Scm 01 structure and decisions in a supply chain
- 1. Kripa Shanker, IIT Kanpur 1 SUPPLY CHAIN MANAGEMENT UNDERSTANDING SUPPLY CHAIN Kripa Shanker Deputy Director Professor Industrial and Management Engineering Department Indian Institute of Technology Kanpur
- 2. Kripa Shanker, IIT Kanpur 2 What is a Supply Chain ? A SUPPLY CHAIN consists of all parties* involved, directly or indirectly, in fulfilling a customer request. * parties manufacturer suppliers transporters warehouses retailers customers (themselves)
- 3. Kripa Shanker, IIT Kanpur 3 What is a Supply Chain ? Functions involved in receiving and filling a customer request new product development marketing operations distribution finance customer service Functions of a SUPPLY CHAIN
- 4. Kripa Shanker, IIT Kanpur 4 What is a Supply Chain ? Timber Paper Manufacturer Packaging Company Plastic Producer Chemical Manufacturer Manufacturer Distribution Centre Store Customers Customers Stages of a detergent supply chain
- 5. Kripa Shanker, IIT Kanpur 5 What is a Supply Chain ? A SUPPLY CHAIN • is dynamic • involves the constant flow of information, product and funds between different stages
- 6. Kripa Shanker, IIT Kanpur 6 What is a Supply Chain ? Timber Paper Manufacturer Packaging Company Plastic Producer Chemical Manufacturer Manufacturer Distribution Centre Store Customers Customers Stages of a detergent supply chain Identify flows : info, product, funds
- 7. Kripa Shanker, IIT Kanpur 7 What is a SUPPLY CHAIN ? Another example of SUPPLY CHAIN : purchasing on-line
- 8. Kripa Shanker, IIT Kanpur 8 What is a Supply Chain ? The term SUPPLY CHAIN conjures up images of product or supply moving from suppliers to manufacturers to distributors to retailers to customers along a chain. • Flows of information, products and funds take place along both the directions of the chain. • Only one player is involved at each stage. • A manufacturer may receive material from several suppliers and then supply several distributors. Thus, it may be more accurate to use the term SUPPLY NETWORK or SUPPLY WEB. Stages of a SUPPLY CHAIN • Customers • Retailers • Wholesalers/Distributors • Manufacturers • Component/Raw material suppliers
- 9. Kripa Shanker, IIT Kanpur 9 What is a Supply Chain ? SUPPLY CHAIN STAGES Supplier Manufacturer Distributor Customer Retailer Supplier Supplier Manufacturer Manufacturer Distributor Distributor Retailer Retailer Customer Customer ? Will all the Supply Chains necessarily have all the stages
- 10. Kripa Shanker, IIT Kanpur 10 What is a Supply Chain ? The objective of a SUPPLY CHAIN : maximize the overall value generated. Value = (worth of the final product to the customer) – (efforts spent in filling the customer’s order) • Generally, for most of commercial supply chains Value = Supply chain profitability • Supply chain profitability = (Revenue generated from the customers) - (overall cost across the supply chain) • Supply chain profitability : to be shared across all stages • Success of Supply Chain is measured in terms of supply chain profitability (and not in terms of the profits at an individual stage) Revenue source : customer Costs sources : all stages of the chain SUPPLY CHAIN MANAGEMENT • Management of flows* between and among stages in a supply chain to maximize total supply chain profitability * product, information and funds
- 11. Kripa Shanker, IIT Kanpur 11 Decision Phases in a Supply Chain Supply Chain Strategy or Design Supply Chain Planning Supply Chain Operation Design Planning Operational Strategic Tactical Operational
- 12. Kripa Shanker, IIT Kanpur 12 Decision Phases in a Supply Chain ? Supply Chain Strategy or Design - long term decision (over the next several years) - very expensive to alter Configuration of the chain Allocation of resources Processes at each stage Location and capacities of production facilities Location and capacities of warehousing facilities Products to be manufactured/stored at various locations Modes of transportation along different legs Type of information system
- 13. Kripa Shanker, IIT Kanpur 13 Decision Phases in a Supply Chain Supply Chain Planning - intermediate term decision (quarter to a year) - configuration determined in strategic phase establishes constraints within which planning must be made Forecasting (over the next year) Allocation of markets to different locations Production quantities at various locations Subcontracting Inventory policies Timing and sizing of marketing promotions - Must include uncertainties in demand, exchange rates, and competition - Try to incorporate any flexibility built into the chain at the design phase
- 14. Kripa Shanker, IIT Kanpur 14 Decision Phases in a Supply Chain Supply Chain Operation - short-term time horizon (weekly, or daily) - configuration determined in strategic phase fixed - planning policies are already defined Handling of individual incoming customer order Allocating inventory or production to individual orders Set a date of filling the order Generate pick lists at ware house Allocate an order to a particular shipping mode and shipment Set delivery schedule of trucks Place replenishment orders - Since the time frame is short, there is less uncertainty in demand information - Goal is to exploit the reduction of uncertainty and optimize performance - Try to incorporate any flexibility built into the chain at the design phase