SUPPLY CHAIN MANAGEMENT

MODULE I: INTRODUCTION OF LOGISTICS AND SCM

EVOLUTION OF LOGISTICS AND IMPORTANCE OF SUPPLY CHAIN MANAGEMENT IN THE OVERALL

ORGANIZATION FUNCTIONING:

Supply chain management (SCM) is the management of the flow of goods. It includes the
movement and storage of raw materials, work-in-process inventory, and finished goods from
point of origin to point of consumption. Interconnected or interlinked networks, channels and
node businesses are involved in the provision of products and services required by end
customers in a supply chain
Understanding the supply chain
a) What is a supply chain?
b) Decision phases in a supply chain.
c) Process view of a supply chain.
d) The importance of supply chain flows.
e) Competitive Supply Chain Strategies.
f) Achieving strategic fit.
Logistics management is the 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
customer's requirements. A professional working in the field of logistics management is called a
logistician.

1. Materials management
2. Channel management
3. Distribution (or physical distribution)
4. Supply-chain management
Supply Chain Management (SCM) is an essential element to operational efficiency. SCM can be
applied to customer satisfaction and company success, as well as within societal settings,
including medical missions; disaster relief operations and other kinds of emergencies; cultural
evolution; and it can help improve quality of life. Because of the vital role SCM plays within
organizations, employers seek employees with an abundance of SCM skills and
knowledge. Supply chain management is critical to business operations and success for the
following reasons:

SCM is Globally Necessary

Basically, the world is one big supply chain. Supply chain management touches major issues,
including the rapid growth of multinational corporations and strategic partnerships; global
expansion and sourcing; fluctuating gas prices and environmental concerns, each of these issues
dramatically affects corporate strategy and bottom line. Because of these emerging trends,
supply chain management is the most critical business discipline in the world today.

INTER-FUNCTIONAL COORDINATION:

CUSTOMER FOCUS IN SUPPLY CHAIN:

Supply Chain Management (SCM) was introduced in the 1990s as a buzzword often used by
logistics and softwareproviders to describe the integrated network of product, information, and
cash flow between the various entities in a supply chain. SCM has been embraced by many non-
supply chain professionals simply as a new and faster way of acquiring goods and services using
integrated software tools and global logistics.

Today, SCM is widely recognized as a better way of doing business in a complex global economy.
Traditionally, Supply Chain Management has focused on negotiating long term agreements, cost
reduction, outsourcing, third-party logistics, and the use of SCM software tools. Customer
Focused Supply Chain Management, CFSCM, is a strategic approach to acquiring goods and
services. CFSCM is based on the idea that by enhancing your customers overall satisfaction with
your product or service, in the long run, you will improve the profitability and efficiency of your
entire enterprise which includes your supply chain partners.

The overriding philosophy of CFSCM is that everyone in a customers supply chain is linked to the
customer, and that the supply chain is only as strong as its weakest link. The strategy of CFSCM is
to establish collaborative relationships up and down the supply chain; from upstream raw
material suppliers to downstream final users of the product or service. With CFSCM we seek new
and better ways to acquire goods and services that will increase our customers satisfaction and
improve profitability.

Increased customer satisfaction means greater profitability, because loyal satisfied customers
provide long term revenues and reduced costs. It is less costly to maintain satisfied customers
than it is to acquire new ones. Also, by dealing with loyal customer-focused suppliers, you can
achieve efficiencies and cost savings well beyond those achieved from the traditional approaches
of competitive bidding and price negotiations.

The mistake that too many companies make is employing the tools and techniques of SCM
without having first established collaborative relationships with their customers and suppliers. It
is not the tools that make you successful in SCM; it is the relationships. Collaborative
relationships start with trust, honesty, mutual interests, and mutual benefits. Traditional arms-
length relationships with suppliers do not support collaboration. Many of these relationships are
competitive based on everyone getting their share of the pie, often at the expense of others.

Once the entire supply chain becomes focused on the needs of the customer, you can begin to
employ the tools and techniques of SCM: outsourcing, 3rd and 4th party logistics, supply chain
collaboration, early supplier involvement (ESI), and SCM software.

The first step in implementing a CFSCM program is to establish free and open two-way
communications with your customers and suppliers. Understand their needs. Work with them to
solve design, fulfillment or quality problems. Establish functional interfaces between your
companies. And, collaborate with them on product design and improvement.

Find out what the customer is looking for: low cost? speed to market? service? flexibility?
technological innovation? Only when you truly understand the needs and strategic objectives of
your customer can you set operational strategies for your company and the suppliers in your
supply chain. The goal is to establish a smooth flow of information up the supply chain from
customers to suppliers, and smooth flow of product and services down the supply chain from
suppliers to customers. The more information that suppliers know about their customers actual
requirements, the less inventory needed in the supply chain.

To illustrate this point: In the traditional supply chain with multiple tiers of suppliers and
customers, each operation plans production or distribution requirements based on forecasted
demand. Actual demand is only generated by a customer order. This means that each entity
needs to carry inventory in anticipation of customer orders. Typically, each member of the
supply chain will tend to over-plan inventory to assure good customer service. This is known
as the bullwhip effect; where a small change in demand downstream generates increasingly
larger demands as it progresses up-stream. In a synchronized supply chain, the actual demand
captured at the point-of-sale can be communicated up the supply chain, using information
technology, greatly reducing the amount of inventory that each entity needs to maintain in order
to support customer service goals.

This example is one of the many ways that a customer focused approach to Supply Chain
Management will improve customer service and profitability. Key performance factors such as
reliability, responsiveness, flexibility, lower costs, and better resource management can be
achieved faster, and more effectively through a collaborative supply chain than by the individual
efforts of any one member of the supply chain.

SUPPLY CHAIN LOGISTICS OPERATIONS:

Introduction

Operational supply chain decisions are made hundreds of times each day in a company. These
are the decisions that are made at business locations that affect how products are developed,
sold, moved and manufactured.

Operational decisions are made with awareness of the strategic and tactical decisions that have
been adopted within a company. These higher level decisions are made to create a framework
within the companys supply chain operate and to the best competitive advantage. The day to
day operational supply chain decisions ensure that the products efficiently move along the
supply chain achieving the maximum cost benefit. A number of examples of operational
decisions can be identified in manufacturing, supplier relationships and logistics.

Manufacturing

Companies make tactical decisions with regards to manufacturing, such as the adoption of
kanban and just-in-time. However, if the local manufacturing site is unable to rely on certain
suppliers delivery times, the just-in-time method may not be suitable for some product lines.
The local plant management may make an operational decision to keep certain items in stock to
ensure that production is not halted. This inventory will increase costs, but a greater cost would
be incurred if the production line was brought to a standstill due to a lack of items from a
supplier.

Suppliers

Global suppliers and negotiated contracts are decisions made at a company level to take
advantage of the companys global buying power. This offers considerable cost savings, but local
sites may have to make operational decisions with suppliers to ensure an efficient supply chain.
In some instances local negotiations with global suppliers are required to ensure quality of the
product. For example, in some countries the quality of the product produced by a supplier is not
at the same level as other countries. The local management would have to make an operational
decision to negotiate with the supplier for them to create a product with a higher quality to
ensure the quality of the finished product.

Logistics

Strategic and tactical supply chain decisions in the logistics process often focus on the use of
third party logistics companies (3PL). Many companies have identified the cost benefits of these
3PL companies and have integrated them into their supply chain. However, in some instances
these 3PL companies may not operate in all regions where the company requires logistics. In
those cases the local management has to make operational decisions on leasing local
warehousing and negotiating with regional logistics companies.

Although strategic and tactical supply chain decisions are made to bring the greatest efficiencies
at the lowest cost, the daily operations of the supply chain require that local management make
hundreds of operational decisions. These operational decisions are made within the framework
created by the strategic and tactical processes and not made in isolation.

OBJECTIVES OF PURCHASING,
PURCHASE STRATEGIES:

Companies implement Purchasing strategies in order to make cost effective purchasing decisions
from a group of efficient vendors who will deliver quality goods on time and at mutually
agreeable terms.

These purchasing strategies may include such choices as making procurement savings by
using centralized purchasing which is concentrating the entire procurement activities within
one principal location.

Other companies may decide to undertake a single source procurement strategy that involves
obtaining excellent dedicated service from a single vendor. These strategies are predominant
when sourcing for IT or indirect purchasing such as office supplies and cleaning.

Other companies may use a procurement strategy of using a core purchasing cycle. This is
where they order from a group of regular vendors and use outsourcing procurementfor their
larger and ad hoc purchases.
 Still others, particularly when they are seeking labor for short-term projects will
use procurement auctions in order to obtain the best pricing levels.

Regardless of the size of the company, there is a core group of purchasing strategies that most of
them implement. These are:

Supplier Optimization

The company chooses an optimum mix of vendors who can provide the best prices and terms.
This process usually means that the less able suppliers who cannot provide a quality service at
the terms and prices required are discarded. This is by far the most common of the various
purchasing strategies.

TQM

Total Quality Methods, requires the vendors to provide an ever increasing quality service with
zero errors. The supplier ensures purchasing best practices using a number of tools such as six
sigma.

Risk Management

As more companies obtain their supplies from countries such as China and India, they are more
concerned with the risk management of this supply chain. Whilst these countries can supply
products at very advantageous prices, these advantages can be soon negated by a natural or
human disaster.

Global Sourcing

Large multinational companies see the world as one large market and source from many
vendors, regardless of their country of origin.

Vendor Development

Some companies believe that they are working hand-in-hand with their vendors. They therefore
spend some time in developing processes that assist these vendors. There may also be the
situation where a company is dependent upon just one supplier for their products. If this
supplier is unable to perform to the required standards, the purchaser may assist the vendor in
improving their service or implement processes to improve their procurement cycle.

Green Purchasing
This is one of the more common purchasing strategies for governments and local governments.
This strategy champions the need for recycling and purchasing products that have a negative
impact on the environment.

A company will choose purchasing strategies that promote their procurement best practices of
minimizing costs, maximizing quality and ensuring that quality products are delivered on time.

OUTSOURCING IN SCM:

WHAT IS OUTSOURCING?

