Professional Documents
Culture Documents
Definition of SCM:
Supply chain management (SCM) is the oversight of materials, information, and finances as
they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
Supply chain management involves coordinating and integrating these flows both within and
among companies. It is said that the ultimate goal of any effective supply chain management
system is to reduce inventory (with the assumption that products are available when needed).
Supply chain management flows can be divided into three main flows:
End
customers
Transportation &
storage activities
Information/planning/activity integration
Fig-1.1
The product flow includes the movement of goods from a supplier to a customer, as well as any
customer returns or service needs. The information flow involves transmitting orders and updating
the status of delivery. The financial flow consists of credit terms, payment schedules, and
consignment and title ownership arrangements.
There are two main types of SCM software: planning applications and execution applications.
Planning applications use advanced algorithms to determine the best way to fill an order.
Execution applications track the physical status of goods, the management of materials, and
financial information involving all parties.
By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company's
clients), SCM applications have the potential to improve the time-to-market of products, reduce
costs, and allow all parties in the supply chain to better manage current resources and plan for
future needs.
Increased Supply
chain capabilities
Supply Chain
Relationship Formation
Inventory Management
MRP-I, MRP-II
Fig-1.2
I. During 1950s and 1960s, manufactures were employing mass production techniques to
reduce cost and improve productivity; while relatively little attention was typically paid to
creating supplier partnerships, improving process design and flexibility or improving product
quality.
II. In the 1960s and 1970s Material requirement planning (MRP-I) systems and
Manufacturing resource planning (MRP-II) systems were developed, and the importance
of effective materials management was recognized as manufacturers became aware of the
impact of high levels of inventories on manufacturing and storage costs.
III. In 1980s were the breakout years for supply chain management. Manufacturers utilized just-
in-time (JIT) and total quality management (TQM) strategies to improve quality,
manufacturing efficiency, and delivery times.
IV. Business Process Re-engineering (BPR), process was introduced in the early 1990s and was
the result of growing interest during the time in the need for cost reduction.
PURCHASE OPERATION
SCM
INTEGRATION DISTRIBUTION
Fig-1.3
One of the most crucial issues in purchasing is supplier management. This involves assessing your
supplier’s current capabilities & then figuring out how to improve them. Thus one of the key
activities in supplier management is supplier evaluation. This occurs both when potential suppliers
are being evaluated for a future purchase and when existing suppliers are periodically evaluated for
performance purpose. A closely related activity is supplier certification.
ii. Operation module: once materials components and other purchased products are delivered to the
buying organisation, a number of internal operations elements become important in assembling or
processing the items into finished products, ensuring that the right amount of product is produced
and that the finished product meets specific quality, cost and customer service requirements.
During a calendar year, seasonal demand variation commonly occurs. Firms can predict when
these variation will occur, based on historic demand patterns, and use forecasting techniques to
iii. Distribution module: When products are completed they are delivered to customers through a
number of different modes of transportation. Delivering products top customers at the right time,
quality, and volume requires a high level of planning and cooperation between the firm, its
customers and the various distribution elements or services employed [such as warehousing,
transportation or replacing services]. For services products are produced and delivered to the
customer simultaneously in most cases, so services are extremely dependent upon server capacity
and successful service delivery to meet customer requirements.
Transportation management decisions typically involve a trade off between cost and delivering
timing or customer service. Motor carriers [trucks] are typically more expensive than rail carriers
but offer more flexibility and speed, particularly for short routes. Air carriers are yet more
expensive but much faster than any other transportation modes. Water carriers are the slowest but
are also the least expensive. The desired outcome of distribution is customer service. Through
frequent contact with customers, firm develop customer relationship management strategies
regarding how to meet delivery dates, how to resolve customer complaints how to communicate
with customers and to determine how to determine distribution service required.
iv. Integration module: Activities in a supply chain are said to be coordinated when members of
the supply chain work together when making delivery, inventory, production, and purchasing
decision that impact the profits of the supply chain. If one activity fails or is performed poorly,
then supply along the chain is disrupted which jeopardizes the effectiveness of entire supply chain.
