INTRODUCTION OF
SUPPLY CHAIN MANAGEMENT (SCM)A supply chain is a
network of
facilities and distribution options that performs the
functions of
procurement of materials, transformation of
these materials into
intermediate and
finished products , and the distribution of these
finished products to customers. Supply chains
exist in
both service and
manufacturing organizations ,
although the
complexity of the chain
may
vary greatly from industry to industry and
firm to firm.
Supply chain management is
typically viewed to lie
between fully vertically
integrated firms ,
where the
entire material flow is owned by a
single firm and those
where each
channel member operates independently.
Therefore coordination between the various players in the chain is key in its
effective management.
Cooper and Ellram [1993]
compare supply chain
management to a well-balanced and well-practiced
relay team .
Such a
team is more
competitive when each
player knows how to be positioned
for the
hand -off. The relationships are the strongest between players
who directly pass the baton (
stick ), but the entire team
needs to
make a coordinated effort to win the
race .
Below is an example of a very
simple supply chain for a single product, where raw material is
procured from vendors, transformed into finished
goods in a single
step , and then transported to distribution centers, and ultimately,
customers. Realistic supply chains have multiple end products with
shared
components , facilities and capacities. The flow of materials
is not always
along an arborescent network, various modes of
transportation may be
considered , and the
bill of materials for the
end
items may be both deep and large.
To simplify the
concept ,
supply chain management can be defined as a
loop : it starts with the
customer and ends with the customer. All materials, finished
products, information, and
even all transactions flow
through the
loop.
However , supply chain management can be a very difficult
task because in the
reality , the supply chain is a
complex and
dynamic network of facilities and organizations with
different , conflicting
objectives.
Supply chains exist in both
service and manufacturing organizations, although the complexity of
the chain may vary greatly from industry to industry and firm to
firm.
Unlike commercial
manufacturing supplies,
services such as
clinical supplies
planning are very dynamic and can often have last
minute changes . Availability
of
patient kit when patient
arrives at investigator site is very
important for clinical
trial success . This
results in overproduction
of drug products to take care of last minute
change in
demand . R&D
manufacturing is very
expensive and overproduction of patient
kits adds significant
cost to the
total cost of clinical trials. An
integrated supply chain can
reduce the overproduction of drug
products by efficient demand management, planning, and
inventory management.
Traditionally,
marketing ,
distribution, planning, manufacturing, and the purchasing
organizations along the supply chain operated independently. These
organizations have their own objectives and these are often
conflicting. Marketing's
objective of high customer service and
maximum sales dollars conflict with manufacturing and distribution
goals . Many manufacturing operations are
designed to maximize
throughput and
lower costs with
little consideration for the impact
on inventory levels and distribution capabilities. Purchasing
contracts are often negotiated with very little information
beyond historical buying patterns. The
result of these factors is that
there is not a single, integrated plan for the organization---there were as
many
plans as businesses.
Clearly , there is a need for a mechanism
through which these different functions can be integrated together.
Supply chain management is a
strategy through which such integration
can be achieved.
IMPLICATIONS
OF SCM ON LOGISTIC MANAGEMENTThe
challenge of integrating
and coordinating the flow of materials from multitude of suppliers,
including offshore , and
similarly managing the distribution of the
finished product by way of multiple intermediaries.
Achieving cost
reduction or
profit improvement at the expense of their supply chain
partners does
not make
companies more competitive.
Transferring cost
upstream or
downstream leads to “
logistics myopia” as all costs ultimately
will make way to the
final market place to be reflected in the
price paid by the end
user .
Therefore, the
leading edge
companies seek to make the supply chain as a hole more competitive
through the
value it adds and the cost it reduces
overall .
Thus
today the
real competition is not the companies against the companies but
rather supply chain against supply chain.
DEFINITIONSSupply Chain Management (SCM)
is the
process of planning, implementing, and
controlling the
operations of the supply
chain
with the
purpose to satisfy customer
requirements as
efficiently as
possible. Supply chain management
spans all
movement and
storage of raw
materials,
work -in-process inventory, and finished goods from point-of-
origin to
point-of-
consumption .
According to the Council of Supply Chain Management Professionals
(CSCMP),a professional association
that
developed a
definition in 2004, Supply Chain Management
“encompasses the planning and management of all
activities involved
in sourcing and procurement, conversion, and all logistics management
activities”. Importantly, it also includes coordination and
collaboration with channel partners, which can be suppliers,
intermediaries, third-
party service providers, and customers. In
essence, Supply Chain Management integrates supply and demand
management
within and
across companies.
According
to Cohen & Lee (1988)Supply
Chain Management is “The
network of organizations that are
having linkages, both upstream and
downstream, in different
processes and activities that produces and
delivers the value in form of products and services in the
hands of
ultimate
consumer .”
Thus a
shirt manufacturer is a
part of supply chain that extends up
stream through the weaves of fabrics to the spinners and the
manufacturers of fibers, and down stream through distributions and
retailers to the final consumer. Though each of these organizations
are
dependent on each
other yet traditionally do not closely
cooperate with each other. An
integrated supply chain management streamlines processes and
increases profitability by delivering the right product to the right
place, at the right time, and at the lowest possible cost.
According
to Ganeshan & Harrison
(2001)Supply
Chain Management is a “systems
approach to managing the entire flow
of information, materials, and services from raw materials suppliers
through factories and warehouses to the end customer.”
Supply
chain event management
(abbreviated as SCEM) is a consideration of all possible occurring
events and factors that can
cause a disruption in a supply chain.
With SCEM possible scenarios can be created and
solutions can be
planned.
Some experts
distinguish supply chain management and logistics
management, while others consider the terms to be interchangeable. From the point
of view of an enterprise, the scope of supply chain management is usually bounded on the supply side by your supplier 's suppliers and
on the customer side by your customer's customers.Supply chain management
is also a category of software products. DIFFERENCE BETWEEN LOGISTICS MANAGEMENT AND SCMLogistics ManagementSupply Chain ManagementLogistics management is primarily concerned with optimizing flows within the organization.
Supply Chain Management deals with integration of all the partners in the value chain.
Logistics is essentially a
framework that creates a single plan for the flow of products and information through a business
Supply chain builds
upon this framework and seeks to achieve
linkage and coordination between process of other entities in the
pipeline i.e. suppliers and costumers, and the organization it self.
COMPONENTS
OF SUPPLY CHAIN MANAGEMENTThe
following are the
five basic components of Supply Chain Management:
Plan:-
This
is the strategic portion of SCM. You need a strategy for managing all
the resources that go toward meeting customer demand for your product
or service. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and
delivers high quality and value to customers.
Source:-
Choose
the suppliers that will deliver the goods and services you need to
create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and
improving the relationships. And put together processes for managing
the inventory of goods and services you receive from suppliers,
including receiving shipments, verifying them , transferring them to
your manufacturing facilities and authorizing supplier payments .
