2. 2
SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker.
He is an International-Corporate Trainer, Mentor & Author
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic Sourcing,
Global Sourcing, Logistics, Exports & Imports, Indirect Taxes – GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles; 80 + YouTubes & more than
80 SlideShares Presentations
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 30 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion in 2016
Certified Lean Six Sigma Black Belt from Exemplar Global / KPMG
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India)
ZED Consultant – Certified by QCI – MSME (Govt of India)
Member Board of Studies, IIMM
Co-Chairman, Indirect Tax Committee, FTAPCCI
Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad
4. 4
A supply chain is a Chain of Supplies - is the network of all the individuals,
organizations, resources, activities and technology involved in the creation and supply of
a product, from the delivery of source materials from the Supplier to Manufacturer
to Distributer to Wholesaler to Retailer and Eventually Delivery to the End User or
Consumer.
5. 5
Distribution
Centres
(DCs)
D Mart
Retail Shop
Customer
Buys a Bread
Manufacturer
of Bread
Suppliers
Flour Mills
Packing
Materials
Manufacturer
Farmers
Raw Materials
For Packaging
Paper
Manufacturers
Wood
Suppliers
Logistics –
Transport &
Labour Service
Providers
Chemical
Manufactures
8. 8
Supply Chain Management (SCM) is the
Management of a Network of Inter-Connected
Businesses involved in Receipt of Inputs,
Processes and Delivery of Finished Goods or
Services Required by the End Consumer.
Supply Chain Management spans all Movements
and Storage of Raw Materials, Work-in-Process
Inventory and Finished Goods from Point of
Origin to Point of Destination at Consumption.
9. 9
DistributionIntegration Procurement Operation
Integration is the process
of closely Coordinating
with Supply Chain
Functions and Elements.
The key component of
integration is Data and
its Collection, Storing
and Use -
Communication.
The four elements of
supply chain
management must
work cohesively to
Reap benefit.
In a B2B sale, the procurement
function will usually manage
both the sourcing and the
purchasing functions ensuring
an organization has everything
required to manufacture a
product or deliver a service,
including materials, supplies,
tools and equipment.
Sourcing is the process of
finding, evaluating, and
engaging suppliers to provide
goods and services to business.
Procurement is the process of
purchasing goods and services.
The supply chain ends when
the product or service is
delivered to the customer.
However, delivering the
product or service means
having a well-planned and
managed distribution and
logistics organization,
mainly dealing with
services such as
transportation,
warehousing, delivery,
and other related
operations.
This link in the supply chain
coordinates the specifics
of day-to-day operations
for the company.
It plans the company’s
output to make sure
everything is running well as
per Demand using
business forecasting to
predict which supplies will be
needed when and by
whom & accordingly
Optimize Production &
Minimize Inventory.
10. SN Panigrahi 10
Retail Supply Chain : Example- Reliance Fresh Customers
Reliance
Fresh
Collection
Units /
Centers
Packing
Units
Processing
Units
Distribution
Centers
Other Input
Suppliers
Farmers
Farmers
Farmers
Supply Side Demand Side
11. 11
SCOR was developed in 1996 by the management consulting firm PRTM, now part of
PricewaterhouseCoopers LLP (PwC) and AMR Research, now part of Gartner, and
endorsed by the Supply-Chain Council (SCC), now part of APICS, as the cross-industry de
facto standard strategy, performance management, and process improvement diagnostic
tool for supply chain management.
It is standard diagnostic tool for supply chain management. The SCOR model
describes the business activities associated with satisfying a customer's demand, which
include plan, source, make, deliver, return and enable.
Use of the model includes analyzing the current state of a company's processes and goals,
quantifying operational performance, and comparing company performance to benchmark
data. SCOR has developed a set of metrics for supply chain performance, and Supply
Chain Council members have formed industry groups to collect best practices information
that companies can use to elevate their supply chain models.
12. 12
SCOR is based on six distinct management processes: Plan, Source, Make, Deliver, Return, and
Enable.[5][6]
Plan – Processes that balance aggregate demand and supply to develop a course of action which
best meets sourcing, production, and delivery requirements.
Source – Processes that Procure Goods and Services to meet Planned or Actual Demand.
Make – Processes that Transform Product to a Finished State to meet planned or actual demand.
Deliver – Processes that Provide Finished Goods and Services to meet Planned or Actual
Demand, typically including order management, transportation management, and distribution
management.
Return – Processes Associated with Returning or Receiving Returned Products for any reason.
These processes extend into post-delivery customer support.
Enable – Processes being associated with the management of the supply chain. These processes
include management of: business rules, performance, data, resources, facilities, contracts, supply
chain network management, managing regulatory compliance and risk management. The process is
implemented in Version 11 (Dec 2012).
13. 13
Balance Aggregate
Demand and Supply to
Develop a Course of
Action
Transform Product to a
Finished State to Meet
Planned or Actual
Demand
Associated with
Returning or Receiving
Returned Products for
any Reason
Procure Goods and
Services to meet
Planned or Actual
Demand
Provide Finished Goods
and Services - typically
including Order
Management, Transportation
Management, and
Distribution Management.
These processes include
management of: Business
Rules, Performance, Data,
Resources, Facilities,
Contracts, supply chain
network management,
Managing Regulatory
Compliance and Risk
Management
15. 15
Supply Chain Management (SCM) can be defined as Management of
the Supply Chains as an Integrated Process of
Acquisition and Management of Flow of Supply of from point of origin
to point of consumption and Delivering Further Value Added Output to
the Next Level Point of Consumption (like from supplier to
manufacturer to wholesaler to retailer and to final consumer)
by Balancing Supply and Demand with Optimal Management of
Resources with the objective of establishing relationships for Maximizing
Value for Mutual Benefits on Economically, Socially and
Environmentally Sustainable basis.
