Supply Chain Management :

Background

Production & Operation

Management
By
Prof Srikanth Venkataswamy

Purchasing
What is Purchasing ?
Purchasing is an Act Of Buying
an item at a price.

Objective Of Purchasing
The Basic objective of Purchasing Is
To procure : 5 Rs
1. The right material
2. With the right quality and Along With
the right quantity
3. At the right Time
4. For the right Price
5. From the right source

Goals of Purchasing
1.
2.
3.

4.
5.
6.
7.

Uninterrupted Flow Of Material

Manage Inventory
Improve quality
Developing and managing suppliers
relationship
Achieve Lowest Total costs
Reduce administrative costs
Advance firms competitive Position

Importance Of Purchasing
1.
2.
3.

4.
5.

Purchase function provides material and

flow of materials to the Organization.
Provides Effective Buying
As purchase Of material Contributes
almost 50% to 60% of the organizational
spending budget led to efficient buying
and cost saving structure.
Helps in proper Planning and control of
materials.
Helps in better forecast , scheduling,
capacity planning to the top management.

Centralized & decentralized

Purchasing
Centralized & decentralized Purchasing is the
matter of discretion and policy.
Centralized Purchasing:
Is the policy of the Management where
all purchases of the entire organistion is
made by a single purchase department.

Merits of Centralized Purchasing

1.
2.

3.
4.
5.
6.
7.

Uniform purchasing policy/Duplicacy

avoided:
Better cost (economics of large scale
buying)& quality control:
Control on Multiple buying:
Healthy Supplier buyer relationship:
Effective Flow of materials/Supplies:
Efficient Departmental line of control
Better cash Flow/working capital or
Financial management:

Demerits of Centralized Purchasing

1.

2.
3.
4.
5.

6.

Efficiency of other related departments

depends On the efficiency of the purchase
department.
No localized Purchase advantages:
Delay in supply & Receipt Of materials:
Room for Miscommunication/ gaps in line of
authority.
Unsuitable for small buys or for perishable
goods or distance between the purchase &
production been very Large :
Huge Transitional procedures, systems,
Paperwork, approvals & costs

Decentralized Purchasing
Decentralized Purchasing:
Stands for extended line of
authority to make independent decision and
act up them.

Merits of Decentralized Purchasing

1.

2.
3.

4.
5.
6.
7.

Better decision freedom /cut on In Efficiency &

short comings of the centralised department:
Close Vendor vendee relationship directly with
the user departments:
Hands on to tap local Advantage:
Effective follow up/Better interdepartmental coordination:
Reduce in Transitional procedures, systems,
Paperwork, approvals & costs:
Reduction of overloading of centralized Purchase
Departments
Streamlined & better Control on the decentralized
units for the top management.

Demerits of Decentralized Purchasing

1.
2.
3.
4.
5.

Lack of uniform or standard Practices with

the different units of the organistion:
Underutilization of services of Experts:
Absent of Economics of Large Scale
Buying:
Sometimes Maintaining Decentralized
department may be costlier.
May lack centralized coordination between
different departments and may lead to
conflicts.

Steps Involved In Purchasing

1.

2.
3.
4.

Need recognition
Description of the need/ Specification
of the requirements
Suitable source selection
Determination of price & availability

Industrial Buying- Decision

Process
Phases In Buying Decision Process :
1. Recognition Of problem or need
2. Description of the need/
Specification of the requirements/

Determination of the application or

Characteristics and Quantity of needed product
/Development of specifications or description of
Need

3.

Search for source and Qualification

of Potential suppliers

Industrial Buying- Decision

Process Cont
Obtaining and analyzing supplier
proposal and selection of suppliers/
Determination of price & availability
6. Selection of an order Routine/Placing
purchase orders
7. Performance feedback/Delivery Of
material :
8. Post Purchase evaluation:
Checking Invoice/approval quality &
Quantity/Making payment
5.

Purchasing cycle
Recognition
Of problem
or need

Post
Purchase
evaluation

Description
Specification
of the Need

Search for source

& Qualification
of Potential suppliers

Feedback
Delivery
Of material

Routine/
Placing
PO

selection of
suppliers

Phases In Buying Decision Process :

Phase-1
Recognition Of problem or need :

The Recognition of a problem or

need May originate within the Buying
firm or may also be recognized By a
Smart Marketer.

Phase-2
Determination of the characteristics
and Quantity of needed product :
Once The problem is recognized within
or outside the organization, The next
Phase Is How To resolve the
problem.
Questions : What Type of products or
services to be considered ? What
quantity of product needed?

