INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

Logistics & Supply Chain Management (Term-III,IILM) - Vikram S. Tyagi

Logistics Management (in 21 st Century)

Logistics management refers to creating (designing, developing, producing) and operating an integrated system which responds to customer expectations by making available required quantity of required quality products and services as and when required (Time, place & speed) at the least possible costs .

Evolution of logistics Management

Period Logistics Evolution Era

Till1950s Independent Business Function

1960s Limited Internal integration

1980s Fully Internally Integrated Function

1990s Externally integrated Function

2000+ IT integrated process function

Independent Business Function Era (Till 1950s)

Long history of application in wars but no formal concepts or theory for business existed.

Post war-large demands and acute shortages of products

Mindset-Increased capacities and high volume production

Main object- maximize profit by volume sales

Role of logistics limited to warehousing & transportation of raw materials and finished products.

“ Production Focus”

Independent Functional Structure Chief Executive Manufacturing Sales & Marketing Finance &Control -Prod. scheduling -Plant location -RM purchases - Factory transport - Inventory mgmt. -Packaging -Work in process

-Sales forecasting

-Depot locations and

operations

-Depot stock levels

Delivery transports

Distribution channels

- Order processing -Use of computers -Credit controls -Investments in inventories -Operational research

Limited Internal integration Era (1960-70s)

Recession of 1958

Plentiful of products, very sluggish demand, severe price competition

Business focus- price based competition and cost controls

Limited Internal Integration of- Materials Management and Distribution Management.

“ Focus: Cost Control”

Limited Internally Integrated Functional Structure Chief Executive Manufacturing Sales & Marketing Finance &Control -Prod. scheduling -Industrial Eng. -in-plant storage

-Sales forecasting

-Sales operations

Market Intelligence

-Credit controls -Facility planning -Budgeting Materials Management Distribution Management -Material req. planning -Procurement, purchase -Warehousing -RM inventory -In-bound transport -Out-bound transport -Fin. goods stocks -order processing -Distrib. warehousing

Fully Internally Integrated Functional Era(1980s )

OPEC embargo-steep increase in oil price

Sharp increase in transport costs-reduced profitability

Very high inflation- significant increase in interest rates

Gradual change in economic structure- multinational operations

Pressure for increased internal efficiencies

Fully Internally Integrated Functional Era(1980s).. contd

Business need- maximize profitable sales volume and cost reduction

Major development- Integrated logistics management i.e. Materials Management, Production Management and Distribution Management

Main Focus- increased productivity, profitability

“ Focus: Internal Efficiencies”

Fully Internally Integrated Functional structure(1980s)

Externally integrated Functional Era (1990s)

Rapid privatization, Liberalization and globalization

Business scenario becomes still more competitive

New pattern for survival- provide most value at least cost

Rapid technology development, many new concepts developed- TQM,MRP,DRP, JIT, 3PL & 4PL

Major thrust of era- Core Competence and high degree of specialization

Do what you can do the best and outsource the rest

“ Focus” Core Competencies”

IT integrated Functional Era(2000+) (Virtual Organization Era)

Major developments in Information technology

Real time and high speed communications becoming common

Web based transaction becoming common

Supplier, manufacture, seller and customer can make transactions simultaneously on a real time basis

E-commerce, VMI, Zero Inventory and many other developments

IT Integrated Functional Structure

IT Integrated process Structure Chief Executive Multi-discipline Logistics Management Team Transaction Management foundation Software Supplier Relationship Management (SRM) Internal Logistics Management (ILM) Custom Relationship Management (CRM) Logistics Executive -Source -Negotiate -Buy -supply collabortn. -Design collaboratn . - Strategic Planning -Demand and supply Planning -Fulfillment -Field service -Call centre -Marketing -Selling -Order Management -Customer service

Logistics Management Overview Ten Elements Of Logistics Service Based Industries Products based industries Export & Import business Retail Chain Outlets Mfg & distribution Electronic & M business Media, Entertainment &Music Travel, Tourism, leisure & Event Mgmt BPO, KPO & Fin. Services International Trade Operations SCM-Supply Chain Mgmt SDM-Services delivery Mgmt ISCM /Global SCM Repairs, Maint.& Post sales services Logistics Admin Managing Logistics change Motivation, Training, coordin.

Ten Basic Elements of Logistics

Information Systems

Forecasting

Inventory

Warehousing &Distribution Centres

Material Handling Systems

Transportation

Protective Packaging

Order Processing

Purchasing & Sourcing

Supply Chain Design

Logistics Management (in 21 st Century)

Logistics management refers to creating (designing, developing, producing) and operating an integrated system which responds to customer expectations by making available required quantity of required quality products and services as and when required (Time, place & speed) at the least possible costs .

( Value Chain; Value Engineering; Business process Engineering; products, funds and information flows; paradigm shift in the way business is done)

What is a Supply Chain? Customer wants detergent and goes to Jewel Jewel Supermarket Jewel or third party DC P&G or other manufacturer Plastic Producer Chemical manufacturer (e.g. Oil Company) Tenneco Packaging Paper Manufacturer Timber Industry Chemical manufacturer (e.g. Oil Company)

Flows in a Supply Chain Customer Information Product Funds Supply Chain

Supply Chain Assignment