YT YouTube2Text

YouTube2Text → Transcripts → Lecture 25 : Objectives of Supply Chain Networks

Lecture 25 : Objectives of Supply Chain Networks — Transcript

by NPTEL IIT Kharagpur · 6,286 words · 968 segments · language en · Watch on YouTube

Open in transcriber Summarize with AI Download SRT/VTT

Full transcript

0:01[Music]
0:22[Music]
0:25hello dear friends welcome back to npdl
0:27online course on Logistics and supply
0:29chain manag agement I'm Dr vikas takur
0:31assistant professor Department of
0:33humanities and social sciences IIT kakur
0:36so uh now we started discussion on
0:38Supply Chain management and uh we
0:41discussed uh the different three
0:43different streams uh in that overall
0:45supply chain Network right and what is
0:48the importance how these those three
0:50different streams are interconnected and
0:53in that way we need to ensure the
0:55integrated you know all those three
0:57streams so that the overall uh the
1:00customer experience can be enhanced and
1:03the quality of delivering the products
1:05and services can be improved right so
1:08today we are here with the uh we'll
1:11Define what are the uh different
1:13objectives when we are talking about
1:15Supply Chain management as complete
1:17functional unit what for what we are
1:20striving for and then we'll talk about
1:23little bit what are the factors when you
1:25are you know going for Designing
1:27different supply chain networks right
1:29and then I have come up with one very
1:31beautiful case with the uh case of Zara
1:34how they are managing their supply chain
1:37in that way they are saying that uh they
1:39are responsive and they are designing
1:41the you know pattern in that way that
1:44they are replenishing their inventry so
1:46quickly that updated designs are coming
1:49through their supply chain so this is
1:51the content we'll cover in this session
1:54right so quickly we'll go with the
1:56objectives of the supply chain so
1:59obviously
2:00objective if I'll talk about the points
2:03are coming from the customer end and
2:06those are coming in terms of their
2:08expectations expectations in terms of
2:11delivery when they want how much
2:14quantity they want what quality they are
2:16expecting what variety they are
2:18expecting how much they the overall
2:21experience of delivery they are
2:22expecting how they are expecting the
2:25return policies and the features of the
2:27products and the quality all those
2:30things are coming as you know one kind
2:33of information to us as a product or
2:37Services manufacturer right and then we
2:40are here processing those that all
2:43information designing the physical
2:45prototype in terms of product and
2:47services and then we are defining okay
2:50for producing this particular product I
2:52need to tap up with these many vendors
2:55to ensure the raw material supply all
2:58togethers open up new you know
3:00performance metrix where we'll find out
3:03how our suppliers can be more efficient
3:05how we can improve their productivity so
3:07that the raw material cost can be
3:09decreased how the stakeholders like
3:12Transportation uh different
3:14Transportation function unit can you
3:16know improve the cost performance and
3:18delivery performance and then
3:20warehousing how we can do that so if
3:23talking about all the objectives of
3:25complete Network we need to include all
3:27the stakeholders this is very clear and
3:30all those stakeholders are targeting to
3:32meet the demand coming from the last
3:36stakeholder of that supply chain which
3:38is consumer or customer right so quickly
3:41we'll go through these different terms
3:44right looking for sources of cost and
3:47revenue right now I told you the
3:50everything is starting from the End
3:52customer in the supply chain so Revenue
3:55will come from where from the End
3:57customer only right so so cost how you
4:01will Define the cost
4:03function obviously what
4:06expectations are coming from the
4:08customer will help you to define the
4:12cost in terms of because expectations
4:15you will record of the customers and
4:17then you'll say okay these many features
4:18you need to add up right this is how you
4:21need to prepare the product and then
4:23these many you know features quality
4:26variety all those things you need to
4:29ensure this will you know develop the
4:31cost function of producing and
4:33delivering those product and services to
4:35the End customer so that the revenue
4:37will be generated from the End customer
4:40maximize the value generated this is the
4:43difference between the cost paid by the
4:45customer and in experience in a Cod it's
4:47not only now customer is evaluating for
4:50your product whatever you are delivering
4:52now the customer is also evaluating for
4:54the delivery services how you are
4:57delivering right so
5:00because when you are delivering the
5:01product and you are kind of very
5:04misbehaving with the customer customer
5:06will hardly place order with the same
5:09retail shop or distribution Channel or
5:12immediately will complaint uh against
5:14that career partner that he did not drop
5:17the package at the doorstep and he asked
5:20me to come downstairs and pick up that
5:23packet so that is this is you know the