Phase 2 contd.
For technical Products:
The technical depts like R&D ,
industrial engineering, production or
Quality control Will suggest general
Solutions of The needed Product.
For Non-technical Products & services:
Either the User dept or the
Purchase dept May suggest products &
services Based On experience and also the
quantity required to solve the problem or
by any external source as well.

Phase-3
Development of Specifications Of
Needed Product :
Phase 2 & 3 are Closely related, once
the problem is Recognized and
determined,
in this Phase development Of a
precise statement of specifications
and Characteristics are taken up .
Outside sources Such as suppliers &
Consultants may also be contacted .

Search phase
Phase 4- Search & Qualification Of
potential supplier
In the Phase the Buying organization
Searches for acceptable suppliers or
vendors.
The search for potential buyer is based on
various sources of information like trade
journals, sales calls, word- of
Mouth,catalogues,trade shows,industrial
directories, associations, approved list from
approval agencies,web sites and other
media.

Phase-5
Obtaining and Analyzing supplier
Proposal

Once the qualified suppliers are

decided
Float enquiries (RFQ)
Obtain proposal- In form of a
formal bid, quotation or written email

 The proposal should Include1. Product Specification Details

2. Price
3. Delivery Period
4. Payment terms
5. Taxes & levies
6. Transportation Type & cost
7. Insurance-transit , product etc.
8. Any other Costs , discounts (if
any),Delivery schedule,(Quantity )
9. Other details

Selection of supplier/Source
1.
2.
3.
4.
5.

6.
7.

8.

General soundness of the supplier in

Consideration.
Financial strengths
Technical Proficiency/manufacture or
supplying abilities
Flexibility and cooperative ability
Special consideration influencing the choice
Size of the supplier/SWOT Analysis
Suppliers client List / List Of clients/
background
Delivery adherence : confirmation/Analysis.

Purchasing policy
Tenders
Make or Buy
Vendor analysis and vendor rating
Ancillarisation
Ethics
Purchasing For the benefits
Organisation
Gifts

Modes of Tendering
Open tendering
Global tendering
Limited Tendering
Single tender
Spot tender.

Make or Buy Decision

Making or Buying an item

Making the item now bought out
Buying the item now made

The Two Factors to be consider in

Make Or Buy Decision are:
1. Cost
2. Production Capacity

Factors
1.
2.
3.
4.
5.
6.
7.
8.

Less expenses In making the part

Secrecy to be maintained
Optimum utilization of the plant capacity
Suppliers are not up to the expectations
Production & Quality are Of Prime
importance/need direct supervision
Small quantity required
Less expensive than manufacturing
Govt Policies Favors Ancillarisation.

Make

Buy

Factors
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.

Suppliers cannot quote

Different operations Integration
Type of the product
Company attained Decline stage
Industry ageless
Suppliers Specialized know-how available
Production facilities not much
To Maintain constant work force
Multiple source policy
Monopoly items and buyer no option
Temporary Ramp up

Make

Buy

Inventory Management

The central focus of most

manufacturing layouts is to minimize
the cost of processing, transporting,
and storing materials throughout the
production system.
Materials used in manufacturing
include:
Raw material
Purchased components
Work-in-progress
Finished goods
Packaging material
Maintenance, repair, and
operating supplies

What are Inventories ?

Inventories are the stocks Of

materials Of any Kind stored for future
operations.
Inventories Includes materials like :
Raw materials
Semi Finished goods
Work-in-process
Finished Goods
Consumables
Maintenance Spare Parts

Objective Of Inventories
Objective Of Inventory Management are:
1.
To facilitate smooth Operations of the
manufacturing process Or Balance Demand to
Supply.
2.
To run the operations economically
3.
To minimize investment on inventory.
4.
To reduce material Handling costs and other Costs.
5.
To eliminate Uncertainties

6.
7.

Uncertainties in demand from customers

Uncertainties in Procuring the material.

Reasonable utilization of manpower and Other

resources.
Contribute to the efficient and effective operation
of the production system.

Inventory Costs
Four types of Inventory costs:
1. Ordering Costs
2. Inventory Carrying Costs
3. Out -Of-stock or stock out Costs
4. Capacity costs

Inventory Costs

1.Ordering
Costs

2.Inventory
Carrying Costs

3.Out-Of-Stock
Costs

4.Capacity
Costs

Inventory costs:

1.Ordering costs

1.Ordering costs:
Cost Of Placing an order
a) Preparing a purchase order.
b) Processing Payments.
c) Receiving & inspecting the material.

