III SEMESTER

SUPPLY CHAIN MANAGEMENT

REGULATION 2009
SYLLABUS

BA9185 SUPPLY CHAIN MANAGEMENT

UNIT – I INTRODUCTION 9
Supply Chain – Fundamentals –Evolution- Role in Economy - Importance -
Decision Phases - Supplier- Manufacturer-Customer chain. Supply chain strategy
- Enablers/ Drivers of Supply Chain Performance. Overview of Supply Chain
Models and Modeling Systems.

UNIT – II STRATEGIC SOURCING 9

Outsourcing – Make Vs buy - Identifying core processes - Market Vs Hierarchy -
Make Vs buy continuum -Sourcing strategy - Supplier Evaluation and
Measurement - Supplier Selection and Contract Negotiation. Creating a world
class supply base. World Wide Sourcing.

UNIOT – III SUPPLY CHAIN NETWORK 9

Distribution Network Design – Role - Factors Influencing Options, Value Addition.
Models for Facility Location and Capacity allocation. Impact of uncertainty on
Network Design. Network Design decisions using Decision trees. Distribution
Center Location Models. Supply Chain Network optimization models.

UNIT – IV PLANNING DEMAND, INVENTORY AND SUPPLY 9

Value of Information: Bullwhip Effect - Effective forecasting - Coordinating the
supply chain. Managing supply chain cycle inventory. Uncertainty in the supply
chain – Safety Inventory. Coordination in the Supply Chain. Analysing impact of
supply chain redesign on the inventory. Managing inventory for short life - cycle
products -multiple item -multiple location inv mgmt.

UNIT – V CURRENT TRENDS 9

Supply Chain Integration - Building partnership and trust in SC. SC Restructuring
- SC Mapping -SC process restructuring, Postpone the point of differentiation.. E-
Business – Framework and Role of Supply Chain in e- business and b2b
practices. Supply Chain IT Framework. Fundamentals of transaction
management. Information Systems development - eSCM - Agile Supply Chains -
Reverse Supply chain. Agricultural Supply Chains.

Total: 45

1
TEXT BOOKS
1. Janat Shah, Supply Chain Management – Text and Cases,
Pearson Education, 2009.
2. Sunil Chopra and Peter Meindl, Supply Chain Management-Strategy
Planning and Operation, PHI Learning / Pearson Education, 2007.
3. David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi, Designing and
Managing the Supply Chain: Concepts, Strategies, and Cases, Tata McGraw-
Hill, 2005.

REFERENCES
1. Altekar Rahul V, Supply Chain Management-Concept and Cases, PHI, 2005.
2. Shapiro Jeremy F, Modeling the Supply Chain, Thomson Learning,
Second Reprint , 2002.
3. Ballou Ronald H, Business Logistics and Supply Chain Management,
Pearson Education, Second Indian Reprint, 2004.
4. Joel D. Wisner, G. Keong Leong, Keah-Choon Tan, Principles of Supply Chain
Management- A Balanced Approach, South-Western, Cengage Learning 2008.
 o Ex: Wal-Mart, Dell, Dabbawallas of Mumbai

Decision Phases in a Supply Chain:

1. Supply Chain Strategy or Design – A company decides how to structure the

supply chain over the next several years.
Strategic Decisions:
o Outsourcing decision
o Location and Capacities of Production
o Warehousing Facilities
o Modes of transportation
o Type of information system

Design Decisions:
o Chain Configuration
o Resources Allocation
o Process Design for each stage

2. Supply Chain Planning – Time frame is a quarter to one year. Planning

establishes parameters within which a supply chain will function over a
specified period of time. Companies define a set of operating policies that
govern short-term operations. Planning includes

o Forecast of demand
o Which Market will be supplied from which location
o Subcontracting of manufacturing
o Inventory policies
o Timing and size of marketing
o Price promotions