5:25overall value you are creating for the
5:27customer so that this is one way how you
5:30can enhance the customer experience then
5:33Improvement of cost of quality we talked
5:35about that quality is free in that
5:38session so quality is free means cost
5:43of ensuring the
5:46quality uh and then you will talk about
5:49the if you are not ensuring the quality
5:51the appraisal cost is not there when you
5:52are not ensuring the quality the
5:55products will come in terms of warranty
5:57guarantee and then you need to fix all
5:59those those things so that Co cost will
6:01be higher than the cost of quality right
6:04so that you need to take care another
6:06objective is that how quickly you are
6:09replenishing the product it's not only
6:12replenishing the raw material inventory
6:14from the supplier it is also how your
6:18distribution Network your uh uh retail
6:21shop if you are operating through a
6:23particular retail shop how quickly
6:25retail shop is you know feasible to
6:28replenish the stock and that will only
6:30ensure if your complete supply chain is
6:33so responsive that whatever record uh
6:35orders you are recording from that
6:37particular retail shop are supplied
6:39timely right Speedy Delivery is
6:42obviously again objective of the supply
6:45chain how quickly you can deliver the
6:47product and shorten the time to order so
6:51when I'm placing the order and if you
6:53are saying tomorrow you are going to get
6:54the order it's good enough but if I'm
6:56talking about something medicine I want
6:58that delivery within half an hour within
7:011 hour right that much long we cannot
7:03wait so then we are talking about some
7:05kind of emergency supply chain right so
7:07that it's not that now regular items
7:11what we are purchas purchasing we want
7:13that emergency kind of experience
7:15because we we are not planning in that
7:18way we are so busy with our whatever
7:20routine stuff we are doing and then
7:21suddenly we want the inventory should
7:23reach our house right so that is one
7:26point efficiency and efficacy if cany
7:30how effectively you are producing the
7:32product how efficiency with minimum cost
7:35you are delivering through your supply
7:37chain so delivery
7:40optimization that that can happen when
7:43you can you know one thing is you can
7:45consolidate order from
7:47multiple uh uh customers right if C you
7:51are promising 30 minutes pizza delivery
7:53so then you need to see from IIT kakur
7:56how many orders are coming so maybe
7:59another 5 minutes I will bait even then
8:01I will reach all those five ORD doorstep
8:04I'll reach on time so that 5 m maybe 5
8:07minutes I can consolidate maybe two
8:09three more orders right so in that way
8:11delivery optimization this is one way
8:13other way is finding the best root
8:16utilizing the proper container capacity
8:19more awareness in terms of supply chain
8:21efficiency and Dynamics how the things
8:24are operating in the outside world how
8:27you are recording and responding to that
8:29and and then only you can ensure the
8:31overall performance of your supply chain
8:34inventory optimization you need to
8:36ensure outflow inflow of the inventory
8:39inflow whatever raw material you are
8:41requiring how you are keeping how much
8:43you are keeping and then in the
8:45distribution chain how much raw material
8:47you are keeping right so that will
8:50ensure you to balance the demand and
8:53Supply but yes this is the basic purpose
8:56why we are keeping inventory inventory
8:58exists because there is is gap between
9:00these two supply and demand that's why
9:03we need to keep the inventory how you
9:05can minimize the Gap when you have that
9:08integrated information system whenever
9:11order is coming your production
9:14facilities can be fed at the same moment
9:17with the raw material can be produced
9:19within no time can be shipped to the
9:21customer and if you are near to your
9:23manufacturing facility is near to
9:25customer then it will help you to reduce
9:28that time to order
9:29time right flexibility flexibility if
9:33something is coming from the market and
9:35you need to react on that maybe in terms
9:38of changing the process maybe in terms
9:40of providing the product quality maybe
9:42in terms of adding some new features how
9:44quickly you are doing that how flexible
9:47your supply chain to you know to op to
9:51adopt all those changes dynamism coming
9:53from the market so business
9:56characteristics whether you are
9:57operating at micro level or micro level
10:00so if it is you are shipping your orders
10:03in large quantity then you can talk
10:05about that maybe uh efficiency and uh
10:09Effectiveness right when you will ensure
10:11the complete utilization of Your
10:13Capacity but when you are talking about
10:15within few minutes delivery so then I
10:18think that is another business
10:19characteristics where you are you know
10:21the basic USP is you are feeding to
10:23emergency supply chain efficacy already
10:26I talked about how uh you are
10:28Manufacturing the product but how
10:30efficiently you are manufacturing so
10:32that is your the scope is different
10:35efficacy is only related to how you are
