Supply chain

1. Best Practices in SCM

2. Major Operational Strategies for SCM
➢ Tierisation of Suppliers
➢ Reverse logistics / Recyclable packaging
➢ Vendor-managed inventory
➢ Milk round system
➢ Bar coding
➢ Hub and spokes arrangement
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3. Tierisation of Suppliers
➢A vehicle manufacturer, instead of sourcing
individual small parts and putting them together in-
house would now outsource complete system such as
brake system, cockpit, chassis etc. as modules.
➢The OEM merely assemble the vehicle in the form of
pre-assembled modules
➢OEM, TIER 1, TIER2, TIER 3 SUPPLIERS
https://www.schnellecke.com/services-logistics-module-assemblies
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4. Benefits of Tierisation of Suppliers
➢Rationalization of supplier
➢Minimization of OEM assembly cost
➢Lower follow up cost
➢Straight shipping of pre-assembled, tested in modules
to OEM
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5. Reverse Logistics
➢Reverse logistics comprises of the sector of
supply chains that process anything returning
inwards through the supply chain or traveling
‘backward’ through the supply chain.
➢This can encompass anything from returned
goods, inward disposal/recycling of packaging
materials, the recycling/responsible disposal of
materials from previously sold products, etc.
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7. Cont..
• Reverse Logistics Includes any re-manufacturing or refurbishment of
goods.
Some reverse logistics examples are:
• Return of goods by customers
• Return of unsold goods by distribution partners due to contract terms
• Re-use of packaging
• Refurbishment of goods
• Repairs and maintenance as per guarantee agreements
• Re-manufacturing of goods from returned or defective items
• Selling of goods to a secondary market in response to returns or
overstocking
• Recycling and disposal of end-of-life goods
• Existing and growing market dynamics, such as higher customer return
rates and a need for recycling and re-use, are increasing the
occurrence of these instances of reverse logistics.
•

8. Mode of Recyclable packaging, used as effective tool
for SCM through
➢Extensive use of plastic bins and trolleys
➢Color coding for vendor identification
➢Tailor made partitioning
➢Stretch wrapping of critical dust prone components in
their respective packing
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9. Q ????
➢Truck leaves the OEM plant with three empty
containers of suppliers – A, B, C
➢At supplier A, empty containers unloaded and packed
containers loaded, truck moves to B
➢At suppliers B & C same process…..repeats
➢Truck with full containers moves to OEM
➢Empty containers ready at OEM, full containers
unloaded, and truck takes back the empty containers.
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10. Milk Round / Run System
➢A Milk Run is a delivery method used to transport
mixed loads from various suppliers to one customer.
Instead of each supplier sending a truck every week
to meet the needs of one customer, one truck (or
vehicle) visits the suppliers to pick up the loads for
that customer.
➢It involves fixed frequency / time of movement of trucks
based on exact production requirement in small lots
➢The collection and supply of material is exactly in tune with
the OEM’s requirement
➢Used through a 3PL provider who would organize supplies
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11. Milk Round / Run System

12. https://www.youtube.com/watch?v=_nMBbx3E1wY&feature=emb_logo

13. Bar Coding
➢Bar coding is an automatic identification
technology that allows data to be collected rapidly
and accurately from all aspects of a company's
operations, including manufacturing, inspection,
transportation, and inventory elements.
➢Bar coding is normally used for material entries or
supply tracking
➢It can……
➢Aid faster entry of material
➢Reduce error made during manual entry
➢https://www.youtube.com/watch?v=e6aR1k-
ympo&t=156s
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14. Hub and spokes arrangement
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The hub and spoke model refers to a
distribution method in which a centralized
"hub" exists. Everything either originates in the
hub or is sent to the hub for distribution to
consumers. From the hub, goods travel
outward to smaller locations owned by the
company, called spokes, for further processing
and distribution

15. Cross Docking
• Cross docking is a logistics procedure where products from a supplier or
manufacturing plant are distributed directly to a customer or retail chain with
marginal to no handling or storage time.
• Cross docking takes place in a distribution docking terminal which usually consists
of trucks and dock doors on two (inbound and outbound) sides with minimal
storage space.
• The name ‘cross docking’ explains the process of receiving products through an
inbound dock and then transferring them across the dock to the outbound
transportation dock.

