YTread Logo
YTread Logo

Introduction to Supply Chain Management

Introduction to Supply Chain Management
good afternoon friends we are going to start our discussions on a very important topic for managers of the day that is

supply

chain

analytics

supply

chain

analytics is a combination of data analytics into the

supply

chain

management

supply

chain

management

we all know is one of the most important aspect of business nowadays we know some of the popular names of Fortune 500 companies like Walmart Dell and similarly 7-eleven etcetera from Japan Alibaba from China these companies are known because
introduction to supply chain management
of their

supply

chain

competence and nowadays it is believed that

supply

chain

is one such area in the organization which can provide lot of competitive advantage to a particular organization if you go to the website of Harvard publishing you will find maximum cases in the area of

supply

chain

management

and I come particularly from the domain of operations

management

and now many of us feel that

supply

chain

management

which was once upon a time considered to be a subset of operations

management

and nowadays the situation is almost reversed the

supply

chain

has become a umbrella term and operation

management

has become a subset of

supply

chain

management

so therefore the course on

supply

chain

management

and using the data analytics technique into the

supply

chain

management

so that name has come

supply

chain

analytics in the first lecture we will have some kind of

introduction

of

supply

chain

that evolution of

supply

chain

over last hundred years then what are the different
important decision phases in

supply

chain

there are different ways which we can study the

supply

-

chain

those process views we will see in our discussion in first two lectures which are the introductory lectures of this course then we will also see what are the importance of various types of flows in the

supply

chain

we will also see some very important examples which make

supply

chain

s so popular and then we also see the strategic aspect of the

supply

chain

management

and then we see that how
can we achieve that strategic fit with respect to the

supply

chain

management

and the competitive strategy of the organization so in first two lecture we will have a broad overview of this subject and we will see that how

supply

chain

management

has become the use of data analytics and particularly the present form of

supply

chain

management

where most of the decisions we are taking with the help of real-time data so let us start with understanding of what is

supply

chain

now

supply

chain

has
become such a common term that we find so much mention of this term in media reports we find the mention of this term in parliamentary debates we find the mention of this term in day-to-day discussions also so many a times we may wonder whether it is a academic term or it is more a term of media and reports but now we are going through a formal course of

supply

chain

management

and therefore we it will be very relevant for us to understand the real meaning of

supply

chain

and what does it mean
and what are the meanings of

supply

chain

management

further now as we can see that

supply

chain

involves all the stages in the fulfillment of the requirement of the customer and these stages may include factors suppliers transporters warehouses retailers and customer himself it is very important to understand all the time and I will be emphasizing all through this course that customer is a very much integral part of

supply

chain

all the time please we need to ensure that customer is always
considered whenever we are taking a decision related to

supply

chain

whenever we are talking of

supply

chain

so customer is always an integral part of

supply

chain

many a time we feel that up to retainer is our

supply

chain

and customer is not the part of

supply

chain

but now onwards once we are going through this formal course please remember that customer is always a very integral part of

supply

chain

the role of

supply

chain

is integration of demand and

supply

this is very important demand
comes from the customer side and

supply

come from all these people manufacturer suppliers transporters warehouses retailers they all help us in fulfilling the demand of the customer so proper integration of demand and

supply

that is very much necessary for customer satisfaction as well as for the profitability of the service providers so therefore the importance of this subject is becoming more and more in the coming competitive times and within each company within each company the

supply

chain

includes all functions involving product development marketing operations distribution finance customer service after sales services etc many of us may feel that

supply

chain

is a more related to operations

management

but if we talk in a very holistic manner nowadays it is no longer a specific to operations rather it is more holistic concept and we require equal involvement of product development the involvement of marketing the involvement of distribution the involvement of finance and
after-sales services in achieving the objectives of

supply

chain

management

because as I am saying that it is integration of demand and

supply

so the demand side information the demand side data is normally captured by the marketing people and on the basis of that data that information the product development team the operations team they develop new products they ensure the