10:37manufacturing the product only that
10:39scope is limited right so cost reduction
10:42if you are
10:44efficient you can ensure the proper
10:47utilization in your warehousing raw
10:49material supply inventory Transportation
10:52obviously the overall cost reduction can
10:54be ensured right better decision making
10:58now this decision making again because
11:02information is coming from the market
11:04but then the maybe the top level
11:06management or middle level management
11:08will make this decision whether you are
11:10going a kind of growth
11:12strategy if growth strategy so obviously
11:15you need to expand your network right
11:18expand your network in terms of
11:20distribution Network in terms of your
11:22acquiring the raw material as well in
11:25terms of expanding the capacity of your
11:27manufacturing facility right so that
11:30better decision making will be there if
11:32you are having that information access
11:35to that timely information and accurate
11:37information right only then better
11:40distribution can be ensured when you
11:42have that better information from the
11:44market so then quickly that can be
11:48channelized your inventory can be
11:49channelized to the customer so here is
11:52one small video we'll see how cap jamy
11:55is promising that what type of Supply
11:58chains are required these these days and
11:59how you can make it more efficient what
12:01are the demands what are the objectives
12:03of any supply chain how we can use capj
12:07you know solutions to make it more
12:09effect uh effective and efficient so
12:11here I have included some uh video links
12:14you guys can just quickly go through
12:16these videos so you can see through this
12:19video what are the you know the
12:22expectations are coming expectation
12:24level is growing like anything from the
12:27customers and to meet those expectations
12:30capj is promising that AI enabled
12:32solution we are realtime tracking
12:34information recording and information
12:36sharing can be done and decision making
12:38automated decision making can be done
12:40right so in that way you need to come up
12:43with your intelligent Supply chains
12:45right where supply chain systems
12:47softwares techniques are automatically
12:49they are taking decision based on
12:51information right so in that way we'll
12:54be more accurate so now uh these
12:58objectives how we fulfill these
13:00objective obviously we need to ensure
13:02the complete supply chain Network and
13:04this network is
13:06interconnected uh all the organizations
13:09interconnection among all the
13:11organizations like your whatever
13:13facilities or activities or resources
13:16are involved right so if I'll talk about
13:20interconnection of organization raw
13:22material suppliers Transportation
13:25agencies manufacturing co-manufacturing
13:27units distribution partners and customer
13:31so integration of all those right if I'm
13:33talking about activities raw material
13:36production shipping storage production
13:39of uh of raw material means converting
13:41of raw material into finished one again
13:44distribution warehousing Transportation
13:47final and mile delivery these all are
13:50activities resources these all resources
13:52are flowing through that supply chain
13:55right so this network you can you know
13:58uh characterize any supply chain network
14:01with these three parameters what are the
14:03facilities are involved stakeholders are
14:06involved what are different activities
14:08we are doing and what are the resources
14:10those are flowing through these uh uh
14:13different supply chain Network and your
14:16resources you we have you know
14:18generalized those resources in terms of
14:20goods are flowing information is flowing
14:23and then finances are flowing through
14:24that distribution Network right so to
14:27ensure that smooth Supply the process of
14:30building and modeling your supply chain
14:32modeling your supply chain as per the
14:36you whatever your understanding of you
14:38know the requirements if you talk about
14:41the intelligent supply chain keeping
14:43aside the cost and time required what
14:46intelligent supply chain is extra doing
14:49so how quickly responding to customer
14:51requirements whenever customer is
14:53placing order how you are recording
14:55those orders and immediately shared with
14:57the manufacturing facility or
14:59automatically in the manufacturing
15:00facility it is taken decision that now
15:02we need to make this particular model
15:04because the demand is coming up right so
15:08this supply chain network will cover all
15:10the aspect so uh cover all the movement
15:14and storage of raw material work in
15:16progress inventory finished goods from
15:18the point of origion to the point of
15:20consumption and it covers planning
15:23implementation and control of supply
15:25chain operations so key component or
15:29already we talked about these are the
15:30key stakeholders included in any uh
15:34supply chain right so when you are
15:35designing the supply chain you need
15:38to First fix the number of these
15:41stakeholders how many uh Distributors
15:44are there how many Transportation
