1. AMAT CONSULTANTS Introduction to Strategic Logistics & Supply Chain Management Based on Materials From Supply Chain Management, Chopra & Meindl, 2001 [A] © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 Fundamentals of Logistics Management, Lambert, Stock & Ellram, 1998 [B] © 1998 McGraw-Hill Companies 1

2. Module Details See Moodle document “Handbook BSST H4025 SLSCM” on Moodle 2 one hour lectures per week 1 one hour tutorial per week Assessment 60% exam 40% CA 2

3. CA Details Continuous Assessment (CA) will consist of 1 major (20%) and 4 minor (5%) events Minor CA events are held during tutorials and consist of short multiple-choice tests that examine key concepts covered in recent lectures and tutorials. Events will generally be at 2 week intervals with a provisional schedule of weeks 4, 6, 8, 10. The major CA event will be project based and due on week 11. To score well in CA events, it is necessary that students attend both lectures and tutorials regularly. Many of the questions will be based on additional and contextual information generated during lectures and tutorials. A detailed schedule will be published on Moodle shortly 3

4. Outline What is a Supply Chain? Decision Phases in a Supply Chain Process View of a Supply Chain The Importance of Supply Chain Flows Examples of Supply Chains 1-4

5. Supply Chain Management “Supply Chain Management (SCM) is the integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers”. [B] Chapter 14 P. 504. SCM includes all key business activities across all members of the supply chain SCM is an all-inclusive process that is dynamic, complex and interactive 5

6. What is a Supply Chain? “A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request A supply chain consists of flows of information, products and funds across different stages SCs consist of many stages with each having a different function and each interacting with other stages as appropriate 6

7. Stakeholders in the Supply Chain Includes manufacturers, suppliers, transporters, warehouses, retailers, customers Within each company, the supply chain includes all functions involved in fulfilling a customer request including: product development Marketing Operations Distribution Finance customer service) 7

8. Key Activities in a Supply Chain Buy - purchasing of goods and services required to make your product Make – producing your finished product Fulfil – ensuring your customer receives your product At every stage of the Supply Chain, goods are made (or provided) by a Stakeholder; this involves items being bought from the previous Stakeholder, and orders being fulfilled to the next Stakeholder © 2005 Accenture. All rights reserved. 8

9. Flows in a Supply Chain 1-9 Customer Information Product Funds

10. Why is the Supply Chain Important? Accounting for as much as seventy percent of operating costs Typically comprising at least half of all assets 80% of Fortune 1000 companies said supply chain initiatives were able to cut cost costs, improve efficiencies, enhance customer service and revenues, or improve competitiveness Source: Accenture research. © 2005 Accenture. All rights reserved 10

11. Example of a Supply Chain When you order a laptop online, the supply chain may include amongst others: You the customer The ordering web pages that captures, places, and tracks orders The suppliers who will supply the necessary components The assembly plant that will build the laptop The logistics company that will make the delivery The IT support company that will manage the warranty 11

12. Example of a Supply Chain (Cont.) Flows of information, product and funds include: You the customer customises your order The seller provides specification and pricing information to you When you pay, funds will be transferred to the seller The seller will transfer data e.g. address, preferences for delivery, restocking information to its distribution centre The distribution centre will transfer information to the logistics company and vica-versa Similar transfers occur across the entire supply chain 12

13. 3 Minute Exercise... Think of an example of a supply chain and list the stakeholders and likely information flows across the supply chain. 13

14. Objectives of a Supply Chain Objective is to maximise value generated Value generated is the difference between what the customer pays and the costs incurred in fulfilling the customer’s order For example, when you buy your laptop online for say, €750: Supply chain receives €750 The seller and other stakeholders incur costs conveying information, making components, storing them, transporting them, and in transferring funds etc. The difference between the €750 that you paid and the sum of all costs incurred by the supply chain to produce and distribute the computer represents the supply chain profitability. Supply chain management is the management of flows between and among supply chain stages to maximise total supply chain profitability 14

15. Typical Sources of Revenue and Cost in the Supply Chain For any supply chain, there is only one source of revenue: the customer. When you purchase the laptop online, you are the only one one providing positive cash flow for the supply chain. All other cash flows are simply fund exchanges that occur within the supply chain given that different stages have different owners When the laptop seller pays its suppliers, it is taking a portion of your funds and passing that money on to them All flows of information, product, or funds generate costs within the supply chain Thus, the appropriate management of these flows is a key to supply chain success Supply chain management involves the management of flows between and among stages in a supply chain to maximise total supply chain profitability. 15