Inventory costs:

A.

2.Inventory carrying
costs

Costs connected directly with the

Materials
1. Obsolescence
2. Deterioration
3. Pilferage

B.

Costs connected to finance.

1.
2.
3.
4.
5.

Taxes
Insurance
Storage
Interest On Capital
Interest On inventory

2.Inventory carrying
costs contd

Inventory costs:

Details Of Carrying costsCapital Goods:

Interest On Capital Invested In inventory.
Interest On Capital Invested on land &
building to hold the inventory. Rent On
Building Taxes & insurance on Building
/inventory ,Depreciation ,Cost of
maintenance & repairs, Utility Charges,
Salaries Of security, maintenance personnel
Interest On Capital Invested In inventory
Holding and control equipment.

2.Inventory carrying
costs contd

Inventory costs:

Handling Equipment costs:

Cost of Capital on equipment
Taxes & insurances On equipment
Depreciation
Fuel expense
Cost Of maintenance and repairs

Inventory costs:

Back

3. Out-Of-Stock costs

ordering
Lost sales

Inventory costs:
1.
2.

4. Capacity costs

Overtime payments when capacity

is too small
Layoffs and idle time when capacity
is too large.

Different costs Involved

The cost of holding the stock (e.g., based on
the interest rate).
The cost of placing an order (e.g., for row
material stocks) or the set-up cost of
production.
The cost of shortage, i.e., what is lost if the
stock is insufficient to meet all demand.
The third element is the most difficult to
measure and is often handled by
establishing a "service level" policy, e. g,
certain percentage of demand will be met
from stock without delay.

Costs & EOQ

Total costs

Cost/Period

Carrying
costs

Order costs

Min EOQ

Factors Affecting Inventory

Costs
Factors Affecting
Inventory costs

Sales
Characteristics

Market
Characteristics
Production
Characteristics

Factors Affecting Inventory

Costs
1.

Sales Characteristics

Size & frequency of the order

Uniformity Or Probability of Sales
Service Requirements
Distribution Pattern
Accuracy, Frequency & Details Of
sales forecasts

Factors Affecting Inventory

Costs
2. Production

Characteristics:

Types Of production
No Of Manufacturing Stages
Degree of specification Of the Product at
specific Stages
Processing Time At Each Stage
Production Flexibility
Capacity Of production & Warehousing
Stages
Kind Of Processing

Factors Affecting Inventory

Costs
3.

Market Characteristic:

Procurement Cycle
Internal Lead Time
Frequency Of Cancellation of the Purchase
Orders
Terms Of Payments
Discounts
Speculation
Imports
Govt/Organisational Polices
Shortages/Rising Prices
Other Marketing Forces.

Process Of Inventory
Management & control
1.
2.
3.
4.

Determination of optimum inventory

Analysis
Determination The Optimize degree
of stock control required.
Planning and design of the inventory
control system
Planning Of the inventory control
Mission

Why We Want to Hold

Inventories
Improve customer service
Reduce certain costs such as

ordering costs
stock out costs
acquisition costs
start-up quality costs

Contribute to the efficient and

effective operation of the production
system

Why We Want to Hold Inventories

Contd

Finished Goods
Essential in produce-to-stock positioning
strategies
Necessary in level aggregate capacity plans
Products can be displayed to customers

Work-in-Process

Necessary in process-focused production

May reduce material-handling & production
costs

Raw Material

Suppliers may produce/ship materials in

batches
Quantity discounts & freight/handling $$
savings

Why We Do Not Want to

Hold Inventories

Certain costs increase such as:

carrying costs
cost of customer responsiveness
cost of coordinating production
cost of diluted return on
investment
reduced-capacity costs
large-lot quality cost
cost of production problems

Inventory control
Inventory Control

Inventory
Analysis

Stock
Control

Inventory Analysis/Techniques
ABC Analysis ( Always Better Control)
Based On The Annual Usage Value.
VED Analysis : Based On criticality Of items:

Vital,essential,desirable

SDE Analysis (Scare, Difficult, Easily Available)

Based On Procurement aspects
XYZ Analysis: Based On The value Of Inventory
Held
HML Analysis: ( High, Medium , Low) Based on Unit
cost
FSN Analysis: (Fast Moving, Slow moving, Non
moving ) Based on Consumption rate.
AX,BY,CZ Analysis: Combining ABC With XYZ
AV,BE,CD Analysis : Combining ABC with VED

Minimum Maximum
Two Bin
S-os Analysis
G-O-L-F Analysis

G Govt, O Open Market, L Local, F foreign

EOC-Economic ordering Quantity
JIT Just -IN- Time

ABC Analysis
The ABC classification process is an
analysis of a range of items, such as finished
products or customers into three categories:
A - outstandingly important;
B - of average importance;
C - relatively unimportant as a basis for a
control scheme.
Each category can and sometimes should be
handled in a different way, with more attention
being devoted to category A, less to B, and
less to C.

