S 27 Logistics and Supply Chain Mangement
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8/8/2019 S 27 Logistics and Supply Chain Mangement
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Session 20
1
Logistics and Supply Chain
Management
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Agenda
240-
y Logistics
y Supply Chain Management
y
Warehousing Management Fundamentalsy Transportation Management Practices
y Role of IT
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Nature and Importance of Marketing
Logistics
340-
y Involves getting the right product to the right customers in the right
place at the right time.
y
Companies today place greater emphasis on logistics because:y customer service and satisfaction have become the cornerstone of marketing
strategy.
y logistics is a major cost element for most companies.
y the explosion in product variety has created a need for improved logistics
management.y Improvements in information technology has created opportunities for major
gains in distribution efficiency.
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Retail Logistics
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y Retail logistics incorporates the following functions :
y Thephysical movement of goods
y The holding of these goods at stock holding points
y
The holding of goods in quantities required to meet the demand from theend consumer
y The management and administration of the process
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Inventory
When to orderHow much to order
Just-in-time
Costs
Minimize Costs ofAttaining Logistics
Objectives
WarehousingStorage
DistributionAutomated
Order ProcessingReceivedProcessed
Shipped
Logistics
Fun
ctionsTransportation
Rail, Truck, Water,
Pipeline, Air,Intermodal
Major Logistics Functions
540-
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Rail
Nations largest carrier, cost-effectivefor shipping bulk products, piggyback
Rail
Nations largest carrier, cost-effectivefor shipping bulk products, piggyback
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goods
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goods
WaterLow cost for shipping bulky, low-value,
non perishable goods, slowest form
WaterLow cost for shipping bulky, low-value,
non perishable goods, slowest form
Pipe
lineShip petroleum, naturalgas, and chemicals
from sources to markets
Pipe
lineShip petroleum, naturalgas, and chemicals
from sources to markets
AirHigh cost, idealwhen speed is needed or
distance markets have to be reached
AirHigh cost, idealwhen speed is needed or
distance markets have to be reached
Transportation Modes
640-
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1. Speed
2. Dependability
3. Availability
4. Costs
5. Others
Checklist for ChoosingTransportation Modes
ChoosingTransportation Modes
740-
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Concept Recognizes that Providing Better CustomerService and Trimming Distribution Costs Requires
TeamworkTeamwork, Both Inside the Company and Among All the
Marketing Channel Organizations.
Cross-Functional Teamwork inside the Company
Building Channel Partnerships
Third-Party Logistics
Integrated Logistics Management
840-
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Logistics management
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y The core of SCM is in logistics management.
y Logistics strategy can either be pull strategy or a push strategy.
y At the heart of logistics is the distribution centre. It serves several
functions from co-ordinating inbound transportation ,receiving
,checking , storing ,cross docking and coordinating outbound
transportation.
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Logistics Strategy
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Pull Supply Chain
Merchandise shipped tostores based on sales andinventory levels in thestores
Push Supply ChainMerchandiseshipped to the
stores based onforecasted sales
rate
(c) Brand X Pictures/PunchStock
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Activities Performed by Distribution Center
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y Managing inbound transportation
y Receiving and checking merchandise
y Storing or cross docking merchandise
y Preparing merchandise for the sales floor
y Ticketing and marking
y Putting on hangers
y Shipping merchandise to
stores
y Managing outboundtransportation
Ryan McVay/Getty Images
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Advantages of Using a Distribution
Center
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y Effects of forecast error for individual
stores are minimized
y Enables retailers to carry less
merchandise in the store
y Easier to avoid running out of stocky Retail store space is more expensive than
space at the distribution center
Ryan McVay/Getty Images
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Logistics in India
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y Size $ 50 billion per year
y Growth rate 40% per annum
y 60% through road
y 15% of the business comes from organized players
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Reverse Logistics
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y Disposition of returned goods through:
y Putting back into inventory
y Sold through liquidation centres
y Broken down to component parts
y The basic approach is how to recapture value in this flow
Customer
Retailer DistributionCentre
Vendor
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Key Logistics Activities
1540-
y Customer Servicey Demand Forecastingy Distribution communicationy Inventory controly Materials handlingy
Order processingy After sales parts and service supporty Plant and warehouse site locationy Procurementy Packagingy Returned goods handlingy
Reverse logisticsy Salvage and scrp disposaly Traffic and transportationy Warehousing and storage
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GLOSSARY OF ACRONYMS COMMONLY
USED IN CHANNEL LOGISTICS
1640-
y SCM (Supply Chain Management)
y WIP (Work In Process inventory)
y SKU (Stock Keeping Unit)
y 3PL (3rd Party Logistics providers)
y QR (Quick Response)y ECR (Efficient Consumer Response)
y ABC (Activity Based Costing)y EOQ (Economic Order Quantity)
y MRP (Materials Requirements Planning)
y JIT (Just In Time)
y EDI (Electronic Data Interchange)
y VAN (Value Added Network)
y CRP (Continuous Replenishment Program)y CAD/CAM (Computer-Aided Design and Computer-Aided Manufacturing)y POS (Point Of Sale)
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The Basic Supply Chain
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Supply chain management is the delivery of economicvalue to customers through management of the flow ofphysical goods and associated information from vendorsto customers
RETAILER
Supplier
Raw/Packing MaterialWarehouse
Stock Manufacturer
ManufacturerWarehouse
Stock
RetailerWarehouse
Stock
RetailStore
Capacity CapacityStock Stock Stock Stock
Flow of orders
Flow of goods
Consumers
Feedback
Products
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Supply Chain Objectives
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Right
Deliver
Product
Place
Time
Price & Profit
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Typical Supply Chain
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Suppliers Manufacturing DistributionCenter(s)
Customers
Physical flows
Information flows
Financial flows
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Complexity
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Physical flows (100+ SKUs)
Information flows (GRNs, POs, GPs )
Financial flows (CNs, DNs, cheques )
Suppliers
100+
Manufacturers3 +
DistributionCentre 20+
Customers???
