INTERNATIONAL LOGISTICS

AND
SUPPLY CHAIN
MANAGEMENT
BY
C.RAJA
V.VINEETH
R.NAVEEN RAJ
B.SREEHARINATH
VICTOR JAYAKUMAR EDWARD
SUPPLY CHAIN MANAGEMENT
 Also referred to as the logistics network
 Suppliers, manufacturers, warehouses, distribution centers and
retail outlets – “facilities”
and the
 Raw materials
 Work-in-process (WIP) inventory
 Finished products

that flow between the facilities.

Hence SCM is a network of all parties involved, either directly (or)

indirectly, in fulfilling a customer request.
WHAT IS A SUPPLY CHAIN?

 Supply chains are linkages of partially discrete,

yet interdependent entities that collectively
transform raw materials into finished products.
 Supply chains connect the functions of inbound
activities (such as purchasing) with outbound
activities (such as logistics and “place”
activities).

A. . . . . . . . . . . . . . . End Customer
 FORMAL DEFINITION
OF A SUPPLY CHAIN

 A supply chain is a “network of facilities and activities that

performs the functions of product development,
procurement of material from suppliers, the movement of
materials between facilities, the manufacturing of
products, the distribution of finished goods to customers,
and after-market support for sustainment” (Mabert and
Venkataraman 1998).
SUPPLY CHAIN UTILITIES

TIME PLACE POSSESSION

 TRADITIONAL SUPPLY CHAIN SYSTEMS
Supplier Manufacturer MDC WDC Retail Customer
plant

3rd Party Logistics

Providers (3PL)

Material Flow
Information Flow
SUPPLY CHAIN
Suppliers Manufacturers Warehouses & Customers
Distribution Centers

Transportation Transportation
Costs Costs
Material Costs Transportation
Manufacturing Costs Inventory Costs Costs
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Supply Chain objectives

 To have the right products in the right

quantities at the right place at the right
moment at minimal cost.
 It is characterized by a sharp focus on
 Maximize the overall profit
 Better asset utilization
 Cost reduction.
Importance of SC
 Reduced inventories along the chain.
 Better information sharing among the partners.
 Planning being done in consultation rather than in isolation.
 Supply chain design, planning and operation decisions play a
significant role in the success or failure of the firm

Measuring Factors of SCM

 Responsiveness
 Efficiency

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Principles of SC
 Sourcing, procurement and supply management
 Component order arrival
 Production scheduling
 Receiving

 Materials management
 Forecasting, Inventory, stores management, stock keeping

 Logistics and distribution management

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DECISION PHASES IN SC
Developing Strategy / Design

Planning Supply Chain

Supply Chain Operation

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Decisons in Developing a strategy or Design:

What is the chain’s configuration?

How resources will be allocated?

What process each stages will perform?

Whether to outsource or perform

in/house?
Decisions in Planning Supply Chain:

Forecasting the demand for the coming year

Which markets will be supplied from which locations?

The inventory policies to be followed

The timing and size of marketing and size of marketing and pricing
promotions
Steps in Supply Chain Operations:
Set delivery schedules of trucks
and placing orders

Set a date that the order to be filled.

Generate pick lists at a warehouse

Allocate a particular order to particular shipping mode or

shipment

Allocate inventory or production to individual orders.

PROCESS VIEWS
 Cycle view
 Push/pull view

Cycle View: The process is divided into a series of cycles, each

performed at the interface between two successive stages of a
supply chain.

Push/Pull view: The process in supply chain are divided into

two categories depending on whether they are executedin
response to the consumer order or in anticipation of the
customer orders.
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Cycle View:
• Given the fivestages of supply chain :
• Customer Customer
order cycle

• Retailer Replenishment
Cycle
• Distributor
Manufacturing
• Manufacturer cycle

Procurement
• Supplier Cycle
Sub Process in each cycle:

Supplier markets
Supplier receives
product Buyer places order
order

Buyer reverse flows to

supplier or third Buyer receives Supplier supplies
party supply order
PUSH STRATEGIES
 Classical manufacturing supply chain strategy
 Manufacturing forecasts are long-range
 Orders from retailers’ warehouses
 Longer response time to react to marketplace changes
 Unable to meet changing demand patterns
 Supply chain inventory becomes obsolete as demand for certain
products disappears
 Increased variability (Bullwhip effect) leading to:
 Large inventory safety stocks
 Larger and more variably sized production batches
 Unacceptable service levels
 Inventory obsolescence
 Inefficient use of production facilities (factories)
 How is demand determined? Peak? Average?
 How is transportation capacity determined?
 Examples: Auto industry, large appliances, others?

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PULL STRATEGIES
 Demand-driven
 Coordinated with true customer demand
 None or little inventory held
 Only in response to specific orders
 Decreased lead times
 Decreased retailer inventory
 Decreased variability in the supply chain and especially at
manufacturers
 Decreased manufacturer inventory
 More efficient use of resources
 More difficult to take advantage of scale opportunities
 Examples: Dell, Amazon

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PUSH/PULL STRATEGIES
 Hybrid of “push” and “pull” strategies to overcome
disadvantages of each
 Early stages of product assembly are done in a “push” manner
 Partial assembly of product based on aggregate demand forecasts
(which are more accurate than individual product demand
forecasts)
 Uncertainty is reduced so safety stock inventory is lower
 Final product assembly is done based on customer demand for
specific product configurations
 Supply chain timeline determines “push-pull boundary”
Push-
Pull
Boundary
“Generic” Product “Customized” Product

Push Strategy Pull Strategy

Raw End
Materials Consumer
Supply Chain Timeline 20
CHARACTERISTICS OF PUSH, PULL AND
PUSH/PULL STRATEGIES

