SUPPLY CHAIN:

The supply chain encompasses the steps it takes to get a good or service from the supplier to the
customer.

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The
supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses,
retailers, and customers themselves.

DRIVERS OF SUPPLY CHAIN PERFORMANCE:

 Facilities

 places where inventory is stored, assembled, or fabricated

 production sites and storage sites

 Inventory

 raw materials, WIP, finished goods within a supply chain

 inventory policies

 Transportation

 moving inventory from point to point in a supply chain

 combinations of transportation modes and routes

 Information

 data and analysis regarding inventory, transportation, facilities throughout the supply
chain

 potentially the biggest driver of supply chain performance

 Sourcing

 functions a firm performs and functions that are outsourced-affects bottom line

 Pricing

 Price associated with goods and services provided by a firm to the supply chain-affects
top line
STRATEGIC FIT OF SUPPLY CHAIN:

It means that the Business /Competitive strategy of the company and supply chain strategy should have
the same goal .It refers to the consistency between customer priorities that the competitive strategy is
designed to satisfy and the supply chain capabilities that the supply chain strategy aims to build up.

STEPS FOR STRATEGIC FIT

• Know your customers

• Know your supply chain

• Achieve strategic fit

MANUFACTURING STRATEGY

ENGINEER-TO-ORDER

 Manufacturer does not start until the order is received

 Custom designs

 Unique products

 Long lead time

 Inventory purchased after order is received

MAKE-TO-ORDER

 Manufacturer does not start until the order is received

 Often uses standard components

 Little design time

 Lead time is reduced

 Inventory held as raw materials

ASSEMBLE-TO-ORDER

 Manufacturer inventories standard components

 No design time required

 Assembly only required

 Shorter lead time

  Inventory held as standard components

MAKE-TO-STOCK

 Manufacturer produces the goods in anticipation of customer demand

 Little customer involvement with design

 Shortest lead time

 Inventory held as finished goods

TRANSPORTATION

Transportation is necessary to move purchased goods from suppliers to buyers.

IMPACT OF TRANSPORTATION ON SUPPLY CHAIN MANAGEMENT

Time utility- products are delivered at the right time.

Place utility- products are delivered to the desired location.

CHOICE OF TRANSPORTATION CARRIERS AFFECTS

(1) The pricing of products

(2) Delivery performance

(3) Condition of the goods when they arrive

FUNDAMENTALS OF TRANSPORTATION

Legal Forms of Transportation- Transportation service companies are classified legally as either
common, contract, exempt, or private carriers.

 Common carriers- offer transportation services to all shippers at published rates

between designated locations without discrimination.

 Contract carriers- not bound to serve the general public. Contract carriers serve specific
customers under contractual agreements.

 Exempt carriers- exempt from regulation of services & rates & if they transport certain
exempt products like produce, livestock, coal, or newspapers.

 Private carrier- not subject to economic regulation & typically transports goods for the
company owning the carrier.
MODES OF TRANSPORTATION

Motor Carriers (trucks)- most flexible mode of transportation & account for over 80 % of U.S. freight.
Trucks compete w/rail & air for short-to medium hauls. Weather is primary disadvantage.

 Less-than-truckload (LTL) carriers or truck-load (TL) carriers. LTL carriers move small shipments
& fees are higher.

 General freight carriers carry the majority of goods shipped & include common carriers.

 Specialized carriers transport liquid petroleum, household goods, building materials, & other
specialized items.

Rail Carriers- compete most favorably when the distance is long & the shipments are heavy or bulky.

 Rail relatively slow & inflexible, rail roads have begun purchasing motor carriers & can
thus offer point-to-point pickup & delivery service known as trailer-on-flatcar (TOFC)
service.

 Rail companies use each other’s rail cars. Keeping track of rail cars & getting them
where they are needed can be problematic.

 Railroad infrastructure & aging equipment are also problems for the railroads.

Air Carriers- Very expensive relative to other modes but also very fast. Air carriers transport about 5 %
of the U.S. freight bill.

 Airlines cannot carry extremely heavy or bulky cargo.

 For light, high value goods that need to travel long distances quickly, most small cities &
towns do not have airports.

Water Carriers- Inexpensive, slow & inflexible. Include inland waterway, coastal & intercoastal, & deep-
sea.

 Inland waterway transportation is used for heavy, bulky, low-value materials (e.g., coal,
grain). Competes w/rail & pipeline.

 Water carriers are paired w/trucks to enable door-to-door delivery.

 Supertankers are +1,500 ft long & 200 ft wide.

Pipeline Carriers- Limited in variety they can carry.

Little maintenance once pipeline is running.

Materials hauled in a liquid or gaseous state.

  In choosing a transportation mode, shippers consider five criteria;

 speed of delivery

 Timeliness (are they late?)

 ability to handle various products

 number of geographic points served

 cost per ton-mile

MULTI-MODAL TRANSPORTATION

 Multimodal transport (also known as combined transport) is the transportation of goods under
a single contract, but performed with at least two different means of transport; the carrier is
liable (in a legal sense) for the entire carriage, even though it is performed by several different
modes of transport (by rail, sea and road, for example).
INTERMODAL CONTAINER

 An intermodal container is a large standardized shipping container, designed and built

for intermodal freight transport, meaning these containers can be used across different modes
of transport – from ship to rail to truck – without unloading and reloading their cargo.

