Supply Chain ManagementDr. S Panneerselvam Associate Professor P.G. Dept. of Management Studies Siddaganga Institute of Technology Tumkur – 572 103. Books Sunil Chopra and Peter Meindl, Supply Chain Management – Strategy, Planning and Operation, PHI, 4th Edition, 2011. Martin Christopher, Logistics and Supply Chain Management, Prentice Hall, 3rd Edition, 2005. Jeremy F Shapiro, Modeling the Supply Chain, Cengage Learning, 2nd Edition, 2007. Mohanty R P, Deshmukh S G, Supply Chain Management, Theories and Practices, biztantra, 2005. Supply Chain Logistics Management, Donald J Bowersox, David J Closs, M Bixby Cooper, Tata McGraw-Hill, 2nd Edition, 2008 Supply Chain Management, K Shridhara Bhat, 2010, Himalaya Publishing House and Case Studies. Keong Leong and Keah-Choon Tan. 2005. Thomson Press. Supply Chain Management in the twenty-first century. Managing the Supply Chain – A Strategic Perspective. . Macmillan 2000. McGraw Hill International Edition 2003. Strategies. David Simchi-Levi et al. Principles of Supply Chain Management A Balanced Approach.Books Wisner. Gattorna J L and Walters D W. Palgrave 1996. Sahay B S. Designing and Managing the Supply Chain – Concepts. The piecemeal and isolated fragmented set of activities was rampant. The inventory was the responsibility of the marketing. accounting and/or production areas. Order processing was an accounting or sales responsibility. accounting and finance. marketing. . Production and manufacturing were given uppermost attention. the term supply chain (management) was unheard of.Evolution of SCM Until about mid 1950's. This fragmented way resulted in a great deal of friction on account of the conflicting objectives between production. the term logistics was applied to the food-supply activities. The word logistics was first associated with the military in 1905 as a branch of war that pertains to the movement and the supply for armies. During the Ethiopian famine relief efforts of the 1980's. limited to productivity within the four walls of the factory or manufacturing till the 1970's. . Initial focus and emphasis was on the internal front.) This led to the assertion in the early 1960's that logistics was one of the real frontiers of opportunity for enterprises to improve their corporate efficiency. In early 1900s. the farm products distributors realized the importance for providing time and place utility.Evolution of SCM (Contd. ) During World War II. transportation.Evolution of SCM (Contd. purchasing and supplies and physical distribution to focus on integration. cycle time reduction and streamlined channels. . visibility. The evolution of the SCM has moved from disparate functions of logistics. military forces made effective use of logistics models and forms of systems analysis to ensure that the required material was at the right place on time every time. logistics. customer service. marketing. receiving orders. quality. etc. The Supply Chain Management (SCM) calls for the integration of all the members of the supply chain namely suppliers. among other activities. manufacturing.Supply Chain Management Supply comprises all activities required to deliver products to the customer. Anything that influences a product’s time-to-market. This includes designing products. . price. information exchange and delivery. is part of the supply chain. receiving payment and so on. into a harmonious operating entity. retailers. procuring materials. distributors. Traditional Vs SCM Approach In the earlier days. distributors and customers were inflexible.SCM. SCM has transformed this archaic process with its just-intime delivery. . which began literally as a tool for managing supply of produced goods. suppliers. has come a long way to occupy a key position in an organisation’s decision making process. ironclad manufacturing plans and hypothetical shipping schedules. precise inventory visibility and real time distribution tracking capabilities. an organisation’s link to manufacturers. They somehow managed to get products to the market. An organization was often involved in paper-heavy transactions with questionable inventory forecasts. Earlier. as the SCM cycle takes firm root. supply chain is the fulcrum around which they operate. for large corporates. The Internet's ability to remove inefficiencies. . Now. Businesses have leveraged the Internet for the same reason. Modest beginnings can also see enterprises notch up large gains. companies often used supply chain to cut costs from existing operations rather than exploring opportunities for competitive advantage and differentiation. reach disparate audiences and foster collaboration perfectly suit supply chain management. break down communication barriers.Importance of SCM The supply chain management system doesn’t call for a Big Bang approach as in the case of ERP. . Nokia with fast moving product and discerning customers.) The supply chain leaders showed a market capitalisation compounded annual growth rate (CAGR) between 7 and 26 percentage points higher than the industry average. that were in the forefront of implementing supply chains resulted in outperforming their competitors and providing customer satisfaction. altered its playing field with rapid-response manufacturing. Dell.Importance of SCM (Contd. quick-ship logistics and a global supply web to link its suppliers and plants and to also support its vendor managed inventory and collaborative planning. The innovative companies such as Toyota. Nokia. 