UNIT 5

Supply Chain Management Network Design and Facilities Development

Supply chain Network design:
Supply Chain Network Design (SNDC) also known as 'strategic supply chain planning' is the
process for building and modelling the supply chain to understand the costs and time to bring
goods and services to market within an organisations available resources.
SCND covers all the movements and storage of raw materials, work-in-process inventory and
finished goods from the point-of-origin to the point-of-consumption. It covers the planning,
implementation and control of supply chain operations.
How does strategic supply chain planning fit into the planning process?
Planning processes in SCND aim at finding the best possible supply chain configuration so
that all operations are performed in an efficient way. Three planning levels are distinguished
depending on the time horizon.
Strategic: Covers future planning, market factors, capacity and technological changes.
Tactical: Focused on a shorter planning cycle - demand, inventory and supply.
Operational: Activities measured in weeks, demand fulfilment, scheduling, production &
transport.
What are the steps to successful application of SCND
Step 1. Determine the current and future organisation strategy.
Step 2. Determine the current strategy processes with products, materials and information.
Step 3. Select key customers and map their features.
Step 4. Determine the importance of products from the customer points of view.
Step 5. Determine the organisations waste elimination opportunities.

What is Supply Chain Planning?

Supply chain planning helps you match product supply with customer demand using
forecasting, pricing strategy and inventory management techniques. Before delving into the
details of supply chain planning, here are two key concepts you need to know.
Supply chain planning vs. supply chain execution: Supply chain planners are long-term
prognosticators, asked to peer months or even years into the future. But their predictions
aren’t based on what they see in crystal balls. Instead, they analyze manufacturing, logistics
and inventory data to make their plans.
Supply chain execution, on the other hand, is the day-to-day implementation of that plan—
order fulfillment, transporting goods, warehousing. Think of them as two sides of the same
coin.
Supply Chain Planning strategies and methods include:
Demand Planning - One of the very first steps involved in supply chain planning is demand
planning. Knowing what the demand for your products will be can be a challenging feat in
and of itself as there is growing demand volatility in the market. However, this is necessary
as demand will tell you how much material, resource capacity, labor resources, etc required
for production.
Lean Principles - Successful supply chain planning provides an opportunity for your
organization to employ some lean scheduling principles. Lean manufacturing looks to reduce
waste in all areas of the company with the goal to only produce what is required when it is
needed. Supply chain planning can help this as it coordinates multiple departments and
increases visibility between them so you can be assured that you have just the right amount of
materials you need for production.
Increased Visibility - One of the main challenges in supply chain planning is ensuring that
there is sufficient visibility in every department to prevent waste and miscalculations..
Standardization - Implementing standard processes in supply chain planning will further
reduce the errors and inefficiencies that can arise. Obtaining an ERP system that enables
growth will help the supply chain in the short and long run by increasing revenue. Along with
an ERP system, an Advanced Planning and Scheduling system can go beyond the planning
element by coordinating demand, forecasts, inventory data, resource and labor capacity, and
material availability to create an optimized production schedule.
Supply chain planning is an intricate process that requires coordination, visibility, and
synchronization of multiple departments and components of the supply chain.
Development of SCM Planning strategies:
1. Understand How Your Supply Chain Strategies and Business Plans Connect
There are two components of a business plan that deal with the shipping and tracking of
products from Point A to Point B and everywhere else in between. This is the supply chain
and the supply chain management strategy. And, as you probably know, they differ.
Take for example Apple, maker of iPhones and iMacs, and the many suppliers within its
supply chain. The parts for their iconic iPhone are created by a number of different
manufacturers. For example, the LTE modem is produced by Qualcomm and the battery by
Huapu (both located in China), and the display is created from Ashai in Japan. After suppliers
have built these parts – and many others – and shipped them to Apple, the company builds its
phones. From there, it distributes its finished product to third-party retailers to sell to
consumers. Apple also sells their products directly to consumers. A supply chain and supply
chain management strategy are broad concepts that involve the intricate process of managing
suppliers and other factors in the supply chain, as well as the procedures to track information
relating to these supply chain transactions.
2. Analyze your Current Supply Chain and Supply Chain Management Strategy
In order to make a change to your supply chain and management strategy, you first need to
figure out what the problem (or problems) are and how to make adjustments.
Conducting this type of analysis is often very difficult to do alone because it’s hard to step
away from the situation and observe it from an outside perspective. This is where a third-
party consulting firm can help. For those who don’t want to be blindsided by a third-party
search, here are a few things these professionals might do:
3. Work Closely With Your Team and Third-Party Vendors
One of the reasons supply chains falter is because there exists a disruption in the flow of
communication or information exchange between strategy planners, third-party vendors and
the main company.
4. Choose the Right Solution
There are a number of different supply chain management solutions available. Here are some
that RFgen offers:
 Inventory Management Solutions.
 Warehouse Automation Solutions
 Off-Network Mobility Solutions

