Supply Chain Management :

Background
Production & Operation
Management
By
Prof Srikanth Venkataswamy
 Purchasing

What is Purchasing ?
Purchasing is an “Act” Of Buying
an item at a price.
 Objective Of Purchasing
The Basic objective of Purchasing Is
To procure : 5 R’s
1. The right material
2. With the right quality and Along With
the right quantity
3. At the right Time
4. For the right Price
5. From the right source
 Goals of Purchasing
1. Uninterrupted Flow Of Material
2. Manage Inventory
3. Improve quality
4. Developing and managing suppliers
relationship
5. Achieve Lowest Total costs
6. Reduce administrative costs
7. Advance firm’s competitive Position
 Importance Of Purchasing
1. Purchase function provides material and
flow of materials to the Organization.
2. Provides Effective Buying
3. As purchase Of material Contributes
almost 50% to 60% of the organizational
spending budget led to efficient buying
and cost saving structure.
4. Helps in proper Planning and control of
materials.
5. Helps in better forecast , scheduling,
capacity planning to the top management.
 Centralized & decentralized
Purchasing
Centralized & decentralized Purchasing is the
matter of discretion and policy.

Centralized Purchasing:
Is the policy of the Management where
all purchases of the entire organistion is
made by a single purchase department.
Merits of Centralized Purchasing
1. Uniform purchasing policy/Duplicacy
avoided:
2. Better cost (economics of large scale
buying)& quality control:
3. Control on Multiple buying:
4. Healthy Supplier buyer relationship:
5. Effective Flow of materials/Supplies:
6. Efficient Departmental line of control
7. Better cash Flow/working capital or
Financial management:
 Demerits of Centralized Purchasing
1. Efficiency of other related departments
depends On the efficiency of the purchase
department.
2. No localized Purchase advantages:
3. Delay in supply & Receipt Of materials:
4. Room for Miscommunication/ gaps in line of
authority.
5. Unsuitable for small buys or for perishable
goods or distance between the purchase &
production been very Large :
6. Huge Transitional procedures, systems,
Paperwork, approvals & costs
 Decentralized Purchasing

Decentralized Purchasing:
Stands for extended line of
authority to make independent decision and
act up them.
Merits of Decentralized Purchasing
1. Better decision freedom /cut on In Efficiency &
short comings of the centralised department:
2. Close Vendor – vendee relationship directly with
the user departments:
3. Hands on to tap local Advantage:
4. Effective follow up/Better interdepartmental co-
ordination:
5. Reduce in Transitional procedures, systems,
Paperwork, approvals & costs:
6. Reduction of overloading of centralized Purchase
Departments
7. Streamlined & better Control on the decentralized
units for the top management.
Demerits of Decentralized Purchasing
1. Lack of uniform or standard Practices with
the different units of the organistion:
2. Underutilization of services of Experts:
3. Absent of Economics of Large Scale
Buying:
4. Sometimes Maintaining Decentralized
department may be costlier.
5. May lack centralized coordination between
different departments and may lead to
conflicts.
 Steps Involved In Purchasing
1. Need recognition
2. Description of the need/ Specification
of the requirements
3. Suitable source selection
4. Determination of price & availability
 Industrial Buying- Decision
Process
Phases In Buying Decision Process :
1. Recognition Of problem or need
2. Description of the need/
Specification of the requirements/
Determination of the application or
Characteristics and Quantity of needed product
/Development of specifications or description of
Need
3. Search for source and Qualification
of Potential suppliers
 Industrial Buying- Decision
Process Cont…
5. Obtaining and analyzing supplier
proposal and selection of suppliers/
Determination of price & availability
6. Selection of an order Routine/Placing
purchase orders
7. Performance feedback/Delivery Of
material :
8. Post Purchase evaluation:
Checking Invoice/approval quality &
Quantity/Making payment
 Purchasing cycle
Recognition Description Search for source
selection of
Of problem Specification & Qualification
or need of the Need of Potential suppliers suppliers

Post Feedback Routine/

Purchase Delivery Placing
evaluation Of material PO
 Phases In Buying Decision Process :
Phase-1
Recognition Of problem or need :

The Recognition of a problem or

need May originate within the Buying
firm or may also be recognized By a
Smart Marketer.
 Phase-2
Determination of the characteristics
and Quantity of needed product :

Once The problem is recognized within

or outside the organization, The next
Phase Is How To resolve the
problem.

