GIMS - Logistics and SCM - Personal Master File

GIMS – Logistics and Supply Chain ManagementPersonal Master File

1© Prof. Dr. Willi DarrHof, Summer Term 2012

Logistics and Supply Chain Management

GIMS

Personal Master File from

…………..

Summer Term 2012



Content:

A - Introduction

B - Fundamentals

C - Top Agenda

D - Methods

E

F

G

H

I

J

K

L



Content A: Introduction

Topics

• 1 Supply Chain

• 2 Importance of SCM

• 3 Attention: Risks in the Supply Chain

• 5 Lernziele und Lernplan




Explanation

• 1.Supply Chain: This chain involves the Supplier,

Industry, Logistic service provider, Whole saler,

Retailer Consumer and Recycling.

• 2. Importance of Supply Chain: Helps to improve

to improve the GNP, Export/Import and also helps

to provide jobs.

• 3.Risks in the the supply chain: Supply chain can be

affected by natural disasters, accidents, piracy and also

the share market.


Impact to India

• Companies in a developing country like India

are slowly realizing the importance of SCM so

in turn it helps in developing the economy of

the country.

• In India the current infrastructure cant handle

burgeoening traffic and is prone to accidents.

Natural disasters like floods and the tsunami

in 2004 affect SCM in the country.The indian

ocean is also prone to pirate attacks.



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• Lernziele zu “SCM”: Learning targets through SCM are Knowledge, Analytical Skills, Social skills and Personal skills

• As a developing nation India must look

to improve the 4 skills in order to improve

SCM capabilities




My Learnings

• 1 SCM plays an important role in distribution

of products to consumers.

• 2 SCM boosts customer service, reduce operational

cost and improve financial position (company

and Country).

• 3 Natural disasters can affect SCM.

• 4 Leaning targets helps a company improve in

SCM

Content

Practical Experience

• 1 Tomato distribution

• 2 Maufacturing of Adidas ball and the

manufacturing of Apple products in

China

• 3 Tornados in the U.S. and tsunami in

Japan.

. 4 Many companies in India like L&T

are developing in SCM through

these learning targets.



Content B: Fundamentals

Topics

Basics to Supply Chain Management (SCM)a. Object of Supply Chains and of SCMb. The seven lines of vision of Supply Chainsc. Interdependences of Supply Chainsi. Serials interdependencesii. Bundled/ Pooled interdependencesiii. Reciprocal interdependences



Content B: Fundamentals

Explanation

1Definition of Logistics:„Logistic as a system of transfer, contains the coordination,implementation and control, of all resources and activities, determining the flow of

transaction objects between the point oforigin („source“) and a defined destination („valley“).

2 Definition of SCM: “design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand,and measuring performance globally.”





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• Explanation

Management approaches of SCM:

1 Value orientation: Accounting the relevant factors essential for increasing the turnover, reducing their process cost

and minimizing the asset base.

2 Customer orientation: All activities within the scope of the business processes are guided by costumers and market conditions.

3 Flow orientation: Striving for continuous, just‐in‐time handling of all processes activities without standby time.

• Impact to India

1 Companies in a developing country like India who are following this strategy tend to minimize their costs and asset base.

2 Companies in India who have followed this strategy in the face of heavy competition from competitors have outpaced their competitors.

3 Automobile companies in India like TATA and M & M who follow this strategy tend to see more profits





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Holistic orientation: Functional and organizational overlapping development from customer’s demand to the payment created through the integration of business aims and strategies.

• Many automobile companies in India who follow this approach tend to be more efficient and successful.





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First line of view-Logistics as space‐/ time transfer/ bridging:

• Logistics comprises the physical time and space bridging (TUL process).

• Infrastructure and processes.• Transport and Warehouse.

Second line of view- Order Cycles• Consists of both logistics and purchase

organization or process.• Purchase process releases flow of goods• Purchase processes are fixed items in

material logistics• Endpoint is the surrender to the customer.

Third line of view-OPP• The Order Penetration Point separates the

forecast which is oriented from value added activities

• The OPP separates the supply chain from raw material to consumer“ in several parts

Learning's

a.T= Transport, U= separation, L= Warehouse.

