SUPPLY CHAIN & LOGISTIC

MANAGEMENT
UNIT 1

1 Supply Chain Concepts – Objectives of a Supply Chain

2 Stages of Supply Chain

3 Value Chain Process

4 Cycle view of Supply Chain Process

5 Key Issues in SCM

6 Logistics & SCM

7 Supply Chain Drivers and Obstacles

8 Supply Chain Strategies

9 Best Practices in SCM

10 Obstacles of Streamlined SCM

UNIT 2

1 Evolution and Objectives of Logistics

2 Components and Functions of Logistics Management

3 Distribution Related Issues and Challenges in Logistics Management

4 Gaining Competitive Advantage through Logistics Management

5 Transportation – Function, Cost & Mode of Transportation

6 Transportation Network and Decision

7 Containerization

8 Cross Docking
UNIT 3 Supply Chain Performance

1 Bullwhip effect and Reduction

2 Performance Measurement: Dimension, Tools of Performance Measurement

3 SCOR Model

4 Demand Chain Management

5 Global Supply Chain:

6 Challenges in establishing Global Supply Chain

7 Factor that influences designing Global Supply Chain Network

UNIT 4 Warehousing

1 Warehousing: Concept and Types

2 Warehousing facility Location & Network Design

3 Reverse Logistics

4 Outsourcing: Nature and Concept

5 Strategic decision to Outsourcing

6 Third Party Logistics (3PL)

7 Fourth Party Logistics (4PL)

UNIT 5

1 Supply chain and CRM Linkage

2 IT infrastructure used for Supply chain and CRM

3 Functions components for CRM

4 Green Supply Chain Management

5 Supply Chain sustainability

 UNIT 1-SUPPLY CHAIN CONCEPT

SCLM/U1 Topic 1

Supply Chain Concepts – Objectives of a Supply Chain

Supply Chain

A supply chain is a network between a company and its suppliers to produce and distribute a
specific product to the final buyer. This network includes different activities, people, entities,
information, and resources.

Supply chains are developed by companies so they can reduce their costs and remain competitive
in the business landscape.

A supply chain includes a series of steps involved to get a product or service to the customer.
The steps include moving and transforming raw materials into finished products, transporting
those products, and distributing them to the end user. The entities involved in the supply chain
include producers, vendors, warehouses, transportation companies, distribution centers, and
retailers.

The elements of a supply chain include all the functions that start with receiving an order to
meeting the customer’s request. These functions include product development, marketing,
operations, distribution, finance, and customer service.

• A supply chain is a network between a company and its suppliers to produce and
distribute a specific product or service.

• The entities in the supply chain include producers, vendors, warehouses, transportation
companies, distribution centers, and retailers.

• The functions in a supply chain include product development, marketing, operations,

distribution, finance, and customer service.

• Supply chain management results in lower costs and a faster production cycle.

The objective of a supply chain

The objective of every supply chain is to maximize the overall value generated. The value of a
supply chain generates the difference between what the final product is worth to the customer
and the effort of the supply chain expands in filling the customer’s request. For most commercial
supply chains, the value will be strongly correlated with supply chain profitability, the difference
between the revenue generated from the customer and the overall cost across the supply chain.
For most commercial supply chains, the value will be strongly correlated with supply chain
profitability, the difference between the revenue generated from the customer and the overall
cost across the supply chain.

For example, a customer purchasing a computer from Dell pays $2,000, which represents the
revenue the supply china receives. Dell and other stages of the supply chain incur costs to
convey information, produce components, store them, transport them, transfer funds, and so on.

The difference between the $2,000 that the customer paid and the sum of all costs incurred by the
supply chain to produce and distribute the computer represents the supply chain profitability.
Supply chain profitability is the total profit to be shared across all supply chain. Supply chain
success should be measured in terms of supply chain profitability and not in terms of the profits
at an individual stage.
SCLM/U1

Topic 2

Stages of Supply Chain

Supply chain management encompasses (Enclose) such a wide range of functions that it can
seem daunting, even to the most experienced international businessperson. However, the process
can be effectively modelled by breaking it down into several main strategic areas. One common
and very effective model is the Supply Chain Operations Reference (SCOR) model, developed
by the Supply Chain Council to enable managers to address, improve and communicate supply
chain management practices effectively. The SCOR model runs through five supply chain stages:
Plan, Source, Make, Deliver, and Return.

Stage 1: Plan

Planning involves a wide range of activities. Companies must first decide on their operations
strategy. Whether to manufacture a product or component or buy it from a supplier is a major
decision.

Companies must weigh the benefits and disadvantages of different options presented by
international supply chains.

Options include:

• Manufacturing a product component domestically

• Manufacturing a component in a foreign market by setting up international production

facilities

• Buying a component from a foreign supplier

• Buying a component from a domestic supplier

If companies are manufacturing products, they must decide how they will be produced.

Goods can be:

• Make to stock (produced and stored, awaiting customer orders);

• Make to order (constructed in response to a customer order);

• Configure to order (partially manufactured the product and completed it after a firm
customer order is received); or
 • Engineer to order (manufactured a product to unique specifications provided by a
customer).

Sometimes, goods can be produced by a combination of these methods. Companies must also
decide whether they will outsource manufacturing. This operations planning is essential because
these decisions influence the supply chain.

Planning also involves mapping out the network of manufacturing facilities and warehouses,
determining the levels of production and specifying transportation flows between sites. It also
involves assessing how to improve the global supply chain and its management processes.

When planning, companies should ensure that their supply chain management strategies align to
business strategies, that communication plans for the entire supply chain are decided and that
methods of measuring performance and gathering data are established before planning begins.

Stage 2: Source

This aspect of supply chain management involves organizing the procurement of raw materials
and components.

Procurement is the acquisition of goods and services at the best possible price, in the right
quantity and at the right time.

When sources have been selected and vetted, companies must negotiate contracts and schedule
deliveries. Supplier performance must be assessed and payments to the suppliers made when
appropriate. In some cases, companies will be working with a network of suppliers. This will
involve working with this network, managing inventory and company assets and ensuring that
export and import requirements are met.

Stage 3: Make

This stage is concerned with scheduling of production activities, testing of products, packing and
release. Companies must also manage rules for performance, data that must be stored, facilities
and regulatory compliance.

Stage 4: Deliver

The delivery stage encompasses all the steps from processing customer inquiries to selecting
distribution strategies and transportation options. Companies must also manage warehousing and
inventory or pay for a service provider to manage these tasks for them.

The delivery stage includes any trial period or warranty period, customers or retail sites must be
invoiced and payments received, and companies must manage import and export requirements
for the finished product.
Stage 5: Return

Return is associated with managing all returns of defective products, including identifying the
product condition, authorizing returns, scheduling product shipments, replacing defective
products and providing refunds.

Returns also include “end-of-life” products (those that are in the end of their product lifetime and
a vendor will no longer be marketing, selling, or promoting a particular product and may also be
limiting or ending support for the product).

Companies must establish rules for the following:

• Product returns

• Monitoring performance and costs

• Managing inventory of returned product

SCLM/U1 Topic 3

Value Chain Process

A value chain is a business model that describes the full range of activities needed to
create a product or service. For companies that produce goods, a value chain comprises
the steps that involve bringing a product from conception to distribution, and everything in
between—such as procuring raw materials, manufacturing functions, and marketing
activities.

A company conducts a value-chain analysis by evaluating the detailed procedures involved

in each step of its business. The purpose of value-chain analyses is to increase production
efficiency so that a company may deliver maximum value for the least possible cost.

Components of a Value Chain

In his concept of a value chain, Porter splits a business’s activities into two categories,
“primary” and “support,” whose sample activities we list below. Specific activities in each
category will vary according to the industry.

Primary activities consist of five components, and all are essential for adding value and
creating a competitive advantage:

(i) Inbound logistics

Functions like receiving, warehousing, and managing inventory.

(ii) Operations

Procedures for converting raw materials into finished product.

(iii) Outbound logistics

Activities to distribute a final product to a consumer.

(iv) Marketing and sales

Strategies to enhance visibility and target appropriate customers—such as advertising,

promotion, and pricing.

(v) Service

Programs to maintain products and enhance consumer experience—customer service,

maintenance, repair, refund, and exchange.

Support Activities
The role of support activities is to help make the primary activities more efficient. When you
increase the efficiency of any of the four support activities, it benefits at least one of the five
primary activities. These support activities are generally denoted as overhead costs on a
company’s income statement:

(i) Procurement

How a company obtains raw materials.

(ii) Technological development

Used at a firm’s research and development (R&D) stage—designing and developing

manufacturing techniques; and automating processes.

(iii) Human resources (HR) management

Hiring and retaining employees who will fulfill business strategy; and help design, market,
and sell the product.

(iv) Infrastructure

Company systems; and composition of its management team—planning, accounting,

finance, and quality control.
VALUE CHAIN PROCESS
Step 1 – Identify subactivities for each primary activity

For each primary activity, determine which specific subactivities create value. There are
three different types of subactivities:-

(i) Direct activities: Create value by themselves. For example, in a book publisher’s
marketing and sales activity, direct subactivities include making sales calls to bookstores,
advertising, and selling online.

(ii) Indirect activities: Allow direct activities to run smoothly. For the book publisher’s sales
and marketing activity, indirect subactivities include managing the sales force and keeping
customer records.

(iii) Quality assurance: Activities ensure that direct and indirect activities meet the
necessary standards. For the book publisher’s sales and marketing activity, this might
include proofreading and editing advertisements.

Step 2 – Identify subactivities for each support activity.

For each of the Human Resource Management, Technology Development and

Procurement support activities, determine the subactivities that create value within each
primary activity. For example, consider how human resource management adds value to
inbound logistics, operations, outbound logistics, and so on. As in Step 1, look for direct,
indirect, and quality assurance subactivities.

Then identify the various value-creating subactivities in your company’s infrastructure.

These will generally be cross-functional in nature, rather than specific to each primary
activity. Again, look for direct, indirect, and quality assurance activities.

Step 3 – Identify links

Find the connections between all of the value activities you’ve identified. This will take time,
but the links are key to increasing competitive advantage from the value chain framework.
For example, there’s a link between developing the sales force (an HR investment) and
sales volumes. There’s another link between order turnaround times, and service phone
calls from frustrated customers waiting for deliveries.

Step 4 – Look for opportunities to increase value

Review each of the subactivities and links that you’ve identified, and think about how you
can change or enhance it to maximize the value you offer to customers (customers of
support activities can be internal as well as external).
SCLM/U1 Topic 4

Cycle view of Supply Chain Process

Supply Chain is a sequence of processes and flows that take place within and between
different stages and combine to fill a customer need for a product. The processes in a
Supply Chain are divided into series of cycles, each performed at the interface between two
successive stages of a Supply Chain. Cycle view of Supply Chain is useful in making
operational decisions as role of each member of Supply Chain is clearly defined.
SCLM/U1 Topic 5

Key Issues in SCM

Key Issue #1: Globalization

Globalization presents several critical supply chain management challenges to enterprises

and organizations:

First, to reduce costs across the supply chain, enterprises are moving manufacturing
operations to countries which offer lower labor costs, lower taxes, and/or lower costs of
transport for raw materials. For some companies, outsourcing production involves not only a
single country, but several countries for different parts of their products.

However, outsourcing not only extends the production process globally, but also the
company’s procurement network. Having suppliers in different geographic locations
complicates the supply chain. Companies will have to deal with, coordinate, and collaborate
with parties across borders regarding manufacturing, storage, and logistics. Furthermore,
they have to extend or maintain fast delivery lead times to customers who want to receive
their products on schedule despite the increased complexity in the manufacturer’s supply
chains. Finally, they also have to maintain real-time visibility into their production cycle —
from raw materials to finished goods — to ensure the efficiency of their manufacturing
processes.

Second, as companies expand sales into global markets, localization of existing products
requires a significant change in the supply chain as companies adapt their products to
different cultures and preferences. There is an inherent risk of losing control, visibility, and
proper management over inventory , especially if enterprise applications are not
integrated. This requires managing diverse structures of data across geographies
effectively.

For example: many manufacturers in Asia still handle trading partner communications via
fax and email while suppliers in North America and Europe have utilized EDI for
decades. As technology matures, suppliers in emerging markets may skip EDI altogether
and move to a more modern API driven approach to communication just as developing
countries have skipped land lines in favor cell phones.

Supply chain practitioners need to ask if their enterprise technology is prepared to handle
these diverse forms of communication that arise from Globalization, and build a business
case to stay prepared.

Key Issue #2: Fast-changing Markets

According to EduCBA, consumer behavior is affected by cultural, social, personal, and

psychological factors that are quickly being changed by technology and globalization. Social
media is creating new pressures for consumers to conform while putting pressure on
enterprises to utilize these sources of information to respond to changing preferences in
order to stay interesting and relevant.

Like globalization, the fast-changing consumer market also brings with it supply chain
management challenges:

First, products have shorter life cycles due to rapidly changing market demands.
Enterprises are under pressure to keep up with the latest trends and innovate by introducing
new products, while keeping their total manufacturing costs low because they understand
that trends will not last for a long time. This also demands a flexible supply chain that can
be utilized for manufacturing other products and for future projects.

Second, aside from new products, companies also need to constantly update product
features. Enhancing product features requires enterprises to redesign their supply chain to
accommodate product changes.

Finally, innovation presents a challenge in forecasting demand for new products. The
constant innovation necessitated by fast-changing markets also means enterprises will
constantly have to anticipate demand for new products. Enterprises need to create and
maintain an agile supply chain that can respond well to spikes and dips in demand and
production needs.

Companies should be asking if they have all the data needed to make planning decisions to
address challenges created by fast-changing markets. For example, if stated lead times
from suppliers are longer than actual times, this will lead to higher inventory levels than are
actually required and affect costly decisions around network planning and
optimization. Omnichannel retail has reated silos of sales data that have to be blended and
harmonized to detect demand signals earlier in the planning process as well.

Key Issue #3: Quality and Compliance

Aside from influencing consumer behavior, social media highlights the importance of having
high-quality products. According to research conducted by eMarketer, reading reviews,
comments, and feedback is the top social media activity that influences online shopping
behavior. Furthermore, social media has not only raised consumers’ expectations of product
quality, but has also amplified the damages caused by product recalls. Thus, enterprises
are under increasing pressure to create high-quality products and to create them
consistently. They can do so by addressing quality at every level of the supply chain, such
as raw materials procurement, manufacturing, packaging, logistics, and product handling.

Product quality often goes hand-in-hand with compliance. Enterprises need to ensure that
they meet local and international regulatory standards in manufacturing, packaging,
handling, and shipping of their products. Aside from passing quality control and safety tests,
enterprises are also required to prepare compliance documents such as permits, licenses,
and certification which can overwhelm them and their supply chain management systems.
Emerging capabilities like IoT, Smart Packaging, and Blockchain are changing how
compliance is enforced and measured. However, these innovations will produce streams of
data that can’t be handled with the enterprise technology of the past 20 years. Managers
should carefully consider where these investments make sense and asking IT if the
business is utilizing platforms based on micro-services and big data to support these heavy
data lifting requirements.

SCLM/U1 Topic 6

Logistics & SCM

All the activities, associated with the sourcing, procurement, conversion and logistics
management, comes under the supply chain management. Above all, it encompasses the
coordination and collaboration with the parties like suppliers, intermediaries, distributors and
customers. Logistics Management is a small portion of Supply Chain Management that
deals with the management of goods in an efficient way.

Supply Chain Management, it is a broader term which refers to the connection, right from
the suppliers to the ultimate consumer.

It has been noticed that there is a drastic change in the manner in which business was
conducted many years ago and now. Due to the improvement in the technology, which
leads to the development of all key areas of business. Supply Chain Management also
evolved as an improvement over Logistics Management, from past years. Check out this
article to understand the difference between Logistics Management and Supply Chain
Management.

Comparison
 BASIS FOR SUPPLY CHAIN
LOGISTICS MANAGEMENT
COMPARISON MANAGEMENT

The process of integrating the The coordination and

movement and maintenance management of the supply
Meaning
of goods in and out the chain activities are known as
organization is Logistics. Supply Chain Management.
Objective Customer Satisfaction Competitive Advantage
The concept of Logistics has Supply Chain Management is
Evolution
been evolved earlier. a modern concept.
How many organizations
Single Multiple
are involved?
Logistics Management is a Supply Chain Management is
One in
fraction of Supply Chain the new version of Logistics
another
Management. Management.
Logistics Management
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:

(i) Inbound Logistics: The activities which are concerned with procurement of material,
handling, storage and transportation

(ii) Outbound Logistics: The activities which are concerned with the collection,
maintenance, and distribution or delivery to the final consumer.

Apart from these, other activities are warehousing, protective packing, order fulfillment,
stock control, maintaining equilibrium between demand and supply, stock management.
This will result in savings in cost and time, high-quality products, etc.

Supply Chain Management

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.
 These organizations may include the firms with whom the organization is currently working
like partners or suppliers, manufacturers, wholesalers, retailers, and consumers. The
activities may include integration, sourcing, procurement, production, testing, logistics,
customer services, performance measurement, etc.

