Handout 1 Scm Iimr 1

Evolution of SCM

Supply Chain Management: Some Contemporary Perspectives

Major revolutions along the journey •The First Revolution: The Ford Supply Chain •Vertical Integration •Zero Product Variety

•The Second Revolution: The Toyota Supply Chain •Long-term partnership with suppliers (Kieretsu system), and •Increased product variety

•The Third Revolution: The Dell Supply Chain •Individual customization •Loosely-held supplier networks •Enablers of supply chain performance

Why SCM is Important now? •1970, Quality •1980, lean manufacturing •1990 and beyond, SCM –The Increased complexity of supply chain

•Emergence of global supply chain •More demanding customers •Shorter production lifecycles •Outsourcing, decentralized control and more… –Feasibilities

•radical improvement in information technology and communication capabilities

Background

Impetus For Supply Chain Management Four key factors have provided the impetus for companies to take a broader view... • New Customer Service Definition • Beyond perfect order• shifting responsibilities/Vendor Managed Inventory ... • Escalating Logistics Cost ... • Cycle Time Compression--E-Commerce • Globalization--Worldwide rise in exports far exceed • Worldwide purchasing, manufacturing, and selling. • Long and complex global pipelines. • Product proliferation. • Cultural adaptation of their enterprise and its environment...

Logistics

Supply Chain Material management(inbound logistics) The acquisition and storage of raw materials, parts, and supplies The complete cycle of material flow from the purchase and internal control of production materials to the planning and control of WIP

Physical distribution(outbound logistics)

 Logistics is that part of supply chain

process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point-of-origin to the point-of-consumption in order to meet customers’ requirements.

All outbound logistics activities related to providing customer service. Order receipt and processing, inventory deployment, storage and handling, outbound transportation, consolidation, pricing, promotional support, returned product handling, and life cycle support…

1

Logistics...

Logistics: Past The study of logistics has its roots in the military… The traditional view emphasized local optimization within functional silos and within individual corporations

In 1984 CLM formulated a new definition which refocused the concept of logistics...

CLM Definition “The process of planning, implementing, and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.” This definition includes inbound, outbound, internal, and external movements.

But functional optimization leads to conflicts ...

CLM - Council of Logistics management -Adopted 1984

...a new flow and process orientation not a set of discrete activities and handoffs

Logistics - Evolution

Complexity in Logistics

Most modern companies have recognized that to improve cost and performance of the corporation they must... Accounting /

Finance

 Integrate internal logistics

activities  Integrate logistics with other corporate functions

Material Planning

Manufacturing

 Multi-location  Multi-product

Sales and Marketing

 Added Cost at various stages and locations

Production Planning Distribution Inventory Control

 Multi-modal transportation

Planning

Customers

Suppliers Procurement

Financial Institutions

Warehouse Operations Customer Service

Transportation

Carriers

 Different perspectives held by various

stakeholders in the logistics !

Other Log. Providers

but other pressures indicate that companies must look outside their own four walls...

Supply Chain Stages

Supply Chain Management  Supply

chain management deals with the management of materials, information and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers (Stanford Supply Chain Forum, 1999)

Supply Chain encompasses all activities associated with the flow and transformation of materials and information from the raw material stage through to the end user.

Supplier

Manufacturer

Distributor

Retailer

Customer

Supply chain management is a set of approaches utilized efficiently

to integrate suppliers, manufacturers, warehouses, and stores so that merchandise is distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide costs while satisfying service level requirements (Simchi-Levi et al., 2008)

2

Why study Supply Chains ? Supply chains are ubiquitous: you could consider every product or service to have its own supply chain.  Companies world-wide are spending trillions of rupees on SCM  Backbone of E-business  Wholesome mix of industrial engineering, mathematics, computer science, and management. 