(As defined by the Author SN Panigrahi in his Article “Value Insights into Supply Chain”
Published in Aug’2010 issue of MMR – IIMM)
16. 16
Acquisition of Goods & Services
Management of Flow
Value Addition at Each Supply Point
Integration of Different Activities
Balancing Supply and Demand
Optimal Management of Resources
Relationships with Suppliers & Customers
Maximizing Value for Mutual Benefits
Economical, Social and Environmental Sustainability.
17. 17
Materials Flow
Forward Logistics - Materials Movement – Supplier to Customer
Reverse Logistics – Sales Returns : Customer to Supplier
Information Flow
Product Data, Descriptions & Pricing & Offer- Bills of Materials, Invoice
Customer Enquiry / Order Information, Delivery Scheduling
Financial Flow
Credit Notes – Payments for Quality Claims & Damages
Consideration for Materials Supply – Debit Notes –
Late Fee for Release of Payments Due
Value Flow
Value Addition in Supply : Inputs to Production - Distribution
Customer Feedbacks – Improvements - Relationships
Risk Flow
Demand, Supply, Price, Lead Time, etc
Cash Flow Constraints, Inventory Financing & Delayed payment
21. 21
Value-added is the difference between the price of product or service and the cost of
producing it. The price is determined by what customers are willing to pay based on
their perceived value. Value is added or created in different ways.
The addition of value can increase either the product's price or value. For example, offering
one year of free support on a new computer would be a value-added feature. Individuals can
also add value to services they perform, such as bringing advanced skills into the workforce.
Value can be added to a product, service, process, or an entire business. Value can be added
by providing better or extra services in the form of after-sales services and better customer
support. Value can also be added by improving a product in some way, or by including extras
with the product. For example, a retail seller of computers can add value by including software
or computer accessories with the basic product – the computer.
Companies with strong branding can add value to their products or services simply by using
the company’s logo to sell a product.
22. SN Panigrahi, Essenpee Business Solutions, India 22
This relates to characteristics that would have some degree of measurability,
such as appropriate Performance, Speed of Service, Quality, or Reliability or
Some Specific Outcome.
Functional Value
Economic value can be described as a measure of the benefit from a good or
service to an Organization. It is typically measured in units of currency -
Money the Customer is willing to Pay.
Economic Value
Perceived value is the customers' evaluation of the merits of a product or service
and its ability to meet their needs and expectations, especially in comparison
with its peers – Brand Image, Reputation etc
Perceived Value
Value by virtue of its Appearance, Artworks, Beauty, Elegance, Gracefulness,
Harmony, Proportion, Unity etc. which experiences pleasure & Happiness
Aesthetic Value
Emotional value is the economic value or monetary worth of feelings when customers
positively experience an organization's products and / or services; Loyalty, .Passion,
Preferences etc. Insurance Company tapping into both fear and the need for security to
provide value.
Emotional Value
Epistemic value is generated by a sense of novelty or simple fun, which can
be derived by inducing curiosity or a desire to learn more about a product or a
service.
Epistemic value
Comparative Value is a method of Determining, Denoting or Involving
Comparison an asset's worth that takes into account the value of similar assets.
Comparative
Value
23. SN Panigrahi, Essenpee Business Solutions, India 23
CustomersRetailersManufacturers Distributors WholesalersSuppliers
Value-added is the difference between the price of product or service and the
cost of Producing it or Procuring it. The price is determined by what customers
are willing to pay based on their perceived value. Value is Added or Created
at Each Stage or Point of Supply in Different ways. The addition of value can
increase either the product's price or value.
Customers
Reliance
Fresh
Collection
Units /
Centers
Processing
Units
Distribution
Centers
Farmers
Value Addition
28. 28
Strategic
Long Term
Perspective (>1 Yr);
Higher Level
Decisions
Tactical
Medium Term Perspective
(Quarterly / Monthly)
Operational
Short Term /
Day to Day
What ?
Establish Objectives, Policies &
Operating Foot Prints
How Much ?
Deploy to match Supply to
Demand
When & Where ?
