SCM INFRASTRUCTURE

PRADEEP KUMAR. M MBA (FT), S3 SMS, CUSAT

SCM
A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.

SPECIALIZATIONS IN SCM

Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and nonasset-based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management.

Implementation Aspects of SCM

SCM implementation is one of the most difficult projects a company undertakes. If it is implemented right, it will have a huge savings. If not, it can even break a company. A successful implementation of an SCM project needs both Breadth of knowledge (Managerial) and Depth of knowledge (Technical).

SCM Planning
In the planning stage, a detailed plan of implementation is drafted (including budget and schedule), the infrastructure that will support the program is established, and the resources necessary to begin the plan are earmarked and secured.

A supply chain typically includes the following functions.

Sourcing and procurement of materials Inventory management

Manufacturing
Warehousing Distribution

Some factors to be considered in sourcing:

Replenishment lead time On-time performance Supply flexibility Delivery frequency/minimum lot size Inbound transportation cost

Pricing terms
Design collaboration capability

SCM Networking
Public networks.

Private networks

Electronic Data Interchange ( EDI ) Electronic transmission of data between a firm & its supplier Purchase requisitions, purchase orders, acknowledgements, order status & tracking and tracing information Integration between buyers and sellers Quick, accurate and interactive communication Internet & B2B Procurement Overcomes compatibility issues of EDI Easy exchange of files and information B2B transactions over $1 trillion in 2005

 Organizational infrastructure--how business units and functional areas are organized; how changemanagement programs are led and coordinated within the existing organizational structure.

 There are four key enablers for SCM initiatives: organizational infrastructure, technology, and strategic alliances and human resources management.

Technology
Technology has been at the center of changes taking place that affect the supply chain. When technology is mentioned most people immediately think information technology, but it went beyond information. Therefore technology can be presented in two parts: information technology and manufacturing and materials management technology.

Facilities
Facilities are the actual physical locations in the supply chain network where product are stored, assembled or fabricated. The two major types of facilities are : Production sites(factories) Storage sites(warehouses)

Inventory
In SCM the inventory encompasses all the raw materials, work in process, and finished goods within a supply chain. Changing in the inventory policies can dramatically alter the supply chains efficiency & responsiveness. There are three basic decisions to make regarding the creation and holding of inventory:

 1. Cycle Inventory: This is the amount of inventory needed to satisfy demand for the product in the period between purchases of the product. 2. Safety Inventory: inventory that is held as a buffer against uncertainty. If demand forecasting could be done with perfect accuracy, then the only inventory that would be needed would be cycle inventory. 3. Seasonal Inventory: This is inventory that is built up in anticipation of predictable increases in demand that occur at certain times of the year.

Transportation
The transportation entails the moving of inventory from one point to another point in the supply chain. The transportation can take the form of many combinations of modes & routes, each with its own performance characteristics. There are six basic modes of transport that a company can choose from:

also the slowest mode of transport. It is limited to use between locations that are situated nest to navigable waterways & facilities such as harbor & canals.

Ship which is very cost efficient but

Rails which is also very cost efficient but can be slow. This mode is also restricted to use between locations that are served by rail lines.
Pipelines can be very efficient but are restricted to commodities that are liquid or gases such as water, oil & natural gas.

mode of transport. Trucks can go almost anywhere. The cost of this mode is prone to fluctuations though, as the cost of fuel fluctuates and the condition of road varies. Airplanes are a very fast mode of transport and are very responsive. This mode is also very expensive mode & is somewhat limited by the availability of appropriate airport facilities.

Trucks are a relatively quick & very flexible

Electronic transport is the fastest mode of transport and it is very flexible & cost efficient. However , it can be only be used for movement of certain types of products such as electric energy, data, & products composed of data such as music, pictures & text.

Information

Information serves as the connection between various stages of a supply chain, allowing them to coordinate & maximize total supply chain profitability. It is also crucial to the daily operations of each stage in a supply chain for e.g. a production scheduling system. Information is mainly used for the following purpose in a supply chain:

Sourcing

Sourcing is the set of business processes required to purchase goods & services. The managers must first decide which tasks will be outsourced & those that will be performed within the firm. The Components of sourcing decisions

significant sourcing decision for a firm is whether to perform a task in-house or outsource it to a third party. This decision should be driven in part by its impact on the total supply chain profitability.

In-House or outsource: The most

Supplier selection: It must be decided on the number of suppliers they will have for a particular activity. The must then identify the criteria along which suppliers will be evaluated & how they will be selected like through direct negotiations or resort to an auction.

Inventory
Inventory: exists at every stage of the supply chain as either raw materials, semi-finished or finished goods. Purpose: to buffer against any uncertainty that exists in the supply chain Inventory Management Systems Ownership of Inventories Specific Contents of Inventories Locations of Inventories Tracking Order Quantity Order Timing

Vendor Managed Inventory (VMI)

Customer trusts the vendor to manage the inventory: Vendor monitors customers inventory and controls inventory replenishment & decides when to deliver, how much to deliver and how to deliver VMI transfers inventory management from the customer to the supplier Provides assurance that product will be available when required

Manufacturing
Application of tools and a processing medium to the transformation of raw materials into finished goods.

Just In Time (JIT) Production Systems

take a demand pull approach in which goods are only manufactured to satisfy customer orders purchase of goods or materials is in such a way that a delivery immediately precedes demand or use Reduces manufacturing lead time and setup time Builds strong supplier relationships

Flexible Manufacturing Systems (FMS)

Use flexible automation in which several machine tools are linked to the material handling system A central computer controls all aspects of the system Reduced labour Shorter response time Better control over manufacturing process

Computer Integrated Manufacturing (CIM)

Incorporates all engineering functions of CAD/CAM and business functions of the firm Maintains the operational and info-processing functions Connects various computerized systems to a single multi-functional system Expansion affected by high cost & lack of standardized interfaces

Materials Requirement Planning (MRP)

Used in complex manufacturing organizations Backward scheduling process that estimates requirement of materials Advanced planning & scheduling Helps in coordinating orders from external and internal sources Reduced investment in inventory Manufacturing Resources Planning ( MRP II )

Distribution
Main activity of the supply chain that brings the finished products to the end customers Companies make use of

Distribution Centres Transportation

Distribution Centre
A warehouse or other specialized building with refrigeration or air conditioning which are supplied by transport, such as aircraft, truck, rail or ship, and then re-distributed to retailers or wholesalers Foundation of a retailing network Allow a retail location to stock vast numbers of products without high transportation costs Large distribution centers service 50-125 stores

some named major manufacturers have achieved a common protocol of data operations, by distributing without cost to their respective suppliers, appropriate SCM communications software. Advises firms to retain their electronic data interchange SCM tools, until Web-based SCM is well established into the manufacturing infrastructure.

Supply Chain Management Software

As global markets grow increasingly efficient, competition no longer takes place between individual businesses, but between entire value chains. Collaboration through intelligent ebusiness networks will provide the competitive edge that enables all the participants in a value chain to prevail and grow.

REFERRENCES
www.wikipedia.com
http://www.amrresearch.com http://www.capsresearch.org/ http://www.scmexpertonline.com http://www.sandiego.edu/business/centers/supply_chai n_management http://www.scmr.com/article/CA6389475.html