Managing Supply Chain PDF

MANAGING SUPPLY CHAINS Unit 7: Logistics and Supply Chain  Introduction ➔ Supply Chain - represents all the organizations and steps involved in producing a product and delivering it to its final customers. ➔ Every business relies on others to produce and distribute its...

MANAGING SUPPLY CHAINS Unit 7: Logistics and Supply Chain  Introduction ➔ Supply Chain - represents all the organizations and steps involved in producing a product and delivering it to its final customers. ➔ Every business relies on others to produce and distribute its product. ◆ Example - suppliers of raw materials, and parts, machinery, energy, labour requirements services, financial services, transportation and retail outlets, etc.  Logistics Flow Chart 01 03 Right 05 Right Quantity Place Right Right Right Product Condition Time 02 04 Logistics Flow Chart 06 Right Price Right Customer 07  Components of Logistics ➔ Logistics - the process of organizing and managing the flow or movement of unfinished, semi finished and finished goods between businesses and to the final consumer. ➔ Involves the management of supply chains as well as planning, organizing, and controlling the flow of goods between their different stages of production and the distribution of the finished product to their end users.  Managing Forward and Reverse Flows of Good ➔ Logistics Management - governs the flow of goods, storage of goods and related services and information between businesses, within a supply chain and between the producer of the finished product and the final consumer.  Managing Forward and Reverse Flows of Good ➔ Forward logistics refers to the process of moving goods from the manufacturer to the end consumer. This includes: ◆ Production: Manufacturing of goods. ◆ Storage: Warehousing of finished products. ◆ Distribution: Transportation of goods to retailers or directly to consumers. ◆ Delivery: The final step where products reach the end customer.  Managing Forward and Reverse Flows of Good ➔ Reverse logistics - the process of moving goods from the end consumer back to the manufacturer or distribution center. This includes: ◆ Returns Management: Handling products that customers return. ◆ Refurbishment: Repairing or upgrading returned products for resale. ◆ Recycling: Processing products to recover materials for reuse. ◆ Disposal: Safely disposing of products that cannot be reused or recycled.  Warehouses ➔ Warehouses - a building used for storing goods used by producers, exporters, wholesalers, customer officials, distributors and many more. ➔ They often have specialized equipment for moving goods, such as forklifts and cranes. ➔ Can be owned, rented, and leased to suit their needs. ◆ Eg - To be closer to customers or transportation hub (sea port, airport or railway station)  Warehouses Warehousing involves the inbound flows of goods and the outbound flows of goods. ➔ Inbound flow of goods- in the product setting will include raw materials and parts which need to be stored so that they can be easily moved on to the production process. ◆ Some of these items may need specialized storage facilities (such as refrigeration to prevent spoilage of foods) ➔ Outbound flow of goods - comes after the production process when goods need to be moved to a location in the warehouse where staff can prepare orders for customer. ◆ Picking - pulling finished products from the warehouse to put together an order to pack and label for transportation to the customer.  Just In Time ➔ Just in time - allows goods to arrive just before they are needed in the production process, so minimizing storage costs.  Impacts of Managing Warehouses on Profitability Storing Large Quantities of Raw Storing Only What is Needed Materials Businesses can prepare for If the business can store increased demand for their only what it needs, it can goods through storing the have cash available to extra raw materials needed invest in other areas. in their warehouse.  Impacts of Managing Warehouses on Profitability Storing Seasonal Products Grading and Conditioning Some goods need to be Warehouses fill the gaps packed and graded and between when the demand conditioned before they can is reduced and when they be sold. (some types of rum are required by customers. and coffee)  Impacts of Managing Warehouses on Profitability Collateral for a Loan Minimizing Risk The goods is a warehouse Perishable goods can be have a dollar value. kept in cold storage to They can be used by the prevent damage. owner of the goods as Good can be insured, to collateral for a loan based minimize risk of fire, theft or on the value stored. accidental damage.  Insuring Risks in Production, Storage & Distribution ➔ There are many risks involved in the production, storage and distribution of goods. ➔ Businesses need to insure themselves against all losses, since it can affect the business financially when they are unable to deliver due to the following issues. ◆ Eg - Vandalism, floods, fires, natural disasters, theft, etc… ➔ Good logistics management requires contingency planning for when thing go wrong. ◆ Eg - installing generators, identifying and using storage facilities in different locations, hiring haulage companies to provide additional transportation when required. Types of Transport and Logistics Insurance Warehouse Storage Risk Theft and Insurance Insurance Accident Insurance Vehicle Land and Marine Insurance Cargo Insurance  Flow of Information for Logistical Management ➔ Logistics managers rely on advanced information systems to manage and track goods. ➔ Good Logistics management need to be: ◆ Up to date, ◆ Easily accessible and, ◆ Accurate information ➔ On the flow of parts and other production materials, stocks of work in progress and finished goods and on customer orders. ◆ Eg - If a shipment has not arrived on time, you need to be able to find out where it is,why it is late and when it will be delivered.  