Supply Chain Management Seminar at Bangalore Dec. 6, 2003

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1 Supply Chain Management Seminar at Bangalore Dec. 6, 2003 Collaboration Synergies within the Firm Dr. P. Balasubramanian

2 Who is minding the Store? Demand Forecasting Production Planning. Requirements Planning Production Scheduling Distribution Planning Planning functions Inventory Management Production Management Warehouse Management Order management Delivery Management Execution Management Purchase Stores Production Production Planning Sales Delivery Functional Departments

3 Who is minding the Store? Demand Forecasting Production Planning. Requirements Planning Production Scheduling Distribution Planning Planning functions Inventory Management Production Management Warehouse Management Order management Delivery Management Execution Management

4 Supply Chain Management The Supply Chain Management function then calls for integrating the functional silos of a traditional organization to create a seamless interface with the Customer to satisfy the demand.

5 Achieving functional excellence How does sharing of information between functional units lead to higher level of effectiveness at each dept? A case study from a multi plant and multi product tyre company

6 Returned Tyres Analysis : An illustration Returned Tyres Data Tyre Production Data Base Returned Tyres Analysis System Tyre Sales Data Base Productwise Failure Analysis Early Failures vs Regular Failures Plantwise Analysis Production Batchwise Analysis Sales Regionwise Analysis

7 Returned Tyres Analysis : An illustration Production Quality Data Base Machinery Maintenance Data Base Plantwise Analysis Mould Data Base Preventive Maintenance Schedule changes Production Processes Changes Mould Retirements and Repairs Crew to Products Assignment changes Training Programs

8 Returned Tyres Analysis : An illustration Supplierwise issues Production Quality Data Base Production Batchwise Analysis Supply Batch related issues R.M. attributes issues Mismatch between a set of inputs ( combinatorial analysis ) Supplier Data Base Raw Materials Lab Data Base

9 Returned Tyres Analysis : An illustration Retailer Contracts Regionwise Analysis Tyre Sales Data Base Redefinition of Product Attributes Sales and Service condition alterations

10 Beyond Returned Tyres Information available in one dept but needed in other places. Customer Satisfaction Product Performance Performance during warranty period Sales Returns Usage Variance Product Profitability Machinery capacity available in current period Manpower availability Preventive Maintenance Schedule Production Constraints Raw materilas and consumables inventory; on hand and in pipeline Supplier issues Lead time issues Transportation constraints Alternate sources and materials

11 Cost Management Raw Material suitability Cost Management Use of New cost effective materials Feasibility of the use of certain raw materials Vendor Identification Relationship Management Negotiations Coordination Vendor Rating Scheduling Storage optimization Asset Utilization Materials Handling Service Level Management Inbound Logistics Impact on Maintenance & Production costs Linkage to production plan and BOM changes Manufacturing Scheduling Storage optimization Material Handling Asset Utilization Materials Handling Service Level Management Outbound Logistics Resource Utilization Capacity Planning Order Management Spares management Quality Issue management Sourcing Warehousing Product Design Materials Management The Dimensions of Materials Management Sales n Support

12 Challenges Faced by the Materials Manager Product Design Visibility and collaboration with the R&D team Access to information on potential substitutes Sourcing Variation in FG Demand Visibility to supply constraints with the vendors Import & Regulatory Issues Competitive pricing Secure & quick payment mechanisms Inbound/Outbound logistics Visibility to critical consignment status Access to dispatch and expected delivery date information Customs, Excise and regulatory requirements Information on market opportunities (back-freighting)

13 Challenges Faced by the Materials Manager Manufacturing Visibility into total cost of raw material usage Variability on production plans Warehousing Inventory age views for limited shelf life items Access to correct inventory position (quick cycle counts) Knowledge about new material handling systems & practices Sales and Support Availability of warranty cause and effect analysis Visibility into spares requirement

