SCM
SCM
SEMESTER - III
COURSE MATERIALS
INDEX
Chapter
Number
TITLE
Page
Number
15
Demand Planning
28
40
62
70
85
10
Returns Management
99
11
Overview of Outsourcing
105
12
Measuring SC Performance
114
13
142
52
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Supply chain consists of all the stages that are required to satisfy the customer request.
It starts with the supplier and passes through the manufacturing, distribution, and retailer
and finally reaches the customer.
Supply chain management (SCM) is the oversight of materials, information, and finances
as they move in a process from supplier to manufacturer to wholesaler to retailer to
consumer.
The following diagram shows the graphical representation of the supply chain that will
expect to satisfy the customer request.
In the supply chain management there are mainly three flows. They are as follows.
Product flow: The movement of goods from a supplier to a customer, through
the manufacturer, distributor, and retailer.
Information flow: It involves transmitting orders and updating the status of
delivery. The information flow is useful for the success of the supply chain
management.
Financial flow: It consists of credit terms, payment schedules, discount
information and consignment and title ownership arrangements.
RM - Supplier
Manufacturers
Distributors
Retailers
Customers
Sharing of benefits.
Employee Relations Management (ERM): This is useful for the reduction of wastage in
the production process. This will ultimately reduce the cost for customer.
As a part of achieving the twin goals of supply chain management through delivering
maximum value to end customer and keeping the costs to optimum level for business
profits+ growth of the
employees and best work culture, empowerment and practices for maximum
effectiveness and performance and results. Desired employee traits are
Flexibility in the work of employees.
Higher productivity through skills and training.
Having shared goals.
Effective training programs for the employees.
Allowing them to participation in decision making.
Having good performance measurement program.
Giving rewards to the employees who has high performance.
Feeling of ownership.
Giving continuous improvement suggestions.
Meeting commitments made by company via shared goals +transparent
dealings.
Having transparent in the company.
Customer Relations Management (CRM): This is useful for the achieving of end
customer satisfaction. In order to achieve the customer satisfaction,
Know your customer
Listen to your customer
Know his wants + needs - collect data
Location:
sourcing points are located; these determine the paths along which goods will flow. The
organizations should keep the stocking points close to the production location. This will
help to reduce the wastage in the production and also inventory is available with least
time. The organization should also select the sourcing points which are near to the
organization. This helps to reduce the carrying cost.
A basic trade-off here is whether to centralize to gain economies of scale or decentralize
to become more responsive by being closer to the customer. Companies must also
consider the local area in which the facility may be situated.
Production: An organization must decide what products to create at which plants, which
suppliers will service those plants, which plants will supply specific distribution centers,
and, sometimes, how goods will get to the final customer. These decisions have a big
impact on revenue, costs and customer service. Keep the production facilities near to
the supplier. This will help to reduce the carrying cost from the supplier. This will also
helps in reducing the inventory. And also helps to reduce lead time. And the product is
faster to the market.
Inventory: Each link in the supply chain has to keep a certain inventory of raw materials,
parts, subassemblies and other goods on hand as a buffer against uncertainties and
unpredictabilitys. Shutting down an assembly plant because an expected part shipment
didn't arrive is expensive. But inventory costs money too, so it's important to manage
deployment strategies, determine efficient order quantities and reorder points, and set
safety stock levels. Inventory has a direct cost impact in a supply chain and it has a huge
impact on responsiveness. In order to maintain the efficient inventory, the organizations
should accurately determine following element.
Accurate demand forecasting.
Set safety stock level.
Set reorder points.
Determine the lead time.
Determine the level of product availability.
= RT
For example, if the flow time of an auto assembly process is 10 hours and the
throughput is 60 units an hour, Littles law tells us that the inventory is 60 * 10 = 600
units. If we are able to reduce inventory to 300 units while holding throughput constant,
we would reduce our flow time to five hours (300/60). In this relation inventory and
through must be in the same relation. The logical conclusion here is that inventory and
flow time are synonymous in a supply chain.
Transportation: How do materials, parts and products get from one link in the supply
chain to the next? Choosing the best way to transport goods often involves trading off
the shipping cost against the indirect cost of inventory. For example, shipping by air is
generally fast and reliable. Shipping by sea or rail will likely be cheaper, especially for
bulky goods and large quantities, but slower and less reliable. So if you ship by sea or
rail, you have to plan further in advance and keep larger inventories than you do if you
ship by air. Transportation has an impact on both responsiveness and efficiency. Faster
transportation allows a supply chain to be more responsive but reduces its efficiency.
The type of transportation a company uses also affects the inventory and facility
locations in the supply chain. Dell, for example uses air transportation from Asia
because doing so allows the company to lower the level of inventory it holds. Clearly,
such a practice increases responsiveness but decreases transportation efficiency
because it is more costly than transporting parts by ship.
Information: Information could be overlooked at major driver in supply chain because it
does not have physical structure. Information flow is the Heart of Supply Chain.
Information servers as the connection between various stages of supply chain allow
them to coordinate their actions and increase the supply chain profitability.
Information also useful for the daily operations in the company. For example, warehouse
management system uses information to give the warehouses inventory visibility. The
company can then use this information to determine whether new orders can be filled.
Helps reduce variability in the supply chain.
Helps improve forecasts
Helps coordination
Better customer service
Reduces lead times
Reduces inventories
Supply chain management decision can be described at various levels of the
organization.
The strategic level - concerned with long term issues such as the number and
location of manufacturing plants and warehouses.
The tactical level - concerned with shorter term decisions such as purchasing
and manufacturing decisions.
The operational level - concerned with day-to-day decisions such as
scheduling and truck load.
Supply chain management is the combination of the enterprise strategies, business
process and information technologies that integrates the suppliers of raw materials or
components, the manufacturers or assemblers of the finished products, and distributors
of the products or services into one cohesive process to include demand forecasting,
materials requisition, order processing, order fulfillment, transportation services,
receiving, invoicing, and payment processing.
While ERP and CRM systems are intended to re-engineer internal business processes
to achieve better resource planning and coordination across departments, SCM systems
are utilized to facilitate the coordination with outside business entities, or in the scope of
extended enterprise. SCM usually refers to the redesign of supply chain processes in
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or
raw
materials
are
manufactured
into
finished
goods.
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Retailer
Manufacture
r
Leveraging technology to drive costs out of the supply system is another important
aspect of the information systems function. The delivery of products to the end
consumer involves a series of steps including raw material delivery, conversion to a
finished product, transportation to a distributor or customer distribution center,
transportation to the store and placement on the store shelf. The degree to which all
parties involved can drive costs out of these systems result in corresponding savings
that can be passed on to the consumer in the form of lower product costs.
In order to drive down costs product information is needed to move from the retailer back
through the supply system. As better consumer data flowed back from the retailer to the
raw material supplier, better forecasts could be anticipated and the right material put in
place for finished product manufacturing.
Additional Benefits of Information Sharing
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To understand the value of simplifying the business process then applying technology,
the business situation below provides a concrete example. By 1990, P&Gs business
relationship with Wal-Mart was headed in a positive direction. Joint sales were up,
standard scorecards to track the business, and both companies were proud of the
progress of the partnership. However, there continued to be issues in the area of
accounts payable/receivable.
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Second, watch for industry standard approaches to share the demand side data similar
to the standards they have in place today for EDI. Developing an industry based
approach for sharing point of sale data, market data, and consumer data for joint
decision making will be a key to success. In addition, driving key third party data
providers such as Nielson and IRI to provide quality data in agreed to Industry standard
hierarchies will lead to better integration between joint buyer/seller workstations. The
Internet will provide the technical platform to exchange information between
manufacturers, retailers and third party data providers.