Outsourcing is defined as the contracting of one or more of a companys business processes to

an outside service provider to help increase shareholder value, by primarily reducing operating
cost and focusing on core competencies.

CIO defines outsourcing as an arrangement in which one company provides services for another
company that could also be or usually have been provided in- house.

Automatic data processing Inc. (ADP) defines . outsourcing as the contracting out of a companys
non- core, non-revenue-producing activities to specialists. It differs from contracting in that
outsourcing is a strategic management tool that involves the restructuring of an organization
around what it does best its core competencies.
WHY DO COMPANIES OUTSOURCE?

There are several reasons why outsourcing is becoming a habit. The simplest reason to
outsource is to alleviate administrative burdens and focus on strategic areas.
As the companies move from non-outsourcing environment to an outsourcing environment the
profile of the time spent by the executives on various activities change dramatically. According to
Figure 1 in a non outsourcing environment, executives spend 60 per cent of their time on
administration matters, while 30 per cent on tactical issues and this leaves only 10 per cent of
their time to focus on strategic matters. On the contrary when they switch to an outsourcing
environment and outsource some of the activities they need to spend only 10 per cent of their
time on handling administration issues, 30 per cent time they focus on tactical matters while 60
per cent of their time they can devote to thinking, strategizing and planning.

Some other reasons behind outsourcing are:

1. Reduce costs: A company may emphasize costsavings for a variety of reasons, such as being in
a poor financial position, or because of a goal to increase profits. Reducing costs by using a
supplier is possible, but not in all situations. A supplier has clearly lower costs, if it can centralize
the work of several companies at one location, such as central truck maintenance facilities or a
data processing centre. It can also lower costs if materials or supplies can be bought at lower
costs by using volume purchasing. It can also purchase assets from a company and then lease the
assets back as a part of an outsourcing deal, thereby giving the companies an upfront cash
infusion.Power of Outsourcing in Supply Chain ManagementIts not what you dont known that
hurts you. Its what you know that aint so. Otherwise, its costs will be higher than those of the
company, for it must include a profit as well as sales and marketing costs in its budget an
internal department does not have to earn a profit, nor does it have a sales force. Thus, there
are a few situations in which a company can reduce its costs by outsourcing, but there are many
more cases where this is not a realistic reason for outsourcing.
2. Focus on core functions : A company typically has a small number of functions that are key to
its survival while other functions or activities are required to be done but are non-core. It may
want to focus all of its energies on those functions and distribute all other functions among a
group of suppliers who are capable of performing them well enough that the company
management will not have to be bothered with any of the details associated with running them.
The company may even what to outsource those functions that are core functions at the
moment, but which are expected to become less important in the near future due to changes in
the nature of the business. In addition, a company could even outsource a function that is
considered key to the companys survival if it can find a supplier that can perform the function
betterin short, only keep those functions that are core functions and which the company can
do better than any supplier. For example, a company may be the low cost manufacturer in its
industry, which allows it to maintain a large enough, pricing advantage over its competitors, that
it is guaranteed a large share of the market.
3. Acquire new skills : A company may find that its in-house skill set is inadequate for a given
function. This is the most common reason and is used for outsourcing those functions that
require high skill levels, such as engineering and computer services.
4. Acquire better management : A company may find that an in-house function is not performing
as expected not because of any problem with the staff but because of inadequate management
support or capability. Symptoms of this are high turnover, absenteeism, poor work products and
missed deadlines. It can be very hard to obtain quality management, so outsourcing a function to
a supplier just to gain access to the suppliers better management can be a viable option. It may
also be possible to rent management from the supplier. This can be a good option in all
functional areas, though it is more common in areas requiring high levels of expertise such as
engineering.
5. Assist a fast growth situation : If a company is rapidly acquiring market share, the management
team will be stretched to its limit, building the company up so that it can handle the vastly
increased volume of business. In such situations, the management team will desperately need
additional help in running the company. A supplier can step in and take over the function so that
the management team can focus its attention on a smaller number of core activities. For
example, a company in a high growth situation may outsource its customer support function to a
supplier, who already has the phone line capacity and trained staff available to handle the deluge
of incoming calls.
6. Avoid labour problems : If a company is constantly bogged down by labour problems which
start affecting its productivity and performance, outsourcing becomes a viable option.
Companies can in such cases use suppliers infrastructure, manpower and facilities for
production and concentrate on marketing or getting business.
7. Focus on strategy : A companys managers typically spend the bulk of each day handling the
detailed operations of their functional areasthe tactical aspects of the job. By outsourcing a
function while retaining the core management team, a company can give the tactical part of
each managers job to a supplier, which allows the management team to spend far more time in
such strategy related issues as market positioning, new product development, acquisitions, and
long-term financing issues.
8. Avoid major investments : A company may find that it has a function that is not as efficient as it
could be, due to lack of investment in the function. If the company keeps the function in-house,
it will eventually have to make a major investment in the function in order to modernize it.
Outsourcing this function can avoid any major investments. For example, by outsourcing
transportation. activity, the company that owns an ageing transportation fleet can sell the fleet
to a supplier, who then can provide an upgraded fleet to the company as part of its service.

9. Handle overflow situations : A company may find that there are times of the day or year when
a function is overloaded for reasons that are beyond its control. In these situations it may be cost
effective to retain a supplier to whom the excess work will be shunted when the in-house staff is
unable to keep up with demand. This is a reasonable alternative to the less palatable option of
overstaffing the in-house function in order to deal with overflow situations that may only occur a
small percentage of time. This is a popular option for help desk services as well as customer
support, where excess incoming calls are sent to the supplier instead of having customers wait
on line for an excessively long time.
10. Improve flexibility : This is similar to using outsourcing to handle overflow situations, except
that the supplier gets the entire function, not just the overflow business. When a function
experiences extremely large swings in the volume of work it handles, it may be easier to
eliminate the fixed cost of an internal staff and move the function to a supplier who will only be
paid for the actual work done. This converts a fixed cost into variable costthe price of the
suppliers services will fluctuate directly with the transaction volume it handles.
11. Improve ratios: Some companies are so driven by their performance ratios that they will
outsource functions solely to improve them. For example, outsourcing a function that involves
transferring assets to the supplier will increase the companys return on assets (which is one of
the most important measurements for many companies). The functions most likely to improve
this ratio are those heavy in assets, such as maintenance, manufacturing and computer services.
Another ratio that can be improved is profitability per person. To enhance this, a company
should outsource all functions involving large numbers of employees, such as manufacturing or
sales.
12. Jump on the bandwagon : A company may decide to outsource a function simply because
everyone else is doing it, too. Also, a large amount of coverage of outsourcing in various national
or industry specific publications will give company management the impression that outsourcing
is the trend, and they must use it or fail. For example, due to the large amount of publicity
surrounding some of the very large computer services outsourcing deals, the bandwagon effect
has probably led to additional outsourcing deals for the computer services function.
13. Enhance credibility : A small company can use outsourcing as a marketing tool. It can tell
potential customers the names of its suppliers, implying that since its functions are being
maintained by such well-known suppliers, the companys customers can be assured of a high
degree of quality service. In these instances, the company will want to hire the best known
suppliers, since it wants to draw off of their prestige. Also, for key functions, the company may
even want to team up with a supplier to make joint presentations to company customers, since
having the suppliers staff present gives the company additional credibility.
14. Maintain old functions : A company may find that its in-house staff is unable to maintain its
existing functions, while transitioning to new technology or to a new location. Outsourcing is a
good solution here, for it allows the company to focus its efforts on implementing new initiatives
while the supplier maintains existing day-to-day functions. This reason is most common in
computer services, where suppliers are hired to maintain old legacy systems while the in-house
staff works on transitions to an entirely new computer system.
15. Improve performance: A company may find that it has a function that has bloated costs or
inadequate performance. To shake up the function, company management can put the function
out to bid and include the internal functions staff in the bidding process. The internal staff can
then submit a bid alongside outside suppliers that commits it to specific service levels and costs.
If the bid proves to be competitive, management can keep the function in-house, but hold the
functions staff to the specific cost and performance levels noted in its bid. As long as suppliers
are told upfront that the internal staff will be bidding and that the selection will be a fair process,
they should not have a problem with this type of competition. This approach can be used for any
functional area.
16. Begin a strategic initiative : A companys management may declare complete company
reorganization and outsourcing can be used to put an exclamation point on its determination to
really change the current situation. By making such a significant move at the start of the
reorganization, employees will know that management is serious about the changes and will be
more likely to assist in making the transition to the new company structure.
Usually one of the above reasons dictates an outsourcing decision. But before finally taking the
plunge, company should exhaustively evaluate the working and functioning of the
department/function concerned. Many a time there is a deeper problem where the function in
question is not doing a good job of presenting its benefits to management. In such a case, the
function manager may not be able to showcase its accomplishments, or showing management
that the cost of keeping the function in- house is more favourable.
If the management suspects that this may be the reason why outsourcing is being considered, it
is useful to bring in a consultant who can review the performance of the in-house employees and
see if they are, in fact doing a better job than they are saying. Sometimes investigating the ability
of in-house staff prior to outsourcing functions will keep the outsourcing from occurring.

The manager who is making the outsourcing decision should also consider that it is not necessary
to outsource an entire functional areainstead the manager can cherry pick only .those tasks
within the function that are clearly worthy of being outsourced and keep all other tasks inhouse.
This reduces the risk to the company of having the chosen supplier do a bad job of handling its
assigned tasks, since fewer tasks are at risk, and it allows the company to hand over the
remaining functional tasks to the supplier as it becomes more comfortable with the suppliers
performance. For example, a company can outsource just the maintenance of its computer
services function, or it may add network services, telephone services, application development,
or data centre operations task to one or more suppliers.

These options are all available to the manager who is edging into a decision to outsource.