Supplier

Supplier

Manufacturing Plants

Regional Warehouses

Field Warehouses

Retail Outlets

Customers

Material Flow Integration Stage I

Traditional Material Flow System

Procurement

Procurement

Operations

Operations

Distribution

Distribution STAGE I

• • •

Manufacturing firms had three separate material flow systems Buffered each system with inventory

Material Flow Integration Stage II= Logistics

Procurement

Operations

Distribution

•

STAGE I Integration - Physical Distribution Management- integration within The Distribution Loop Integration of finished goods transportation, warehousing, inventory and customer service function

•

Material Flow Integration - Stage III = Supply Chain Management

Vendor

Procurement Operations

Distribution

Retailer

STAGE II = LOGISTICS STAGE III = SUPPLY CHAIN MANAGEMENT

-

Integration of materials across procurement/ operations/distribution sub-systems of the firm

-

Requires elimination of inventory buffers through better information interfaces

-

Does not require change in organizational structure of firm

• • •

Manage inventory flow from vendor through firm all the way to retailer Primary Resource Transformation is trading information for inventory as in EDI, ECR, JIT etc. Focus on BOTH level and velocity of inventory

3

The Functional Approach

S U P P L I E R S

Sales

C U S T O M E R S

GENERAL SUPPLY CHAIN NETWORK Supplier 1

Supplier 2 ... Supplier n

SOURCES

Production Facilities

Distribution Manufacturing

Enterprise Logistic Facilities

Purchasing

 Traditional Approach: Functional, silo

based !  No attempt to look holistically!

SINKS

19

Customer 1

Customer 2 ...Customer m

ENTERPRISE Supply Chain NETWORK

Issues in Management of Supply Chain

Supplier 1

 Lead time

Supplier 2 ... Supplier n

SOURCES

 Total cost  Management of Inventory

Production Facilities

 Material Handling  Performance Monitoring & Control  Sensitization about the Logistics cost to all the

Enterprise Logistic Facilities

stakeholders !  Information Sharing………….. SINKS

Customer 1

Integrated Supply Chain Approach

C U S T O M E R S

Customer 2 ...Customer m

INTEGRATED SUPPLY CHAIN NETWORK Supplier 1

Supplier 2 ... Supplier n

SOURCES

Sales S U P P L I E R S

Distribution Manufacturing Purchasing

Production Facilities

Integrator

Logistic Facilities

INTERMEDIARIES SINKS

 Looks at the entire chain  Global rather than local focus

Customer 1

Customer 2 ...Customer m

 Integrated rather than fragmented approach 23

CONSUMERS

4

Broadened Scope of Information and Coordination

Supply Chain Management ... The clear implication is the need for further integration of all the parties involved…

Plan

Accounting /

Finance

Suppliers’ Supplier

Source

Make Deliver

Supplier

Source

Make

Deliver

Make Deliver Source

Customer

Your Company

(internal or external)

Inventory Control

Procurement

Customer’s Customer

Financial Institutions

(internal or external)

Accounting /

Finance

Distribution Planning

Material Planning Customers

Suppliers Source

Sales and Marketing

Production Planning

Material Planning

Deliver

Manufacturing

Warehouse Operations Customer Service

Transportation

Carriers

Other Log. Providers

...

Suppliers Procurement

Financial Institutions

Manufacturing

Sales and Marketing

Production Planning Inventory Control

Distribution Planning

Customers

Warehouse Operations Customer Service

Transportation

Carriers

Other Log. Providers

Integration Migration to prosper in this dynamic environment...

John Birchak, Intel Corp., National Science Foundation, University of Florida, October 1998

Conflicting Objectives in the Supply Chain

Conflicting Objectives in the Supply Chain

3. Warehousing • Low inventory • Reduced transportation costs • Quick replenishment capability 4. Customers • Short order lead time • High in stock • Enormous variety of products • Low prices

1. Purchasing • Stable volume requirements • Flexible delivery time • Little variation in mix • Large quantities 2. Manufacturing • Long run production • High quality • High productivity • Low production cost

What Management Gets...

Customer Demand

Distributor Orders

Order Size

Order Size

The Dynamics of the Supply Chain

Customer Demand

Retailer Orders

Production Plan

Production Plan

Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

5

Supply Chain: The Magnitude

What Management Wants…

Volumes

 In 1998, American companies spent $898 Production Plan

Customer Demand

billion in supply-related activities (or 10.6% of Gross Domestic Product). 

