MS-55 LOGISTICS AND SUPPLY CHAIN MANAGEMENT

1. MS-55LOGISTICS AND SUPPLY CHAIN MANAGEMENT BLOCK-I AN OVERVIEW UNIT-1 INTRODUCTION

2. LOGISTICS Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involve the integration of information, transportation, inventory, warehousing, material-handling, and packaging. The term "logistics" originates from the ancient Greek "λόγος" ("logos"—"ratio, word, calculation, reason, speech, oration"). The Oxford English dictionary defines logistics as: “The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities." Another dictionary definition is: "The time related positioning of resources." As such, logistics is commonly seen as a branch of engineering which creates "people systems" rather than "machine systems"....

3. SUPPLY CHAIN MANAGEMENT • Supply chain management (SCM) is the process of planning, implementing and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. • The definition one American professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies

4. LOGISTICS ACTIVITIES • Customer service • Demand forecasting • Distribution communication • Inventory control • Material handling • Order processing • Parts & service support • Plant & warehouse site • Selection • Procurement • Packaging • Return goods handling • Scrap disposal • Traffic & transportation

5. LOGISTIC ELEMENT • Facility location: determining location, number & size of facilities needed, allocation demand to facilities • Transportation: Mode & service selection, carrier routing, vehicle scheduling • Inventories: finished goods stocking policies, record keeping, supply scheduling, short term sales forecasting • Customer service: cooperate with marketing in determining needs & wants for service, determining customer response to service. • Order processing & information flow: sales order procedure, information collection, storage & manipulation, data analysis

6. LOGISTIC ELEMENT Warehousing & material handling: Space determination, stock layout, material handling equipment selection, stock storage & retrieval, equipment replacement policies. Protection packaging: design for- handling, storage, protection. Product Scheduling: co-operate with product in specifying aggregate production quantities, sequencing & timing of production.

7. ROLE OF LOGISTICS IN THE ECONOMY Logistics play a key role in the economy in two significant ways. FIRST, logistics is of the major expenditures for business. It accounts for around for around 15-20% of GDP. SECOND, As it support the movement and flow of many economic transactions; it is an important activity in facilitating the sales of virtually all goods & services.

8. Value Chain Modelfrom Michael E. Porter’s Competitive Advantage SUPPORT ACTIVITIES Firm Infrastructure (General Management) Human Resource Management Customer Value Margin Technology Development Procurement Inbound Logistics Outbound Logistics Sales & Marketing Service and Support Ops. Margin Customer Value PRIMARY ACTIVITIES

9. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin. Inbound logistics include the receiving, warehousing, and inventory control of input materials. Operations are the value-creating activities that transform the inputs into the final product. Outbound logistics are the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc. Marketing & Sales are those activities associated with getting buyers to purchase the product, including channel selection, advertising, pricing, etc. Service activities are those that maintain and enhance the product's value including customer support, repair services, etc. Any or all of these primary activities may be vital in developing a competitive advantage. For example, logistics activities are critical for a provider of distribution services, and service activities may be the key focus for a firm offering on-site maintenance contracts for office equipment.

10. Support Activities The primary value chain activities described above are facilitated by support activities. Porter identified four generic categories of support activities, the details of which are industry-specific. Procurement - the function of purchasing the raw materials and other inputs used in the value-creating activities. Technology Development - includes research and development, process automation, and other technology development used to support the value-chain activities. Human Resource Management - the activities associated with recruiting, development, and compensation of employees. Firm Infrastructure - includes activities such as finance, legal, quality management, etc. Support activities often are viewed as "overhead", but some firms successfully have used them to develop a competitive advantage, for example, to develop a cost advantage through innovative management of information systems.