5. Implement the Plan

Your supply chain management strategy should include a serious discussion about how your
team plans to implement the plan into the company’s operations.This process can be difficult
to accomplish, especially if employees are set in their ways, but it shouldn’t be cast aside.
 Gather Employee Feedback
 Create an Eye-Pleasing Report
  Present to Upper Management
 Roll out the Plan:
 Evaluate the Result
Forming a strategy isn’t easy – as you can see there are many comprehensive steps involved
that take a lot of explaining. However, if you adhere to these policies, we’re confident you
can build a supply chain management strategy that works great for your company.
Supply chain Uncertainties:
Here are several ways to define uncertainty.
Supply chain uncertainty refers to the decision-making process in the supply chain in which
the decision maker does not know exactly what to decide due to lack of transparency of the
supply chain and the impact of possible actions.
Supply chain uncertainty refers to the change of the balance and profitability of the supply
chain caused by potential and unpredictable events, which requires a response to re-establish
the balance. An event can be an unexpected order, late delivery from a supplier or a
breakdown of critical production equipment.
Uncertainty: What am I going to deliver in the future?
The result of demand uncertainty is increased cost, most commonly in the form of excess
inventory, excess capacity in production, or the use of faster and more expensive
transportation of goods.
Uncertainty: How much will my customer return?
The returns loop is often regarded a more difficult flow to master efficiently, and it often
involves additional work tasks adding cost. For this reason, anticipating the number of
products returned can be of great interest. Returns typically appear either due to faulty
products or due to customer expectations of price/quality – or in fashion retail, wrong size of
fit.
Uncertainty: What kind of quality problems will my customers experience?
This is a big question for many companies. Despite doing everything possible to make sure
that the products sent out live up to the quality requirements, some products will fail after
some time. For a company, quality issues can be disastrous – and the stories are many. Do a
Google search on product recalls and you will find several examples of quality issues that
have had serious impacts on the manufacturer – financial and reputational.
What is Supply Chain Vulnerability
Supply chain vulnerability indicates the responsiveness of a supply chain to disruptions, and
can be defined as an exposure to serious disturbance arising from supply chain risks and
affecting the supply chain’s ability to effectively serve the end customer market.
Supply chain coordination and integration

Supply chain integration is a process where all the parties involved with the fulfillment of a
product are integrated into a single system. This requires significant coordination and
alignment in order to ensure everyone is effectively working toward the same goal at all
times.

Having the parts required for a product show up where they are needed, when they are
needed, helps to not only prevent delays in the manufacturing process, but also eliminates a
lot of wasted time, storage space, and more. When done properly, supply chain integration
will bring parties that are often at odds together with a single focus.

All of the materials and components from along the supply chain are needed, and by
integrating everything into a single system, it is much easier for effective product creation.

When looking at the information sharing of supply chain integration, most companies go
through a series of stages once they begin working toward a full supply chain integration.
These stages are as follows:

Baseline - This is the first stage, and it is when every department or system within a company
is managing their own supply chain, and related issues. Companies also refer to this as a
siloed approach, and while it can have some benefits, it is quite inefficient.
Functional Integration - In this next stage, all the different departments within a company
will work together to help to improve efficiency and reduce cost. This could be done by
combining orders, scheduling jobs together, or other important steps.

Internal Supply Chain Integration - All the departments within a company are connected
using the same systems. This will almost always involve using some type of IT infrastructure
solution that allows the departments to work efficiently together, share their needs, and
identify collaboration opportunities.

External Supply Chain Integration - The final stage involves external vendors as well as all
of the internal departments. Providing a vendor with system access, and encouraging them to
function almost as another department helps to generate the best possible results.

Integrating Supply Chains

When it comes to integrating supply chains within a company, there are quite a few things
that need to come together. The following are some of the key steps that most companies will
need to take during this process:

 Choosing Vendors
 Internal Teams
 Waste Elimination

There are many other things involved with effective supply chain integration. This can seem
like a very complex process, and in many ways, it really is. Once the initial integration is
completed, the system should run very smoothly for years to come.

Role of IT in supply chain management

The role that IT plays in supply chain management or SCM is so important. IT provides the
tools which can pick up relevant information, break it down for proper analysis and execute it
for optimum performance of the supply chain. Data is pivotal to the execution of the supply
chain, primarily because it provides the base on which the supply chain managers can take
decisions.
Real-time or almost real-time information is the key to proper supply chain management.
With information about the various stages of the supply chain, decision-makers can plan,
manage, and adjust processes to achieve goals in procurement, inventory, manufacturing, etc.

Why is technology important in supply chain management?

Business processes have been digitalized in the past couple of decades, and it has become a
necessity rather than an option. Why not? IT integrates various operations carried out by
different companies in the supply chain. It speeds up the business processes and prevents
bottlenecks.

The Role of IT in Supply Chain Management

IT is leaving a mark everywhere. Nothing remains untouched. No wonder every aspect of a

business is now under its command! The role of IT in Supply Chain Management is
highlighted in the following points.
 Integrated and Coordinated Supply Chain 
 Increased Productivity
 Cost Reduction 
 Product Improvement 
 Supply Chain Visibility 

Impact of Internet in SCM: The Impact of the Internet on Supply Chain Management
Electronic supply chain management: Combines the concepts of electronic business (e-
business) and supply chain management (SCM), and depicts how trade channel members are
working together to optimize resources and opportunities.

Benefits: - Reducing costs, improving service, enhancing customer satisfaction and retaining
competitive advantage.

Drawback: - Incorrect logistics strategies

IT enabled SCM

Information Technology offers many opportunities for companies to cut cost and improve
responsiveness to customer’s needs. Some of the positive points of IT enabled services are:

1. Information technology is comparatively less capital intensive.

2. It is environment friendly and clean.
3. It is not location specific and can be undertaken from anywhere (large cities, small
towns or even remote locations with Internet facilities)
4. It does not require expensive infrastructure facilities like roads, rail heads, etc.

Various IT Solutions:

 Communication
 Electronic mail (e-mail)
 Electronic Data Interchange (EDI)
 Enterprise Resource Planning (ERP)