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Unit -1 UNIT: 1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

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(1)Unit -1 UNIT: 1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT Concept of supply chain Management, Importance and Scope of Supply Chain Management, Decision phases in Supply chain, Process view of Supply Chain, A model of Supply Chain; Function of SCM, Integrated Supply Chain/Value chain, Supply chain management as a Management Philosophy, Focus areas of SCM, Enablers in Supply Chain, Supply Chain trends and challenges in India, Autonomous Supply Chain. # 1 2 3 4 5 6 7 8 9. Topics Supply Chain Management Background Define Supply Chain Importance of Supply Chain Evolution of Supply Chain The Value Chain Core Functions of SCM Supply Chain Enablers & Drivers The flows in Supply Chain Management An example of Supply Chain Management. 10 11. Benefits of Supply Chain Management Decision Phases in Supply Chain Management. 12. Process view of a Supply Chain. 13. Supply Chain Challenges. 14. Supply Chain Trends. 1. Supply Chain Management Background The goal of Supply chain management (SCM) is to implementdecisions that results in optimalperformance of an organisation. Supply chains can exist in bothmanufacturing and service organizations. They are principally concerned with theflow of products and information betweenthe organizations in the supply chainnetwork, the procurement of materials,transformation of materials into finishedproducts, and distribution of those productsto the end customers. Today‘s informationdriven,integrated supply chains are enablingorganizations to reduce inventory and costs,add product value, extend resources,accelerate time to market, and retaincustomers.. Ashok Mammen V Assistant professor. Page 1.

(2) In the last few years,organizations that are supply chaininnovators have migrated from buildingexcellence in its supply chain to making useof the supply chain to create addedvalue. Values can be in the form of new productideas, innovative processes, marketexpansion, new ways of serving customers,and new solutions for businesses. Inaddition, the availability of real-timeinformation and real-time data processingtools such as radio frequency identification(RFID), GPS, flow control sensors, cellulartelephones, navigation systems, and satellitepositioning systems has raised newmanagement opportunities and challengesfor organizations. Automatic decisiontechnology is available that automates,connects and manages information flows andtransactions for specific functions in supplychain optimization (Davenport and Harris,2005).. 2. Definition and Meaning SUPPLY CHAIN MANAGEMENT is defined as ―the integration of key business processes from end-users through original suppliers that provide products, services, and information and add value for customersand other stakeholders‖ (Cooper et al., 1997b, p. 2). It is the management of the flow of products and services includes raw material movement and storage, work –in-progress, inventory and finished goods movement from point of origin to point of consumption. Definition by council of Logistics Management, USA - SCM encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities. It also includes coordination and collaboration with channel partners, intermediaries, third party service providers and customers. In essence SM integrates supply and demand management within and across companies. 3. Importance of Supply Chain SCM can have a significant impact on business performance. SCM account for a major share of the companies‘ operating costs andcomprised at least half of all the typical company‘s assets. Company mergers and acquisitions result in promised synergies in SCM. Forexample, (in January 2020) is the merger of Ruchi Soya with Patajali.. **1 (for insight refer article in newpaper/ magazines. Eg: - Walmart takeover of Flipkart, Patajali takeover of Ruchi Soya, interesting Joint Ventures, perils of Corona Virus and its impact on LSCM in china) Ashok Mammen V Assistant professor. Page 2.

(3) 4. Evolution of Supply Chain. 5. The Value Chain Value chain activities can be categorised into two types – primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) and support activities (infrastructure, human resource management, technology development and procurement). These activities are integrating functions that cut across the traditional functions of the firm. Competitive advantage is derived from the way in which firms organise and perform these activities within the value chain. To gain competitive advantage over its rivals, a firm must deliver value to its customers by performing these activities more efficiently than its competitors or by performing the activities in a unique way that creates greater differentiation. Business Processes Typically, a supply chain is composed of two main business processes: Ashok Mammen V Assistant professor. Page 3.

(4) • Material management (inbound logistics) • Physical distribution (outbound logistics) Material management is concerned with the acquisition and storage of raw materials, parts, and supplies. Material management supports the complete cycle of material flow—from the purchase and internal control of production materials, to the planning and control of work-inprocess, to the warehousing, shipping, and distribution of finished products (Johnson and Malucci, 1999). On the other hand, physical distribution encompasses all outbound logistics activities related to providing customer service. These activities include order receipt and processing, inventory deployment, storage and handling, outbound transportation, consolidation, pricing, promotional support, returned product handling, and life-cycle support (Bowersox and Closs, 1996). 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.. Value chain model by Michael Porter. The supply chain network enhances the value of a product by Form utility – the raw materials are converted to finished products. i.. Form utility refers to how well a product or service meets the customer's needs. For example, a company might design a product to target a specific client's needs or wants. Form utility is the incorporation of customer needs and wants into the features and benefits of the products being offered by the company. Companies invest time and money into product research to Ashok Mammen V Assistant professor. Page 4.

(5) pinpoint exactly what products or services consumers‘ desire. From there, company executives strategize on the development of the product with the goal of meeting or exceeding those needs to create form utility. Form utility might include offering consumers lower prices, more convenience, or a wider selection of products. The goal of these efforts is to increase and maximize the perceived value of the products.. Time utility – the members in the supply chain saves time as the products can be ordered for and the same is made available with the least efforts.. ii.. Time utility exists when a company maximizes the availability of a product so that customers can buy it during the times that are the most convenient or desirable for them. Companies analyze how to create or maximize their products' time utility and adjust their production process, logistical planning of manufacturing, and delivery. Creating time utility includes considering the hours and days of the week a company might choose to make its services available. For example, a store might open on the weekends if customers typically shop for that product at that time. Time utility might also include 24-hour availability for a product or the company's customer service department through a phone number or website chat function. iii.. Place utility – products and services are physically made available to the potential customers.. Place utility refers primarily to making goods or services physically available or accessible to potential customers. Examples of place utility range from a retail store's location to how easy a company's website or services are to find on the internet. Companies that have effective search engine optimization or SEO strategies can improve their place utility. SEO is the process of increasing a website's availability to internet users through their searches on the web. Increasing convenience for customers can be a key element in attracting business. A company that offers easy access to technical assistance offers an added value in comparison to a similar company that does not offer a similar service. Making a product available in a wide variety of stores and locations is considered an added value since its more convenient. For example, Apple Inc. (AAPL) sells iPhones and laptops through its retail stores, but also offers its products through other electronics retailers, including Best Buy Co. Inc. (BBY). iv.. Possession utility – the supply chain enables the potential customers to take possession of the goods. Possession utility is the amount of usefulness or perceived value from owning a product. For example, owning a car or truck might be considered to have a high possession utility. Also, increasing the ease of ownership boosts the possession utility or the perceived value of a product. For example, offering favorable financing terms toward ownership of a car, Ashok Mammen V Assistant professor. Page 5.