This involves space and time transfer between the first raw material producer to the end consumer

b. Order cycles are present between every supplier and customer in every tier. The objective is to have bigger order cycles in order to reduce time and cost for the customer

c. Analyzing the OPP we get information about the company and also the supplier and customer

By reducing OPP

1.One can reduce OPP

2.Reduce stocks

3. Forecasting department





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Sixth line of view- Supply Chain structure

• Vertical range of manufacture of a company and.

• Scale of specialization in complete supply chain.

Learning

• Ford model is the first example for vertical range of manufacturing.

• Japanese started with the KANBAN policy or Just in Time

• Just in Time policy offers the following advantages

1.No stock in the warehouse for a long time. It can be used for other purposes.

2.Enough stock only when it is needed by the customer

3.In the end it saves money and space for the company





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• Seventh Line of viewLearning:Strategies are given by the bossTactics are handled by the middle

menLogistics and transport are handled

by the operational sector

Reasons for hierarchy• Relevance for the whole company• (success, risk).• Planning horizons.• Planning dates and aggregation.• Decision maker and management

levels





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Interdependencies

Serial Interdependencies

The output of the delivery step is the input of the customer step

Pooled interdependencies• Use of mutual resources.• Use of central warehouse, the same

purchase organization, the same delivery tour etc.

• Cost effective and competitive.

Reciprocal interdependencies

The respective output of an decision is the input of the respective others in the supply chain.

• Learning

In serial production the outcome of one company in Tier 1(product) is the input for the OEM

• Warehouses are perfect examples for this. They use 90-95% of the warehouse at any given time must be utilized. It is only possible through pooled interdependencies

• Transport and warehousing .Each is dependent on the other.



Content C: Top Agenda

Topics

1 Value added per vehicle replaces volume growth

2 OEM concentration results in 8 global purchasing hubs and triggers suppliers globalization

3 Increasing platforms and model varieties require advanced deal and project management capabilities 4 Tier-1 supplier stake an increasing share of risk from the OEMs5 Suppliers take over the system integration responsibility and management of the supply chain

6 Electronics B2B commerce revolutinizes the supply chain and triggers industry shakeout

7 The electronics revolution changes the rules of the game

8 Suppliers establishes closer links to consumers

9 30-50 mega suppliers will lead the supplier pyramid and set the performance standards



Content C: Top Agenda

Explanation

• Value added per vehicle replaces volume growth

a. Growth in production of light vehicles in markets like USA,Western Europe and Japan is expected to stagnate.b. Markets like India and China are showing a strong growth rate in vehicle production.c. Suppliers can also grow by innovating,diversifying, outsourcing of system and modules and by expanding in existing markets but they have to overcome the challenges.

a. More car per car

Impact to India

a. Automobile sales in India is increasing every year and to cater to this demand automobile companies are setting up their factories in India.

b. Global automobile majors are setting up factories in India and so must suppliers of these automobile companies

c. Since these suppliers need to maintain a good customer relationship they will also want to be close to their customers and it will also be cost effective





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OEM concentration results in 8 global purchasing hubs and triggers suppliers globalization

• By 2010 there will be only 8 major independent OEM’s

• The minimum number of cars needed to be sold should be 2.8 million in order to survive

• Each OEM will source an average volume of US $100 bn per year.

• Global players will more and more dominate the supplier industry

• OEMs believe this trend to happen faster than the suppliers do

Impact to India

• Suppliers in India who are looking to get a slice of US $100 bn must go to were the OEM’s are located but ,since the OEM’s themselves are coming to India, suppliers in India have a great chance to improve their business opportunities

• If Indian suppliers become global players they can dominate the supplier industry





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3.Increasing platforms and model varieties require advanced deal and project management capabilities

• The share of platform-based cars is expected to grow as well as the variety of models

• It is expected to rise from 65% in 1999 to 82 % in 2010

• Model related projects are expected to rise.This will cause the increase of complexity and number of projects

• Small number of large platform deals.Sharp reduction in number of deals and increases scale and global delivery requirement.

• Top-suppliers need to fine-tune their processes, structures and strategies to achieve profitable system business growth

Impact on India

Suppliers in India must change

Their process, structure and strategies in order to attract the OEM’s

Suppliers in India must be able to handle the complexity of the project.

