Overview of Logistics

and
Supply Chain Management
Dr.T.A.S.Vijayaraghavan,
XLRI Jamshedpur

Supply Chain Management

• Supply Chain Management is now part of

the business vocabulary.
• Impact of global marketplace drastically
changed the landscape of business.
• Change was rapid and continuous in the
1990s.
• Doing business in the comfort zone was
no longer synonymous with success
Sorry for the clichés!
Most books and lectures start with these and hence I too
have to!!

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 Customers,
Field demand
Sources: Regional Warehouses: centers
plants Warehouses: stocking sinks
vendors stocking points
ports points

Supply

Inventory &
warehousing
costs
Production/
purchase Transportation Transportation
costs costs costs
Inventory &
warehousing
costs

Competitive Advantage and “Three C’s”

CUSTOMERS
Needs seeking benefits at
acceptable prices

Va
lue
lu e
Va

COMPANY COMPETITOR
Cost Differentials
Assets & Utilization Assets & Utilization

•Success in market place is based around the triangular

linkage of the Company, its Customers and its Competitors-
the “Three C’s”.

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• Successful Companies either have a productivity advantage or
they have a “Value” advantage or a combination of the two

•Productivity Advantage gives a lower cost profile and the Value

Advantage gives the product or offering a differential ‘plus’ over
competitive offerings

•Supply Chain and Logistics Management can provide a multitude of

ways to increase efficiency and productivity and hence contribute
significantly to reduced unit costs

•Companies have focused upon service as a means of competitive

advantage

Logistics and Competitive Advantage

Cost and Service

High

Service Leader
Responsiveness Leader
Value Advantage

Commodity Market Cost Leader

Low

Efficiency

Low High

Productivity Advantage

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 Logistics in the Manufacturing Firm

• Profit 4% Profit
Logistics
Cost
• Logistics Cost 21% Marketing
Cost

• Marketing Cost 27%

Manufacturing
• Manufacturing Cost 48% Cost

A Typical Supply Chain

Customer wants
P&G or other third
Supermarket detergent and goes
manufacturer party DC to Supermarket

Chemical
Plastic XYZ
manufacturer
Producer Packaging
(e.g. Oil Company)

Chemical
Paper Timber
manufacturer
(e.g. Oil Company)
Manufacturer Industry

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 Flows in a Supply Chain

Information

Product
Customer
Funds

The Changing Business Landscape

Five Driving Forces

• The Empowered Consumer

• Power Shift in the Supply
Chain
• Liberalization
• Globalization
• Technology
(I call them as Pancha Bhuthas of Business!)

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 Five Driving Forces
First… The Empowered Consumer
• Impact on logistics is more
direct.
• Informed consumers have
low tolerance for poor quality
in products and services.
• Changing demographics
commands 24/7 service.
• Increased customer service
increases the importance of
logistics and supply chains.

Demand Management is
tougher in supply chains!!

This is what I call a challenge: Five

Thousand people out there to
manage the supply chain…..and
we two are holding the fort on the
demand front

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 So.. Customer holds the fort
in Supply Chains and it is a
dynamic force

So customer is the King or

Queen and so effectiveness is
emphasized all throughout

I do appreciate your honesty in

admitting to a weak supply chain
management. But that still doesn’t
explain the one-and-a half-idly

Five Driving Forces

Second…….Power Shift in the Supply Chain
Power shift in the supply chain towards
retailers and customers from Manufacturing

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 Five Driving Forces

Power Shift in the Supply

Chain
– Large retailers more
demanding and commanding.
– Focus upon distribution costs
– Changing logistics and supply
chain strategies resulted from
shifts in the balance of
economic power.

But this can possibly cause something else in the supply chain!!!!

The Dynamics of the Supply Chain

Order Size

Customer
Customer
Demand
Demand

Retailer
Retailer Orders
Orders
Distributor
Distributor Orders
Orders

Production
Production Plan
Plan

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

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 What Supply Chain Gets...

