Supply Chain Management Notes (Suhas Rane)
Prepared By: Sudhanshu Chaudhary
Class 1
Purpose of Business: To create wealth (Adam Smith). Customer should perceive value of the product (offer to needy – Customer targeting)
· Why business is done - Wealth creation (Adam SMith), Money is the outcome of wealth creation process.
· How wealth is created - When customer perceives value in the product / service and is willing to pay for it by offering to needy customer (customer is needing that product or marketing makes him feel the need)
· Why Value is a perception - Different customers perceive value of something in different terms with different importance level (like good job is money / satisfaction / recognition)
6 basic functions of a business TO START
1) Creation – Idea generation / Product selection. Example: Tata Airlines from JRD Tata group going to Karachi.
1st process of any business is IDEA Generation / Configuring the product - What will sell in the market, what customer needs
Example - JRD Tata 80 years ago perceived that Air-lines will become future mode of transportation and started Tata airlines which subsequently became Air India
2) Finance – Managing resources, capital acquisition and financial record keeping ((Acquiring resource, keep operations running)
3) Personnel – HR, labor relations - One need outsiders in the form of suppliers, financers, partners, staff to run the business
4) Purchasing – Buying of required resources. Resources include equipment (form of capital goods like laptop, office equipment, Xerox, courier) + Material (Revenue generator) + Services
(Production + Services = Operations)
Outsourcing is purchase of services; Buying equipment (Capital Goods), Buying Raw material (Revenue Goods)
5) Conversion (Operations) – Changing raw materials to economic goods (Raw form converted to economic form)
Production Management - Only factory is covered where raw material is converted to finished goods
Operations Management - All other services like vendor management, purchasing, after sales service etc.
6) Distribution – Selling and marketing (reaching the customer)
What is produced should reach the customer (made available) & buy from me as I am better (Marketing)
Operations Management – Effective & efficient management of process (A Process has an input and a value added output, the objective is to add value)
Transformational process
1) Physical – Manufacturing operations
2) Locational – Transport operations
3) Exchange – From wholesale to retail operations
4) Physiological – As in health care
5) Psychological – As in entertainment, movies, TV serials
6) Informational – As in communication, education
In a college, students are products, prospective employers are customers, college administration / prof are operation manager
Crafts Production – Dilip Chabaria car, MF Hussain painting, village potterman. Customized, exclusive, unit cost of production is very high (Fixed cost is spread over small quantity)
Mass Production – Standardized, less lead time, low unit cost of production (fixed cost is spread over large quantity)
Mass customization – McDonalds, Ikea, Dell, Toyota, McDonalds, Titan. Components are standard, finished product is customized (different for different customers). Postponment is the strategy used for mass customization.
Lean Management (Slim) – Quick process, less installation time / change-over time. Remove set-up time. 1950s (Change the die within 1-10 min
Today’s Mantra of quality process
1) Quality is determined by customer
2) Quality control is over entire process (TQM)
3) Price is what customer is willing to pay (Target Pricing)
4) Marketing is everyone’s responsibility from Chairman to shop floor worker
5) Focus on what’s good for the customer (earlier it was what’s good for the company)
6) Have single supplier with good reliability (Rich Dad, Poor Dad)
7) Information Technology has made it possible to track supply chain
8) Department is supreme
9) Old approach was functional (no interaction of data with department), New approach is integrated approach which looks at entire supply chain
Supply chain encompasses all activities associated with flow and transformation of materials and information from the raw material stage through to the end user. Main aim is to supply end consumer by plugging all losses and give best value to end user.
Coverage of supply chain
1) Production, planning and control
2) MRP (Material Requirement planning, Manufacturing resource planning)
3) Purchase and procurement
4) Vendor development
5) Inventory and storage
6) Warehousing and logistics
7) Outsource services
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