CERTIFIED LOGISTICS & SUPPLY CHAIN MANAGEMENT PROFESSIONAL

(CLSCMP)

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 Course Objectives
1 Supply Chain Management Fundamentals
2 Concepts of International Trade
3 Transportation
4 Purchasing and Procurement
5 Free-zone Operations
6 Warehouse management
7 Inventory
8 Advances in Logistics
9 Negotiation
10 Lean Thinking 1
1. Supply Chain Management Fundamentals

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 Supply Chain Management(SCM)
• Supply chain management (SCM), the management of
the flow of goods and services, involves the movement
and storage of raw materials, of work-in-process
inventory, and of finished goods from point of origin to
point of consumption.

• Supply chain management is the management of the flow

of goods and services and includes all processes that
transform raw materials into final products.
Key benefits of supply chain management:
1. Develops better customer relationship and service.
2. Creates better delivery mechanisms for products and services in demand.
3. Minimum delay.
4. Improvises productivity and business functions.
5. Minimizes warehouse and transportation costs.
6. Minimizes direct and indirect costs.
7. Enhances inventory management, supporting the successful execution of
just-in time stock models.
8. Assists companies in adapting to the challenges of globalization,
economic upheaval, expanding consumer expectations, and related
differences.
9. Assists companies in minimizing waste, driving out costs, and achieving
efficiencies throughout the supply chain process.
10. Assists in achieving shipping of right products to the right place at the
right time.
 R’s and P’s of Logistics
R’s P’s
• Right Product
• Right Quality Product
• Right Quantity Price
• Right Time Promotion
• Right Place
People
• Right Condition
• Right price Place
• Right Customer
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 The Supply Chain : A Ketchup Story
Ketchup Factory
Tomato Farm Processing, Packing & Logistics
Raw material Supplier Warehousing Shipment of Finished Product

Value Demand
Delivery Information

Final Consumer Retail Outlets Distribution Centers

Satisfying Customer Demand Stocks & redistribution to
Wholesale/Retail outlets

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Primary product flow Primary Cash flow

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Service Industries includes All services Except
Farming, Mining And Manufacturing

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2. Concepts of International Trade

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International Trade : Regulations

Protectionism
• Trade Restriction through Import TARIFFS, Quotas
• Economic policies like domestic subsidies, tax cuts
• Increase growth of Home industry, fair pricing and
employment security

Free Trade
• Policy which allows fair trade (Import & Export)
• Without Tariffs, restrictions or quotas
• Several bodies like WTO, NAFTA, EU, ASEAN, ICC
have been setup to document, mediate and protect
the economic interests of the member nations

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International Trade : Cooperation

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International Chamber of Commerce

 International Commercial dispute

arbitration & resolution

 Fighting Corruption and Commercial Crime

 UCP 600 : Uniform Customs and Practice (guidelines

for LCs as a financial tool for International Trade)

 WCF Certificate Of Origin guidelines

 ICC Incoterms ® : definitions of risk and obligations
of the Buyer or Seller in aspects of International trade
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ICC Incoterms® 2010 (latest Release)

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ICC Incoterms® 2010 (latest Release)
Ex Works (EXW_Seller’s premise)
• Goods considered ‘delivered’ when made available to collect
at Seller’s premises, not loaded on any collecting vehicle or
cleared for Export
• Costs and risk related to movement after this point is borne
by the Buyer

Free Carrier (FCA_named Place)

• Goods are ‘delivered’ when made available cleared for
export, into the charge of the carrier named by the buyer at
the named place or point.

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ICC Incoterms® 2010 (latest Release)
Free Alongside Ship (FAS_Origin port)
• seller fulfills his obligation to deliver when the goods
(export cleared and seaworthy packed) have been
placed alongside the vessel at the named port of export

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ICC Incoterms® 2010 (latest Release)
Free On Board (FOB_Origin port)
• ‘delivered’ when the goods have been placed onboard
the ship at the named port of shipment on the date or
within the period stipulated and in the manner
customary at the port

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ICC Incoterms® 2010 (latest Release)
Cost & Freight (CFR_Destination port)
• seller must pay the related costs (export license, export
taxes, port charges, and freight) necessary to bring the
goods to the named port of destination

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ICC Incoterms® 2010 (latest Release)
Cost, Insurance & Freight (CIF_Destination)
• Minimum Marine Insurance is procured by Seller in
addition to the terms provided by CFR term.

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ICC Incoterms® 2010 (latest Release)
Carriage Paid To (CPT_named place)
• Seller delivers the goods into the custody of the carrier
for transportation (multimodal) to the named place of
destination on the date or within the period stipulated

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ICC Incoterms® 2010 (latest Release)

Carriage & Insurance Paid To (CIP_named place)

 Seller as in CPT Incoterm clears the goods for export
and delivers them to the carrier along with minimum
insurance cover.

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ICC Incoterms® 2010 (latest Release)
Delivery At Terminal (DAT_Destination port)
 Seller clears the goods for export and bears all risks and
costs associated with delivering and unloading goods at
the terminal at the named port, place of destination.

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ICC Incoterms® 2010 (latest Release)
Delivery At Place (DAP_named place)
 Seller clears the goods for export and bears all risks and
costs associated with delivering the goods to the named
place of destination not unloaded.

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ICC Incoterms® 2010 (latest Release)
Delivery Duty Paid (DDP_Destination place)
 Seller bears all risks and costs associated with
delivering the goods to the named place of destination
(all cost and risk covered)

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7 Key changes to Incoterms 2020
1.DAT Incoterm changed to DPU
2.Insurance points are clarified in CIF and CIP
incoterms rules
3.Costs and cost structures are now clarified
4.Security in relation to transport is now clearly
detailed
5.Provisions to allow for own transport rather than
assuming 3rd party transport
6.FCA, FOB and Bills of Lading
7.Presentation and design is much more user friendly
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 The rule DAT Delivered at Terminal (DAT) has been
renamed Delivered at Place Unloaded (DPU)

 For Carriage and Insurance Paid (CIP), the level of

freight insurance provided is now Institute Clauses (A),
and not the lower level Institute Clauses (C). For Cost
Insurance and Freight (CIF), the level of freight
insurance provided has remained unchanged at Institute
Clauses (C)

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International Trade : Payments (Risk mitigation)
Clean Payments : Open credit or Cash In Advance
A. Open Account/Credit : A sale where the goods are
shipped and delivered before payment is due

Buyer(Importer) Seller (Exporter)

(1) Ship Goods

(2) Make Payment

Lowest Risk Highest Risk

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International Trade : Payments (Risk mitigation)
B. Payment in Advance : payment is made by the
Importer before transfer of ownership of goods is
effected (delivery/shipping documents).

Buyer(Importer) Seller (Exporter)

(1) Make Payment

(2) Ship Goods

Highest Risk Lowest Risk

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International Trade : Payments (Risk mitigation)
b) Documentary Collection : transaction whereby the
exporter (Principal/drawer) entrusts the collection of
the payment for a sale to their bank (Remitting bank),
which sends the documents (Transport/Title of
ownership) to the importer’s bank (Collecting bank),
with instructions (Letter of collection) to release the
documents to the buyer (Drawee, importer) against
payment or acceptance of a time draft for payment at a
future date.