The integration process also requires better internal functional integration of activities within each
of the participants firms, such that the supply chain acts as one entity. One additional integration
topic is the use of a supply chain performance measurement system. Performance measurement
must be utilized across the supply chain to help firms to keep track of their supply chain
management efforts. It is crucial for firms to know whether certain strategies are working as
expected or not before financial drains on the organization.
a) Production: This is typically related to the issues on what to produce, how much to
produce and when to produce.
b) Inventory: Here the decisions and issues may be concerned with how much to make and
how much to store as inventory and where to store these items.
c) Location: A number of locations regarding location such as where to locate plant, where to
locate warehouse.
d) Information: Information is the binding force having critical implications for the supply
chain. Information acts as basis for making various decisions in the supply chain. It also
acts as an integrator.
PRODUCTION INVENTORY
What, how, and when to How much to make and
produce how much to store
INFORMATION
The basis for making these
decision and life line of the
organisation
TRANSPORATION LOCATION
How and when to move Where best to do what
product activity
Fig-1.4
1. Agile manufacturing, JIT, mass customization, efficient consumer response, and quick
responsive are all terms referring to concept that are intended to make the firm more flexible
and responsive to customer requirements and changes.
2. Particularly with tremendous level of competition in almost all avenues of business, firms
are looking today at ways to become more responsive to their customers.
3. To achieve greater level of customer responsiveness, supply chains must identify the end
customers needs look at what the competition is doing and position the supply chain’s products
and services to successfully compete and then consider the impact of these requirements on the
supply chain participants and the intermediate products and services they provide.
4. Once these issues have been adequately addressed among the firm in the supply chain,
additional improvement in responsiveness comes from designing more effective and faster
product and service delivery systems as products are passed through the supply chain and by
continuously monitoring the changes according the marketplace and using the information to
reposition the supply chain to stay competitive.
5. Improving customer responsiveness require firms to revaluate their supply chain
relationships, to utilise business process reengineering, to reposition warehouses, design new
products and services, reduce new product designs cycles, standardize processes and products.
Empower and train workers in multiple skills, build customer feedback into daily operations
and finally link together all of the supply chain participant’s information and communication
systems.
___________________________________________________________
1. Standardization
2. Simplification
3. Specification
4. Value Analysis
5. Ergonomics
6. Just-in-time
Fig-2.1
4. Inventory control: Inventory generally refers to the materials in stock. It is also called the
idle resource of an enterprise. The interval between receiving the purchased parts and
transforming them into final products varies from industries to industries depending on the
cycle time of manufacturer. It is therefore, necessary to hold inventories of various kinds to
act as a buffer between supply chain and demand for efficient operation of the system.
b) Value analysis: Value analysis is concerned with the costs added due to inefficient or
unnecessary specification and features.
Traditionally purchasing was regarded as being a service to production and corporate paid
limited attention to issues concerned with purchasing. However as global competition
intensified in the 1980’s executives realized the impact of large quantities of purchased
materials and work-in-process inventories or manufacturing costs, quality, new product
development, and delivery lead time.
a. The primary goals of purchasing are to insure uninterrupted flow of raw materials
at the lowest possible cost, to improve quality of finished goods produced, and to
optimise customer satisfaction.
c. Purchasing is the crucial link between the source of supply and the organisation
itself, with support coming from overlapping activities to enhance manufacturability for
both the customer and the supplier.
Need
Recognition
Maintenance
of Vendors
Selection of
Supplier
Purchasing
Maintenance Placing
of records Procedure Order
Payment of Follow-up
Invoice
Receiving
&
Inspection
Fig-2.2
1) Recognition of the need: The initiation of the process starts with the recognition of the
need by the needy section. The demand is lodged with the purchase department in the
prescribed Purchase Requisition form forwarded by the authorised person either directly or
through the stores department. The purchase requisition clearly specifies the details, such
as, specifications of materials, quality and the suggested supplier, etc.
