Supply Chain Optimization

• In today's fierce global market, businesses are compelled to focus on optimizing their supply chains due to shorter product lifecycles and rising customer demand.
• Progress in communications and transportation drives constant adjustments to supply chain.
• Structures of production systems are affected by competition and advancements in IT, which are causing a need for:

Time, Flexibility, Cost, and Quality

• Reduction in time to market
• Higher flexibility of systems
• Drastic reduction of costs
• Extended quality concept

Supply Chain Defined

• A supply chain involves organizations, people, technology, activities, information, and resources, for moving a product or service from supplier to customer.
• Encompasses retailers, distributors, transporters, storage, and suppliers involved in production, delivery, and sale to the consumer
• Activities include flow and transformation of goods from raw materials to the end user, including information and funds.
• Transforms resources and materials into finished products for end customers.
• A link between a business and its suppliers and customers can be referred to as such system.
• Logistics network and supply chain include suppliers, manufacturing centers, warehouses, distribution centers, retail outlets, materials, and inventory
• The three key components are

Supply

• Focuses on raw materials, supply timing, locations etc

Manufacturing

• Concentrates on raw materials conversion into final products

Distribution

• Concentrates on ensuring product reaches consumers through distributors, warehouses, and retailers.
• Fulfilment of customer demands and requests is encompassed
• Some sophisticated systems allow recycling of used or waste products

A Supply Chain Strategy

• Outlines how the supply chain should operate to compete, assessing benefits and costs
• Focuses on operational operations and supply chain operations for meeting specific goal
• Integrates and coordinates materials, information, and funds flow.

SCM

• Supply Chain Management oversees materials, information, and finances flowing from supplier to consumer.
• Integrates all necessary steps and coordination within a company and to the end consumer.
• Encompasses planning, sourcing, procurement, conversion, and all logistics activities; also includes channel partner coordination
• Integration of supply and demand across companies is essential

SCM Functions

• Links business functions and processes into a cohesive and high-performing business model
• Encompasses all logistics activities, marketing, sales, product design, finance, and information technology, as well as manufacturing operations.
• Considered the art of providing the right product, at the right time, right place and at the right cost

Three Main Flows:

• Product flow: Moving goods and customer service
• Information flow: Order information and delivery status
• Financial flow: Payment schedules, credit terms, and arrangements

SCM Approaches

• Efficiently integrate suppliers, manufacturers, warehouses, and stores to produce and distribute merchandise at the right quantities, locations, and timing, minimizing system-wide costs and meeting service requirements.

Objective of SCM

• Aims to improve flow of material and information between suppliers and customers globally at the lowest cost and highest speed to encourage customer satisfaction.
• Considers every facility's impact on cost and role in aligning the product with customer needs.
• The main goal is value maximization including difference between the cost and the product's worth to the customer known as supply chain surplus correlated with profitability of commercial supply chain.
• Requires balancing effeciency and cost effectiveness across the entire system.

Key Goals:

• Enhancing customer service
• Expanding sales revenue
• Reducing Inventory cost
• Improving on-time delivery
• Reducing order to delivery cycle time
• Reducing lead time
• Reducing transportation cost
• Reducing warehouse cost
• Reducing supplier base
• Expanding depth of distribution

Importance of SCM

• Becomes evident when focusing on losses from ineffective strategy, or benefits of an effective strategy.
• Integration helps firms; example when XYZ needs 50,000 units of ABC's cycle chains, PQR which makes bits doesn't know ABC's needs so doesn't know how many bits to make
• Lack of information can lead to excess inventory or business loss

Primary Roles

• Reduce Supply Chain Inventories
• Improvement of information Sharing
• Planning with Consultation

Management Activities

• Effective management focuses on different parts of the company

Strategy

• Organization-wide strategic decisions regarding manufacturing sites, partnerships, markets, etc.
• Product design, internal vs. external manufacturing, supplier selection, strategic partnering, and material flow decisions are made

Tactical

• Cost benefit measures, industry practices, purchasing strategies, logistics, and warehouse strategies are decided
• Updated quarterly or annually including purchasing details, inventory policies, and transportation strategies

Operational

• Affects product movement, schedule changes, purchase orders, customer orders, and warehouse operations and involves daily decisions
• Day-to-day decisions include lead time quotes, routing, and truck loading

Decision Phases of SCM

• There are decision phases affecting information flow, product, and funds

Strategy or Design Phase

• Structures and configures the supply chain.
• Resources are allocated, and processes are performed in this stage.
• Strategic Decisions include where to locate, including capacities of factories, where to store, modes of transportation, types of information system(s).
• Decisions are made long term and are difficult to alter, so market conditions take top influence

Planning Phase

• This consideration of time frame with quarterly or annual consideration
• Established constraints guide planning such as parameters for supply chain function
• Planning is focused on the coming year for different markets and includes market and production quantities
• Should account for fluctuations in demand, exchange rates, and competition
• Aim to optimize the performance exploiting the supply chain

Operation Phase

• Weekly or daily schedule for individual and customer orders.
• Focuses on efficiently handling customer orders
• Activities include allocation of inventory to individual orders and the creation of pick lists to set shipping schedules

Decisions Made

• Inventory allocation
• Generating pick lists
• Allocating an order to a shipping mode that ships in a shipment
• Setting delivery schedule
• Placing replenishment orders
• Short-Term decisions are made with little uncertainty
• Focus is to reduce uncertainty and optimize the performance exploiting any reduction in said uncertainty implementing operating policies effectively.

Process Categories

• Supply processing occurs at the interface between supply chain stages

Cycle View

• Supply chain processes are separated in different cycles at different interfaces
  • Customer Order Cycle (Customer Retailer)
  • Replenishment cycle (Retailer - Distributor)
  • Manufacturing Cycle (Distributor - Manufacturer)
  • Procurement Cycle (Manufacturer- Supplier)

Push/Pull View

• Describes whether processes respond to a consumer order or depend on an anticipation of orders

Key Factors

• Design and management of supply chain involving key considerations
• Successful or failures relate to the flows in supply chains

Competition and Business

• Defines customer needs satisfying its services such as product differentiation
• Nature of material procurement determined
• Requires consistency and support

Factors to Improve

• Inventory to improve efficiency of raw processing through supply chain and demand
• Transportation to analyze analysis of customer orders
• Facilities to analyze warehouse and store information

Barriers to SCM

• Factors can prevent effective SCM
  • lack of top management support
  • non-aligned strategic and operating philosophies
  • unwillingness to share information and risks (among supply chain members)
  • lack of trust among supply chain members
  • inflexible organizational systems and processes
  • cross-functional conflicts and inconsistent performance measures
  • resistance to change
  • lack of training

Scope of Activities

• SCM incorporates sourcing and procurement, scheduling, order processing, inventory and warehouse management, customer service, distribution, and reverse logistics.

Marketing Mix

• Managers utilize the 'Four P's' (Price, Product, Promotion, Place) to define business strategy.

P's

• Parameters that the marketing manager controls to make decisions within market environment

• Important in each stage of the product life cycle

  • Price - amount customer pays
  • Product - including the product and branding.
  • Promotion- Advertising and sales
  • Place - location, distribution

  The elements of Marketing Mix

• Customer relationship

• Interactivity exchange

• Design