PUSH PULL
Objective Minimize Cost Maximize Service Level

Complexity High Low

Focus Resource Allocation Responsiveness

Lead Time Long Short

Processes Supply Chain Planning Order Fulfillment

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SUPPLY CHAIN DRIVERS
 LOGISTICS DRIVERS
 Facilities
 Inventory
 Transport
 CROSS- FUNCTIONAL DRIVERS
 Information
 Sourcing
 Pricing

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SCM MACRO PROCESSES IN FIRM

SUPPLIER CUSTOMER

SUPPLIER INTERNAL CUSTOMER

RELATIONSHI SUPPLY CHAIN RELATIONSHI
P MANAGEMEN P
MANAGEMEN T MANAGEMEN
T T

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SUPPLY CHAIN MANAGEMENT – KEY ISSUES

 Overcoming functional silos with conflicting goals

Customer Service/
Purchasing Manufacturing Distribution
Sales

Low pur- Few change-

chase price overs High service
Low levels
Multiple Stable inventories
vendors schedules Low costs
Low
transportation
costs

SOURCE MAKE DELIVER SELL

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SUPPLY CHAIN MANAGEMENT – KEY
ISSUES
ISSUE CONSIDERATIONS
Network Planning • Warehouse locations and capacities
• Plant locations and production levels
• Transportation flows between facilities to minimize cost and time

Inventory Control • How should inventory be managed?

• Why does inventory fluctuate and what strategies minimize this?

Supply Contracts • Impact of Revenue sharing

• Pricing strategies

Strategic Partnering • What information and processes can be shared?

• What partnerships should be implemented and in which situations?

Outsourcing & Procurement • What are our core supply chain capabilities and which are not?
Strategies • Does our product design mandate different outsourcing approaches?
• Risk management

Product Design • How are inventory holding and transportation costs affected by product
design?
• How does product design enable mass customization?

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BULL WHIP EFFECT

 Inventory and back-order levels fluctuate considerably across the

supply chain even when customer demand doesn’t vary
 The variability worsens as we travel “up” the supply chain
 Forecasting doesn’t help
Multi-tier Wholesale
Suppliers Manufacturer Distributors Retailers Consumers

Sales

Sales
Sales

Sales

Time Time Time

Time

Bullwhip Effect
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FACTORS CONTRIBUTING TO THE BULLWHIP

 Demand forecasting practices

 Min-max inventory management (reorder points to bring
inventory up to predicted levels)
 Lead time
 Longer lead times lead to greater variability in estimates of
average demand, thus increasing variability and safety stock costs
 Batch ordering
 Fixed ordering costs
 Impact of transportation costs (e.g., fuel costs)
 Sales quotas
 Price fluctuations
 Promotion and discount policies
 Lack of centralized information

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TAMING THE BULLWHIP

Four critical methods for reducing the Bullwhip effect:

 Reduce uncertainty in the supply chain
 Centralize demand information
 Keep each stage of the supply chain provided with up-to-date
customer demand information
 More frequent planning (continuous real-time planning the goal)

 Reduce variability in the supply chain

 Every-day-low-price strategies for stable demand patterns

 Eliminate the bullwhip through strategic partnerships

 Vendor-managed inventory (VMI)
 Collaborative planning, forecasting and replenishment (CPFR)

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SUPPLY CHAIN MANAGEMENT OPERATIONS STRATEGIES

STRATEGY WHEN TO CHOOSE BENEFITS

Make to Stock standardized products, Low manufacturing costs;
relatively predictable meet customer demands
demand quickly

Make to Order customized products, Customization; reduced

many variations inventory; improved service
levels

Configure to Order many variations on Low inventory levels; wide

finished product; range of product offerings;
infrequent demand simplified planning

Engineer to Order complex products, Enables response to specific

unique customer customer requirements
specifications

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SUPPLY CHAIN IMPERATIVES FOR SUCCESS

 View the supply chain as a strategic asset

 Dell’s innovative direct-to-consumer sales and build-to-order
manufacturing
 Create unique supply chain configurations that align with your
company’s strategic objectives
 Operations strategy
 Outsourcing strategy
 Channel strategy Supply chain configuration components
 Customer service strategy
 Asset network
 Reduce uncertainty
 Forecasting
 Collaboration
 Integration

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SUPPLY CHAIN COLLABORATION

 Many different definitions depending on perspective

 The means by which companies within the supply chain work
together towards mutual goals by sharing
 Ideas
 Information
 Processes
 Knowledge
 Information
 Risks
 Rewards
 Why collaborate?
 Accelerate entry into new markets
 Changes the relationship between cost/value/profit equation

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SUPPLY CHAIN COLLABORATION
 The only method that has the potential to eliminate or minimize
the Bullwhip effect
Retailers

Suppliers Synchronized Manufacturer

Production
Scheduling Collaborative
Distributors/
Demand Wholesalers
Collaborative Planning
Product
Development

Collaborative Logistics Planning

• Transportation services
• Distribution center services

Logistics Providers

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BENEFITS OF SUPPLY CHAIN COLLABORATION
CUSTOMERS MATERIAL SERVICE
SUPPLIERS SUPPLIERS

• Reduced inventory • Reduced inventory • Lower freight costs

• Increased revenue • Lower warehousing costs • Faster and more reliable
• Lower order management • Lower material acquisition delivery
costs costs • Lower capital costs
• Higher Gross Margin • Fewer stockout conditions • Reduced depreciation
• Better forecast accuracy • Lower fixed costs
• Better allocation of
promotional budgets

• Improved customer service

• More efficient use of human resources

Source: Cohen & Roussel

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EMERGING BEST PRACTICES IN SCM
STRATEGY

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