Indroduction To Supply Chain 1

Unit I Part 1
Introduction to Supply Chain Management (SCM): Concept of SCM Components Features Strategic issues in SCM,
The Supply Chain Revolution-Customer focus in SCM , Demand planning, Purchase Planning Make or Buy decision
indigenous and global sourcing, Development and Management of suppliers Legal aspect of Buying Cost managementNegotiating for purchasing and sub contracting Purchase insurance Evaluation of Purchase performance.
INTRODUCTION
Supply Chain management is the process of strategically managing the procurement, movement,
and storage of materials, parts and finished inventory (and related information flow) through the
organization and its marketing channels in such a way that current and future profitability are
maximized through system wide cost effective fulfilment of orders.
Supply chain encompasses all activities involved in the transformation of goods from the raw
material stage to the final stage, where goods and services reach the end customer. SCM 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.
A typical supply chain with various stages and the related flows are represented in figure 1.1
below
Vendors
Plants
Depots
Retail outlets
Customers
MATERIAL FLOW
INFORMATION FLOW
FINANCE FLOW
Fig 1.1 Stages of Supply Chain Management and the related flows
1
Operations Management Notes ( Pvt Circulation Only)
Compiled by Santhosh.S, Associate Professor, SCMS Cochin
Supply chain exists in both service and manufacturing organizations, although the complexity of
chain may vary greatly from industry to industry and firm to firm. SCM is a major source of
competitive and financial advantage, ie position of enduring superiority in terms of customer
preference.
The conceptual model of SCM is shown in Fig 1.2
Multi-Tier Supplier
Multiparty Net-Logistics
Partner ship
Highly Sophisticated IT
SUPPLY CHAIN
Systems
MANAGEMENT
Multi-Tier Supplier
Partner ship
Make / Engineer to order
Non Core outsourcing
Philosophy
Fig 1.2 The Conceptual model of Supply chain management.

IMPORTANCE OF SCM
In the past, customers were not very demanding and competition was not really intense. Today,
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 product are not available at the right place and
time. The following are the five major trends that have emerged to make supply chain
management a critical success factor in most industries.
Proliferation of product lines

Companies have realized that more and more product variety is needed to satisfy the
growing range of customer tastes and requirements. Even a simple toilet soap has 50
odd varieties. Stock- Keeping unit (SKU) can be defined as a unit of variety. Each variety
is treated as a separate SKU. Companies like HUL, in their personal care products,
manage on an average 1200 SKUs. Chains like Foodworld manage about 6000 SKUs.
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Shorter product life cycles

With increased competition, product life cycle across all industries is becoming shorter.
With shorter product life cycle, inventory of the product and the components needed to
manufacture it becomes obsolete within a short span of time. Hence companies that
efficiently operate their supply chain with low inventories are in a better position to avoid
loss than others with higher inventory burden. For example, the PC industry works with a
life cycle as short as 6 months. Hence companies like Dell with just 7 days average
inventory as compared to the industry standard of 35 days need not worry much about
product and component obsolescence.
High level of outsourcing

Firms increasingly focus on their core activities and outsource non-core activities to other
competent players. Apart from the primary activities in the value chain even the support
activities that were usually done in-house are outsourced in a big way now. Bharathi
Tele-ventures, Indias number one private telecom service provider, has outsourced
network-management services, IT services and call centre operations. This trend towards
outsourcing is irreversible but a higher level of outsourcing makes supply chain more
vulnerable, thereby forcing firms to develop different types of supply chain capabilities
within the organization.
Shift in power structure in the value chain

In every industry, the entities closer to customers are becoming more powerful. With
increasing, competition, a steadily rising number of products is 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 cases of retailers asking for slotting allowance when
manufacturers introduce new products in the market place. Savvy firms have started
talking about trade marketing and treating dealers and retailers as their customers while
simultaneously trying to woo the retailers aggressively. There is a clear shift in the power
structure. Discount retailers like Wall-mart have been asking, their suppliers to replenish
the supplies on a daily basis based on actual sales data from their point-of sales systems.
In general, manufacturers are forced to respond more quickly to the customers demands,
because of changes in the power structure within the chain.
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Globalization of manufacturing
Unlike in the past when firms use to source components, produce goods and sell them
locally, now firms are integrating their supply chain for the entire world market. For
example companies like ABB have developed some global centres of excellence for each
of their product lines that take care of the global market. In telecommunication and
electronics industry, companies usually get their chips from Taiwan, test them in Europe
and finally integrate them with other products in the United States of America to sell
them in the international market. This has made managing supply chain extremely
complicated. Unlike information and finance flow, which can be managed electronically,
materials and product have to move physically, an as this movement can be across
continent, managing supply chain is now a extremely complex issue.
DECISION PHASES IN A SUPPLY CHAIN

Successful supply chain management requires many decisions relating to the flow of
information, product and funds. Each decision should be made to raise the supply chain
surplus (Income from product or service given minus cost of providing the product or
service to the customer). These decisions fall into three categories or phases, depending
on the frequency of each decision and the time frame during which a decision phase has
an impact.
1. Supply chain Strategy or Design:
During this phase, a company decides on the structure of its supply chain for the
next several years. It decides what the chains configuration will be, how
resources will be allocated, and what processes each stage will perform. Strategic
decision made by the company include
a. Whether to outsource or perform a supply chain function in-house.
b. The location and capacities of production and warehousing facilities
c. The products to be manufactured or stored at various locations.
d. The modes of transportation to be made available along different shipping
legs.
e. Type of information to be used
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These decisions are typically made for the long term (a matter of years) and are
very expensive to alter on short notice. Consequently when companies make these
decisions, they must take into account uncertainty in anticipated market
conditions over the next few years.
2. Supply chain planning
This objective of the planning phase is to maximize the supply chain surplus,
given the constraints established in the Design phase. The planning phase starts
with a forecast for the coming year, or comparable time frame, of demand in
different markets. Planning includes making decisions regarding which market
will be supplied from which locations, the subcontracting of manufacturing, the
inventory policies to be followed and the timing and size of marketing and price
promotions. As a result of planning phase, companies define a set of operating
policies that govern short term operations.
3. Supply chain Operations:
The time horizon here is weekly or daily and during this phase companies make
decisions regarding individual customer orders. At the operational level supply
chain configuration is considered fixed, and planning policies are already defined.
The goal of supply chain operations is to handle incoming customer orders in the
best possible manner. During this phase, firms allocate inventory or production to
individual orders, set a date that an order is to be filled , generate pick lists at
warehouse, allocate an order to a particular shipment mode and shipment, set
delivery schedules of trucks, and place replenishment orders. Given the
constraints established by the configuration and planning policies, the goal during
the operation phase is to exploit the reduction of uncertainty and optimize
performance.
SCM PROCESSES
A close examination of the supply chain reveals that it is a sequence of various processes and
flows within and between the various stages in the supply chain. For better understanding and
analysing the processes it is advantageous to divided the processes into different categories or
view it from different points of view. There are two different ways to view the processes
performed in a supply chain
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1. Cycle View: The processes in a supply chain are divided into a series of cycles, each
performed at the interface between two successive stages of a supply chain.
2. Push/Pull view: The processes in a supply chain are divided into two categories
depending on whether they are executed
a. in response to a customer order or
b. in anticipation of customer order
Pull processes are initiated by a customer order, whereas push processes are initiated and
performed in anticipation of customer order.
Cycle View of supply chain
All supply chain processes can be broken into the following four process cycles,
Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle
The four process cycles are shown in the figure 1.2 below
CUSTOMER
CUSTOMER
ORDER CYCLE
RETAILER
REPLENISHMENT
CYCLE
DISTRIBUTOR
MANUFACTURING
CYCLE
MANUFACTURER
PROCUREMENT
CYCLE
Fig.1.3 Supply chain Process Cycles.
SUPPLIER
6

