Supply Chain Revision PDF

Logistics management : is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requireme...

Logistics management : is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” The management process which integrates the movement of goods, services, information, and capital, right from the sourcing of raw material, till it reaches its end consumer is known as Logistics Management. The objective behind this process is to provide the right product with the right quality at the right time in the right place at the right price to the ultimate customer. The logistic activities are divided into two broad categories they are: Inbound Logistics: The activities which are concerned with procurement of material, handling, storage and transportation Outbound Logistics: The activities which are concerned with the collection, maintenance, and distribution or delivery to the final consumer. Supply chain management (SCM) is management of the flow of goods, data, and finances related to a product or service, from the procurement of raw materials to the delivery of the product at its final destination. Supply Chain Management (SCM) is a series of interconnected activities related to the transformation and movement of raw material to the finished goods till it reaches to the end user. It is the outcome of the efforts of multiple organizations that helped in making this chain of activities successful. Difference Between Logistics and Supply Chain pg. 1  The Increased Importance of Logistics A reduction in economic regulation Changes in consumer behavior Technological advances Advances in retailing Globalization of trade The Systems and Total Cost Approaches to Logistics Systems approach Compatibility between a company’s goals and objectives and major functional area goals and objectives (marketing, finance, production, logistics) Interdependence of functional areas Under marketing concept, focuses on satisfying customer needs and wants thus increased in the number of Stock-keeping units (SKUs) Interdependence of logistics activities or intra-functional logistics Total cost approach Cost trade-offs: changes to one activity cause some costs to increase and others to decrease (E.g. a decrease in transportation costs is often associated with an increase in warehousing costs) Total logistics concept: integration of all activities into a unified whole that seeks to minimize distribution costs in a manner that supports an organization’s strategic objectives. Evolution of Supply Chain Management Relatively young concept—rarely mentioned prior to 1990 Recognition grew when value could be found in coordinating various business functions SCM philosophy: Coordinate not only within organizations, but also across organizations pg. 2  The supply chain concept has evolved since the middle of the 20th Century, with the following developments: 1950–1960s: Distribution broadly represented by haulage industries, with a focus on transport. 1960–1970s: Concept of Physical Distribution developed and the distribution activities were considered the ‘dark continent’ of operations therefore becoming a valid management area. 1980–1990s: The logistics concept in search of cost trade-offs, the search for cost competitiveness continued with emphasis on reduction on stock levels, the use of ICT, and the growth of Third-Party logistics (3PLs) service providers. 1990–2000: Supply chain concept emerging from the need to plan and control all processes from sources through production to distribution to the final consumer. This called for a rethink of business processes, e.g. process re-engineering (BPR), so as to include operations of partners outside organisational boundaries, e.g. partnerships, alliances, etc. 2000–2010: Sustainability of operations has also become a contemporary management issue for logistics and supply chains due to pressures regarding efficient use of resources, global trade and other societal demands. Organisations are continuously searching for improvements in their operations. Managers have sought new ways or techniques of managing their organisations’ operations in order to satisfy demands.Some of these techniques include:  Operations management: focusing more on the internal capability of the organisation to mobilise its resources in the production of goods and services.  Production management: with a focus on production or manufacturing organisations to improve the cost efficiency of manufacturing.  Material Management (MM): focusing more on materials requirements for production, to smooth the flow and availability of raw materials and other inventories in a manufacturing environment.  Logistics management: is the art and science of moving things from one point to another and storing them along the way.  Physical distribution: Refers to the storage of finished product and movement to the customer.  