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International Trade : Payments (Risk mitigation)
b) Documentary Collection
11.Payment Flow

6. Original Document Flow

4. Confirmation Remitting Bank

Exporter/Remitter

7. Original Document Flow

1. Proforma Invoice

10. Payment Flow

3. Notification
5. Goods Shipped

2. Application

9. Original Document Flow

8. Payment Flow Collecting/ Presenting Bank

Importer/Drawee
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International Trade : Payments (Risk mitigation)
c) Letter of Credit: also referred to as a documentary
credit, is a contractual agreement whereby the Issuing
bank (importer’s bank), acting on behalf of its
Customer (the importer or applicant), promises to
make payment to the Beneficiary (exporter) through
Importer’s or intermediary bank (advising/confirming)
up to a stated amount, within a prescribed time limit
and on receipt of “complying stipulated” documents.

Be Careful :
 Required Documents must be prepared in strict compliance with the
requirements stipulated in the Letter of Credit or the exporter is exposed to
the Risk of delayed or non-payment.
 Liability is ONLY applicable to the authenticity of required documents but
NOT to the Quantity, Quality or Accuracy of the goods in question 38
International Trade : Payments (Risk mitigation)
c) Letter of Credit:
9. Payment Flow

6. Original Document Flow

Exporter/Beneficiary 4. LC Confirmation Advising/Confirming Bank

7. Original Docs Flow

3. Notification

8. Payment Flow
1. Proforma

5. Goods Shipped

2. LC Application

10. Original Docs Flow

Importer/Applicant 9. Payment Flow Issuing Bank

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
• Revocable Letter of Credit : can be void or reversed
without the consent of the Exporter
• Irrevocable Letter of Credit : L/C cannot be canceled
(or its terms amended) without the seller's
(beneficiary's) prior written approval, and comes
usually as a confirmed irrevocable letter of credit.
• Sight Letter of Credit : dictates that payment is made to
the seller immediately after the required documents have
been submitted as per LC stipulation (seller meets all
conditions mentioned therein).
o Quickest form of payment for the exporter
(seller/beneficiary). Banks will usually take 5-7 days
for document verification. 40
International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
Usance (Deferred) Letter of Credit : is paid a fixed number
of days after shipment or presentation of prescribed
documents. It is used where a buyer and a seller have a close
working relationship because, in effect, the seller is financing
the purchase by allowing the buyer the agreed grace period
for payment.
o A deferred payment letter of credit differs from a sight draft in
that no drafts are involved but the payment is guaranteed on
the stated date. However, there being no draft, the beneficiary
party's ability to discount or sell his or her right to payment is
restricted.

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
• Revolving Credit : Single LC applicable on partial
deliveries of the ordered goods at specific intervals
(partial shipments/documents) over a long period.
o Instead of arranging a new L/C for each separate
shipment, the buyer establishes a L/C that revolves
either in value (a fixed amount is available which is
replenished when exhausted) or in time (an amount is
available in fixed installments over a period such as
week, month, or year). Cumulative type, the sum
unutilized in a period is carried over to be utilized in
the next period; whereas in the non-cumulative type,
it is not carried over.

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
• Confirmed Credit : typically used when the issuing
bank of the letter of credit may have questionable
creditworthiness and the seller seeks to get a second
guarantee to assure payment.
o A secondary bank (confirming Bank) which adds
more commitment to that of the issuing bank
(Importer’s bank) for payment of the LC amount to
the Seller (Exporter) through his/her bank (Advising
Bank). Usually located in the same region as the
advising bank.

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
• Back to Back Letter of Credit : Arrangement in which
one irrevocable letter of credit serves as the collateral for
another; the advising bank of the first letter of credit
becomes the issuing bank of the second letter of credit.
o In comparison to a transferable LC, permission of
the ultimate buyer (the applicant or account party of
the first letter of credit) or that of the issuing bank,
is not required in a back-to-back letter of credit. It is
used mainly by intermediaries to hide the identity of
the actual supplier or manufacturer.

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
Back to Back Letter of Credit

Buyer (Main) Seller (Intermediary) Seller (Main)

London Dubai Singapore

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Types)
• Red Clause credit : L/C that carries a provision
(traditionally written or typed in red ink) which
allows a seller to draw up to a fixed sum from the
advising or paying-bank, in advance of the shipment
or before presenting the prescribed documents.
o It is normally used only where the buyer and
seller have close working relationship because,
in effect, the buyer is extending an unsecured
loan to the seller (and bears the financial risk
and the currency risk).

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International Trade : Payments (Risk mitigation)
c) Letter of Credit : (Required Documents)
• Financial Claim (Draft/Bill of Exchange) : A Demand
for payment accompanied by the presented documents (bill of
lading, invoice, packing list, certificate of origin, etc.)

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International Trade : Transport Documents
Bill of Lading (Types - as a contract of carriage) :
Ocean Bill of Lading : Issued for consignments
transported on board ocean-going vessels nationally or
internationally.
Air Waybill : Issued for shipments transported by air
domestically or internationally.
Multimodal/Combined Transport Bill of Lading :
Involves a minimum of two different modes of
transport, land or ocean

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International Trade : Transport Documents
Bill of Lading (Types - as a receipt of goods onboard) :
 Clean Bill of Lading : certifies that the goods were
received by the carrier in good condition and properly packed
as per requirement.
• No annotations are made on the BoL other than a signature
for receipt of goods (the ship’s captain or carrier rep.)

 Unclean Bill of Lading/Fouled BoL/Dirty

BoL/Soiled BoL : Reflects the fact the carrier received the
goods in anything other than that considered as good
condition (damaged, bad packaging, incorrect quantities, etc..)

Note : All letters of Credit and Documentary collections require only and only a clean
Bill of Lading for payment approvals.
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International Trade : Transport Documents
Bill of Lading (Types - as a certificate of Title) :
 Straight BoL : a non-negotiable BoL where the consignee
has been named and ownership of the goods cannot be
changed while in transit.
• Consignee (in case of a company) authorizes the release
of the goods to the import agent on stamping and signing
on the Original BoL

 Negotiable or “To Order” Bill of Lading : BoL on

which the consignee name has been left blank or the words
“To Order” or “To the Order of Bank XYZ” are mentioned as
consignee.
• Ownership of the goods can change even when still in transit
• Whoever has the original BoL at destination has the right to
the goods 50
International Trade : Transport Documents
Transport Documents (attachments) :
• Commercial Invoice - accounting document which
shows the financial claim of the seller against the buyer.
• Packing lists, weight lists, and official accompanying
documents or permits required for export and/or import.
• Insurance Certificate – if Incoterms are CIF or CIP,
insurance document must cover the goods, freight and
the risks defined in the letter of credit, unless stated
otherwise.
• Certificate of Origin - confirms the origin of the goods
usually issued by an official organization, such as a
chamber of commerce, ministry…

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• House Bill of Lading
• Master Bill of Lading
• Exchange Bill of Lading
• Back to Back BoL

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International Trade : Transport Documents
Transport Documents (other) :
• HS Code (Tariff) List : Harmonized Commodity
Description and Coding System (HS) is a global standardized
system of names and numbers to classify traded products
(form & function) which forms the basis of the Customs Tariff
• Shipper’s Letter of Instruction : a "letter" from the
Shipper instructing the Freight Forwarder how and where to
send the export shipment (BL Instructions).
• Fumigation Certificate : also 'pest control certificate' is
the proof that wooden packing materials used in international
freight shipping e.g. wooden pallets & crates, wool etc. have
been fumigated prior to the shipment.