The cycles occur at the interface between successive stages of the supply chain. Thus the five
stage supply chain has four cycles at its interface. Not all supply chain will have all four cycles
clearly separated. For example, a grocery supply chain in which a retailer stocks finished-goods
inventory and places replenishment order with distributor is likely to have all the four cycles
separated. Dell, in contrast, sells directly to customers, thus bypassing the retailer and distributor.
Customer order and

manufacturing Cycle
Procurement cycle
Fig 1.4 Cycle view of Dell
Each of the cycle consist of six sub processes as shown in Fig. 1.5
Supplier stage
Buyer stage returns
Markets product
flow to supplier
Buyer stage Places
Buyer stage
order
Receives Supply
Supplier stage
Supplier stage
Receives order
Supplies order
Within each cycle, the goal of the buyer is to ensure product availability and to achieve
economies of scale of ordering. The supplier then attempts to forecast customer orders and
reduce cost of receiving orders. The supplier then works to fill the order on time and improve the
efficiency and accuracy of order fulfilment process. The buyer then works to reduce the cost of
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the receiving process. Reverse flows are managed to reduce cost and meet environmental
objectives.
Even though each cycle has the same basic sub processes, there are a few important differences
between cycles. The differences are
Nature of Demand: In the customer order cycle, demand is external to the supply chain
and thus uncertain, whereas in all other cycles order placement is uncertain but can be
projected based on policies followed by the particular supply chain stage. For example
in the procurement cycle a supplier of tyre to an automotive manufacturer can predict
tyre demand precisely once the production schedule of manufacturer is known.
Scale of Order: The second difference is as we move from customer to the supplier the
number of individual orders decreases but the size of each order increases. For example
customers order a single car where as dealers order multiple cars at a time from the
manufacturer and the manufacturers in turn orders an even larger quantity of tyres from
the supplier. So from customer to supplier number of orders decreases but size of order
increases. Thus sharing of information and operating policies across the supply chain
stages become more important as we move from customer to supplier end.
The cycle view of the supply chain is very useful when considering operational decisions
because it clearly specifies the roles of each member of the supply chain. A detailed process
description of a supply chain in the cycle view forces a supply chain designer to consider the
infrastructure required to support these processes. Cycle view is useful while setting up the
information system to support the supply chain operations.
Push / Pull view of Supply chain processes
In this view all processes in a supply chain fall into one of the two categories depending on the
timing of their execution relative the end-customer demand. With pull processes, execution is
initiated in response to a customer order. With push processes, execution is initiated in
anticipation of customer order. There fore, at the time of execution of a pull process, customer
demand is known with certainty, whereas at the time of execution of push process, demand is not
known and must be forecast. Pull processes may also be referred to as reactive processes because
the react to customer demand. Push process may also be referred to as speculative processes they
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respond to speculated (or forecasted) rather than actual demand. The push/pull boundary
separates the push processes from the pull processes. Push processes operate in an environment
of uncertainty whereas the pull processes are often constrained by the inventory and capacity
decisions that were made in the push phase. ( for example the customer order cycle cannot order
more than what is available in stock with the retailer which is decided by the replenishment
cycle which is a push cycle)
PUSH / PULL BOUNDARY
Push processes
Process 1
Process 2
Pull Processes
Process 3
Process Process n-2 Process n-1 Process n
Customer Order Arrives

We shall analyse an apparel company (Zodiac) which stocks the fashion apparels in its retail
showrooms and a retailer selling Asian paints which stocks paint bases and colour chemicals at
the retailer which is mixed as per the customer order.
Analysis of Zodiac
Zodiac executes all processes in the customer order cycle after the customer arrives. So all the
processes that are part of the customer order fulfilment cycle are pull processes. Order
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fulfillment takes place from product in inventory that is built up in anticipation of customer
orders. The goal of the replenishment cycle is to ensure availability when a customer order
arrives. All processes in the replenishment cycle are performed in anticipation of demand and are
thus push processes. The same holds true for processes in the manufacturing and procurement
cycle.
Analysis of Asian Paints
The customer order cycle and part of manufacturing process is pull process as the mixing of
paint is done on the demand placed by the customer. Procurement cycle is push process.
Supply Chain Macro Processes
All the supply chain processes can be classified into 3 macro processes. They are
1. Customer Relationship Management ( CRM): All processes that focus on the interface
between the firm and its customers
2. Internal Supply Chain Management (ISCM): All processes those are internal to the firm.
3. Supplier Relationship Management (SRM): All processes that focus on the interface
between the firm and its suppliers.
Strategic Issues in Supply chain Management
The strategic issue of a supply chain can be summarized as How to provide superior value to
the end customer in an efficient manner. In other words how to match the supply chain
capabilities to the uncertainties of demand. The issue is of achieving appropriate fit with the
Business Strategy. This issue is the key consideration during the design phase of the Supply
chain management process.
The strategic fit between the Business Strategy and the Supply chain Strategy can be achieved
through three basic steps
1. Understanding the Customer (demand) and Supply chain uncertainty
2. Understand the supply chain capabilities
3. Achieving the strategic fit.
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1. Understanding the customer and supply chain uncertainty