Transportation 58%



Inventory 38%



Management 4%

 Third party logistics services grew in 1998 by Time

15% to nearly $40 billion

Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Supply Chain: The Magnitude Ratio of Logistics cost with GDP for few select countries Country

Japan

Ratio of Logistics cost 8.7 with GDP (in %)

United States of America

Korea

India

8.5

16.5

12.3

 It is estimated that the grocery industry could

Source: G.Raghuram and J. Shah

Supply Chain: The Magnitude

save $30 billion (10% of operating cost) by using effective logistics strategies. 

A typical box of cereal spends more than three months getting from factory to supermarket.



A typical new car spends 15 days traveling from the factory to the dealership, although actual travel time is 5 days.

Supply Chain: The Magnitude

 Compaq computer estimates it lost $500 million to $1

billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them.  In 1993, IBM lost a major fraction of its potential sales of

desktop computers because it could not purchase enough chips that control the computer displays.

 Boeing Aircraft, one of America’s leading capital goods

producers, was forced to announce writedowns of $2.6 billion in October 1997. The reason? “Raw material shortages, internal and supplier parts shortages…”. (Wall Street Journal, Oct. 23, 1997)

 When the 1 gig processor was introduced by AMD, the

price of the 800 mb processor dropped by 30%

6

Supply Chain: The Potential

Supply Chain: The Potential

 Procter & Gamble estimates that it saved retail

customers $65 million through logistics gains over the past 18 months.

 In two years, National Semiconductor reduced

distribution costs by 2.5%, delivery time by 47% and increased sales by 34% by

“According to P&G, the essence of its approach lies in manufacturers and suppliers working closely together …. jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain”. (Journal of Business Strategy, Oct./Nov. 1997)

- Shutting six warehouses around the globe. - Air-freighting microchips to customers from a new centralized distribution center.

Supply Chain: The Potential Source

USA

UK

Far East

Mainland Europe

 In 10 years, Wal-Mart transformed itself by

changing its logistics system. It has the highest sales per square foot, inventory turnover and operating profit of any discount retailer.

Storage

Mahwah

Retail Market

USA

Newtown

Milton Keynes

Veldhoven

 Laura Ashley turns its inventory 10 times a

year, five times faster than three years ago. This is achieved by using - New Information System - Centralized Warehouse

Far East Pacific Basin

UK

Mainland Europe

Figure : Laura Ashley- before

40

Supply Chain: The Complexity Source

USA

UK

Far East

Mainland Europe

National Semiconductors: •

Storage

Satellite process centre

Process centre •

Retail market

USA

UK

Far East Japan

Mainland Europe

Figure : Laura Ashley- after

Production: – Produces chips in six different locations: four in the US, one in Britain and one in Israel – Chips are shipped to seven assembly locations in Southeast Asia. Distribution – The final product is shipped to hundreds of facilities all over the world – 20,000 different routes – 12 different airlines are involved – 95% of the products are delivered within 45 days – 5% are delivered within 90 days.

41

7

ISSUES: Decision Classification  Strategic Planning:

Decisions that typically involve major capital investments and have a long-term effect. 1. Determination of the number, size and location of new plants, distribution centers and warehouses

ISSUES: Decision Classification  Tactical Planning:

Effective allocation of manufacturing and distribution resources over a period of several months 1. Work-force size

2. Acquisition of new production equipment and the design of working centers within each plant

2. Inventory policies

3. Design of transportation facilities, communications equipment, data processing means, etc.

4. Selection of transportation and trans-shipment alternatives

3. Defining the distribution channels

ISSUES: Decision Classification

ISSUES: Why Keep Inventory?  Uncertainty in customer demands

 Operational Control:

Includes day-to-day operational decisions

 Uncertainty in the supply 

1. The assignment of customer orders to individual machines 2. Dispatching, expediting and processing orders

 

Uncertainty in quantity and quality Uncertainty in delivery time Uncertainty in costs

 Economies of scale

3. Vehicle scheduling

ISSUES: Demand Forecast

ISSUES: Inventory control

 The three principles of all forecasting techniques:

 How much inventory to keep?

