[00:08] it arrives at your doorstep the very next day. Sounds simple, right? But think about everything that had to happen before that delivery. Someone had to source the raw materials, manufacture the components, assemble the phone,
[00:21] manage inventory, transport it across multiple locations, and then finally deliver it to your address. Now, imagine one small thing goes wrong. A supplier delays a critical component, a warehouse runs out of stock, or a transportation
[00:35] delay prevents thousands of orders from reaching the customers. And suddenly, the entire process is affected. And that is why exactly supply chain management is so important. With that being said, I welcome you all to the supply chain
[00:49] Whether you are a complete beginner, a student, or a working professional looking to strengthen your understanding of supply chain operations, this course foundation through practical explanations and real-world business
[01:04] examples. Now, before we move on, here's the agenda of our today's session. First, we're going to start with the fundamentals of supply chain management. Then, we'll move ahead to understanding upstream versus downstream supply chain.
[01:16] After that, we will discuss about the three fundamental supply chain flows, four primary supply chain cycles, and push versus pull operating strategies. Next, we'll move into supply chain planning and performance, covering
[01:29] integrated supply chain planning, lead time, and service level metrics. After understanding the bullwhip effect. Then, we will explore sustainable supply chains, including sustainable supply chain principles, reverse logistics, and
[01:44] circular flow. After that, we're going to move into one of the most important area, that is inventory and replenishment, where we will cover types of inventory and why business holds stock. Throughout the session, we will
[01:57] connect these concepts with practical business examples so that you can understand not just what these processes are, but how they work together in real supply chain. Before we move on, just a quick info, guys. If you're looking to
[02:09] advance your career in IT service management, then you should check out Simply Learn's ITIL 4 Specialist Create, Deliver, and Support certification training. This course is going to help you master service management practices,
[02:22] improve service quality, and learn how to create, deliver, and support IT-enabled products and services. You'll get expert-designed learning content, simulation exams, and ITIL 4 Specialist certification exam voucher to support
[02:36] your certification journey. So, if you're ready to take out your IT service then you should check out the course link in the description below. So, guys, hurry up now and join the course. The course link is mentioned in the
[02:49] quiz to test your knowledge. Which of the following best describes the primary objective of supply chain management? Your options are to manufacture as many products as possible, to coordinate the flow of goods, information, and finances
[03:02] efficiently across the supply chain, or to maintain the highest possible inventory levels, or to focus only on reducing transportation cost. You can answer. Also, please mention your answers in the comment section below.
[03:15] So, let's get started. So, let us start with a simple question. What exactly is supply chain management? In simple terms, supply chain management or SCM is a process of planning, coordinating, and controlling the movement of products,
[03:30] information, and money across network of organizations from supplier to the final customer. Now, that definition might sound broad, so let us break it down using an example. Imagine a company called Smart Home Appliances. And this
[03:47] company manufactures kitchen appliances, including mixers, grinders, electric kettles, and induction cooktops. Let us focus on just one product that is mixer grinder. To manufacture one mixer grinder, Smart Home needs an electric
[04:03] motor, steel blades, plastic housing, switches, electric wiring, and packaging material. Now, Smart Home may not manufacture all these components itself. It might purchase electric motors from one supplier, plastic components from
[04:19] the another supplier, and packaging materials from a third supplier. All these materials must arrive at the factory so that the manufacturing process can begin. Once the components are available,
[04:31] workers and machine assemble them into finished mixer grinders. And the finished products are tested, packed, and prepared for shipment. The company then transports these products to warehouses or distribution centers. From
[04:47] there, the products are sold to the retailers, e-commerce platform, or directly to the customers. So, we have a complete network involving suppliers, manufacturing facilities, warehouses, transportation providers, retailers, and
[05:01] customers. The entire network is called the supply chain. Now, there's an important distinction between supply chain and supply chain management. The supply chain is a network itself. It includes the organizations, facilities,
[05:17] and the activities involved in producing and delivering products. Supply chain management refers to how that network is planned, coordinated, monitored, and improved. In other words, the supply chain tells us who and what is involved,
[05:33] while supply chain management tells us how the entire system is managed. Now, let us try to understand why companies need to manage this network carefully.
[05:45] need to manage this network carefully. Suppose Smart Home expects to sell 5,000 mixer grinders next month. To meet the demand, the company needs to purchase enough components, schedule sufficient manufacturing capacity, arrange
[05:58] warehouse space, and prepare transportation services. But imagine the motor supplier can deliver only 4,000 motors. Even if SmartHome has enough plastic housings, blades, and packaging materials, it cannot manufacture all
[06:13] 5,000 mixer grinders without the remaining motors. And this is an example of how a problem at the supplier level can disrupt production and affect customer deliveries. Now imagine the opposite solution. Suppose SmartHome
[06:28] opposite solution. Suppose SmartHome purchases materials for 10,000 mixer grinders, but customer demand turns out to be only 5,000 units. The company may end up holding large quantities of unused components or finished products.
