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A Report about SCM & Logistics


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A Report about SCM & Logistics

  1. 1. Supply Chain Management A Training Report about Supply Chain Management & Logistics Organized By:- Ashutosh Tiwari CEO, Sherpa Adventure Gear Chen Pathmanathan Supply Chain & Logistic Consultant Supply Chain Workshop Prepare By: Santosh Khadka
  2. 2. Supply Chain Management INTRODUCTION 1.1 Background of the Study Since logistics advanced from 1950s, there were numerous researches focused on this area in different applications. Due to the trend of nationalization and globalization in recent decades, the importance of logistics management has been growing in various areas. For industries, logistics helps to optimize the existing production and distribution processes based on the same resources through management techniques for promoting the efficiency and competitiveness of enterprises. The key element in a logistics chain is transportation system, which joints the separated activities. Transportation occupies one-third of the amount in the logistics costs and transportation systems influence the performance of logistics system hugely. Transporting is required in the whole production procedures, from manufacturing to delivery to the final consumers and returns. Only a good coordination between each component would bring the benefits to a maximum. The purpose of this paper is to re-clarify and redefine the position logistics systems through collecting and analyzing various applications cases and practices in logistics from literatures. It is to provide a general framework and expect to be referred for further development and researches. The paper started from introducing the development of logistics and transport-related sectors based on a historical review. Afterwards it discussed the interrelationships of transportation and logistics. It expresses the benefits that transportation brings to logistics activities and vice versa. For instance the increase of the efficiency of logistics also would bestead to release traffic load in the urban areas. Furthermore, some major logistics activities and concepts were also discussed in this paper. It especially presents City Logistics independently due to it is considered as a main tendency and an available method of future integration of transport and logistics in the urban areas. Finally, this paper will discuss and conclude the potential further development of logistics systems. Source: -Proceedings of the Eastern Asia Society for Transportation Studies,Vol.5, pp. 1657 - 1672, 2005.
  3. 3. Supply Chain Management 1.1.1 Concept of SupplyChain Management Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. The process of converting an Idea into a saleable , useable product / service ensuring that the right customer receives that service / product at the right time and at the best cost. Reasons for SCM in Society Supply chain management is necessary to the foundation and infrastructure within societies. SCM within a well-functioning society creates jobs, decreases pollution, decreases energy use and increases the standard of living. Two examples of the effect of SCM within societies include: o Hurricane Katrina - 2005 In 2005, Hurricane Katrina flooded New Orleans, LA, leaving residents without access to food or clean water. As a result, a massive rescue of the inhabitants had to be made. During the first weekend of the rescue effort, 1.9 million meals and 6.7 million liters of water were delivered o Foundation for Economic Growth A society with a highly developed supply chain infrastructure that includes interstate highways, a large railroad network, ports and airports is able to trade many goods at low cost. Business and consumers are able to obtain these goods quickly, resulting in economic growth.
  4. 4. Supply Chain Management SCM Before Now, SCM Marketing Manager – Sell the Product Operations and Supply Chain – Makeand Deliver the Product Finance Management – Calculate costand pay taxes Human Resource Management
  5. 5. Supply Chain Management Human Resources – Supply People to get the above done 1.1.3 Component of Supply Chain Management and Logistics Supply Chain Management Information Sharing Product Development Procurement & Sourcing Production & Manufacturing Logistics & Warehousing Inventory & Cost Management Customer Satisfaction
  6. 6. Supply Chain Management 1.1.2 Concept of Logistic Council of Logistics Management (1991) defined that logistics is ‘part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements’. Johnson and Wood’s definition (cited in Tilanus, 1997) uses ‘five important key terms’, which are logistics, inbound logistics, materials management, physical distribution, and supply-chain management, to interpret. Logistics describes the entire process of materials and products moving into, through, and out of firm. Inbound logistics covers the movement of material received from suppliers. Materials management describes the movement of materials and components within a firm. Physical distribution refers to the movement of goods outward from the end of the assembly line to the customer. Finally, supply-chain management is somewhat larger than logistics, and it links logistics more directly with the user’s total communications network and with the firm’s engineering staff. The commonality of the recent definitions is that logistics is a process of moving and handling goods and materials, from the beginning to the end of the production, sale process and waste disposal, to satisfy customers and add business competitiveness. It is ‘the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods- or service-producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way’ (Tilanus, 1997). Simply to say, ‘logistics is customer-oriented operation management’.