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By
Professor B.S. Sahay
Management Development Institute
Gurgaon 122 001
The importance of supply chain in India can be gauged from the fact that logistics cost
is in the range of 10-12% of our GDP. As per the recent CMIE database, over Rs.
1,00,000 crores of total capital is tied up in inventories in industrial sector. This is close
to 22% of aggregate industry sales. This may be attributed to many reasons, like
increasing complexity and uncertainty of supply networks, globalization of businesses,
proliferation of product variety, and shortening of product lifecycles. These are forcing
businesses to realize that it is no longer possible to prosper in isolation. As a result,
Indian organizations are required to look beyond their four walls for collaboration and
coordination with supply chain partners. It is imperative for Indian organizations to
highlight the effects and the benefits of the five key dimensions namely - information
integration, workflow assimilation, technology assimilation, synchronization, and trust
to make supply chain integration a reality in today's business environment.
Information Integration
Information is the enabler of supply chain integration. Information integration refers to
not only sharing of information among supply chain members but also exploiting the
information collectively. This means shared demand information, inventory status,
capacity plans, production schedules, promotion plans, demand forecasts, and
demand schedules. Information integration is critical so as to ensure that the entire
supply chain is driven by true consumer demand. This is the most effective way to
counter the problem of demand information distortion up the supply chain.
Information distortion can arise from partners making use of local information to make
demand forecasts and passing them onto upstream partners; partners making ordering
decisions on local economic factors and constraints; and gaming behaviors that
exaggerate orders when there are perceived uncertainties in supply conditions. These
conditions are amplified from one level to another in a supply chain. The sole way to
counter this is to have total transparency of demand information not just between
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Incorporating the technology in the product, the process and the information flow must
enable technology assimilation for sustained success. Supply chains should access
the market through both physical channel and cyber-based channel to serve the needs
of the consumer. Both channels should accentuate e-Commerce features to
distinguish the supply chain in the eyes of the customer.
Synchronization
Time has a negative impact on supply chain management. First, time affects lead-time
on overall inventory levels. Typically, the further the component or finished item from
the end consumer, the longer is the lead-time. The second negative aspect of time is
that it forces lead time to be carried in finished goods inventories. The extra inventory
in the delivery part of the supply chain is driven by longer lead times in earlier part of
the chain and by a forecast error cushion largely created by push-system behaviour.
This systematic asynchronous behaviour deteriorates supply chain performance by
reducing reliability, yield, quality and capability.
The goal of synchronization in supply chain integration is to develop production and
delivery mechanisms and processes that can produce goods to the actual end-user
rate of demand for the smallest time-period manageable. To meet this goal, Indian
supply chain partners must change long established operating processes and
behaviors. To change this mindset and truly synchronize for success companies need
to take action on three fronts - adopt a counterintuitive inventory management
strategy;
take
productive
pull
approach;
and
put
inventory
in
motion.
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Manufacturers and Retailers alike are assessing and utilising ever more sophisticated
techniques to understanding how consumer demand should be anticipated, planned for
and influenced. The design and operation of their supply chains, and the use of timely,
accurate consumer demand information to drive these supply chains is at the top of most
companys agendas. This paper considers the techniques such companies are using to
arrive at an improved understanding of consumer demand; and addresses some of the
most important issues companies should consider when selecting and applying
automated techniques to assist in both predicting and influencing this demand.
The competitive power of prediction
Decades of research and experience in the disciplines of econometrics, investment
decision-making and natural sciences have transformed the ability of companies to
predict and create consumer demand. These approaches have found their way into
commercial software applications used in Demand and Supply Chain Planning - and are
now becoming a major competitive weapon for enterprises across all sectors of industry.
Companies have long understood how significant inventory reductions, coupled with
high and profitable consumer availability provides competitive edge. They also recognise
that using Point of Sale and SKU level data for forecasting provides a more timely and
accurate picture of consumer demand for their supply chain, and is a significant
contributor to improving forecast accuracy and making appropriate and profitable
inventory decisions.
Understanding demand at the consumer level is a major enabler for companies under
pressure to deliver the inventory, availability and profitability improvements demanded of
them.
Predictions by Industry Analysts predictions in the mid 1990s on Demand Planning
trends have proved to be highly accurate. They included:
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Attributes of the Product such as colour, dimension, ABC rank and lifecycle phase can
be important ways in which to segment and analyse demand patterns. Location
attributes such as throughput volumes may be a way of segmenting the distribution
network. Critically, these analyses reflect the real way in which a company is organised
and does business. Many of these cut across existing or planned organisational
structures such as Brand or Market - but can be vital in understanding and accurately
predicting demand patterns, which may otherwise be hidden.
Cause and effect: the power to transform a Supply Chain environment
In broadest terms, seasonality, the day of the week or the month can all be considered
as causal factors - and all can have a major effect on demand and supply chains. For
example, demand for ice cream is highly seasonal; demand for a given newspaper will
vary depending on the day of the week.
The real situation is however far more complex. Many other interrelated factors influence
consumer demand - from macro-economic influencers such as lending rates, to the
weather on a particular day, to the price of an item, to whether an item is being
advertised or promoted. These factors will also vary by location, and the effect of each
will vary from product to product. In addition, their impact, whether externally (eg:
weather) or internally produced (eg: price) will usually be overlaid and will interact.
Understanding the relative contribution of each factor to accurately predict demand
individually, collectively and in combination is critical but complex - and has the power to
transform a supply chain environment. Sophisticated Demand Planning applications are
vital to achieving this. Companies using the Bayesian approach in their Demand
Planning can simultaneously introduce any and all variables in their forecasting process,
to arrive at the greatest understanding of the factors influencing demand - and thereby
achieve the most accurate prediction of that demand. They can then use that knowledge
to empower their supply chain, for cost reduction and competitive edge.
Mapping of the causal factors onto the real world model created in the Demand Planning
application and associating them with the correct Product / Location / Channel
combinations is clearly crucial. It is important to evaluate demand-planning processes
throughout the organisation, from Finance through Marketing to Operations, and to
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Product
Introductions,
Competitive
influences,
Company
revenue,
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Performance
measurement
goes
hand-in-hand
with
continuous
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For detailed examples of best practices in procurement: The Purchasing Machine, How
the Top Ten Companies Use Best Practices to Manage Their Supply Chains, coauthored by Nelson, Patricia E. Moody, and Jonathan Stegner, published by The Free
Press, 2001.
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Consumers are becoming more demanding than ever, wanting cheaper, more
customised products and better service. Competition in the manufacturing marketplace
has never been more aggressive. Tough challenges and rapid changes must be faced
by manufacturing organisations simply to remain competitive. Solutions, practices,
technologies and business processes have to develop fast, squeezing greater efficiency
out of the supply chain.
Efficient Manufacturing Supply Chain solutions have become the differentiator between
success and failure. They must be implemented in order to optimise everyday process
industry activities, enabling more intelligent and economical decisions with efficient
planning processes. Improved supply chain velocity, enhanced visibility across the whole
of the supply chain and more opportune, accurate information flows can be seen as a
result.
ORIGIN OF SUPPLY CHAIN MANAGEMENT
SCM is a concept that has originated and flourished in the manufacturing industry. The
first signs of SCM were perceptible in the JIT delivery system as part of the Toyota
Production System (Shingo 1988). This system aimed to regulate supplies to the Toyota
motor factory just in the right - small - amount, just on the right time. The main goal was
to decrease inventory drastically, and to regulate the suppliers interaction with the
production line more effectively.