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International Trade : Transport Documents
Transport Documents (other) :
• Dangerous Goods Declaration (IMO form) :
Exporter certifies that the shipped dangerous/Hazardous
cargo has been packaged, labeled, and declared in
accordance with standard IMO (ocean) or IATA (Air)
procedures.

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(Logistics)

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Transport

“Is a logistics component which constitutes the movement

of raw material or final product from one location to another as
it makes it’s way from the upstream side (Supplier) of the supply
chain to the down stream side (Customer)”.
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Transport

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Transport
• Road : Trucking involves movement of goods from place to
place either as a complete Truck Load (FTL) or less than that
(LTL)
o Cost effective over short
distances, can access remote
areas, and flexible with loading &
unloading cargo

o More expensive with

increase in Cargo Volume,
Cargo Weight, distance to
destination and susceptible
to traffic delays, break
downs…
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Transport
• Rail : Form of land transport network developed for low cost,
high volume, heavy weight and long distance cargo commonly
from industrial areas to distribution points to transport connection
points (stations).

o Faster, more reliable and

Cheaper than Road Transport
over long distances.

o Not flexible as it runs on fixed

rail freight operator’s timetable,
subject to unforeseen delays
and requires goods to be
available only at the station. 61
Transport
• Pipeline : Form of land transport network developed for crude,
refined petroleum products, water and natural gas.

o Reliable, cost effective over time and more environment friendly mode
o Not flexible as it runs on fixed lines, high maintenance costs and is
specific to only particular product transportation
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Transport
• Air : utilized for time sensitive, high value – light weight
commodities to be moved over long distances (usually international
or intercontinental) with high safety & security standards.

o Best suited for urgent (low lead

times), high value, sensitive (special
handling) items and sometimes for
emergency delivery to remote areas.

o Very Expensive for heavy – Bulky

merchandise on short distances,
susceptible to cancellation based on
weather, & security, not as flexible as
road transport.
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Transport
• Ocean or Sea : primarily for low cost delivery of heavy, high
volume, long distance and non urgent cargo from one global
seaport to another.

 Shipping Lines (MLO – Main Line Operator) : own cargo vessels

that operate on specific routes and timetables (Maersk, CMA
CGM, MSC, etc.)
 NVOCC’s (Non Vessel Operating Common Carriers)
• Do not own or operate the vessels but acts as a carrier
legally by accepting required responsibilities of a carrier
• Specialize in LCL shipments or cargo consolidation

• Can own or lease their containers for shipment

• Issue HBoL or HAWB 64
Transport : Vessel Types
1. General /Dry Cargo Vessel :
Carries a wide range of dry
packaged material from foods,
steel, furniture, chemicals and
machinery. (multi purpose or break
bulk vessels).

2. Bulk Carrier (Bulkers) :

Carries a wide range of
dry loose cargo like coal,
iron ore, grain, scrap
metal, etc.

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Transport : Vessel Types
3. Roll On Roll Off Vessel (ro-ro) :
cargo is wheeled or driven on and
off the deck of the ship mostly
tractors, buses and trucks, or
oversized cargo loaded on special
flatbed, or lowbed trailers.

4. LNG/LPG Vessel (Liquefied

Natural/Petroleum Gas) : tanker
ship designed for transporting
dangerous liquefied gas at
controlled temperatures along the
entire journey. 66
 Transport : Vessel Types
7. Refrigerated Vessels (Reefer)
: purpose built low temperature
cargo storage for transportation
of fruit, meats, fish and other
food products.

8. Container vessels :
probably the most common
in the marine fleet designed
for fast and convenient
on/off loading process
among many other
advantages (standard
Container (Box) sizes range from TEU (Twenty Foot Equivalent)
package size).
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 Transport : Vessel Types
9. Feeder Vessel /Barges: move along inland waterways between
small inland ports (berths are not deep enough for huge vessels
to dock) and major international shipping ports consisting of
rivers, canals, backwaters, etc.

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 Transport : Vessel Types
10. Livestock Carriers : purpose built ships to carry live animals
in bulk over long distances.

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Transport : Vessel Types
11. Heavy Lift Vessels : specially built to load, carry and
discharge large, unusual shaped cargoes (or even other vessels)
that will simply not fit inside the holds of conventional vessels.

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 Supply Chain Professional
Transport : Vessel Types
12. Tugboats : small boats with the mighty task to pulling and
directing vessels to and from the docking berth to and fro the
High Seas

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Transport : Vessel Types
13. Tankers (Crude Carrier/Petroleum Tanker) : Purpose built
to carry high volumes of crude oil.

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Transport : Containerization
i. General Cargo (Standard Hard Top)
Container (20’ ft/40’ ft)
Volume : 33 Cbm – 67 Cbm
Payload : 28200 Kgs – 28800 Kgs
Tare Weight : 2280 Kgs – 3700 Kgs

ii. General Cargo (High Cube)

Container (40’ ft/45’ ft)
Volume : 76 Cbm – 85 Cbm
Payload : 28600 Kgs – 27600 Kgs
Tare Weight : 4000 Kgs – 4900 Kgs

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Transport : Containerization
iii. Open Top Container
(20’ ft/40’ ft/40’ft High Cube)

iv. Flat Rack (Folding Ends)

v. Platform

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Transport : Containerization
vi. Refrigerated
Container
(Reefer)

vii.Tank Container (ISO

Container/Tanktainer)
• Purpose built Universal, LPG,
Reefer Bulk liquid Storage
Container

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Transport : Cargo Handling Equipment
Name : Forklift
Capacity :
3 Ton – 50 Ton
Fuel : Gas, Electric & Diesel
Types : Standing, 3 Wheeler, Reacher
Truck type, etc..
CAUTION: Operated STRICTLY by
CERTIFIED Personnel ONLY!!!

Name : Crane
Capacity : 7 Ton – 500 Ton
Fuel : Hydraulic , Electric & Diesel
Types : Mobile, Tower, Overhead Mounted type, etc..
Caution : Operated STRICTLY by CERTIFIED Personnel ONLY

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International Trade : Import Process

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International Trade : Export Process

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4.Purchasing and Procurement

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Purchasing: Defined…
the monetary transaction involved in
procuring supplies of material or service of the Right
quality, Right quantity, at the Right time, Right cost
and Right place inline with the corporate strategic
goals of the company.
“Procurement is a tactical level function of the
Supply Chain that directly delivers overall Cost
savings, Quality assurance, delivery consistency and
a defined value driven sourcing as well as Supplier
relationship building strategy”

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 Purchasing : Contracts
Contract : Voluntary Agreement between 2 or more
entities (individuals, businesses, organizations or
government agencies) to do, or to refrain from
doing, a particular activity, service, transaction in
exchange for something of Value (worth, utility
or benefit).

Enforceable by the
law of the agreed
jurisdiction!!!