Questions : What Type of products or

services to be considered ? What
quantity of product needed?
 Phase –2 contd….
For technical Products:
The technical depts like R&D ,
industrial engineering, production or
Quality control Will suggest general
Solutions of The needed Product.

For Non-technical Products & services:

Either the User dept or the
Purchase dept May suggest products &
services Based On experience and also the
quantity required to solve the problem or
by any external source as well.
 Phase-3
Development of Specifications Of
Needed Product :
Phase 2 & 3 are Closely related, once
the problem is Recognized and
determined,
in this Phase development Of a
precise statement of specifications
and Characteristics are taken up .
Outside sources Such as suppliers &
Consultants may also be contacted .
 Search phase
Phase 4- Search & Qualification Of
potential supplier
In the Phase the Buying organization
Searches for acceptable suppliers or
vendors.
The search for potential buyer is based on
various sources of information like trade
journals, sales calls, word- of –
Mouth,catalogues,trade shows,industrial
directories, associations, approved list from
approval agencies,web sites and other
media.
 Phase-5
Obtaining and Analyzing supplier
Proposal
 Once the qualified suppliers are
decided
 Float enquiries (RFQ)
 Obtain proposal- In form of a
formal bid, quotation or written e-
mail
 The proposal should Include-
1. Product Specification Details
2. Price
3. Delivery Period
4. Payment terms
5. Taxes & levies
6. Transportation Type & cost
7. Insurance-transit , product etc.
8. Any other Costs , discounts (if
any),Delivery schedule,(Quantity )
9. Other details
 Selection of supplier/Source
1. General soundness of the supplier in
Consideration.
2. Financial strengths
3. Technical Proficiency/manufacture or
supplying abilities
4. Flexibility and cooperative ability
5. Special consideration influencing the choice
6. Size of the supplier/SWOT Analysis
7. Supplier’s client List / List Of clients/
background
8. Delivery adherence : confirmation/Analysis.
 Purchasing policy
 Tenders
 Make or Buy
 Vendor analysis and vendor rating
 Ancillarisation
 Ethics
 Purchasing For the benefits
Organisation
 Gifts
 Modes of Tendering

 Open tendering
 Global tendering
 Limited Tendering
 Single tender
 Spot tender.
 Make or Buy Decision
 Making or Buying an item
 Making the item now bought out
 Buying the item now made

The Two Factors to be consider in

Make Or Buy Decision are:
1. Cost
2. Production Capacity
Factors Make Buy
1. Less expenses In making the part
2. Secrecy to be maintained
3. Optimum utilization of the plant capacity
4. Suppliers are not up to the expectations
5. Production & Quality are Of Prime
importance/need direct supervision
6. Small quantity required
7. Less expensive than manufacturing
8. Govt Policies Favors Ancillarisation.
Factors Make Buy
9. Suppliers cannot quote
10. Different operations Integration
11. Type of the product
12. Company attained Decline stage
13. Industry ageless
14. Suppliers Specialized know-how available
15. Production facilities not much
16. To Maintain constant work force
17. Multiple source policy
18. Monopoly items and buyer no option
19. Temporary Ramp up
Inventory Management
The central focus of most
manufacturing layouts is to minimize
the cost of processing, transporting,
and storing materials throughout the
production system.
Materials used in manufacturing
include:
Raw material
Purchased components
Work-in-progress
Finished goods
Packaging material
Maintenance, repair, and
operating supplies
 What are Inventories ?
Inventories are the stocks Of
materials Of any Kind stored for future
operations.
Inventories Includes materials like :
 Raw materials
 Semi Finished goods
 Work-in-process
 Finished Goods
 Consumables
 Maintenance Spare Parts
 Objective Of Inventories
Objective Of Inventory Management are:
1. To facilitate smooth Operations of the
manufacturing process Or Balance Demand to
Supply.
2. To run the operations economically
3. To minimize investment on inventory.
4. To reduce material Handling costs and other Costs.
5. To eliminate Uncertainties-
 Uncertainties in demand from customers
 Uncertainties in Procuring the material.
6. Reasonable utilization of manpower and Other
resources.
7. Contribute to the efficient and effective operation
of the production system.
 Inventory Costs
Four types of Inventory costs:
1. Ordering Costs
2. Inventory Carrying Costs
3. Out -Of-stock or stock out Costs
4. Capacity costs
 Inventory Costs