Customer demand uncertainty
The demand of a product by various customer segment depends on various attributes like
Quantity of product needed in each lot eg. A component needed to repair a production
line will be very small, where as a component needed build a new product line will be
very large.
The response time of the company in meeting the demand- Example a tolerable
response time for an emergency order would be very short where as it would be long for
a construction order.
The product variety offered emergency repair order all products expected from a single
supplier where as for construction order that is not so important.
The Service level required- Emergency repair order expects immediate delivery,
construction order this is not insisted.
The price of the product- Emergency order not sensitive to price, construction order is
price sensitive.
The innovativeness expected in the product.- Customers of high end department store
may expect a lot of product innovativeness where as a customer at the govt. Dept. Store
may not expect products to be innovative.
One key measure that combines all the attributes along which the demand of a product varies and
which is particularly useful in the design of supply chain is the implied demand uncertainty.
Implied demand uncertainty can be explained with an example, the electronic components used
in TV. Demand uncertainty of electronic component depends on the demand for TVs and also for
the repair of the TVs. The needs of the TV manufacturer and the needs of the emergency repair
of TV are different. The response time that each of these customers are willing to tolerate are
different. The TV manufacturer may be willing to wait for a day for delivery where as the
emergency repair customer would prefer immediate delivery of the components. So depending
upon which need is attempted to be satisfied by the supply chain, the demand varies. This is the
implied demand uncertainty. So implied demand uncertainty is the uncertainty imposed on the
supply chain because of the customer needs it seeks to satisfy. From the supply chain design
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point of view, products with low implied demands uncertainty are generally known as functional
products and products with high implied demand uncertainty are Innovative products.
The difference on various aspects of demand of functional and innovative products is tabulated
below
Aspect of Demand
Functional ( Low implied Innovative ( High implied

demand uncertainty)
demand uncertainty)
Product Life cycle

Contribution margin
Product Variety
More than 2 years

3 months to 1 year
5-20%
20-60%
Low ( 10-20 variants per
High ( Often thousands of
category)
variants per category)
Likely forecast error
5-20%
40-100%
Average stock out rate
1-2%
10-40%
End of season markdown
0%
10-30%
Source: Adapted from M.LFisher What is the right supply chain of your product? Harvard
business Review( March-April 1997)
Supply uncertainty
Supply side uncertainty is typically high with products in the early stages of its life cycle, eg a
newly introduced component which has not yet stabilized its manufacturing, or agricultural
products dependant on weather ( coffee, spices). The supply side uncertainty is low with mature
products because design and manufacturing processes have evolved and stabilized.
2. Understanding the supply chain capabilities
In order to create a best strategic fit it is important to understand supply chain capabilities.
Supply chain capability is ability of the supply chain to provide superior value to the end
customer in an efficient manner. Customer service and supply chain costs are closely related. As
service level increases the cost of service also increases. The first step of understanding the
supply chain capabilities is to understand the position of the supply chain in the cost and service
level graph given below
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Cost
Efficiency Frontier
Existing Position
Service level
If the firm is not on the efficiency frontier due to the inefficiencies in the supply chain then the
first effort would be to address these inefficiencies. The business strategy of a firm helps in
choosing an appropriate position on the efficiency frontier.
The demand and profit are directly dependant on the service level and the service level is closely
related to the cost. Hence it would be optimal for a company to operate at a specific level of
customer service where the customer taste and competitor offering affects the revenue curve and
the supply chain innovations affect the cost curve.
Revenue
Revenue
cost
Profit contribution
Service Level
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The customer service has various dimensions like
Order Delivery lead time
Responsiveness
Delivery reliability
Product variety
Order delivery lead time

Order delivery time is the time taken by the supply chain to complete all the activities from order
to delivery. This dimension of customer service has a significant impact on the way a supply
chain is designed and operated. The figure 1.5 shows the supply chain lead time and the order
delivery lead time of a typical firm that sources material, manufactures components, assembles
the product and delivers the finished product to the end customer. The aggregate of all the
individual stages is the supply chain lead time, which is total time required for the supply chain
to carry out all activities from beginning to the end. In the competitive market the order delivery
Customer order
Order penetration point
Order delivery lead time
Source
Make components
Assembly
Deliver
y
Supply Chain lead time

Fig 1.5 Interaction between Supply chain lead time and delivery lead time.
lead time is dictated by competitive offerings and customer needs and the supply chain lead time
is usually much longer than the order delivery lead time.
A critical characteristic of the supply chain is the customer order penetration or decoupling point.
There are essentially three types of supply chain characterized by the customer order penetration
point: Make to stock ( MTS), Make to order (MTO), and configure to order ( CTO) also known
as Assemble to order or build to order. See figure 1.6 below
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Customer order
Source
Make components
Assembly
Deliver
y
Customer order
Source
Make components
Assembly
Deliver
Make components
MTO
Customer order
Source
MTS
Assembly
Deliver
Fig 1.6 Order penetration point based supply chain typology
CTO
Supply Chain Responsiveness

Responsiveness captures the firms ability to handle the uncertainty of market demand. Based on
the kind of demand uncertainty faced by the product the supply chain strategy should design the
supply chain. The figure below provides an idea of matching the supply chain design with the
nature of product
Functional
Products
Efficient supply
Innovative
Products
MATCH
MISMATCH
MISMATCH
MATCH
chain
Responsive
supply chain
Fig 1.7 Matching supply chain design with nature of product.

Delivery Reliability
Delivery lead time is an important dimension of customer service, and delivery reliability
essentially captures the degree to which a firm is able to service its customers with the promised
delivery time. Delivery reliability measures the fraction of customer demand that is satisfied
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within the promised delivery lead time. For firms operating on MTS model, the percentage of
orders getting served from the stock is known as product availability also commonly referred to
as the service level in supply chain literature.
Product Variety
The quantum of variety offered by the firm is an important dimension of customer service. In the
past couple of years a variety explosion has taken place in most product categories. Higher the
product variety offers greater choices to the customer who is likely to get a product that fits
closer to his or actual requirement. Higher variety would lead to greater complexity, resulting in
higher supply chain costs.
3. Achieving Strategic fit
Achieving strategic fit is to ensure that the degree of supply chain responsiveness is consistent
with implied demand uncertainty. The goal is to target high responsiveness for a supply facing
high implied uncertainty( Innovative products) and to target efficiency for a supply chain facing
low implied uncertainty.
Responsive
supply Chain
Zone of strategic fit
Responsiveness
Spectrum
Efficient
Supply chain Certain Demand
Uncertain demand
Implied demand uncertainty
Implied demand uncertainty depends on the customer segment that the supply chain wishes to
satisfy, Or the firms target customer. This target customer is usually specified by the business
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strategy so in other words the supply chain strategy should achieve a perfect fit with the
corporate or the overall business strategy.
Other issues in Strategic Supply Chain Management
Multiple products and customer segments
Product life cycle
Globalization and competitive changes over time
Growing supply chain uncertainty
Environment and sustainability
Multiple Products and Customer Segments