The ABC Classification

The ABC Classification

The ABC classification system
is to grouping items according to
Annual sales volume, in an attempt
to identify the small number of items
that will account for most of the
sales volume and that are the most
important ones to control for
effective inventory management.

ABC Analysis (Paretos Principle)

C
I00

95
A

% Total Annual Usage value Rs

80

% OF Items

EOQ Economic Order Quantity

EOQ Or Best Quantity Technique Or
Economic lot Size
EOQ Is That Quantity to be bought at a
time where the over cost is the least
EOQ Is the technique of determining
that quantity where the two sets of
costs are minimum or equated.
TWO Sets Of costs:
1. Inventory procurement costs
2. Inventory carrying costs.

EOQ
Ordering Point

Reorder Point

Quantity

Buffer
STOCK
Reserve STOCK

Safety STOCK

TIME

EOQ Meanings

Re-Order Point: It Is the point in time when the

Next purchase order is to be released to
replenish the stock. (This is done when the stock begins to fall
below the reorder stock level, which is the sum of the buffer stock, safety stock and
reverse stock.)

Buffer Stock: Is equivalent To the stock required to

meet normal consumption during normal lead time

Virtual Stock: Is the sum Of reserve Stock, safety stock
and order quantity.
Safety Stock: It Is the stock which provides for delays in
the supply of material. It is Equal To The Normal Consumption rate
and Max consumption rate multiplied by average lead Time.

Reserve Stock: It Is The stock which provides for

abnormal consumption. it Is Equal to the Difference
Between Normal & Max Consumption Rate Multiplied by
average Lead time

EOQ Formula
EOQ = 2 X AC X OC
CC %
Where: AC = Annual Consumption in Units
OC = Ordering Cost Per Order
CC% = Inventory carry costs as a
percentage of unit cost.

Ordering Costs
1.

2.
3.
4.
5.
6.
7.
8.

Costs Incurred in sending enquiries, Receiving

quotations, Planning an Order, Finalizing the
order, expediting and follow up costs of an order.
Transportation & Stationery costs.
Rent For the space used By The Purchasing
department
The Salaries and wages of the office staff of the
purchasing department
Deprecation of the equipments and furniture Of
the Purchase departments
Inspection Costs and costs Of the Settlement Of
the payment.
Purchase Audit costs
Other Over Heads.

Inventory Carrying costs

1.

2.
3.
4.
5.

6.

7.

Rent For the Storage Space and period.

Salaries and wages of store keeping
Department
Pilferage and deterioration costs
Internal Transportation & Stationery costs.
Cost Of Obsolescence where the inventories
rendered useless.

Interest On Capital Blocked in

inventories
Taxes on inventories.

Standardization, Codification,
Simplification

Advantages Of Classification & codification:

1. Correct identification of each & every item
by systematic grouping of similar items.
(items kept in one place and coded with proper numbers).

2.

Reduction in sizes and varieties. The usage of long

description is simplified and possible confusion avoided.

3.

Duplication of stocks & Less confusion . Avoids

duplication of the stocks of the same item being held under different
names, Descriptions, Brand names ,Part numbers and different stores.

4.
5.

Standardization of Materials greatly improves and

helps to finding substitutes.
Simpler Storage methods, Accurate & proper
maintaining of records, Easy Inventory & Accounts
control Procedures etc. can be achieved

Principles Of Classification
Effective Classification & codification
systems are based on UCUS:
1. Basis Of Classification to be made
uniform (Uniformity)
2. Classification to cover full range of
Items (comprehensiveness)
3. Unique one code number to each
item (Uniqueness)
4. Ease to adapt by each & every one
(simplicity)

Methods Of Classification &

Codification

Raw Material Stores

Work-in-Process Stores
Assembly Stores
Semi finished Stores
Finished Stores
Consumable Stores
Tools Stores
Packing Materials Stores
Spare parts stores
Small Parts Stores
Heavy Parts stores
Hardware Stores

Break Even Analysis

Elements of JIT Manufacturing

Eliminating waste
Enforced problem solving and continuous
improvement
People make JIT work
Total Quality Management (TQM)
Parallel processing
Kanban production control
JIT purchasing
Reducing inventories
Working toward repetitive manufacturing

Benefits of JIT

Inventory levels are drastically

reduced:
frees up working capital for other
projects
less space is needed
customer responsiveness increases

Total product cycle time drops

Product quality is improved
Scrap and rework costs go down
Forces managers to fix problems and
eliminate waste .... or it wont work!