16. Hub and spokes arrangement
➢The consolidation center (hub) receives material from
a number of (spokes) suppliers and subsequently
organizes supplies to OEMs.
➢IT backup is an essential prerequisite for ensuring
speedy communication of production plans and change
in order, so that the material is dispatched well in time
to reach OEM on time.
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17. 4PL Providers
➢Next stage of development in the field of logistics
service providers
➢Now, in India, more and more business processes are
being outsourced
➢Warehousing, transportation, inventory management
may be done by one 3PL.
➢HRD, security done by another….
➢Product development by another…..
➢There is a need of integrator who assembles the
capital, technology and resources of its own
organization and manages all 3PL and run the SC.
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18. Models of 4PL
1) Synergy Plus or Basic Functional Relationship
Model
2) Solution Integrator
3) Industry Innovator
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19. The basic relationship model of 4PL
3PL+4PL
C1 C2 CUSTOMERS C3 C4
➢Arrangement relies on working
relationship of 3PL and 4PL service
providers
➢Form a partnership to market SC
➢The 4PL company may provide
technology, SC strategy skills,
capability to the 3PL
➢Serves different customers

20. 4PL as a solution integrator
customer
3PL1
3PL3
3PL2 4PL
➢4PL operates and manages a comprehensive SC
solution for a single client

21. 4PL as an industry innovator
3PL 1
3PL 2
3PL 3
4PL
C 3
C 2
C 1
➢4PL organization develops and runs a supply chain
solution for multiple industry players with focus on
synchronization and collaboration.
➢The 4PLs adopt a Best of Breed approach to provide
services and technology to a client.

22. The Wal-Mart supply chain
Financing
Corporate headquarters
WAL-MART
Video link
Supplier payment
suppliers
organizational
learning
Satellite
communication
Point-of-sale data
Retail store
Communications support
Communications support WM
Distribution centersSource: Harvard Business review, Vol. 70, No. 2, March-April 1992, pp. 60-61

23. Modern Strategies
➢Postponement strategy
➢Cross-docking ( Wal-Mart….)
➢Drop-shipping (Directly to customers)
➢Risk-pooling
➢Trans-shipment
➢ Automation in Trace and Track Mechanisms; Bar
Coding, Radio frequency identification (RFID) etc.
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24. Postponement strategy
➢Postponement is a business strategy which maximizes possible benefit and
minimizes risk by delaying further investment into a product or service until the
last possible moment.
➢In SCM, postponement is a deliberate action to delay final manufacturing or
distribution of a product until receipt of a customer order. This reduces the incidence of
wrong manufacturing or incorrect inventory deployment.
➢Benetton’s postponement of garments
➢Dyeing of garments after knitting
➢Increases cost by 10%
➢But ensures availability in different colors based on
demand
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25. Risk-Pool
➢A risk pool is one of the forms of risk management
➢Aggregates demand across locations
➢High demand from one customer will be offset by low
demand from another.
➢This reduction in variability allows a decrease in
safety stock and therefore reduces average inventory.
➢For example: in the centralized distribution system,
the warehouse serves all customers, which leads to a
reduction in variability
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26. Trans-shipment
➢Trans-shipment is the shipment of goods or containers
to an intermediate destination, then to yet another
destination.
➢One possible reason for trans-shipment is to change
the means of transport during the journey.
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27. Transhipment….

28. Radio-frequency Identification (RFID)
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➢ RFID is one method for Automatic Identification and Data
Capture.
➢ Radio-frequency identification (RFID) uses
electromagnetic fields to automatically identify and track
tags attached to objects.
➢ The tags contain electronically stored information.

29. Radio-frequency Identification (RFID)
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➢ Passive tags collect energy from a nearby RFID reader's
interrogating radio waves.
➢ Active tags have a local power source such as a battery
and may operate at hundreds of meters from the RFID
reader.
➢ Unlike a barcode, the tag need not be within the line of
sight of the reader, so it may be embedded in the tracked
object.
➢ https://www.youtube.com/watch?v=Ukfpq71BoMo

30. Components of a RFID system
Host
RF modular
reader
Tag
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➢Identifying a person or object using a radio frequency
transmission

31. Concerns in using RFID
➢High Investment
➢Limited Range
➢Health Concerns
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32. Dropshipping
• Dropshipping is a retail fulfillment method where
a store doesn't keep the products it sells in stock.
when a store sells a product using this model, it
purchases the item from a third party and has
shipped it directly to the customer.

33. Thank You