Supply Chain Management

Unit-1

Introduction

Department of Humanities & Management

• A supply chain consists of all
parties involved, directly or
indirectly, in fulfilling a customer
requirement.

• All facilities, functions, activities,

associated with flow and
transformation of goods and
services from raw materials to
customer, as well as the
associated information flows.
• An integrated group of processes
to “source,” “make,” and
“deliver” products.
• Supply chain management
involves planning, design and
control of flow of material,
information and finance along
the supply chain to deliver
superior value to the end
customer in an effective and
efficient manner
Definition:

• Supply Chain Management is primarily concerned with the efficient

integration of suppliers, factories, warehouses and stores so that
merchandise is produced and distributed in the right quantities, to the
right locations and at the right time, and so as to minimize total system
cost subject to satisfying customer service requirements.

• 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.
Customers,
Field demand centres
Sources: Regional Warehouses: sinks
plants Warehouses: stocking
vendors stocking points
ports points

Supply

Inventory &
warehousing
costs
Production/
purchase Transportation Transportation
costs costs costs
Inventory &
warehousing
costs
Objectives

The goal or mission of supply chain management can be defined using

Mr. Goldratt’s words as:

“Increase through output while simultaneously reducing both

inventory and operating expense”

The objective of every supply chain should be to maximize the overall

value generated. The value a supply chain generated is the difference
between what the final product is worth to the customer and the costs
the supply chain incurs in filling the customer’s request.
1. Cost Efficiency: Supply chains aim to minimize costs associated with
procurement, transportation, production, and inventory management. This often
involves streamlining processes, optimizing transportation routes, and reducing
waste.

2. Responsive to Demand: A successful supply chain can quickly adapt to

changes in consumer demand, whether it's an increase or decrease. This requires
real-time visibility into inventory levels and demand forecasting.

3. Quality Assurance: Maintaining product or service quality throughout the supply

chain is crucial to meet customer expectations and prevent defects or recalls.

4. Lead Time Reduction: Reducing the time it takes for a product to move from the
initial order to delivery can provide a competitive advantage by improving
responsiveness to customer needs.
5. Flexibility and Adaptability: Supply chains should be adaptable to
changes in market conditions, supplier availability, and unforeseen
disruptions. This can involve having backup suppliers, diversified sourcing,
and contingency plans.

6. Collaboration and Communication: Effective communication and

collaboration among all stakeholders in the supply chain, including
suppliers, manufacturers, distributors, and retailers, help ensure smooth
operations and minimize delays.

7. Optimized Inventory Management: Balancing inventory levels to meet

demand without excessive stockpiling helps reduce storage costs and the
risk of obsolescence.
8. Sustainability: Increasingly, supply chains are also focusing on
environmentally and socially responsible practices. This involves
minimizing carbon footprints, reducing waste, and ensuring ethical
sourcing.

9. Customer Satisfaction: Ultimately, a successful supply chain aims to

meet customer needs and expectations by delivering the right product, in
the right quantity, at the right time, and in the right condition.

10. Profitability: While achieving all these goals, the supply chain's overall
impact should contribute to the company's profitability and financial
success.
So in general, the objectives is to:
• Satisfy the customer needs.
• Maximize the overall value generated.
• Increase supply chain surplus.

Supply chain profitability is the difference between the revenue generated from
the customer and the overall cost across the supply chain. The higher the
supply chain profitability, the more successful is the supply chain.
What Is Supply Chain Management (SCM)?

Plan Source Make Deliver Buy

• A set of approaches used to efficiently integrate

– Suppliers
– Manufacturers
– Warehouses
– Distribution centers
• So that the product is produced and distributed
– In the right quantities
– To the right locations
– And at the right time
• System-wide costs are minimized and
• Service level requirements are satisfied
Supply Chain Illustration
• 1960’s - Inventory Management
Focus, Cost Control
• 1970’s - MRP & OM - Operations
Planning
• 1980’s - MRPII, JIT - Materials
History of Management, Logistics
Supply Chain • 1990’s - SCM - ERP - “Integrated”
Purchasing, Financials,
Management Manufacturing, Order Entry
• 2000’s - Optimized “Value Network”
with Real-Time Decision Support;
Synchronized & Collaborative
Extended Network for SCM.
Benefits of SCM

Reduces This positively Contributes

affects inventory to overall
uncertainty levels, cycle
& risks in increase in
time, business profitability
the supply processes &
chain. customer &
service. competitive
advantage.
Reasons for Growing
Importance of Supply Chain

Firms that do not manage their supply chain will incur

huge inventory costs and eventually end up losing a lot
of customers because the right products are not
available at the right place and time.

