UNIT 4

Supply Chain Management

Supply Chain

All facilities, functions, activities, associated

with flow and transformation of goods and

services from raw materials to customer, as

well as the associated information flows.

An integrated group of processes to

“source,” “make,” and “deliver” products.

Supply chain management is the

management of a network of

interconnected businesses involved

in the ultimate provision of product

and service packages required by

end customers (Harland, 1996).

Supply Chain Management – Definitions

Supply chain activities transform natural

resources, raw material and components into a

finished product that is delivered to end customer 

•In SCM companies and corporations involve

themselves in supply chain by exchanging

information regarding market

fluctuations, production capabilities , demand

forecasts etc.

•Supply Chain is a system of organizations, people,

technology, activities and Information and

resources In moving a product or service from

supplier to customer .

Design a supply chain network that delivers high quality products to the right customers at the right time at minimum cost.

Key objective of SCM

Supply Chain Illustration

Supply Chain

for Denim Jeans

Supply Chain Processes

Terms are used interchangeably

Supply chainactivities that get raw materials and

subassemblies into manufacturing operation & to final consumer.

Value chainevery step from raw materials to the

eventual end userultimate goal is delivery of maximum

value to the end user

Value vs. Supply Chain

Managing flow of information through supply

chain in order to attain the level of

synchronization that will make it more responsive

to customer needs while lowering costs.

Keys to effective SCM

information

communication

cooperation

trust

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Supply Chain Management (SCM)

10-12

Supply Chain Uncertainty One goal in SCM:

respond to uncertainty in

customer demand without

creating costly excess

inventory

Negative effects of

uncertainty

lateness

incomplete orders

Inventory

insurance against supply

chain uncertainty

Factors that contribute to

uncertainty

inaccurate demand

forecasting

Long& variable lead times

late deliveries

incomplete shipments

price fluctuations and

discounts

inflated orders

Reduce uncertainty impact on profitability -According to A.T.

Kearney's research, inefficiencies in the supply chain can waste up to 25 percent of a company's operating costs.

right thing right time at right place customer delight,competitive advantage minimizing waste

Importance

Working-capital reductions-Increasing inventory turns, managing receivables and payables, minimising days of supply in inventory, and accelerating the cash-to-cash cycle all are affected by supply chain execution. A the case of a consumer products company that took 20 minutes to make a product and five and a half months to collect payment for it. If you can cut the cash cycle down, there are millions of dollars there.

Fixed-capital efficiency-This refers to network optimisation--for instance, assuring that the company has the right number of warehouses in the right places, or outsourcing functions where it makes more economic sense.

Bullwhip EffectOccurs when slight demand variability is magnified as

information moves back upstream

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JUST IN TIME

What is just-in-timeIf you think about someone's journey to work,

they could leave the house just-in-time to

cycle to the train station, just-in-time to catch

their train, which would get them to their

place of work just-in-time, allowing them to be

at their desk just-in-time to start work.

There is no problem with this concept;

however, achieving it would be rather more

complex and so too is applying this concept in

engineering manufacture.

What is just-in-time?In engineering, using the just-in-time

theory would allow the components that are needed to produce a product to be delivered to the worker, just-in-time.

The products can then be made available for the customers just-in-time.

This process allows for all types of stock, including materials and finished products, to be eliminated.

Implementing a just-in-time structure can mean a company is adopting a lean production system.

JIT is both a philosophy and collection of management

methods and techniques used to eliminate waste

(particularly inventory)

JIT also known as lean production or stockless production

JIT improves profits and return on investment by:-

1. Reducing inventory levels

2. Increasing the inventory turnover rate

3. Reducing variability

4. Improving product quality,

5. Reducing production and delivery lead times,

6. And reducing other costs (such as those associated with

machine setup and equipment breakdown).

KEY ELEMENTS OF JIT

1.To have a flexible workforce capable of using

multiple skills.

2.Insist for defect free materials & supplies be

delivered when needed.

3.Strives for reduced set-up times & small lot

sizes.

1. There should be reliable vendors, employee

involvement & co-operation with total

productive maintenance.

As a concept JIT means that, virtually no

inventories are held at any stage of production

and that the exact number of units are brought

to each successive stages of production at the

right time.

THAT’S WHY THE JIT CONCCEPT IS OTHERWISE KNOWN AS : ZIPS (ZERO INVENTORY PRODUCTION SYSTEM), ZIN (ZERO INVENTORIES), MAN ( MATERIALS AS NEEDED), NOT (NICK OF TIME).