3. Supply Chain Operation – The time horizon here is weekly or daily, and
during this phase companies make decisions regarding individual customer
orders. Goal is to handle incoming customer orders in the best possible
manner.

o Allocation of inventory or production to individual orders

Cycle
Customer
Customer Order Cycle

Procur
ement Retailer
Cycle
Replenishment
Cycle

Distributor

Manufacturing
 Manufacturer

Pull

Supplier
Push
o Setting a date that an order is to be filled
o Generating pick lists at a warehouse
o Allocation of order to a particular shipping mode and shipment
o Setting delivery schedules of trucks
o Placement of replenishment orders

Given the constraints established by the configuration and the planning policies,
the goal during the operation phase is to exploit the reduction of uncertainty and
optimize performance.
Process Views of a Supply Chain:

A supply chain is a sequence of processes and flows that take place within and between
different stages and combine to fill a customer need for a product. There are two different
ways to view the processes performed in a supply chain.

Cycle View of Supply Chain Processes:

The processes in a supply chain are divided into a series of cycles, each performed at the
interface between two successive stages of a supply chain.
A cycle view of the supply chain clearly defines the processes involved and the owners of
each process.
This view is very useful when considering operational decisions because it specifies the
roles and responsibilities of each member of the supply chain and the desired outcome for
each process.
Supply Chain processes can be broken down into the following four process cycles.
o Customer order cycle
o Replenishment cycle
o Manufacturing cycle
o Procurement cycle

Each cycle occurs at the interface between two successive stages of the supply chain.

o Within each cycle, the goal of the buyer is to ensure product availability and to
achieve economies of scale in ordering.
 o The supplier attempts to forecast customer orders and reduce the cost of receiving
the order.
o The supplier then works to fill the order on time and improve efficiency and
accuracy of the order fulfillment process.
o The buyer then works to reduce the cost of the receiving process.
o Reverse flows are managed to reduce cost and meet environmental objectives.

Important differences between cycles:

o Demand
o Scale of an order
Each cycle consists of six sub-processes.

Supplier Stage markets product

Buyer Stage places order

Supplier Stage receives order

Buyer returns reverse flows to supplier or third party

Buyer Stage receives supply

Supplier Stage supplies order

Push/Pull View: The processes are divided into two categories depending on whether
they are executed in response to a customer order or in anticipation of customer orders.

Pull View of Supply Chain Processes:

o Execution is initiated in response to customer order.
o May also be referred to as reactive processes because they react to customer
demand.
o Pull processes operate in an environment in which customer demand is known.

Push View of Supply Chain Processes:

o Execution is initiated in anticipation of customer orders.
o May also be referred to as speculative processes because they respond to
speculated demand rather than actual demand.
o Push processes operate in an uncertain environment in which customer demand is
not yet known.
 PUSH/PULL BOUNDARY

PUSH PROCESSES PULL PROCESSES

Process 1 Process 2 Process K Process ProcessProcess N-1N

K+1

CUSTOMER ORDER ARRIVES

Situation 1:
Make – To – Stock:
o All processes in the customer order cycle are executed after the customer order
arrives.
o Therefore, all processes that are part of customer order cycle are pull processes.
o Order is fulfilled from product in inventory that is built up in anticipation of
customer orders.
o The next process is replenishment of the shelves.
o The goal of replenishment cycle is to ensure product availability when a customer
order arrives.
o Therefore, all processes in the replenishment cycle, manufacturing cycle and
procurement cycle are pull processes.
Situation 2:
Build – To – Order:
o Here, the arrival of a customer order triggers production of the product.
o The manufacturing cycle thus becomes the part of the customer order fulfillment
process in the customer order cycle.
o Therefore, all processes in the customer order cycle and manufacturing cycle are
push processes.
o However, the procurement of raw material can’t happen after the customer places
an order.
o Therefore, all processes in the procurement cycle are pull processes as they are in
response to a forecast.
Thus, a push/pull view of the supply chain is very useful when considering strategic
decisions relating to a supply chain design.
The goal is to identify an appropriate push/pull boundary such that the supply chain can
match supply and demand effectively.
Supply chain macro processes in a firm:
Within a firm, all supply chain activities belong to one of the three macro processes given
below. The three macro processes manage the flow of information, product and funds
required to generate, receive and fulfill a customer request.
1. Customer Relationship Management
2. Internal Supply Chain Management
3. Supplier Relationship Management
Integration among the three macro processes is crucial for successful supply chain
management.