supply

of those products to the customers and then further wherever the customer is ensuring the

supply

to that very point
to that very place is the responsibility of distribution team so it is very important that the scope of

supply

chain

management

to be understood in a wider perspective and just not limited to the operation sky so therefore therefore we will see in our coming discussion that

supply

chain

management

has all three verticals of decision making it is deal at the strategic level also it is deal at the tactical level also and it is deal at the execution level also because of involvement of almost all
introduction to supply chain management
the functions it is very much similar when we talk of integrated marketing when we talk of total quality

management

or when we come to this class of

supply

chain

management

we talk of involvement of all functions so this holistic city is very very important in modern

management

concepts and that is what we are trying to emphasize as I mentioned that customer is very much integral part of the

supply

chain

and the

supply

chain

includes movement of products from suppliers those are here in the left
side of the

supply

chain

to the manufacturer and to distributor and also includes movement of information ferns and products in both the direction we will see these things in a better pictorial manner in our coming slides with increasing competition it is a more appropriate nowadays to say that

supply

chain

is now changing into the form of a

supply

network or

supply

wave because when we talk of a

chain

it is linear like this but actually it is no longer a linear system you have many important
players at each of these locations and there may be a crisscross at each of these stations and therefore it is more appropriate to say that

supply

chain

is now becoming

supply

network or

supply

wave let's see these are some of the generic type of

supply

chain

s where you can see that in a very conventional type of normal

supply

chain

which we all know there is a manufacturer manufacturer is producing the goods these goods are coming to wholesaler wholesaler is distributing to large number of
retailers in the market and those products are coming to the customer this is a very conventional type of

supply

chain

and we all have used this type of

supply

chain

but nowadays you can also see you can also understand that there are

supply

chain

s where wholesalers are not there you have large retail houses like Big Bazaar like Reliance

chain

s like Walmart's we're probably wholesalers are not there and manufacturer directly

supply

ing these products through the detainer and retailer
those big retailers are directly

supply

ing these products to the and customers and then there are

supply

chain

s where manufacturer is directly distributing products to the customer for example BHEL take the example of BHEL BHEL is the manufacturer and the customers are State Electricity Board so if DHL is making a turbine so there is no wholesaler no retailer in between and in that

supply

chain

BHEL is directly distributing those products to the customers and customers so depending upon your
product to product depending upon the nature the unit cost and so many other factors you may have variety of

supply

chain

these are some of the generic type of

supply

chain

and the suitability of this

supply

chain

depends upon the type of products the type of customers the type of intermediaries you require but as I told you that these are very linear kind of arrangements these three which I have shown here these are very linear kind of arrangements but actually it is not so actually the
situation is like this where you have manufacturer but many wholesalers many retailers are there and these wholesalers and retailers are making a network kind of situation so these are

chain

s but what I have drawn on the board this is more like a network so this is

supply

chain

network so in the present environment in the present environment we say that

supply

chain

network is more appropriate than simply

supply

chain

and one more thing which I would like to emphasize in the beginning that
nowadays the competition is not between one organization to another organization it is not correct to say that Maruti in India is competing with Tata Motors rather it is more appropriate to say that

supply

chain

of Maruti is competing with

supply

chain

of Tata Motors so well

supply

chain

competes with another

supply

chain

and therefore for the success of the organization for the success of the organization it is very important that we develop the competence of entire

supply

chain

it is not the
competence of a single organization if apple is competing with samsung so it is not the apple and samsung directly but it is the result of entire

supply

chain

of Apple which is competing with the entire

supply

chain

of samsung because lot of wholesalers retailers and there are large number of players on the left-hand side of these manufacturers also so in our coming slide we will go to those also and then only then only this competition is taking place between one

supply

chain

and another

supply

chain

so these are some generic

supply

chain

s but as we go ahead in this course we will see more specific

supply

chain

s also know coming to a very specific example of a

supply

chain

where some customer is going to purchase some detergent at a Big Bazaar mall supermarket and let us see how things are happening in this real

