Module I: Global Supply Chain Overview Introduction & Importance of Supply Chain Management

Supply Chain Management encompasses every effort involved in producing and delivering a final product or service, from the suppliers supplier to the customers customer. Supply Chain Management includes 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, U.S.A.

Why SCM strategy is important for an Organization

Supply Chain Strategies are the critical backbone to Business Organizations today. Effective Market coverage, Availability of Products at locations which hold the key to revenue recognition depends upon the effectiveness of Supply Chain Strategy rolled out. Very simply stated, when a product is introduced in the market and advertised, the entire market in the country and all the sales counters need to have the product where the customer is able to buy and take delivery. Any glitch in product not being available at the right time can result in drop in customer interest and demand which can be disastrous. Transportation network design and management assume importance to support sales and marketing strategy. Inventory control and inventory visibility are two very critical elements in any operations for these are the cost drivers and directly impact the bottom lines in the balance sheet. Inventory means value and is an asset of the company. Every business has a standard for inventory turnaround that is optimum for the business. Inventory turnaround refers to the number of times the inventory is sold and replaced in a period of twelve months. The health of the inventory turn relates to the health of business. In a global scenario, the finished goods inventory is held at many locations and distribution centers, managed by third parties. A lot of inventory would also be in the pipeline in transportation, besides the inventory with distributors and retail stocking points. Since any loss of inventory anywhere in the supply chain would result in loss of value, effective control of inventory and visibility of inventory gains importance as a key factor of Supply Chain Management function.

Developing Supply Chain as a Competitive Tool for Customer Satisfaction and Corporate Profitability To highlight the importance of the concept of competitiveness in the supply chain and to present a conceptual framework for Supply Chain Competitiveness (SCC). The framework is based on supply chain activities, which are inputs, necessary for SCC and the benefits which are the outputs of SCC. A literature review is conducted on key supply chain competitiveness issues, its determinants, its various dimensions followed by exploration for SCC. Based on the insights gained, a conceptual framework for SCC is presented based on activities for SCC, SCC environment and outcomes of SCC. The information flow in the conceptual framework is bi-directional at all levels and the activities are interrelated in a global competitive environment. The activities include the activities of suppliers, manufacturers and distributors, giving more emphasis on manufacturers activities. Further, implications of various factors such as economic, politico legal, technical, socio-cultural, competition, demographic etc. are also highlighted. The SCC framework is an attempt to cover the relatively less explored area of supply chain competitiveness. It is expected that this work will further motivate researchers, academicians and practitioners to work in this area and offers conceptual help in providing a directions for supply chain competitiveness which leads to improvement in the supply chain and supply chain performance.

Supplier Network Development

Applications today manage multiple functions in Supply Chain. While applications primarily function as store house of information, database to capture all transactional information and history, they also drive and enable processes in the supply chain. Various technology platforms collaborate and function to enhance supply chain network functions today. Applications like ERP with various modules covering all functions like MM, SCM etc. Warehouse Management System, Warranty Management System and many more core business enterprise systems drive business processes in Supply Chain network. However these systems alone do not serve. Many more applications to support these systems are used as required depending upon specific process and needs of the business. Supporting soft wares may be used as stand alone applications or integrated with the ERP. Most often it is found that the systems are used as stand alone applications without having to integrate with ERP in lieu of the cost of integrating and the effort involved therein. Let us take the example of a supply chain situation of managing multiple vendor supplies in a warehouse owned and managed by a 3PL service provider on behalf of multiple vendors at the buyers plant location to effect Just in Time supplies in a VMI Distribution Center. Operations involve sellers at one end, the buyer at the other end besides in house operations and the freight services and logistics of inbound traffic. The 3PL warehouse has to be linked with Buyer to constantly publish updated inventory information and snapshots to buyers system to trigger call off for materials to be supplies as well as to trigger procurement cycle. 3PL warehouse system also needs to be talking to suppliers/sellers to give visibility to inventory to trigger replenishment cycles in sellers system. Further 3PL Operations need visibility to trace and track shipments in pipeline with the freight forwarder. The entire concept of business philosophy has move away from traditional model to being more customer oriented, driven by demand and based on collaborative and joint operational strategies across global markets. Supply Chain Networks have in recent times evolved from simple sequential and liner process networks to highly dynamic processes which call for information and sharing and visibility to be available across the network coupled with decision making on real time basis. Integrated approach to managing logistical tasks in a highly dynamic market place is necessary as it involves a number of internal as well as external business processes and agencies working in tandem to manage supply chains.

