Supply Chain Management

SUMMER TRAINING PROJECT REPORT ON SUPPLY CHAIN MANAGEMENT AT WIPRO CONSULTANCY

UNDER THE GUIDANCE OF

Mr. Parminder Singh Senior Manager (SCM Advisory Services)

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ACKNOWLEDGEMENT I express my sincere si ncere thanks to Mr. Parminder Singh, Senior Manager  (SCM Advisory Services) at WIPRO Consulting for guiding me right from the inception till the successful completion of the project.

I sincerely acknowledge them for extending their valuable guidance, support for literature & other details & above all the moral support they had provided to me with all stages of this project.

My thanks are due to all those thos e who have directly or indirectly helped me in preparing this project report. However, I accept the sole responsibility for any possible error of omission & would be extremely grateful to the readers of this project report if they bring such mistakes to my notice. n otice.

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ACKNOWLEDGEMENT I express my sincere si ncere thanks to Mr. Parminder Singh, Senior Manager  (SCM Advisory Services) at WIPRO Consulting for guiding me right from the inception till the successful completion of the project.

I sincerely acknowledge them for extending their valuable guidance, support for literature & other details & above all the moral support they had provided to me with all stages of this project.

My thanks are due to all those thos e who have directly or indirectly helped me in preparing this project report. However, I accept the sole responsibility for any possible error of omission & would be extremely grateful to the readers of this project report if they bring such mistakes to my notice. n otice.

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EXECUTIVE SUMMARY The project aims to know the impact of technology in manufacturing industries, especially on their supply chain management. To know about the details of the impact of technology, an extensive research was undertaken, which included searching on the internet and referring to books and seniors working in this field to gain knowledge about this topic.

Supply Chain Management Management is the management of the entire value-added chain, from the supplier to manufacturer right through to the retailer and the final customer. SCM has three primary goals: Reduce inventory, increase the transaction speed by exchanging data in real-time, and increase sales by implementing implementing custom c ustomer er requirements requirements more efficiently. The role of IT I T to manage the manufacturer's manufacturer's supply chain has been long documented; documented; however in the past, companies measured the success of their  supply chains-product chains-product development, development, production and supply, and sales and service-by whether they produced a good product at a good price.

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Benefits of Supply Chain Management 

Lower inventories

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Higher productivity

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Greater agility

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Shorter lead times

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Higher profits

Need for Supply Chain Management 

Improve operations

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Increasing levels of outsourcing

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Increasing globalization

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Increasing importance of e-commerce

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Complexity of supply chains

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Manage inventories

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INDEX S.No.

Topic

Page No.

1.

About WIPRO

6

2.

Manufacturing: The current Indian scenario

8

3.

Supply Chain Management

13

4.

Problems addressed by supply chain management

22

5.

Distribution Requirement Planning

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6.

Electronic Data Interchange

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7.

E-Commerce

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8.

Supply Chain Performance Drivers ,Creating an Effective Supply Chain

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9.

Conclusion

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10.

Bibliography

29

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WIPRO

Wipro Limited is a global information technology (IT) services company headquartered in Bangalore, India. According to the 2011 revenue, Wipro is the third largest IT services company in India and employs more than 122,385 people worldwide as of March 2011. Wipro is ranked 31 globally in 2011 in the list of IT service providers. It is 9th most valuable brand in India according to an annual survey conducted by Brand Finance and The Economic Times in 2010. It  provides outsourced research and development, infrastructure outsourcing, business process outsourcing (BPO) and business consulting services. The company operates in three segments: IT Services, IT Products, Consumer Care and Lighting.

Wipro Technologies, the global technology and consulting services division of Indian conglomerate Wipro Limited.

The company was established in 1980 as subsidiary of Wipro Limited listed on New York Stock  Exchange. Wipro was founded in 1945 by M.H.Hasham Premji in Amalner, Maharashtra,  producing sunflower Vanaspati Oil and soaps. At that time, the company was called Western India Vegetable Products Limited (later abbreviated down to Wipro). The company logo still contains a sunflower to reflect their original business. Over the years, Wipro diversified into several unrelated businesses on its own and through subsidiaries. These industries included soaps, wax, and tin containers for packaging and crushing. Hasham Premji died in 1966, and was succeeded by his son Azim Premji.