supply

chain

those were the generic

supply

chain

s in the previous slide now this is an example of a real

supply

chain

know in this particular case you see customer is coming to
the Big Bazaar to purchase the detergent and Big Bazaar is keeping that detergent now how many different parties are involved in this entire process Big Bazaar is procuring the detergent from the Procter & Gamble no Proctor and nimble is manufacturing the detergent or any other manufacturer which is manufacturing the detergent it requires plastic producer it requires packaging it requires chemical manufacturer and they also like plastic producer is further requiring the supplier like
introduction to supply chain management
chemical manufacturer to get the plastic granules this packaging supplier this requires timber industry and paper manufacturer paper manufacturer is the supplier to the packaging industry and paper industry requires the timber industry and then again this chemical manufacturer which is required for making the detergent so now you see to get a product like detergent from the Big Bazaar and which is manufactured by some manufacturer like PNG and some one like that you have even timber industry in
that

supply

detail for a normal customer for a normal customer it is very difficult to realize that the detergent which I am purchasing from a big Bazaar mall is actually originating the

supply

chain

from the timber manufacturer or timber industry but when you see in a very holistic manner you will find that this entire

supply

chain

is there and now because of you can say limitation because our interest is not that much you can further find that there may be few suppliers before this chemical
manufacturer also there may be few other suppliers before this paper manufacturer also I have only listed the timber industry here but there may be some other suppliers also before this paper manufacturer so just to give you an idea that how real

supply

chain

a supplied Network looks like so you don't have only single supplier here rather you have a variety of suppliers

supply

ing different types of components differ no type in different types of raw materials to Procter & Gamble and then
it is going to make the final product and finally you get a packet of detergent at the big major mall so this way this looks very simple but there are so many individuals to whom we need to manage and therefore this

management

can provide a very important competitiveness to the organization going further this slide is very very important to understand that normally we feel or we normally in our day-to-day discussion are more concerned about the flow of product in the

supply

chain

but actually as
I told you in the beginning the second slide that in a

supply

chain

we are actually having the flow of three important elements and these three important elements are information product and firts you can see the arrows in both the direction in this slide just to tell you normally the primary thing which flows in the

supply

chain

that is product and product flows from the manufacturer side to the customer side product flows from the manufacturer side to the customer side but nowadays because of
environmental issues and because of so many other cost related issues lot of products also flow in the reverse direction also and therefore we have arrows with respect to product in both the directions you have example of LPG cylinders so filled LPG cylinders flow from the manufacturer to the but empty cylinders flow from the customer to the manufacturer for refilling you have glass bottles of Pepsi coke the filled in bottles flow from manufacturer to the customer but the empty bottles flow from
the customer to the manufacturer side so and in pharma in FMCG and in variety of these organizations you have expired products also so expired products flow from the customer side to the manufacturer side for proper disposal information is also very important information related to product availability flows from manufacturer side to the customer side but information related to what types of products are required in how much quantity these products are required that type of information flows
from the customer side to manufacturer side so that accordingly new products can be developed accordingly designs can be changed accordingly quantities can be adjusted for all those things this information flows in both the direction funds that is the third important flow which is there in the

supply

chain

normally the flow of funds the source of that is the customer customer is the only positive source of cash flow or front flow in this

supply

chain

but when we talk of reverse logistics when we
talk of products going from the customer side to the manufacturer side in that case the funds may flow from that side left side to the right side also so therefore the arrows in all three cases information product and funds are in both these direction but one thing is very important flow of information is independent flow of information is independent while flow of product and funds are related the direction of flow of products and funds is always opposite to each other if products are flowing
left to right so in that case funds will flow right to left and if products are flowing right to left in that case funds will flow left to right so these radicals are restricted directions and the flow of information is independent it can flow independently in both the direction so that is about three important flows in