Companies produce and sell multiple products to multiple customer segments, each with
different characteristics. Depending on the nature of the product and the need of the customer
that the product attempts to meet the implied demand uncertainty is different and the design of
supply chain varies. For example Levi Strauss which sells both standard-size jeans and the
customized jeans. The demand uncertainty for standard size jean, a functional product is much
lower than the demand uncertainty of customized jeans, a innovative product. When devising the
supply chains for each different product or customer segment, the key issue for the companies
like Levi Strauss is to balance the supply chain efficiency and supply chain responsiveness given
its portfolio of products, customer segments, and supply chain sources. One of the ways in which
to achieve this is to set up independent supply chains for each different product or customer
segment. This is feasible if the segment is large enough to support a dedicated supply chain. This
strategy however fails to take advantage of any economies of scope that often exists among a
companys different products. Therefore, preferable strategy is to tailor the supply chain to best
meet the needs of each product demand. Tailoring the supply chain requires sharing some links
in the supply chain with some products while having separate operations for other links. The
links are shared to achieve maximum possible efficiency while providing the appropriate level of
responsiveness to each segment. For instance, all product may be made on the same line in a
plant, but products requiring a high level of responsiveness may be shipped using a fast mode of
transportation while products that do not need to have high responsiveness may be shipped using
slower cost effective modes of shipment.
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Product life cycle

The demand and supply characteristics change over a products life cycle. Because demand and
supply characteristics change, the supply chain strategy must also change over the product life
cycle if the company is to continue achieving strategic fit. A classic example is the case with
pharmaceutical companies. When a new drug is introduced by a pharmaceutical company it
would be protected under patent it is an innovative product where the demand is uncertain and
supply unpredictable, profit margins are very high, Cost is not an important consideration but as
time goes the patent expires and the drug becomes a generic drug and exhibits characteristics of a
functional product. At this stage the demand has become more stable and supply is predictable,
the profit margins have dropped and price becomes a significant factor in customer choice. So
the supply chain of this pharmaceutical company should also evolve along with the product as it
moves through its product life cycle.
Globalization and competitive changes over time
The changing competitor behaviour resulting from changing marketplace or increased
globalization is also an important issue to be considered in the designing the supply chain of an
organization. As competitors flood the market with variety of products the customers are
becoming accustomed to having their individual needs satisfied. Thus, the competitive focus is
on producing sufficient variety at a reasonable price. Another big change is the increase in global
sourcing of products. As the competitive landscape changes, a firm is forced to alter its
competitive strategy and with change in competitive strategy, a firm must also change its supply
chain strategy to maintain strategic fit.
Growing supply chain uncertainty and issues relating to environment and sustainability too have
to accounted for while designing the supply chain.
What are the strategic issues faced by a manager of a Supply chain?

Answering tipsThe strategic issues are
1. Understanding the customer demand uncertainties.
2. Understanding the supply chain capability ( efficiency and responsiveness)
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3. Formulating a SC strategy that achieves a fit with the business strategy. Fit means the
SC strategy that
a. Matches the SC strategy to the overall corporate business strategy
b. Matches the with various individual functional strategies ( marketing, pricing,
inventory, supplier strategy, financial strategy etc.)
c. Matches the SC capability with the implied demand uncertainty.
4. Issues arising due to the changing business scenario like
a. Multi-products and customer segments
b. Shorter product life cycles
c. Globalization
CUSTOMER FOCUS IN SCM
The primary objective of any supply chain is to meet the customers delivery expectation and
requirements and also the availability of inventory.
To understand the Customer focus in SCM you need to understand
1. How SCM
a. Supports Customer-Focussed Marketing
b. Meets Customer Service requirements
A. How SCM supports Customer Focussed Marketing
Of the four fundamental ideas of marketing concepts, SCMs focus is on the idea that products
and services become meaningful when available and positioned from customers perspective.
(Other marketing concepts are: Customers needs and requirements are more basic than products
and services, different customers have different needs and requirements, and volume is
secondary to profit.)
As long as individuals specialize in production of specific products and services a mechanism
must arise for the exchange of those goods and services to satisfy the consumption needs of
individuals. To do so effectively and efficiently firms must overcome three discrepancies:
Discrepancy in space, discrepancy in time and discrepancy in quantity and assortment.
Discrepancy of space refers to the fact that the location of production activities and the location
of consumption are seldom the same. Similarly the time of production and the time of
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consumption are different. Discrepancy of quantity and assortments refers to the fact that
production typically aims at producing large quantities with very little product variety whereas
consumption is characterized by small quantities with a lot of variations. To address these
discrepancies Bucklin developed a long standing theory that specifies four generic service
outputs necessary to accommodate customer requirements they are
1. Spatial convenience
2. Lot size
3. Waiting time
4. Product variety and assortment.
Spatial convenience refers to the amount of shopping time and effort that will be required on the
part of the customer. Higher levels of spatial convenience are achieved in a supply chain by
providing customers with access to its products in a larger number of places, thus reducing he
shopping effort.
Similarly SCM facilitates the purchase of small quantities in small lot sizes, reduces the waiting
time and provides for the product variety and assortment desired by the customer.
B. How SCM meets customer service requirements
(How SCM meets the three fundamental attributes of customer service)
The fundamental attributes of Customer service are
1. Availability
2. Operational performance and
3. Service reliability
Availability
Availability is the capacity to have inventory when desired by the customer. Availability is based
on the performance measures : Stock out frequency, fill rate and orders shipped complete. Stock
out frequency is the probability that a firm will not have inventory available to meet a customer
order. Fill rate measures the magnitude and impact of stock outs over time. If a customer wanted
100 units and only 97 units are available then the fill rate is 97 %. Orders shipped complete ( is
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complete orders shipped) Even if one item ordered by the customer is missing then order is
counted as incomplete order.
Operational Performance
Operational performance deals with the time required to deliver a customers order. Operational
performance is specified in terms of
Speed of performance elapsed time from when a customer establishes a need to order
until the product is delivered and is ready for customer use.
Consistency- Number of times that actual cycles meet the time planned for completion.
Flexibility- Flexibility involves a firms ability to accommodate special situations and

