2. Supply Chain Management
INTRODUCTION
1.1 Background of the Study
Since logistics advanced from 1950s, there were numerous researches focused on
this area in different applications. Due to the trend of nationalization and
globalization in recent decades, the importance of logistics management has been
growing in various areas. For industries, logistics helps to optimize the existing
production and distribution processes based on the same resources through
management techniques for promoting the efficiency and competitiveness of
enterprises. The key element in a logistics chain is transportation system, which
joints the separated activities. Transportation occupies one-third of the amount in
the logistics costs and transportation systems influence the performance of logistics
system hugely. Transporting is required in the whole production procedures, from
manufacturing to delivery to the final consumers and returns. Only a good
coordination between each component would bring the benefits to a maximum.
The purpose of this paper is to re-clarify and redefine the position logistics
systems through collecting and analyzing various applications cases and practices
in logistics from literatures. It is to provide a general framework and expect to be
referred for further development and researches. The paper started from
introducing the development of logistics and transport-related sectors based on a
historical review. Afterwards it discussed the interrelationships of transportation
and logistics. It expresses the benefits that transportation brings to logistics
activities and vice versa. For instance the increase of the efficiency of logistics also
would bestead to release traffic load in the urban areas. Furthermore, some major
logistics activities and concepts were also discussed in this paper. It especially
presents City Logistics independently due to it is considered as a main tendency
and an available method of future integration of transport and logistics in the urban
areas. Finally, this paper will discuss and conclude the potential further
development of logistics systems.
Source: -Proceedings of the Eastern Asia Society for Transportation Studies,Vol.5, pp. 1657 - 1672, 2005.
3. Supply Chain Management
1.1.1 Concept of SupplyChain Management
Supply chain management (SCM) is the oversight of materials, information, and finances
as they move in a process from supplier to manufacturer to wholesaler to retailer to
consumer.
The process of converting an Idea into a saleable , useable product / service ensuring that
the right customer receives that service / product at the right time and at the best cost.
Reasons for SCM in Society
Supply chain management is necessary to the foundation and infrastructure within
societies. SCM within a well-functioning society creates jobs, decreases pollution,
decreases energy use and increases the standard of living. Two examples of the effect of
SCM within societies include:
o Hurricane Katrina - 2005
In 2005, Hurricane Katrina flooded New Orleans, LA, leaving residents without access to
food or clean water. As a result, a massive rescue of the inhabitants had to be made.
During the first weekend of the rescue effort, 1.9 million meals and 6.7 million liters of
water were delivered
o Foundation for Economic Growth
A society with a highly developed supply chain infrastructure that includes interstate
highways, a large railroad network, ports and airports is able to trade many goods at low
cost. Business and consumers are able to obtain these goods quickly, resulting in
economic growth.
4. Supply Chain Management
SCM Before
Now, SCM
Marketing Manager – Sell the Product
Operations and Supply Chain – Makeand Deliver the Product
Finance Management – Calculate costand pay taxes
Human Resource Management
5. Supply Chain Management
Human Resources – Supply People to get the above done
1.1.3 Component of Supply Chain Management and Logistics
Supply
Chain
Management
Information
Sharing
Product
Development
Procurement
& Sourcing
Production &
Manufacturing
Logistics &
Warehousing
Inventory &
Cost
Management
Customer
Satisfaction
6. Supply Chain Management
1.1.2 Concept of Logistic
Council of Logistics Management (1991) defined that logistics is ‘part of the
supply chain process that plans, implements, and controls 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’.
Johnson and Wood’s definition (cited in Tilanus, 1997) uses ‘five important key
terms’, which are logistics, inbound logistics, materials management, physical
distribution, and supply-chain management, to interpret. Logistics describes
the entire process of materials and products moving into, through, and out of firm.
Inbound logistics covers the movement of material received from suppliers.
Materials management describes the movement of materials and components
within a firm. Physical distribution refers to the movement of goods outward from
the end of the assembly line to the customer. Finally, supply-chain management is
somewhat larger than logistics, and it links logistics more directly with the user’s
total communications network and with the firm’s engineering staff. The
commonality of the recent definitions is that logistics is a process of moving and
handling goods and materials, from the beginning to the end of the production, sale
process and waste disposal, to satisfy customers and add business competitiveness.