[06:43] And that excess inventory occupies storage space and ties up the money that could have been used elsewhere. So, supply chain management helps companies balance two important objectives. The first is meeting customer demand
[06:59] reliably, and the second is controlling the resource and costs required to meet that demand. Now, let us understand the five major supply chain activities. The first activity is planning. Planning involves estimating future demand,
[07:15] deciding production quantities, determining inventory requirements, and allocating the resources. The second activity is sourcing. Sourcing involves finding suppliers, evaluating their capabilities, negotiating terms, and
[07:29] purchasing materials or services. The third activity is making or manufacturing, and this is where raw materials and components are transformed into finished products. The fourth activity is delivering.
[07:42] Delivery includes storing finished products, processing customer orders, arranging transportation, and ensuring that products reach their destinations. And the fifth activity is returning. Return involves managing defective,
[07:57] damaged, or unwanted products that move back through the supply chain. This refurbishment, recycling, or disposal. Now, one thing is worth remembering that supply chains are not always linear. A company may
[08:13] have multiple suppliers, several factories, regional warehouses, retail partners, and different customer groups. Some products may move directly from manufacturer to the customers. While others may pass through several
[08:28] intermediates. So, modern supply chain can become quite complex. And that complexity is precisely why coordination, information sharing, and effective planning are important. The ultimate goal of supply chain management
[08:42] is to make sure that the right product reaches the right customer in the right quantity at the right time with acceptable quality and at a sustainable total cost. Now that we had understand the purpose of supply chain
[08:57] management, let us look more closely into the individual stages and the flow that makes up the supply chain. Now, let us continue with our smartphone, mixer grinder example. The first stage involves suppliers. These are the
[09:12] businesses that provide components and raw materials needed to manufacture the product. For example, one supplier provides electric motors, another provides plastic housings, and another provides the packaging materials. The
[09:25] next stage is manufacturing. At this stage, Smart Home receives the required components and assemble them into finished mixer grinder. So, let us continue with our smartphone, mixer grinder example. The first stage
[09:38] involves suppliers. These are the businesses that provide components and raw materials needed to manufacture the product. For example, one supplier provides electric motors, another provides plastic housings, and another
[09:52] provides the packaging materials. The next step is manufacturing. At this stage, Smart Home receives the required components and assembles them into finished mixer grinders. Once manufacturing is completed, the products
[10:06] move to a distribution center or a warehouse. The warehouse stores the product until the orders are received from retailers or customers. From there, the products move through the distribution channels. Some products
[10:20] may be shipped to retail stores, while other may be sent directly to the consumers through online orders. And finally, product reaches the customer. So, the basic structure is supplier, manufacturer, distribution center,
[10:34] retailer, and a customer. So guys, as you can see all over here, so we'll be doing some simulations. So, the software that I am preferring is AnyLogic stix. So, this is a sandbox where we can perform our simulation. Now, you can see
[10:49] all over here like we'll be taking up the factory, the supplier, the manufacturers, and the customer. And based on that, we are going to build our supply chain management. Now, let us move to the next part
[11:03] where we will understand the difference between upstream and downstream supply chain, the three fundamental supply chain flows, and the four major supply chain cycles. So, this is one of the most fundamental concepts in supply
[11:18] chain management, upstream and downstream activities. Now, imagine Smart Home is manufacturing a mixer grinder. To manufacture this product, the company needs several components. It needs an electric motor, steel blades,
[11:32] plastic housings, electrical wiring, switches, and packaging materials. All these components come from different suppliers. The activities and the relationships involved in obtaining material, components, and other inputs
[11:46] from suppliers are generally referred to as upstream side of the supply chain. So, when Smart Home purchases motors from the supplier or coordinates with packaging manufacturer, those are upstream activities. Now, once the mixer
[12:02] grinder has been manufactured, it needs to reach the customer. The finished product might move from factory to the distribution center. And from the distribution center to the retailer. And finally, from retailer to the customer.