The typical path that a company follows starts with a function that has minimum strategic value
and will not present a problem even if the suppliers does a poor job of providing the service. If
the companys experience with these low-end functions prove successful, then company
management will be more likely to advance to outsourcing those functions with more strategic
value or with more company threatening consequences, if the provided service is inadequate.
These functions include accounting, HR and materials management. Finally, if the company
continues to perform well with all or part of these functions; typically these are manufacturing,
computer services and engineering (though this may vary by industry). Only by considering the
reasons in favour of outsourcing alongside the associated risks can a manager arrive at a
considered decision to outsource a function.
OUTSOURCING RISKS
These can range from pricing issues to non- performance by a supplier of a key function. The
person making the outsourcing decision must be aware of these risks before making the decision
to hand over a function to a supplier. Broadly, these risks can be classified into short-term risks
and long-term risks. Companies indulging in outsourcing have to guard against both of these
risks. Short-term risks can include among others operational issues at suppliers end, while long-
term risks can be nonalignment of companys goals with suppliers goals in the long term.

Suppliers situation may change in the future, causing problems in the outsourcing relationship.
For example, the supplier may have financial difficulties, be bought out by a company that does
not want to be in the outsourcing business, or undergo a shift in strategy that forces it to provide
different services. Also, the technology needed to service the companys needs may change over
time and the supplier may no longer be able to service that new technology. These risks can be
lowered by ensuring that there is a termination clause in the outsourcing contract that allows
the company to back out of the contract if any of the above circumstances occur. Also, these
risks are less important if there is a large number of competing suppliers to whom the business
can be shifted. Alternatively, the risk is greater if there are few competing suppliers to whom the
companys business can be shifted. Suppliers inability to grow in the same proportion as the
company, can be another big risk. But this is a long-term risk and can be gauged and understood
beforehand.
OUTSOURCING PROCESS

1 .Understanding company goals and objectives

Outsourcing decisions have to be taken within the framework of a companys goals and
objectives. Both the short-term goals and long-term strategies have to be considered,
understood and acted upon. Outsourcing suppliers also have to appreciate these goals and
functions accordingly.
2. A strategic vision and plan
Drafting an outsourcing vision and plan is the next important step. Once again, this plan has to
be both long-term and short-term. Long-term plan can contain the overall companys policy
towards outsourcing in general, clarity on the functions, activities to be outsourced, etc. while
the short-term plan contains an immediate plan of action.
3. Selecting the right vendor
This is one of the most vital and important activities. It is also a long-drawn out activity which
should involve activities such as collecting supplier intelligence, collecting supplier background
information, evaluation of this information, etc. Vendors attitude, his growth potential, past
performance, etc. need to be evaluated.
4. Management of the relationships
Relationship management is an extremely important task in outsourcing. The more one indulges
in outsourcing, the more relationships one has to manage. Hence it is essential to have a
structured method of managing the relationships.
5. A properly structured contrac t
Structuring an outsourcing contract is both an art and a science. This contract needs to have all
the necessary clauses, scope for growth, scope for incentives and all other clauses built into it.
This contract will be the main document that will govern the relationship.
6. Open communication
When the company takes outsourcing-related decisions for the first time, it is always one of the
activity/function initially done internally. This either causes closure of an
internal function/activity or pruning it substantially. Hence this action displaces an internal group
and can cause a lot of unrest within the company. Therefore, handling this situation effectively is
also a part of an outsourcing process. This is applicable even for situations where the company
decides to increase outsourcing or outsource some other activity/function.
7. Section executive support
This is essential initially to garner support for outsourcing. Also inputs from these senior
executives can be helpful for drafting the contract.
8. Use of outside expertise
It is sometimes essential to involve an outside consultant to help the company through the
process, especially when the company is doing it for the first time. This person should be an
expert in outsourcing and should have adequate experience in drafting the outsourcing contract.
OUTSOURCING IN SCM
Outsourcing logistics has been a favourite with companies since several years. It is only recently
that companies have started thinking about outsourcing other aspects of SCM.
Despite the wide acceptance of outsourcing logistics functions, a variety of organizational
concerns inhibit the outsourcing of logistics processes, including:

1. Fear of losing control. Companies are hesitant to hand over important logistics processes to a
third party. As the third party might also be managing the logistics processes of competitors,
companies are afraid that trade secrets might be misused, mismanaged, or lostor in the worst
case, pass through the third-party provider into the hands of competitors.

2. Lack of confidence. Compounding the fear of loss of control is the lack of confidence compan
feel about the ability of third-party providers to meet their needs.
3. Lack of outsourcing education. Many companies are familiar with outsourcing, in terms of the
IT and bnsiness-process enhancements that logistics service providers can offer. However, they
lack a through understanding of the experience of managing the outsourcing service provider
throughout the life of the relationship.
4. Management philosophy and tradition. Many companies simply resist change. They may reject
the concept of outsourcing logistics activities due to a perceived potential negative effect on
their business model and operations. In addition, these companies may have had poor
outsourcing relationships in the past and may be less inclined to initiate new outsourcing
contracts. Furthermore, they may believe that the geographical separation between them and
their outsourcer could cause service management issues.
For example, some companies feel that an outsourcer may not be sensitized to the unique
logistics needs of their product lines. Others feel that outsourcers are not equipped to deal with
dynamic or mission-critical operations. Due to this lack of confidence, companies are cautious
about getting locked into a long-term contract with an outsourcer and are concerned about the
associated legal fees and penalties that would be incurred if disputes arose.
LEAN COMPANIES : NEW OPPORTUNITIES IN SCM OUTSOURCING

In todays global economy, companies are making their best attempt at shedding their flab and
becoming lean and trim. This new avatar can ensure a faster response, agility and better ability
to handle pressure. These companies often find it much more cost effective to outsource rather
than build a proprietary infrastructure. They believe in having no production facility, no
warehouse, no loading dock, no boardroomjust office space, a handful of employees, and a
great idea for a product or service and marketing strength.
In this case, outsourcing SCM can ensure that the entire necessary infrastructure is in place,
without actually having to spend on any infrastructure. This can save a lot of working capital
from getting locked. Moreover, companies can then focus on core activity of getting the
customers and servicing them efficiently.
Through the use of outsourced services, enterprises can avoid all or some of the costs associated
with physical plant, specialized IT systems and equipment, telephone lines and bodiesand best
of allno distractions from the carrying out of their core competencies. Especially young
companies or new companies should not waste t time focusing on
building these operational infrastructures when their primary business is to create and sell
products and servicesand not managing supply chain activities.

VENDOR MANAGEMENT AND DEVELOPMENT:

Managing Vendors and Suppliers

It is just as important to communicate with your suppliers and vendors as it is to communicate

with your customers. Establishing the proper communication channels and information flows
between you and your suppliers can lead to increased efficiencies, reduced costs and better
customer service. This section will cover the simple communication methods (i.e. telephone) and
other ideas that will allow your company to build a win-win relationship with your suppliers and
vendors.

LIQUID LOGISTICS:

Liquid logistics is a special category of logistics that relates to liquid products, and is used
extensively in the "supply chain for liquids" discipline.
Standard logistics techniques are generally used for discrete or unit products. Liquid products
have logistics characteristics that distinguish them from discrete products. Some of the major
characteristics of liquid products that impact their logistics handling are:

Liquids flowing from a higher level to a lower level provide the ability to move the liquids
without mechanical propulsion or manual intervention.

Liquids adaptation to the shape of the container they are in provides a great deal of
flexibility in the design of storage systems and the use of dead space for storage.

The level of a liquid as it has settled in a tank may be used to automatically and continuously
know the quantity of liquid in the tank.

Liquids provide indications through changes in their characteristics that may be sensed and
translated into measures of the quality of the liquid.

Many security and safety risks are significantly reduced or eliminated using liquid logistics
techniques. Tools such as liquid level sensors and flow meters can be useful in reducing
security risk by providing directly,near real-time and accurate measurements of product's
movement and balance along the supply-chain flow. The safety risk is reducing as product
movement through the process of supply stream is independent and controlled.

Liquids may in some cases be processed well downstream from the original production
facility and thus offer the opportunity for improved efficiencies throughout the supply
 stream together with more flexibility as to the nature of the product at the point of final
usage.
Each of these points represents a differentiation of liquid logistics from logistics techniques used
for discrete items. When properly planned for and handled these points of differentiation may
lead to business advantages for companies that produce, process, move, or use liquid products.

COLD CHAIN OPERATIONS. :

The Cold ChainWhile globalization has made the relative distance between regions of the world
much smaller, the physical separation of these same regions is still a very important reality. The
greater the physical separation, the more likely freight can be damaged in one of the complex
transport operations involved. Some goods can be damaged by shocks while others can be
damaged by undue temperature variations. For a range of goods labeled as perishables,
particularly food (produces), their quality degrades with time since they maintain chemical
reactions which rate can be mostly mitigated with lower temperatures. It takes time and
coordination to efficiently move a shipment and every delay can have negative consequences,
notably if this cargo is perishable. To ensure that cargo does not become damaged or
compromised throughout this process, businesses in the pharmaceutical, medical and food
industries are increasingly relying on the cold chain.
The cold chain involves the transportation of temperature sensitive products along a supply
chain through thermal and refrigerated packaging methods and the logistical planning to protect
the integrity of these shipments. There are several means in which cold chain products can be
transported, including refrigerated trucks and railcars, refrigerated cargo ships as well as by air
cargo.
The cold chain is thus a science, a technology and a process. It is a science since it requires the
understanding of the chemical and biological processes linked with perishability. It is
a technologysince it relies on physical means to insure appropriate temperature conditions along
the supply chain. It is a process since a series of tasks must be performed to prepare, store,
transport and monitor temperature sensitive products.From an economic development
perspective, the cold chain enables many developing countries to take part in the global
perishable products market either as producers or as consumers. The growth in income is
associated with a higher propensity to consume fruits, vegetables, fish and meat products.
Increasing income levels create a change in diet with amongst others a growing demand for
fresh fruit and higher value foodstuffs such as meat and fish. Persons with higher socioeconomic
status are more likely to consume vegetables and fruit, particularly fresh, not only in higher
quantities but also in greater variety. Consumers with increasing purchase power have become
preoccupied with healthy eating, therefore producers and retailers have responded with an array
of exotic fresh fruits originating from around the world.From a geographical perspective, the
cold chain has the following impacts:

Global. Specialization of agricultural functions permitting the transport of temperature

sensitive food products to distant markets. Enables the distribution of vaccines and other
pharmaceutical or biological products from single large facilities.
Regional. Can support the specialization of production and economies of scale in
distribution. This could involve large cold storage facilities servicing regional grocery
markets or specialized laboratories exchanging temperature sensitive components.
Local. Timely distribution to the final consumer of perishables, namely grocery stores and
restaurants.