Supply Chain Management (SCM): ‘plans, implements, and controls the efficient, effective forward and reverse flows and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements’ (Fawcett et al., 2007, p. 153). pg. 3  Evolution of Supply Chain Management  Some are more complex than others  Typically, more difficult to coordinate complex supply chains  Complex supply chains may include third-party logistics (3PL) providers  Customers are an integral component regardless of complexity level Use of supply chain facilitators  Third-party logistics (3PL), also known as logistics outsourcing or contract logistics  Any logistics activity not performed in-house is representative of third-party logistics  Common 3PL activities involve inbound and outbound transportation, carrier negotiation and contracting, and freight consolidation  Well-known 3PL providers include DHL Supply Chain, Kuehne and Nagle, DB Schenker, and UPS Supply Chain Solutions Supply Chain includes the following activities: Procurement Manufacture Distribution and waste disposal (recycling) Transportation Warehousing Inventory control Materials handling Order processing, distribution Information processing pg. 4  The generic supply chain begins with the sourcing and extraction of raw materials. The raw materials are then taken by a logistics provider to a supplier, which acts as the wholesaler. The materials are taken to a manufacturer, or probably to various manufacturers that refine and process them into a finished product. Afterward, it goes to a distributor that wholesales the finished product, which is next delivered to a retailer. The retailer sells the product in a store to consumers. Once the consumer buys it, this completes the cycle, but it’s the demand that then goes back and drives the production of more raw materials, and the cycle continues. Upstream supply chain includes all activities related to the organization’s suppliers: those parties that source raw material inputs to send to the manufacturer which are further grouped into ‘tiers’:  First (1st) tier suppliers represent the immediate suppliers of the firm  Second (2nd) tier suppliers represent the suppliers to the first- tier suppliers Downstream supply chain refers to post-manufacturing activities namely distributing the product to the final customer.  First (1st) tier customers are the firm’s immediate customers  Second (2nd) tier customers represent customers of the first-tier customers  Third (3rd) tier customers represent customers of the second-tier customers From the figure below showing the supply chain of “jeans manufacturing”, identify the following: a. upstream b. downstream c. 1st tier supplier d. 2nd tier supplier e. 1st tier customer f. 2nd tier customer pg. 5  Modern Supply Chain Model PUSH products downstream Each activity is managed independently. Little coordinated effort. Inventory is used to buffer between these activities resulting in large stocks of inventories. PULL demand data from downstream using IT systems Produce only what there is demand for Greater visibility on demand and as a consequence inventory / pipeline stocks Synchronized effort between all parties. Greater efficiency with everyone focused on their core competency. At the heart of every organization are the logistics operations that create and deliver products and services. These operations require inputs in order to: produce the right output/product to the right customers to be delivered at the right time at the right location/place in the right condition in the right quantity at the right price pg. 6  Flow is how work progresses through a system. There are three types of main flows that happen in any supply chains: flow of materials/goods, flow of money/cash, and flow of information. 1- Material flow in supply chain management represents the movement of raw materials, components, work-in-progress inventory, and finished goods. Within a company, the movement of goods is regarded as an internal material flow. Materials or goods flow downstream if there is any returns for any reason, there will be a reverse flow of materials/goods in the opposite direction to the forward flow. 2- Information Flows  It is important that information flows in all directions of the supply chain (regular interaction). This aspect is referred to as ‘information sharing’ and is essential if the objectives of a supply chain are to be achieved. pg. 7  Transportation documents Each of these modes of transport has specific documents required for the movement of goods throughout the supply chain operations. These documents specify :  The names of the sender (consignor) and receiver (consignee)  The origin and destination points  The description of the goods to be moved  The freight charges (incoterms)  The responsibilities for payment of freight changes Money flow  Money flows from the consumer upstream in a supply chain until all suppliers have received payment for the goods and services they provided.  SC role is to ensure minimize delays in processing invoices and ensuring accuracy when producing financial-related documents.  In the event of REFUND, money flows downstream. Reverse Flows There are occasions when materials move upstream or in the opposite direction, i.e. from customers to suppliers. Products move upstream for various reasons including: Product recalls for quality or safety reasons Damages Unwanted goods Over-stocks Used packaging for recycling and disposal Reverse flow is another term for reverse logistics in the supply chain which refers to the movement of goods from customer to vendor or at least one step backward up the supply chain. pg. 8  Warehousing Refers to “that part of the firm’s logistics system that stores products (raw materials, parts, goods- in-process, finished goods) at and between points of origin and point of consumption” Why do warehouses exist? Because there is a need to satisfy demand from customers further down the supply chain, warehouses act as a buffer to smooth out differences between the supply and demand for goods and services.  