UNIT-4

Syllabus
• Overview of supply chain management, conceptual model vs
Smart and Sustainable Model of SCM, functions and supply
chain drivers, inbound and outbound logistics, Bullwhip effect
in SCM, push and pull systems, role of IT in SCM, GVC. Lean and
agile manufacturing
 Supply Chain Management
Supply Chain management covers the flow of goods from suppliers
through manufacturing and distribution chains to the end users.
Supply chain management is a set of approaches utilized to
efficiently integrate suppliers, manufacturers, warehouses, and
stores, so that products can be produced and distributed in the
right quantities, to the right locations, and at the right time, in
order to minimize system wide costs while satisfying service level
requirements. This is why Demand chain management is the
modern technique of supply chain management.
[Link]
Conceptual model vs Smart and Sustainable Model of SCM

• A conceptual model of SCM is a theoretical framework that

describes the key components, relationships, and processes
within a supply chain. It provides a structured way to
understand how goods, information, and finances flow
between different entities in the supply chain.
• Linear Flow: Typically involves a one-way, step-by-step
movement from supplier → manufacturer → distributor →
retailer → customer.
 Key Features:

– Focus on efficiency and cost reduction.

– Limited real-time visibility.
– Siloed operations (each part works independently).
– Minimal adaptability and responsiveness to disruption.
– Reactive rather than proactive in crisis situations.
– Sustainability considerations are often minimal or absent.
 Smart Supply Chain Management
• A smart and sustainable model of Supply Chain Management
(SCM) integrates advanced technologies and environmentally
responsible practices to optimize resource utilization, reduce
waste, and improve transparency and efficiency throughout
the entire supply chain, from sourcing to end-of-life.
 Smart and Sustainable Model of SCM
• Integrated & Circular Flow: Data, materials, and resources circulate and are
interconnected across the entire supply chain.
• Key Features:
– Real-time Data Integration: IoT, AI, and Big Data analytics for smarter decision-making.
– Circular Economy: Emphasizes reuse, recycling, and waste minimization.
– Resilience: Built-in adaptability to disruptions like pandemics, geopolitical risks, etc.
– Automation: Use of robotics, drones, and autonomous systems.
– Green Logistics: Emphasis on carbon footprint reduction, clean energy, and sustainable
packaging.
– Collaboration & Transparency: High levels of collaboration between all partners including
customers.
– Ethical & Social Responsibility: Focus on fair labor, community impact, and compliance.
TRADITIONAL MODEL TO SMART, SUSTAINABLE SYSTEM IN SCM

TRADITIONAL MODEL SMART & SUSTAINABLE MODEL

 TO BE CONT….
TRADITIONAL MODEL SMART & SUSTAINABLE MODEL
• Focuses on – production and logistics • Customer engagement, improving product
only value and operational efficiency
• Approach- Push system • Pull system
• Limited interaction with customers • More customer engagement
• Manual interaction between parties • Digital technology
• Less flexibility • Higher flexibility, agility
• Higher cost • Cost effective due to automation and
scalability
• Longer lead time • Shorter time cycle or lead time
SMART & SUSTAINABLE MODEL
 Eliminating waste

Eliminate Non Value Added activities

Suppliers Value Chain Consumers

Reduce Lead Time

 Global Value Chain
• A Global Value Chain (GVC) refers to the interconnected
activities involved in producing and distributing a product or
service, with stages often spanning multiple countries, from
design and sourcing to manufacturing, marketing, and
distribution.
Global Value Chain
 Key Characteristics of Global Value
: Chains
•International Production Sharing: GVCs involve breaking down the
production process into various stages and tasks, with different
countries or firms specializing in specific aspects.
•Value Addition at Each Stage: Each stage of the GVC adds value,
whether through design, manufacturing, assembly, or marketing.
•Cross-Border Activities: GVCs involve activities that cross national
borders multiple times, as raw materials, components, and finished
goods move across countries.
•Interconnected Networks:GVCs are characterized by intricate
networks of suppliers, manufacturers, and distributors collaborating to
create goods and services.
•Examples: A smartphone assembled in China might include graphic
design elements from the United States, computer code from France,
and silicone chips from Singapore.
iphone- SCM
Diamond- SCM
 Why are GVCs important?
•Economic Growth and Development: GVCs can drive economic growth, job
creation, and increased living standards by allowing countries to specialize in
activities where they have a comparative advantage.
•Trade and Integration: GVCs are a major driver of international trade and
help integrate developing countries into the global economy.
•Productivity and Innovation: Participation in GVCs can lead to increased
productivity and technological advancements, as countries learn from and
collaborate with other firms and countries.
•Increased Efficiency: GVCs can lead to more efficient resource allocation
and production, as companies can focus on their core competencies and
outsource other activities.
•Challenges:While GVCs offer many benefits, they also present challenges,
such as ensuring fair labor standards, protecting intellectual property, and
addressing environmental concerns.
Five Supply Chain Drivers
 Main functions of Supply Chain Management

