SUPPLY CHAIN

MANAGEMENT
UNIT 1
Alex Kuruvilla
NSM
Syllabus
Supply chain strategic framework– Concept of Supply Chain, Objectives and
Importance of Supply Chain, Supply Chain Process, Supply Chain Decisions,
Competitive and Supply Chain Strategies, Achieving Strategic Fit, Expanding
Strategic Scope, Obstacles to achieving strategic Fit, Achieving and Maintaining
Strategic Fit in the current Indian Scenario, Supply Chain Drivers and Metrics
Supply Chain Management (SCM)
Flow of products and services from:
• Raw materials manufacturers
• Intermediate products manufacturers
• End product manufacturers
• Wholesalers and distributors and
• Retailers
Connected by transportation and storage activities
Integrated through information, planning, and integration activities
Cost and service levels
Core functions of SCM
• Management of suppliers
• Management of Raw Material
• Transportation Management
• Information Management
• Tracking and Monitoring
• Cost Management
• Inventory Management
• Distribution and Return Management
• Customer Satisfaction
Different flows
in supply chain
Product flow
Fund flow
Information flow
Objectives of Supply chain
SC is the integration of suppliers, factories, warehouses, and stores with the objective of
sourcing, producing and distributing merchandise:
a. In the right quantities
b. To the right location
c. At the right time
So that the organization can achieve the following:
• Minimize total system cost to improve the profitability
• Satisfy customers
• Beat competition
• Improve standardization
Importance of Supply chain
• To make products available for the customer
• Reduce operating costs
• To improve customer service
• To improve financial position
Supply chain process or Process views of
supply chain
Two types of views
1. Cycle view
2. Push/Pull view
Decision Phases in supply chain
• Supply chain strategy
• Supply chain planning
• Supply chain operation
Supply Chain Strategy
• Supply chain strategy is made up of Sourcing strategy, Operation strategy and
Distribution strategy.
Sourcing Strategy
Sourcing strategy deals with planning, designing and building a reliable and
competitive supplier base, determining the strategy for procurement, defining
pricing strategies and supply chain requirements. The strategy involves integration
of its objectives in line with or confirming to the objectives of stake holders in
operations, finance, marketing and distribution. Lastly sourcing strategy involves
planning competitive buying sources for its raw materials, components and services
along with alternative variables.
 Operation
strategy
• It consist of long term strategy for
running the Production and related
activities.
• Production strategy is made up of Make
To-Stock (MTS), Assemble-To-Order
(ATO), Make-To-Order (MTO), and
Engineering-To Order (ETO)
Distribution Strategy
• It is a plan aimed at providing products or
services to the customers through the
supply chain.
• It embraces marketing channels choice and
processes coordination. The company must
determine who would be its intermediary.
• There are three distribution strategies:
a. intensive distribution
b. exclusive distribution
c. selective distribution.
Strategic Fit
• Aligning the supply chain strategy with
company’s competitive strategy
• The alignment should be in terms of
developing supply chain capabilities to
satisfy customer priorities.
To Achieve strategic fit
• Competitive strategy and all functional strategies must fit together to a
coordinated overall strategy
• All functions should align all their processes and structures so as to execute the
strategies
• Design the supply chain to support supply chain strategy
Strategic fit –
Supply chain
Expanding the strategic scope
• Intraoperation Scope: to minimize local cost view
• Intrafunctional Scope: To minimize functional cost
• Interfunctional Scope: To maximise company profit
• Intercompany Scope: To maximize supply chain surplus
• Agile Intercompany scope
Challenges to achieving and maintaining
strategic fit
• Increasing product variety and shrinking life cycles
• Globalization and increasing uncertainty
• Fragmentation of supply chain ownership
• Changing environment
• Sustainability aspects
Achieving strategic fit in Indian market
Steps to create strategic fit
Indian market overview
(Company perspective)
• High Diversity • Highly adaptive
• Huge Indian middle class • Clear pricing strategy
• Price sensitive • Hedging risk by expanding
• Huge unorganized sector • Focusing on brand building
• Huge country • Understanding customer attitude
• Highly biased and unpredictable • Equal importance to rural and urban
government markets
• Agri-market • Efficient and responsive company
Indian market strategic fit of supply
chains
• Align supply chain goals and strategy with company goals and strategy and market scenario.
• Outsource or create strong distribution networks
• Selection of production location is crucial
• Branding and packaging to be done as per company targets
• Cost effective supply chains to be created
• Direct linkages with farmers and suppliers to be developed
• Volume or big quantity
• Number of retailers very crucial
• Be ready for change
Supply chain drivers
• Facilities
• Inventories
• Transportation
• Information
• Sourcing
• Pricing
 Facilities
Components Metrics
Role
• Manufacturing • Location • Capacity
• Warehousing • Capacity • Utilization
• Achieving economies • Manufacturing • Production cost
of scale • Warehousing • Product variety
• Processing / idle/ down
Time
 Inventory
Components Metrics
Role
• Mismatch b/w supply • Cycle inventory • Average inventory
and demand • Safety inventory • Cash to cash cycle
• Control cost time
• Seasonal inventory
• Material flow • Inventory turns
• Seasonal inventory
• Average safety
inventory
 Transportation
Components Metrics
Role
• Movement • Mode • Cost (inbound and
• •
outbound)
Inventory Route
• Shipment size
• In-house or outsourced (inbound and
outbound)
 Information
Components Metrics
Role
• Connection b/w various • Push versus pull • Forecast horizon
stages • Coordination and • Frequency of update
• Daily performance information sharing • Forecast error
• IT • Forecasting and
aggregate planning
• Enabling technologies
 Sourcing
Components Metrics
Role
• Purchase • In-house vs outsource • Average purchase price
• Supplier selection • Procurement process • Range of purchase price
• Supplier evaluation • Average purchase
quantity
• Fraction of on time
deliveries
• Supply quality
• Supply lead time
• Supplier reliability
Thank You