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 Purchasing : Contracts
Content of a Business contract :
1. General Introduction - concept of need/what/why/who/when
2. Contract document acceptance mode – Electronic, Fax, or
certified mail, etc.
3. Description of Goods/Services – Specifications, Quality, Quantity,
Origin/Content, etc.
4. Price payable for Goods/Service
5. Payment Terms – payment mode, credit terms, and payment
initiation process trigger points
6. Insurance – Goods, Services and/or Third party liability, Risk of
Loss
**Contracts must always be in written form with witnesses because its difficult for either
party to prove terms of a verbal agreement incase of any misunderstanding or breach later on 84
 Contracting : Sample Cycle

Project Plan Invitation (Tender) Award

• Budgets • Tender notices
• Details of award (LOI,
• Project Detail • Project Specifications
MOU,MOA, …)
• Procurement plans • Line items & values
• Bidder information
• Market studies • Bid receipt process
• Bid evaluation/Decision
• Public hearing info • Negotiation/Evaluations

Implementation/Execution Contract
• Payments • Guarantees, Bonds,
• Progress updates/Review /Audits legal, Insurance…
• Variations/Claims • Final details
• Amendments • Contract Signing
• Completion or Termination info • Amendments

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 Contracts : Bonds
Bid Bonds : protect the project's owner if the bid is not
honored by the principal (contractor). The owner is the
beneficiary under the bond and has the right to sue the principal
and the surety (the issuer, bank, insurance company) to enforce
the bond in case of breach of contract.
Payment Bond : guarantees all payments that are due to
subcontractors and suppliers (beneficiaries) from the principal.
Performance Bonds : issued by the contractor, or principal to
guarantee that they will complete the contract in accordance
with its terms. If the principal defaults, the owner may call upon
the surety (bond issuer) to complete the contract (use a new
contractor or pay the completion costs).
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 Contracts : Others
LOI (Letter of Intent) : interim agreement that summarizes the
main points of a proposed deal, or a certain course of action to
be taken, doesn’t constitute a definite contract but a genuine
interest in reaching the final agreement subject to due diligence,
additional information, or fulfillment of certain conditions.
BOM (Bill of Materials) : detailed list of parts, items,
assemblies and sub-assemblies, for creating a final product plus
explaining what to buy, how to buy and where to buy, and
includes instructions for how to assemble the product.

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Purchasing : Sample Organization Chart
Supply Chain Director

Logistics Procurement Store

Manager Manager Manager

Logistics Buyer
Store Keeper
Officer Raw material

Logistics Buyer Store

Assistants Supplies Assistants

Buyer
Spares
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Purchasing : Management Roles
 Needs Comparison Vs Budget Allocation
 Cost Vs Benefit Analysis
 Material/Service Acquisition
 Asset Risk Management
 Strategic Procurement/SRM development
 Forecasting and Demand management
 Departmental Process Flow designs
 Human Resource Planning, deployment and Training
 Key Performance Indicators (KPIs)
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 Purchasing : Process Flow
Functions Process Start Process Process Process Process End
2) RFQ, Supplier 4) Issue approved PO, 8) Follow up 12) Close PO,
Price/Value Receive Confirmation on material Archive PO,
Comparison, Quality / of Order from readiness as Review Supplier
Purchasing warranty Docs, Supplier per PO terms, performance
Supplier -Selection, Monitor
Prepare PO or Supplier
Contract performance
5) Initiate Transport 9) Transport support if
Logistics Plans depending on required as per PO
PO Incoterms conditions
6) Material/Space / 10) Delivery
Manpower planning confirmation as per
Stores based on PO terms. PO Quality & Qty
Confirm availability specifications,
of Safety stock Stock Update
3) Approve Supplier/ 11) Confirm GRN with
PO/Contract based on PO terms, Stock
Finance
Budget, Value & update data, start
Credit Terms payment process
1) Issue request for 7) Production scheduling
material with & Manpower resource
Production exact quantity, planning based on PO
time required and terms
quality specs
 Purchasing : Process Flow
Documents applicable to a Purchase Cycle;
1. Material Requisition Note : this document identifies the need of
the specified material, exact quantity, quality specifications, and
most importantly the required date usually issued internally.
2. Request For Quotation (RFQ) : sent to suppliers asking for
detailed information about a specific product or service like
availability, mode of delivery, quality standards, price, etc.
3. Price Comparison : prepared by the purchaser (buyer) as an aid
to internal procurement decisions, budgeting and monitor
product price movement. It is a summary of all the responses to
the RFQs for the particular product or service.

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 Purchasing : Process Flow
Documents applicable to a Purchase Cycle; Cont’d
4. Purchase Requisition (PR) : is a statement of organizational
need for procurement. The information contained in a purchase
requisition will be used to create a purchasing document
5. Purchase Order (PO or LPO) : A purchase order is a legally
binding document (signed & stamped by the authorized
personnel) and is used as an independent purchasing document to
obtain commodities against the agreed prices in the final RFQ.
Common, minimum quantity, low cost items are usually ordered
periodically by the stores function against a Master Order (long
term contract).

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 Purchasing : Process Flow
Documents applicable to a Purchase Cycle; Cont’d
6. Delivery Note (DN) : A document accompanying a shipment of
goods that lists the description, condition and quantity of the
goods delivered. A copy of the delivery note, signed by the buyer
or consignee, is returned to the seller or consignor as a proof of
delivery as per the terms of the PO
7. Goods Received Note (GRN) : Issued internally by the Stores
function as a confirmation ( and for stock updates) of having
received all the specified goods in the right quantity and
condition as per PO terms.

93
 Purchasing : Process Flow
Documents applicable to a Purchase Cycle; Cont’d
8. Credit Application : The supplier may sometimes request the
buyer (first time purchase) to fill out a credit application form
detailing the required period, amount, banking information,
authorized check signatory, payment terms & vendor references
9. Invoice : A non negotiable commercial document issued by the
supplier to the buyer requesting for payment against goods or
services rendered as per PO and related supporting documents

94
 Invoice
• A pro forma invoice provides an estimate for the
final amount of an order.
• A commercial invoice shows the final amount that
should be paid.
• Pro forma invoices are used in importing and
exporting to declare the value of goods for customs.
• Commercial invoices are used in accounting, to pay
bills.
• A purchase order is considered a commercial
document, meaning an official confirmation of a sale,
while a proforma invoice is a quote from a sale, not a
confirmation.
• That's why the terms in a proforma invoice are still
subjected to change while a purchase order is a
legally binding agreement.
• 10.Vendor Performance review: Information
relative to the capabilities, flexibility and
performance can be recorded by the responsible
buyer for future evaluation insights.

