Supply chain management, Logistics

UNIT 1
SUPPLY CHAIN MANAGEMENT
Lecture 1
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What is SCM
⦿ Supply chain?
⦿ Supply chain management?
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Supply chain
⦿ A supply chain is a network between a
company and its suppliers to produce and
distribute a specific product to the final
buyer.
⦿ This network includes different activities,
people, entities, information, and
resources.
⦿ The supply chain also represents the steps
it takes to get the product from its original
state to the customer.
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⦿ The steps include moving and
transforming raw materials into finished
products, transporting those products,
and distributing them to the end-user.
⦿ The entities involved in the supply chain
include producers, vendors,
warehouses, transportation companies,
distribution centers, and retailers.
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⦿ The elements of a supply chain include
all the functions that start with receiving
an order to meeting the customer's
request.
⦿ These functions include product
development, marketing,
operations, finance, and customer
service.
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Steps in the supply chain
1. Sourcing raw materials.
2. Refining those materials into basic
parts.
3. Combining those basic parts to create a
product.
4. Order fulfillment/Sales.
5. Product delivery.
6. Customer support and return services.
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SUPPLY CHAIN
MANAGEMENT
⦿ Supply chain management (SCM) is the
oversight of materials, information as
they move in a process from supplier to
manufacturer to wholesaler to retailer and
then to the consumer.
⦿ The three main flows of the supply chain
are the product flow, the information
flow and the finances flow.
⦿ SCM involves coordinating and
integrating these flows both within and
among companies.
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⦿ It also includes coordination and
collaboration with channel partners,
which can be suppliers, intermediaries,
third party service providers, and
customers.
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Examples
?
Ask students
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Lecture 2
SCM and Evolution
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⦿ A supply chain is a network between a
company and its suppliers to produce
and distribute a specific product to the
final buyer.
⦿ The steps include moving and
transforming raw materials into finished
products, transporting those products,
and distributing them to the end-user
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Flow in SCM
⦿ The three main flows of the supply chain
are the product flow, the information
flow and the finances flow.
⦿ SCM involves coordinating and
integrating these flows both within and
among companies.
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⦿ A supply chain is referred to as an integrated system that
synchronizes a series of interrelated business processes
in order to:
⦿ (1) create demand for products;
⦿ (2) acquire raw materials and parts;
⦿ (3) transform these raw materials and parts into finished
products;
⦿ (4) add value to these products;
⦿ (5) distribute and promote these products to either
retailers or customers;
⦿ (6) facilitate information exchange among various
business partners (e.g.,suppliers, manufacturers,
distributors, third-party logistics providers, and retailers).
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Generalised supply chain
model
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Supply chain network
⦿ Combining the activities of material
management and physical distribution, a
supply chain does not merely represent a
linear chain of one-on-one business
relationships, but a web of multiple
business networks and relationships.
⦿ Along a supply chain, there may be
multiple stakeholders, composed of various
suppliers, manufacturers, distributors,
third-party logistics providers, retailers,
and customers.
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Successful integration of the
supply chain process
⦿ Improved customer service and value added—
Customer service can be improved through
increased inventory availability, beer on-time
delivery performances, higher order filltrates,
and lower post-sales costs.
⦿ Utiilized asset—Asset utilization can be
maximized by increasing inventory turns and
closely aligning supply with demand.
⦿ Increased sales and profitability—The ability to
assess outcomes due to price changes,
promotional events, and new product
development, resultant from information sharing
among supply chain partners.
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⦿ The evolution of supply chain
management has been characterized by
an increasing degree of integration of
separate tasks, a trend that was
underlined in the 1960s as a key area
for future productivity improvements
since the system was highly
fragmented.
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⦿ Initially consolidated into two distinct
functions, related to materials
management and physical distribution
during the 1970s and 1980s. This
process moved further in the 1990s as
globalization incited a functional
integration and the emergence of
logistics in a true sense; all the
elements of the supply chain became
part of a single management
perspective.
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With the implementation of modern
information and communication
technologies did a more complete
integration became possible with the
emergence of supply chain management.
It allows for the integrated management
and control of information, finance and
goods, flows and made possible a new
range of production and distribution
systems.
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SCM REVOLUTION
The revolution brought by the dawn of the digital
aged changed the system from plainly stocking
inventory to a more responsive type of
procurement.
Hence management strategies and fields have
surfaced to answer the call of this revolution.
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Supply Chain Management is a field that is brought
forth by this revolution. It is the relationship of firms
talking deeply with each other to meet each other’s
demand and improving output and efficiency.
