INTERNATIONAL SUPPLY CHAIN MANAGEMENT AND

LOGISTICS

MIB- PAPER 545

CONTENTS

SECTION A1. Basic framework 2. Integrated SCM3. Managing Relationship4. Purchasing process5. SCM and Information management

SECTION B6. Logistic system7. Transport fundamentals8. General structure of shipping9. International air transport10. Sea transport11. Warehousing and inventory management

BASIC FRAMEWORK OF SUPPLY CHAIN MANAGEMENT

MEANING :

A supply chain is a network of facilities and distribution options that

performs the functions of procurement of materials,

transformation of these materials into intermediate and finished

products, and the distribution of these finished products to

customers.

Customer

Supplier

SUPPLY CHAIN STAGES

Manufacturer

RetailerDistributor

Forwarding Agent

First of all the Raw Materials goes to the Manufacturer where Raw Materials are converted into Finished Goods. After that the Goods are supplied to Distributor & Retailer with the help of various Modes of Transport which comes to an end with Customer.

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory and finished goods from point-of-origin to point-of-consumption.

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) is a process of integrating/utilizing suppliers, manufacturers, warehouses and retailers, so that goods are produced and delivered at the right quantities, and at the right time, while minimizing costs as well as satisfying customer requirements.

SUPPLY CHAIN EXISTENCE

Supply chains exist in both service and manufacturing organizations,

although the complexity of the chain may vary greatly from

industry to industry and firm to firm.

Supply Chain Flows

Consumer

Materials Flow

Information Flow

Monetary Flow

Supply chain execution is managing and coordinating the movement of materials, information and funds across the supply chain.

Manufacturer

Objective of Supply Chain

The objective of Supply chain concept is to synchronize the service requirements of the customer with the flow of materials from suppliers, such that the apparent contradictory situation of conflicting goals of high customer service, low inventory investment and low operating costs may be balanced (or optimized).

Components of SCM

Plan : This is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service.

Source : Choose the suppliers that will deliver the goods and services you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships.

Make : Schedule the activities necessary for production, testing, packaging and preparation for delivery.

Deliver : Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.

Return : Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.

KEY ISSUES IN SUPPLY CHAIN MANAGEMENT

Increased outsourcing

Large global supply networks

Increased competition

Consumer driven

Today’s Supply Chain Reality

SUPPLY CHAIN DECISIONS

STRATEGIC

TACTICAL

OPERATIONS

SENIORMANAGEMENT

MIDDLEMANAGEMENT

OPERATIONAL PERSONNEL

STRATEGIC DECISIONS

Strategic network optimization, including the number, location, and size of warehouses, distribution centers and facilities.

Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements.

Product design coordination, so that new and existing products can be optimally integrated into the supply chain, load management

Information Technology infrastructure, to support supply chain operations.

Where-to-make and what-to-make-or-buy decisions Aligning overall organizational strategy with supply strategy.

TACTICAL DECISIONS Sourcing contracts and other purchasing decisions. Production decisions, including contracting, locations,

scheduling, and planning process definition. Inventory decisions, including quantity, location, and

quality of inventory. Transportation strategy, including frequency, routes,

and contracting. Benchmarking of all operations against competitors and

implementation of best practices throughout the enterprise.

Milestone payments

OPERATIONAL DECISIONS Daily production and distribution planning, including all

nodes in the supply chain. Production scheduling for each manufacturing facility in

the supply chain (minute by minute). Demand planning and forecasting, coordinating the

demand forecast of all customers and sharing the forecast with all suppliers.

Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.

Inbound operations, including transportation from suppliers and receiving inventory.

Production operations, including the consumption of materials and flow of finished goods.

Outbound operations, including all fulfillment activities and transportation to customers.

Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. 

Supply Chain Management Software

Today IT industry has developed various Software's which helps the

Company to store their current data and also anticipate their

future needs relating to Supply System with the help of Surveys at

different levels. E.g.- SAP, Lotus etc.

CONCLUSION

Thus from supply to supply chain to supply chain system to supply chain

management, we can conclude that in the present scenario of globalization ,

liberalization & privatization, the effective management of supply chain system is very essential for medium & large scale companies if they want to

portray a lasting image in international market.

LOGISTICS

SEVEN R’s DESCRIBING LOGISTICS

RIGHTPRICE

RIGHTCUSTOMER

RIGHTTIME

RIGHTPLACE

RIGHTCONDITION

RIGHTQUANTITY

RIGHTPRODUCT

LOGISTICSOFINCOME

LOGISTICS

The process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

- Council of Logistics Management

LOGISTICS CREATES COMPETITIVE ADVANTAGE

Optimizes operations cost and productivity.

Efficient utilization of assets. Facilitating internal business fulfillment

functions. Integrating external channel suppliers. Achieving conformance to performance

requirements.

FUNCTIONAL DEFINITION OF LOGISTICS

LOGISTICSMANAGEMENT

MATERIALS MANAGEMENT

PHYSICALDISTRIBUTIONMANAGEMENT

Inbound Logistics

Functions

Outbound Logistics

Functions

SCM AND LOGISTICS

The science of logistics has evolved from a purely operation function to a competitive weapon capable of providing goods and services to the farthest regions of the supply chain.

VALUE CHAIN ANALYSIS

ORIGIN OF THE CONCEPT

The value chain, also known as value chain analysis, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.

MEANING A value chain is a chain of activities. Products pass all activities of the chain

in order and at each activity the product gains some value.

The chain of activities gives the products more added value than the sum of added values of all activities.

PRIMARY VALUE CHAIN ACTIVITIES

Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required.

Operations: the processes of transforming inputs into finished products and services.

Outbound Logistics: the warehousing and distribution of finished goods.