Supply Chain Management has a multi-dimensional approach which manages the flow of
raw materials and works in progress (semi-finished goods) within the organization and the
end product outside the organization till it reaches the hands of the final consumer with a
complete emphasis on the customer requirement.

Key Differences between Logistics and Supply Chain Management

The following are the major differences between logistics and supply chain management:

1. The flow and storage of goods inside and outside the firm are known as Logistics. The
movement and integration of supply chain activities are known as Supply Chain
Management.
2. The main aim of Logistics is full customer satisfaction. Conversely, the main aim behind
Supply Chain Management is to gain a substantial competitive advantage.
3. There is only one organization involved in Logistics while some organizations are involved
in Supply Chain Management.
4. Supply Chain Management is a new concept as compared to Logistics.
5. Logistics is only an activity of Supply Chain Management.
 Logistics is a very old term, firstly used in the military, for the maintenance, storage and
transportation of army persons and goods. Nowadays, this term is used in many spheres,
not specifically in the military after the evolution of the concept of Supply Chain
Management. It has also been said that SCM is an addition over Logistics Management as
well as SCM comprises of logistics. Both are inseparable. Hence they do not contradict but
supplement each other. SCM helps Logistics to be in touch with the transportation, storage
and distribution team.

SCLM/U1 Topic 7

Supply Chain Drivers and Obstacles

Supply Chain Drivers

Supply chain capabilities are guided by the decisions you make regarding the five supply
chain drivers. Each of these drivers can be developed and managed to emphasize
responsiveness or efficiency depending on changing business requirements.

The five drivers provide a useful framework for thinking about supply chain capabilities.
Decisions made about how each driver operates will determine the blend of responsiveness
and efficiency a supply chain is capable of achieving. The five drivers are illustrated in the
diagram below:

1. PRODUCTION

This driver can be made very responsive by building factories that have a lot of excess
capacity and use flexible manufacturing techniques to produce a wide range of items. To
be even more responsive, a company could do their production in many smaller plants that
are close to major groups of customers so delivery times would be shorter. If efficiency is
desirable, then a company can build factories with very little excess capacity and have
those factories optimized for producing a limited range of items. Further efficiency can also
be gained by centralizing production in large central plants to get better economies of scale,
even though delivery times might be longer.

2. INVENTORY

Responsiveness can be had by stocking high levels of inventory for a wide range of
products. Additional responsiveness can be gained by stocking products at many locations
so as to have the inventory close to customers and available to them
immediately. Efficiency in inventory management would call for reducing inventory levels of
all items and especially of items that do not sell as frequently. Also, economies of scale and
cost savings can be gotten by stocking inventory in only a few central locations such as
regional distribution centers (DCs).
3. LOCATION

A location decision that emphasizes responsiveness would be one where a company

establishes many locations that are close to its customer base. For example, fast-food
chains use location to be very responsive to their customers by opening up lots of stores in
high volume markets. Efficiency can be achieved by operating from only a few locations and
centralizing activities in common locations. An example of this is the way e-commerce
retailers serve large geographical markets from only a few central locations that perform a
wide range of activities.

4. TRANSPORTATION

Responsiveness can be achieved by a transportation mode that is fast and flexible such as
trucks and airplanes. Many companies that sell products through catalogs or on the
Internet are able to provide high levels of responsiveness by using transportation to deliver
their products often within 48 hours or less. FedEx and UPS are two companies that can
provide very responsive transportation services. And now Amazon is expanding and
operating its own transportation services in high volume markets to be more responsive to
customer desires. Efficiency can be emphasized by transporting products in larger batches
and doing it less often. The use of transportation modes such as ship, railroad, and
pipelines can be very efficient. Transportation can also be made more efficient if it is
 originated out of a central hub facility or distribution center (DC) instead of from many
separate branch locations.

5. INFORMATION

The power of this driver grows stronger every year as the technology for collecting and
sharing information becomes more wide spread, easier to use, and less
expensive. Information, much like money, is a very useful commodity because it can be
applied directly to enhance the performance of the other four supply chain drivers. High
levels of responsiveness can be achieved when companies collect and share accurate and
timely data generated by the operations of the other four drivers. An example of this is the
supply chains that serve the electronics market; they are some of the most responsive in
the world. Companies in these supply chains, the manufacturers, distributors, and the big
retailers all collect and share data about customer demand, production schedules, and
inventory levels. This enables companies in these supply chains to respond quickly to
situations and new market demands in the high-change and unpredictable world of
electronic devices (smartphones, sensors, home entertainment and video game equipment,
etc.).

Obstacles to Achieving Strategic Fit

Increasing Variety of Products: In the era of mass customization production variety is
increasing.

The customers becoming increasingly demanding. Today’s customers are demanding faster
fulfillment, better quality, and better performing products for the same price that they are
paying today.

The supply chain is getting fragmented. At one time vertical integration was the order of the
day. But the present trend is to concentrate on core competence and outsource more
activities. Thus the supply chain is more fragmented now.

Globalization is creating global supply chains and hence physical distance is increasing
between a company and its suppliers and a company and its customers.

While creating a strategy is difficult, executing it is much more difficult. Many companies
understand Toyota Production System now, but still find it difficult to implement and
operate.

SCLM/U1

Topic 8 Supply Chain Strategies

Supply chain and logistics improvements are neither easy nor inexpensive. Better
strategic and operational investments and decisions in supply chain and logistics can help
to reduce cost by 10% to 40%, and also to grow overall corporate revenues through
enhanced customer service and demand management.
 In response to such challenges, the Stewart School of Industrial and Systems Engineering’s
Supply Chain and Logistics Institute (SCL) established a Center of Focused Research in
Supply Chain Strategy. Faculty and students from ISyE bring a wide range of backgrounds
and methodology to the supply chain strategy research done in our partnerships with
industry. This work involves developing business and operational strategies for:

(1) Designing, synchronizing and optimizing global supply chains,

(2) Integrating people, process, and technologies to achieve supply chain objectives,

(3) Developing competitive advantage from outsourcing and collaboration, and

(4) Providing supply chain oversight and control. The Center is involved with a variety of
related projects.

Designing and controlling efficient and effective supply chains is an extremely important
factor in reducing costs and maximizing revenues in companies. In fact, developing
strategies for supply chain improvement is also a matter of survival in today’s highly
competitive and global environment. Join the Stewart School of ISyE in this exciting area of
research that include:

• Designing, synchronizing and optimizing global supply chains

• Integrating people, process, and technologies to achieve supply chain objectives
• Developing competitive advantage from outsourcing and collaboration
• Providing supply chain oversight and control
 SCLM/U1 Topic 9

Best Practices in SCM

“The major trends in business right now — low-cost country sourcing, outsourcing,
customization, globalization — all create tremendous complexities in a supply chain,” said
Steve Matthesen, vice president and global leader for supply chain at Boston Consulting
Group, in a special business operations report. “In most cases, however, companies have
not changed how they manage this critical part of the business.”

According to the Indian Institute of Materials Management, “Business today is in a global

environment [and] companies are going truly global with Supply Chain Management
(SCM)… Companies have changed the ways in which they manage their operations and
logistics activities. Changes in trade, the spread and modernization of transport
infrastructures and the intensification of competition have elevated the importance of flow
management to new levels.”

The following best practices in supply chain management offer a critical look at best-in-class
manufacturers and what they are doing to implement the most effective supply chains.

1. Set up your supply chain council

Without an internal council of leaders in place, your supply chain may lack a clear strategy
for efficiency and functionality. There’s also a good chance an existing supply chain strategy
will not align with the company’s overall strategy if your organization doesn’t have a
governing body to synchronize the two. For example, if a company goal is to improve
inventory turns, your supply chain probably shouldn’t take in a container of raw material
requiring about 12 months to consume. By supporting your supply chain with a council of
executive leadership and lower level management, your council can improve cross-
functional communication and demonstrate the value of an organized supply chain — two
barriers to success that often hinder operations without a supply chain council.

2. Establish an appropriate and thoughtfully staffed supply chain structure.

Ideally, your supply chain will be staffed and structured in a way that maximizes
effectiveness as well as efficiency in order to bring the most benefit to your organization.
Most organizations these days find that a centralized strategy, implemented by specialized
managers in their various business units is the most optimal approach. Reportedly, this
combination leads to more harmony between strategy and implementation, while also
resulting in the best service. In staffing your supply chain, you should be more focused on
strategy than simply transactional ability with your top leadership. These leaders should
extend this strategic thinking toward creating value using strong interpersonal skills (such as
communication and relationship management) internally as well as externally.

3. Identify areas where technology can help improve and streamline processes.
 Approximately 79 percent of supply chain enterprises surveyed worldwide fault manually
driven processes as the cause for continued lack of supply chain visibility. Lack of visibility
and another global concern, the uncoordinated nature of supply chain processes can be
solved with the automation provided by technology: “On average, large companies report
that their international supply chains are only 50 percent as automated as their domestic
supply chains. Overall, only 6 percent of companies report that they have highly automated
end-to-end and cross-functional processes.” Although improving efficiency in your supply
chain is a key concern when selecting software and technology, it’s backwards to structure
your processes around technology. Instead, review processes that are producing below
standard to determine areas where technology can help improve, and then select your
software solutions to fit those needs. With appropriate technology in place, detailed
reporting data will be more accessible and accurate to better inform the supply chain council
for performance measures as well as strategic planning.

4. Maintain healthy supplier relationships

An important indicator of success in this industry is the health of your supplier relationships.
These connections should be maintained and cultivated on an ongoing basis, beyond the
finalization of your deal. The best supplier relationships are the ones with two-way
communication between the buyer and seller. Your objectives should include mechanism(s)
to maintain the health of your relationship, goals for continuing improvement and value,
performance measurement and a platform for conflict resolution.

5. In procurement, look at total cost of ownership over price

Follow the example of best-in-class companies, and move away from the procurement
practice of selecting a supplier based completely on price. Instead, strategic sourcing
involves understanding the total cost of ownership/consumption (TCO) of a product or
service. This makes more business sense when you remember that the cost of acquisition
for most products and services is only 25 to 40 percent of the TCO, while the rest is
comprised of operating, warehousing, and transportation costs, to name a few. Not
surprisingly, your procurement teams will need more collaboration with your suppliers in
order to determine an accurate TCO.

6. Source suppliers strategically and with collaboration

Strategic selection of suppliers is at the heart of successful supply chain management, and
adding a collaborative element to strategic sourcing produces even better results. In a 2009
Industry Week article, J. Paul Dittmann of the University of Tennessee noted that successful
supply chains are proficient in five key pillars of excellence: Talent, technology, internal
collaboration, external collaboration, and change management. Collaboration is at the heart.
Take your sourcing beyond the purchasing department to engage your suppliers in the
decision-making process. Solicit their feedback on all areas of internal business or function
that may affect the success of your initiatives or processes. With collaborative strategic
sourcing, you’ll enjoy streamlined operations, reduced costs, and improved responsiveness.

7. Move contract management responsibility to the supply chain

 Although potential savings are often negotiated during the procurement process, they are
rarely fully realized. This is most commonly because of a lapse in communication or lack of
follow-through on contract compliance. To combat this and actually realize those cost
savings, best-in-class companies move contract management under the supply chain. This
allows the supply chain leader to leverage spend where there is greater opportunity for
reducing costs and mitigating risk, usually with services.

8. Optimize inventory for reduced cost

In any business, there’s a desire to reduce costs and improve the bottom line. This is
especially true in times of global economic downturn, like the one we’re currently subject to.
In light of and in support of these efforts, supply chain management should include a
consistent look at optimizing inventory quantities. There’s a very real cost of holding and
storing inventory, and it’s almost always higher than the generally assumed 20 to 25
percent. In fact, “Research reveals that inventory holding costs could represent up to 60
percent of the cost of an item that is held in inventory for 12 months,” as reported by Supply
Chain Quarterly. To optimize your supply chain inventory, include forecasting and demand
planning.

9. Establish regular reviews to ensure efficiency and mitigate risk

Your supply chain council and leadership team members should be constantly reviewing
procedures and policies to ensure compliance, efficiency, and currency. This will help avoid
process bottlenecks and help streamline operations while mitigating the risk of theft, fraud,
and the like. Risk mitigation in the supply chain must adhere to some important steps:
identifying all elements of risk, evaluating their probability of occurrence, estimating the
financial impact in the event of an incident, and prioritizing risks for appropriate monitoring
and prevention measures.

10. Be socially responsible and establish “green” initiatives

It’s no longer optional for your supply chain company to actively reduce its carbon footprint,
instead, supply chain organizations must become sustainable and socially responsible if
they hope to thrive or even survive. While the U.S. doesn’t yet have a carbon-trading
regime, buyers are now considering environmental impact when they choose suppliers. On
a more general scale, social responsibility is also becoming more and more significant in
buyers’ estimation when making purchase decisions. A best-in-class supply chain
organization should have a measureable framework of policies and procedures designed to
improve the workplace for the greater good of employees, the organization itself, and also
its community.

SCLM/U1 Topic 10

Obstacles of Streamlined SCM

1. Juggling multiple systems to complete the same task

 When information is fragmented across different applications and tools, operational delays
become inevitable. For example, a team might end up checking several carrier systems for
updates while sharing error-laden spreadsheets via email.

Reconciling all of this data saps valuable time. It also complicates tasks such as
procurement and supply planning, producing considerable inefficiencies that drive up costs
for workflows such as freight invoicing.

Ideally, such islands of information can be consolidated without having to resort to onerous
manual processes. Integrated supply chain solutions implemented by a trusted partner such
as Inspirage will put you on the track to a more cost-effective, scalable and transparent
supply chain management solution.

2. Outsourcing logistics visibility to third parties

Outsourcing to third party logistics providers is unavoidable in some industries, not to

mention a practical necessity among large organizations with national or even global
footprints. At the same time, ineffective third-party partnerships can become a major drag
on overall supply chain visibility, with cascading effects across the whole enterprise.

Relying on outside help for logistics visibility creates issues similar to those we raised in the
first item above: Namely, time-consuming and expensive fragmentation. In contrast, having
data points such as carrier commonly available in a platform such as Oracle Transportation
Management greatly simplifies transportation management.

The results often speak for themselves. A more streamlined supply chain is both
economical and easy to manage, thanks to features such as centralized data repositories.

3. Working with outdated technology

Have you ever researched a product on a retailer’s website, checked to verify that it’s
available at a specific location, visited that store and discovered instead that the item is out
of stock? There are many reasons for such discrepancies, with lack of an up-to-date data
near the top of the list.

While consumers regularly engage with organizations across multiple devices and
platforms, companies do not always possess the right tools to keep pace. Accordingly, they
might have to lean on decades-old ERP systems and complex customizations, which
together contribute to difficulties in meeting product demand, allocating costs for parts and
ensuring that publicly viewable indicators of store stock (e.g., on an e-commerce site or in a
mobile app) are accurate.

4. Paying too much for essential services

As a result of these flaws and many others, many organizations end up with a supply chain
burdened by costs and incapable of adapting to evolving requirements. Overpaying for
freight invoices is a prime example of a pitfall opened up by inefficient supply chain
management: much of the cost of paying for these items can be eliminated with the right
pairing of processes and tools.

The good news is that you have worthwhile options for modernizing your approach to
supply chain management. Inspirage is an end-to-end Oracle partner with a long track
record of ensuring industry-appropriate implementations that finish on time and on budget.
 UNIT 2- LOGISTICS

SCLM/U2 Topic 1

Evolution and Objectives of Logistics

Evolution of Logistics
The evolution of logistics in the 1990s can be traced back to “physical distribution
management” in the 1970s when there was no coordination among the various functions of
an organization, and each was committed to attain its own goal. This myopic approach then
transformed into “integrated logistic management” in the 1980s that called for the integration
of various functions to achieve a system-wide objective. Supply Chain Management (SCM)
further widens this scope by including the suppliers and customers into the organizational
fold, and coordinating the flow of materials and information from the procurement of raw
materials to the consumption of finished goods.

Logistics involves getting, in the right way, the right product, in the right quantity and right
quality, in the right place at the right time, for the right customer at the right cost. The logistic
network consists of the suppliers, the retailer and the users. The purpose of an integrated
logistic network in a supply chain is to fulfill customer orders through providing place utility
to deliver products and services to end users. The place utility is achieved by managing a
number of key functions of a supply chain. The functions include:

• Demand management
• Inventory management
• Transportation
• Warehousing
• Order processing
• Information Management

Logistics is a key enabler of supply chain collaboration. Improving performance in this field
allows supply chains to increase their efficiency significantly and help to create innovations
in different areas. In this context, an important task is to find structures and approaches
which enable all types of performance management in logistics and supply chains for a
better fulfillment of customer needs.

Objectives of Logistics
1. Cost Reduction and Profit Maximization

Logistics management results in cost reduction and profit maximization, primarily due to:

• Improved material handling

• Safe, speedy and economical transportation
• Optimum number and convenient location of warehouses etc.

