Logistic and Supply Chain Management
What Is the Supply Chain?
Supply chain activities transform natural resources, raw material and components into a finished product that is delivered to end consumer.
A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers
So that the product is produced and distributed In the right quantities To the right locations And at the right time
System-wide costs are minimized and Service level requirements are satisfied
What Is Supply Chain Management?
End UserEnd User
Selling & DistributionSelling & Distribution
ManufacturingManufacturing
WarehousingWare
housing
MovingMoving
Process of Supply Chain Management
CUSTOMERSMATERIAL SUPPLIERS
SERVICE SUPPLIERS
•Reduced inventory• Increased revenue• Lower order management costs• Higher Gross Margin• Better forecast accuracy• Better allocation of promotional budgets
•Reduced inventory• Lower warehousing costs• Lower material acquisition costs• Fewer stockout conditions
•Lower freight costs• Faster and more reliable delivery• Lower capital costs• Reduced depreciation• Lower fixed costs
• Improved customer service• More efficient use of human resources
Benefits of Supply Chain
Supply Chain Elements
• Supply Chain Design• Resource Acquisition• Long Term Planning (1 Year ++)`
• Production/ Distribution Planning• Resource Allocation• Medium Term Planning (Qtrly, Monthly)
• Shipment Scheduling• Resource Scheduling• Short Term Planning (Weekly,Daily)
Strategic
Tactical
Operational
The 3 Ts
Key IngredientsFor ImprovingSupply ChainEfficiencies
TimelinessVelocity
Acceleration
Trust
Collaboration
Empowerment
SharingInformation(eg. open schedules)
Accountability
Understanding the process
Transparency Ability to see the real situation
The 3 T’s in SCM
Inventory and back-order levels fluctuate considerably across the supply chain even when customer demand doesn’t vary
The variability worsens as we travel “up” the supply chain Forecasting doesn’t help!
SCM and Uncertainty
Manufacturer
Wholesale
Distributors
Consumers
Multi-tier
SuppliersRetaile
rs
Time
Sale
s
Sale
s
Time
Sale
s
Time
Sale
s
Time
Bullwhip Effect
Volatility amplification along the network Increase in demand variability as we move
upstream away from the market Mainly because of lack of communication and
coordination Delays in information and material flows
What is Bullwhip Effect
Bullwhip Effect Factors contributing to the Bullwhip Effect:
Forecast Errors Lead Time Variability Batch Ordering Price Fluctuations Product Promotions Inflated Orders
Methods intended to reduce uncertainty, variability, and lead time:
Vendor Managed Inventory (VMI) Just In Time replenishment (JIT) Strategic partnership
SCM is one small part of logistics.
LOGISTIC
SCM
SCM
LOGISTIC
The relabeling perspective simply renames logistics; what was logistics is now SCM.
“Logistics “ originated in military The word logistics has originated from the Greek word
Logistikos and the latin word logisticus meaning the science of calculating and computing.
In ancient time it was more in connection with the art of moving armies and supplies of food and armaments to the war front.
The usage of this word can be traced back to the 17th century, when it was probably used in the first time by the French army .
Origin of Logistic
Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and often security.
What is Logistics
Refers to “interrelation & management of all activities involved in making products and raw materials available for manufacturing and in providing finished products to customers when, where and how they are desired.”
Logistics-the Business Arena
1) Inbound logistics: This includes movement of raw materials and components for processing from the supplier to manufacturer.
2) Process logistics: This includes storage and movement of raw material and components within the manufacturing premises.
Logistics, a 3-Phase view
SourcingOrder
Placement & Expediting
Vendor Supplier
Receiving Transportation
3)Outbound logistics: This includes warehousing , transportation, and
inventory management of finished goods.
Order Processing
Order Transmission
Customer Order
Order Selection Order Transportation
Customer Delivery
Logistics, a 3-Phase view
Logistic Process
consignor Bagging Scan
Out ScanOrigin airport
Dest. Airport
Out Scan
Delivery
Sheet
pick up Data Entry
ManifestTransfer challan
In Scan Area In Scan
Delivery
Security In Scan
In ScanConnection
Out Scan Transfer challan
Consignee
Check
Scan
Logistics covers the following functional areas, termed as ‘Logistics Mix’ by Martin Christopher.
1. Information Maintenance: Collection and storage Data analysis
2. Warehousing Space determination Warehouse configuration Stock layout and planning
The Logistics concept - a ‘system’ approach
3. Inventory Management : Stock level policies Short term sales forecasting Product mix by location Stocking location
4. Protective Packaging: Design for handling Design for storage Design for protection
The Logistics concept - a ‘system’ approach
5. Transportation: Mode & carrier selection Carrier route planning Vehicle scheduling
The Logistics concept - a ‘system’ approach
1. Inventory Reduction: Through the financial accounting perspective, inventory is an
asset and does not cause any appreciable disadvantage, even when stocked in excess.
Traditionally, firms carry excess inventory for the purpose of extending excellent customer service.
Efficient and reliable logistics will help eliminate costs of maintaining excess inventory and excellent customer service even without excess inventory.
Objectives of Logistic Management
2. Reliable and consistent delivery performance- to retain customers:
Timely delivery is crucial to the customer to keep up his production schedule
This will help in building customer confidence and contribute to creating long term relationships.
3. Freight economy: Freight is the major cost element in logistical cost. This can be reduced by adopting measures like freight consolidation ,transport mode selection, route planning, long distance shipments etc.
Objectives of Logistic Management
4. Minimize product damages: Product damage adds to the logistics cost. The reason for product damages are improper logistical
packaging, frequent consignment handling, etc.
5. Quick response: This aspect is related to the capability of the firm to respond
to the customer in the shortest time frame. The usage of latest technologies in information processing
and communication will enhance the capabilities in terms of accuracy and time.
Faster decision making results
Objectives of Logistic Management
1. External: Globalisation Technology Challenging nature of the work force Environmental concerns2. Internal: Customer service and quality Third party networks Supply chain management Changes in management and organization style
Current Logistic Related Issue
1. Performance: Better service for customers Improved productivity Assess just in time and quick response needs
2. System structure: Better relationship with vendors, customers and third parties to more
effectively manage the supply chain Better relationship within and across the organization.
3. Technology integration: Better information systems that connect functions and organizations Combine information and material handling systems for increased efficiency
and effectiveness.
Steps to mitigate the issues