[12:16] These customer-facing movements and relationships are referred to as the downstream side of the supply chain. Now, here's a simple way to remember the difference. Upstream activities focus on obtaining the inputs required for the
[12:30] business. Whereas the downstream activities focus on moving products towards customers and fulfilling their requirements. Now, let's make this more practical. Suppose the company expects to manufacture a 5,000
[12:45] mixer grinders next month. And before production begins, Smart Home needs to confirm whether suppliers can deliver the required components or not. The procurement team communicates with the suppliers, verifies delivery schedules,
[13:00] and ensures materials will arrive on repeat. And it ensures that materials will arrive on time. These are upstream supply chain activities. Once the production is complete, the distribution team decides how many units should be
[13:16] shipped to Mumbai, Bengaluru, or Hyderabad. The warehouse team prepares the products and logistic partners and transports them. These are the downstream activities. Now, it's important to understand that upstream
[13:30] organization we are discussing. For a motor manufacturer supplying smart home is a downstream customer. But, from the smart home's perspective, the motor
[13:42] manufacturer is a upstream supplier. These are the terms that depend upon whether we are standing within the supply chain or not. And here's why this distinction matters. Upstream problems can create material shortages and
[13:58] production delays. Whereas downstream problems can create delivery delays, excess finished good inventory, and dissatisfied customers. A successful supply chain manager needs visibility in both directions because manufacturing
[14:13] efficiency alone isn't enough if suppliers cannot deliver materials. And reliable customers aren't good enough if finished products cannot reach customer efficiently. So, understanding upstream and downstream activities helps
[14:28] us to see the complete supply chain instead of focusing on just one instead of focusing on just one department. And now that we understand the direction of the supply chain activities, let us explore what actually
[14:40] moves through this network. When people think about a supply chain, they usually imagine trucks moving products from one place to another. But, a supply chain physical goods. There are three fundamental flows that
[14:55] keeps the entire system functioning. And these are product flow, information flow, and the financial flow. Let's understand each one using the smart home example. The first is a product flow. Product flow refers to the physical
[15:09] movement of raw materials, components, work in progress, and finished products. For example, electric motors move from supplier to smart home factory. Once the mixer grinders are manufactured, the finished products move
[15:24] from factory to the distribution center. And when the customer places an order, the product moves from the warehouse to the customer's address. All these examples are of product flow. Now, physical products don't always move only
[15:38] in one direction. Now, if a customer returns a defective mixer grinder, the product may move back from the customer to a return facility or repair center. So, product flow can include both forward logistics and
[15:52] reverse logistics. The second is information flow. Information flow involves sharing data between different participants in the supply chain. Let's say a smart home normally sells 100 mixer grinders every day. And suddenly,
[16:08] mixer grinders every day. And suddenly, customer demand increases to 150 units per day. The sales system record this change. The inventory team needs to know about it, so they can review stock availability. The production team needs
[16:22] that information to decide whether manufacturing output should increase or not. And the procurement team may need to purchase additional components from So, information must move between customers, sales teams, warehouses,
[16:36] manufacturers, and suppliers. And that's why accurate information is very, very important. If inventory records are incorrect or demand forecasts aren't shared on time, different departments make decision based on outdated
[16:52] information. And that can lead to excess inventory, stock-outs, or delayed shipments. The third one if I talk about, it's the financial flow, which includes payments, invoices, credit terms, refunds, and other financial
[17:06] transactions. For example, when a customer purchases a mixer grinder, the customer pays the retailer or the company. Then the company pays it to the company. Then the company pays it to the suppliers, logistics, and also the
[17:20] businesses and also the business partners according to the agreed term. Now notice how all three flows are connected. When customer places an order, information flows through the system. The warehouse then prepares the
[17:34] physical product or shipment. And then the order also triggers financial activities such as payment processing or invoicing. So one customer order can create product movement, information exchange, and financial transactions.
[17:48] And this leads us to another important concept. These activities don't happen randomly. They can be organized into series of connected supply chain cycles. Now let us understand these cycles next. A common way to understand supply chain
[18:03] operations is through four primary cycles. And these are customer order cycle, replenishment cycle, manufacturing cycle, and procurement cycle. Let us start with a customer order cycle. This cycle begins when a
[18:16] customer places an order and continues through the activities required to fulfill that order. For example, imagine a customer visiting Smart Home website and purchasing a mixer grinder. The order is received, payment or credit
[18:30] arrangements are processed, and the inventory is checked, and the product is picked, packed, and shipped. Once the customer receives the product and the relevant order requirements are completed, the customer-facing
[18:43] fulfillment cycle is complete. Now let's move to the replenishment cycle. Suppose move to the replenishment cycle. Suppose a retail store sells 40 mixer grinders during the week. The store needs to replace the product it has sold. So it
[18:56] places a replenishment order with distributor or the manufacturer. The distributor processes the order, sends the additional stock to the retailer. This is a replenishment cycle. Its main purpose is to restore inventory so that
[19:09] future customer demand can be met. The next cycle is the manufacturing cycle. This cycle includes the activities required to convert materials into finished products. Let's say smart home distribution center, which needs 1,000
[19:24] additional mixer grinders. The factory receives the production requirements, production planning checks the material availability and the manufacturing capacity. The factory schedules assembly, performs production
[19:36] operations, carries out quality checks and prepares the finished goods. These cycle. And finally, we have the procurement cycle. The procurement cycle
[19:48] begins when the company identifies the requirement for materials or components. For example, smart home needs 1,000 electric motors. The procurement team identifies suitable supplier, places purchase orders, tracks deliveries,
[20:04] receives the material and completes the relevant purchasing activities. Now, let's connect all the four cycles. For example, a customer purchases a mixer grinder. The sale reduces the inventory and the customer facing location. The
[20:18] business may need to replenish the stock. Replenishment may create manufacturing requirement and manufacturing may create a need to purchase additional raw materials. And that creates procurement requirement.
