Supply Chain Management

Table of Content

Sr. No. Content Page No
1. Introduction 3
2. Supply Chain Strategies 4
3. Bullwhip Effect 5
4. Example 7
5. References 9









INTRODUCTION

SUPPLY CHAIN MANAGEMENT
Supply Chain Management is a business practice that has used to give an effective service to
the customers and to make the business more sustainable by looking into all the aspects
from the supplier to the consumer.


Supply Chain integrates features such as manufacturer, supplier, transport, wholesalers,
retailers, customers. Its main objective is to fulfil customer demands by adding value to the
products and services.
Supply chain management has the objective to have the right products in the right
quantities at the right time at minimal cost, a situation that would guarantee optimal service
levels for the customer and optimal performance for the organizations as a whole and
separately.


Raw
Material
Supplier
Manufacturing
Consumer Customer Distribution
Supply Chain Strategies


Lean:
This strategy helps the supply chain by reducing the waste and non value added services i.e. waste
can be in the form of costs, time and inventory. To create a lean supply chain, companies must look
into every process in their supply chain (such as manufacturing, warehousing, transportation and
returns management) and implement in such a manner to reduce the waste and resources.
Therefore this strategy increases the company performance and profitability.

Agile:
Agile supply chain strategy helps companies to respond to change the customer demand rapidly. The
main aspect of this strategy is flexibility and speed. It ensures customer satisfaction through swift,
accurate and effective implementation of various supply chain activities.

Postponement:
Sometimes it is important to delay the manufacturing until the receipt of the actual customer order
is received. This strategy results in reduction of wrong manufacturing and inventory. Therefore this
strategy help companies not only avoid stocking unwanted products but also increase the customer
satisfaction by delivering them with latest products.

Speculation:
This strategy emphasise on increasing savings by manufacturing and distributing finished goods in
bulk. It helps to reduce costs by maximizing the uses of resources, warehousing and transportation.




Bullwhip Effect in Supply Chain

The bullwhip effect on the supply chain occurs when the changes in consumer demand
causes the companies in a supply chain to order more goods to meet the new demand.
The bullwhip effect usually flows up the supply chain, starting with the retailer, wholesaler,
distributor, manufacturer and then the raw materials supplier.
It occurs because the demand for goods is based on demand forecasts from companies,
rather than actual consumer demand.

Example:
The actual demand from a customer is 6 units, the retailer then orders 8 units to the
distributor and therefore orders 2 extra units to ensure they dont run out of stock.




Manufacturer
Distributor
Retailer
Customer
32
16
8
6

The distributor then orders 16 units to the manufacturer allowing him to buy in bulk so they
have enough stock to guarantee timely shipment of goods to the retailer.
The manufacturer then receives the order and then places an order to the supplier in bulk;
further the manufacturer places an order for 32 units to ensure economy of scale in
production to meet demand.
Now the 32 units have been produced for a demand of only 6 units, which means the
retailer will have to increase demand by dropping prices or finding more customers.
Although the bullwhip effect is a common problem for supply chain management
understanding the causes of the bullwhip effect can help managers to eliminate the effect.












Example

THE DELL SUPPLY CHAIN

Order Received
As per the diagram, when the order is received from the sales department, a credit check
will be run on the customer. If the customer is an end user then the term shall be prepaid
and the finance department will ensure that the correct payment has been made. Once this
procedure is done the finance department will release the order flow to production.
Order pushed into production
This order is then send to the manufacturing department, where the line operator is given
custom specification of the model through a unified communication system.


Order
Received
Order
Processed
Assembly
Line
Labelling Burn Test
Image,
Operating
System
Boxing
Custom
Clearance
Delivered to
Logistics
Delivered to
End User

Line1
1 1
Line2
2
Assembly line
Here there are 7 stations in line 1.The line operator is the 1
st
station that receives the order,
while the other 6 stations which assemble the chassis, motherboard, processor, ram, hard
disk and power supply. The last operator will push the assembled machine to line2.
Image, operating system, drivers, bloat ware are loaded
The process here is automated where the operating system, relevant drivers and software is
loaded to the hardware and pushed to a burn test.
Burn Test
This burn test takes around 4 hours depending on the configuration of a system. The burn
test is a stress test to identify defect on the hardware. This is a continuous flow of
production with no halt until boxing of the product. Once the hardware passes the burn
test, a line operator will label the hardware with a unique 7 digit alpha numeric code and
sends it for boxing.
Boxing and Customs Clearance
Another operator will check the finished hardware for any physical defect before boxing.
Since all of Dells manufacturing plants are located in free trade zones, the hardwares will
need to go through customs inspection before being delivered to the logistic hub.
Delivered to logistic hub and delivered to commercial end user for
customization
Once in the logistic hub, the finished goods will be segregated to its destination by country,
then state, and then district before dispatching them. A factory will have minimum of 8
peripherals. Dell practices product oriented layout as each line operators are individually
trained for the continuous process.

References:

Supply Chain Management by B.S. Sahay
Supply Chain Management by Sarika Kulkarni and Ashok Sharma.
Scribd.com
http://www.aalhysterforklifts.com.au/index.php/about/blog-
post/what_is_the_bullwhip_effect_understanding_the_concept_definition