Schedule, Execute,
Logistics, Monitor,
Control &
Adjust Production
Objectives, Supply /
Service Level Policies;
Net Work Design;
Locational & Distribution Decisions
Partnerships / Collaborations;
Long Term Resource Planning & Allocation
Demand Forecast – Short Term
Production, Procurement
Logistic Planning;
Medium Term Resource Allocation
Work Center Scheduling;
Order / Inventory Tracking
Order Cycle;
Material Movement
Daily / Weekly Operational &
Resource Scheduling
SN Panigrahi
29. 29
Customer
Services
Order
Entry
Order
Processing
Technical
Support
Claims
Management
Invoicing
Demand
Planning
Distribution
Planning
Purchasing /
Expediting
Inventory
Optimization
Inventory
Control
Service Loss
Analysis
Transportatio
n Planning
Carrier
Selection
Outbound /
Inbound
Management
Track &
Trace
Freight Bill
Audit &
Payment
Freight
Forwarding
Warehousing
Consolidatio
n
Product
Marking /
Labeling
Packaging
Kitting
Quality
Assurance
Customs
Management
Fiscal
Compliances
Tax
Management
Tariff
Management
Permits &
Permisions
Licences
Management
Asset
Recovery
Return /
Exchange
Management
Repairs
Processing
Re-
Manufacturin
g
Disposal
Management
Financial
Settlement
Sub-
assembly &
Kitting
Sequencing
Line Side
Delivery
Postpone to
Build
Fiscal
Services
Sales &
Marketing
HR Services
Supplier
Performance
Management
Program
Management
SCM
Performance
Management
Supply Chain Strategy
Supply Chain Design
Supporting Systems & Technology
Execution
Order
Management
Materials
Management
Transport
Management Distribution
Statutory
Compliance
Reverse
Logistics
Manufacturing
Logistics
Business
Support
Network Design Channel Strategy Asset Planning
Transportation Modeling Inventory Simulation Facility Design
Business Process
Engineering
IT Planning Application Selection System Integration Application Maintenance
SNPanigrahi
30. How Supply Chain Decisions Impact Strategy
Low-Cost Strategy Response Strategy Differentiation Strategy
Supplier’s goal Supply demand at lowest
possible cost (e.g.,
Emerson Electric, Taco
Bell)
Respond quickly to changing
requirements and demand to
minimize stockouts (e.g., Dell
Computers)
Share market research; jointly
develop products and options
(e.g., Benetton)
Primary selection
criteria
Select primarily for cost Select primarily for capacity,
speed, and flexibility
Product development skills;
Willing to Share Information;
Jointly & Rapidly Dev. Products
Process
characteristics
Maintain high average
utilization
Invest in excess capacity and
flexible processes
Modular processes that lend
themselves to mass customization
Inventory
characteristics
Minimize inventory
throughout the chain to
hold down cost
Develop responsive system with
buffer stocks positioned to
ensure supply
Minimize inventory in the chain to
avoid obsolescence
Lead-time
characteristics
Shorten lead time as long as
it does not increase costs
Invest aggressively to reduce
production lead time
Invest aggressively to reduce
development lead time
Product-design
characteristics
Maximize performance and
minimize costs
Use product designs that lead to
low setup time and rapid
production ramp-up
Use modular design to postpone
product differentiation as long as
possible
Distribution
Characteristics
Inexpensive Transportation
Sell through Discount
Distributors / Retailors
Fast Transpiration
Provide Premium Customer
Service
Gather and Communicate Market
Research Data
Knowledgeable Sales Staff
31. 31
Supply Chain in India Challenging Environment
Supply Chain
in India
Source : A.T. Kearney Analysis
Competition is no longer between companies; it is between supply chains
SUPPLY CHAIN KEY
CHALLENGES
Global Competition
Well Informed & More Powerful Customers
Increasing Customer Expectations
Shorter Product Life Cycles
New, Low Cost Distribution Channels
Internet & e-Business Strategies
33. 33
Bargaining
Power of
Customers
Threat of New
Entrant
Threat of
Substitute
Products
Bargaining
Power of
Suppliers
Competitive
Rivalry within
an Industry
Porter recognized that organizations
likely keep a close watch on their rivals,
but he encouraged them to look
beyond the actions of their competitors
and examine what other factors could
impact the business environment.
He identified five forces that make up
the competitive environment, and
which can erode your profitability.
34. 34
This looks at the Number and Strength of your
Competitors. How many rivals do you have? Who are
they, and how does the quality of their products and
services compare with yours?
Where rivalry is intense, companies can attract
customers with aggressive price cuts and high-
impact marketing campaigns. Also, in markets with
lots of rivals, your suppliers and buyers can go
elsewhere if they feel that they're not getting a good
deal from you.
On the other hand, where competitive rivalry is
minimal, and no one else is doing what you do, then
you'll likely have tremendous strength and healthy
profits.
This is determined by how easy it is for your
suppliers to increase their prices. How many
potential suppliers do you have? How unique is the
product or service that they provide, and how
expensive would it be to switch from one supplier
to another?
The more you have to choose from, the easier it will
be to switch to a cheaper alternative.
But the fewer suppliers there are, and the more you
need their help, the stronger their position and their
ability to charge you more. That can impact your
profit.
35. 35
Here, you ask yourself how easy it is for buyers to
drive your prices down.
How many buyers are there, and how big are their
orders?
How much would it cost them to switch from your
products and services to those of a rival?
Are your buyers strong enough to dictate terms to
you?
When you deal with only a few savvy customers,
they have more power, but your power increases if
you have many customers.
Your position can be affected by people's ability to
enter your market. So, think about how easily this
could be done. How easy is it to get a foothold in
your industry or market? How much would it cost,
and how tightly is your sector regulated?
If it takes little money and effort to enter your
market and compete effectively, or if you have little
protection for your key technologies, then rivals can
quickly enter your market and weaken your position.
If you have strong and durable barriers to entry,
then you can preserve a favorable position and take
fair advantage of it.
36. 36
This refers to the likelihood of your customers
finding a different way of doing what you do.
For example, if you supply a unique software product
that automates an important process, people may
substitute it by doing the process manually or by
outsourcing it.
A substitution that is easy and cheap to make can
weaken your position and threaten your
profitability.
37. 37
Ever-Increasing
Customer
Demands &
Expectations
Excellent Customer
Service
Lower Cost
Accurate Forecasts Forward Planning
Competitive
Sourcing &
Improved
Efficiencies
The challenge of effective supply chain management is to deliver on ever-
increasing customer demands for excellent customer service while simultaneously
managing costs. Agility and responsiveness, aligned with cost-effectiveness, is the
aim. In order to do that, Forward Planning is key, and Accurate Forecasts are a
critical input.
38. 38
Where lead times are long and product complexity is high, understanding demand and
reacting to the needs of the market becomes even more crucial. The quest then lies
within forecasting, which seeks to provide the best possible estimate of future
sales to enable the team to effectively plan to meet that future requirement.
