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21st-Century Supply Chains and

logistics management: Ch1

McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Overview of 21st-century supply
chains
The supply chain revolution
Why integration creates value
Generalized supply chain model
Responsiveness
Financial sophistication
Globalization

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The supply chain revolution has reshaped
contemporary strategic thinking
Supply Chain Management
Consists of firms collaborating to
leverage strategic positioning and
to improve operating efficiency
Supply Chain Strategy
Is a channel and business
organizational arrangement
based on acknowledge
dependency and collaboration
Logistics
The work required to move and
geographically position inventory

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The total integration of the overall business
process creates value
Table 1.1 Integrative Management Value Proposition

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Supply Chain Management

Definition:
Supply Chain Management (SCM) is a set of
approach primarily concerned with the efficient
integration of suppliers, factories, warehouses and
stores so that merchandise is produced and
distributed in the right quantities, to the right
locations and at the right time, and so as to
minimize total system cost subject to satisfying
service requirements
- David Simchi-Levi, Kaminsky and Edith Simchi-Levi, 2007

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What is Supply chain?
A supply chain network:

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An integrated supply chain for manufactured meat
products, Ref: Sadler* Figure C2.3, p 65

Supply Chain Schedules Information from


Retailers eg Orders
E
n
d
Distribution Super-
Centre market C
Packing & o
Suppliers Primary Secondary Order n
Manufacture Manufacture Assembly Industrial s
Products u
m
e
Route r
Trade s

Legend
Transport

*Sadler, I, 2007 Logistics and Supply Chain Integration, Sage 7


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The integrated value-creation process must be
managed across firms from end to end

Figure 1.1 The Integrated Supply Chain Framework s 1-8


Logistics
Logistics is that part of the supply chain process that plans, implements, and controls
the efficient, effective flow and storage of goods, services and related information from
the point-of-origin to the point-of-consumption in order to meet customers
requirements: Council Of Logistics Management, 1998
Logistics covers a wide range of business activities including:
Transportation

Warehousing

Material handling

Packaging

Inventory management

Logistics information systems

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Physical supply Physical distribution
materials management outbound logistics
inbound logistics
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Enterprise operations modules support day-
to-day supply chain operations
Enterprise Operations

Customer
Inventory
relationship Logistics Manufacturing Purchasing
Deployment
management

Customer Relationship Purchase Order Integrated Inventory


Finished Inventory
Management Manufacturing Administration Planning
Management
(CRM) Resource Planning (POA)
(FIM) Advanced Planning and
(MRP II)
Scheduling\
Forecasting
Materials Requirements
Order Processing
Demand Management Capacity Management Planning (MRP)
(OPS)
(DMS) Planning (CMP)
Supplier Relationship
Warehouse
Collaborative Master Production Management (SRM)
Management (WMS)
Planning, Forecasting Schedule (MPS)
and Replenishment Accounts Payable
Transportation
(CPFR)
Production Execution Interface
Management (TMS)
and Control (Shop
Floor)
Order Management Yard Management
(OMS) (YMS)
Quality Management Donald J. Bowersox, Ph.D. 2005
(QM)
Accounts Receivable
Interface Figure 1.6 Enterprise Operations Modules 1-11
Integrative management requires simultaneous
achievement of 8 processes

Table 1.2 Eight Supply Chain Processes 1-12


Forces driving supply chain
strategies
Information technology
Integrative management
Responsiveness-pull system
Globalization

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Postponement strategies keep supply
chains responsive
Types of Postponement
Manufacturing (or Form)
Geographic (or Logistics)
Manufacturing and geographic types are exact
opposites in practice but have the same goal
Meeting customer demand quickly while minimizing
inventories

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Manufacturing (or form) postponement
Manufacturing one order at a time
Base modular construction of product
No customization until the exact customer specs and
financial commitment is received
Objective is to maintain products in an uncommitted status
as long as possible
Balances economy of scale with responsiveness
Can build a sufficient quantity of ready to customize basic units
Requires a lot of forethought during product design

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Example of manufacturing postponement

Keeping all the car panels a base color (white or gray) until
the order is received, then painting to the color ordered

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Geographic (or logistics) postponement

Build or stock a full-line inventory at one or a few strategic


locations
Forward deployment of inventory is postponed until
customer orders are received
Once orders received, specific item is expedited to the local
distributor
Advantages are manufacturing economies of scale along
with responsiveness to customer
Often used for critical, high cost parts and assemblies (e.g.
engines)
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Example of geographic postponement

Keeping full inventory in a central warehouse and releasing


customer orders to local distributors or direct shipping to
customer
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Globalization offers firms several attractive
opportunities
Demand exceeds local
supply
90% of global demand is not
fully satisfied by local supply
Strategic sourcing
Identifying and matching the
sources of raw materials and
components to manufacturers
and distributors
Offshoring
Moving manufacturing and
distribution operations to
countries with favorable labor
costs and tax laws

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Significant differences for global logistics

Distance of typical order-to-delivery operations is


significantly longer compared to domestic business
Documentation requirements for business
transactions is significantly more complex
Operations must be deal with significant Diversity
in work practices and local operating environments
How consumers Demand products and services
must accommodate cultural variations

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Unit topics
1. Role of logistics
2. Customer relationship management
3. Managing finished goods inventory
4. Transport & Flow of Goods
5. Distribution Centres and warehousing
6. Packaging and handling
7. Logistics facility design/ location decision
8. Distribution strategies- collaboration
9. Distribution Performance Measurement

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Tutorial 1

Question 1

-Identify a product and draw its supply chain (distribution )


network,
-what specific role does logistics play in supply chain operations?
-What do customers want from a distribution system?

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