TL6005 Principles of Logistics and Supply Chain

Review: Logistics and Supply Chain Management

Course Intended Learning Outcomes:
1. Demonstrate an understanding of the logistics
operations’ nature, scope, and structure.
2. Assess the interrelationship and functions in
logistics and supply chain management.
3. Analyse and evaluate the dynamic effects of
managing logistics and the supply chain.
Logistics: What It Is (1 of 2)
• Council of Supply Chain Management Professionals
(CSCMP) definition:
“Logistics management is that part of supply chain
management that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of
goods, services, and related information between the point
of origin and the point of consumption in order to meet
customers’ requirements.”

www.cscmp.org
Logistics: What It Is (2 of 2)
• The management process which integrates the movement of goods,
services, information, and capital, right from the sourcing of raw
material, till it reaches its end consumer is known as Logistics
Management. The objective behind this process is to provide the right
product with the right quality at the right time in the right place at the
right price to the ultimate customer. The logistic activities are divided
into two broad categories they are:

• Inbound Logistics: The activities which are concerned with procurement

of material, handling, storage and transportation
• Outbound Logistics: The activities which are concerned with the
collection, maintenance, and distribution or delivery to the final
consumer.
Supply Change Management – What it is?
• Supply chain management (SCM) is management of the
flow of goods, data, and finances related to a product or
service, from the procurement of raw materials to the
delivery of the product at its final destination.
• Supply Chain Management (SCM) is a series of
interconnected activities related to the transformation
and movement of raw material to the finished goods till
it reaches to the end user. It is the outcome of the efforts
of multiple organizations that helped in making this
chain of activities successful.
Difference Between Logistics and Supply Chain
BASIS FOR COMPARISON LOGISTICS MANAGEMENT
Meaning The process of integrating
the movement and
maintenance of goods in
and out the organization is
Logistics.
SUPPLY CHAIN
MANAGEMENT
The coordination and
management of the supply
chain activities are known as
Supply Chain Management.

Objective Customer Satisfaction Competitive Advantage

Evolution The concept of Logistics has Supply Chain Management

been evolved earlier. is a modern concept.
How many organizations are Single Multiple
involved?
One in another Logistics Management is a Supply Chain Management
fraction of Supply Chain is the new version of
Management. Logistics Management.
The Increased Importance of Logistics
• A reduction in economic regulation
• Changes in consumer behavior
• Technological advances
• Advances in retailing
• Globalization of trade
The Systems and Total Cost Approaches to
Logistics (1 of 2)
Systems approach
• Compatibility between a company’s goals and
objectives and major functional area goals and
objectives (marketing, finance, production, logistics)
• Interdependence of functional areas
• Under marketing concept, focuses on satisfying
customer needs and wants thus increased in the
number of Stock-keeping units (SKUs)
• Interdependence of logistics activities or intra-
functional logistics
The Systems and Total Cost Approaches to
Logistics (2 of 2)
• Total cost approach
• Cost trade-offs: changes to one activity cause some
costs to increase and others to decrease (E.g. a
decrease in transportation costs is often associated
with an increase in warehousing costs)
• Total logistics concept: integration of all activities
into a unified whole that seeks to minimize
distribution costs in a manner that supports an
organization’s strategic objectives
a. Evolution of Supply Chain Management (1 of 7)
• Relatively young concept—rarely mentioned prior to 1990
• Recognition grew when value could be found in coordinating
various business functions
• SCM philosophy:
 Coordinate not only within organizations, but also across
organizations
 LESSON 1- Supply Chain Concept

The supply chain concept has evolved since the middle of the 20th Century, with the following
developments:

1950–1960s: Distribution broadly represented by haulage industries, with a focus on transport.

1960–1970s: Concept of Physical Distribution developed and the distribution activities were
considered the ‘dark continent’ of operations therefore becoming a valid management area.

1980–1990s: The logistics concept in search of cost trade-offs, the search for cost competitiveness
continued with emphasis on reduction on stock levels, the use of ICT, and the growth of Third-Party
logistics (3PLs) service providers.

