
Breakdowns of machines and vehicles
Weather, natural disaster, war
Local politics, labour conditions
The complexity of the problem to globally optimize a
supply chain is significant
Change in price
Bullwhip effect in SCM
Bullwhip Effect
The bullwhip effect is a distribution channel
phenomenon in which forecasts yield supply
chain inefficiencies.
It refers to increasing swings in inventory in
response to shifts in customer demand as one
moves further up the supply chain.
Example of bullwhip effect
Graphical Representation of
Bullwhip effect
7 ways to cope with Bullwhip
effect
Focus on the customer. Optimal network design
centered around your customer.
Define the right push-pull boundaries and strategy.
Share Information.
Manage Product Portfolio.
Break order batches.
Stabilize prices.
Eliminate gaming in shortage situations.
Why Bullwhip effect important?
The bullwhip effect is when the supply chain is driven
by forecasts.
It is seen when there is a large variability in the
inventory that is caused directly by the changes in
customer demand.
This is why it is so important to synchronize the flow
of materials between all of the supply chain partners.
One more example
Bullwhip effects
The bullwhip effect is caused by demand forecast
updating, order batching, price fluctuation, and
rationing and gaming.
Price fluctuations due to inflationary factors, quantity
discounts, or sales tend to encourage customers to buy
larger quantities than they require.