Make:-
This
is the manufacturing step. Schedule the activities necessary for production , testing, packaging and preparation for delivery. As the
most metric- intensive portion of the supply chain, measure quality
levels, production output and worker productivity.
Deliver:-
This
is the part that many insiders refer to as logistics. Coordinate the receipt of orders from customers, develop a network of warehouses,
pick carriers to get products to customers and set up an invoicing
system to receive payments.
Return :-
The
problem part of the supply chain. Create a network for receiving
defective and excess products back from customers and supporting
customers who have problems with delivered products.
OBJECTIVES/NEED
FOR SCM
Traditionally,
marketing, distribution, planning, manufacturing, and the purchasing
organizations along the supply chain operated independently. These
organizations have their own objectives and these are often
conflicting.
Marketing's
objective of high customer service and maximum sales dollars conflict
with manufacturing and distribution goals. Many manufacturing
operations are designed to maximize throughput and lower costs with
little consideration for the impact on inventory levels and
distribution capabilities. Purchasing contracts are often negotiated
with very little information beyond historical buying patterns.
The
result of these factors is that there is not a single, integrated
plan for the organization---there were as many plans as businesses.
Clearly, there is a need for a mechanism through which these
different functions can be integrated together. Supply chain
management is a strategy through which such integration can be
achieved.
Moreover,
shortened product life cycles, increased competition, and heightened expectations of customers have forced many leading edge companies to move from physical logistic management towards more advanced supply
chain management. Additionally, in recent years it has become clear that many companies have reduced their manufacturing costs as much as
it is practically possible. Therefore, in many cases , the only
possible way to further reduce costs and lead times is with effective
supply chain management.
In
addition to cost reduction, the supply chain management approach also
facilitates customer service improvements. It enables the management
of:
- inventories,
- transportation systems and
- whole distribution networks
so
that organizations are able to meet or even exceed their customers'
expectations.
The
major objective of supply chain management
is to reduce or eliminate the buffers of inventory that exists
between originations in chain through the sharing of information on
demand and current stock levels.
Broadly,
an organization needs an efficient and proper supply
chain management system so that the following strategic and
competitive areas can be used to their full advantage if a supply
chain management system is properly implemented.
Fulfillment of raw materials:
Ensuring
the right quantity of parts for production or products for sale arrive at the right time. This is enabled through efficient communication , ensuring that orders are placed with the appropriate amount of time available to be filled . The supply chain management
system also allows a company to constantly see what is on stock and making sure that the right quantities are ordered to replace stock.
Logistics:
The
cost of transporting materials as low as possible consistent with
safe and reliable delivery. Here the supply chain management system
enables a company to have constant contact with its distribution
team, which could consist of trucks, trains , or any other mode of
transportation. The system can allow the company to track where the required materials are at all times. As well, it may be cost
effective to share transportation costs with a partner company if
shipments are not large enough to fill a whole truck and this again,
allows the company to make this decision .
Smooth Production:
Ensuring
production lines function smoothly because high-quality parts are
available when needed. Production can run smoothly as a result of
fulfillment and logistics being implemented correctly. If the correct quantity is not ordered and delivered at the requested time,
production will be halted, but having an effective supply chain
management system in place will ensure that production can always run
smoothly without delays due to ordering and transportation.
Increase in Revenue & profit:
Ensuring
no sales is lost because shelves are empty. Managing the supply chain
improves a company flexibility to respond to unforeseen changes in
demand and supply. Because of this, a company has the ability to
produce goods at lower prices and distribute them to consumers
quicker then companies without supply chain management thus
increasing the overall profit.
Reduction in Costs:
Keeping the cost of purchased parts and products at acceptable levels. Supply
chain management reduces costs by increasing inventory turnover on
the shop floor and in the warehouse controlling the quality of goods
thus reducing internal and external failure costs and working with
suppliers to produce the most cost efficient means of manufacturing a
product.
Mutual Success:
Among supply chain partners ensures mutual success. Collaborative planning,
forecasting and replenishment (CPFR) is a longer- term commitment , joint work on quality, and support by the buyer of the supplier’s
managerial, technological , and capacity development . This relationship allows a company to have access to current, reliable
information, obtain lower inventory levels, cut lead times, enhance product quality, improve forecasting accuracy and ultimately improve
customer service and overall profits. The suppliers also benefit from
the cooperative relationship through increased buyer input from
suggestions on improving the quality and costs and though shared
savings. Consumers can benefit as well through higher quality goods provided at a lower cost.
ACTIVITIES/FUNCTIONS
OF SCM
Supply
chain management is a cross - functional approach to managing the
movement of raw materials into an organization and the movement of
finished goods out of the organization toward the end-consumer. As
corporations strive to focus on core competencies and become more
flexible, they have reduced their ownership of raw materials sources
and distribution channels. These functions are increasingly being
outsourced to other corporations that can perform the activities
better or more cost effectively. The effect has been to increase the
number of companies involved in satisfying consumer demand, while
reducing management control of daily logistics operations. Less
control and more supply chain partners led to the creation of supply
chain management concepts. The purpose of supply chain management is
to improve trust and collaboration among supply chain partners, thus
improving inventory visibility and improving inventory velocity .
Several models have been proposed for understanding the activities required
managing material movements across organizational and functional
boundaries. SCOR is a supply chain management model promoted by the Supply-Chain
Council. Another model is the SCM Model proposed by the Global Supply Chain
Forum (GSCF). Supply chain activities can be grouped into strategic,
tactical, and operational levels of activities.
Strategic:-
- Strategic network optimization , including the number, location , and size of warehouses, distribution centers and facilities.
- Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking , direct shipping, and third-party logistics.
- Products design coordination, so that new and existing products can be optimally integrated into the supply chain.
- Information Technology infrastructure, to support supply chain operations.
- Where to make and what to make or buy decisions .
Tactical:-
- Sourcing contracts and other purchasing decisions.
- Production decisions, including contracting, locations, scheduling, and planning process definition.
- Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency , routes, and contracting.
Operational:-
- Daily production and distribution planning, including all nodes in the supply chain.
- Production scheduling for each manufacturing facility in the supply chain (minute by minute).
- Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
- Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. Inbound operations, including transportation from suppliers and receiving inventory.
- Production operations, including the consumption of materials and flow of finished goods.
- Outbound operations, including all fulfillment activities and transportation to customers.
INTEGRATED
SUPPLY CHAIN MANAGEMENT
An integrated supply chain
management streamlines processes and increases profitability by
delivering the right product to the right place, at the right time,
and at the lowest possible cost. Unlike commercial manufacturing
supplies, clinical supplies planning is very dynamic and can often
have last minute changes. Availability of patient kit when patient
arrives at investigator site is very important for clinical trial
success.
