SUPPLY CHAIN

MANAGEMENT
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What is a Supply Chain?
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WHAT IS A SUPPLY CHAIN?
A supply chain is the system of organizations, people,
activities, information and resources involved in moving a
product or service from supplier to customer. Supply chain
activities transform raw materials and components into a
finished product that is delivered to the end customer.
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Supplier Manufacturer Distributor Retailer Customers
SUPPLY CHAIN
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A Supply Chain Example
Coke
JNJ
Kellog
P&G
GA
FL
AL
TX
Kroger
Tier 1
suppliers
Super market
chains
State
distributors
V. Highlands
Peachtree
Ocean Drive
Ft. Laud.
Local stores
E
n
d

c
u
s
t
o
m
e
r

Publix
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WHAT IS SCM ?
Supply chain management (SCM) is the management of the
flow of goods. It includes the movement and storage of raw
materials, work-in-process inventory, and finished goods from
point of origin to point of consumption.
Supply chain management has been defined as the "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."
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SCM draws heavily from the areas of operations management,
logistics, procurement, and information technology, and strives
for an integrated approach.

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PROBLEMS ADDRESSED
Distribution network configuration
Distribution strategy
Trade-offs in logistical activities
Information
Inventory management
Cash flow
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FUNCTIONS
Supply chain management is a cross-functional approach that includes
managing the movement of raw materials into an organization, certain
aspects of the internal processing of materials into finished goods, and the
movement of finished goods out of the organization and toward the end
consumer.
As organizations strive to focus on core competencies and becoming more
flexible, they reduce their ownership of raw materials sources and
distribution channels. These functions are increasingly being outsourced to
other firms that can perform the activities better or more cost effectively.


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The effect is to increase the number of organizations involved
in satisfying customer demand, while reducing managerial
control of daily logistics operations. Less control and more
supply chain partners led to the creation of the concept of
supply chain management.
The purpose of supply chain management is to improve trust
and collaboration among supply chain partners, thus improving
inventory visibility and the velocity of inventory movement.

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IMPORTANCE
Firms with large system inventories, many suppliers, complex
product assemblies, and highly valued customers with large
purchasing budgets have the most to gain from the practice of
supply chain management.
For these firms, even moderate supply chain management
success can mean lower purchasing and inventory costs,
better product quality, and higher levels of customer service
and sales. Purchasing inventory, and transportation cost
saving is quite sizable for firms utilizing supply chain
management strategies.


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HISTORICAL DEVELOPMENTS
Creation era
Integration era
Globalization era
Specialization era (phase I): outsourced manufacturing and
distribution
Specialization era (phase II): supply chain management as a
service
Supply chain management 2.0 (SCM 2.0)
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BUSINESS PROCESS
INTEGRATION
Customer service management
Procurement
Product development and commercialization
Manufacturing flow management/support
Physical distribution
Outsourcing/partnerships
Performance measurement
Warehousing management
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WAL-MARTS SUPPLY
CHAIN
A Business Success
WAL-MART IS THE WORLDS
LARGEST RETAIL COMPANY
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HISTORY OF WAL-MART
The companys founder is Sam Walton.

He was born in 1918 at Oklahoma.

In 1940, he worked for the famous retailer, J C Penney.
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HISTORY OF WAL-MART
This phenomenal growth of Wal-Mart is
attributed to its continued focus on customer
needs and reducing cost through efficient supply
chain management practices.
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QUICK LOOK
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HUB AND SPOKE SYSTEM
In the early 1970s, Wal-Mart became one of the first retailing
companies in the world to centralize its distribution system,
pioneering the retail hub-and-spoke system.

Under the system, goods were centrally ordered, assembled at
a massive warehouse, known as distribution center (hub),
from where they were dispatched to the individual stores
(spoke).
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HUB AND SPOKE SYSTEM
The hub and spoke system enabled Wal-Mart to
achieve significant cost advantages by the centralized
purchasing of goods in huge quantities..
and distributing them through its own logistics
infrastructure to the retail stores spread across the U.S.
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WAL-MARTS PROCUREMENT
Wal-Mart emphasized the need to reduce purchasing costs
and offer the best price to the customer.

The company directly procured from manufacturers, by
passing all intermediaries.
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WAL-MARTS PROCUREMENT
Wal-Mart finalizes a purchase deal only when it is
fully confident that the products being bought is
not available else where at a lower price.
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WAL-MARTS PROCUREMENT
Wal-Mart spends a significant amount of time meeting vendors
and understanding their cost structure.

By making the process transparent, the retailer can be certain
that the manufacturers are doing their best to cut down costs.
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USING EDI FOR PROCUREMENT
The computer systems of Wal-Mart were connected to those of
its suppliers.

EDI enabled the suppliers to download purchase orders along
with store-to-store sales information relating to their products
sold.

On receiving information about the sales of various products,
the suppliers shipped the required goods to Wal-Marts
distribution centers.
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LOGISTICS MANAGEMENT
An important feature of Wal-Marts logistics infrastructure is its
fast and responsive transportation system.

The distribution centers were serviced by more than 7000
company owned trucks.
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LOGISTICS MANAGEMENT
Wal-Mart believed that it needed drivers who were committed
and dedicated to customer service.

The company hired only experienced drivers who had driven
more than 300,000 accident-free miles, with no major traffic
violation.
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CROSS-DOCKING
To make its distribution process more efficient, Wal-Mart also
made use of a logistics technique called cross-docking.