unusual or unexpected customer requests.
Malfunction reliability- The availability of contingency plans to accomplish recovery in

case of malfunction.
Service Reliability
Service reliability involves the combined attributes of logistics and concerns a firms ability to
perform all order-related activities as well as provide customers with critical information
regarding logistical operations and status. Beyond availability and operational performance
Reliability may mean that shipments arrive damage-free, invoices are correct and error-free;
shipments are made to the correct locations and the exact amount of product ordered is included
in the shipment.
The above discussion illustrates the Customer focus of SCM.
CUST OMER RELATIONSHIP MANAGEMENT
CRM and Customer Relationship
CRM is one of the three major processes within the Supply chain that consists of processes that
take place between an enterprise and its customers downstream in the supply chain. If we look
closely at the macro-processes of an organization we can see that they are 3 kinds
1. Processes that are downstream of their supply chain Customer side
2. Processes internal to the organization Internal
3. Processes that are upstream of their supply chain Supplier side.
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Upstream processes
Supplier Relationship
Management
(SRM)
Downstream Processes
Internal Supply Chain
Management
(ISCM)
Customer Relationship
Management
(CRM)
TRANSACTION MANAGEMENT FUNCTION

(TMF)
The goal of CRM macro process is to generate customer demand and facilitate transmission and
tracking of orders.
The key processes under CRM are as follows
Marketing
Marketing processes involve decisions regarding which customer to target, how to target
customers, what products to offer, how to price products, and how to manage actual campaigns
targeting customers.
Sell
The sell process focuses on making an actual sale to a customer (compared to marketing, in
which processes are more focused on planning who to sell to and what to sell). The sell process
includes providing the sales force the information it needs to make a sale and then execute the
actual sale.
Order Management
The process of managing customer orders as they flow through an enterprise is important for
customer to track his order and for the enterprise to plan and execute order fulfilment. The
process ties together the demand from the customer with the supply from the enterprise.
Call/ Service Center.
A call/ service center is often the primary point of contact between a company and its customers.
A call center, helps customers place orders, suggests products, solves problems and provides
information on order status.
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Importance of CRM
CRM helps the enterprise to better understand the needs and requirements of the customer, their
profile, buying behaviour. CRM captures vital data about the customers and the potential
customers, stores them and generates customer related information that can be used effectively
by the enterprise to attract and retain customers
Information provided by CRM can be used in determining the customer value to the
organization. CRM also helps in evaluating the probability of success of doing business with any
particular customer. Now the two information can be used to zero in on the effective strategies
that can be adopted for the customers using the following matrix.
Marketing Strategies based on customer value and probability of success.
Probability of Success with the Customer
Customer
value
Low
Medium
High
Low
Withdraw
Service Minimally
Retain minimally
Medium
Defend Minimally
Selectively develop
Defend against
competition
High
Build Brand Image
Target for
development
Build strategic
Relationship
Thus a good CRM helps in

1. Getting a good understanding of the customers needs and requirements
2. To gain insight into the behaviour of the customer, their purchasing habits, opinions,
preferences and modify their business.
3. To anticipate needs and take proactive steps.
4. To facilitate cross selling of products
5. To identify which customers are profitable.
6. To use all the above information in determining the value of various customers to the
enterprise, which in turns helps in formulating various strategies.
DEMAND PLANNING
Demand planning and forecasting is considered to be the very first step in determining the longterm capacity needs, yearly business plan and supply chain activities of any organization.
23
Forecasting is the basis on which all the demand planning rests. Forecasts drive the supply chain
information system planning and coordination. Forecast is a projection or the prediction of the
number of units that will be produced, shipped or sold. Prior to determining a forecast process, it
is important to understand the nature of demand and the major forecast components
Nature of Demand
Demand can be of two types
Independent Demand
Dependant Demand or derived Demand
Independent demand items are generally finished goods while dependant demand items
are generally components or sub assemblies. Independent demand items are forecasted,
as the future requirements are not known, whereas dependant demand item requirements
can be derived based on demand for finished goods. For example demand for a car in the
month of January would be forecasted, say 100 but the demand for the tires (5 per car)
would be calculated as 500 tires. Demand for Car is independent while the demand for
tire is dependant.
Key steps in demand planning include:
Importing historical sales data
Creating statistical forecasts
Importing customer forecasts
Collaborating with customers
Managing forecasts
Building consensus forecasts
Supply and demand collaboration
Securing constrained forecasts
Confirmation with customers
Re examining data and adjusting planning accordingly.

24

FORECASTING
Is important because, businesses can benefit from accurate forecasts to
1. Optimise the businesses to reduce the cost of operations by prevention of unforeseen
changes in production schedules resulting in high costs due to changes in personnel ,
equipments, raw material movements etc.
2. By accurate projections of raw material and finished goods leading to better inventory
management resulting in low inventory carrying costs and minimum shipping costs.
3. Increase sales opportunities for maximising profits.
4. Provide accurate information for making better decisions.
5. Provides basis for many functional and strategic decisions.
Example:
Production : Scheduling, Inventory control, aggregate planning.
Marketing: Sales force allocation, promotion, and new product introduction.
Finance: Plant / equipment investment, budgetary planning.
Personnel: Workforce planning, hiring, layoffs.
Forecasting of mature products with stable demand like Milk, groceries etc is relatively easy
where as the forecast is extremely difficult when either the raw material supply or demand of
finished products is highly unpredictable.
Wrong forecasts or no forecasts would lead to misguided business plans, errant decisions and a
lack of collaboration and consensus, which limits buying across the organisations.
Characteristics of Forecasts
Forecasts are always wrong: All forecasts include both and expected value and the
measure of forecasting error (demand uncertainty).
Long term forecasts are usually less accurate than short-term forecasts: Forecasts for next
6 month would be more accurate than the forecast for next week, which would be more
accurate than the forecast for the next day.
Aggregate forecasts are usually less accurate than disaggregate forecasts: The forecast of
the demand for A-segment passenger cars ( Santro, Alto, indica, figo, Micra ) would be
more accurate than the specific forecast of Santro cars.) Forecast for bathing soap would
be more accurate than forecast for the specific bathing soap say Lux.
25

The farther up the supply chain a company is the greater is the forecast error due to
greater distortion in the information it receives. ( Bull Whip Effect )
Factors affecting demand.