Logistics events at each stage of the network demands transactional exchange of information and documentation which further leads to decision making by various stake holders at each activity level on continuous basis. The technology has not only reduced supply chain timelines, but increased its reliance on system and application capabilities to manage critical processes All these multiple systems talking to each other in real time is made possible by communication enabling applications including interfaces, EDI, Internet, e-mail, Web Enabling of applications etc. Flow of Information and Cargo in a Supply Chain Network

Supply Chain Logistics Operations.

Logistics has aided and contributed to enabling global trade. Third Party Logistics Service Providers both at global levels and local levels form major partners to manage and offer Supply Chain services and the second major factor being the internet and IT technology which helps manage information and data ahead of or along with flow of materials and goods . Supply chain Consultants and professionals find it very essential to have knowledge of the operational field and how things work on the ground. Theoretical models can be effectively deployed only when realities on the ground are understood and adapted to. Take an example of DELL which has successfully implemented its Supply Chain strategy built around the concept of JIT manufacturing and Direct Marketing Dell has manufacturing facilities located in Austin-Texas, North Carolina, Miami, Florida that service US Markets. European Markets are serviced from its plants in Ireland and Poland. Asia and other sub continents are supported by its manufacturing facilities in Penang in Malaysia and Xiamen in China along with the latest factory setup in Chennai in India. South America is serviced from its Eldora do plant while the new plan in Brazil supports the African continent. One can imagine the complexities involved in designing procurement systems. Dell does not buy raw materials and components and maintain inventory. Dells vendors use third party service providers to setup logistics parks and distribution warehouses close to Dells plants and deliver materials just in time to the plant against an order for production which is triggers based on an order confirmed by the customer on the internet. Under procurement Logistics in this case, there are number of logistics service providers who play major part in ensuring smooth operations. Vendors are based out of Europe, Taiwan, China, Singapore, Hong Kong, Korea and Japan etc. Though the raw materials belong to the vendors until the time they are supplied to production shop floor, the design, planning and selection of logistics service provider is initiated and managed by Dell. Dell has appointed freight forwarders such as DHL, CEVA, Panalpina, UPS etc sector wise to pick up shipments from vendor locations, transport the collected shipments by road and consolidate inventories of all vendors in the freight forwarders consolidation warehouses situated at the gate ways in each country and ship out cargo by ships to the port of destination or airfreight shipments to the plant locations after completing exports and customs clearance formalities on behalf of vendors. While the shipments are in transit, the freight forwarders electronically transfer shipment information and documentations to their overseas offices or agents at the destination and keep Dell and vendors informed of the status of shipments.

Freight forwarders at the destination ports file advance shipment documents with customs and on arrival of cargo, complete customs formalities and custom cleared cargo is then transported to freight forwarders warehouse or customs bonded warehouse or to another designated third party warehouse which houses all inventories meant for Dell. The third party service provider who manages the inventories in his warehouse receives the cargo, unpacks the shipments from bulk skids to individual carton level and completes inbound formalities including up dating of inventories in its system and stocks the materials in designated rack locations. Both vendors and Dell are continuously kept informed of the data regarding shipments and stocks. The warehouse stocks inventories in the name of various vendors at SKU level. Most of the times these warehouses are situated adjacent to the plant or at close proximity. Upon receiving a production order from Dell, as per Bill of Material received through DELL ERP system, items are picked up, loaded into the supply cages and trays as per pre determined design and delivered to the plant after completing documentation and system entries to remove inventory from its system held in vendors name, invoice raised and physical delivery accompanied with documents completes the supply chain cycle of Raw material supply. The revenue recognition happens when material is transferred out of the warehouse and its system and invoiced to Dell.