15:47agencies are there warehouses are
15:49involved if third party warehousing you
15:51are taking then how many your raw
15:54material vendors are there
15:56right then because supply chain may vary
16:00as per the complexity and we talked
16:02about the steel industry where maybe
16:05steel industry is where the ore is
16:08coming from one uh supplier and directly
16:12steel rods are supplied to the end
16:14retailer and from the retailer customer
16:17is picking up as per the requirement
16:19right this is steel industry very simple
16:21Supply complex supply chain when we
16:23talked about automobile industry
16:29where we are using so many different raw
16:33material components you talk about
16:36Hospital industry example of services
16:38industry where the services are also
16:41required sometime you are going for test
16:42sometime again you are going for test so
16:44many different medicines are required so
16:46many different medical equipments are
16:48required emergency services are required
16:50those way those kind of services are
16:52also very sometimes that supply chain
16:55becomes very very critical complex
16:57immediately you need to shift the
16:59patient from this hospital to other
17:01Hospital taking care of the information
17:03whether the other hospital is having
17:05that uh availability of the maybe ICU
17:09availability of the blood group required
17:11availability of the medicine
17:12availability of the doctors expertise
17:14all those things in that way how complex
17:17it is right so depending upon the
17:19complexity then again you need to design
17:22the your supply chain Network in that
17:25way scale if you are uh transport in or
17:29delivering fixed order quantity right in
17:32terms of quantity or that is very fixed
17:35like steel roads if you are supplying to
17:37the market you are very much you know
17:40matured in that market and then you can
17:42figure out the
17:43demand so stock out and excess stock uh
17:47means that you can manage in a very uh
17:49you know precise manner but we talking
17:52about kind of Hospital Services maybe
17:54for 5 hours there is no demand for the
17:57ambulance for next 5 minutes you
18:01immediately you need five ambulance so
18:03how you will manage that so in that way
18:06the complexity and you know scale of the
18:08operation require means have put uh
18:11different constraints on designing the
18:14supply chain Network right so any supply
18:17chain we are designing we are looking
18:19for optimizing the processes enhancing
18:22the collaboration livering the
18:23technology to improve the visibility
18:25through the supply chain how the product
18:27is moving if we are talking about
18:29Hospital industry we need to talk about
18:31how the patient is moving from one lab
18:33to other lab from Lab to ICU from One
18:36hospital to other hospital that also we
18:38need to take care during that channel
18:41how we are maintaining the health of
18:43that patient right that also is
18:45important and then we need to minimize
18:47cost reduce Le time mitigate risk on the
18:51uh bay whatever it is coming and enhance
18:54the customer overall satisfaction
18:56experience right so these are some of
18:58the parameters when we are talking about
19:00designing the uh your distribution
19:02Network these will take care now these
19:05are some of the decision we will make
19:07facility
19:08role what role facility will play if
19:11you're talking about
19:14Warehouse which is you know storing the
19:16finished goods so Warehouse you want to
19:20keep your Warehouse near to the
19:24customers right near to the market so
19:27that immediately L demand is coming you
19:30can you know uh fulfill the order but
19:34the another problem with keeping the
19:36facility near to the customer maybe the
19:39cost will be higher of facility location
19:41if you are picking up the location
19:44facility in the Heart of the City
19:46obviously cost operational cost will
19:48increase acquiring that facility land
19:51that will be you know uh costly in terms
19:54of if you are keeping it little away
19:56from the city so then faity location in
19:59that way what are the locations you are
20:01picking capacity allocation how much
20:04capacity not only today what is the
20:06requirement tomorrow just know we talked
20:09about if we need to expand our capacity
20:12whether we have that feasibility of
20:14expanding the existing
20:16capacity right so that also we need to
20:19and then from if we are having these
20:23factories Factory 1 Factory 2 Factory 3
20:26n number of factories
20:28Market One Market Two And there are so
20:31many market so first factory maybe will
20:34be supplying three markets second
20:36Factory will be supplying these two
20:38Market maybe nth Mark factory will
20:41supply depending upon so many different
20:44factors so that also you need to decide
20:46depending upon the first is distance
20:49Transportation cost how much you can
20:51reduce second thing is if there is
20:53emergency demand can you shift from one
20:56Supply to other Supply Source you have
20:58to because the one Supply Source may be
21:01maybe shut down maybe breakdown happened
21:05or something goes wrong with one Supply