Given that demand can change every day, forecasting becomes the ultimate
adventure.
As a general statement, focus on demand planning has grown in recent years as the
challenge of understanding market requirements has become ever more complex.
Irregular demand, as a consequence of changing customer requirements, now makes
operating in new and volatile emerging markets essential to business growth. Then, if
you add additional requirements around new product introductions as product
life cycles shorten, the need for effective demand management skills becomes
even more complex.
39. 39
Demand
Uncertainty
Volatile due to
Competition, New
Products, Substitution
& Socio-Political-
Economic Factors
SKU Complexity
Businesses
Maintain a Large
Variety of Products
to Address
Personalized
Consumer Needs
Multi-Nodal
Supply Chain
Businesses Need to
Reach Consumers
around the World to
Ensure Profitability &
Mitigate Risks
Supply
Uncertainty
Supplier’s Cost,
Lead Times,
Flexibility, Capacity,
Technology,
Adoptability
Cost
Uncertainties
Price Fluctuations,
Volatility, Cost
Factors & Sensitivity,
Constant Pressure
for Cost Reduction
Geographic Risk
Large
Consolidation
Efforts have Led to
High Geographic
Dependence
Delivery Demands
Faster, Reliable, All
Time Availability,
Lot Size, Mode of
Transport, Cost,
Loss or Damage
Resource
Constraints
Human, Financial,
Infrastructural,
Systems
Lack Synchronization
Between Planning &
Execution
Lack of real-time data
visibility, with no common
view across all businesses
and channels
Irregular reviews of safety
stock levels, causing
frequent stock-outs or
excess inventory.
Lack of Flexibility in the
network and distribution -
difficult to prioritize between
cost to serve and customer
service levels
Price volatility and
difficulty in de-risking
Production line imbalance
and suboptimal batch
sizes, creating asset
underutilization
40. SN Panigrahi, Essenpee Business Solutions, India 40
1. Supplier Risk
2. Policies and Cultures
3. Environmental Risk
4. Demand Risk
5. Operational Risk
6. Economic Risk
7. Regulatory Risk
8. Unresponsive SC
9. Reputation
10. Resource Risk
Reliability, Dependability, Capacity, Competence, Financial -Bankruptcy
Types of Policies & Cultures will change how the Supply Chain Runs
Regulations: Carbon Emissions - environmental pollution and Resource Use - hazardous
materials, Energy Consumption; Natural Calamities - Earthquakes, floods, extreme hot etc
Demand Fluctuations, Changes of Customer Behavior etc : Have a comprehensive demand
forecasting system in place in order to minimize the risk of producing too much or too little
Internal risks to the supply chain are those that cause disruptions to the operations or
processes - Machine Break Downs or production problems / failures.
Exchange Rates, Labour Costs and Interest Rates; Inflation; Govt. Economic
Policies; Taxes, Investment; cost cutting measures etc
Shifts in Local, National, and International Trade and Regulatory Policies; Industry
Standards
If there is a sudden change in the supply chain cause by any of the above factors
then the supply will need to be responsive
Unethical Practices – Unlawful Acts – Eg.: Apple - Foxconn
Human Resources –Financial
41. 41
1. Trade Wars Drive Manufacturing
Network Restructuring
2. Rising Demand and Fragile Supply
Create Raw Material Shortages.
3. Recalls And Safety Scares Put Quality
Under Scrutiny.
4. Climate Change Impact Heats Up
5. Tougher Environmental Regulations
Make Polluters Pay
6. Economic Uncertainty And Structural
Change Put Suppliers Under Threat
7. Cargo Caught Up In Industrial Unrest
8. Hazardous Transport: Container Ship
Fires
9. Battles At The Borders Increase Wait
Times
10. Drones Strike A Blow To Aviation Safety
42. SN Panigrahi, Essenpee Business Solutions, India 42
In a study conducted by the Institute for Supply Management,
almost 75% of the 628 businesses surveyed had experienced
supply chain disruptions as a result of the COVID-19 outbreak.
In this same survey, 57% of respondents said they were facing
longer lead times for orders with suppliers in China.
Dr. Bob Novack, Associate Professor of Business Logistics at Penn
State explains, “This pandemic is like a natural disaster, but it’s also
not. The results of a natural disaster on the supply chain are usually
localized and short-lived. In a pandemic it’s global. It’s the rapid
increase in demand that a pandemic creates that puts additional
strain on suppliers.”
43. 43
A 2009 report from the Economist Intelligence Unit titled “Managing supply-chain risk for reward” certainly goes a
long ways towards establishing why it is important to address the variables and complexities of this important
subject in the paper’s opening paragraph.
In a kind of comparison that is reminiscent of Dr. John Tantillo’s famous Winners and Losers brand, The Economist
report relates the following story:
Nearly a decade ago, lighting struck a Philips microchip plant in New Mexico, causing a fire that contaminated
millions of mobile phone chips. Among Philips’ biggest customers were Nokia and Ericsson, the mobile phone
manufacturers, but each reacted differently to the disaster. Nokia’s supply-chain management strategy allowed it
to switch suppliers quickly; it even re-engineered some of its phones to accept both American and Japanese chips,
which meant its production line was relatively unaffected. Ericsson, however, accepted Philips’ word that
production at the plant would be back on track in a week and it took no action. That decision cost Ericsson more
than US $400 m in annual earnings and, perhaps more significantly, the company lost market share. By
contrast, Nokia’s profits rose by 42% that year.
So here is the question . . . where did this risk originate (and don’t say when the lighting struck the Philips plant in
New Mexico), and at which touch points within the organization should it have been addressed? Was it during the
contract negotiations? How about at the point of hand-off between proof of concept product development and
production environment output? Perhaps it was an issue that should have been considered in terms of supplier
relationship management?