Forecasting is always wrong The longer the forecast horizon the worse the forecast Aggregate forecasts are more accurate

 Can uncertainty be reduced?

 



 What size should orders be?  How does forecasting tool effect

inventory level?

8

ISSUES: Purchasing

ISSUES: The Challenge of Inventory Management  Matching supply and demand accurately is a

critical challenge 

“Dell Computers predicts a loss; stock plunges. Dell acknowledged that the company was sharply off in its forecast of demand, resulting in inventory writedowns”. (WSJ, August 1993)



“IBM continues to struggle with shortages in the Think Pad line”. (WSJ, May 1994)



“Liz Claiborne said its unexpected earnings decline is the consequence of higher than anticipated excess inventories”. (WSJ, August 1993)

 What to Purchase

- In-house production Vs. external suppliers  Where to purchase

- Domestic Vs. international  From whom to purchase

- Cost - Reliability: quality and on time delivery - Availability and flexibility

ISSUES: Purchasing  Centralized Vs. Decentralized  Number of suppliers:

Single sourcing Vs. Multiple sourcing  Supply contracts

ISSUES: Production  Location of manufacturing plants 

Production cost



Taxes



Incentives (by government)



Proximity to markets and raw materials



Transportation infrastructure



Political stability and culture

ISSUES: Production Flexibility 



The ability to produce different products simultaneously and efficiently The ability to produce new products efficiently

ISSUES: Production  Efficiency  

Low cost Short lead time

 Reliability  

On-time delivery Quality

9

ISSUES: Distribution

ISSUES: Product Design

 The structure of the distribution network

 What role does product design play in

supply chain management?

 The distribution strategy 

The Classical Strategy



Cross Docking



Direct Shipping

 When is redesigning products worth the

cost?  Can product design compensate for

uncertainty in customer demand?

Case : Benetton Manufacturing Process Postponement Old Sequence

ISSUES: Information Systems

New Sequence

Purchase Yarn

Purchase Yarn

Dye Yarn

Knit Garment Parts

Finish Yarn

Join Parts

 The advantages of advanced information

systems  The challenge of unlimited data  The roll of e-commerce

Knit Garment Parts

Dye Garment

Join Parts

Finish Garment

 Impact of the internet This process is postponed

ISSUES: What’s New in Logistics?

ISSUES: What’s New in Logistics?  Global competition

 New communications and information

technologies POS and EDI technology  Shorter product life cycle  Increasing product variety  New, low-cost distribution channels



Wireless technology

 Decision Support Systems  Integrated systems  Multi-modal transportation

 More powerful well-informed customers

10

ISSUES: What’s New in Logistics?

There is no simple key to success My customer wants it next day

You have to reduce inventories and other costs by 20% this year

 New concepts in logistics 

Push Vs Pull strategies



Cross docking



Strategic alliances



Manufacturing postponement



Design for Logistics

1 day more and we save 10% in transport costs

I want to see it in stock before I believe

Long production runs reduce costs

Others go to JIT

Supply Chain Network- Sample Structure

The Core Issues in Supply Chain Management

Tier 3 to Initial Suppliers

Tier 2 Tier 1 Suppliers Suppliers

Tier 1 Customers

Tier 2 Customers

1

Cycle Time

Technology Integration

Initiatives

Cost Management

Tier 3 to n suppliers

Alliances

n

1 1

2

1 n

2

1 2

n

Environmental Pressures

1 n

n

1

Focal Company Members of the Focal Company’s Supply Chain

634

. . .

Four Flows within Supply Chain

Non-core Critical Areas

Tier 2 Tier 1

Core Competency Areas

Tier 2

Tier 1 Tier 2 . . .

Supply chain management requires parallel control of: • Physical Goods • Logistics Information • Payments • Ownership Rights

Tier 1

Tier 1

Tier 2

Focal Company Closest Integration Tier 1 * Design team member Tier 1 - R& D collaboration * Prod/logistics info sharing * Rare partnership

Tier 1 . . .