Also it is the acknowledgement that each element in the
supply chain is interdependent on each other, this
acknowledgement brought fourth the study of
distribution or marketing channels.
While Supply Chain Strategy is how the firm deals with
what it has taken from its supply chain management.
Logistics is a field in Supply Chain Management that
deals with getting one product from point A to point
B.
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Digital Business
Transformation
⦿ Usage of digital technologies.
⦿ Co ordination and communication.
⦿ Change in Culture of an organisation.
⦿ Survival of business
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Lecture 3
Supply Chain Models
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⦿ There are six main supply chain models
that almost all businesses adopt. These
can be grouped into main categories:
⦿ Supply chain models that are oriented to
efficiency
⦿ Supply chain models that are oriented to
responsiveness
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Efficiency
⦿ In industries where the value proposition
is oriented to metrics such as high
relevance of asset utilization, low cost,
and total cost, is given high priority.
⦿ Examples of such industries include
steel, cement, paper, fast fashion, and
commodity manufacturing in general.
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1. THE ''EFFICIENT'' SUPPLY CHAIN MODEL
⦿ This model is best suited to industries that exist in highly
competitive markets with several producers, and
customers who may not readily appreciate their different
value propositions.
⦿ These are usually commoditized businesses where
production is scheduled based on expected sales for the
length of the production cycle and competition is almost
solely based on price.
⦿ The steel and cement industries fall under this category.
⦿ The key objective of the efficient supply chain model is
that managers should focus on maximizing end-to-end
efficiency including high rates of asset utilization in a bid
to lower costs.
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2. THE ''FAST'' SUPPLY CHAIN MODEL
⦿ This supply chain model is best suited for
companies that manufacture trendy products
with short lifecycles.
⦿ Consumers are mostly concerned with how
fast the manufacturer updates their product
portfolios to keep up with fashion trends.
⦿ Companies that adopt the fast supply chain
model focus on shortening the time from idea
to market and maximizing the levels of
forecast accuracy so as to reduce market
mediation cost.
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⦿ This focuses competition in the market on
manufacturers' ability to continuously
develop new products they can sell at an
affordable price
⦿ In an industry framework characterized by
a short lifecycle, this might appear to be a
conundrum, but with an understanding of
market trends and consumers' habits, it
is possible to maintain market mediation
cost at an optimal level.
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3. THE ''CONTINUOUS FLOW'' MODEL
⦿ This model is ideal for industries with high demand
stability.
⦿ The manufacturing processes in a continuous flow
model are designed to generate a regular cadence of
product and information flow.
⦿ This supply chain model is suited for mature
industries with little variation in the customer demand
profile.
⦿ Competitive positioning for this model involves
offering a continuous replenishment system that
ensures high service levels and low inventory levels
at customers' facilities.
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⦿ This supply chain model typically works
well for businesses with short-shelf-life
products, such as dairy products and
bread.
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⦿ Consequently, the production workload
can match demand through a
continuous-replenishment model based
on a "make to stock" decoupling point,
where production is scheduled to
replenish predefined stock levels based
on a specified reorder point for inventory
in the production cycle.
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Supply chains oriented to
responsiveness
In industries that are characterized by high
demand uncertainty, supply chain
models that are oriented to
responsiveness are usually employed.
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1. THE "AGILE" SUPPLY CHAIN MODEL
⦿ The agile supply chain model is ideal for companies
that manufacture products under unique
specifications by their customers.
⦿ This model is mostly used in industries
characterized by unpredictable demand.
⦿ The model uses a make-to-order decoupling point
that involves manufacturing an item after receiving
customers’ purchase orders.
⦿ To ensure agility in the supply chain, managers
focus on having the ability for excess capacity and
designing manufacturing processes that are capable
of the smallest possible batches.
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⦿ Generally, this type of supply chain is
employed by manufacturers of
intermediary goods that make products
for industrial customers according to
each customer's specific needs, and by
companies whose industrial customers
place a high value on short lead times.
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⦿ In order to reduce lead time, materials and components
should be designed for a common platform (a group of
products that share some key components) and they
should always be available in inventory.
⦿ Collaborative relationships with key customers are
important. They will help suppliers anticipate changes in
capacity requirements, both in the short term for
scheduling purposes and in the long term for asset-
investment decisions.
⦿ If extra capacity gradually decreases to low levels, the
company should invest in additional assets so it can
maintain its ability to be agile. If it cannot do so, then it
should migrate to an efficient or a continuous-flow supply
chain and adjust its value proposal from agility to
efficiency.
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2. THE "CUSTOM-CONFIGURED" MODEL
⦿ This model is ideal where products with multiple and
potentially unlimited product configurations are
required.
