MODULE 1:

● Logistics and Supply Chain Management – An Overview:

● Logistics, SCM and the difference between logistics and SCM.
● Supply chain and value chain
● Mission of logistics management
● Value addition by logistics
● Drivers of supply chain performance
Supply Chain Strategy and Performance Measures:
● Customer service and cost trade-offs
● Impact of out-of-stock
● Setting customer service objectives and priorities
● Supply chain performance measures
● Enhancing supply chain performance
● Outsourcing: Make versus Buy

WHAT IS A SUPPLY CHAIN?

● A supply chain consists of all parties involved, directly or indirectly, in fulfilling

a customer request. The supply chain includes not only the manufacturer and
suppliers, but also transporters, warehouses, retailers, and even customers
themselves. Within each organization, such as a manufacturer, the supply
chain includes all functions involved in receiving and filling a customer
request.
● These functions include, but are not limited to, new product development,
marketing, operations, distribution, finance, and cus-tomer service.

Example of a simple Supply Chain Management:

But Actually Supply Chain Management is a web of complex relationships as
illustrated below:
LOGISTICS MANAGEMENT:

● Logistics is used more broadly to refer to the process of coordinating and

moving resources – people, materials, inventory, and equipment – from one
location to storage at the desired destination.
● Logistics management involves identifying prospective distributors and
suppliers and determining their effectiveness and accessibility.
● "Logistics" was initially a military-based term used in reference to how
military personnel obtained, stored, and moved equipment and supplies.
The term is now used widely in the business sector, particularly by
companies in the manufacturing sectors, to refer to how resources are
handled and moved along the supply chain.
● Getting the Right product, in the Right quantity, in the Right condition, at
the Right place, at the Right time, to the Right customer, at the Right
price.

●
 ● This definition is useful because it explains the function of logistics,
getting things moved about in a synchronised fashion to meet a specific
criteria such as timeliness, condition and the correct place!
● Another definition that also reflects the Rs of logistics is:

The process of planning, implementing, and controlling the efficient and

effective forward and reverse flow and storage of goods, services, and
related information from point of origin to point of consumption for the
purpose of meeting customer requirements. (Council of Logistics
Management 1991)

Logistics has three types; inbound, outbound, and reverse logistics.

Inbound logistics

● As the name suggests, inbound logistics is concerned with activities related to

the incoming flow of resources needed to make a product or a service.

● Inbound logistics processes may include managing suppliers, costs, inventory,

and transportation to ensure the right components or subassemblies arrive in
your factory on time.
● Inbound logistics is generally complex because hundreds of parts are coming
in to manufacture one final product, therefore, it tends to be more intricate than
outbound flow.
● Procurement is the major element in inbound logistics as it deals with sourcing
and transporting raw materials from the supplier to buyer’s factory .
Outbound logistics

● Outbound logistics refers to activities in delivering the right product at the right
time to customers at a minimum cost.
● Customer satisfaction is the primary objective of outbound logistics, that is why
many organizations especially e-commerce companies are competing for last-
mile or same-day delivery to their customers.
● Companies bring out their value proposition to their customers and back it up
with their outbound logistics capability.
● Distribution system plays a critical role in outbound logistics. The distribution
channels and transportation system should support the value the company is
trying to provide to customers (e.g. quick response to the customer, customer
service level, etc.). The prevalence of e-commerce in the retail industry
intensifies the need for an optimized outbound logistics flow.
● Retail e-commerce sector operates heavily in outbound logistics than any other
industries. Look at Amazon, Walmart, and Lazada, they take bold steps
innovating technologies and building facilities to accelerate their logistics
performance.

Reverse logistics
 ● Reverse logistics is the process of moving products from end-user back to the
origin to recover value or for proper disposal. The value is recaptured from
products recovered from customers through rework, refurbishment, reuse,
scrap recycling, or government incentives for recyclable products.
● A refurbished iPhone is a good example of reverse logistics. If an iPhone sold
to the customer is found defective within the warranty period, the customer
returns it to the carrier network and then send it back to the Apple factory for
refurbishing. Apple inspects the iPhone to determine the issue and replace it
with new parts or software. A new iPhone is then labeled with a new serial or
model number for reselling. A refurbished iPhone is re-sold to the customer,
thus, creating value to Apple.
● Product returns come in different forms including the commercial return, recall,
refurbishment, or product’s end-of-life. Companies must have systems and
infrastructure in handling returns to minimize recovery costs, increase
recaptured value, and increase visibility. In e-commerce retail industry, the
rising return rates make retailers suffer from costs associated with returns
because customers get refunded for returned products (especially seasonal
goods) that cannot be resold at the original price due to wear and tear,
obsolescence, or damage. Implementing a return policy can mitigate reverse
logistics costs as it controls and limits customers from returning goods.

Supply chain managers work across multiple functions and companies to

ensure that a finished product not only gets to the end consumer but meets all
requirements as well. Logistics is just one small part of the larger, all-
encompassing supply chain network.
Value Chain:

● A value chain is a combination of the systems a company or organization uses

to make money. That is, a value chain is made up of various subsystems that
are used to create products or services. This includes the process from start to
finish.
● The concept of the value chain comes from a business management perspective.
Value chain managers look for opportunities to add value to the business.
● They may look for ways to cut back on shortages, prepare product plans, and
work with others in the chain to add value to the customer.
● He used the idea to show how companies add value to their raw materials to
produce products that are eventually sold to the public.
● In value chain management, the consumer is seen as the source of value.
Consumers create value for manufacturers when they demand products. The
 focus is not on the cost of goods, as in supply chain management, but in creating
value in the consumer’s eyes.
● The difference between the SCM and Value chain management is that in supply
chain management, the flow is down – from the source to the consumer. In value
chain management, the flow is up – from the consumer to the source.

Michael Porter's Value Chain:

● Given the importance of the value chain, Michael Porter developed a strategic
management tool for analyzing a company’s value chain.
● Porter, known for Porter’s five forces, laid out his method of analyzing value
chains in his 1985 book Competitive Advantage.
● Porter sought to define a company’s competitive advantage noting that it stems
from a company’s processes, such as marketing and supporting activities.
● Porter breaks value chain analysis into five primary activities. Then, he further
breaks those down into four activities that help support primary activities.
● The primary activities of Michael Porter's value chain are inbound logistics,
operations, outbound logistics, marketing and sales, and service.
● The goal of the five sets of activities is to create value that exceeds the cost of
conducting that activity, therefore generating a higher profit.5 Here are the five
key primary activities.

Porter’s Value Chain Primary Activities

Inbound Logistics

● Inbound logistics include the receiving, warehousing and inventory control of a

company's raw materials. This also covers all relationships with suppliers. For
example, for an e-commerce company, inbound logistics would be the receiving
and storing products from a manufacturer that it plans to sell.

Operations
● Operations include procedures for converting raw materials into a finished
product or service. This includes changing all inputs to ready them as outputs. In
the above e-commerce example, this would include adding labels or branding or
packaging several products as a bundle to add value to the product.

Outbound Logistics

● All activities to distribute a final product to a consumer are considered outbound

logistics. This includes delivery of the product but also includes storage and
distribution systems and can be external or internal. For the e-commerce
company above, this includes storing products for shipping and the actual
shipping of said products.

Marketing and Sales

● Strategies to enhance visibility and target appropriate customers—such as

advertising, promotion, and pricing—are included in marketing and sales.
Basically, this is all activities that help convince a consumer to purchase a
company’s product or service. Continuing with the above example, an e-
commerce company may run ads on Instagram or build an email list for email
marketing.

Services

● This includes activities to maintain products and enhance consumer

experience—customer service, maintenance, repair, refund, and exchange. For
an e-commerce company, this could include repairs or replacements, or
warranty.

Porter's Value Chain Secondary Activities

● Now, companies can further improve the primary activities of their value chain
with secondary activities. Value chain support activities do just that, they support
the primary activities. The support, or secondary, activity generally plays a role
in each primary activity. Such as human resource management, which can play
a role in operations and marketing and sales. Here are the four supporting
activities.
 Procurement

● Procurement is the acquisition of inputs, or resources, for the firm. This is how a
company obtains raw materials, thus, it includes finding and negotiating prices
with suppliers and vendors. This relates heavily to the inbound logistics primary
activity, where an e-commerce company would look to procure materials or
goods for resale.

Human Resource Management

● Hiring and retaining employees who will fulfill business strategy, as well as help
design, market, and sell the product. Overall, managing employees is useful for
all primary activities, where employees and effective hiring are needed for
marketing, logistics, and operations, among others.

Infrastructure

● Infrastructure covers a company's support systems and the functions that allow
it to maintain operations. This includes all accounting, legal, and administrative
functions. A solid infrastructure is necessary for all primary functions.

Technological Development

● Technological development is used during research and development and can

include designing and developing manufacturing techniques and automating
processes. This includes equipment, hardware, software, procedures, and
technical knowledge. Overall, a business working to reduce technology costs,
such as shifting from a hardware storage system to the cloud, is technological
development.

Bottom Line

● The primary activities within Michael Porter's value chain are used to provide a
company with a competitive advantage in any one of the five activities so it has
an advantage in the industry in which it operates. In general, the analysis was
meant for companies that manufacture goods. But almost any company can use
the value chain analysis laid out by Porter even if they don’t have all the
components.
DRIVERS OF SUPPLY CHAIN PERFORMANCE:

● Supply chain capabilities are guided by the decisions you make regarding the
five supply chain drivers. Each of these drivers can be developed and managed
to emphasize responsiveness or efficiency depending on changing business
requirements.
● The five drivers provide a useful framework for thinking about supply chain
capabilities. Decisions made about how each driver operates will determine the
blend of responsiveness and efficiency a supply chain is capable of achieving.
The five drivers are illustrated in the diagram below:

1. PRODUCTION –
 ● This driver can be made very responsive by building factories that have a
lot of excess capacity and use flexible manufacturing techniques to
produce a wide range of items.
● To be even more responsive, a company could do their production in many
smaller plants that are close to major groups of customers so delivery times
would be shorter.
● If efficiency is desirable, then a company can build factories with very little
excess capacity and have those factories optimized for producing a limited
range of items.
● Further efficiency can also be gained by centralizing production in large central
plants to get better economies of scale, even though delivery times might be
longer.

[If asked in case study: Simulate decisions about production in SCM Globe by
defining different products and facilities in the supply chain, and select locations for
the facilities that make those products.]

2. INVENTORY –

● Responsiveness can be had by stocking high levels of inventory for a wide

range of products. Additional responsiveness can be gained by stocking
products at many locations so as to have the inventory close to customers and
available to them immediately.
● Efficiency in inventory management would call for reducing inventory levels of
all items and especially of items that do not sell as frequently. Also, economies
of scale and cost savings can be gotten by stocking inventory in only a few
central locations such as regional distribution centers (DCs).

3. LOCATION –

● A location decision that emphasizes responsiveness would be one where a

company establishes many locations that are close to its customer base.
● For example, fast-food chains use location to be very responsive to their
customers by opening up lots of stores in high volume markets. Efficiency can
be achieved by operating from only a few locations and centralizing activities in
common locations.
● An example of this is the way e-commerce retailers serve large geographical
markets from only a few central locations that perform a wide range of activities.

4. TRANSPORTATION –
● Responsiveness can be achieved by a transportation mode that is fast and
flexible such as trucks and airplanes. Many companies that sell products
through catalogs or on the Internet are able to provide high levels of
responsiveness by using transportation to deliver their products often within 48
hours or less.
● FedEx and UPS are two companies that can provide very responsive
transportation services. And now Amazon is expanding and operating its own
transportation services in high volume markets to be more responsive to
customer desires.
● Efficiency can be emphasized by transporting products in larger batches and
doing it less often. The use of transportation modes such as ship, railroad, and
pipelines can be very efficient. Transportation can also be made more efficient
if it is originated out of a central hub facility or distribution center (DC) instead
of from many separate branch locations.

5. INFORMATION –

● The power of this driver grows stronger every year as the technology for
collecting and sharing information becomes more wide spread, easier to use,
and less expensive.
● Information, much like money, is a very useful commodity because it can be
applied directly to enhance the performance of the other four supply chain
drivers.
● High levels of responsiveness can be achieved when companies collect and
share accurate and timely data generated by the operations of the other four
drivers. An example of this is the supply chains that serve the electronics
market; they are some of the most responsive in the world.
● Companies in these supply chains, the manufacturers, distributors, and the big
retailers all collect and share data about customer demand, production
schedules, and inventory levels.
● This enables companies in these supply chains to respond quickly to situations
and new market demands in the high-change and unpredictable world of
electronic devices (smartphones, sensors, home entertainment and video
game equipment, etc.).
● Companies and supply chains continually adjust their mix of responsiveness
and efficiency as situations changes depicted in the table below:
 Over the long run, the cost of one driver — Information — continues to drop
while the cost of the other four drivers continues to rise.

Companies that make best use of information to increase their internal

efficiency, and increase their responsiveness to external supply chain partners
will gain the most customers and be the most profitable.

When to be Efficient and When to be Responsive

Efficiency is good — Efficiency drove the economy of the 20th century.

● The push for efficiency increased productivity and lowered the prices of
products from automobiles to home appliances thus making them available to
a wide segment of the population.
● Yet efficiency requires two things that are becoming much harder to find. The
first thing is predictability. To efficiently plan and manage production and
 distribution of products you need to know what the demand will be for those
products, and you need to know what the cost of raw materials will be and what
the selling prices will be for the products.
● Then you can optimize your operations to produce the right amounts at the right
prices and maximize profits.

Efficiency requires one more thing — stability.

● You need to know that demand and prices will remain relatively stable for some
number of years (5 or 10 years or more). Because then you can build factories
and stores and transportation infrastructure to enable your efficient operating
model.
● Efficiency is best when producing relatively simple commodity products and
services that sell in more predictable and stable markets.