S.N.Panigrahi
45. 45
1.
Pandemics
2.
Natural Disasters
3.
Product
Problems
4.
Price
Fluctuations
5.
Cyber Attacks
6.
Logistic Failures
& Delays
7.
Supplier
Bottlenecks
8.
Regulatory
Issues
9.
Geopolitical
Instability:
War, Civil Disturbances,
Strikes
Supply chain disruption
is defined as major
breakdowns in the
production or
distribution of a
supply chain,
including events such
as a fire, a machine
breakdown, natural
disasters, quality
issues, and an
unexpected surge in
capacity.
It can lead to
decreased
productivity,
increased costs,
rising customer
dissatisfaction, and
more.
46. SN Panigrahi, Essenpee Business Solutions, India 46
The aerospace and defense industry depends on thousands of suppliers and
subcontractors — there are an infinite number of events that may affect the
cost, timing, and risk of a supply chain.
In 2016, the Airbus A350 program was in a crisis because of serious supply
chain delays from a seats and cabins supplier.
Only thirteen A350s made it to customers in the first three months, despite a
projected plan for roughly 80 deliveries before the end of the year. Supplier
bottlenecks for Airbus eased by the second half of 2017, but is an example of
supply chain vulnerability and the cost of disruption.
47. 47
1.Create a Supply Chain Emergency Plan.
2.Build up Inventory.
3.Conduct a Supply Chain Vulnerability Audit.
4.Identify Backup Suppliers (B -Plan)
5.Diversify Supply Base.
6.Partner with a Logistics Expert.
7.Adopt Risk Evaluation Tools.
8.Have End-to-End Visibility
9.Create Open Lines of Communication
10.Document Lessons Learned
48. SN Panigrahi, Essenpee Business Solutions, India 48
The bullwhip effect is a distribution channel
phenomenon in which forecasts yield supply chain
inefficiencies.
It refers to increasing swings in inventory in response to
shifts in customer demand as one moves further up
the supply chain. The concept first appeared in Jay
Forrester's Industrial Dynamics (1961) and thus it is also
known as the Forrester effect.
49. SN Panigrahi, Essenpee Business Solutions, India 49
The bullwhip effect is a supply chain phenomenon
describing how small fluctuations in demand at the retail level
can cause progressively larger fluctuations in the Up Stream
50. SN Panigrahi, Essenpee Business Solutions, India 50
Because customer demand is rarely perfectly stable, businesses must forecast
demand to properly position inventory and other resources. Forecasts are
based on statistics, and they are rarely perfectly accurate. Because forecast
errors are given, companies often carry an inventory buffer called "safety
stock".
Moving up the supply chain from end-consumer to raw materials supplier,
each supply chain participant has greater observed variation in demand and
thus greater need for safety stock. In periods of rising demand, down-stream
participants increase orders. In periods of falling demand, orders fall or stop,
thereby not reducing inventory. The effect is that variations are amplified as
one moves upstream in the supply chain (further from the customer).
51. SN Panigrahi, Essenpee Business Solutions, India 51
Behavioural Causes Operational Causes
Behavioural Causes
Under-estimation of the pipeline
Complementary Bias,
Over-estimation of the pipeline
Misuse of base-stock policies
Mis-perceptions of feedback and time delays
Panic ordering reactions after unmet demand
Perceived risk of other players' bounded rationali
Demand Forecast Updating - Multiple Updates
Order Batching – Rounds up
Price Fluctuations – Promotional Schemes
Rationing and Gaming
Demand Processing
- Forecast Errors
- Adjustments
- Lead time variability
-Lot-sizing/order synchronization
- Trade promotion and forward buying
- Anticipation of shortages
52. 52
Sales Inventory Operation
➢ SIOP is a key Integrated Business Management process that derives from an organization's
strategic plan.
➢ This process allows organizations to develop a supply and demand plan that helps the
business better understand the demand of the products and services offered by the business.
➢ SIOP provides valuable information to the organization including updated sales, production,
inventory and new product development plans.
➢ Further, this process helps an organization to balance supply and demand and reduce out-of
stock merchandise.
➢ In order to implement an efficient sales and operations planning process, an organization
needs to bring together different elements within the business including sales, marketing,
finance and operations.
➢ Further, SIOP helps the organization manage replenishment and profitability strategies.
➢ Rough cut capacity planning also uses SIOP to set production targets and inventory levels.
➢ Inventory levels affect the organization's ability to produce and deliver on time and on budget.
55. 55
Supply Chain Analytics is the application of mathematics, statistics,
predictive modeling and machine-learning techniques to find meaningful
patterns and knowledge in order, shipment and transactional and sensor data
in order to Improve Operational Efficiency & Effectiveness by Enabling
Data-Driven Decisions at Strategic, Operational & Tactical Levels.
It encompasses virtually the complete value chain: sourcing, manufacturing,
distribution and logistics.
Supply Chain Analytics can identify known risks and help to predict future
risks by spotting patterns and trends throughout the supply chain.
Increase accuracy in planning. By analyzing customer data, supply chain
analytics can help a business better predict future demand.