2. Efficient Flow of Manufacturing Operations

Inbound logistics helps in the efficient flow of manufacturing operations, due to on-time
delivery of materials, proper utilization of materials and semi-finished goods in the
production process and so on.

3. Competitive Edge

Logistics provide, maintain and sharpen the competitive edge of an enterprise by:

• Increasing sales through providing better customer service

• Arranging for rapid and reliable delivery
• Avoiding errors in order processing; and so on.

4. Effective Communication System

An efficient information system is a must for sound logistics management. As such, logistics
management helps in developing effective communication system for continuous interface
with suppliers and rapid response to customer enquiries.

5. Sound Inventory Management

Sound inventory management is a by-product of logistics management. A major headache

of production management, financial management etc. is how to ensure sound inventory
management; which headache is cured by logistics management.

SCLM/U2 Topic 2

Components and Functions of Logistics Management

According to Phillip Kotler, “Market logistics involve planning, implementing and controlling
physical flow of material and final (finished) goods from the point of origin to the point of use
to meet customer requirements, at a profit.”

Logistics management consists of the process of planning, implementing and controlling the
efficient flow of raw-materials, work-in-progress and finished goods and related information-
from point of origin to point of consumption; with a view to providing satisfaction to the
customer.
 Components of Logistics Management
Logistics management consists of three major components:

1. Order processing or Input

This component is the first process of logistics where information about the resources and
production is gathered based on which the products are manufactured. In the case of freight
forwarding, order processing refers to the step where the various source of vendors and
transportation are gathered for the importing or exporting of goods.

2. Inventory Management

Inventory management plays an important role in the supply chain management system. As
the name suggests, inventory management helps the logistics company in allocating the
resources like transport vehicles, labour and other resources according to the order
received by the client. This helps in making sure that no orders or freights are being left out
or are being delayed for delivery.

3. Freight transportation

This is the last and the major component of logistics management. After the order is
processed and the resources are allocated in order to transport the freight to the
destination. Various routes and types of transportation are analysed to check which
transportation and the routes will deliver the product on or before the delivery time. There
are tools and software which analyse these factors with the help of artificial intelligence and
machine learning tools and provide the best plans to the logistics company.

These components together help in delivering the best quality goods to the consumers and
is delivered on time. These components help in reducing the additional costs and increasing
the productivity of the work, therefore the logistics company will be able to provide the best
services with great quality to their clients and consumers.

Functions of Logistics Management

(i) Network Design

Network design is one of the prime responsibilities of logistics management. This network is
required to determine the number and location of manufacturing plants, warehouses,
material handling equipment’s etc. on which logistical efficiency depends.

(ii) Order Processing

Customers’ orders are very important in logistics management. Order processing includes
activities for receiving, handling, filing, recording of orders. Herein, management has to
ensure that order processing is accurate, reliable and fast.
 Further, management has to minimize the time between receipt of orders and date of
dispatch of the consignment to ensure speedy processing of the order. Delays in execution
of orders can become serious grounds for customer dissatisfaction; which must be avoided
at all costs.

(iii) Procurement

It is related to obtaining materials from outside suppliers. It includes supply sourcing,

negotiation, order placement, inbound transportation, receiving and inspection, storage and
handling etc. Its main objective is to support manufacturing, by providing timely supplies of
qualitative materials, at the lowest possible cost.

(iv) Material Handling

It involves the activities of handling raw-materials, parts, semi-finished and finished goods
into and out of plant, warehouses and transportation terminals. Management has to ensure
that the raw-materials, parts, semi-finished and finished goods are handled properly to
minimize losses due to breakage, spoilage etc. Further, the management has to minimize
the handling costs and the time involved in material handling.

(v) Inventory Management

The basic objective of inventory management is to minimize the amount of working capital
blocked in inventories; and at the same time to provide a continuous flow of materials to
match production requirements; and to provide timely supplies of goods to meet customers’
demands.

Management has to maintain inventories of:

• Raw-materials and parts

• Semi-finished goods
• Finished goods

(vi) Packaging and Labeling

Packaging and labeling are an important aspect of logistics management. Packaging

implies enclosing or encasing a product into suitable packets or containers, for easy and
convenient handling of the product by both, the seller and specially the buyer.

Packaging facilities the sale of a product. It acts as a silent salesman. For example, a fancy
and decorative packaging of sweets, biscuits etc. on the eve of Diwali, makes for a good
sale of such items.

Labeling means putting identification marks on the package of the product. A label provides
information about – date of packing and expiry, weight or size of product, ingredients used
 in the manufacture of the product, instructions for sale handling of the product, price
payable by the buyer etc.

(vii) Warehousing

Storage or warehousing is that logistical activity which creates time utility by storing goods
from the time of production till the time these are needed by ultimate consumers.

Here, the management has to decide about:

• The number and type of warehouses needed and

• The location of warehouses.

(viii) Transportation

Transportation is that logistical activity which creates place utility.

Transportation is needed for:

• Movement of raw-materials from suppliers to the manufacturing unit.

• Movement of work-in-progress within the plant.
• Movement of finished goods from plant to the final consumers.

SCLM/U2 Topic 3

Distribution Related Issues and Challenges in Logistics Management

1. Fuel Costs

One of the highest costs contributing to the ‘cutting transportation cost’ concern is fuel
prices. Higher fuel prices are likely to increase transportation costs for US shippers this year
by pushing up fuel surcharges. Rising India diesel fuel prices are escalating surcharges
added to freight rates, which is reversing a two-year trend that cut into the revenue and
earnings of truckers as fuel prices plummeted.

2. Business Process Improvement

Not withstanding the need for new technology, which we discuss in number eight on this list,
it has become an increasing challenge for the logistics industry to stay on top of new
advances in business processes. Taking advantage of these new opportunities sounds
enticing but adoption and onboarding can be overwhelming.

3. Improved Customer Service

 Customers want full transparency into where their delivery is at all times. These days, the
location of a package is as interconnected as your social network. In fact, as customer
expectations have increased, their willingness to pay for fast shipping has decreased with
just about 64 percent of consumers unwilling to pay anything extra for less than two-day
shipping.

4. Economy

With high fuel prices comes a greater credit crisis and rising inflationary demands that take
a greater toll on the US economy. This industry is then pressured by increasing compliance
regulations, declining demand, additional capacity with additional increases in key cost
centers.

5. Driver Shortage & Retention

Hiring and retention remain an issue despite the lower demand mentioned above.

6. Government Regulations

Carriers face significant compliance regulations imposed by federal, state and local
authorities.

7. Environmental Issues

The anti-idling and other emission reduction regulations brought about by state and local
governments has created concern that the compliance costs could exceed benefits.

8. Technology Strategy & Implementation

While the industry understands and supports many of the benefits of these technologies,
some questions remain as to how they will pay for it and who will help implement the
improvements.

SCLM/U2 Topic 4

Gaining Competitive Advantage through Logistics Management

Effective logistics management can provide a major source of competitive advantage.

The bases for successes in the marketplace are numerous, but a simple model has been
based around the three C’s – Customer, Company & Competitor. The source of competitive
advantage is found firstly in the ability of the organization to differentiate itself, in the eyes of
 the customer, from its competition and secondly by operating at a lower cost and hence at
greater profit.

Seeking a sustainable competitive advantage has become the concern of every manager
who realizes the realities of the marketplace. It is no longer acceptable to assume that the
goods will sell themselves. An elemental, commercial success is derived either form a cost
advantage or a value advantage or, ideally both. The greater the profitability of the company
the lesser is the cost of production. Also a value advantage gives the product an advantage
over the competitive offerings. Successful companies either have a productivity advantage
or they have a value advantage or maybe a combination of the two.

There are two main vectors of strategic direction that need to be examined:

1. Productivity Advantage

In many industries there will be a competitor who will be a low cost producer and will have
greater sales volume in that sector. This is partly due to economies of scale, which enable
fixed costs to spread over a greater volume but more particularly to the impact of the
experience curve.

It is possible to identify and predict improvements in the rate of output of workers as they
become more skilled in the processes and tasks on which they work. Bruce Henderson
extended this concept by demonstrating that all costs, not just production costs, would
decline at a given rate as volume increased. This cost decline applies only to value added,
i.e. costs other than bought in supplies. Traditionally it has been suggested that the main
route to cost reduction was by gaining greater sales volume and there can be no doubt
about the close linkage between relative market share and relative costs. However it must
also be recognized that logistics management can provide a multitude of ways to increase
efficiency and productivity and hence contribute significantly to reduced unit costs.

2. Value Advantage

It is a cliché that customers don’t buy products they buy benefits. These benefits may be
intangible i.e. they relate not to specific product features but to such things as image and
reputation. Unless the product or service that we offer can be distinguished in some way
from its competitors there is a strong likelihood that the marketplace will view it as a
‘commodity’ and so the sale will tend to go to the cheapest supplier. Value differentiation
can be gained in numerous ways. When a company scrutinizes markets closely it frequently
finds that there are distinct value segments. In other words different groups of customers
attach different levels of importance to different benefits. The importance of such benefit
segmentation lies in the fact that often there are substantial opportunities for creating
differentiated appeals for specific segments. Adding value through differentiation is a
powerful means of achieving a defensible advantage in the market. Equally powerful as a
means of adding value is service. Increasingly it is the case that markets are becoming
more service sensitive and this poses a challenge in management of logistics. It is important
to seek differentiation through means other than technology. A number of companies have
responded to this by focusing upon service as a means of gaining a competitive edge.
Service in this context relates to the process of developing relationships with customers
through the provision of an augmented offer. This augmentation can take many forms
including delivery service, after sales service, financial packages, technical support and so
on.

In commodity market situations where a company’s products are indistinguishable from their
competitors’ offerings the only strategy is to move towards being a cost leader or towards
being a service leader. Often the leadership route is not available. This particularly will be
the case in a mature market where substantial market share gains are difficult to achieve.

Cost leadership strategies have been based upon the economies of scale, gained through
greater volume of sales. This is why market share is considered to be so important in many
industries. This cost advantage can be used strategically to assume a position of price
leader and make it difficult for high cost competitors to survive. This cost advantage can
come through effective logistics management. In many industries logistics cost represents
such a large part of total costs that that it is possible to make major cost reductions through
fundamentally reengineering logistics processes.

The other way to come out of the commodity quadrant of the matrix is to seek a strategy of
differentiation through service excellence. Customers ion all industries are seeking greater
responsiveness and reliability from suppliers; they are looking for reduced lead times, just-
in-time delivery and value added services that help them do a better job of serving their
customers.

GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICS

A firm can gain competitive advantage only when it performs its strategically important
activities (designing, producing, marketing delivering and supporting its product) more
cheaply or better than its competitors.

Value chain activity disaggregates a firm into its strategically relevant activities in order to
understand behavior of costs and existing and potential sources of differentiation. They are
further categorized into two types

(i) Primary: inbound logistics, operation outbound logistics, marketing and sales, and
service

(ii) Support: infrastructure, human resource management, technology development and

procurement

To gain competitive advantage over its rivals, a firm must deliver value to its customers
through performing these activities more efficiently than its competitors or by performing
these activities in a unique way that creates greater differentiation.

Logistics management has the potential to assist the firm in the achievement of both a
cost/productivity advantage and a value advantage. The under lying philosophy behind the
 logistics concept is that of planning and coordinating the materials flow from source to user
as an integrated system rather than, as was so often the case in the past, managing the
goods flow as a series of independent activities. Thus under a logistics management regime
the goal is to link the marketplace, the distribution network, the manufacturing process and
the procurement activity in such a way that customers are service at higher levels and yet at
lower cost.

SCLM/U2 Topic 5

Transportation – Function, Cost & Mode of Transportation

Transport or Transportation is the movement of humans, animals and goods from one
location to another. In other words, the action of transport is defined as a particular
movement of an organism or thing from a point A to a Point B. Modes of transport include
air, land (rail and road), water, cable, pipeline and space. The field can be divided into
infrastructure, vehicles and operations. Transport enables trade between people, which is
essential for the development of civilizations.

Transport infrastructure consists of the fixed installations, including roads, railways, airways,
waterways, canals and pipelines and terminals such as airports, railway stations, bus
stations, warehouses, trucking terminals, refueling depots (including fueling docks and fuel
stations) and seaports. Terminals may be used both for interchange of passengers and
cargo and for maintenance.

Function of Transportation
Transportation Functionality provides 2 major functions which are described below:

1. Product Movement

To move various types of product whether it is raw materials component, semi- finished
goods, finished goods, packaging material, scrap and so on. Transportation has become a
very essential. Infact if human beings are considered as a product. One can be amount of
people transport from one place to another by private and public carriers.

Transportation of a product involves the use of temporal resources. This is because a

particular product is inaccessible while it is in-transit. i.e while it is being transport from one
place to another place. These products are called in-transit inventories. These products are
significantly important because they influence a variety of supply chain decision. For e.g, if
supply chain is a considering a just in time strategy, or say. quick response strategy with
regard to supply of goods to the customer then this influences the time for which the goods
should be in transit because the goods have to reach quickly, or just in time to meet the
requirement of the customer. Further, if goods are dispatched only when a customers
 requires them. Then such decision also affects the amount of inventories that have to be
stored at the distribution centers.

Transportation of product involves the use of financial resources. Expenses on transport

result from cost of driver, cleaner, casual laborer, taxes, administrative costs, and repairs/
maintenance. In addition, if during transportation there is product loss or product damage,
may be this expenses have also to be taken into consideration.

Transportations of product also use environmental resources. Either directly or indirectly. In

direct terms, transportation uses a very large amount of energy in term of fuel and oil.
Though attempts are being made to make transport vehicles more fuel efficient. But
consumption of fuel and oil is not expected to decrease because of the ever-increasing
global operation in indirect term, transportation create environmental expenses in terms of
congestion, air pollution, and noise pollution.

2. Product storage

Though it is not very common, but one of the functions of transportation is also temporary
storage of goods. Of course, storing goods in vehicles is quite an expensive affair.
However, in case of goods have to be moved once again within Just a few days. It is
advisable to keep them stored in transport vehicles themselves. This will avoid the cost of
unloading and loading as well as the possible damage to goods during such operation.

It may happen that a company has limited storage facility at a particular warehouse. Hence,
when the company loads the goods in to the transport vehicle to be sent to the warehouse.
It may request the transport company to take a longer route to reach the destination. This
will act as temporary storage for the goods.

TRANSPORT COSTS
Transport systems face requirements to increase their capacity and to reduce the costs of
movements. All users (e.g. individuals, corporations, institutions, governments, etc.) have to
negotiate or bid for the transfer of goods, people, information and capital because supplies,
distribution systems, tariffs, salaries, locations, marketing techniques as well as fuel costs
are changing constantly. There are also costs involved in gathering information, negotiating,
and enforcing contracts and transactions, which are often referred as the cost of doing
business. Trade also involves transactions costs that all agents attempt to reduce since
transaction costs account for a growing share of the resources consumed by the economy.

Frequently, corporations and individuals must take decisions about how to route
passengers or freight through the transport system. This choice has been considerably
expanded in the context of the production of lighter and high value consuming goods, such
as electronics, and less bulky production techniques. It is not uncommon for transport costs
to account for 10% of the total cost of a product. This share also roughly applies to personal
mobility where households spend about 10% of their income for transportation, including the
automobile which has a complex cost structure. Thus, the choice of a transportation mode
to route people and freight between origins and destinations becomes important and
 depends on a number of factors such as the nature of the goods, the available
infrastructures, origins and destinations, technology, and particularly their respective
distances. Jointly, they define transportation costs.

Transport costs come as fixed (infrastructure) and variable (operating) costs, depending on
a variety of conditions related to geography, infrastructure, administrative barriers, energy,
and on how passengers and freight are carried. Three major components, related to
transactions, shipments and the friction of distance, impact on transport costs.

MODE OF TRANSPORTATION

1. Road transportation

Road infrastructures are large consumers of space with the lowest level of physical
constraints among transportation modes. However, physiographical constraints are
significant in road construction with substantial additional costs to overcome features such
as rivers or rugged terrain. While historically road transportation was developed to support
non-motorized forms of transportation (walking, domestication of animals and cycling at the
end of the 19th century), it is motorization that has shaped the most its development since
the beginning of the 20th century.

Road transportation has an average operational flexibility as vehicles can serve several
purposes but are rarely able to move outside roads. Road transport systems have high
maintenance costs, both for the vehicles and infrastructures. They are mainly linked to light
industries where rapid movements of freight in small batches are the norm. Yet, with
containerization, road transportation has become a crucial link in freight distribution.

2. Rail transportation and pipelines

Railways are composed of a traced path on which wheeled vehicles are bound. In light of
more recent technological developments, rail transportation also include monorails and
maglev. They have an average level of physical constrains linked to the types of
locomotives and a low gradient is required, particularly for freight. Heavy industries are
traditionally linked with rail transport systems, although containerization has improved the
flexibility of rail transportation by linking it with road and maritime modes. Rail is by far the
land transportation mode offering the highest capacity with a 23,000 tons fully loaded coal
unit train being the heaviest load ever carried. Gauges, however, vary around the world,
often challenging the integration of rail systems.