Warehouses facilitaate the regrouping function in a supply chain which involves rearranging the quantities and assortment of products as they move through the supply chain.  List as many reasons as you can, why warehouses need to store inventory?  Provide a suitable buffer to smooth variations between supply and demand  Enable Economies of Scale in manufacturing  Enable procurement savings through large purchases  Cover seasonal fluctuations and peaks  Provide a wide range of different products from different suppliers and locations in one central location  Cover for planned or breakdown supply situations. Warehousing can be provided by:  Warehouses  Fulfillment centers  Distribution centers  Cross-docking facilities 1 - Warehouses  Emphasize the storage of products  Primary purpose is to maximize the usage of available storage space 2 - Fulfillment centers  Focused on e-commerce orders  is a specialized facility or warehouse where third-party logistics (3PL) and eCommerce companies store, process, and fulfill customer orders for their products. pg. 9 3 - Distribution centers  Emphasize rapid movement of products through the facility  Attempt to maximize throughput (defined as the amount of product entering and leaving a facility in a given time period)  There are four basic types of DCs that serve different purposes: 1. Consolidation – Takes in various products from various suppliers and creates consolidated shipments to its customers. 2. Break-bulk – Takes large quantities of a few products and redistributes them in part to various customers. 3. Cross-dock – A distribution center that holds little to no inventory, but merely redistributes the product it receives. 4. Mixing or Order Assembly – May do some or all the other three. It is what people typically think of when they consider the term “distribution center” pg. 10 Cross-docking  Defined as “the process of receiving product and shipping it out the same day or overnight without putting it into storage”3  Key benefits include improved service by allowing products to reach their destinations more quickly as well as reduced inventory carrying costs from less stock because of faster product delivery4 Cross-docking facilities  Is differentiated from distribution centers by the length of time a product is in a facility (24 hours or less for cross-docking facility)  Should be designed with a minimal amount of storage space and truck doors on two or more sides 5 Some important tips!  For fragile items (e.g., art, crockery, glass, and jewelry). ground floor locations are ideal, or at least not on a much higher level.  Layout of eCommerce warehouses should be spread out horizontally.  If hazardous chemicals or materials form part of your cargo, use locations that are peripheral to the city.  Heavy cargo across international borders and use ships needs a strong road or rail network to complete the cargo movement (both inward and outward). pg. 11  Components of a Warehouse Flow/Layout Warehousing process Material handling equipment is any machine or tool that is used to transport, process, store, or package materials. It improves efficiency and can help automate processes that would otherwise require a lot of manual labor, saving you time and money. pg. 12 pg. 13 pg. 14 Transportation  The actual, physical movement of goods and people between two points Intermodal Transportation Refers to transportation when using a container or other equipment that can be transferred from the vehicle of one mode to the vehicle of another mode without the contents being reloaded or disturbed 2 Every part of the process is contracted with different providers. pg. 15 Intermodal Transportation There are two types of intermodal transportation: COFC – Container on Flat Car where containers can be loaded onto a ‘well car’ (also known as a double-stack car or stack car) simultaneously. TOFC – Trailer-On-Flat Car is an intermodal transportation method where the over-the- road or OTR trailer is placed on the well-car directly. Both the COFC and TOFC cut down on manual labor and save up time, effort, and money for shippers. Containers – Moved by mechanical devices (e.g., container crane) – Are measured by TEUs (20-foot equivalent unit) – Allowed for land bridge services Containers – Unit load devices (ULDs) is a pallet or a container which is used to hold or protect loose freight to be shipped via airfreight. – are designed specifically for fuselage Multimodal Transportation is a combination of at least two or more different freight transport modes to move cargo from one country to another. It still falls under one single bill of lading where the carrier is fully liable for the entire carriage even though it’s performed by different modes of transport. The attractiveness of a particular mode depends on the following attributes: 1 Cost Speed Capacity Reach Shipment visibility Reliability Environmental impact pg. 16 Transportation documents Each of the modes of transport has specific documents required for the movement of goods throughout the supply chain operations. These documents specify :  The names of the sender (consignor) and receiver (consignee)  The origin and destination points  The description of the goods to be moved  The freight charges (incoterms- a set of internationally recognized rules which define the responsibilities of sellers and buyers in the export transaction.)  The responsibilities for payment of freight changes What kind of information do those documents encompass? 