11. SUPPLY CHAIN INTEGRATION Supply chain integration links a firm with its customers, suppliers & other channel members. It integrates their relationships, activities, functions, processes & locations. The purpose is to improve the effectiveness & efficiency of SC for ultimate consumers. A model of evolution of SC integrations starts with: • BASELINE Purchasing<material control<production<sales<distribution

12. FUNCTIONAL INTEGRATION Materials management<manufacturing management<distribution management INTERNAL INTEGRATION Materials management<manufacturing management<distribution management EXTERNAL INTEGRATION Suppliers<internal supply chain<customers

13. PHYSICAL DISTRIBUTION MANAGEMENT • Physical distribution management (PDM) is concerned with ensuring the product is in the right place at the right time. • Physical distribution – Concerned with what happens to outbound goods as they move from the organization to its customers

14. Components of PDM • Order processing • Transportation • Inventory management • Warehousing • Materials handling

15. 1. Order processing • From placement of order till the customer receives the product 3 tasks that happen in a logical sequence • Order entry – by various means • Order handling – Physical goods, finance department • Order delivery – Mode of transport depending on service level and product nature Electronic Data interchange – EDI • Electronic data exchange of various business forms such as order forms, financial reports, delivery notes.

16. 1. Order processing

17. 2. Transportation - Modes • Rail – mainly bulky items and large volumes over large distances. Relatively low cost depending on infrastructure • Road – Short distances and all categories but smaller weight / volumes. Flexible format and the delivery to the doorstep concept is popular. • Air – Expensive but gives fastest form over distance. Ideal for valuable lightweight small bulk goods and perishable goods • Pipelines – Effective and efficient after initial startup cost. Draw back is limited goods are suitable. • Water – Restricted to international trade in SAF. Lower cost bit relatively high risk. Suitable for big bulk goods were lead times are longer

18. 2. Transportation - Modes

19. 2. Transportation - Factors • Cost – Total cost of moving products from one location to another. Includes transport, levies, insurance. • Time – Time from when courier is notified to delivery at destination • Accessibility – Number of different location that can be reached by specific mode of Transport. Road is most accessible while pipe is least. • Capability – Ability to handle different types of goods. • Frequency – How often the mode of transport can be used. • Reliability – Ability to deliver goods safely and on time

20. 3. Inventory management Objective - is to minimize inventory cost • 2 major issues – When to order inventory (Re-order point) • How much to order (Economic order quantity) Re-order point – Reached when an organization's inventory levels reach a certain minimum level. Important concepts to remember. • Order lead time – time from placing order till receipt of order • Usage rate – rate at which inventory is being used / sold during a specific time period. • Safety stock – the amount of stock that is kept to ensure no stock outs.

21. 3. Inventory management “Just in time” – Right product arrives, in the right quantities just when they are required Philosophy that eliminates waste in the manufacturing process • A system that produces the required item at the time and in the quantities needed. • Inventory control philosophy whose goal it is to maintain just enough material in just the right place at just the right time to make just the right amount of product. • A Program that seeks to eliminate non value adding activities from any operation The basis of JIT is the relationship between supplier and customer.

22. JIT Ideal Inventory level is one unit Faster production than necessary is a waste Trade offs is bad. All they do is replace problems Safety stock is seen as waste Conventional More is better Faster production is better Scheduling and queuing is essential production processes. Inventory provides safety Inventory smoothes production JIT vs.. Traditional approach

23. 4. Warehousing Why do we have Warehouses? • Impossible for manufacturers to produce goods exactly when required • Bulk production is more economical but bulk needs to be stored Functions of Warehouses • Receiving goods – Inventory is money and receiving of goods needs to be seen as a financial activity • Sorting goods – To ensure appropriate inventory control goods need to be allocated in predetermined positions • Storage of goods • Filling of orders – Warehouses are responsible for the making up of order parcels • Dispatching orders – Sending out of Orders to customers

24. 4. Warehousing • Warehousing decisions • How many are needed? • What types of Warehouses? • Location of Warehouses • Types of Warehouses • Private Warehouses • Long Term commitment • Special handling or unique products • Need for high level of control