Some domestic or transnational supply chains may only require one transportation mode, but
many times ground shipments are only one link in a combination of transport modes. This makes
intermodal transfers critical for the cold chain. Intermodal shipments typically use either 20 or
40 foot refrigerated containers that are capable of holding up to 26 tons of food. The container
makes loading and unloading periods shorter and less susceptible to damage both on the
container and its cargo. The environments in these containers are controlled electronically by
either plugging into a generator or power source on the ship or truck. The efficiency of cold
chain logistics permitted the consolidation of cold storage facilities.

MODULE II: STRATEGIC ISSUES IN SUPPLY CHAIN MANAGEMENT

VALUE CHAIN AND VALUE DELIVERY SYSTEM:

A value chain is a chain of activities that a firm operating in a specific industry performs in order
to deliver a valuable product or servicefor the market. The concept comes from business
management and was first described and popularized by Michael Porter
The idea of the value chain is based on the process view of organizations, the idea of seeing a
manufacturing (or service) organization as a system, made up of subsystems each with inputs,
transformation processes and outputs. Inputs, transformation processes, and outputs involve
the acquisition and consumption of resources - money, labour, materials, equipment, buildings,
land, administration and management. How value chain activities are carried out determines
costs and affects profits.

The value chain framework quickly made its way to the forefront of management thought as a
powerful analysis tool for strategic planning. The simpler concept of value streams, a cross-
functional process which was developed over the next decade,[13] had some success in the early
1990s.[14]
The value-chain concept has been extended beyond individual firms. It can apply to whole supply
chains and distribution networks. The delivery of a mix of products and services to the end
customer will mobilize different economic factors, each managing its own value chain. The
industry wide synchronized interactions of those local value chains create an extended value
chain, sometimes global in extent. Porter terms this larger interconnected system of value chains
the "value system". A value system includes the value chains of a firm's supplier (and their
suppliers all the way back), the firm itself, the firm distribution channels, and the firm's buyers
(and presumably extended to the buyers of their products, and so on).
Capturing the value generated along the chain is the new approach taken by many management
strategists. For example, a manufacturer might require its parts suppliers to be located nearby its
assembly plant to minimize the cost of transportation. By exploiting the upstream and
downstream information flowing along the value chain, the firms may try to bypass the
intermediaries creating new business models, or in other ways create improvements in its value
system.
Value chain analysis has also been successfully used in large petrochemical plant maintenance
organizations to show how work selection, work planning, work scheduling and finally work
execution can (when considered as elements of chains) help drive lean approaches to
maintenance. The Maintenance Value Chain approach is particularly successful when used as a
tool for helping change management as it is seen as more user-friendly than other business
process tools.
A value chain approach could also offer a meaningful alternative to evaluate private or public
companies when there is a lack of publicly known data from direct competition, where the
subject company is compared with, for example, a known downstream industry to have a good
feel of its value by building useful correlations with its downstream companies.

INTER-CORPORATE COOPERATION
DIFFERENT MODES OF TRANSPORTATION:
Mode of transport (or means of transport or transport mode or transport modality or form of
transport) is a term used to distinguish substantially different ways to perform transport. The
most dominant modes of transport are aviation, land transport, which includes rail, road and off-
road transport, and ship transport. Other modes also exist, including pipelines, cable transport,
and space transport. Human-powered transport and animal-powered transport are sometimes
regarded as their own mode, but these normally also fall into the other categories.
Each mode of transport has a fundamentally different technological solution, and some require a
separate environment. Each mode has its own infrastructure, vehicles, and operations, and often
has unique regulations. Each mode also has separate subsystems. A subsystem is a group of
many parts that make up one part.

CHOICE FOR TRANSPORTATION, CONCEPT OF MULTI-MODAL TRANSPORTATION AND

INFRASTRUCTURE NEEDS;

THIRD PARTY LOGISTICS,

A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides service
to its customers of outsourced (or "third party") logistics services for part, or all of their supply
chain management functions. Third party logistics providers typically specialize in integrated
operation, warehousing and transportation services that can be scaled and customized to
customers' needs based on market conditions and the demands and delivery service
requirements for their products and materials. Often, these services go beyond logistics and
include value-added services related to the production or procurement of goods, i.e., services
that integrate parts of the supply chain. Then the provider is called third-party supply chain
management provider (3PSCM) or supply chain management service provider (SCMSP). Third
Party Logistics System is a process which targets a particular Function in the management. It may
be like warehousing, transportation, raw material provider, etc.
Advantages of 3PL
- Cost and time savings for the client
As logistics is the core competence of third party logistics providers. They possess better know
how and a greater expertise as any producing or selling company could be able. This know how
together with the global networks of the often large company size enables a higher time and
cost efficiency. Another point is, that the equipment and the IT systems of 3PL providers are
constantly updated and adapted to new requirement of their customers, so that they are able to
meet the requirements of their customers suppliers. And that is more than essential to a
companys survival. Producing or selling companies often do not have the time, resources or
expertise to adapt their equipment and systems as quickly as necessary. So in conclusion a 3PL
provider can meet the technical requirements in a faster and more cost efficient way than a
company could do itself.[2]
- Low capital commitment
Thus the fact that most or all operative functions are outsourced to a 3PL provider there is no
need for the client to hold own warehouses or transport assets. There is very less or no tied up
logistics capital. This is very beneficial if a company has high deviations in warehouse capacity
utilization, because a bad capacity utilization ratio at equal fix cost (for warehouse) is evil for a
companys efficiency and profits.[3]
- Ability of client to focus on core business
The outsourcing of logistics departments permits the company to focus even more on their real
core business. If logistics is one of the firms core businesses then outsourcing doesnt make
sense. But if logistics is no core competency but rather needed or annoying attachment it should
be outsourced to a logistics provider, because the continuous increasing of business complexity
makes it impossible to be an expert in every division or sector.[4] And if you are no expert in a
division, there is always the opportunity to improve. Often only the core competency is really
adding value to your product. So it is immense important to be best in class or one of the market
leaders to generate profits, because normally the quality of the core product is the main (not the
only, but the main!) reason for the consumer to buy it.
-3PLs provide flexibility
Third party logistics provider can provide a much higher flexibility in geographic aspects and can
offer a much larger variety of services than the clients could provider their selves. In addition to
that, the client gets flexibility in resources and workforce size and logistics fix costs turn into
variable costs.
The only big disadvantage (if you see it as one) is the loss of control a client has by working with
third party logistics. Eminently in outbound logistics when the 3PL provider completely assumes
the communication and interacting with a firms customer or supplier. By having a good and
continuous communication with their clients most 3PLs counter and try to charm away such
doubts. Some 3PLs even paint the clients logos on their assets and vest their employees like the
clients ones.

What is a 3PL?
A third party logistics company is one that works with shippers in order to manage another
companys logistics operations department. 3PL is the action of outsourcing activities that are
related to logistics and distribution.
What is a 4PL?
The concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.

Main Difference between 3PLs and 4PLs

 The 3PL targets a single function, whereas the 4PL manages the entire process. A 4PL may
manage the 3PL.

3PL
Third party logistics providers usually specialise in

Integrating operations
Warehousing
Transportation services
Cross-docking
Inventory management
Packaging
Freight forwarding

These services are scaled and customised to the customers specific needs based on their market
conditions and the different demands and delivery service requirements for their products or
materials.

There are thousands of 3PLs in the market that offer different models and perform different
tasks. For example, certain 3PLs may only specialise in certain industries.

The 3PL have a large footprint throughout the country. This makes it viable for companies to
service clients in remote regions at a much lower cost than doing it themselves.

Types of 3PL Providers

1. Standard
Basic activities: Pick and pack, warehousing and distribution.

2. Service Developer
Value-added services such as tracking and tracing, cross-docking and specific packaging

3. Customer Adapter
This comes in at the request of a customer. It is when the 3PL takes over complete logistics of
the firm.

4. Customer Developer
This is the highest level of 3PL. This is when the 3PL integrates itself with the company, and ends
up taking over the entire logistics operation.

4PL:

Functions provided by a 4PL company

 Procurement
Storage
Distribution
Processes

A 4PL company takes over the logistics section of a business. This could be the entire process, or
a side business thats imperative to have as part of the main business.

An example here would be a bicycle importer. The main function is to import bicycles however,
they need to have spare parts for these unique bikes. A 4PL would manage the total logistic
operations for the spare parts business.

DISTRIBUTION CHANNEL DESIGN,:

The path through which goods and services travel from the vendor to
the consumer or payments for those products travel from the consumer to the vendor.
A distribution channel can be as short as a direct transaction from the vendor to the consumer,
or may include several interconnected intermediaries along the way such aswholesalers,
distributers, agents and retailers. Each intermediary receives the item at one pricing point and
movies it to the next higher pricing point until it reaches the final buyer. Coffee does
not reach the consumer before first going through a channel involving
the farmer, exporter, importer, distributor and the retailer. Alsocalled the channel of
distribution.

A channel of distribution or trade channel is defined as the path or route along which goods
move from producers or manufacturers to ultimate consumers or industrial users. In other
words, it is a distribution network through which producer puts his products in the market and
passes it to the actual users. This channel consists of :- producers, consumers or users and the
various middlemen like wholesalers,selling agents and retailers(dealers) who intervene between
the producers and consumers. Therefore,the channel serves to bridge the gap between the
point of production and the point of consumption thereby creating time, place and possession
utilities.

A channel of distribution consists of three types of flows:-

Downward flow of goods from producers to consumers

 Upward flow of cash payments for goods from consumers to producers

Flow of marketing information in both downward and upward direction i.e. Flow of
information on new products, new uses of existing products,etc from producers to
consumers. And flow of information in the form of feedback on the
wants,suggestions,complaints,etc from consumers/users to producers.