98
 Purchasing : Sourcing
i. Supplier Selection : identify, evaluate, and contract
What do we need in a supplier (as a business partner);

 Reliability – letting you  Value for money :

down means breaking down you pay for
the whole Supply Chain with reliability, utility,
a ripple effect… and Quality, but
does this mean
maximized Value?
 Quality & Consistency
Market will always Demand
continuous flow of Value

99
Purchasing : Sourcing
i. Supplier Selection : What do we really need in a supplier ;
 Strong Service & Transparent Communication – honest &
straight forward, communicating any pitfalls in their own Supply
Chain and listening out for your needs and concerns

 Financial security : Flexibility :

Confidence that the towards product
supply partner has got configuration and
the “financial muscle” delivery schedule
to deliver all the way

100
 Sourcing: Supplier Selection
Assessment criteria for supplier capability ;
1) Supplier Audit: identifies non conformances in the
manufacturing process, engineering change process, invoicing
process, quality process, and also the supplier/shipment process
to document the relationship between different companies in
order to verify compliance of a supplier’s products and
processes.
2) Ability to supply locally or globally as appropriate (Logistics
capability and proven market reach)
2) Consistency in delivery performance, Service standards and
product quality
2) Willingness to change, flexible management and workforce
attitude 101
Sourcing: Supplier Selection
 ISO 9000 certification or equivalent - set of international
standards that define, establish, document and maintain regulatory
plus statutory product or service quality management principles
for increase in efficiency and customer satisfaction.
1. Awareness training
2. Quality Policy & Objectives
3. Gap Analysis/Documentation
4. Process Design/Implementation
5. Internal Audit (Quality, Root Cause Analysis & Problem
Resolution & Prevention)
6. Management review meeting
7. Corrective – Preventive Actions
8. Final Certification Audit

102
5.Free-zone Operations

103
Free Trade Zones : UAE

104
Free Trade Zones : Purpose

Goods Storage, Exhibition

or Transfer of Ownership
Manufactured, transformed for Local
Market or Export sale

Repacked & Rebranded for Retail

Steel Structure Fabrication Major
Construction projects
105
•No restrictions on currency or minimum capital investment

•100% foreign ownership: JAFZA allows its clients to operate

as a wholly owned entity, without any need for local
partnership. Moreover, the shareholder's liability is limited to
the amount of its paid-up share capital

•0% personal income tax

•0% corporate tax for a period of 50 years, a concession that is

renewable

•No currency restrictions and flexibility for companies to

transfer any required capital
•0% customs duties on import and/or re-export
106
•No restriction on hiring foreign employees

•A company established in JAFZA that has built its own facility

has the convenience of mortgaging its own premises on the
leased land to any bank or financing company for any of their
debts or obligations

•Access to abundant energy makes this place cost-effective for

clients to conduct production operations

•Presence of ready-made factories, warehouses, convention

centers, on-site residential complexes, and pre-fitted offices

•Excellent infrastructure, support services, and communications

107
Free Zone Operations
 Import into Free Zone

 Import from Free Zone into UAE/GCC

 Import for Re-export from Free Zone

 Ex- FZ Export Bill (FZ Transit Out)

 Free Zone Temporary Admission

 Free Zone Internal Transfer
 Export of Goods from Local
 Market through Free Zone
108
 Free Trade Zones : Functionality

UAE
(Local region)
ROW (Rest of the World)

ROW (Rest of the World)

• Corporations
Jebel Ali Port • LLC Hamriyah Port
• National Industrial License
• Ministry of Economy

Dubai Airport
Sharjah Airport

GCC Region

109
Only Three Things Happen Naturally
in an Organization!!!

Under
Friction Confusion Performance

Everything Else…requires Leadership!

Peter Drucker

110
6. Warehouse management

111
Warehouse Management
integral part of the supply
chain which involves managing of all processes
(administrative and physical) associated with receipt,
identification, inspection, verification, storage, retrieval
(for issue or delivery) of materials and goods ensuring
quality and safety along the way.

11
2
113
 Logistics activities include inbound logistics or
outbound logistics. Inbound logistics refers to
the sourcing, expediting and receiving of goods,
that is coming to the business organization.

 On the other extreme, outbound logistics is all

about warehousing, packaging and transporting
of goods, going out of the organisation.

114
Supply Chain : Warehouse
Credits : Iptor.com

115
116
117
Warehousing : Objectives
 To safely secure company materials,
stock and physical assets
 Efficient Storage Space, Labor and
Equipment utilization
 Quick, Secure & Accurate material
receiving and issuing when required
(ensuring production & supply flow
consistency)
 Inventory Control (ensure optimal
levels of spares, supplies, raw
materials, finished goods or seasonal
perishables when and in the exact
quantities/quality required)
118
Warehousing : Processes
 Receiving (Inbound material activities)
o Unloading
o Identification
o Quantity and Quality Check (Expiry date if applicable)
o Verification against Order (DN Vs PO)
o Marking and registration (coding & stock update)
 Put-away (Inbound material activities)
o Product Categorizing, wrapping & Palletizing
o Location and stacking
o Update system (GRN to Accounts/Internal requestor)
Warehousing : Processes
 Storage (material processing activities)
o Stocking & Cycle Counting
o Replenishment (updates with material & location codes)
o Stock Rotation (FIFO, LILO)
o Warehouse racking and storage systems (material specific)
o Space planning & Optimization
 Order Picking or Retrieval (material processing activities)
o Stock check against requisition or shipping order
o Proper & Safe retrieval of required material Quantities
o Quality Check
o Inventory updates (balance, replenishment cycle, order
quantities)
Warehousing : Processes

Inbound Material Activities Material Processing Activities Outbound

Receiving Put- Away Storage Retrieval Packing Shipping
Unloading Labeling Cycle Counting Picking Packing Shipping Documents
Identification Wrapping Space Planning Stock Check Shipping Marks Loading
Quantity Check Palletization Stock Rotation Quantity Check Verification System update
Verification Stacking Storage Systems Stock update Sealing Invoicing
Quality Check Safety & Security

121
 Warehousing : Location
 Strategically located to efficiently & effectively serve purpose
• Close proximity to distribution channels, Markets & Supplier base
• Local transportation networks or hubs (ports, airports, etc.)
• Security

122
 Warehousing : Location
 Availability of resources (Labour, utilities, etc.)
 Cost factor Vs long term benefits
 Local regulations (Municipal, Environmental, etc.)
• Adequate approval on storage facility
• Equipment test certificate (Inspection, testing of equipment)
• Waste disposal in permitted government designated sites
• Periodical Fire Fighting equipment testing
 Geopolitical Factors (UN disaster response point, trade
partnership programs, Army Bases, …)

123
Warehousing : Layout
 Improve Customer Service
 Reduce distribution costs
 Streamlined product flow (inline with processes)
 Maximum Space Utilization
 Minimum Material Handling
 Easy, prompt & Fast physical stock verification
 Flexibility of operations with a futuristic outlook
 Safety and Security
 Preservation and protection of materials by ensuring
adequate environmental conditions
124
Warehousing : Layout
Receiv Perishable
e Storage

Inbound
Reserve
(Unloading)
MRO

Assembly
Area

Outbound
Office Rejects Dispatc (Loading)
h

125
Warehousing : Types
i. Private Warehouses : owned and
managed by an individual, company
or organization for the sole purpose
of storing own raw materials,
supplies, work in process, inventory
and finished products.

ii. Customs Bonded Warehouses :

licensed and authorized to
accept imported goods while
awaiting payment of specified
customs duty as trusted partner.
126
Warehousing : Types
iii. Contract or Leased Warehouses : are built to offer
commercial space for rent to those seeking storage facilities for
specific periods with a written contract (between Tenant and
Landlord) defining the terms of the lease.

iv. Third party (3PL or 4PL) :

sophisticated warehouses managed
by 3PL providers to serve as an
outsourced multi-client, cost
effective, dedicated, secure and
reliable storage service.