After its emergence in the Japanese automotive industry as part of a production system,
the conceptual evolution of SCM has resulted in an autonomous status of the concept in
industrial management theory, and a distinct subject of scientific research, as discussed
in literature on SCM (e.g., Bechtel and Yayaram 1997, Cooper et al. 1997). Along with
original SCM approaches, other management concepts (e.g., value chain, extended
enterprise) have been influencing the conceptual evolution towards the present
understanding of SCM.
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SCM looks across the entire supply chain (Figure 1), rather than just at the next entity or
level, and aims to increase transparency and alignment of the supply chains
coordination and configuration, regardless of functional or corporate boundaries (Cooper
and Ellram 1993).
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OLD SYSTEM
NEW SYSTEM
It was Kiichiro Toyodas rich imagination of JIT that stimulated Taichi Ohno, to think
about it seriously and put it into practice. He was responsible for the successful
implementation of JIT
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Fulfillment services involve receiving, inventorying, warehousing, delivery, recordkeeping and customer inquiries. You have options to outsource part of or all of fulfillment
services to a third part. Fulfillment options includes 'Do It Yourself', 'Use Suppliers for
Fulfillment', 'Drop Ship from Distributors', or 'Use a Fulfillment Company'. The fulfillment
option you use depends on types of goods, volumes of orders and the dependence of
fulfillment process on other business processes.
The quality of fulfillment service directly impacts customer satisfaction or return of
customers to your website. Use of fulfillment software or other information technology
can streamline ecommerce fulfillment operation.
Warehousing Physical goods are stored in storage. Valuable items are usually stored in
secure storage. While fulfillment companies have their warehouse and distribution
centers, small businesses can store goods in their garages or basements.
Inventory Management The activities of inventory management involves in identifying
inventory requirements, setting targets, providing replenishment techniques and options,
monitoring item usages, reconciling the inventory balances, and reporting inventory
status.
Order Processing & Shipping Goods are delivered to customers in various shipping
methods, ground, overnight, and etc. Customers specify shipping methods when they
place their orders and the fulfillment company usually can adjust the shipping methods
of the delivery. To ensure smooth operations, ordering process is customized to fit
unique business needs of each client.
Some pitfalls in Inventory Management
Pitfall 1. No Supply Chain Metrics:
In a supply chain with multiple sites, each site will often have its fairly autonomous
management team. The objectives of the various teams may differ, and even be
conflicting. Inventory may for example be reduced at a Site A of a supply chain, and
thereby, seen from a local perspective, the performance is enhanced. But the inventory
decrease may also decrease Site A's flexibility. Because Site A now responds more
slowly to changes, Site B, which is Site A's customer will have to increase its inventory
(of Site A parts) in order to maintain its flexibility and level of customer service. The lack
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= RT
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inventories low is that firms must pay interest on the investment made on inventories.
Inventory holding ( or carrying ) cost is a variable cost on items such as storage and
handling, taxes, insurance, interest on capital and shrinkage cost. The annual cost to
maintain one unit in inventory typically ranges from 20 to 40 percent of its value.
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Illustration:
If a firms holding cost is 30 percent. If the average value of total inventory is 20 percent
of sales, the average annual cost to hold inventory is 6 percent {0.03(0.20)} of total
sales.
This cost is significant in terns of gross profit margins, which often are less than 10
percent.
The various costs are broadly classified as follows:
Interest or Oppurtunities Cost Inorder to finance inventory, a company may
obtain a loan or forgo an oppurtunity of an investment promising an attractive
return. Interest or oppurutnity cost whichever is higher is the largest
component of holding cost.
Storage and Handling Costs This cost is incurred when a firm rents out
space. There also is an oppurtunity cost, as the firm can utilize the storage
space productively in some other way.
Taxes, Insurance and Shrinkage When inventories are high, the insurance on
the assets (ie. Inventories) also increases.
Shrinkage takes place in three forms.
Pilferage or theft of inventory by customers or employees.
Obsolesence occurs when inventory cannot be used or sold to the full value
due to change in model, engineering modifications or low demand.
Deterioration through physical spoilagge or damage results in lost value.
Reasons for Carrying Inventories
Carrying Inventory can be classified under four heads
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placed but not yet received. Therefore stocking locations, improving materials handling
and delays in distribution should be overcomed.
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Conclusion
Thus inventory management decisions involve trade-offs among the conflicting
objectives of low inventory, high resource utlization and good customer service. For
making supply chain leaner, firms are using selective control techniques like EOQ, ABC,
etc. and inventory control models like MRP, DRP, JIT, AITS. Therefore, inventory should
be held only when the benefits of holding it exceeds the cost of carrying the inventory.
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The mode choice aspects of these decisions are the more strategic ones. These are
closely linked to the inventory decisions, since the best choice of mode is often found by
trading-off the cost of using the particular mode of transport with the indirect cost of
inventory associated with that mode. While air shipments may be fast, reliable, and
warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may
be much cheaper, but they necessitate holding relatively large amounts of inventory to
buffer against the inherent uncertainty associated with them. Therefore customer service
levels, and geographic location play vital roles in such decisions. Since transportation is
more than 30 percent of the logistics costs, operating efficiently makes good economic
sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and
scheduling of equipment are key in effective management of the firm's transport
strategy.
Transportation moves the product between different stages in supply chain.
Transportation has a large impact on both responsiveness and efficiency. If the firms
competitive strategy depends on high level of responsiveness, the companies uses
faster transportations such as air transportation, internet etc. if firms competitive
strategy targets customers whose main decision criterion is, price then the company can
use transportation to lower the cost of the product at the expense of responsiveness.
Components of transportation decision:
Mode of transportation .it is the manner in which product is moved from one location in
supply chain network to another. Companies have the following basic modes of
transportation.
Air. The most expensive mode but also very fast.
Truck. A relatively quick and inexpensive mode with high levels of flexibility.
Rail. An inexpensive mode used for large quantities.
Ship. Inexpensive and slowest mode.
Pipeline. Used primarily to transport oil and gas.
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movement and storage of materials within an operation and process the associated
transactions. Directed picking, directed replenishment, and directed put away are the
key to WMS. The detailed setup and processing within a WMS can vary significantly
from one software vendor to another; however the basic logic will use a combination of
item, location, quantity, unit of measure, and order information to determine where to
stock, where to pick, and in what sequence to perform these operations.
In todays competitive marketplace, the primary focus of many organizations is on
improving customer service. To accomplish this, companies are embarking on a wide
range of process-improvement initiatives. In many cases, increasing customer service
levels involves adding personnel and increasing overall expenditures. Unfortunately,
these additional expenses can erode profitability.
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CATEGORY
REAREASONS
N
levels;
higher
space
Personnel handling paper - potential headcount WMS automates the management of order
reduction or resource redeployment*
and priorities, eliminating paper.
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replace
physical
intensive, and applications. They tend to require a lot of initial setup, a lot of system
resources to run, and a lot of ongoing data management to continue to run. Thats right,
you need to "manage" your warehouse "management" system. An often time, large
operations will end up creating a new IS department with the sole responsibility of
managing the WMS.
The Claims
WMS will reduce inventory!
WMS will reduce labor costs!
WMS will increase storage capacity!
WMS will increase customer service!
WMS will increase inventory accuracy!