Pipeline routes are practically unlimited as they can be laid on land or under water. The
longest gas pipeline links Alberta to Sarnia (Canada), which is 2,911 km in length. The
longest oil pipeline is the Transiberian, extending over 9,344 km from the Russian arctic
oilfields in eastern Siberia to Western Europe. Physical constraints are low and include the
landscape and pergelisol in arctic or subarctic environments. Pipeline construction costs
vary according to the diameter and increase proportionally with the distance and with the
viscosity of fluids (from gas, low viscosity, to oil, high viscosity). The Trans Alaskan pipeline,
which is 1,300 km long, was built under difficult conditions and has to be above ground for
 most of its path. Pipeline terminals are very important since they correspond to refineries
and harbors.

3. Maritime transportation

Because of the physical properties of water conferring buoyancy and limited friction,
maritime transportation is the most effective mode to move large quantities of cargo over
long distances. Main maritime routes are composed of oceans, coasts, seas, lakes, rivers
and channels. However, due to the location of economic activities maritime circulation takes
place on specific parts of the maritime space, particularly over the North Atlantic and the
North Pacific. The construction of channels, locks and dredging are attempts to facilitate
maritime circulation by reducing discontinuity. Comprehensive inland waterway systems
include Western Europe, the Volga / Don system, St. Lawrence / Great Lakes system, the
Mississippi and its tributaries, the Amazon, the Panama / Paraguay and the interior of
China. Maritime transportation has high terminal costs, since port infrastructures are among
the most expensive to build, maintain and improve. High inventory costs also characterize
maritime transportation. More than any other mode, maritime transportation is linked to
heavy industries, such as steel and petrochemical facilities adjacent to port sites.

4. Air transportation

Air routes are practically unlimited, but they are denser over the North Atlantic, inside North
America and Europe and over the North Pacific. Air transport constraints are
multidimensional and include the site (a commercial plane needs about 3,300 meters of
runway for landing and take off), the climate, fog and aerial currents. Air activities are linked
to the tertiary and quaternary sectors, notably finance and tourism, which lean on the long
distance mobility of people. More recently, air transportation has been accommodating
growing quantities of high value freight and is playing a growing role in global logistics.

5. Intermodal transportation

Concerns a variety of modes used in combination so that the respective advantages of each
mode are better exploited. Although intermodal transportation applies for passenger
movements, such as the usage of the different, but interconnected modes of a public transit
system, it is over freight transportation that the most significant impacts have been
observed. Containerization has been a powerful vector of intermodal integration, enabling
maritime and land transportation modes to more effectively interconnect.

6. Telecommunications

Cover a grey area in terms of if they can be considered as a transport mode since unlike
true transportation, telecommunications often do not have a physicality. Yet, they are
structured as networks with a practically unlimited capacity and very low constraints, which
may include the physiography and oceanic masses that may impair the setting of cables.
They provide for the “instantaneous” movement of information (speed of light). Wave
transmissions, because of their limited coverage, often require substations, such as for
cellular phone networks. Satellites are often using a geostationary orbit which is getting
crowded. High network costs and low distribution costs characterize many
telecommunication networks, which are linked to the tertiary and quaternary sectors (stock
markets, business to business information networks, etc.). Telecommunications can provide
a substitution for personal movements in some economic sectors.

SCLM/U2 Topic 6

Transportation Network and Decision

Economic uncertainty, fluctuating fuel prices, increased safety and social regulation,
escalating customer expectations, globalization, improved technologies, labor and
equipment shortages, a changing transportation service industry…today’s managers are
faced with an array of challenges and opportunities that contrast dramatically with those of a
decade ago.

It is not surprising, then, that many managers have failed to fully adapt to the changing
environment, resulting in performance shortcomings and lost opportunities. Prominent
among the list of lost opportunities is fully leveraging the transportation function as a critical
strategic element within the supply chain.

Transportation plays a central role in seamless supply chain operations, moving inbound
materials from supply sites to manufacturing facilities, repositioning inventory among
different plants and distribution centers, and delivering finished products to customers.
Benefits that should result from world-class operations at the points of supply, production,
and customer locations will never be realized without the accompaniment of excellent
transportation planning and execution. Having inventory positioned and available for
delivery is not enough if it cannot be cost effectively delivered when and where needed.

Long-Term Decisions
At the highest strategic decision level, transportation managers must fully understand total
supply chain freight flows and have input into network design. At this level, long-term
decisions related to the appropriateness and availability of transportation modes for freight
movement are be made. Managers need to decide, for example, which primary mode of
transportation is appropriate for each general flow (i.e., inbound, interfacility, outbound) by
product and/or location, paying careful attention to consolidation opportunities where
feasible.

Plans should indicate the general nature of product flows, including volume, frequency,
seasonality, physical characteristics, and special handling requirements. Strategic mode
and carrier-sourcing decisions should be considered part of a long-term network design,
identifying core carriers in each relevant mode to enhance service quality commitments and
increase bargaining power. Additionally, managers need to make decisions regarding the
level of outsourcing desired for each major product flow—ranging from providing the
transportation through the company’s own assets (e.g., private fleets) to latch-key turnover
of transportation operations to third-party providers.

Network and lane design decisions at the strategic level should examine tradeoffs with other
operational cost areas such as inventory and distribution center costs. In conducting this
analysis, companies should keep in mind that networks need not be fixed or
constant. Rather, substantial service improvements and cost reductions can be achieved
by critically examining existing networks and associated flows. For instance, it may become
apparent that stock locations can be centralized by using contract transportation providers
to move volume freight to regional cross-dock facilities for sorting, packaging, and brokering
small loads to individual customers.

Lane Operation Decisions

The second level of decision-making regards lane operation decisions. Where network
design decisions are concerned with long-term planning, these decisions focus on daily
operational freight transactions. At this level, transportation managers armed with real-time
information on product needs at various system nodes must coordinate product movements
along inbound, interfacility, and outbound shipping lanes to meet service requirements at
lowest total costs. Decision-makers who are adept at managing information can take
advantage of consolidation opportunities, while ensuring that products arrive where they are
needed in the quantities they are needed just in time to facilitate other value-added
activities. At the same time, they are realizing transportation cost savings.

The primary opportunities associated with lane operation decisions include

inbound/outbound consolidation, temporal consolidation, vehicle consolidation, and carrier
consolidation. If managers have access to inbound and outbound freight movement plans,
they can identify opportunities to combine freight to build volume shipments. An inbound
shipment may arrive from a supplier located in Philadelphia, for example, on the same day
that a production order destined for a customer in Wilmington, Del., becomes available for
movement. If this information is known to transportation planners far enough in advance,
arrangements could be made for the inbound carrier to haul the outbound load back to
Wilmington.

In many cases the inbound carrier would be willing to negotiate lower roundtrip rates to
avoid deadhead miles on the backhaul. This is particularly true if the carrier and/or driver
are headquartered in the Philadelphia area. If this happens to be a heavy traffic lane, the
firm may consider strategically sourcing a core carrier in this geographic region to capitalize
on this opportunity.

Similarly, less-than-volume-load (LVL) shipments moving to the same geographic region on

consecutive days may be detained until sufficient volumes exists to justify a full load on one
carrier with multiple stops (temporal consolidation). By avoiding the LVL terminal system,
the detained freight often arrives at the same time or earlier than the original LVL
shipment—and at a lower cost. Multiple, small shipments inbound from suppliers or
outbound to customers in the same geographic region scheduled for delivery on the same
day may also be combined on one vehicle at full-volume rates, paying stop-off charges but
saving on multiple LVL rates (vehicle consolidation).

Another consolidation opportunity springs from the core carrier concept. Assigning greater
shipping volumes to fewer carriers should result in lower per-unit transportation costs and
higher priority assigned to the shipper’s increased freight. In addition to consolidating the
carrier base, the shipper can identify reliable carriers in need of backhaul miles.

For instance, a plastics distributor identifies carriers that operate a high percentage of
deadhead miles in lanes over which the firm regularly moves freight. The firm negotiates
advantageous rates with these carriers in exchange for guaranteed backhaul revenue miles.
If the plastics firm plans to move significant amounts of product from Texas to Florida, the
transportation manager will find a Florida carrier that moves a large volume of product from
Florida to Texas. Given sufficient planning information, the transportation manager can use
guaranteed volumes on the backhaul to negotiate attractive rates.

Choice of Mode and Carrier

A third level of transportation decision-making involves the choice of mode and carrier for a
particular freight transaction. Due to the blurring of service capabilities among traditional
transportation modes, options that in the past would not be considered feasible may now
emerge as the preferred choice. For example, rail container service may offer a cost-
effective alternative to longhaul motor transport while yielding equivalent service. Similarly,
package delivery carriers are competing with traditional LTL operators. Truckload carriers,
on the other hand, are increasingly bidding for low-volume shipments as well as for
overnight freight movements. For the shipper seeking 24-hour delivery, truckload carriers
may offer an alternative to air carriers at significantly lower rates—and, quite possibly,
higher reliability.

In an integrated mode/carrier decision-making scenario, each shipment would be evaluated

based upon the service criteria that must be met, (for example, delivery date/time or special
handling requirements) as well as the movement’s cost constraints. All core carriers,
regardless of mode, that could possibly meet the service and cost criteria would be pulled
from the database. Managers would then choose the carrier from this multi-modal set
based on availability and existing rates.

Dock Level Operations

The final set of transportation decisions involves dock level operations, such as load
planning, routing, and scheduling. These activities encompass the operational execution of
the higher-level planning decisions. While the fundamental purpose of shipping docks may
not have changed much over the years, the manner in which work is done certainly has.
One obvious change is the common usage of advanced IT and decision support systems.
These tools help the dock personnel to make better use of the transportation vehicle space;
to identify the most efficient routes; and to better schedule equipment, facilities and drivers
on a given day.
Transportation departments that avail themselves of better and more timely information can
derive significant benefits from more efficient and effective load planning, routing, and
scheduling. For example, if a vehicle is being loaded with multiple customer orders, dock-
level managers must ensure that the driver is informed of the most efficient route and that
loads are placed in the order of the planned stops. Transportation managers, even at the
dock level, must develop expertise in using the information tools available to aid in these
decisions.

Successful managers today require a broad view of transportation management’s role and
responsibilities in an integrated supply chain. Managers will continue to encounter
significant challenges as their firms proceed down the road toward supply chain integration,
particularly as external environmental characteristics such as fuel costs and the overall
economy wax and wane.

SCLM/U2 Topic 7

Containerization

Containerization is a system of intermodal freight transport using intermodal containers

(also called shipping containers and ISO containers). The containers have standardized
dimensions. They can be loaded and unloaded, stacked, transported efficiently over long
distances, and transferred from one mode of transport to another—container ships, rail
transport flatcars, and semi-trailer trucks—without being opened. The handling system is
completely mechanized so that all handling is done with cranes and special forklift trucks.
All containers are numbered and tracked using computerized systems.

Containerization originated several centuries ago but was not well developed or widely
applied until after World War II, when it dramatically reduced the costs of transport,
supported the post-war boom in international trade, and was a major element in
globalization. Containerization did away with the manual sorting of most shipments and the
need for warehousing. It displaced many thousands of dock workers who formerly handled
break bulk cargo. Containerization also reduced congestion in ports, significantly shortened
shipping time and reduced losses from damage and theft.

The main advantages of containerization are:

(i) Standardization

Standard transport product that can be handled anywhere in the world (ISO standard)
through specialized modes (ships, trucks, barges and wagons) and equipment. Each
container has an unique identification number and a size type code.
(ii) Flexibility

Can be used to carry a wide variety of goods such as commodities (coal, wheat),
manufactured goods, cars, refrigerated (perishable) goods. There are adapted containers
for dry cargo, liquids (oil and chemical products) and refrigerated cargo. Discarded
containers can be recycled and reused for other purposes.

(iii) Costs

Lower transport costs due to the advantages of standardization. Moving the same amount
of break-bulk freight in a container is about 20 times less expensive than conventional
means. The containers enables economies of scale at modes and terminals that were not
possible through standard break-bulk handling.

(iv) Velocity

Transshipment operations are minimal and rapid and port turnaround times have been
reduced from 3 weeks to about 24 hours. Containerships are faster than regular freighter
ships, but this advantage is undermined by slow steaming.

(v) Warehousing

The container is its own warehouse, protecting the cargo it contains. This implies simpler
and less expensive packaging for containerized cargoes, particularly consumption goods.
The stacking capacity on ships, trains (doublestacking) and on the ground (container yards)
is a net advantage of containers.

(vi) Security and safety

The contents of the container is unknown to carriers since it can only be opened at the
origin (seller/shipper), at customs and at the destination (buyer). This implies reduced
spoilage and losses (theft).
Drawbacks of containerization:
(i) Site Constrains

Containers are a large consumer of terminal space (mostly for storage), implying that many
intermodal terminals have been relocated to the urban periphery. Draft issues at port are
emerging with the introduction of larger containerships, particularly those of the post-
panamax class. A large post-panamax containerships requires a draft of at least 13 meters.

(ii) Capital intensiveness

Container handling infrastructures and equipment (giant cranes, warehousing facilities,

inland road, rail access) are important capital investments that require readily sources.
Further, the push towards automation is increasing the capital intensiveness of intermodal
terminals.

(iii) Stacking

Complexity of arrangement of containers, both on the ground and on modes (containerships

and double-stack trains). Restacking difficult to avoid and incurs additional costs and time
for terminal operators. The larger the mode or the yard, the more complex the management.

(iv) Repositioning

Many containers are moved empty (20% of all flows). However, either full or empty, a
container takes the same amount of space. The observed divergence between production
and consumption at the global level requires the repositioning of containerized assets over
long distances (transoceanic).

(v) Theft and Losses

High value goods and a load unit that can forcefully opened or carried away (on truck)
implied a level of cargo vulnerability between a terminal and the final destination. About
1,500 containers are lost at sea each year (fall overboard), but these figures vary
substantially depending on if a specific incident takes place on any given year.

(vi) Illicit Trade

The container is an instrument used in the illicit trade of goods, drugs and weapons, as well
as for illegal immigration (rare). There are concerns about the usage of containers for
terrorism but no documented use has emerged.

SCLM/U2 Topic 8

Cross Docking

Cross-docking is a practice in logistics of unloading materials from an incoming semi-

trailer truck or railroad car and loading these materials directly into outbound trucks, trailers,
or rail cars, with little or no storage in between. This may be done to change the type of
conveyance, to sort material intended for different destinations, or to combine material from
different origins into transport vehicles (or containers) with the same or similar destinations.

Cross-dock operations were pioneered in the US trucking industry in the 1930s, and have
been in continuous use in less-than-truckload operations ever since. The US military began
using cross-docking operations in the 1950s. Wal-Mart began using cross-docking in the
retail sector in the late 1980s.

In the LTL trucking industry, cross-docking is done by moving cargo from one transport
vehicle directly onto another, with minimal or no warehousing. In retail practice, cross-
docking operations may utilize staging areas where inbound materials are sorted,
consolidated, and stored until the outbound shipment is complete and ready to ship.
 Advantages of Cross-docking:

• Streamlines the supply chain, from point of origin to point of sale

• Reduces labor costs through less inventory handling
• Reduces inventory holding costs by reducing storage times and potentially eliminating the
need to retain safety stock
• Products reach the distributor, and consequently the customer, faster
• Reduces or eliminates warehousing costs
• May increase available retail sales space
• Less risk of inventory handling

Disadvantages of cross-docking:

• Potential partners may not have the necessary storage capacities

• An adequate transport fleet is needed to operate
• A computerized logistics system is needed
• Additional freight handling can lead to product damage
• Labour costs are also incurred in the moving and shipping of stock

Factors influencing the use of retail cross-docks

• Cross-docking depends on continuous communication between suppliers, distribution
centers, and all points of sale
• Customer and supplier geography, particularly when a single corporate customer has many
multiple branches or using points
• Freight costs for the commodities being transported
• Cost of inventory in transit
• Complexity of loads
• Handling methods
• Logistics software integration between supplier(s), vendor, and shipper
• Tracking of inventory in transit

Cross-dock facility design

Cross-dock facilities are generally designed in an “I” configuration, which is an elongated
rectangle. The goal in using this shape is to maximize the number of inbound and outbound
doors that can be added to the facility while keeping the floor area inside the facility to a
minimum. Bartholdi and Gue (2004) demonstrated that this shape is ideal for facilities with
150 doors or less. For facilities with 150–200 doors, a “T” shape is more cost effective.
Finally, for facilities with 200 or more doors, the cost-minimizing shape is an “X”. Cross
docking is a logistics procedure where products from a supplier or manufacturing plant are
distributed directly to a customer or retail chain with marginal to no handling or storage time.
Cross docking takes place in a distribution docking terminal; usually consisting of trucks and
dock doors on two (inbound and outbound) sides with minimal storage space.
 UNIT 3 Supply Chain Performance

OM/U3 Topic 1

Bullwhip Effect in SCM

The bullwhip effect on the supply chain occurs when changes in consumer demand causes
the companies in a supply chain to order more goods to meet the new demand. The
bullwhip effect is a distribution channel phenomenon, rather problem, in which demand
forecasts yield supply chain inefficiencies. This mostly happens when retailers become
highly reactive to consumer demand, and in turn, intensify expectations around it. This
results into inefficient asset allocations and high inventory fluctuations, moving down in the
supply chain.