Tier 2 Tier 2

Tier 1

      

Tier 2 Tier 2 Non-strategic, Non-critical Areas

Close collaboration (less expensive than innermost core) * Exchange design/development information * Prod/logistics info sharing Collaboration principally * Increasing partnership via tier 1 suppliers * Occasional direct contact with focal company

Degree of integration decreases

2

n

n

Tier 2

n

3

3

Inbound, Operations & Outbound

n

1

1 2

Tier 3 to Consumers/ End-Customers

Degree of integration decreases

Customer Needs

  Ownership Rights Ownership Rights   

Physical Distribution



ProductionProcure Manu- InventoryWarehousing& Transpor Order Forecast Mgt. -ing Planning -ment facturing Mgt. Materials Mgt. -tation

      

Payments



Logistics Information

Network Planning

Customer Satisfaction

     

11

Typical supply chain

Goals of SCM •Maximize the overall value generated in the chain •Generate cost savings and better customer service over the entire supply chain •Ideal:

upstream

–Have the right product –At the right place –At the right time –At the least cost –In the right amount

downstream

Toshiba PC supply chain

How is SCM different? upstream

Intel, AMD

Microsoft, Red Hat

Seagate, IBM

Toshiba America Irvine, California

North America DC

Europe DC

Toshiba Turkey

downstream

Enablers of Supply Chain Management... There are two principal factors which make supply chain management a reality... •

•

Increased Organizational Integration  Internal  External Advances in Communications and Information Technology  Capabilities  EDI/XML/Internet  RF/GPS/POS data capture  Broadband Communications  Integrated database management tools  Cheaper and faster processing …  Perspective

Builds on traditional fields such as production management, operations management or logistics management. The key differentiator is the systems approach of the supply chain management SCM considers every stage and facility in the supply chain and the interactions between them, whether they belong to different companies or different organizations within a company SCM considers the total costs in the supply chain Since SCM deals with all stages of the supply chain and their integration, it encompasses the firm’s activities at many levels: strategic, tactical and operational

Process View of a Supply Chain  Cycle view: processes in a supply chain

are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages  Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push)

12

Cycle View of Supply Chains Customer Customer Order Cycle

Cycle View of a Supply Chain  Each cycle occurs at the interface between two

successive stages  Customer order cycle (customer-retailer)

Retailer Replenishment Cycle

 Replenishment cycle (retailer-distributor)  Manufacturing cycle (distributor-manufacturer)

Distributor

 Procurement cycle (manufacturer-supplier)  Cycle view clearly defines processes involved and

Manufacturing Cycle

Manufacturer Procurement Cycle

the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each process.

Supplier

Customer Order Cycle

Replenishment Cycle

Customer Arrival

Customer Order Receiving

Retail Order Trigger

Retail Order Receiving

Customer Order Entry

Customer Order Fulfilment

Retail Order Entry

Retail Order Fulfilment

Manufacturing Cycle

Order Arrival

Receiving

Production Scheduling

Manufacturing and Shipping

Procurement Cycle

Order based on Manufacturer’s Production Schedule or Supplier’s Stocking Needs

Receiving at Manufacturer

Supplier Production Scheduling

Component Manufacturing and Shipping

13

Push/Pull View of Supply Chain Processes

Push/Pull View of Supply Chain Processes

 Supply chain processes fall into one of two

 Useful in considering strategic decisions relating

categories depending on the timing of their execution relative to customer demand  Pull: execution is initiated in response to a customer order (reactive)  Push: execution is initiated in anticipation of customer orders (speculative)  Push/pull boundary separates push processes from pull processes

to supply chain design – more global view of how supply chain processes relate to customer orders  Can combine the push/pull and cycle views  

L.L. Bean Dell

 The relative proportion of push and pull

processes can have an impact on supply chain performance

Push/Pull Processes for L.L. Bean Supply Chain Customer Order Cycle

Procurement, Manufacturing and Replenishment cycles

PUSH PROCESSES

PULL PROCESSES

Push/Pull Processes for Dell Supply Chain Cycle

PUSH PROCESSES

Customer Order Arrives

views can be classified into:   

Customer Relationship Management (CRM) Internal Supply Chain Management (ISCM) Supplier Relationship Management (SRM)

 Integration among the above three macro

processes is critical for effective and successful supply chain management

PULL PROCESSES

Customer Order Arrives

Supply Chain Macro Processes in a Firm  Supply chain processes discussed in the two

Customer Order and Manufacturing

Procurement cycle

Examples of Supply Chains  Gateway  Zara  McMaster Carr / W.W. Grainger  Toyota  Amazon / Barnes and Noble

What are some key issues in these supply chains?