Supply Chain Management

Introduction & Importance of

Supply Chain Management

Module I: Global Supply Chain

Overview
Introduction & Importance of Supply
Chain Management, Developing Supply
Chain as a Competitive Tool for Customer
Satisfaction and Corporate Profitability,
Channel Structure, Supplier Network
Development, Outsourcing., Supply Chain
Logistics Operations.

PREAMBLE: SCM
Manufacturers world over are frantically trying to
improve efficiencies in their operations, the
urgency further accelerated by the shrinking
global economy.
Falling customer demand, tighter credit, rising
input prices and the economic uncertainty are
forcing companies to re-evaluate their business
plans especially with respect to investments in
new capacities, markets and products.
At the same time, there is a renewed focus on
making current assets work harder and maximize
the return on the already invested dollar.
However, achieving operational efficiencies
requires more than reducing costs, high
utilization mandates, strict inventory control and
rationalizing capacity or manpower.

There is no denying the usefulness of

these steps, but the key is to ensure
every bit of the supply chain is
performing towards meeting a single
objective right product at the right
place in the right quantity at the right
time.
This requires all operational entities
within the enterprise to be integrated
through business processes and
technological enablers.

PREAMBLE: SCM
Supply Chain Management exists to an end
satisfied customers at the optimum cost.
And as markets and businesses have evolved,
supply chains have become more complex,
more global and a more critical business
function than ever before.
At the same time, many leading firms have
realized that a well run supply chain can be a
source of distinct competitive advantage in the
marketplace, and have been in the forefront in
adopting practices that deliver superlative
efficiencies in their supply chain functions.

PREAMBLE: SCM
While many have been successful in
optimizing important supply chain
functions, a few have managed to
make their entire supply chain
behave as a single linked entity
from end customer delivery to raw
material procurements to achieve
truly synchronized operations.

Supply Chain Process

Integrated , coordinated network of value
delivering business processes that procure
raw materials, transform them into final
products, services and delivers the product to
the customers
Procurement
Manufacturing/assembly
Inbound logistics
Warehousing
Distribution

Outbound logistics

Supply Chain Management

Processes
Supply Chain Management is the management of eight
key business processes
1. Customer Relationship Management
2. Customer Service Management
3. Demand Management
4. Order Fulfillment
5. Manufacturing Flow Management
6. Procurement
7. Product Development and commercialization
8. Returns
Key requirement for successful implementation of
supply chain management are executive support,
leadership, commitment to change, and
empowerment.

 Different aspects of SCM which have

received much attention in traditional
production and operations management
community:

Inventory control,
forecasting,
transportation logistics,
distribution, and
procurement

In the first half of the

twentieth century industry
replaced agriculture, in the
second half of the twentieth
century service has replaced
manufacturing -and right
now, the knowledge industry is
beginning to replace the others.

George
Kotzmetzk

Introduction
*What is Supply Chain Management?
* Why is Supply Chain Management important?
* The origins of Supply Chain Management
*
*Important Elements of Supply Chain

Management:
- Purchasing
- Operations
- Distribution
- Integration
* Strategies for Supply Chain Management
* Future Trends in Supply Chain Management

What is a Supply Chain?

A supply chain consists of the flow of products and
services from/to:
--Raw materials manufacturers
--Intermediate products manufacturers
--End product manufacturers
--Wholesalers and distributors
--Retailers and,
--End customers

Connected by agents, transportation and storage activities,

and
Integrated through sharing of information, planning, and
processing activities\

Examples???

Typical Supply Chains

Production

Distribution

Purchasing Receiving Storage Operations Storage

Typical Supply Chain for a

Manufacturer

Supplier
Supplier

Supplier

Storage

Mfg.

Storage

Dist.