⦿ Usually, product configuration is accomplished
during an assembly process, where some of the
parts are mounted or assembled according to an
individual customer's requirements.
⦿ Because of those factors, this type of supply chain
employs a "configurable to order" decoupling point
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⦿ One example of where this supply chain
strategy makes sense is the assembly of
personalized products, such as computers
and vehicles.
⦿ Another example is in the paper
manufacturing industry, where the
decoupling point occurs after the
manufacture of the big paper rolls, and the
products are customized in the cutting and
packaging process.
⦿ In the service sector, some fast food
restaurants apply this supply chain model.
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3. THE “FLEXIBLE" SUPPLY CHAIN MODEL
⦿ The sixth supply chain type, the flexible model, is suited
for companies that must meet unexpected demand and
therefore are faced with high demand peaks and long
periods of low workload.
⦿ This supply chain model is characterized by adaptability,
which is the capability to reconfigure internal processes in
order to meet a customer's specific need or solve a
customer's problem.
⦿ This model typically is used by service companies that
focus on handling unexpected situations, perhaps even
including emergencies.
⦿ Due to the nature of such events, customers appreciate
not only the speed of a supplier's response, but also
its ability to tailor solutions to their needs.
⦿ Consequently, the price becomes largely irrelevant to the
customer.
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⦿ A typical example of this type of supply chain
can be found in companies that provide
metalworking and machining services for the
manufacture of spare parts for industrial
customers.
⦿ This type of company may encounter
emergency situations such as the need to
immediately replace broken parts. Accordingly,
they must be able to provide a fast response
and sufficient capacity to develop unique parts
by combining successive processes, such as
turning, reaming, and welding, in a
configuration adapted to a specific situation.
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Achieving Strategic Fit
⦿ The goal is to target high responsiveness for a supply
chain facing high implied uncertainty and efficiency for a
supply chain facing low implied uncertainty. For eg. The
competitive strategy of Dell targets customers who value
having customized PCs delivered within days. Given the
vast variety of PCs, the high level of innovation and rapid
delivery, demand from Dell customers is having high
demand uncertainty. Some supply uncertainty also exists,
especially for newly introduced components. Building a
responsive supply chain, will allow Dell to meet its
customer’s needs..
⦿ On the other hand, salt is a product with relatively stable
customer demand, giving it a low implied demand
uncertainty. Supply is also quite predictable. It will be in a
much better position if it designs a more efficient supply
chain with a focus on cost reduction.
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FINANCIAL
SOPHISTICATION
⦿ The measure of how well the Supply Chain is doing is by the
finances, how fast can the product be turned into money.
⦿ competitive prices
⦿ Cash-to-cash conversion is the time required to convert raw
materials or inventory purchases into sales revenue.
⦿ It is the inventory turnover ratio of the company, the higher the turn
the better.
⦿ Dwell time minimization is a ratio of the time that an asset sits idle
to the time required to satisfy its supply chain mission. The goal
here is to keep the inventory moving.
⦿ Cash spin is the reduction of assets in the supply chain and
reinvest in another project.
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GLOBALISATION
⦿ The most advanced phase of international engagement
is globalization.
⦿ Opportunities for firms going global:
⦿ Demand exceeds local supply, Strategic sourcing and
offshoring.
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Sourcing
⦿ Internationalization is accomplished through
a shift in focus from domestic purchasing to
global-based material sourcing, processes,
and technologies.
⦿ Suppliers can be perceived as anything that
offers the right materials or processes that
you need to run your business successfully.
⦿ By sourcing from a wide variety of countries
and locations, you increase your ability to
expand and branch out to serve a global
community.
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⦿ Offshore sourcing is utilized in cases where
personnel costs of a company need to be
reduced.
⦿ By utilizing the resources and services
available from a faraway country, a
company may reduce its operating costs
substantially.
⦿ However, they should focus on good
communication to make this arrangement
successful. Sometimes the language
barrier is a challenge, also.
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Advantages
⦿ Reach new customers in new markets around the world – Globalization
simplifies communication between business owners, vendors, and customers
and therefore makes it easier to reach new markets and stay connected with
customers no matter where they are in the globe.
⦿ Expand sourcing opportunities – Globalization makes it possible for businesses
to secure a diverse selection of workers, materials, and products from regions
of the world that were previously out of reach.
⦿ Offer a larger selection of goods and services – Globalization increases your
sourcing opportunities which means it also increases the range of products and
services that you can provide for your customer.
⦿ Save money and increase profits – more options to source from and to
capitalize on means more chances to save on spending and a greater chance of
profit.
