understanding the supply chain (exam)

8/7/2019 Understanding the Supply Chain (Exam)

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Understanding the Supply Chain

A supply chain is dynamic and involves the constant flow of information, production and funds

between different stages.

Each stage of the supply chain performs different processes and interacts with other stages of the

supply chain.

A typical supply chain may involve a variety of stages. Customers

Retailers

Wholesalers/distributors

Manufacturers

Component/raw material suppliers.

Stages of a Detergent Supply Chain

The Objective of a Supply Chain

The objective of every supply chain is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to

the customer and the effort the supply chain expends in filling the customers request.

Decision Phases in a Supply Chain

Supply chain strategy or design.

How to structure the supply chain.

Location, capacities of production, and warehousing facilities.

Supply chain planning

Companies define a set of operating policies that govern short-term operations.

Forecast market, inventories, subcontracting of manufacturing.

Supply chain operation

Make decisions regarding individual customer orders.

Firms allocate individual orders to inventory or production Shipments, delivery schedules of trucks.

Process View of a Supply Chain

A supply chain is a sequence of processes and flows that take place within and between different supply

chain stages and combine to fill a customer need for a product.

Cycle view

Push/Pull view


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Cycle View of Supply Chain Process (The processes in a supply chain are divided into a series of cycles,

each performed at the interface between two successive stages of a supply chain).

Customer order cycle

Replenishment cycle (at retailer/distributor)


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Manufacturing Cycle

Push/Pull View

The processes in a supply chain are divided into two categories depending on whether they are executedin response to a customer order or in anticipation of customer orders.

Pull processes are initiated by a customer order, and push processes are initiated and performed in

anticipation of customer orders.

The push/pull boundary in a supply chain separates push processes from pull processes.

Supply chain processes fall into one of two categories depending on the timing of their execution relative

to customer demand. FMCG supply Chain, automotive supply chain, IT supply chain industries fall under

Pull or Push supply chain (both hybrid puss and pool).

What is Pull Supply Chain?

Under pull supply chain, products are manufactured or procured based on specific customer requests. We

also know it as Built to Order or Configured to Order model. We often see this model operating in

IT/High Tech Industries, where customization is the competitive advantage. Briefly, we have seen this

model in automotive industry and it is being used in high end luxury market segment. The objective of

this model is to minimize the Inventory carrying and optimize supply. Pull model are is as a response to

growing uncertainty in demand and short product cycle. Some of the characteristics of this model include:1. Volatile demand situation;

2. High rate of Customization;

3. Minimal Inventory Carrying;4. Not a off the shelf product;

5. Highly dynamic and effective distribution network.

Even though there are many challenges in implementing a pull supply chain in a globalized environment,

converting a push supply chain into a pull supply chain is considered as next frontier of innovation and

lean thinking. Particularly if we are able to implement pull process for procurement activity and take

advantage of Point of Sale information to provide the demand visibility to suppliers, it would be a great

innovation. However, if we can implement, the business would be saving costs (warehousing, inventory

carrying; capital costs etc.) and also could introduce JIT or Cross Dock Operation which are again cost

efficient models.What is Push Supply Chain?

Under Push model, products are manufactured or procured based on anticipated customer orders

(speculative). This model is also known as Built to Inventory or Built to Sock. The name itself reveals its

functionality. Products are manufactured in anticipation of customer needs. There are no prizes for

identifying industries that use push model, it is obvious that retail heavily uses push model. Even though

direct to store or cross docks are implemented, overall retail supply chain is based on push model. Some

of the big names in the retail industry are trying to adopt the hybrid model which is a combination of pull

and push. Some of the key challenges and characteristics could include:


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1. High inventory costs,

2. Challenging working capital requirements due to low inventory turns;

3. Huge warehousing and distribution costs;

4. Inability to meet dynamic market conditions and

5. Seasonal demand and off the shelf product.

Push/Pull Process for the L.L. Bean Supply Chain

Cycles in Dell Supply Chain


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Push/Pull Process for Dell Supply Chain

The Importance of Supply Chain Flows There is a close connection between the design and management of supply chain flows and the

success of a supply chain.