  7. 7. Supply Chain Management 1.1.4 Situation of Global Logistic Service The heat is turning up on logistics processes as sourcing and manufacturing activities are increasingly being done globally. Companies going global are experiencing unexpected transportation costs, higher inventory investment, and Longer and more unpredictable cycle times, while at the same time their local customers are demanding lower prices, more unique execution, and improved responsiveness. As a result, companies are seeking ways to make their Global logistics processes more reliable, more flexible, and less expensive. Aberdeen surveyed and interviewed more than 400 Global logistics and trade managers in 2005 to find out how companies are coping. In November and December 2005, Aberdeen researched companies that are transforming their Global logistics operations to find out the details of how they are achieving improvements. Out of this research, eight companies were selected as best practice winners, two in each logistics management category: global inventory control, transportation spend management, import/export process management, and Global logistics outsourcing History and Advancement of Logistics Logistics was initially a military activity concerned with getting soldiers and munitions to the battlefront in time for flight, but it is now seen as an integral part of the modern production process. The main background of its development is that the recession of America in the 1950s caused the industrial to place importance on goods circulations. The term, logistics, was initially developed in the context of military activities in the late 18th and early 19th centuries and it launched from the military logistics of World War II. The probable origin of the term is the Greek logistikos, meaning ‘skilled in calculating’. (BTRE, 2001) Military definitions typically incorporate the supply, movement and quartering of troops in a set. And now, a number of researches were taken and made logistics applications from military activities to business activities. Dormant Years DevelopmentYear Taker Years LogisticAlliance 3rd party LogisticGlobalizationLogistics
  8. 8. Supply Chain Management Supply Chain Competitive advantage Cheaper Faster Better The logistics manager always considers minimizing the costas possiblefrom the upstream to downstream. Service should be faster and better to deliver the shipments in time because a minute of delay work the company should endure many loses. 21st Century1960S – 1970S1950S 1980S – 1990S Figure 2. Logistics historical development FasterBetter Cheaper
  9. 9. Supply Chain Management Competing through Supply Chain CostAdvantage1 Costis important for all supply chain processes – That goes without saying. Low costs in marketplace = low prices or high margins, or a bit of each. Many products compete specifically on the basis of low price. Time Advantage 1 Time measures how long a customer has to wait in order to receive a given productor service. Profit Supply Chain Involvement I n v o l v e m e n t Sales Cost
  10. 10. Supply Chain Management Quality Advantage1 The most fundamental objective – it is a foundation for the others – is to carry out all processes acrossthe supply chain so that the end productdoes what it is supposed to do. Defects, incorrect quantities and wrong items delivered Customer’s loyalty. Previously a key advantage – Now a necessity. No Longer an order winner SupplyChain Techniques What are the factors affecting? Operations, Transport, Storage, Suppliers Inventory Management How • Optimize Inventory • Reduce Excess un sold inventory • Serve Customer on time and ensure availability • Optimize Transport and Warehouse • Supplier Development • Quality – Suppliers / Design , Inspection SupplyChain Techniques Supply chain and operations techniques to meet customer demand and reduce inventory  JIT / Lean supply chain  Agile Supply Chain  Hybrid Supply Chain
  11. 11. Supply Chain Management JIT & Lean systems Just-in-time (JIT) is a strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs2 Just in time is a type of operations management approachwhich originated in Japan in the 1950s. Very predominantly used by ToyotaMotors for their production, inventory and scheduling It adopts the pull system of inventory management rather than the push system3 – Where goods and Services are moved along the supply chain just as they are needed. Lean System focuses on waste elimination – Waste can also be excess Inventory/ unnecessaryprocess – JIT is a part of lean operations Lean and Wastemanagement • Transport • Inventory • Motion • Waiting • Over-Processing • Overproduction • Defects The different types of Wastes are:- Waste can also be classified as non-value added activities that cost the company