(6) appliance, or home would likely create possession utility for those products and lead to increased sales. 6. Core Functions of SCM Even though primarily SCM is concerned with suppliers and the proper movement of raw material into the organisation, it is increasingly adopting areas that are crucial for customer satisfaction. Some of the important functions of supply chain management are:. -. Management of suppliers Management of Raw Material Transportation Management Information Management Tracking and Monitoring Cost Management Inventory Management Distribution and Return Management Management of Supply Chains Customer Satisfaction. 7. Supply Chain Enablers & Drivers 7.1. Supply Chain Enablers: The four main supply chain enablers are a) Organisational Infrastructure b) Information Technologies c) Strategic Alliance d) Human Resource Management 7.2. Supply Chain Drivers a) Production b) Inventory c) Transportation d) Facility Location e) Sourcing f) Information g) Pricing 8. The different flows in Supply Chains a) Products: Includes raw materials, work-in-progress (WIP), sub-assemblies, and finished goods b) Funds: Includes invoices, payments, and credits Ashok Mammen V Assistant professor. Page 6.

(7) c) Information: Includes orders, deliveries, marketing promotions, plant capacities, inventory, and so on Thus, the flows in the supply chain are not just ―goods.‖ Tracking flows from the suppliers to the customers is called ―moving downstream‖ in the supply chain. Tracking flows from the customers to the suppliers is called ―moving upstream‖ in the supply chain.. 9. An example of a SCM A supply chain for typical automobile seats linking suppliers, manufacturers, third-party logistics providers, and customers is graphically illustrated in Figure 1.2. As shown in this figure, the supply chain begins with customers such as Ford, General Motors, and FiatChrysler, who need to use automobile seats as critical parts of their manufactured cars. At the next upstream stage of the supply chain, the car manufacturer often purchases automobile seats from the original equipment manufacturer (OEM). This OEM needs to acquire the parts and components of the automobile seats, including brackets, foam, fabric, and fasteners from tier-one suppliers fabricating those parts and components. Because these parts and components are made of metals, screws, bolts, plastics, and textiles, the tier-one suppliers should acquire some simple parts and raw materials from tier-two suppliers, who should obtains such parts and materials from tier-three suppliers such steel and yarn producers. These tier-three suppliers, in turn, obtain their sources of materials from ore mining and cotton plants at the furthest upstream of the supply chain. In case logistics activities Ashok Mammen V Assistant professor. Page 7.

(8) involving the movement, handling, storage, and packaging of these materials, parts, components, and finished goods are outsourced from third-party logistics providers, the complexity of the supply chain network will be increased due to the possibility of both forward and reverse flow of products. As illustrated by this example, the typical supply chain cannot be explained by a linear linkage among the supply chain members.. 10. Benefits of Supply Chain Management The successful integration of the entire supply chain process can bring about a number of bottom-line benefits (Schlegel, 1999): a) Improved customer service and value added—Customer service can be improved through increased inventory availability, better on-time delivery performances, higher order fill rates, and lower post-sales costs. b) Enhanced fixed capital—fixed capacity is maximized through a strategic partnership and joint planning that can increase overall capacity and throughput. c) Utilized asset—Asset utilization can be maximized by increasing inventory turns and closely aligning supply with demand. Ashok Mammen V Assistant professor. Page 8.

(9) d) Increased sales and profitability—The ability to assess outcomes due to price changes, promotional events, and new product development can be enhanced through increased visibility resultant from information sharing among supply chain partners. Despite these benefits of supply chain integration, firms engaged in this effort must be aware of the various challenges because of the unprecedented number and diversity of products and services available to customers in the era of mass customization. This variety will make it more difficult for a firm to predict customer needs and requirements. Therefore, the consequence of making forecasting errors will be more serious than ever before. The bullwhip effect is generally referred to as an inverse ripple effect of forecasting errors throughout the supply chain that leads to amplified supply and demand misalignment, where orders (perceived demand) to the upstream supply chain member tend to exaggerate the true patterns of end-customer demand because each chain member‘s view of true demand can be blocked by its immediate downstream supply chain member (Min, 2000; Lee et al., 1997a). The common symptoms of the bullwhip effect include delayed new product development, constant shortages and backorders, frequent order cancellations and returns, excessive pipeline inventory, erratic production scheduling, expedited shipments, and chronic overcapacity problems (Min, 2000; Lee et al., 1997b).. 11. Decision Phases in Supply Chain Management The 3 decision phases that occur within a supply chain are supply chain strategy (or design), supply chain planning and supply chain operation. Decisions relate to the flow of information, product and funds. Supply Chain Strategy or Design- these are long term decisions made by companies. These involve expensive investments and are not easy to change. The company has to take into account the uncertainty in anticipated market conditions over the next few years. Decisions include (i) the location and capacities of production and warehousing facilities, (ii)products to be manufactured or stored at various locations (iii) modes of transportation to be made available along different shipping legs, (iv) type of information system to be utilised. Supply Chain Planning - companies should set operational plans with regard to (i) which market to be served, and from which location (ii) the planned build-up of inventories (iii) the subcontracting of manufacturing (iv) the replenishment and inventory policies to be followed (v) policies with regard to back up locations in case of stock out (vi) timing and size of marketing promotions. Compared to strategic plans, these are short term operational plans. Supply Chain Operations - companies make decisions for the time horizon of a week / a day with regard to individual customer orders. The aim is to implement the operational plans (i) allocation of individual orders to inventory / production (ii) setting dates for fulfilling orders (iii) Ashok Mammen V Assistant professor. Page 9.

(10) generating pick list at a warehouse (iv) allocating an order to a particular shipping mode or shipment (v) getting delivery schedule of trucks (vi) placing replenishment orders. 12. Process view of a supply chain There are two ways to view the supply chain process 1. CYCLE VIEW. Customer. Customer Order Cycle. Retailer. Distributor. Replenishment Cycle. Manuf acturin g Cycle. Supplier. Procurement Cycle. Manufacturer. The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain. The four cycles are Customer Order Cycle: this occurs at the customer - retailer interface and includes i. Customer arrival - a customer visiting the store ii. Customer order entry - the customer places an order with the retailer, and the retailer allocates the products to the customer iii. Customer order fulfilment - the process by which the order is fulfilled and delivered to the customer iv. Customer Order receiving - the customer receives the products, takes ownership of the product. Replenishment Cycle: this occurs at the Retailer - Distributor interface and includes Ashok Mammen V Assistant professor. Page 10.