[20:32] So, the four cycles are actually connected. Customer orders influence replenishment, replenishment influences manufacturing and manufacturing influences procurement. Now, these cycles don't always happen in a strict
[20:45] sequence. In real supply chain, many activities happen simultaneously. A company might be purchasing materials, manufacturing byproducts, replenishing stores and delivering customer orders at the same time. But dividing the supply
[21:00] chain into cycles helps us understand who performs each activity and what triggers the next action. And once we understand these cycles, the next question becomes very important. Should businesses perform these activities
[21:14] based on expected demand, or should they wait for the actual customer orders? And that's where push and pull operating strategies come in. Let's imagine Smart strategies come in. Let's imagine Smart Home expects a major increase in sales
[21:27] during the festive season. The company predicts that customers will purchase 10,000 mixer grinders over the next month. Now, one option is to manufacture those products in advance and distribute them to warehouses before customer order
[21:41] arrive. And this example is of push strategy. In push operating strategy, a production or inventory movement is driven primarily by anticipated demand. The company uses forecast to decide how much to manufacture, purchase, or
[21:58] distribute. Now, why would a business use this approach? Because manufacturing takes time. Transportation also takes time. And if company waits until customer places their order before starting every activity, deliveries
[22:12] might become too slow. So, producing in advance can help businesses maintain product availability. But the push strategy is also involved risk. If Smart strategy is also involved risk. If Smart Home manufactures 10,000 mixer grinders
[22:26] and only 6,000 are sold, the company may be left with 4,000 unsold units. Now, this creates excess inventory and increase storage costs. Now, let us consider the opposite approach. Suppose Smart Home manufactures
[22:41] customized commercial kitchen equipment. Customers can choose different motor capacities, materials, and configuration. So, instead of producing every possible variation in advance, the company waits until a customer places a
[22:55] confirmed order. Now, once the order arrives, production or final assembly begins. This is actually a pull strategy. In a pull operating strategy, activities are triggered by actual customer demand. One advantage is the
[23:09] company can reduce unnecessary finished goods inventory. But, the trade-off is the customers may need to wait while the product is manufactured or assembled. Now, which strategy is better? The answer depends
[23:23] on product characteristics, demand predictability, production lead times, and customer expectations. For products with stable demand and short required useful. For highly customized products with
[23:38] uncertain demand, a pull approach may be more suitable. But, many businesses use a combination of two. Now, let us turn to the earlier example that we were discussing, which was smart home. The company might purchase a standard
[23:52] electric motors and plastic components based on forecast. Those are basically forecast-driven activities. But, final assembly of specialized appliances might begin only after confirmed customer order arrives. Now,
[24:06] these are order-driven activities, and this approach combines push and pull. Now, there's an important concept called push-pull boundary, also known as the customer order decoupling point. This is the point in the supply chain where
[24:20] activities transition from forecast-driven operations to customer-order driven operations. Before that point, the businesses generally prepares based on the expected demand. After that point, activities respond
[24:34] more directly to the actual customer orders. Understanding where to place this boundary is important because it affects inventory levels, manufacturing flexibility, and delivery speed. The main key takeaway is that neither push
[24:47] or pull is universally better. Businesses need to choose an operating strategy that balances demand uncertainty, inventory cost, production capability, and customer service. And to make that decision effectively,
[25:01] companies need integrated supply chain planning. Now, let's imagine you are supply chain manager at a smart home company. And your sales team tells you company. And your sales team tells you that company expects to sell 5,000 mixer
[25:14] grinders next month. But when you speak to the production team, you discover that the factory can manufacture only 4,000 units. You then check the warehouse and find that 600 finished units are already available. So, let's
[25:28] calculate the total available supply. We have the 4,000 units of planned production and 600 units of opening inventory. Now, that gives us 4,600
[25:40] units. But expected demand is 5,000 units, so there is a projected shortage of 400 units. Now, the important question is, how should the business handle the shortage? Should it schedule overtime to increase its production?
[25:55] Should it purchase the finished products from another manufacturer? Or should it prioritize certain customer orders? Or should the sales team adjust its commitments? Now, this is where the integrated supply chain planning becomes
[26:09] important. Integrated supply chain planning connects demand forecasting, procurement, production inventory, distribution, and financial planning process. So, instead of allowing every department
[26:23] to create independent plans, the businesses attempt to align its operation around shared objective. Let's understand this through three levels of planning. So, strategic planning actually focuses The first one that I
[26:37] have for you is strategic planning, which focuses on long-term decisions, such as where factories and warehouses should be located, which markets uh the company should serve, and how much manufacturing capacity should it
[26:51] invest in. For example, a Home may decide to open a second distribution That would be strategic supply chain decision. The second level is tactical planning, which involves decisions over the coming weeks or month. For example,
[27:06] how many mixer grinders should the factory manufacture next month? Or how much safety stock should be maintained? Or how much material should be purchased from each supplier? The third level is operational planning. Operational
[27:20] planning focuses on day-to-day activities, like which customer orders should be shipped today? Which production lines should operate tomorrow? And which products need immediate replenishment? Now, let's
[27:33] understand sales and operation planning. Before understanding this topic, let us begin with a simple question. Let's say when you order a product online, what's one of the first thing you check? Usually, is the expected delivery date.