supply

chain

normally normally most of our cost related diseases are linked with the flow of products that how the flow of product is taking place in your

supply

chain

but at the
same time when we are talking of

supply

chain

analytics the flow of information is equally important because nowadays we are moving for real-time decision-making of

supply

chain

and for that purpose the efficient flow of information efficient flow of data is very very important in this particular case so that our decision-making becomes more efficient more useful helping the

supply

chain

and helping ultimately the objectives of the organization now let us see what are the objectives typical
objectives of a modern-day

supply

chain

so modern-day

supply

chain

the objectives are to maximize the value which we are creating in the

supply

chain

the

supply

chain

value is actually the difference between what the final product which we are offering to customer is worth and the customer is giving how much for that and this value we can directly relate with the profitability of the

supply

chain

and just to give you the idea of the process of this value in the

supply

chain

this slide is very
helpful for us where you see now in this case you have three entities to the left side of the manufacturer and these are vendors these are suppliers to the manufacturer which we call them tier 1 supplier tier 2 supplier tier 3 suppliers they are

supply

ing raw materials they are

supply

ing components they are

supply

ing parts of assemblies etc to the manufacturer and most of the value addition from this right till the manufacturer finishes the final product is because of processing and the
manufacturing activities you are doing lot of processing you are doing painting you are fabrication and all these things are happening so incremental value addition is taking place because of all these activities once product leaves the manufacturer and it reaches wholesaler retainer and to the customer the value addition is taking place in these phases also but here the value addition is because of marketing and logistics activities so we need to see that finally when the product is reaches in
the hand of the customers so what is the value the product has acquired and how much customer is paying for that value and we want to actually maximize this difference so that that difference is actually the profitability of the organization so it is very very important to understand that we need to do value addition but for that value addition how much customer is ready to pay if you do excess value addition and for which it is difficult to get money out of the customers pocket then your
profitability will be certainly under the question mark so you need to see that you don't waste your resources in those things where you do not significant value and therefore the concepts will help us in achieving that objective for an example this slide gives you that if I purchase a mobile phone of micro maths at the price of rupees 10,000 and the

supply

chain

this is the revenue of the

supply

chain

when I am paying 10,000 rupees for purchase of a Micromax mobile so if I am paying 10,000
rupees so this is revenue of the

supply

chain

and

supply

chain

incurs cost in getting the information storage transportation the components the assembly etcetera so all that is the cost of

supply

chain

now the difference between this 10,000 rupees and the sum of all these cost is the profit of the

supply

chain

and throughout this course we are actually targeting to maximize this

supply

chain

profit so the

supply

chain

profitability is total profit to be shared across all stages of the

supply

chain

now it is also very important to understand that when we are talking of

supply

chain

so we are talking of total profit and that total profit is shared among all these

supply

chain

partners all these stages so I am NOT talking of profit of an individual stage or individual member of the

supply

chain

so

supply

chain

success should be measured by total

supply

chain

profitability and not profit of an individual stage and as soon as we start off individual stage the very objective of

supply

chain

the very objective of working together is defeated and then the purpose of the competing with

supply

chain

competing with

supply

network will be lost so all the time we need to keep this in mind and later on with the help of some data and some crime of modeling exercises we will see that how this a

supply

chain

profit which we are talking in totality is always more than we talk of profit at the individual stage so it is not a like a preaching statement it is it can be proved with the help
of some kind of quantitative data also now we also need to see the evolution of

supply

chain

over last hundred years and we will use our part two of the lecture to discuss the evolution of

supply

chain

management

so at the time we are just stopping here to discuss that what is the

supply

chain

and how we need to do business in a

supply

chain

environment with the help of coordination with the help of all entities working together and not to think for individual

supply

chain

individual gains or
individual profits it is a business with the help of coordination with the help of cooperation of all the members of

supply

chain

and therefore the success of

supply

chain

lies in the coordination

supply

chain

success lies in trusting each other and these are the fundamentals of

supply

chain

management

thank you very much