Supply Chain Info

CAPABILITY MATURITY MODEL

DEFINITION: CMM is nothing but an organizational model in which how the processes in an organization are managed.

HISTORY:

CMM is a service mark registered with the U.S. It was originally developed as tool for assessing the government contractor’s processes to perform a contracted software project.

Even though it starts with the software development process it penetrates into all departments such as Software engineering, System Engineering, Project Management, Risk Management Etc., It is used to evaluate the way the software was built and Maintained. The CMM was found to be problematic when it is integrated with the multiple models so it paves the way for the New Model called CMMI( Capability Maturity Model Integration) which sort out the issues of using Multiple Models in software Processes. Each and every entity ( it may be Manufacturing or Software ) are always looking for their best process to improve the efficiency, quality of the product , and also to satisfy the customer.

SOFTWARE MATURITY MODEL:

It describes the principles and practices involving in software process maturity. It intends to improve the Maturity of the software process. It consists of five stages and it starts from Initial to Optimizing of the Processes. To identify the key process areas where we can improve it to a disciplined one. Each and every Process has their own standard operating procedures, policies that force the organization to implementing and performing consistently.

Practices should be repeated so that you can improve it without any obstacle. After the improvement of the process the organization should implement and perform consistently.

Define the process, Analyze the process and the performance variations, Measures should be taken to maintain the process inline. Standardize the process and the final stage is optimizing it.

FIVE STAGES OF CMM:

Initial:

In the initial level process is ad-hoc, poorly controlled, unpredictable, and only a few processes are defined.

Repeatable:

The Output of the process is consistent and basic controls are in place, and the process that produces results are

not understood.

Defined Level:

In this level the process outputs are consistent and understood, used by the organization.

Managed Level:

In this level process are measured by the detailed collection of data and the quality of the output produced by the process.

Optimizing Level:

In this level continuous process improvement is in place and adopted by feedback, new ideas, technologies.

KAIZEN - OVERVIEW

KAIZEN - SMALL IMPROVMENT or STEP BY STEP IMPROVEMENT.

Kaizen is one of the most powerful tool in any industry to reduce waste in process or activity, so start implementing kaizen in your process, Organization and it saves from you doing a lot of manual activity and money for your company.

It is nothing but a small changes in the process improvement or step by step improvment in a process to save time,eliminating a proces step, automating a process step to reduce the human fatigue etc.,

For Ex. In a Logistics Industry, during the loading and unloading process of materials in the dock, it requires lot of human work needed to load and unload the material in the vehicle, it has to be automated by using any equipment like forklift, or like trolley so that it will reduce the workers fatigue, and time saving to load the vehicle and unload the vehicle even It will automatically reduces the turn around time.

PROJECT MANAGEMENT- CPM AND PERT

Project Management is considered as one of the most important in all the fields. It may be in the production scheduling, construction, banking , industrial project and while conducting ,organizing mega events.

Project is represented in the form of Network Diagrams for an analyses of scheduling, planning the activities of a project. A Network diagram Consists of set of arrows and which connected through a set of nodes and circles.

for Example the below diagram show a clear view about Network Diagrams:

There are two important Network diagram concepts which we will use oftenly:
1.CPM
2.PERT
3.GANTT CHART.

CPM: Critical Path Method:
The Critical Path of a project Network is the longest path in the network. It can be identified by listing out all the possiblities of paths from starting node to ending node of the project and selecting the path with the maximum sum of activities .

GANTT CHART:

This chart gives us a clear Picture of the starting time and ending time of the project. It will be useful to allocate resources like man,machine, money etc., with this one can adjust the resources also. this software is available in MS OFFICE PACKAGE- MS PROJECT.

TO MAKE A BETTER SUPPLY CHAIN

To make a better supply chain the following steps should be followed:

STEP 1: DESIGNING THE SUPPLY CHAIN

1. Determine the supply chain network.
   To determine the supply chain network, first we have to make sure about the channel distribution.

supplier --Manufacturers--- dealers --- distributors---consumers..
or sometimes it may be direct distribution from manufacturers to consumers as a dell supply chain.

2. At each stage of the supply chain we have to take care of services .

   STEP 2: OPTIMIZING THE SUPPLY CHAIN

   1. To determine the channel distribution ways from supplier to customer.

   2. Suppliers to manufacturers and manufacturers to customers

   3. To identify the risk in the stages of the supply chain at the suppliers and production plants.
   4. according to the risk plan the procurement and production activities.