Suppliers in India must be able to deliver their products on time for they cannot afford to lose their customers





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4.Tier-1 supplier stake an increasing share of risk from the OEMs

• Cost pressure on tier-1 suppliers will increasingly be complemented by risk

sharing• Sharing of risk with the OEM tends to increase

profits for the supplier.

5 .Suppliers take over the system integration responsibility and management of the supply chain

• OEMs will continue to reduce their value added by shifting system/module integration and supply to their tier-1s.

• OEMs follow various innovative approaches to strengthen the partnership with their suppliers.

• The integration of suppliers into the development process and extension of systems contents

Impact on India

• Suppliers in India who do a bit of R & D and help their customers with new and innovative products tend to see more profits.

• Suppliers in India must be willing to take more risks in order to earn a good profit.

• Suppliers in India have the opportunity now to add value to the customers product and thereby benefit from it.

• More contribution means more recognition by the end consumer and OEM.





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6.Electronics B2B commerce revolutionizes the supply chain and triggers industry shakeout.

• All OEMs are currently moving towards an internet-based platform for their supplier relationships.

• In the mid-term, B2B has the potential to bring revolutionary changes to the industry - far beyond the simple reduction of purchasing prices

• The majority of suppliers today is only reacting - however, early action is key to success in automotive B2B

Impact to India

• Opportunities for software firms in India to provide safe and secure platform for the companies to interact on the internet.

• Easier for Indian suppliers to communicate to OEMs located abroad





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7.The electronics revolution changes the rules of the game:

1 The electronics revolution in the automotive

industry takes place in 4 levels

• Surge in electronic innovations in the car.• Networking and integration of electronics.• Networking of vehicles with environment

telematic applications.• Automotive embedded mobile computing.

2 90% of all future innovations will be driven by electronics.

3.Electronics is expected to take an increasing share of a vehicle‘s production cost.

4. Relative importance and value of components undergo dramatic change

Impact on India• Medium sized electronic companies in India

have a good chance of being suppliers to these OEM’s .

• Companies who have good products to offer to these companies have chances of being there long term suppliers.

• Since importance and value of these electronic components is expected to increases the suppliers will have chance to get more profits in the future





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• Electronic subsystems will be more and more integrated – the road is heading towards the ,,Auto PC”

• Telematics is a trigger technology that will shape the direction of the industry

• IT, software, telecom and media companies will try to capture the market to provide solutions for the suppliers regarding telematics.

• The automobile will become an integrated part of information, messaging and transaction services.





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8.Suppliers establishes closer links to consumers

• Suppliers are looking for more recognition among the end customers.

• They are looking to add their brand names to the parts of the cars so that the end consumer knows about the brand.

• Suppliers looks to intoduce a second brand for the aftermarket.

Impact to India

• Suppliers in India have the chance to make their brands globally known.

• Suppliers can look to enter the after market by introducing new products





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9.30-50 mega suppliers will lead the supplier pyramid and set the performance standards

• Number of top suppliers per module have reduced.• Number of module per vehicle also have reduced.• Integration of the system leaders.

Impact to India

• Better integration of the industry • Increased revenue• High reliability• Small scale industries will be affected



Content D

Topics

• 1 Requirement of Methods

• 2 Material flow /Process Analysis

• 3 Activity Based Costing

• 4 Target Costing



Explanation

1 Why we need methods?

• We need methods to improve the effeciency

and effectiveness of the product .Hence it helps

to reduce the complexity.

• It is also used to define and replicate the process

2 Material flow analysis

• Area system boundaries: Which supply network and hub are vital to consider supplier-manufacturer-trader

• It involves the flow of good and information.

• Timeline: day- week - month – year

Average flow of information

• Transport and storage





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• Processing time and waiting time

Activity Based Costing:

Defining the process, main process and process areas.

Cost driver

Plan costing for every process

Calculation for plan-volume

Remaining cost as surcharge cost.

Target Costing:

Learning:Activity based costing:Helps in Better management

Helps to identify inefficient departments, products and activities

Helps to control costs

Target Costing:The main purpose of this is to control and reduce costs in order to get more profit.