Responsiveness is better —
● In the 21st century, responsiveness is what drives the economy.
Responsiveness is what drives continuous innovation in products and
technology and continuous change in the ways we organize businesses and
serve customers.
● The big companies of the 20th century were efficient manufacturing companies
(Ford, GM, US Steel, Kodak, Whirlpool etc.), but the big companies of the 21st
century are responsive service and technology companies (Alibaba, Amazon,
Apple, Facebook, Google, Starbucks, Tencent, etc.).
● All these 21st century companies certainly need to be efficient, but their
success is based mostly on their ability to sense and respond quickly to
changing markets and evolving customer desires.
● Lowest price is not always the deciding factor in purchasing decisions; people
want what they want. They want products and services that respond quickly
and meet their needs and desires.
● Apple and Starbucks do not sell the lowest priced laptops or cups of coffee, nor
does Porsche make the lowest priced cars, but as long as people value the
quality and innovation offered by those companies and others like them they
will pay more for their products.
● Home delivery of everything from clothes to groceries costs a bit more, but
people value and pay for the responsiveness and convenience of those
services.
● Responsiveness is best when providing more complex and unique
products and services that sell in continuously changing markets shaped
by evolving technology and new customer needs and desires.
● However, even within supply chains that emphasize overall responsiveness,
there are still segments of those supply chains that should focus on efficiency.
For example, segments of supply chains that connect factories with
warehouses and distribution centers should be as efficient as possible. In most
cases they should use the most efficient transportation modes and delivery
schedules. And segments of supply chains that connect warehouses to end use
consumers should usually focus on responsiveness and use transportation
modes and delivery schedules that emphasize responsiveness because
customers have come to expect fast delivery of products. In every supply chain
some operations will need to focus on efficiency and others on responsiveness.
 That mix continues to shift over time as customer preferences and market
conditions change.
● New technologies such as robots, drones, artificial intelligence and 3D printing
are making big impacts on how supply chains operate. And yet after all is said
and done, these new technologies can be employed to do one of two things:
increase efficiency or increase responsiveness (or some blend of the two). See
our blog article “Five New Supply Chain Technologies and How to Use
Them” for ideas about how new technologies can be used to improve efficiency
and responsiveness of the supply chain drivers, and create supply chains that
become competitive advantages.

CUSTOMER SERVICE AND COST TRADE OFF’S

1. Impact of out of stock

● One of the worst things that can happen to a business is to have a stockout.
This means that with no inventory of a certain item, production has to be
stopped or a customer order will not be fulfilled.
● For a warehouse or inventory manager it is a scenario that they most dread
and with it comes a significant cost to the company. An optimized supply
chain will help you supply your customers with what they want, when they
want it - and prevent stockout situations.

Effects of a Stockout

● The basic scenario for a stockout is when an item that is to be used for a
customer's order or for a production order is not in stock when required.
● If an item is not available for manufacturing then it may be possible to change
the production schedule, although there is a significant cost in this due to the
changes in a machine, teardown costs, resource changes, plus the time
involved in carrying out all the changes.
● If an item is not available for a customer order then four possible effects can
occur.
 Customer agrees to wait for the item - If the item is vital to the customer,
then they may be prepared to wait. Despite the goodwill of the customer,
there may be significant damage to the customer's satisfaction level.
Customer backorders the item - Not as ideal as when the customer agrees
to wait for the order to be complete, but the order is still being fulfilled.
Nevertheless, the customer's satisfaction level is still significantly reduced.
Customer cancels the order - If the customer is able to obtain the item from
another vendor or does not need the item immediately, then the customer can
cancel the order. It is still possible that the customer will order from you in the
future, but their customer satisfaction level has been damaged.
Customer cancels the order, and is no longer a customer - This is the
worst-case scenario of a stockout. However, if a customer is unhappy with the
communication or information supplied by the vendor then they may be willing
to cut all ties and work with another vendor.

Cost of Back Ordering

● If a customer is unwilling to wait for their order to be fulfilled then they could
backorder the item. This will mean that the vendor will incur some costs due
to the stockout.
● There are increased order processing costs as the customer service staff
amends the order to create a new suitable delivery date. In addition, there
may be additional shipping charges if the order was part of a larger delivery,
then the backorder will require special transportation.
● As a means of stimulating some much-needed customer satisfaction, the
vendor can also agree to expedite shipping at their expense or offer the
customer free shipping or a discount on the order.

Cost of Cancelled Orders

● If a customer decides to cancel their order due to the stockout then they have
probably found an alternate vendor for the item. Many companies will ensure
that they have more than one source of supply for their key items;
therefore, it may be easier to order from the alternate than to wait for the order
to be completed.
 ● For the vendor, a canceled order can be costly, not only in lost profit but in the
purchase of raw materials or parts that were brought in or on order for the
customer's order. Obsolete, slow-moving or unusable inventory costs money -
not just due to its purchase price, but also in inventory carrying costs.
● There is also the cost involved in trying to minimize customer dissatisfaction,
either by offering incentives for them to order from the vendor again or in
marketing to reduce any negative posts that may have been made on social
media.

Cost of Losing a Customer:

● Losing a customer to a stockout is the worst outcome, and comes with it the
highest cost to the vendor. By a customer no longer placing any order with a
vendor, every order is a cost that has to be considered. If a customer was a
major purchaser of goods then the cost could be severe and put the vendor in
financial difficulty. There is also the cost of trying to find new customers to
replace the order that would have been placed.

AVOID STOCKOUTS/ WAYS TO PREVENT STOCKOUTS:

While the goal of most businesses is to sell the stock on hand in the fastest possible
time, accomplishing this goal can ultimately lead to stock-outs at some point.

Unfortunately, the damage stock-outs cause extends beyond lost sales. Aggressively
wooing a customer and then failing to deliver the product amounts to a lot of effort and
resources going to waste. Additionally, you end up earning annoyed customers who
may never to return and are likely to spread bad word of mouth. In order to avoid stock-
outs and their potentially unpleasant consequences, businesses require a highly
functional supply chain along with a systematic approach to managing inventory.

Understand the Inventory:

Inventory can include anything from raw materials to finished goods, from components
needed to make a product to packaging items. As the adage goes, “for want of a nail,
the kingdom was lost.” Unavailability of seemingly insignificant items can cause major
disruption of sales. For example, if an essential component like screws to fix furniture
is not available, it may lead to stock-out. Similarly, want of packing materials can cause
disruption. A good inventory management system makes an estimate of all the
materials and components required to make sales-ready products and make due
provisions to maintain adequate stock levels.

Automate the Process

Automation is fast becoming indispensable for smooth operation. As the number of

retailers and products are increasing, the highly stressed workforce finds it difficult to
keep pace with the complexities. Automated inventory anticipates demand and
prompts automatic re-orders when stock drops below a certain threshold. It makes an
estimate of the delivery time, and triggers re-orders well in advance to make the entire
process seamless and less chaotic.

Get the Re-order Thresholds Right

While the economics of demand and supply is (and always should be) a major
consideration in deciding inventory levels, many businesses make the mistake of
giving disproportionate weight to it, or worse, making it the sole consideration.

Optimal inventory levels depend on several factors – predictability of demand,

seasonal fluctuations in supply, any anticipated advertising blitz or promotional
campaigns in the pipeline, the possibility of any external factor affecting supply chain,
the reliability of the supply chain partners, and more. For instance, an anticipated
shutdown in the geographical area from where a raw material is supplied can delay
supplies and bring sales to a grinding halt.

● Even if the supply is reliable, it makes sense to purchase in bulk and get
discounted rates and immunity from potential price hikes, rather than opt for
just in time models. Effective inventory management is more than just storing
the products. What also matters is the size, nature, if the inventory is fast
moving, profitable, best practices for efficient and uninterrupted production, and
the deployment of efficient techniques to balance demand-supply loop.
● Of all the different inventory models, such as fixed time reordering, just in time
inventory, fixed order re-order, economic order quantity (EOQ), and others,
there is no one-size that fits all. Effective inventory management requires the
 flexibility to adapt to the methods, or even combine methods, to best suit the
specific circumstances.
● Effective forecasting and maintaining adequate buffers is a sound way to
maintain optimal stock levels. Here, the use of big data analytics is invaluable
in not just predicting demand, but also anticipating the replenishment time of
new orders.

Deploy a Proactive Inventory Management System

● A truly effective inventory management system goes beyond the management

of in-stock inventory. It should also be able to offer several proactive services,
such as stock alerts when a product is nearly out-of-stock, alert when back-in-
stock, internal back order management and adjustments, shipment notification
to key stakeholders, and more.
● The best inventory feeds offer comprehensive and in-depth real-time
information to the stakeholders, including information such as available
inventory by location, re-stock dates for low or out-of-stock units, the real-time
position of inventory in transit, and more. Such notifications and proactive
services envision stock out issues and permit managers to remain in control
over stock and the supply chain.
● Inventory being a critical component of the business process requires effective
real time monitoring, to resolve glitches as it emerges. Staying organized and
vigilant, and keeping a proactive and live relationship with channel partners
such as suppliers is the name of the game for success.
● Sound technologies, such as timely alerts through mobile, Radio Frequency
Identification (RFID) or sensors for effective tracking, and more, are key
enablers of the process.

These days, most companies are adopting lean inventory management as they
contribute well to the bottom line. The benefits include reduced stock keeping units
(SKU) and inventory levels, increased use of standards in processes and materials,
improved collaborations and a general reduction in cost of goods sold.

2. Customer Service Objectives and Goals

 Setting proper customer service objectives is an essential part of your business

strategy.

● With inbound customer service, the focus is centered on attracting, engaging,

and delighting your customers. This turns your smiling customers into

passionate advocates for your brand.

The methodology can be broken down into the following three stages:

Attract Stage

● Utilizing resources and positive testimonials, you can attract both existing and

future customers to your company.

● These resources can be in the form of an informational blog, video content,

case studies, or any other content offers that can offer value to your audience.

Engage Stage

● Being ready to quickly engage with your customers in case the resources

you’ve supplied aren’t enough is critical. Customers should be able to reach

you through different channels, like email, phone, instant messaging, and even

social media.

● Responding to tickets in a timely manner not only provides quality service to

them, but it boosts your reputation too.

Delight Stage

● Delighted customers leave happy reviews and may become a strong advocate

who will share their positive experience with their friends.

● Be sure to get helpful feedback from surveys to learn how you can improve

each customer’s experience. Positive comments can even be used as

recommendations.
 Defining Customer Service

Make sure that your customer service objectives align with each stage and are

mapped to each aspect of your service team. The vague concept of “customer service”

exists within a spectrum, with three different aspects of service.

Customer Support

● Much more centered on reacting to a customer’s needs, support is about

helping them with whatever they want, whenever they want. The customer calls

the shots in this interaction, from start to finish.

Customer Service

● Here, the services team takes much more initiative in reaching out to customers

in order to offer a service. In this phase, you aren’t reliant on them to reach out

to you with a problem. In contrast, service is more about you guiding the

customer to business.

Customer Success

● Expanding value mutually for your business and for the customer is what

customer success is about. This occurs when you are able to upsell or cross-

sell new products or services.

● The customer may not have even known that they needed the new offer, but it
supplies greater value to them. This requires in-depth knowledge of your

clientele and can only be achieved once you’ve proven that you can guide and

support effectively.

With each customer service objective you set, there should be important

metrics tied to it. For example, on an internal level, the metrics you might use

to manage and track your goals include:

● Average time to first response

 ● Average call handling time
● Average number of interactions per resolution
● Overall resolution rate
● Customer satisfaction score
● Customer request volume

For actual customer service success, there are plenty of metrics you can use:

● Customer satisfaction score (CSAT): This provides a direct measure of client

happiness.

● Customer effort score (CES): A measure of how much effort customers have to
provide.

● First response time (FRT): How long it took a customer to receive a response
to their ticket.

● First contact resolution rate (FCR): The average of problems resolved within
that first response.

● Net promoter score (NPS): Another way to measure customer satisfaction,

centered on the likelihood of your customers actually recommending you to a

friend.

● Average handling time (AHT): The average amount of time it takes to provide a
solution to a customer’s issue.

● Resolution rate: The percentage of issues resolved in a given time period in

relation to the number of issues received in that time period.

How to Craft Your Objectives for Customer Service

● The first step in creating service objectives should be to audit your current

processes. From there you can prioritize what weaknesses, vulnerabilities, and

gaps you want to address. [SWOT Analysis]

 ● Determine what area you want to focus on, which you should base on your
audit. There are several areas of service you can set goals for, like:

➢ Customer relationships

➢ Customer advocacy

➢ Customer recovery

➢ Customer loyalty

➢ Customer lifetime value

➢ Productivity

➢ Product knowledge

➢ Word of mouth

● Write out SMART goals for each element once you’ve figured out your priorities.

You want to do this as comprehensively as possible.

● Build in due dates or time frames for each service objective that you write out

and involve the whole company so that everyone is on the same page. Keep

your team on track by aligning specific tactics and action items with each goal

so that there’s no confusion in what needs to get done.

Customer Service Objectives Examples

Here are some examples to review for a better idea of what great objectives look like.

● The average handling time (AHT) for customer issues will be reduced from 25
minutes to 15 minutes by the end of Q3.

● First contact resolution (FCR) to be improved by 15 percent by Q4.

● By end of year, first response time (FRT) across time zones to improve from 37
minutes to 20 minutes.

● The service call resolution rate to be improved from 72 percent to 85 percent

by Q3.
 ● All customer service requests via all channels will be resolved within 24 hours
of receipt.

● Net Promoter Score (NPS) to be improved by 6 percent by the end of the current
quarter.

● Surveyed customer satisfaction scores (CSAT) to be improved by 15 percent

by Q3.

● Customer effort score (CES) for service instant messaging to be improved from
eight minutes to five minutes by Q4.