It is important to understand the factors that affect the demand so that adequate provisions are
made for these factors while forecasting is done. These factors also affect the choice of selection
of the methodology to be used for forecasting.
These factors are
Past demand
Lead time replenishment
Planned advertising or marketing efforts
State of economy.
Planned price decisions
Actions that competitors have taken.
FORECASTING METHODS
Forecasting methods are classified according to the four types
Qualitative: Are subjective and rely on human judgement. Are more appropriate when very
less historical data is available or the experts have the market intelligence to make the
forecast. eg Expert opinion, Delphi approach, Market research.
Time Series: Uses historical data to make a forecast. Based on the assumption that past
demand is a good indicator of future demand. These methods are very suitable when the
environmental situation is stable and the basic demand pattern does not vary significantly
from one year to another. Are simple to implement and provide a very good beginning.
Causal : Causal forecasting method assume that the demand forecast is highly correlated with
certain factors in the environment ( the state of the economy, interest rates etc.) Causal
forecasting methods find the correlation between demand and environmental factors and
use estimates of what environmental factors will be to forecast future demand.
Simulation: Simulation forecasting imitate the consumer choices that give rise to demand to
arrive at a forecast.
Companies find it difficult to decide which forecasting method is most appropriate for
forecasting. Using multiple methods of forecasting to arrive at a combine forecast is more
effective than using one method alone.
26
Observed demand generally has two components ; the Systematic component and the Random
component.
Observed demand = Systematic Component + Random component
Systematic component measures the expected value of demand and consists of
Level component : the current de-seasonalized demand.
Trend: the rate of growth or decline in demand for the next period.
Seasonality: the predictable seasonal fluctuations in demand.
The random component is that part of the forecast that deviates from the systematic part. A
company cannot ( and should not) forecast the random component. All a company can predict is
the size and variability of the random component which provides a measure of the companys
forecast error.
Selecting a particular forecast method
Step1 : Consider the nature of the industry, the type of the product for which forecast demand is
needed. By looking at the pattern of demand, a few forecasting methods can be shortlisted.
Step 2: Consider the various estimates of forecast errors and prepare a priority list based on their
relative importance to the organization.
Step 3: Estimate the forecast error of each of the short-listed forecast methods in step one.
Step 4: Choose the forecast method/ methods which give the least forecast error estimate.
COLLABORATIVE PLANNING FORECASTING AND REPLENISHMENT - CPFR
Definition : CPFR is the sharing of forecast and related business information among, business
partners in the supply chain to enable automatic product replenishment.
The voluntary Inter industry commerce Standards association ( VICS ) has defined
CPFR as a business practice that combines the intelligence of multiple partners in
the planning and fulfilment of customer demand.
Sales history, sales projections, raw material availability, lead times and other important business
information are shared between the manufacturer and business partners. The information is then
integrated, synchronised and used to eliminate excess inventory and improve in-stock positions
making everyone in the supply chain more profitable.
Sellers and buyers in a supply chain may collaborate along any or all of the following four
supply chain activities
27
Strategy and planning: Both partners decided the roles and responsibilities and checkpoints.
They then identify the significant events that affect the demand and supply like the new
product introduction, promotions, store opening / closing, changes in inventory policy
etc.
Demand and supply management: The consolidated forecast of customer demand estimate of
the partners ( Collaborative sales forecast) is projected at the point of sale and based on
this a collaborative order plan is created that determines the future orders and delivery
requirements based on the sales forecast, inventory positions and replenishment lead
times.
Execution: As forecasts become firm they are converted to actual orders. The fulfilment of
these orders then involves production, shipping, receiving, and stocking of products.
Analysis: The key analysis focuses on identifying exceptions and on performance evaluation
metrics that are used to asses the performance or identify trends.
Risks and Hurdles of CPFR implementation
Risk of misuse of information : Lot of information is shared between the supplier and buyer
(partners ) and sometimes the supplier may be supplying to the buyers competition too.
If one partner changes the scale of operation or technology the other partner is also forced to
follow suit or lose the collaborative relationship.
The partners may have huge cultural differences and hence fostering a collaborative culture
may be very difficult.
Steps to achieve Collaborative coordination
Quantify bullwhip effect: Analyse the variance between the demand from your customer and
the demand you place on the supplier. This is the internal bullwhip that you are creating.
Evidence of size of bull whip effect is very effective in getting different stages of the
supply chain to focus on efforts to achieve coordination and eliminate the variability
created within the supply chain.
Get top management commitment for coordination.
Devote resources to coordination: Without committing significant managerial resources
success in coordination may not be achieved.
28
Focus on communication with other stages: Regular communication helps different stages of
the supply chain share their goals and identify common goals and mutually beneficial
actions and improve coordination.
Try to achieve coordination of the entire supply chain network: The full benefit of
coordination is achieved only when the entire supply chain network is coordinated.
Use technology to improve connectivity in the supply chain: Internet and a variety of
different types of software systems can be used to increase the visibility of information
throughout the supply chain.
Share benefits of coordination equitably: The greatest hurdle to coordination in the supply
chain is the feeling on the part of any stage that the benefits of coordination are not being
equitably shared. Managers from the stronger party in the supply chain relationship must
be sensitive to this fact and ensure that all parties perceive that the way benefits are
shared is fair.
Traditional supply chain relationship
Customer
store
Retail DC
Wholesale
Manufacturing
DC
Collaborative Planning Forecasting and replenishment ( CPFR)
Supplier
store
Synchronization of customer trend or ordering Information
Customer
Store
Retail DC
Wholesale
Manufacturing
DC
Supplier
store
PURCHASE PLANNING
Make or Buy Decisions
The decision of a firm, to perform its activities internally or get those activities done from an
independent firm, is known as, make or buy decision. The make or buy decision is strategic in
nature and involves the following key decisions
1. What activities should be done in-house and what activities should be outsourced?
2. How to select entities/partners to carry out outsourced activities?
29
3. What should be the relationship between those outsourced entities? Should it be

transactional (Just exchange of goods and services) or should it be long term partnership?
Strategic Approaches to Make or Buy Decisions

Some of the approaches adopted by successful firms in making the In-house or outsourced
decisions are
1. The value chain analysis
2. Identification of core activities and focusing resources to build capabilities in core
activities and outsource non-core activities ( also known as commodity activities)
1. Value Chain Analysis
Value chain is a framework (tool) developed by Michael porter. Using this framework all the
activities in a supply chain, involved in the transformation of raw materials to the final stage, is
classified into primary activities and secondary activities.
The primary activities include
Inbound logistics : Activities involved in the movement of raw materials in wards to the
firm
Operations: All the transformation activities taking place within the firm.
Outbound Logistics: Activities involved in the movement of finished goods outwards to

the firm.
Sales and Services: Sales and after sales activities
The secondary activities or support activities include
Procurement activities: Activities involved in purchasing raw materials and services

needed by the firm
Infrastructure: The facilities needed by the firm, the physical as well as the financial
infrastructure.
Technology: The technological know how and the expertise.
Human resource management.
The make decision steps