The Reality
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The predominant factors that control inventory levels are lot sizing, lead times, and
demand variability. It is unlikely that a WMS will have a significant impact on any of
these factors. And while a WMS certainly provides the tools for more organized storage
which may result in increased storage capacity, this improvement will be relative to just
how sloppy your pre-WMS processes were.
Beyond labor efficiencies, the determining factors in deciding to implement a WMS tend
to be more often associated with the need to do something to service your customers
that your current system does not support (or does not support well) such as first-in-firstout, cross-docking, automated pick replenishment, wave picking, lot tracking, yard
management, automated data collection, automated material handling equipment, etc.
*********************************************
Annexure:
Future-proof warehouse management
By Allen Scott
Vice President, European Operations, Manhattan Associates Inc.
Smart warehouse management systems will play a critical role in helping retailers meet
the future demands of both shareholders and customers.
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are
becoming
more
demanding.
is
becoming
more
global,
as
These paradigm shifts in the way retail businesses are run, where customers are
located, and how consumers behave mean that the role of warehouses everywhere will
change radically.
Forward-thinking retailers of all sizes and varieties have already started to appreciate
how the organization of their logistics is likely to be a major source of future competitive
advantage. They no longer regard the warehouse as a cost center, as many have
traditionally done, or as simply a goods in/goods out facility. Instead, they see the
warehouse as an opportunity to enhance revenue, customer satisfaction, and, ultimately,
shareholder value. Perhaps most important, they have started to recognize that the
software required to manage the warehouse and the wider supply chain needs to
become a great deal more sophisticated to meet the requirements of increasingly
complex supply chains.
In the future, systems that run warehouses will need to become a lot smarter in the way
they manage conventional warehousing processes by applying new technologies such
as radio frequency identification (RFID) and voice recognition. They will also need to
facilitate trading-partner management, supply-chain event management, goods-returns
management, and order management. These all depend on the ability of an enterprise
and its business partners to make availableand deliverinformation in real time to
parties along the supply chain that require that information to make decisions.
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Choosing a WMS
So what should supply-chain and IT directors of retail businesses consider and look for
when selecting a warehouse management system (WMS) that is capable of rising to
these challenges? There are three main considerations.
First, there is no one type of WMS that fits all retailers requirements. Instead, the
selection of a WMS depends on the strategic and tactical objectives of the organization.
In other words, the retailer needs to decide if it wants to improve the bottom line by
reducing operational costs or improve the top line by generating more sales through
better service and/or by targeting multiple sales channels.
Second, in this new era where supply chains now compete with other supply chains, it is
no longer feasible to regard the warehouse as a stand-alone operation. Decisions about
the type of WMS a company will select and how its warehousing operations will be
organized need to be made in the context of the wider supply chain.
Finally, and a point often overlooked, is that the best technology available does not
guarantee success. In fact, other selection criteria such as the upgrade road map and
the vendors vertical sector experience must also be considered.
Functionality meets strategic, tactical objectives
In choosing a vendor there are, broadly, two types of warehouse management systems:
those that handle traditional warehouse movements and those that embrace the
changing role of the warehouse as a multichannel distribution center. The first type will
enable a company to better manage traditional warehousing operations that focus on
serving a single sales channel.
The advantage of the second type is that it meets the diverse and changing needs of
retailers, their suppliers, and their customers. For example, it enables a new breed of
distribution center to handle both bulk and single picking, so that both store and
individual customer orders can be fulfilled. It can also process the entire order, not just
picking. For instance, for individual customer orders received via mail order or the Web,
goods can not only be picked, but they can also be gift wrapped, packed, labeled, and
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Source-to-consumption execution
Trends indicate that we are moving on from just supply-chain planning and supply-chain
execution toward source-to-consumption supply-chain execution. This is supply-chain
execution performed collaboratively and in real time by supply-chain business partners
involved from initial production to final consumption, allowing supply-chain optimization
to be achieved in real time. In the ASN example, we mentioned how information might
be exchanged between two supply-chain partners to make supply-chain performance
more effective. This is a single piece of information being exchanged, a single step
toward integrating and generating visibility between two partners in a supply chain.
When one considers the number of players involved in some global supply chains
supply chains that might consist of hundreds of suppliers, assemblers, manufacturers,
transport service providers, wholesalers, and retailersand the amount of information
that is exchanged, the potential to improve a supply chains performance and the bottom
and top lines for every member of that supply-chain community is enormous.
A WMS that is integrated into the world around it must be able to facilitate process
integration and trading-partner personalization. It must also be capable of generating
and receiving information that can be selectively passed on to or received from other
supply-chain participants. More importantly, it should facilitate real-time visibility into
supply-chain partners systems. Finally, it must have supply-chain event management
capability. The more complex the supply chain, the greater the challenge. However, the
key is selecting a WMS that can interface seamlessly with disparate systems and
facilitate real-time information exchange.
Selecting the best technology does not guarantee a successful implementation. Other
factors should also be taken into account.
It is important to appreciate that systems today are less customized and more
productized. This is crucial since retailers must focus not only on their current needs, but
also on their future requirements. It is easy to outgrow a customized system, which will
ultimately prove very costly when the time comes to replace the system completely. A
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4) Redistribution
Redistribution stage resembles a traditional distribution network. In particular, we find the
conventional tradeoff between consolidation and responsiveness in transportation. If
collection and redistribution are combined we can achieve efficiencies in vehicle loading.
Redistribution can also be done along with distribution of new products.
Reverse Logistics Information Systems:
One of the most serious problems that the companies face in execution of a reverse
logistics operation is the dearth of good information systems. To work well, a flexible
reverse logistics information system is required. Reverse logistics is typically a
boundary-spanning process between the companies or business units of the same
company, thus developing systems that have to work across boundaries adds additional
complexity to the problem. Eg: for a retailer, a system that tracks returns at store level is
desirable. The system should create a database at store level so that the retailer can
begin tracking returned product and follow it all the way back through the supply chain.
Information systems should also include detailed information programs about important
reverse logistics measurements, such as return rates, recovery rates, and returns
inventory turnover etc.
For many companies, current information systems do not allow them to monitor the
status of their returns. Additionally, useful tools such as radio frequency (RF) are helpful.
New innovations such as two-dimensional bar codes and radio frequency identification
license plates (RFID) may soon be in use extensively.
Conclusion
Reverse logistics practices vary based on industry and channel position. Industries
where returns are a larger portion of operational cost tend to have better reverse
logistics systems and processes in place. For Reverse Logistics to be successful,
collaboration between the supply chain partners is very important. Technologies like bar-
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In mid to large size organizations action represents the development of both the senior
management and peer support as well as the team required to complete the change
process. Obviously other resources and IT systems required to complete the process
must be specified and put into place, and then the leadership skills of the Logistics
Professional are the final ingredients to make it happen.
After these change initiatives then result in the attainment of a "flashpoint" where
dramatic improvements are seen relative to expense/capital/D.C. space reductions and
an increase of value added services and true supply chain activities.
Once the process is completed or well on the way to completion, the Logistics
Professional then encounters only opportunities for incremental change and relatively
minor benefits.
The challenge has been met, achieved, and is then followed by a short period of
recognition. Recognition by the company of the results and effort, but also recognition
that maybe the need for such a high level functioning expert and team is no longer
required on a day to day basis. In fact any Logistics Professional with an active mind
requiring challenge and not satisfied to simply "fill" an office has already realized this on
their own, and is taking the relevant career planning steps.
Traditionally this meant moving to an equivalent or hopefully senior position in another,
hopefully, larger organization and then resuming the climb.