7-eleven Japan. Wal-Mart and Zara. Improving supply chain performance can help companies cut down their inventories by 25-50 per cent. . This could result in increased sales atleast by five per cent. a 35 per cent market share. and an average cost to make and sell phones that is 18 per cent lower than its rivals. throughput time by more than 60 per cent while completely eliminating stock-outs and improving service levels.) These capabilities have contributed to a 20 per cent to margins.Importance of SCM (Contd. The transformation that began in the 1990s has become more pronounced in the new millennium. Indian companies have been far less wary than the Japanese in breaking decades-old supplier relationships. A business confidence survey conducted by ET-NCAER in October 2002 covering 580 companies showed that most of the firms of size more than 100 crores are the first to introduce changes. be it in upgradation of information technology.Indian Scenario Indian corporations has shown a huge appetite for change and are able to withstand the vagaries of competition. . introduction of IT in supply chain or retaining existing customers. An AT Kearney study ranked India sixth in terms of SCM potential. This is close to 22% of aggregate industry sales. 1.) The importance of supply chain in India can be gauged from the fact that logistics cost is in the range of 10-12% of the GDP. As per the recent CMIE database. globalisation of businesses.00. . and shortening of product life cycle. over Rs. This may be attributed to many reasons like increasing complexity and uncertainty of supply networks. proliferation of product variety.Indian Scenario (Contd.000 crores of total capital is tied up in inventories in industrial sector. Decrease in logistic cost by one per cent could save nearly $4. logistics cost is high as compared to an average eight to nine per cent world over.8 billion per year for the companies. .) In India. Better supply-chain management could reduce cost substantially.Indian Scenario (contd. SCM can improve profit margins by at least 18 per cent for organizations. There is a tremendous potential for savings in this area. $455 Billion $221.Traditional View: Logistics in the Economy (1990. 1996) Freight Transportation Inventory Expense Administrative Expense Logistics Related Activity $352. 10. $31 Billion 11%. $311 Billion $27.5% of GNP . Traditional View: Logistics in the Manufacturing Firm Profit Logistics Cost 4% 21% Profit Logistics Cost Marketing Cost Manufacturing Cost Marketing Cost Manufacturing Cost 27% 48% . Supply Chain Management: The Magnitude in the Traditional View Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies – A typical box of cereal spends 104 days from factory to sale – A typical car spends 15 days from factory to dealership Laura Ashley turns its inventory 10 times a year. five times faster than 3 years ago . Supply Chain Management: The True Magnitude HP (Compaq) estimates it lost $0.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed. the price of the 800 mb processor dropped by 30%. When the 1 gig processor was introduced by AMD. P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand . directly or indirectly. in fulfilling a customer request Includes manufacturers. customer service) . Within each company. marketing. the supply chain includes all functions involved in fulfilling a customer request (product development. warehouses. operations. distribution. and customers transporters. suppliers.What is a Supply Chain? All stages involved. finance. retailers. g.Customer is an integral part of the supply chain Includes movement of products from suppliers to manufacturers to distributors. and products in both directions Probably more accurate to use the term “supply network” or “supply web” Typical supply chain stages: customers. no retailer or distributor for Dell) . manufacturers. suppliers retailers.. All stages may not be present in all supply chains (e. distributors. but also includes movement of information. funds. In India. it is a multi-echelon distribution model. .The appropriate design of the supply chain will depend on both the customer’s needs and the roles of the stages involved in filling those needs. typically. Stages of a Detergent Supply Chain Detergent Manufacturer 3 PL or own logistics Super Market Store Customer Chemical Manufacturer Packaging Paper Manufacturer Timber Industry . Supply Chain Supplier Supplier Manufacturer Manufacturer Distributor Distributor Retailer Retailer Customer Customer Customer Supplier Manufacturer Distributor Retailer . Flows in a Supply Chain Information Product Customer Funds .