1. Introduction to Supply Chain and Logistics Management
Faculty of Management Sciences
Unit 1
Introduction to Supply Chain and Logistics Management
By: Gloria Tshoopara
Date: 06 February 2018

2. Unit outline Faculty of Management Sciences
What is a supply chain and supply chain management?
Origin of Supply Chain Management
What is Logistics and logistics management?
Supply Chain Components
Benefits of integrated sc
Why SC are important and SC goals
Supply Chain Activities/Processes
The Logistics/SCM mission
Supply Chain Management Activities
Supply Chain Challenges
Elements of SC
Functions of logistics management
An overview of logistics and supply chain management activities

3. Origins of supply chain management
1950s & 1960s
- Mass production techniques used as principle cost reduction and productivity
improvement strategies
1960s & 1970s
- Development of Materials Requirements Planning (MRP) and Manufacturing Resource
Planning (MRPII) to coordinate inventory management and improve internal
communication
1980s & 1990s
- Intense global competition lead manufacturers to adopt:
· Supply Chain Management (SCM)
· Just-In-Time (JIT)
· Total Quality Management (TQM)
· Business Process Reengineering (BPR)
2000s and beyond
- Companies will focus on relationships, sustainability, and social responsibility
- Companies will focus on improving supply chain capabilities with initiatives such as:
· Third-party service providers (3PLs)
· Integrating logistics
· Using transportation to facilitate rapid response

4. What is a Supply Chain?

5. What Is A Supply Chain?
The system of suppliers, manufacturers, transportation, distributors, and vendors that exists to transform raw materials to final products and supply those products to customers.
That portion of the supply chain which comes after the manufacturing process is sometimes known as the distribution network.

6. What is a Supply Chain?
A supply chain consists of the flow of products and services from:
Raw materials manufacturers
Intermediate products manufacturers
End product manufacturers
Wholesalers and distributors and
Retailers
Connected by transportation and storage activities, and
Integrated through information, planning, and integration activities
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

7. What is a Supply Chain?
A supply chain consists of the flow of products and services from/to:
--Raw materials manufacturers SEE FIGURE 1.1
--Intermediate products manufacturers
--End product manufacturers
--Wholesalers and distributors
--Retailers and,
--End customers
Connected by agents, transportation and storage activities, and
Integrated through sharing of information, planning, and processing activities\
Examples???

8. © 2005 Thomson Business and Professional Publishing
What is a Supply Chain?
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

9. DEFINITION: SUPPLY CHAIN
"a channel of distribution beginning with the supplier of materials or components, extending through a manufacturing process to the distributor and retailer, and ultimately to the consumer" (dictionary.com) The interconnected set of business procedures and business partners that manage the flow of goods and information from the point of design to the delivery of the product or service to the end customer (City University, London)

10. SUPPLY CHAIN COMPONENTS
SUPPLIERS
Source of raw materials, component parts, semi-manufactured products and unfinished or non-consumable products that occurs early in the supply chain.
MANUFACTURERS
Makers of final products. Manufacturers perform the task of final assembly or product integration.
DISTRIBUTORS
Responsible for managing, storing and handling of products for organizations that don’t want to carry entire variety of products in their own facilities.
LOGISTICS SERVICE PROVIDERS
Commercial provider of individual or multiple integrated service for other entities in the supply chain e.g. transportation management, value-added warehousing and distribution and information technology based services
RETAILERS
The entity that buys from the manufacturer and sell to the final customer.
CONSUMERS
People who go into the stores and buy and consume the product

11. DEFINITION: SUPPLY CHAIN MANAGEMENT
“The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities” (CSCMP) An integrated supply chain management is the coordination and efficient management of information, material and financial flow through improved relationships at all stages of supply chain to obtain a sustainable competitive advantage. (City University, London)

12. What is logistics?
One quite widely accepted view shows the relationship as shows:
Lately, a more scientific definition was used :
Logistics = Supply + Materials management + Distribution
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.“
Council of Logistics Management