Five major trends that have emerged to make supply

chain management a critical success factor in most
industries.
• Proliferation in product lines – Companies have
realized that more and more product variety is
needed to satisfy the growing range of customer
tastes and requirements. Companies like HUL, in
their personal care products, manage, on an average,
2000 SKU’s. Chains like Foodworld manage about
6000 SKU’s. With increasing product variety, it
becomes rather difficult to forecast accurately.
Hence, retailers and other organizations involved in
the business are forced to either maintain greater
amount of inventories or lose customers.
• Shorter product life cycles –
With increased competition, product life
cycles across all industries are becoming
shorter. So a firm like Dell, which has, on an
average, just 7 days of inventory, as
compared to the industry average of 35
days, does not have to worry about product
and component obsolescence. Its
competitors with higher inventories end up
writing off huge amounts of stocks every year
as obsolete.

• Higher level of outsourcing –

Firms increasingly focus on their core
activities and outsource non-core activities to
other competent players. This trend towards
outsourcing is irreversible but a higher level of
outsourcing makes supply chains more
vulnerable, thereby forcing firms to develop
different types of supply chain capabilities
within the organization.
• Shift in power structure in the chain –
In every industry, the entities closer to customers
are becoming more powerful. With increasing
competition, a steadily rising number of products
are chasing the same retail shelf space. Retail
shelf space has not increased at the pace at
which product variety has increased. So there
have been case of retailers asking for slotting
allowance when manufacturers introduce new
products in the market place. Retailers have
realized that they are powerful entities in the
chain and hence expect the manufacturers to be
more responsive to their demands and needs.

• Globalization of manufacturing –
Over the past decade, tariff levels have come
down significantly. Many companies are
restructuring their production facilities to be at
par with global standards. Unlike in the past,
when firms used to source components, produce
goods and sell them locally, now firms are
integrating their supply chain for the entire world
market. This has made managing supply chains
extremely complicated.
Participants in the SUPPLY CHAIN

– It is not compulsory that all the stages should be

present in a supply chain
Supply Chain
Decisions
• Ensure effective flow of goods and
information.
• Clusters of store near the distribution
center.
• Collaboration with suppliers.
• Active efforts to steer customer at real
time.
• Centralized manufacturing.
• Worth of inventory.
• Manage cash flow.
• Should be flexible.
Decision
Phases In
Supply
Chain
• 1. Supply chain Strategy or Design
• How to structure for next several years?
• What is the chain configuration?
• How resources allocated?
• What process each stage will perform?
• Whether to go with out sourcing?
• What all are the in-house functions?
• Locations and capacities of production
and ware houses
• Mode of transportation
• Type of information system
• 2. Supply chain Planning
• - for several months.
• Forecast for the coming year
• Analyses demand in different markets
• Which market? Location?
• Sub contracting.
• Inventory policies.
• Timing.
• Size of marketing.
• Price promotions.
• 3. Supply chain Operations
• - Weekly or daily operation decisions
• Individual customer orders
• Allocation of inventory and production
• Set dates for activities
• Generate lists for warehouses
• Allocation of shipments
• Schedules of trucks.
Importance
of Supply Helps in
achieving
Effective flow of
goods and
Chain success information

Decisions
Reduces the
Improved match
level of Inventory
between supply
with the
and demand
manufacturer

Reason for
company’s
success
Process Views Of Supply Chain

1. CYCLE VIEW
Process divided into series of cycles. Each cycle occurs at the
interface between two successive stages of the supply chain.
• Customer order cycle
• Replenishment cycle
• Manufacturing cycle
• Procurement cycle
A cycle view of supply chain clearly define the process
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 supply chain and the desired outcome of each
process.
2. PUSH PULL VIEW OF SUPPLY CHAIN

Process View -
• Executed in response to a customer
order(pull process)
• Executed in anticipation of
customer orders(push
process)
A Push vs
Pull view of Generally, a “pull” organization of the

the SC supply chain provides tighter control of

inventory costs and the ability to support
higher levels of product customization.
operations
Supply Chain Integration – Push Strategies

• Classical manufacturing supply chain strategy

• Manufacturing forecasts are long-range
– Orders from retailers’ warehouses
• Longer response time to react to marketplace changes
– Unable to meet changing demand patterns
– Supply chain inventory becomes obsolete as demand for
certain products disappears
• Increased variability (Bullwhip effect) leading to:
– Large inventory safety stocks
– Larger and more variably sized production batches
– Unacceptable service levels
– Inventory obsolescence
• Inefficient use of production facilities (factories)
– How is demand determined? Peak? Average?
– How is transportation capacity determined?