● The minimum number of customer interactions per agent, per week to increase
from 120 to 185 within two months.

● The number of repeat customer service calls (within one month) to be reduced
by 13 percent by Q4.

https://www.youtube.com/watch?v=oIXteWGjjtM

SUPPLY CHAIN PERFORMANCE MEASURES:

● When a company wants to look at the performance of its supply chain, there
are a great many metrics that can be used. Each supply chain performance
metric gives a slightly different view of a piece of the supply chain.
● The important decision for any company is to prioritize which supply chain
metrics are important and how they will be used.
● Many companies use supply chain performance metrics that are easy to
calculate but may not necessarily give a true indication of how the supply chain
is performing.
● Some companies use a range of metrics that they require their logistics
department to adhere to, but do not realize that in doing so, other parts of the
supply chain may be negatively impacted.

Characteristics of a Good Performance Metric

When companies look at the various performance metrics that are available, there are
a number of characteristics that they should look for when selecting metrics that will
help with their business decisions.

● Easy To Understand - A good metric is one that can easily be understood by

anyone that looks at it. It should be clear as to what the metric is actually
measuring and how it is actually derived.
● Quantitative - An important characteristic for a supply chain performance
metric is that it is expressed by a value that is objective, i.e. derived from real
data and not subjective.
● Measures What is Important - Some metrics can look to be important, but
when the data is analyzed, the relevance of the metric can be tenuous. It is
vital that a performance metric on which business decisions are made should
measure important data.
● Causes Correct Behavior - A good performance metric should be one that
makes the user take the correct action. For example, if a metric shows a
number of orders processed per day, then the correct action increases the
number processed. However, sometimes the metric by itself can cause the
user to take action but at the determent of other areas. For example, if the
metric is to measure the warehouse staff by the number of movements per
day, they can increase the number of movements at the determent of the
number of trucks loaded and a number of orders processed.
● Metrics Should be Easy To Collect - Sometimes companies select complex
performance metrics that are very time-consuming to collect and may require
time to be taken away from line staff to prepare. This is counterproductive and
these types of metrics should be avoided.

SUPPLY CHAIN PERFORMANCE MEASURES:

The average Supply Chain management professional measures their Supply Chain by
reviewing cost reduction. Is cost reduction all that there is in measuring Supply Chain
performance? Sure, supply chain cost reduction is important in reducing the cost of
goods sold (COGS) and increasing profit, but there are other measurements which
should not be forgotten.
3 Key Metrics for Measuring Supply Chain Performance Beyond Cost Reduction

● If cost reduction is not the only thing to measuring supply chain performance,
that begs the questions: “Maybe we should be measuring other Supply Chain
Management activities and what would they be?”
● Inventory measurement is critical and it is money after all in that it took a
capital expense to procure. The goal is to keep inventory levels at a minimum
to meet customer needs. A pull system is better than a push system.
● measuring working capital in the Supply Chain. The handful of companies
in the top quartile of working capital performance had working capital
expenditures as a percentage of overall revenues of between 6% and 10%. In
comparison, the poorest-performing companies in the lowest quartile had a
range of working capital between 23% and 39% as a percentage of revenues.
● Time is a critical component of measuring supply chain performance.

What kinds of “time” measurements exist?

❖ Promise time,
❖ lead time,
❖ cycle time,
❖ transit time,
❖ delivery time,
❖ unloading time,
❖ processing time,
❖ queue time,
❖ quality assurance time,
❖ processing time,
❖ turnaround time,
❖ receiving time,
❖ and shipping time to the customer, (and I bet you could think of more “times” to
measure!).

For clarity, in measuring supply chain performance, we should be focusing on:

inventory,working capital,and time.

10 Soft Metric Considerations in Measuring Supply Chain Performance

Collaboration and frequent communication between Supply Chain partners,

including those considered at one time as a competitor: the supply chain has become
increasingly collaborative, and supply chain entities are taking note of how
collaboration between once-perceived enemies and competitors can actually help
build trust with consumers, maintain compliance with authoritative entities, ensure
transparency across the organization, be applied and implemented through different
software, and further drive customer-centric focus. Read more.

Customer Service Levels: When it comes to how a shipper defines the value of a
logistics provider or 3PL to the bottom line, there are often several Key Performance
Indicators (KPIs) and Logistics Metrics taken into consideration. Every company
knows customer service is important, but it is seldom well-defined, and even more
rarely measured in logistics operations. .

Effective, successful Key Performance Indicators (KPIs)/A balanced scorecard:

Effective KPI management starts with some key areas to have both parties
understand. These are core principles which will guide the rest of the more detailed
and statistical KPIs found in the Service Level Agreement. Read More.

Using supply chain technology to aid in measurement & efficiency: In today’s

highly competitive marketplace, it’s imperative for businesses to innovate new ways
to streamline their supply chain and optimize productivity. With the aid of modern
supply chain technology applications, you can create better visibility within your supply
chain, which will enable you to have more control over your business and stay ahead
of the competition. Technology can help to simplify your supply chain management,
which will enable your business to operate more efficiently, give you more visibility and
control over your inventory, and help to reduce your operational costs. Read More.

RFID, AIDC, and IOT Systems: The advantages of using RFID-, AIDC-, and IoT-
based technologies seem fairly simple. Each of these logistics technologies provides
a benefit that meets the demands of its respective driving forces. However, these
technologies are poised to give benefits throughout the industry in several other ways
as well.

Risk Management methods: Supply chain risk management and resiliency are hot-
button topics in the industry. However, minute supply chain entities do not understand
how resilience relates to risk management and what it means for improving focus on
the supply chain.

As the supply chain continues to grow in complexity and regulation, the opportunities
for problems and other events to impact operations negatively will consequently grow.
As a result, supply chain entities need to understand how risk management and
resiliency applies to both good and bad situations and how an organization can
improve supply chain risk management and resiliency processes. Read More.
Cyber Security Systems: We are all now familiar with the concept of the Internet of
Things and if you take the manufacturing industry, for example, many manufacturers
are now widely operating in an increasingly connected environment and making the
most of the Industrial Internet of Things. Read More.

GPS: Global Positioning System (GPS) is a navigation system that depends on

satellites to locate vehicles anywhere on Earth. It was originally developed by the
United States Defense Department at an unknown cost. The first such satellites were
launched in 1979. A few years later, the GPS system was made available for civilian
use. As of November 2013, there were 31 GPS satellites in operation.

Supply Chain Visibility: Supply chain visibility has long been a goal supported by
supply chain professionals. Until recently, however, technologies that could make this
goal a reality have not been available. Today, however, there is hardly an activity that
doesn’t produce some kind of data that can help companies understand what is going
on within their supply chains. As the ability to see more clearly and deeper into supply
chains improves, supply chains will become safer and more secure. Lora Cecere, of
Supply Chain Insights writes, “Today 1/3 of fruits and vegetables and poultry products
are thrown away due to spoilage. Companies struggle with counterfeit goods. In
the future, I expect the automation of the chain of custody with better control of
temperature and secure handling.”.

But, we should never forget the major ingredient in measuring supply chain
performance: PEOPLE. PEOPLE make it all happen. IT systems and tools truly
enhance the Supply Chain, but without PEOPLE communicating and collaborating,
there is no Supply Chain Management success.

OUTSOURCING: MAKE VS BUY:

The Strategic Approach

● The supply chain involves a number of firms and encompasses all activities
associated with the transformation of goods from the raw material stage to the
final stage, wherein the goods and services reach the end customer.
● While studying make versus buy decisions, we analyse from the point of view
of the focal firm or the nodal firm, which is at the strategic centre of the supply
chain. The firm that provides an identity to the product in terms of brand (Bharti,
HUL, Nike, etc.) has higher stakes in the chain and has been identified as the
main entity of the chain,
● The make versus buy decision evaluates the contribution of each activity. Using
the value chain framework developed by Michael Porter, we classify all
supply chain activities as primary activities and support activities.
● Primary activities consist of inbound logistics, operations, outbound logistics,
sales and service. Secondary activities involve procurement, technology
development, human resource management and firm infrastructure
management.
● The make versus buy decisions look at each of these activities critically and
ask the question: Should this activity be done internally or can it be outsourced
to an external party?
● Once the decision to outsource has been taken, the firm has to choose among
competing suppliers and also decide on the nature of the relationship it would
like to establish with the supplier firm.
● Traditionally, firms believed that everything should be done internally unless
there is a compelling logic in favour of outsourcing. Thus, all outsourcing-related
decisions had to be justified.
● In the Ford Motor Company vertical integration was the norm. Now, perhaps,
we are on the other extreme with of virtual corporations, where a firm starts
with the assumption that all activities must be outsourced unless there is a
compelling logic to justify keeping activities in-house.
● Michael Dell, the CEO of Dell Computers, has stated that if his company was
vertically integrated, it would need five times as many employees and would
suffer from a drag effect.
● Apart from primary activities in the value chain, even support activities that were
usually done in-house are outsourced in big way now. Rather than taking
extreme positions, we need to build up managerial logic to understand these
issues.

BHARTI AIRTEL: OUTSOURCING OF NETWORK OPERATIONS

 Bharti Airtel Limited, formerly known as Bharti Tele-Ventures, is one of India’s
leading private sector providers of telecommunications services with a market
capitalization of Rs 936 billion, revenue of Rs 185 billion and customer base of
27 million. Bharti Airtel has been rated as one of the top 10 best performing
companies in the world in the BusinessWeek IT 100 list. For the last couple of
years, its subscriber base has been growing steadily at 60 per cent per
annum.

In 2004, Bharti decided to outsource the following three areas of operations: •

Network management to Ericsson, Nokia and Siemens:

Identifying Core Processes

● The decision to identify selected processes as core processes and focus

on improving those can have a significant impact on the performance of a firm.
The identification of core processes is a crucial decision.
● If this is driven by short-term benefits such as reengineering of balance sheets
and improved return on investments, then the long-term business
sustainability is endangered.
● The mere decision to focus the resources on core activities to match capabilities
with the best-in-class performance is not enough; firms must strive to be the
best in the world in that specific area. In these areas they can invest in
people, equipments and R&D. Such a focus will also help the firm in attracting
the best talent from that field.
● Many corporations have realized that they can never hope to attract the best
talent in IT; hence, they have decided to depend on their outside partners for
the IT support required for business application.
● Thus, the first step for a firm is to develop the capability to distinguish between
core activities and commodity activities. Even among core activities, it has
to keep certain activities in-house, and for all outsourced critical
activities, it has to maintain some knowledge so that it can manage an
 effective relationship with its outsourcing partner. The two ways through
which one can identify a firm’s core processes are the business process route
and the product architecture route.

The Business Process Route

● For any firm, three core and high-level business processes include customer
relationship, product innovation and supply chain management. Customer
relationship focuses on acquiring new customers and building relationships with
existing customers.
● Product innovation focuses on developing new products and services, while
supply chain management focuses on fulfilment of customer orders. It is
possible to un-bundle the three business processes and a firm can afford to
outsource two of these business processes. Some researchers have argued
that a firm must identify and ensure that it builds core capabilities in-house in at
least one of these areas.
● Firms like HP and high-end pharmaceutical firms focus on product innovations.
● Core processes retained within the company must be strategic from the
business point of view. Firms must realize that value within the chain gets
distributed to the chain partners on the basis of the unique capabilities that they
bring to the table.
● A firm has to ensure that it has a relatively higher bargaining power within
the chain. A firm has to make sure that in-house business processes give it
enough strategic power in the chain and do not allow other chain partners to
dictate the terms of value exchange in the chain.
● In the PC business, the power within the chain went to Intel and Microsoft. So,
even though IBM was at a strategic point in product development, it lost its
power and became a peripheral player in the chain.

The Product Architecture Route

● In the product architecture approach, the focus is on subsystems and

components and the make or buy decisions are made at that level.
● A product like a car can be divided into sub-systems such as engine, chassis
and transmission. The engine sub-system can be divided into components such
 as power cylinder, fuel system and engine electronics. In a product, first the
sub-systems are classified as strategic and non-strategic.
● A subsystem is strategic if it involves technologies that change rapidly, if it
requires specialized skills and technologies and if it can significantly impact the
performance of the product on attributes that are considered important by the
customer.
● By keeping theses strategic sub-systems internal, a firm can ensure that it can
offer differentiated products and can avoid being commoditized. Further, within
a sub-system, the same kind of analysis has to be done for all major
components.
● All those components where the firm is technologically ahead of potential
suppliers or can hope to achieve a leadership position with some
investments are kept internal to the firm.
● In case the suppliers have a huge technological lead, which will be impossible
to bridge in the foreseeable future, or if the time and investments required for
catching up may not be worth the effort, then the component should be
outsourced and the supplier should be treated as a strategic partner
● If a firm finds that for all the components the suppliers have a lead and it has
no hope of catching up in the near future, then the firm has become a hollow
corporation and will see a decline in its fortunes over a period of time.
● Tata Motors realized that in diesel engine technology it was far behind its
suppliers and will never be in a position to catch up with them. So it decided to
buy diesel engines from Fiat and treat Fiat as a strategic partner.

Examples are Hero Honda, Bajaj Allianz

Market Versus Hierarchy:

The make versus buy decision is also known as the market versus hierarchy
decision in economics literature.