• The bullwhip effect usually flows up the supply chain, starting with the retailer, wholesaler,
distributor, manufacturer and then the raw materials supplier.
• This effect can be observed through most supply chains across several industries; it occurs
because the demand for goods is based on demand forecasts from companies, rather than
actual consumer demand.
• The bullwhip effect can be explained as an occurrence detected by the supply chain where
orders sent to the manufacturer and supplier create larger variance then the sales to the
end customer.
• These irregular orders in the lower part of the supply chain develop to be more distinct
higher up in the supply chain.

How Do we minimize the bullwhip effect?

 Every industry has its own unique supply chain, inventory placements, and complexities.
However, after analyzing the bullwhip effect and implementing improvement steps,
inventories in the range of 10 to 30 percent can be reduced and 15 to 35 percent reduction
in instances of stock out situations and missed customer orders can be achieved. Below are
some of the methods to minimize the bullwhip effect.

1. Accept and understand the bullwhip effect

The first and the most important step towards improvement is the recognition of the
presence of the bullwhip effect. Many companies fail to acknowledge that high buffer
inventories exist throughout their supply chain. A detailed stock analysis of the inventory
points from stores to raw material suppliers will help uncover idle excess inventories. Supply
chain managers can further analyze the reasons for excess inventories, take corrective
action and set norms.

2. Improve the inventory planning process

Inventory planning is a careful mix of historical trends for seasonal demand, forward-looking
demand, new product launches and discontinuation of older products. Safety stock settings
and min-max stock range of each inventory point need to be reviewed and periodically
adjusted. Inventories lying in the entire network need to be balanced based on regional
demands. Regular reporting and early warning system need to be implemented for major
deviations from the set inventory norms.

3. Improve the raw material planning process

Purchase managers generally tend to order in advance and keep high buffers of raw
material to avoid disruption in production. Raw material planning needs to be directly linked
to the production plan. Production plan needs to be released sufficiently in advance to
respect the general purchasing lead times. Consolidation to a smaller vendor base from a
larger vendor base, for similar raw material, will improve the flexibility and reliability of the
supplies. This, in turn, will result in lower raw material inventories.

4. Collaboration and information sharing between managers

There might be some inter-conflicting targets between purchasing managers, production
managers, logistics managers and sales managers. Giving more weight to common
company objectives in performance evaluation will improve collaboration between different
departments. Also providing regular and structured inter-departmental meetings will improve
information sharing and decision-making process.

5. Optimize the minimum order quantity and offer stable pricing

Certain products have high minimum order quantity for end customers resulting in overall
high gaps between subsequent orders. Lowering the minimum order quantity to an optimal
level will help provide create smoother order patterns. Stable pricing throughout the year
 instead of frequent promotional offers and discounts may also create stable and predictable
demand.

SCLM/U3 Topic 2

Performance Measurement: Dimension, Tools of Performance Measurement

Supply chain performance measure can be defined as an approach to judge the

performance of supply chain system. Supply chain performance measures can broadly be
classified into two categories:

• Qualitative Measures: For example, customer satisfaction and product quality.

• Quantitative Measures: For example, order-to-delivery lead time, supply chain response
time, flexibility, resource utilization, delivery performance.

Here, we will be considering the quantitative performance measures only. The performance
of a supply chain can be improvised by using a multi-dimensional strategy, which addresses
how the company needs to provide services to diverse customer demands.

Quantitative Measures
Mostly the measures taken for measuring the performance may be somewhat similar to
each other, but the objective behind each segment is very different from the other.

Quantitative measures is the assessments used to measure the performance, and compare
or track the performance or products. We can further divide the quantitative measures of
supply chain performance into two types. They are:

• Non-financial measures
• Financial measures

Non – Financials Measures

The metrics of non-financial measures comprise cycle time, customer service level,
inventory levels, resource utilization ability to perform, flexibility, and quality. In this section,
we will discuss the first four dimensions of the metrics:

Cycle Time
Cycle time is often called the lead time. It can be simply defined as the end-to-end delay in
a business process. For supply chains, cycle time can be defined as the business
processes of interest, supply chain process and the order-to-delivery process. In the cycle
time, we should learn about two types of lead times. They are as follows:
• Supply chain lead time
• Order-to-delivery lead time

The order-to-delivery lead time can be defined as the time of delay in the middle of the
placement of order by a customer and the delivery of products to the customer. In case the
item is in stock, it would be similar to the distribution lead time and order management time.
If the ordered item needs to be produced, it would be the summation of supplier lead time,
manufacturing lead time, distribution lead time and order management time.

The supply chain process lead time can be defined as the time taken by the supply chain to
transform the raw materials into final products along with the time required to reach the
products to the customer’s destination address.

Hence it comprises supplier lead time, manufacturing lead time, distribution lead time and
the logistics lead time for transport of raw materials from suppliers to plants and for
shipment of semi-finished/finished products in and out of intermediate storage points.

Lead time in supply chains is governed by the halts in the interface because of the
interfaces between suppliers and manufacturing plants, between plants and warehouses,
between distributors and retailers and many more.

Lead time compression is a crucial topic to discuss due to the time based competition and
the collaboration of lead time with inventory levels, costs, and customer service levels.

Customer Service Level

The customer service level in a supply chain is marked as an operation of multiple unique
performance indices. Here we have three measures to gauge performance. They are as
follows:

• Order fill Rate: The order fill rate is the portion of customer demands that can be easily
satisfied from the stock available. For this portion of customer demands, there is no need to
consider the supplier lead time and the manufacturing lead time. The order fill rate could be
with respect to a central warehouse or a field warehouse or stock at any level in the system.
• Stockout Rate: It is the reverse of order fill rate and marks the portion of orders lost
because of a stockout.
• Backorder Level: This is yet another measure, which is the gauge of total number of orders
waiting to be filled.
• Probability of on-time delivery: It is the portion of customer orders that are completed on-
time, i.e., within the agreed-upon due date.

In order to maximize the customer service level, it is important to maximize order fill rate,
minimize stockout rate, and minimize backorder levels.

Inventory Levels
 As the inventory-carrying costs increase the total costs significantly, it is essential to carry
sufficient inventory to meet the customer demands. In a supply chain system, inventories
can be further divided into four categories.

• Raw materials
• Work-in-process, i.e., unfinished and semi-finished sections
• Finished goods inventory
• Spare parts

Every inventory is held for a different reason. It’s a must to maintain optimal levels of each
type of inventory. Hence gauging the actual inventory levels will supply a better scenario of
system efficiency.

Resource Utilization
In a supply chain network, huge variety of resources is used. These different types of
resources available for different applications are mentioned below.

• Manufacturing Resources: Include the machines, material handlers, tools, etc.

• Storage Resources: Comprise warehouses, automated storage and retrieval systems.
• Logistics Resources: Engage trucks, rail transport, air-cargo carriers, etc.
• Human Resources: Consist of labor, scientific and technical personnel.
• Financial Resources: Include working capital, stocks, etc.

In the resource utilization paradigm, the main motto is to utilize all the assets or resources
efficiently in order to maximize customer service levels, reduce lead times and optimize
inventory levels.

Finanacial Measures
The measures taken for gauging different fixed and operational costs related to a supply
chain are considered the financial measures. Finally, the key objective to be achieved is to
maximize the revenue by maintaining low supply chain costs.

There is a hike in prices because of the inventories, transportation, facilities, operations,

technology, materials, and labor. Generally, the financial performance of a supply chain is
assessed by considering the following items:

• Cost of raw materials.

• Revenue from goods sold.
• Activity-based costs like the material handling, manufacturing, assembling rates etc.
• Inventory holding costs.
• Transportation costs.
• Cost of expired perishable goods.
• Penalties for incorrectly filled or late orders delivered to customers.
• Credits for incorrectly filled or late deliveries from suppliers.
• Cost of goods returned by customers.
• Credits for goods returned to suppliers.

In short, we can say that the financial performance indices can be merged as one by using
key modules such as activity based costing, inventory costing, transportation costing, and
inter-company financial transactions.

SCLM/U3 Topic 3

Supply Chain Operations Reference Model (SCOR Model)

One of the most promising models for strategic decision-making in supply chain
management is known as the SCOR model. 70 leading members of the manufacturing,
distribution, and solutions supplier industries (in collaboration with the Supply Chain
Council) developed the management tool, which is short for “Supply Chain Operations
Reference Model.” The program has been designed in a way that it can applicable to any
size operation. The SCOR model is a process meant to assess waste, establish standards,
and continuously improve. It is a repetitive framework of constant engagement and
discovery, developed to describe all the business activities associated with the phases of
satisfying a customer.

SCOR MODEL: Management Process

The SCOR model is based on three major principles: process modeling/re-engineering,
measuring performance, and best practices. There are 5 distinct process-modeling building
blocks to the SCOR model:

1. Plan: These are processes that relate to demand and supply planning. Standards must be
established to improve and measure supply chain efficiency. These rules can span
compliance, inventory, transportation, and assets, among other things.
2. Source: This step in the SCOR model involves any processes that procure goods or
services in order to meet a demand (real or planned). Material acquisitions and sourcing
infrastructure are examined to determine how to manage the supplier network, inventory,
supplier performance, and agreements. This stage should help you plan on when to
receive, verify, and transfer a product in the supply chain.
3. Make: In order to meet planned or actual demand, this is the process in which a product is
transformed to its final state. This step is particularly important in the manufacturing and
distribution industries, and helps to answer the questions of: make-to-order, make-to-stock,
or engineer-to-order? The “make” part of the process includes production activities,
packaging, staging, and releasing the product. It also involves production networks and
managing equipment and facilities.
4. Deliver: Any process that involves getting the product out, from order management and
warehousing, to distribution and transportation. This step also involves customer service
and overall management of product lifecycles, finished inventories, assets, and
importing/exporting requirements.
5. Return: This final step focuses on all products that are returned or received, for any reason.
Organizations must be prepared to handle the return of defective products, containers, and
packaging. The return process involves the application of business rules, return inventory,
assets, and regulatory requirements. This final step directly extends to post-delivery
customer support and follow-up.

SCOR MODEL: Scope

The SCOR model does not attempt to explain every business process or activity. As in all
business models, there is a specific scope that the SCOR model addresses, including the
following segments:

• Customer Interactions: The entire process of the customer relationship, from order entry
through paid invoice.
• Product Transactions: All product, from the supplier’s supplier to the customer’s customer,
including equipment, supplies, bulk products, etc.
• Market Interactions: From the understanding of demand, to the fulfillment of every order.

The focus of SCOR can also be defined and measured on 3 levels of process detail.

• Level 1: Defining Scope – geographies, segments, and context

• Level 2: Configuration of the supply chain
• Level 3: Process element details – identifies key business activities within the chain.

A major supplier of light bulbs around the world, Philips Lighting has been using the SCOR
model since 1999. They recently reported to the Supply Chain Council that over the years,
incorporating the SCOR model into their business framework has directly resulted in
improved customer service and reduced inventories. The SCOR model is a tried and true
process for manufacturing and distribution industries that has seen decades of success.
When applied correctly, it can streamline processes and refine your organization’s supply
chain.

SCLM/U3 Topic 4

Demand Chain Management

Demand-chain management (DCM) is the management of relationships between suppliers

and customers to deliver the best value to the customer at the least cost to the demand
chain as a whole. Demand-chain management is similar to supply-chain management but
with special regard to the customers.

Demand Chain Management software tools bridge the gap between the customer-
relationship management and the supply-chain management. The organization’s supply
chain processes are managed to deliver best value according to the demand of the
customers. DCM creates strategic assets for the firm in terms of the overall value creation
 as it enables the firm to implement and integrate marketing and supply chain
management (SCM) strategies that improve its overall performance. A study of the
university in Wageningen (the Netherlands) sees DCM as an extension of supply chain
management, due to its incorporation of the market-orientation perspective on its concept.

A Demand-driven supply network (DDSN) is one method of supply-chain management

which involves building supply chains in response to demand signals. The main force
of DDSN is that it is driven by customers demand. In comparison with the traditional supply
chain, DDSN uses the pull technique. It gives DDSN market opportunities to share more
information and to collaborate with others in the supply chain.

DDSN uses a capability model that consist of four levels. The first level is Reacting, the
second level is Anticipating, the third level is Collaborating and the last level is
Orchestrating. The first two levels focus on the internal supply chain while the last two levels
concentrate on external relations throughout the Extended Enterprise.

In a demand-driven chain, a customer activates the flow by ordering from the retailer, who
reorders from the wholesaler, who reorders from the manufacturer, who reorders raw
materials from suppliers. Orders flow backward, up the chain, in this structure.

Many companies are trying to shift from a build-to-forecast to a build-to-order discipline. The
property of being demand-driven is one of degree: Being “0 percent” demand-driven means
all production/inventory decisions are based on forecasts, and so, all products available for
sale to the end user is there by virtue of a forecast. This could be the case of fashion goods,
where the designer may not know how buyers will react to a new design, or the beverage
industry, where products are produced based on a given forecast. A “100 percent” demand-
driven is one in which the order is received before production begins. The commercial
aircraft industry match to this description. In most cases, no production occurs until the
order is received.

Competitive Advantages
To create sustainable competitive advantages with DDSN, companies have to do deal with
three conditions:

• Alignment (create shared incentives)

• Agility (respond quickly to short-term change)
• Adaptability (adjust design of the supply chain)

Misconceptions

There are five commonly-made misconceptions of demand driven (DDSN):

Companies might think they are demand driven because they have a good forecast of their
company.
• They have implemented lean manufacturing.
• They have great data on all their customers.
• They think it is a technology project and the corporate forecast is a demand visibility signal.
• They have a better view of customers demand.

An important component of DDSN is DDM (“real-time” demand driven manufacturing). DDM

gives customers the opportunity to say what they want, where and when.

Demand Driven execution

Demand-chain management is the same as supply chain management, but with emphasis
on consumer pull vs. supplier push. The demand chain begins with customers, then funnels
through any resellers, distributors, and other business partners who help sell the company’s
products and services. The demand chain includes both direct and indirect sales forces.
Customers demand is hard to detect because out of stock situations (OOS) falsify data
collected from POS-Terminals. According to studies of Corsten/Gruen (2002, 2008) the
OOS-rate is about 8%. For products under sales promotion OOS rates up to 30% exist.
Reliable information about demand is necessary for DCM therefore lowering OOS is a main
factor for successful DCM.

Corsten and Gruen describe key factors for lowering OOS-rates:

• Data accuracy
• Forecast and order accuracy
• Order quantity
• Replenishment
• Capacity (time supply)
• Capacity (Packout) and Planogram Compliance
• Shelf Replenishment

MIB/U3 Topic 5

Global Supply Chain Management

Firms are creating truly global supply chains because it enables them to reduce their costs.
Companies can take advantage of lower production costs and they can outsource to free
capital from non-core activities and generate large-scale efficiencies. In addition, the costs
of shipping, communications and tariff-related charges have come down over the years.

Global supply chain management involves planning how the entire supply chain will function
as an integrated whole, with the aim of generating an optimum level of customer service
while being as cost efficient as possible.

Other aims include increasing the speed by which your product reaches your customers, as
well as flexibility in dealing with customer transactions.
It incorporates management processes that integrate the network of suppliers,
manufacturers, warehouses and retail outlets so that the right type of goods are sourced,
supplied, produced and shipped in the right quantities, to the right locations, at the right time
and are received in sound condition.

To achieve successful integration, flows of information (such as purchase orders, shipping

notices, waybills and invoices), materials (including raw and finished products) and finances
(payments and refunds) through the supply chain must be co-ordinated effectively.

What are the three things all successful supply chain management needs?
Supply chain management touches all of an organization’s functions. To be successful, it
requires focused effort across the entire company and collaboration with all outside
suppliers and service providers. This means that supply chain management must have a
multidimensional approach, involving people, processes and technology.

People
People are key to supply chain management because they are the core of organizations.
For successful supply chain management, the people involved must have the skills and
knowledge to manage sourcing, manufacturing, storage and transportation of products.
They must have a solid view of the company’s strategic business vision and know how their
role fits into the overall functioning of the supply chain.

Processes

The processes in supply chain management are the actions taken with the aim of satisfying
customers. They include all functions involved in the supply chain: sourcing, distribution,
transportation, warehousing, sales and customer service. They also include all actions
performed by external companies that are part of the supply chain.

Technology
Technology is used in the supply chain to connect people and processes. However, people
involved in the supply chain will not use technology unless they find it easy to adopt. Careful
selection and implementation of the supply chain technologies a company uses is essential
for supply chain success.