Customer Relationship Management:

o All processes that focus on the interface between the firm and its customers.
o The CRM macro process aims to generate customer demand and facilitate the
placement and tracking of orders.

Internal Supply Chain Management:

o All processes those are internal to the firm.
o The ISCM macro process aims to fulfill demand generated by the CRM process in
a timely manner and at the lowest possible cost.

Supplier Relationship Management

o All processes that focus on the interface between the firm and its suppliers.
o The SRM macro process aims to arrange for and manage supply sources for
various goods and services.

Supplier Firm Customer

SRM ISCM CRM

1. Source 1. Strategic Planning 1. Market

2. Negotiate 2. Demand Planning 2. Price
3. Buy 3. Supply Planning 3. Sell
4. Design Collaboration 4. Order Fulfillment 4. Call Center
5. Supply Collaboration 5. Field Service 5.Order Management

Achieving Strategic Fit:

Competitive Strategy: A company’s competitive strategy is the set of customer needs

that it seeks to satisfy through its products and services, relative to its competitors.
Wal-Mart’s Competitive Strategy – High availability of a variety of products of
reasonable quality at low prices.

The given below are few of the functional strategies that form part of the competitive
strategy of a company:

o Product Development Strategy

o Marketing and Sales Strategy
o Supply Chain Strategy

Value Chain of a Company:

Finance, Accounting, Information Technology, Human Resources

T
New Product Marketing Operations Distribution Servic
Development and Sales e

 The value chain emphasizes the close relationship between the functional
strategies within a company.
 Each function is crucial if a company is to satisfy customer needs profitably.
 The various functional strategies cannot be formulated in isolation.
 They are closely intertwined and must fit and support each other if a company is
to succeed.

Strategic Fit: It means that both the competitive and supply chain strategies have aligned
goals.

It refers to consistency between the customer priorities that the competitive strategy
hopes to satisfy and the supply chain capabilities that the supply chain strategy aims to
build.

Achieving Strategic Fit:

Step 1: Understanding the Customer and Supply Chain Uncertainty

Understanding Customers

o The quantity of the Product needed in each lot

o The response time that customers are willing to tolerate
o The variety of products needed
o The service level required
o The price of the product
 o The desired rate of innovation in the product

Supply Chain Uncertainty

o Demand Uncertainty – is the uncertainty of customer demand for a product
o Implied demand uncertainty – is demand uncertainty due to the portion of demand
that the supply chain is targeting, not the entire demand.

Uncertainty from the customer and the supply chain can be combined and mapped on the
implied uncertainty spectrum.

The Implied Uncertainty Spectrum:

Predictable Predictable supply Highly Uncertain

supply and and uncertain demand supply and
demand (or) uncertain supply demand
And predictable demand
(or) somewhat uncertain
demand and supply

Salt at a Supermarket An existing automobile A new Communication

Model Device

Step 2: Understanding the Supply Chain Capabilities

 Like customer needs, supply chains have many different characteristics that
influence their responsiveness and efficiency

Supply Chain Responsiveness: It includes the supply chain’s ability to do the following:
 Respond to wide range of quantities demanded
 Meet short term lead times
 Handle a large variety of products
 Build highly innovative products
 Meet a high service level
 Handle supply uncertainty

The more of these abilities a supply chain has, the more responsive it is.

Supply Chain Efficiency: It is the inverse of the cost of making and delivering a product
to the customer. Increase in cost lowers efficiency.