   STEP 3: PLANNING OF MATERIAL FLOW

   1. Determine the material flow timings that is the demand.
   2. making the decisions depend upon the demand from the customer and have to plan the material flow.
   3. using the techniques of supply chain tools such as forecast, ERP etc.,

   STEP 4: TRANSACTION PROCESSING AND SHORT TERM AFTER SCHEDULING''

   1. Customer demand may vary each and every time.
   2. To track the day to day transaction we have to make accounting system in-place for transaction processing.
   3. customer order cycle, replenishment cycle, maufacturing cycle and procurrement cycle.

SUPPLY CHAIN MODELS

There are two types of modelling in supply chain :
1. Descriptive Modelling.
2. prescriptive Modelling

Descriptive Modelling:
a) forecasting of demand using quantitative and qualitative forecasting models.
b)collection of data and data mining.
c) activity based costing( ABC analysis)
d)performance metrics.

prescriptive modelling:
a) using the optimizations methods using simplex, duplex method of mathematical programming.

supply chain operation strategies

The following are the supply chain operation strategies:
1. Make to stock
2. Make to order
3. Make to assembly.

Make to stock is nothing but the goods are manufactured to stock as inventory without any forecast in demand or it may be due to anticipation of customer demand.

Make to order is nothing but the goods are manufactured depend upon the execution of information from customer.

Make to assembly is nothing but the products are made ready only need to assemble and deliver.

HISTORY OF SUPPLY CHAIN

•
History of supply chain:

1960’s - Inventory Management Focus, Cost Control

•1970’s - MRP & BOM - Operations Planning

•1980’s - MRPII, JIT - Materials Management, Logistics

•1990’s - SCM - ERP - “Integrated” Purchasing, Financials, Manufacturing, Order Entry

•2000’s - Optimized “Value Network” with Real-Time Decision Support; Synchronized & Collaborative Extended Network

push and pull view of supply chain process

what is push and pull view in the supply chain?

push process is nothing but what the company has produced will sell to the customers. they did not take care of the needs and wants of customers.( selling process)

pull process is nothing but the depend upon the needs and wants of the customers the product has been manufactured .

In the pull process the production is executed depend upon the customer demand .
In the push process the production is executed in anticipation of customer demand.

what are the factors influencing the purchase price of material

The following factors which influence the purchase price of a material.
1.Replenishment Lead time.
2..On time delivery of material
3. supplier flexibility
4. supplier pricing and quality
5. Logistics cost -- transportation cost
6. design collaboration
7. exchange rates and taxes.

SOURCING PROCESS

Once you had chosen to outsource the raw materials for your production activities.These are the following steps for sourcing a raw material from a new supplier.

The first step is the Supplier scoring and assessment.
in this step, we have to rate the suppliers according to their service, quality, on time material delivery, price etc.,

The second step is the Supplier Selection. Among the rated suppliers we have to chose the best supplier who is suitable for us in all the factors.

The third step is the design collaboration.Both the manufacturer and supplier working together for the design of the new product.

The fourth step is the Procurement . After confirmation of supplier with the Lead Time, price, minimum order quantity and forecast of the material etc.,the manufacturer has to place the PO with the supplier to receive the material on time.

The fifth step is the sourcing analysis - It is nothing but the planning for new sources and identifying the opportunities for decreasing the costs.

Make or buy decision.

In the make or buy decision, first we have to calculate the total cost incurred on manufacturing the product.

In the make decision, we have to calculate the following

what will be the annual demand of the product, is there enough capacity available, raw material availability for the product, tool cost, ordering cost, labor cost, transportation cost etc .

In the buy decision, supplier has to continuously supply the products without any delay, is the supplier having enough capacity to meet our demand. we have to compare the calculated cost of making in house and outsourcing cost.

for example:

if a prodcut is manufacturing in house the cost will be Rs.5.25.

if we buy the prodcut the total cost will be RS.5.00

It means we can buy the product as the cost of buying ( outsourcing cost is very less) so we can go for buying the product .

what are the decisions phases in the supply chain?

In the supply chain there are three Decision Phases in the supply chain.

1. strategy - it includes the design, location, capacity, warehouse , channel design and outsourcing.

2. planning -- it consits of the supply planning, inventory and subcontracting.

3. operations -- Allocation of orders to the plants according to the capacity, and finished goods to the warehouses and allocation of transportation routes . optimization of routes

BULL WHIP EFFECT

BULL WHIP EFFECT:

As we move along the supply chain from the suppliers to the manufacturers the demand of the goods has been increased which increases cost and reduce profitability.

for example:

The consumers asks for a soap in a shop, as a dealer he needs a stock to deliver the goods in right time to the people, so the dealer orders 5 Soaps to a manufacturer. so manufacturer produces 10 soaps at a time to increase stock and also to satisfy the customer demand. if you see in each and every stage the demand of the soap has been increased and it increases the cost and reduce the profitability. This is how the demand affects the supply chain and increases the cost.