WIPRO CONSULTANCY Wipro Consulting Services (WCS) is a division of the Wipro Ltd, a $5 Billion enterprise that employs over 90,000 employees across the globe. WCS offers Business Advisory, IT consulting and Risk and Compliance services designed to improve business performance, drive operational efficiency and maximize ROI. With experts based in Western Europe, North America, India, Asia Pacific and the Middle East, our integrated Consulting, IT, BPO and Product Engineering services combine the benefits of expert proximity with global leverage to provide technology edge and speed to your strategic programs. WCS has a partnership driven approach and our seasoned practitioners engage actively with our  clients to ensure realization of benefits. Our solutions are tested, measurable, implementable and Page | 7

adjusted to align with the change readiness and culture of our clients. Our solutions are also rapid, as we leverage best practices, accelerator tool kits and have experienced consulting  professionals. We have an adaptive and flexible model to facilitate consensus and adoption of  our solutions by our clients.

Specialties Business Consulting, Strategic Consulting, IT advisory

Wipro in Supply Chain Management Wipro partners with companies and provides Consulting Services to meet their supply chain challenges (cost reduction, increasing customer service expectations, operational efficiencies) and aligns them with the business strategies to deliver consistently improved results. Our consultants will lead & support the complete transformation life cycle by •

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Enabling business strategies We help redefine and prioritize the customers supply chain strategies to support the  business strategy. Demonstrable interdependence among business and supply chain strategies develops efficient and cost-effective networks. Assessing the current supply chain Wipro uses a powerful tool SCOD (Supply Chain Opportunity Diagnostic) , developed  by its ‘Supply chain Center of Excellence’ to assess the supply chain performance and  processes, discover supply chain bottlenecks & identify value enhancing improvement opportunities. Defining the future-state supply chain We define an operating model which deals connects the operating strategy with people,  processes and technology. Wipro Consulting Services also develops a tailored implementation roadmap for the supply chain strategy detailing business requirements,  processes migrations, prioritized initiatives, performance metrics and contingencies. Identifying quick wins The Quick Win activities provide a sequenced approach to opportunities i.e. identifying, defining and prioritizing specific decisions/actions that can be taken to achieve immediate improvements in business performance.

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Manufacturing: The current Indian scenario Manufacturing is slowly but surely sweeping back in the national economic space. India is witnessing a wave of growth in manufacturing after its decline in the late nineties. The current surge in the manufacturing sector is touted to be much more promising than the first wave. With this new manufacturing opportunity slated to be more skills intensive, the industry leaders foresee India as well poised to take advantage of this shift. Over and above the feel good factor of being given a second chance, there are graver reasons that necessitate the country's success in manufacturing this time round. Manufacturing has linkages with the all other sectors of the economy. The progress of manufacturing still sets the tone for  the overall business cycle and the health of this sector is very much at the core of India's socioeconomic fabric. Inspite of the boom in the services sector, 75% of India's working population is educated only to middle school or below. This staggering figure of approximately 600 million people is not even equipped to benefit from the opportunities in the flourishing knowledge sector. It is only the labor intensive manufacturing sector that has the capability to generate employment in adequate numbers to absorb the larger labor pool. Manufacturing has large stakes involved, not just because the sector employs 30 per cent of the non-agricultural workforce in India, but also because of its contribution to the overall economy/GDP. According to FICCI even though agriculture supports 60% of the working  population, it contributes only 22% of the country's gross domestic product. This mismatch  between distribution of workforce and value added in agriculture is one of the main reasons for  the large number of poor, and this trend is expected to further widen in the coming decades. Against this background, only a sharp increase in the Indian manufacturing sector workforce will increase overall income levels of the country. The economic benefits of playing the manufacturing card are quite clear - if India is to sustain overall GDP growth of 8% per annum, it is essential that both manufacturing and services grow at more than 11% even when agriculture growth picks up from its current 2.3%. So let's take stock of India's manufacturing sector as it is poised today - The country is increasingly getting recognized for high value goods requiring a fair amount of engineering  precision and quality. No wonder then that the export opportunity of industries such as auto components (US $ 25 billion by 2015), and textile (US $ 50 billion by 2010) is mind boggling to say the least. However to get a realistic picture of the achievements of the manufacturing sector, one only has to compare its performance to that of India's sunrise industry- software services. The Indian IT services industry which is only about two decades old has already notched up exports in excess Page | 9

of US $15 billion. This is in comparison to the age old industries of textile and auto components which are today at US $13.4 billion and US$ 1.4 respectively. Challenges facing the manufacturing industry