● The key issue here is to coordinate the chain so as to provide a bundle of goods
and services at the lowest cost for a given level of service required by the
customer.
● If a firm decides to make the relevant component in-house, it may not have the
necessary economies of scale and might have to use internal hierarchy for
coordination.
● In the hierarchical form, a firm has greater control over coordination but there
may not be enough motivation for the internal supplier to work on innovations
to reduce cost and improve service over a period of time. The costs involved in
control and coordination of internal supply is termed agency costs in
economics.
● When a firm uses market mechanisms to procure the necessary inputs, it may
be able to take advantage of economies of scale and also choose the supplier
that supplies goods and services at lower prices.
● In this case, the supplier has enough motivation to innovate and the firm, as a
buyer, has the flexibility of changing the supplier, which is not an option
available to the firm that chooses to make inputs internally. However, there are
costs incurred in the control and coordination of the external supplier and are
termed as transaction costs in economics.
● Costs related to economies of scale are tangible in nature but the bulk of agency
and transaction costs are intangible in nature.

economies of scale, agency costs and transaction costs,

● Economies of Scale Firms that specialize in production of input can usually

achieve higher economies of scale -vertically integrated firms.
● A vertically integrated firm produces only for its internal needs, while an
external supplier firm can aggregate demands of many potential buyers and,
thereby, enjoy huge economies of scale.
● Economies of scale can be achieved in manufacturing or logistics activities.
There are four major sources of economies of scale, which are briefly discussed
here.
○ Higher volume allows a firm to spread its fixed cost over a larger
volume of operations. Any manufacturing or logistics process will involve
investments in fixed costs. A firm with higher volume is able to spread its
fixed costs over a higher output and thus has lower cost of operations.
For example, the cost of a truck trip from Mumbai to Bangalore is more
 or less fixed because major costs like driver cost, bulk of fuel cost and
administrative cost are independent of the load carried by the truck.
Similarly, when a firm sets up its manufacturing unit, the set-up cost is
the same, irrespective of the volume of production. So a firm with bigger
batch sizes will have lower costs of operation.
○ Higher volume allows a firm to choose more efficient technologies.
Higher volume allows a firm to invest in technologies that are capital
intensive but result in lower fixed and variable costs per unit of output.
○ Pooling of buffer capacities and inventories: If firms keep their
activities in-house, they have to keep buffer capacities and inventories
to take care of the uncertainties in demand. A supplier, on the other
hand, is able to pool uncertainties over a larger number of customers
and as a result needs much lower levels of buffer capacity and safety
inventory. A supplier can also ensure utilization of high capacity by
pooling demand across customers who have different demand profiles.
For example, a logistics firm that transports Maruti cars from Gurgaon to
Bangalore carries Kurlon’s mattresses to their Delhi warehouse on the
return trip. Consequently, it is able to offer lower transport costs to Maruti
as well as to Kurlon.

Learning curve effect:

The learning curve captures the impact of cumulative production on

the average cost of production.

The management and the workers are able to improve their performance
based on experience gained through the cumulative production of a firm.

In several industries, it is found that with doubling of cumulative

production the average cost declines by 10 to 20 per cent.

The pressure faced by firms due to steadily rising costs is forcing them
to review their earlier decisions, and increasingly, firms are availing the
advantages of third-party companies that provide manufacturing and
logistics services. A supplier who is providing services to a larger set of
customers will always have lower costs. Firms are turning to contract
manufacturers whenever they think that the manufacturing process does
not provide sources of competitive advantage. Within the electronics
industry, a bulk of manufacturing has shifted to electronics
manufacturing service providers like Flextronics, Solectron and
Celestica. Similarly, very few firms own transportation- and
warehousing-related asset, and depend on transport and warehousing
firms for their logistics operations. Many firms are outsourcing their IT
operations to firms like IBM and Wipro, which have strong economies of
scale. Then there is also the case of Indo Nissin Foods Ltd, the
manufacturer of Top Ramen noodles, which has outsourced its
distribution operations to Marico. However, if a firm has large volumes
and a reasonably stable demand, internal manufacturing is likely to offer
more or less similar costs of production. Hence, almost all automobile
companies assemble vehicles internally, unlike the electronic goods
manufacturers or white goods manufacturers. Wal-Mart has huge
volumes and finds it more economical to own a fleet of vehicles. In
general, the marginal benefit of a “buy” decision starts coming down if a
firm has large volumes of operation. So a multi-product firm may benefit
from vertically integrated operations. Third parties will offer services at a
lower cost, provided there is enough competition in the supply market. If
there are not enough suppliers, then the supplier may use its
monopolistic power and may not pass on the benefits of scale to the
customers. Agency Cost Bharti used to manage customer billing
operations through its internal IT department. The important question
here is, “How does one ensure that the interest of the IT department and
that of the marketing departments are aligned, and how does one make
sure that the IT department is putting its best effort and is not
slackening?” This issue is known as the agency problem in economics
literature. The IT department is known as the agent and the marketing
department as the principal. A firm with its own fleet of trucks faces a
similar problem of motivating the transport department, where the
internal transport department is the agent and the marketing department
is the principal. In a hierarchical firm, there is greater control over
coordination, but there may not be enough motivation for the internal
supplier to work on innovations to reduce costs and improve service over
a period of time. The cost involved in control and coordination of internal
supply is termed agency cost in economics. There is significant time and
effort involved in the control and coordination of internal activities. If one
decides to manufacture the necessary inputs within the firm, then the
firm has to worry about agency issues. It is quite common that managers
and workers of internal supply units sometimes knowingly do not act in
the best interests of the firms. Thus, the top management incurs agency
costs associated with in-house supply. In-house divisions within a firm
are usually treated as cost centres and are usually insulated from
competitive pressures as they have captive internal markets. Further,
most large firms have common overheads and joint costs, which are
allocated to different units, so it is usually difficult to measure individual
divisions’ contributions to overall profitability. The absence of market
competition along with problems involved in measuring divisional
performance make it difficult for the top management to evaluate the
current performance of input supply operations with respect to its best
achievable performance
 ● The make-or-buy decision is the act of making a strategic choice between
producing an item internally (in-house) or buying it externally (from an outside
supplier).
● The buy side of the decision also is referred to as outsourcing. Make-or-buy
decisions usually arise when a firm that has developed a product or part—or
significantly modified a product or part—is having trouble with current suppliers,
or has diminishing capacity or changing demand.
● Make-or-buy analysis is conducted at the strategic and operational level.
Obviously, the strategic level is the more long-range of the two. Variables
considered at the strategic level include analysis of the future, as well as the
current environment. Issues like government regulation, competing firms, and
market trends all have a strategic impact on the make-or-buy decision. Of
course, firms should make items that reinforce or are in-line with their core
competencies. These are areas in which the firm is strongest and which give
the firm a competitive advantage.
● The increased existence of firms that utilize the concept of lean manufacturing
has prompted an increase in outsourcing. Manufacturers are tending to
purchase subassemblies rather than piece parts, and are outsourcing activities
ranging from logistics to administrative services.
● In their 2003 book World Class Supply Management, David Burt, Donald
Dobler, and Stephen Starling present a rule of thumb for out-sourcing.
● It prescribes that a firm outsource all items that do not fit one of the following
three categories: (1) the item is critical to the success of the product, including
customer perception of important product attributes; (2) the item requires
specialized design and manufacturing skills or equipment, and the number of
capable and reliable suppliers is extremely limited; and (3) the item fits well
within the firm's core competencies, or within those the firm must develop to
fulfill future plans. Items that fit under one of these three categories are
considered strategic in nature and should be produced internally if at all
possible.

Make-or-buy decisions also occur at the operational level. Analysis in separate texts
by Burt, Dobler, and Starling, as well as Joel Wisner, G. Keong Leong, and Keah-
Choon Tan, suggest these considerations that favor making a part in-house:
 ● Cost considerations (less expensive to make the part)
● Desire to integrate plant operations
● Productive use of excess plant capacity to help absorb fixed overhead (using
existing idle capacity)
● Need to exert direct control over production and/or quality
● Better quality control
● Design secrecy is required to protect proprietary technology
● Unreliable suppliers
● No competent suppliers
● Desire to maintain a stable workforce (in periods of declining sales)
● Quantity too small to interest a supplier
● Control of lead time, transportation, and warehousing costs
● Greater assurance of continual supply
● Provision of a second source
● Political, social or environmental reasons (union pressure)
● Emotion (e.g., pride)

Factors that may influence firms to buy a part externally include:

● Lack of expertise
● Suppliers' research and specialized know-how exceeds that of the buyer
● cost considerations (less expensive to buy the item)
● Small-volume requirements
● Limited production facilities or insufficient capacity
● Desire to maintain a multiple-source policy
● Indirect managerial control considerations
● Procurement and inventory considerations
● Brand preference
● Item not essential to the firm's strategy
● The two most important factors to consider in a make-or-buy decision are cost
and the availability of production capacity.
● Burt, Dobler, and Starling warn that "no other factor is subject to more varied
interpretation and to greater misunderstanding"
● Cost considerations should include all relevant costs and be long-term in
nature. Obviously, the buying firm will compare production and purchase costs.
 Burt, Dobler, and Starling provide the major elements included in this
comparison.

Elements of the "make" analysis include:

● Incremental inventory-carrying costs

● Direct labor costs
● Incremental factory overhead costs
● Delivered purchased material costs
● Incremental managerial costs
● Any follow-on costs stemming from quality and related problems
● Incremental purchasing costs
● Incremental capital costs

Cost considerations for the "buy" analysis include:

● Purchase price of the part

● Transportation costs
● Receiving and inspection costs
● Incremental purchasing costs
● Any follow-on costs related to quality or service

One will note that six of the costs to consider are incremental. By definition,
incremental costs would not be incurred if the part were purchased from an outside
source. If a firm does not currently have the capacity to make the part, incremental
costs will include variable costs plus the full portion of fixed overhead allocable to the
part's manufacture. If the firm has excess capacity that can be used to produce the
part in question, only the variable overhead caused by production of the parts are
considered incremental. That is, fixed costs, under conditions of sufficient idle
capacity, are not incremental and should not be considered as part of the cost to make
the part.

● While cost is seldom the only criterion used in a make-or-buy decision, simple
break-even analysis can be an effective way to quickly surmise the cost
implications within a decision.
● Suppose that a firm can purchase equipment for in-house use for $250,000 and
produce the needed parts for $10 each. Alternatively, a supplier could produce
 and ship the part for $15 each. Ignoring the cost of negotiating a contract with
the supplier, the simple break-even point could easily be computed:

$250,000 + $10Q = $15Q

$250,000 = $15Q − $10Q

$250,000 = $5Q

50,000 = Q

Therefore, it would be more cost effective for a firm to buy the part if demand is less
than 50,000 units, and make the part if demand exceeds 50,000 units. However, if the
firm had enough idle capacity to produce the parts, the fixed cost of $250,000 would
not be incurred (meaning it is not an incremental cost), making the prospect of making
the part too cost efficient to ignore.

Firms have started to realize the importance of the make-or-buy decision to overall
manufacturing strategy and the implication it can have for employment levels, asset
levels, and core competencies. In response to this, some firms have adopted total
cost of ownership (TCO) procedures for incorporating non-price considerations into
the make-or-buy decision.

The total cost of ownership (TCO) is used to calculate the total cost of
purchasing and operating a technology product or service over its useful life.

1. https://www.youtube.com/watch?v=oIXteWGjjtM&t=469s
2. https://www.youtube.com/watch?v=81awuyDhfA8
3. https://www.youtube.com/watch?v=yZC4neLax5o

MODULE 2:

Logistics Management:

● Role of Logistics in Supply Chain Management

● Logistics Service Providers 3PL’s & 4PL’s
● Logistics Activities: Marketing and logistics interface
● Logistics cost analysis and total cost analysis
● Reducing logistics lead time
● Packaging and materials handling

Designing Transportation Network:

● Drivers of transportation decisions

● Modes of transportation
● Design options
● Direct shipment network
● Direct shipping via milk run
● Distribution centre
● Cross docking
● Shipping via DC using milk runs
● Tailored network
● Routing, scheduling and sequencing in transportation.
● Vehicle Routing Problems.
● Route sequencing procedure Farthest insert, nearest insert, nearest neighbor,
Sweep
● Route improvement procedure 2-OPT and 3-OPT.

Reverse Logistics:

● Definition, reasons, benefits

● Elements of reverse logistics
● Closed loop supply chain
1PL - First-Party Logistics

An enterprise that sends goods or products from one location to another is a 1PL. For

example, a local farm that transports eggs directly to a grocery store for sale is a 1PL.

2PL - Second-Party Logistics

An enterprise that owns assets such as vehicles or planes to transport products from

one location to another is a 2PL. That same local farm might hire a 2PL to transport

their eggs from the farm to the grocery store.

3PL - Third-Party Logistics

In a 3PL model, an enterprise maintains management oversight, but outsources

operations of transportation and logistics to a provider who may subcontract out some

or all of the execution. Additional services may be performed such as crating, boxing

and packaging to add value to the supply chain. In our farm-to-grocery store example,

a 3PL may be responsible for packing the eggs in cartons in addition to moving the

eggs from the farm to the grocery store.

4PL - Fourth-Party Logistics

In a 4PL model, an enterprise outsources management of logistics activities as well

as the execution across the supply chain. The 4PL provider typically offers more

strategic insight and management over the enterprise's supply chain. A manufacturer

will use a 4PL to essentially outsource its entire logistics operations. In this case, the

4PL may manage the communication with the farmer to produce more eggs as the

grocery store's inventory decreases.

5PL - Fifth-Party Logistics

A 5PL provider supplies innovative logistics solutions and develops an optimum supply

chain network. 5PL providers seek to gain efficiencies and increased value from the

beginning of the supply chain to the end through the use of technology like blockchain,

robotics, automation, Bluetooth beacons and Radio Frequency Identification (RFID)

devices.

As we progress through the spectrum of logistics models from 1PL to 5PL, it's clear

that more and more of the logistics function is in the hands of the provider rather than

the enterprise itself. The most common models now are 3PL and 4PL and we'll look

at how each one can help solve supply chain challenges.

What is a Third-Party Logistics Provider?

It simply means that a third party is involved in a company's logistics operations, in

addition to the shipper/receiver and the carrier.