The probability of all of these factors being aligned at the time you need to make this job
move is something akin to a rare planetary alignment, or winning the lottery and
sometimes results in the individual compromising with their career aspirations at least
temporarily.
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REVENUE-DRIVEN REASONS
Gain market access and business opportunities through the providers
network.
Accelerate expansion by tapping into the providers developed capacity,
processes, and systems.
Expand sales and production capacity during periods when such expansion
cannot be financed.
Commercially exploit existing skills.
COST-DRIVEN REASONS
Reduce costs through superior provider performance and the providers lower
cost structure.
Turn fixed costs into variable costs.
EMPLOYEE-DRIVEN REASONS
Give employees a stronger career path.
Increase commitment and energy in non-core areas.
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Making
the end
product:
manufacturing,
testing,
packaging,
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companies
need
to
adopt
concurrent
engineering
approach,
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designing
the
product
and
its
specifications,
the
associated
manufacturing processes and the supply chain (including identifying suppliers, the
manufacturing locations, transportation and inventory needs). Traditional approaches
begin with designing the product, and then either designing the supply chain or
designing the manufacturing process - in the bargain, much time is lost in iterations, redesign and re-specification. The 3DCE approach melds the three into a seamless whole.
Possibly with the addition and evolution of Level 0, the SCOR model will move to
address the effectiveness of the supply chain with product development as an integral
part, as I believe it should be. Product development is linked to customer needs, existing
or potential, and if the supply chain is to be measured, the impact of product
development has to be accounted for.
Level 1, the Top or Process-Type Level, defines the various process types and
performance targets at the enterprise or entity level. At this level, the company is
essentially defining its competitive position and operations strategy. This includes its
competitive performance requirements, performance metrics, its supply chain scorecard
and gap analysis, and a project plan.
This level highlights five distinct management processes: Plan, Source, Make, Deliver,
Return. (For reasons why "return" is now being added to the supply chain processes,
please see the chapter on reverse supply chains.)
Plan: This process includes the assessment of supply resources, aggregate and
prioritise demand, plan inventory, distribution requirements, production, material and
rough-cut capacity of all products and all channels, make-or-buy decisions, as well
as product cycles.
Source: Sourcing infrastructure and processes include supplier evaluation,
certification and feedback, quality monitoring, negotiation and vendor contracts, as
well as processes dealing with the receiving of material.
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quotations
through
entering
orders),
warehouse
management
and
transportation management.
This also includes creating and maintaining customer databases, product and price
database, and credit management during the customer interaction, as well as channel
management rules, order management rules and managing delivery inventories and
managing delivery quality.
Level 2, the configuration level, defines 30 core process categories that are possible
components of a supply chain. Organisations can configure their ideal or actual
operations using these processes. Each product may have its own supply chain that
might need to be configured. This level goes into the next layer of detail. For instance,
under the Planning Process, at this level Plan would include Plan supply chain, Plan
source, Make to stock, Deliver make-to-order etc. At this level, as the company breaks
its processes down, it can uncover process inefficiencies and can even move towards
flattening the chain. Level 2 allows a degree of "what-of" analysis and therefore an
evaluation of the impact of potential improvements.
Focusing on the material flow, this level includes the geographical and thread diagram
for the as-is and the to-be process.
Level 3, the Process Element Level, provides the information required for successfully
planning and setting goals for supply-chain improvements. It defines the process
elements and includes inputs and outputs, performance metrics, best practices where
applicable, and system capabilities needed to support best practices. This level
specifically gets into information and workflow analysis, and helps to align performance
levels, practices, and systems. This level leads to the fine-tuning of the company's
operational strategy. At this level and below, the impact of improvements can be
validated.
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(demand generation),
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It also makes a further qualification about the network itself, where collaboration takes
place amongst "entities" which may be consortiums, enterprises, divisions or corporate
functions - this is clearly a quantum jump ahead from thinking of business processes as
within the four walls of one company. This leads us to one other issue: that of product
development. Product development, especially in short life cycle industries (such as
fashion) has always been collaborative and across companies. The high degree of
"product decay" that has been present in short life cycle industries is now beginning to
occur in most other sectors. Computers, consumer electronics, even automobiles, are
getting outmoded faster than ever.
In this ever-quicker marketplace, to create a super-responsive supply chain, companies
need to adopt a 3-dimensional concurrent engineering approach. 3-DCE involves
simultaneously
designing
the
product
and
its
specifications,
the
associated
manufacturing processes and the supply chain (including identifying suppliers, the
manufacturing locations, transportation and inventory needs). Traditional approaches
begin with designing the product, and then either designing the supply chain or
designing the manufacturing process - in the bargain, much time is lost in iterations, redesign and re-specification. The 3DCE approach melds the three into a seamless whole.
Possibly with the addition and evolution of Level 0, the SCOR model will move to
address the effectiveness of the supply chain with product development as an integral
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Inventory,
Transportation and Customer Service. However, a strong performance in one part of the
Supply Chain is not sufficient. Your Supply Chain is only as strong as its weakest link.
The solution is for management to identify the key areas of the Supply Chain that need
to be monitored.
As you view the links to the left, there are a few things to keep in mind:
Tracking your Metrics allows you to view your performance over time and guides you to
optimize your Supply Chain. It allows management to identify problem areas, and to
compare your company to other like companies through like industry benchmarking.
Certain metrics, such as Inventory Turns, have a widely accepted definition. Other
metrics, such as Backorders, may need to be customized for your particular industry or
business model.
Measurements alone are not the solution to your weak areas! The solution lies in the
corrective action that you take to improve the measure. The solution comes from
process improvements.
Measurements should have owners....people or departments that are responsible for
achieving a target on the metric.
Using the correct set of metrics can lead you to the solution to the question: do we have
the right balance between service and cost?
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But how do you optimize your Supply Chains performance? How can metrics lead to an
improved management of your Supply Chain? How do you calculate Inventory Turns,
Fill Rate or Backorders?
The first step is to understand the meaning of these metrics. It is not enough for
management to simply view these measures, they must also understand the meaning
behind them. The second step is to learn the mechanics behind the measurements.
What drives them...positive & negative?
Although metrics do vary, we give you a general overview of some of the common
Supply Chain Measurements in use today.
Backorder: An unfilled customer order. A backorder is demand (immediate or past due)
against an item whose current stock level is insufficient to satisfy demand.
This calculation can vary. Some companies count items that are not confirmed (not
allocated) and past the Requested Delivery Date (or Requested Ship Date). Other
coanies may also count those items with stock confirmed, but past due.
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Example:
In
house
Training
Hours,
APICS
Membership/
Certification.
While the Balanced Scorecard approach was not specifically designed for the Supply
Chain, it does give a good guidance for your core measures. The central idea is to focus
on key metrics that have real meaning to your company. You don't want to get lost in a
sea of numbers that don't really mean anything. The Balance Scorecard approach helps
you to keep your measures aligned with your objectives. These measures should be
tracked over time (usually monthly) with specific targets for each.
Here are just a few of the many Cycle Times you should consider for your Supply Chain.
All of these measures should not only calculate the days (or hours) from the start and
finish, but also between the various steps in between.
Customer Order Promised Cycle Time: The anticipated or agreed upon cycle time of a
Purchase Order. It is gap between the Purchase Order creation date and the RDD
(Requested Delivery Date).
Customer Order Actual Cycle Time: The average time it takes to actually fill a customers
purchase order. This measure can be viewed on an Order or an Order Line level. The
measure starts when the customers order is sent/received/entered. It is measured along
its various steps of the order cycle. Through credit checks, pricing, warehouse picking
and shipping. The measure ends at either the time of shipment or at the time of delivery
to the customer (sometimes tracked by using an EDI #214). This "actual" cycle time
should be compared to the "promised" cycle time.