  12. 12. Supply Chain Management Agile SupplyChain Agile supply chain = customer responsive Customer Responsive = Reading and Respondingto Customers to end consumer demand. Most organizations today are forecast-drivenrather than demand-driven. Agile -mean Flexible Agile manufacturing represents a very interesting approach to developing a competitive advantage in today’s fast-moving marketplace. It places an extremely strong focus on rapid response to the customer – turning speed, flexibility and agility into a key competitive advantage. An agile company is in a much better position to take advantage of short windows of opportunity and fast changes in customer demand. Agile - How Different Suppliers – Same product Prefer to Pay high prices - Focus on time to deliver rather than economies of scale locate closer suppliers – Closer to factory the better Allocate Vendor Managed Inventories – To avoid delays
  13. 13. Supply Chain Management High Flexibility in Transportation and Operations – 2nd Shifts, Air transport Demand management Adaptable / Flexible productdesign Hybrid Mix of Agile and JIT Hybrid supply chain strategies recognize that within a mixed portfolio of products and markets there will be some products where demand is stable and predictable and some where the converse is true.
  14. 14. Supply Chain Management Procurement Strategies Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organization needs or may need to fulfill its strategic objectives. – CIPS Australia Procurement Manager You are what you eat A bodyis developed by the food we put in A company is defined by its supplies Garbage in garbage out Procurement Manager Objectives Identify Best Supplier Cost Quality Time to Serve – faster and uninterrupted flow of goods best fit for your organization Cheaper Faster Better
  15. 15. Supply Chain Management Supplier Development Develop the right supplier to get the best productfor the company Partnership / Integration Supplier Collaboration Training Suppliers to be the best fit Aligning Supplier with Company goals Monitoring and Evaluation SupplierRelationships Advantages of Developing Supplier Relationships S S h a r i n g o f I n f o r m a t i o Sharing of Information Trust and Openness Openness Mutual benefits and Sharing of Risks Coordination and Planning
  16. 16. Supply Chain Management • Increased Productivity & Quality • Reduced Monitoring • Increased transparency • Better Demand Planning • Win – Win Situations • Suppler Expertise and Technology • Reduced over all costs / reduced time to market Demand Forecasting for Inventory Management What is Forecasting? Demand Forecasting Process ofPredicting a future event based on historical data. Educated Prediction and Estimation of Demand Why do we need Demand Forecasting? • Too Much Inventory • Too Less Inventory • Production Planning • Return of Capital Employed / Return of Investment
  17. 17. Supply Chain Management Forecasting Predict the next number in the pattern: a) 3.7, 3.7, 3.7, 3.7, 3.7, ? b) 2.5, 4.5, 6.5, 8.5, 10.5, ? c) 5.0, 7.5, 6.0, 4.5, 7.0, 9.5, 8.0, 6.5, ? • Predict the next number in the pattern: a) 3.7, 3.7, 3.7, 3.7, = 3.7, b) 2.5, 4.5, 6.5, 8.5, 10.5, = 12.5 c) 5.0, 7.5, 6.0, 4.5, 7.0, 9.5, 8.0, 6.5, = 9.0 Forecasting trends • Seasonal Demand • Holidays • Dassain , Tihar, Christmas, Chinese New Year - Clothes, Sweets • Black Friday • UK, US, India – Electronics, Online shopping • Discounts and Sales ,  New Productlaunches , Critics Review, Latest Movies Types of Forecasting Qualitative Methods – Logical / Rational Forecasts generated subjectively by the forecaster Quantitative Methods – Statistics / Data
  18. 18. Supply Chain Management Forecasts generated through mathematical modeling Forecasting during product life cycle Qualitative Quantitative Warehousing & Freight Transport What is the Single most valuable commodity today? – Besides Water Space Expensive Location determines everything Own Rent Lease - Landlord What is the purposeof Warehousing? To provide Customer service Introduction - Growth – Maturity – Decline - End