A 3PL does not take ownership of (or title to) the products being shipped. This third

party comes into play as an intermediary or manager between the other two parties.
The first 3PLs were intermodal marketing companies that accepted loads from

shippers and tendered them to railroads, becoming a third party in the contract

between shippers and carriers, according to the Council of Supply Chain Management

Professionals (CSCMP) glossary. Today, any company that offers some form of

logistics services for hire is known as a 3PL. This includes facilitating the movement

of parts and materials from suppliers to manufacturers, as well as finished products

from manufacturers to distributors and retailers.

A 3PL may or may not have its own assets, such as trucks and warehouses. In some

cases, the role of 3PL and broker overlap, but typically a broker is used to engage

trucking capacity for a specific shipment. A 3PL may act as a broker or use brokers to

move clients' freight.

Most 3PLs offer a bundle of integrated supply chain services, including:

● Transportation

● Warehousing

● Cross-docking

● Inventory management

● Packaging

● Freight forwarding

A 3PL can scale and customize services to meet customers' needs based on their

strategic requirements to move, store, and fulfill products and materials. Companies

turn to 3PLs when their supply chain becomes too complex to manage internally. For

example, a company may grow through mergers and acquisitions, so a supply chain

that was manageable at one time outgrows the in-house capability.

The 3PL offers experience gained from working for multiple clients across many

different industries. They also offer technology solutions — in some cases, proprietary

tools — such as transportation and warehouse management systems beyond what

the shipper could afford to invest in independently. Long-term relationships with

carriers can result in better pricing and service during periods when capacity may

come at a premium. The economy of scale can lower prices on everything from

packing tape to ocean shipping rates.

Advantages of 3PL
A 3PL will offer innovative strategies to transform your supply chain into a cost-

effective, responsive model. Consider what we're doing at Warehouse Anywhere as

an example. In contrast to the traditional single distribution center (DC) model, we

have pioneered and perfected forward-deployed inventory management. The common

hub-and-spoke DC model is not able to keep up with the pace of business, with large

inventories and infrequent truck service. We've developed the forward-deployed

model for warehousing and distribution that uses a larger number of smaller locations

to move products closer to the customer. This decentralized, hyper-connected model

provides the responsiveness needed to meet customers' expectations for timely

delivery.

No matter if you're direct-to-consumer or in a service-level agreement situation,

customers expect overnight delivery, or as close to it as possible. The Warehouse

Anywhere system can optimize your inventory per location to ensure stock is on hand

in areas of highest demand. You will save on transportation and logistics expenses

while improving customer service.

Disadvantages of 3PL
While the 3PL model has been successful for decades, there are some things to

consider. Perhaps the most significant caveat is the lack of direct oversight and control.

After all, a 3PL is an outsourced service provider. That means some activities will take

place outside of your direct supervision. Ensuring quality control and customer service
requires an extra level of diligence. If a 3PL fails to deliver on a customer's expectation,

the customer will blame your company, not the 3PL.

Another issue is the degree of dependency a 3PL can create. When you outsource a

significant segment of your business, it can be difficult to switch providers or take the

operations in-house if pricing or service levels no longer meet expectations.

Typically, the 4PL does not own transportation or warehouse assets. Instead, it

coordinates those aspects of the supply chain with vendors. The 4PL may coordinate

activities of other 3PLs that handle various aspects of the supply chain. The 4PL

functions at the integration and optimization level, while a 3PL may be more focused

on day-to-day operations. A 4PL also may be known as a Lead Logistics Partner (LLP),

according to the CSCMP.

The primary advantage of a 4PL relationship is that it is a strategic relationship focused

on providing the highest level of services for the best value, as opposed to a 3PL that

may be more transaction focused. A 4PL provides a single point of contact for your

supply chain. With a 3PL, there may be some aspects that you still have to manage.

The 4PL should take over those processes for you, acting as the intermediary for 3PLs,

carriers, warehouse vendors and other participants in your supply chain.

The 4PL relationship simplifies and streamlines the logistics function using technology

for greater visibility and imposing operational discipline across many partners and

suppliers. The enterprise can focus on its core competencies and rely on the 4PL

partner to manage the supply chain function for maximum value. Basically, the 4PL

acts as the enterprise would if the supply chain functions were managed in-house.

As companies transition their supply chain model to forward deployment or

decentralized distribution, a 4PL partner can step in and manage that complexity.

Retailers, in particular, are shifting toward a more nimble model to support e-

commerce and omnichannel services. A 4PL can manage the multiplying number of

resources that it takes to compete at that level. The days of the million-square-foot
super regional DC may be over, as companies opt for shared warehouse space near

major customer centers to speed up responsiveness. The 4PL can manage those

relationships, as well as optimize the network to use parcel carriers or couriers to

support e-commerce, rather than LTL or truckload services.

Fourth-Party Logistics Advantages

Choosing a 3PL vs. a 4PL can be a complicated decision that depends on the

complexity of your supply chain and your company's strategic goals.

A 3PL relationship works well when the organization has a solid, high-performance

supply chain strategy in place and requires support to execute the plan. Working with

a 3PL will typically require a high level of internal management commitment and

oversight to ensure performance meets your standards. However, many day-to-day

decisions are out of your hands as you count on the providers selected by the 3PL to

meet your service commitments. An asset-based 3PL may focus too much on ensuring

that its own assets are fully utilized at the expense of lower rates or better services

from other providers. For smaller companies, a 3PL can provide an immediate level of

scale that would otherwise be cost prohibitive.

A non-asset based 4PL is agnostic in choosing suppliers, concentrating on finding the

best combination of value and service. Typically, a 4PL will have integrated technology

offerings that deliver a high level of visibility into the supply chain for tactical and

strategic analysis. Of course, internal resources are still necessary to manage the 4PL

performance, but it should be a higher level of oversight than a 3PL.

Warehouse Anywhere has performed as both a 3PL and 4PL for our clients. Recently,

we've seen great success in acting as a 4PL in managing forward-deployed

inventories in a variety of vertical markets. We can localize your inventory in hundreds

of U.S. cities in a very short period of time.

Logistics Activities: Marketing and logistics interface

Logistics cost analysis and total cost analysis:

The costs of satisfying customer demand can be significant and yet, surprisingly, they
are not always fully understood by organisations.

● One reason for this is that traditional accounting systems tend to be focused
around understanding product costs rather than customer costs.
 ● Logistics activity requires resources in the form of fixed capital and working
capital and so there are financial issues to be considered when supply chain
strategies are devised.
● Logistics management is a flow-oriented concept with the objective of
integrating resources across a pipeline which extends from suppliers to final
customers, it is desirable to have a means whereby costs and performance
of that pipeline flow can be assessed.
● One of the main reasons why the adoption of an integrated approach to logistics
and distribution management has proved so difficult for many companies is the
lack of appropriate cost information.

The Concept of Total Cost Analysis:

Reducing logistics lead time:

Reducing lead time through eliminating waste and waiting times means also that
the process will be in better control: through lead time reduction also the variation of
the lead time can be reduced. Thus there is a double positive impact from the
customer’s point of view: on top of shorter lead times, the delivery accuracy typically
also improves.

There are at least three key processes / flows which should be a target for lead time
analysis and reduction:

● Order to delivery process, i.e. from the moment the customer makes an
order (or wants to make an order) to the point when the product / service
is delivered to customer and is ready for use. Order to delivery process
can be thought of as the customer’s “window” into our company: speed in
this process is seen directly as speedy delivery in customer’s eyes.
● Material flow throughout the whole supply chain. The speed in material
flow brings many benefits: fast delivery times to the customer, fast
reaction to changes in demand, low tied capital, and fast noticing of
quality mistakes and other problems.
● New product development process or in big picture the whole process of
bringing a new product to the market. By speeding up this process one
 can either be earlier in the market with the new product than the
competition, or by starting the development later can utilize newer
technology than competition, still coming to the market the same time
than the competition.

In order to reduce lead times one must first understand how long the lead time is, how
big is the variance in the lead time and how the total lead time is split between different
steps of the process. In other words, one must map the process, measure the total
lead time and its variance, and measure the lead times of individual steps. To find
reduction potential, the process steps and individual tasks can be analyzed from four
different points of view: can the task be removed totally, can tasks be combined, can
tasks be speeded up (for example through eliminating waiting or automating), or can
tasks be done in parallel.

http://www.logistiikanmaailma.fi/en/logistics/production/lead-time-reduction/

[ https://tinuiti.com/blog/amazon/amazon-supply-chain /]

http://www.chicago-consulting.com/lead-time-
matters/#:~:text=So%20valuable%20does%20Amazon%20rank,of%
20them%20being%20electronically%20sent.

Packaging and materials handling

https://www.morethanshipping.com/the-importance-of-packaging-
in-international-logistics/

https://ircgroupglobal.com/importance-of-packaging-in-logistics/

Designing Transportation Network:

Selection of Transportation strategy:

It would involve designing the most effective way of reaching products to
geographically dispersed markets from the plants in cost effective way.

CHOICE OF TRANSPORTATION MODEL:

Drivers of transportation decisions :

● Transportation cost structure

● Economies of distance and scale: eg FTL/LTL
● Product and demand characteristics like value, density, customer
requirements etc
● Transportation modes
● Intermodal transportation

Modes of transportation :

A Diversity of Modes:

● Transport modes are designed to either carry passengers or freight, but most
modes can carry a combination of both. For instance, an automobile has a
capacity to carry some freight while a passenger plane has a bellyhold that is
used for luggage and cargo.
● Each mode is characterized by a set of technical, operational, and commercial
characteristics. Technical characteristics relate to attributes such as speed,
capacity, and motive technology, while operational characteristics involve the
context in which modes operated, including speed limits, safety conditions, or
operating hours.
● The demand for transport and the ownership of modes are dominant
commercial characteristics.

a. Road transportation

Road infrastructures are large consumers of space with the lowest level of physical
constraints among transportation modes. However, physiographic constraints are
significant in road construction with substantial additional costs to overcome features
such as rivers or rugged terrain.
Road transportation has average operational flexibility as vehicles can serve several
purposes but are rarely able to operate outside roads. Road transport systems have
high maintenance costs, both for the vehicles and infrastructures. They are mainly
linked to light industries and freight distribution, where rapid movements of freight in
small batches are the norm. Yet, with containerization, road transportation has
become a crucial link in freight distribution.

b. Rail transportation and pipelines

● Railways are composed of a traced path on which wheeled vehicles are bound.
In light of recent technological developments, rail transportation also includes
monorails and maglev. They have an average level of physical constraints, and
a low gradient is required, particularly for freight. Heavy industries are
traditionally linked with rail transport systems, although containerization has
improved the flexibility of rail transportation by linking it with road and maritime
modes.
● Rail is by far the land transportation mode offering the highest capacity with a
23,000 tons fully loaded coal unit train being the heaviest load ever carried.
Gauges, however, vary around the world, often challenging the integration of
rail systems.
● Pipeline routes are practically unlimited as they can be laid on land or
underwater. Their purpose is to move liquids such as petroleum products over
long distances in a cost-effective fashion. The longest gas pipeline links
Alberta to Sarnia (Canada), which is 2,911 km in length. The longest oil
pipeline is the Transiberian, extending over 9,344 km from the Russian arctic
oilfields in eastern Siberia to Western Europe.
● Pipeline construction costs vary according to the diameter and increase
proportionally with the distance and with the viscosity of fluids (from low
viscosity gas to high viscosity oil). The Trans Alaskan pipeline, which is 1,300
km long, was built under challenging conditions and had to be above ground
for most of its path. Pipeline terminals are essential since they correspond to
refineries and harbors.

c. Maritime transportation
With physical properties such as buoyancy and limited friction, maritime transportation
is the most effective mode to move large quantities of cargo over long distances. Main
maritime routes are composed of oceans, coasts, seas, lakes, rivers, and channels.
However, due to the location of economic activities, maritime circulation takes place
on specific parts of the maritime space, particularly over the North Atlantic and the
North Pacific. The construction of channels, locks, and dredging are attempting to
facilitate maritime circulation by reducing its discontinuity, but such endeavors are
highly expensive. Comprehensive inland waterway systems include Western Europe,
the Volga / Don system, the St. Lawrence / Great Lakes system, the Mississippi and
its tributaries, the Amazon, the Panama / Paraguay, and the interior of China.

Maritime transportation has high terminal costs since port infrastructures are among
the most expensive to build, maintain, and operate. These high costs also relate to
maritime shipping, where the construction, operation, and maintenance of ships is
capital intensive. More than any other mode, maritime transportation is linked to heavy
industries, such as steel and petrochemical facilities adjacent to port sites. Yet, with
containerization, maritime shipping has become the linchpin of globalization, allowing
trading a wide range of goods and commodities.

d. Air transportation

Air routes are practically unlimited, but they are denser over the North Atlantic, inside
North America and Europe and over the North Pacific. Air transport constraints are
multidimensional and include the site (a commercial plane needs about 3,300 meters
of runway for landing and take-off), the climate, fog, and aerial currents. Air activities
are linked to the tertiary and quaternary sectors, notably finance and tourism, which
lean on the long-distance mobility of people. More recently, air transportation has been
accommodating growing quantities of high-value freight and is playing an increasing
role in global logistics.

e. Intermodal transportation

Intermodalism concerns a variety of modes used in combination so that the respective

advantages of each mode are advantaged. Although intermodal transportation applies
for passenger movements, such as the usage of the different, interconnected modes
of a public transit system, it is over freight transportation that the most significant
impacts of intermodalism have been observed. Containerization has been a powerful
vector of intermodal integration, enabling maritime and land transportation systems to
interconnect.

f. Telecommunications

Cover a grey area in terms of if they can be considered as a transport mode since
telecommunications often do not have an apparent physicality. Yet, this physicality is
real since they are structured as high capacity networks with very low constraints,
which may include the physiography and oceanic masses crossed by fiber optic
cables. They provide for the “instantaneous” movement of information (speed of light).
Wave transmissions, because of their limited coverage, often require substations,
such as for cellular phone and data networks where WiFi connections are of even
more limited range. Satellites are often using a geostationary orbit, which is getting
crowded.