An entrepreneur has a number of alternative channels available to him for distributing his
products. These channels vary in the number and types of middlemen involved. Some channels
are short and directly link producers with customers. Whereas other channels are long and
indirectly link the two through one or more middlemen.

These channels of distribution are broadly divided into four types:-

Producer-Customer:- This is the simplest and shortest channel in which no middlemen is

involved and producers directly sell their products to the consumers. It is fast and
economical channel of distribution. Under it, the producer or entrepreneur performs all
the marketing activities himself and has full control over distribution. A producer may sell
directly to consumers through door-to-door salesmen, direct mailor through his own
retail stores. Big firms adopt this channel to cut distribution costs and to sell industrial
products of high value. Small producers and producers of perishable commodities also
sell directly to local consumers.

Producer-Retailer-Customer:- This channel of distribution involves only one middlemen

called 'retailer'. Under it, the producer sells his product to big retailers (or retailers who
buy goods in large quantities) who in turn sell to the ultimate consumers.This channel
relieves the manufacturer from burden of selling the goods himself and at the same time
gives him control over the process of distribution. This is often suited for distribution of
consumer durables and products of high value.

Producer-Wholesaler-Retailer-Customer:- This is the most common and traditional

channel of distribution. Under it, two middlemen i.e. wholesalers and retailers are
involved. Here, the producer sells his product to wholesalers, who in turn sell it to
 retailers. And retailers finally sell the product to the ultimate consumers. This channel is
suitable for the producers having limited finance, narrow product line and who needed
expert services and promotional support of wholesalers. This is mostly used for the
products with widely scattered market.

Producer-Agent-Wholesaler-Retailer-Customer:- This is the longest channel of distribution

in which three middlemen are involved. This is used when the producer wants to be fully
relieved of the problem of distribution and thus hands over his entire output to the
selling agents. The agents distribute the product among a few wholesalers. Each
wholesaler distribute the product among a number of retailers who finally sell it to the
ultimate consumers. This channel is suitable for wider distribution of various industrial
products.

An entrepreneur has to choose a suitable channel of distribution for his product such that the
channel chosen is flexible,effective and consistent with the declared marketing policies and
programmes of the firm. While selecting a distribution channel, the entrepreneur should
compare the costs,sales volume and profits expected from alternative channels of distribution
and take into account the following factors:-

Product Consideration:- The type and the nature of products manufactured is one of the
important elements in choosing the distribution channel. The major product related
factors are:-

Products of low unit value and of common use are generally sold through
middlemen. Whereas,expensive consumer goods and industrial products are sold
directly by the producer himself.
Perishable products; products subjected to frequent changes in fashion or style as
well as heavy and bulky products follow relatively shorter routes and are generally
distributed directly to minimise costs.
Industrial products requiring demonstration, installation and aftersale service are
often sold directly to the consumers. While the consumer products of technical
nature are generally sold through retailers.
An entrepreneur producing a wide range of products may find it economical to
set up his own retail outlets and sell directly to the consumers. On the other
hand, firms producing a narrow range of products may their products distribute
through wholesalers and retailers.
 A new product needs greater promotional efforts in the initial stages and hence
few middlemen may be required.

Market Consideration:- Another important factor influencing the choice of distribution

channel is the nature of the target market. Some of the important features in this respect
are:-

If the market for the product is meant for industrial users, the channel of
distribution will not need any middlemen because they buy the product in large
quantities. short one and may as they buy in a large quantity. While in the case of
the goods meant for domestic consumers, middlemen may have to be involved.
If the number of prospective customers is small or the market for the product is
geographically located in a limited area, direct selling is more suitable. While in
case of a large number of potential customers, use of middlemen becomes
necessary.
If the customers place order for the product in big lots, direct selling is preferred.
But,if the product is sold in small quantities, middlemen are used to distribute
such products.

Other Considerations:- There are several other factors that an entrepreneur must take
into account while choosing a distribution channel. Some of these are as follows:-

A new business firm may need to involve one or more middlemen in order to
promote its product, while a well established firm with a good market standing
may sell its product directly to the consumers.
A small firm which cannot invest in setting up its own distribution network has to
depend on middlemen for selling its product. On the other hand, a large firm can
establish its own retail outlets.
The distribution costs of each channel is also an important factor because it
affects the price of the final product. Generally,a less expensive channel is
preferred. But sometimes, a channel which is more convenient to the customers
is preferred even if it is more expensive.
If the demand for the product is high,more number of channels may be used to
profitably distribute the product to maximum number of customers. But, if the
demand is low only a few channels would be sufficient.
 The nature and the type of the middlemen required by the firm and its availability
also affects the choice of the distribution channel. A company prefers a
middlemen who can maximise the volume of sales of their product and also offers
other services like storage, promotion as well as aftersale services. When the
desired type of middlemen are not available, the manufacturer will have to
establish his own distribution network.

All these factors or considerations affecting the choice of a distribution channel are inter-related
and interdependent. Hence, an entrepreneur must choose the most efficient and cost effective
channel of distribution by taking into account all these factors as a whole in the light of the
prevailing economic conditions. Such a decision is very important for a business to sustain long
term profitability.

STRATEGIC ALLIANCES,: A strategic alliance is a relationship between two or more entities that
agree to share resources to achieve a mutually beneficial objective. For example, a company
manufactures and distributes a product in the United States and desires to sell it in other
countries. Another company wants to expand its product line with the type of product the first
company creates, and has a worldwide distribution channel. The two companies establish an
alliance to expand the distribution of the first companys product.

Critical Success Factors

A successful strategic alliance is mutually beneficial to the two companies involved. Each must
see a clear benefit from the arrangement. The responsibilities of each company in implementing
the alliance must be clearly identified. Both parties must agree on the objectives of the
relationship and be flexible and adaptable in the operation of the alliance. Each company may
have a different culture and method of doing business.

Basic Steps
To secure a strategic alliance, define what type of partner you are seeking, along with the ideal
characteristics of a partner. Clearly identify what strengths you could offer the other party and
why the potential partner would want to forge a relationship with you. Develop a list of potential
alliance candidates. If possible, contactalliance partners through someone you both know. If that
isnt feasible, send out a direct letter outlining your interest and asking for an opportunity to
explore a relationship. Have an exploratory meeting and, if there is an interest, develop a letter
of understanding outlining how both partners will work together and how money will be
allocated. Have your attorney prepare a formal agreement for both of you to sign.
Advantages
Strategic alliances permit a company to pursue an opportunity more quickly, leveraging the
resources and knowledge of the other party. Fewer resources are required than if a company
pursued an opportunity on its own. An alliance can provide easier access to new opportunities
and a lower barrier to entry.

Disadvantages
Implementing and managing a strategic alliance may be difficult because each alliance partner
has a different way of operating. Mistrust could occur, particularly when competitive or
proprietary information is involved. The alliance partners could become more dependent on
each other, making it difficult to operate again as separate entities if required.

MANAGING MATERIAL-, MONEY-, AND COMMUNICATION-FLOWS OF SUPPLY CHAIN:

Materials management can deal with campus planning and building design for the movement of
materials, or with logistics that deal with the tangible components of a supply chain. Specifically,
this covers the acquisition of spare parts and replacements, quality control of purchasing and
ordering such parts, and the standards involved in ordering, shipping, and warehousing the said
parts.

STRATEGIC LEAD TIME MANAGEMENT

DEFINITION OF 'LEAD TIME'
The amount of time that elapses between when a process starts and when it is completed. Lead
time is examined closely in manufacturing, supply chain management and project management,
as companies want to reduce the amount of time it takes to deliver products to the market. In
business, lead time minimization is normally preferred

Lead time is broken into several components: preprocessing, processing and post processing.
Preprocessing involves determining resource requirements and initiating the steps required to
fill an order. Processing involves the actual manufacturing or creation of the order. Post
processing involves delivery of products to the market. Companies look at each component and
compare it against benchmarks to determine where slowdowns are occurring.

Lead time is the time that elapses between the placing of an order (either a purchase order or a
production order issued to the shop or the factory floor) and actually receiving the goods
ordered.
If a supplier (an external firm or an internal department or plant) cannot supply the required
goods on demand, then the client firm must keep an inventory of the needed goods. The longer
the lead time, the larger the quantity of goods the firm must carry in inventory.

A just-in-time (JIT) manufacturing firm, such as some automobile manufacturing fims, can
maintain extremely low levels of inventory. Some of these companies take delivery of some
goods as many as 18 times per day. However, steel mills may have a lead time of up to three
months. That means that a firm that uses steel produced at the mill must place orders at least
three months in advance of their need. In order to keep their operations running in the
meantime an on-hand inventory of three months' steel requirements would be necessary

CONTAINERIZATION IN SCM:
ontainerization is a stowage of general or special cargoes in a container for transport in the
various modes. This is a system of freight transport based on a range of steel intermodal
containers (alsoshipping containers, ISO containers, etc.). Containers are built to agreed upon
standard dimensions and can be loaded and unloaded, stacked and transported efficiently over
long distances, often by container ship, rail and semi-trailer trucks without being opened. The
system developed after WWII and led to greatly reduced transport costs and supported a vast
increase in international trade.Containerizable cargo is such one that will fit into a container and
result in an economical shipment
Containerization is a system of intermodal freight transport using intermodal containers (also
called shipping containers and ISOcontainers) made of weathering steel. The containers
have standardized dimensions. They can be loaded and unloaded, stacked, transported
efficiently over long distances, and transferred from one mode of transport to another
container ships, rail transport flatcars, andsemi-trailer truckswithout being opened. The
handling system is completely mechanized so that all handling is done with cranes and special
forklift trucks. All containers are numbered and tracked using computerized systems.
The system, developed after World War II, dramatically reduced transport costs, supported
the post-war boom in international trade, and was a major element in globalization.
Containerization did away with the sorting of most shipments and the need for warehousing. It
displaced many thousands of dock workers who formerly handled break bulk cargo.
Containerization also reduced congestion in ports, significantly shortened shipping time and
reduced losses from damage and theft
REVERSE LOGISTICS :;
Reverse logistics stands for all operations related to the reuse of products and materials. 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. More
precisely, reverse logistics is the process of moving goods from their typical final destination for
the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities
also may be included in the definition of reverse logistics."[1] The reverse logistics process
includes the management and the sale of surplus as well as returned equipment and machines
from the hardware leasing business. Normally, logistics deal with events that bring the product
towards the customer. In the case of reverse logistics, 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.[2]
When a manufacturer's product normally moves through the supply chain network, it is to reach
the distributor or customer. Any process or management after the sale of the product involves
reverse logistics. If the product is defective, the customer would return the product. The
manufacturing firm would then have to organise shipping of the defective product, testing the
product, dismantling, repairing, recycling or disposing the product. The product would travel in
reverse through the supply chain network in order to retain any use from the defective product.
The logistics for such matters is reverse logistics.