1990–2000: Supply chain concept emerging from the need to plan and control all processes from
sources through production to distribution to the final consumer. This called for a rethink of business
processes, e.g. process re-engineering (BPR), so as to include operations of partners outside
organisational boundaries, e.g. partnerships, alliances, etc.

2000–2010: Sustainability of operations has also become a contemporary management issue for
logistics and supply chains due to pressures regarding efficient use of resources, global trade and
other societal demands.

2ND Semester 2022-2023 School of Logistics and Maritime Studies

by Dr. Cecilia M. TL6302- Introduction to Supply Chain Operations and Procurement 11
 LESSON 1- Supply Chain Concept

2ND Semester 2022-2023 School of Logistics and Maritime Studies

by Dr. Cecilia M. TL6302- Introduction to Supply Chain Operations and Procurement 13
 LESSON 1- Supply Chain Concept

Organisations are continuously searching for improvements in their operations. Managers have
sought new ways or techniques of managing their organisations’ operations in order to satisfy
demands.

Some of these techniques include:

 Operations management: focusing more on the internal capability of the organisation to
mobilise its resources in the production of goods and services.
 Production management: with a focus on production or manufacturing organisations to
improve the cost efficiency of manufacturing.
 Material Management (MM): focusing more on materials requirements for production, to
smooth the flow and availability of raw materials and other inventories in a manufacturing
environment.
 Logistics management: is the art and science of moving things from one point to another and
storing them along the way.
 Physical distribution: Refers to the storage of finished product and movement to the customer.
 Supply Chain Management (SCM): ‘plans, implements, and controls the efficient, effective
forward and reverse flows and storage of goods, services, and related information between the
point of origin and the point of consumption in order to meet customers’ requirements’
(Fawcett et al., 2007, p. 153).
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Control Over the Flow of Inbound and Outbound
Movements
Different Supply Chain Configurations
 Evolution of Supply Chain Management
• Supply chains
 Some are more
complex than others
 Typically, more difficult
to coordinate complex
supply chains
 Complex supply chains
may include third-party
logistics (3PL) providers
 Customers are an
integral component
regardless of
complexity level
https://www.youtube.com/watch?v=g3RP_kaWcDQ
• Use of supply chain facilitators
 Third-party logistics (3PL), also known as logistics
outsourcing or contract logistics
o Any logistics activity not performed in-house is
representative of third-party logistics
o Common 3PL activities involve inbound and
outbound transportation, carrier negotiation and
contracting, and freight consolidation
o Well-known 3PL providers include DHL Supply
Chain, Kuehne and Nagle, DB Schenker, and UPS
Supply Chain Solutions
Supply Chain Activities
Supply Chain includes the following activities:

• Procurement
• Manufacture
• Distribution and waste disposal (recycling)
• Transportation
• Warehousing
• Inventory control
• Materials handling
• Order processing, distribution
• Information processing
 LESSON 2- Supply Chain Concepts

Supply Chain Structure, Flows and Streams

Upstream Midstream Downstream

1st tier 1st tier 2nd tier 3rd tier

2nd tier
Suppliers Customers Customers Customers
Suppliers

Raw Suppliers Manufacturer Distributors Retailers Consumers

Materials

Material/Goods/ Product flow.

Information flow
Fund/ Money flow

REFUNDS

RETURNS

Reverse flow/Reverse Logistics

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Participants of Supply Chain

The generic supply chain begins with the sourcing and extraction of
raw materials. The raw materials are then taken by a logistics
provider to a supplier, which acts as the wholesaler. The materials
are taken to a manufacturer, or probably to various manufacturers
that refine and process them into a finished product. Afterward, it
goes to a distributor that wholesales the finished product, which is
next delivered to a retailer. The retailer sells the product in a store
to consumers. Once the consumer buys it, this completes the cycle,
but it’s the demand that then goes back and drives the production
of more raw materials, and the cycle continues.