13. What is logistics management?
Is that part of supply chain management that plans, implements and control 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.
Council of Supply Chain Management Professionals(CSCMP)

14. Logistics versus supply chain management?
Logistics Defined Logistics is the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements Council of Logistics Management Supply Chain Management Defined SCM is the integration of all activities associated with the flow and transformation of goods from raw materials through to end user, as well as information flows, through improved supply chain relationships, to achieve a sustainable competitive advantage Handfield and Nichols

15. Evolution of logistics
The concept of “Logistics” started many years before Christ and was used by Greek generals (Leon the Wise, Alexander the Great) in order to describe all the procedures for the army’s procurement on food, clothing, ammunition, etc.
Alexander the Great was a big fan of the mobility of his troops and he didn’t want his troops to stay in one place waiting for supplies from Macedonia. Thus, he tried to resolve the issues of supplies by using supplies from the local resources of his defeated enemies.
For many years, logistics were always an issue in war affairs. Kingdoms and generals with strategic planning on logistics were those who won the war.
World War II was the major motivation of logistics to increase recognition and emphasis, following the clear importance of their contribution toward the Allied victory.
Starting from the early ‘60s, many factors, such as deregulation, competitive pressures, information technology, globalization, profit leverage, etc., contributed to the increase of logistics science in the form we now it today.

16. Traditional Scope of the Supply Chain
Physical distribution
Physical supply
(Materials management)
Business logistics
Sources of
supply
Plants/
operations
Customers •
Transportation
Inventory maintenance
Order processing
Acquisition
Protective packaging
Warehousing
Materials handling
Information maintenance
Product scheduling
Internal supply chain
1-14
CR (2004) Prentice Hall, Inc.
Dickson Chiu 2006

17. Key Activities/Processes
Primary
Setting customer service goals
Transportation
Inventory management
Location
Secondary, or supporting
Warehousing
Materials handling
Acquisition (purchasing)
Protective packaging
Product scheduling
Order processing
Dickson Chiu 2006

18. The Logistics/SCM Mission
Getting the right goods or services to the right place, at the right time, and in the desired condition at the lowest cost and highest return on investment.
Effective SCM – 7 Rs
• Right product
• Right quantity
• Right condition
• Right place
• Right time
• Right customer
• Right cost
Product / Service Utility
Possession Utility - the value or usefulness that comes from a customer being able to take possession of a product
Form Utility - in a form that can be used by the customer and is of value to the customer
Place Utility - available where they are needed by customers
Time Utility - available when they are needed by customers
Logistics obviously help time and place utility
Dickson Chiu 2006

19. Supply Chain Integration
Chapter 14 Supply Chain Management
Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements
Internal Operations Integration
A competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chain
Customer Integration 19

20. Key foundations for effective SCM
Supply Supply base rationalisation, supplier alliances, SRM, global sourcing, ethics and sustainability
Operations Demand management, CPFR, MRP, ERP, inventory visibility, lean systems, six sigma quality systems
Logistics Logistics management, customer relationship management, network design, RFID, global supply chains, sustainability, service response logistics
Integrations Risk and security management, performance measurement, green supply chains

21. Why so Difficult to Match Supply and Demand?
Uncertainty in demand and/or supply
Changing customer requirements
Decreasing product life cycles
Fragmentation of supply chain ownership
Conflicting objectives in the supply chain
Conflicting objectives even within a single firm
Marketing/Sales wants: more FGI inventory, fast delivery, many package types, special wishes/promotions
Production wants: bigger batch size, depots at factory, latest ship date, decrease changeovers, stable production plan
Distribution wants: full truckload, low depot costs, low distribution costs, small # of SKUs, stable distribution plan

22. Losing Sight of the Common Objective
I'm glad that the hole
is not on our side!

23. SCM
«The Integrated, synchronized flow of materials, information and funds from suppliers thru manufacturers to consumer point of sale», i.e. from end-to-end
In a very broad sense: «all organizations involved in fulfilling the customer request». Supply chain management thus is a cross- functional approach.