This results in
overproduction of drug products to take care of last minute change in
demand. R&D manufacturing is very expensive and overproduction of
patient kits adds significant cost to the total cost of clinical
trials.
An integrated supply chain
can reduce the overproduction of drug products by efficient demand
management, planning, and inventory management. Implementation of ERP
system (such as SAP) in R&D can have major ROI by an efficient
supply and inventory management system and also by reducing
overproduction.
- How Integration Is Achieved In Supply Chain?
Stage
1:
Complete functional
independence where each business function such as production or
purchasing does its own thing in complete isolation from other
business function. For instance , production function seeking to
optimize its unit cost of manufacture by long production runs with
out regard for build up of finished goods inventory and advance
impact it will have on the warehousing as well as working capital.
Stage
2:
Companies recognize the need
of limited integration between adjacent functions such as
distribution and inventory management or purchasing and material
control.
Stage
3:
A natural extension of stage
two, leading to establishment and implementation of end- to-end
integration. A concept of linkage and coordination is achieved.
STAGE
4:
The linkage achieved in stage
three is extended upstream to suppliers and down stream to customers.
It represents true supply chain integration. This concept is also
called ‘co- managed inventory’ (CMI).
Force of supply chain
management is on trust and cooperation and the recognition that is
properly managed ‘the whole cane be greater then the sum of its
part’.
No. supply chain management is
not the same as vertical integration. Vertical integration normally
implies ownership of upstream suppliers and down stream customer.
Once , the vertical integration
used to be describable strategy but increasingly the companies are
focusing on their ‘core business’ i.e. the activities that they
do really well and where they have a differential advantage. Every
thing else is ‘out-sourced’ i.e. procured from outside the firm.
SUPPLY
CHAIN DECISIONS
We
classify the decisions for supply chain management into two broad categories – Short term & Long term decisions. As the term
implies, short term decisions focus on activities over a day-to-day basis . On the other hand, long term decisions are made typically over
a longer time horizon. These are closely linked to the corporate strategy and guide supply chain policies from a design perspective.
There are four major decision
areas in supply chain management:
Location,
Production,
Inventory, and
Transportation (distribution), and there are both short term and long-term elements in each of these decision areas.
Location Decisions:
The geographic placement of production facilities, stocking points , and
sourcing points is the natural first step in creating a supply chain.
The location of facilities involves a commitment of resources to a
long-term plan. Once the size, number, and location of these are determined , so are the possible paths by which the product flows
through to the final customer. These decisions are of great
significance to a firm since they represent the basic strategy for
accessing customer markets , and will have a considerable impact on
revenue, cost, and level of service. These decisions should be
determined by an optimization routine that considers production
costs, taxes , duties and duty drawback, tariffs, local content,
distribution costs, production limitations, etc. Although location
decisions are primarily long term they also have implications on
short term level.
Production Decisions:
The
long term decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants
to DC's, and DC's to customer markets. As before , these decisions
have a big impact on the revenues , costs and customer service levels
of the firm. These decisions assume the existence of the facilities,
but determine the exact path(s) through which a product flows to and
from these facilities. Another critical issue is the capacity of the
manufacturing facilities--and this largely depends the degree of
vertical integration within the firm. Short term decisions focus
decisions focus on detailed production scheduling. These decisions
include the construction of the master production schedules,
scheduling production on machines , and equipment maintenance . Other
considerations include workload balancing, and quality control measures at a production facility.
Inventory Decisions:
These
refer to means by which inventories are managed. Inventories exist at
every stage of the supply chain as either raw material, semi-finished
or finished goods. They can also be in-process between locations.
Their primary purpose to buffer against any uncertainty that might
exist in the supply chain. Since holding of inventories can cost
anywhere between 20 to 40 percent of their value, their efficient
management is critical in supply chain operations. It is long term in
the sense that top management sets goals. However, most researchers
have approached the management of inventory from short term
perspective. These include deployment strategies ( push versus pull ),
control policies --- the determination of the optimal levels of order
quantities and reorder points, and setting safety stock levels, at
each stocking location. These levels are critical, since they are
primary determinants of customer service levels.
Transportation Decisions:
The
mode choice aspect of these decisions is the more long term ones.
These are closely linked to the inventory decisions, since the best
choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory
associated with that mode. While air shipments may be fast , reliable,
and warrant lesser safety stocks, they are expensive. Meanwhile
shipping by sea or rail may be much cheaper, but they necessitate
holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service
levels and geographic location play vital roles in such decisions.
Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes
(consolidated bulk shipments versus Lot-for-Lot), routing and
scheduling of equipment are key in effective management of the firm's
transport strategy.
SCM
PROCESS INTEGRATION
Successful
SCM requires a change from managing individual functions to
integrating activities into key supply chain processes. The
purchasing department placed orders as requirements became
appropriate and marketing, responding to customer demand, interfaced
with several distributors and retailers and attempted to satisfy this
demand. Shared information between supply chain partners can only be
fully leveraged through process integration. Process integration
means collaborative working between buyers and suppliers, joint
product development, common systems and shared information.
According
to Lambert and Cooper (2000), operating an integrated supply chain
requires continuous information flows, which in turn assist to
achieve the best product flows. However, in many companies, such as
3M, management has reached the conclusion that optimizing the product
flows cannot be accomplished without implementing a process approach
to the business.
The
key critical supply business processes stated by Lambert and Cooper
are as follows:
Customer service management process:
Customer
service provides the source of customer information. It also provides
the customer with real-time information on promising dates and
product availability through interfaces with the company production
and distribution operations
Procurement process:
Strategic
plans are developed with suppliers to support the manufacturing flow
management process and development of new products. In firms where
operations extend globally, sourcing should be managed on a global
basis. The desired outcome is a win-win relationship, where both parties benefit, and reduction times in the design cycle and product
development is achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange and Internet linkages to faster transfer possible requirements.
Activities related to obtaining products and materials from outside
suppliers requires performing resource planning, supply sourcing,
negotiation, order placement, inbound transportation, storage and handling and quality assurance Also, includes the responsibility to
coordinate with suppliers in scheduling, supply continuity &
research to new programmes.
Product development and commercialization:
Here,
customers and suppliers must be united into the product development
process, thus to reduce time to market. As product life cycles
shorten, the appropriate products must be developed and successfully
launched in ever shorter time-schedules to remain competitive.
According to Lambert and Cooper, managers of the product development
and commercialization process must:
coordinate with customer relationship management to identify customer-articulated needs;
select materials and suppliers in conjunction with procurement, and
develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination
Manufacturing flow management process:
The
manufacturing process is produced and supplied products to the
distribution channels based on past forecasts . Manufacturing
processes must be flexible to respond to market changes, and must
accommodate mass customization. Orders are processes on a
just-in-time (JIT) basis in minimum lot sizes. Also, changes in the
manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers.