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Pressures
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Competition
Prices
EnvironmentalConcerns
Technology
ProductLifecycles
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History of the supply chain initiative
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yCrafted with Pride in the USA - 1984
y 1985 - delivery time - apparel supply chain - 66 weeks
y 40 weeks - spent in warehouses or in transit major losses
y The result - development of QR Quick Response
y The industry adopted the Universal Product Code
y Enabled Electronic Data Interface , and Point Of Sale scanning systems
y Sales directly to outlets instead of through Distribution Centres
y Efficient Consumer Response started by the grocery industry in the US
y From Materials Planning in the 70s to Resources Planning in the 80s to
Enterprise planning in early 90s to SCM in 1995
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SCM Framework
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CustomerService
STRATEGIC
Channel DesignNetwork Strategy
STRUCTURAL
Warehouse design and operationsTransportation Management
Materials Management
FUNCTIONAL
Information SystemsPolicies and ProceduresFacilities and Equipment
Organisation and Change Management
IMPLEMENTATION
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SCM -- Underlying Philosophy
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Integration !!!Marketing team which analyses sales data and working out how to meet
targetsMerchandising team for understanding customer needs
Materials team getting the best price for the merchandise
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Need for SCM in Retail
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y Short Life Cycles
y High Volatility
y Low Predictability
y High Impulse Purchase
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Lead Times
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y Time to MarketyRecognising a market opportunity and converting it
into a product or servicey Example pre cooked meals in India
y Time to Servey Time taken to convert an order into delivery by the
supply chain
y Time to React to changes in demandy The Lead Time Gapy The difference between the logistics pipeline and
customer order cycle
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Innovations in SCM
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y Vendor Managed Inventory through EDI
y Collaborative Planning Forecasting and Replenishment
y Cross docking
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Vendor Managed Inventory
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Collaborative Planning Forecasting and
Replenishment
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y Alignment of forecasts of retailer and suppliers
y Managing them on exception basis
y Sharing of forecasts, results and data on the internet
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Cross Docking
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y Wal-marts Bentonville warehouse has 19 conveyor belts; can ship 360
cartons a minute
y 264 dock doors take goods from suppliers trucks and ship them through
116 shipping lanes to 125 stores
y Merchandise flows directly from
the vendors trucks through the
retailers distribution center and is
loaded on the trucks going to the
retailers stores without being
stored in the distribution center
Ryan McVay/Getty Images
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Benefits of Efficient Supply Chain Management
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Fewer stockouts merchandise will be available when the
customer wants them
Tailoring assortments the right merchandise is available at
the right store
Customers respond to the convenience as evidenced by
increased salesRyan McVay/Getty Images
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Minimizing Stockouts
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Royalty-Free/CORBIS
Forecast demand accuratel
Make suremerchandise in
stockrooms is onthe shelves
Buyers placeorders at theright time
with vendors
Stores need to placeorders with
distribution centersin a timely fashion
DistributionCentersneed to
send rightquantities
Managers need toprovide enough lead
time for deliveries
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Wal-Marts Sustainable Advantage
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Wal-Marts success is its information and supply chain managementsystems. Why are competitors lagging behind?
Ryan McVay/Getty Images
The software is unavailableelsewhere and is constantlyupdated and improved
Wal-Mart made a substantialinvestment in developing itssystems and has the scaleeconomies to justify it.
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Food and Grocery Supply Chain
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Farmer Farmer Farmer
Consolidator Commission Agent
Traders
Wholesalers
Retailers
Consumers
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Food and Grocery Supply Chain
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y 35 to 40% wastage in supply chain
y Organised retail procuring straight from farmers and
consolidators
y
Also investing in cold storage and refrigerated vansy Hub and spoke approach at state level
y May even have two or three hubs in bigger states
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