Supply Chain: The supply chain encompasses all activities associated with
the flow and transformation of goods / services from the raw materials stage
(extraction), through to end users, as well as the associated information
flows.
SCM is the integration of all the activities in the supply
chain to achieve a sustainable competitive advantage. Supply Chain can be broadly
classified of comprising of three networks – Supplier, Firm and Distribution.
Logistics: Logistics, also called as Physical distribution, focuses on
the physical movement and storage of goods and materials. Logistics is that
part of the supply chain process that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of goods, services,
and related information between the point of origin and the point of consumption.
Elements of Supply Chain : Customers, Producers, Suppliers
Suppliers > Produers > Customers / Suppliers >
Manufacturing Facility > Customer
Three
distinct phases of evolution of SCM:
Pre-1970
era:
- Supply Chain was not considered as a competitive unit. Companies seek more profit by maneuvering their suppliers and customers.
- Scientific methods like EOQ and SPC were applied.
- Companies attempted at Vertical integration – themselves
1970 – 1980 era :
- Holding inventory becomes key due to Oil shock
- TQM and JIT practice becomes popular in Japan
- Distribution is not yet the focus area
- MRP systems gain popularity in US and Europe
Post 1980 era :
- Inventory profits dry up as inflation reigns in US manufacturers embrace JIT philosophy. JIT pushes inventory upstream.
- Lower setup times, lower batch quantities result in reduction in lead times and drastic improvement in customer responsiveness.
- Suppliers and customers considered as part of the organization network. We against them philosophy fades away.
- MRP systems give way to MRP II systems, ERP and then to advanced supply chain systems involving optimization.
21st Century era :
- Advanced Supply Chain Planning methods due to globalization
- Combination of Advanced MRP for finished goods and critical assemblies and JIT for raw material / common assemblies inventory
- Evolution of new philosophies like TOC (Theory of constraints), Constraint based planning, Global Supply chains, Global Procurement, Hub and Spoke distributions etc.
Business Processes that connect various
elements in the SCM:
- Design to Release: Product development and Engineering
- Supply Chain Planning: Purchase planning & Production Planning
- Procure to Pay: Sourcing and Purchasing of the components
- Production Plan to Schedule: Detail scheduling of the resources and jobs / batch
- Schedule to Build: Production / Manufacturing of the Product
- Order to Cash: Order orchestration and Order fulfillment
- Demand Management: Forecasting and Demand planning
- Customer Relationship Management: Maintaining and increasing the customers
Production Environments:
- Design / Engineer to order: ETO environment caters to specific customers’ requirements. The process starts with the preparation of unique / highly customized engineering designs of the product, with the close involvement of the customer. Delivery lead is maximum in this environment. Typical product topology is project based.
- Make to Order: In this environment, the final product is made after the receipt of the customer order. Standard components are purchased / manufactured and are usually stocked as raw material inventory. On receipt of customer orders, the product is made from these standard components and the process may include minor customizations of the design. Lead time is less than Engineer to order due to lack of significant change in the design. Production is project based or in small batches.
- Assemble to Order: In this environment, the standard components and sub-assemblies are manufactured and stocked in the form of component / sub-assembly inventories. Delivery lead time is the time required to assemble and ship the product. Production is in batches like that of Automobile industry.
- Make to Stock: In this environment, the products are completely manufactured and the finished goods are stocked as end item / finished goods inventory. On the receipt of customer orders, the goods are packed and shipped to the customers and hence the delivery lead time in this environment comprises of only the shipping time.