Retailer

Customer

What is Supply Chain

Management?
Here are two definitions:
The design and management of seamless, value-added
process across organizational boundaries to meet the real
needs of the end customer
-- Institute for Supply Management
Managing supply and demand, sourcing raw materials and
parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management,
distribution across all channels, and delivery to the
customer
-- The Supply Chain Council

Supply chain management (SCM) holds

promise for not just improving productivity
but also competitiveness.
SCM has to be leveraged for corporate
Indias gain without delay
In consumer durables, the entry of MNCs
has increased competition and SCM is
perceived as the vital factor, which
differentiates failure from success.

SCM Offers Opportunities for:

Reduction in costs across functions
Better planning for purchase and
production
More efficient use of capital
A $50 billion (13% of our GDP)
opportunity for a variety of services
Trucking, warehousing, IT, etc.

Most leading companies in India have an

SCM drive in place.
Source:ETIG-PwC SCM Survey 2002

Supply Chains in India

Sony India managed to reduce its

inventories by 70% just six months
after it began its SCM initiative

Maruti has wired all its suppliers

together and 60% of business
transactions are now happening online

Source: Pulling Power, DATAQUEST; 31 October 2001.

Supply Chains in India

Samsung manages a 5,000-dealers' online

network with just 15 employees

Mahindra & Mahindra's tractor division

aims for a reduction of 48% in inventories,
30% in logistics costs and a cutback in
production cycle from a month to a week

Source: Pulling Power, DATAQUEST; 31 October 2001.

Supply Chains in India

All these companies have one thing in
common.
They are among the early adopters of Supply
Chain Management systems in the
country
They went out all by themselves, setting a
path for others to learn from.
Source: Pulling Power, DATAQUEST; 31 October 2001.

What is new in SCM?

Two dimensions which differentiate
SCM from traditional concepts:
Organizational Integration and

Flow Coordination

Stated simply, a supply chain is a network of

entities that starts with the suppliers
suppliers and ends with the customers
customers for production and delivery of
goods and services.

Competitiveness
Customer service
Integration:

Coordination:

Choice of partners

Use of information and

communication
technology

Network organization
and inter-organizational
collaboration

Process orientation

Leadership

Advanced planning

Foundations:
Logistics, marketing, operations research, organizational theory,
purchasing and supply
: Fig. House of SCM

Supply Chain Building

Blocks
Structural

Logical

IT / ITEC
Informational

Structural Building Blocks

Suppliers
Manufacturing / Assembly Plants
Warehouses
Distribution Centers
Retailers / Customers
Logistics Network
Inbound
Outbound

Customers Orders

Example of a Typical Supply Chain: IBM Europe PC Supply Chain

Warehouse

Port

PC Assembly
Plant

Suppliers
(International)

1.2 Million PC/Yr.

Glasgow U.K.

Retailers

13 Transshipment
Country-wide
Points (TPs) in Europe Distribution
Centers (DCs)

Logical Building Blocks

STRATEGIC

TACTICAL
OPERATIONAL
Procurement

Logistics

Manufacturing

Distribution

Logistics

Order/ Product Flow through Supply Chain Functions

Products

Orders

Order Management

Channel A
Orders

Channel B

Orders

Customer

Orders

Manufacturing

Parts

Products

Products
Product
Distribution

Production
Plans

Part Supply

Products

Demand
Forecast

Supply Planning
Component
Requirement

Channel C

Demand Planning

Conclusion
Efficiency

Responsiveness
Supply chain structure

Inventory

Transportation

Facilities

Information

Drivers of Supply Chain Performance

Source: Chopra & Meindl/Logistics Strategy

Elements of Supply Chain Management

R

Inbound
Sourcing

Logistics

Manufacturing

Outbound

After Market

Logistics

Service

n
s

a
t
e
r
I
a
l
s

Vendor Number,
Location, Capacity
etc
Product design
support
Tooling design
and supply

Spot market
purchase or
partnership

Warehouse
Number,
Location, Size,
Function etc
Transportation
mode
In-house vs
contract carrier
Inventory/safety
stock levels

Delivery schedules

AS/AR systems

Supplier
development

Vehicle
dispatching

PO tracking

Bar coding

EDI links

Plant Location(s)

DC Location(s)

Capacity Levels

DC functions
and size

Number &
location of service
centers

In-house vs
contract carrier

Function and
size

Inventory/safety
stock levels

AS/AR systems

Spares inventory
level and
locations

Package
engineering

Service fleet size

and equipment

EDI customer
links

Failure analysis

Shipping
schedules

Work force
levels

Process
Technologies
Product &
process
development
Maintenance
programs
WIP targets
Workforce levels
Robotics
CAD/CAM/CAE

Data mining

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