(11) i. Retail order trigger - As and when customers buy the products, the stock of these items go down, and the retailer as to place an order with the distributor. The retailer devices some ordering policy so that the stock of items are replenished on time. ii. Retail Order entry - the retailer places an order with the distributor or manufacturer. iii. Retail order fulfilment - the process by which the order is fulfilled and the distributor or manufacturer allocates the products to the retailer iv. Retail order receiving - the retailer physically collects the products, updates the inventory records, and the stocks are displayed on the racks. Manufacturing cycle: this occurs at the distributor manufacture interface and includes i. ii. iii. iv.. Order arrival from the distributor, retailer or customer Production schedule - the production are scheduled to fulfil the orders received Manufacturing and shipping - the finished products are shipped in time to the party Receiving at the distributor, retailer or customer - the products are received by the party and a confirmation given to the Manufacturer. Procurement Cycle: this occurs at the manufacturer supplier interface and includes all the processes necessary to ensure that materials are available for carrying out manufacturing as per the schedule. The manufacturer orders for raw materials and components from suppliers. The order is placed to the suppliers for these raw materials / components, the supplies are scheduled and shipped to the manufacturer, and on receiving the items the manufacturer updates the inventory records and uses the same for the manufacturing process. 2. PUSH - PULL VIEWof supply chain process Pull processes - the execution of the supply chain process is initiated in response to customer order. The demand is known and the players in the supply chain react to the known market situations. There is some certainty. Push processes - the execution of the supply chain process is initiated by the manufacturer in anticipation of customer order. The demand is speculated on and is based on forecast.. 13. Supply Chain Challenges Some of the challenges faced by Supply Chain are 1. 2. 3. 4.. Lack of synchronisation between planning and implementation Lack of real time data visibility with no common view across all businesses and channels Irregular reviews of safety stock levels causing frequent stock outs or excess inventory Lack of flexibility in the network and distribution. Ashok Mammen V Assistant professor. Page 11.

(12) 5. Decision makers find it difficult to prioritise between cost to serve and customer service levels, resulting in less profitability. 6. Price volatility and difficulty to de-risking 7. Production line imbalance and suboptimal best sizing of assets. (underutilisation). [For additional reading] . . . .. 14. Supply Chain Trends https://financesonline.com/supply-chain-trends/. Ashok Mammen V Assistant professor. Page 12.

(13) 1. Supply Chains are going Green Climate change advocacy groups and consumers‘ growing efforts to be more environmentally responsible push the supply chain to become less harmful to the environment. Electricity and transportation hugely contribute to greenhouse gas emissions in the US, so green logistics are quickly gaining traction among many companies today. Green logistics is just one of the many supply chain trends affecting warehousing. Eco-friendly warehouses, for instance, feature advanced energy management systems that use timers and gauges to monitor the usage of electricity, heat, water, and gas all over facilities. These systems Ashok Mammen V Assistant professor. Page 13.

(14) help prevent excessive waste of resources. Electric and solar-powered vehicles are also seeing more use in supply chains; these vehicles help reduce the overall carbon footprint of supply chains. Similarly, climate-smart supply chain planning is expected to play a more significant role in SCM in the next year and beyond. Environmental changes brought by climate change affect the availability of materials and resources, posing potential disruptions to supply chains. Companies will have to consider these factors and look for other resources if necessary. Aside from doing their share to preserve the environment, businesses that adopt sustainable efforts also stand to gain more in terms of profit and customer loyalty. After all, more than 60% of customers don‘t mind paying a premium for sustainable products. With green consumerism on the rise, more companies are expected to implement eco-friendly supply chain processes in the coming years. 2. Circular Supply Chains are the Future Linear supply chains will soon be replaced by circular supply chains, where manufacturers refurbish discarded products for resale. To deal with the rising costs of raw materials and their volatile availability, many companies are opting to break down their products and turn them back into their raw material form. Looping the supply chain can help cut down costs, past the initial costs of putting new processes in place. With a circular supply chain, companies can spend less on raw materials and, in turn, enjoy a reduced risk of price volatility. Moreover, a circular supply chain creates less waste, helping companies reduce their overall impact on the environment. Stricter government regulations on recycling and waste disposal also push companies to consider adopting the circular supply chain. Businesses with sustainable practices may also stand to gain incentives for their efforts, not only from the government but also from consumers, a majority of whom prefer environmentally friendly products. 3. More Supply Chain Integrations The coming years will see even more components being added into the supply chain, as companies look to make partnerships and build integrations with third parties. Partnering up with third-party services can help companies reduce costs while improving customer service. For instance, more businesses will integrate and start to offer inland services, reducing overall freight costs, and streamlining the supply chain. Integrations are particularly useful for shippers who often use a combination of sea and land transportation for their products. With integrated services, delivery times become shorter, and customer service improves.. Ashok Mammen V Assistant professor. Page 14.

(15) The Amazon Effect also pushes companies to optimize their supply chains as much as possible. As a result, more supply chain managers will be partnering up with third-party logistics providers (3PLs) and 3PL-based technologies. 3PL providers offer inbound and outbound freight management and handle order fulfillment on any channel, and companies can take advantage of these to organize their supply chains. Similarly, 3PL-based technologies allow supply chain managers to integrate multiple management systems via API and connect them to the cloud. These integrations will enable supply chain managers to overcome the limitations of in-house technology solutions. Companies will also seek partnerships with other businesses that incorporate digital solutions, which deliver more accurate delivery ETA estimates and cut down administrative work. 4. Workforce Globalization and Challenges Companies can expect major changes in the labor component of the supply chains. For instance, one such change is the globalization of the workforce. Research says that 80% of manufacturers will have multi-country operations by 2020. Factors such as the need for more knowledge workers influence the demand for workforce globalization. Knowledge workers—those capable of handling complex processes like analytics, procurement processing, and provision of services—drive the labor component of supply chains, and the emerging labor workforce in the US doesn‘t have the training and expertise to handle these processes. As a result, employment opportunities in logistics, warehousing, and transportation have been rising each year. More companies are trying to fill the gap by outsourcing these jobs and expanding operations to countries outside the US. Advanced IT systems, collaboration software, and sophisticated logistics setups make globalization easier for companies. Aside from the skills gap, the shortage of supply chain workers also stems from a lack of interest in these jobs. Experts expect warehouse and supply chain managers to offer unique benefits such as mentoring programs and tuition reimbursement to make supply chain jobs more attractive to younger generations. 5. The Spread of SCaaS and SCM Support on Tap Many companies today handle their supply chain activities in-house. Still, we may see more businesses adopting ‗Supply Chain as a Service‘ or SCaaS business models and outsourcing activities like manufacturing, logistics, and inventory management. Companies‘ supply chain management teams will soon evolve to become a smaller group of skilled individuals focused on making strategic decisions to improve the supply chain.. Ashok Mammen V Assistant professor. Page 15.