e.g.) Dell has only 10 days of inventory contrast to other pc makers of 80 to 100 days. The

success of the Dell supply chain is facilitated by sophisticated information exchange. (customized

web pages)

Outsourcing

Managing Inventory

We all worry about Inventory Control and Inventory carrying costs. Let us ask one fundamental question,

why we carry inventory at all? There could be many reasons for that but some very important are:

1. It enables the firm to achieve economy of scale.

2. It balances supply and demand.

3. It enables specialization in manufacturing.4. It provides protection from uncertainties in demand and order cycle.

5. It acts as buffer between critical interfaces within the supply chain.

Hence, it is essential to control the inventory and add value to the business process by minimizing

inventory carrying costs. In order to control inventory we need inventory status update on online basis

(inventory visibility). The first step towards inventory optimization is to know your total inventory in

supply chain. The second step would be to understand poor inventory management symptoms:

1. Increasing number of back orders;2. Low Inventory Turns;

3. High Customer Turnover rate;

4. Lost Sales;

5. Periodic lack of sufficient storage space;

6. Inventory Variance;7. Obsolete inventory.

Some of the suggestions for improving inventory control:

1. Create Inventory Visibility;

2. Introduce aging (FSN) analysis of Inventory if not already in practice;

3. Create accountability and introduce incentives for meeting inventory targets;

4. Implement Cycle Counts every week and ensure stock take once a month;

5. Classify the inventory (A,B, and C) and increase focus on big ticket items;


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6. Improve surveillance efficiency to eliminate pilferage;

7. Optimize Ordering Process;

8. Share POS information and consumption patterns with Vendors;

9. Make Vendors jointly responsible for avoiding stock outs and excess inventory;

10. Align supply with Demand;

What Drives Supply Chain Excellence?

Some believe that supply chain superiority or excellence is achieved with the help of three elements;

process, people and technology. Another group would advocate continuous improvement, benchmarking

and KPIs, and innovative thinking would lead to supply chain excellence.

In order to make all above mentioned factors to work effectively three factors are critical. The first and

foremost is Collaborative Relationships. The other two factors are Trust and Commitment. In my

opinion supply chain is all about managing relationships, demonstrating trust in relationships and

committing to the core objectives.

How Procter and Gamble has reached successful network collaboration:

By its ability to move large volumes of data. They realized that data should betransferred directly and not be transformed or translated on arrival. This avoidsmiscommunication. The ability to establish connections quickly on demand if necessary within hours. Enhance backup and recovery strategies for all systems.

P& G has developed private e- market place for customers and suppliers. Thismeans that they are able to perform real time transactions on web-enabled frontend systems. Enabled inventory savings across the whole supply chain, allowedother improvements such as automatic invoice processing. This helped improve

quick responses to events which enabled the company to have more promotionalevents leaving it with less inventory after the promotions.Its also experimenting with early pilots to help reach demand capabilities. Theseinclude superimposing real time signals onto production plan and integrating realtime shop floor and warehouse data. A dynamic distribution planning system, inwhich the planning cycle is automatically triggered by major events like demandand inventory and can be controlled at any time. Though the pilots are still in earlystages incorporating these ideals will cut costs and improve customer satisfaction.
http://en.wikipedia.org/wiki/Continuous_Improvement_Processhttp://en.wikipedia.org/wiki/Performance_indicatorhttp://en.wikipedia.org/wiki/Collaborationhttp://en.wikipedia.org/wiki/Collaborationhttp://en.wikipedia.org/wiki/Trust_(social_sciences)http://en.wikipedia.org/wiki/Trust_(social_sciences)http://en.wikipedia.org/wiki/Involuntary_commitmenthttp://en.wikipedia.org/wiki/Involuntary_commitmenthttp://en.wikipedia.org/wiki/Continuous_Improvement_Processhttp://en.wikipedia.org/wiki/Performance_indicatorhttp://en.wikipedia.org/wiki/Collaborationhttp://en.wikipedia.org/wiki/Trust_(social_sciences)http://en.wikipedia.org/wiki/Involuntary_commitment

understanding the supply chain (exam)

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