[27:47] You want to know how long you'll have to wait before the product reaches you. In supply chain management, this concept is closely related to lead time. Now, what is basically lead time? Lead time refers to the elapsed time between a defined
[28:03] starting event and the corresponding completion event. For example, supplier lead time is a time between placing a replenishment order with a supplier and receiving the required goods using the agreed measurement convention.
[28:18] Let's take Smart Home as an example. Suppose the company places a purchase order for electric motors on Monday. The supplier processes the order, prepares the shipment, and delivers the motor on Friday. Using elapsed calendar days from
[28:34] Monday to Friday, the supplier lead time is generally 4 days. Now, different operations have different types of lead time. Procurement lead time measures the time required to obtain materials. Manufacturing lead time measures how
[28:49] long production takes from the defined starting point to the completion. Transportation lead time measures the time required to move goods between different locations. And customer order lead time measures the time from order
[29:03] placement to a defined completion event such as delivery. Now, you'd be wondering, why does this matter? Because lead time affects planning and inventory. If a supplier takes 20 days to deliver materials, Smart Home may
[29:17] need to place orders much earlier than it would with a supplier that takes 4 days. Long or highly variable lead times can make inventory planning more difficult. Now, let's understand service level. Service level measures how
[29:32] successfully a supply chain meets defined customer availability or delivery expectations. There are several metrics used to measure this. And one of them is the fill rate. Fill rate measures the proportion of demand
[29:46] fulfilled immediately from available stock under the chosen definition. Suppose customers request 1,000 mixer grinders during a period, and Smart Home grinders during a period, and Smart Home immediately fulfills 950
[30:01] units from the available inventory. The unit fill rate is 950 divided by 1,000 multiplied by 100. Now, that gives us exactly the fill rate. Now, another metric is the on-time delivery rate. So, out of those orders,
[30:18] are delivered with their promised delivery windows. The on-time delivery delivery windows. The on-time delivery rate is 108 divided by 200, then rate is 108 divided by 200, then multiplied by 100. That's 94%.
[30:31] Now, here's something important. Fill rate and on-time delivery rate aren't the same thing. Let me explain you with this example. A company could have enough inventory to fulfill an order, but still deliver it late because of
[30:44] transportation delays. Or it could deliver available orders on time, but still have poor fill rate because many other orders couldn't be fulfilled immediately. And another useful metric is order cycle time. Now, this measures
[30:59] the elapsed time from receiving an order to define fulfillment milestone. If the company receives an order on October 1st and delivers it on October 4th, the elapsed calendar time is generally 3 days. Now, in inventory management, you
[31:14] may also encounter cycle and service level. Cycle service level commonly refers to the probability of avoiding a stockout during replenishment cycle under the specified inventory model. It is kind of different from the unit fill
[31:28] rate. A 95% cycle service level does not automatically mean that 95% of the requested units are fulfilled immediately. The distinction becomes important when designing safety stock policies. The main lesson is that
[31:43] businesses should measure both speed and reliability. A shorter lead times helps companies respond faster. But a strong service level indicates how consistently the business meets its defined customer requirements. Now, let's look at a
[31:59] phenomenon that can make both planning and inventory reliability worse. Even when actual customer demand doesn't change very much. And that is called as the bullwhip effect. So, you can see all over here, it's written small
[32:13] fluctuations in the retail customer demand trigger progressively variance triggers progressively larger variance swing upstream for the wholesalers, manufacturers, and the raw material supplier. Imagine a supermarket that
[32:27] normally sells 100 smartphone mixer grinders every week. For several weeks, customer demand remains relatively stable. Then one week demand increases stable. Then one week demand increases slightly from 100 units to 105 units.
[32:42] Now, that's an increase of only five units. Now, the retailer notices the increase and becomes concerned that demand might continue rising. Instead of placing its normal replenishment order, it orders 115
[32:58] units from the distributor. The distributor receives this unusually large order and assumes demanding is increasing rapidly. So, it places an order for 135 units with the manufacturer. The manufacturer sees the
[33:12] increased demand from the distributor and schedules production for 160 units. Now, let's look at what happened. Actual customer demand increased by just five
[33:24] units. But, the manufacturing plan increased to 160 units. Now, this amplification of demand fluctuation as we move the upstream is known as the bullwhip effect. In simple terms, the bullwhip effect occurs when relatively
[33:38] small fluctuations in final customer demand causes increasingly larger fluctuations in orders placed by retailers, distributors, and manufacturers. And this can create some serious problem for the businesses.