127
 3PL and 4PL
Third-party logistics (abbreviated as 3PL, or TPL) in logistics and supply
chain management is an organization's use of third-party businesses to
outsource elements of its distribution, warehousing, and fulfillment services.
 Third-party logistics (3PL) involves using external organisations to execute
logistics activities that have previously been performed within an
organisation itself.
The third-party logistics includes any form of outsourcing of
logistics activities previously performed in-house.
For example, a company with its own warehousing facilities
employing external transportation.
 Third party logistics, 3PL provider performs one or more of the
logistics activities relating to the flow of product, information
and funds.
Traditionally, 3PLs focused on specific functions such as
transportation, warehousing and information technology.
128
 Capacity aggregation
 Inventory aggregation
 Transportation aggregation by
transportation intermediaries
 Transportation aggregation by
storage intermediaries
 Warehousing aggregation
 Procurement aggregation
 Information aggregation
 Receivables aggregation
 Relationship aggregation
 Lower costs and higher quality
129
There can be following risks of using a
third party logistics:

 Loss in continuation of process

 Underestimation of the cost of
coordination
 Reduced customer supplier contact
 Loss of internal capability and
growth in third party power
 Sensitive data and information
leakage
 Ineffective contracts
130
4PL

 A fourth-party logistics (4PL) targets

management of the entire process, whereas a
third party logistics (3PL) service provider
targets a function.

 4PL may be a general contractor who

manages other 3PLs, truckers, forwarders
and custom house agents.

131
132
Warehouse : Equipment

Forklift Telehandler

Reach truck

Electric Pallet Truck

Cherry picker/ Boom lift Manual Pallet Truck Warehouse racking system

133
Warehousing : Food For Thought
Cross Docking : is where material goes directly from receiving
area to the shipping area with minimal obstacles

SKU (Stock Keeping Unit) : a unique usually alphanumeric

identification assigned to a specific stock item for many purposes
like inventory control, location management, price, product
specifications, procurement source (OEM)…
o ISBN : International Standard Book Code
o UPC : Universal Product Code

134
Warehousing : Safety
 Safety Begins With You! or A Near Miss is an Accident waiting
to Happen! : are common warehouse or manufacturing facility
Visual warnings to ensure minimal to zero accidents.
• Periodic First Aid training, Safety awareness workshops or
live Fire Fighting demonstrations are very important to keep
workers informed, alert and vigilant about each others’ safety
• Visual Aids and Warning Signs for reminders and emphasis
on procedure in cases of emergency
o Most production or construction
sites display their accumulated
Accident-Free Man
Hours as
a sense of team achievement
towards Safety.
135
Warehousing : Security
 The main Objective of a warehouse is to secure merchandise,
stock, consumables, spares or finished products which are
translated into financial assets or company treasury.
• Security Control systems should be in place to monitor all warehouse
activities 24/7 (Close circuit TV Monitors, Security guards, etc.)
• Effective inventory controls and reviews to reduce or eliminate
pilferage and theft if any.
• Restricting unauthorized personnel from having access to your storage
facility

Credit : sourcesecurity.com
136
Warehousing : KPIs
KPIs (Key Performance Indicators) are
quantifiable measures (metrics) against which a
company defines & evaluates it’s progress towards
achieving set strategic and operational goals

“You Can Only Manage What You Can Measure”

137
Warehousing : KPIs
KPIs (Key Performance Indicators)
• % Handling Damages per specified Inventory Volume
• % Stock Variances
• % Time to complete particular processes (receipt,
verification, stow, order picking accuracy, packing,
loading, etc.)
• % Absenteeism
• % On Time Deliveries
• % Order Completion

“You Can Only Improve that which you can monitor”138

 Warehousing : KPIs
Activity UOM Best Med Worst
Receiving Dock to Stock Cycle Time Hours 2.5 8 21
Orders processed per hour No. 11 5 0.8
Orders received with correct information % 99.2% 97% <90%
Damage free receipts % >=99% 95% <83%
Pick/Pack Order Pick Accuracy % 99.5% 99% <97%
Orders picked n Packed per hour No. >23.5 8.5 <3
Pallets Packed and Shipped per Hour No >22 15 <4
Shipping Shipped Complete as per Order % 99.5% 98% <92%
Damage free Shipments % 99% 98% <96%
Correct Documentation % 99% 98% <97%
On time ready to Ship % 99% 98% <97%
Overall Total Order Cycle Time Hours <24 48 <180
On time delivery % >=99.4% 98% <93%
Ordered Vs Shipped % >=99.5% 98% <92%
Material Handling Damage % 0.008% 0.2% >1% 139
7. Inventory

140
 Inventory Management
Inventory Management (strategic level) looks at;
• Correct allocation of resources
• Sales and Operations Planning Support
• Forecasting and replenishment
• MRP I (Material Resource Planning)
• MRP II (Manufacturing Resource Planning)
While Inventory Control (tactical level) is concerned with;
• Physical Inventory & cycle counting
• Perpetual, Periodic or Hybrid Inventory System
• Efficient usage, accountability or dispersal of inventory
to avoid spoilage, obsolescence, etc.
141
Inventory : Types
 Raw materials
o Purchased parts, materials that are used at the start of the
product manufacturing process
 Work in Process
o Materials and partly finished products that are at various stages
of the production process
 Sub Assemblies
o Manufactured parts that are partially completed and stocked in
inventory
 Finished product
o Items ready for delivery or consumption by customer demand
 MRO
o Maintenance, Repair and Operation supplies
142
Inventory : Reason for Holding
• To ensure sufficient goods are available to meet
forecasted demand
• To meet future shortages
• Taking advantage of bulk purchase discounts
• Absorb seasonal fluctuations and variations in usage
and demand
• To allow for smooth flow in production processes
• As a necessary part of the production process
(components, fermentation of barley, winery, etc.)
• As a deliberate investment policy (stock piling grain
during bumper harvest for sale during shortages).
143
Inventory Management : Strategies
A common inventory management strategy is through
classification of the items based on number of factors;
o Value
o Consumption rate
o Necessity
o Lead Time
o Easy of procurement
o or a combination of the factors.