reverse logistics 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. More precisely, reverse logistics is the process of moving goods from their
typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing
and refurbishing activities also may be included in the definition of reverse logistics.
Reverse logistics is more than reusing containers and recycling packaging materials. Redesigning
packaging to use less material, or reducing the energy and pollution from transportation are
important activities, but they might be secondary to the real importance of overall reverse
logistics.
Importance of Reverse Logistics
If no goods or materials are being sent "backward", the activity probably is not a reverse logistics
activity. Reverse logistics also includes processing returned merchandise due to damage,
seasonal inventory, restock, salvage, recalls, and excess inventory. It also includes recycling
programs, hazardous material programs, obsolete equipment disposition, and asset recovery.
 Reverse logistics is the collection of all processes that come into play for goods that move in the
reverse direction, i.e., from the customer to the business. Here are the most important
processes that are covered under reverse logistics:

Customer Support
This could be in the form of a call centre, support by email, or an online chat. Often it is a
combination of all of these methods. The ecommerce business needs to make itself available
for a conversation with the customer, who may want to return or repair the goods purchased.

Physical Movement of Goods

There are a wide variety of methods by which an ecommerce business can receive the goods
from the customer. The customer could be required to mail in the goods, or drop them off at
designated locations. Some merchants will organize for a pickup of the goods from the
customer's location.

Warehousing
The physical goods that are collected need to be tagged, tracked, and stored. This is the
purpose of the warehousing process. A warehouse is typically a large storage space on the
outskirts of major towns or cities. In addition to storage space, large warehouses have many
devices and automated processes to tag and track the stored goods.

Triage
Triage means sorting of goods based on their condition or quality. Some of the goods need to
be repaired and sent back. Others have to be sold off as used / defective goods. Still others
need to be sold as scrap. For making this decision, reverse logistics includes the important
step of triage.

Repair
Repairs are an important process in the reverse logistics supply chain -- either for returning to
the repaired goods to the customer or for reselling the returned goods. Cost effective repairs
can enable the reverse logistics centre to actually become a profit centre. In fact, the business
model of several third party reverse logistics providers depends upon selling refurbished
products at high markups. Some go so far as to actually provide warranties on the refurbished
goods.

After Sales Support

Assume that the returned goods are refurbished and sold to a new customer. Now the reverse
logistics provider has become the new seller. All aspects of after sales support, such as:
 servicing the product and supporting it with an annual maintenance contract (AMC) are
required even in the case of goods sold second-hand.

AND CLOSED-LOOP SUPPLY CHAIN.

MODULE III: MANAGING THE SUPPLY CHAIN PERFORMANCE

WAREHOUSING OPERATION:
Constructing and fitting out a modern warehouse with all its required equipment
and tools require significant capital expenditure. The early warehouse planning and design stage
is key. Mistakes in planning and layout will decrease warehouse utility and performance while
increasing your operational costs. Careful attention should be paid to operational optimization;
even a warehouse which operated effectively before may not do so under increasing loads.

Simulation modeling is the modern tool that facilitates design, layout, and optimization of
warehouse operations. Simulating a warehouse implies developing a computer model and
testing it by executing computational experiments with different combinations of parameters
based on that model these experiments provide a low-cost and low risk method to determine
the optimal parameter set for a warehouse under development or redesign.

Our consulting division offers a full package of warehouse operations set up and optimization
services based on simulation modeling we begin with a thorough investigation of
the problem working in close cooperation with customer representatives. This approach ensures
a precise problem definition and clear requirements supporting a mutually understood scope of
work.
The first step in creating a model is detailing the warehouse structure anthropology: the exact
location of major apartment and zones and transportation routes. The next step is to specify the
business processes that determine warehouse operation: the who/what/when, of resources
(staff and equipment) associated with various procedures. We consider material arrival schedule
including variable such as: parts, volume, and timing. During model operation we typically
generate and collect detailed warehouse operations statistics such as resource utilization rates,
activity durations, completion times, etc. as specified by the customer.

Our deliverables are tailored for each assignment but often include such items as: a detailed
report describing warehouse design, suggested changes to layout a stone optimization
results, software caught allowing the customer to reach these determinations himself, or a
software decision support system to be used on an ongoing basis. Whatever the specific
deliverable most warehouse simulation solutions address:
 the required quantity and type of transportation and material handling equipment;
staff level requirements;
floor space requirements and layout;
ultimate scenarios of equipment lay out an arrangement;
calculating performance metrics such as execution time;
resource utilization rates, inventory levels, etc.;
calculating and optimizing warehouse operational expenses;
determining the optimal number of loading and unloading gates;
developing more effective freight traffic flows;
optimizing operational timetables.

Warehouse Operations
Once the scope of a given warehouse is determined, managerial attention focuses on
establishing the operation. A typical warehouse contains materials, parts, and finished goods
inventory. Warehouse operations consist of handling and storage. The objective is to efficiently
receive inventory, store it as required, assemble it into unique orders, and make customer
shipment. This emphasis on continuous product flow requires a modern warehouse be viewed as
a product mixing facility. As such, a great deal of managerial attention concerns how to design
the facility to accomplish efficient handling.

Handling
A first consideration is movement continuity and efficiency throughout the warehouse.
Movement continuity means that it is better for an employee using handling equipment to
perform longer moves than to undertake a number of short handlings to accomplish the same
overall inventory move. Exchanging products between handlers or moving goods from one piece
of equipment to another wastes time and increases the potential for product damage. Thus, as a
general rule, longer warehouse handling movements are preferred. Ideally, goods, once in
motion, should be continuously moved until arrival at their final destination.
Scale economies justify moving the largest quantities or loads possible. Instead of moving
individual cases, handling procedures should be designed to move cases grouped on pallets,
slipsheets, or containers. The overall objective of handling is to eventually sort inbound
shipments into unique customer assortments. The three primary handling activities are
receiving, in-storage handling or transfer, and shipping.

Receiving
The majority of products and materials arrive at warehouses in large-quantity truck shipments.
The first handling activity is unloading. At most warehouses, unloading is performed using a
combination of a lift truck, conveyors, and manual processes. When freight is floor stacked in the
transportation vehicle, the typical procedure is to group products into unit loads using pallets. In
some situations products are placed on conveyors to facilitate receiving. When inbound product
arrives unitized on pallets or in containers, lift trucks are used to move products from the vehicle
to the dock. A primary benefit of receiving unitized loads is the ability to rapidly unload and
release inbound transportation equipment.

In-Storage Handling
In-storage handling consists of inventory movements performed within the warehouse.
Following receipt and movement to an initial staging location, product is often moved within the
facility for storage or order selection. Finally, when an order is processed it is necessary to select
the required products and move them to a shipping area. These two types of in-storage handling
are typically referred to as transferand selection.
There are at least two and sometimes three transfer movements in a typical warehouse.
The merchandise is initially moved from the receiving area to a remote storage location. This
movement is typically achieved using a lift truck when pallets or slipsheets are used or by other
mechanical means for other types of unit loads. A second internal movement may be required
prior to order assembly, depending upon warehouse operating procedures. When unit loads
have to be broken down for order selection, they are usually transferred from storage to an
order selection or picking area. When products are large or bulky, such as appliances, this
intermediate movement to a picking area may not be necessary. Such product is often selected
from the storage area and moved directly to the outbound shipment staging area. The staging
area is typically adjacent to the shipping dock. In order selection warehouses, the assembled
customer order is transferred from the selection area to the shipping staging area.
Characteristically, in-storage handling involves lower volume movements than receiving.
Order selection is one of the major handling activities within warehouses. The selection
process requires that materials, parts, and products be grouped to facilitate order assembly. It is
typical for one area of a warehouse to be designated as a selection or picking area to assemble
orders. For each order, the combination of products must be selected and packaged to meet
specific customer order requirements.
An emerging technology, radio-frequency identificator (RFID) holds substantial promise in
the area of warehouse layout, receiving, order selection, and shipping. Because of the large
number of different products processed and handled in a typical distribution center, RFID
technology has great potential to improve operational efficiency. The deployment of RFID
technology in warehouse design and material handling is discussed in Chapter 10.

Shipping
Shipping consists of order verification and outbound transportation equipment loading. As in
receiving, firms may use conveyors or unit load handling equipment such as lift trucks to move
products from the staging area into the outbound truck trailer or container. In comparison to
receiving, warehouse shipping must accommodate relatively low-volume movements of a
mixture of products, thus reducing the potential for economies of scale. Shipping unit loads is
becoming increasingly popular because considerable time can be saved in vehicle loading. A unit
load consists of unitized or palletized product. To facilitate this loading and subsequent
unloading upon delivery, many customers are requesting that suppliers provide mixed
combinations of product within a trailer or on a pallet. The alternative is to floor-stack cases in
the transportation vehicle. Shipment content verification is typically required when product
changes ownership. Verification may be limited to a simple carton count or a piece-by-piece
check for proper brand, size, and in some cases serial number to assure shipment accuracy.
Over-the-road trailers are typically sealed at the time they are fully loaded and ready for
shipment. The seal serves to verify that the content has not been altered during transit.
Certification that seals have not been tampered with has become a critical factor in post 9/11
security.3

Storage
In planning warehouse layout, it is essential that products be assigned specific locations,
called slots, on the basis of individual characteristics. The most important product variables to
consider in a slotting plan are product velocity, weight, and special storage requirements.
Product velocity is the major factor driving warehouse layout. High-volume product should
be positioned in the warehouse to minimize movement distance. For example, high-velocity
products should be positioned near doors, primary aisles, and at lower levels in storage racks.
Such positioning minimizes warehouse handling and reduces the need for frequent lifting.
Conversely, products with low volume are typically assigned locations more distant from primary
aisles or higher up in storage racks.

