An Introduction to Supply Chain ManagementWhat is Supply Chain Management?A more formal definition is:Another description of SCM is:A familiar household exampleThere are many options available, for the above task e.g.There are various competing issues that might be considered:SCM is the topic of importanceCosts?Route to SCMOptimization of Existing ResourcesUse of new computer and communication technologiesSlide 13The Supply Chain CouncilCharacteristic of Poorly Performing Supply ChainThe issue in Supply Chain OptimizationSlide 17Slide 18Slide 19Slide 20Stages in development of SCMStages in development of SCM (cont.)Slide 23Success StoriesKey factors associated with Claimed successesKey factors (cont.)Slide 27Static or Dynamic SCMInnovative Supply Chain StrategiesInnovative Supply chain Strategies (cont.)Principle of PostponementPostponementConsolidationCross dockingKey enables in Supply Chain innovationsSCM SoftwareSuppliers of SCM software include (based on 1998 data):Slide 38Case study-Wal-martCase Study – Dell ComputerDell-computer (cont.)Dell Computer (cont.)1An Introduction to Supply Chain ManagementS. ViswanathanW. Watthayu2What is Supply Chain Management?Supply Chain Management (SCM) is concerned with three core aspects of a company’s operations: Material SupplyGoods ProductionProduct Delivery to Customers3A more formal definition is: “Integrated Supply Chain Management is a processing-oriented, integrated approach to procuring, producing and delivery products and services to customers. It has a broad score that includes sub-suppliers, suppliers, internal operations, trade customers, retail customers, and end users. It covers the management of material, information and funds flows”By Peter Metz “ Demystifying Supply Chain Management”4Another description of SCM is: “Effective SCM enables you to make informed decisions along the entire supply chain from acquiring raw materials to manufacturing products to distributing finished goods to the customers”5A familiar household example Of course, supply chain management ideas also occur in all walks of life and thus the basic concepts will be very familiar to the reader.As a trivial example, consider the problem of supplying bread and milk to a household6There are many options available, for the above task e.g. Have the items home deliveredBuy the items at the corner store each dayPick them up at a service station when purchasing gasoline for the family carPurchase them in bulk every 2 or 3 days from a large supermarketPurchase via e-commerce over the Internet7There are various competing issues that might be considered: Reliability of supplyFreshness of the productCostConvenienceCapacity to combine this task with other functionsAvailability of diversity and variety in the products, etc.8SCM is the topic of importance One can readily imagines that if one application applies the same kind of thinking to the manufacture of a sophisticate item, then the issues become considerably more complex but also potentially more important.Indeed, one can readily understand that making the decision could be of considerable commercial importance and, indeed, could sometimes make the difference between staying in business or loosing out to competitors “Thus SCM is the topic of importance”9Costs? SCM is not a trivial matter. The costs of taking this issues seriously can be substantial. Hence, it is important to be able to make the right kind of decisions about the extent to which one embraces this technology.In this context, theses notes are intended as a preliminary guide to aid decision making.10Route to SCM From the many literatures, we can identify three routes that one might follow to introduce SCM into a company. These are:1. Via the optimization of the utilization of existing facilities2. Via the use of new technologies e.g. the Internet and e-commerce3. Via a major restructuringThese are further explained on the next three slides.11Optimization of Existing Resources SCMOptimization of the existing facilities Little restructuring required12Use of new computer and communication technologies Electronic and otherIntermediaries e-commerceMay lead to the needfor restructuringNew computerTechnologies,Internet13Inadequate or Old infrastructureNew manufacturing Technologies such as agile manufacturingPostponement, etcMajor restructuring14The Supply Chain Council A possible source of information on SCM is the supply chain councilSupply Chain council Inc.303 Freepport RoadPittsburgh, PA 15215http://www.supply-chain.org15Characteristic of Poorly Performing Supply ChainExcess inventoriesLong cycle timesStockouts and product substitutionsInefficient plant schedulingExcess capacityLTL deliveriesHigh transaction costsetc.16The issue in Supply Chain OptimizationPlanSourceMakeDeliverFour core management processes1718192021Stages in development of SCM Inter-relating Warehousing and TransportationShorter order response times via faster warehouse handing and faster transportation lessens the length of forecast period and increase accuracy of forecast. Aided by improved data communications between different levels of warehouse (plant, regional distribution centers, locate distribution center).22Stages in development of SCM (cont.)Logistics StageAddition of manufacturing, procurement and order management functions. Aided by electronic data interchange, worldwide communications, and use of computers to store, retrieve and analyze data.23Stages in development of SCM (cont.)Integrate SCMAdd supplier and end customers. Utilizes electronic data, electronic funds transfer, computerized decision support systemsKey driver: Explosive development of computer and communications technology24Success Stories Some claims made for the success of SCM principles are given below:Inventory reduced by 50 percentSupply chain total cost share of revenue reduced 20 percent40 percent increase in on-time deliveriesCumulative cycle time reduced by 27 percentRevenues increased 17 percentInventory turns up 2x while out-of-stock incidents down 9x50 percent reduction in finished-good inventory by postponing package25Key factors associated with Claimed successes Five key factors enabling these accomplishments1. An overriding, pervasive customer focus. At every stage in the supply chain, the ultimate customer’s needs are understood and forced into
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