• Examples: Auto industry, large appliances, others?

Supply Chain Integration – Pull Strategies

• Production and distribution are demand-driven

– Coordinated with true customer demand
• None or little inventory held
– Only in response to specific orders
• Fast information flow mechanisms
– POS data
• Decreased lead times
• Decreased retailer inventory
• Decreased variability in the supply chain and especially at
manufacturers
• Decreased manufacturer inventory
• More efficient use of resources
• More difficult to take advantage of scale opportunities
• Examples: Dell, Amazon
Supply Chain Integration – Push/Pull Strategies

• Hybrid of “push” and “pull” strategies to overcome

disadvantages of each
• Early stages of product assembly are done in a “push” manner
– Partial assembly of product based on aggregate demand
forecasts (which are more accurate than individual product
demand forecasts)
– Uncertainty is reduced so safety stock inventory is lower
• Final product assembly is done based on customer demand for
specific product configurations
• Supply chain timeline determines “push-pull boundary”

Boundary
“Generic” Product “Customized” Product

Push Strategy Pull Strategy

Raw
End
Materials Supply Chain Timeline Consumer
Choosing Between Push/Pull Strategies

Pull High Industries where: Where do the following

Industries where:
industries fit in this
• Customization is High • Demand is uncertain model:
• Demand is uncertain • Scale economies are High
• Low economies of scale
Demand Uncertainty

• Scale economies are Low

• Automobile?
• Aircraft?
Computer Furniture • Fashion?
equipment • Petroleum refining?
• Pharmaceuticals?
Industries where: Industries where:
• Biotechnology?
• Uncertainty is low • Standard processes are the • Medical Devices?
• Low economies of scale norm
• Push-pull supply chain • Demand is stable
• Scale economies are High

Books, CD’s Grocery,

Push Low Beverages
Low Economies of Scale High

Pull Push Source: Simchi-Levi

Characteristics of Push, Pull and
Push/Pull Strategies
Source: Simchi-Levi

PUSH PULL
Objective Minimize Cost Maximize Service
Level
Complexity High Low

Focus Resource Allocation Responsiveness

Lead Time Long Short

Processes Supply Chain Order Fulfilment

Planning
DRIVERS OF
SUPPLY CHAIN
PERFORMANCE
• Aim..
responsiveness and
efficiency at lowest
possible cost.
• Drivers are set to
improve the supply
chain
performance.
A framework for structuring drivers

• Facilities Logistical drivers

• Inventory
• Transportation
Cross-functional drivers
• Information
• Sourcing
• Pricing
Drivers of Supply Chain Performance

Facilities Inventory Transportation

Places where inventory is Raw materials, WIP, finished Moving inventory from point to
stored, assembled, or goods within a supply chain point in a supply chain
fabricated inventory policies Combinations of transportation
Production sites and storage Responsiveness – Large modes and routes
sites (distribution inventories, Efficiency – low Transportation choices make
facilities/centres (DC)) inventories big impact on responsiveness
Location, capacity, flexibility
Responsive – several DC close
to customer vs.. Efficiency-
central few DCs
Information Sourcing Pricing
Data and analysis and sharing Sourcing functions that are Price associated with goods
information regarding inventory, outsourced, like production, and services provided by a firm
transportation, facilities, costs, storage, management of to the supply chain
prices, supplier performance, information etc. Affects the behavior of the
demand forecast throughout Motorola suffered from buyer.
the supply chain. responsiveness after Transportation company
Potentially the biggest driver of outsourcing production to charging based on lead time
supply chain performance, contract manufacturers in provided by customer.
affects all other drivers directly. China because of long Efficiency customers will order
distances, started flying in early. If the price is not
some of its cellular phones. dependent on lead time early
orders are very unlikely.
Structuring Drivers; Wal-Mart example

Competitive strategy; Inventory – low levels of

Supply chain must be
every-day-low-price, inventories, cross-ducking
efficient with adequate
reliable product (no storage at DCs)
level of responsiveness
availability, wide-variety. (efficiency)