It is ‘the process of anticipating customer needs and wants; acquiring the capital,
materials, people, technologies, and information necessary to meet those needs and
wants; optimizing the goods- or service-producing network to fulfill customer
requests; and utilizing the network to fulfill customer requests in a timely way’
(Tilanus, 1997). Simply to say, ‘logistics is customer-oriented operation
management’.
7. Supply Chain Management
1.1.4 Situation of Global Logistic Service
The heat is turning up on logistics processes as sourcing and manufacturing
activities are increasingly being done globally. Companies going global are
experiencing unexpected transportation costs, higher inventory investment, and
Longer and more unpredictable cycle times, while at the same time their local
customers are demanding lower prices, more unique execution, and improved
responsiveness. As a result, companies are seeking ways to make their Global
logistics processes more reliable, more flexible, and less expensive.
Aberdeen surveyed and interviewed more than 400 Global logistics and trade
managers in 2005 to find out how companies are coping. In November and
December 2005, Aberdeen researched companies that are transforming their
Global logistics operations to find out the details of how they are achieving
improvements. Out of this research, eight companies were selected as best practice
winners, two in each logistics management category: global inventory control,
transportation spend management, import/export process management, and Global
logistics outsourcing
History and Advancement of Logistics
Logistics was initially a military activity concerned with getting soldiers and
munitions to the battlefront in time for flight, but it is now seen as an integral part
of the modern production process. The main background of its development is that
the recession of America in the 1950s caused the industrial to place importance on
goods circulations.
The term, logistics, was initially developed in the context of military activities in
the late 18th and early 19th centuries and it launched from the military logistics of
World War II. The probable origin of the term is the Greek logistikos, meaning
‘skilled in calculating’. (BTRE, 2001) Military definitions typically incorporate the
supply, movement and quartering of troops in a set. And now, a number of
researches were taken and made logistics applications from military activities to
business activities.
Dormant Years DevelopmentYear Taker Years
LogisticAlliance 3rd
party
LogisticGlobalizationLogistics
8. Supply Chain Management
Supply Chain Competitive advantage
Cheaper
Faster
Better
The logistics manager always considers minimizing the costas possiblefrom the
upstream to downstream. Service should be faster and better to deliver the
shipments in time because a minute of delay work the company should endure
many loses.
21st
Century1960S – 1970S1950S 1980S – 1990S
Figure 2. Logistics historical development
FasterBetter
Cheaper
9. Supply Chain Management
Competing through Supply Chain
CostAdvantage1
Costis important for all supply chain processes
– That goes without saying.
Low costs in marketplace = low prices or high margins, or a bit of each.
Many products compete specifically on the basis of low price.
Time Advantage 1
Time measures how long a customer has to wait in order to receive a given
productor service.
Profit
Supply
Chain
Involvement
I
n
v
o
l
v
e
m
e
n
t
Sales
Cost
10. Supply Chain Management
Quality Advantage1
The most fundamental objective – it is a foundation for the others – is to carry out
all processes acrossthe supply chain so that the end productdoes what it is
supposed to do.
Defects, incorrect quantities and wrong items delivered
Customer’s loyalty.
Previously a key advantage – Now a necessity.
No Longer an order winner
SupplyChain Techniques
What are the factors affecting?
Operations, Transport, Storage, Suppliers Inventory Management
How
• Optimize Inventory
• Reduce Excess un sold inventory
• Serve Customer on time and ensure availability
• Optimize Transport and Warehouse
• Supplier Development
• Quality – Suppliers / Design , Inspection
SupplyChain Techniques
Supply chain and operations techniques to meet customer demand and reduce
inventory
JIT / Lean supply chain
Agile Supply Chain
Hybrid Supply Chain
11. Supply Chain Management
JIT & Lean systems
Just-in-time (JIT) is a strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production
process, thereby reducing inventory costs2
Just in time is a type of operations management approachwhich originated in
Japan in the 1950s.
