Quiz 1 Revision PDF

Lecture 1 LO1: SC & SCM What is a SC? ○ All stages involved (directly/indirectly) in fulfilling a customer’s request. ○ Includes manufacturers, suppliers, transport providers, warehouses, retailers, & customers. ○ Focus on upstream / downstream flow....

Lecture 1 LO1: SC & SCM What is a SC? ○ All stages involved (directly/indirectly) in fulfilling a customer’s request. ○ Includes manufacturers, suppliers, transport providers, warehouses, retailers, & customers. ○ Focus on upstream / downstream flow. ○ ○ Includes all activities associated with the flow and transformation of goods from raw material stage to the end user. ○ 4 flows: Forward flow of materials/goods (supplier to consumer) Reverse flow of materials/goods (consumer to supplier) Flow of money (consumer to supplier) Flow of information (both ways) ○ What is SCM? ○ The planning and management of all activities involved in sourcing and procurement, manufacturing, and all logistics management activities. ○ Involves coordination and collaboration with channel partners, which can be suppliers, intermediaries, 3rd party service providers, and customers. LO2: Major SC Risks Poor supplier performance ○ How to predict supplier performance? Financial health Production capability Quality of products Quality of packaging Price On-time delivery Demand Planning Complexity ○ Demand patterns can be changing and influenced by many factors ○ Increased complexity in terms of: Stock keeping units (how many units to store) Customer/supplier locations Transportation requirements (source locally/overseas) Regulations ○ What is optimal number of warehouses? To prevent lost of sales Implications of increasing warehouses? More warehouse → cost of warehouse increases More warehouse → transport cost decreases More warehouse → cost of low sales decreases as company is able to better meet customer demand Global Labour Shortage ○ Increased competition for skilled labours Company might have insufficient labour resources to manufacture goods / deliver services on time Might need to turn to technology such as AI Rising Inflation  ○ Unpredictable price increases ○ More difficult to plan and manage cashflows effectively ○ Price negotiation with suppliers could take more time Volatile Global Economy ○ Poor economy → people spend less ○ Inventories left unsold Complex sanctions and regulations ○ Sanctions on a country, companies need to source from alternative suppliers ○ Might lead to an increase in commodity price Geopolitical risk ○ Wars, Zero-covid policy ○ Disrupts global SC, companies need to source from alternative suppliers ○ Can lead to delay in production/delivery due to long lead times Reputational risk ○ Green washing, impact on company’s image and customer loyalty Natural disasters and climate risk ○ Agricultural sector, perishable goods → disrupt SC Cyber Risk ○ Hacking → lost of company data, disrupt SC operations LO3: GSCF (vry Important!!!) Customer Relationship Management ○ “Provides structure for how r/s with customers are developed and maintained” ○ Identifies key customers and customer groups ○ Key clients/accounts worked with to improve processes and eliminate non-value-added services ○ Performance reports measure the profitability of customers/groups ○ E.g using tools to track what customers click on the most Customer Service Management ○ “Represent company’s face to customers” ○ Provide customer information such as product availability, shipping dates and order status ○ Provide real-time information to customers → Customer R/S VS. Customer Service ○ r/s does not deal with customers directly. More back office, like gathering data and doing research about customers. ○ Service deals with customers directly, more front office. Demand Management ○ “Balances customer’s requirements with SC capabilities” ○ Forecasting demand & synchronise with production, procurement, & distribution ○ Developing & executing contingency plans when operations are disrupted Order Fulfilment ○ “All activities needed to fulfil customer requirements, and enable company to meet the requests while minimising total delivered costs”  ○ Integration of company’s manufacturing, logistics, and marketing plans ○ Development of partnerships with key SC members Manufacturing Flow Management ○ “Deals with making products and establishing manufacturing flexibility to serve target markets” ○ Obtaining, implementing, & managing manufacturing flexibility in SC and to move products through the plants ○ Manufacturing Flexibility → ability to manage production resources & uncertainty to meet various customers demands or changing trends Supplier R/S Management ○ “Provides structure for how r/s with suppliers are developed & maintained” ○ Develop close r/s with few key suppliers and maintain traditional arm-length r/s with others Product Development & Commercialisation ○ “Developing new products quickly and getting them to the marketplace in an efficient manner” ○ Working closely with customers and suppliers to develop products and bring them to the