What then needs to be explored are the reasons for the manufacturing industry's chequered  performance. In a scenario wherein skilled Indian labor is as inexpensive as China's in absolute terms, wherein lies the Indian manufacturing industry's Achilles heel? FICCI estimates that the higher input costs for the Indian manufacturing sector as a result of  cascading effect of indirect taxes on selling prices of commodities, higher cost of utilities like  power, railway transport, water, higher cost of finance and high transactions costs puts the sector  at a severe disadvantage as compared to its Asian counterparts. In a ten point agenda that encompasses factors such as entry of more private sector investors in important infrastructure sectors like electricity distribution, aviation, roads, railways, ports and a new bill for improving India's labor laws including encouraging contract labor, FICCI has laid down guidelines to the government to accelerate growth and improve competitiveness of Indian manufacturing. However, over and above more conducive government regulation, what the Indian manufacturing sector needs is a productivity boost. CEOs of some of India's leading export firms on visits to China have come away impressed at the efficiency per employee and the dawning realization that current productivity of their factories is half to one third levels of what might otherwise be achievable. IT to increase productivity on the shop floor

Today when most exporters are looking forward to unshackled growth, their first step has been to completely overhaul existing machinery, putting in place imported machines that offer   productivity levels that are six or seven times higher than those of Indian machines. This however is but a small step in the larger scheme of things. In today's business environment, manufacturers must increase productivity through the entire supply chain - this necessitates that real-time data from the plant floor be made available to their ERP, SCM, and Manufacturing Execution Systems (MES) systems. However, due to disparate networks, that data is often hidden. Manufacturers till now have built various control networks that are often separate from their   business networks. These legacy control networks use proprietary interfaces that can prohibit the control and business networks from communicating, creating silos of information.

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Enter the need for an Intelligent Networked Manufacturing (INM) vision. What this entails is an Ethernet to the Factory (EttF) solution that allows for the integration of plant floor data with  business systems, providing employees with access to the information as and when they need it. While this improves business efficiencies and decision-making abilities on one hand, more importantly it enables manufacturers to obtain visibility to the factory floor without disrupting the production line. EttF empowers manufacturers to add new services to the existing control network at any time and at any location in the network, while maintaining the existing control scheme. Manufacturers can add wireless applications and improve plant personnel mobility. They can add IP-based  phones, which eliminate the need to add separate time-division multiplexing (TDM) phone lines. They can add security and intrusion detection to existing network services, all without interrupting critical manufacturing processes. The end result is the provision of repeatable, deterministic data from real-time devices, helping to ensure the continued efficient operation of  the manufacturing plant and the emergence of each and every employee into a strategic business asset. IT to manage the supply chain

The role of IT to manage the manufacturer's supply chain has been long documented; however in the past, companies measured the success of their supply chains-product development,  production and supply, and sales and service-by whether they produced a good product at a good  price. An effective, profitable supply chain today is driven by customer demand. According to AMR  Research, in the next-generation supply chain, end-user demand will drive all supply chain activities among trading partners. This is virtually impossible with the traditional supply chain, where people and processes are often isolated not just from the customer but also from each other. The new supply chains will need to respond quickly to demand and command a better price without having to discount excess inventory, meet evolving and more rigorous external and internal compliance mandates, such as radio frequency identification (RFID) and enterprise resource planning (ERP) extensions, not to mention outsource functions without losing control, visibility, speed, quality, or other requirements The need of the hour is a Demand Driven Supply Chain (DDSC) solution that enables visibility into the entire supply chain, allowing manufacturers to make informed decisions based on the most up to date information and flexibility to make decisions based on current inventory levels. Additionally a DDSC solution contrary to traditional supply chain constraints can re-route goods in transit, manage network security across many different connected locations, both internal and external and also allow for collaboration with the factory floor, suppliers, distribution centers, and even customers. Page | 11

