Module 1

Introduction to Supply Chain

Management
-Prof. (Dr.) Shweta Kishore
Supply, Supply Chain and
Supply Chain Management
A Supply is the quantity of inventory/goods available (in
required quantity) for use or the actual replenishment of a
product or component.
A Supply Chain is the link connecting set of facilities,
companies, demand and supply points and service providers.
Supply Chain links suppliers and downstream customers with
the flows of products, services, finances.
Supply Chain Management (SCM) is the systematic and
strategic coordination of all business functions within a
company for the purposes of improving the long term
performance of the supply chain as a whole.
Supply Chain
• Supply chain consists of all links/stages involved directly or
indirectly in fulfilling customer’s request /order.
• The supply chain includes not only the manufacturers and
suppliers, but also transporters, warehouses, retailers and
even customers themselves.
Supply Chain Management…
Supply chain management encompasses the planning
and management of all activities involved in
sourcing and procurement
conversion
and all logistics management activities

Importantly, it also includes coordination and

collaboration with channel partners, which can be
suppliers
intermediaries
third party service providers
and customers

In essence, supply chain management integrates supply

and demand management within and across
companies.
Generic Supply Chain
Dell Supply Chain
•Video: What is supply chain
Management
•https://www.youtube.com/watch?v=Mi
1QBxVjZAw
Evolution of SCM
Materials Management ▪ Phase One- The Origin of
Materials Management.
▪ Phase Two- Development
Physical distribution management
of Physical Distribution
Management.
Logistics management ▪ Phase Three- Emergence
of Logistics Management.

Integrated logistics management ▪ Phase Four- Development

of Integrated Logistics
Management
Supply chain management
▪ Phase Five- Introduction
to SCM.
Integrated supply chain
management ▪ Phase Six - Convergence
into Integrated SCM 8
Evolution of SCM
• The evolution of supply chain management has been
characterized by an increasing degree of integration of
separate tasks, a trend that was underlined in the 1960s as a
key area for future productivity improvements since the
system was highly fragmented.

• Although the tasks composing logistics have remained

relatively similar, they initially consolidated into two distinct
functions related to materials management and physical
distribution during the 1970s and 1980s.

• This process moved further in the 1990s as globalization

incited a functional integration and the emergence of logistics
in a true sense; all the elements of the supply chain became
part of a single management perspective.
Evolution of SCM, Contd….

• However, only with the implementation of modern

information and communication technologies, a more
complete integration became possible with the emergence of
supply chain management.

• It allows for the integrated management and control of

information, finance and goods flows and made possible a
new range of production and distribution systems.

• Supply chain management has become a complex sequence of

activities aiming at value capture and competitiveness.
Evolution of SCM, Contd….

• More recently, the growing level of automation of supply

chains has been a dominant element of the evolution of
both physical distribution and materials management.

• This digitalization is particularly notable within distribution

centers that have experienced a remarkable push towards
automation such as storage, materials handling, and
packaging.
What is Supply Chain Management ?

• Supply chain Management is nothing but managing the flow

throughout the chain.
Flows in a Supply Chain
Flows in a Supply Chain

Focal firms are those companies “that usually rule or govern

the supply chain
What SCM Does?
• Manages three flows
inventory, information and cash
• Manages four cycles
procurement, manufacturing, replenishment and order
fulfillment
• Aligns capabilities of
Suppliers and service providers
Example
• Customer walks…..Wal-Mart to purchase…..say
detergent.
• SC begins with the need for detergent.
• Customer visits Wal-Mart.
• Wal-Mart….inventory….supplied
from……warehouse…..using trucks of a third party.
• The distributor…..stocked by ….. manufacturer
(say P & G).
• P & G manufacturing plant receives Raw
Material…..from a variety of suppliers…..who
themselves are supplied by lower tier suppliers.
In addition to material flow, there will be flow of funds as well as
information also
Supply Chain
• The customer is an integral part of the supply chain. In
fact the primary purpose of any supply chain is to satisfy
customer needs and in the process generate profit for
itself.
Supply chain stages
• A typical supply chain may involve a variety of
stages. These stages include :
Customers
Retailers
Wholesalers/distributors
Manufacturers
Suppliers
• Each stage in a supply chain is connected through
the flow of products, information and funds which
often occur in both directions.
Objectives of SCM
• Improvement – cost and quality
• Shortening performance cycle
• Speed to market
• Responsiveness
• Reliability
• Flexibility – volumes and variety
• Demand management
• Turnover Rate
• Communication and Coordination
• Profitability
 Supply Chain Decision Phases

