Class 4

Class 4 – SCM (Prof. Suhas Rane)

Cross docking – Many companies manufacturing different products (like Britania - biscuit, Unilever - soap, Marico - oil, Samsung - TV) keep their goods in one central warehouse of company say Walmart. All of them are then transported immediately to different walmart stores. In a normal scenario, the above process comprises of 4 steps – Receiving of goods, storage in ware house, order receiving from stores, picking up of supply from shelves and shipping them to the stores. In cross docking only goods are received and sorted to be shipped immediately (Material is not supposed to rest in the warehouse for more than 24 hours – This is called high turnover of volume of goods).

Vendor managed inventory – Vendor here is responsible / accountable for stock out situation. Hence, the profit is shared equally among all the stake holders in the supply chain.

CPFR – It stands for collaborative, planning, forecasting, replenishment. Big companies like P&G (manufacturing firm) and Walmart (Selling store) will decide how much to manufacture.

Lean Management – Eliminate storage, reach pull method rather than push.

Risk Pooling – (caused due to different peak time of stock requirement)

Due to same material (*here material means safety stock) required by different department at different times (say paper, steel), orders in small quantity is given which increases the overall cost for the entire year for the company. Instead, one big order can be given and stored at a central place. Here, the cost of storage needs to be taken into account. Also, chances of theft is reduced, hence, insurance cost is low.

Also, the overall stock stored is less compared to stock stored by individual departments in total. Also, the wastage and wear & tear of stock is also avoided due to continuous consumption / usage.

Risk pooling is applicable in continuous production only.

7 wastes

Inventory – What is in company’s possession (legal / financial)

ABC – Always better control

MRO – Maintenance, repair and office items

VED – Vital essential desirable

Some info about Inventory cost diagram–

· Average inventory is used (D/2) for calculation (Reduces the Triangle into a rectangle – Here triangle is stock quantity which reduces steadily wrt time)

· The vertical height of point of intersection of ICC (Inventory carrying cost) and ordering cost = Distance between pt of intersection and lowest pt of total cost

· The line joining the lowest pt of total cost and pt of intersection of ICC and ordering cost is parallel to Y-Axis

Kanban card – Kanban means scorecard. It is visual sign to signal absence of a part. It gives the signal that stock is limited and order needs to be placed immediately (the stock left will finish exactly when the new stock arrives as soon as level reaches to Kanban card).

What is the disadvantage of safety stock / inventory – Safety stock hides the problems and bad practices related to supply chain process (a robust supply chain ensures optimum / zero inventory as inventory has cost associated with it, moreover it gets wasted if stored for a long period, may get out of fashion if it apparel / mobile etc.) which lead to defects & disruptions. Sometimes, inventory is like sweeping the dirt under the carpet.