The result is improved decision making by feeding real-time data about customer demand into a  partner's production and distribution process, improved sales and order forecasting, manufacturing and distribution planning, and matching customer demand to available supply. It also allows for easy adaptability to changing market conditions, including changes in the supply of raw materials and improving the movement of goods to deliver the right amount of inventory to the right place at the right time. This helps to keep costs down and ensure prompt and accurate order fulfillment. IT to better manage new product introductions

Faced with increasingly demanding customers and intensifying global competition, manufacturers must find ways to achieve greater efficiency and speed in the product development process. It follows that today shorter product lifecycles are putting more pressure on development organizations to bring products to market more quickly. Lack of access to the same information set can result in costly engineering change orders, unanticipated problems with regulatory compliance, and higher support costs after product introduction. Companies lack the flexibility to expand their labor pools or reduce development costs with contractors and off-shore development teams because of concern about loss of control and safeguarding intellectual  property. Collaborative Product Development (CPD) solution that focuses on establishing a collaborative environment during the product development phase of new product introductions is what's required. The CPD solution enables all stakeholders, including key suppliers, logistics providers,  production control, and engineers, to collaborate with each other with one common set of  information. This results into reduced costs, greater flexibility in choosing development resources, rapid time to market, and faster safety and environmental compliance. As a result, manufacturers gain greater agility so they can be more responsive to changing customer demands and can stay ahead of the competition. IT to build and manage customer intimacy

Manufacturers today are focusing on customer intimacy as the way to stay lean and profitable by delivering what customers want, when they want it, with the high-quality, personalized service and support they expect. The prevailing wisdom that manufacturers could become leaner, more  profitable organizations by reducing production and transaction costs is now passé. A major   barrier to achieving customer intimacy is the limited ability of sales, service, and support to exchange information for better understanding and anticipation of customer requirements. Without a foundation for optimizing interactions across these crucial customer-facing functions, manufacturers faced challenges such as customer retention, inability to anticipate customer needs leading to waste in production, impairing profitability and competitiveness, lack of a unified view of the customer and concerns over control and security that makes it more difficult to outsource non-strategic support functions to reduce costs.

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There is a need for a Customer Interaction Network (CIN) solution that helps enhance interactions across all customer touch points, including sales, service, outsourcing vendors, and channel partners, to work together more effectively and efficiently to achieve greater customer  intimacy. By anticipating and responding to customer needs, companies not only improve customer loyalty, but also optimize the entire production process to deliver what sells. The CIN solution helps enable manufacturers to improve their customer interaction process, specifically anticipating and responding to customer needs, maintaining higher customer  satisfaction scores, reduced time to problem resolution, lower cost of acquiring and servicing customers and tighter channel partner integration. In conclusion, to compete and succeed in a price-driven market, manufacturers must create a  business edge by offering something that their competitors don't. Shorter lead times, faster  turnaround times, and better service are key "customer-centric" competitive advantages that can make the difference in attracting new business and retaining existing business. Cisco's Intelligent Networked Manufacturing vision that encompasses Ethernet to the Factory, Demand Driven Supply Chains, Collaborative Product Development and Customer Interaction  Network can transform separate manufacturing processes into a single, efficient, collaborative workflow across the entire organization. The result is an integrated workflow solution that delivers real-time information to employees, partners, and customers at any time, from anywhere in the world, creating greater mobility and seamless connectivity.

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SUPPLY CHAIN MANAGEMENT

Definitions of Supply Chain Management : •

Supply Chain Management is the management of the entire value-added chain, from the supplier to manufacturer right through to the retailer and the final customer. SCM has three primary goals: Reduce inventory, increase the transaction speed by exchanging data in real-time, and increase sales by implementing customer requirements more efficiently.

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The coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods, and deliver   both goods and services to customers. It includes chain-wide information sharing,  planning, resource synchronization and global performance measurements.

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An attempt to coordinate processes involved in producing, shipping and distributing  products, generally with large suppliers. Net markets can extend supply chain management to all trading partners regardless of size because they provide a central hub to integrate information from buyers and sellers.

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Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.

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The control of the supply of Parts from vendor through to customer. There is no fundamental difference in principle between Supply Chain Management and Manufacturing Resource Planning. SCM is also used to refer to short cycle manufacturing, which are the manufacturing elements of Just in Time.