High network costs and low distribution costs characterize many telecommunication
networks, which are linked to the tertiary and quaternary sectors (stock markets,
business to business information networks, etc.). Telecommunications can provide a
substitution for personal mobility in some economic sectors, but the major impact is
related to e-commerce, which has opened a whole range of commercial opportunities.

Design options :

● The design of a transportation network affects the performance of a supply

chain by establishing the infrastructure within which operational transportation
decisions regarding scheduling and routing are made.
Direct Shipment Network:

● The buyer structures his transportation network so that all shipments come
directly from each supplier to each buyer location. The routing of each shipment
is specified and the supply chain manager only needs to decide on the quantity
to ship and the mode of transportation to use. (trade off between transportation
and inventory costs) Used if demand at buyer locations is large enough.

Advantage:

● Eliminates intermediate warehouses and simple in operation and

coordination.
● The transportation time from supplier to buyer location is short because
each shipment goes direct.

Direct Shipping With Milk Runs :

What is a Milk Run?

A Milk Run is a delivery method used to transport mixed loads from various suppliers
to one customer. Instead of each supplier sending a truck every week to meet the
needs of one customer, one truck (or vehicle) visits the suppliers to pick up the loads
for that customer. This method of transport got its name from the dairy industry
practice, where one tanker used to collect milk from several dairy farms for delivery to
a milk processing company.

● A milk run is a route on which a truck either delivers product from a single
supplier to multiple retailers or goes from multiple suppliers to a single buyer
location.
● A supplier delivers directly to multiple buyer locations on a truck or a truck picks
up deliveries destined for the same buyer location from many suppliers.
● Major decision supply chain manager has to decide on the routing of each milk
run.

Advantage:
 ● Eliminates intermediate warehouses.
● Lower transportation cost and increases utilization by consolidating shipments
to multiple locations on a single truck.

All Shipments via Central Distribution Centre (DC):

● Suppliers do not send shipments directly to buyer locations.

● The buyer divides locations by geographic region and a DC is built for each
region. Suppliers send their shipments to the DC and the DC then forwards
appropriate shipments to each buyer location.
● Dc plays two roles - one is to store inventory and the other is to serve as a
transfer location.

Advantage:

● DCs can help reduce supply chain costs when suppliers are located far from
the buyer locations and transportation costs are high.
● Allows a supply chain to achieve economies of scale for inbound transportation
to a point close to the final destination, because each supplier sends a large
shipment to the DC that contains product for all locations the DC serves.
● because DCs serve locations nearby, the outbound transportation cost is not
very large.
● Cross docking at DCs help to reduce inventory and saves handling costs. (Used
for products with large, predictable demands)

Shipping via DC Using Milk Runs:

● Can be used from a DC if lot sizes to be delivered to each buyer location are
small.

Advantage:

Reduce outbound transportation costs by consolidating small shipments.

Tailored Network:

● Here transportation uses a combination of cross-docking, milk runs, and TL

and LTL carriers, along with package carriers in some cases.
 ● Requires significant investment in information infrastructure to facilitate the
coordination.

Advantage:

● Allows for the selective use of a shipment method to minimize the transportation
as well as inventory costs.
Routing, scheduling and sequencing in transportation:

● Routing - Routing is defined as the process of creating the most cost effective
route through minimization of distance or travel time necessary in order to reach
a set of planned stops. Routing is a crucial process of logistics systems,
especially due to the high competition and narrowing margins in the global
market. Routing of goods and services incurs huge costs for vehicle operation,
fuel, labor, and maintenance.
● Route Scheduling - Route scheduling is the process of assigning an arrival
and service time for each stop, with drivers being assigned shifts that adhere
to working hours. The entire objective of both routing and route scheduling is to
effectively cut down on your expenses, such as mileage and vehicle capital
costs.
● Route Optimization - Route optimization is the process of planning one or
multiple routes, with the purpose of minimizing overall costs, while achieving
the highest possible performance under a set of given constraints.

● Vehicle Routing Problems:

In the Vehicle Routing Problem (VRP), the goal is to find optimal routes for multiple
vehicles visiting a set of locations. (When there's only one vehicle, it reduces to the
Traveling Salesman Problem.)

But what do we mean by "optimal routes" for a VRP? One answer is the routes with the
least total distance. However, if there are no other constraints, the optimal solution is
to assign just one vehicle to visit all locations, and find the shortest route for that
vehicle.
A better way to define optimal routes is to minimize the length of the longest single
route among all vehicles.

● Route sequencing procedure Farthest insert, nearest insert,

nearest neighbor, Sweep
● Route improvement procedure 2-OPT and 3-OPT.

Reverse Logistics:

● Definition, reasons, benefits

● Elements of reverse logistics
● Closed loop supply chain

EXAMPLE:

Apple

Apple is a fantastic example of a successful reverse logistics system. Apple

manufactures iPhones and other products, which are then sold in various stores

across the world. Consumers purchase iPhones and enjoy the product until they want

to upgrade their product. When consumers return to a store to buy the latest model,

Apple offers consumers discounts on a new product if they turn in their old product.

Apple then collects the old models and brings the products back to their factories. This

process allows Apple to use parts from previous models in their newer products,

helping Apple be more environmentally friendly and save money on production costs.

DEFINITION:
Reverse logistics includes all the processes within the supply chain that are dedicated

to pick up certain materials from the consumer and transfer them to the manufacturer.

Benefits of Reverse Logistics:

Companies use reverse logistics to implement proper product disposal, to retrieve

parts, or to refurbish used products. Reverse logistics can also help a company reduce

waste and improve their environmental footprint.

Reduce environmental impact: Reverse logistics is an excellent strategy

environmentally-friendly companies should employ. Reverse logistics keeps reusable

materials out of landfills and allows your company to be in control of safely disposing

your products in a way that reduces harmful waste.

Lower bills: By re-collecting your products, you can reduce materials costs. Reusing

pieces of your old products can help lower your overall material cost and reduce your

environmental footprint.

Be prepared: Unfortunately, there are instances in which companies must issue a

recall. If your company already has an efficient reverse logistics system in place,

reaching customers and collecting recalled products will be much easier.

Types of reverse logistics:

Return logistics: This has become one of the most important, and problematic points

of any e-commerce business.

Waste logistics: Whether your company sets out to take advantage of waste

conveniently, or whether it’s to avoid environmental damage – recovering waste has

become one of the biggest priorities in business today.

What is a Closed-Loop Supply Chain?

A closed-loop supply chain essentially combines the traditional supply chain (forward

logistics) with reverse logistics, considering the item after it’s served its original

purpose. Once the item has been manufactured, shipped, and distributed through a

reseller, the manufacturer works to encourage the item’s return once it’s no longer

functional or needed. Reverse logistics then kick in, and the items can either be

repaired and resold, or they can be broken down for reuse in future products. The

“closed-loop” term refers to the fact that the chain is intended to maintain and recover

value from unused products, while helping to create as little waste as possible.

How Does it Work?

Annually, American companies alone are responsible for approximately 7.6 billion tons

of solid waste. Closed-loop supply chains can substantially help cut back on these

wastes. For example, most products require raw materials to make, but some recycled

material is useable for creating new consumer products. Even if raw materials are

used, the goal of the closed-loop supply chain is to reduce the number of raw materials

needed, through reclaiming and reusing post-consumer materials.

Once the original product is made, it is sent along the supply chain as usual, going to

a distributor and retailer, eventually reaching the customer. But that’s where new

reverse logistics come in—the product must be recyclable or manufacturers must offer

take-back programs and returns to close the supply chain.

Customers who find that their product doesn’t work properly, or simply doesn’t meet

their needs return items all the time. The manufacturer then has to determine if the

item can be fixed and resold, or if it should continue on to another step in the reverse

logistics path. If it does, the item might be recycled—along with the products that other

consumers submit to the manufacturer via take-back programs. These programs allow

customers to recycle potentially hazardous items like electronics, whether they’re

broken or out-of-date, so they can be disposed of and recycled in an environmentally

friendly way.

Once these products have been recycled, they might be found in the next new

generation of products. Dell was among the first manufacturers to implement this

practice back in 2014, using at least 10% post-consumer recycled plastic in a line of

their computers. This was a revolutionary step, and Dell continues to offer take-back

programs to help feed their closed-loop supply chain and support the environment.

MODULE 3: [ https://www.youtube.com/watch?v=01bI1XeMaaw]

Network Design of Global Supply Chain

https://www.youtube.com/watch?v=DhZfuh_xTqA

● Network Design: Define the network design process

Network design consists of decisions regarding the location of plants, suppliers and
distribution centres so as to serve the customers in a cost effective way.

Supply Chain Network Design is a systematic approach to determining the best

location and optimal size of the facilities to be included in the supply chain, and to
ensure an optimal flow of products using advanced mathematical modelling.

1. Network Design aims to define:

 ○ Best fit Procurement model - Buying decision and processes- VMI,
JIT, Kanban, procurement cost models etc.
○ Production processes - One or more number of plants, plant capacity
design, Building to order, build to stock etc, in-house manufacturing or
outsource manufacturing and related decisions including technology for
production.
○ Manufacturing Facility design - Location, Number of factories, size of
unit, time frames for the plant setup project etc.
○ Finished Goods Supply Chain network - Number of warehouses,
location & size of warehouses, inventory flow and volume decisions,
transportation.
○ Sales and Marketing Decisions - Sales Channel and network strategy,
Sales pricing and promotions, order management and fulfillment
process, service delivery process definitions.
4. Network Design also examines:
○ Derives cost estimates for every network element
○ Examines ways to optimize costs and reduce costs
○ Extrapolates cost impact over various product lines and all possible
permutations and combinations to project profitability
5. Some of the key factors that affect the supply chain network modeling
are:
○ Government Policies of the Country where plants are to be located.
○ Political climate
○ Local culture, availability of skilled / unskilled human resources,
industrial relations environment, infrastructural support, energy
availability etc.
○ Taxation policies, Incentives, Subsidies etc across proposed plant
location as well as tax structures in different market locations.
○ Technology infrastructure status.
○ Foreign investment policy, Foreign Exchange and repatriation Policy and
regulations.
Supply Chain Network designs not only provide an operating framework of the entire
business to guide the managements, they also examine the structure from strategic
view point taking into account external influences, interdependencies of all processes
and critically evaluate opportunities to maximize profitability.

FACTORS THAT INFLUENCE SUPPLY CHAIN NETWORK DESIGN

DECISIONS

Here’s a look at the critical Supply Chain Network Design Factors.

1. Location and Distance

Distance between the different locations of the supply chain and the locations themselves
are important factors to be considered. The location of the supply chain network includes
customers, suppliers manufacturing abilities, airports, ports and so on.

2. Current and Future Demand

The current and future demands of the company are taken into account as well and should
be grouped appropriately.

3. Service Requirements

The maximum allowable transit time and distance are used to determine the location of
the warehouses to be added to the supply chain.

4. Size and Frequency of Shipment

Size and frequency of the shipment are essential factors for determining the costs – higher
the frequency, the greater the cost; smaller the shipment, higher the cost.

5. Warehousing and Labour Costs

Warehousing costs are fixed costs and are factored into the decision making process. The
labour costs are not fixed, and they play a role as well.

6. Trucking Costs

The cost and type of the trucking are of a considerable importance.

7. Mode of Transportation
Which mode of transportation is used in the running of the supply chain matters as well.

LSCM Audit :
The logistics audit is a logistical diagnostic that concerns a particular field of a
company’s logistics and that aims to deal with an organizational dysfunction and
improve the company’s performance in general.
Why Conducting a Logistics Audit Is Essential:
A logistics audit is used to measure the company’s performance and concerns all its
skills or only some part of the logistics system.
During a logistics audit, the proper implementation of a certain number of processes
is verified and validated, similar to a quality audit.
Grades or points can be assigned to the process.
The logistics audit is articulated with the organization’s logistics strategy and depends
on the company’s overall strategy.

Measuring the performance of the logistics function therefore allows a

company:

● To ensure that all methods and procedures are implemented to control the
costs of transportation, stock, or storage.
● To ensure the optimization of methods for high-quality customer service.
● To ensure the proper level of trust and cooperation between the different
organizations that intervene throughout the supply chain. By measuring this
specific point and sharing the results with the employees, the company can
optimize its long-term strategy as a team.
The goals of a logistics audit for a company:

The audit – a professional examination based on techniques of identifying and

evaluating deviations from norms and objectives – has different goals:

● Analyzing an existing situation compared to a benchmark;

● Identifying deviations and dysfunctions compared to this benchmark;
● Proposing recommendations and areas of improvement to address perceived
deviations.
How to optimize your business strategy with a logistics audit:

● To conduct a relevant and effective logistics audit, it’s first necessary to

understand and familiarize yourself with the mission assigned to the
logistics department within the company in question.
● It’s also necessary to perform an evaluation of the company’s competitive
positioning and the place given to service, innovation, target markets, or
its range. Indeed, many factors can vary the missions assigned to the logistics
department.
● Another important factor to consider during a logistics audit is the final sales
price of the products and services marketed by the company. Indeed, the ratio
of the sales price to the related logistics costs has a major impact.

The Logistics Benchmark for the Logistics Audit:

● To be able to perform a diagnostic, it’s necessary to rely on an internal

benchmark that can be edited directly in house or by external consulting firms.
That way, it’s possible to compare your own performance with that of your
competitors.
● Based on these results, a company can identify areas of progress.
● A logistics benchmark is also a great way to gather information about the
competition legally without needing to rely on an illegal method of obtaining
information.
● Once possible improvements and obstacles to better logistical organization
have been identified, it’s possible – even necessary – to develop a solid action
plan to plan all the elements and actions to be implemented in order to achieve
the goals.
● Finally, for the plan to be successful, the methods must be clearly identified,
and the procedures must be simple to apply. Of course, each person’s role must
also be carefully decided and defined.