Manufacturing Cycle Time: Measured from the Firm Planned Order until the final
production is reported. It usually takes into account the original planned production
quantity verses the actual production quantity. Example: X% of the planned quantity
must be completed on a production run or the cycle time should not be considered.
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Value Fill Rate: Same as above, except the order line value is used instead of cases.
Calculation: Value of Order Lines Shipped on the Initial Order / Total Value of the Order
($400/$500 = 80%)
What happens if a customer orders 10 products, but then decides to expedite out just
one of them? Should the other 9 products be counted as a Fill Rate "miss"? ( 1 shipped /
10 ordered = 10%). The answer is no. You should factor rushed lines out of your Fill
Rate calculation. This can usually be done by identifying the routing code (as in an SAP
system) or by the carrier (FEDX).
*NOTE: "Shipped on the Initial Order" - This usually refers to the first shipment out of
the primary warehouse. Therefore, if an order line ships out of an alternate shipping
facility and it ships out on/before the first shipment out of the primary warehouse, then it
is considered a + to the Fill Rate.
Inventory Record Accuracy
A common calculation is:
Stratify SKU's: (annual usage X standard cost)
A items= items representing the top 80% of total dollars
B items= items representing the next 15% of dollars
C items= items representing the bottom 5% of dollars
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Example: If on Line 1, the order was for 30 skus of product "AB" and on line 2, they
ordered 10 skus of item "AC". The Requested Ship Date is April 1st. If Line 1 ships on
March 28 and line 2 on April 20, the the SKU Fill Rate is 75%
Calculation: Number of SKUs Shipped OnTime / Total Number of SKUs Ordered (30/40
= 75%).
OnTime Case Count: The amount of cases shipped OnTime verses the amount of cases
ordered.
example- ABC Company orders 6 products that total 200 cases, on its Purchase Order
#1235. The manufacturer ships out 140 cases on 3/1/01 and the remaining 60 cases on
3/10/01. The Requested Ship Date is 3/1. The Case OnTime Rate for this Purchase
Order is 70%. The number of Order Lines is not considered in this calculation. This
OnTime measure gives "weight" to the order
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: 99.2%
Delivered on Time
: 96%
: 99%
Invoiced Correctly
: 99.8%
Therefore, the Perfect Order Measure is 99.95% * 99.2% * 96% * 99% * 99.8% =
94.04%
There may be other fields used such as "The Sales Representative recommending the
correct item" or the "FillRate".
Performance to Promise Dates: When a Distributor places a Purchase Order against a
Manufacturer, he has certain expectations on when he will receive the items ordered.
His original expectation is the OnTime Delivery Metric. However, the manufacturer may
give him a revised estimate as to when they expect to fill the order. The manufacturers
promise is called the "Performance to Promise Date Metric".
Example: ABC Company Orders 2 Products on Purchase Order #1234, with a
Requested Ship Date of June 10.
The first item is in-stock and ships on June 10th..
The second item is on backorder. The manufacturer estimates that the 2nd item will ship
by July
1. The item is manufactured and ships out on June 28.
The Performance to Promise Date is 100% (items ship ontime or early)
*However, if the 2nd item does not ship till July 2nd, then it's late. The Performance to
Promise Date is 50%.
Transportation Metrics:
Freight cost per unit shipped: Calculated by dividing total freight costs by number of units
shipped per period. Useful in businesses where units of measure are standard (e.g.,
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Percent of truckload capacity utilized: Generally used for shipments over 10,000 lbs.
Calculated by dividing the total pounds shipped by the theoretical maximum. For
example, assume your trucks can hold 40,000 lbs. of product. During the prior month,
there were 675 shipments totaling 22.95MM lbs. The percentage utilization was 85%.
The 15% unused capacity is an opportunity for more efficiency.
Mode selection vs. optimal: This is calculated by dividing the number of shipments sent
via the optimal mode by the total number of shipments for the period. To measure this,
each traffic lane must have a designated optimal mode, based on freight costs and
customer service requirements.
Truck turnaround time: This is calculated by measuring the average time elapsed
between a truck's arrival at your facility and its departure. This is an indicator of the
efficiency of your lot and dock door space, receiving processes, and shipping
processes. This also directly affects freight carrier profits on your business.
Shipment visibility/traceability percent: Calculated by dividing the total number of
shipments via carriers with order tracking systems, by the total number of shipments
sent during a period. This is an indicator of the relative sophistication of your carrier
base, and one measure of the non-price value available from your carrier base.
Number of carriers per mode: Calculated by counting the total number of freight carriers
used in a given period, by mode (ocean, barge, rail, intermodal, truckload, LTL, small
package, etc.). This is an indication of your volume leverage and control over the
transportation function.
On-time pickups: Calculated by dividing the number of pick-ups made on-time (by the
freight carrier) by the total number of shipments in a period. This is an indication of
freight carrier performance, and carriers' affect on your shipping operations and
customer service.
Upside Flexibility: The ability of a manufacturer to meet additional demand requirements.
This is usually compared as a percentage over the original order. This is protection for
the buyer. It allows for the actual demand to be higher than the forecasted quantity.
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(categories, brands,
assortments, SKUs, key items, etc.) and financials (sales, fill rates, pricing, inventory,
safety stock, gross margin, etc.). The sharing should be on mutual trust and a common
system of communication for collaborative planning needs to be implemented.
There are a few software applications, which support such kind of collaborative, real time
information sharing. For example we can see the kind of software Manugistics provides:
Web-based collaboration:
The web-based collaboration application enables you to share and collaborate with
partners on forecasts, replenishment plans, and promotions in a flexible, easy-to-use
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Now the techniques followed are collaborative replenishment and vendor managed
inventory. As stated earlier the roadblocks for implementation of these techniques are
eliminated by information technology. Through IT the manufacturer takes the
responsibility to replenish the distributor inventory. The inventories are maintained,
monitored and replenished with the help of an information system. The manufacturer
gains as he can get visibility of the inventory held in the supply chain and has the ability
to control it. He also gets the demand information from this data.
Logistics and ware house management
The concept looking at the logistics as a separate function came in much later. Logistics
was more manual intensive and there was no visibility of the movement of goods. Later
automation was employer in warehouses and logistics operations. This reduced time
spent on these operations and increased efficiency. The need for track and trace was
felt in logistics and now the technologies like the GPS, RFID and other wireless
technologies complement this idea. The Internet has opened up many more possibilities
giving all the players visibility at any point in the world.
Sales/ customer service
Sales and customer service were completely cut off from manufacturing departments.
The service was limited and was only reactive. The complaints or information from
customers was difficult to reach the concerned department and took a lot of time. The
next era recognised this and segmented their customers and determined service levels
and served them in better by allocating resources to serve specific customers. Now the
customer service is more proactive; it reaches the customer through the Internet and
takes continuous feedback from them.
Now we shall see how the software in managing the macro processes in the supply
chain are broadly classified:
Supplier relationship management
Internal supply chain management
Customer relationship management
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After the transact stage the partners actually conduct business on the network, the
networked channel becomes a source of revenues and a channel to provide customer
service.
In todays scenario it is quite common to appreciate the relevance of IT in business and
decision-making. The technology has kept pace with the newer business concepts and
change is the only factor that is constant. Present day managers are gearing themselves
to accept this reality and are devising their own ways of dealing with change.