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The delivery of customer and economic value through integrated management of the flow of physical goods and associated information, from raw materials sourcing to delivery of finished products to consumers.

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Inter-company planning control and monitoring of central functions such as procurement,  production and sales to increase their efficiency. Page | 14

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The offering of complete logistics solutions tailored to the industry-specific needs

of particular customers and covering the entire logistics chain. •

Looks at the entire supply chain of a company to optimize the flow of information and materials between internal and external suppliers, production, distributors and customers.

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SCM is an integration of business that processes from the end user through original suppliers that provide products, services, and information that add value for customers.

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The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

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The process of developing, producing and transporting products to customers.

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Supply chain management (SCM) deals with the planning and execution issues involved in managing a supply chain.

What is supply chain management? Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. The following are five basic components of SCM. 1. Plan – This is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service. A big piece of   planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers. 2. Source – Choose the suppliers that will deliver the goods and services you need to create your   product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. And put together processes for  managing the inventory of goods and services you receive from suppliers, including receiving shipments, verifying them, transferring them to your manufacturing facilities and authorizing supplier payments.

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3. Make – This is the manufacturing step. Schedule the activities necessary for production, testing, packaging and preparation for delivery. As the most metric-intensive portion of the supply chain, measure quality levels, production output and worker productivity. 4. Deliver – This is the part that many insiders refer to as logistics. Coordinate the receipt of  orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. 5. Return – The problem part of the supply chain. Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.

What does supply chain management software do? Supply chain management software is possibly the most fractured group of software applications on the planet. Each of the five major supply chain steps previously outlined composes dozens of  specific tasks, many of which have their own specific software. Some vendors have assembled many of these different chunks of software together under a single roof, but no one has a complete package that is right for every company. For example, most companies need to track  demand, supply, manufacturing status, logistics (i.e. where things are in the supply chain), and distribution. They also need to share data with supply chain partners at an ever increasing rate. While products from large ERP vendors like SAP’s Advanced Planner and Optimizer (APO) can  perform many or all of these tasks, because each industry’s supply chain has a unique set of  challenges, many companies decide to go with targeted best of breed products instead, even if  some integration is an inevitable consequence. It’s worth mentioning that the old adage about systems only being as good as the information that they contain applies doubly to SCM. If the information entered into a demand forecasting application is not accurate then you will get an inaccurate forecast. Similarly, if employees  bypass the supply chain systems and try to manage things manually, then even the most expensive systems will provide an incomplete picture of what is happening in a company’s supply chain.

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What is the relationship between ERP and SCM? Many SCM applications are reliant upon the kind of information that is stored in the most quantity inside ERP software. Theoretically you could assemble the information you need to feed the SCM applications from legacy systems (for most companies this means Excel spreadsheets spread out all over the place), but it can be nightmarish to try to get that information flowing on a fast, reliable basis from all the areas of the company. ERP is the battering ram that integrates all that information together in a single application, and SCM applications benefit from having a single major source to go to for up-to-date information. Most CIOs who have tried to install SCM applications say they are glad they did ERP first. They call the ERP projects "putting your information house in order." Of course, ERP is expensive and difficult, so you may want to explore ways to feed your SCM applications the information they need without doing ERP first. These days, most ERP vendors have SCM modules so doing an ERP project may be a way to kill two birds with one stone. Companies will need to decide if these products meet their  needs or if they need a more specialized system. Applications that simply automate the logistics aspects of SCM are less dependent upon gathering information from around the company, so they tend to be independent of the ERP decision. But chances are, you'll need to have these applications communicate with ERP in some fashion. It's important to pay attention to the software's ability to integrate with the Internet and with ERP applications because the Internet will drive demand for integrated information. For  example, if you want to build a private website for communicating with your customers and suppliers, you will want to pull information from ERP and supply chain applications together to  present updated information about orders, payments, manufacturing status and delivery.

