Module 1 : Overview of Supply Chains

Overview of SCM and Current Trends Evolution - Macro and Micro Analysis -
Supply Chain Re-Structuring Decisions - Value Analysis / Engineering and PLC -
VE and VA Comparison - Supply Chain Strategies Cost Management - SC
Forecasting - Managing Bull Whip - Managing Supply Chain Performance - SCM
ESG and Sustainability
RECOMMENDED TEXT
Sunil Chopra and Peter Meindl, - Supply Chain Management, Strategy, Planning,
Operation, Pearson Publications, 6 th Edition.
Paul R Murphy, A. Michael Knemeyer, - Contemporary Logistics, Pearson
Publications, 12th Edition
Martin Christopher – Logistics & Supply Chain Management, Pearson Publication,
4th Edition
 Overview of S C M

It is the flow of product

It is the flow of information

Is that so simple, or is it really complex ? ? ?

Why so much hype……
 Symphony of Supply Chain

Supply Chain is a coordinated Ecosystem of People, Organizations, Activities, Information,

Resources, etc. in making the product or service in physical or virtual manner to the end
customer / user
 Supply Chain Strategies

Strategies Action points

 Customer Centric  Digitization
 Efficient  Artificial Intelligence and Machine Learning
 Effective  Visibility, Traceability and Location Intelligence
 Integrated / Collaborated  Cybersecurity
 Techy  Disruption and Risk Management
 Agile  Investment in Systems and People
 Resilient  Agility and Resilience
 Sustainable  Digital Supply Chain Management

Challenges – Q, C, D

D - Service levels, C - Cost, Compliance, Q - “Quality is guaranteed / compromised ?”

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 Factors influencing Supply Chain
Supply chain management (SCM)
has evolved over time due to a
number of factors, including:

• Globalization
• As businesses expand globally,
supply chains become more
complex, which has led to the
need for more advanced SCM
solutions.

• E-commerce
• The rise of online shopping has
increased the demand for SCM
and put pressure on supply
chains to be more efficient and
responsive.

• Technology integration
• The integration of technologies
like AI, IoT, and blockchain has
revolutionized SCM. These
technologies are helping to
create smarter, more
responsive, and highly efficient
supply chains.
 Supply Chain Cost Management as a Strategy

Action Points

1. Leverage meaningful demand forecasting – Simulation, Scenario Planning, What If Analysis

2. Improving transportation and logistics – Track and Trace of consignment, Proactive corrections /
Risk Managing, Multimodal, Outsource

3. Inventory analytics (Stock outs, Over stocks, Hygiene, Age Analysis)

4. Enhancing operational efficiency – K P Is (Financial and non-Financial)

5. Upskill employees with proper training – Skill Matrix, Skill Development, Job Rotation, Mock
Leading
 Supply Chain Forecasting
What : It is the practice of using past data, trends and known upcoming events to predict needed inventory levels
for a future period. Accurate forecasting ensures businesses have enough product to fulfill customer orders while
not tying up cash in unnecessary inventory.

Types of Forecasting : Qualitative and Quantitative

● Qualitative forecasting: When there is lack of historical data, some companies go straight to the source: their
customers. Qualitative forecasting often involves complex data collection, such as focus groups and market
research. Forecasters then generate models from this type of data.
● Primarily, these are used when data is scarce—for example, when a product is first introduced into a market.
They use human judgment and rating schemes to turn qualitative information into quantitative estimates.

● Quantitative forecasting are widely used in businesses to make predictions about future trends. These
methods rely on mathematical models and historical data to make informed predictions. Quantitative
forecasting methods are best used when historical data is available, and the relationships between variables are
clearly defined. There are various types of quantitative methods of forecasting, including time-series analysis,
regression analysis, and econometric modeling.
 Bullwhip Effect in Supply Chain
The bullwhip effect is a supply chain phenomenon where small demand
fluctuations at the retail level cause larger fluctuations as they move up the
supply chain. This can lead to excess inventory, lost revenue, and over
production.
5 common causes of the
bullwhip effect

 Complex supply chain; involving

many touchpoints and players
tend to get complex.

 Miscommunication. ...

 Consumer demand. ...

 Long lead times. ...