2) The selection of the supplier: The process for the selection of the supplier involves two
basic aspects; searching for all possible sources and short listing out of the identified
sources. The important considerations in the selection are the price, ability to supply the
required quantity, maintenance of quality standard, financial standing etc. for the repetitive
orders and for the purchases of low-value, small lot items, generally the previous suppliers
with good records are preferred.
3) Placing the order: Once the supplier is selected the next step is to place the purchase
order. Purchase order is a letter sent to a supplier asking to supply the said material. The
copies of PO are retained by storekeeper, accounts section, inspection department, purchase
department, and by the department placing the requisition.
4) Follow-up of the order: Follow-up procedure should be employed wherever the costs and
risks resulting from the delayed deliveries of materials are greater than the costs of follow-
up procedure, the follow-up procedure tries to see that the purchase order is confirmed by
the supplier and the delivery is promised.
5) Receiving and inspection of the material: The receiving department receives the material
supplied by the vendor. The quantity are verified and tallied with the PO. The receipt of the
1) Capital costs: This is usually an internal cost of funds rate multiplied by the value of the
product. Values such as labour costs, material costs, transportation, etc are added to the
product as it moves along the supply chain; this cost tends to increase as product moves
downstream.
Two-bin system: This system is simple to operate and easy to understand. Notionally, there
are two bins kept full of items. Items from the first bin are used first. The moment the first bin
is exhausted, an order is placed for items and the second bin acts as buffer.
1) ABC Analysis: In this analysis the classification of the inventory is based on annual
consumption and the annual value of the items. We obtain the quantity of inventory items
consumed during the year and multiply it by unit cost to obtain annual usage cost. The items are
then arranged in descending order of such annual cost.
Once ABC analysis has been achieved, the policy control can be formulated as follows;
100
80
60
40
20
A B C
0
20 40 60 80 100
Fig--2.3
a) A-Item: Very tight control, the items being of high value. The control need be exercised at
high level of authority.
b) B-Item: Moderate control, the item being of moderate value. The control need be exercised
at middle level of authority.
c) C-Item: Item being of low value, the control can be exercised at grass root level, ie: by
respective department managers.
2) HML Analysis: In this analysis classification of the inventory is based on unit price of the
items. They are classified as high price, medium price, and low price items.
3) VED Analysis: In this analysis the items are classified based on criticality. They are classified
as vital, essential and desirable.
4) FSN Analysis: In this analysis the classification of items is based on the consumption of the
items. They are classified as fast moving, slow moving, and non moving items.
5) GOLF Analysis: In this analysis the classification of items is done on the basis of source of
supply of the items. They are classified as government supply, ordinarily available, locally
available, and foreign source of supply items.
a.Producing, packaging, moving, storing, repackaging, and delivering products to their final
destination can pose a significant threat to the environment in terms of discarded packaging
materials, carbon monoxide emissions, noise, traffic congestions and other forms of
industrial pollution.
b. As the practice of supply chain management becomes more
widespread, firms and their supply chain partners will be working harder to reduce these
environmental problems.
c.In fact relationships between companies in an integrated supply chain are much more
conducive to taking a more proactive approach to reducing the negative environmental
consequences of producing, moving and storing products as they move through the supply
chain.
The Customer Managed Inventory (CMI):
1) The Customer Managed Inventory (CMI) Model enhances inventory
operations through customer management
a. Product and process technologies: Supplier should have up to date and capable products, as
well as process technologies to produce the material needed.
b. Willingness to share technologies and information
c. Quality
d. Cost
e. Reliability
f. Order system and cycle time: Placing order with a supplier should be easy, quick and
effective. Delivery lead time should be short, so that small lot sizes can be ordered on a
more frequent basis to reduce inventory holding cases.
g. Capacity
h. Communication capability: Supplier should posses a communication capability that
facilitates communication between parties.
i. Location: Geographical location is another important factor in supplier selection. As it
impacts delivery lead-time, transportation and logistical costs.
j. Services: Suppliers must be able to back up their products by providing good services when
needed.
1. Companies want to develop partnerships with the best suppliers to leverage supplier’s
expertise and technologies to create a competitive advantage.
2. Learning more about how an organization’s key suppliers are performing can lead to
greater visibility, which can provide opportunities for further collaborative involvement in
value added activities.