• Procurement & Sourcing

• Production & Manufacturing
• Warehousing & Inventory Management
• Transportation & Logistics
• Order Fulfillment & Distribution
• Customer Service & Relationship Management
• Sustainability & Green Supply Chain Management
 Flows in Supply Chain Management

• Product Flow
• Value Flow
• Information Flow
• Cash Flow
• Flow of Risk
 Push vs Pull
• In supply chain management, a "push" strategy involves
producing goods based on forecasts and pushing them through
the chain, while a "pull" strategy triggers production only when
actual customer demand is detected.
 Push Strategy:

•Production Triggered by Forecasts: Production starts

based on predicted demand, not actual orders.
•Inventory Focus: Emphasizes building up inventory in
anticipation of future demand.
•Suitable for: Products with predictable demand, longer
shelf lives, and where economies of scale are important.
•Example: FMCG companies like Coca-Cola, which predict
demand and push inventory to retailers.
•Potential Drawbacks: Risk of overstocking if forecasts
are inaccurate, leading to higher inventory costs.
 Pull Strategy:
•Production Triggered by Demand: Production is initiated
only when customer orders are received.
•Inventory Focus: Minimizes inventory by producing only
what's needed.
•Suitable for: Products with unpredictable demand, shorter
shelf lives, or those that are highly customized.
•Example: Toyota's production system, which relies on
signals from downstream stages to trigger production.
•Potential Drawbacks: Risk of stockouts if demand surges
unexpectedly or if the system is not robust enough.
Role of Information Technology (IT) in SCM
• Use of bar-coding in logistics systems
• Use of Electronic Data Interchange (EDI) to communicate
between branches
• Enterprise Solutions like Enterprise resource planning (ERP)
• Use of Material Requirements Planning
• Internet and Web Services for communication between
partners
 Benefits of IT application in SCM
• Streamlining—Communicate and collaborate more effectively with
suppliers and others worldwide.
• Connecting—Make the connection between what your customers
want and what you produce.
• Analyzing—Analyze your supply chain and manufacturing options and
choose the plan that makes best use of your assets.
• Synchronizing—Synchronize the flow of your batch production by
managing the capacity of vessels, tanks, and lines-and the flow
between them.
• Designing—Create the optimal supply chain network and adapt the
network to keep pace with changes in your business.
 To be cont….
• Transforming—Transform processes inside the warehouse
and across the supply chain to meet demands for new
efficiencies.
• Understanding—Get a better understanding of your
warehouse labor activities and implement the changes you
need to optimize worker performance.
• Maximizing—Maximize warehouse profits by using advanced
costing, billing, and invoicing capabilities.
• Optimizing—Optimize your day-to-day fleet performance to
reduce costs and improve customer satisfaction.
 Meaning of Reverse logistics
• Reverse logistics is the opposite of the standard supply chain.
The goods move from the end user back to the seller or
manufacturer. It can include returns from e-commerce and
retail, as well as components for refurbishing and
remanufacturing. The products may be resold or disposed off
permanently.
Process steps in Reverse Logistics
 Relevance of Reverse logistics
• The amount of product returns can be very high, with some
industries experiencing returns at over 50% of sales.
• Sales opportunities in secondary and global markets have increased
revenue generation from previously discarded products.
• End-of-life take-back laws proliferated in foreign countries requires
businesses to effectively manage the entire life-cycle of the product.
• Consumers have successfully pressured businesses to take
responsibility for the disposal off their products that contain
hazardous waste.
 Application Area of RSCM
• Printing industry: Repurchase of old edition, un-sold books.
• Computer industry: Resale due to fast moving technology
• Automobiles: Resale due to new models availability e.g. Maruti
True Value scheme
• Electronic industry: Mobile phones, televisions etc. repurchased
to recover electronic parts
Integrated Supply Chain Management
Integrated supply chain management refers to an enterprise resource planning
approach to SCM. A business facilitates relationships with all of its suppliers
and manages all distribution and logistics activities through a centralized
system rather than having multiple systems within the organization.
INTERNAL INTEGRATION: Internal integration refers to linking of internal
cross-functional integration within the company like integration between
purchasing and procurement (buy), production planning and control (make),
warehouse management (store), transport management (move) and
customer relationship management (sell).

