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SDM
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Logistics and SCM, Some Takeaways ……
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Materials Management
Logistics……
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Materials Handling
○ Sorting of goods
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Logistics Defined
● Choice of markets
● Procurement
● Inventory management
● Packaging decisions
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Components of LOG Management
Logistics Activities
Input Output
Customer service
Demand forecasting
Distribution • Marketing
• Natural Communications Orientation
Resources Inventory control
(competitive
(land, facilities Materials handling
Order processing
Advantage)
Equipment) • Time and
• HR Parts and service support
• Finance Plants and warehouse selection Place utility
Procurement • Efficient move
• Information
Packaging to customer
Return goods handling
Salvage and scrap disposal
Traffic and transportation
Warehouse and storage
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Logistics and Marketing
● Interface on:
● Getting the order, preparing the invoice, picking and packing the
goods and despatch
● Quality, speed and accuracy of the order processing function
determines the ‘value’ of the logistics function
○ Price master – details of the prices for the items to be despatched to customers
○ General data base – customer quotations, customer sales history and open sales
orders
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Benefits
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Source: Michael Porter
The Value Chain
S Company Infrastructure
U
P Organisation, people, methods
margin
P
Systems & technology
P
O
R Procurement
T
margin
Primary activities
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Logistics Strategy
● Corporate strategy defines the business the company wants to be in
● The marketing strategy decides the products and markets to be focused
on
● The distribution strategy decides how the company will ‘reach’ its
customers/markets
● The distribution strategy includes the physical distribution and channel
management
● Logistics Strategy Based On…
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Logistics Strategy Based On…
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Logistics Plan Outline
Strategic Operational
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Logistics for Rural
○ Producers of agricultural produce and the users of consumer products are dispersed
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Supply Chain Management
● Business context:
○ Globalization of the market place
○ Advances in technology
○ To reduce costs
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Logistics and SCM
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Supply Chain Integration
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Supply Chain Integration
Customer Analysis
Order Fulfillment
Purchasing/Supplier
Partnering
● Based on the principle to produce more and do more with minimum resources
○ Meant to create value and reduce waste for the end customer
● Components of lean supply chain: developing lean systems in the suppliers
and the procurement process, warehousing and transportation practices
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Benefits of a Lean SC
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SC Agility – Factors
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6 Sigma in Supply Chain
● 6 Sigma means quality level of 3.4 defects per million. Operational issues to
be tackled for SC become 6 Sigma compliant:
○ Late delivery of materials from suppliers
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Benefits of a 6 Sigma Supply Chain
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Service Level Improvements
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Information Technology in Supply Chain
● Software to provide:
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Leading Vendors for SCM Solutions
● SAP
● Oracle
● JDA software
● Manhattan Associates
● Epicor
● IBM
● Descartes Systems
● Infor
● Highjump software
● GT Nexus
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IT Systems for SCM
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IT Systems for SCM
● Bar codes – popular and cost effective way of tracking items along the
supply chain. Improved further with QR Codes
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Q R Codes
● Machine readable code using black and white squares which store URLs or
any other information
● Can be read by a camera in a smartphone
● Compared to bar codes, QR codes can store more data and can be read
faster
● Uses: item identification, product tracking, time tracking, documentation
management
Inventory… 32
Why Carry Inventory?
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Functions of Inventory
○ Material requirements for an operation and the output from the previous operation
○ Parts and materials to begin an operation and the suppliers of these materials
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Factors Which Drive Inventory
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Categories of Inventory
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Categories of Inventory
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Types of Inventory
● Obvious….
○ Raw materials
○ Work-in-process
○ In-transit, pipeline
Performance measures…
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Performance Measures
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Types of Inventory Systems
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Types of Classification
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ABC Inventory Analysis
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Inventory Related Costs
● Stock-out costs
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Approaches for Controlling
Inventory
● Continuous review:
○ Safety stocks and forecasting methods
Warehouse management…
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Stores Management Objectives
● Controlling inventory
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Functions
Warehouses
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Purpose of Warehousing
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Reasons for Warehousing
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Warehouses
● Support manufacturing
● Mix products from multiple facilities for shipment to a single customer
● Break-bulk
● Aggregate
● Used more as a ‘flow-thru’ point than as a ‘hoarding’ point
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Distribution Warehousing
○ Production positioned
○ Intermediately positioned
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Distribution Center
● Warehouse designed to speed the flow of goods and avoid unnecessary
costs
● Speeds bulk-breaking to avoid inventory carrying costs
Market positioned..
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Market Positioned
● Warehouses located nearest to the final customer
○ Transportation costs
○ Order size
Production positioned….
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In between…
Production Positioned
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Intermediate Positioned
● Mid point locations between the final customer and the producer
● High customer service levels possible even if products made in number of
units
Transportation management….
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Transportation
Principles….
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Transportation Principles
● Continuous flow
● Standardisation
Process….
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The Transport Planning Criteria
● Selecting mode
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Cost Factors
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Customer Service Factors
● Consistency, dependability
● Transit time
Reverse logistics…
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Comparison of modes……
Reverse Logistics
○ Stringent legislation
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Advantages of Rail
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Disadvantages
Road transport…..
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Road Freight Advantages
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Disadvantages
Air transport….
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Air Transport Advantages
● Faster mode
● Reduction in cost particularly inventory
● Broad service range
● Increasing capabilities
● Disadvantages:
○ High cost
Water transport….. 65
Water Transport
● Advantages:
Pipeline….
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Pipeline Movement
● Advantages:
○ Reliable, continuous, all weather transport
○ Economies of scale – double the throughput for only 30% additional cost
● Advantages:
○ In hilly or inaccessible areas
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Carrier Selection
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Chart of Relative Merits
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Key Learnings
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Key Learnings
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Key Learnings
● Inventory directly supports customer service but also adds to the cost
and has to be managed carefully
● Warehousing provides the place utility and works as a balance
between production and meeting customer needs
● Transportation supports the place and time utility and uses different
modes to reach the products to the consumer
● Modern day supply chains integrate the operations of a firm, its
suppliers and customers
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Key Learnings
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Key Learnings
○ Data warehousing
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