Very predominantly used by ToyotaMotors for their production, inventory and
scheduling
It adopts the pull system of inventory management rather than the push system3
– Where goods and Services are moved along the supply chain just as they are
needed.
Lean System focuses on waste elimination – Waste can also be excess
Inventory/ unnecessaryprocess – JIT is a part of lean operations
Lean and Wastemanagement
• Transport
• Inventory
• Motion
• Waiting
• Over-Processing
• Overproduction
• Defects
The different types
of Wastes are:-
Waste can also be classified as
non-value added activities that
cost the company
12. Supply Chain Management
Agile SupplyChain
Agile supply chain = customer responsive
Customer Responsive = Reading and Respondingto Customers to end consumer
demand.
Most organizations today are forecast-drivenrather than demand-driven.
Agile -mean Flexible
Agile manufacturing represents a very interesting approach to developing a
competitive advantage in today’s fast-moving marketplace.
It places an extremely strong focus on rapid response to the customer – turning
speed, flexibility and agility into a key competitive advantage.
An agile company is in a much better position to take advantage of short
windows of opportunity and fast changes in customer demand.
Agile - How
Different Suppliers – Same product
Prefer to Pay high prices - Focus on time to deliver rather than economies of scale
locate closer suppliers – Closer to factory the better
Allocate Vendor Managed Inventories – To avoid delays
13. Supply Chain Management
High Flexibility in Transportation and Operations – 2nd Shifts, Air
transport Demand management
Adaptable / Flexible productdesign
Hybrid
Mix of Agile and JIT
Hybrid supply chain strategies recognize that within a mixed portfolio of products
and markets there will be some products where demand is stable and predictable
and some where the converse is true.
14. Supply Chain Management
Procurement Strategies
Procurement is the business management function that ensures identification,
sourcing, access and management of the external resources that an organization
needs or may need to fulfill its strategic objectives. – CIPS Australia
Procurement Manager
You are what you eat
A bodyis developed by the food we put in
A company is defined by its supplies
Garbage in garbage out
Procurement Manager Objectives
Identify Best Supplier
Cost
Quality
Time to Serve – faster and uninterrupted flow of goods best
fit for your organization
Cheaper
Faster
Better
15. Supply Chain Management
Supplier Development
Develop the right supplier to get the best productfor the company
Partnership / Integration
Supplier Collaboration
Training Suppliers to be the best
fit Aligning Supplier with
Company goals
Monitoring and Evaluation
SupplierRelationships
Advantages of Developing Supplier
Relationships
S
S
h
a
r
i
n
g
o
f
I
n
f
o
r
m
a
t
i
o
Sharing of
Information
Trust and
Openness
Openness
Mutual
benefits and
Sharing of
Risks
Coordination
and Planning
16. Supply Chain Management
• Increased Productivity & Quality
• Reduced Monitoring
• Increased transparency
• Better Demand Planning
• Win – Win Situations
• Suppler Expertise and Technology
• Reduced over all costs / reduced time to market
Demand Forecasting for Inventory Management
What is Forecasting?
Demand Forecasting Process ofPredicting a future event based on historical data.
Educated Prediction and Estimation of Demand
Why do we need Demand Forecasting?
• Too Much Inventory
• Too Less Inventory
• Production Planning
• Return of Capital Employed / Return of Investment
17. Supply Chain Management
Forecasting
Predict the next number in the pattern:
a) 3.7, 3.7, 3.7, 3.7, 3.7, ?
b) 2.5, 4.5, 6.5, 8.5, 10.5, ?
c) 5.0, 7.5, 6.0, 4.5, 7.0, 9.5, 8.0, 6.5, ?