25. Warehousing • Trends • New Technology to ensure speed and accuracy • Less inventory is kept due to cost of inventory • Quality of goods is critical due to lower inventory levels • Service is key aspect

26. 5. Materials handling Transfer of goods into, around and out of an organization to a transport agency. • Objectives • Lowest cost • Maximum Capacity utilization • Minimum handling of goods • Safety of employees • Provision of quality service

27. Cost elements of Total logistics cost • Storage cost • Delivery cost • Trucking cost • Inventory cost • Capital cost: cost of physical stock. • Service cost: stock management & insurance cost • Risk cost • System cost: it represents a variety of information or communication requirements ranging from order processing to load assembly lists. THANKS……………..

28. MS-55LOGISTICS AND SUPPLY CHAIN MANAGEMENT BLOCK-I AN OVERVIEW UNIT-2 PRINCIPLES OF SUPPLY CHAIN MANAGEMENT

29. What is Supply chain? • Consists of all parties involved, directly or indirectly, in fulfilling a customer request Supplier Manufacturer Distributor Retailer Customer

30. HOW DOES SCM WORK? The SCM is viewed as a system that links an enterprise with its customer & suppliers. SCM is an integrated approach that is highly interactive & complex and requires simultaneous consideration of many trade-offs. SCM is the management of all the business process across a number of supply chains. So, operating an integrated supply chain requires continuous information flows, which in turn helps to create the best product flow.

31. So, what is SCM? • Objective is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost.

32. KEY PROCESSES FOR INTEGRATED SCM • Customer relationship management: This term applied to processes implemented by a company to handle its contact with its customers. CRM is used to support these processes, storing information on current and prospective customers. The rationale behind this approach is to improve services provided directly to customers and to use the information in the system for targeted marketing and sales purposes. • Customer service management: “Customer service is a series of activities designed to enhance the level of customer satisfaction – that is, the feeling that a product or service has met the customer expectation.”

33. Demand Management: It is the art or science of controlling economic demand to avoid a recession. It refers to policies to control consumer demand for environmentally sensitive or harmful goods such as water and energy. Within manufacturing firms the term is used to describe the activities of demand forecasting, planning and order fulfillment. “Demand management" — a proven mechanism to take costs out of an organization without further reducing its capacity to execute.

34. Customer order fulfillment: It is designed to link every phase of order fulfillment, from capture to invoice and settlement, and with close integration to the demand management and order planning loops. This end-to-end solution can create a single face to the customer across disparate processes, lines of business, geographies, and IT systems. Manufacturing Flow Management: Itprovides a cost effective way for small and mid-size manufacturers to optimize their manufacturing and business systems. The implementation of manufacturing flow strategies can answer the question, “How can we do more with less.”

35. Procurement: Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quantity and quality, at the right time, in the right place and from the right source for the direct benefit or use of corporations, or individuals, generally via a contract. Product development & commercialization: Itpresents a holistic framework for the development of high-technology products. A systems approach is advocated and illustrated in which all of the functional units within a firm interactively contribute to the product realization process.

36. AREAS LOGISTICS-MARKETING INTERFACE • Product Design • Pricing • Market & Sales forecasts • Customer service policies • Number & location of warehouses • Inventory policies • Order processing • Channels of distribution

37. LOGISTICS MANUFACTURING INTERFACE Manufacturing & logistic are interrelated so no one can be considered in isolation. Decisions made in these two areas commit the organization to relatively long-lasting cost structures & also determine the manner in which the business competes in its chosen market. To maintain its competitive position in a dynamic industry, the manufacturing & logistics functions must respond positively by considering the manufacturing/ logistics network as a whole. Refer table 2.1

38. Customer Service issues at the Logistics Manufacturing interface • Demand Forecasting: It is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements, or in making decisions on whether to enter a new market . • Customer & Supplier oriented system: Organization systems will need to be directly related to the issues of how to bind the customer more tightly to the organization & how effectively integrate suppliers into the overall supply chain with the objective of enhancing customer service.