1.Ordering 2.Inventory 3.Out-Of-Stock 4.Capacity

Costs Carrying Costs Costs Costs
 Inventory costs: 1.Ordering costs
1.Ordering costs:
Cost Of Placing an order –
a) Preparing a purchase order.
b) Processing Payments.
c) Receiving & inspecting the material.
Inventory costs: 2.Inventory carrying
costs
A. Costs connected directly with the
Materials
1. Obsolescence
2. Deterioration
3. Pilferage
B. Costs connected to finance.
1. Taxes
2. Insurance
3. Storage
4. Interest On Capital
5. Interest On inventory
 2.Inventory carrying
Inventory costs:

costs contd…
Details Of Carrying costs-
Capital Goods:
 Interest On Capital Invested In inventory.
 Interest On Capital Invested on land &
building to hold the inventory. Rent On
Building Taxes & insurance on Building
/inventory ,Depreciation ,Cost of
maintenance & repairs, Utility Charges,
Salaries Of security, maintenance personnel
 Interest On Capital Invested In inventory
Holding and control equipment.
 2.Inventory carrying
Inventory costs:

costs contd…
Handling –Equipment costs:
 Cost of Capital on equipment
 Taxes & insurances On equipment
 Depreciation
 Fuel expense
 Cost Of maintenance and repairs
Inventory costs: 3. Out-Of-Stock costs

 Back ordering
 Lost sales
 Inventory costs: 4. Capacity costs
1. Overtime payments when capacity
is too small
2. Layoffs and idle time when capacity
is too large.
 Different costs Involved
 The cost of holding the stock (e.g., based on
the interest rate).
 The cost of placing an order (e.g., for row
material stocks) or the set-up cost of
production.
 The cost of shortage, i.e., what is lost if the
stock is insufficient to meet all demand.
The third element is the most difficult to
measure and is often handled by
establishing a "service level" policy, e. g,
certain percentage of demand will be met
from stock without delay.
 Costs & EOQ
Total costs

Carrying
costs
Cost/Period

Order costs

Min EOQ
 Factors Affecting Inventory
Costs
Factors Affecting
Inventory costs

Sales Market
Characteristics Characteristics

Production
Characteristics
 Factors Affecting Inventory
Costs
1. Sales Characteristics-
 Size & frequency of the order
 Uniformity Or Probability of Sales
 Service Requirements
 Distribution Pattern
 Accuracy, Frequency & Details Of
sales forecasts
 Factors Affecting Inventory
Costs
2. Production Characteristics:
 Types Of production
 No Of Manufacturing Stages
 Degree of specification Of the Product at
specific Stages
 Processing Time At Each Stage
 Production Flexibility
 Capacity Of production & Warehousing
Stages
 Kind Of Processing
 Factors Affecting Inventory
Costs
3. Market Characteristic:
– Procurement Cycle
– Internal Lead Time
– Frequency Of Cancellation of the Purchase
Orders
– Terms Of Payments
– Discounts
– Speculation
– Imports
– Govt/Organisational Polices
– Shortages/Rising Prices
– Other Marketing Forces.
 Process Of Inventory
Management & control
1. Determination of optimum inventory
Analysis
2. Determination The Optimize degree
of stock control required.
3. Planning and design of the inventory
control system
4. Planning Of the inventory control
Mission
 Why We Want to Hold
Inventories
 Improve customer service
 Reduce certain costs such as
– ordering costs
– stock out costs
– acquisition costs
– start-up quality costs
 Contribute to the efficient and
effective operation of the production
system
 Why We Want to Hold Inventories Contd…