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Critical
Elements of a
Successful
Supply Chain
Focus on End
Consumer
Futuristic
Predictive
Thinking
Data Driven
Decisions
Flexibility
Full Integration
Innovation &
Continuous
Improvement
Monitor &
Measure
Performance
Take Corrective
& Preventive
Measures
SN Panigrahi
57. SN Panigrahi, Essenpee Business Solutions, India 57
Key Deliverables
➢ Improve Forecast Accuracy
➢ Improve Fill Rates and Deliver Growth
➢ Improve Service Levels
➢ Reduce Inventory and Release cash
➢ Optimize Freight Utilization by Improving Loading Levels and Routing, Reducing
Cost to Serve
➢ Eliminate Wastages and Improve Margins
➢ Devise inventory norms for all nodes in the supply chain
➢ Conduct root cause analysis for excess inventory or stock outs at the nodes
➢ Support Reconfiguration of a Network by Identifying all Feasible network
scenarios, evaluating the transition costs, risks and returns for each one
59. 59
• Provides visibility and a single source of truth across the supply chain,
for both internal and external systems and data.
Descriptive
Analytics
• Helps an organization understand the most likely outcome or future
scenario and its business implications. For example, using predictive
analytics can project and mitigate disruptions and risks.
Predictive
Analytics
• Helps organizations solve problems and collaborate for maximum
business value. Helps businesses collaborate with logistic partners to
reduce time and effort in mitigating disruptions.
Prescriptive
Analytics
• Helps an organization answer complex questions in natural language —
in the way a person or team of people might respond to a question. It
assists companies to think through a complex problem or issue, such as
“How might we improve or optimize X?
Cognitive
Analytics
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Supply chain analytics can help an organization make smarter, quicker and more efficient decisions. Benefits
include the ability to:
➢ Increase Accuracy in Planning. By analyzing customer data, supply chain analytics can help a business
better predict future demand. It helps an organization decide what products can be minimized when they
become less profitable or understand what customer needs will be after the initial order.
➢ Better understand risks. Supply chain analytics can identify known risks and help to predict future risks
by spotting patterns and trends throughout the supply chain.
➢ Achieve the lean supply chain. Companies can use supply chain analytics to monitor warehouse,
partner responses and customer needs for better-informed decisions.
➢ Prepare for the future. Companies are now offering advanced analytics for supply chain management.
Advanced analytics can process both structured and unstructured data to give organizations an edge to
get alerts on time to make the optimal decisions. It can build correlation and patterns among different
sources to provide alerts that minimize risks at little cost and less sustainability impact.
➢ Gain a significant return on investment. A recent Gartner survey revealed that 29 percent of surveyed
organizations said they have achieved high levels of ROI by using analytics, compared with only four
percent that achieved no ROI.
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Connected
Collaborative
Cyber-WareCognitively
enabled
Comprehensive
IDC’s Simon Ellis in The
Thinking Supply
Chain identifies the five
“Cs” of the effective
Supply Chain Analytics of
the future:
Being able to access unstructured data from
social media, structured data from the Internet of
Things (IoT) and more traditional data sets
available through traditional ERP and B2B
integration tools.
•Improving collaboration with suppliers
increasingly means the use of cloud-
based commerce networks to enable
multi-enterprise collaboration and
engagement.
•The supply chain must harden its
systems from cyber-intrusions and
hacks, which should be an enterprise-
wide concern.
•The AI platform becomes the modern supply
chain's control tower by collating, coordinating
and conducting decisions and actions across
the chain. Most of the supply chain is
automated and self-learning.
•Analytics capabilities must
be scaled with data in real
time. Insights will be
comprehensive and fast.
Latency is unacceptable in
the supply chain of the future
“By 2020, more than seven billion
people and businesses, and at least 30
billion devices, will be connected to
the Internet.
As per Gartner’s Analysis - Trends in Supply
Chain.
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Business
Strategies
Competitive
Strategies
Supply Chain
Strategy
Business Strategy :
It involves leveraging the core competencies of the
organization to achieve a defined high-level goal or
objective
Competitive Strategy :
A company's competition strategic defines the set of customer
needs that it seeks to satisfy through its products and
services.
The company's competitive strategy will be defined based
upon the customer priorities.
Supply Chain Strategy
It includes what many traditionally calls supply strategy,
operations strategy, and logistics strategy, decisions regarding
inventory, transportation, operating facilities, and information
flows in the supply chain are all part of supply chain strategy.
Strategic fit means that both the competitive and supply
chain strategies have the same goal. It refers to
consistency between the customer priorities that
the competitive strategy hopes to satisfy and the supply
chain capabilities that the supply chain strategy aims to
built.
Strategic Fit
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Forecasts are Projections
1.Pivotal in strategic planning of Business: Forecasting is the underlying
hypothesis for strategic business activities like expansion planning, budgeting,
financial planning, risk assessment, and mitigation. Critical business
assumptions like turnover, profit margins, cash flow, capital expenditure, etc. are
also dependent on Forecasting.
2.Initiating all push–processes of Supply Chain: Forecasting is the starting
point for all push-processes of Supply Chain like raw material planning,
purchasing, inbound logistics, and manufacturing. Better forecasts help
optimize the inventory levels and capacity utilization.
3.Driving all pull–processes of Supply Chain: Forecasting drives all pull-
process of Supply Chain like order management, packaging,
distribution, and outbound logistics. Better forecast improves the distribution
and logistics and increases customer service levels.
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pull system production orders begin upon
Receiving Orders – Production based on
Precision – Orders
- Actual Consumption
- Small Lot Sizes
- Low Inventories
- Waste Reduction
- Adoption of Lean Principles
- Kanban / JIT
Eg.:
Manufacturing Plant & Machinery
Large Projects
Push System production begins based on
Expected Demand (forecasted or actual
demand) – Production Approximation based
on Projections / Forecasts
- Larger Lot Sizes
- High Investment
- High Levels of Inventory
- High Waste
Eg.:
Mining
Steel & Cement
Consumer Goods
67. 67
Manufacturing Capacity, Distribution Centre Capacity, Transportation Vehicles etc.