• EXTERNAL INTEGRATION: External integration refers to linkages of external

players such as suppliers, distributors, wholesalers, retailers, customers,
outsourced logistic supporters and other external stake holders.
 Inbound &outbound SCM
• Inbound logistics cover anything that your company orders from
suppliers, which can include tools, raw materials and office
equipment in addition to inventory. Outbound logistics, on the
other hand, deals almost exclusively with your end products. Tools,
materials and equipment only fall into the outbound category if
your company sells them as a main line of business. Inbound
logistics for a furniture manufacturer, for example, can include
wood, cloth materials, glue, nails and safety glasses, while the
manufacturer's outbound logistics would likely only cover finished
furniture products.
 Classification of Logistical Activities
Logistics (or Logistical Activities) may be Broadly Classified into Two Categories:
 Inbound Logistics
 Outbound Logistics
 Bullwhip Effect
• The bullwhip effect (or the Forrester Effect) is a supply chain
phenomenon where small fluctuations in consumer demand
are amplified as they move upstream, leading to larger swings
in production and inventory levels.
LEAN VS AGILE MANUFACTURING
 Lean

 By the early 60's Toyota had

developed a system to design,
manufacture and market a
product that changed the World.

 It allowed them to make vehicles

of a higher quality, in a shorter
time frame, at lower cost with
more variety; these tools can be
used to improve almost any
business.

 [Link]
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Lean manufacturing is a philosophy or a systematic
approach to identify and eliminate waste (non-value
added activities) through continuous improvement
by flowing the service at pull of the customer in
pursuit of perfection.

Thus its targeted for elimination.

Working from the perspective of the client who
consumes a product or service.
 Principles of Lean
• 1. Eliminate Waste
• 2. Build Quality In
• 3. Create Knowledge
• 4. Defer Commitment
• 5. Deliver Fast
• 6. Optimize the Whole
 Lean Thinking – Waste/Muda/NVA
MOTION TRANSPORT
REWORK

OVERPRODUCING
INVENTORY
WASTE

OVER
INTELLECT

G
PROCESSING

TIN
I
WA
 LEAN eliminates non-value added activities

Value adding
5%
Optimize
Primary focus of “traditional”
efficiency improvements
Necessary but
not value adding 35%
Minimize

Primary focus of
LEAN improvements

Non value
adding = 60%
WASTE
 LEAN eliminates non-value added activities
Primary focus of “traditional”
efficiency improvements
Value Adding
Optimize
5%
Necessary but not Value
Adding Non Value Adding

Minimize Eliminate
30%

65%

Primary focus of
LEAN improvements
 Eliminating waste

Eliminate Non Value Added activities

Suppliers Value Chain Consumers

Reduce Lead Time

 Higher
flexibility Less
stocks Better
service  Reduced
Complexity Less
cost Improved
Freshness
 Working More Efficiently

Work Work Waste more work

Waste

Work Waste
Work

1. Recognizing waste
Waste
2. Removing waste
Work Work 3. Increase value
Remain-
Waste added work
ing
waste
 click The Concept

Value Waste
Total Time

5%- 15% 85%- 95%

Value
Waste
Lean drives -Waiting
Elimination of waste & -Overproduction
Is Goal Oriented rather than -Rework/Defect
tool oriented -Motion
-Transportation
-Inventory
-Extra processing
[Link]
-Intellect
 Agile manufacturing
• Agile manufacturing is a term applied to an
organization that has created the processes, tools,
and training to enable it to respond quickly to customer needs and
market changes while still
controlling costs and quality.
• Agile manufacturing is seen as the next step after Lean
manufacturing in the evolution of production methodology.
[Link]
 Principles of Agile
• 1. Highest priority is customer satisfaction
• 2. Welcome changing requirements
• 3. Frequent delivery of software
• 4. Business people & developers cooperating daily
• 5. Build projects around motivated people
• 6. Face-to-face conversation is best
• 7. Progress measured by working software
• 8. Sustainable development pace
• 9. Continuous attention to technical excellence
• 10. Simplicity
• 11. Self-organizing teams
• 12. Regular reflection & adaptation
 Difference
Lean Agile
• NO Customization Customizable
• Only 1 or 2 versions of product Numerous options are
available
• Minimum Inventory Inventory Buffers
• Perfect Quality Acceptable Quality
• Mass Production Mass Customization
• Emphasis on efficient Emphasis on continuous change
use of resources
• Smooth production schedule Production schedule is
responsive to change