3. A supplier evaluation and certification process must be in place so that the organisation can
identify their best and more reliable suppliers.
4. Providing frequent feedback on the supplier performance can help organizations avoid
major surprises and maintain good relations.
5. One of the goals of evaluating suppliers is to determine if the supplier is performing
according to the buyer’s requirements.
6. An extension of supplier evaluation is supplier certification, defined by the institute for
Supply Management as “an organization’s process for evaluating the quality system of key
suppliers in an effort to eliminate incoming inspections”.
7. Implementing an effective supplier certification is critical to reducing the supplier base,
building long-term relationships, reducing time spent on incoming inspections, improving
delivery and responsiveness, recognizing excellence, developing a commitment to continuous
improvement and improving overall performance.
1) Identify critical products and services: Assess the relative importance of the products
and services from a strategic prospective. Products and services that are purchased in high
volume, do not have good substitute, or have limited sources of supply are considered
strategic supplies.
2) Identify critical suppliers: Suppliers of strategic supplies who do not meet minimum
performance in quality, on-time delivery, cost, technology, or cycle time are targets for
development.
The following are services that can help an organization with order fulfilment:
a. The material user initiates the e-procurement process by entering a materials request and
other relevant information, such as quantity and date needed, into the material requisition
module.
b. Next the material requisition is printed out and submitted to a buyer at the purchasing
department (or submitted electronically).
c. The buyer reviews the MR for accuracy and appropriate approval level.
d. Upon satisfactory verification of requisition, the buyer transfers the MR data to the internet
based e-procurement system and assigns qualified suppliers to bid on the requisition.
e. The product description, closing dates, and bid conditions are specified on the requisition.
f. Suppliers connected to the e-commerce system receives the bid instantaneously while
others can receive faxed bid from service provider
g. Upon closing of the bids, the buyer reviews all the bids tendered through the internet based
e-procurement system and selects a supplier based on quality, cost, and delivery
performance.
h. Finally the purchase order is submitted electronically to the selected supplier if it is
connected to the e-procurement system; otherwise a purchase order is printed and mailed to
the supplier.
1) Time saving: e-procurement is more efficient when; (a) Selecting & maintaining a list of
potential suppliers, (b) processing request for quotation and purchase orders and (c) making
repeat purchases.
2) Cost saving: Buyers can generate more purchases, and the manual task of matching bids to
materials requisition is eliminated. Other cost savings include lower prices of goods and
services since more suppliers can be contacted, reduced inventory costs due to ability to
purchase on a more frequent basis, fewer purchasing staff, lower administrative costs, and
faster order fulfilment.
___________________________________________________________
Production Product
Operation Design
Material Management
Management
Process
Design
Quality Control
Product & Planning
Control
Fig-3.1
a. Demand forecasting is critical to the efficient functioning of the supply chain process.
b. It forms the basis for the planning activities in the supply chain. An accurate forecast
optimizes the inventory level and improves the supply chain's responsiveness.
c. Forecasting is the establishment of future expectations by the analysis of past data, or the
formation of opinions.
d. Forecasting is an essential element of capital budgeting. Capital budgeting requires the
commitment of significant funds today in the hope of long term benefits.
e. The role of forecasting is the estimation of these benefits.
1. Qualitative Methods:
These methods rely on experts who try to quantify the level of demand from the available
qualitative data. The two most widely followed methods are:
i. Jury of execution opinion method: Opinions of a group of experts is called for and these
are then combined to arrive at the estimated demand.
ii. Delphi Method: In this method a group of experts are sent questionnaires through mail.
The responses received are summarised without disclosing the identities. Further mails are
sent for clarification in cases of extreme views. The process is repeated till the group
reaches to a reasonable agreement.
Techniques Routes
Top-down route
Bottom-up route
Quantitative Qualitative
Delphi method
Simple regressions
Consumer Survey
Multiple regressions
Jury of executive opinion
Time trends
Scenario projection
Moving averages
Fig-3.2
2. Quantitative Methods:
.i Trend projection methods: These methods involve determining the trend of consumption
based on past consumption and project future consumption by extrapolating this trend.