Bullwhip Effect….
Who triggers that?
…..Retailers!!!!
Order Size

Customer
Customer
Demand
Demand

Production
Production Plan
Plan

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

What Supply Chain Wants…

Volumes

Production
Production Plan
Plan
Customer
Customer
Demand
Demand

Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

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 Five Driving Forces
Third……Liberalisation
• Changing economic controls
empowered creativity and
competition.
• Changes in transportation –
fewer or no economic controls
over rates and services.
• Change in financial institutions
blurred traditional differences
and increased competition.
• Change in the communications
industry also resulted in more
competition.
• Changes in the utility industry
allows more competition.

Five Driving Forces

Fourth…….Globalization
• Global marketplace concept
• Global network sourcing,
manufacturing, marketing and
distribution
• Global alternatives have
blossomed
• No geography --- access
available to the world
• Supply chain challenges
• New supply sources

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 Five Driving Forces
Fifth……..Technology
– Information Age
provides new and
unrestricted access
to the place aspect
of business.
– My time, my place
– IT as an enabler with
internet and satellite
communications

Result of reading an article on IBM’s supply chain

1. Request for Quote 3. Purchase Order

4. P. O. Confirmation 2. Quotation
13. Payment Order 6. Ship Order
/ Instr.
14. Remittance
15. Import 12. Export Supplier
Documents Documents
Buyer Bank
Bank st 7a. ice
nif
e Ma str. + Invo
Ma r Order/In 5. Shipper Order/Instr.
n ife 5. Shippe
7a. Air Freight st + Invoice
16. Proof of + Packing List
Delivery Terminal at Terminal
Destination ifest
at Origin
an
7a. M
Surface Carriers

11. Pre-al 7a. Ship Instr. Cycle

ert/Arriv
al Notice
L)
/O, Bo
ycle (S Freight Forwarder
O rder C
ipping
Capture 7b. Sh
Freight Forwarder
Gate Movement 8. Gate-in/ 8. Gate-out/
Capture
Gate-out Gate Movement
Gate-in
Terminal at (Gate-out/in)
Destination
10. Bay Plan 9. Bay Plan Terminal
Ocean Carrier at Origin

IBM’s Supply Chain is Complex, Extensive, Contains high value items and
Controlled Technologies.

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 I tried a Google search about Supply
Chain Management in the internet

The result was…………

Quick Response Manufacturing

Service level
Cash-to-Cash E-supply chain
Dis ERP
trib E-CRM
Supply chain utio
Strate n
gic So CRM, SRM MRP
urcing TOC
a in
ch E-auctions DRP
fa c tu rin g ue A
Agile Man
u l L ea PS
Va nM LP /A
Avai a E D PO
lable Logi nu Ou
to P stics B2B, B f ac t s
y romi 2C nt tur Ins our
n tor se
e m e
r
in
ce g
ou
rci cing/
ve n a g m e ng
In e nt sin g M a om
g e m c s C
Supply
Mana
ho
u isti ativ
e
ve
r e e d Log l l abor n t bo rati
Reve a gra
t Co me olla ng
one
rse au
ction W Inte p C nni g
P os t
P la castin ent
hi p e hm
Bullw en t e rce For lenis
em mm p
Qui
ocur E-co Re dor
Res k
c
E-pr n se J I Ven ged
sp o T a
pon
se e r Re Man tories
m F n
t C onsu lexib
le M Inve
ie n eplenish m en t an ufac
Effic Continuous R turin
g

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 And….you all thought
only the species called
Professors can confuse
you……….!!!!!!

(It’s all outsourced now!)

•The term SCM is relatively new and first

time appeared in 1982

•In 1990 academics first described SCM

from a theoretical standpoint to clarify the
difference from more traditional
approaches to managing the flow of
materials and the associated information.

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The initial usage of the term SCM
emphasized a reduction in inventory
both within and across firms but that
initial perspective has been broadening.

The term Logistics also has many

interpretations. From some statements
of SCM, it appeared that SCM is
Logistics across inter-organizational
boundaries

We will discuss first about Logistics

Management and later come to the
discussion on Supply Chain
Management

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