24. Availability to customer
Why is Supply Chain Mgmt. so important? It influences availability, sales, manufacturing costs, working capital and quality of product!
stocks
Forcasting
Manufacturing
Logistics
Sales & distribution
Availability to customer
Purchasing
Investments
Purpose of this slide
Use this slide to show how Roche’s Pharma Strategy drives supply chain activities as well as the impact Supply Chain Management has
General comments
Supply chain improvement is part of Roche’s Pharma Strategy and of the strategic goals set by Pharma Executive Committee
It is critical for Roche Pharma’s future to have a high performing supply chain
Pressure on prices due to competitive market asks for low operations cost
Reliable supplies to customers
Improve return on capital
Return on capital (ROC) is an abbreviated term for return on capital employed (ROCE)
ROCE = EBIT / capital employed
Capital employed = total assets - current liabilities
Capital employed = current assets + fixed assets - current liabilities
EBIT = earnings before interest and taxes
Argumentation
Inventory is part of current assets (=cash + receivables + inventory)
The smaller the value of inventory, the smaller are current assets
The smaller current assets are, the smaller is the capital employed
The smaller the capital employed is, the bigger is the ROCE
Pharma long term strategy
Innovation (“offering targeted, clinical differentiated medicines that treat unmet medical needs”)
Personalized medicines (“take a leading role in the trend towards personalised medicine”)
Strive for continued outstanding performance (“double total shareholder return in five years”)
Instructions
Depending on the audience, this slide should be customized (cogwheel naming should be adapted)
Possible stakeholders: Technical Development, Customer Service, Marketing, etc.
Arguments
Make point that Supply Chain Management is a part of our business that has great influence on all others and vice versa
Explain impact of supply chain on business performance in terms of
Sales
Flexibility to supply more material in case of business opportunity (tender, competitors problems, etc.)
No stock outs
Manufacturing cost
Proper planning enables us to have the right capacity in place and to manufacture at the economic optimum (e.g. EOQ, MOQ)
Working capital
Inventory (capital cost, capital lockup, etc)
Fixed assets
Mid – long term demand forecasts are the basis for investments into manufacturing assets
Possibly use examples (e.g. impact of Tamiflu Supply Chain Management on sales, etc.)
Tax and customs

25. BENEFITS OF AN INTEGRATED SUPPLY CHAIN
The Essentials of Supply Chain Management: New Business Concepts and Applications (FT Press Operations Management)
BENEFITS OF AN INTEGRATED SUPPLY CHAIN
IMPROVED CUSTOMER SERVICE & VALUE ADDED
Increased inventory availability, better on-time delivery performances, higher order fill rates and lower post sales costs.
Better USE OF FIXED CAPITAL
Fixed capital use is maximized through partnerships and joint planning that can decrease stock levels whilst maintaining service.
UTILIZED ASSET
Asset utilization can be maximized by increasing inventory turns and closely aligning supply with demand
INCREASED SALES & PROFITABILITY
The ability to assess outcomes due to price changes, promotional events and new product development can be enhanced through increased visibility resultant from information sharing among supply chain partners

26. SUPPLY CHAIN MANAGEMENT ACTIVITIES
PURCHASING
Activities relating to the procurement of all necessary goods and services required to operate. Involves all components of SC.
ORDER PROCESSING
The function needed to fill customers’ orders, such as order receipt, order picking and order shipment. Involves manufacturers, distributors and retailers
FORECASTING
The process of predicting customer demand based on expected future sales and actual past sales.
PRODUCTION PLANNING
The process of scheduling manufacturing lines to meet the needs determined by forecasting. It also includes ensuring that needed raw materials and supplies are on hand for production.
INVENTORY MGMT.
The process entails monitoring of stock levels, proper positioning of stock and active tracking of product age and availability.
WAREHOUSING
The holding of goods with focus on moving product into, through and out of warehouses in a timely manner.
TRANSPORTATION
The movement of products from one destination to another using single (motor, rail, water, air, pipeline) or combined modes of transport (intermodal).
CUSTOMER SERVICE
All sales or after sales activities that occur between the buyer and seller such as order status and post sales support.