Flow of Information for Logistical Management ➔ The need for a well-designed information system for logistics management, which will give you a competitive advantage in business. ◆ This will help in determining what the customer wants, stock levels for production and when more products should be produced or shipped. ➔ Modern information communication technologies have greatly improved the collection and retrieval of accurate real-time information requirement for logistics management. ◆ This will improve supply chain coordination and reduce distribution risks and costs.  Activities in Supply Chain Operations Movement & Storage of Raw Transformation of Natural Resources Materials Raw materials received must be moved to a secure Processing of raw material location and managed until to create parts and they are needed by materials that can be used production. in the production of other Must be stored in a goods. appropriate climate, with clean and secure conditions.  Activities in Supply Chain Operations Processing of Raw Materials & Storage of Work-in-progress Components into Finished Goods & Finished Goods Work-in-progress goods and partially finished foods have Converting the raw yet to be completed and materials and components often need to be stored into finished goods. before they are completed. Completed items may also be stored before distribution. Activities in Supply Chain Operations Delivery of Finished Goods Movement of finished goods from producers to their final consumers. Moving the goods into storage using wholesalers, and then to retail outlets for sale or to directly to consumers.  Process of Distribution ➔ Distribution - getting the right product to the right customers, in the right place, in the right quantities, and at the right time, and as quickly and as cheaply as possible. ➔ Ensures that customer can purchase the product when and where they want to. ◆ If the product is not available, they may quickly change to another available product.  Distribution Chains or Channels ➔ Distribution Chain - consists of all the people, operation and organizations involved in the physical movement and transfer of goods, from producers to their final consumers. ➔ Typically involves moving a finished product from its producer to the final consumer through intermediaries called wholesalers and retailers.  The Links in a Typical Distribution Chain 01 02 03 04 Producer or Wholesaler Retailer Final Consumer Manufacturer  Wholesaler ➔ Wholesaler- buys products in bulk from manufacturers, stores them, and then breaks up the bulk into smaller quantities for retailers to buy. ◆ Offer significant advantages to both the manufacturer and the retailer.  Functions and Benefits of Wholesalers ➔ Wholesalers deal with the cost of storing large quantities of goods instead of the manufacturer. ➔ Promotes the product to retailers. ➔ Cost of warehousing passed on to wholesalers. ➔ A ‘one stop shop’ for retailers, who they can purchase a variety of products from and at discounted prices. ➔ Conveniently located within communities, easily accessible for retailers. ➔ Can offer credit to retailers and provide transport to retailers’ locations. ➔ Provides feedback to manufacturers due to high level of interaction with retailers.  Retailer ➔ Retailer - a business organization that specializes in selling products to consumers. ◆ Many large retail organizations own multiple outlets and buy products from a variety of different stores, and may also own online stores.  Functions and Benefits of Retailers ➔ Stocks a variety of goods, with benefits to consumers. ➔ Located closer to consumers, making accessibility easy. (Eg- online) ➔ Close interaction with customers, thus, providing valuable information. ➔ Provides advice to consumers on their purchases. ➔ Offers repackaging of goods in smaller quantities from the wholesaler, suitable for consumers. ◆ Eg- Beans, rice, cheese, etc… ➔ May sell goods on credit to the consumer. ➔ May arrange for delivery of goods to the consumer. Alternative Distribution Channels  Channel #1 Manufacturer Manufacturer to Consumer The manufacturer sells directly to the customer. Gives control to the manufacturer to set prices to the customer and the amount to be sold. ○ Eg - Internet selling, mail, orders, factory outlets. Consumer  Channel #2 Manufacturer Manufacturer to Retailer to Consumer The manufacturer sells to the retailers, who sells goods to the customer. Has on intermediary, usually a retailer. The size of the retailer limits the amount Retailer of good available. ○ Eg- Ulta Beauty, Forever21 Consumer  Channel #3 Manufacturer Manufacturer to Wholesaler to Consumer Offers the variety of a retail store, but with the discounted prices and bulk quantities. Wholesaler Customers can purchase in bulk. Challenge in customer service due to fewer workers. Eg- Sam’s Club Consumer  Channel #4 Manufacturer Manufacturer to Wholesaler to Retailer to Consumer Wholesaler A wholesaler stores large quantities of goods from several manufacturers and then delivers to retailers in smaller quantities. Retailer This is useful for small retailers. Eg- Kraft Foods, Sony Consumer