  19. 19. Supply Chain Management • Quick Response Same Day Delivery, Next Day Delivery, 2 Day Delivery • Safety Stocks • Consolidated deliveries • Value added services Special packing Postponement Basic Warehousing Functions Types of Warehouses • Manufacturing Support Receiving Unload Vehicle Inspect for Damage Check for Accuracy Put Away Identify Product Correct Location Update Records Order Picking Pick the right product Batch Picking Packing Boxes / Pallets Labeling Shipping Load Vehicle Bill Record Update Customer Order Manufacturing/ Value Adding Inbound Outbound
  20. 20. Supply Chain Management • Consolidation • Cross Docking • Break Bulk
  21. 21. Supply Chain Management
  22. 22. Supply Chain Management Cross Docking Seller-A Seller-B Seller-C Customer Custome r Custome r Seller Seller Warehouse Customer-A Customer-B Customer-C Seller
  23. 23. Supply Chain Management Objectives of Effective Design Handling • Handling must optimize movement continuity and efficiency • Receiving—Unloading the arriving vehicles • In-Storage—moving goods for storage (transfer) or order selection (picking) • Shipping—verifying the order and loading the departing vehicles
  24. 24. Supply Chain Management Design - Receiving and Shipping In and Out Ideally What goes in should not come out the same way – Large Movements / High frequency Receiving Receiving Receiving Shipping Shipping Shipping Shipping Receiving WAREHOUSING W A R E H O U SI N G
  25. 25. Supply Chain Management Location Consideration Cost– Rent, Land Cost Congestion Available Resources – Electricity, Water, Man Power – Skills, Wages Govt. Projects, Chemical Factory, Laws Customers Location Supplier Closer Access General Area Access to Sea, Airports, Transport Routes
  26. 26. Supply Chain Management Other Warehouse Design Factors • Design for Safety • Design for Health • Fire / Humidity Proof • Pests and Insects • Insurance Warehouse Design – Space utilization Storage Picking/Packing Goodsin / out Goods Office, other
  27. 27. Supply Chain Management Freight Transportation Cost - Weight Reliable - Fast
  28. 28. Supply Chain Management Finance SupplyChain • Interlink between Finance Department and Sourcing/ Supply Chain Department • Almost 70% of financial Activities related to Sourcing / Supply Chain • Sourcing Budgeting based on production plan • Close Supervision on Supply Chain Activities CHALLENGING ASPECTS • Difficult to convince about Nepal Custom Process • Proforma Invoice Content • Reliable Vendor Selection • Export Invoice Number Booking by Buyers EXPECTATION FROM SOURCING AND SUPPLY CHAIN MANAGER • Budgeting for Sourcing based on Order and Production Plan • Proforma Invoice based on Nepal Compliance • Material In-house Planning • Bank Guarantee status and its utilization • Selling Planning • Sourcing Planning • Goods Delivery Planning • APC Requirement
  29. 29. Supply Chain Management 1.2 Objective of the Study As stated by the topic, I was curious to know how the impact of Global logistic service providers to local logistics service providers in Nepal and Global such a large network supply chain. I was also very eager to know the importance of logistics and its supply for business environment and consumers’ daily life by providing goods and service in right time, at right place, in right quantity, in right quality and in right cost. Through increasingly global supply chains, the logistics industry inevitable touches every facet of our lives, both at home and at work. Today, these supply chains are in the spotlight. They are one of the first places informed consumers look to see what sustainable practices are associated with sustainable practices are associated with a given product or service. Consumers now better understand and take into account the environmental impact of the transportation of the goods they buy. That the sector is currently a significant consumer of fossil fuels is self-evident; however, this makes the industry’s emerging vision of a future with minimal environmental impacts even more important to achieve. As international trade grows, so too does the need for companies to create more focused and resilient supply chains: logistics and transport have moved from the backroom to the boardroom to become a competitive differentiator, critical for business success. The core Objectives were:- 1. Analysis of upstream and downstream of Logistics Company. 2. Analysis the gap between customer requirement and quality supply by producer. 3. To help, understand the nature of organizational problem in real life situation, learn to find solutions of those problems. 4. Overview of the supply chain management of logistic company. 5. Explore the challenges of the logistics company. 6. To get knowledge of the networking and relationship of suppliers supplier to consumers’ consumer and their satisfaction
