Scm integrated
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This document discusses integrated supply chain management. It begins with an agenda that covers supply chain laws, business cases, and communication. It then discusses concepts like achieving an integrated supply chain through internal and external integration. It introduces four "laws of logistics" - the law of lowest total cost, the law of speed quality and accuracy, the law of supply chain volatility, and the law of counter-intuition. Several business cases are presented involving supply network design and logistics optimization at P&G. The document emphasizes the importance of information sharing, speed, and counteracting natural human tendencies to introduce delays that can increase volatility and costs.
Scm integrated
- 1. Integrated Supply Chain by Dr. Gopalan Uppiliappan
- 2. • To expose you to current trends and thinking on Logistics & Supply Chain Management • To share with you some of Integrated SCM Experience & thoughts 3 2 Purpose
- 3. • 4 Laws of Logistics • Business Cases • Communication 3 3 Agenda
- 4. Two Moments of Truth for the Consumer When she chooses and when she uses
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- 6. Retailers and manufacturers loose when a consumer faces an empty shelf European consumer behavior facing Out-of-Stock in store Doesn't buy anything 9% Buys different size 16% Buys brand elsewhere 21% Buys a different brand 37% Returns later 17% 30 % lost opportunities for Retailer 46% lost opportunities for Manufacturer 6 4 billion Euro of lost sales in Europe!
- 7. Supply Chain Management 3 7 • “Supply chain management can be defined as the management of upstream and downstream relationships with suppliers, distributors and customers to achieve greater customer value- added at less total cost”.
- 8. Mission of Supply Chain/Logistics Get your product to the consumer at the lowest possible cost & cash 8
- 9. What are Supply Chain “Laws” ? Manufacturing Distribution RetailMaterial Supplier Customers Supply Chains conform to Physical / Empirical Laws Implication: • Supply chain performance is predictable and can be designed • By precisely specifying the structure of the supply chain, the operating strategy and quantifying measures consistently, we can dramatically improve Supply Chain performance 3 9
- 10. The Laws of Logistics* 3 10 The Law of Lowest Total Cost The Law of Speed, Quality and Accuracy The Law of Supply Chain Volatility The Law of Counter-intuition The Laws of Logistics are an original concept of Logistics Consulting Partners Ltd. They may be quoted but must be accredited. © LCP Ltd. All rights reserved
- 11. Achieving an Integrated Supply Chain Stage I: Isolation Stage II: Internal Integration Materials Management Stage III: External Integration Manufacturing Management Distribution Suppliers Internal Supply Chain Customers Purchasing Material Control Production Sales Distribution Consumers 11
- 12. • Extended enterprise thinking Focus on the ultimate • consumer Increase profits for all Consider total costs Share ideas, information • and resources Improve joint process efficiency • (Source : A.T. Kearney) 12 The Extended Enterprise Viewpoint • Single company thinking Focus on the customer Increase own profits Consider own costs only Guard ideas, information and resources Improve internal process efficiency
- 14. Choosing The Operating Strategy P Planning Operating Strategy – The set of parameters and principles which guide the way resources will be managed to achieve the business objectives at the lowest total system cost. Demand Capability C capacity I inventory D demand
- 15. P&G‟s approach towards Supply Chain: 15 Consumer Driven Supply Network • Win at the first and second month of truth: when the consumer buys (1st) and when they try (2nd) the product By Making sure that: • The Right Product arrives at • The Right Place at • The Right Time at • The Right Cost
- 16. 1.The Law of Lowest Total Cost 16 “The total cost of producing & delivering product is usually larger than the sum of the lowest functional costs of each element in the supply chain”
- 17. The Effect of Time Lead-Time Gap 85 days !!! 17 Procurement Manufacturing Delivery Logistics Lead Time (90 days) Customer‟s Order Cycle Order Fulfillment (5 days)
- 19. Traditional Supply Chain Manufacturer Customers Goods flow Demand flow DC Store • Sequential backward action • Filtering of real demand by inventory • Significant batching activity • Noise in demand patterns • Forecast dependent 19
- 20. Continuous flow requires Information Sharing 20 • Using shared information to reduce time in the supply chain • Optimize use of capacity • Managing upstream inventory • Using shared information to reduce forecast horizon
- 21. Why Do We need Inventory? Inventory B Volatile Demand Inaccurate Forecasts Unreliable Suppliers Quality Problems Bottlenecks A Inventory Hides the Problems 21
- 22. Dell Computers • Logistics strategy plays an important role in Dell Computer’s impressive financial performance. • Dell’s direct distribution eliminates as much as 2 months of warehouse and retail storage. • About 80% of the cost of a PC consists of components. • Component prices fall while on the shelves at 30% per year. • The consequences of logistics delays are overpriced products and possible obsolescence. • Direct sales also helps Dell in forecasting. 22
- 23. Two key techniques: • Vendor Managed Inventory (VMI) • Collaborative Planning, Forecasting & Replenishment (CPFR) 23 Achieving Speed in the Supply Chain: Substituting Information for Inventory
- 24. 2.The Law of Speed, Quality and Accuracy “In logistics & supply chain management, faster simpler and better is almost always cheaper” 24
- 25. P&G Ukraine Supply Chain • 2 plants and 2 distribution centers • 40 brands, 3000 stock keeping units • Products are shipped to 50+ customers • Imports from 31 foreign plants • 30 trucks enter Ukraine border everyday • 30 trucks arrive to customers everyday • 1500 employees are involved in P&G supply chain plus 400 from our partner companies
- 26. Business Case 1: Supply network design Customization center P&G DC and buffer Gillette DC and buffer Gala DC and buffer P&G distributors Gillette distributors Gala distributors Question: do we need change? If yes, what exactly would you suggest to change?
