VALUE OF INFORMATION CONTENTS Introduction The bullwhip effect

VALUE OF INFORMATION CONTENTS Introduction The bullwhip effect in logistics Quantifying bullwhip effect Locating desired products Lead time reduction Developing Supply Chain as a competitive focus Conflicting objectives of SCM Integrating the supply chain

INTRODUCTION Over the last ten years or so, the entire business landscape has changed, impacted by factors external to the organisation. The two fundamental forces, which influenced these changes, are: Liberalisation of the economic environment An ever expanding force called the internet. Corporate environment is changing under the influence of a number of inexorable developments such as: The Information Power Accelerating Pace of Change in Technology Globalisation of Markets

FLOWS IN A SUPPLY CHAIN

BULLWHIP EFFECT The bullwhip effect can be defined as exponential difference between the supply and the demand in supply chain. If the coordination between the supply and demand increases the total supply chain would be benefited which would lead in the profit to an organisation. The coordination between the supply and demand in the supply chain is extremely difficult to be minimised as the supply chain may have many different layers. These layers may have number of owners who would forecast the demand of product in the market which could provide the owner some share in the profit although the product at the customers end would be sold at a steady rate. The lack of coordination at different levels of supply chain is due to the conflicts in the objectives or information that moves through different levels in the supply chain may get delayed or distorted Could possibly happen because of the discussion making of different capabilities of owners at different levels

QUANTIFYING BULLWHIP EFFECT The bullwhip effect increases: manufacturing cost; increases inventory cost; increases replenishment lead times in the supply chain; increases transportation cost within the supply chain; increases labor costs associated with shipping and receiving; disturbs the level of product availability and results in more stock outs; customer service issues and; lower profitability.

IMPACT OF BULLWHIP EFFECT ON SUPPLY CHAIN PERFORMANCE

LOCATING DESIRED PRODUCTS Locating materials within the organisation is rather simple and the matter is discussed in MIS and warehouse management. Locating the manufacturers or dealers of products for procurement is now done on procurement data base Historical data of vendors. The vendor equipment’s, brands and other details. Procurement data about past orders on vendors for similar items. Vendor performance details in procurement files. Internet sources or search engines like Google. Commodity wise vendor files. Recommendations from user departments on purchase indents. From consultants and collaborators. From customers, distributor and retailers who deal in similar products. From experts in the field. From trade organisations like FICCI or ICL From Foreign Embassy Trade missions Trade directories, trade exhibitions and seminars. From sales men. From advertisement in trade magazines

LEAD TIME REDUCTION In the organisation context the lead time is the time taken to convert an order from a customer into cash. It is also called cash to cash cycle. The raw materials are purchased, the manufacturing continues. In the mean time the resources of the company are consumed and the working capital must be infused in the system. A purchase lead time is the time taken from the date of receipt of purchase request to date of accepted material in warehouse.

LEAD TIME COMPONENTS STAGES

THE LEAD TIME COMPONENTS ARE:

DEVELOPING SUPPLY CHAIN AS COMPETITIVE FOCUS Supply chain as competitive tools was successfully developed by Wal-Mart a global retail chain. Reduction in lead time and inventory management were important in Wal-Mart in maintaining low prices. This needed connecting seamlessly sales and suppliers. The communication infrastructure, the information processing and usage were made real time basis. User friendly technology was built up by spending large amounts. The centralised data base and instant access helped the customer to get commodities cheaper The steps in achieving the competitive focus are: ü Strategic Planning: ü Plan Information Flows ü Build Technical Infrastructure ü Train People ü Management Control

CONFLICTING OBJECTIVES OF SCM Supply Chain Management is essentially controlling three flows; (a) Flow of value that is product, services and materials, (b) Flow of information and (c) Flow of funds The others that flow along the supply chain are time, technology and management decision making. The conflicting objective areas are: Ø Finance Ø Procurement Ø Technology Ø Flow of value of flow of materials and services Ø Demand Management Ø Managing Supply Side Ø Make of buy decisions Ø Lead time Management Ø Inventory Management Ø Resource Utilisation

INTEGRATING THE SUPPLY CHAIN The supply chain management represents conscious efforts by the management to make it effective and efficient ways with unity in objective. The three flows discussed in sub chapter above have to be planned and increased. a) Leadership: with long range vision and decisions making. b) Strategic planning: Reaching the problem areas from whole part. c) The supply chain cannot work in Iceland’s. It has to be seamless and as a team. d) Share common data base in the organisation the working has to be in collaboration with not only insiders but also vendors and customers. e) Use of technology and state of art equipment and systems to give volumes, quality and cost effectiveness. f) Develop ‘Quick response’ logistics: The idea behind quick response is that in order to reap advantages of time based competition, it is necessary to develop systems that are responsive and fast. g) Vendor as Associate: Develop good vendors invest in vendors to reap long range benefits. Vendor managed inventory is advantageous. h) Organisation: Look out of organisational bottlenecks to implement supply chain strategies. Stress on ethical levels in all types of work. i) Build lead supply chain: To achieve smooth flowing and lean supply chain it needs orientation that facilitates end to end management. j) Integrated approach: organisation should be agile, flexible and integrated in approaches.