Decisions taken at the beginning





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• a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design

• The basic steps involved:

1. Define the product

2. Set the price and cost targets

3. Achieve the targets

4. Maintain competitive costs• Allowable costs= Target Price- Target costs

Is said to affect the final cost price

1. The number of different components

2. Whether the components are standard or not.

3. Materials used in the product.





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Value creation in Supply Chain

1.Overview over the value creation decisions

2.Make‐or‐Buy‐Decision

3.Core competencies of a company

4.Describing of business models

5.Postponement/ Speculation in the Supply Chain

a. Manufacturing and Logistics Postponement

b. Frame conditions as basis of decision‐making





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Explanation

Value added

Learning

Each player in the supply chain adds value from the raw materail producer to the trader adds value to the product.

The customer is dependant on the trader and the trader is dependant on the OEM and the OEM on the supplier





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Explanation

Added value strategies

Make or Buy:

This is a major decision a company has to make,whether the outsource a service or component to another company.

Reasons for outsourcing

Higher concentration on the own core competencies

Shortage / lack of Know‐how or qualified labour

Higher and better performance

Optimal scaling of production

Cost efficiency / cost reduction through less Total Cost of Ownership

Mobility of working places and data

Mobility of working places and data

Faster reaction on changes in the environment

No own investments (software, hardware, new technologies)

Learning

Make or buy decision of a company is based on whether the company is confident enough or has enough time and resources to make a product or service the customer.

If the company sees if it is cost effective and saves time for the company,the company will outsource the product or service.

The present trend in major OEM's is that they outsource majority of their components and services to the suppliers

Than they would do earlier.Only 20% of the work is done by the OEM's in the autombile industry

eg. Automobile industry (BMW)





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Explanation

Transaction Cost Theory:

Founded by willamson and further developed by Jarillo and Ouchi.

It involves the terms IC(Internal cost) and External cost (EC)

Keynote of comparison of costs:

1. Intern costs (IC)

2. Extern costs (EC) = Ext. Price (EP) + TAK (TC)

Comparison: EP + TC > IC , i.e. integrate

Comparison: EP + TC < IC , i.e. additional purchasing

Ouchi and Jarillo have extended the alternatives „market or

hierarchy“ :

Market: Market and strategic network

Hierarchy: Bureaucracy and clans

Learning

Transaction cost is a cost incurred in making an economic exchange

eg.Buying a spatula from a store; to purchase the spatula, The costs will be not only the price of the spatula itself, but also the energy and effort it requires to find out which of the various spatula products you prefer.

This theory is required when the borders between companies vanishes (when transactions between companies increases)





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In a market people involved deal on the basis of spot prices.

Beauraucracy involves employment contracts and internal organization.

Clans involves long term relationships without concrete contracts and formal organization.

Strategic network involves spcial long term privity of contracts to indepentant partners.





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Explanation

Heterarchy or Hierarchy

Learning

Heterarchy is better than hierarchy because there is also a discussion and feedback

Transaction costs are lower

Ideas are generated faster

Changes when required can also be implemented faster





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Explanation

Core competencies:

Learning:

Every company must be aware of its core competencies in order to survive in the global environment..

Knowing the core competencies of a company can help save resources, manpower and money





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Explanation Learning

A company must know to value its customer

A company must protect itself from imitation by competitors eg. Zara supply chain

A company must have products which can be easily differentiable.

A company must diversify into new markets when there is a huge potential eg.Apple with the iPhone





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Postponement/Speculation in the added value

Postponement:

Postponement of the customer related added value processes in of in direction „Raw material/downwards in the SC“

Grundgedanke: avoiding of risks in the case of false costumer prognosis

Seperation point between postponement and speculation is called

Added value: Production (materiell) and logistics (room‐/temporaly)

Learning:

If the product value is big eg. Porsche car then the company has to postpone its decision as late as possible on how many porsche cayenne cars needs to be produced depending on external and internal factors.

If the value of the product is less eg.candythen the company can offerd to speculate.Sine there will not be a significant loss for the company even if there is no strong demand for the product





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Explanation:

Speculation: (Opposide of Postponement‐Strategie)

Speculation of the costumer expectations

Risk of a false customer assess.

Fundamental question: Use of cost‐ and time advantage Nutzen von Kosten‐ und

Time advantage in the added value





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GIMS - Logistics and SCM - Personal Master File

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