1. Consider a activity in the value chain.
2. The decision whether to perform the activity in-house or outsourced is based on the net
value created when done in-house and when outsourced.
30
3. If the net value created (Total value created by the activity - Cost of performing the
activity ) is greater when outsourced then the activity is decided to be outsourced other
wise it is performed in-house.
2. Make or Buy decision based on Identification of Core and Non-core Activities.
The decision to identify selected processes as core processes and focus on improving those
can have a significant impact on the performance of a firm. So identification of the core
activities and focussing all the resources on to the core activity to achieve world class
capability in those activities could be a successful strategy. So the first capability that a firm
must achieve is the capability to identify core and commodity activities.
Identification of Core Activities
a. Business Process Route
b. Product architecture route
Business Process Route
For any firm three, core and high-level business processes include, customer relationship,
Product innovation and supply chain management. Customer relationship focuses on
acquiring new customers and building relationships with existing customers, Product
innovation focuses on developing new products and services and supply chain management
focuses on fulfilment of customer order. While taking outsourcing decisions two out of these
three can be outsourced. Researchers are of the view that firms should identify and ensure
that it builds core competencies in at least one of these areas. HP and high end
pharmaceuticals have identified product innovation as their core in-house activity while
Nike, Benetton in house focus is on brand building and customer relationship while WalMart and Dell computers have in-house capability in supply chain management. While taking
make or buy decisions firm must make sure that in-house business processes give it enough
strategic power in the chain and do not allow other chain partners to dictate the terms of
value exchange in the chain. (eg. In PC business the power went to intel and Microsoft
though IBM was at a strategic point in product development initial which was lost and
became a peripheral player in this chain)
Product Architecture Route
31
In the product architecture approach, the focus is on sub-system and components and the
make or buy decisions are taken at that level. The product is broken down into systems and
sub-systems and categorized as strategic and non-strategic.
A sub system is strategic if
It involves technologies that change rapidly,
If it requires specialized skills and technologies and
If it can significantly impact the performance of the product or attributes that are
considered important by the customer.
By keeping the strategic sub-systems internal, a firm can ensure that it can offer differentiated
product and can avoid being commoditized. Further the same kind of analysis is done for all the
major components in sub-systems. All those components where the firm is technologically ahead
of potential supplier or can hope to achieve a leadership position with some investments are kept
internal to the firm. In case the suppliers have a huge technological lead, which will be
impossible to bridge in the foreseeable future, or if the time and investments required for
catching up may not be worth the effort, then the component should be outsourced and supplier
should be treated as a strategic partner. Example Tata motors realized that in diesel engine
technology it was far behind its suppliers and will never be in a position to catch up with them.
So it decided to buy diesel engines from FIAT and treat FIAT as a strategic partner.
Advantages and Disadvantages of OutSourcing
The decision to outsource by a firm is primarily based on the ability of the third party to increase
the supply chain surplus (Only those activities where third party can increase the value at a lesser
cost than the firm are outsourced). But along with the supply chain surplus the risk also increase
to the firm due to outsourcing. Both these aspects need to considered to understand the issue of
outsourcing
How do third Parties increase the supply chain surplus?
1. Capacity aggregation
2. Inventory aggregation
3. Transportation aggregation by transportation intermediaries.
4. Transportation aggregation by storage intermediaries
5. Warehousing aggregation
6. Procurement aggregation
32
7. Information aggregation
8. Receivable aggregation
9. Relationship aggregation
10. Lower cost and higher quality
Capacity Aggregation
A third party can increase the supply chain surplus by aggregating demand across multiple firms
and gaining production economies of scale that no single firm can on its own. This is one of the
most common reason for outsourcing production in a supply chain. Dell outsources design and
production of the processors in its PCs to Intel because Intel supplies many computer
manufacturers and gains economies of scale that are not available to Dell.
Inventory Aggregation
Third party can increase the surplus by aggregating inventories across a large number of
customers. Aggregation allows them to significantly lower overall uncertainty and increase
significantly less safety and cycle inventory than would be required if each customer decided to
carry inventory on his own. The third party performing inventory aggregation adds most to the
supply chain surplus when the demand from the customer is fragmented and uncertain.
Transportation aggregation by transportation intermediaries
A third party may increase the surplus by aggregating the transportation function to a higher
level than any shipper can on his own. FedEX, UPS etc are some of the examples of
transportation intermediaries that increase the supply chain surplus by aggregating transportation
across a variety of shippers. A transportation intermediary increases the supply chain surplus
when shippers are sending small packages or LTL ( Less than Truck Load) quantities to
customers that are geographically distributed.
Transportation aggregation by storage intermediaries
A third party that stores inventory can also increase the supply surplus by aggregating inbound
and outbound transportation. This form of aggregation is effective if the intermediary stocks
products from many suppliers and serves many customers, each ordering in small quantities.
This form of aggregation becomes less effective as the scale of shipment from a supplier to
customer grows.
Warehousing aggregation
33
A third party may increase the supply chain surplus by aggregating warehousing needs over
several customers. The growth in surplus is achieved in terms of lower real estate costs as well as
lower processing costs within the warehouse. Savings through warehousing aggregation arise if
the suppliers warehousing needs are small or if its needs fluctuate over time.
Procurement aggregation
A third party increases the supply chain surplus if it aggregates procurement for many small
players and facilitates economies of scale in production and inbound transportation. Procurement
aggregation is most effective across many small buyers but is not likely to be a big factor in a
situation with a few large customers.
Information aggregation
A third party may increase the surplus by aggregating information to a higher level than can be
achieved by a firm performing the function in house. All retailers aggregate information on
products from many manufacturers in a single location. This information aggregation reduces the
search cost for customers.
Receivable aggregation
A third party may increase the supply chain surplus if it can aggregate the receivables risk to a
higher level than the firm or it has a lower collection cost than the firm. Collecting receivables
from each retail outlet is a very expensive proposition for a manufacturer. Given that a retailer
buys from many manufacturers , the power of each manufacturer to collect is also reduced.
Receivable aggregation is likely to increase the supply chain surplus if retail outlets are small
and numerous and each outlet stocks products from many manufacturers that are all served by
the same distributor.
Relationship Aggregation
An intermediary can increase the supply chain surplus by decreasing the number of relationships
required between multiple buyers and sellers. Relationship aggregation increases the supply
chain surplus by increasing the size of each transaction and decreasing their number.
Relationship aggregation is most effective when many buyers sporadically purchase small
amounts at a time but each order often has products from multiple suppliers.
34
Lower costs and higher quality