21:07Center so you need to go for the
21:08alternate Supply Center right so that
21:11these are some of the important
21:12decisions when you are developing or
21:14your supply chain networks what are the
21:17factors which will influence your this
21:20decision we'll go through quickly these
21:22Factor strategic
21:24Factor because once you will set up your
21:27Warehouse anywhere
21:29right or your manufacturing facility or
21:31you have located your vendors you cannot
21:34change so frequently your vendors right
21:36this is for sure so that's why this
21:38strategic factor is very very important
21:40because this includes long-term
21:42investment let's take when very example
21:45that simple example cost leadership now
21:48I just talked about uh the property or
21:51the retail showroom you want to open
21:53within the Heart of the City so you
21:55cannot be you know in that way cost
21:58efficient
21:59right so maybe if you are 2 km away from
22:02the city you will get the cheap location
22:05you will get the the you know the
22:07operational expenses will be little
22:10lower in compared to the where you know
22:13the costly location I'm talking about so
22:16in that way you can see this example
22:18electronic manufacturing industry foxc
22:21or fonics they what they are doing they
22:24have find the this lowcost countries
22:28like like China where they have located
22:30maximum facilities because they want
22:34cheap location from there they will
22:36transport material to all the possible
22:39markets wherever they have explode right
22:41now in that way because now you are
22:43little away from the market so that Gap
22:46is there so response time you need will
22:49be little higher if customer is
22:51demanding something it will take some
22:53time to respond to process the
22:55information coming from the market it
22:57will take some time there is Gap but on
22:59the other hand Zara is coming up again
23:03different strategy where they have your
23:07manufacturing location like Portugal and
23:09Spain where the cost of living is very
23:12high the location facilities land is
23:15also very costly but still they are uh
23:18you know they want to set up their
23:20stores or uh these uh production units
23:24near to the customer so that immediately
23:27they can come with new trends and C they
23:30can engage their customers right this is
23:33one very beautiful strategy Jara is
23:35opting but again then that depends upon
23:37the nature of the industry what is the
23:40nature of the product you are providing
23:42whether you you're supposed to be near
23:43to the customer or even if you are away
23:46little bit away from the customer and
23:47you are supplying with lesser cost
23:49hardly matters if you are buying cement
23:51for manufacturing your house cement is
23:54coming from retail shop is located
23:57somewhere at very high High costly area
23:59or at cheap location hardly matters
24:01right as long as you can minimize that
24:04cost because it is a kind of standard
24:06product technological factors this is
24:09again important what kind of Technology
24:12you are going to use will help you to
24:14decide whether you should uh where you
24:17should locate your facility this is very
24:19common example you might have seen
24:21recently our Indian government is also
24:23coming up with the schemes of setting up
24:26uh these facilities because
24:28semiconductor manufacturing facility is
24:31a require very high initial investment
24:34and it is a kind of industry you know
24:36you cannot come up with so many
24:38different stores because manufacturing
24:40facilities so you will maybe you will
24:43come up with very high capacity limited
24:46number of manufacturing facility because
24:48initial investment is very high but then
24:51Transportation cost will be you can
24:53somewhere you can see the transportation
24:55cost will be higher because from one
24:57station you are transporting the product
24:59to everywhere so that way the distance
25:01you are covering will be very higher on
25:04the other hand Coca-Cola Bottling plant
25:06it is cheap to you know initial
25:09investment required is very less right
25:11in that way so I want to minimize this
25:15Transportation distance let us open
25:17small small bottling plants which can
25:20cover this Market this Market again one
25:22bottling plant here can cover these
25:24three markets right so that means
25:26Transportation cost here is is important
25:29and I can set up my manufacturing
25:30facility near to the markets I can
25:33reduce the overall cost macroeconomic
25:36factors what are the taxes tariff
25:38exchange rate shipping cost all those
25:40things within that particular area right
25:43special economic zones where you are
25:45getting some reats so you are moving
25:47towards those economic zones special
25:49economic zones right so those economic
25:51factors are also very important if you
25:53are getting the concession rates on the
25:55tariffs or taxes very simply simplified
25:58structure so obviously that's why now
26:00India has simplified the tech structure
26:03so that the foreign investment can be
26:05invited within the country and the
26:08manufacturing facilities can be set up