 Price fluctuations.
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 Bullwhip effect – How to mitigate
1. Acknowledge and grasp the dynamics of the 6. Establish controls and consistency in the sales:
bullwhip effect in the Supply Chain: Implement robust controls to ensure consistency in the
Understand how demand fluctuations impact different sales forecasting and order processing, minimizing
levels of your supply chain, creating a ripple effect unnecessary fluctuations

2. Enhance the inventory planning and policy 7.Conduct regular audits, strengthen relationships
Implement data-driven strategies to optimize with suppliers, and understand them better:
inventory levels, considering factors like lead times, Regularly assess your supply chain processes, build
seasonality, and demand variability strong relationships with suppliers, and understand their
capabilities and limitations
3. Foster improved communication among teams:
Encourage regular communication to ensure all 8.Expedite onboarding of new suppliers:
teams are aligned, share insights, and collectively Streamline the onboarding process for new suppliers to
work towards a more responsive supply chain enhance flexibility and diversify supply chain network

4. Optimize minimum order quantities (MOQ) : 9.Facilitate open discussions and information
Fine-tune your MOQs and inventory to strike a sharing on actual demand across all stakeholders:
balance between cost-effectiveness and meeting Foster a culture of openness and collaboration to share
customer demands real-time demand information among all stakeholders,
promoting better decision-making
5. Effectively manage orders, returns, and adapt
supplier and inventory policies: 10. Align procurement and logistics teams:
Develop flexible policies that can adapt to changing Coordinate efforts between procurement and logistics
demands, and efficiently manage orders and returns teams to enhance efficiency, reduce lead times, and
to minimize disruptions respond swiftly to changes in demand
 Managing Supply Chain Performance –
Q, C, D and Compliance
Why - To find areas to achieve Spend Optimization, improve Efficiency /
Effectiveness and exceed customer expectations by reducing delivery time.

How - The best way to optimize your supply chain performance is to measure Key
Performance Indices and tune the system / collaboration.

Examples of K P Is are, inventory turnover, transportation costs, warehousing

expenses, fulfillment cycle time, on-time delivery, lead time, order accuracy and
production cycle time to improve efficiency across your entire supply chain, etc.
 Supply Chain Performance KPIs
On-time delivery rate as a KPI for supply chain performance
The on-time delivery rate refers to the percentage of orders you deliver to
customers within the promised timeframe. This KPI holds significant importance
because it directly affects customer satisfaction and overall business success

Inventory turnover ratio as a KPI for supply chain efficiency

The inventory turnover ratio measures the number of times a business sells and
replenishes its inventory within a specific period.
Inventory turnover ratio:
Inventory turnover = cost of goods (COG) sold / average value of
inventory

Order accuracy rate as a KPI for supply chain quality

Order accuracy rate measures the quality of supply chain operations. It
represents the percentage of orders fulfilled correctly without errors or
discrepancies. A high order accuracy rate is indicative of a well-
functioning and efficient supply chain. Maintaining a high order accuracy
rate is crucial for several reasons: When orders are fulfilled accurately,
customers receive the correct products in the right quantities and specifications,
 Supply Chain Performance KPIs
Carrying Cost of Inventory :carrying cost of inventory is a more reliable benchmark
than ISR in supply chain analysis. Carrying costs are usually 20-30% of the total
cost of inventory, but will vary with your industry and business size.
inventory carrying cost:=Inventory carrying rate x Average inventory
value

Purchase Order Tracking

Your order status metrics are definitely something you’ll want to track

Supplier On-time Delivery – OTIF of suppliers

DSI – Days Sales of Inventory

DSI is the average number of days your company takes to sell its inventory. This
metric is useful when analyzing your sales efficiency

Freight Cost Per Tonne Shipped

Knowing your freight costs is essential for correct pricing and avoiding
operational losses. You might be paying more for freight,
 Supply Chain ESG principles
ESG principles includes environmental sustainability, social responsibility, and
governance and ethical practices.

Environmental refers to whether the organization is operating

as a steward of the environment and covers environmental
issues like climate change, greenhouse gas emissions (GHG),
deforestation, biodiversity, carbon emissions, waste
management and pollution.

Social refers to the impact the organization has on people,

culture and communities and looks at the social impact of
diversity, inclusivity, human rights and supply chains.

Governance refers to how the organization is directed and

looks at corporate governance factors like executive
compensation, succession planning, board management
practices and shareholder rights.
 Supply Chain Sustainability

It is achieved by It refers to the ability and In this, products are

successfully integrating willingness of a business to disassembled or
environmentally openly disclose information reduced to their raw
responsible principles about the provenance of materials form, and
and benchmarks into goods and labour and end-to- remade into sellable
supply chain end supply chain practices products – thus
management. This allowing businesses
includes product to achieve the
design, materials environmental
sourcing, benefits of recycling
manufacturing, while recouping costs
logistics, and end-of-life in the process.
Questions time…
End of the Module 1