It is important to bear in mind that information technology needs to be contemporary to
business. As business processes are changing because of changes in the market, one
will also have to look at an overall IT strategy and evaluate options to be competitive. It
is true that one should aspire to be a leader in application of information technology in
business and set path breaking business process, the way Dell or Amazon did. But
business is not just being one bright spot in a cloud! Many others are attempting to
leverage their existing resources and capabilities to stay competitive.
In todays business, the customer is the key driver and the business processes are
woven around the customer. Be it manufacturing, retailing, services including
government or any other economic activity, the focus is on what the customer wants and
value creation. In addition to Customer Relationship Management, supply chain
management, ECR, JIT, VMI, MRP have assumed critical roles in shaping the future of
the business. This article deals with the IT strategy for Supply Chain Management.
The Supply Chain Management assumes greater importance for the following reasons:
Comprehensive nature of management span from sourcing of material to
servicing of goods.
Changing the gamut of operation from modular activity like warehousing,
transportation to logistics management and further to all activities along
supply chain network.
Amount of knowledge flow and business process reconfiguration demanding
new and higher skill sets.
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More importantly, vast application of technology - from physical tracing and tracking to
information technology driven visibility and transparency.
Thus, a supply chain network consists of all players right from the customer to any
vendor who contributes in fulfilling customers demand. It includes various parties who
directly or indirectly enable such a network. Given this situation, application of
information technology highlights the importance of the 3As in achieving seamless
integration along the supply chain. They are accuracy, accessibility and appropriateness
of information.
In decision making, accuracy of information is very vital. One must ideally have cent
percent accurate information whenever it is based on tracking, consolidation and / or
mining from historical transactions. In the absence of this, one could use past patterns
for projecting the future. In either case, a reliable and consistent IT system will play a key
role. Disparate systems will have to be integrated to avoid redundant data creation /
transfer at multiple points.
A second important characteristic is accessibility of information on time and the level in
hierarchy for decision-making. Especially in a multi location, multi level organisation
where there are a number of external players who also constantly interact, this becomes
critical. The type of systems and application deployed adds to the complexity. Security
considerations and a conservative outlook add another dimension to an already complex
situation. To achieve efficient supply chain integration, there is a need to evolve a
system that provides accessibility at the right level.
A third important characteristic related closely to the accessibility is the appropriateness
of information. This relates to structuring and defining the hierarchy of information. There
is a general tendency to create a system that focuses on the capture of a lot of irrelevant
information. To avoid this, any system should be role based and / or process centric to
ensure that only appropriate information get captured, tracked and made amenable for
transactions and decision-making.
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IT investments for supply chain management could also be evaluated on the above
criteria. The following different application scenario could be possible:
Legacy system in use and SCM module deployed as a supplementary tool
ERP which may enable certain features of supply chain activities, but there is
a need to deploy an aggressive SCM application to achieve competitive
advantage
Creating a new tailor-made system or first generation application
Application deployment at modular activity level like for warehousing,
transportation, demand forecasting, etc.
There are many vendors and solutions integrators with domain expertise who could use
existing products for configuring any such solutions. It is ideal to look for an application
considering the following criteria:
1. Domain expertise
2. Ability to deliver an integrated solution
3. Cost effectiveness
4. Ability to cover and integrate external entities
5. Flexibility to incorporate newer development on a shorter cycle
6. Ability to facilitate smooth migration
To conclude, IT application in SCM domain must bring transparency and visibility across
the chain for achieving efficiency in operations and servicing the customer to the best of
his expectations. No longer business processes are rigid and hence applications must
be adaptable to such vulnerability at least cost and time. All players across the Supply
Chain network, be it a small supplier or a logistics service provider or a customer, must
see value for them instead of the internal organization alone. The future lies in partnering
relationship not only to optimize resources but also capabilities including IT across the
chain. To cite an application, a cycle manufacturer may have to see how it can integrate
the smallest component provider - namely, a brake shoe supplier - and dealer at a rural
center, in order to optimize model production run and retain the customer instead of
losing them to competition. Today all these are possible with available technology if only
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PRACTICE AREA
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b. Customer relationship
management
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c. Inventory
b. Facilities
d. Transportation
e. Information
9. Distribution is a key driver of the overall profitability of a firm
a. The addition of distributor only adds cost to supply chain
b. It directly impacts both supply chain costs and customer experience
c. It slows down the responsiveness of the supply chain
d. It cannot be developed as a supply chain strategy
10. Lead time is the gap between
a. When an order is placed and when the order is received
b. When an order is received and when it is put away
c. When an order is received and when it is used
d. None of the above
11. The cycle view of a supply chain holds that the processes in a supply chain are
divided into 2 categories depending on whether they are initiated in response to
or in anticipation of customer orders.
True / False
12. The main advantage of a distribution network with local storage is that it can
lower the delivery cost and provide a faster response than other networks.
True / False
13. To extract maximum benefit from e-business, firms should integrate it with their
existing supply chain networks.
True / False
14. Successful supply chain management requires which of the following decision
phases? (Tick the correct option from the choices below)
a. Supply chain
strategy/design
e. a and b only
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d. Customer experience.
b. Product variety.
e. Order visibility.
c. Product availability.
16. A milk run is a route in which a truck either delivers product from a single supplier
to multiple retailers or goes from multiple suppliers to a single retailer.
True / False
17. A reliable supplier has low variability of lead-time, whereas an unreliable supplier
has high variability.
True / False
18. The selection of suppliers, design of supplier contracts, product design
collaboration, procurement of material, and evaluation of supplier performance
are a part of
a. Procurement.
d. Supplier selection.
b. Sourcing.
mode.
e. Both a and b
b. Inventory aggregation.
c. Level of customer
responsiveness.
20. E-business enhances traditional business transactions by allowing them to take
place over the Internet where they can often be executed
a. Less efficiently and with a lower level of responsiveness.
b. Less efficiently but with a higher level of responsiveness.
c. More efficiently and with a higher level of responsiveness.
d. More efficiently but with a lower level of responsiveness.
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24. A companys partners in the supply chain may well determine the companys
profitability as the partners are intimately tied to its supply chain.
True / False
25. The major drivers of supply chain performance are inventory, facilities and
transportation only.
True / False
26. Increasing the number of facilities decreases the response time and
transportation cost but increases inventory and facility cost.
True / False
27. The goal of network design is to maximize the supply chains long-term
profitability. This is possible by having a well laid out business strategy.
True / False
28. Cycle Inventory exists in a supply chain because different stages exploit
economics of scale to lower total cost. The costs considered include material
cost, fixed ordering cost and handling cost.
True / False
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b. supply chain
d. Logistics
c. Storage density
b. Warehouse ratio
d. Warehouse occupancy
36. An independent logistics service provider who performs any or all the functions of
logistics to get the clients products to the market is :
a. 2PL service provider
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37. Applying concepts of logistics to business conducted via the internet is called as
E-fulfillment.
True / False
38. RFID is an automated identification technology that encodes information in an
array of parallel, rectangular bars and spaces that varies in width.
True / False
39. The document listing the number of pieces, contents, weight and measurement
of each; item in the consignment is
a. Dock receipt
b. Bill of lading
c. Packing list
d. None of the above
40. Logistics audit helps in preparing strategic plans to bring efficiency and
effectiveness in to the entire logistical supply chain.
True / False
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1) Explain the role of the major drivers of the supply chain performance.
2) How E-Business does affects the supply chain activities.
3) What are the three Decision phases in the supply chain? Explain.