Facilities – Centrally Information – High

Transportation – owns its located DCs. Won’t open investment on information
fleet of trucks stores until demand technology, sharing sales
(responsiveness) justifies several of them data directly and timely
and a DC to support them. with its suppliers

Sourcing – finding efficient Pricing – Every day low

suppliers, feeding them price (no sales season),
with large orders assuring steady demand
What is project
planning?
PROJECT LIFE CYCLE

Conceptual
Phase

Closure Planning
phase Phase

Execution/
Implementation
Phase
• 5 Phases of Project Management
“Project planning is a form of operational planning, whereby the consecutive steps to
implement the project activities are carefully mapped out, based on an analysis of
relevant information and linked to the program in which the project takes place and
to which it should contribute. Essentially, project planning involves establishing the
scope, aims and objectives of a project, the way in which the project will be
performed, the roles and responsibilities of those involved, and the time and cost
estimates.” (Project Management in Public Health in Europe, EU Health, 2011)

▪ Planning normally answer the question like what, how, who and when.
▪ Planning is simply how to seek the balance between project constraints to
achieve the set goal.
Inputs in Project • Project Charter
Planning • Concept proposal

• Assessment
Processes of Project
• Prioritization
Planning • Design of plan using various tools and techniques

• Project Plan
Output of Project (Project requirements, Project Plan of Action and
planning Project Management Plan-Implementation plan,
Monitoring and Evaluation plan)
COMMONLY
USED TOOLS
FOR PROJECT
PLANNING
•Gantt Chart
•Problem tree analysis
•SWOT Analysis
•LFA (Logical Framework Analysis)
•PRECEDE/PROCEED
•Intervention Mapping (esp. for
health promotion projects)
•Project Managing Software's
What Is a Gantt Chart?
A Gantt chart is a timeline of a project. It
illustrates work completed over a period
of time in relation to the time planned for
the work. The top of the chart shows the
time frame and the left side of the chart
lists the project activities.

A Gantt chart shows:

What tasks need to be done to complete
the project
When these tasks need to be done

Generalized Activity Normalization Time Table (GANTT)

What is Problem Tree Analysis?
A Problem Tree Analysis is a pictorial
representation of a problem, its causes, and its
consequences. This analysis tool helps the
project team get a quick glance at how a range
of complex issues contribute toward a
problem and how this problem branches out
into a set of consequences. Both causes and
consequences are fitted into the diagram on a
hierarchical preference basis.
What Is SWOT Analysis?
SWOT (strengths, weaknesses, opportunities, and
threats) analysis is a framework used to evaluate
a company's competitive position and to develop
strategic planning. SWOT analysis assesses
internal and external factors, as well as current
and future potential.
What Is Logical
Framework Approach ?

The Logical Framework Approach or

LFA is a systematic and analytical
process for objectives-oriented project
planning and management. LFA is also
known under other names, such as
Objectives Oriented Planning or Goals
Oriented Planning. It makes use of
the basic logframe matrix to design, plan
and manage projects.
What is PRECEDE-PROCEED
MODEL?

The PRECEDE-PROCEED model provides a

comprehensive structure for assessing
health and quality-of-life needs and for
designing, implementing, and evaluating
health promotion and other public
health programs to meet those needs.
PRECEDE (Predisposing, Reinforcing,
and Enabling Constructs
in Educational Diagnosis and Evaluation)
outlines a diagnostic planning process to
assist in the development of targeted and
focused public health programs.
PROCEED (Policy, Regulatory,
and Organizational Constructs
in Educational
and Environmental Development) guides
the implementation and evaluation of the
programs designed using PRECEDE.
Why is project planning
important?
Project planning is important at every phase of a project. It lays out the
basics of a project, including the following:
• scope
• objectives
• goals
• schedule
• It enables project managers to turn an
intangible idea into reality. Key purposes of
planning include the following:
• Facilitate communication and provide a
central source of information for project
personnel;
• Help the project sponsor and other
key stakeholders know what is required;
• Identify who will perform certain tasks, and
when and how those tasks will happen;
• Facilitate project management and control
as the project progresses;
• Enable effective monitoring and control of
a project;
• Manage project risk; and
• Generate feedback useful for the next
project planning phase.
What are the components of a project
plan?
The three major parts of a project plan are the
scope, budget and timeline. They involve the
following aspects:

• Scope. The scope determines what a project

team will and will not do. It takes the team's vision,
what stakeholders want and the customer's
requirements and then determines what's possible.
As part of defining the project scope, the project
manager must set performance goals.