Cost – Responsiveness Efficient Frontier:

 Responsiveness

High

Low
High Low
Cost
For a given level of high responsiveness, the cost can not go beyond the lowest point as
shown in the above graph.

The Responsive Spectrum:

Highly Somewhat Somewhat Highly

Efficient Efficient Responsive Responsive

Any integrated A traditional Most Automotive Reliance Fresh

Plant make – to stock production
Manufacturing

Step 3: Achieving Strategic Fit: This step aims to match supply chain responsiveness
with the implied uncertainty from demand and supply. The supply chain design and all
functional strategies within the firm must also support the supply chain’s level of
responsiveness.
Finding the zone of strategic fit:

Responsive
Supply Chain

Zone
Responsiveness of
Spectrum Strategic
Fit

Efficient Supply
Chain

Certain Implied Uncertain

Demand Uncertainty Demand
Demand

Fit between Competitive and Functional strategies:

Competitive Strategy

Product Supply Chain Strategy Marketing and Sales

Development Manufacturing Strategy
Strategy Inventory
Lead Time
Purchasing
Transportation

Information Technology Strategy

Finance Strategy

Human Resources strategy

UNIT II
LOGISTICS MANAGEMENT
Logistics:
The process of moving and positioning inventory to meet customer requirements at the
lowest possible cost.
Logistics Management:
The managerial responsibility to design and administer a system to control the flow and
positioning of material, work-in-process, and finished inventory to support business
strategy

Logistics Structure:

Components of logistics management:

Warehousing:
WAREHOUSING
A warehouse is a commercial building for storage of goods. Warehouses are used by
manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc.
They are usually large plain buildings in industrial areas of cities and towns. They
usually have loading docks to load and unload goods from trucks. Sometimes warehouses
load and unload goods directly from railways, airports, or seaports. They often have
cranes and forklifts for moving goods, which are usually placed on ISO standard pallets
loaded into pallet racks.
 Types of Warehouses

The warehouse is the most common type of storage though other forms do exist (e.g.,
storage tanks, computer server farms). Some warehouses are massive structures that
simultaneously support the unloading of numerous in-bound trucks and railroad cars
containing suppliers’ products while at the same time loading multiple trucks for
shipment to customers.

Below we discuss five types of warehouses:

 Private Warehouse - This type of warehouse is owned and operated by channel

suppliers and resellers and used in their own distribution activity. For instance, a
major retail chain may have several regional warehouses supplying their stores or
a wholesaler will operate a warehouse at which it receives and distributes
products.
 Public Warehouse - The public warehouse is essentially space that can be leased
to solve short-term distribution needs. Retailers that operate their own private
warehouses may occasionally seek additional storage space if their facilities have
reached capacity or if they are making a special, large purchase of products. For
example, retailers may order extra merchandise to prepare for in-store sales or
order a large volume of a product that is offered at a low promotional price by a
supplier.
 Automated Warehouse - With advances in computer and robotics technology
many warehouses now have automated capabilities. The level of automation
ranges from a small conveyor belt transporting products in a small area all the
way up to a fully automated facility where only a few people are needed to handle
storage activity for thousands of pounds/kilograms of product. In fact, many
warehouses use machines to handle nearly all physical distribution activities such
as moving product-filled pallets (i.e., platforms that hold large amounts of
product) around buildings that may be several stories tall and the length of two or
more football fields.
 Climate-Controlled Warehouse - Warehouses handle storage of many types of
products including those that need special handling conditions such as freezers for
storing frozen products, humidity-controlled environments for delicate products,
such as produce or flowers, and dirt-free facilities for handling highly sensitive
computer products.
 Distribution Center - There are some warehouses where product storage is
considered a very temporary activity. These warehouses serve as points in the
distribution system at which products are received from many suppliers and
quickly shipped out to many customers. In some cases, such as with distribution
centers handling perishable food (e.g., produce), most of the product enters in the
early morning and is distributed by the end of the day.