OUTSOURCING SUPPLY CHAIN MANAGEMENT

Companies turn to outsourcing and consulting for many reasons. They look to reduce costs, shorten cycle time, improve shareholder value, decrease inventory, focus on core competencies, gain information technology, increase expertise and more. Likewise transport, warehouse, forwarder and other logistics service providers want to provide outsource and consulting services. They want to improve profits, transition from being a commodity service provider, gain volumes and throughput by leveraging existing core logistics service, increase revenues and more. This creates a mutual need between the two parties. Yet despite this common interest, half of the outsourcing and consulting relationships end unsatisfactorily within three years. Half are not able to go beyond a buyer-seller relationship. The responsibility for the failure often resides with both parties. Reasons for the failures run the gamut and include: *Poor project design *Lack of metrics or key performance indicators (KPIs) *Use of improper metrics or KPIs *Not fulfilling expectations of either or both parties

*No clear lines of responsibility and accountability *Inability to evolve the relationship from short term to long term and from static to dynamic Some reasons for failure reflect symptoms, not causes. Failures are not unique to outsourcing; but outsourcing is unique. Outsourcing goes beyond transport or warehouse agreements and service. Supply chain management is one of largest costs and has significant service impact to companies. Some contract logistics projects are critical to a company's supply chain and operating success. Therefore outsourcing consulting should be designed not to fail, especially with supply chain management. The impact can be significant to the company doing the outsourcing. Much is discussed about metrics and service level agreements (SLAs) in defining the outsourcing relationship. These should be after-the-fact and matter-of-fact results of the project definition and design. Whether the two parties are trying to develop the contract logistics relationship or are striving to make an existing outsourced program succeed, there are three fundamental issues that must be addressed Define what is being outsourced.This may seem obvious. However the matter may go much deeper and may obscure the real project and program. Both parties need to fully understand it. At the minimum, discussion should include: Is it transaction or process?Transactions reflect assignment of work; process reflects delegation of responsibility. If the topic is using a forwarder to help with supplier ocean transport or having a warehouse pick and pack products and deliver them, then those are transactions. Supply chain management should be a process. So if the contract logistics need is for transactions, then it must be clear as to what the transactions are, what triggers them, how they must be performed and, more importantly, how they fit into the process. However if the consulting topic is managing the import supply or managing store inventory and replenishment, then those are processes. When supply chain process is being outsourced, then very clear definitions of the process must be developed For the company looking to outsource, it can be an attempt to reduce costs or achieve other benefits that it is unable to realize internally. A 15% cost reduction goal may be attainable; while a 40% may be more difficult and require a different approach as to design, implementation and timing. Are the risks identified?There are inherent risks with any change; and there are risks created with the type of change.Outsourcing involves change; so there are risks. Supply chain management has more experience with outsourcing than other business functions. Historically using outside transaction-activity service providers-- trucking companies, public warehouses, freight forwarders and freight bill payment services--has occurred in logistics. Experience can change risk sensitivity; but it should not diminish risk recognition

Supply chain management is a process that crosses the company. This can put outsourcing and contract logistics provider in conflict with the traditional organization silos. Corporate culture and other differences may exist between the two parties as to risk aversion which can stifle risk sharing and project success. Conclusion. Outsourcing of supply chain management should be designed and developed to succeed. Both parties must take the dialogue deeper. Whether it develops into a partnership depends on mutuality. The three issues frame and drive the relationship, its direction, purpose and its continuity. It should be based on a prudent, rational, open exchange between the firm wanting to outsource and the firm wanting to handle the outsourcing. There should be no rush to judgment and have no artificial deadlines for completion. All this increases the chances for success.Supply chain outsourcing is too important to fail.