1. Commercial invoice: Outlining product value 2. Packing list: details the contents, and often dimensions and weight, of each package or container 3. Bill of lading (BoL): (historically used in sea freight) 4. Manifest: cargo, passengers, and crew of a ship, aircraft, or vehicle 5. Declaration/certificate of origin (COO): country origins of product/consignment 6. Preference (movement) certificate: Special requirements for goods (e.g. perishable) 7. Material Safety Data Sheet (MSDS): Document required for hazardous goods 8. Forwarders Certificate of Receipt (FCR) document enables the freight forwarder to provide the consignor with a special document as an official acknowledgement that he has assumed responsibility of the goods. pg. 17 Transportation influences or is influenced by the following logistics activities: Transportation costs are affected by the location of the firm’s plants, warehouses, vendors, retail locations, and customers Inventory requirements are influenced by mode of transportation used Transport mode selected influences packaging, and carrier classification rules dictate packing choice Type of carrier used dictates a manufacturing plant’s materials handling equipment and the design of receiving and shipping docks Order-management philosophy that encourages maximum consolidation of shipments between common points enables a company to give larger shipments to its carriers and take advantage of volume discounts Customer service goals influence the type and quality of carrier and carrier service selected by the seller Transportation Specialists Freight forwarders  is a firm specializing in the arrangement of moving the cargo for a fee on behalf of shippers through different modes of transportation from the origin and/or to destination. Freight forwarders  Give volume discounts to customers shipping large quantities of freight at one time  TL rates less than LTL rates because Shipper loads the goods, and consignee unloads trailer The load goes directly from shipper to consignee without passing through terminals pg. 18  Shippers’ associations Generally non-profit transportation membership cooperatives which arrange for the domestic or international shipment of members' cargo Primarily focused on achieving the lowest rates for members Brokers Freight broker is an intermediary between a shipper and freight service provider within a country’s borders. Customs broker is the intermediary between an importer, or exporter, and a government’s customs department in the country of destination. Can handle both LTL and TL Those handling LTL shipments consolidate them and then give to motor carriers, freight forwarders, or shippers’ associations Third-party logistics companies (3PLs) can store inventory; pick, pack, and ship products; and provide a vital link between manufacturing operations and end customers. Additional services: FTL and LTL freight shipping Freight forwarding Parcel carriers Parcels are packages weighing up to 150 pounds Parcel carriers are companies that specialize in transporting parcels pg. 19 Questions Perhaps the biggest drawback to public warehousing is the inability to provide specialized services. False The systems approach indicates that a company's objectives can be realized by recognizing the mutual interdependence of the major functional areas of a firm. True Cross-docking refers to the process of receiving product and put it into storage before shipping within two days. False Material management involves warehousing, planning, logistics, quality as core activities across all organizations. False Transportation is the actual, physical movement of goods only between two points. False With public warehousing the user rents space as needed, thus avoiding the cost of unneeded space. True Narrower aisles can increase the space utilization of a facility. True One drawback of cross-docking is that it increases the amount of necessary warehousing space. False The general idea behind third-party logistics is that one company allows a specialist company to provide it with one or more logistics functions. True Physical distribution refers to the storage of finished product and movement to the customer. True There are less than five (5) mode of transportation. False The key to the total cost approach is that all relevant cost items are considered simultaneously when making a decision. True Consignors are the receivers of freight. False Airfreight is best suited to transport high-value and high-volume products. False Airfreight is the costliest mode for freight transportation. True The seller assumes title and control of the goods until the goods are receive by the buyer. FOB destination Consignees are. preferred suppliers The process of receiving and shipping of product on the same day. Cross-docking The movement and storage of materials into a firm. Materials Management Information not important and not included on transportation documents. Drivers name With FOB shipping point the buyer assumes title and pay for the transport of the shipment at the point of pickup. Private warehousing is owned by the firm storing goods in the facility. The supply chain management concept originated in what discipline. Logistics Which of the following is not a possible reason for a facility closing? limited competition Refers to the storage of finished product and movement to the customer. Physical Distribution pg. 20