 Intermodal containers are primarily used to store and transport materials and products
efficiently and securely in the global containerized intermodal freight transport system, but
smaller numbers are in regional use as well.

 These containers are known under a number of names, such as simply

container, cargo or freight container, ISO container, shipping,sea or ocean container, container
van or (Conex) box

Third-Party Logistics Services- intermediaries facilitate use of the transportation alternatives.

 Freight forwarders- consolidate shipments to fill trucks or rail cars.

 Transportation brokers- handle transportation requirements of shippers. legally

authorized to act as agents on shippers behalf.

 Integrated logistics service providers provide services for a fee.

 1PL – 7PL

CROSS DOCKING- to receive, breakdown, repackage, & distribute components to a manufacturing

location or finished products to customers warehouse. Today’s warehouses are more correctly referred
to as distribution centers.

WHY IS FACILITY LOCATION SO IMPORTANT?

 Facility location has a long-term impact on the supply chain & must be part of the firm’s
strategy.

 Companies can locate anywhere in the world due to increased globalization, technology
infrastructure, transportation, communications, & open markets,

 Location still matters- clusters in many industries show that innovation & competition
are geographically concentrated.

CONSIDERABLE FACTORS WHILE SELECTING LOCATION

Government Taxes & Incentives

 Several levels of government must be considered when evaluating potential locations.

  Countries with high tariffs discourage companies from importing goods into the country.

 High tariffs encourage multinational corporations to set up factories to produce locally.

 Many countries have set up foreign trade zones (FTZs) where materials are imported
duty-free as long as the imports are used as inputs to production of goods.

Currency Stability

 Impacts business costs & consequently location decisions.

Access & Proximity to Markets/Customers

 “The trend in manufacturing is to be within delivery proximity of your customers.

Logistics timelines & costs are the concerns, so that reinforces a clustering effect of
suppliers & producers to places that offer lower cost labor & real estate.”

 In the service industry, proximity to customers is even more critical

Environmental Issues

 Global warming, air pollution, & acid rain are increasingly debated as the price of
industrialization.

 Trade liberalization creates need for environmental cooperation.

Labor Issues

 Labor availability, productivity, & skill.

 Unemployment & underemployment rates.

 Wage rates; turnover rates; labor force competitors.

Right-to-Work Laws

 The right of employees to decide whether or not to join or support a union.

Access to Suppliers & Cost

 Supplier proximity influences the delivery of materials & effectiveness of the supply
chain.

Utility Availability & Cost

 Supply of electricity has not kept pace with the high speed of development.

 In heavy industries the availability & cost of energy are critical considerations.
  Telecommunication costs have dropped dramatically. Many organizations now have
back office operations & call centers internationally to serve the U.S. market.

Quality-of-Life Issues- Defined as “a feeling of well-being, fulfillment, or satisfaction resulting from

factors in the external environment.”

 Education

 Economy

 Natural Environment

 Social Environment

 Culture/recreation

 Health

 Government/politics

 Mobility

 Public Safety

Land Availability & Costs

 As land & construction costs in big cities continue to escalate, the trend is to locate in
the suburbs & rural areas.

FACILITY LOCATION MODELS

The Weighted-Factor Rating Model- A method used to compare the attractiveness of several locations
along a number of quantitative & qualitative dimensions.

 Identify the factors

 Assign weights to each factor. The weights sum to 1.

 Determine a score for each factor.

 Multiply the factor score by the weight, then sum the weighted scores

 The location with the highest total weighted score is the recommended location.

BENEFITS OF WAREHOUSING

 Consolidation

 Break bulk
  Processing/ Postponement

 Stock pilling

WAREHOUSING TYPES (STRATEGY)

(1) Private warehouses,

(2) Public warehouses, and

(3) Contract warehouses.

WAREHOUSING MANAGEMENT SYSTEM (WMS)

Warehouse management systems (WMS), incorporate processes to guide physical activities, including
product receipt, material movement and storage, and order selection

Warehousing has been recently defined as mixing inventory assortments to meet customer
requirements. Associated transactions of warehousing include shipping, receiving, put away, and
picking.

Warehouse Location Strategies proposed by Edgar Hoover

 Market-positioned strategy- warehouses close to customers to maximize distribution

svcs & improve transp. economies of scale.

 Product positioned strategy- warehouses close to the sources of supply to enable the
firm to collect goods & consolidate these.

 Intermediately positioned strategy- warehouses midway between the sources of supply

& the customers when distribution requirements are high & product assortments come
from various locations.

PURCHASING CYCLE

1. Receive and analyse purchase requisitions

2. Select suppliers, issue quotations

3. Determine the right price

4. Issue purchase orders

5. Follow-up to assure correct delivery

6. Receive and accept the goods

7. Approve invoice for payment