Examine the LSCM network alternatives:

The Logistics Network consists of: Facilities: Plants/Vendors Ports Warehouse

Retailers/Distribution Centers Customers Raw materials and finished products
that flow between the facilities.
 Key Strategic Decisions in the Logistics Network :

● Assuming that plants and retailer locations are fixed, we concentrate on

the following strategic decisions in terms of warehouses.

● Pick the optimal number, location, and size of warehouses

● Determine optimal sourcing strategy Which plant/vendor should produce

which product

● Determine best distribution channels

● Which warehouses should service which retailers

● The objective is to design or reconfigure the logistics network so as to

minimize annual system-wide costs, including
Production/ purchasing costs
Inventory carrying costs, and facility costs (handling and fixed
costs)
Transportation costs

That is, we would like to find a minimal-annual-cost configuration of the

distribution network that satisfies product demands at specified customer
service levels.

A typical network configuration problem involves large amount of data,

including information on

● Location of customers, stocking points and sources—location theory

● A listing of all products
● Demand for each product by customer location–forecast technique
● Transportation rates by mode—information system, like rating engine
● Mileage estimation—GIS
● Warehousing costs (handling and fixed)—inventory management
● Service level requirement—probabilistic technique
● Shipment sizes by product
Conduct a Facility Location analysis:

[separate notes]

Make decisions regarding network and facility locations:

[http://nraomtr.blogspot.com/2011/12/network-design-in-
supply-chain.html ]

Modeling Approaches: Optimization and simulation models :

Basis for choice of model:

https://www.inboundlogistics.com/cms/article/optimizing-
your-supply-chain-a-model-approach/
 OPTIMIZATION MODEL:

SIMULATION MODEL:

https://www.anylogistix.com/supply-chain-simulation/

Facility Location & Capacity Allocation Optimization Models

https://www.youtube.com/watch?v=Uo986R-0o5c

Designing Distribution Networks

https://www.youtube.com/watch?v=X7VlyPaR9Uc

Supply Chain Restructuring.

https://www.cio.com/article/2448397/restructuring-the-supply-

chain.html#:~:text=In%20fact%2C%20companies%20that%20want,tighter%20relatio

nships%20with%20both%20parties.

MODULE 4:

● Synchronous Supply Chain:

DEFINITION

Supply chain synchronization is an ecosystem of connected, collaborative data

partners, whereby information gets collected, analyzed, and utilized in real time. All
stakeholders within the critical path obtain accurate visibility, identify weaknesses,
streamline processes, and mitigate risk.
SYNCHRONIZATION

Supply chain synchronization requires for the collection, analysis, and use of
information to take place in real time to enable the management of the critical path
order lifecycle with pinpoint accuracy to mitigate risk so that:

suppliers can organize raw materials and plan production around realistic and
quantified lead times

logistics providers can determine shipping requirements with certainty

distribution centers have visibility for receiving and planning, labor and stockholding
optimization

shop floor optimizers get to understand when product is due to store

finance departments know with certainty when to trigger payments and hedge
currencies, etc.

In essence, all participants in the supply chain must work together, knowing their
contribution interconnects with others.

The Five Steps to Achieve Supply Chain Synchronization

The five steps to achieve supply chain synchronization include the following:

Collaboration and Engagement Facilitation - Collaboration and engagement

facilitation are key within the first step of supply chain synchronization. You must enlist
supply chain participants as stakeholders and ensure that everyone is engaged within
their role in making production run as smoothly as possible, both internally and
externally. You must segment your suppliers and identify any relationships that yield
profits and begin the process with them. Without everyone on the same page, your
supply chain will be unsynchronized and overall inefficient, which is why it is important
to ensure that everyone understands their part within the process.

Visibility Establishment - Thorough visibility allows you to make decisions based off
of all of the information provided. You do not want cloudy information that is hard to
understand or is missing important components/factors, which is why visibility
establishment is an absolute must for supply chain synchronization. Map your end-to-
end processes among various departments and ensure that you identify and road test
every process to provide exact lead times with all considerations and known buffers.
Share the data with everyone and you will easily enhance visibility within your supply
chain.

Collecting Real-Time Data - It is important to define who provides data, how you can
capture it, and where it needs to go in order for all parties to work off one version of
the truth. Collecting real-time data is an integral step in supply chain synchronization.

Monitoring, Managing, and Executing - Monitoring, managing, and executing

ensures that the system informs everyone in real time on any deviation to the plan or
where disruption may loom. This enables all participants to collaborate and take action
where it is needed.

Measuring, Remodeling, and Re-Engineering - It is important to measure your

supply chain synchronization efforts regularly instead of waiting until the end of the
year. This allows you to continuously examine whether or not your efforts are effective
and if you should continue in the direction that you are heading. Therefore, let the
system analyze and predict to help plan for future ordering for your production process.

A software that can easily help with supply chain synchronization is PlanetTogether’s
Advanced Planning and Scheduling Software (APS). Advanced Planning and
Scheduling Software (APS) has become an integral part of manufacturing operations
that are seeking to take their production process to the next level. APS software allows
you to have a visual representation of your production process and aid in the location
of potential bottlenecks, constraints, and areas where production could be improved.
APS software offers various features such as finite capacity scheduling, gantt drag
and drop, what-if scenarios, and others that allow you to easily design your production
process in the manner that you wish. PlanetTogether’s Advanced Planning and
Scheduling Software (APS) can turn your manufacturing operation and shop floor into
a goldmine.

Advanced Planning and Scheduling Software

Advanced Planning and Scheduling (APS) software has become a must for modern-
day manufacturing operations due to customer demand for increased product mix and
fast delivery combined with downward cost pressures. APS can be quickly integrated
with a ERP/MRP software to fill gaps where these system lack planning and
scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps
planners save time while providing greater agility in updating ever-changing priorities,
production schedules, and inventory plans.

Create optimized schedules balancing production efficiency and delivery performance

Maximize output on bottleneck resources to increase revenue

Synchronize supply with demand to reduce inventories

Provide company-wide visibility to capacity

Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your
manufacturing operations to the next level of production efficiency, taking advantage
of the operational data you already have in your ERP.

Virtual supply chain and the extended enterprise

An extended enterprise is a loosely coupled, self-organizing network of firms

that combine their economic output to provide products and services offerings
to the market. Firms in the extended enterprise may operate independently, for
example, through market mechanisms, or cooperatively through agreements
and contracts. They provide value added service or product to the OEM (Original
Equipment Manufacturer).

Alternatively referred to as a "supply chain" or a "value chain", the extended enterprise describes
the community of participants involved with provisioning a set of service offerings. The extended
enterprise associated with "McDonald's", for example, includes not only McDonald's Corporation,
but also franchisees and joint venture partners of McDonald's Corporation, the 3PLs that provide
food and materials to McDonald's restaurants, the advertising agencies that produce and distribute
McDonald's advertising, the suppliers of McDonald's food ingredients, kitchen equipment, building
services, utilities, and other goods and services, the designers of Happy Meal toys, and others.

Extended enterprise is a more descriptive term than supply chain, in that it permits the
notion of different types and degrees and permanence of connectivity. Connections may
be by contract, as in partnerships or alliances or trade agreements, or by open market

exchange or participation in public tariffs.[1]

How an extended enterprise is organized and structured and its policies and mechanisms for the

exchange of information, goods, services and money is described by the enterprise architecture.[2]

The notion of the extended enterprise has taken on more importance as firms have become more
specialized and inter-connected, trade has become more global, processes have become more
standardized and information has become ubiquitous. The standardization of business processes
has permitted companies to purchase as services many of the activities that previously had been
provided directly by the business entity. By outsourcing certain business functions that had been
previously self-provided, such as transportation, warehousing, procurement, public relations,
information technology, firms have been able to concentrate their resources on those investments
and activities that provide them the greatest rate of return. The remaining "core competencies"

determine the firm's unique value proposition.[3]

Recently, the notion of extended enterprise has been updated by Alguezaui and Filieri (2014)[4]
who have reconceptualized the extended enterprise in the knowledge economy.

Through the proper functioning of one business, other businesses flourish.

As a result, a chain of unrelated businesses working together is formed,
this is called the extended enterprise model. Here, an organization is more
than just a single entity. External bodies or other businesses act as major
contributors to the organization’s success. Hence, considered as
extensions of the organization, i.e. extended enterprise.

For e.g.: A tire manufacturer purchases rubber from farmers which is delivered to the
factory by a logistics company. They manufacture the tire and sell it to tire dealerships
and car manufacturers. In this case, the rubber farmers, logistics company, and even
customers form the tire company’s extended enterprise.

As already discussed, in some cases, an extended enterprise is the same as a supply

chain. In other cases, it includes the customers as well. In this article, we take a look
at the parties making up an extended enterprise ecosystem in an organization.
Moreover, we also discuss their functions.

WHO FORMS THE EXTENDED ENTERPRISE NETWORK?

VENDORS (SUPPLY SIDE)

In the extended enterprise model, a vendor is probably the most important partner an
organization has. They essentially are the organization’s supply chain. Manufacturing,
automobile, and other businesses the production of tangible products is where such
relations are the most evident. The reason for this is simple.

Vendors sell raw/semi-finished products to complete the manufacturing of

a finished product. As a result, the quality of the finished product depends
on the quality of the supplied raw/semi-finished product. Hence, the vendor
is as important as any internal employee to the organization’s success.

Manufacturers or buyers hold training programs for extended enterprise partners like
vendors. These training programs revolve around good practices, compliance, or
training on manufacturing the semi-finished product—in-line with the standards
prescribed by an organization. It almost resembles the training provided to an auxiliary
branch of an organization. However, in reality, the vendor is still a third-party body and
merely a supply chain facilitator to the organization.

The service and technology sector also rely on vendors to support key aspects of their
business. Not everything is done in-house.

DISTRIBUTORS (CUSTOMER SIDE)

Many organizations do not sell their products directly. They rely on a set of distribution
channels consisting of wholesalers, retailers, and resellers who assess the demand
for a product and distribute it accordingly.

Moreover, these distributors are responsible for marketing products at the

micro-level. They are responsible for assessing customer needs and
sharing the information with the manufacturer, who eventually attempts to
 address the need. Without the participation of these distributors, an
organization most certainly cannot ensure the sales and penetration of
their products across the globe. This is why it is important to categorize
them as an extended enterprise body.

Distributors are trained in product marketing. while also ensuring the product is not
misrepresented or sold wrongly. Distributors are also given the benefits of easy
financing, marketing support at a micro-level, and buyback of surplus stocks.
Organizations spend considerable time and energy in maintaining their ties with
distributors, and this is why they are considered as an extended enterprise member.

RESELLERS, TECHNICIANS, PARTNERS (SERVICE AND PRODUCT

DELIVERY SUPPORT SIDE)
The most common type of extended partners for industries such as pharma,
automobile manufacturing, software, electronics, F&B, and lifestyle products are
resellers, partners, and technicians. Many times, managing the services and public
relations on behalf of the organization. They also act as external agents when dealing
with customers. Car dealers are a great example. They sell cars of various kinds and
offer services like repairs and maintenance as well. Dealership technicians often travel
to the manufacturer’s plant during new car launches. They learn about the new car
and return to provide customer support.

Pharmaceutical dispensaries are also resellers. They stock up on drugs of

various brands, but they also provide guidance on how to use these drugs
safely and effectively. On the other hand, if the laundry machine at a
customer’s home breaks down, an independent technician trained by the
manufacturer or the reseller’s technician visits the customer to diagnose
their problems. All these examples are of extended enterprise members
who play an important role in the success of an organization when dealing
with customers.

All organizations supported by third-party members are form an extended enterprise.

Training them on compliance, engaging with them, and aligning their goals with those
of your organization is very important.
CUSTOMERS
Most organizations seldom realize it, but their customers are an extension of their
organization. Especially, the loyal ones.

It is the repeat business, word-of-mouth publicity, and unpaid brand

promotions that classifies customers as extended enterprise.
Organizations spend sizable amounts of resources nurturing their
customers. These include loyalty programs, discounts for existing
customers, upgrade options, and more. Engaging with customers is as
important as engaging with any other external member. They are your
brand ambassadors and are often your organization’s biggest allies.

In cases such as technology products, automobiles, appliances etc., providing training

to customers is a big task by itself. This is true for the B2C (Business to Consumer),
more so for B2B (Business to Business) organizations, and especially for IT and
technology products. Customer training on product usage is a non-negotiable. Often,
included in the contract itself.

Training customers may sometimes be a for-profit initiative as well.

Certifying customers and administrative users on the usage of products is a huge part
of how organizations look at extended enterprise. Training delivery may be part of the
rollout plan, especially for enterprise software companies. Customers rarely exist
within the supply chain. However, they are important. Perhaps, equally important,
hence included as an extended enterprise member.