The Benefits of Global Supply Chain Management

In the modern global marketplace, advances in communications and transportation
technologies have led customers to expect a steady and regular supply of products in good
condition at the lowest possible price, despite the long distances most products,
commodities and foodstuffs are shipped.
 Companies must always be looking for ways to improve the functioning of their supply
chains to ensure that their supply meets projected demands cost effectively. If they do not
produce sufficient product to meet demand, they will lose customers. If they produce too
much product, they must pay for expensive warehousing of the excess inventory, which
they might not be able to sell.

If supplies are not sourced carefully and production is not monitored, companies might be
faced with mass product recalls or returns. These can result in financial ruin for a company.

“By managing their supply chains carefully, companies can select the most cost-
effective solution at each stage in the chain and can avoid business costs. This
provides a company with a real competitive edge.”

The cost savings provided by supply chain management enhance additional cost-cutting
manufacturing methods and strategies that many international companies have already
instituted. These strategies include the following:

• Just-in-time (JIT) manufacturing (reducing inventory levels, overall costs, product

variability and production times, and also improving product quality)
• Lean manufacturing (producing goods using less manpower, raw materials, time and
space)
• Total quality management (embedding awareness of quality in all operational strategies)

Global supply chain management has many benefits for a company. It enables business
processes to be organized using international organizations that be reduced, companies
can react rapidly to unforeseen market conditions, transport strategies can be improved,
costs can be minimized and waste can be eliminated. You can get your product to market
substantially more quickly.

Small- and medium-sized businesses benefit as well. These smaller organizations,

especially with niche technologies or specializations, can now sell to multinational
organizations or to their suppliers. Many of these large firms have started outsourcing
activities that were carried out internally in the past.

SCLM/U3 Topic 6

Challenges in establishing Global Supply Chain

In every industry, networks of suppliers, manufacturers, trade intermediaries and customers

have spread around the globe as companies strive to lower their costs, increase their profits
and improve productivity in a highly competitive global marketplace. A paradigm shift has
occurred in which companies that once built domestically to sell internationally now look
globally for raw materials, services and finished goods to sell into a defined marketplace.
This shift is happening because of reduced barriers to trade and investment, lower
 transportation costs, ease of information flows, new enabling technologies and the
emergence of economies such as China and India. Supply chain management aims to
manage the flow of goods, information and finances among these business networks in the
most efficient manner. Companies have discovered that effective supply chain management
cuts costs, reduces waste, prevents over-production and helps ensure that customers are
more satisfied with product, price and service. This means it is an essential tool for
competitiveness in a global marketplace.

Challenges that companies face with global supply chains include the following: Currency
fluctuations: When dealing with suppliers or customers overseas, companies must plan for
fluctuating charges and income from foreign exchange rate variations.

Maintaining intellectual property protection: A company might be able to have a product

assembled overseas more cost effectively than assembling it domestically. However, some
countries have less stringent laws regulating protection of intellectual property.

Identifying and assuring the reliability of international business partners: With

suppliers, distributors, customers and business partners located in many regional areas of
the world, it can be difficult for companies to monitor the business practices and financial
stability of all organizations in the supply chain.

Accessing finance and insurance: Financial transactions conducted internationally are

always more complicated than domestic transactions. Companies must establish lines of
credit with banks and work with other members of the supply chain to identify preferred
methods of payment. Obtaining the correct insurance to protect foreign property and
shipments is also essential.

Compliance with international regulations and standards: Quality standards, import and
export restrictions, safety and packing regulations and labelling regulations vary around the
globe. For companies new to international trade, ensuring that materials provided by a
foreign supplier will meet all domestic entry regulations can be a daunting undertaking.

If you ignore or mishandle these risks, they can result in cost penalties and distracting
inefficiencies. Identifying the risks up front, so you know what to look for, can be the key to
success. The following six risks can easily have a negative impact on your business:

1. Quality levels and defects. Manufacturing processes aren’t perfect, so the industry
typically accepts a certain quality level for products. Complexity and variability are part of
any production process, and unfamiliar sources might not adhere to accepted U.S. defect
levels. Choosing a non-U.S.-based sourcing firm can open up questions and disputes about
which party is liable for defect percentages that rise above normal.
2. Time zones. Some U.S. firms experience issues when dealing with companies on the other
side of the country—and never mind the 13-hour time difference between the United States
and Asia. Waking and working hours do not coincide, which can be a challenge when a
pressing issue arises. Waiting one day to clarify a product question or process change can
often simply be too long for companies that are trying to run nimble operations.
3. Long-range logistics. Purchasing items at a delivered price is easy, but the shipment can
be delayed. Whether it is a factory hold-up or transit problem, ignoring the complexity of
long-range logistics can be a risk.
4. Accountability and compliance. Companies should consider social compliance every time
they look at global sourcing. They need to conduct due diligence about child labor practices,
acceptable working conditions, forced labor, and fair compensation practices. Barring the
hiring of local staff members, however, there isn’t a surefire way to ensure social
compliance from across the globe. Risk comes in the form of severe brand damage due to
unfair or illegal practices that come to light.
5. To receive on-time product delivery, it is vital to have firm completion dates and shipping
timeframes. An item that is globally sourced, however, is often just a piece of a bill of
materials that must be on hand for product completion. Delays from a non-U.S. source can
derail production and drive up related costs.
6. Language barriers. Global partners offer competitive pricing and efficiencies, but still often
conduct day-to-day business in a different language. Managers will likely speak English, but
their directions must be relayed to line staff, and your own words might be lost in translation.
Errors are bound to happen when communications aren’t translated and interpreted
perfectly.

These six factors present mighty risks, but they are not insurmountable. Companies looking
to take advantage of global sourcing opportunities can build their own teams located in the
United States or abroad, or work with experienced partners to mitigate and remove these
risks. The benefits of sourcing from outside the country can be great when handled
properly.

SCLM/U3 Topic 7

Factor that influences designing Global Supply Chain Network

Designing Supply Chain Network for each industry or business involves arriving at a
satisfactory design framework taking into all elements like product, market, process,
technology, costs, external environment and factors and their impact besides evaluating
alternate scenarios suiting your specific business requirements. No two supply chain
designs can be the same. The network design will vary depending upon many factors
including location and whether you are looking at national, regional or global business
models.

1. Supply Chain Network in Simple and basic Terms Involves determining following
process design:

Procurement

• Where are your suppliers

• How will you procure raw materials and components
 Manufacturing

• Where will you locate the factories for manufacturing/assembly

• Manufacturing Methodology

Finished Good

• Where will you hold inventories, Number of Warehouses, Location of warehouses etc.
• How will you distribute to markets – Transportation and Distribution logistics

All above decisions are influenced and driven by Key Driver which is the Customer
Fulfillment.

2. Designing Supply Chain Network involves determining and defining following

Elements:
o Market Structure
o Demand Plotting or Estimation
3. Market Segment
o Procurement Cost
o Product /Conversion Costs
o Logistics Costs including Inventory holding costs
o Over heads
o Cost of Sales
4. Network Design aims to define:
o Best fit Procurement model – Buying decision and processes- VMI, JIT, Kanban,
procurement cost models etc.
o Production processes – One or more number of plants, plant capacity design, Building to
order, build to stock etc, in-house manufacturing or outsource manufacturing and related
decisions including technology for production.
o Manufacturing Facility design – Location, Number of factories, size of unit, time frames for
the plant setup project etc.
o Finished Goods Supply Chain network – Number of warehouses, location & size of
warehouses, inventory flow and volume decisions, transportation.
o Sales and Marketing Decisions – Sales Channel and network strategy, Sales pricing and
promotions, order management and fulfillment process, service delivery process definitions.
5. Network Design also examines:
o Derives cost estimates for every network element
o Examines ways to optimize costs and reduce costs
o Extrapolates cost impact over various product lines and all possible permutations and
combinations to project profitability
6. Some of the key factors that affect the supply chain network modeling are:
o Government Policies of the Country where plants are to be located.
o Political climate
o Local culture, availability of skilled / unskilled human resources, industrial relations
environment, infrastructural support, energy availability etc.
o Taxation policies, Incentives, Subsidies etc across proposed plant location as well as tax
structures in different market locations.
o Technology infrastructure status.
o Foreign investment policy, Foreign Exchange and repatriation Policy and regulations.

Supply Chain Network designs not only provide an operating framework of the entire
business to guide the managements, they also examine the structure from strategic view
point taking into account external influences, interdependencies of all processes and
critically evaluate opportunities to maximize profitability.

Supply Chain Design consultants use various design softwares and optimization techniques
coupled with inputs from industry consultants and experts.

UNIT 4 Warehousing

SCLM/U4 Topic 1

Warehousing: Concept and Types

A warehouse may be defined as a place used for the storage or accumulation of goods. The
function of storage can be carried out successful with the help of warehouses used for
storing the goods.

Warehousing can also be defined as assumption of responsibility for the storage of goods.
By storing the goods throughout the year and releasing them as and when they are needed,
warehousing creates time utility.

Functions of Warehousing:

1. Storage:

This is the basic function of warehousing. Surplus commodities which are not needed
immediately can be stored in warehouses. They can be supplied as and when needed by
the customers.

2. Price Stabilization:

Warehouses play an important role in the process of price stabilization. It is achieved by the
creation of time utility by warehousing. Fall in the prices of goods when their supply is in
abundance and rise in their prices during the slack season are avoided.

3. Risk bearing:
 When the goods are stored in warehouses they are exposed to many risks in the form of
theft, deterioration, exploration, fire etc. Warehouses are constructed in such a way as to
minimise these risks. Contract of bailment operates when the goods are stored in wave-
houses.

The person keeping the goods in warehouses acts as boiler and warehouse keeper acts as
boiler. A warehouse keeper has to take the reasonable care of the goods and safeguard
them against various risks. For any loss or damage sustained by goods, warehouse keeper
shall be liable to the owner of the goods.

4. Financing:

Loans can be raised from the warehouse keeper against the goods stored by the owner.
Goods act as security for the warehouse keeper. Similarly, banks and other financial
institutions also advance loans against warehouse receipts. In this manner, warehousing
acts as a source of finance for the businessmen for meeting business operations.

5. Grading and Packing:

Warehouses nowadays provide the facilities of packing, processing and grading of goods.
Goods can be packed in convenient sizes as per the instructions of the owner.

Importance of Warehousing In the Development of Trade and Commerce:

Warehousing or storage refers to the holding and preservation of goods until they are
dispatched to the consumers. Generally, there is a time gap between the production and
consumption of products. By bridging this gap, storage creates time utility.

There is need for storing the goods so as to make them available to buyers as and when
required. Some amount of goods is stored at every stage in the marketing process. Proper
and adequate arrangements to retail the goods in perfect condition are essential for
success in marketing. Storage enables a firm to carry on production in anticipation of
demand in future.

A warehouse is a place used for the storage or accumulation of goods. It may also be
defined as an establishment that assumes responsibility for the safe custody of goods.
Warehouses enable the businessmen to carry on production throughout the year and to sell
their products, whenever there is adequate demand.

Need for warehouse arises also because some goods are produced only in a particular
season but are demanded throughout the year. Similarly certain products are produced
throughout the year but demanded only during a particular season. Warehousing facilitates
production and distribution on a large scale.

Benefits from Warehouses:

1. Regular production:

Raw materials need to be stored to enable mass production to be carried on continuously.

Sometimes, goods are stored in anticipation of a rise in prices. Warehouses enable
manufacturers to produce goods in anticipation of demand in future.

2. Time utility:

A warehouse creates time utility by bringing the time gap between the production and
consumption of goods. It helps in making available the goods whenever required or
demanded by the customers.

Some goods are produced throughout the year but demanded only during particular
seasons, e.g., wool, raincoat, umbrella, heater, etc. on the other hand, some products are
demanded throughout the year but they are produced in certain region, e.g., wheat, rice,
potatoes, etc. Goods like rice, tobacco, liquor and jaggery become more valuable with the
passage of time.

3. Store of surplus goods:

Basically, a warehouse acts as a store of surplus goods which are not needed immediately.
Goods are often produced in anticipation of demand and need to be preserved properly until
they are demanded by the customers. Goods which are not required immediately can be
stored in a warehouse to meet the demand in future.

4. Price stabilization:

Warehouses reduce violent fluctuations in prices by storing goods when their supply
exceeds demand and by releasing them when the demand is more than immediate
productions. Warehouses ensure a regular supply of goods in the market. This matching of
supply with demand helps to stabilise prices.

5. Minimisation of risk:

Warehouses provide for the safe custody of goods. Perishable products can be preserved
in cold storage. By keeping their goods in warehouses, businessmen can minimise the loss
from damage, fire, theft etc. The goods kept in the warehouse are generally insured. In case
of loss or damage to the goods, the owner of goods can get full compensation from the
insurance company.

6. Packing and grading:

Certain products have to be conditioned or processed to make them fit for human use, e.g.,
coffee, tobacco, etc. A modern warehouse provides facilities for processing, packing,
blending, grading etc., of the goods for the purpose of sale. The prospective buyers can
inspect the goods kept in a warehouse.
7. Financing:

Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse.
The owner can borrow money against the security of goods by making an endorsement on
the warehouse receipt. In some countries, warehouse authorities advance money against
the goods deposited in the warehouse. By keeping the imported goods in a bonded
warehouse, a businessman can pay customs duty in installments.

Type of Warehouses:
Private Warehouses:

The private warehouses are owned and operated by big manufacturers and merchants to
fulfill their own storage needs. The goods manufactured or purchased by the owner of the
warehouses have a limited value or utility as businessmen in general cannot make use of
them because of the heavy investment required in the construction of a warehouse, some
big business firms which need large storage capacity on a regular basis and who can afford
money, construct and maintain their private warehouses. A big manufacturer or wholesaler
may have a network of his own warehouses in different parts of the country.

Public Warehouses:

A public warehouse is a specialised business establishment that provides storage facilities

to the general public for a certain charge. It may be owned and operated by an individual or
a cooperative society. It has to work under a license from the government in accordance
with the prescribed rules and regulations.

Public warehouses are very important in the marketing of agricultural products and
therefore the government is encouraging the establishment of public warehouses in the
cooperative sector. A public warehouse is also known as duty-paid warehouse.

Public warehouses are very useful to the business community. Most of the business
enterprises cannot afford to maintain their own warehouses due to huge capital Investment.
In many cases the storage facilities required by a business enterprise do not warrant the
maintenance of a private warehouse. Such enterprises can meet their storage needs easily
and economically by making use of the public warehouses, without heavy investment.

Public warehouses provide storage facilities to small manufacturers and traders at low cost.
These warehouses are well constructed and guarded round the clock to ensure safe
custody of goods. Public warehouses are generally located near the junctions of railways,
highways and waterways.

They provide, therefore, excellent facilities for the easy receipt, despatch, loading and
unloading of goods. They also use mechanical devices for the handling of heavy and bulky
goods. A public warehouse enables a businessman to serve his customers quickly and
economically by carrying regional stocks near the important trading centres or markets of
two countries.

Public warehouses provide facilities for the inspection of goods by prospective buyers. They
also permit packaging, grading and grading of goods. The public warehouses receipts are
good collateral securities for borrowings.

Bonded Warehouses:

Bonded warehouses are licensed by the government to accept imported goods for storage
until the payment of custom duty. They are located near the ports. These warehouses are
either operated by the government or work under the control of custom authorities.

The warehouse is required to give an undertaking or ‘Bond’ that it will not allow the goods to
be removed without the consent of the custom authorities. The goods are held in bond and
cannot be withdrawn without paying the custom duty. The goods stored in bonded
warehouses cannot be interfered by the owner without the permission of customs
authorities. Hence the name bonded warehouse.

Bonded warehouses are very helpful to importers and exporters. If an importer is unable or
unwilling to pay customs duty immediately after the arrival of goods he can store the goods
in a bonded warehouse. He can withdraw the goods in installments by paying the customs
duty proportionately.

In case he wishes to export the goods, he need not pay customs duty. Moreover, a bonded
warehouse provides all services which are provided by public warehouses. Goods lying in a
bonded warehouse can be packaged, graded and branded for the purpose of sale.

SCLM/U4 Topic 2

Warehousing facility Location & Network Design

LOGISTICS network design is concerned with the purpose of the number and site of
warehouses and manufacturing plants, allocation of customer demand, distribution of
warehouses to production plants. The best configuration must be able to deliver the goods
to the customers at the least cost (commonly used objective) while satisfying the service
level needs. In most logistics network design models, the customer demand is exogenous
and defined as a consistent quantity for each product. Such a uniform demand value does
not take advantage of the possibility that different customers have different sensitivity to
delivery lead-time.
 Logistics network design is a vital strategic decision for Audi. It is very important to allocate
the customer demand points to warehouses, and allocate products from warehouses to
production plants. As Audi have become more global, there has been a trend towards
outsourcing the logistics function to third-party logistics (3PL) firms, so that manufacturing
companies can focus their efforts on their core competencies. Thus, 3PL companies must
have the capability to design efficient and effective logistics network so as to add value to
their clients’ business. Audi is excellent in this.