What is the goal of installing supply chain management software? Before the Internet came along, the aspirations of supply chain software devotees were limited to improving their ability to predict demand from customers and make their own supply chains run Page | 17

more smoothly. But the cheap, ubiquitous nature of the Internet, along with its simple, universally accepted communication standards have thrown things wide open. Now, you can connect your supply chain with the supply chains of your suppliers and customers together in a single vast network that optimizes costs and opportunities for everyone involved. This was the reason for the B2B explosion; the idea that everyone you do business with could be connected together into one big happy, cooperative family. Of course, reality isn’t quite that happy and cooperative, but today most companies share at least some data with their supply chain partners. The goal of these projects is greater supply chain visibility. The supply chain in most industries is like a big card game. The players don't want to show their cards because they don't trust anyone else with the information. But if they showed their hands they could all benefit. Suppliers wouldn't have to guess how many raw materials to order, and manufacturers wouldn't have to order more than they need from suppliers to make sure they have enough on hand if demand for their products unexpectedly goes up. And retailers would have fewer empty shelves if they shared the information they had about sales of a manufacturer's product in all their stores with the manufacturer. The Internet makes showing your hand to others possible, but centuries of distrust and lack of coordination within industries make it difficult. Over the last few years most companies have gotten over the trust issue. In many cases "gotten over" is a euphemism for "have been bullied into sharing supply chain information from a dominant industry player." Want to sell your goods in Wal-Mart? Better be prepared to share data. The payoff of timely and accurate supply chain information is the ability to make or ship only as much of a product as there is a market for. This is the practice known as just-in-time manufacturing, and it allows companies to reduce the amount of inventory that they keep. This can cut costs substantially, since you no longer need to pay to produce and store excess goods.

What is supply chain collaboration? Let's look at consumer packaged goods for an example of collaboration. If there are two companies that have made supply chain a household word, they are Wal-Mart and Procter & Page | 18

Gamble. Before these two companies started collaborating back in the '80s, retailers shared very little information with manufacturers. But then the two giants built a software system that hooked P&G up to Wal-Mart's distribution centers. When P&G's products run low at the distribution centers, the system sends an automatic alert to P&G to ship more products. In some cases, the system goes all the way to the individual Wal-Mart store. It lets P&G monitor the shelves through real-time satellite link-ups that send messages to the factory whenever a P&G item swoops past a scanner at the register. With this kind of minute-to-minute information, P&G knows when to make, ship and display more products at the Wal-Mart stores. No need to keep products piled up in warehouses awaiting Wal-Mart's call. Invoicing and payments happen automatically too. The system saves P&G so much in time, reduced inventory and lower order-processing costs that it can afford to give WalMart "low, everyday prices" without putting itself out of business.

What are the roadblocks to installing supply chain software? Gaining trust from your suppliers and partners .

Supply chain automation is uniquely difficult because its complexity extends beyond your  company's walls. Your people will need to change the way they work and so will the people from each supplier that you add to your network. Only the largest and most powerful manufacturers can force such radical changes down suppliers' throats. Most companies have to sell outsiders on the system. Moreover, your goals in installing the system may be threatening to those suppliers, to say the least. For example, Wal-Mart's collaboration with P&G meant that P&G would assume more responsibility for inventory management, something retailers have traditionally done on their own. Wal-Mart had the clout to demand this from P&G, but it also gave P&G something in return-better information about Wal-Mart's product demand, which helped P&G manufacture its products more efficiently. To get your supply chain partners to agree to collaborate with you, you have to be willing to compromise and help them achieve their  own goals.

 Internal resistance to change.

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If selling supply chain systems is difficult on the outside, it isn't much easier inside. Operations  people are accustomed to dealing with phone calls, faxes and hunches scrawled on paper, and will most likely want to keep it that way. If you can't convince people that using the software will be worth their time, they will easily find ways to work around it. You cannot disconnect the telephones and fax machines just because you have supply chain software in place.

 Many mistakes at first.

There is a diabolical twist to the quest for supply chain software acceptance among your  employees. New supply chain systems process data as they are programmed to do, but the technology cannot absorb a company's history and processes in the first few months after an implementation. Forecasters and planners need to understand that the first bits of information they get from a system might need some tweaking. If they are not warned about the system's initial naiveté, they will think it is useless. In one case, just before a large automotive industry supplier installed a new supply chain forecasting application to predict demand for a product, an automaker put in an order for an unusually large number of units. The system responded by  predicting huge demand for the product based largely on one unusual order. Blindly following the system's numbers could have led to inaccurate orders for materials being sent to suppliers within the chain. The company caught the problem but only after a demand forecaster threw out the system's numbers and used his own. That created another problem: Forecasters stopped trusting the system and worked strictly with their own data. The supplier had to fine-tune the system itself, and then work on reestablishing employees' confidence. Once employees understood that they would be merging their expertise with the system's increasing accuracy, they began to accept and use the new technology.