[33:52] Let's understand why it happens. One major reason is demand forecasting based on incoming orders rather than final customer demand. If manufacturer only see distributor orders, they may not know whether a sudden increase reflects
[34:07] genuine customer demand or simply additional inventory being purchased by the distributors. Another cause of I have to say is order batching. Some businesses place large orders periodically instead of smaller and more
[34:21] frequent orders. For example, a retailer might order 400 units once a month rather than 100 units every week. Even if customer purchase products
[34:33] consistently, the distributor sees a large spike when the monthly order arrives. Another cause is price promotions. Suppose a Smart Home offers a temporary discount to the distributors. Distributors may purchase
[34:47] extra units during the discount period to benefit from the lower price. After promotion ends, orders may decrease sharply because distributors still have excess stock. This creates fluctuations that don't necessarily reflect actual
[35:02] customer consumption. Long lead times can also make the problem worse. When replenishment takes longer, companies may order additional stock because they are worried about future shortages. Now, what are the consequences? The first is
[35:17] excess inventory. If manufacturers produce too many products, the company may have to store them for long periods. The second is stock outs. Demand distortion causes inventory to be positioned incorrectly across the supply
[35:32] chain. The third is higher operating costs. Factories may need overtime during sudden order peaks. Warehouses may need additional space and transportation schedules and may become inefficient. Fourth one is poor
[35:47] coordination. When every organization reacts independently to distorted information, the entire supply chain becomes less predictable. Now, let's visualize this using Excel. Now, let's say in the first column we have week.
[36:04] Okay? So, let's say the number of weeks I have taken is 12 weeks. Then there is a customer demand. So, let's say in the week one we have 100 units, in week two we have 105 units, week three we have 95 units, week four we have 102 units, week
[36:20] units, week four we have 102 units, week five we have 98, week six 108, and seven five we have 98, week six 108, and seven 92, and so on and so forth. In the next column, we have the retailer orders. For example, 100 units, 108, 93, 103, 97,
[36:35] example, 100 units, 108, 93, 103, 97, 112, 88, 106, and then finally 102. Then on the one column, you see the distributor orders. 100, 112, 90, 105, distributor orders. 100, 112, 90, 105, 82, 109, and it goes till 103.
[36:50] Similarly, we have the manufacturer column and in which the manufacturer orders are mentioned as 100, 118, 85, 108, 94, 127, and it goes till 105. Then
[37:03] you can see there are delta values for customer. So, initially, let's say it was 100 and 100 got utilized, so zero. Similarly, delta here is also zero. Uh for the next week, the delta for customer is five, then minus five,
[37:18] two, minus two, and you can see there are some negative and positive values uh manufacturers, uh initially, we have zero, then we have initially, we have zero, then we have 18, minus 15, eight, minus six, uh 27,
[37:34] and it goes till five. Now, you can see all over here that we have something called as if we change the blue customer demand. Let's say if I just uh change some here, the customer demand all over here in the first column, then
[37:48] I would see a change in my graph. Now, initially, let's look at the given model that we have applied. So, you can see the graph is going somewhat like this, and here you can see there is a blue line, and it it goes up to a peak point,
[38:03] then it comes down, then it it goes up, and all these are calculated since there is lot of correlation among all the column. So, you can see there are one, two, three, four, four different lines indicating the curve. Now, you can see
[38:15] the response factor value has been mentioned. So, retailer response factor mentioned. So, retailer response factor 1.5, distributor response factor is 1.5, manufacturer response factor is 1.50, and reference demand units is 100 units.
[38:29] Now, if you see all over here, what is the inference that we are getting? The customer demand line is showing relatively smaller variation, and the retailer order line fluctuates more. And this is illustrating how demand
[38:42] variability can become an amplified upstream. Now, if you do it take a detailed study based on real-time scenario, then on the supply chain simulation, we have to calculate the orders based on
[38:56] specific inventory policies, forecast, and lead times. Now, let us do one thing. Let us change this customer demand. Let's say make it to 500 units and see the graph right now. So, the blue line is a customer demand.
[39:13] You can see the orange line is a retailer demand. This is a distributor one, and this is a manufacturer order one. And you can see all over here how it's uh how there has been very less variation, and
[39:26] the delta that we are getting is too much for the customer. And for the manufacturer, it has also increased. So, this is basically a simulation of bullwhip effect. Now, there are a couple of analysis. Let's say if the ratio is
[39:41] one, that means that same variability as customer demand. So, higher the variance ratio is there, more upstream order volatility would be there for the customer demand. If it is greater than one, that means it is amplified orders.