market Returns Management ○ “Activities associated with returns, reverse logistics within the company and across SC” ○ Effective management of processes enables company to identify productivity improvement opportunities LO4: Key Attributes of SCM Customer power ○ Greater access to information → customers have knowledge → have power over buying decisions ○ SC needs to be fast & agile → respond to changes in demand in terms of volume & variety Long Term Orientation ○ Focus on partnerships with SC members ○ Characteristics of the partnership: High interdependence Shared information Compatible goals Mutual trust Leveraging Technology ○ Allows all SC members to have instantaneous visibility to same data ○ Opportunities for SC to be more proactive → lower inventories and improve profitability Inventory Control ○ Better controlled flow of inventory with fewer expensive inventory lumps along the way  ○ Bullwhip effect → poor inventory control affects all SC members E.g. customers order more → retailers order more → SC members end up ordering more. Can be due to lack of information passed up the SC. Cause wastage in SC. ○ Reduction of the amount of inventory in SC: Smaller, more frequent orders Use of premium transportation Elimination or consolidation of slower-moving products Lecture 2 LO1: Development of logistics from historical & modern perspectives Modern Perspective ○ The range of activities related to the production & distribution of goods for consumption ○ Materials management: activities related to production of parts & finished goods ○ Physical distribution: activities related to making parts & finished goods available for consumption ○ Involves r/s between induced & derived demand: Materials mgmt creates induced demand for physical distribution, goods must be transported, stored, & sold Physical mgmt has derived effect on materials mgmt as distribution capabilities will shape production LO2: Define Logistics and Logistics Management Logistics Definition ○ Acquiring, storing, & distributing materials & products in proper place & quantity Logistics Management Definition ○ Part of SC management that plans, implements, & controls the efficient, effective forward & reverse flow & storage of goods, services, & related information between the point of origin & the point of consumption in order to meet customers’ requirements. Efficiency vs effectiveness ○ efficiency Using least possible resources ○ Effectiveness Increasing revenue / reducing cost through more value-added processes. LO3: Key Activities in Logistics (10 activities) Inputs into logistics ○ Natural resources ○ Human resources ○ Financial resources ○ Information resources Outputs  ○ Competitive advantage ○ Time & place utility Time: being able to provide products/services to customers at the time they demand them Place: making products/services easily accessible to customers ○ Efficient movement to customer ○ Proprietary asset Customer service ○ Set the level of output and degree of readiness of the logistics system ○ Logs cost increase when customer service lvl increase ○ Can split into 2 parts Fulfillment (goals) Order: right product & qty Delivery: right location & time Quality: right condition Cost: right price Demand (operations) Transportation: handling & packaging Inventory: production scheduling, warehousing Orders: sales & purchases Demand forecasting ○ Estimating product demand for a future time period Marketing: forecasts customer demand based on promotions, pricing, competitions….. manufacturing : forecasts production requirements based on marketing sales demand forecasts & current inventory lvl Procurement ○ All related activities needed to acquire raw materials, work-in-process, & finished goods from outside company to support company operations. Inventory management ○ Managing the stocks of goods for resale, support manufacturing, or assembling purposes ○ Associated costs: Cost of carrying products Cost of ordering Cost of stock out → lost sales Transportation management ○ Managing the physical movement of goods from one place to another ○ Involves: Mode selection Route schedule Compliance of customs regulations Carrier selection Warehousing management  ○ Role of warehouse: Part of logs system Stores products between origin & consumption Provides info to company management on the status, condition, & nature of items stored Materials handling: ○ Movement of raw materials, work-in-process / finished gds within a plant or warehouse ○ Involves: Equipment selection Order picking Stock storage & retrieval Packaging ○ To protect product while it’s being shipped & stored ○ Marketing → consumer packaging→ attractive packaging ○ Logistical → industrial packaging → just normal boxes ○ Excessive packaging → costs increase ○ Inadequate packaging Order management ○ Management of activities, between when customer places order and when its received by customer ○ Order cycle components: Order transmittal Order processing Order picking + assembly Order delivery Reverse logs ○ Managing returned goods ○ Understand: Why products returned? How to optimise reverse logs? Managed by 3rd party or internally? LO4: Total Cost Concept 6 major logs costs covering key logs activities Customer service lvl ○ Place: distribution channel decisions Where to sell products? Where to make it available? ○ Product: changes in design / sizes affects type of storage & material handling system ○ Price: pricing product to cover relevant production, marketing, distribution, & admin costs ○ Promotion: availability of highly advertised products when company is running price campaigns Transport costs  ○ Transport mode chosen ○ Vol & weight of shipment ○ Location of markets ○ Domestic / international transport ○ Ease or difficulty of handling product Warehouse costs ○ Cost of warehouse influence the size of warehouse ○ Depends on: Customer service lvl Size of markets Number & size of products Degree of automation Order processing / info costs (basically the admin costs) Related to: Order processing Distribution communications Forecasting demand Lot qty costs Due to procurement & production capabilities Vary with changes in order size or frequency Inventory carrying costs ○ Capital costs Inventory investment ○ Inventory service costs Insurance taxes ○ Storage space costs Warehouse ○ Inventory risk costs Obsolescence Damage Shrinkage Relocation costs Lecture 3 Aims of procurement ○ Organise reliable & uninterrupted flow of materials ○ Work closely with different departments ○ Find good suppliers, work closely with them, & develop beneficial r/s ○ Buy right materials and ensure acceptable quality ○ Negotiate good prices & conditions ○ Keep stocks low ○ Move materials quickly through supply chains  ○ Be informed of price increases, new products & scarcities Procurement process ○ 6 steps: Needs analysis Identify / re-evaluate needs Define & evaluate user requirements Make or buy decision Make in-house or buy from outside suppliers Purchase type Type of purchase needed to satisfy user’s needs ○ Straight rebuy: same qty/type ○ Modified rebuy: change in existing supplier or input ○ New buy: new requirements Select vendor / supplier Conduct market analysis Identify all possible suppliers Pre-screen all possible sources Re-evaluate remaining supplier base Choose suppliers → single or multi sourcing ? Product / service delivery Post purchase performance evaluation Once product / service delivered, must evaluate supplier performance Take corrective actions if expectations not met Supplier selection criteria ○ Capability Production capability Technical capability Corporate governance Labour relations ○ Quality of products Technical specifications Chemical & physical properties Design Product life Ease of repair & maintenance ○ Reliability On-time delivery Performance Warranty & replacement policies ○ Risk Cost risk → sudden increase in price? Potential for supply uncertainty Lead time risk & uncertainty  ○ Financial Price of products → does it meet company’s budget? Financial stability → is supplier financially stable? ○ Desirable qualities Attitude & cultural compatibility Training aids for employees → teach employees how to use products Packaging → is it sufficient? location → local / international ? Single sourcing ○ Advantages: Stronger r/s between customers and suppliers Commitment of all parties in making r/s successful EOS & price discounts with large orders Easier communication, reduced admin for regular orders Less variations in materials and supply Easier to keep requirements, conditions confidential ○ Disadvantages: Harder negotiation Vulnerability of supply chain Might not be aware of new innovations other suppliers are offering Multi-sourcing ○ Advantages: Competition between suppliers reduce prices Less chance of disrupted SC, can switch suppliers Deal more easily with varying demands Access to wider knowledge & info Encourage innovation & improvement Does not put all eggs into one basket ○ Disadvantages: Higher transaction costs Transport Admin Need for effort for QC Variations in quality & standard of materials received Ethical sourcing ○ Sourcing products in sustainable & responsible way ○ Consider triple bottom line → people, planet, profits ○ 4 factors to consider: Diversity → minority & women rights Environment → emissions, waste reduction Human rights → child labour Safety → safe operations ○ Why important? Increase in global interest  Can affect company reputation & image Can affect customer purchase decisions Legal & regulatory compliance Lecture 4 Costs affected by warehousing when warehouses increase ○ Inventory costs Increases as companies usually stock minimum amt of all products at every warehouse location ○ Warehousing costs Increases as number of warehouses increase → more rent, money needed ○ Transportation costs Warehouses nearer to customers and market area, transport distance & costs decrease ○ Cost of lost sales Increase in warehouse → increase in products qty and proximity to customers → cost of lost sale decrease Warehouse vs Distribution Centres ○ Warehouse Supply driven (storage) Buffer