What is the extended supply chain? The extended supply chain is a clever way of describing everyone who contributes to a product. So if you make text books, then your extended supply chain would include the factories where Page | 20

the books are printed and bound, but also the company that sells you the paper, the mill where that supplier buys their stock, and so on. It is important to keep track of what is happening in your extended supply chain because with a supplier or a supplier’s supplier could end up having an impact on you (as the old saying goes, a chain is only a strong as its weakest link). For  example, a fire in a paper mill might cause the text book manufacturer’s paper supplier to run out of inventory. If the text book company knows what is happening in its extended supply chain it can find another paper vendor.

What is the impact of globalization on the Supply Chain? The extended supply chain is a clever way of describing everyone who contributes to a product. So if you make text books, then your extended supply chain would include the factories where the books are printed and bound, but also the company that sells you the paper, the mill where that supplier buys their stock, and so on. It is important to keep track of what is happening in your extended supply chain because with a supplier or a supplier’s supplier could end up having an impact on you (as the old saying goes, a chain is only a strong as its weakest link). For  example, a fire in a paper mill might cause the text book manufacturer’s paper supplier to run out of inventory. If the text book company knows what is happening in its extended supply chain it can find another paper vendor.

What are some emerging technologies that will affect the Supply Chain? The most notable is Radio Frequency Identification, or RFID. RFID tags are essentially barcodes on steroids. Whereas barcodes only identify the product, RFID tags can tell what the product is, where it has been, when it expires, whatever information someone wishes to program it with. RFID technology is going to generate mountains of data about the location of pallets, cases, cartons, totes and individual products in the supply chain. It's going to produce oceans of  information about when and where merchandise is manufactured, picked, packed and shipped. It's going to create rivers of numbers telling retailers about the expiration dates of their   perishable items—numbers that will have to be stored, transmitted in real-time and shared with Page | 21

warehouse management, inventory management, financial and other enterprise systems. In other  words, it is going to have a really big impact. Another benefit of RFIDs is that, unlike barcodes, RFID tags can be read automatically by electronic readers. Imagine a truck carrying a container full of widgets entering a shipping terminal in China. If the container is equipped with an RFID tag, and the terminal has an RFID sensor network, that container’s whereabouts can be automatically sent to Widget Co. without the truck ever slowing down. It has the potential to add a substantial amount of visibility into the extended supply chain. Right now the two biggest hurdles to widespread RFID adoption are the cost of building the infrastructure and the lack of agreed-upon industry standards.

Need for Supply Chain Management 1. Improve operations 2. Increasing levels of outsourcing 3. Increasing globalization 4. Increasing importance of e-commerce 5. Complexity of supply chains 6. Manage inventories

Problems addressed by supply chain management Supply chain management must address the following problems:

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Distribution Network Configuration : number, location and network missions of  suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy : questions of operating control (centralized, decentralized or  shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer  on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated,  private carrier, common carrier, contract carrier, or 3PL). Trade-Offs in Logistical Activities : The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if  only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will  be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy. Information : Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. Inventory Management : Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods. Cash-Flow : Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.

DISTRIBUTION REQUIREMENT PLANNING

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▪

DRP (Distribution Requirement Planning) is the logical extension of Manufacturing

Requirements Planning (MRP). ▪

MRP is determined by a production schedule that can be controlled by the

enterprise and generally operates in a dependant demand situation. ▪

DRP is guided by customer demand, which is not controllable by the enterprise and

operates in an independent environment where uncertain customer demand determines inventory requirements. ▪

Manufacturing Requirement Planning coordinates the scheduling and integration of 

materials into finished products. ▪

DRP takes over the responsibility of coordination once the finished goods are

received in the plant warehouse.