Activities related to planning, scheduling and supporting
manufacturing operations, such as work-in-process storage, handling,
transportation, and time phasing of components, inventory at
manufacturing sites and maximum flexibility in the coordination of
geographic and final assemblies postponement of physical distribution
operations.
Physical Distribution:
This concerns movement of a finished product/service to customers. In
physical distribution, the customer is the final destination of a
marketing channel, and the availability of the product/service is a
vital part of each channel participant . It is also through the
physical distribution process that the time and space of customer
service become an integral part of marketing, thus it links a
marketing channel with its customers (e.g. links manufacturers,
wholesalers, retailers).
Outsourcing/ Partnerships:
Not
just outsourcing the procurement of materials and components, but
also outsourcing of services that traditionally have been provided
in-house. The logic of this trend is that the company will
increasingly focus on those activities in the value chain where it
has a distinctive advantage and everything else it will outsource.
This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is
increasingly subcontracted to specialists or logistics partners.
Also, to manage and control this network of partners and suppliers
requires a blend of both central and local involvement. Hence ,
strategic decisions need to be taken centrally with the monitoring
and control of supplier performance and day-to-day liaison with
logistics partners being best managed at a local level.
Performance Measurement:
By taking advantage of supplier capabilities and emphasizing a long-term
supply chain perspective in customer relationships can be both
correlated with firm performance. As logistics competency becomes a
more critical factor in creating and maintaining competitive
advantage, logistics measurement becomes increasingly important
because the difference between profitable and unprofitable operations
becomes narrower. As Kearney Consultants (1985) noted that firms
engaging in comprehensive performance measurement realized
improvements in overall productivity. According to internal measures
are generally collected and analyzed by the firm including
1)
Cost,
2)
Customer Service,
3)
Productivity measures,
4)
Asset measurement, and
5)
Quality…..
Force
of supply chain management is on trust and cooperation and the
recognition that is properly managed 'the whole cane be greater then
the sum of its part'.
For
example:
Let's look at consumer packaged goods for an example of collaboration. If
there are two companies that have made supply chain a household word,
they are Wal-Mart and Procter & Gamble. Before these two
companies started collaborating back in the '80s, retailers shared
very little information with manufacturers. But then the two giants built a software system that hooked P&G up to Wal-Mart's
distribution centers.
When
P&G's products run low at the distribution centers, the system
sends an automatic alert to P&G to ship more products. In some
cases, the system goes all the way to the individual Wal-Mart store.
It lets P&G monitor the shelves through real-time satellite
link-ups that send messages to the factory whenever a P&G item
swoops past a scanner at the register .
With
this kind of minute-to-minute information, P&G knows when to make
ship and display more products at the Wal-Mart stores. No need to keep products piled up in warehouses awaiting Wal-Mart's call .
Invoicing and payments happen automatically too. The system saves P&G
so much in time, reduced inventory and lower order- processing costs
that it can afford to give Wal-Mart "low, everyday prices"
without putting itself out of business.
ROLE AND APPLICATION OF SOFTWARE’S IN SCM
Supply
chain management software is possibly the most fractured group of
software applications on the planet . Each of the five major supply
chain steps previously outlined composes dozens of specific tasks,
many of which have their own specific software. Some vendors have
assembled many of these different chunks of software together under a
single roof , but no one has a complete package that is right for
every company.
For
example:
Most
companies need to track demand, supply, manufacturing status ,
logistics (i.e. where things are in the supply chain), and
distribution. They also need to share data with supply chain partners
at an ever increasing rate . While products from large ERP vendors
like Sap’s Advanced Planner and Optimizer (APO) can perform many or
all of these tasks, because each industry's supply chain has a unique set of challenges, many companies decide to go with targeted best of
breed products instead, even if some integration is an inevitable
consequence.
- Goal of installing SCM software’s:
Before
the Internet came along, the aspirations of supply chain software
devotees were limited to improving their ability to predict demand
from customers and make their own supply chains run more smoothly.
But the cheap , ubiquitous nature of the Internet, along with its
simple, universally accepted communication standards have thrown
things wide open . Now, you can connect your supply chain with the
supply chains of your suppliers and customers together in a single
vast network that optimizes costs and opportunities for everyone
involved. This was the reason for the B2B explosion; the idea that
everyone you do business with could be connected together into one
big happy , cooperative family.
Of course , reality isn't quite that happy and cooperative, but today
most companies share at least some data with their supply chain
partners. The goal of these projects is greater supply chain
visibility. The supply chain in most industries is like a big card
game. The players don't want to show their cards because they don't
trust anyone else with the information. But if they showed their
hands they could all benefit. Suppliers wouldn't have to guess how
many raw materials to order, and manufacturers wouldn't have to order
more than they need from suppliers to make sure they have enough on
hand if demand for their products unexpectedly goes up. And retailers
would have fewer empty shelves if they shared the information they
had about sales of a manufacturer's product in all their stores with
the manufacturer.
- Relationship between ERP and SCM:
Many
SCM applications are reliant upon the kind of information that is stored in the most quantity inside ERP software. Theoretically you
could assemble the information you need to feed the SCM applications
from legacy systems (for most companies this means Excel spreadsheets spread out all over the place), but it can be nightmarish to try to
get that information flowing on a fast, reliable basis from all the
areas of the company. ERP is the battering ram that integrates all
that information together in a single application, and SCM
applications benefit from having a single major source to go to for
up-to- date information. Most CIO’s who have tried to install SCM
applications say they are glad they did ERP first. They call the ERP
projects "putting your information house in order." Of
course, ERP is expensive and difficult, so you may want to explore ways to feed your SCM applications the information they need without
doing ERP first. These days , most ERP vendors have SCM modules so
doing an ERP project may be a way to kill two birds with one stone .
Companies will need to decide if these products meet their needs or
if they need a more specialized system.
Applications
that simply automate the logistics aspects of SCM are less dependent
upon gathering information from around the company, so they tend to
be independent of the ERP decision. But chances are, you'll need to
have these applications communicate with ERP in some fashion . It's
important to pay attention to the software's ability to integrate
with the Internet and with ERP applications because the Internet will drive demand for integrated information. For example, if you want to
build a private website for communicating with your customers and
suppliers, you will want to pull information from ERP and supply
chain applications together to present updated information about
orders, payments, manufacturing status and delivery.
- Roadblocks in installing SCM Software’s:
There
are some hurdles which come in way while installing the SCM
software’s in the organizations. They are:
Gaining trust from your suppliers and partners:-
Supply
chain automation is uniquely difficult because its complexity extends
beyond your company's walls. Your people will need to change the way
they work and so will the people from each supplier that you add to
your network. Only the largest and most powerful manufacturers can
force such radical changes down suppliers' throats. Most companies
have to sell outsiders on the system. Moreover, your goals in
installing the system may be threatening to those suppliers, to say
the least.
