Supply Chain Management

Overview of Logistics

and

Supply Chain Management

Dr.T.A.S.Vijayaraghavan, XLRI Jamshedpur

Supply Chain Management

• Supply Chain Management is now part of

the business vocabulary.

• Impact of global marketplace drastically

changed the landscape of business.

• Change was rapid and continuous in the

1990s.

• Doing business in the comfort zone was

no longer synonymous with success

Sorry for the clichés!

Most books and lectures start with these and hence I too have to!!

Supply Sources: plants vendors ports Regional Warehouses: stocking points Field Warehouses: stocking points Customers, demand centers sinks Production/ purchase costs Inventory & warehousing costs Transportation costs Inventory & warehousing costs Transportation costs CUSTOMERS Needs seeking benefits at

acceptable prices

COMPANY Assets & Utilization

COMPETITOR Assets & Utilization

Cost Differentials

Value

Valu_e

Competitive Advantage and “Three C’s”

•Success in market place is based around the triangular linkage of the Company, its Customers and its

Competitors-• Successful Companies either have a productivity advantage or they have a “Value” advantage or a combination of the two

•Productivity Advantage gives a lower cost profile and the Value Advantage gives the product or offering a differential ‘plus’ over competitive offerings

•Supply Chain and Logistics Management can provide a multitude of ways to increase efficiency and productivity and hence contribute significantly to reduced unit costs

•Companies have focused upon service as a means of competitive advantage

Cost Leader Cost and Service Leader Commodity Market Service Leader Productivity Advantage Valu e A d v a n tag e Low High L o w High

Logistics and Competitive Advantage

Efficiency Responsiveness

Logistics in the Manufacturing Firm

• Profit

4%

• Logistics Cost

21%

• Marketing Cost

27%

• Manufacturing Cost

48%

A Typical Supply Chain

Customer wants detergent and goes

to Supermarket Supermarket third party DC P&G or other manufacturer Plastic Producer Chemical manufacturer (e.g. Oil Company)

XYZ Packaging Paper Manufacturer Timber Industry Chemical manufacturer (e.g. Oil Company)

Flows in a Supply Chain

Customer

Information

Product

Funds

• The Empowered Consumer

• Power Shift in the Supply

Chain

• Liberalization

• Globalization

• Technology

(I call them as Pancha Bhuthas of Business!)

The Changing Business Landscape

Five Driving Forces

• Impact on logistics is more

direct.

• Informed consumers have

low tolerance for poor quality

in products and services.

• Changing demographics

commands 24/7 service.

• Increased customer service

increases the importance of

logistics and supply chains.

First…

The Empowered Consumer

Demand Management is tougher in supply chains!!

This is what I call a challenge: Five Thousand people out there to manage the supply chain…..and we two are holding the fort on the demand front

So.. Customer holds the fort in Supply Chains and it is a dynamic force

I do appreciate your honesty in admitting to a weak supply chain management. But that still doesn’t

explain the one-and-a half-idly So customer is the King or Queen and so effectiveness is emphasized all throughout

Five Driving Forces

Power shift in the supply chain towards retailers and customers from Manufacturing

Five Driving Forces

Power Shift in the Supply

Chain

– Large retailers more

demanding and commanding. – Focus upon distribution costs – Changing logistics and supply

chain strategies resulted from shifts in the balance of

economic power.

But this can possibly cause something else in the supply chain!!!!

The Dynamics of the Supply Chain

Orde r Size Time Customer Demand Customer Demand Retailer Orders Retailer Orders Distributor Orders Distributor Orders Production Plan Production Plan

What Supply Chain Gets...

Orde

r Size

Time

Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Customer Demand Customer Demand Production Plan Production Plan

Bullwhip Effect….

Who triggers that?

…..Retailers!!!!

What Supply Chain Wants…

Volumes

Time

Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Production Plan Production Plan Customer Demand Customer Demand

Five Driving Forces

empowered creativity and competition.

• Changes in transportation – fewer or no economic controls over rates and services.

• Change in financial institutions blurred traditional differences and increased competition. • Change in the communications

industry also resulted in more competition.

• Changes in the utility industry allows more competition

.

Five Driving Forces

• Global network sourcing, manufacturing, marketing and distribution

• Global alternatives have blossomed

• No geography --- access available to the world • Supply chain challenges • New supply sources

Five Driving Forces

– Information Age

provides new and

unrestricted access

to the place aspect

of business.

– My time, my place

– IT as an enabler with

internet and satellite

communications

Fifth……..Technology

IBM’s Supply Chain is Complex, Extensive, Contains high value items and Controlled Technologies. Buyer Supplier Freight Forwarder Freight Forwarder Terminal at Origin Surface Carriers Ocean Carrier Bank Bank Air Freight Terminal at

Destination Terminalat Origin

1. Request for Quote

2. Quotation 3. Purchase Order 4. P. O. Confirmation 5. Shipper Order/Instr. + Invoice + Packing List 6. Ship Order / Instr. 11. Pre-alert/Arriva_{l Notice} 7b. Shipping O rder Cycle (S/O

, BoL)

7a. Ship Instr. Cycle

8. Gate-out/ Gate-in 10. Bay Plan 13. Payment Order 14. Remittance 15. Import Documents 16. Proof of Delivery 9. Bay Plan Capture Gate Movement (Gate-out/in) Capture Gate Movement 12. Export Documents 8. Gate-in/ Gate-out 5. Shipper Order/Instr . + Invoice 7a. Manifest 7a. Ma nifest 7a. M anife_st Terminal at Destination

I tried a Google search about Supply

Chain Management in the internet

The result was…………

Supply chain Logistics Distr ibution Inve ntory War ehou sing E-procu rement E-comm erce E-supply chain CRM, SRM Lea_{n M} anu factu ring B2B, B2C Valu e ch ain E-auctions Reverse_auction Availa ble to P romise Bullwhip Consum er Respo nse JIT Postp onem ent Collab orative Plann ing Forec asting Reple nishm ent EDLP Cash-to-Cash ERP MRP DRP AP S/A PO Service level Vendor Manage d Inventor ies Quick Resp_onse E-CRM Strategic Sourcing

Quick Response Manufacturing

Ou_tso urc_ing / Inso_urc ing Integra ted Lo gistics Manag ement Agile Manufacturi ng Flexible Manufa Collab orative Comm erce TOC Supply Manag ement

And….you all thought

only the species called

Professors can confuse

you……….!!!!!!

(It’s all outsourced now!)

•The term SCM is relatively new and first

time appeared in 1982

•In 1990 academics first described SCM

from a theoretical standpoint to clarify the

difference from more traditional

approaches to managing the flow of

materials and the associated information.

The initial usage of the term SCM

emphasized a reduction in inventory

both within and across firms but that

initial perspective has been broadening.

The term Logistics also has many

interpretations. From some statements

of SCM, it appeared that

SCM is

Logistics across inter-organizational

boundaries

We will discuss first about Logistics

Management and later come to the

discussion on Supply Chain

Management