INVENTORY MANAGEMENT:
The overseeing and controlling of the ordering, storage and use of components that a company
will use in the production of the items it will sell as well as the overseeing and controlling of
quantities of finished products for sale. A business's inventory is one of its major assets and
represents an investment that is tied up until the item is sold or used in the production of an
item that is sold. It also costs money to store, track and insure inventory. Inventories that are
mismanaged can create significant financial problems for a business, whether the
mismanagement results in an inventory glut or an inventory shortage.

Investopedia explains 'Inventory Management'

Successful inventory management involves creating a purchasing plan that will ensure that items
are available when they are needed (but that neither too much nor too little is purchased) and
keeping track of existing inventory and its use. Two common inventory-management strategies
are the just-in-time method, where companies plan to receive items as they are needed rather
than maintaining high inventory levels, and materials requirement planning, which schedules
material deliveries based on sales forecasts.
Activities employed in maintaining the optimum number or amount of each inventory item.
The objective of inventory management is to provide uninterrupted production, sales,
and/or customer-service levels at the minimum cost. Since for many companies inventory is the
largest item in the current assets category, inventory problems can and do contribute to losses
or even business failures. Also called inventory control. See also inventory analysis

VENDOR MANAGED INVENTORY

Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product
(business) provides certain information to a vendor (supply chain) supplier of that product and
the supplier takes full responsibility for maintaining an agreed inventory of the material, usually
at the buyer's consumption location (usually a store). A third-party logistics provider can also be
involved to make sure that the buyer has the required level of inventory by adjusting the
demand and supply gaps.
As a symbiotic relationship, VMI makes it less likely that a business will unintentionally become
out of stock of a good and reduces inventory in the supply chain. Furthermore, vendor (supplier)
representatives in a store benefit the vendor by ensuring the product is properly displayed and
store staff are familiar with the features of the product line, all the while helping to clean and
organize their product lines for the store.
One of the keys to making VMI work is shared risk. In some cases, if the inventory does not sell,
the vendor (supplier) will repurchase the product from the buyer (retailer). In other cases, the
product may be in the possession of the retailer but is not owned by the retailer until the sale
takes place, meaning that the retailer simply houses (and assists with the sale of) the product in
exchange for a predetermined commission or profit (sometimes referred to as consignment
stock). A special form of this commission business is scan-based trading, where VMI is usually
applied but its use is not mandatory.
This is one of the successful business models used by Walmart and many other big
box retailers.[1] Oil companies often use technology to manage the gasoline inventories at the
service stations that they supply (see Petrolsoft Corporation). Home Depot uses the technique
with larger suppliers of manufactured goods. VMI helps foster a closer understanding between
the supplier and manufacturer by using Electronic Data Interchange formats, EDI software and
statistical methodologies to forecast and maintain correct inventory in thesupply chain.
Vendors benefit from more control of displays and more customer contact for their employees;
retailers benefit from reduced risk, better store staff knowledge (which builds brand loyalty for
both the vendor and the retailer), and reduced display maintenance outlays.
Consumers benefit from knowledgeable store staff who are in frequent and familiar contact with
manufacturer (vendor) representatives when parts or service are required. Store staff have good
knowledge of most product lines offered by the entire range of vendors. They can help the
consumer choose from competing products for items most suited to them and offer service
support being offered by the store.

, SCM AND INFORMATION TECHNOLOGY, INTER-FIRM INTEGRATION: IMPLEMENTATION ISSUES,

APPLICATION OF RFID:
Radio-frequency identification (RFID) is the wireless use of electromagnetic fields to transfer
data, for the purposes of automatically identifying and tracking tags attached to objects. The tags
contain electronically stored information. Some tags are powered byelectromagnetic
induction from magnetic fields produced near the reader. Some types collect energy from the
interrogating radio waves and act as a passive transponder. Other types have a local power
source such as a battery and may operate at hundreds of meters from the reader. Unlike
a barcode, the tag does not necessarily need to be within line of sight of the reader, and may be
embedded in the tracked object. Radio frequency identification (RFID) is one method
for Automatic Identification and Data Capture (AIDC).
RFID tags are used in many industries. An RFID tag attached to an automobile during production
can be used to track its progress through the assembly line. Pharmaceuticals can be tracked
through warehouses. Livestock and pets may have tags injected, allowing positive identification
of the animal.
Since RFID tags can be attached to cash, clothing, possessions, or even implanted within people,
the possibility of reading personally-linked information without consent has raised serious
privacy concerns.[1]
The RFID world market is estimated to surpass US$20 billion by 2014
Agriculture

Tracking the movements of animals via RFID is probably one of the first areas where this
technology was used. Farm management systems can be extremely expensive, but monitoring
the health of animals is essential for any modern day farmer. Ensuring the correct feed is
provided to a specific individual among a herd of hundreds can be extremely time consuming.
With RFID this can be achieved automatically and cost effectively, with information sent back to
central database in real time to show which animals are healthy.

Retail

With mobile RFID devices already on the market, the infrastructure is also beginning to grow for
RFID payments as several retailers from McDonalds to Starbucks in the UK have already signed
up. The video below from IBM has been around for a while but examines how this concept can
be taken further.

From a consumer perspective RFID is a fairly simple approach, however for a retailer this
technology has massive implications on the supply chain. The cost benefit analysis of
implementing tags on all products to have real time asset management, warehouse management
and supply chain visibility is immensely valuable. Each product can now be accurately tracked
from its raw materials, straight through to the manufacturing process and finally to the individual
end user. With the rise of the intelligent fridge we could see better communication between
several closed systems. For example once a product is consumed a message could be sent back
to the retailer to deliverymore and also to the manufacturer to produce more, thus allowing for
better stock control and reducing waste.

Smart Plates & Edible RFID Tags

NutriSmart have developed edible RFID tags which really demonstrates how far the true supply
chain can really be measured. Incorporating printable RFID tags into food produce has huge
benefits for the health and medical industries. This could ensure people are taking the right
medicine and those with health problems are consuming the right foods. This type of
technology could identify whether the food is safe to eat, whether it has the right nutritional
value and may then go on to track it through the body's digestive system and communicate any
problems to your mobile phone. The SmartPlate could soon become a product many of us
simply cannot live without.

ERP:
Enterprise resource planning (ERP) is a business management softwareusually a suite of
integrated applicationsthat a company can use to collect, store, manage and interpret data
from many business activities, including:-

Product planning, cost and development

Manufacturing or service delivery
Marketing and sales
Inventory management
Shipping and payment
ERP provides an integrated view of core business processes, often in real-time, using common
databases maintained by a database management system. ERP systems track business
resourcescash, raw materials, production capacityand the status of business commitments:
orders, purchase orders, and payroll. The applications that make up the system share data across
the various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the
data.[1] ERP facilitates information flow between all business functions, and manages
connections to outside stakeholders.[2]
Enterprise system software is a multi-billion dollar industry that produces components that
support a variety of business functions. IT investments have become the largest category of
capital expenditure in United States-based businesses over the past decade. Though early ERP
systems focused on large enterprises, smaller enterprises increasingly use ERP systems.[3]
The ERP system is considered a vital organizational tool because it integrates varied
organizational systems and facilitates error-free transactions and production. However, ERP
system development is different from traditional systems development.[4] ERP systems run on a
variety of computer hardware and network configurations, typically using a databaseas
an information repository.[5]

JIT:
 Just-In-Time (JIT) is a very simple idea but one that is essential in modern supply chain
management. JIT sets out to cut costs by reducing the amount of goods and materials a firm
holds in stock. JIT involves:
producing and delivering finished goods just in time to be sold
partly finished goods just in time to be assembled into finished goods
parts just in time to go into partly finished goods
materials just in time to be made into parts.
The principle that underpins JIT is that production should be pulled through rather than
pushed through. This means that production should be for specific customer orders, so that the
production cycle starts only once a customer has placed an order with the producer. Stocks are
delivered when they are needed. Consequently, this approach requires much more frequent
delivery of stocks. Developing a JIT approach requires sophisticated planning and considerable
experience in this field. This is why leading companies contract out their supply chain
management to a specialist company like Exel with considerable experience of this area.
Just-In-Time is the key element in what is termed lean production. Lean production is a
philosophy and a way of working involving eliminating all forms of waste (where waste is defined
as anything that does not add value in the production process and supply chain).
The idea behind lean production stems from Japan where for many years supply chain managers
have been seeking to eliminate muda ie any activity which involves wasted effort, materials and
time. Exel is particularly effective in ensuring lean production because it is able to reduce muda
at every stage in the supply chain from designing efficient warehousing systems, to sophisticated
tracking methods in freight forwarding, developing e-commerce links, and cutting out any
wasteful processes at any stage of distribution.
A further advantage of JIT is the benefit derived from eliminating lineside storage of parts and
the associated clutter which inhibits efficient movements to/from the production line. By
reducing the storage of parts at the production line, a manufacturer is often able to increase the
speed of the production line and produce more carswith the same number of resources,
lowering the overall unit cost of production.

Applications
Typically, supply chain managers are trying to maximize the profitable operation of their
manufacturing and distribution supply chain. This could include measures like maximizinggross
margin return on inventory invested (GMROII) (balancing the cost of inventory at all points in the
supply chain with availability to the customer), minimizing total operating expenses
(transportation, inventory and manufacturing), or maximizing gross profit of products distributed
through the supply chain. Supply chain optimization addresses the general supply chain problem
of delivering products to customers at the lowest total cost and highest profit. This includes
trading off the costs of inventory, transportation, distributing and manufacturing. In addition,
optimizing storage and transportation costs by means of product / package size is one of the
easiest and most cost effective initial implementations available to save money in product
distribution. [2]
Supply chain optimization has applications in all industries manufacturing and/or distributing
goods, including retail, industrial products, and consumer packaged goods (CPG).