• Budget. Project managers look at what

manpower and other resources will be required to
meet the project goals to estimate the project's
cost.

• Timeline. This reveals the length of time

expected to complete each phase of the project
and includes a schedule of milestones that will be
met.
How do
you create
a project
plan?
Project planning tools and software

•Asana offers different project views to suit a team's preferences.

•ClickUp comes with several Agile-based features, including a custom
automation builder that lets users create reusable task templates.
•Freedcamp lets users organize their projects using a Gantt chart or Kanban
•Hive has a template creation tool in the task management feature that speeds
up task creation.
•Scoro is a combination of tools and includes customer relationship
management
•Trello provides Kanban features, budget management, resource management
and progress tracking features.
•Wrike integrates with tools like Jira, Slack and Dropbox
VALUE ANALYSIS
Worth to you
Value =
Price you pay

The concept of value analysis was developed during World

War II by Lawrence D. Miles of General Electric
Company.
A process of systematic review that is applied
to existing product designs in order to compare
DEFINITION the function of the product required by a
customer to meet their requirements at the
lowest cost consistent with the specified
performance and reliability needed.
Value Analysis is an effective tool for
cost reduction and the results
accomplished are far greater.
• It improves the effectiveness of
work.
• It is an organized approach to a
problem.
• It is value applied at the design
stage itself.
• It reduces unnecessary costs,
obvious and hidden which can be
eliminated without adversely
affecting quality, efficiency, safety
and other customer features.
• Capital goods – plant, equipment,
machinery, tools, etc.
• Raw and semi-processed material,
including fuel.
• Materials handling and transportation
costs.
• Purchased parts, components, sub-
APPLICATION assemblies, etc.
• Maintenance, repairs, and operational
OF VALUE items.
ANALYSIS • Finishing items such as paints, oils,
varnishes, etc.
• Packing materials and packaging.
• Printing and Stationery items.
• Miscellaneous items of regular
consumptions.
• Power, water supply, air, steam & other
utilities
• To provide better value to a
product/service.
• To improve the company’s
competitive position.
• To ensure that every
element of Cost ( Labor,
Materials, Suppliers and
OBJECTIVES Service ) contribute
OF VALUE equally to the function
of the product.
ANALYSIS • To Eliminate unnecessary Cost.

In reality, a complex number of reasons

exists that necessitate the structured
approach of value analysis as a means of
logical cost reduction.
STEPS CARRYING VALUE ANALYSIS

1 2 3 4 5 6 7 8

Establish the Consider a Analyze the Decompose Hold a Sort the Select the Develop a
objectives team for production various creative ideas to best plan for
(e.g., cost marketing, process of characteristi brainstormin establish the alternative. implementin
reduction). sales, the supplier cs of g session to cost of each. g the
production, company. purchased explore all change.
purchasing, product. alternative
etc. possibilities.
SIX “ WHATs OF VALUE ANALYSIS “

• What is it ?
• What does it do ?
• What does it cost ?
• What is it worth ?
• What else will do the job?
• What does that cost ?
TECHNIQUES OF VALUE ANALYSIS