Process of Determining what Customer will Purchase and When
Customer Order Receiving, Verifying, Fulfilling, Invoicing, Communicating
Production Planning by Balancing Demand – Capacity & Stock in hand
Demand Planning, Inventory Optimization, Safety Stock mgt., Excess and
Obsolete Inventory mgt or right inventory levels
Monitoring of Stocks and the automatic creation of procurement proposals
Activities like Goods-in (receiving), put-a-way to stores, picking, packing,
shipping and managing return goods
Learning and Implementing Improvements Continuously
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Push / Pull View of Supply Chain
Processes in a supply chain are divided into two
categories depending on whether they are
executed in response to a customer order (pull) or
in anticipation of a customer order (push).
❖ Supply Chain Falls into one of the Two
❖ Pull: execution is initiated in response to a customer
order (reactive)
❖ Push: execution is initiated in anticipation of customer
orders (speculative)
❖ Push/pull boundary separates push processes from
pull processes
❖ Useful in considering strategic decisions relating to
supply chain design – more global view of how supply
chain processes relate to customer orders
❖ Can combine the push/pull and cycle views
❖ The relative proportion of push and pull processes can
have an impact on supply chain performance.
Cycle View of Supply Chain
Processes in a supply chain are divided into a
series of cycles, each performed at the interfaces
between two successive supply chain stages
➢ Each cycle occurs at the interface between two
successive stages
➢ Customer order cycle (customer-retailer)
➢ Replenishment cycle (retailer-distributor)
➢ Manufacturing cycle (distributor-manufacturer)
➢ Procurement cycle (manufacturer-supplier)
➢ Cycle view clearly defines processes involved and
the owners of each process. Specifies the roles and
responsibilities of each member and the desired
outcome of each process.
71. 71
Manufacturer
Distributor
Retailer
Customer Demand Forecasting Tools
Analytics and Reports Tools
Security Features Tools
Compliance Tools
Shipping Status Tools
Order Processing Tools
Lean Inventory Tools
Warehouse Management Tools
Supplier Management Tools
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Descriptive Analytics
Descriptive analytics gives users a window into what’s happening within the supply chain right now.
The data involved in this type of analytics will be relied on every day and will require corporate
databases to store and recall. This type of analytics is focused on providing a single source of truth
across the entire supply chain, including internal and external systems. Some of the things this type
of analytics can uncover are:
•Customer-Product Matrix – A customer buys a product that could create an opening for another
product
•Coefficient of Variation – The last 12 months of shipments can be used to calculate the average
demand for a product
•Customers per SKU – The number of customers one product goes to. If a product that is difficult
to make is purchased by many, it may be time to update sales strategies
•Alert Reporting – Logic tools can help create alerts for situations like stock-outs
•Safety Stocks – Descriptive statistics can help guide users toward which high volume products
require backstock to avoid running out at inopportune times
These traditional business intelligence findings are then taken and displayed on an easily accessible
dashboard. This type of supply chain analytics is also considered a hindsight tool; users can find out
what happened in the past and how it relates to the future.
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Predictive Analytics
Much like the title suggests, predictive analytics are all about forecasting the
future and preparing for changes down the line. This method is employed
when a business is considering a future scenario to see how it would play
out before diverting resources.
Machine learning and AI are amazing inclusions into the world of analytics, but
no algorithm is always right. Hence the need for human employees to shoulder
the burden of choice and planning for the future.
In fact, a recent study shows that the number of companies currently using the
predictive method has grown 76% from 2017 to today. This year, 30% of
respondents said predictive analytics technology was currently in use. This is up
from 17% two years ago. It comes as no surprise that more businesses are
turning to predictive analytics to fine-tune their supply chains.
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Prescriptive Analytics
Prescriptive analytics lives in the past, present and future, using data from them all
to give businesses potential routes forward. By leveraging data from the past and
comparing it with information from today, this method can highlight future
opportunities or warn about incoming risks.
This type of analytical style uses a constant stream of structured numerical data as
well as unstructured video and image information to act as a sort of crystal ball.
Without technology like machine learning (the ability of a machine to move
forward based on data without human interaction), this type of analytics would be
unavailable.
The major difference between this and predictive analytics is that the
prescriptive method recommends a course of action to take.
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Cognitive Technologies are Rede ning Businesses Cognitive technologies such as
Artificial Intelligence (AI), machine learning, and Natural Language Processing (NLP)
are permeating all facets of business, across all domains, with fast growing use cases.
Cognitive computing in the context of analytics can refer to the use of analytics to ‘learn’
about specific business functions so as to gain insights about customers, competitors,
market perceptions, etc.
Cognitive analytics can also be used to extrapolate business contexts and run
simulation models for predictive insights.
The biggest advantages of cognitive analytics technologies stem from their ability to
understand queries posed in natural language, processing power to analyze large volumes
of data to return real-time insights, and a self-learning loop that enables the algorithms to
trace the outcomes of delivered insights, and use the outcomes to improve the accuracy
and relevance of results on an ongoing basis.
Cognitive Technologies
78. Most performance measures can be grouped into one of the following six general categories.
However, certain organizations may develop their own categories as appropriate depending on the
organization's mission:
1.Effectiveness: A process characteristic indicating the degree to which the process output(work
product) conforms to requirements.(Are we doing the right things?)
2.Efficiency: A process characteristic indicating the degree to which the process produces the
required output at minimum resource cost. (Are we doing things right?)
3.Quality: The degree to which a product or service meets customer requirements and
expectations.