144
 Inventory Management : Strategies
Item classification Methods;
• Pareto Principle (80/20): based on value & consumption, classifies
80% of the inventory as having 20% Value and vice versa.
• ABC analysis :
A - Valuable (10% of the Items with 70% Value),
B – mid value (20% of the items with 20% Value) and
C – least Valuable (70% of the items with 10% value).
• VED (Vital, Essential & Desirable) :
Vital being those items without which the company can’t operate;
Essential items being those without which it can operate but with
effects on quality of resultant product or service and;
Desirable items being those that are just for added value or superficial
purpose.
145
Inventory Management : Systems
Inventory Software systems : computer-based system for
tracking inventory levels, orders, sales and deliveries.
Most small business software are independent to the
function while most integrate the entire value chain process
into an Enterprise resource Planning system

TradeGecko
146
Inventory : Demand Management
Demand Management is a planning methodology used to
forecast [predict], plan for and manage the demand for
products and services across the entire Supply Chain

147
 Forecasting : the Approach
Forecasting approach involves extensive market
research to establish information about the targeted
demography including but not limited to; competition,
growth trends, market area, population, and sometimes the
economic bracket of the target region.
 Decide what needs to be forecast
• Level of detail, units of analysis & time horizon required
 Evaluate and analyze appropriate data
• Identify needed data & whether it’s available
 Select and test the forecasting model
• Cost, ease of use & accuracy
 Generate the forecast
 Monitor forecast accuracy over time
148
Forecasting : is it worth the drama?
Sales Forecast/Targets

Demand Estimates

Inventory Management

Distribution Resource Planning

Production Resource Planning

Material Resource Planning

Business Strategy

149
 Demand Management (Planning for a Forecast)
Qualitative Methods Quantitative Methods
Approach Based on Human Based on demand
Judgment, opinion, history and analysis of
intuitive hunches, mathematical data
subjective, non-
mathematical
Strengths Can incorporate changes Consistent and
in business environment objective
Weakness Can bias the forecast and Only as good as
prone to forecasting error available data which in
most cases is not that
available

150
 Quantitative forecasting methods are;
 Time Series (Statistical) Models:
 Assumes information needed to generate a forecast is in a time
series of data e.g. historical demand, inventory usage, etc.
 Analysis of the time series finds a pattern used to create a forecast
 Statistical forecasting assumes; past sales or consumption
information is a reliable guide to the future,
 Forecast errors can be quantified and future errors anticipated
 Causal Models or Associative Models :
 Explores cause-and-effect relationships (develop the best statistical
relationship between a dependent and one or more independent
variables)
 Uses leading indicators to predict the future
o Housing Market statistics for appliance or home decor sales
151
 Quantitative Analysis : Time Series
• Moving Average (MA):
 The average value over a set time period
(e.g.: the last four weeks, months or days depending on frequency of
forecast activity)
Sales Data : Product A00012
Data Period : Jan – Jun
Purpose : Sales Forecast for July month
Month Jan Feb Mar Apr May Jun Jul
Sales 45 30 62 85 40 74
(Actual)
Forecast X
Moving Average : (Sum/Months) = (45+30+62+85+40+75)/6
x = 336/6 = 56
Forecast for July (MA for past 6 months) = 56
152
 Inventory : Demand Management (Time Series)
Sales Data : Product A00012
Data Period : Jan – Jul (Forecast for Aug)
Month Jan Feb Mar Apr May Jun Jul Aug
Sales (Actual) 45 30 62 85 40 74 95 75
6 MA 56 Y
3 MA 66.33 P

Forecast for Aug (MA for past 3 months) = P = 69.67

Forecast for Aug (MA for past 6 months) = Y = 64.33
Forecast for Aug (MA for past 7 months) = 61.57
 Better approach is to use weighted Average
 Weighted averages assign a heavier value to more current data points.
(the higher the weight, then the higher importance we are placing on
data points; similarly, for lower weights).
 Also referred to as Simple or First Order Exponential Smoothing
153
 Inventory : Order Systems
Basic inventory control systems provide answers to two main questions;
 When to Order the SKU?
 How much of the SKU to order?
Two frequently used systems in the work place;
 Fixed Order Quantity (FOQ) : is the control policy where
the inventory level is continuously monitored and replenishment
stock is only ordered in previously-fixed quantities at the time
when at-hand stock falls to the established re-order level.
 Fixed Order Cycle (FOC) : is a system where the time intervals
between the orders are constant but the order quantities vary at
every order according to the usage, safety levels and demand.

154
Inventory : Order Systems
The FOQ System in a graphical representation
Maximum Rate of Usage
Without Stock – Outs
Reorder Quantity (Q)
STOCK LEVEL

Reorder Level Point (A)

Expected Rate of Usage (R)

X
Buffer (Safety) Stock Level
Lead Time B

TIME

Reorder Time (X) = Buffer Stock Time (B) – Lead Time

Buffer Stock Time : Time taken to consume inventory from
Maximum to Buffer Stock Levels
155
 Inventory : Order Systems
The FOC (Fixed Order Cycle) System in a graphical representation;
ORDER UP TO LEVEL
REORDER REORDER
QUANTITY QUANTITY
STOCK LEVEL

Cover Period

BUFFER STOCK LEVEL

LEAD TIME LEAD TIME

REVIEW PERIOD REVIEW PERIOD

TIME

156
Inventory : Order Systems
The FOC (Fixed Order Cycle) Vs FOQ (Fixed Order Quantity)
models;

Control FOQ FOC

Order Interval Variable Fixed
Order Quantity Fixed Variable
Stock Carried Smaller Buffer Larger Buffer
Detects Dead Stock No Yes
Order Function Load Variable Fixed
Stock recording Continuous At Review

157
 Inventory : Some Definitions
Economic Order Quantity (EOQ) : optimum number of units that a
company must add to inventory with each order to minimize holding
costs, ordering costs and shortage costs. Usually dependent of
purchasing potential (cash or credit), Lead time and discount
quantities.

If the re-order quantity is set to a value so as to minimize the total costs

associated with holding and ordering inventory (cost graphs intersect), then
it’s referred to as EOQ
 Physical Distribution
Coordinated activities related to handling, storage and
movement of materials or finished products to make them
available to a wide number of consumers.
Distribution Center : a warehouse or group of
warehouses or other specialized storage buildings, with highly
automated material handling systems for receipt, temporary
storage and redistribution of goods to wholesalers, retail outlets
or even directly to consumers.
Order processing : includes picking, recording, filling, and
packing of products for dispatch or issue

159
Distribution : Case Strategy
VMI VMI
EDI EDI

Supplier
Distribution Center
(Barcode, RFID, Radio)
Retail Outlets
POS
VMI
EDI

ERP
VMI – Vendor Managed Inventory
EDI – Electronic Data Interchange
Manufacturer
RFID – Radio Frequency Identification
POS – Point Of Sale
Headquarters
ERP – Enterprise Resource Planning
8.Advances in Logistics

161
Barcode Systems to Solve Your Warehouse Inventory Problems

Barcode Scanner
162
Warehouse Robotics

163
Warehouse Robotics Reduce Worker Injuries
It's increasingly common for warehouse managers to
implement robots to supplement their human workforces.
These specialized machines are able to productivity levels high
while maintaining consistent output.
Warehouse executives often decide to invest in automation
solutions when they want to ramp up production without
needing to hire new workers and go through the onboarding
process with them.
While robots meet production demands, they also serve the dual
purpose of reducing workplace injuries related to lifting, falls and
other hazards.
Automation solutions have increased productivity while
alleviating employees from performing physically-intensive tasks.
164
Warehouse Robotics Advantages:

1. Reducing Lifting Injuries

The majority of warehouse workers are familiar
with lifting materials using equipment or by hand.
Even when employees receive training with proper
lifting techniques, accidents can happen, and
musculoskeletal-related injuries are not uncommon.

2. Increasing Efficiency While Maintaining Safety

3. Minimizing Incidents of Falls From High Levels
4. Managing Worker Fatigue Issues

165
DRONES

ROBOTICS

166
Robotic Storage and Retrieval System for Automated Order
Fulfillment - PaR Systems

167
Automated Guided Vehicles, Storage and Retrieval Machines

168
Never before has Pick-by-Vision been implemented
more successfully than by Picavi.

Picavi provides everything for a perfect ecosystem.