 Finished Goods
– Essential in produce-to-stock positioning
strategies
– Necessary in level aggregate capacity plans
– Products can be displayed to customers
 Work-in-Process
– Necessary in process-focused production
– May reduce material-handling & production
costs
 Raw Material
– Suppliers may produce/ship materials in
batches
– Quantity discounts & freight/handling $$
savings
 Why We Do Not Want to
Hold Inventories
 Certain costs increase such as:
– carrying costs
– cost of customer responsiveness
– cost of coordinating production
– cost of diluted return on
investment
– reduced-capacity costs
– large-lot quality cost
– cost of production problems
 Inventory control

Inventory Control

Inventory Stock
Analysis Control
Inventory Analysis/Techniques
 ABC Analysis ( Always Better Control)
Based On The Annual Usage Value.
 VED Analysis : Based On criticality Of items:
Vital,essential,desirable
 SDE Analysis (Scare, Difficult, Easily Available)
Based On Procurement aspects
 XYZ Analysis: Based On The value Of Inventory
Held
 HML Analysis: ( High, Medium , Low) Based on Unit
cost
 FSN Analysis: (Fast Moving, Slow moving, Non
moving ) Based on Consumption rate.
 AX,BY,CZ Analysis: Combining ABC With XYZ
 AV,BE,CD Analysis : Combining ABC with VED
 Minimum –Maximum
 Two Bin
 S-os Analysis
 G-O-L-F Analysis
G Govt, O Open Market, L Local, F foreign
 EOC-Economic ordering Quantity
 JIT Just -IN- Time
 ABC Analysis
The ABC classification process is an
analysis of a range of items, such as finished
products or customers into three categories:
 A - outstandingly important;
 B - of average importance;
 C - relatively unimportant as a basis for a
control scheme.
Each category can and sometimes should be
handled in a different way, with more attention
being devoted to category A, less to B, and
less to C.
 The ABC Classification
 The ABC Classification
The ABC classification system
is to grouping items according to
Annual sales volume, in an attempt
to identify the small number of items
that will account for most of the
sales volume and that are the most
important ones to control for
effective inventory management.
 ABC Analysis (Pareto’s Principle)
C
I00
B
95

80 A
% Total Annual Usage value Rs

% OF Items
 EOQ Economic Order Quantity
EOQ Or Best Quantity Technique Or
Economic lot Size
EOQ Is That Quantity to be bought at a
time where the over cost is the least
EOQ Is the technique of determining
that quantity where the two sets of
costs are minimum or equated.
TWO Sets Of costs:
1. Inventory procurement costs
2. Inventory carrying costs.
 EOQ
Ordering Point

Reorder Point

STOCK
Buffer
Quantity

Reserve STOCK

Safety STOCK

TIME
 EOQ Meanings
 Re-Order Point: It Is the point in time when the
Next purchase order is to be released to
replenish the stock. (This is done when the stock begins to fall
below the reorder stock level, which is the sum of the buffer stock, safety stock and
reverse stock.)
 Buffer Stock: Is equivalent To the stock required to
meet normal consumption during normal lead time
 Virtual Stock: Is the sum Of reserve Stock, safety stock
and order quantity.
 Safety Stock: It Is the stock which provides for delays in
the supply of material. It is Equal To The Normal Consumption rate
and Max consumption rate multiplied by average lead Time.
 Reserve Stock: It Is The stock which provides for
abnormal consumption. it Is Equal to the Difference
Between Normal & Max Consumption Rate Multiplied by
average Lead time
 EOQ Formula