Quick response logistics :

Quick response is a method that enables retailers or manufacturers to share their

inventory needs almost in real-time. For the retailers, quick response helps to
communicate the need for goods on the shelves and to consumer demands. In the
case of manufacturers, it helps in the assembly line.
Quick response, in general, helps companies to boost their supply chain management
efficiency. In addition, it reduces operational expenses.

https://www.slideshare.net/sWaATii1/quick-response-42614330

1. Why Quick Response? • Emphasis on the reduction of internal and external lead times •

Shorter lead times ▫ Improve quality ▫ Reduce cost ▫ Eliminate non value added waste

within organisation • QR eliminates dysfunctional variability like, rework and changing

due dates

2. 5. Principles of QR • Lead time reduction • Focus on manufacturing enterprise • Focus

on implementation and sustainability • New material planning and control approach •
Manufacturing Critical path time
3. 6. Causes for QR • Increased Competition in market • Outsourcing of supply chain
processes, like production • Changes in consumer lifestyle • Increased demands
4. 7. 4 Rs Of Quick Response • Responsiveness : Responsive operation systems of the
supply chain Information management Partnership between supply chain members
Manufacturing flexibility Effective inventory management Strong logistic system

5. 8. • Reliability : ▫ Conformance to consumer expectations ▫ Delivering the promised

product ▫ TQM • Resilience : ▫ Managing the weaknesses of the supply chain ▫

Recovering quickly from unexpected disturbances • Relationship : ▫ Developing positive

supply chain relations through collaboration and information sharing ▫ Performance

depends on alliances and relationships ▫ Helps to deal with changing market conditions

6. 9. Benefits of QR implementation • Supplier’s benefits : ▫ Reduction of buying mistakes ▫

Minimization of stock holding ▫ Quick tracking of merchandise ▫ Higher stock turn ▫

Improvement of cash flow ▫ Betterment of customer service ▫ Very high level of profit ▫

Enlarged competitive advantages

7. 10. • Retailer’s Benefits : ▫ Improvement of planning systems ▫ Quick access to sales

information ▫ Easy tracking of products ▫ Security of getting more orders ▫ Improvement

of manufacturing systems ▫ High volume of production ▫ Higher sales ▫ Good profit

margin ▫ Enhanced customer satisfaction & loyalty

 8. 11. QR in apparel supply chain • In recent years, consumer demands have diversified

and the duration of acceptance of the products has decreased, and thus, the lifetime of

the product has considerably reduced. • The concept of QR was introduced in textile and

retail sectors to ▫ reduce inventories ▫ shorten cycle times ▫ respond rapidly to changing

consumer demands.

9. 12. • The primary objective of QR is risk reduction by optimising the lead time • Factors

responsible for the need of QR in fashion : ▫ Changes in the lifestyle ▫ Expansion of the

intercultural relationships ▫ Development of technologies ▫ Changes in economic

conditions • 3 Cs of Quick Response : ▫ Control ▫ Communication ▫ Collaboration

10. 13. Necessity of QR in Apparel industry • Impossible to accurately forecast volumes and

product mix ▫ Results in hike costs of stock out and carrying costs • The 6 month or

yearly forecast may not be able to judge (or meet) consumer expectations • Individual

efficiencies of system do not ensure over all efficiency of the supply chain

11. 14. The main trends in QR strategies implementation in the fashion industry • Design of
specific demand management techniques in relation with fashion trends in general, and
colours • Interactive designing customer-retailer offering garments structure using CAD
• The manufacturer/ retailer systems will have to use reliable POS data so that the
industry can be attached into the very complicated up-stream systems to support the
demand-activated production

● Role of information:

Why is information so important in supply chains? What are the inherent challenges
to the successful development and implementation of effective information?

Information is crucial to the performance of a supply chain because it provides the

basis on which supply chain managers make decisions. Information technology
consists of the tools used to gain awareness of information, analyze this information,
and execute on it to improve the performance of the supply chain. Information is
essential to making good supply chain decisions because it provides the broad view
needed to make optimal decisions. IT provides the tools to gather this information and
analyze it to make the best supply chain decisions (Chopra & Meindl, 2013).

Information is a key supply chain driver because it serves as the glue that allows the
other supply chain drivers to work together to create an integrated, coordinated supply
chain. Information is crucial to supply chain performance because it provides the
foundation on which supply chain processes execute transactions and managers
make decisions. Without information, a manager cannot know what customers want,
how much inventory is in stock, and when more products should be produced or
shipped. In short, information provides supply chain visibility, allowing managers to
make decisions to improve the supply chain’s performance (Chopra & Meindl, 2013).

Using IT systems to capture and analyze information can have a significant impact on
a firm’s performance. Availability and analysis of information to drive decision-making
is key to the success of a supply chain. To support effective supply chain decisions,
information must have the following characteristics: Information must be accurate,
must be accessible promptly, must be of the right kind, and must be shared (Chopra
& Meindl, 2013).

In summary, information is crucial to making good supply chain decisions at all three
levels of decision making (strategy, planning, and operations) and in each of the other
supply chain drivers (facilities, inventory, transportation, sourcing, and pricing).
Information Technology enables not only the gathering of these data to create supply
chain visibility but also the analysis of these data so that the supply chain decisions
made will maximize profitability (Chopra & Meindl, 2013).

The inherent challenges to the successful development and implementation of

effective information are the sharing of information along supply chains and the
discipline to ensure the integrity of the data collected, (Coyle, Langley, Novack &
Gibson, 2013). The information and communication systems that are available to
organizations today lead to the collection and storage of vast amounts of data, but
some organizations may not be taking advantage of the abundance of data to develop
information systems to improve decision-making. The accumulation and storage of
data are almost useless unless the data are shared horizontally and vertically in the
supply chain and used to make better decisions about inventory, customer services,
transportation, and so forth. Information can be a powerful tool if it is timely, accurate,
managed, and shared, (Coyle, Langley, Novack & Gibson, 2013).

Every day, organizations in all sizes have a large amount of data compiling into their
systems, raw data will not make much sense without proper analysis. I believe that the
most challenging part is how to make use of those data? How to make raw data
meaningful and understandable in a business sense to decision-makers? How to
derive the inherent insights from those data? Although it is both art and science in
doing so, I believe that it requires commonsense, analytical skills, carefully think of the
background of your audiences, using the right tools and of course, maintain integrity.

https://www.linkedin.com/pulse/why-information-so-important-supply-
chain-jit-
hinchman#:~:text=Information%20is%20crucial%20to%20supply,should
%20be%20produced%20or%20shipped.

More information:
https://www.tutorialspoint.com/supply_chain_management/supply_chain_
management_it_role.htm

● Agile Supply Chains:

https://www.ivalua.com/blog/supply-chain-management-zara/

Lean Supply Chain

The lean supply chain is the traditional “factory” chain, which focuses on producing
high volume at low cost. The goal is to add value for customers by reducing the cost
of goods and lowering waste (waste is whatever isn’t valuable to the customer).

This sort of supply chain focuses on reliability and predictability rather than on
flexibility and adaptability. Production is planned months or even years in advance
rather than adapting to a changing market. This pre-planning helps to find the lowest
possible cost for large volumes of goods.

Generally, the lean supply chain is best for products with low market variability.
Demand for these products stays even keel despite the economic situation or
changing trends. These tend to be necessary, functional products like food and
toiletries.

The lean supply chain has traditionally been the most popular form of production
because it focuses on reducing costs—and all consumers like to pay less. However,
more and more companies are moving away from a strictly lean model since today’s
markets can change overnight. Adaptability and agility become a crucial factor in
responding to these fluctuations.

Agile Supply Chain

The agile supply chain focuses on flexibility and receptiveness. It responds quickly
to changes in demand, customer preference, and industry. It’s made to handle
unpredictability in the market through “postponement”— waiting to see what the
market will dictate before finishing production.

An agile supply chain waits to see how much demand there is before creating the final
product, thus responding directly to demand rather than forecasting. Some predicting
of the market is still necessary, though, since parts of a product are created ahead of
time to make the finalization process fast and efficient. Agility focuses on balancing
up-to-date data with short-term forecasted projections.

Agile supply chains are generally used for products with short life cycles or
customizable elements. Take fast-fashion as an example. Fashion changes rapidly
in today’s Instagram and blogger culture, so production needs to be prepared to keep
up with the emerging and shifting trends. There needs to be both flexibility and
efficiency to get the product on the shelves and into the hands of consumers before
the next big craze hits.

Strong partnerships and interactions between vendors are crucial to making an agile
supply chain work. If there isn’t a collaboration of suppliers with one and other and
with the market, goods will not be created as quickly and efficiently as an agile chain
calls for.

An agile supply chain also tends to have less warehousing costs. You aren’t holding
significant inventory on hand to meet demand. Rather, demand comes and supply is
then created to meet the demand. A lean chain, on the other hand, focuses on
overstocking inventory in order to keep up with potential demand.

Should You Use Lean or Agile?

Qualities Lean Agile
Product Type Functional; Lasting Trending or Variable
Product Demand Predictable; Consistent Market-based; Changing
Product Life Cycle Long Short
Consumer Drivers Low-cost Popular assortment

Steps to Create an Agile Supply Chain Management Framework:

Step 1: Build an agile team
The concept of agility has come from software developers. It is an alternative project

management technique that designs a process that is aligned to customers’ needs by

regularly testing products and ideas within the development phase. Similarly, building

an agile supply chain team will encourage the creation of strategies that can better

align supplier output with customer needs. Also, it focuses on achieving better

outcomes and create an agile supply chain management framework.

Step 2: Get quicker and more accurate data

Leading consumer goods companies who are exposed to the uncertainties of the retail

or consumer markets are investing in newer demand sensing technologies. Such

technologies provide them with a more accurate picture of the future demand. Gaining

quicker access to data helps companies to respond intelligently, increase product

availability, and capture a higher market share while improving agile supply chain

management.

Step 3: Be innovative
Most companies choose to rely on processes that are tried and tested. They become

reluctant to experiments due to fear of failure. Creating an environment which can

encourage staff and suppliers to build effective agile supply chain management

strategies will help companies to execute pilot programs and select the best course of

action during supply disruptions or unexpected orders.

Step 4: Connect to key people in the supply chain

Connect not only to retailers but also to suppliers, co-packers, contract manufacturers,

and logistics providers. This will help you gain an end-to-end picture of the current

status of the supply chain and the important happenings in the supply chain. Moreover,

better communications will help you understand the supply chain better and devise

strategies in case of any unforeseen risks.

Devising effective strategies for agile supply chain management requires

accurate analysis of different factors impacting the supply chain.

Step 5: Develop agile supplier contracts

Implement ‘multisource’ supplier strategies to reduce risk in the supply chain. This will

help you strengthen relationships with a range of suppliers to ensure the delivery of

required goods. You can easily switch to other previously identified alternatives if a

supplier fails. Similarly, companies can develop buy-back contracts, zero-volume

contracts, or improve relationships with suppliers to improve agile supply chain

management and meet changing market needs.

● https://www.youtube.com/watch?v=whFsziS3x18
● https://www.youtube.com/watch?v=qhCM0F81vEg
● https://www.youtube.com/watch?v=I8_gmYNCQ1g

Introduction to use of Technology in SCM [L-8, SCM:PG 189 Janat Shah]

● Role of Technology in Supply Chain Management :

● Key Application Tools

Strategic Challenges for supply chains.

Sustainable Supply Chain Management

VIDEOS FOR THE LECTURE:

1. https://www.youtube.com/watch?v=oIXteWGjjtM [ how airlines manage

food]
2. https://www.youtube.com/watch?v=F3yYQnR5i4Y [ starbucks case
study]
3. https://www.youtube.com/watch?v=DvEh04LNJ_I [DHL]
4. https://www.youtube.com/watch?v=9J2pTNTksno [ 2PL, 3PL]
5. https://www.youtube.com/watch?v=ncwsr1Of6Cw [Amazon Supply
chain optimisation]
6. https://www.youtube.com/watch?v=06xkXDvnnK4 [OYO Rooms]
7. https://www.youtube.com/watch?v=hQj2HLdIN34 [OYO Rooms]
8. https://www.youtube.com/watch?v=g-9lVi2GoBs [OLA business model]
9. https://www.youtube.com/watch?v=4mBiFEspcIM [ Why big dairy firms
failed in India]
10. https://www.youtube.com/watch?v=C4MHnVY-_rQ [Amul]
11. https://www.youtube.com/watch?v=qRQwkJLRfWw [ Inside an Amazon
Warehouse]
12. https://www.youtube.com/watch?v=4DKrcpa8Z_E [ Inside Amazon
warehouse]
13. https://www.youtube.com/watch?v=cLVCGEmkJs0 [ Amazon
Warehouse Robotic]
14. https://www.youtube.com/watch?v=b3X3r5UVtEM Auto store
15. https://www.youtube.com/watch?v=UBSOiHUctrY [Coco cola supply
chain]
16. https://www.youtube.com/watch?v=XfDZGXibvCA [Starbucks supply
chain.
17. https://www.youtube.com/watch?v=qsEeoYDhgak [Pizza hut supply
chain]
18. Dynamic Milk run in Volvo

https://www.youtube.com/watch?v=bySIzhODws4

19. Network Design:

https://www.youtube.com/watch?v=01bI1XeMaaw]

20. Network optimization model

https://www.youtube.com/watch?v=sIrZqL44e6Q

21. SIMULATION MODEL:

https://www.anylogistix.com/supply-chain-simulation/
22. Facility Location & Capacity Allocation Optimization Models

https://www.youtube.com/watch?v=Uo986R-0o5c

23. Designing Distribution Networks

https://www.youtube.com/watch?v=X7VlyPaR9Uc

24. Network Design of Global Supply Chain

https://www.youtube.com/watch?v=DhZfuh_xTqA

25. Alternative channels of Distribution

https://www.youtube.com/watch?v=lYCn6CoPIGg

26. Location Decisions in Supply Chain

https://www.youtube.com/watch?v=Rune2SJNeTA
27. Predictive Modelling in Forecasting in Supply Chain
https://www.youtube.com/watch?v=Gv0kHqiEyFE

28. Supply Chain Restructuring.

https://www.cio.com/article/2448397/restructuring-the-supply-

chain.html#:~:text=In%20fact%2C%20companies%20that%20want,tigh

ter%20relationships%20with%20both%20parties.

29. Types of supply chain management

https://ibisinc.com/blog/3-types-of-collaborations-in-supply-chain-
management/

Dynamic Milk run in Volvo

https://www.youtube.com/watch?v=bySIzhODws4

World logistics performance index:

https://lpi.worldbank.org/international/global

Ikea:

https://digital.hbs.edu/platform-rctom/submission/ikea-worlds-

most-successful-furniture-retailer/
https://www.cnbc.com/2019/10/05/psychology-behind-ikeas-huge-

success.html