For
example:
Wal-Mart's
collaboration with P&G meant that P&G would assume more
responsibility for inventory management, something retailers have
traditionally done on their own. Wal-Mart had the clout to demand
this from P&G, but it also gave P&G something in
return-better information about Wal-Mart's product demand, which
helped P&G manufacture its products more efficiently. To get your
supply chain partners to agree to collaborate with you, you have to
be willing to compromise and help them achieve their own goals.
Internal resistance to change:-
If selling supply chain systems is difficult on the outside, it isn't
much easier inside. Operations people are accustomed to dealing with
phone calls, faxes and hunches scrawled on paper , and will most
likely want to keep it that way. If you can't convince people that
using the software will be worth their time, they will easily find ways to work around it. You cannot disconnect the telephones and fax
machines just because you have supply chain software in place.
Many mistakes at first:-
There
is a diabolical twist to the quest for supply chain software
acceptance among your employees. New supply chain systems process
data as they are programmed to do, but the technology cannot absorb a
company's history and processes in the first few months after an
implementation. Forecasters and planners need to understand that the
first bits of information they get from a system might need some
tweaking. If they are not warned about the system's initial naiveté
(simplicity), they will think it is useless.
In
one case , just before a large automotive industry supplier installed
a new supply chain forecasting application to predict demand for a
product, an automaker put in an order for an unusually large number
of units . The system responded by predicting huge demand for the
product based largely on one unusual order. Blindly following the
system's numbers could have led to inaccurate orders for materials
being sent to suppliers within the chain. The company caught the
problem but only after a demand forecaster threw out the system's
numbers and used his own. That created another problem: Forecasters
stopped trusting the system and worked strictly with their own data.
The supplier had to fine- tune the system itself, and then work on
reestablishing employees' confidence . Once employees understood that
they would be merging their expertise with the system's increasing
accuracy, they began to accept and use the new technology.
What
has enabled the effective implementation of supply chain management?
The answer is found from the rapid developments in information and
communications technologies. Use of databases , communication systems,
and foremost advanced computer software are crucial for the
development of a modern cost-effective supply chain management.
MANAGING
THE GLOBAL SUPPLY CHAIN
We live in interesting times. Powerful forces are re- shaping the global
business scene : financial and economic upheaval in the Far East ,
Latin America & China is creating a tidal- wave of change in the
competitive environment. Organisations that once felt insulated from
overseas low-priced competitors now find that they too must not only
continue to constantly create new value for customers, but must do so
at a lower price.
To
meet the challenge of simultaneously reducing cost and enhancing
customer value requires a radically different approach to the way the
business responds to marketplace demand. One of the keys to success
is the creation of an agile supply chain on a worldwide scale.
There
is now widespread recognition of the role that supply chain
management can play in enabling organisations to compete in volatile
markets. However, experience suggests that there are significant
barriers both within the company and between its upstream and
downstream partners in achieving the required level of responsiveness
across the chain as a whole. Continuous change is a phenomenon with
which the supply chains have had to cope for some time. But due to
high rate of competition in today’s market the logistics
environment of the new millennium will have to contend with:
- ) turbulent markets that change rapidly and unpredictably,
- ) highly fragmented 'niche' markets instead of mass markets,
- ) ever greater rates of technological innovation in products and processes,
- ) shorter product life-cycles,
- ) growing demand for tailored products - 'mass customisation',
- ) the delivery of complete 'solutions' to customers, comprising products and services.
And
all of the above to be achieved at less cost!
These
severe challenges mean that a new operating paradigm is needed. The
key factor is agility - rapid strategic and operational adaptation to
large scale, unpredictable changes in the business environment.
Agility implies responsiveness from one end of the supply chain to
the other. It focuses upon eliminating the barriers to quick
response, be they organisational or technical.
Figure 1 suggests that whilst there will still be conditions where lean
concepts are appropriate, in particular where the product is standard
and volume demand is high and predictable. Increasingly however these
situations are tending to become fewer as the global forces we have
described lead to higher levels of market volatility.
How
do global supply chains achieve agility? In a sense the very process
of globalisation has retarded agility. For example, many companies in
their search for lower production costs have moved much of their
manufacturing and assembly offshore. The main driver for such moves
often being low labour costs. However, in so doing they run the risk
of extending their lead-times significantly thus generating the need
for more inventory in the pipeline.
As
a result their agility is reduced. Some organisations have actually
sought to reverse this trend by bringing manufacturing back closer to
their main markets - Dell Computer being a case in point. Other
companies are using low cost sources of supply to manufacture
products where there is a predictable demand and using more local,
flexible facilities for producing less predictable, more volatile
products. Zara , the successful Spanish fashion retailer, has followed
a very similar strategy enabling it to respond more rapidly to
changes in demand.
To
overcome the potential loss of agility through extended global supply
chains, companies need to adopt a number of guiding principles:-
- Remove the organisational barriers:
Too
many companies are hindered in their attempts to streamline their
supply chains because of their out-molded organisational structures .
It is not possible to even contemplate a seamless global pipeline if
there are quasi -independent national subsidiaries making their own
decisions on sourcing, distribution facilities and inventory for
example.
Similarly,
it is still the case that for many businesses the functional 'barons'
still wield significant power . As a result decisions are taken which
are based on a narrow definition of 'optimisation' - in other words the focus is on improving performance within a function without
regard for its wider supply chain impact. Thus we find, for instance,
that often factories are designed and built to maximise the economies of scale rather than to enhance flexibility of response. In a global
marketplace this tunnel vision can lead to a damaging loss of
competitiveness.
The solution has to be to re- engineer the organisation structure so that
supply chains are managed on a truly integral basis with
cross-functional teams being given the responsibility for managing
the pipeline from source to final market.
- Make the supply chain the value chain:
The
idea that companies should focus on their core competencies is
rapidly taking hold . As a result there is a greater willingness to
out-source than was previously the case. This trend has been
particularly observable in global corporations where there has been
recognition that the complexity of managing a worldwide logistics
chain requires specialist resources.
There
is now a great opportunity to start thinking of the supply chain as a
value chain. Rather than accepting the conventional view that
believes that all value-creating activities need to be conducted
under the same corporate roof, forward - looking organisations are
taking a different view. Particularly as supply chains become global
it will often make sense to move to a greater level of
'localisation', i.e. the final finishing or configuration of the
product being performed much closer to the point of demand. To enable this to be achieved on a global basis, specialist third party
logistics service providers have emerged who can now act as
extensions of the company's value chain.