EOQ = 2 X AC X OC
CC %

Where: AC = Annual Consumption in Units

OC = Ordering Cost Per Order
CC% = Inventory carry costs as a
percentage of unit cost.
 Ordering Costs
1. Costs Incurred in sending enquiries, Receiving
quotations, Planning an Order, Finalizing the
order, expediting and follow up costs of an order.
2. Transportation & Stationery costs.
3. Rent For the space used By The Purchasing
department
4. The Salaries and wages of the office staff of the
purchasing department
5. Deprecation of the equipments and furniture Of
the Purchase departments
6. Inspection Costs and costs Of the Settlement Of
the payment.
7. Purchase Audit costs
8. Other Over Heads.
 Inventory Carrying costs
1. Rent For the Storage Space and period.
2. Salaries and wages of store keeping
Department
3. Pilferage and deterioration costs
4. Internal Transportation & Stationery costs.
5. Cost Of Obsolescence where the inventories
rendered useless.
6. Interest On Capital Blocked in
inventories
7. Taxes on inventories.
 Standardization, Codification,
Simplification
Advantages Of Classification & codification:
1. Correct identification of each & every item
by systematic grouping of similar items.
(items kept in one place and coded with proper numbers).
2. Reduction in sizes and varieties. The usage of long
description is simplified and possible confusion avoided.
3. Duplication of stocks & Less confusion . Avoids
duplication of the stocks of the same item being held under different
names, Descriptions, Brand names ,Part numbers and different stores.
4. Standardization of Materials greatly improves and
helps to finding substitutes.
5. Simpler Storage methods, Accurate & proper
maintaining of records, Easy Inventory & Accounts
control Procedures etc. can be achieved
 Principles Of Classification
Effective Classification & codification
systems are based on UCUS:
1. Basis Of Classification to be made
uniform (Uniformity)
2. Classification to cover full range of
Items (comprehensiveness)
3. Unique one code number to each
item (Uniqueness)
4. Ease to adapt by each & every one
(simplicity)
 Methods Of Classification &
Codification
 Raw Material Stores
 Work-in-Process Stores
 Assembly Stores
 Semi finished Stores
 Finished Stores
 Consumable Stores
 Tools Stores
 Packing Materials Stores
 Spare parts stores
 Small Parts Stores
 Heavy Parts stores
 Hardware Stores
Break Even Analysis
 Elements of JIT Manufacturing
 Eliminating waste
 Enforced problem solving and continuous
improvement
 People make JIT work
 Total Quality Management (TQM)
 Parallel processing
 Kanban production control
 JIT purchasing
 Reducing inventories
 Working toward repetitive manufacturing
 Benefits of JIT
 Inventory levels are drastically
reduced:
– frees up working capital for other
projects
– less space is needed
– customer responsiveness increases
 Total product cycle time drops
 Product quality is improved
 Scrap and rework costs go down
 Forces managers to fix problems and
eliminate waste .... or it won’t work!
Supply Chain Management
Introduction & Importance of
Supply Chain Management
 Module I: Global Supply Chain –
Overview
 Introduction & Importance of Supply
Chain Management, Developing Supply
Chain as a Competitive Tool for Customer
Satisfaction and Corporate Profitability,
Channel Structure, Supplier Network
Development, Outsourcing., Supply Chain
Logistics Operations.
 PREAMBLE: SCM
Manufacturers world over are frantically trying to
improve efficiencies in their operations, the
urgency further accelerated by the shrinking
global economy.
