Value Addition in SCM & Demand Chain Management: Group Members

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Value Addition in SCM

&
Demand Chain Management
Group members
Sumit Khanna
Sweta Jaiswal
Shipra Maurya
Sneha Bharti
Suhail Alam
Value chain
The business world has come to refer to networks of
companies, business partners, and affiliates as “chains.”
 Michael Porter of the Harvard Business School first
established the term “value chain” to describe the range of
inter-linked activities that a business uses to make and sell its
goods and services.

Supply chain Demand chain

Purchasing manufacturing distribution marketing sales services

value chain
Value addition in SCM
Value addition refers to addition of some specific and
unique activities in SCM that can bring effectiveness and
efficiency in current business processes which increases the
value for customer.

Value addition activities are customer focused or customer


centric so they are also called as customer focused SCM.

E.g.- deployment of IT solution in business processes,


outsourcing, JIT (just in time), producing different
variants (in size, flavor etc)
Areas of value added services
Customer – focused services.
Promotion – focused services.
Manufacturing – focused services.
Time – Focused services.
Demand
The desire or need of customers for goods or services
which they want to buy or use
Demand chain
“ Demand chain is a network of trading partners that
extends from manufacturer to the customer. ”

The various participants of the demand chain are


manufacturer’s warehouse, wholesaler’s distribution
centers, retail chain warehouses and retail outlets.
Demand chain configuration
YOUR COMPANY

Indirect Sales
Direct Sales

Telesales Field sales Call center VARs Distributors Other


partners

YOUR
CUSTOMERS
Demand chain management
“ Demand Chain Management is the
management of upstream and downstream
relationships between suppliers and customers to
deliver the best value to the customer at the least cost
to the demand chain as a whole. ”
DCM Philosophy
The key to a quality demand chain
management program is to focus
management decision-making
processes around market demand.
The better management’s ability to
forecast demand, the better decisions
they can make and the more rapidly
and effectively they can position their
company to respond to the forecast’s
predictions.
Philosophy Shift
Demand Chain Management is about breaking
down the barriers via a philosophy shift from a
“silo” driven, territorial, “not my department”
approach to one of a holistic, strategic, solution
driven philosophy.
How is this achieved?.......Through partnerships.
It is all about garnering trust, following through,
and being creative in breaking down existing
barriers.
How is this achieved?
Get out there! Go visit your users and the individuals
you are buying for. See their work environment, the
limitations they face, meet with them regularly to follow
up on issues, resolution, future needs.
Listen. Your users and partner areas such as Accounts
Payable, Central Distribution, Warehousing, as well as
Suppliers can provide you with a wealth of information, if
you let them.
Be creative. Look for creative, strategic solutions to
potential problems, talk with the users and get feedback,
think outside of the norm. Don’t be afraid to do things
differently than they have always been done.
Partner and Network with your end users, your
counterparts in Accounts Payable, Central Distribution,
Warehousing and in your supply network, build
relationships based upon mutual understandings and
common goals.
Approaches to implement DCM
DCM based on forecasts and plans
 Combination of business intelligence software and POS-data analysis to
predict customers demand based on historical data.
 Keep in mind other key factors like Holidays, Events (sports, Olympia, car

races ..) to react on possible future customers demand.

DCM based on monitoring the reality


 A different approach is to record every event related to stock changes like
sales and replenishment in real time
 DCM can calculate sales trends on the fly and generate reorder signals our
out-of-stock signals, and the best based on sales trends
 If this signal raises early enough the supply chain can avoid the out-of-

stock-situation.
Supply chain v/s demand chain
Supply chain
 1. your suppliers. 2. your supplier’s suppliers. 3. the
complicated network of direct and indirect manufacturing
and distribution professionals that provide you with the
capability to design, manufacture, and deliver your products
better, faster, and cheaper.
Demand chain
 1. your customers. 2. your customer’s customers. 3. the
network of direct and indirect marketing, sales, and
service professionals that provide you with the capability to
get, keep, and grow profitable customer relationships better,
faster, and bigger.
Supply Chain
Demand chain
Processes/systems in DCM
 IT solutions that support DCM must begin with the
processes and systems that forecast demand, such as:
 Sales forecasting/pipeline systems.
 Marketing analytics systems.
 Customer service systems.
 Order management systems.
DCM helps in
 Marketing campaign creation, scheduling and prioritization.
 Product introductions/launches or retirements.
 Sales incentive compensation (establishment of goals and territories).
 Service level plans built and staffing scheduled.
 Warranty/claims budgets and plans.
 Financial budgets.
 Shareholder earnings forecasts.
 Recruiting or layoff plans.
 Production and resource plans.
 Portfolio balance/mix planning.
Who does Demand Chain Management
Impact?
Typically everyone along the
procurement/distribution/payment continuum.
Ideally the impact is positive for all parties and can
include: greater understanding of organizational needs, a
better process for the user, buyer, supplier, accounts
payable staff; improved communication and improved
responsiveness. All of this should result in reduced costs
to the organization.
Who does Demand Chain Management
Impact?
For the User, they have the benefit of a Procurement
specialist who is intimately familiar with their needs and
their organization who can negotiate a better contract on
their behalf.
For The Procurement Individual, it results in a reduction
in transactional business and allows them time to develop
better contracts, to improve on existing contracts, and is a
shift from processing purchase orders to managing their
resultant strategic contracts on behalf of the organization.
For the Supplier, it increases their ability to meet their
contractual requirements as the increased communication
both upstream and downstream should result in clearer
product specifications, a clearer understanding of
performance requirements, and in many cases a shorter
payment cycle.
Who does Demand Chain Management Impact?
For Warehousing, Distribution and Logistics staff,
depending upon the contract it can result in an increased
need for warehousing and logistics management or a
reduced need as in the case of direct-delivery contracts.
For Accounts Payable Individuals, it can result in
improved methods for payment such as consolidated
monthly billing thus reducing the number of invoices
handled monthly; an evaluated receipts process where the
signed, received packing slip serves a dual function as both
the proof of delivery and is a means for issuing payment
thus reducing the number of incoming invoices and
streamlining the payment process; or a sub-voucher
process for automated payments that are a regular amount,
issued regularly over the course of the contract; ACH/EFT
payments; procurement card utilization.
Customer’s value
A customer is the most important visitor in our
premises. He is not dependent on us. we are
dependent on him. He is not an interruption of our
work. He is the purpose of it. He is not an outsider to
our business. He is part of it. We are not doing a
favor by serving him. He is doing us a favor by giving
the opportunity to do so.
Advantages
Marketing campaign creation, scheduling &
prioritization.
Product introduction/ launches or retirements.
Sales incentive compensation.
Service level plans built and staffing scheduled.
Warranty, claims, budgets, plans.
Financial budgets.
Shareholder earnings forecasts.
Recruiting or layoff plans.
Advantages
Production and resources plans..
Portfolio balance/ mix planning.
Demand chain challenges
At present there appear to be four main challenges to
progress in transforming Demand Chains and making
them faster, leaner and better:
Linking Demand and Supply Chains
Demand Chain Information Systems
Demand Chain Process Re-Engineering
Demand Chain Resource Distribution and
Optimisation

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