FACTOR CONTRIBUTING TO BULL WHIP EFFECT:

• Demand forecasting practices

– Economic ordering quantity – maintain Min-max inventory – Reorder level of inventory.

• Lead time

– Longer lead times lead to greater variability in estimates of average demand, thus increasing variability and safety stock costs

• Batch ordering

– Fixed ordering costs

– Impact of transportation costs (e.g., fuel costs)

• Price fluctuations

– Promotion and discount policies

• Lack of centralized information

what are the three types of flow in supply chain?

In the supply chain there are three types of flow from the supplier to the end customer in the chain.

1. Product Flow.
2. information flow.
3. money flow.

product flow is nothing but starting from the raw materials to the end product to the customer.

information flow is nothing but the sharing of informations from the customer as well as supplier . It is both directions.

Money flow is nothing but the funds flow from the consumers to the manufacturer, from manufacturer to supplier.

what are the supply chain drivers?

The supply chain drivers are grouped under two main drivers:

1. logistics drivers

2. cross functional drivers

The following are the important drivers of the supply chain?

LOGISTICS DRIVERS:

1. facilities -- warehouse or storage locations or factory location.

2. Inventory -- stock of rawmaterials or finished goods

3. transportation--- moving of goods from one place to another.

CROSS FUNCTIONAL DRIVERS:

4. pricing - cost of goods

5. information --- information is nothing but the customer needs and wants

6. sourcing -- procuring raw materials for production activities.

what is the supply chain cost?

supply chain cost is nothing but cost of holding inventory and the logistics cost.

inventory cost is nothing but the cost of ordering and cost of holding.

INVENTORY TURN OVER:
Inventory turn over is nothing but the cost of replacing and no.of times the inventory is sold during a period of time.

IOT = COST OF GOODS SOLD/AVERAGE INVENTORY.

what are the cost involved in the supply chain?

supply chain starts from the supplier until the product reaches end customer.

supplier ----purchasing-----production---distribution----end customer. this is how the supply chain works.

Here most of the supply chain costs are occurred as "INVENTORY COST".
another cost is "LOGISTICS COST" . it is the most important cost, because the transportation of raw materials, semi finished goods and finished goods. so the logistics cost plays a major role in supply chain.

Inventory TurnOver is nothing but the how many times the inventory has been sold and replaced over a period of time.

IOT = COST OF GOODS SOLD/ AVERAGE INVENTORY.

what is value chain?

Value chain was first defined by Michael Porter.value chain also known as value chain analysis.

Value chain consists of the primary activities and support activities. the primary activities are the following:
1. inbound logistics.
2. outbound logistics.
3. operations.
4, marketing .
5. finally sales and service.

The support activities are the following:
1. procurement.
2. technology.
3. human resource department.
4.. infrastructure.

The value chain example:

In an manufacturing industry, the raw materials are converted into finished goods in each and every stage..

here the inbound logistics is to support for bringing the raw materials for the production.
2. Outbound logistics is for the transfer of finished goods to the desired locations from the factory.
3. operations is for performing the operations on the raw materials to convert into finished goods.
4. marketing is for the sale of goods to the customers by the customer needs and wants.
5. service department is doing the job of servicing the goods.

THE SUPPORT ACTIVITIES:
The procurement team purchases the materials from the vendor for production activities.
the HR team recruits the human resources for the production activities.

this is how the value has been added .
The value chain is one of most important in all the industry.

what is the difference between proforma and commercial invoice

proforma invoice is same as the commercial invoice but with a small difference.

proforma invoice is a document that provide commitment by the seller to the buyer against the selling of goods. Though it is not a commercial invoice. Proforma invoice is used for customs clearence for goods in the warehouse. it is not a true invoice and also it is not used for entering in accounts receivables by the buyer and accounts payable by the seller.

commercial invoice is a true invoice for receiving goods and also it is an official document for entering into accounts ledger. it is used for customs clearance in the international trade.

what are the constituents of purchase order

purchase order is nothing but the legal document for the purchase of goods from supplier.

purchase order consists of follwing things:
1. part number
2. total qty
3. unit price.
4. total price
5. ship to address
6. bill to address
7. purchase order no
8, delivery date.
9. line item .

Difference between sourcing and Procurement.

Sourcing is defined as finding of new suppliers for our new products, getting RFQ for the raw materials, evaluating them and continuing business with the suppliers.Sourcing is a one time process for a raw material.
The sourcing activities are the Request for Quotes for new products, getting the vendor information, uploading the vendor information into the system, lead time,pricing,Minimum ordering quantity, standard packing quantity.The following activities are one time activity, but we have to change the price and other factors in the system as per the supplier request.

Procurement is a repeated process of placing purchase order(POs ) with the suppliers, getting confirmation for the orders, and follow up with the suppliers untill the on time delivery of material.