  30. 30. Supply Chain Management INDING, CONCLUSIONS AND RECOMMENDATIONS 3.1 Findings Firstly, the project should determine the forms of logistics uncertainty that impact on supply chain performance. After that, intensive research should be carried out in establish the impact of supply chain strategies and principles on green logistics performance. The global logistic service providers and local logistic service providers companies in evolving global market environment first, by supporting quantifiable and targeted environmental and energy improvements and second, by maintaining the sector’s economic viability during a time of limited capital financing and international competition. Logistic objective were aligned with government priorities, and with the departmental strategic objective of Environmental Responsibility. The evaluation also found that there was a clear role for the federal government in this type of programming considering the wider environmental benefit for Nepalese and the fact that the logistic ran in parallel with similar targeted funding initiatives to stimulate capacity in other key industrial sectors. The logistic also clearly resulted in enhanced capacity-building and relationship-building for both internal and external stakeholders. The important of green logistic is to improve the environmental performance of Nepal’s industry, in turn contributing to environmental and hence, commercial, sustainability. The key to success behind is the only management of SCM of any industry. We can say that role of SCM is not limited to any industry rather it has application over almost all industries. It would not be overstatement of the supply chain management if one would say any firm can complete in industry just only the bases of how it manages its supply chain, work for betterment of it and move it towards higher efficiency every day.
  31. 31. Supply Chain Management 3.1 Conclusion 3 Recommendations  Flexibility is extremely important, especially when dealing with your extended network.  Negotiation with Government of Nepal (GON) for providing some facilities regarding the inventory holding cost in customs office at the time of striking, clear tax policies while importing the raw material from other country and so on.  The Logistic should go with systematic research method for forecasting of demand in the country so that it can reduce inventory holding cost.  The industry should strengthen distribution channel for widely distribution. All distribution channels should be adopted by the industry. Zero level channel of distribution will be effective when the ultimate user is construction industry.  Shorten time to market and shrink your planning horizon. The severe time compression makes for more overlap between the design, production and inventory control phases, rendering some conventional procedures either unnecessary or counterproductive. Look for “waste” in the value chain and remove it. Shrinking your planning and execution horizon is hard but has good results.  Lead time and agility mean more than chasing the needle for the absolute minimum cost. The lowest-cost supplier is likely to be the slowest as well, because it will rely on full capacity utilization to compensate for low margins.  Forecast at the style level. Don’t attempt to create a detailed forecast per channel. Instead, create a one-number anticipated demand per style and a supply plan with built- in flexibility to meet both a 300-plus percent uplift and to minimize the commitment risk on a flop.  Manage inventory as a central pool. Remove all inventory silos and DO NOT allow separate inventory management by channel.  pre-allocate warehoused material stocks as a standard procedure. Market volatility due to fickle consumers, the impact of social media, and other factors make it meaningless.
  32. 32. Supply Chain Management  Build strong value chain partnerships with your suppliers and integrate processes so that you can replenish just in time in a matter of days rather than weeks, thereby minimizing inventory and work in progress risk in the supply chain. .