• Supply chain strategy or design

• Supply chain planning
• Supply chain operation
 Supply Chain Strategy or Design

• Decisions about the structure of the supply chain

• and what processes each stage will perform

Strategic supply
– Locations and chain
capacities decisions
of facilities

– Products to be made or stored at various locations

– Modes of transportation
– Information systems
• Supply chain design must support strategic
objectives
• design decisions are long-term and
Supply chain
expensive to reverse – must take into account
market uncertainty
 Supply Chain Planning

• Definition of a set of policies that govern

short-term operations
• Fixed by the supply configuration from
previous
Starts phase
with a forecast of demand in the
•
coming year
 Supply Chain Planning

• Planning decisions:
– Which markets will be supplied from which locations
– Planned buildup of inventories
– Subcontracting, backup locations
–
Inventory policies
–
Timing
Must and sizeinofplanning
consider market promotions
decisions demand
•
uncertainty, exchange rates, competition over the
time horizon
 Supply Chain Operation
• Time horizon is weekly or daily
• Decisions regarding individual customer orders
• Supply chain configuration is fixed and operating
policies are determined
• Goal is to implement the operating policies as
effectively as possible
• Allocate orders to inventory or production, set
order due dates, generate pick lists at a
warehouse, allocate an order to a particular
shipment, set delivery schedules, place
 What are Different types
of planning?

The 3 types of planning are

• Strategic,
• Tactical, and
• Operational,

One more type of planning

• contingency planning.
Decisions in SCM
Decisions in SCM
• Network
• Vendors
• Production
• Inventory
• Distribution
• Information
Network
• Choice of supply points near demand points
• Production facilities
• Stocking points
• Sourcing points
•Long term planning horizon
•Impacts revenue, cost and level of service
•Have implications on operational level
activities
Vendor
• Firms need reliable suppliers, conforming to
delivery schedules and lead times.
• Reducing supplier’s base enhances control,
reliability and loyalty of suppliers.
• Helps in developing long term relationship based
upon trust, mutual dependence and sincerity
• Firms can employ distributors, who collect raw
materials from various suppliers and dispatch it to
manufacturer

Consolidation
Suppliers Manufacturer
Agent
Example
• For McDonalds,
• Mutton comes from Hyderabad based Al-Kabeer
• Lettuce is flown in from Pune and Ooty
• Buns from Cremica Industries, Ludhiana
• Cheese from Dynamica Industries, Baramati
(Maharastra)
• Hubs of cold chain is located in North and West ,
managed by RadhaKrishna Foodland, who
dispatches supplies to restaurants, processes
information and coordinates the work.
Production
• About product mix, location of plant, supplier base
to that plant
• Decisions about allocation of plants to DCs and DCs
to market
• Capacities of the manufacturing facilities
• Decision impacts revenues, costs, customer service
• Flexible manufacturing system
• Production planning, equipment maintenance
• Workload balancing, quality control
Inventory
• R/M, semi-finished, finished goods
• Purpose of inventory is to reduce the level of
uncertainty in SC.
• Proper inventory control policy
• Order quantity, reorder points, safety stock level
Distribution
• Mode of transport and route
• Controlling the cost and speed to the market
• Selection of transportation mix
• Trade off of cost of transportation and cost of
inventory……Air vs. Ship
Information Flow
• Most crucial element
• Proper integration throughout the chain
• Use of internet
• ERP can be adopted to connect customers,
suppliers and enterprise
Supply Chain of Amul