(16) As in-house supply chain teams grow smaller, control towers will become more prevalent. These advanced digital control towers give supply chain managers an end-to-end view of the supply chain. Cloud technology allows supply chain managers to access the data they need wherever they are. Likewise, technology has innovated support for SCM. Supply chain technologies will soon be available ―on tap.‖ Originally seen in SaaS software, this method allows companies to reduce overhead spending by avoiding fixed costs in infrastructure, upgrades, and maintenance. 6. The Effects of Shorter Product Lifecycles As product lifecycles and clockspeeds become shorter, supply chains must evolve to become faster and more efficient. Many companies today use a single supply chain for all products, despite the differences in these products‘ life cycles. In the future, companies will have to develop different supply chains to accommodate these varying lifecycles and remain profitable.. The shorter product life cycle requires companies to rethink their supply chains and streamline processes to ensure that they can keep up with the regular demand for new products. Advanced tools such as inventory management can help SCM teams keep better track of stocks and automate order management. To this end, more companies will also be streamlining their reverse logistics processes to improve the handling of obsolete products. 7. The rise of Elastic Logistics It‘s not enough for supply chains to have lean processes; supply chains need to be flexible and responsive to market fluctuations as well. As a result, more businesses are adopting a flexible approach to logistics. Elastic logistics allow the supply chain to easily expand or shrink according to current market demands. Technologies such as artificial intelligence allow supply chains to adjust as needed with minimal disruptions. Elastic logistics provides flexibility to many variables in the supply chain, including sailing schedules, carrier space, container usage, and route optimization. The adjustability helps companies‘ better handle potential issues such as overstocking and unoptimized space in vessels. As a result, businesses can enjoy greater stability and remain competitive despite market fluctuations. 8. A Standard Certification Process for SCM With the complexity of SCM, it‘s not surprising why many universities offer undergraduate and graduate degrees in SCM. Professional associations also provide certification programs for aspiring supply chain managers. Ashok Mammen V Assistant professor. Page 16.

(17) However, none of these programs offer a single set of knowledge for SCM. Instead, they focus on specific activities, such as financial analysis or manufacturing. This will change in the next few years, as technologies such as IoT allow for the development and integration of a cohesive system that defines SCM. Supply chain professions will soon have a standardized certification program like those of CPAs and engineers. A standard certification process for SCM will ease the deployment of new systems and services. It will also help fill the current skills gap in the supply chain profession. 9. Better Transparency in the Supply Chain Rising consumer concerns over the impact of modern business on society create a need for companies to be more transparent about supply chain externalities. Companies have begun providing some transparency when it comes to the sustainability of their supply chains and their efforts to reduce their carbon footprint. Still, more visibility is needed on the impact of the supply chain on other aspects of society. The shifting nature of global trade and its corporate requirements may also result in mandatory corporate disclosures for a variety of supply chain practices. For instance, companies will soon have to look into providing reports on the impact of their supply chains on jobs created, sourcing practices, as well as types of labor and modes of transportation used. Disclosing information about these aspects of their supply chain can help companies enhance brand image among consumers and prepare for compliance with regulatory requirements if necessary.. 10. Blockchain Tools to Handle Information Supply chain visibility remains a top concern for most companies today, so it‘s not surprising that more businesses will be looking to integrate blockchain technology into their supply chains. Blockchain technology can help make the entire supply chain more transparent to minimize disruptions and improve customer service. Through blockchain, all components of the supply chain can be integrated into a single platform. Carriers, shipping lines, forwarders, and logistics providers can use the same platform to update companies and customers of the product journey. Invoicing and payments can be made from the same system, too. This integration streamlines the entire supply chain and helps supply chain managers to identify issues before they occur. Blockchain also provides unparalleled protection for information, as the technology‘s decentralization methodology protects data from being edited. All users must agree to updates or edits to the data before they‘re implemented. Ashok Mammen V Assistant professor. Page 17.

(18) 11. Extensive Adoption of IoT Aside from blockchain, more companies are implementing IoT devices to enhance the visibility of their supply chains. For instance, airplanes, trucks, and other modes of transportation can be fitted with sensors, which provide live tracking updates on shipping and delivery. IoT technology in warehouses and retail outlets can also improve visibility in production, inventory management, and predictive maintenance. Companies can use all these real-time information to proactively service customer demands, minimize downtime, and increase the supply chain‘s overall efficiency. By increasing visibility across components of the supply chain, IoT devices can also help businesses optimize their assets and ROI. Many businesses will also leverage the power of IoT by integrating the technology with core business applications such as business intelligence software. These integrations will enable analytics for the information gathered by IoT devices, allowing companies to make data-driven decisions on supply chain strategies. 12. Robotic Automation of the Supply Chain Robotics currently play a huge role in transforming supply chains and SCM. During the first half of 2019 alone, North American companies spent $869 million on more than 16, 400 robots. More companies today are using drones and driverless vehicles to streamline logistics operations. Companies and consumers can expect drones to become fully capable of making deliveries of small goods. Self-driving cars are also likely to be more advanced by 2020, with capabilities to make automated traffic decisions. In warehouses, autonomous mobile robots will see more use in speeding up menial, laborintensive tasks. Combined with efficient warehouse management software, robots can drastically improve the supply chain‘s productivity.. The growing use of robots and robotic processes automation software, however, does not end in the replacement of humans. The technology is intended to augment human efforts by speeding up simple, repetitive tasks. By relegating these tasks to machines, human workers can focus on higher-value tasks that have a more direct effect on business growth and customer experience. 13. Automation through AI, AR, and VR Artificial intelligence (AI) will also play an essential role in making supply chains more efficient. The technology can be used to automate procedures using algorithms based on data. Ashok Mammen V Assistant professor. Page 18.

(19) from previous processes. Automation makes supply chains more efficient by eliminating human errors. AI also can identify patterns in the supply chain, and companies can leverage this technology to predict purchasing demands and manage inventory. This takes the guesswork out of planning and procurement, eliminating the need for planners to do the same calculations over and over. Augmented reality (AR) and virtual reality (VR) also pose various possibilities in improving the efficiency of supply chains. For instance, AR devices allow workers to multitask more effectively. Companies can also use these devices to enhance product development efforts by predicting potential product uses in a realistic setting. 14. More Agile Supply Chains Aside from climate events, new tariffs and global trade issues require companies to be more agile in terms of supply chain planning. To ensure stability and maintain high service levels, companies must make sure that their supply chains are agile enough to cope with natural disasters and the shifting availability and costs of raw materials. Supply chain managers can take advantage of supply chain modelling solutions to predict scenarios and identify potential problems. This way, they can plan the best responses to disruptions. UNIT: 2 INTRODUCTIONS TO LOGISTICS Meaning of logistics and Logistics Management, Logistics management to Supply Chain management, Decision areas in Logistics; Key Players in Logistics; Role of logistics in (a) Supply Chain, (b) the economy, (c) the organization; Role of government in logistics; classification of logistics applications ================= LOGISTICS The Council of Supply Chain Management Professionals defines logistics as “part of the supply chain process that plans, implements and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer’s requirements. Logistics is the function responsible for the flow of materials from suppliers into an organization, through operations within the organisation, and then out to customers. The following activities are normally included in logistics. 1) Procurement or purchasing. The flow of materials through an organisation is usually initiated when the organisation sends a purchase order to a supplier. This means that the Ashok Mammen V Assistant professor. Page 19.