.ii Moving Average Method: According to this method, the forecast for the next period
represents a simple or weighted arithmetic average of the last few observations.
.iii Exponential smoothing: In statistics, exponential smoothing is a technique that can be
applied to time series data, either to produce smoothed data for presentation, or to make
forecasts. The time series data themselves are a sequence of observations. The observed
phenomenon may be an essentially random process, or it may be an orderly, but noisy, process.
Collaborative Planning
The CPFR Process
Collaborative
Create Sales forecast Forecasting
Identify exception
Resolve exceptions
Generate Order
Fig-3.3
Planning:--
The enterprise of participating builds up a set of cooperative relation of the instruction policy and
rule. Mainly is for letting to participate of enterprise to each other of be in conjunction with the
cooperation contain consistent consensus and the commitment.
The enterprise commutation of participating is each from of information of enterprise strategy and
the business project with build up the associated business project.
Forecasting:--
Step3 Create Sales Forecast The dealer and supplier together predict the need of the
Step4 Identify Exceptions for consumer, pointing out what condition under will produce the
Sales Forecast exception condition, and then the basis may cause exception
Step5 Resolve/Collaborate on of reason take in to solve, or adjust the project.
Exception Items
Step6 Create Order Forecast The dealer and supplier together predict the order, and draft to
Step7 Identify Exceptions for repair the goods project, similarly, the exception condition
Order Forecast that aims at the possible occurrence takes in to solve.
Step8 Resolve/Collaborate on
Exception Items
Replenishment:--
Predict from order to the creation of the actual order, no matter the order is what manufactory or
wholesaler send out, will consume at first the order predicted.
EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum.
Fig-3.4
h. In the context of systems engineering, capacity planning is used during system design and
system performance monitoring.
i. Capacity planning is long-term decision that establishes a firms' overall level of resources.
j. It extends over time horizon long enough to obtain resources.
k. Capacity decisions affect the production lead time, customer responsiveness, operating cost
and company ability to compete.
l. Inadequate capacity planning can lead to the loss of the customer and business.
m. Excess capacity can drain the company's resources and prevent investments into more
lucrative ventures.
n. The question of when capacity should be increased and by how much is the critical
decisions.
____________________________________________________________________________
4. Distribution in SCM
4.1 Importance of transportation in SCM:
a. Transportation is what allows products to move from point of origin to point of
consumption throughout supply chain, and thus is responsible for creating time utility and
place utility.
b. Time utility or time value is created when customer gets product delivered at precisely
right time, not earlier and not later.
c. The transportation function creates time utility by determining how fast products are
delivered and how long they are held in storage prior to delivery.
d. Thus transportation in a supply chain setting is extremely important in that products must
be routinely delivered to each supply chain partners on time and to correct locations.
e. As mistakes occur in deliveries along the supply chain, more safety stocks must be held
and customer satisfaction for end customer service levels deteriorate eventually causing
higher costs and lower satisfaction for end consumers.
f. To make up for lost time, overnight deliveries are also frequently used, causing
transportation costs to escalate.
g. Thus we can say that value is created for supply chain by transportation
h. It is what effectively links each supply chain partner.
i. Poor transportation management can bring a supply chain to its knees literally, regardless
of the production cost or quality of the products produced.
j. Alternatively, good transportation management can be one of the elements creating
competitive advantage for supply chain.
Legal Forms of
Transportation
Fig-4.1
Transportation services are classified as follows:
a. Common Carriers: They offer transportation services to all shippers at published rates
between designated locations. Common carriers must offer their transportation services to
the general public without discrimination, meaning they must charge the same rates for the
same services to all customers. Because common carriers are given the authority to serve
the general public they are the most heavily regulated of all carrier classifications.
b. Contract Carriers: They are also for hire carriers like common carriers; however they are
not bound to serve the general; public. Instead, contract carriers serve the specific
customers under contractual agreements. Typical contracts are for movement of a specified
cargo for a negotiated and agreed price.