In
structuring cost-effective and agile global supply chains the
question of where in that chain the value creation should take place
becomes crucial. By working more closely with specialist providers,
greater levels of customer value can often be achieved at less cost
to the supply chain as a whole. Hewlett Packard has adopted this
concept for many of its products such as the Desk Jet printer , even going to the lengths of re-designing it so that a generic
semi-finished global version could be built centrally with
localisation being performed by regional partners.
- Shift the de-coupling point:
A
major problem in all supply chains, but significantly worse for
global business, is that they have little visibility of 'real'
demand. Because global supply chains tend to be extended with
multiple echelons of inventory between the point of production and
the final market place they tend to be forecast driven rather than
demand driven. In other words decisions on production and
distribution are based upon forecasts or orders (which themselves do
not necessarily reflect demand but rather tend to be based on
arbitrary ' rules ' such as re-order points and re-order quantities).
The
point to which real demand penetrates upstream in a supply chain is
termed the decoupling point. These decoupling points also tend to
dictate the form in which inventory is held . Thus in the uppermost
example in Figure 2 demand penetrates right to the point of
manufacture and inventory is probably held in the form of components
or materials. In the lower example demand is only visible at the end
of the chain; hence inventory will be in the form of finished
product.
Ideally,
information from the marketplace should flow as far upstream and in
as close to real time as possible. In this way all the parties in the
supply chain work to the same information and reduce their dependency
on the forecast. At the same time opportunities for postponing the
final configuration of finished inventory should be investigated. The
aim of the global supply chain should be to carry inventory in a
generic form, i.e. standard semi-finished products awaiting final
assembly or localisation.
Managing
the global supply chain requires a level of agility and
responsiveness several magnitudes greater than that required in the
old model of 'local for local' manufacturing. Emphasis will
increasingly have to be placed on creating a business model that
recognises that competitive advantage is created through the
management of the supply chain as a single entity rather than through
fragmented, locally-focused decision making units. For the
foreseeable future leadership in global markets will belong to those
organisations that exhibit greater agility than their competitors.
FUTURE
OF SCM
The
most notable is Radio Frequency Identification, or RFID. RFID tags are essentially barcodes on steroids. Whereas barcodes only identify
the product, RFID tags can tell what the product is, where it has
been, when it expires, whatever information someone wishes to program
it with. RFID technology is going to generate mountains of data about
the location of pallets, cases, cartons, totes and individual
products in the supply chain. It's going to produce oceans of
information about when and where merchandise is manufactured, picked,
packed and shipped . It's going to create rivers of numbers telling
retailers about the expiration dates of their perishable
items-numbers that will have to be stored, transmitted in real-time
and shared with warehouse management, inventory management, financial
and other enterprise systems. In other words, it is going to have a
really big impact.
- The a b c...... D of RFID: "DATA"
In
current systems, you may know there are 10 items on the shelf , and
that information is compiled in an enterprise planning software
system. With RFID, you know there are 10 items, their age, lot
number, and expiration date and warehouse origin. It's like knowing
there are 1,000 people in a city. With RFID, you know their names .
Think like you are a HR manager of a global corporation who remembers
all the employees by their names!! Wouldn't that be great? That's the
power of RFID- the DATA.
Radio
frequency identification (RFID) can be broadly categorized as an
'e-tagging' technology. RFID enables passive object tagging and
automatic data capture , using RF sensing as opposed to optical
sensing in the case of barcodes. RFID is fast, reliable, and does not require physical sight or contact between reader/scanner eliminating
the problems mentioned for barcodes. The range of sensing RFID tags
from a reader varies from a few centimeters to a few meters,
depending on the frequency and the type of tags ( active or passive).
The amount of data that can be stored inside RFID tag ranges from few
bits to 1 MB for active tags.
The
main benefit of RFIDs is that, unlike barcodes, RFID tags can be read
automatically by electronic readers. Imagine a truck carrying a
container full of widgets entering a shipping terminal in China. If
the container is equipped with an RFID tag, and the terminal has an
RFID sensor network, that container's whereabouts can be
automatically sent to Widget Co. without the truck ever slowing down.
It has the potential to add a substantial amount of visibility into
the extended supply chain.
The
benefits are divided into two parts
Benefits to Organisation:
- Inventory Management:-
- Maintain a real-time view of tagged inventory as it flows through the supply chain.
- Track discrete movement of tagged inventory.
- Trigger alerts around inventory movement based on business rules you construct .
- Allowing just-in-time practices.
- Maximizing warehouse space:-
With
the high costs associated with storage real estate , the goal is to
maximize warehouse space. This will improve utilization without
undermining the ease with which goods can be moved in and out.
- Minimizing goods shrinkage:-
Theft
combined with imprecise inventory management can create a significant
shortfall in actual versus expected goods available. Within the
retail environment goods shrinkage is widely perceived to account for
up to one per cent of stock, representing a significant dent in
profit margin .
Benefits to Consumers:
- Value Innovation in customer service
Marks
& Spencer , a British retailer, has just extended a trial in which
tags are applied to suits, shirts and ties for men, allowing
retailers to monitor and replenish stock levels with far more
accuracy at the end of each day to make sure that every size, style
and color remains in stock. Beyond improving efficiencies, the smart tags could help to drive sales. One example of improving customer
service: a customer could take a tagged suit to a kiosk, which could
then suggest a matching shirt and tie.
- Minimizing errors in delivery
Misdirected
deliveries or incorrect orders can immediately result in on-shelf
out-of-stock situations leading to reduced sales and damaged customer
relationships. Indeed, for organizations relying on the delivery of
specific components to fulfill their own order schedule, such errors
can have a serious impact on customer satisfaction.
RFID
tags represent a significant step forward from traditional bar code technology and offer highly reliable data most notably, the US
Department of Defense requires their suppliers to ship products with
RFID tags from 2006 onwards. Therefore, the broad adoption of RFID is
on its way. By 2010, RFID should be ubiquitous throughout industries.
Right now the two biggest hurdles to widespread RFID adoption are the
cost of building the infrastructure and the lack of agreed-upon
industry standards.
Some
Key technologies which are going to change the face of SCM in coming days are:
EDI (for exchange for information across different players in the supply chain);
Electronic payment protocols;
Internet auctions (for selecting suppliers, distributors, demand forecasting, etc.);
Electronic Business Process Optimization;
E-logistics;
Continuous tracking of customer orders through the Internet;
Internet-based shared services manufacturing; etc.
SUPPLY
CHAIN MANAGEMENT PROBLEMS
Supply chain management must
address the following problems:
Distribution Network Configuration:
Number and location of
suppliers, production facilities, distribution centers, warehouses
and customers.
Distribution Strategy:
Centralized versus
decentralized, direct shipment, cross docking, pull or push
strategies, third party logistics.
Information:
Integrate systems and
processes through the supply chain to share valuable information,
including demand signals, forecasts, inventory and transportation.
Inventory Management:
Quantity and location of
inventory including raw materials, work-in-process and finished
goods.
