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Unit 13: Supply Chain Management and JIT

must also identify key and critical supply chains components. It must be knowledgeable regarding Notes
its part of the supply chain and also must understand how the part interfaces with the other parts
of the supply chain.
The supply chain configuration should support the organization's strategic objectives.

Example: In the case of TI Cycles discussed in Module 1, its decisions regarding the
location and capacity of its manufacturing facilities at Aurangabad, the joint manufacturing
agreement with Avon Cycles and distribution network are all supply chain design or strategic
decisions.
These are long-term decisions and are very expensive to alter on short notice. Consequently,
when companies make these decisions, they must take into account uncertainty in anticipated
market conditions over the next few years.

Supply Chain Planning

In the planning phase, companies define a set of operating policies that govern short-term
operations and are normally determined on an annual basis. These decisions are made within
the supply chain's configuration. Planning starts with a demand forecast for the coming year.
Based on the demand, an annual plan is worked out. Decisions regarding which markets will be
supplied from which locations, outsourcing and sub-contracting, inventory policies, etc. are
made. Planning, in other words, establishes parameters within which a supply chain will function
over a specified period of time.

Once the key supply chains have been identified, one must identify the supply chain member
organizations (suppliers and customers) that are considered most critical to the organization's
supply chain management efforts. In selecting external members, several issues should be
addressed.
1. SCM endeavors are likely to be more productive if participating organizations are not
direct competitors. There may be limits to collaborative supply chain efforts when both
buyer-supplier and competitor relationships exist between participating organizations.

2. All organizations and their representatives must be pursuing similar goals. This does not
mean that each organization should have identical goals, but that their respective goals
must be compatible with the overall SCM initiative.
3. SCM initiative is unlikely to be successful unless all members from each organization
involved feel they are benefiting from participation. SCM efforts have to be focused
where the involvement is beneficial to all the members.
In well managed organizations, in the planning phase uncertainty in demand, exchange rates,
and competition over this time horizon are included in the decisions. Given a shorter time
horizon and better forecasts than the design phase, the planning phase tries to exploit the supply
chain design to optimize performance.

Supply Chain Operation

This has a short-term time horizon, monthly, weekly or daily. The focus, during this phase, is on
individual customer orders. At the operational level, within planning policies, the goal is to
handle incoming customer orders in the best possible manner. Firms allocate inventory or
production to individual orders, set a date that an order is to be filled, generate pick lists at a
warehouse, allocate an order to a particular shipping mode and shipment, set delivery schedules
of trucks, and place replenishment orders.

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