26:10because then documentation and all that
26:12is very tricky process requires more
26:14time and in that way your resources
26:17consuming infrastructural
26:19factors once you have ensured the
26:21facility but infrastructure minimum
26:23infrastructure is required right
26:25infrastructure in terms of Road
26:27connectivity electricity water
26:29connection these kind of basic infr Air
26:31Force airport facility your train
26:34facility if you are dealing with those
26:36kind of logistics uh distributions heavy
26:39items so train is can be very cheap
26:41Source right so that's why you can see
26:45uh still because in China in Shanghai
26:48the location is costly but still many
26:51players are setting up their uh facility
26:54because they are getting those uh
26:56infrastructure factors Pol political
26:58factors again if stable government is
27:00there you are in that way ensure that
27:02this government is promoting that
27:04particular maybe industry real estate
27:08you are you know that way confident in
27:10investing into real estate They are
27:12promoting all the industries
27:13manufacturing industry within the
27:15country you are in that way safe right
27:17you so that you are calculating Global
27:20political Risk Index so as per the risk
27:23scenario we'll talk about the India
27:25position overall worldwide it's the 30th
27:28because of uh not only the political
27:31scenario Sometimes some governments are
27:33favoring some type of Industries but
27:35other uh you know disasters happens and
27:38mostly like of maybe natural disaster
27:41are obviously there but then the
27:43agitations frequently hesitations and
27:46all those things so then the country you
27:50know ranking is 30th position in terms
27:52of the risk competitive factors sometime
27:55what do you do you want to locate all
27:57kind of stores in one market you might
28:00have seen Furniture Market right or all
28:02the goldsmiths are in one street only
28:05right so there what is happening there
28:07are two different concepts you can get
28:09the raw material easily because all are
28:11there only so raw material suppliers you
28:13can get easily right customer are also
28:16aware that if you want quick meal short
28:18meal or maybe fast food this street is
28:21known for fast food you go there you'll
28:23get all the products right variety is
28:25there Fruit Market vegetable market is
28:27example
28:28the other thing is kind of your
28:30organized onstop solution where malls
28:33are coming and there in one mall you'll
28:36get almost all the products now this is
28:38for those people who wants to you know
28:41purchase the inventory for one or two
28:43months including everything grocery
28:45items your if you are related to your
28:49kitchen item washroom items or maybe
28:51related clothing if you want to try
28:54something so all those brands are there
28:56shoe brands are there other accessories
28:58you are buying so maybe in one mall if
29:01you'll visit you spend four five hours
29:03for 2 months it is done right so that is
29:06another concept so you need to take care
29:07of those things customer response time
29:10and local presence so if customer is
29:13ready to visit so maybe you can provide
29:15the convenience store but if customer is
29:19you know uh if it customer is ready to
29:23visit so then you can maybe move your
29:25Supermarket maybe 5 or 10 km away mall
29:29where they are going spending watching
29:31movie and purchasing all the stuff but
29:33they want very quick uh access to the
29:36inventory like milk products you are
29:38getting so convenience store so that
29:41means many stores you need to open near
29:43to the customer right so in that way
29:46another factor which is you know helping
29:48you to decide the location Logistics and
29:51facility cost so this again important
29:54because from where you are transporting
29:57if it is in the
29:58middle of the city so Transportation
30:00will be difficult right and then you
30:02need to find out those timings when the
30:05transportation is allowed right so
30:06Factory transportation and you are
30:08moving in large numbers so that also is
30:11important usually Transportation cost
30:14decreases as number of facilities
30:16increases this is like
30:19this number of facilities are on x-axis
30:23and transportation cost is on y- axis
30:26now why it is happening
30:28there are two reason first is maybe here
30:30we are transporting 10 units here we are
30:32transporting 100 units here we are
30:34transporting th000 units so that full
30:36capacity we are utilizing but after this
30:38it will shoot up because this was the
30:41maximum capacity of that container now
30:43we'll go for another container so 110
30:46items means again the cost will shoot up
30:48right another reason is if I'm having
30:52the um manufacturing facility or
30:55distribution facility near to my and
30:58market so this this distance outbound
31:02distance inbound logistic cost is lesser
31:06than outbound logistic cost so outbound
31:09distance I want to decrease how you can
31:12decrease outbound logistic cost when we
31:15are setting up our manufacturing
31:16facility or warehouses near to the
31:18customer right so this example I