Processes and IT

Major warehousing processes include:

  Receiving
 Put away
 Order preparation / picking
 Shipping
 Inventory management (cycle counting, addressing...)

Warehouses frequently provide services, such as:

 Co-packing
 Kitting
 Repair

A piece pick, also known as broken case pick, split-case pick, each pick, over-pack or
pick/pack, is a type of order selection process where product is picked and handled in
individual units and placed in an outer carton, tote or other container before shipping.
Catalog companies and internet retailers are examples of predominantly piece-pick
operations. Their customers rarely order in pallet or case quantities; instead, they
typically order just one or two pieces of one or two items.

Material direction and tracking in a warehouse can be coordinated by a Warehouse

Management System (WMS), a database driven computer program. Logistics personnel
use the WMS to improve warehouse efficiency by directing putaways and to maintain
accurate inventory by recording warehouse transactions.

Warehouse management system

A warehouse management system, or WMS, is a key part of the supply chain and
primarily aims to control the movement and storage of materials within a warehouse and
process the associated transactions, including shipping, receiving, putaway and picking.
The systems also direct and optimize stock putaway based on real-time information about
the status of bin utilization.

Warehouse management systems often utilize Auto ID Data Capture (AIDC) technology,
such as barcode scanners, mobile computers, wireless LANs and potentially Radio-
frequency identification (RFID) to efficiently monitor the flow of products. Once data
has been collected, there is either a batch synchronization with, or a real-time wireless
transmission to a central database. The database can then provide useful reports about the
status of goods in the warehouse.

The objective of a warehouse management system is to provide a set of computerized

procedures to handle the receipt of stock and returns into a warehouse facility, model and
manage the logical representation of the physical storage facilities (e.g. racking etc),
manage the stock within the facility and enable a seamless link to order processing and
logistics management in order to pick, pack and ship product out of the facility.
Warehouse management systems can be stand alone systems, or modules of an ERP
system or supply chain execution suite.

The primary purpose of a WMS is to control the movement and storage of materials
within a warehouse – you might even describe it as the legs at the end-of-the line which
automates the store, traffic and shipping management.

In its simplest form, the WMS can data track products during the production process and
act as an interpreter and message buffer between existing ERP and WMS systems.
Warehouse Management is not just managing within the boundaries of a warehouse
today, it is much wider and goes beyond the physical boundaries. Inventory
management,inventory planning, cost management, IT applications & communication
technology to be used are all related to warehouse management. The container storage,
loading and unloading are also covered by warehouse management today.Warehouse
management today is part of SCM and demand management. Even production
management is to a great extent dependent on warehouse management. Efficient
warehouse management gives a cutting edge to a retail chain distribution company.
Warehouse management does not just start with receipt of material but it actually starts
with actual initial planning when container design is made for a product. Warehouse
design and process design within the warehouse (e.g. Wave Picking) is also part of
warehouse management. Warehouse management is part of Logistics and SCM.

Warehouse Management monitors the progress of products through the warehouse. It

involves the physical warehouse infrastructure, tracking systems, and
communication between product stations.

Warehouse management deals with receipt, storage and movement of goods, normally
finished goods, to intermediate storage locations or to final customer. In the multi-
echelon model for distribution, there are levels of warehouses, starting with the Central
Warehouse(s), regional warehouses services by the central warehouses and retail
warehouses at the third level services by the regional warehouses and so on. The
objective of warehousing management is to help in optimal cost of timely order
fulfillment by managing the resources economically. Warehouse management =
"Management of storage of products and services rendered on the products within the
four walls of a warehouse"