Falling customer demand, tighter credit, rising
input prices and the economic uncertainty are
forcing companies to re-evaluate their business
plans especially with respect to investments in
new capacities, markets and products.
At the same time, there is a renewed focus on
making current assets work harder and maximize
the return on the already invested dollar.
However, achieving operational efficiencies
requires more than reducing costs, high
utilization mandates, strict inventory control and
rationalizing capacity or manpower.
There is no denying the usefulness of
these steps, but the key is to ensure
every bit of the supply chain is
performing towards meeting a single
objective – right product at the right
place in the right quantity at the right
time.
This requires all operational entities
within the enterprise to be integrated
through business processes and
technological enablers.
 PREAMBLE: SCM
Supply Chain Management exists to an end –
satisfied customers at the optimum cost.
And as markets and businesses have evolved,
supply chains have become more complex,
more global and a more critical business
function than ever before.
At the same time, many leading firms have
realized that a well run supply chain can be a
source of distinct competitive advantage in the
marketplace, and have been in the forefront in
adopting practices that deliver superlative
efficiencies in their supply chain functions.
 PREAMBLE: SCM
While many have been successful in
optimizing important supply chain
functions, a few have managed to
make their entire supply chain
behave as a single linked entity –
from end customer delivery to raw
material procurements – to achieve
truly synchronized operations.
 Supply Chain Process
Integrated , coordinated network of value
delivering business processes that procure
raw materials, transform them into final
products, services and delivers the product to
the customers
 Procurement
 Manufacturing/assembly
 Inbound logistics
 Warehousing
 Distribution
 Outbound logistics
 Supply Chain Management
Processes
Supply Chain Management is the management of eight
key business processes
1. Customer Relationship Management
2. Customer Service Management
3. Demand Management
4. Order Fulfillment
5. Manufacturing Flow Management
6. Procurement
7. Product Development and commercialization
8. Returns
Key requirement for successful implementation of
supply chain management are executive support,
leadership, commitment to change, and
empowerment.
• Different aspects of SCM which have
received much attention in traditional
production and operations management
community:
– Inventory control,
– forecasting,
– transportation logistics,
– distribution, and
– procurement
 In the first half of the
twentieth century industry
replaced agriculture, in the
second half of the twentieth
century –“service” has replaced
“manufacturing” -and right
now, the knowledge industry is
beginning to replace the others.
−−George
Kotzmetzk
 Introduction
*What is Supply Chain Management?
* Why is Supply Chain Management important?
* The origins of Supply Chain Management
*
*Important Elements of Supply Chain
Management:
- Purchasing
- Operations
- Distribution
- Integration
* Strategies for Supply Chain Management
* Future Trends in Supply Chain Management
 What is a Supply Chain?
A supply chain consists of the flow of products and
services from/to:
--Raw materials manufacturers
--Intermediate products manufacturers
--End product manufacturers
--Wholesalers and distributors
--Retailers and,
--End customers