• Predict the next number in the pattern:
a) 3.7, 3.7, 3.7, 3.7, = 3.7,
b) 2.5, 4.5, 6.5, 8.5, 10.5, = 12.5
c) 5.0, 7.5, 6.0, 4.5, 7.0, 9.5, 8.0, 6.5, = 9.0
Forecasting trends
• Seasonal Demand
• Holidays
• Dassain , Tihar, Christmas, Chinese New Year - Clothes, Sweets
• Black Friday
• UK, US, India – Electronics, Online shopping
• Discounts and Sales ,
New Productlaunches , Critics Review, Latest Movies
Types of Forecasting
Qualitative Methods – Logical / Rational
Forecasts generated subjectively by the forecaster Quantitative Methods –
Statistics / Data
18. Supply Chain Management
Forecasts generated through mathematical modeling
Forecasting during product life cycle
Qualitative Quantitative
Warehousing & Freight Transport
What is the Single most valuable commodity today? – Besides Water
Space
Expensive
Location determines everything
Own
Rent
Lease -
Landlord
What is the purposeof Warehousing?
To provide Customer service
Introduction - Growth – Maturity – Decline - End
19. Supply Chain Management
• Quick Response
Same Day Delivery, Next Day Delivery, 2 Day Delivery
• Safety Stocks
• Consolidated deliveries
• Value added services
Special packing
Postponement
Basic Warehousing Functions
Types of Warehouses
• Manufacturing Support
Receiving
Unload Vehicle
Inspect for Damage
Check for Accuracy
Put Away
Identify Product
Correct Location
Update Records
Order Picking
Pick the right
product
Batch Picking
Packing
Boxes / Pallets
Labeling
Shipping
Load Vehicle
Bill
Record Update
Customer Order
Manufacturing/
Value Adding
Inbound
Outbound
23. Supply Chain Management
Objectives of Effective Design
Handling
• Handling must optimize movement continuity
and efficiency
• Receiving—Unloading the arriving
vehicles
• In-Storage—moving goods for storage
(transfer) or order selection (picking)
• Shipping—verifying the order and
loading the departing vehicles
24. Supply Chain Management
Design - Receiving and Shipping
In and Out
Ideally
What goes in should not come out the same way – Large Movements / High
frequency
Receiving
Receiving
Receiving
Shipping
Shipping
Shipping
Shipping
Receiving
WAREHOUSING
W
A
R
E
H
O
U
SI
N
G
25. Supply Chain Management
Location Consideration
Cost– Rent, Land Cost
Congestion
Available Resources – Electricity, Water,
Man Power – Skills, Wages
Govt. Projects, Chemical Factory, Laws
Customers
Location
Supplier
Closer
Access
General Area
Access to Sea, Airports, Transport Routes
26. Supply Chain Management
Other Warehouse Design Factors
• Design for Safety
• Design for Health
• Fire / Humidity Proof
• Pests and Insects
• Insurance
Warehouse Design – Space utilization
Storage Picking/Packing Goodsin / out Goods
Office,
other
28. Supply Chain Management
Finance SupplyChain
• Interlink between Finance Department and Sourcing/ Supply Chain
Department
• Almost 70% of financial Activities related to Sourcing / Supply Chain
• Sourcing Budgeting based on production plan
• Close Supervision on Supply Chain Activities
CHALLENGING ASPECTS
• Difficult to convince about Nepal Custom Process
• Proforma Invoice Content
• Reliable Vendor Selection
• Export Invoice Number Booking by Buyers
EXPECTATION FROM SOURCING AND SUPPLY
CHAIN MANAGER
• Budgeting for Sourcing based on Order and Production Plan
• Proforma Invoice based on Nepal Compliance
• Material In-house Planning
• Bank Guarantee status and its utilization
• Selling Planning
• Sourcing Planning
• Goods Delivery Planning
• APC Requirement
29. Supply Chain Management
1.2 Objective of the Study
As stated by the topic, I was curious to know how the impact of Global logistic
service providers to local logistics service providers in Nepal and Global such a
large network supply chain. I was also very eager to know the importance of
logistics and its supply for business environment and consumers’ daily life by
providing goods and service in right time, at right place, in right quantity, in right
quality and in right cost.
Through increasingly global supply chains, the logistics industry inevitable touches
every facet of our lives, both at home and at work. Today, these supply chains are
in the spotlight. They are one of the first places informed consumers look to see
what sustainable practices are associated with sustainable practices are associated
with a given product or service. Consumers now better understand and take into
account the environmental impact of the transportation of the goods they buy.