In this system, the finished goods were directly picked up from
the manufacturing plant, sorted out and then directly supplied
to the customers.
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INVENTORY MANAGEMENT
Wal-Mart invested heavily in IT and communication systems to
effectively track sales and merchandise inventories in stores
across the country.

With the rapid expansion, it was essential to have a good
communication system.

Hence, Wal-Mart set up its own satellite communication
system in 1983.
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INVENTORY MANAGEMENT
Wal-Mart was able to reduce unproductive inventory by
allowing stores to manage their own stocks, reducing pack
sizes across many product categories, and timely price
markdowns.

Instead of cutting the inventory across the board, Wal-Mart
made full use of its IT capabilities to make more inventories
available in the case of items that customers wanted most,
while reducing the overall inventory levels.
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INVENTORY MANAGEMENT
Employees at the stores had the Magic Wand, a hand-held
computer which was linked to in-store terminals through a
radio frequency network.

These helped them to keep track of the inventory in stores,
deliveries, and backup merchandise in stock at the distribution
centers.
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INVENTORY MANAGEMENT
The order management and store replenishment of goods
were entirely executed with the help of computers through the
Point-of-Sales (POS) system.

Through this system, it was possible to monitor and track the
sales and merchandise stock levels on the store shelves.
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VOICE-BASED ORDER FILLING
(VOF)
In 1998, Wal-Mart installed a voice-based order filling (VOF)
system in all its grocery distribution centers.

Each person responsible for order picking was provided with a
microphone/speaker headset, connected to the portable (VOF)
system that could be worn on waist belt.

They were guided by the voice to item locations in the
distribution centers.
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INVENTORY MANAGEMENT
(QUICK REPLENISHMENT)
Since the floor area of any Wal-Mart store varied between
40,000 to 200,000 square feet, movement of goods within the
store was an important part of logistics operations.

Wal-Mart made significant investments in IT to quickly locate
and replenish goods at the stores.
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INVENTORY MANAGEMENT
(RETAIL LINK SYSTEM)
In 1991, Wal-Mart had invested approximately $4 billion to
build a retail link system.

More than 10,000 Wal-Mart retail suppliers used the retail link
system to monitor the sales of their goods at stores and
replenish inventories.

Details of daily transactions (~10 million per day) were
processed through this system.
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INVENTORY MANAGEMENT
(RETAIL LINK SYSTEM)
Retail Link connected Wal-Marts EDI network with an extranet, accessible to Wal-Marts
thousands of suppliers.

The suppliers could find out how their product was performing vis-a-vis competitors
products in a particular product category.
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INVENTORY MANAGEMENT
(RETAIL LINK SYSTEM)
Wal-Mart owned the largest and most sophisticated computer
system in the private sector.

The company used Massively Parallel Processor (MPP)
computer system to track the movement of goods and stock
levels.

All information related to sales and inventories was passed on
through an advanced satellite communication system.
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CPFR
By the mid 1990s, Retail Link had emerged into
an Internet-enabled SCM system whose
functions were not confined to inventory
management alone, but also covered
collaborative planning, forecasting and
replenishment (CPFR).
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CPFR
In CPFR, Wal-Mart worked together with its key suppliers on a
real-time basis by using the Internet to jointly determine
product-wise demand forecast.

CPFR is defined as a business practice for business partners
to share forecasts and results data through the Internet, in
order to reduce inventory costs while at the same time,
enhancing product availability across the supply chain.
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CPFR: HARD TO IMPLEMENT
Though CPFR was a promising supply chain initiative aimed at
a mutually beneficial collaboration between Wal-Mart and its
suppliers, its actual implementation required huge investments
in time and money.

A few suppliers with whom Wal-Mart tried to implement CPFR
complained that a significant amount of time had to be spent
on developing forecasts and analyzing sales data.
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RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
In efforts to implement new technologies to
reduce costs and increase the efficiency, in July
2003, Wal-Mart asked its top 100 suppliers to be
RFID compliant by January, 2005.

Wal-Mart planned to replace bar-code technology
with RFID technology.

The company believed that this replacement
would reduce its supply chain management costs
and enhance efficiency.
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RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
Because of the implementation of RFID, employees were no
longer required to physically scan the bar codes of goods
entering the stores and distribution centers, saving labor cost
and time.

Wal-Mart expected that RFID would reduce the instances of
stock-outs at the stores.
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RFID TECHNOLOGY
(RADIO FREQUENCY IDENTIFICATION)
Although Wal-Mart was optimistic about the benefits of RFID,
analysts felt that it would impose a heavy burden on its
suppliers.

To make themselves RFID compliant, the suppliers needed to
incur an estimated $20 Million.

Of this, an estimated %50 would be spent on integrating the
system and making modifications in the supply chain software.
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WAL-MART GETS BENEFITED THROUGH
SUPPLY CHAIN
Lower inventories
Higher productivity
Greater agility
Shorter lead times
Higher profits
Greater customer loyalty

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WAL-MART STRATEGY
Everyday low price
Effective use of logistics management
Effective inventory control
Bargaining power over suppliers
Global Expansion for new market opportunity

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VIDEO
http://www.youtube.com/watch?v=yZC4neLax5o
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THANKS
VISHAL RANJAN B002
AMRITPREET SINGH B015
BRONY TILVA B025
PIYUSH JAJODIA B036
PRATIK DOSHI B038
AKUL SINGHAL B040
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