In Audi Company, we see three new models for logistics network design with special focus
on the perspective of 3PL companies. The chief objective of these new models is to
increase the effectiveness of the resulting network design and the utilization of facilities in
the network.

The three models encompass the following areas:

1. Logistics network design with differentiated delivery lead time,

2. Logistics network design with price discount, and
3. Consolidated logistics network design using consolidation hubs.

A new perspective of Audi that incorporates into logistics network design are, two factor
namely delivery lead time and price discount that are usually not considered. This shows
that designing network with differentiated delivery lead time can reduce the network cost,
while the other shows that combining pricing decision and demand management can result
in a network design with higher net profits, combines tactical decision for inventory
replenishment policy with strategic decision for consolidated network design. These shows
by adding consolidation hubs at suitable locations near to the suppliers, we can leverage on
concave Audi’s cost to reduce the overall network cost.

Network design and inventory replenishment policy simultaneously our findings provide
managerial insights into how 3PL companies can and their results to improve their
business. Audi design more effective logistic networks to support their clients and Audi is
applicable to the order fulfilment business process and managing suppliers for
manufacturers. As every part is made by Audi but work is divided into different department,
for example tyre, machine etc are produced in different plant.

Audi is designing a network according to demand classes segmented according to their

sensitivity to delivery lead time. This shows that potential network cost savings can be
achieved by designing a network with segmented customer demand as compared to a
network without segmented demand. For the segmented demand case, the short LT
demand customers are served from their local warehouse or a nearby warehouse which
can satisfy the delivery lead time requirement; while the long LT demand customers are
served directly from the hub which is located further away. In addition, the model explored
the multiple facilities grouping method which groups facilities which can serve the same
customer location within the short LT requirement. It was shown that multiple facility
grouping can reduce the network cost, especially for networks with lower inventory holding
cost and high fixed facility cost.
 Network Design: Key Issues

• Pick the optimal number, location, and size of warehouses and/or plants
• Determine optimal sourcing strategy
• -Which plant/vendor should produce which product?
• Determine best distribution channels
• -Which warehouses should service which customers?

Data for Network Design

1. A listing of all products

2. Location of customers, stocking points and sources
3. Demand for each product by customer location
4. Transportation rates
5. Warehousing costs
6. Shipment sizes by product
7. Order patterns by frequency, size, and season, content
8. Order processing costs
9. Customer service goals

IL/U5 Topic 2

Reverse Logistics: Application area and Activities involved

Reverse Logistics
Reverse logistics is for all operations related to the reuse of products and materials. It is
“the process of moving goods from their typical final destination for the purpose of capturing
value, or proper disposal. Remanufacturing and refurbishing activities also may be included
in the definition of reverse logistics.” Growing green concerns and advancement of green
supply chain management concepts and practices make it all the more relevant. The
number of publications on the topic of reverse logistics have increased significantly over the
past two decades. The first use of the term “reverse logistics” in a publication was by James
R. Stock in a White Paper titled “Reverse Logistics,” published by the Council of Logistics
Management in 1992. The concept was further refined in subsequent publications by Stock
(1998) in another Council of Logistics Management book, titled Development and
Implementation of Reverse Logistics Programs, and by Rogers and Tibben-Lembke (1999)
in a book published by the Reverse Logistics Association titled Going Backwards: Reverse
Logistics Trends and Practices. The reverse logistics process includes the management
and the sale of surplus as well as returned equipment and machines from the hardware
leasing business. Normally, logistics deal with events that bring the product towards the
customer. In the case of reverse logistics, the resource goes at least one step back in the
supply chain. For instance, goods move from the customer to the distributor or to the
manufacturer.
 When a manufacturer’s product normally moves through the supply chain network, it is to
reach the distributor or customer. Any process or management after the delivery of the
product involves reverse logistics. If the product is defective, the customer would return the
product. The manufacturing firm would then have to organise shipping of the defective
product, testing the product, dismantling, repairing, recycling or disposing the product. The
product would travel in reverse through the supply chain network in order to retain any use
from the defective product. The logistics for such matters is reverse logistics.

Benefits of an Efficient Reverse Logistics Systems

While many companies consider the return process to be a necessary evil that shouldn’t be
noticed, companies that implement an effective reverse logistics workflow can reap several
benefits.

Some of these benefits are:-

1. Reduced costs

By planning ahead for returns and making the return order right, you can reduce related
costs (administration, shipping, transportation, tech support, QA, etc.)

2. Faster service

This refers to the original shipping of goods and the return / reimbursement of goods.
Quickly refunding or replacing goods can help restore a customer’s faith in a brand.

3. Customer retention

Dealing with errors is just as important as making sales. If a customer had a bad experience
with your product, you have to make it right. Fulfilment blunders can create educational
opportunities. Learn how to keep your customers happy and engaged with your company –
even after you’ve made a mistake.

4. Reduced losses and unplanned profits

 Recover the loss of investment in your failed product by fixing and restocking the unit,
scrapping it for parts, or repurposing it in a secondary market. With a good reverse logistics
program in place, you don’t have to leave money on the table. Take a product that would
otherwise just cost your company money and turn it into an unforeseen asset.

Application area and Activities involved in Reverse Logistic

Reverse logistics has become one of the significant concepts for various industries to
practice to achieve sustainability objectives. Reverse logistic is defined as “The movement
of goods from a consumer towards a producer in a channel of distribution”. A number of
cases that implement successful reverse logistics system have been found worldwide in
specific industrial sectors such as heavy machines, electronic sectors and plastic sector.
Whereas, there is a limited application of reverse logistics in other sectors. The main
purpose of this study is to explore and describe the applications of reverse logistics
processes in industrial sector. This leads the researcher to conduct a comparison using
qualitative approach between those applications to highlight strengths and weaknesses in
RL practices in Egyptian industrial companies. Finally, the researcher proposes a number of
corrective and preventive actions to improve the application of RL. Based on the findings of
the comparison, the researcher recommends that the companies shall establish, implement
and maintain acquisition strategy and a manual to describe the inspection criteria and
guidelines for the inspection process to accelerate the process and avoid any errors in
deposition decision.

SCLM/U4 Topic 4

Outsourcing: Nature and Concept

Outsourcing is the process of contracting a business function or any specific business

activity to specialized agencies. Mostly, the non-core areas such as sanitation, security,
household, pantry, etc are outsourced by the company. The company makes a formal
agreement with the agency.

The agency then sends the manpower required to the company. The agency charges the
company for their services and in turn pays wages to their employees. Global competition
has given rise to outsourcing. With the help of outsourcing, companies can focus on their
core areas which leads to better profits and increase the quality of their product.

Advantages of Outsourcing

• Overall Cost Advantage: It eludes the need to hire individuals in‐house; hence recruitment
and operational costs can be minimized to a great extent. It reduces the cost and also
saves time and efforting on training cost.
• Stimulates Entrepreneurship, Employment, and Exports: Outsourcing stimulates
Entrepreneurship, Employment, and Exports in the country from where outsourcing is done.
 Look at the example of India. After the initial success of call centres, there was a sudden
emergence of many small scales and medium scale BPo and KPO companies.
• Low Manpower Cost: The manpower cost is much lower than that of the host country. This
is exactly the case with India. We have a very large educated workforce. And this causes
the labour cost in our country to be much lower.
• Access to Professional, Expert and High‐quality Services: Mostly, the tasks are given
to people who are skilled in that particular field. This provides us with a better level of
service and fewer chances of errors or misjudgment.
• Emphasis on Core Process Rather than the Supporting Ones: With its help, companies
can focus on their core areas which lead to better profits and increase the quality of their
product. They simply outsource ancillary services.
• Investment Requirements are Reduced: The organization can save on investing in the
latest technology, software, and infrastructure and let the outsourcing partner handle the
entire infrastructure.
• Increased Efficiency and Productivity: There is an increased efficiency and productivity
in the non – core areas of an organization.
• Knowledge Sharing: Outsourcing enables the organizations to share knowledge and best
practices with each
It helps develop both the companies and also boosts goodwill in the industry.

Disadvantages of Outsourcing

• Lack of Customer Focus: An outsourced vendor may be catering to the needs of multiple
organizations at a time. In such situations, vendors may lack complete focus on an
individual organization’s tasks. And the reputation of the organization may suffer as a result
• A Threat to Security and Confidentiality: The inside news of the organization may be
leaked to the third party, so there are security issues. The leak of sensitive information may
result in losses to the company and also be an advantage to competitors.
• Dissatisfactory Services: Some of the common problem areas with outsourcing include
stretched delivery time and sub‐standard quality.
• Ethical Issues: The major ethical issue is taking away employment opportunities from
one’s own country. Instead of creating employment and wealth in the origin country it gets
outsourced to another country. In recent times this has been viewed by many as unethical
and even unpatriotic.
• Other Disadvantages: Include misunderstanding of the contract, lack of communication,
poor quality and delayed
services amongst others.

SCLM/U4 Topic 5

Strategic Decision to Outsourcing

Outsourcing – A Strategic Decision?

Does strategic outsourcing actually benefit an organization? Or will it backfire in the long
run? Here’s how outsourcing has impacted organizations in India, and how it can benefit
you. by Soutiman Das Gupta

What do companies like Hero Honda Motors, Bharti Tele-Ventures Limited, the National
Stock Exchange (NSE), HDFC Bank, Sony Entertainment Television, Hyatt Services India
Pvt. Ltd, and HPCL have in common?

The common thread running through these large organizations is that all of them have
chosen outsourcing as a strategic business decision to garner tangible and intangible
benefits in the near and long run.

Indeed, it’s difficult to find a successful and growing organization in India, irrespective of
size, that does not outsource a certain amount of its IT infrastructure services or
management.

Does it work?
Does it make sense for an organization to outsource its IT needs? Most of the CIOs and
analysts we spoke to felt that strategic outsourcing helps an organization to save on cost
and speed up delivery while focusing on core business needs.

To elaborate on the benefits, let’s look at Infrastructure Strategies (IS 2004), the CIO annual
survey conducted by Network Magazine to analyze technology investment patterns in the
Indian enterprise. The survey, conducted amongst India’s top corporates, shows that nearly
54 per cent of the CIOs outsource “to reduce costs”.

A similar view is echoed by Michele Caminos, Vice President, Team Manager, IT Services,
Asia/Pacific, Gartner. “The most compelling reason why companies get into outsourcing
engagements is to save costs,” she agrees.

According to Infrastructure Strategies, other impor-tant drivers for strategic IT outsourcing

are focus on core competencies, access to special expertise, higher speed of delivery, and
access to new technologies.

Focus on the core

Given the pressures of a competitive market, organizations tend to focus on their core
activities — activities that link-up directly with the revenues and hence the profitability. In
such a scenario, companies tend to outsource their non-core tasks to focus on business
decision-making. And IT infrastructure easily lends itself to outsourcing.

Hero Honda Motors is a good example of an organization that uses strategic outsourcing to
focus on core competency. “We wanted to outsource all routine (IT maintenance) tasks so
that we could concentrate on the main business issues. With the headache of dealing with
routine complaints taken away, our staff focuses on user requirements and is able to deliver
services to users on time,” explains SR Balasubramanian, Vice President – Information
Systems, Hero Honda Motors Limited.

The IS 2004 survey reports that 46 per cent of the CIOs who outsource or have plans to do
so, consider “focus on core competencies” as the second most important reason to
outsource.

“There are definite cost savings in terms of resource management and less manpower
costs. As an IT team we can focus more on providing new infrastructure solutions to enable
various requirements of our core media business rather than get caught up with the daily
maintenance requirements of the existing set-up,” explains Aneeta Pankaj, Senior Manager,
Information Technology, Sony Entertainment Television (SET) India Private Limited.

Competitive Business Strategy

Outsourcing is best adopted after a careful look at business needs and available options. It
is essential that the outsourcing relationship provides strategic business benefits in the
future.

“Outsourcing provides a competitive strategy benefit in a number of ways to an

organization. It allows ease of management, reduction in cost, lesser manpower, and frees
up internal resources,” says Pankaj.

“Outsourcing can, and frequently does, provide both long- and short-term benefits to
companies that outsource, provided they have a strategic objective for outsourcing. Medium
and long-term gains are best realised by selecting a vendor who brings value to your core
business, rather than one who can provide you with the lowest prices,” explains Sharad
Sanghi, Managing Director & CEO, Netmagic Solution Pvt. Ltd.

Business-Related
It’s important to understand that outsourcing is a business-related decision and not simply
an IT need. The ultimate goal of outsourcing is to bring benefits to the business and
subsequently the customer.

Hero Honda’s Balasubramanian says, “We believe an outsourcing service provider could
better handle our day-to-day management needs than our own team. We’ve not added
numbers to our staffing in spite of increased business activity. Since the outsourcing agency
manages the data centre round the clock, our staff has been relieved from working in
shifts.”

Bharti Tele-Ventures Limited has cut one of the largest outsourcing deals in Asia on the IT
infrastructure and network management areas. Dr Jai Menon, Joint President, Enterprise
Business, Bharti Tele-Ventures, says that the outsourcing relationship has brought,
“unparalleled value to the company for our customers, employees and shareholders.”
“For customers, it brings innovative and streamlined products and services like billing, CRM
and data warehousing. For employees, it brings enhanced performance-critical applications
like intranet, e-mail and online collaboration. And at an overall level, the strategic alliance
provides predictable IT spends, and additional revenue streams to further enhance
shareholder value,” he adds.

The changing landscape

In the past, Indian companies were not very keen to outsource their IT needs, primarily
because their enterprise IT environments were relatively less complex, easier to manage,
and inexpensive to maintain. Besides, few outsourcing service providers offered a number
of outsourcing options under one roof.

But now, IT environments in companies have become more complex. There has been
growth in terms of volume of business, range of services, number of employees, number of
competitors, nationwide locations, and enterprise applications. This calls for more attention
to IT as a service to provide strategic business benefits.

To help organizations get optimum value out IT and use it as a strategic tool to further the
cause of business, many CIOs think it worth their while to outsource IT infrastructure
management.

Innovative options
Indian enterprises today have a variety of outsourcing options from which they can choose
the right fit. Outsourcing solution providers offer services that include desktop client
management, server management, cable management, firewall management, patch
management, software license management, IT audits, backbone and connectivity, website
hosting, and IT infrastructure management.

Thus the available services are innovative, significantly more customised, and better
aligned with individual customer requirements. An enterprise can pick-and-chose specific
services and build a reliable mode of service delivery. A company can outsource basic
desktop management needs, or the management of the entire nationwide IT infrastructure if
needed.

To introduce more flexibility, many service providers offer clients hire-purchase schemes,
infrastructure on-demand, and pay-as-you-use options.

Hyatt Services India Pvt. Ltd has given a three-year contract to a service provider to
outsource network monitoring services. Says Harcharan Singh, the company’s Director of
Information Systems, “The service provider has to upgrade and buy back the existing
hardware as per the depreciation cost agreed in the SLA. This clause protects us from
technology obsolescence, since technology changes rapidly.”
 IndusInd bank has entered into an infrastructure-on-demand agreement with IBM India,
which includes building an IT infrastructure, implementing server consolidation, and setting
up disaster recovery systems. The partnership supports the bank’s goal to become totally
customer-centric by providing more secure, responsive and efficient service, in line with its
renewed focus on retail banking. It allows the bank to scale up operations and pursue
aggressive growth plans.

Before you outsource

All things said, outsourcing is a strategic business decision that should be made only if a
company sees true business benefits accruing from it. Badly-planned outsourcing could
result in erosion of service value and cost escalation, but a well-planned outsourcing
decision can help you sleep better at night, knowing that the responsibility of deliverables is
in safe hands.

Michele Caminos of Gartner highlights a few steps that can lead you to take a proper
decision in this context.

• What type of a service is it? Identify characteristics of service and the respective type.
• What perspective is driving the effort? Identify decision rights (service owner) and input
rights (other stakeholders).
• How are other perspectives affected? Identify conflicts and work them out. Check ‘killer’
factor. Improve solution.
• Check compliance with principles and fit with architecture.
• Who should carry it out? Evaluate different staffing possibilities. Select best from
combination.
• Who should participate in the decision? Submit service proposal to specific decision
process. Follow it up.

She recommends the following:

• Understand different business perspectives and how they affect sourcing decisions.
• Understand how perspectives must be harnessed to drive sourcing decisions.
• Develop a structured sequence of steps to sourcing decisions.
• Develop evolving governance architecture to support sourcing decisions.
• Develop internal sourcing decision roles.

SCLM/U4 Topic 6

Third Party Logistics (3PL)

A 3PL (third-party logistics) provider offers outsourced logistics services, which encompass
anything that involves management of one or more facets of procurement and fulfillment
activities. In business, 3PL has a broad meaning that applies to any service contract that
involves storing or shipping items. A 3PL service may be a single provider, such as
transportation or warehouse storage, or it can be a systemwide bundle of services capable
of handling supply chain management.