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Disadvantages
⦿ Greater complexity – Global supply chains have global problems. As
companies globalize they must scale up all aspects of their business,
especially their supply chain.
⦿ Increased risk to your supply chain – When your materials, factories,
and customers are spread around theglobe that means your business
is entirely at the mercy of global events, like natural disasters, port
and border closures and changes to the geo-political landscape.
⦿ Increased competition – You can bet that if your company broke into
a new market that there are severalcompanies just like yours with the
have access to the exact same supplies, products, labor pool,
andcustomers as you. To stay in global market supply chains, you
need to be as lean and efficient as possible.
⦿ Greater data collection challenges – When different aspects of your
supply chain are scattered around theglobe, the process data
collection and oversight grows in complexity and becomes more
difficult.
⦿ More legal issues – Operating across borders means operating in
countries with different legal systems, which can get complicated and
expensive very quickly.
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Reasons for Growing
Importance of Supply Chain
Firms that do not manage their supply chain will incur huge inventory
costs and eventually end up losing a lot of customers because the right
products are not available at the right place and time. Five major trends
that have emerged to make supply chain management a critical
success factor in most industries.
Proliferation in product lines –
⦿ Companies have realized that more and more product variety is
needed to satisfy the growing range of customer tastes and
requirements.
⦿ Companies like HUL, in their personal care products, manage, on an
average, 1200 SKU’s.
⦿ Chains like Food world manage about 6000 SKU’s. With increasing
product variety, it becomes rather difficult to forecast accurately.
⦿ Hence, retailers and other organizations involved in the business are
forced to either maintain greater amount of inventories or lose
customers
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⦿ Shorter product life cycles – With increased
competition, product life cycles across all
industries are becoming shorter.
⦿ So a firm like Dell, which has, on an
average, just 7 days of inventory, as
compared to the industry average of 35
days, does not have to worry about product
and component obsolescence.
⦿ Its competitors with higher inventories end
up writing off huge amounts of stocks every
year as obsolete.
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⦿ Higher level of outsourcing – Firms
increasingly focus on their core activities
and outsource non-core activities to
other competent players.
⦿ This trend towards outsourcing is
irreversible but a higher level of
outsourcing makes supply chains more
vulnerable, thereby forcing firms to
develop different types of supply chain
capabilities within the organization
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⦿ Shift in power structure in the chain – In every industry, the
entities closer to customers are becoming more powerful. With
increasing competition, a steadily rising number of products are
chasing the same retail shelf space. Retail shelf space has not
increased at the pace at which product variety has increased.
So there have been case of retailers asking for slotting
allowance when manufacturers introduce new products in the
market place. Retailers have realized that they are powerful
entities in the chain and hence expect the manufacturers to be
more responsive to their demands and needs.
⦿ Globalization of manufacturing – Over the past decade, tariff
levels have come down significantly. Many companies are
restructuring their production facilities to be at par with global
standards. Unlike in the past, when firms used to source
components, produce goods and sell them locally, now firms
are integrating their supply chain for the entire world market.
This has made managing supply chains extremely complicated.
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Lecture 5
logistics
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The logistic of business
Part of supply chain management 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.”
⦿ Getting, delivering, and distributing materials and
goods in the correct spot and in legitimate amounts.
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⦿ According to Logistics definition, it is
delivery of Right Products in Right
Quantity and the Right Condition, to
the Right Place at the Right
Time for Right Customer at the Right
Price.
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7 Rs of logistic management
(function)
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Components of logistics
5 Major Components Of Logistics
Management:
⦿ Planning
⦿ Packaging and unitization
⦿ Inventory Control
⦿ Transportation
⦿ Information and Control
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cont…
1. Planning (Storage, Warehousing and Materials Handling)
2. Packaging and Unitisation
⚫ care and conditioning of the products or goods,which can be achieved by good
Packaging and thus it qualifies as one of the key components of Logistics
management.
⚫ Packaging not just shields the item during travel from the producer to the retailer,
however it likewise forestalls harm while the item sits on retail retires.
⚫ How an item is packed might be what pulls in the purchaser to consider buying
the item.
⦿ Unitization or cuboidal packing is the method of how many
individual items aregrouped together and packed as one unit.
⦿ It helps the storage andtransportation of goods as a cube is the
easiest shape to move around.
⦿ Packaging and unitisation normally attempt to pack a product in a cuboidal form
as a cube is the easiest shape to move around, transport, and store.
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3. Inventory Control
⚫ Inventory control refers to the procedure of guaranteeing that
proper measures of stock are kept up by a business, in
order to have the option to satisfy client needs immediately
while keeping the costs related to storage to a minimum.