c. Exempt Carriers: They are also for hire carriers, but they are exempt from regulations of
services and rates. Carriers are classified as exempt if they transport certain exempt
products like produce, livestock, coal, or newspaper. The exempt status was originally
established to allow farmers to transport agricultural products or public roads, but today the
status has been broadened to include a number of commodities.
d. Private Carriers: They are not subjected to economic regulations and typically transport
goods for the company owning the carrier. Firm’s transporting their own products typically
own and operate fleets large enough to make the costs of transportation less if the firm
hired the service. Flexibility and control of product movements may also play a role in the
ownership of private carriers.
b. Motor Carriers:
i. Highway transportation can be extremely flexible if a local carrier does not have the exact
type of equipment.
ii. This ability to tailor the service to the specific type of traffic means added convenience to
shipper.
iii. Trucker’s offer both truckload and less-than-truckload service, but most shipments by
highway seems to be small, less-than-truckload variety.
iv. Motor carriers also have the advantage of not being required to build and maintain their
own right of way
v. Quality of service is a constant problem to motor carriers, loss and damage claims tend to
be high, and frequently service is slow due to the necessity of re-handling large volumes of small
shipments at transfer points.
d. Water Transportation:
i. Water transportation within the nation travels along the rivers and canals.
ii. Speed is slow and made even slower when ice or floods clog the waterways; but water can
carry large bulky cargoes.
iii. This bulky cargo consists mainly of coal, petroleum, grain and iron ore.
iv. The capacity of some modes of water transportation is quite large.
v. Whether continues to be a problem, like storms, icefall etc.
e. Air Transportation:
i. Air, by whatever type of airline, is generally considered a premium means of
transportation.
ii. Air transportation is fast, but the freight rates are correspondingly high.
f. Intermodal Transportation:
i. Intermodal transportation or combination of the various transportation modes is becoming
an extremely popular method of transportation and makes the movement of goods much
more efficient.
ii. Most large transportation service companies today offer one-stop, door-to-door shipping
capabilities—they transport good for one price, then determine the best intermodal
transportation arrangements to meet customer requirements as cheaply as possible
b. Value-of-service Pricing:
i. In this type of pricing, the carriers price their services at competitive levels the market will
bear.
ii. Prices are thus based on the level of competition and the current level of demane for each
service.
iii. This is profit-maximizing pricing approach, if the carrier has a service that is in high in
demand with little competition, prices will tend to be quite high.
iv. As other carriers notice this profit potential of this service, competition eventually increases
and prices fall.
v. As the level of competition increases, carriers seeks way to reduce their costs to maintain
profitability.
c. Pricing Negotiations:
i. Negotiations tend to be based on the carriers fixed and variable costs.
ii. To maintain an equitable partnership, prices are negotiated that allows carriers to cover their
fixed and variable costs and make a reasonable profit.
d. Rate Categories:
i. Carriers prices or rates can be classified a number of ways, line haul rates—are the charges
for moving goods to a non local destination; these can be further classified as class rates,
exception rates, commodity rates, and miscellaneous rates.
ii. Class rate are based on particular class of the product
b. Reliability:
1) Shorter transit time results in lower inventories, while more reliability causes lower
stock-out costs.
2) Consequently, if the transit time is not consistent, the shipper must increase
inventories above the level that a consistent transit time would require.
3) The extended lead time involved in long sea passage are forcing companies to use
the more expensive air freight option, but in the context of inventory holding cost,
potential lost revenue and market flexibility, the increase freight charge may be
worthwhile expense.
4) To achieve the benefit of a reliable transport operation, there is a agreement that
closing the “lead time gap” is vital.
5) The lead time gap can be cut down by reducing the supply chain processes through
effective design and production integration.
c. Relationships:
1) The traditional approach to transport has resulted in firms separating
demand-generation activities, such as advertising and promotion, from supply activities
such as production and transport.
2) However there is an agreement that this separation has allowed transport
management to remain focused on functional efficiencies in isolation from benefits
derived from integration with the rest of the supply chain.