[39:55] Uh you have example causes. Uh repeat. So, guys, these are the ratio with their respective thing. And when you take the given customer demand, retail orders, distributor orders, and
[40:10] manufacturer orders, so you have to calculate variance, standard deviation, and we have to calculate variance against customer table. So, this is how bullwhip effect is done. Now, you'd be wondering how companies can actually
[40:24] reduce the bullwhip effect. So, one approach is sharing actual customer sales data across the supply chain. Another is improving forecasting and coordinating promotions. Businesses can also reduce large order batches, shorten
[40:39] the lead times, and improve replenishment policies. Now, the key lesson is that better information sharing and coordination can prevent small changes in customer demand causing unnecessarily large operational
[40:53] reaction. Now, let us move to the another challenge which is faced by modern supply chains. How can businesses improve operational efficiency while reducing environmental impact? So, for that we have sustainable supply chain.
[41:07] So far, we have discussed how companies manage suppliers, production, inventory, and customer deliveries. But, modern supply chains face another important challenge. Which is the sustainable supply chain. So, we have a couple of
[41:21] principle all over here that we are going to discuss. Now, how can businesses deliver products efficiently without creating unnecessarily environmental and social impacts? This is where sustainable supply chain
[41:33] management comes in. A sustainable supply chain considers environmental, social, and economic factors when making sourcing, manufacturing, transportation, and distribution decisions. Let us understand with the smart home example.
[41:47] Now, think about everything required to manufacture and deliver one mixer grinder. Raw materials are extracted or manufactured. Components travel from suppliers to the factories. Factories consume electricity and other resources.
[42:01] Then, products are packaged and transported to the warehouses. After that, the delivery vehicles move to the retailers and to the customers. Every stage consume resources and it may create waste or emissions. So,
[42:15] sustainability isn't limited to what happens inside the factory. It basically involves the entire supply chain. Now, one important principle is resource efficiency. Businesses aim to reduce unnecessarily consumption of materials,
[42:30] energy, fuel, and packaging. For example, if a smart home redesigns its product packaging so that more mixer grinders fit safely inside one transport vehicle, it might reduce the number of shipments required. Now, that can lower
[42:44] costs and transportation emissions. Another principle is sustainable transportation. Companies can compare transport routes, vehicle efficiency, shipment utilization, and available transport modes. Now, let us take an
[42:58] example. Suppose a smart home needs to transport products from Pune to Mumbai. transport products from Pune to Mumbai. Route A costs 7,000 rupees and generates Route A costs 7,000 rupees and generates an estimated 120 kg of carbon dioxide.
[43:11] Let's say there is route B and it costs 6,500 rupees and generates 95 kg. At first glance, route B performs better on both cost and emissions. But, suppose
[43:23] route B takes 1 hour longer. Now, the logistics team needs to decide whether the longer delivery time is acceptable or not. And this is a simple example of evaluating sustainability alongside cost and service performance. Another
[43:39] important principle is responsible sourcing. Businesses need to consider whether suppliers follow applicable environmental, safety, and labor requirements. And there's also social dimension involved in that. A
[43:52] sustainable supply chain should consider issues such as workplace safety, responsible labor practices, and ethical purchasing. Sustainability doesn't necessarily mean choosing the cheapest route, but using the fewest suppliers or
[44:06] reducing inventory as much as possible. Sometime more resilient supply chain requires additional capacity, alternative suppliers, or regional inventory. So, the decisions should consider long-term impacts instead of
[44:20] focusing only on short-term savings. And one of the most interesting ways companies can reduce waste is by recovering value from products that customer no longer uses. Now, that brings us to the reverse logistics and
[44:35] circular supply chains. Let us imagine customer purchases a smart home mixer grinder again. And after few days later, the customer discovers that the motor isn't functioning correctly. The customer connects Smart Home and
[44:48] requests a return. Now, normally products move from suppliers to the manufacturer, to warehouses, retailers, and customers. But in this situation, the product needs to move in the opposite direction. From the customer,
[45:01] it may travel to a collection center, warehouse, repair facility, or returns processing center. And this is an example of reverse logistics. Reverse logistics involves planning and managing the movement of products or materials
[45:16] backward through the supply chain for activities such as returns, inspection, repairs, or refurbishment, recycling, or disposal. Now, let us understand how this process works. First, the customer initiates the return
[45:30] request. Then, the company verifies the return eligibility according to its policy. Next, the product is collected to set to an authorized return location. And once the product arrives, it goes through an inspection process. Now, the
[45:46] inspection is important because not every return product should be handled in the same way. Suppose the mixer grinder has a minor electrical fault. If the product can be safely repaired, the Smart Home may repair it and return it
[46:01] to the customer or process it through a suitable refurbishment channel. But suppose the product is seriously damaged. In that case, the company may recover reusable components or send suitable materials for recycling. If the
[46:15] product cannot be repaired, reused, or recycled safely, the remaining materials must be disposed of according to the applicable requirements. Now, this connects to the concept of the circular supply chain. In the traditional linear
[46:29] model, materials are extracted, products are manufactured, customers use them, and eventually the products become a waste. A circular model attempts to keep products, components, and materials in productive use for longer. For example,
[46:46] smart home might operate a refurbishment program. Customers return eligible appliances. The company inspects and repairs them. The reusable products may be then sold again through appropriate refurbished product channel. Some
[47:02] components may be recovered for reuse, while other materials may be recycled. Now, this can reduce waste and recover economic value. Now, let's focus on to understanding important distinction. Reverse logistics is the physical and
[47:18] the operational process of moving products backward and handling their return. A circular supply chain is a broader approach of designing and operating systems that reduce waste and recover value of a product's life cycle.