05/22/2024
Dr. Cecilia T. Macaraan
 LESSON 2- Supply Chain Flows

• Upstream supply chain includes all activities related to the organization’s

suppliers: those parties that source raw material inputs to send to the
manufacturer which are further grouped into ‘tiers’:
 First (1st) tier suppliers represent the immediate suppliers of the firm
 Second (2nd) tier suppliers represent the suppliers to the first- tier
suppliers
• Downstream supply chain refers to post-manufacturing activities namely
distributing the product to the final customer.
 First (1st) tier customers are the firm’s immediate customers
 Second (2nd) tier customers represent customers of the first-tier
customers
 Third (3rd) tier customers represent customers of the second-tier
customers

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From the figure below showing the supply chain of “jeans manufacturing”,
identify the following:
a. upstream
b. downstream
c. 1st tier supplier
d. 2nd tier supplier
e. 1st tier customer
f. 2nd tier customer

2ND Semester 2022-2023

by Dr. Cecilia M.
23
 Traditional Supply Chain Model

Procurement Production Distribution

• PUSH products downstream

• Each activity is managed independently.
• Little coordinated effort.
• Inventory is used to buffer between these
activities resulting in large stocks of inventories.
Modern Supply Chain Model

• PULL demand data from

downstream using IT systems
• Produce only what there is
demand for
• Greater visibility on demand and
as a consequence inventory /
pipeline stocks
• Synchronized effort between all
parties.
• Greater efficiency with everyone
focused on their core
competency .

05/22/2024 25
Modern Supply Chain Model

• At the heart of every organization are

the logistics operations that create
and deliver products and services.

• These operations require inputs in

order to:
• produce the right output/product
• to the right customers
• to be delivered at the right time
• at the right location/place
• in the right condition
• in the right quantity
• at the right price
 •Flow is how work
Supply Chain progresses through
a system.
Flows •There are three
types of main
flows that happen
in any supply
chains:
•flow of
materials/goods,
•flow of
money/cash,
•and flow of
information.
1. Materials Flow
• Material flow in supply chain management represents the
movement of raw materials, components, work-in-progress
inventory, and finished goods.
• Within a company, the movement of goods is regarded as an
internal material flow.
• Materials or goods flow downstream
• if there is any returns for any reason, there will be a reverse flow
of materials/goods in the opposite direction to the forward flow.

Sources Consumption
 • It is important that
information flows in all
directions of the supply
chain (regular interaction).
This aspect is referred to as
2. ‘information sharing’ and is
essential if the objectives of
Information a supply chain are to be
achieved.
Flows
• Why do you think
information is vital
in a supply chain?

20xx Sample footer text 29

Information Flows
Upstream
Customer
Demand and requirements

We need information to tell us the requirements and demands

from our customers. We need information flows to record and
retrieve necessary data for physical and monetary flows.

product availability
Supplier
Downstream
 Transportation
documents
• Each of these modes of transport has
specific documents required for the
movement of goods throughout the
supply chain operations.

• These documents specify :

 The names of the sender
(consignor) and receiver
(consignee)
 The origin and destination points
 The description of the goods to be
moved
 The freight charges (incoterms)
 The responsibilities for payment
of freight changes
 3. Money flows
Money flows from the
consumer upstream in a
supply chain until all suppliers
have received payment for
the goods and services they
provided.
SC role is to ensure minimize
delays in processing invoices
and ensuring accuracy when
producing financial-related
documents.
In the event of REFUND,
money flows downstream.
 Reverse Flows
There are occasions when materials move upstream or in
the opposite direction, i.e. from customers to suppliers.
Products move upstream for various reasons including:
• Product recalls for quality or safety reasons
• Damages
• Unwanted goods
• Over-stocks
• Used packaging for recycling and disposal

Reverse flow is another term for reverse logistics in the

supply chain which refers to the movement of goods from
customer to vendor or at least one step backward up the
supply chain.
 LESSON 3- Structures, Reverse flow and
planning of Supply Chain

REVERSE FLOW

2ND Semester 2022-2023 School of Logistics and Maritime Studies

by Dr. Cecilia M. TL6302- Introduction to Supply Chain Operations and Procurement 34
 ANY
QUESTIONS?