Fig-4.2
Following are the factors required for the location of plant in case of all type of organisations;
Controllable factors:
a.Proximity of markets
Uncontrollable factors:
a.Govt. Policy
b. Climatic condition
c.Supporting industries
d. Community attitude
e.Community infrastructure
Specific factors:
a. Favourable labour climate
b. Quality of life
c.Proximity of suppliers and resources
d. Utilities, taxes, and real estate costs
e.Location of competitors
4.9 Warehousing:
a.Firms hold inventories for a number of reasons, wherein warehouses are used to support
purchasing, production and distribution.
b. Firms order raw materials, parts, and assemblies, which
are typically shipped to warehouse location close to buyer’s facility and then eventually
transferred to the user-facility as needed.
c. In a retail setting the warehouse may be regionally located, with the retailer receiving the
bulk orders from many suppliers, breaking these down and reassembling outgoing orders for
delivery to each retail location, then using private fleet of tucks to move the goods order to
the retail locations.
d. Similar distribution centres are used when manufacturers
deliver bulk shipments to regional market areas, then break these down and ship outgoing
order quantities to customers.
e.The different types of warehouse facilities available are as follows;
Private warehouses: They are
warehouses owned by the firm storing the goods. For firms with large volumes of
goods to store or transfer, private warehouses represent an opportunity to reduce the
cost of warehousing. Private warehousing can also enable the firm to better utilize its
workforce and its expertise in terms of transportation and warehousing activities.
Public Warehouses: They are owned
by for profit organisations that contract their services to other companies. Public
warehouses provide a number of specialized services that firms can combine to create
customized services for various shipments and goods:
i. Break-bulk
ii. Re-packaging
iii. Assembly
iv. Quality Inspections
v. Material handling, equipment maintenance
vi. Storage
Purpose
Vehicle Scheduling is part of the component Transportation Planning and Vehicle Scheduling
(TP/VS). This component enables the transportation planner to optimally use available capacities
of trucks, trains, ships, and airplanes with the goals of more efficiently planning loading capacities
and lowering costs, since most customers nowadays depend completely on external transportation
companies for optimum transportation (which means deliveries that are on time and cost saving).
Integration
Within Transportation Management, the component TP/VS includes the tactical and operative
planning area, which is enhanced for transportation by components of the Logistics Execution
Systems (LES) area. In this way, deliveries and shipments are planned in transportation planning.
After they are released from TP/VS, automatic deliveries and shipments can be created in LES. For
this transferred data, make settings in APO Customizing by choosing Advanced Planner and
Optimizer (APO) Transportation Planning/Vehicle Scheduling (TP/VS) Interfaces.
In the APO System, the areas TP/VS, Global ATP and Production Planning are tightly integrated.
Features
a.Reverse logistics stands for all operations related to the reuse of products and materials.
b. It is "the process of planning, implementing, and controlling the efficient, cost effective
flow of raw materials, in-process inventory, finished goods and related information from the
point of consumption to the point of origin for the purpose of recapturing value or proper
disposal.
c. More precisely, reverse logistics is the process of moving goods from their typical final
destination for the purpose of capturing value, or proper disposal.
d. Remanufacturing and refurbishing activities also may be included in the definition of
reverse logistics."
e.The reverse logistics process includes the management and the sale of surplus as well as
returned equipment and machines from the hardware leasing business.
f. Normally, logistics deal with events that bring the product towards the customer.
g. In the case of reverse, the resource goes at least one step back in the supply chain. For
instance, goods move from the customer to the distributor or to the manufacturer.
h. In today's marketplace, many retailers treat merchandise returns as individual, disjointed
transactions. "The challenge for retailers and vendors is to process returns at a proficiency level
that allows quick, efficient and cost-effective collection and return of merchandise.
i. Customer requirements facilitate demand for a high standard of service that includes accuracy
and timeliness.
j. It’s the logistic company's responsibility to shorten the link from return origination to the time
of resell."
k. By following returns management best practices, retailers can achieve a returns process that
addresses both the operational and customer retention issues associated with merchandise
returns.
l. Further, because of the connection between reverse logistics and customer retention, it has
become a key component within Service Lifecycle Management (SLM), a business strategy
aimed at retaining customers by bundling even more coordination of a company's services data
together to achieve greater efficiency in its operations.