39. Plant Configuration: The location, nature & operating performance of manufacturing facilities, central warehouses impact heavily on both cost structure & service levels. So, in conjunction with other factors, the plant configuration is a major structural input to reducing overall supply chain costs. Master Production Scheduling: MPS is a manufacturing plan that quantifies significant processes, parts, and other resources in order to optimize production, to identify bottlenecks, and to anticipate needs and completed goods. Using MPS helps avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of resources. Working with MPS allows to consolidate planned parts, produce master schedules and forecasts for any level of the Bill of Material (BOM) for any type of part. THANKS…………………..

40. MS-55LOGISTICS AND SUPPLY CHAIN MANAGEMENT BLOCK-I AN OVERVIEW UNIT-3 CUSTOMER FOCUS IN SUPPLY CHAIN MANAGEMENT

41. CUSTOMER SERVICE • “Customer service is a series of activities designed to enhance the level of customer satisfaction – that is, the feeling that a product or service has met the customer expectation.” • Basic customer service is defined in terms of : i) Availability ii) Operational performance iii) Reliability

42. Customer Focused Marketing The customer focused marketing is built on three fundamental concepts: • The essence of a marketing orientation to business policy. • Developing supply chain management competency as strategic resources to customer service planning • The changing nature of most desired SCM practice to accommodate product life cycle requirements. Rest refer book….

43. MS-55BLOCK-IIDESIGN & MANAGEMENT OF SCM UNIT-4 LOGISTICS: INBOUND AND OUTBOUND

44. LOGISTICS • Logistics is defined as a business planning framework for the management of material, service, information and capital flows. It includes the increasingly complex information, communication and control systems required in today's business environment. • .the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements."

45. Major aspects of Logistics The two major aspects of logistics are: Transporting & Warehousing. • Transporting:Transport or transportation is the movement of people and goods from one place to another. The term is derived from the Latintrans ("across") and portare ("to carry"). Industries which have the business of providing transport equipment, transport services or transport are important in most national economies, and are referred to as transport industries. • The field can be divided into infrastructure, vehicles, and operations. Infrastructure consists of the fixed installations necessary for transport, and may be roads, railways, airways, waterways, canals and pipelines or terminals such as airports, railway stations, bus stations and seaports. Vehicles traveling on the network include automobiles, bicycles, buses, trains, people and aircraft. Operations deal with the way the vehicles are operated, and the procedures set for this purpose including the financing, legalities and policies.

46. Warehousing: A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They come equipped with loading docks to load and unload trucks; or sometimes are loaded directly from railways, airports, or seaports. They also often have cranes and forklifts for moving goods, which are usually placed on ISO standard pallets loaded into pallet racks. Some warehouses are completely automated, with no workers working inside. The pallets and product are moved with a system of automated conveyors and automated storage and retrieval machines coordinated by programmable logic controllers and computers running logistics automation software.

47. Benefits of Inbound and Outbound Logistics Gain visibility and control of 100% of transactional activity regardless of direction or freight term policy Manage orders, appointments and shipments in a single user interface Improve operational efficiency in various areas including consolidation and cross-docking and scheduling Identify new opportunities for private fleets including backhaul and store delivery strategies

48. LOGISTICS MANAGEMENT • Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.

49. LOGISTIC MANAGEMENT These are all technologically feasible projects. But it is not only the technology that determines the result. Political policy, participation and permission procedures, land expropriation, environmental impact studies, costing, budgeting and price control, logistic efficiency and safety. These, as well as many other aspects, have to be taken into account early in the plan development of real estate and infrastructure projects. It requires engineers who master the process. Engineers, who oversee, analyze and predict all aspects of the design and execution of civil engineering projects.

50. MS-55BLOCK-IIDESIGN & MANAGEMENT OF SCM UNIT-5 MODELS FOR SCM INTEGRATION