(20) organisation finds suitable suppliers, negotiates terms and conditions, organises delivery, arranges insurance and payment, and does everything needed to get materials into the organisation. 2) Inward transport or traffic actually moves materials from suppliers to the organisation’s receiving area. This has to choose the type of transport (road, rail, air, and so on), find the best transport operator, design a route, make sure that all safety and legal requirements are met, get deliveries on time and at reasonable cost, and so on. 3) Receiving of materials - the organisation makes sure that materials delivered correspond to the order, acknowledges receipt, unloads delivery vehicles, inspects materials for damage, and sorts them. 4) Warehousing or stores moves materials into storage, and takes care of them until they are needed. Many materials need special care, such as frozen food, drugs, alcohol in bond, chemicals that emit fumes, animals, and dangerous goods. Warehousing should make sure that materials can be available quickly when needed and that they have the right conditions, treatment and packaging to keep them in good condition. 5) Stock control sets the policies for inventory. It considers the materials to store, the overall investment needed, the customer service, the stock levels to be maintained, the order sizes, the order timing and so on. 6) Order picking finds and removes materials from stores. Typically materials for a customer order are located, identified, checked, removed from racks, consolidated into a single load, wrapped and moved to a departure area for loading onto delivery vehicles. 7) Materials handling moves materials through the operations within an organisation. It moves materials from one operation to the next, and also moves materials picked from stores to the point where they are needed. The aim of materials handling is to give efficient movements, with short journeys, using appropriate equipment, with little damage, and using special packaging and handling where needed. 8) Outward transport takes materials from the departure area and delivers them to customers. 9) Physical distribution management is a general term for the activities that deliver finished goods to customers, including outward transport. It is often aligned with marketing and forms an important link with downstream activities. 10) Recycling, returns and waste disposal - Even when products have been delivered to customers, the work of logistics may not be finished. There might, for example, be problems with delivered materials – perhaps they were faulty, or too many were delivered, or they were the wrong type – and they have to be collected and brought back. Sometimes there are associated materials such as pallets, delivery boxes, cable reels and containers which are returned to suppliers for reuse. Some materials are not reused, but are brought back for recycling, such as metals, glass, paper, plastics and oils. Finally there are materials that Ashok Mammen V Assistant professor. Page 20.

(21) cannot be used again, but are brought back for safe disposal, such as dangerous chemicals. Activities that return materials back to an organisation are called reverse logistics or reverse distribution. 11) Location- Some of the logistics activities can be done in different locations. Stocks of finished goods, for example, can be held at the end of production, moved to nearby warehouses, put into stores nearer to customers or can be passed on to be managed by other organisation. Logistics has to find the best locations for these activities –or at least play a significant role in the decisions. It also considers related questions about the size and number of facilities. 12) Communication - Alongside the physical flow of materials is the associated flow of information. This links all parts of the supply chain, passing information about products, customer demand, materials to be moved, timing, stock levels, availability, problems, costs, service levels, and so on. Co-ordinating the flow of information can be very difficult and logistics managers often describe themselves as processing information rather than moving goods.. THE DIFFERENCE BETWEEN LOGISTICS AND SUPPLY CHAIN MANAGEMENT Sl. N o .. Parameter. 1. Definitions. 2. Processes. Logistics. Supply Chain. 1. The branch of military science 1. A channel of distribution and operations dealing with beginning with the the procurement, supply, and supplier of materials or maintenance of equipment, components, extending with the movement, through a manufacturing evacuation, and hospitalization process to the distributor of personnel, with the and retailer, and provision of facilities and ultimately to the services, and with related consumer matters 2. the planning, implementation, and coordination of the details of a business or other operation  Inbound and Outbound  Procurement Transportation  Supply Planning. Ashok Mammen V Assistant professor. Page 21.

(22)    . Warehousing Reverse Logistics (Returns) Protective Packaging Fulfillment. 3. Purpose. The purpose of logistics is to provide just-in-time delivery for the primary sake of customer satisfaction.. 4. Job. Job responsibilities for a logistics manager include:. Descripti ons. 5. Technology. 1. Managing and planning for logistics policies, objectives, and initiatives. 2. Creating procedures for logistics management to optimize product workflow and minimize cost. 3. Monitoring vendor selection and negotiation, distribution, transportation, and inventory control.. Transportation Management System (TMS): a logistics platform enabling users to. Ashok Mammen V Assistant professor.      . Demand Planning Enterprise Resource Planning Inventory Management Manufacturing Logistics Optimization The goal of supply chain management is supply chain optimization for the sake of competitive advantage, as in the most efficient and cost-effective methods for those working within a supply chain. Job responsibilities for a supply chain manager include:. 1. Overseeing and managing overall supply chain and logistics operations, to maximize efficiency and minimize cost. 2. Collaborating with multiple-functional managers to plan and execute the development of a distribution center operational process to enable seamless transfers. 3. Managing and monitoring vendors' qualifications and performances to ensure they meet the company's requirements. Enterprise Resource Planning (ERP) software: functions Page 22.

(23) manage and optimize daily operations of their transportation fleets Warehouse Management System (WMS): software and processes enabling organizations to control and administer warehouse operations from the time goods or materials enter until they move out. similar to a central nervous system, for a business, by collecting information about the activity and state of various divisions of the body corporate, and making this available to other parts, where it can be used productively and . added, in real-time, by users Radio Frequency Identification: the use of radio waves to read and capture information stored on a tag attached to an object, which can be read from up to several feet away, and doesn't need to be within direct line-ofsight of the reader to be tracked. Customer Relationship Management (CRM) Software: a category of software covering a broad set of applications, designed to help businesses manage many of the following processes: customer data, Ashok Mammen V Assistant professor. Page 23.

(24) customer interaction, information access, and sales automation. “Big Data”: extremely large data sets that may be analyzed computationally to reveal patterns, trends and associations, especially relating to human behavior and interactions. DECISION AREAS IN LOGISTICS The activities that take place in logistics are understood under the twelve points already discussed. These activities can be classified under five broad areas which can be called the decision areas in Logistics. In simple terms the decision areas in logistics can be studied in the following five broad areas 1. 2. 3. 4. 5.. Logistics Network Design Information flow for Logistics Managing Material flow & transportation Inventory Management Warehousing, Materials handling, Packaging. 1. Logistics Network Design involves (i) determining how many of each type of facilities are needed (ii) the geographical locations and (iii) the work to be performed in each location. The logistics facilities are manufacturing plants, warehouses, cross-clock operations and retail stores. A firm’s logistics capabilities should be strong enough tomanage the procurement of inputs like raw materials and components from suppliers and to distribute the finished products to the market.. Ashok Mammen V Assistant professor. Page 24.

(25) It may happen that some of the activities are outsourced to other companies. The facility network may need to accommodate for change in demand and supply infrastructure over-time. In today’s environment computers and technology are essential to plan, to monitor, and to analyse large amount of data generated by the facilities. The objective of the logistic network configuration are 1. to minimize all relevant logistics costs while meeting the constraints on logistics customer service 2. to maximize the logistics customer service levels 3. to maximize the profit contribution by generating more revenue with better customer service levels and at same time keeping the cost under control. Configuration of the network involves location choices, issues related to inventory and transportation. The questions to be addressed in channel planning are: i. ii. iii. iv. v. vi.. How much of each product item should be stocked at each echelon (in a multi- echelon logistics supply channel) and at each stocking point? What is the best mode of transport to be used between each echelon? Should a make-to-order or make-to-stock strategy be followed? Should a push or pull inventory strategy or requirements planning be used? What methods of information flow between stocking echelons are best? Which forecasting methods perform best?. 2. Information flow for Logistics:A business firm which relies heavily on its supply chain network would need correct and timely information to keep itself efficient and effective in the market. Some examples of the information required are – information about the goods which are in transit, the location of those items that are in transit, the quality of goods in stock, the finished items that need to be shipped, information with regard to demand, forecast made by experts in the industry, information with regard to customer order and order processing. The firm should get quality information that should be accurate and timely. This is possible only with the use of information systems and technology. Concepts like Just – in – time (JIT), Continuous Replenishment (CR), Quick Response (QR) can be exercised only when the quality of information is good and reaches fast. Thus a firm should invest in the best suitable Information Systems and Information Technology to be competitive.. Ashok Mammen V Assistant professor. Page 25.