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a.The bullwhip effect is the magnification of demand fluctuations, not the magnification of
demand.
b. The bullwhip effect is evident in a supply chain when demand increases and
decreases.
c.The effect is that these increases and decreases are exaggerated up the supply chain.
d. The essence of the bullwhip effect is that orders to suppliers tend to have larger
variance than sales to the buyer.
e.The more chains in the supply chain the more complex this issue becomes. This distortion of
demand is amplified the farther demand is passed up the supply chain.
f. Because customer demand is rarely perfectly stable, businesses must forecast demand to properly
position inventory and other resources.
g. Forecasts are based on statistics, and they are rarely perfectly accurate. Because
forecast errors are a given, companies often carry an inventory buffer called "safety stock".
h. Moving up the supply chain from end-consumer to raw materials supplier, each
supply chain participant has greater observed variation in demand and thus greater need for
safety stock.
i. In periods of rising demand, down-stream participants increase orders. In periods of falling
demand, orders fall or stop to reduce inventory.
j. The effect is that variations are amplified as one move upstream in the supply chain (further from
the customer).
k. The causes can further be divided into behavioral and operational causes:
i. Behavioural causes:
Misuse of base-stock policies
Misperceptions of feedback and time delays
Panic ordering reactions after unmet demand
Perceived risk of other players' bounded rationality
Fig-5.1
c.Align supply chain strategies with key supply chain process objectives:
Once the overriding strategy has been identified for each of the supply chain end
products, managers need to identify the important processes linking each of the primary
supply chain partners and establish process objectives to assure that resources and effort are
effectively deployed within each firm to support the overall end-product strategy.
The key supply chain processes are as follows:
i. CRM
ii. Customer Service Management
iii. Demand Management
iv. Order Fulfilment
v. Manufacturing Flow Management
vi. SRM
5.3
Fig-6.1
e. The SCOR model has been developed to describe business activities associated with
all phases of satisfying customer demand
i. Level-1: It provides definition for plan source & delivers process time the basic
structure of the reference model is as follows:
Plan: Under this process company should access supply resources, aggregate &
prioritize demand requirements, plan inventory, production & rough cut capacity of
all products all channels are evaluated under this heading.
Source: Under this process, sourcing information is managed, various activities like
vendor certification & fed back sourcing information management vendors contracts
are conducted also activities involved with receiving materials like, obtain, receive,
inspect, hold & issue material.
Make: This process is concerned with production, execution & managing
infrastructure, specifically under production execution activities like manufacturing,
testing, packaging, holding & releasing products is under taken here.
Deliver: This process consist of order management & ware house management.
ii. Level-II: It defines various core process categories that are possible components of
Supply chain organisation can configure their ideal or actual operations using this
process.
iii. Level-III: It provides information required for successful planning & setting goals for
supply chain improvements. This includes defining process elements, setting target
benchmarks defining best practices & system solving capabilities.
iv. Level-IV: It focuses on implementation i.e.: putting specific supply chain
improvements into action these are not designed with industry standard models as
implement can unique to each company.
a. An old age “ You can’t improve what you can’t measure” is particularly true
for buyer supplier alliances measures related to quality cost deliver & flexibility have
traditionally being use to evaluate how well suppliers are doing.
d. Over the past several years (TCO) Total cost: a broad framed performance
metric has been widely discussed in the supply chain literature. TCO is defined as all cost
associated with the maintenance of goods & services & comprise of pre transaction,
transaction & post-transaction cost. Explanation of theses three major cost are as follows;
ii. Transaction cost: These costs include cost of good service & the placing & receiving
the order e.g. purchase price, preparation of order& delivery cost.
iii. Post- transaction cost: These cost are incurred after the goods are in the process of
company, e.g. field failures, companies goods & reputation
e. TCO provides co active approach for understanding cost & supplier performance
leading to reduce cost.
f. However the challenges to effectively identify the key cost drivers needed to
determine total cost ownership.
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ii.
ii.
iii.