14 Modules in ERP-SCM-CRM INBOUND SUPPLY CHAIN PLANNING MARKETING Purchase Order Management Receiving Management Inventory Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment Supply Chain Design Demand Planning Supply Planning Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt Marketing Planning Customer Segmentation Campaign Management SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

15 Maintenance Mgt Vendor Management Production Accounting Production Quality control R.M. Quality control H.R.Systems Accounts Receivable Accounts Payable Gross and Net Margin INBOUND Purchase Order Management Receiving Management Inventory Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment SUPPLY CHAIN PLANNING Supply Chain Design Demand Planning Supply Planning Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt MARKETING Marketing Planning Customer Segmentation Campaign Management SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

16 Returned Tyres Analysis : An illustration Returned Tyres Data Tyre Production Data Base Returned Tyres Analysis System Tyre Sales Data Base Productwise Failure Analysis Early Failures vs Regular Failures Plantwise Analysis Production Batchwise Analysis Sales Regionwise Analysis

17 Maintenance Mgt Vendor Management Production Accounting Production Quality control R.M. Quality control H.R.Systems Sales Returns Accounts Receivable Accounts Payable Gross and Net Margin INBOUND SUPPLY CHAIN PLANNING MARKETING Purchase Order Management Supply Chain Design Marketing Planning Receiving Management Demand Planning Customer Segmentation Inventory Management Supply Planning Campaign Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

18 Returned Tyres Analysis : An illustration Production Quality Data Base Machinery Maintenance Data Base Plantwise Analysis Mould Data Base Preventive Maintenance Schedule changes Production Processes Changes Mould Retirements and Repairs Crew to Products Assignment changes Training Programs

19 Maintenance Mgt Vendor Management Production Accounting Production Quality control R.M. Quality control H.R.Systems Sales Returns Accounts Receivable Accounts Payable Gross and Net Margin INBOUND SUPPLY CHAIN PLANNING MARKETING Purchase Order Management Supply Chain Design Marketing Planning Receiving Management Demand Planning Customer Segmentation Inventory Management Supply Planning Campaign Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

20 Returned Tyres Analysis : An illustration Supplierwise issues Production Quality Data Base Production Batchwise Analysis Supply Batch related issues R.M. attributes issues Mismatch between a set of inputs ( combinatorial analysis ) Supplier Data Base Raw Materials Lab Data Base

21 Maintenance Mgt Vendor Management Production Accounting Production Quality control R.M. Quality control H.R.Systems Sales Returns Accounts Receivable Accounts Payable Gross and Net Margin INBOUND SUPPLY CHAIN PLANNING MARKETING Purchase Order Management Supply Chain Design Marketing Planning Receiving Management Demand Planning Customer Segmentation Inventory Management Supply Planning Campaign Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

22 Returned Tyres Analysis : An illustration Sales Promotions History Regionwise Analysis Tyre Sales Data Base Redefinition of Product Attributes Sales and Service condition alterations

23 Maintenance Mgt Vendor Management Production Accounting Production Quality control R.M. Quality control H.R.Systems Sales Returns Accounts Receivable Accounts Payable Gross and Net Margin INBOUND SUPPLY CHAIN PLANNING MARKETING Purchase Order Management Supply Chain Design Marketing Planning Receiving Management Demand Planning Customer Segmentation Inventory Management Supply Planning Campaign Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

24 Achieving supply chain effectiveness How does information pooling by all functional units ( and willingness to collaborate while deciding) lead to higher level of operational effectiveness for the firm? A case study from a multi plant and multi product company

25 Supply Chain Management Multiple markets to serve M1 M5 M3 M2 M4 M6

26 Supply Chain Management Multiple markets to serve. Multiple factories. M1 M5 F1 M3 F4 M2 F3 F2 M4 M6

27 If cost of production is same at each factory and if unit cost of transportation is same,then a factory supplies to the nearest market Multiple markets to serve. Multiple factories. M1 M5 F1 M3 F4 M2 F3 F2 M4 M6

28 If cost of production is same at each factory and if unit cost of transportation is same,then a factory supplies to the nearest market Multiple markets to serve. Multiple factories. M1 F1 M3 Assumption: Each factory has sufficient capacity M5 F4 M2 F3 F2 M4 M6

29 Real world issues Cost of production varies Unit cost of transportation may vary. Plant capacities are fixed. Selling price may vary from market to market Warranty, after sales service, credit terms etc can vary from market to market Net result is that Net Margins may vary fro market to market Above all, plant capacity is shared by multiple products Plants and markets can be in multiple countries too!