Electronic Data Interchange

EDI is defined as the inter-company computer-to-computer communication of standard  business transactions in a standard format that permits the receiver to perform intended Page | 24

transaction without human intervention. In the EDI environment, a computer can directly use the data sent by other computers in electronic form. Other communication technologies such as Fax and email are not considered to be part of EDI because they do not support automation facilities and information sent using such communication has to be rearranged or rekeyed into a computer  for further use. EDI involves three basic processes: 1. Directing and gathering data from different application programmes; 2. Converting data from propriety formats (used by application programmes) to standard formats (as transmitted by the communication network) and reversing this process at the other end; and, 3. Actual transmission of data between trading partners over a communication network. EDI is the inter-organizational exchange of business documentation in a structured machine processable form. It consists of standardized electronic message formats (called transaction sets) for common business documents such as requests for quotations, purchase orders, invoices, shipping notices and other standard business correspondence documents. These electronic transaction sets enable the computer in one company to communicate wit the computer in the other organization without actually producing paper documents. All human efforts required to sort and transport the documents are eliminated. An EDI facility provides various functions. The basic function is to provide compatibility  between different systems; the interchange facility translates codes and formats operated by individual companies, allowing easier and direct data exchange without the need for rekeying. EDI provides a function known as store and forward. This allows businesses that operate different time-cycles to use EDI without changing their approach. The final function offered by EDI is application support. For EDI to function effectively, the provider has to understand the industries it is working with and must support the users. The benefits of EDI are becoming very apparent despite being relatively new in India. EDI has much more to do with the overall improvements of return on investment and, for many users, has made a significant impact on sales revenues, giving those that use it a new form of  competitive advantage and new forms of relationships between manufacturers and suppliers. The key benefits of EDI are given below: Page | 25

1. Greater effectiveness / efficiency. 2. Gives competitive advantage (via differentiation). 3. Helps to keep customers happy. 4. Leads to an extension of buying/selling centers. 5. Makes strong relationships stronger. 6. Reduced transaction costs and time. 7. Increased accuracy. 8. Optimized inventory. 9. Improved decision making. 10. Increased business opportunities.

E-COMMERCE (E-com)

E-commerce means electronic commerce. Commerce means buying and selling of goods and services. Electronic commerce is concerned to a wide network of business around the world through Internet. Through e-com, a company can capture a huge market by sitting at one place Page | 26

and can satisfying the needs of customers around the world. Online purchasing and selling of  goods and services of various types and qualities is made easy and convenient through e-com.  No paper work is needed in this.

Activities involved in E-commerce:

While buying and selling of the product buyers and sellers has to perform some activities, which is compulsory. These activities are as follows:

1. Marketing: Marketing means promoting a particular product or service in such a way that goodwill is created of the company and its product. So that the huge number of  customers can be capture by giving or specifying the cost, quality advantage, etc. about the  products and services in the market through advertisements and publicity. It makes to customer aware that product that is one of the important work, which is carried out by the sellers.

2. Sales: Sales means the actual transaction, which includes outgoing of the products or  services from seller to buyer against money. Whenever the consumer places an order the sellers fulfills it by supplying the goods and getting the money against it.

3. Payment: It involves the commitment from the buyer for giving money against the goods or services will get from seller.

4. Fulfillment: It includes the actual meeting requirement of goods and services by the seller against the order received from the buyer.

5. Customer’s Services: It is after-sales service, which the seller provides to the buyer for  the product or services he sold to him.

Supply Chain Performance Drivers 1. Quality Page | 27

2. Cost 3. Flexibility 4. Velocity 5. Customer service

Creating an Effective Supply Chain 1. Develop strategic objectives and tactics 2. Integrate and coordinate activities in the internal supply chain 3. Coordinate activities with suppliers with customers 4. Coordinate planning and execution across the supply chain

Velocity 

Inventory velocity 



The rate at which inventory(material) goes through the supply chain

Information velocity 

The rate at which information is communicated in a supply chain

CONCLUSION Supply chain management - delivering the right product to the right  place, at the right time and at the right price - is one of the most

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 powerful engines of business transformation. It is one of the leading cost saving and revenue enhancement strategies in use today. Technologies such as the Internet, electronic data interchange, transportation and warehouse management software, including software that manages plant scheduling, demand forecasting, procurement, make SCM a versatile strategy to adopt.

BIBLIOGRAPHY www.google.com

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