Marketing & Sales: the identification of customer needs and the generation of sales.

Service: the support of customers after the products and services are sold to them.

SUPPORT ACTIVITIES The infrastructure of the firm: organizational

structure, control systems, company culture, etc. Human resource management: employee recruiting,

hiring, training, development, and compensation. Technology development: technologies to support

value-creating activities. Procurement: purchasing inputs such as materials,

supplies, and equipment.

PORTER’S GENERIC VALUE CHAIN

SCOPE OF THE CONCEPT- THE VALUE

SYSTEM

SupplierValue Chain

>

FirmValue Chain

>

ChannelValue Chain

>

BuyerValue Chain

BUILDING COMPETITIVE ADVANTAGE

Cost advantage: by better understanding costs and squeezing them out of the value-adding activities.

Differentiation: by focusing on those activities associated with core competencies and capabilities in order to perform them better than do competitors.

LINKAGES BETWEEN VALUE CHAIN ACTIVITIES

Value chain activities are not isolated from one another.

Rather, one value chain activity often affects the cost or performance of other ones.

Linkages may exist between primary activities and also between primary and support activities.

ANALYZING BUSINESS UNIT RELATIONSHIPS

Interrelationships among business units form the basis for a horizontal strategy.

Such business unit interrelationships can be identified by a value chain analysis.

Tangible interrelationships offer direct opportunities to create a synergy among business units.

OUTSOURCING VALUE CHAIN ACTIVITIES

Whether the activity can be performed cheaper or better by suppliers.

Whether the activity is one of the firm's core competencies from which stems a cost advantage or product differentiation.

The risk of performing the activity in-house (if the activity relies on fast-changing technology or the product is sold in a rapidly-changing market).

Whether the outsourcing of an activity can result in business process improvements such as reduced lead time, higher flexibility, reduced inventory, etc.

INTERNATIONALIZATION OF SUPPLY CHAIN MANAGEMENT

INTERNATIONAL SUPPLY CHAIN MANAGEMENT

International supply chain management is domestic supply chain management spread over a larger geographic area.

FORCES THAT DRIVE THE TREND TOWARDS GLOBALIZATION:

Global market forces Pressures created by foreign competitors Opportunities created by foreign customers

Technological forces Global cost forces Political and economic forces

Regional trade agreements Avoiding tariffs or quotas

INTERNATIONAL SUPPLY CHAIN SYSTEMS

1. INTERNATIONAL DISTRIBUTION SYSTEMS

Manufacturing occurs domestically, but distribution and some marketing takes place overseas.

2. INTERNATIONAL SUPPLIERS Raw materials and components are furnished

by foreign suppliers, but final assembly is performed domestically.

In some cases, the final product is then shipped to foreign markets.

3. OFFSHORE MANUFACTURING

The product is typically sourced and manufactured in a single foreign location.

It is then shipped back to domestic warehouses for sale and distribution.

4. FULLY INTEGRATED GLOBAL SUPPLY CHAIN

The products are supplied, manufactured, and distributed form various facilities located throughout the world.

ADVANTAGES AND RISKS:

Advantages Vast economies of scale in terms of production,

management, distribution, marketing. Increase in potential markets, sales and profits.

Risks Fluctuating exchange rates. Customer reactions, competitor reactions,

supplier reactions, government reactions.

ADDRESSING GLOBAL RISKS

Speculative strategies – a company bets on a single scenario.

Hedge strategies – any losses in the supply chain are offset by gains in another part.

Flexible strategies – a company takes advantage of different scenarios by having multiple suppliers and excess manufacturing capacities in different countries.

Production shifting- e.g. factory relocation Information sharing – anticipate market changes & find

new opportunities Global coordination

REQUIREMENTS FOR GLOBAL STARTEGY IMPLEMENTATION

Michael Mcgarth and Richard Hoole: Product development Purchasing- qualified management team Production

excess capacity and plants in several region Interfactory communication & centralized management

Demand management Order fulfillment

ISSUES IN INTERNATIONAL SUPPLY CHAIN MANAGEMENT

INTERNATIONAL V/S REGIONAL PRODUCTS

Region-specific productsEven if regional designs are different, effective supply chain management can take advantage of common components or subassemblies within the different designs.

True global productsCoca-cola, Levi’s jeans, McDonald burger.Essentially distributed and sold in the same way throughout the world.

LOCAL AUTONOMY V/S. CENTRAL CONTROL

Centralized control can be important in taking advantage of the global opportunities but in many cases, it is beneficial to allow local autonomy in the supply chain.

MISCELLANEOUS DANGERS

Exchange rate fluctuations. Administration of offshore facilities. Cheap but unskilled labour. Collaborators becoming competitors. Foreign governments.

DIFFERENCES THAT MANAGERS MUST CONSIDER WHEN DESIGNING INTERNATIONAL SUPPLY CHAINS.

Cultural differences- language, beliefs, customs.

Infrastructure- highway systems, ports, communication and information systems, advanced manufacturing techniques

Performance expectation and evaluation- operating standards with regards to contracts, environmental regulations, formal partnership contracts, research and development, role of government, customer service measures.

Information system availability Human resources

MAJOR DIFFERNECES BETWEEN DIFFERENT REGIONS

First world Emerging Third world

Infrastructure Highlydeveloped

Underdevelopment

Insufficient to support advanced logistics

SupplierOperatingStandards

High Variable Typically notconsidered

Information systemavailability

Generally available

Support system not available

Not available

Humanresources

Available Available with some differences

Often difficult to find

CONCLUSION

International supply chains covers the spectrum from domestic supply chains with some international product distribution to a fully integrated global supply chain. A successful international supply chain requires true flexibility in operations and in spirit with a clear understanding of regional logistics differences.