OPTIMIZATION OF SUPPLY CHAIN:

Supply chain optimization is the application of processes and tools to ensure the optimal
operation of a manufacturing and distribution supply chain.[1] This includes the optimal
placement of inventory within the supply chain, minimizing operating costs (including
manufacturing costs, transportation costs, and distribution costs). This often involves the
application of mathematical modelling techniques using computer software.

RETAILING MANAGEMENT,

WASTE ELIMINATION AND LEAN THINKING IN SUPPLY CHAIN;

In this era of economic difficulty it is important to make every penny and minute count, as time
is money. Waste within a companys supply chain -- either internal or external -- through
inefficient processes, ordering errors and mistakes, lack of responsiveness and breakdowns in
communications are an enormous expense of both time and money that can be dramatically
decreased through more efficient supply chain processes.

Most successful companies strive to optimize a supply chain which decreases waste and
activities that do not directly add value. This can be achieved through developing lean supply
chain management methods.

One method that can be rapidly implemented is the use of Electronic Data Interchange (EDI) to
standardize business processes including accounts payable/receivable, order processing,
warehousing, logistics and inventory management. The exchange of electronic data can be
integrated with numerous in-house systems, to either replace or enhance their current
functionality making processes more efficient.

Overhead and inefficiency costs are incurred by crucial supply chain processes, including:
physically receiving and processing purchase orders, invoices and payments
 manually sending paper invoices
personally checking inventory
ordering the necessary raw materials by phone, fax or e-mail
preparing and mailing invoice payments.

These four areas, where most inefficiency occurs, can be considered the core of the supply
chain.

Order Processing
Typical internal procedures for handling order processes involve:
Order comes in, verbally, via fax or e-mail
Order gets manually entered
Inventory management is alerted to the order via phone, fax or e-mail.

The process described is unnecessarily wasteful and should be streamlined to occur without the
use of paper, toner and man-hours. An Enterprise Resource System (ERP) or accounting system
can help alleviate much of this activity. These systems are designed to centralize the necessary
information in processing an order, including customer information, pre-filled forms and
automatically generated next-step items.

Additionally, Warehouse Management Systems assist in the ordering and monitoring of

inventory and raw materials, as well as decreasing the man-hours required to physically check
inventory levels.

These two systems can be used simultaneously to create a seamless process from ordering to
inventory management. As these systems can be expensive, it is recommended to complete an
ROI analysis of the cost savings and the expected timeframe to reach those results.

Inventory and Raw Materials

Implementation of just-in-time (JIT) inventory practices allows a company to immediately
increase their cost savings. This process will decrease the cost of inventory, increase inventory
turn and assist on gaining a perfect-order measure of close to 100 percent.

The cost of warehousing inventory is unnecessary when electronic communications can make
ordering raw materials a simple process of typing and clicking, with a dramatic reduction in
communication errors and overhead costs.
With JIT practices, the supply fulfillment process will reflect exactly what is needed for order
fulfillment, without incurring additional costs. Through the execution of this process, not only is
the physical and obsolescence cost of inventory reduced, but also several overhead expenditures
including warehousing, rental and utility costs, as well as insurance and taxes.

Although JIT practices strive to eliminate the surplus cost of inventory and raw materials, some
vendors will offer reduced prices and rates for ordering a minimum amount of product.
Sometimes these rates outweigh the savings incurred by the utilization of JIT practices and
should be taken into account when implementing this strategy.

Material Acquisition
Acquiring the raw materials necessary for order fulfillment includes numerous wasteful
processes including:
Determining the proper quantity of materials
Placing orders via phone, fax or e-mail
Writing purchase orders
Sending purchase orders to suppliers.

The above procedures require an excess of time and money to fulfill. Through the utilization of a
Warehouse Management System that is integrated into a seamless ordering system, such as an
electronic data interchange (EDI) system, this process is decreased from four manual steps to
two:
Check material levels
Type and send purchase order.

This will dramatically reduce the non-essential costs associated with material acquisition, making
it a smoother, more efficient process.

Another way to reduce costs in acquiring raw materials is to find vendors that work in close
proximity to one another. These vendors might be willing to ship products together in one crate
or on one pallet or truck, depending on quantities and the preferred shipping method, to reduce
the cost of transport and delivery.

Using both these tactics to implement lean processes within material acquisition will not only
reduce the overall cost of martial acquisition, but also save money through the elimination of
non-economical business processes.
Lean Manufacturing is the production control technique for eliminating the waste from your
manufacturing. We would like not only to introduce you to the many production control
techniques that have been created in Japan such as the Toyota Production System, Production
Scheduling, JIT, KANBAN and 5S but also to have discussion from consultants,researchers and
other experts in the field of lean manufacturing as well. Our goal is to show you how Lean
Manufacturing is actually being used for real companies in practical situations to improve
everyday production. Not just in Japan but around the world. So whether youre here to share
your knowledge or learn from our experience, everyone at Lean Manufacturing Japan would like
to offer you a warm welcome.

Lean manufacturing is based on finding efficiencies and removing wasteful steps that don't add
value to the end product. There's no need to reduce quality with lean manufacturing the cuts
are a result of finding better, more efficient ways of accomplishing the same tasks.

To find the efficiencies, lean manufacturing adopts a customer-value focus, asking "What is the
customer willing to pay for?" Customers want value, and they'll pay only if you can meet their
needs. They shouldn't pay for defects, or for the extra cost of having large inventories. In other
words, they shouldn't pay for your waste.

Waste is anything that doesn't add value to the end product. In Lean Manufacturing, there are
eight categories* of waste that you should monitor:

1. Overproduction Are you producing more than consumers demand?

2. Waiting How much lag time is there between production steps?
3. Inventory (work in progress) Are your supply levels and work in progress inventories too
high?
4. Transportation Do you move materials efficiently?
5. Over-processing Do you work on the product too many times, or otherwise work
inefficiently?
6. Motion Do people and equipment move between tasks efficiently?
7. Defects How much time do you spend finding and fixing production mistakes?
8. Workforce Do you use workers efficiently?

SUPPLY CHAIN PERFORMANCE MEASUREMENT SYSTEMS; SUPPLY CHAIN BALANCED SCORE CARD:

Supply Chain Balanced Scorecard

The Supply Chain Balanced Scorecard tracks a limited number of key metrics. These metrics
should be closely aligned to the companies strategic objectives. The measurements usually cover
4 areas:
1. Financial - Example: The cost of manufacturing, warehousing, transportation etc.
2. Customer - Example: Order Fill Rate, Backorder Levels, OnTime Delivery 3.
3. Internal Business - Example: Adherence-To-Plan, Forecast Error
4. Training: Example: In house Training Hours, APICS Membership/ Certification.

While the Balanced Scorecard approach was not specifically designed for the Supply Chain, it
does give a good guidance for your core measures. The central idea is to focus on key metrics
that have real meaning to your company. You don't want to get lost in a sea of numbers that
don't really mean anything. The Balance Scorecard approach helps you to keep your measures
aligned with your objectives. These measures should be tracked over time (usually monthly) with
specific targets for each.

SCOR MODEL.
Supply-chain operations reference-model (SCOR) is a process reference model developed by the
management consulting firm PRTM, now part of PricewaterhouseCoopers LLP (PwC) and
endorsed by the Supply-Chain Council (SCC) as the cross-industry de facto standard diagnostic
tool for supply chain management. SCOR enables users to address, improve, and communicate
supply chain management practices within and between all interested parties in the extended
enterprise.
SCOR is a management tool, spanning from the supplier's supplier to the customer's customer.
The model has been developed by the members of the Council on a volunteer basis to describe
the business activities associated with all phases of satisfying a customer's demand.
The model is based on 3 major "pillars":

Process modelling
Performance measurements
Best practices

MODULE IV: SCM IN INDIAN AND GLOBAL PERSPECTIVE

LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN THE INDIAN ENVIRONMENT,:

 In the past green or sustainable topics werent a major focus for companies but this has
changed. Today, 54% of larger companies claim to have established a Green Supply Chain
Management (SCM)*. Public attention is now very focused on these topics and has become a
competitive factor. Furthermore, analysts and rating agencies assess companies on the
maturity of their sustainability.

We can help you address these challenges to:

Comply with sustainable supply chain regulations

Calculate carbon footprint according to EN 16258 and French decree
Define actions to reduce your carbon footprint
Develop carbon neutral logistics services or products
Rate your supplier using sustainability scorecards & audits
Assess your sustainability maturity and develop a roadmap for a green SCM strategy
Develop a sustainable logistics strategy
*Source: BearingPoint Supply Chain Monitor

How BearingPoint brings value

We take a holistic approach to implement green supply chain management for your
organization. It not only covers environmental issues but also other sustainable logistics topics.

Our Green SCM approach comprises of the following services:

Carbon footprint calculation:

Calculate your carbon footprint for logistics using our unique LogEC a leading-edge emissions
calculator
Report carbon data on corporate level or for single shipments / customers in an automated way
LogEC is certified and compliant with the EN 16258 and the French decree 1336
Carbon footprint reduction:

Carbon Quick Check allows to identify low hanging fruits

Proven cost-benefit analysis (Invest per saved ton of CO2)
Network optimization in terms of CO2 reduction
Improvement catalogue for warehousing and transportation
Green SCM Strategy:
 Green SCM Quick Check / Maturity check
Feasible roadmap development / Plan realistic reduction goals
Development and implementation of Green SCM Strategies
Support for certification / rating organizations
Sustainable Logistics:

Materiality analysis conduction

Sustainable SCM Strategy definition
Supplier Score Cards & Audits
Sustainability Software selection & implementation
Based on these services we can lead the way to a sustainable Supply Chain Management.

MOTIVES AND DEVELOPMENT OF GLOBAL MARKETS, SUPPLY CHAIN RECONSIDERATION TO SUIT

THE GLOBAL ENVIRONMENT, RISK INVOLVED IN INTERNATIONAL MARKETS,BENCHMARKING
GLOBAL SUPPLY CHAINS.