(26) 3. Managing Material flow & Transportation: Material management encompasses the administration of raw materials, sub-assemblies, manufacturing parts, packing materials and in process inventory. The objective of materials management are to have goods supplied and stocked at low cost, the quality is assured, there is low level of tied up capital and it supports other functions like production. Efficient material management means that the firm is able to anticipate the material requirements, has sound sourcing strategies, is able to introduce new materials into the organization as and when it is required, and is able to have efficient inventory control. Thus the various activities in materials management are Purchasing and Procurement, Production control, Inbound Logistics, Warehousing & storage, Data and information sharing, forecasting, introduction of new tools and techniques for materials handling. Modern concepts like JIT systems, Total Quality Management (TQM), Material Requirement Planning (MRP-1), Manufacturing Resources Planning (MRP-2), Distribution Requirement Planning (DRP-1), and Distribution Resources Planning (DRP-2) are implemented in firms to improve the management of materials flow. Transportation system is the physical links that connects the supplier, the manufacturing unit, the warehouses, the distribution channels and the customer of an organisation. It creates both place utility and time utility. The movement of materials from one place to another adds value to materials and is referred as Place utility. Time Utility is created by warehousing and storing materials and finished goods until they are needed. Transportation determines how fast and how consistently materials move to its destination. This is known as time in transit and consistency of service. Key decision taken are with regard to i. ii. iii. iv.. i.  . What mode of transportation will the firm use, what carrier in each mode will the firm use, will the firm operate its own fleet or hire outside carriers for transportation services will the firm manage transportation operation or hire a third party. The factors affecting the choice of transportation modes are Nature of goods – example the modes chosen in the case of flammable goods, perishable goods, fragile goods, etc. Access to carriers – at times the suitable means of transportation is not available and so the firm will have to choose other modes. Often intermodal combinations are made use of. Example – it may be cheaper to transport iron ore by water ways but due to the lack of water bodies near the source of transit, it may have to be loaded to trucks, or by rail. When multiple ways of transportation is done we call it intermodal. Ashok Mammen V Assistant professor. Page 26.

(27)     . ii.. Price – price is a key determinant in fixing the mode of transport. For Example, it may be faster to airlift a cargo but the cost may be exorbitant. Transit time – transportation is costly. When goods needed are of urgency a faster mean of transport will be preferred Security of goods – terminals and other storage points in the logistics system can effect the safety of goods. Theft, damages, risk are concerns during transit and a firm should be vigilant Government regulation – certain goods can be transported only in specified ways and in quantity. Both the mode of transport and the tonnage or cubic capacity load are used to regulate the movement of goods. Safety – adequate safety measures are to be exercised while selecting a particular mode of transport. For example – acids, petroleum products, radioactive materials are all transported in restrictive manner. Carriers are the vehicles used to transport the goods. By Carrierselection we mean the choice of a particular trucking or shipping firm to transport the goods. The choice is made on the basis of the cost, the security, the transit time, accessibility, responsiveness, claim records and reliability of the carrier. Tonne – kilometer is the standard measure of freight activity. Intermodal Transportation: common types are Truck – Rail: piggy back, Truck – water: fishy back, Truck – air: birdy back, Rail – Water, Pipeline- Water, Pipeline- Truck. iii. Private fleet or For – Hire Carriage or Third Parties for Transportation Firms may operate its own fleet of vehicles or hire outside carriers or it may be a combination of this. There are many firms that rely on third party to manage their transportation needs. Third party firms provide linkage between shippers and carriers, they work in partnership with other service providers. The various types of third parties are Transportation Brokers, Freight forwarders, Shippers Association, Intermodal marketing firms or shippers’ agents.. Thus a firm should study various aspects of material flows and transportation so as to decide on robust materials management systems and the firm should be able to adopt the best possible transportation strategies in order to maintain the best service levels at an economic cost.. 4. Inventory Management: firms hold inventory to achieve economies of scale, balance the demand and supply and to protect itself from uncertainties, shortage of raw materials, etc. however poor inventory management can lead to lose due to damages, high cost, or it may lead to inadequate stocks, over stocks, inadequate storage space. Stock of goods may depend on the Ashok Mammen V Assistant professor. Page 27.

(28) speculative, cyclical, or seasonal nature of the items. Companies may hold buffer stocks which if not properly and timely utilized may become what we call dead stocks. The inventory turnover time: For example, the sale in a firm is 10 lakhs per year and the firm purchases materials ten times in the year. Thus the average stock in each cycle is 1 lakh each. It can be assumed that the firm holds a buffer stock for 36 days (365 days/ 10). Every industry has a benchmark inventory turnover time. If the buffer stocks are held for more days it may result in loses for the company. The objectives of Inventory management are to reduce back orders or expedited shipments, improve accuracy of forecast, purge or remove obsolete or dead stocks from the system and to reduce cost. Inventory cost is a significant component of the total logistics cost. It includes Inventory carrying cost, order / set up cost, expected stock out costs, and in transit inventory carrying cost. Inventory carrying cost includes (i) capital cost – the cost a company incurs by having capital tied up in its inventory (ii) storage space cost – cost of handling in and out of inventory, rentals, heating, refrigeration, lighting, etc (iii) Inventory service cost – refer to insurance premium paid and taxes (iv) Inventory risk cost – the rupee value of the goods in stock may decline. It can happen if the item in stock becomes obsolete in market. Examples are electronic items, computers etc which have shorter product life cycle. Order / set up cost includes the cost of placing the orders and the expenses incurred for changing a assembly or production process to facilitate changeover of product line to suit the inventory ( item in stock). Expected stock out cost – is the cost of not having a product available when a customer demands or needs it. The customer may shift to a competitor’s product or go for a substitute and the firm may lose the customer permanently. In-transit inventory carrying cost – it is the cost incurred on receiving the items from the source or supplier. Goods may be supplied on the basis of FOB, CIF, etc. and either the supplier agrees to deliver the items at the company site bearing all the risk or it may be risk that is shared. Many variants of it are listed below. There is also delay while goods are in transit and if goods are not cleared from the ports or terminals there are penalties the firm will have to pay.. Ashok Mammen V Assistant professor. Page 28.