27. What Is the Goal of Supply Chain Management?.
Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed:
In the right quantities
To the right locations
At the right time
In order to
Minimize total system cost
Satisfy customer service requirements

28. Why is supply chain management so important?
To gain efficiencies from procurement, distribution and logistics
To make outsourcing more efficient
To reduce transportation costs of inventories
To meet competitive pressures from shorter development times, more new products, and demand for more customization
To meet the challenge of globalization and longer supply chains
To meet the new challenges from e-commerce
To manage the complexities of supply chains
To manage the inventories needed across the supply chain

29. Why is supply chain management difficult?
Different organizations in the supply chain may have different, conflicting objectives
Manufacturers: long run production, high quality, high productivity, low production cost
Distributors: low inventory, reduced transportation costs, quick replenishment capability
Customers: shorter order lead time, high in-stock inventory, large variety of products, low prices
Supply chains are dynamic - they evolve and change over time

30. Supply Chain Challenges
Typical pain points in Supply Chain:
Unreliable forecasting,
Slow customs clearing,
Bad inventory tracking,
Weak (cold) storage and distribution capabilities,
Lack of qualified staff,
Wrong storage conditions,
No waste treatment,
No or unreliable returns management,
Theft and counterfeiting
In most case wholesalers do not provide last mile distribution; many handovers
Poor inspectorate surveillance of rules and regulations (if at all existing)
Intransparent business behaviours, high costs for end consumer

31. Important Elements of SCM
Purchasing- Supplier alliances, supplier management, strategic sourcing
Operations- Demand management, MRP, ERP, JIT, TQM
Distribution- Transportation management, customer relationship management, network design, service response logistics
Integration- Coordination/Integration activities, global integration problems, performance measurement

32. Important Elements of SCM-Cont.
Purchasing:
Long term relationships
Supplier management- improved performance through-
-- Supplier evaluation (determining supplier capabilities and performance)
-- Supplier certification (third party or internal certification to assure product quality and service compliance)
Strategic partnerships- successful and trusting, long-term relationships with top-performing suppliers

33. Important Elements of Supply Chain Management-Cont.
Operations:
-- Demand management- match demand to available capacity
-- Linking buyers & suppliers via MRP and ERP systems
-- Use JIT to improve the “pull” of materials to reduce inventory levels
-- Employ TQM to improve quality compliance among buyers and suppliers

34. Important Elements of Supply Chain Management-Cont.
Distribution:
-- Transportation management- tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air
-- Customer relationship management- strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements
-- Network design- creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system

35. Important Elements of Supply Chain Management-Cont.
Integration:
-- Supply Chain Integration- when supply chain participants work for common goals. Requires intrafirm functional integration. Based on efforts to change attitudes & adversarial relationships
-- Global Supply Chains- advantages that accrue from sourcing from larger global market e.g., lower cost & higher quality suppliers. May involve operating exposure, which is risk found in foreign settings
-- Supply Chain Performance Measurement- Crucial for firms to know if procedures are working

36. Future Trends in Supply Chain Management- Cont.
Increasing Supply Chain Responsiveness
Firms will increasingly need to be more flexible and responsive to customer needs
Supply chains will need to benchmark industry performance and meet and improve on a continuous basis
Responsiveness improvement will come from more effective and faster product & service delivery systems
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

37. Future Trends in Supply Chain Management- Cont.
The Greening of Supply Chains
Supply chains will work harder to reduce environmental degradation
Large majority (75%) of U.S. consumers influenced by a firm’s environmental friendliness reputation
Recycling and conservation are a growing alternative in response to high cost of natural resources
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

38. Future Trends in Supply Chain Management- Cont.
Reducing Supply Chain Costs
Cost reduction achieved through:
Reduced purchasing costs
Reducing waste
Reducing excess inventory
And reducing non-value added activities
Continuous Improvement through
Benchmarking- improve over competitors’ performance
Trial & error
Increased knowledge of supply chain processes
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