- 27. Case 1: what we need to change? P&G DC with in-house customization center P&G ship to •optimize number of DCs •close buffers •establish in-house manipulation capability •optimize number of distributors and ship-to •maximize direct supply from plants to customers Direct deliveries Direct deliveries Direct deliveries Direct deliveries
- 28. • Reduced supply chain lead-time • Reduced inventory • Improved service • Improved productivity • Several $ millions savings annually Executed by Supply Network Operations department Case 1: Streamlined and cost effective supply net-work design
- 29. Variety Grows 29 Increased competition Consumer demand for new products Customer demand for new products Marketing why we are unique High profit margin products What happens when variety increases ?
- 30. Company A Company B Company C Consumer Required capacity 180% 40% 100% Company A The “ ForresterEffect" Company B Company C 30
- 31. Shall we produce once a month ? Every week ? Every day ? 3 times a day ? Is there a right answer? 31 Volatility caused by Manufacturing
- 32. Shall we ship a full truck ? A small full truck? Half a truck ? 1 pallet ? Is there a right answer? 32 Volatility caused by Logistics
- 33. 3.The Law of Supply Chain Volatility 33 “The volatility of final consumer demand is always less than what we experience through the supply chain by distribution, manufacturing and suppliers”
- 34. Example Tide detergent weight/pallet– 1000 kg How many pallets of Tide will fit into truck? Answer: 1 truck of Tide – 20 pallets Pampers weight/pallet – 150 kg How many pallets of Pampers will fit into truck? Answer: 1 truck of Pampers – 33 pallets Challenge: how to ship 33 pallets of Tide and 33 pallets of Pampers in 2 trucks? Business Case 2 :Logistics at P&G Load shipment: By euro trucks – 33 pallets, 20 tons;
- 35. Challenge: how to ship 33 pallets of Tide and 33 pallets of Pampers in 2 trucks? 33 pallets,20 tons. Truck 1: 16 pallets of Tide + 17 pallets of Pampers. (18550 kg) Truck 2: 17 pallets of Tide + 16 pallets of Pampers.(19400 kg) 2000 kg are left. How to use them? Loading on top. Truck 1 – 43 pallets, truck 2 – 37 pallets. Therefore, combining products in trucks helps to reduce number of trucks (and logistics costs)! Logistics at P&G. Case 2
- 36. assortment: 600 SKUs, 50 categories, different densities and pressures. Limit: total weight, weights on axis In practice: heterogeneous transport, quality constraints, different product mix for different customers, how to implement into automated processes at warehouses? Result: 21 – 21.5 tons range Logistics at P&G In reality: how to increase weight limit up to 22 tons?
- 37. If only manufacturing would make what we ask for we could do the business MANUFACTURING PREFERENCEATTRIBUTE MARKETING PREFERENCE Minimum Stable Minimal Long Unacceptable Maximum Continually Changing “Infinite” Short Fact of Life PRODUCT RANGE PRODUCT SET FLEXIBILITY LEAD TIME UNFORECAST DEMAND If only marketing could forecast accurately and sales deliver the orders we could meet requirements Source: Inger 37 Centre of Conflict
- 38. Circular References 38 Volatility is caused by time lags Time lags are created to optimize cost Cost is not necessarily lowered by slowing things down Slowing things down is a function of variety and complexity Variety and complexity mean it all gets „too difficult‟ which is why we do n’ t trus t a ny on e & we slow things down more adding more time creates volatility volatility costs money so we add more time adding more time makes us careless and unreliable Unreliability creates volatility…………………………………………………….
- 39. 4.The Law of Counter-intuition 39 “The normal human response to the effects of the previous laws is to introduce delay in an attempt to increase certainty which simply makes the situation worse - effective supply chain management is counter intuitive”
- 40. What Is the source of Most troubles at Work ? 40 Distortion Of Information
- 41. 44 Distortion of Information Wrong information Too much information Increases confusion
- 42. How to Reduce Confusion 42 • Listening • Simple language • Single point accountability • KPI’s • Being in touch with reality • Frequent feedback from customers • Few layers in the organization • Daily Reviews
- 43. Communication Style Reducing Confusion • Stick to facts, don’t speculate • Check understanding • Avoid slogans, jargon and generic • Don’t repeat • Phone/Talk Vs. e-mail • Know when to stop talking • Get to the point / conclusion • Be open / direct 43