A third party can increase the supply chain surplus if it provides lower cost or higher quality
relative to the firm. If these benefits come from specialization and learning, they are likely to be
sustainable over the longer term.
Three factors affect the increase in surplus that a third party provides: scale, uncertainty, and the
specificity of assets.
The affects are summarized below

Specificity of Assets Involved in Function
Low
High
Low
High growth in Surplus Low-medium growth in surplus
Firm Scale
High Low Growth in surplus No growth in surplus
Low
Low-medium growth In Low growth in surplus
Demand uncertainty
surplus
for the firm
High High growth in surplus Low-medium growth in surplus
Specificity of assets involved in Function means whether the function or the activity of the firm
requires specific kind of assets. If specific assets are required then advantage ( or the growth in
supply chain surplus) of aggregation is low.
35
Factors affecting the make or buy decisions
Considerations favouring MAKING
Considerations favouring BUYING
Cost considerations ( less expensive to make)
Limited production facility
Desire to integrate plants
Cost consideration ( less expensive to buy)
Productive use of excess plant capacity to Small volume requirement

help absorb fixed overhead.
Need to exert direct control over production Suppliers research and specialized know
and / or quantity
how
Design secrecy required
Desire to maintain stable work force
Unreliable suppliers
Desire to maintain multiple source policy
Desire to maintain a stable work force
Indirect managerial control considerations

Procurement and Inventory considerations
RISKS OF USING A THIRD PARTY

Firms must evaluate the following risks when they move any function to a third party.
1. The process is broken
2. Underestimation of the cost of coordination
3. Reduced customer/ supplier contact
4. Loss of internal capability and growth in third-party power.
5. Leakage of sensitive date and information
6. Ineffective contracts.
The process is broken
The biggest problem arises when a firm outsources supply chain functions simply because it has
lost control of the process. Introducing a third party into a broken supply chain process only
makes it worse and harder to control. The first step should be to get the process under control,
then do a cost-benefit analysis, and only then decide on outsourcing.
36
Underestimate the cost of coordination

Coordination between the firm and the outsourced partners requires a lot of effort and time, and
can lead to huge losses if not properly executed. This is especially true if firm plans to outsource
specific function to different third parties. Nike had a coordination problem with i2 technologies
where Nike blamed i2 for it loss of $100 million on inventory management glitches ( mistakes)
that it attributed to the supply chain planning software from i2. I2 in turn blamed the problems on
Nikes execution of the software. Clearly insufficient coordination between the two firms played
a role in this failure.
Reduced customer / supplier contact.

The presence of an intermediary can lead to the loss of contact with the customer/ supplier.
Sometimes the gain achieved by outsourcing the activity would be much less that the gain the
firm would have achieved with better customer/supplier relationship arising from direct contact
with them.
Loss of internal capability and growth in third party power
A firm may choose to keep a supply chain function in-house if outsourcing will significantly
increase the third partys power. HP and Motorola have moved most of their manufacturing
activity to third party but are reluctant to move either procurement or design, even though
manufacturers have developed both capabilities.
Leakage of sensitive data and information
There is always the danger of leakage of critical information like the demand or intellectual
property, industry critical knowledge etc to the firms competitors when third party is used. Strict
use of Firewall (Security measures that ensure no leakage) within the third party is a solution
but this would increase the specificity of asset there by limiting the potential of the third party to
create surplus.
Ineffective contracts
Contracts that significantly reduce the gains from outsourcing can be called ineffective contracts.
An example is cost-plus pricing contracts: Here the third party has no incentive to reduce cost
hence the responsibility of reducing costs falls back on the firm itself so where is the advantage
of outsourcing. Another example is contracts that specify that the third party always holds a
37
certain level of inventory always. Such a contract will reduce the incentive of the third party to
take steps that reduce inventory. In such cases it is better for the firm to insist on certain service
level and leave the third party more freedom with regard to the amount of inventory. The third
party then has an incentive to work on reducing the inventory required to provide a given level of
service
********************END OF PART 1***************************
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Unit I Part 1

Make / Engineer to order

Non Core outsourcing

Fig 1.2 The Conceptual model of Supply chain management.

Proliferation of product lines

Operations Management Notes ( Pvt Circulation Only)

Shorter product life cycles

High level of outsourcing

Shift in power structure in the value chain

Operations Management Notes ( Pvt Circulation Only)

DECISION PHASES IN A SUPPLY CHAIN

Customer order cycle

Operations Management Notes ( Pvt Circulation Only)

Customer order and

Buyer stage returns

Buyer stage Places

Process Process n-2 Process n-1 Process n

Customer Order Arrives

1. Understanding the customer and supply chain uncertainty

Functional ( Low implied Innovative ( High implied

Product Life cycle

More than 2 years

The customer service has various dimensions like

Order Delivery lead time

Order delivery lead time

Supply Chain lead time

Fig 1.6 Order penetration point based supply chain typology

Supply Chain Responsiveness

Fig 1.7 Matching supply chain design with nature of product.

Zone of strategic fit

Multiple products and customer segments

Product life cycle

Globalization and competitive changes over time

Growing supply chain uncertainty

Environment and sustainability

Multiple Products and Customer Segments

Product life cycle

What are the strategic issues faced by a manager of a Supply chain?

Flexibility- Flexibility involves a firms ability to accommodate special situations and

Malfunction reliability- The availability of contingency plans to accomplish recovery in

TRANSACTION MANAGEMENT FUNCTION

Build Brand Image

Thus a good CRM helps in

Importing historical sales data

Creating statistical forecasts

Importing customer forecasts

Collaborating with customers

Building consensus forecasts

Supply and demand collaboration

Securing constrained forecasts

Confirmation with customers

Re examining data and adjusting planning accordingly.

Operations Management Notes ( Pvt Circulation Only)

Operations Management Notes ( Pvt Circulation Only)

Factors affecting demand.

Lead time replenishment

Planned advertising or marketing efforts

Planned price decisions

Actions that competitors have taken.

Level component : the current de-seasonalized demand.

Seasonality: the predictable seasonal fluctuations in demand.

Synchronization of customer trend or ordering Information

3. What should be the relationship between those outsourced entities? Should it be

END OF PART 1*******