SUPPLY
CHAIN MANAGEMENT CURRENT KEY TOPIC: TRADEOFF CURVES
One
of the fundamental tradeoffs in supply chain management is that
between inventory levels and customer service. For any given supply
chain, increasing the level of service (product/spare part
availability) typically means higher levels of inventory. Most
companies have discovered their "best place" on the curve,
depending on what their customers require and what their competition
offers. However, supply chain strategies can shift the entire curve,
lowering your inventory levels without adversely affecting your
customers (or the reverse, improving customer service levels with no
increase in inventory). How might this work? Through effective supply
chain management you may be able to reduce lead times. This would
shift the curve to the right, speeding up customer response times
without raising inventories. Supply Chain Module SCM106 reviews a strategy called postponement, or risk pooling, that can
lower the curve, allowing you to maintain (or enhance) service levels
with less finished-goods inventory.
This
tradeoff curve provides a perfect example of how silo behavior
(in which functional areas lose sight of cross-functional
optimizations) can cause problems in supply chains. One of the first
steps in improving a supply chain is making sure that organizational
responsibility for inventory levels and customer service are
appropriately managed. These two responsibilities should not be
separated - in fact, they should report to the same desk. Doing so
enables a company to set expectations and properly manage this
tradeoff, without costly swings from one place on the curve to
another as different functional groups "fight" for either
lower inventories or higher service.
CURRENT
SITUATION OF SUPPLY CHAIN MANAGEMENT
Nowadays ,
one of the few outcomes in the constantly changing business world is
that organizations can no longer compete solely as individual
entities. Increasingly, they must rely on effective supply chains, or
networks, to successfully compete in the global market and networked
economy (Baziotopoulos, 2004). Peter Drucker ’s (1998) management’s
new paradigms, this concept of business relationships extends beyond
traditional enterprise boundaries and seeks to organize entire
business processes throughout a value chain of multiple companies.
During the
past decades, globalization, outsourcing and information technology
have enabled many organizations such as Dell and Hewlett Packard, to
successfully operate solid collaborative supply networks in which
each specialized business partner focuses on only a few key strategic
activities ( Scott , 1993). This inter-organizational supply network
can be acknowledged as a new form of organization. However, with the
complicated interactions among the players, the network structure
fits neither “market” nor “hierarchy” categories ( Powell ,
1990). It is not clear what kind of performance impacts different
supply network structures could have on firms, and little is known about the coordination conditions trade-offs that may exist among the
players.From a system’s point of view, a complex network structure
can be decomposed into individual component firms (Zhang and Dilts,
2004).
Traditionally,
companies in a supply network concentrate on the inputs and outputs
of the processes, with little concern for the internal management
working of other individual players. Therefore, the choice of
internal management control structure is known to impact local firm
performance ( Mintzberg , 1979).
In the 21st century, there have been few changes in business environment that
contributed to the development of supply chain networks. First, as an
outcome of globalization and proliferation of multi-national
companies, joint ventures, strategic alliances and business
partnerships were found to be significant success factors, following
the earlier “Just-In-Time”, “Lean Management” and “Agile
Manufacturing” practices (MacDuffie and Helper, 1997; Monden, 1993;
Womack and Jones , 1996; Gunasekaran, 1999). Second, technological
changes, particularly the dramatic fall in information communication
costs, a paramount component of transaction costs, has led to changes
in coordination among the members of the supply chain network (Coase,
1998).
Many
researchers have recognized these kinds of supply network structure
as a new organization form, using terms such as “Keiretsu”,
“Extended Enterprise”, “ Virtual Corporation”, Global
Production Network”, and “Next Generation Manufacturing System”
(Drucker, 1998; Tapscott, 1996; Dilts, 1999). In general, such
structures, can be defined as “a group of semi-independent
organizations, each with their capabilities, which collaborate in
ever-changing constellations to serve one or more markets in order to
achieve some business goal specific to that collaboration”
(Akkermans, 2001).
CASE STUDY 1:
MATRIX LABORATORIES (INDIA) LTD.
This
study focuses on the inventory-related issues at bonded stock rooms
(BSR’s) and depots in a huge supply chain network of a leading
consumer products company dealing in cosmetics and other personal
care products.
Matrix Laboratories (India)
Ltd. is a leading consumer Products Company dealing in cosmetics and
personal care products with its head office located at London (U.K).
The company had a supply chain network of 3 factories with bonded
stock rooms (BSR) attached for despatch to the depots and 35 depots
for servicing distributors. Goods move from the factory to the BSR.
BSR dispatches stocks to Mother CFAs (depot). Other depots receive
stocks from the Mother depot and sell them to distributors.
- Key Concerns for the Company:
- To reduce inventory level at the BSR and depots.
- To improve inventory accuracy at stocking points including both BSRs and depots.
- To identify the damaged stocks across the chain and initiate action in a timely manner.
The
company appointed an external Supply Chain expert from US to help
them out of their problems stated above. The expert found out some
discrepancies which are as follows.
A). High Inventory
Levels:
Total average inventory
holding at BSRs was 8.2 weeks of sales and at depots was 6.5 weeks of
sales.
They were very high across the
distribution chain because:
- Sales and despatch forecasts that were not in line with actual primary / secondary sales.
- There was no process to periodically review and refine the Annual Forecasts, in line with market feedback.
- Stocking across all points in the distribution chain was driven by a push-oriented system that did not have provisions to be tuned to market requirements.
- Actual safety stocks maintained at depots were significantly higher that target safety stocks agreed at the beginning of the year . No system was in place to monitor and correct the same during the year.
- Stock allocation from depots was manual . Orders received from distributors were manually processes and no process was in place to automatically collate orders and allocate stocks.
B). High Levels of Old / Withdrawn /Damaged / Slow -moving stocks:
Depots were holding High
inventory of old/withdrawn stocks and damaged stocks for a long time
(over 3 months) Book and physical stocks had discrepancy of over 30%.
Dead stocks were allowed to accumulate in the system mainly because:
There was an absence of visibility into inventory details across stocking points.
The process to monitor and act on dead stocks was not adhered to.
Records of slow-moving / old /withdrawn / damaged stocks were not maintained methodically at the stocking points. Records were inaccurate.
Communication of details of dead stocks to the relevant teams was based on manually filed reports which were time-taking and open to error.
C). Inaccuracy in
inventory records:
The organisation did not have
a clear policy on periodic reconciliation of physical stock with book
records. Thus inaccuracies grew over time, compounded with process
failure on accounting for dead stocks.
The expert advised and
undertook some steps in the organization as follows:
- Bin card system was implemented for each rack at the CFAs and the delivery staff was trained in relevant bin card maintenance practices.
- A process to regularly reconcile physical and book stocks using the cycle-count process was implemented.