30 Traditional way of working Sales Dept Plan Quantities to be sold;price etc Some times reverse pressure exists on Sales based on capacity utilization imperatives Production Dept Plan Quantities to be manufactured Purchase Dept Plan materials to be procured

31 Traditional way of working Sales Dept Plan Quantities to be sold;price etc Revenue Maximization Production Dept Plan Quantities to be manufactured Capacity Utilization Procurement cost minimization Purchase Dept Plan materials to be procured

32 Sales Dept Productwise demand at each market Capacity information Manufac turing Dept New Paradigm Maximize Net margin by Deciding on optimal product mix at each plant Deciding on which plant should supply which product to which market Taking into account procurement cost, transportation costs and other costs Purchase Dept Supply constraints Productwise net margins at each market Finance Dept

33 Maintenance Mgt Vendor Management Production Accounting Production Quality control R.M. Quality control H.R.Systems Accounts Receivable Accounts Payable Gross and Net Margin INBOUND Purchase Order Management Receiving Management Inventory Management DESIGN Engineering Bill of Material MANUFACTURING Production Planning Work In Process Outside Processing OUTBOUND Sales Order Management Order Allocation & Fulfillment SUPPLY CHAIN PLANNING Supply Chain Design Demand Planning Supply Planning Distribution Planning SUPPLY CHAIN EXECUTION Materials Management Warehouse Management Transportation Planning SUPPLY CHAIN COORDINATION Supply Chain Event Management Supply Chain Performance Mgt MARKETING Marketing Planning Customer Segmentation Campaign Management SALES Territory Management Contract Management SERVICE Service Planning & Forecasting Customer Service & Support ANALYTICS Customer Analytics Product Analytics ERP SCM CRM

34 New Paradigm provides for Information sharing without dilution of control,visibility or ownership Optimal decisions for the SC as a whole Swift modification of decisions with the assurance that all impacts are considered

35 The SCC is an independent, not-for for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing state-of of-the-art supply chain management systems and practices. Over 800 Company Members Cross-industry representation Chapters in Australia/New Zealand, Brazil, Europe, Japan, North America, Southern Africa, and South East Asia with petitions for additional chapters pending. The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference-model (SCOR) as the cross- industry standard for supply chain management

36 Level 1 Performance Metrics Customer-Facing Internal-Facing SCOR Level 1 supply chain Management Supply Chain Reliability Responsiveness Flexibility Cost Assets Delivery performance Fill rate Perfect order fulfillment Order fulfillment lead time Supply Chain Response Time Production flexibility Total SCM management cost Cost of Goods Sold Value-added productivity Warranty cost or returns processing cost Cash-to-cash cycle time Inventory days of supply Asset turns

37 SCM Metrics for sample set of firms in India Firm Cash to Cash cycle Inventory (days) Asset turnover ratio ROCE Madura Coats TISCO Siemens Aventis Pharma Cadbury India Whirlpool Hero Honda

38 The impact of internet and the digital revolution Cost of communication has been driven down dramatically 1. Time to communicate is shrunk significantly 2. Real time interaction is feasible (leading to tactical decisions becoming operational) 3. Location Aware and mobility solutions (Hand Held Terminals, RFID, GPS )

39 Collaboration within the firm With investments in Information, Material Handling and Cash Management Technologies Opportunity to make your supply chain efficient and nimble exists. It is also the business imperative for success.

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