(29) 5. Warehousing, Materials handling, Packaging: Warehousing refers to the physical handling or storage of raw materials and component parts until they are used in the production process. It serves vaule adding roles in the logistics systems like a) Consolidation – A form of warehousing that pulls together small shipments from a number of suppliers in the same geographical area and combines them into larger, more economical, shipping loads intended for the same area. Less than truck load (LTL) shipments are consolidated to form larger shipments. This lower shipping costs for participants and may lower inventory levels required b) Product mixing – companies have different variety of the same product depending on the colour, size, fragrance, etc and also will have a range of different products. A product mixing warehouse is the place where these products are sorted and mixed as per the orders. c) Cross –docking refers to the movement of goods directly from the receiving dock to shipping dock to eliminate storage expenses. The products received from different suppliers are received in a warehouse and instead of being stored they are moved to the trucks waiting to be loaded. d) Other functions of warehousing are to provide a. service to customers – like in the case of online selling companies that collects and keeps stocks ready for delivery to customers Ashok Mammen V Assistant professor. Page 29.

(30) b. Contingency protection – in anticipation of delay in supply, strikes, etc stocks are maintained c. Smooth operation – to ensure timely delivery, maintain adequate stocks, meet a seasonal demand, and to ensure reasonable cost and quality. Warehousing decisions such as ownership, number, size, stocking and location, ie: what type of organization, how many, what size, what products and where. Within the warehouse, material handling is an important activity. Products must be received, moved, sorted and assembled to meet customer order requirements. The direct labour and capital invested in material handling equipments are a major part of total logistics cost. Too much of handling of materials can result in product damage and affect the overall efficiency of the warehouse. Each warehouse and its material handling capacity represent a mini system within the overall logistical process. Packaging The objectives of product packaging are i. ii. iii. iv. v. vi.. To facilitate storage and handling To promote better utilization of transport equipment To promote product protection To identify product and provide information To improve efficiency in handling and distributing products To change the product density. The functions of packaging are – i. ii. iii. iv.. v. vi.. Containment: products are contained in suitable containers before they are transported; Protection: protect the contents of the package from damage or loss due to moisture, duct, insects, contamination, etc.; Apportionment: the items are packed into smaller quantities Unitization: the primary packages are unitized into secondary packages (placed in corrugated case), which are then unitized into a stretch wrapped pallet and then into container which is loaded with several pallets. Convenience: packaging allows products to be used conveniently by the customers Communication: packaging allows the use of readily understood symbols such as Universal Product Code (UPC). Ashok Mammen V Assistant professor. Page 30.

(31) Corrugated cardboard box. A pallet is a flat transport structure, which supports goods in a stable fashion while being lifted by a forklift, a pallet jack, a front loader, a jacking device, or an erect crane. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies.. Signs on corrugated cardbox. ROLE OF LOGISTICS IN SUPPLY CHAIN Inbound logistics and Outbound logistics are important primary components of the supply chain (value chain). Ashok Mammen V Assistant professor. Page 31.

(32) Inbound logistics involves transportation of raw materials and components parts from suppliers to the firm, inventory requirements, warehousing, packaging and materials handling. Outbound logistics involves physical distribution of finished goods, which includes finished goods inventory, warehousing, materials handling and packaging.. ROLE OF LOGISTICS IN THE ECONOMY Logistics plays a major role in the economy in the following ways.    . It is one of the major expenditure for business. It affects other economic activities and vice versa. It supports the movement and flow of many economic transactions. It virtually facilitates the sale of all goods and services It adds to time utility and place utility and supports the same. o Time Utility is the value added by having an item when it is received in time. Eg: If the raw materials reach the factory in time the production unit will not lay idle. o Place utility is the value added by receiving the goods/services where it is needed. Eg: If a customer needs a material at site A it does not create any place utility if it is delivered at site B or placed in a ware house.. ROLE OF LOGISTICS IN THE ORGANIZATION Logistics management improves profitability and competitiveness of organizations. According to marketing management philosophy organizational goals can be achieved by   . Determining the needs and wants of target markets. Delivering the desired satisfactions more effectively and efficiently than competitors. Logistics plays a major role in the three elements of marketing concept.. Three Critical elements of marketing concept are the following. i. ii. iii. A. Customer Satisfaction. Integrated effort Adequate corporate profit. firm can be successful if the marketing effort integrates the ideas of having the right product at the right price promoted with right promotion mix and available in the right place.Thus time utility along with place utility of logistics makes a firm successful.. Ashok Mammen V Assistant professor. Page 32.

(33) ROLE OF GOVERNMENT IN LOGISTICS Government of India’s published its Draft National Logistics Policy in February 2019. The Policy provides clarity in strategies to transform the Indian Logistics into an organized sector with a consolidated problem solving approach. The Logistics division in the Department of Commerce was created consequent to the amendment to the second schedule of the Government of India (Allocation of Business) Rules, 1961, on 7th July 2017, that allocated the task of "Integrated development of Logistics sector" to the Department of Commerce.. The draft policy emphasis the following i.. ii. iii. iv. v. vi.. vii. viii.. ix.. it identifies that an effective and efficient logistics ecosystem is the key contributor to robust economic growth in the country, with the potential to facilitate domestic and foreign trade, promote global competitiveness, enhance incomes, drive the ‘Make in India’ initiative and reduce economic disparities across geographies. An efficient supply chain network has the potential to increase farmers’ income manifold, which can lead to a domino effect on the overall economy. An efficient and reliable logistics network coupled with a transparent and consistent cross border trade facilitation process is a key driver of export competitiveness in the country. It acts as an enabler for expanding the foreign markets for indigenous goods. An efficient logistics ecosystem will also encourage investments in the country, especially FDI and will in turn positively impact international trade. Globally, leading countries that have achieved efficiency in logistics follow a completely integrated approach towards logistics, and the government provides a coordinated oversight to the entire logistics value chain. Despite the recognition of logistics being a critical driver of economic development, logistics cost in India, estimated at 13-14% of GDP, is very high. Different parts of the logistics value chain currently are being managed by many ministries including Road Transport and Highways, Shipping, Railways, Civil Aviation, D/o Posts, Commerce and Industry, Finance and Home Affairs. In addition, a large number of government agencies including Central Drug Standard Control Organization, Food Safety and Standards Authority of India, Plant and Animal Quarantine Certification Service provide relevant trade clearances and impact the value chain. Government of India has also recognized the importance of the sector to propel the future growth of the country and a Logistics Wing has been created consequent to an amendment to the second schedule of the Government of India (Allocation of Business) Rules, 1961, on Ashok Mammen V Assistant professor. Page 33.