Connected by agents, transportation and storage activities,

and
Integrated through sharing of information, planning, and
processing activities\
Examples???
 Typical Supply Chains
Production Distribution
Purchasing Receiving Storage Operations Storage
 Typical Supply Chain for a
Manufacturer

Supplier

Supplier
}
Storage Mfg. Storage Dist. Retailer Customer

Supplier
 What is Supply Chain
Management?

Here are two definitions:

The design and management of seamless, value-added
process across organizational boundaries to meet the real
needs of the end customer
-- Institute for Supply Management

Managing supply and demand, sourcing raw materials and

parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management,
distribution across all channels, and delivery to the
customer
-- The Supply Chain Council
 Supply chain management (SCM) holds
promise for not just improving productivity
but also competitiveness.

SCM has to be leveraged for corporate

India’s gain without delay

In consumer durables, the entry of MNCs

has increased competition and SCM is
perceived as the vital factor, which
differentiates failure from success.
 SCM Offers Opportunities for:
 Reduction in costs across functions
 Better planning for purchase and
production
 More efficient use of capital
 A $50 billion (13% of our GDP)
opportunity for a variety of services
– Trucking, warehousing, IT, etc.

Most leading companies in India have an

SCM drive in place.
Source:ETIG-PwC SCM Survey 2002
 Supply Chains in India

 Sony India managed to reduce its

inventories by 70% just six months
after it began its SCM initiative

 Maruti has wired all its suppliers

together and 60% of business
transactions are now happening online

Source: “Pulling Power”, DATAQUEST; 31 October 2001.

 Supply Chains in India

 Samsung manages a 5,000-dealers' online

network with just 15 employees

 Mahindra & Mahindra's tractor division

aims for a reduction of 48% in inventories,
30% in logistics costs and a cutback in
production cycle from a month to a week

Source: “Pulling Power”, DATAQUEST; 31 October 2001.

 Supply Chains in India

All these companies have one thing in

common.

They are among the early adopters of Supply

Chain Management systems in the
country—

They went out all by themselves, setting a

path for others to learn from.

Source: “Pulling Power”, DATAQUEST; 31 October 2001.

 What is new in SCM?
– Two dimensions which differentiate
SCM from traditional concepts:
 Organizational Integration and

 Flow Coordination

Stated simply, a supply chain is a network of

entities that starts with the suppliers’
suppliers and ends with the customers’
customers for production and delivery of
goods and services.
 Competitiveness

Customer service

Integration: Coordination:

Choice of partners Use of information and

communication
Network organization technology
and inter-organizational
collaboration Process orientation

Leadership Advanced planning

Foundations:

Logistics, marketing, operations research, organizational theory,

purchasing and supply…

: Fig. House of SCM

 Supply Chain Building
Blocks

Structural
Logical IT / ITEC
Informational
 Structural Building Blocks
 Suppliers
 Manufacturing / Assembly Plants
 Warehouses
 Distribution Centers
 Retailers / Customers
 Logistics Network
– Inbound
– Outbound
 Customers Orders
 Example of a Typical Supply Chain: IBM Europe PC Supply Chain

Warehouse

Port
PC Assembly
Plant Retailers

Suppliers 1.2 Million PC/Yr. 13 Transshipment Country-wide

(International) Glasgow U.K. Points (TPs) in Europe Distribution
Centers (DCs)
 Logical Building Blocks

STRATEGIC

TACTICAL

OPERATIONAL

Procurement Logistics Manufacturing Distribution Logistics

 Order/ Product Flow through Supply Chain Functions

Products
Orders
Order Management Channel A
Orders

Channel B Customer
Orders

Orders
Products Product Products
Manufacturing Channel C
Distribution Products
Production
Parts
Plans
Demand
Forecast
Part Supply Supply Planning Demand Planning
Component
Requirement
 Conclusion

Efficiency Responsiveness

Supply chain structure

Inventory Transportation Facilities Information

Drivers of Supply Chain Performance

Source: Chopra & Meindl/Logistics Strategy

 Elements of Supply Chain Management
R C
a
o
w
Inbound Outbound After Market
n
Sourcing Manufacturing
Logistics Logistics Service
M s
a •Vendor Number, •Warehouse •Plant Location(s) •DC Location(s)
•Number &
u
Location, Capacity Number,
t etc •Capacity Levels •DC functions location of service
Location, Size,
Function etc •Process
and size centers m
e •Product design
Technologies •In-house vs •Function and
support •Transportation e
r contract carrier size
•Tooling design mode •Product &
I process •Inventory/safety •Spares inventory
and supply •In-house vs
development stock levels
r
contract carrier level and
a •Spot market locations
•Maintenance •AS/AR systems
purchase or •Inventory/safety
l programs •Service fleet size
partnership stock levels •Package
•WIP targets engineering and equipment
s •Delivery schedules •AS/AR systems
•Workforce levels •EDI customer •Failure analysis
•Supplier •Vehicle
links •Data mining
development dispatching •Robotics
•PO tracking •Shipping •Work force
•Bar coding •CAD/CAM/CAE
schedules levels
•EDI links