[47:32] So, reverse logistics can support a circular supply chain, but the two concepts aren't identical. And from the operational perspective, reverse logistics creates additional planning challenges. The company may not know
[47:46] exactly when the products will be returned or when the returned products may have different conditions. Inspection and repair times may vary, and not every item can be returned to the saleable inventory. So, the
[47:59] businesses need proper processes, inventory records, and decision rules. Now, that brings us to the inventory management. Because return products, replacement units, and spare parts all affect inventory availability. Let's
[48:15] explore the main types of inventory and why businesses maintain them. So, here you have cycle stock, where inventory helps to meet predictable customer demand between order replenishment cycle. Then you have the safety stock,
[48:29] where you have buffer inventory, uh which is basically held to protect against demand spike or vendor supply delays. Then you have the transit pipeline stock, where goods currently en route between locations inside trucks,
[48:44] ships, or plane. Then you have MRO supplies, which is maintenance, repair, and operation items, which are needed to keep the facility equipment running. Let us take an example to understand this in way better way. Let's imagine walking
[48:57] into the smart homes manufacturing facility. You'll find different types of inventory at different stages of production. Some components haven't entered to the production yet. Some products are partially assembled. And
[49:11] the other products are completely finished and are ready for sale. So, inventory isn't simply a collection of finished products sitting inside a warehouse. It can exist at multiple stages of the supply chain. Let's
[49:23] understand the main type. The first is raw material inventory. Raw materials and purchased components are the inputs required for production. For smart home, these include electric motors, blades, plastic housings, switches, and wirings.
[49:38] The second is work-in-progress inventory or WIP. Now, these are the products that have entered the manufacturing process, but aren't finished yet. For example, mixer grinder might have its motor fitted into the housing, but still be
[49:53] waiting for wiring testing or final assembly. The third is the finished goods inventory. These are the completed products available for distribution or sale. Now, once the mixer grinder has been assembled, tested, and packaged, it
[50:07] becomes finished goods inventory. Now, we can also classify inventory based on why it is maintained. And one important category is a cycle stock. Cycle stock is inventory which is used to meet the normal demand between replenishment
[50:22] orders. For example, Smart Home may receive a shipment of 500 mixer grinders and gradually sell them over the following days. The quantity being consumed during the normal replenishment cycle is cycle stock. Next category is a
[50:36] safety stock. Safety stock is an additional inventory maintained to product maintained to protect against demand or supply uncertainty. Suppose a Smart Home is fixed to sell 20 units every day, but some days it sells 25 or
[50:52] 30. Maintaining an additional buffer can reduce the risk of stockouts when the demand is higher and expected. Other category is a pipeline inventory. Pipeline inventory refers to the stock that's in transit or moving through the
[51:06] supply chain. For example, the mixer grinders being transported from Pune factory to the Mumbai warehouse are the pipeline inventory. Now, there's also anticipation inventory. Anticipation inventory is a stock
[51:19] accumulated ahead of the expected demand which increases or the supply For example, Smart Home might manufacture additional mixer grinders before a major festival shopping season. The company expects demand to increase,
[51:34] so it builds inventory in advance. Now, why do businesses maintain inventory at all? One reason is to meet customer demand without requiring every product to be manufactured after the order arrives. And another reason is to
[51:49] protect against uncertainty. Supplier delays, production interruptions, and sudden demand increases can all affect product availability. Businesses also maintain inventory because purchasing and manufacturing often happen in
[52:04] batches. Producing 500 units at once might be more efficient than producing one unit every time a customer places an order. But inventory also create cost.
[52:16] The first is a storage cost. Warehouses require space, equipment, employees, and utilities. The second is the capital cost. Money invested in inventory cannot be used for other businesses activities until the
[52:31] inventory is sold or otherwise recovered. The third is a risk cost. Products may be damaged, obsolete, or unsellable. So, inventory managers need to balance product availability with holding the cost. A company that
[52:46] maintains extremely low inventory might experience stock outs. So, that could become a huge problem. And the company that maintains excessive inventory may face high cost and poor working capital efficiency. The objective is not to
[53:01] simply keep inventory as low as possible. It is to maintain suitable inventory at the right locations with appropriate replenishment policies. So guys, this was a short crash course on supply chain management systems. I hope
[53:16] so you like this tutorial. And also guys, do not forget to hit the subscribe button and click the notification bell icon so that you don't miss out any update in the future. Thank you guys for watching this video.