SCM is

2. Definition of Supply Chain Management (SCM) ?
Design, planning, execution, control, and monitoring of supply
chain activities with the objective of creating net value,
building a competitive infrastructure, leveraging worldwide
logistics, synchronizing supply with demand and measuring
performance globally.

3. SCM Development Decades
 EDI & ERP
 Globalization
 Manufacturing & distributions
 SCM : A service
 SCM 2.0

4. What Is the Supply Chain?
 Also referred to as the logistics network
 Suppliers, manufacturers,
warehouses, distribution
centers and retail outlets –
“facilities”
 Raw materials
 Work-in-process (WIP)
inventory
 Finished products
that flow between the facilities

5. The Supply Chain in form of Supply and demand
network

6. The Supply Chain – Another View
Source Make Deliver Buy
Suppliers Manufacturers Warehouses & Customers
Distribution Centers
Transportation Transportation
Material Costs Costs Costs Transportation
Manufacturing Costs Inventory Costs
Costs

7. Short look Supply Chain Management (SCM)?
 A set of approaches used to efficiently integrate
 Suppliers
 Manufacturers
 Warehouses
 Distribution centers
 So that the product is produced and distributed
 In the right quantities
 To the right locations
 And at the right time
 System-wide costs are minimized and
 Service level requirements are satisfied

8. SUPPLY CHAIN INCLUDES
 Customer service management
 Procurement
 Product development and commercialization
 Manufacturing flow management/support
 Physical distribution
 Outsourcing/partnerships
 Performance measurement
 Warehousing management

9. SCM Marketing
 Push Models
 Pull Models

10. Push Strategy
 Applied to that portion of the supply chain where demand uncertainty is
relatively small
 Production and distribution decisions are based on long term forecasts
 Based on past orders received from retailer’s warehouse (may lead
to Bullwhip Effects)
 Inability to meet changing demand patterns
 Large and variable production batches
 Unacceptable service levels
 Excessive inventories due to the need for large safety stocks
 less expenditure on advertising than pull strategy

11. Pull Strategy
 Applied to that portion of the supply chain where demand uncertainty is
high
 Production and distribution are demand driven
 No inventory, response to specific orders
 Point of sale (POS) data comes in handy when shared with supply chain
partners
 Decrease in lead time
 Difficult to implement

12. Supply Chain Goals
Efficient supply chain management must result in tangible business
improvements. It is characterized by a sharp focus on
 Revenue growth
 Better asset utilization
 Cost reduction

13. Problems addressed by supply chain management
 Distribution Network Configuration
 Distribution Strategy
 Trade-Offs in Logistical Activities
 Information
 Inventory Management
 Cash-Flow

14. Why Is SCM Difficult?
 Uncertainty (Not Sure)
 Travel times
 Breakdowns of machines and vehicles
 Weather, natural catastrophe, war
 Local politics, labor conditions, border issues

15. Bullwhip effect

16. Factors Contributing to the Bullwhip
 Demand forecasting practices
 Min-max inventory management (reorder points to bring inventory up to
predicted levels)
 Lead time
 Longer lead times lead to greater variability in estimates of average demand,
thus increasing variability and safety stock costs
 Batch ordering
 Peaks and valleys in orders
 Fixed ordering costs
 Impact of transportation costs (e.g., fuel costs)
 Sales quotas
 Price fluctuations
 Promotion and discount policies
 Lack of centralized information

17. The Importance of Supply Chain Management thus is
in
 Reduced inventories along the chain
 Better information sharing among the partners
 Planning being done in consultation rather than in isolation
The benefits too would be reflected in terms of :
 Lower costs
 Better customer service
 Efficient manufacturing
 Better trust among the partners leading to win-win

18. Supply Chain Management – Key Issues
ISSUE CONSIDERATIONS
Network Planning • Warehouse locations and capacities
• Plant locations and production levels
• Transportation flows between facilities to minimize cost
and time
Inventory Control • How should inventory be managed?
• Why does inventory fluctuate and what strategies minimize
this?
Supply Contracts • Impact of volume discount and revenue sharing
• Pricing strategies to reduce order-shipment variability
Distribution Strategies • Selection of distribution strategies (e.g., direct ship vs.
cross-docking)
• How many cross-dock points are needed?
• Cost/Benefits of different strategies
Integration and Strategic Partnering • How can integration with partners be achieved?
• What level of integration is best?
• What information and processes can be shared?
• What partnerships should be implemented and in which
situations?
Outsourcing & Procurement Strategies • What are our core supply chain capabilities and which are
not?
• Does our product design mandate different outsourcing
approaches?
• Risk management
Product Design • How are inventory holding and transportation costs affected
by product design?
• How does product design enable mass customization?

19. Methods for Improving Forecasts
Judgment Methods Market Research Analysis
• Internal experts
• External experts
• Domain experts • Market surveys
• Market testing
• Focus groups
Accurate
Time-Series Methods Forecasts
Causal Analysis
• Moving average
• Relies on data other than that being
• Exponential smoothing
predicted
• Trend analysis
• Economic data, commodity data,
• Seasonality analysis
etc.

20. Supply Chain Management Operations Strategies
STRATEGY WHEN TO CHOOSE WHEN TO CHOOSE
Make to Stock standardized products, relatively Low manufacturing costs; meet
predictable demand customer demands quickly
Make to Order customized products, many variations Customization; reduced inventory;
improved service levels
Configure to Order many variations on finished product; Low inventory levels; wide range of
infrequent demand product offerings; simplified planning
Engineer to Order complex products, unique customer Enables response to specific customer
specifications requirements

21. SCM Applications

22. SAP SCM
 SAP SCM
 SAP DEMAND PLANNING
 SAP TRANSPORTATION
 SAP EVENT MANAGEMENT
 SAP SERVICE PLANT PLANNING
 SAP EXTENDED WAREHOUSE MANAGEMENT
 SAP SUPPLIER NETWORK COLLABORATION
 SAP FORECASTING AND REPLENISHMENT
 SAP SCM 7.0

23. Important points to keep in mind
 Segment customers based on service needs.
 Modify the supply chain to meet these service requirements profitably.
 Customize the logistics network.
 Develop forecasts collaboratively involving every link of the supply chain.
 Locate the leverage point where the product is unalterably configured to meet a
single requirement
 Delay product differentiation till the last possible moment.
 Cultivate warm relationships with suppliers

24.  Thank you