Supply Chain Management Supply Chain: The sequence of organization’s facilities, functions, and activities that are involved in producing and delivering a product or service.

Need for Supply Chain Management Improve operations Increasing levels of outsourcing Increasing transportation costs Competitive pressures Increasing globalization Increasing importance of e-commerce Complexity of supply chains Manage inventories

Benefits of Supply Chain Management Lower inventories Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty

Elements of Supply Chain Management Deciding how to best move and store materials Logistics Determining location of facilities Location Monitoring supplier quality, delivery, and relations Suppliers Evaluating suppliers and supporting operations Purchasing Meeting demand while managing inventory costs Inventory Controlling quality, scheduling work Processing Incorporating customer wants, mfg., and time Design Predicting quantity and timing of demand Forecasting Determining what customers want Customers Typical Issues Element

Logistics The goal of logistic work is to manage the completion of project life cycles, supply chains and resultant efficiencies. Logistics is the art and science of managing and controlling the flow of goods, energy, information and other resources like products, services, and people, from the source of production to the marketplace. Refers to the movement of materials and information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain.

Logistics Logistics 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 It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging.

Logistics Movement within the facility Bar coding Incoming and outgoing shipments EDI (Electronic Data Interchange) Distribution JIT Deliveries

Logistics: Evaluating Shipping Alternatives A situation that arises frequently in some businesses in making a choice between quicker( expensive) shipping alternatives such as overnight or 2 day air and slower but cheaper alternatives. The decision in such cases often focuses on the cost savings of alternatives versus the increased holding cost that result from using slower alternative.

Logistics: Evaluating Shipping Alternatives Often the supplier gets paid on delivery of the product through EDI the very same time the order reaches its destination. The Incremental Holding cost incurred by using the slower alternative is computed as follows: Incremental Holding Cost= H ( d/365) Where H=Annual Holding cost for the item. d = Time savings in days and d/365 is fraction of year saved.

Logistics Example Determine the shipping alternative ( with in Pakistan) for a Karachi based Montessori toy manufacturer,2 days or 5 days are best when the holding cost of the item is Rs. 100,000 per year and the 2 day shipping cost is Rs 1500. and 5 day shipping cost is Rs. 600 Rs. 500

Logistics Example Solution H= Rs. 100,000 per year Time savings = 3 using 2 days alternative Holding cost for additional 3 days = 100,000 X ( 3/365) = Rs. 822. Or Holding cost per day = Rs. 274

Logistics Example Alternative A Cost savings = Rs. ( 822-600)= Rs. 222, because the actual cost of savings of Rs 222 is less than the holding cost of Rs. 274, use the 1 day option. Cost savings = Rs. ( 822-500)= Rs. 322, because the actual cost of savings of Rs 322 is greater than the holding cost of Rs. 274, use the 5 day option.

Distribution Requirements Planning Distribution requirements planning (DRP) is a system for inventory management and distribution planning. Extends the concepts of MRPII.

Uses of DRP Management uses DRP to plan and coordinate: Transportation Warehousing Workers Equipment Financial flows

Electronic Data Interchange EDI – the direct transmission of inter-organizational transactions, computer-to-computer, including purchase orders, shipping notices, and debit or credit memos.

Electronic Data Interchange Increased productivity Reduction of paperwork Lead time and inventory reduction Facilitation of just-in-time systems Electronic transfer of funds Improved control of operations Reduction in clerical labor Increased accuracy

Efficient Consumer Response Efficient consumer response (ECR) is a supply chain management initiative specific to the food industry. Reflects companies’ efforts to achieve quick response using EDI and bar codes.

E-Commerce E-Commerce: the use of electronic technology to facilitate business transactions.

Successful Supply Chain Trust among trading partners Effective communications Supply chain visibility Event-management capability The ability to detect and respond to unplanned events Performance metrics