- An IT solution was identified and implemented for:
- Accounting the Cycle count process, providing MIS on deviations and accounting the adjustment notes .
- Computing the forecast using consolidated orders, with factoring for promotions and seasonality.
- Calculating safety stock level based on number of weeks of sales target.
- Facilitating communication of closing stock data from BSR and depots to logistics department.
- Facilitating communication of damaged and un-saleable stock quantity to commercial department.
- Automatically allocating stocks using FIFO principle at the depots.
- Demand planning and forecasting were made a periodic activity using the above IT solution to align forecasting with market orders and actual sales. The process of setting safety stocks at depots was made periodic and dynamic, based on updated sales data.
- Norms were set to act on damaged /old and other dead stocks. Clear action steps were laid down to liquidate or destroy these stocks.
- Responsibility and accountability were set to in the organisation to monitor and authorise activities in this regard based on visibility provided by the IT solution.
Due to above steps were
implemented properly the results were fascinating and this increased
the profits of the company by 20%.
The organisation achieved an inventory record accuracy (book stocks correctly reflecting physical stocks) of 95% within 2 months .
The company achieved (Within 2Planning cycles i.e. 2 Months)
Stock level reduction
- From 8.2 weeks to 5.5 weeks at the BSR.
- From 6.5 weeks to 4 weeks at the depots which included damaged inventory.
- Reduction in stock value holding across the supply chain.
Transparency of saleable and damaged stocks quantities across the supply chain resulting in more accurate demand planning, stock allocation and production.
Better management of damaged and un-saleable stocks:
- Sales realisation on salvaging and selling damaged stocks at a discounted price.
- Timely destruction of unusable and potentially harmful products.
- Timely action on transport, handling, stock management and product development fronts to reduce damages.
Reduction in proportion of old and damaged stocks;
Facilitation of ensuring fresher stocks in the market.
This was achieved mainly by
reducing inventory levels across the chain and also by better stock
management at the depots.
CASE
STUDY 2: INFOSYS’ SCM SOFTWARE SOLUTIONS
Infosys'
Supply Chain Management solutions help organizations in creating
strategic differentiation and operational superiority by configuring
and implementing solutions that are aligned with the elements of
organization’s competitive strategy. The Supply Chain Management
solutions and services help manage and optimize the many facets of
Supply Chain Planning, Sourcing & Procurement, Inventory
Optimization, Warehouse Management, Logistics Distribution &
Transportation and Supply Chain Integration. Moreover the
organization can recover their investments earlier. This is because
of the "extended work day" concept of the Global Delivery
Model (GDM), which Infosys pioneered. Infosys' Global Delivery Model
(GDM) also reduces the Total Cost of Ownership (TCO) by cutting
operational costs to the tune of anything between 20-35%. The results
are: robust implementations, faster roll- outs and de-risked upgrades
of the highest quality; all delivered with the on-time, on-budget,
and on-spec industry- benchmark of Infosys Predictability.
Infosys’
supply chain management solutions include:
Fulfillment Management.
Collaborative Vendor Managed Inventory (VMI).
Sales and Operations Planning.
Order Management.
Manufacturing Planning and Scheduling.
Supplier Collaboration.
Procurement Management.
Network Design and Optimization.
Track and Trace .
The Client :
The
client is a global leader in pressure- sensitive technology,
self-adhesive base materials, and self-adhesive consumer and office
products and specialized label systems and ranks among the Fortune 500. With sales of almost USD $5 billion , the client is best known
for its office automation and consumer products, self-adhesive
materials, reflective and graphic materials, peel-and-stick postage
stamps, industrial labeling solutions, Radio Frequency Identification
(RFID) labels, label stock and related services and systems,
automated retail tag and labeling systems, specialty tapes and chemicals .
Business Need and Challenges:
For
the client, success required managing short product lifecycles,
focusing on customer service, and most importantly, reducing supply
chain costs. Optimized supply chain management is crucial for the
success of companies in this industry, and a key component of supply
chain management is accurate forecasting and demand planning.
The
client was looking for a way to make its supply chain more
streamlined, and hence more cost-effective. Specifically, the client
had been looking at forecasting the US sales for each Stock Keeping
Unit (SKU). It wanted to move towards a demand planning model that
was based around collaborative and consensus forecasting. To
facilitate this, the office products division of the client had already implemented i2 Demand Planning (DP), but poor forecast
accuracy and sub-optimal forecasting process took its toll on overall
system efficiencies and diminished user confidence.
The Infosys Solution:
Infosys
was engaged to conduct diagnostics to identify issues in DP
implementation and to tune-up the overall forecasting process. An
Infosys team was deployed to identify the requisite improvements with
a quick turn round time of 5 weeks.
The
Infosys team conducted diagnostics to identify issues with current
implementation and potential opportunities to optimize the system.
The team then came up with 24 recommendations for improvement of
utilization, user productivity and forecast accuracy. These
recommendations were analyzed from two aspects viz. 'ease of
implementation' and 'delivered business value' to arrive at the priority classification for implementation.
In
the second phase, the Infosys team was asked to implement eight of
the statistical modeling initiatives , clubbed under four Clusters
with an objective to improve forecasting process, user productivity
(by making the system user friendly and flexible) and implementing
various advanced features of DP that were not being used. The above
scope was completed within a short span of four months leveraging the
Infosys' Global Delivery Model with significant productivity/ process
improvements.
Benefits:
- Enhanced version management capability, reducing hours of manual work.
- Increased forecast accuracy - Error reduction by 2% and bias improvement by 8mn units over the year.
- Flexible process to manage historical data cleansing and accounting for future promotions.
- Increased user confidence by making the process more transparent and flexible.
- A sustainable and repeatable knowledge base through user education and training.
- A roadmap for future enhancements.
CONCLUSION
Supply
chain management (SCM) is the combination of art and science that
goes into improving the way your company finds the raw components it
needs to make a product or service and deliver it to customers. It
is the process of planning, implementing, and controlling the
operations of the supply
chain
with the purpose to satisfy customer requirements as efficiently as
possible. Supply chain management spans all movement and storage of
raw
materials,
work-in-process inventory, and finished goods from point-of-origin to
point-of-consumption.
Supply
chain management has emerged as the new key to productivity and
competitiveness of manufacturing and service enterprises. The importance of this area is shown by a significant spurt in research
in the last five years and also proliferation of supply chain
solutions and supply chain companies. All major ERP companies are now
offering supply chain solutions as a major extended feature of their
ERP packages.
BIBLIOGRAPHY
Websites
visited:
Reference books:
Notes of NMIMS.
Arntzen, B. C., G. G. Brown, T. P. Harrison, and L. Trafton. Global Supply Chain Management at Digital Equipment Corporation. Interfaces, Jan.-Feb., 1995.
40
10 punkti
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2016-12-08
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jekaterina.ossipova
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