4.Timeliness: Measures whether a unit of work was done correctly and on time. Criteria must be
established to define what constitutes timeliness for a given unit of work. The criterion is usually
based on customer requirements.
5.Productivity: The value added by the process divided by the value of the labor and capital
consumed.
6.Safety: Measures the overall health of the organization and the working environment of its
employees
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Perfect Order Measurement ((total orders – error orders) / total orders) * 100
Cash to Cash Cycle Time Materials Payment Date – Customer Order
Payment Date
Customer Order Cycle Time Actual Delivery Date – Purchase Order Creation
Date
Requested Delivery Date – Purchase Order
Creation Date
Fill Rate
The percentage of a customer’s order that
is filled on the first shipment. This can be
represented as the percentage of items,
SKUs or order value that is included with
the first shipment.
(1 – ((total items – shipped items) / total items)) *
100
Supply Chain Cycle Time
The time it would take to fill a customer
order if inventory levels were zero.
Sum of the longest lead times for each stage of the
cycle
Inventory Days of Supply
The number of days it would take to run out
of supply if it was not replenished.
Inventory on Hand / Average Daily Usage
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Freight bill accuracy
The percentage of freight bills that are error-
free.
(error-free freight bills / total freight bills) * 100
Freight cost per unit
Usually measured as the cost of freight
per item or SKU.
total freight cost / number of items
Inventory Turnover
The number of times that a company’s
inventory cycles per year.
cost of goods sold / average inventory
Days Sales Outstanding
A measure of how quickly revenue can be
collected from customers
(Receivables/Sales) * Days in Period
Average Payment Period for Production
Materials
The average time from receipt of
materials and payment for those
materials.
(Materials Payables/Total Cost of Materials) * Days
in Period
On Time Shipping Rate
The percentage of items, SKUs or order
value that arrives on or before the
requested ship date.
(Number of On Time Items / Total Items) * 100
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Inventory Turnover Ratio (ITR)
It is calculated by dividing Cost of Goods
(COGs) sold by the average inventory
investment.
ITR: COGs / [(Opening Stock-Closing Stock)/2]
Turn-Earn Index (TEI)
TEI helps us to combine the gross margin
and turnover.
TEI: (ITR) x (Gross Profit %) x 100
Gross Margin Return on Investment
(GMROI)
GMROI represents the amount of gross
profit earned for every AED (or $, £, €, ₺)
of the average investment made in
inventory.
GMROI: [Gross Profit] / [(Opening Stock-Closing
Stock) / 2] X 100
Days of Supply (DOS)
DOS is the most common KPI used by
managers in measuring the efficiency in
supply chain.
DOS: Average Inventory / Monthly Demand x 30
Inventory Velocity (IV)
IV is the percentage of inventory we are
projecting to be consumed within the
next period.
IV: Opening Stock / Next Month’s Sales Forecast
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Procurement Production Warehousing Transportation
•Procurement
90.99% perfect
•Production
85.12% perfect
•Warehousing
95.98% perfect
•Transportation
90.02% perfect
Perfect Order Measurement
((Total Orders – Error Orders) / Total Orders) * 100
Correct Method :
Overall Perfect Order Measurement of 4 Stages
= Procurement Perfect X Production Perfect X Warehousing Perfect X Transportation Perfect
= 90.99% X 85.12% X 95.985% X 90.02%
= 66.92%
If we Measure Average of 4 Stages
= (90.99% + 85.12% + 95.985% + 90.02%) / 4 = 90.52%
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Tracking
Courier – Shipping Line – Transport
RFID
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Making Smarter Decisions
How analytics enhance the guest experience at Walt Disney World
By Pete Buczkowski And Hai Chu
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Improving Guest Experience through Forecasting FORECASTING SERVES
AS the analytical foundation for operations planning at the Resort.
It all starts with the park attendance forecast, which lays out the expected
attendance at each park. These predictions are strongly considered when
setting park hours and performing other strategic planning.
More granular forecasts are required for each individual area, such as guest
arrivals at the hotel front desks.
The company recently launched a new labor demand planning system,
which generates transaction forecasts for every 15- minute period at many
locations throughout the property, including park entry turnstiles, quick-
service restaurants and merchandise locations. These forecasts help the
resort plan labor effectively to ensure guest service standards are met.
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The resort’s costuming operation is the largest in the world, with
more than a million costumes in inventory at Walt Disney World alone.
Not only does total garment demand vary by season, but the
distribution of individual garment sizes also changes as the cast mix
evolves over time.
Unlike a traditional inventory system, garments are laundered and
placed back on the shelf after cast members return the garments.
The recycling nature of the garment inventory is further complicated
by occasional garment retires.
This dynamic environment requires sophisticated forecasting models to
have enough garments to meet cast member demand while not
overspending on garments that sit on a shelf
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Another innovative way the resort uses forecasting is for attraction wait times. The most
popular attractions utilize Disney’s FASTPASS system – a unique virtual queueing system
that allows guests to receive a ticket with a designated one-hour window of time when they can
return and skip the regular line.
The virtual queue poses an extra challenge to forecasting the standby wait time since many
FASTPASS guests will return before the guest entering the standby queue reaches the front of
the line.
From a central command center underneath the Magic Kingdom, forecasting models are
executed every 5-10 minutes to project the return patterns of our FASTPASS guests based on
a variety of factors, including entertainment schedules and the number of FASTPASS tickets
that have been distributed. These forecasts are posted at the front of the attractions to help
guests choose whether to enter the line, take a FASTPASS ticket or return to the attraction
later in the day. As an added bonus, these projected wait times are also available on Disney’s
Mobile Magic smart phone app, which shares real-time information about the parks throughout
the day
