Process view of scm & value chain analysis

Logistics & SCM , IIPMB

1. Supply Chain Planning & Scheduling

2. Outline Introduction of SCM Objectives of SC Decision Phases of SCM Process View of SCM Value Chain Analysis 2

3. 1- 3 What is a Supply Chain? All stages involved, directly or indirectly, in fulfilling a customer request Includes manufacturers, suppliers, transporters, warehouses, retailers & customers Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers

4. Objectives of Supply Chain Management Objective is to maximize the overall value generated Value = Final Product Worth to customer – Cost incurred in Supply Chain 4

5. Decision Phases of SCM Phase 1 : Supply Chain Strategy or Design Phase 2: Supply Chain Planning Phase 3: Supply Chain Operation 5

6. Phase 1: Supply Chain Strategy or Design 6 Long Term in Nature What it involves: Outsource or in-house Location and capacities of production and warehousing facilities Products to be manufactured or stored at various locations The modes of transportation to be used Type of information system to be utilized. It is based on: Strategic Objectives Marketing and Pricing Plan

7. Phase 2: Supply Chain Planning Planning decisions: Which markets will be supplied from which locations Planned buildup of inventories Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon

8. Phase 3: Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders 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 replenishment orders

9. Process View of SCM 9

10. 1- 10 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)

11. Cycle View of Supply Chains Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Customer Retailer Distributor Manufacturer Supplier

12. Push/Pull View of Supply Chains Procurement, Manufacturing and Replenishment cycles Customer Order Cycle Customer Order Arrives PUSH PROCESSES PULL PROCESSES

13. Push/Pull View of Supply Chain Processes Supply chain processes fall into one of two 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 )

14. Value Chain Analysis 14

15. Value Chain Analysis 15 Primary Activities Operations After Sale Services Marketing and Sales Distribution New Product Development Support Activities: Finance Accounting Information Technology Human Resources

16. The Value Chain: Linking Supply Chain and Business Strategy

17. How is Strategic Fit Achieved? Step 1: Understanding the customer Step 2: Understanding the supply chain Step 3: Achieving strategic fit

18. Step 1: Understanding the Customer Understanding the Customer Availability Lot size Response time Service level Product variety Price Innovation

19. Step 2: Understanding the SC How does the firm best meet demand? Supply chain responsiveness -- ability to respond to wide ranges of quantities demanded meet short lead times handle a large variety of products build highly innovative products meet a very high service level

20. Step 3: Achieving Strategic Fit All functions in the value chain must support the competitive strategy to achieve strategic fit Two extremes: Efficient supply chains ( T oyota) and responsive supply chains (Dell)

21. Comparison of Efficient & Responsive Supply Chains Efficient Responsive Primary goal Lowest cost Quick response Pricing strategy Lower margins Higher margins Mfg strategy High utilization Capacity flexibility Inventory strategy Minimize inventory Buffer inventory Lead time strategy Reduce but not at expense of greater cost Aggressively reduce even if costs are significant Supplier selection strategy Cost and low quality Speed, flexibility, quality Transportation strategy Greater reliance on low cost modes Greater reliance on responsive (fast) modes