⦿ It consists of a key plan focusing on existing stock,
maintaining information on stock conditions,
availability of warehouses, etc.
It determines decisions like,
⦿ How much stock to store
⦿ Where to store
⦿ How much quantity is to be stored.
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Organizations can accomplish inventory
management benefits which includes
⦿ Accurate Order Fulfillment
⦿ Good Inventory Planning, and Organizing
⦿ Organized Warehouse
⦿ Save Time and Money
⦿ Increased Productivity
⦿ Increased Consumer Satisfaction
⦿ Retention.
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4. Transportation
⦿ From manufacturing to the delivery of finished goods to
consumers (also the returns),transportation is required in
the whole production procedures.
⦿ Transportation serves as the link between various
logistics activities. From the manufacturing to the delivery
of finished goods to consumers (also the
returns),transportation is required in the whole production
procedures.
⦿ Since the transportation process involves keeping direct
contact with the customer, timely management of the
delivery of goods is highly important. Constant late
delivery of goods will lead to a negative impact on the
customer.
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5.Information and control
⦿ The aim is also to improve business
efficiency and also eliminate and reduce
waste making it sustainable logistics. This
is why information and control become one
unavoidable key component of Logistics
management.
⚫ It is also important in forecasting demand and
supply of goods which in turn determines how
much quantity of goods are to be stored in
warehouses and influences other processes of
inventory control.
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Types of logistics
Inbound logistics
⦿ The movement, storage, and transportation of various products and
information from the suppliers, through the warehouse, and further
through production facilities of manufacturers for processing and
production.
⦿ An excellent way to manage inbound logistics is to use automatic
ordering or order-fulfillment systems. With this, you can be sure that it
will directly impact the organization’s success.
⦿ For instance, consider being a car manufacturer. The maker’s inbound
logistics would involve the sourcing of crude material data sources
(sheet metal, glass, wiring, plastics, and so forth.), how to store the
materials in preparation for and during the assembly procedure, and
how to deal with the flow of produced cars that leave the plant.
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Outbound logistics
⦿ Outbound logistics is the movement of
finished products or any other items and
information moving from production
facilities to the next supply chain link.
⦿ These goods move through
warehouses, further to the point of
consumption (in the hands of end-
users). This is often referred to as the
order fulfillment process.
⦿
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⦿ AN EXAMPLE OF OUTBOUND LOGISTICS
⦿ You have probably placed an online order sometime
in the last few months. Let’s say you placed an
order online on Amazon for a book. When Amazon
receives the order, provided they have the book in
stock, they will alert the warehouse to get the book
and box it up. If you have Amazon Prime, the book
will most likely be at your doorstep in two days.
Behind the scenes, the book has been handled
many times, possibly been on several trucks or an
airplane, and then to the final carrier (usually the
USPS or UPS) who will deliver it to your residence.
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Reverse logistics
⦿ As reverse logistics refers to the movement of items
or goods from the end-users, back through the
supply chain to the appropriate party concerned.
⦿ This occurs in the event of returns, or with products
that may need servicing or repairs, refurbishing,
resale, recycling, recovering, or for proper disposal
(in the fact a product cannot be recycled due to
certain elements and must be broken down safely
and appropriately).
⦿ So, this flow encompasses all of the activities carried
out after the point of sale or the end product life
cycle. This process is most common in the
automobile and electronics industry.
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Why Logistics is Important?
⦿ Although many small businesses focus on the design and
production of their products and services to best meet
customer needs, if those products cannot reach
customers, the business will fail. That’s the major role that
logistics plays.
⦿ But logistics also impacts other aspects of the business,
too.
⦿ The more efficiently raw materials can be purchased,
transported, and stored until used, the more profitable the
business can be.
⦿ Coordinating resources to allow for timely delivery and
use of materials can make or break a company.
⦿ And on the customer side, if products cannot be produced
and shipped in a timely manner, customer satisfaction can
decline, also negatively impacting a company’s
profitability and long-term viability.
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⦿ Planning and handling freight
complexities efficiently: This is
important, not only for curbing the
possible inconsistencies in the supply
chain but also for cutting the extra costs.
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Supply Chain
Synchronisation
⦿ Supply chain synchronization is an
ecosystem of connected, collaborative data
partners, whereby information gets collected,
analyzed, and utilized in real time.
⦿ All stakeholders within the critical path obtain
accurate visibility, identify weaknesses,
streamline processes, and mitigate risk.
Real time system
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Supply chain management, Logistics

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