31:21discussed in the previous sessions as
31:22well right so this is the overall
31:24framework of network design
31:26decisions first phase is supply chain
31:29strategy as per the global competition
31:32whether you are going for growth
31:33strategy means in terms of expansion
31:36strategy or you are going for stability
31:38strategy or you are going to acquire
31:41some business houses how you are going
31:43to compete right so that based on that
31:47uh your competitive strategy you will
31:49align your supply chain strategy if you
31:51are fighting with Walmart obviously you
31:54have to be cost efficient so your
31:57competitive strategy is cost efficient
31:59so then your supply chain strategy what
32:01will be the implication implication will
32:03be you need to wait for the economies of
32:05scale you need to consolidate the orders
32:08you cannot run your vehicle to deliver
32:10one order because your basic strategy is
32:14cost efficient second is regional
32:17facility configuration so many Regional
32:20factors we'll consider like just we
32:22talked about what are the tax structure
32:24what is the regional demand in that
32:26particular area we need to set up the
32:28new storage house there because many
32:31demands segregated demands are coming we
32:33can you know fulfill the orders from
32:35that political scenario what is the
32:38political scenario exchange rate demand
32:40risk right so what are the cost factors
32:43reasonal factors cost factor in that
32:45city right if you'll pick the location
32:47somewhere in that City what will be the
32:49cost competitive environment other
32:51players are also there in that right and
32:54production technology what are the
32:55Technologies you are going to use
32:57depending upon that in the third phase
32:59you will come up with the desirable
33:01sites what are the desirable sites in
33:04Kolkata right so maybe four or five
33:07location I picked after that all those
33:10Alternatives I will evaluate with cost
33:13with other factors we with the factor
33:16like technology with the factors like
33:18local Demand with Factor like political
33:20stability exchange rate and the
33:22infrastructure parameters all those
33:24parameters whatever are relevant for
33:27your IND industry you will evaluate and
33:29will say that out of these five
33:32locations the this one is the best
33:35location Third location is the best
33:37location and we'll set up our facility
33:39there only so these phase wise you can
33:42just go through right already I
33:45explained this and uh now I just want to
33:48discuss this case study of Zara which is
33:51Italian uh sorry Spanish uh largest
33:55apparel manufacturer and you can see
33:58almost more than 4700 retail outlets and
34:02their presence is in 76 countries and
34:06they are dealing with those products
34:07where the demand is very very
34:10inconsistent uncertain and with that
34:13uncertainty they are saying that we are
34:16highly responsive whatever you ask for
34:18we'll provide you and how they are
34:21promising this because usually in that
34:24clothing industry apparal industry the
34:27design to sales cycle if you'll talk
34:29about it will take minimum of 6 months
34:32if you are coming up with new design and
34:34when you'll deliver that product in the
34:36market it will take 6 months but Zara
34:40has reduced this to four to 6 months uh
34:42weeks only right so how they have
34:44achieved this because their main
34:47strategy is to you know uh renew the
34:52inventory in the stores as soon as
34:55possible and that's why 75% of the
34:58merchandise display they are changing
35:00every 3 to 4 weeks they are again replen
35:04not only replenishing the inventory new
35:06inventory new products new designs and
35:09because they have reduced this design to
35:11sale cycle time to only four to six week
35:15so every week some new products are
35:17coming right so when it is so they are
35:20matching the customer preferences it's
35:23not that after 6 months they are coming
35:24with the new designs so when because
35:27customer Trends preferences are changing
35:29day by day so in that way Zara is never
35:32out of season out of fashion so they are
35:35selling all the product at full price
35:37and because they are
35:39starting their uh production in
35:43collaboration with the customers after
35:45some recording they are initially they
35:47are producing very less you can see uh
35:50here it is mentioned 40% of the finished
35:53goods so they are not uh producing those
35:56many quantity so that uh that extra
36:00inventory should not be there and in the
36:02end that you know seasonal sale should
36:05not be there they are avoiding that
36:07seasonal sale Whenever there is seasonal
36:09sale obviously your competitors are
36:11giving 50% off 75% off but Zara they are
36:16not doing that because they are
36:18collaborating with their uh uh their
36:21customers recording their preferences so
36:23quickly how efficiently they are
36:26providing quickly and flex ibly they are
36:28providing that uh product because they
36:30have these manufacturing in-house
36:33manufacturing as well as Outsource they
36:35have Outsource as well this is very very