39. Transportation Airways Water Pipelines Motor Carriers Railroads
Chapter 14 Supply Chain Management
Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
Notes:
Supply chain logisticians must decide which mode of transportation to use to move products from supplier to producer and from producer to buyer. These decisions are related to other logistics decisions. The five major modes of transportation are listed on this slide. 39

40. Transportation Mode Choice
Chapter 14 Supply Chain Management
Transportation Mode Choice
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
Notes:
Supply chain managers choose a mode of transportation on the basis of the criteria shown on this slide. 40 40

41. Criteria for Ranking Modes of Transportation
Chapter 14 Supply Chain Management
Criteria for Ranking Modes of Transportation 41

42. Just-in-Time Manufacturing
Chapter 14 Supply Chain Management
Just-in-Time Manufacturing
JIT
A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials at the precise time they are needed on the production line.
Notes:
JIT, or lean production, was borrowed from the Japanese. Manufacturers work with suppliers to get necessary items to the assembly line at the precise time they are needed for production.
For the manufacturer, JIT means that raw materials arrive at the assembly line “just in time” to be installed.
For the supplier, JIT means supplying customers with products in just a few days rather than weeks.
For the consumer, JIT means lower costs, shorter lead times, and products that closely meet the consumer’s needs.

43. Chapter 14 Supply Chain Management
Benefits of JIT
For manufacturers: reduces raw material inventories; immediate shipping of products
For suppliers: daily or hourly deliveries rather than weekly
For customers: lower costs; shorter lead times; products tailored to customer needs
Notes:
The benefits of JIT are shown on this slide.

44. Major external forces
• Globalisation • Technology • Organisational consolidation • Empowered consumer • Government policy and regulation

45. SCM Expertise and Practical Experience required
SCM practice draws from the areas of industrial engineering, systems engineering, operations management, logistics, procurement, information technology (IT), and marketing.
Supply chain professionals need to have knowledge of managing supply chain functions such as transportation, warehousing, inventory management, and production planning. In the past, supply chain professionals emphasized logistics skills, such as knowledge of shipping modes and lanes, familiarity with warehousing equipment and distribution center locations and footprints, and a solid idea of freight modes and rates as well as fuel costs.
Supply chain management extends to logistical support across firms and management of global supply chains. 
Supply chain professionals need to have an understanding of the business environment, the company’s competing strategy as well as business continuity basics and strategies.

46. Supply Chain professionals Roles and responsibilities
Supply chain professionals play major roles in the design and management of supply chains. In the design of supply chains, they help determine whether a product or service is provided by the firm itself (insourcing) or by another firm elsewhere (outsourcing).
One goal of a well-designed and maintained supply chain is to successfully build the product in the right quality at minimal cost. Today, a cheap but robust supply chain is a competitive advantage for any firm.
Beyond design and maintenance of a supply chain itself, supply chain professionals participate in aspects of business that have a big impact on supply chains, such as sales forecasting, quality management, strategy development, customer service, and business development.

47. Supply Chains New developments / co-operative
Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.
In recent decades, globalization, outsourcing, and IT have enabled many organizations, to successfully operate collaborative supply networks in which each specialized business partner focuses on only a few activities (Scott, 1993).
In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures and strategic alliances were developed as significant success factors , complementing the earlier just-in-time (JIT) practices. Second, technological changes, particularly the dramatic fall in IT and communication costs (a significant component of transaction costs), have led to changes in coordination among the members of the supply chain network (Coase, 1998).

48. SCM Aspiration Sustainable competitive advantage
Companies strive to focus on core competencies and become more flexible. They reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively.
In consequence the number of organizations involved in satisfying customer demand is increased while direct control of daily logistics operations is reduced. Less control and more supply chain partners require comprehensive supply chain management.
The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement (i.e. less stocks) without sacrificing product quality and customer experience.

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