Class 8

Class 8 – SCM (Prof. Suhas Rane)

BPR – Business process re-engineering – Michael Hammer and Champy – Can the process be done in a better way / cheaper way / adding value to the final output.

Horizontal organization – It has got 3 major departments –

· New product development team – Includes R&D, Marketing, Sales, Production

· Order fulfillment team – Sales is the leader for this team

· Customer acquisition & maintenance team – Marketing team is the leader

Bull whip effect – It is observed in supply chain. Demand oscillates (demand is variable as it is farther from the source of raw material) and magnifies along the supply chain. This reminds as cracking of a whip and hence, referred to as bull whip effect. Example – Cisco lost $ 2.2 billion due to obsolete inventory.

Reason –

· Nobody forecasts demand properly

· Variability coupled with supply chain

· Order batching – Consumer produces instantaneously, but retailers orders in batches

· Price fluctuation – Consumer buys more when product is at discount. But the consumption rate is usual. Hence, new products are not bought from the market.

· Rationing and shortage gaming

Effect – Demand is amplified. Excessive amount of inventory is now in supply chain.

Hence, to avoid order batching , the transporter uses the following techniques –

· Small trucks

· Milk run system

· Capacity sharing – order of other is accommodated in the truck

EDLP – Everyday low prices – big Bazaar says, throughout the year, I am cheapest.