function (inventory holding) Inventory stored for wks / months Goods owned by supplier or producer Consolidation of goods To cope with unforeseen demand Limited added value outside storage ○ Distribution centres Demand driven (throughput) Fulfilling orders Inventory stored for days / wks Goods owned by distributor or customers Consolidating, deconsolidating, sorting goods load or changing load unit Assembly, packaging, light manufacturing Coping with stable & predictable demand Characteristics of warehouses / DCs over the yrs:  ○ Uses of warehouses ○ Consolidation Finished goods ○ Break bulk → large shipment split into shipments for multiple customers ○ Product mixing Company stock up different products & variations Normally when customers place orders, they want a mixture Product mixing leads to efficient order filling ○ Supply mixing Consolidation of raw materials or semi-finished goods Reduces transportation costs Widely used in materials requirement planning (MRP), or JIT systems ○ Cross docking  Products from different suppliers arriving inbound are directly moved to outbound awaiting trucks to deliver to customers. Arrive warehouse → sorted → delivery out ○ Returned goods centre Receive goods returned by customers Classification of warehouses ○ Stage in supply chain Raw material warehouse Work in process Finished goods Overflow warehouse → hold seasonal inventory Home delivery DC Retail DC Omni channel DC → deliver to mix of home & retail ○ Geographic area ○ Product type ○ Function Inventory holding / sortation ○ Ownership By company or 3PL ○ Company usage For 1 company or shared ○ area/height/euqipment Types of warehouses ○ Public Used for fluctuating demand or seasonal needs Can be rented short / long term No capital needed No labour responsibility Offers value-added services: Pick & pack Inventory management transportation ○ Private Owned long term by company Demand patterns stable High fixed costs Can have control over storage needs ○ Bonded AKA zero GST warehouse Imported dutiable items stored, before taxes and duties are paid for Gov owned Operated by the state Private  Can imported goods belonging to clients / company own goods ○ Contract Less ex than private but more ex than public Mutually beneficial agreement ○ FTZ VS Bonded warehouse Types of racks and shelves (LOOK AT SLIDES PICTURES AND THE ARROWS) ○ Block stacking ○ Mobile stacking ○ Adjustable pallet racking ○ Narrow aisle racking ○ FIFO ○ LIFO Lecture 5 Extension of services by shipping lines done through: ○ Horizontal integration Done through internal growth, mergers & acquisitions, alliances ○ Vertical integration Shipping companies extend their services through internal growth & acquisitions in 3 main areas: Container terminals Provision of intermodal services Provision of logistics services Carrier Tiers and their characteristics:  ○ 3PL VS 4PL ○ 3PL “External suppliers who performs all or part of a company’s logistics functions” Can be divided into 5 categories: Transport based Warehouse based Forwarder based Financial based Info based Advantages: Cost savings ○ Quality 3PL can help improve efficiency, cut costs, & add value ○ Can help to negotiate better rates with carriers with their collective order volumes & frequency ○ Save companies from costly errors with their expertise Access to expertise ○ Have knowledge relating to transportation, documentation, import & export, customs, & international shipping regulations ○ Latest industry best practices & developments in technology Focus on core competencies  ○ Allows companies to focus on core capabilities instead of spending time & resources on essential non-core components Scalability ○ When expanding to new region, 3PL in that country have the expertise to help set up business ○ 3PL allows company to respond to changes in demand swiftly & scale resources without added risk Risk mitigation ○ 3PL have experience in dealing with delays & damaged products since logs is their core business Resource network ○ Vast resource network to maximise efficiency Customer satisfaction ○ Improve customer satisfaction ○ Ensure timely pick up and delivery, qualified drivers Disadvantages: Loss of control ○ Company giving up certain amt of control ○ Sharing of info, can make company vulnerable to data breach IT complexities ○ IT services must be interoperable to achieve synchronization between 3PL and company operations Business understanding ○ 3PL have many customers, might be hard to get their attention and support needed Reverse logs complexities ○ During certain periods, goods returned can be higher than normal → delay in processing returns and slow warehouse operations ○ 4PL Same role as 3PL but have broader responsibility & accountability to help customers reach strategic goals Works to: Optimise transport operations Coordinate suppliers Integrate SC technologies Synchronize inbound & outbound logs flows Manage distribution networks Allows companies to entrust entire SC to one provider instead of dealing with multiple providers/partners 3PL VS 4PL ○