14

Activity domain of SC professionals

Organizational Paradigms

Sr No.

Activity

1

Source selection, development, Incoming quality assurance, Value analysis

Paradigm Shift

2

Channel Management

From functions to process

3

Logistics Provider Development/evaluation, Third Party Logistics (3PL), Logistics management and management of Reverse logistics, Distribution Requirements Planning (DRP)

4

Management of Enterprise Resource Planning (ERP) & other information systems such as Point-of-Sale (POS), Management of Bullwhip Effect

5

Facility Location: Warehouse, distribution centers, plants etc.

6

Transportation: choice and evaluation of mode, cost analysis, development of carriers

7

Management of warehousing function, Cross-docking

8

Inventory Management: location, stock levels, information systems, tracking etc.

9

Management of Customer Service, Evaluation of performance

Leading to

Skills Required

Integral management of material and information flow

Cross-functional management and planning skills

From products to customers

Focus on markets and the creation of customer value

Customer segmentation

From revenue to performance

Focus on the key performance drivers of profit

Understanding of the time based performance indicators

From inventory to performance

Demand based replenishment and quick response systems

Information management

From transactions to relationships

Supply chain partnerships

Relationship management

Select Examples of SC in India Type of Industry

Select Examples

Apparel

Madura Coats, Reliance, Welspun

Automobile

Maruti, Hero-Honda, Telco, Mahindra & Mahindra, Tata Motors, Hyundai

Chemicals/Paints

Reliance, Asian Paints, Goodlass

CASE 1: SCM COMPLEXITY

Nerolac Consumer Durables

Samsung, LG, Godrej, Hitachi

Fast Moving Consumer Goods

Hindustan Lever, Proctor & Gamble, Coca-Cola, Pepsi,

Food

Godrej, Cadbury, Parle, Amul, Dabur

Computers

Wipro, HCL, Dell

Newspaper

Bennett Coleman & Co(Times of India,) HT Media Ltd (Hindustan Times)

Adapted from Prof.Y. Narahari, IISc, Bangalore

Scope / Activities  Supply Chain Management     

Materials Management & Transportation Manufacturing Packaging Total Quality Management Distribution Systems

Product Portfolio Horlicks

NHC

JHlx CHlx MHlx EHlx Hlx P

Viva

Boost Maltova

Oral Care Toothbrush Aquafresh Flex, FnD, FlexiKid Flexi friend

Jordan

Aquafresh mouthpaste x-fresh, F‘n M

Biscuits Hlx Std

Ch.Hlx Elaichi

Eno

Boost EB

Regular, Lemon, Jaljeera

Med

Crocin

15

Manufacturing Facilities - NHC Powders

Packaging Facilities - Nutritional N

3 Factories Nabha - Punjab Rajahmundry - A.P. Sonepat - Haryana

HA

7 Packing Sites

H NSD1

N F

Faridabad (F) Calcutta (C)

CG

Hyderabad (H)

C

Chennai (CH)

R

Nabha (N)

H

Hamira (HA) CH

Chittagong - Bangladesh (CG)

Mfring & Packing FacilitiesAquafresh

Manufacturing Facilities - NHC Solids 2 sites

2 Biscuit sites Burdwan Hyderabad

B

Goa (Tooth Brush) Nashik (Toothpaste) N

H G

Sales depots

Mfring & Packing Facilities OTC 1 Site (ENO) Hyderabad

H

Sales depots 32 nos

16

Supply Complexities

Supply Complexities

Export Supplies

Finished Goods Movement •250 vendors, 350 materials, 15 sites

Nepal

Bangladesh

Middle East

•P/S movement of avg.. 1200 kms •Over 1000 consignments/ month shipped across 130 site-depot linkages

Myanmar

•12 supply sites catering to 37 markets Mauritus

•Primary freight cost of Rs. 30 crore p.a.