36:38unique strategy they are opting for 40%
36:41of the manufacturing is still owned by
36:44index which is owning the Zara brand
36:46right and they are producing in those
36:50you know costly locations in Europe
36:53right and rest of the product they are
36:56producing in you know uh cheaper
37:00location in Asia now when they are fixed
37:04with the demand they are known that that
37:06they are known that demand is going to
37:08be this much they are Outsourcing that
37:10to the Asian locations for manufacturing
37:13but whenever there is uncertainty any
37:16new trends are coming they are
37:17manufacturing inhouse so that they can
37:20control the new products and coming up
37:22with the new products frequently right
37:25so this is their main strategy and then
37:28responsiveness and postponement this is
37:30what I was talking about postponement of
37:33the decision regarding the manufacturing
37:34will help us to you know pile up big
37:37inventories right so when it is not
37:40there you are forecasting very
37:42accurately so that seasonal sale you
37:44need not to go for right so how they are
37:46doing this because they are spending
37:50huge in uh setting up the information
37:53Network so that they can closely monitor
37:56their customers and if you see delivery
37:59time within Europe is 24 hours and they
38:02are promising 48 hours for stores in
38:05America and Asia so this is the strong
38:08promise promises from uh your Zara some
38:12of questions are there we can just think
38:14of these questions what advantage does
38:16Zara gain against the competition by
38:19having a very responsive supply chain
38:22because this is a kind of a paral
38:23industry is kind of trend industry right
38:26where new trends are coming every day
38:27new people want designs if I'm wearing
38:30the shirt same shirt someone else is
38:32wearing so we are in that way not happy
38:35right so that way we'll provide the
38:37Competitive Edge why has index chosen to
38:40both in-house as well as Outsource
38:42manufacturing in-house to control over
38:45the designing part coming up with the
38:47new designs frequently and Outsource
38:50they have done that because Asian
38:52locations are cheaper so where they are
38:54very sure about the demand they are
38:56feeding those Asian players to produce
38:59those product another question is why
39:01does Zara Source Products with uncertain
39:04demand from the local manufacturer
39:06already I told about because uncertain
39:09demand local manufacturer near to the
39:11market any fluctuation you can amend
39:14that but if you are far away still you
39:16are producing and you are not aware that
39:18customer is not demanding or maybe their
39:21preferences have changed but still you
39:22are keep on producing so then you have
39:24to come up with the seasonal offers
39:26right then what Advantage Zara gain from
39:29replenishing its stores multiple times
39:31because they are not keeping High
39:33inventories so they have to make the
39:36frequent shipments replenishment Cycles
39:38right so in that way they are more
39:42updated with the inventory right and do
39:44you think Zara responsive replenishment
39:46infrastructure is better for online or
39:48Offline that you can discuss but my
39:51personal opinion is if they are whatever
39:54way they are going because their network
39:56is so strong collecting the information
39:58but still if they are going with online
40:00they can Pro make more promises with the
40:03customers and in that way they can go
40:05for consolidation of the segregated
40:08orders as well right because in offline
40:11way collecting all those orders and
40:14synchronizing will take a little more
40:16effort and will consume because uh will
40:19consume time as well because many
40:21sources are involved in that way right
40:23so this is how you can see different uh
40:27distribution Network design right for
40:29the same industry same product they are
40:32manufacturing somewhere they are doing
40:34in-house some products they are
40:36Outsourcing right so the this is the
40:39Zara supply chain so these are the
40:42references you can go through so that's
40:45all for this session thank you very much

About this transcript

This page contains the full transcript of Lecture 25 : Objectives of Supply Chain Networks by NPTEL IIT Kharagpur, generated from the public captions YouTube serves with the video. The transcript has 6,286 words across 968 segments, with the original timestamps preserved so you can click any line to jump to that moment in the embedded player.

What you can do with it

Use the transcript to take notes, quote the speaker, build a study guide, generate a summary with ChatGPT or Claude via the YouTube Summary tool, or export it as a timed subtitle file with YouTube to SRT. You can also re-open it in the transcriber to translate the transcript into 100+ languages.

Free YouTube transcript tool

YouTube2Text is a free YouTube transcript generator — no signup, no daily limit. Paste any YouTube link and get the full transcript instantly, with timestamps, click-to-jump, translation to 100+ languages, AI prompts for ChatGPT, Claude, and Gemini, and exports to TXT, SRT, VTT, or Markdown.