Software, smart glasses and Picavi Power Control
work in perfect harmony.

This results in a much faster and more reliable

material flow. Ease of handling is every worker’s
dream come true.
171
9. Negotiation

172
 Negotiation
Negotiation : is constructive dialogue between two or more
people or entities with the sole aim of reaching
mutually acceptable comprise and steering
clear of continued disagreement or dispute or
barriers to future communication.

In the process of negotiation, not only are

different opinions are taken into
account, but influential factors like
individual needs, objectives, interests as
well as respect for differences in
background and culture.

173
Negotiation : Stages
Common Stages; Problem
Introduction

Progress Resistance
Review

Action Plan Hard

Bargaining

Decision
making Strategy
(JPS) Reform

174
Negotiation : Process
a) Preparation
b) Discussion (problem solving skills, negotiation tact)
c) Agreement and Implementation (procedure, timeline,
constraints, options, expectations, strategic thinking and
action plans)

175
Negotiation : Skills

176
Patience is not the ability to
wait, but the ability to keep
a calm attitude while
Waiting!

177
 Future State : where do we want to be?
 Exceptional Customer Service
 Continuous Improvement
 Robust Technology
 Higher Service Quality
 Reduced Operational Cost

178
 Future State – Cont’d
 Better Supplier Relationships
 Better Estimates-to-Actuals
 Lower Compliance Risk
 Efficient Inventory Management

Quality Supplied by Vendor will most definitely

affect your Customer Relationship, market share
and the entire bottom line…
179
10.Lean Thinking

180
Lean Thinking is a management philosophy based
on the Toyota Production System (TPS).

With Lean Thinking, you will be able to enhance

value for your customers by improving service
delivery and eliminating waste.

Simply put, by becoming a Lean organization, you

will be able to improve personal effectiveness,
increase productivity and create greater customer
value with less resources.

181
 LEAN – Bridging the Gap
 Only spend time on what the Customer
considers as Value
 Eliminate all Obstacles that prevent work from
flowing freely through the system
 Solve problems using a data driven, analytical,
disciplined and practical methodology
 The people doing the Work (Frontline) know
best how to improve it
 Seek perfection, continuously improve people

182
 Kaizen, Lean & Six Sigma
Kaizen is a Japanese word for “Continuous Improvement”, as a journey
not the destination, a culture not a tool, which embodies every one’s (team
work) participation of problem identification, solutions, and resurgence
prevention in order to create sustainable and efficient processes that result
into significant results from smaller cumulative changes over time.
• Analysis current state, Perform Root Cause Analysis & Design Future
state (Plan)
• Design & Test Improvements, Obtain Feedback (Do & Check)
• Review and Refine improvements, Train process owners on standards
(Act)
While the majority of changes may be small, the greatest impact may be
Kaizen activities that are led by senior management as
transformational projects, or by cross-functional teams as Kaizen
events. 183
 Kaizen, Lean & Six Sigma
Eliminating waste along entire
value streams, instead of at
isolated points, creating
processes that need less human
effort, less space, less capital,
and less time to make products
and services at far less costs,
faster throughput times and with
much fewer defects, compared
with traditional business
systems.

184
 Kaizen, Lean & Six Sigma
A fact-based, data-driven
philosophy of improvement
that values defect prevention,
increase in performance, high
product quality through
decrease in process
variations.

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 Lean tools : 5s
5S is one of the most common Lean principles that have
proven effective in attaining efficiency, improving
employee morale, Product quality and Customer service.

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 Lean tools : 5s
Sort/Sieri : Sort out & separate that which is needed now,
tomorrow, next month & not needed in the area. Goal ~Tidiness
Set In Order/Seiton : Arrange items that are needed so that they
are ready & easy to use. Clearly marked locations for all items so that
Anyone can find them & return them once task is complete.
Goal ~ Orderliness

Shine/Seiso : Clean the workplace & equipment on a regular

basis in order to maintain it & identify defects. Goal ~ Cleanliness
Standardize/Seiketsu : Revisit the first 3 of the 5S frequently &
confirm the condition of the Gemba (work place) using standard
procedures. Goal ~ Standards
Sustain/Shitsuke : Keep to the rules to maintain the standard &
continue to improve everyday. Goal ~ Discipline
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Lean in the Warehouse (Methodology)

“A Place for everything & Everything in it’s place”

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Lean in the Warehouse (Methodology)

BEFORE 5S AFTER 5S

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Lean ( 8 Wastes – MUDA)

Excess - Defects (Rework)

Processing Over-production

Motion Waiting

Inventory Non Utilized Human Resource

Transportation (Knowledge, Talent, Expertise)

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 Finally – Setting Goals? Be S.M.A.R.T
Specific
What exactly do you want to achieve?
S.M.A.R.T. goal setting clarifies the difference between 'I want to be a millionaire' and 'I want to make $10.000 Net a month for the
next ten years by creating a new software product'.

What exactly do I want to achieve?

Where? How? When? With whom?
What are the conditions and limitations?
Why exactly do I want to reach this goal? What are possible alternative ways of achieving the same?

Measurable
Measurable goals means that you identify exactly what it is you will see, hear and feel when you reach your goal.
It means breaking your goal down into measurable elements.
Being happier is not evidence; not smoking anymore because you adhere to a healthy lifestyle where you eat vegetables twice a day
and fat only once a week, is.

Attainable
Is your goal attainable? That means investigating whether the goal really is acceptable to you and available resources.
You weigh the effort, time and other costs your goal will take against the profits and priorities you have in life.
If you don't have the time, money or talent to reach a certain goal you'll certainly fail and be miserable.
That doesn't mean that you can't take something that seems impossible and make it happen by planning smartly and going for it!
There's nothing wrong with shooting for the stars
 Finally – Setting Goals? Be S.M.A.R.T
Relevant
If you're lacking certain skills, you can plan trainings. If you lack certain resources, you can look for ways of getting them.

The main questions;

why do you want to reach this goal?

What is the objective behind the goal, and will this goal really achieve that?
You could think that having a bigger team will make it perform better, but will it really?

Timely
Time is precious and flies by very fast! Make a tentative plan of everything you do.
Everybody knows that deadlines are what makes most people switch to action (Action Plans).
So install deadlines, for yourself and your team, and go after them (deadlines…not the team).

Keep the timeline realistic and flexible, that way you can keep morale high.

Being too stringent on the timely aspect of your goal setting can have the perverse effect of making the learning path of
achieving your goals and objectives into a hellish race against time – which is most likely not how you want to achieve anything.
Improvement starts with…
Accepting the Challenge to Change!

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 Supply Chain Management
Some Reference Literature
1. Essentials of Supply Chain Management : Michael H. Hugos, 2011
2. Purchasing and Supply Chain Management, 3rd Edition: Monczka,
Trent, 2005
3. Designing and Managing the Supply Chain, 2nd Edition : Simchi-Levi,
Kaminsky; McGraw Hill Education, 2003
4. Strategic Logistics Management, 4th Edition : James Stock, Douglas
Lambert; McGraw Hill Education
5. The Machine that changed the World (Lean) : James P Womack,
Daniel T. jones, Daniel Roos,1990

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