Major Problems

Sri Lanka

Effective Supply ChainChallenges

 Forecast inaccuracy  Un-organised transport sector  Longer lead time for some raw

materials  Frequent change in statuary requirements  Sales promotions disturbs the planning cycles some times leads to major write offs

Effective Supply ChainChallenges

Effective Supply chain is not

limited to manufacturing & distributing products only but also……..

Effective Supply Chain Challenges

Design product to its supply chain

Distribution:- shippers should add

Supplier relationship

value rather than mere transportation Work on the “Customer’s Pull” rather than “Push” Is consumer response is making its way into the chain ?

Manufacturing:- should it be in-

house or to be out-sourced ? Least Product inventories Third Parties:- Partners can add

significant value

103

17

Effective Supply Chain-Challenges

Successful businesses match market demand and core capabilities ...

Then.. 

Contemporary Strategies

 Carriers had transport assets and systems

What’s the way out?

trucks, cars, terminals, tracking and tracing systems, fleet management systems ...  Shippers had critical need for more efficient logistics systems, but no expertise  Shippers needed resources in their core areas 

Result: Alliances in logistics--Third Party Logistics ...

Contemporary Logistics Strategies The competitive marketplace has given rise to logistics alliances ...

Trends in Global Supply Chain Management  Collaborative Product Development  Risk Pooling  Postponement  Demand signal closest to supplier and

Complementary Capabilities

accurate 

Sharing of risks and resources

Strategic Alliances

Competitive Advantage

POS data capture and transmission and now RFID in each piece of product eliminating the need for line of sight scanning—Unilever

Focus on core business

THERE IS ALREADY SIGNIFICANT ACTIVITY IN AUTO SECTOR

Existing/Planned Consortium of Bajaj Auto, M&M, Tata Motors, HM, Maruti (MSIL), Hero Honda, TVS Suzuki, Escorts, Kalyani etc

Vendor market places

Vendor Integration

Tata Motors, Bajaj Auto, Ford, Fiat, Hyundai, Honda, TVS Suzuki, Toyota, M&M etc

Internal Connectivity

Almost All

Dealer Integration

Hero

Maruti, Fiat, Ford, Daewoo, Hyundai, Hero Honda, TVS Suzuki, Bajaj Auto, LML, Kinetic, HM ,Mitsubishi Lancer, M&M etc

Basic Website

Sophisticated website with customisation, cataloging

Almost All

Auto Sector  Supply Chain Integration 

Buy Side



Sell Side

 Supplier

 Re

Integration

intermediation

 Relationship building with Customers

Daewoo, Honda , Fiat, Hyundai etc

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Maruti Suzuki

 Extranet for Dealers - 150 Dealers, 9 Models, 1000

Sub-assemblies, Avg.. 15 components per subassembly, changes avg.. 10 per week   

Wrong Orders / Re-conciliation problems Wrong shipment Multiple Printed Catalog / Addendum and Errata

One ECatalog, Multiple Views, Ordering Modules, Dealer Service, back-ending into Enterprise systems...

Barriers to Success in Emerging SCM  Resistance to change  Poor data availability  Supply chain design complexity  Organization structure  Poor cross-functional collaboration  Lack of trust (suppliers, customers)  Lack of E-commerce skills  Unsure top management commitment

Source: Adapted from A.D. Lttle Survey, 1999

Summary... Future of Supply Chain  More Integration: Comfortable Core

competence  New Market evolution  Increased variety-Low volume products  Industry Maturity  Power/Dominance  Integration & Information sharing

It is clear that the concept of Supply Chain Management provides companies and countries a framework within which they can assess how the challenges of the competitive market    

New customer service paradigms Decreasing cycle times/E-commerce Cost pressures Globalization & complexity

can be met through application of the offsetting enablers  Integration  Technology

making Logistics/SCM another element of competitive advantage.

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THANK YOU

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