(34) x.. xi.. 7th July 2017, allocating the task of "Integrated development of Logistics sector" to the Department of Commerce and Industry. Some of the activities like cold chains, multi-modal logistics parks etc. in the logistics sector have also been included in the Harmonized Master List of Infrastructure sub-sectors' and has been granted infrastructure status in November 2017. The key objectives of the national logistics policy are the following a. Creating a single point of reference for all logistics and trade facilitation matters in the country which will also function as a knowledge and information sharing platform. b. Driving logistics cost as a % of GDP down from estimated current levels of 13-14% to 10% in line with best-in-class global standards1 and incentivize the sector to become more efficient by promoting integrated development of logistics. c. Optimizing the current modal mix(road-60%,rail-31%,water-9%) in line with international benchmarks(25-30% share of road, 50-55% share of railways, 20-25% share of waterways)2 and promote development of multi modal infrastructure. d. Improving first mile and last mile connectivity to expand market access of farmers, MSMEs and small businesses e. Enhancing efficiency across the logistics value chain through increased digitization and technology adoption f. Ensuring standardization in logistics (warehousing, packaging, 3PL players, freight forwarders) g. Creating a National Logistics e-marketplace as a one stop marketplace. It will involve simplification of documentation for exports/imports and drive transparency through digitization of processes involving Customs, PGAs etc in regulatory, certification and compliance services h. Creating a data and analytics center to drive transparency and continuous monitoring of key logistics metrics.. CLASSIFICATION OF LOGISTICS APPLICATIONS Logistics application can be classified in terms of issues and actors. Other imported classifications based on various dimensions are:Decision-wise: Illustration 1 - Product- large moulded plastic water tanks: For this product transportation cost is a significant portion of the product cost. The weightbased capacity of the trucks is under-utilised due to the large volume.To reduce the transportation cost which results in reduction of product cost the design is modified with a seperable lid and a wide mouth so that smaller sized tanks are packed inside the larger ones. Since at present, the results of the research are uncertain, a location Ashok Mammen V Assistant professor. Page 34.

(35) decision has been taken to manufacture the product in four regions rather than at one place. Illustration 2 - Product- cement. • Since covered railway wagons are not available as and when needed a few cement manufacturers are modifying their production. Cement is being sent to the distribution centres in a granulated form so that open wagons can be used. Fine grinding is being done prior to the secondary distribution. Packaging decisions as to whether cement should be transported in bulk or in jute bag or in high-density polyethylene bags are also under consideration. • Illustration 3 - Product- two-wheeler The manufacturer is re-examining its distribution network design as well as its warehouse locations to ensure better response times to satisfy customer requirements and lower total product cost by optimising on costs related to primary distribution, secondary distribution, warehouse operations and sales tax. Actor-wise The key actors involved in ensuring an efficient and effective logistics system are: I. Shippers (Users of logistics) II. Suppliers of logistics services a. Carriers- rail, road, air, water, pipeline, ropeway etc. b. Terminal operators – ports, etc c. Warehouse providers d. Freight forwarders III. Government (Regulator of logistics) When there are so many actors there is a need for better coordination among them. The lack of proper coordination leads to inefficient logistics management. If there is a proactive approach by the management logistics costs could be reduced customer services could be improved. In India, the government plays a significant role in logistics management. Some of the important legislations that are related to logistics are: a. The Central Goods and Services Tax Act, 2017 Ashok Mammen V Assistant professor. Page 35.

(36) b. The Central Excise Tariff Act, 1985l c. The Motor Vehicles (Amendment) Act, 2019. d. The Multimodal Transportation of Goods Act, 1993. Inbound Logistics and Outbound Logistics Inbound logistics focuses on the transportation and storage of incoming goods. It is important to understand who is liable to take the financial burden in these transportation contracts when there is a voyage between a seller and buyer. It is also important to decide on the cost of any damage which occurs in transit at various points. Outbound logistics refers to the same for goods going out of a business Most organisations have to manage their outbound logistics (that is, physically distributing the products to the customers from the factory) whereas inbound logistics are limited to the purchasing function. If inbound logistics is managed well there would be better control of production planning and it reduces uncertainties. Well managed inbound and outbound logistics results in cost savings. Directly managed inbound and outbound logistics forms one of the basis for the shift from logistics management to supply chain management. Private vs. Public Sector The nature of ownership of the organisation would influence the objectives of the organisation and hence, logistics management. The choice of modes, transport contracting, responses to socially oriented regulations, location choices, etc., could be on different considerations. In government sector, the Railways, the Public Works Departments, the Water Supply and Sewerage Boards, and the various public sector undertakings such as Electricity Boards, Transport Authorities etc. have to have sound logistics management for both internal management efficiency as well as better services delivery to the public. Single vs. Multiple Plants Certain decisions like allocation decisions, coordination in production planning across plants, product-wise specialisation of plants etc, etc., would be issues of significance in the multi-plant case. Nature of Product. Ashok Mammen V Assistant professor. Page 36.

(37) There could be various sub-dimensions here like, bulk vs. packaged products, perishable vs. non-perishable products, durable vs. non-durable products, single vs. multiple products and industrial vs. consumer products. Handling of bulk products (cement) is quite different from handling packaged products (cosmetics). Shipment size is an important decision for packaged products. In the case of perishable products (fruits), the total time from production to consumption is critical and needs to be minimised while in nonperishable products (stationery), conventional practices of inventory management would suffice. Made to Stock vs. Made to Order Decisions related to inventory, transportation and distribution network are more significant for an organisation in which the products are made to stock rather than made to order. For made to order products, it is usually the scheduling of internal operations (typically using some specialised facilities) that is the main decision area. References:   . . LSCM- textbook by K.Shridhara Bhat Webinar on 'Logistics Management' https://www.cafworldwide.com/blog/whats-the-difference-between-logistics-and-supply-chainmanagement https://hbr.org/2020/03/coronavirus-is-proving-that-we-need-more-resilient-supply-chains ------**------. UNIT: 3 CUSTOMER FOCUS IN SUPPLY CHAIN MANAGEMENT. Customer service dimensions from a supply chain perspective (Order delivery lead time, responsiveness, delivery reliability and product variety), Buyers Perspective, Suppliers Perspective, Stages of Development in Supplier Relations ------CUSTOMER SERVICE DIMENSIONS In a broad sense, customer service is referred to as all the activities occurring at the interface between the customer and the corporation that enhance or facilitate the sale and use of the corporation’s products and services.La Londeand Zinszer (1976) group the elements of customer service into three distinctive phasesof the interface between the firm and its customers, as displayed below in figure-1 Ashok Mammen V Assistant professor. Page 37.

(38) 1. Pre-transaction elements 2. Transaction elements 3. Post-transaction elements. Pre-transaction elements are characterized by non- routine, policy-relatedactivities that require management input due to their significant impact on product sales. The specific elements of pre-transaction customer service include the following: • •. •. •. A written statement of customer service policy—this statement would be based on customer needs, service standards, and report channels in case of service failures. There should be a written statement of customer service policy and the customers should be familiar with it. A firm’s customer service policy, so that they can find recourse when the firm’s service performance levels are not met. Organizational structure—an organizational structure must allow for proper communication and interfaces among functions involved in developing the customer service policy. The names, contact numbers, and email addresses of those individuals should be given to customers for points of contact. System flexibility—is necessary to react to customer complaints in case unplanned events such as inclement weather, labor strikes, earthquakes, fire, floods, and power failure abruptly disrupt the service process.. Ashok Mammen V Assistant professor. Page 38.

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