• Case Study Discussion on SC of Amul

• https://www.youtube.com/watch?v=njjZOdqw5XU
Question AMUL Case Study
• Core Advantage: How does Amul's farmer-owned
cooperative model create a sustainable competitive
advantage in the Indian dairy market?
• Operational Excellence: What are the key factors
that contribute to Amul's efficient milk
procurement, processing, and distribution?
• Value Creation: How does Amul create value for
farmers, consumers, and the Indian economy?
• Future Challenges: What are the major challenges
and opportunities facing Amul's supply chain in the
coming years, and how can they adapt?
Process View of SCM
1) 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

2) 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).
Cycle View

• Four clearly defined process cycles in SC from

downstream to upstream.

• Each performed at the interface between two

successive stages of the supply chain.
Cycle View of a Supply Chain
• The five stages of a supply chain can be broken
down into four process cycles.
Cycle View of Supply Chain

• Each cycle occurs at the interface between two

successive stages of the supply chain
• Four supply chain process between five stages.
• It defines processes involved and owners.
• Not every supply chain will have all the four cycles
clearly separated.
• Dell sells directly to customers, thus bypassing the
retailer and distributors.
Sub-Process in each Supply Chain
Process Cycle
• Each cycle consists of six sub-processes

Supplier stage markets Buyer returns reverse flows

products to supplier or third party

Buyer stage place order Buyer stage receives supply

Supplier stage receives Supplier stage supplies

order order
Push/Pull View

• The processes in a supply chain are divided into

two categories depending on whether they are
executed in response to a customer order or in
anticipation of customer orders.

• Pull processes are initiated on customer order,

whereas push processes are initiated and
performed in anticipation of customer orders.
Push/Pull View of Supply Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives
Push/Pull View
Extended Supply Chain
• Supply Chain of a manufacturing firm has 3 main
functions to integrate and manage:
1) Buy
2) Make
3) Distribute
• If SC is further extended to look into
• supplier’s suppliers and
• downstream to customer’s customers,
• it is called an Extended SC.
• Too complex to control
• But if managed properly, results in better control of cost
, delivery and end- product quality.
Extended Supply Chain...
Supply Chain Integration
• Today is a competitive world
• Company cannot survive on its own
• Can grow with the help of suppliers and their
co-operation
• Proper information flow to manufacturer
• Uncertainty can be handled with accurate market
feedback
• Decision making nodes in chain to join hands to
Improve quality
Reduce costs
Reduce lead times
Enhance information sharing
Performance Metrics of SCM
Four measures of supply chain performance are:

Delivery
Quality
Time
Cost
Challenges in SCM
• Increased supply chain volatility and uncertainty
• Creating global customer and supplier network
• Creating optimized supply chain configuration
• Risk management in the end-to-end supply chain
• Integrating and empowering existing supply chain
The importance of supply chain
decisions

• Close connection between the design and management of

supply chain flows (product, information and funds) and the
success of a supply chain.

• Wal-Mart, Dell Computer are few examples of companies

that have built their success on superior design, planning
and operation of the supply chain.
Wal-Mart
• Wal-Mart has invested heavily in transportation and
information infrastructure
• Cluster of stores around distribution centres
• Frequent replenishment
• Leader in sharing information and collaborating
with suppliers
 Dell
• Dell bypassed distributors and retailers
• Sells directly to customers.
• Close contact with customers
• It steer customers in real time
• Centralized manufacturing and inventories at few
locations and postponement till order arrives

If Intel introduced a new chip, low level of inventory

allow it to reach market fast with a new PC
With sudden drop in price of old stock, it has less
loss.