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Supply chain managemant

A supply chain is a network of facilities and
distribution options that performs the functions of
procurement of materials, transformation of these
materials into intermediate and finished products,
and the distribution of these finished products to
customers. Supply chains exist in both service and
manufacturing organizations, although the
complexity of the chain may vary greatly from
industry to industry and firm to firm.
Supply chain management (SCM) is the
management of a network of interconnected
businesses involved in the ultimate provision of
product and service packages required by end
customers (Harland, 1996).[1] Supply chain
management spans all movement and storage of
raw materials, work-in-process inventory, and
finished goods from point of origin to point of
consumption (supply chain).

Mapping business Process

In order to effectively analyze business processes,
reviewers need a tool that takes into account the
objectives of the business, the actual work being
accomplished, and, most importantly, the impact of
processes on customers. Business process mapping
is just that tool. In a four-step process, analysis can
be performed that accomplishes this holistic
approach. At the same time, business process
mapping also helps gain employees' buy-in and can
result in an increased sense of pride for employees.

The Four Major Steps of Process Mapping

1.Process identification -- attaining a full
understanding of all the steps of a process.
2.Information gathering -- identifying
objectives, risks, and key controls in a
process.
3.Interviewing and mapping -- understanding
the point of view of individuals in the process
and designing actual maps
4.Analysis -- utilizing tools and approaches to
make the process run more effectively and
efficiently.

5. Measuring Process
Performance
“People do what you inspect, not what you
expect.”
When we work with clients to help them implement
Process Management we
often introduce a simple “Process Capability and
Maturity Model”. This
framework can be used to help plan what needs to be
done at an organisational
level, but can also be applied at the level of
individual processes.
Balanced Measurement
Every process should have a balanced set of
measurements (Key Performance
Indicators - KPIs) against which its performance can
be tracked, communicated
and improved.
There are three types of measurement required:
Internal measures
Output (or quality) measures
Satisfaction measures

A top-down approach (also known as step-wise

design) is essentially the breaking down of a system
to gain insight into its compositional sub-systems. In
a top-down approach an overview of the system is
formulated, specifying but not detailing any first-
level subsystems. Each subsystem is then refined in
yet greater detail, sometimes in many additional
subsystem levels, until the entire specification is
reduced to base elements. A top-down model is
often specified with the assistance of "black boxes",
these make it easier to manipulate. However, black
boxes may fail to elucidate elementary mechanisms
or be detailed enough to realistically validate the
model.
A bottom-up approach is the piecing together of
systems to give rise to grander systems, thus making
the original systems sub-systems of the emergent
system. In a bottom-up approach the individual base
elements of the system are first specified in great
detail. These elements are then linked together to
form larger subsystems, which then in turn are
linked, sometimes in many levels, until a complete
top-level system is formed. This strategy often
resembles a "seed" model, whereby the beginnings
are small but eventually grow in complexity and
completeness. However, "organic strategies" may
result in a tangle of elements and subsystems,
developed in isolation and subject to local
optimization as opposed to meeting a global
purpose.
Concurrent engineering is a work methodology
based on the parallelization of tasks (i.e.
performing tasks concurrently). It refers to an
approach used in product development in which
functions of design engineering, manufacturing
engineering and other functions are integrated to
 reduce the elapsed time required to bring a new
product to the market.

Material requirements planning (MRP) is a

production planning and inventory control system
used to manage manufacturing processes. Most
MRP systems are software-based, while it is
possible to conduct MRP by hand as well.
An MRP system is intended to simultaneously meet
three objectives:
 Ensure materials are available for production
and products are available for delivery to
customers.
 Maintain the lowest possible level of inventory.
 Plan manufacturing activities, delivery schedules
and purchasing activitie
Quality function deployment (QFD) is a “method
to transform user demands into design quality, to
deploy the functions forming quality, and to deploy
methods for achieving the design quality into
subsystems and component parts, and ultimately to
specific elements of the manufacturing process.”,[1]
as described by Dr. Yoji Akao, who originally
developed QFD in Japan in 1966, when the author
combined his work in quality assurance and quality
control points with function deployment used in
value engineering.
QFD is designed to help planners focus on
characteristics of a new or existing product or
service from the viewpoints of market segments,
company, or technology-development needs. The
technique yields graphs and matrices.
Group Technology or GT is a manufacturing
philosophy in which the parts having similarities
(Geometry, manufacturing process and/or
function) are grouped together to achieve higher
level of integration between the design and
manufacturing functions of a firm. [1][citation needed].
The aim is to reduce work-in-progress and
improve delivery performance by reducing lead
times. GT is based on a general principle that
many problems are similar and by grouping similar
problems, a single solution can be found to a set
of problems, thus saving time and effort. The
group of similar parts is known as part family and
the group of machineries used to process an
individual part family is known as machine cell. It
is not necessary for each part of a part family to
be processed by every machine of corresponding
machine cell. This type of manufacturing in which
a part family is produced by a machine cell is
known as cellular manufacturing. The
manufacturing efficiencies are generally increased
 by employing GT because the required operations
may be confined to only a small cell and thus
avoiding the need for transportation of in-process
parts[citation needed].