16. Decision Phases of a Supply Chain Supply chain strategy or design Supply chain planning Supply chain operation 1-16

17. Supply Chain Strategy or Design Decisions about the structure of the supply chain and what processes each stage will perform Strategic supply chain decisions Locations and capacities of facilities Products to be made or stored at various locations Modes of transportation Information systems Supply chain design must support strategic objectives Supply chain design decisions are long-term and expensive to reverse – must take into account market uncertainty 1-17

18. Supply Chain Planning Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year 1-18

19. Supply Chain Planning Planning decisions: Which markets will be supplied from which locations Planned buildup of inventories Subcontracting, backup locations Inventory policies Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon 1-19

20. Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment order 1-20

21. Process View of a Supply Chain Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push) 1-21

22. Cycle View of Supply Chains 1-22 Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Customer Retailer Distributor Manufacturer Supplier

23. Push/Pull View of Supply Chains 1-23 Procurement, Manufacturing and Replenishment cycles Customer Order Cycle Customer Order Arrives PUSH PROCESSESPULL PROCESSES

24. Push/Pull View of Supply Chain Processes Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative) Push/pull boundary separates push processes from pull processes 1-24

25. Push/Pull View of Supply Chain Processes Is useful in considering strategic decisions relating to supply chain design – more global view of how supply chain processes relate to customer orders Can combine the push/pull and cycle views The relative proportion of push and pull processes can have an impact on supply chain performance 1-25

26. LOGISTICS 1-26

27. SCM and Logistics “Supply Chain Management (SCM) is the integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers”. [B] Chapter 14 P. 504. SCM includes all key business activities across all members of the supply chain SCM is an all-inclusive process that is dynamic, complex and interactive 27

28. Differences between SCM and Logistics? Much Confusion exists between both academics and practitioners in business as to what or any differences exist Stock and Lambert [B] suggest that SCM is much more of a Systems approach i.e. It is holistic, all encompassing, and considers all and every aspect of that journey of product from original supplier to the end user. They see SCM as much more interactive and complex 28

29. Differences between SCM and Logistics? Much Confusion exists between both academics and practitioners in business Stock and Lambert [B] suggest that SCM is much more of a Systems approach i.e. It is holistic, all encompassing, and considers all and every aspect of that journey of product from original supplier to the end user. They see SCM as much more interactive and complex See next slide... 29

30. Differences between SCM and Logistics? Lambert and Stock [B] suggest supply chain management is the management of eight key business processes: 1. Customer relationship management 2. Customer service management 3. Demand management 4. Order fulfilment 5. Manufacturing flow management 6. Procurement 7. Product development and commercialisation 8. Returns 30

31. Differences between SCM and Logistics? There are many different perspectives Paul D. Larson & Arni Halldorsson suggest that there are 4: 1. Traditionalist; SCM is a small part of logistics 2. Relabeling; simply renames logistics; what was logistics is now SCM 3. Unionist; this perspective treats logistics as a part of SCM. SCM completely subsumes logistics 4. Intersection concept suggests SCM and logistics overlap somewhat but are not the same thing 31

32. For our purposes... We will go with the definition used by Lambert and Stock in [B] There definition is that logistics is 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” 32

33. Components of Logistics Management 33

34. Role of Logistics in an Organisation - Customer Satisfaction - Key area for improving profitability and competitiveness By the late 1980s and early 1990s, customer service was being placed at the centre of things in many organisations Effective logistics is key to satisfying the customer and meeting their needs Logistics consists of the planning, implementing and controlling the efficient flow and storage of goods to the customer Therefore, its important role in satisfying the customer through meeting or exceeding their requirements is obvious 34

35. Role of Logistics in an Organisation - Profits - It is usually a key objective to maximise profits and to get the greatest return on investments possible Key logistics activities include: Customer service Demand forecasting / planning Inventory management Logistics communications Material handling All of these activities can be major areas of cost For example, customer service cost considerations include: The cost of meeting customer service levels The cost of fulfilling the order, supplying parts, and service support The cost of dealing with complaints and returns The cost of losing a sale and/or a customer As profit = (Price – Cost) all of these logistics activities will impact significantly on the bottomn line 35