Transportation
Transport involves
– equipment (trucks, planes, trains, boats, pipeline),
– people (drivers, loaders & un-loaders), and
– decisions (routing, timing, quantities, equipment size, transport mode).
When deciding the transport mode for a given product there are several things to
consider:
• Mode price
• Transit time and variability (reliability)
 • Potential for loss or damage.
Transport Cost:
– Fixed costs:
• Terminal facilities
• Transport equipment
• Carrier administration
• Roadway acquisition and maintenance [Infrastructure (road,
rail, pipeline, navigation, etc.)]
– Variable costs:
• Fuel
• Labor
• Equipment maintenance
• Handling, pickup & delivery, taxes
Transportation Objectives:
1. To move product from an origin location to a prescribed destination
2. Minimize costs (Temporal, Financial and Environmental) and expenses (Loss or
damage )
3. Meet the customer demands regarding delivery performance and
shipment information availability
Transportation functionality:
Provides two major functions
– Product Movement :
• Primary function of moving products up and down the value chain
• Involves movement of materials, components, work-in-progress or finished
goods between phases of production and to the ultimate consumer
– Product storage
• Transportation vehicles offers expensive, temporary storage of the product
• It is justified
– From the total cost or performance perspective when loading and unloading
costs are high,
– In case of capacity constraints
– By its the ability to extend lead times

Fundamental principles underlying transportation management and operations:

– Economy of Scale:
• Transportation cost ά 1
per unit of weight size of shipment increases
• Large capacity vehicles cost (water and rail) < Small capacity
vehicles (Motor or air)
• Fixed expenses (admin costs of taking an order, time to position
vehicle for loading and unloading, invoicing, equipment cost) are
spread out
– Economy of Distance (Tapering Principle):
• Transportation cost per unit ά Distance
• Fixed expenses are spread out thereby decreasing the cost
Participants in Transportation Decisions

Information Flow Goods Flow

• Carrier (party that moves or transports the product)

– Vehicle-related cost
– Fixed operating cost
– Trip-related cost
• Shipper (party that requires the movement of the product between
two points in the supply chain)
– Transportation cost
– Inventory cost
– Facility cost
• Government (party that is interested in the impact of transportation on
the economy)
– Regulation: restrictions on the markets served by the carriers, price
setting
– Promotion: Support in R&D, providing rights of way as roadways, air
traffic control systems
– Ownership: Govt owned carriers that control the markets,
services and rates
Transport Infrastructure:
 • It consists of the rights-of-way, vehicles and carrier organizations that offer
transportation services for hire or internal basis
• The nature of infrastructure determines the economic and
legal characteristics of the modes of transport

Modes of Transport:

• Rail
– Low cost, high-volume [Products: Heavy industry, minerals, chemicals,
agricultural products, autos, etc.]
– Improving flexibility
– intermodal service
• Water
– One of oldest means of transport
– Low-cost, high-volume, slow
– Bulky, heavy and/or large items (Products: Nonperishable bulk cargo -
Liquids, minerals, grain, petroleum, lumber, etc )]
– Standardized shipping containers improve service
– Combined with trucking & rail for complete systems
– International trade
• Motor
 – Most used mode
– Flexible, small loads [Products: Medium and light manufacturing, food,
clothing, all retail goods]
– Trucks can go door-to-door as opposed to planes and trains.
• Air
–Rapidly growing segment of transportation industry
–Lightweight, small items [Products: Perishable and time sensitive
goods: Flowers, produce, electronics, mail, emergency shipments,
documents, etc.]
– Quick, reliable, expensive
– Often combined with trucking operations
• Pipeline
– Primarily for oil & refined oil products
– Slurry lines carry coal or kaolin
– High capital investment
– Low operating costs
– Can cross difficult terrain
– Highly reliable; Low product losses

Suppliers of Transportation Services:

Suppliers

Single Mode Operators Specialized Carriers Non operating Intermediaries

Basic Package Services Freight Forwarders

Premium Package Carriers

Shippers Associations/ Cooperatives and

Piggyback/TOFC/ COFC/Roadrailer Brokers

Containerships

Coordinated air and truck

UNIT III
NETWORK DESIGN