Kanban (看板?), also spelled kamban, pronounced /

ˈkɑnˈbɑn/, and literally meaning "signboard" or
"billboard", is a concept related to lean and just-in-
time (JIT) production. According to Taiichi Ohno,
the man credited with developing Just-in-time,
kanban is one means through which JIT is achieved.
[2][3]

Kanban is not an inventory control system. Rather, it

is a scheduling system that tells you what to
produce, when to produce it, and how much to
produce.
The need to maintain a high rate of improvements
led Toyota to devise the kanban system. Kanban
became an effective tool to support the running of
the production system as a whole. In addition, it
proved to be an excellent way for promoting
improvements because reducing the number of
kanban in circulation highlighted problem areas.[4]

Informatin system
Supply chain management SCM is the integration
and management of supply chain organizations and
activities through collaboration, effective business
processes and high levels of information sharing.
The supply chain concept has become a concern due
to global competition and increasing customer
demand for value. Thus, the information must be
available in real time across the supply chain and
this can not be achieved without an integrated
software system for supply chain management.
Supply chain members have to collaborate, sharing
information for improving customers satisfaction.
Web technologies enable enterprises to become
more effective, to trade with suppliers and customers
over the Internet in real time. For this, businesses
have to integrate their information systems and
applications with those of their suppliers and
customers. First, companies have to redesign their
supply chain to create an integrated value system
and afterwards, companies can develop business to
business applications across supply chain structure
for the optimization of the supply chain . The
implementation of the supply chain information
systems in companies facilitates an increase in their
competitiveness and their profits.
Safety stock (also called buffer stock) is a term
used by logisticians to describe a level of extra stock
that is maintained to mitigate risk of stockouts
(shortfall in raw material or packaging) due to
uncertainties in supply and demand. Adequate safety
stock levels permit business operations to proceed
according to their plans.[1] Safety stock is held when
there is uncertainty in the demand level or lead time
for the product; it serves as an insurance against
stockouts.
Reasons for safety stock
Safety stocks are mainly used in a "Make To Stock"
manufacturing strategy. This strategy is employed
when the lead time of manufacturing is too long to
satisfy the customer demand at the right
cost/quality/waiting time.
The main goal of safety stocks is to absorb the
variability of the customer demand. Indeed, the
Production Planning is based on a forecast which is
(by definition) different form the real demand. By
absorbing these variations, safety stock improves the
customer service level.
By creating a safety stock, you will also prevent
stock-outs from other variations :
 an upward trend in the demand
 a problem in the incoming product flow
(machinery breakdown, supplies delayed,
strike, ...)
[edit] Reducing safety stock
Safety stock is used as a buffer to protect
organizations from stockouts caused by inaccurate
planning or poor schedule adherence by suppliers.
As such, its cost (in both material and management)
is often seen as a drain on financial resources which
results in reduction initiatives. In addition, time
sensitive goods such as food, drink, and other
perishable items could spoil and go to waste if held
as safety stock for too long.[2] Various methods exist
to reduce safety stock, these include better use of
technology, increased collaboration with suppliers,
and more accurate forecasting [3][4] In a lean supply
environment, lead times are reduced which can help
minimize safety stock levels thus reducing the
likelihood and impact of stockouts.[5] Due to the cost
of safety stock, many organizations opt for a service
level led safety stock calculation; for example, a
95% service level could result in stockouts, but is at
a level which is satisfactory to the company. The
lower the service level, the lower the requirement for
safety stock.
Inventory policy
The size of the safety stock depends on the type of
inventory policy that is in effect. An inventory node
is supplied from a "source" which fulfills orders for
the considered product after a certain replenishment
lead time. In a "periodic review" inventory policy
the inventory level is checked periodically (such as
once a month) and an order is placed at that time if
necessary; in this case the risk period is equal to the
time until the next review plus the replenishment
lead time. On the other hand, if the inventory policy
is a "continuous review" policy (such as an Order
point-Order Quantity policy or an Order Point-Order
Up To policy) the inventory level is being check
continuously and orders can be placed immediately,
so the risk period is just the replenishment lead time.
Therefore "continuous review" inventory policies
can make do with a smaller safety stock.
A lead time is the latency (delay) between the
initiation and execution of a process. For example,
the lead time for ordering a new car from a
manufacturer may be anywhere from 2 weeks to 6
months. In industry, lead time reduction is an
important part of lean manufacturing.
The ABC analysis is a business term used to define
an inventory categorization technique often used in
materials management. It is also known as Selective
Inventory Control.
The ABC analysis provides a mechanism for
identifying items that will have a significant impact
on overall inventory cost, [1] while also providing a
mechanism for identifying different categories of
stock that will require different management and
controls.[2]
The ABC analysis suggests that inventories of an
organization are not of equal value. [3] Thus, the
inventory is grouped into three categories (A, B, and
C) in order of their estimated importance.
'A' items are very important for an organization.
Because of the high value of these ‘A’ items,
frequently value analysis are required. In addition to
that, an organization needs to choose an appropriate
order pattern (e.g. ‘Just- in- time’) to avoid excess
capacity.
'B' items are important, but of course less important,
than ‘A’ items and more important than ‘C’ items.
Therefore ‘B’ items are intergroup items.
'C' items are marginally important. [4]
[edit] ABC analysis categories
 ‘A’ items – 20% of the items accounts for 70%
of the annual consumption value of the items.
 ‘B’ items - 30% of the items accounts for 25%
of the annual consumption value of the items.
 ‘C’ items - 50% of the items accounts for 5% of
the annual consumption value of the items.[5]
ABC Analysis is similar to the Pareto principle in
that the 'A' items will typically account for a large
proportion of the overall value but a small
percentage of the overall volume of inventory.[6]
Another recommended breakdown of ABC classes[7]:
1."A" approximately 10% of items or 66.6% of
value
2."B" approximately 20% of items or 23.3% of
value
3."C" approximately 70% of items or 10.1% of
value
Sale & Operation planning
Sales and operations planning (S&OP), sometimes
known as aggregate planning, is a process where
executive level management regularly meets and
reviews projections for demand, supply and the
resulting financial impact. S&OP is a decision
making process that makes certain that tactical
plans in every business area are in line with the
overall view of the company’s business plan. The
overall result of the S&OP process is that a single
operating plan is created that identifies the
allocation of company resources, including time,
money and employees.