1.Function Analysis System Technique (FAST): FAST is a graphical technique used

to break down a product or process into its functional components. It helps in
understanding the purpose and relationships of each component, which aids in
identifying areas for cost reduction or improvement.
2.Cost-Benefit Analysis (CBA): CBA involves comparing the costs of implementing
changes or improvements with the expected benefits. It helps in determining whether
the proposed changes are financially viable and if the benefits outweigh the costs.
3.Value Engineering (VE): Value engineering is a systematic approach to optimizing
the value of products, processes, or services. It involves brainstorming sessions where
cross-functional teams analyze components and processes to identify ways to improve
value while reducing costs.
4.Benchmarking: Benchmarking involves comparing the performance of one's supply
chain components or processes with those of industry leaders or best practices. This
helps identify areas where improvements can be made to match or exceed the industry
standards.
5.Supplier Collaboration: Collaborating closely with suppliers can lead to joint
efforts in identifying cost-saving opportunities, innovative solutions, and process
improvements.
6. Life Cycle Cost Analysis: This technique considers costs associated with the entire lifecycle of
a product, including design, manufacturing, distribution, use, and disposal. It helps in making
decisions that minimize total cost over the product's life.
7. Pareto Analysis: Also known as the 80/20 rule, Pareto analysis involves identifying the most
significant factors contributing to costs or value within the supply chain. This allows focusing
efforts on the most impactful areas.
8. Value Stream Mapping: This technique involves mapping the entire process from raw
materials to the end customer. It helps in visualizing the flow of materials, information, and
activities and identifying areas where bottlenecks or inefficiencies occur.
9. Cross-Functional Teams: Bringing together individuals from various departments and
functions within an organization can provide diverse perspectives and expertise, leading to
innovative ideas and solutions.
10. Cost Estimation Techniques: Various techniques, such as cost modeling, should-
cost analysis, and cost forecasting, help in estimating costs associated with different
components, processes, or changes.
11. Simulation and Modeling: Computer simulations and modeling can be used to
analyze different scenarios and their potential impacts on the supply chain, helping in
decision-making.
12.Total Cost of Ownership (TCO) Analysis: TCO analysis goes beyond the initial
purchase cost to consider all costs associated with owning and using a product or
service, including maintenance, operating, and disposal costs.
13. Risk Analysis: Identifying potential risks in the supply chain and evaluating their
potential impact on value and costs. This can help in designing risk mitigation
strategies.
14. Innovation Workshops: Organizing workshops or brainstorming sessions focused
on generating innovative ideas and solutions to enhance value and reduce costs.
VALUE IMPROVEMENT PROCESS

• Performing value analysis or producing the FAST model and analyzing functions with
the value analysis matrix are only the first steps in the process. The real work begins
with brainstorming, developing and analyzing potential improvements in the product.
These subsequent steps are supported by:

• The QFD Concept Selection Matrix is a powerful tool to evaluate various concept and
design alternatives based on a set of weighted criteria that ultimately tie back to
customer needs.

• Benchmarking competitors and other similar products helps to see new ways
functions can be performed and breaks down some of the not-invented-here
paradigms.

• Product cost and life cycle cost models support the estimating of cost for the
Function-Cost and Value Analysis Matrices and aid in the evaluation of various product
• Technology evaluation leads us to new ways that basic functions can be
performed in a better or less costly way. Concept development should involve
people with a knowledge of new technology development and an open mind to
identify how this technology might relate to product functions that need to be
performed. Methods such as the theory of inventive problem solving or TRIZ are
useful in this regard.

• Design for Manufacturability/Assembly principles provide guidance on how to

better design components and assemblies that are more manufacturable and, as a
result, are lower in cost.
The Value Analysis process

Value analysis is based on the application of a systematic

work plan that may be divided into various steps:
• Orientation/preparation
• Information
• Analysis
• Innovation/creativity,
• Evaluation and
• Implementation and monitoring.

The application of value analysis only needs to make use of

basic techniques such as matrixes, pareto chart, pert and
gantt diagrams, etc.
BENEFITS TO BE ACHIEVED BY VALUEANALYSIS

• Better purchasing techniques

• Better suppliers & manufacturing methods
• Lower operating costs
• Standardisation & re-evaluation
• Substitution & packaging
• Better material handling
• Better inventory control
• Lower maintenance & overhead cost
value analysis in supply chain management
Key aspects of include:
1.Cost Analysis: Identifying and evaluating the costs associated with each component
and process in the supply chain. This involves analyzing direct costs (such as material
costs, labor costs, transportation costs) as well as indirect costs (such as inventory
holding costs, warehousing costs, quality control costs).
2.Function Analysis: Understanding the functions and purposes of each component,
process, or activity in the supply chain. This helps to determine whether a particular
component or process is essential to delivering value to the end customer.
3.Value Identification: Identifying the aspects of the supply chain that directly
contribute to customer satisfaction and value. These aspects are the ones that customers
are willing to pay for.
4.Cost-Value Reconciliation: Comparing the costs of different components and
processes with their corresponding value contributions. This step helps identify areas
where costs can be reduced without compromising the value delivered to customers.
5. Alternatives Evaluation: Exploring alternative solutions, processes, or suppliers that
could potentially provide the same or higher value at a lower cost.
6. Collaborative Decision Making: Involving various stakeholders from different parts
of the supply chain in the decision-making process. This can include suppliers,
manufacturers, distributors, and customers.
7. Continuous Improvement: Value analysis is not a one-time event. It's an ongoing
process aimed at continuous improvement. Regularly revisiting the supply chain
components and processes helps to adapt to changing market conditions, customer
preferences, and technological advancements.