That the sector is currently a significant consumer of fossil fuels is self-evident;
however, this makes the industry’s emerging vision of a future with minimal
environmental impacts even more important to achieve. As international trade
grows, so too does the need for companies to create more focused and resilient
supply chains: logistics and transport have moved from the backroom to the
boardroom to become a competitive differentiator, critical for business success.
The core Objectives were:-
1. Analysis of upstream and downstream of Logistics Company.
2. Analysis the gap between customer requirement and quality supply by
producer.
3. To help, understand the nature of organizational problem in real life
situation, learn to find solutions of those problems.
4. Overview of the supply chain management of logistic company.
5. Explore the challenges of the logistics company.
6. To get knowledge of the networking and relationship of suppliers supplier to
consumers’ consumer and their satisfaction
30. Supply Chain Management
INDING, CONCLUSIONS AND RECOMMENDATIONS
3.1 Findings
Firstly, the project should determine the forms of logistics uncertainty that impact
on supply chain performance. After that, intensive research should be carried out in
establish the impact of supply chain strategies and principles on green logistics
performance. The global logistic service providers and local logistic service
providers companies in evolving global market environment first, by supporting
quantifiable and targeted environmental and energy improvements and second, by
maintaining the sector’s economic viability during a time of limited capital
financing and international competition. Logistic objective were aligned with
government priorities, and with the departmental strategic objective of
Environmental Responsibility. The evaluation also found that there was a clear role
for the federal government in this type of programming considering the wider
environmental benefit for Nepalese and the fact that the logistic ran in parallel with
similar targeted funding initiatives to stimulate capacity in other key industrial
sectors. The logistic also clearly resulted in enhanced capacity-building and
relationship-building for both internal and external stakeholders.
The important of green logistic is to improve the environmental performance of
Nepal’s industry, in turn contributing to environmental and hence, commercial,
sustainability. The key to success behind is the only management of SCM of any
industry. We can say that role of SCM is not limited to any industry rather it has
application over almost all industries. It would not be overstatement of the supply
chain management if one would say any firm can complete in industry just only the
bases of how it manages its supply chain, work for betterment of it and move it
towards higher efficiency every day.
31. Supply Chain Management
3.1 Conclusion
3 Recommendations
Flexibility is extremely important, especially when dealing with your extended network.
Negotiation with Government of Nepal (GON) for providing some facilities regarding the
inventory holding cost in customs office at the time of striking, clear tax policies while
importing the raw material from other country and so on.
The Logistic should go with systematic research method for forecasting of demand in the
country so that it can reduce inventory holding cost.
The industry should strengthen distribution channel for widely distribution. All
distribution channels should be adopted by the industry. Zero level channel of
distribution will be effective when the ultimate user is construction industry.
Shorten time to market and shrink your planning horizon. The severe time compression
makes for more overlap between the design, production and inventory control phases,
rendering some conventional procedures either unnecessary or counterproductive. Look
for “waste” in the value chain and remove it. Shrinking your planning and execution
horizon is hard but has good results.
Lead time and agility mean more than chasing the needle for the absolute minimum
cost. The lowest-cost supplier is likely to be the slowest as well, because it will rely on
full capacity utilization to compensate for low margins.
Forecast at the style level. Don’t attempt to create a detailed forecast per channel.
Instead, create a one-number anticipated demand per style and a supply plan with built-
in flexibility to meet both a 300-plus percent uplift and to minimize the commitment risk
on a flop.
Manage inventory as a central pool. Remove all inventory silos and DO NOT allow
separate inventory management by channel.
pre-allocate warehoused material stocks as a standard procedure. Market volatility due
to fickle consumers, the impact of social media, and other factors make it meaningless.
32. Supply Chain Management
Build strong value chain partnerships with your suppliers and integrate processes so that
you can replenish just in time in a matter of days rather than weeks, thereby minimizing
inventory and work in progress risk in the supply chain.
.