4) Discuss the importance of collaboration within a supply chain when performing
aggregate planning.
5) Define supply chain integration process and need for creating an effective
supply chain organization structure. Explain with an illustration.
6) Contemporary supply chain management depends on technology and visibility
of information across the chain. Elucidate with an example.
7) Explain the need for demand planning and three approaches to forecasting.
8) Organizations are increasingly outsourcing supply chain function to 3 PL
service
Illustrate with
examples.
11) In the global economy, a well developed ability to create and sustain fruitful
collaboration gives companies a significant leg-up Kanter. David Farmer
says that, Much of the history of Commercial transaction in India has been
enacted against backcloth of the Latin tag CAVEAT EMPTOR Buyer
Beware. Please reconcile the statements and suggest eight critical points
necessary for inter-organizational relationships to meet, if they are to be
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12) What are some industries in which aggregate planning would be particularly
important? What are their characteristics?
13) What are the main differences between the aggregate planning strategies?
14) What modes of transportation are best suited for large, low value shipments?
Why? Discuss key drivers that may be used to tailor transportation. How does
tailoring help?
15) Proper decision on warehousing will enhance the effectiveness of marketing
considerably Explain
16) Discuss different techniques for inventory control with their merits and demerits
17) Explain the need for demand planning and three approaches to forecasting.
18) How do logistics requirements for e-commerce business differ from those of
traditional business?
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(SD)
(FP)
(PF)
Revenue (Rs)
315,400
850,000
400,000
240,000
600,000
360,000
5,000
150
300
150
No of deliveries received
125
850
275
216
2,160
1,080
Item sold
50,000
400,000
125,000
Description
A. Bottle returns
5,000
B. Ordering
62,400
C. Delivery
D. Shelf-stocking
Stocking of merchandise
E. Customer-support
Assistance
provided
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75,000
to 125,000
173
174
Factory
Wholesalers
Retailers
End
consumers
Maximum stock level = Monthly demand from Retailers + Lead time demand +1
week safety stock
175
Sales/consumption
Per month ( Rs. Lakhs)
1. At supplier end
45
Inventory Turnover
based on monthly sales
4.0
2 At Factory
RM (Consumption)
80
1.33
120
1.2
FG (Sales value)
160
2.0
3 Whole saler
40
0.6
4. Retailer
25
1.33
Case 3:
Study the enclosed Case Study ANAND METAL AND TIN PRODUCTS PVT LTD and
analyze the case, using a fish-bone (cause and effect) diagram and react:
176
comparison to other competitive firms in the line during the previous years, but during
the last two to three years it has dwindled further even though there are good demands
for metal and tin products in the market.
In an effort to bring about a change in his company, Mr. Anand fired Mr. B N Mishra, the
General Manager of the company who had been holding the position for the last seven
years.
perquisites.
On joining the company, Srivastava carefully went through the sales records and
predicted sales increases for several products listed in the Sales Catalogue. In his
estimates, he also convincingly declared increases in sales would turn the table and this
would enable the company to make good profit. He therefore instructed all the regional
Product Managers that they in consultation with the Warehouse Managers should
immediately initiate purchase actions for all items. He outlined the inventory policy as
follows:
Stocks in warehouses may rise due to this larger quantity purchases, but
increased carrying cost for higher inventory holdings would be compensated by
an increase in sales and better customer service.
Within a short time, sales picked up and by the year-end it was expected to go beyond
all predictions. But all the warehouses reported huge stocks of unsold inventory. This
superseded all previous records in the company history.
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Following a rumor that there is an impending strike in the factories of a major metal and
tin products manufacturer in the country, Srivastava urged all the warehouses to
increase stocks further and instructed Product Managers to procure all items from any
available source.
The strike, however, did not materialize owing to a union management settlement and
the Product Managers promptly acting on his advice inflated stocks of the warehouses to
a danger level. At the-end of the year during final accounting it was found that even
though there has been some improvement in the sales, the company has actually
incurred loss.
Do you think Mr. Anand was right in pinning his faith on Srivastava?
Was
Srivastavas action for a policy of inventory built-up right, without studying pros and
cons of the metal and tin products business?
-xCase 4:
Study the enclosed Case Study, titled Newspapers as CRM tools and answer the
Three questions provided at the end.
Your answers may be supported with any diagrams, models or algorithms, as may be
necessary.
Neatness, brevity and clarity in the answers will be appreciated and recognized
appropriately.
British Industry can save USD2.4bn a year
Supply chain relationships hold the key
British manufacturing companies can save USD 2.4bn a year by developing effective
supply chain relationships with customers and suppliers. This is the conclusion of a new
repot, based on research for the institute of logistics, by A.T. Kearney, management
consultants, and Manchester School of Management of UMIST. The report says that
178
As a result, many
companies are unable to develop relationships to the point where they deliver tangible
results rather than rhetoric claiming partnership. The difference between results and
rhetoric can generate savings of up to 6 percent in purchased material costs each year,
according to Steve Young of A.T. Kearney. For a typical USD 100m turnover
manufacturer, this would represent around USD 2m in lost opportunity annually.
The report shows that this failure to measure that pain and gain of closer supply chain
relationships makes it difficult to demonstrate that they have been a success in anything
other than a subjective way, or to identify areas in which the relationships could be
further improved. As a result, few relationships progress beyond the stage of limited cooperation at an operational level.
Development to more advanced levels is also held back by a concern on the part of
suppliers about becoming over-dependent on their major customers, even though they
commonly wish to increase their customers dependence on them. The reluctance of
firms to make themselves too vulnerable to particular customers acts as a constraint on
the relationships that are required to improve interface and share ideas on how to
reduce costs and improve service and quality.
The study found that over three-quarters of the collaborative initiatives studied brought
benefits to other relationships, so that developing the right relationships can be a
powerful driver of change within a company overall, through the transfer of ideas and
learning. This means that the idea of win-win relationships needs to be treated with
some caution.
imbalances in the distribution of costs and benefits, typically with the supplier paying and
the customer benefits.
learning and applies it to other areas of the business, or where the level of trust builds
over time to encourage collaboration at a strategic level in areas such as market entry
and product innovation.
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The evidence suggests that supply chain integration is not being fully exploited. The
links that exist are still fundamentally arms length, with traditional behaviours and them
and us attitudes.
enterprise, from raw material sources through to end customer, from a total business,
rather than a narrow buyer-seller perspective.
This is not achieved overnight. The report characterizes courtship that can ultimately
lead to partnership in four ways:
1. Clear goals endorsed by senior management that reflect significant business
objectives
2. Accurate measurement of costs and benefits allowing prioritization of effort
and demonstration of success
3. Commitment of an appropriate level and quality of resources on both sides to
make real progress quickly.
4. Active learning processes to share best practice information across both
organisations,
thus
leveraging
individual
relationships
and
building
partnerships
Partnerships based on this strong foundation will deliver results rather than rhetoric.
Steve young says: British industry needs to stop flirting with relationships and start
going steady with partners who have the potential to make a difference. Each partner
should expect a degree of nervousness in the other much like marriage, if a=only
because collaboration creates a sense of dependency.
This nervousness should be tolerated until confidence is established. It should be
understood that while the customer may get immediate benefits through substantial cost
savings, the supplier may suffer short-term pain before benefiting form its new
competitive position.
If there are changes in both customers and suppliers operations there is likely to be an
equal distribution of costs and benefits including long-term strategic advantages.
However, where the changes are predominantly made by the supplier, the benefits are
skewed towards the customer and the costs towards the supplier.
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