How Third-Party Logistics work

Here is an example of how 3PL arrangements operate: A book publisher hires writers,
editors and graphic designers to produce publications, but it may not want to handle the
consumer ordering process or transportation of book shipments. Instead, the book publisher
uses a fulfillment center to process its online orders and hires a trucking carrier to haul its
freight. The fulfillment center and carrier both act as 3PL providers. It’s possible for a single
3PL provider to fulfill and ship book orders, too.

By contracting with a 3PL provider, the book company can use supply and distribution
services only when needed, thus controlling costs more effectively while focusing on its core
competency of producing books.

The growth of 3PLs

Aspects of 3PLs probably date back hundreds, if not thousands, of years. The Council of
Supply Chain Management Professionals traces the actual 3PL abbreviation to four
decades ago. “The term 3PL was first used in the early 1970s to identify intermodal
marketing companies … in transportation contracts,” the council wrote in a glossary. “Up to
that point, contracts for transportation had featured only two parties, the shipper and the
carrier.”

The Motor Carrier Act of 1980 deregulated the trucking industry, which reduced trucking
rates and also increased the amount of competition, all of which fed into 3PL concepts.

The term 3PL got bandied about more by consultants and during conferences in the 1990s,
likely tied to evolving technology, including the rise of the internet.

An overview of levels of Logistics Service

Later, the Consumer Product Safety Improvement Act of 2008 legally defined 3PL: “The
term third-party logistics provider means a person who solely receives, holds or otherwise
transports a consumer product in the ordinary course of business but who does not take title
to the product.”

According to a frequently cited 2017 report from Armstrong & Associates, a supply chain
consultancy, 90% of domestic Fortune 500 companies rely on 3PL providers to handle
logistics, compared to the 46% Armstrong reported in 2001.

The growth in online sales and increasing consumer demand for faster delivery and lower
prices have spiked demand for 3PL services. 3PLs have also bloomed thanks to tracking
technology, such as radio frequency identification (RFID) and global positioning system
(GPS), both of which offer extended supply chain visibility. Meanwhile, internet of things
(IoT) technology has improved tracking metrics for trucking and other carriers.

The Benefits of 3PL

The primary benefit of using a 3PL service to handle logistics, such as packaging,
warehousing, fulfillment and distribution, is cost savings — for example, not having to
maintain a warehouse or the staff to monitor supply chain operations.

A 3PL service likely offers better performance on efforts such as shipping while also
enjoying an easier ability to scale its operations. If the publishing company in the example
above suddenly needs to ship more copies of a popular title, a fulfillment center will have an
easier time meeting that demand than if the publisher itself had to ship additional copies of
the book.

3PL vs. freight forwarding

Freight forwarding and 3PL may come across as similar, but there are noticeable
differences.

Freight forwarders do not actually ship materials, and instead function as a liaison between
a client company and shipping firms. The freight forwarder negotiates prices, determines
the best modes of transportation, establishes economical shipping routes and works on
other logistics concerns. As noted earlier, 3PL providers handle a broader range of services
compared to forwarders.

SCLM/U4 Topic 7

Fourth Party Logistics (4PL)

While third-party logistics outsourcing is accepted business practice (though not without
risk), corporations are now looking to outsource to a single partner who will assess, design,
build, run and measure integrated comprehensive supply chain solutions on their behalf.
This evolution in supply chain outsourcing is Fourth-party Logistics or 4PL.

A 4PL provider is a supply chain integrator. The 4PL assembles and manages all
resources, capabilities and technology of an organisation’s Supply Chain and its array of
providers.

An experienced and reliable 4PL provider will bring value and a reengineered approach to
your organisation as it will manage the logistics process, regardless of what carriers,
forwarders or warehouses are used. As the centralised contact with the client, 4PL
has overall responsibility for logistics performance and the ability to impact the entire supply
chain and not just single elements. Consider how many discrete discussions you need to
have in your company to ensure your product gets into consumers hands!

Like Business Process Outsourcing, a 4PL solution aims to manage people, process and
technology. Importantly, 4PL outsourcing must not be seen as a pure cost reduction issue
and if it is considered as such then it is prone to failure. Adopting a 4PL approach brings a
different perspective, knowledge, experience and technology to the existing in-house
function. Successful 4PL partnerships will see both parties work side by side motivated by
mutual success and reward.

Some of the 4PL benefits include: access to a broader base of potential suppliers; back-end
system integration; increased market transparency for goods and services; standardisation
and automation of order placement; reduced procurement costs and order cycle times. If
your business and people are sufficiently mature you might also integrate the 4PL into
the S&OP process. Think how powerful that could be!

Organisations are exploring this solution because it can improve their own bottom line
through increased and sustainable business efficiency. A word of warning; do not go down
this road unless your existing supply chain is already robust AND people are sufficiently
experienced to cope with a very different way of doing business.

UNIT 5- SUPPLY CHAIN AND CRM

SCLM/U5 Topic 1 Supply chain and CRM Linkage

Organizations need business supply activities to maximize the customer base and gain the
competitive advantage in the market. It is important to understand that the logistics
contribute to the customer satisfaction by fulfilling the customer orders in minimum time.
Although the term supply chain has many different perspectives, from the perspective of
total supply chain management the end user is the ultimate owner of the product. The
delivery process involves the customer focused market that allows the organization to
achieve its goals. Organizations can perform transactional or relationship marketing based
on the market segmentation and relationship marketing.

Procurement is also an important domain

The comprehensive supply chain information system provides the resource planning and
administration through the enterprise resource planning (ERP) system and customer
relationship management (CRM). The CRM is the backbone of most of the organizational
customer management and marketing information systems. However, the concept is not limited
only to the customer satisfaction as procurement plays important role in delivery the products
with continuous supply and inventory management. Organizations require high operational
 efficiency to deal with the increased demand by the customers. The customer delivery can
range from homes to warehouse with greater emphasis on in time delivery. The organizations
not only require performance but also reaching the customer through the strategy for serving.
Organizations need to overcome the problem of space, time, and quantity for efficient client
management. Furthermore, the customer service plays important role in providing the desired
product in cost-effective manner. The availability, operational performance, and service
reliability leads to the perfect order. The integrated concepts of achieving the requirements,
expectations, actual and perceived performance requires integrated software for providing
overall customer satisfaction experience. Organizations require combinations of different system
with consideration of procurement as important part of the supply chain management. The
procurement process provides the potential for every dollar spent and saved from a valuable
procurement strategy. The procurement strategy should focus on the lower total cost of
ownership in contrast to the purchase price .

Supplier selection and assessment must be identified to meet the buying

organizations requirement

The complete supply chain network must include different management systems such as ERP
and CRM system.

• The CRM system provides the ability to the organization for managing the customer orders,
delivery of products, revenue, marketing, order management, products information along with
strategies for reaching the target market in timely and efficient manner.
• The supply chain integrates the CRM for making the database of customer information and
collecting valuable data to show the current needs and wants of the customers.
• The CRM ensures good customer relationships as the right product for the right customer at the
right time in right quantity, condition, and cost.
• The CRM segments the each of the customer needs and supports the relationship
marketing/cross selling.
• The CRM integration in supply chain leads to forecast the customer behavior and retains
customers by analyzing the likelihood of customer purchases.
• Furthermore, the CRM can be used to run the sales promotions under any specific customer
groups using the business analytics tools.

However, there can be certain challenges for integration the CRM with the SCM at the practical
level. The two environments cannot be exactly same for the same phase or process. The
integrated system can give end to end visibility of the supply chain for the SCM with precision
ability for the product creation, modification, or replaced. The CRM also reduces the SKU
complexity, increases the prediction accuracy, revenue growth, and overall supply chain cost
reduction.

Organizations must conduct compatibility audit before CRM implementation

Although, it depends on the need of the organizations to install any system with supply chain. Last, but
not least all management systems have costs associated with them. Organizations should analyze the
financial resources before starting any management system project.
 SCLM/U5 Topic 2

IT infrastructure used for Supply chain and CRM

Supply chain infrastructure consists of both the physical and informational assets required to
run a supply chain. This includes the buildings in which a company manufactures and
distributes its products; the fixed and mobile equipment inside those buildings; the
transportation fleet that moves product within the manufacturing and distribution network; and
the information technology needed to plan, execute, and track supply chain activities.

Without reference to these assets, standard definitions of “supply chain” are substantively
lacking. Building locations define the movements of products within a supply chain. Material
handling systems determine the activities required to process and distribute goods—and
whether those activities are efficient or not. Information technology (IT) systems enable and
constrain the supply chain processes that a company deploys. These assets will largely
prescribe a supply chain’s cost and service outcomes.

Assets consume a company’s available capital—that limited, precious resource for which all
areas of the corporation compete—and decisions about how to invest that capital must be
made. For example, should a company build new stores, or retrofit the distribution center?
Should it acquire a small competitor operating in a different market, or should it install a new
transportation management system? Many supply chain professionals don’t deal with such stark
contrasts, but they should understand how upper management views such choices: Every dollar
of capital that the supply chain consumes is a dollar of capital that cannot be spent on projects
that could potentially be more beneficial to the company.

Conversely, starving a supply chain of capital results in a creeping escalation in operating costs,
a decline in customer service levels, and the eventual weakening of a company’s position in the
marketplace. This happens because the supply chain infrastructure loses its capacity to sustain
the company’s volume of business, and expensive “temporary fixes,” such as overtime or
outside storage, become permanent fixtures in the operation.

The assets that make up supply chain infrastructure have other important characteristics:

1. The value of infrastructure depreciates. The rates of depreciation vary based on the asset
class in question. Buildings retain their “book value” 20 to 30 years after construction has been
completed, while IT investments lose all their value anywhere from three to seven years
following an implementation. Even a stable supply chain, with no change in volume or character,
requires a reinvestment of capital into its infrastructure just to replace assets that have
exhausted their useful life. However, that reinvestment is infrequent enough that the average
supply chain professional is likely a novice when it comes to properly defining a supply chain’s
infrastructure needs and navigating the investment process. If a mistake is made during this
investment cycle, it could take years, and perhaps decades, to correct that mistake.
2. Infrastructure deteriorates physically. Facilities, equipment, and IT systems require regular
maintenance to keep them operating efficiently. This means incurring operating expenses to
perform routine functions like repairing packaging lines or fork trucks, or a small injection of
 capital on a regular basis, to replace a lighting system or upgrade to the latest version of
software, for example.
3. Infrastructure can be owned, leased, and/or operated by a third party. It doesn’t really
matter who owns a particular asset within a company’s supply chain infrastructure; there are
myriad reasons to own or not own, and to control or not control supply chain assets. What does
matter is that, when looked at as a whole, the decision determines how effectively (and at what
cost) a supply chain operates. For instance, having a distribution network operated by a third-
party logistics services provider (3PL) does not mean the infrastructure is solely the 3PL’s
problem, as the operator will pass on any operating penalties from infrastructure deficiencies to
its customer in the form of higher costs. This is particularly true in the age of cloud-based
software solutions, where applications reside on far-distant servers accessed via the Internet.

The Dangers of scattered responsibility

Too often, companies fail to look at their supply chain assets as a single, cohesive
infrastructure. Instead, they scatter responsibility for individual elements across different
departments within their organization. This approach inevitably causes the supply chain to suffer
some classic failings. Do any of the following sound familiar?

Operating in silos: Finance controls IT, and operations controls facilities and equipment. Each
department makes decisions in a vacuum, sometimes at cross-purposes, and sometimes
overcompensating for perceived underinvestment on the part of other departments.

Here is a real-life example of the potential consequences of this all-too-common disconnect.

During a tour of a bedding manufacturer’s principal distribution center, the director of
warehousing explained that a new warehouse management system (WMS) would be
implemented in a few months. When asked how the new software would affect day-to-day
operation, he responded that he didn’t know. “It’s a finance project, and I haven’t yet seen the
application, but they tell me it’s got everything on our wish list.”

The fact that he was uninformed about the details of the new WMS was surprising—and a
warning signal of potential problems. At the time, the facility’s conveyor system, racking system,
and product slotting were the subject of a fairly extensive re-engineering project. The
warehouse control systems (WCS) that operated the conveyor system were managed by
operations, and the project team was contemplating a number of upgrades to that software’s
functionality. Depending on the capabilities of the new WMS, however, those changes might
have been excessive, contradictory, or even unnecessary. Without intervention, investments
made in both systems would have been redundant, resulting in a complete waste of capital.

Sore tooth syndrome: Companies often consider making capital investments in infrastructure
only after capacity constraints begin to limit growth and/or disrupt customer service. We often
refer to such behavior as “sore tooth syndrome.” Much like a person who waits until a tooth
becomes painful to visit the dentist, some companies react to infrastructure deficits only when
they become a problem, instead of identifying them and planning or developing solutions before
they happen. In this environment, companies typically are under pressure to solve a problem
quickly, which often leads them to make shortsighted capital-investment decisions.

To understand this point, consider the case of a foodservice distributor that was operating three
distribution centers (DCs) in the U.S. Midwest. Its flagship distribution center had reached
capacity in the freezer and ambient departments, thereby affecting its ability to serve major
chain-store accounts. In response, the company launched a rapid expansion project for that
facility. However, there was another alternative management failed to consider before
embarking on this expansion: shifting volumes from the flagship distribution center to a second
DC that had sufficient capacity to handle the overflow.

To accommodate a shift in volumes, the distributor would have had to make minor modifications
to the second DC’s layout. It also would have incurred additional transportation expenses of just
over US $100,000 due to an increase in the delivery miles across the network. The facility
expansion, however, cost several million dollars; it would take 25 years of the additional
transportation penalty to offset the amount of capital sunk into the expansion. Clearly, the
distributor was quickly reacting to a “sore tooth” and did not spend time thinking through all its
infrastructure options.

Missing Links: Companies sometimes make the mistake of scattering responsibility for the
various assets that make up their supply chain infrastructure across multiple departments and
divisions. They do not have a single, coherent vision of their entire supply chain, and as a result,
they fail to recognize when something is missing from their supply chain infrastructure. The
most frequently encountered “missing link” results from not viewing information technology as a
vital part of that infrastructure, as the following example illustrates.

A 3PL handled the distribution of consumer electronics to retail outlets for several
manufacturers. This required highly accurate asset-tracking capabilities, so the 3PL installed a
WMS in two distribution centers to manage the receiving, device configuration, and shipment to
retail locations. It also managed reverse logistics, in which devices were returned from the
stores for repair, reconfiguration, or disposal.

Despite the WMS installation, inventory accuracy was still well below the customers’
expectations. To find out what was wrong, the 3PL launched a complete audit of the consumer
electronics operations.

It turned out that the problem was not the WMS. It was the warehouse layout and corresponding
storage locations. There were too few locations to meet the customers’ inventory requirements,
and these locations were too large. As a result, when the warehouse crew put inventory away,
they were commingling different types of items in individual locations. Then, when order pickers
pulled inventory from those locations, they were making errors because they had to sort through
different items to get the product they were directed to pick. An inappropriate racking system
design made the WMS less effective than it should have been. The solution to the inventory-
accuracy issue was re-profiling the racking to ensure that the DCs always have the right-sized
inventory locations for the individual inventory instances, and then letting the WMS do its work.

Drunken sailor behavior: Too often, companies are led down a path of excessive capital
spending by thinking that each individual project will be the opportunity to solve every supply
chain problem. Convinced that the “breakthrough” automation technology they read about in a
magazine or saw at a trade show will be the solution to some bigger problem, they may end up
spending money on infrastructure improvements with abandon—”spending like a drunken
sailor,” as the saying goes. Although any spending on supply chain infrastructure may sound
like a good idea, excessive spending can create problems elsewhere. That is, when supply
 chain infrastructure consumes too much precious capital, critical demands for capital in other
areas of the business go unfilled.

That is what happened to one food manufacturer that was planning an expansion of its finished-
goods warehouse. Having seen automated storage and retrieval system (AS/RS) cranes in one
of his customer’s distribution centers, the food manufacturer’s chief executive officer (CEO)
contacted the equipment maker to learn more. Through discussions with the equipment
manufacturer, the CEO became convinced that a multimillion-dollar investment in AS/RS cranes
should be integral to his expansion plans.

He knew that his wage rates, even when benefits were included, did not come close to the
threshold required to provide a solid payback based on labor reductions. Instead, he justified the
AS/RS investment based on the fact that the system would track inventory and therefore
eliminate his company’s product-rotation and inventory-accuracy problems. But those problems
could have been eliminated with a much smaller investment in an appropriate warehouse
management system. In short, the CEO was planning to spend millions of dollars on robots
when the real benefit he was seeking was in the software that managed those robots.

The value of “continuous evolvement”

A company’s supply chain infrastructure changes very slowly over time due to the lifecycle of
the assets involved. Year after year, individual assets are expanded, upgraded, and replaced
such that, as a whole, the infrastructure evolves. If that evolution happens in accordance with a
holistic vision of the entire supply chain—rather than through ad hocreactions to individual
events or developments—then a company will have every opportunity to avoid the failings
outlined above. It will also have the opportunity to improve its cost and service effectiveness
with each investment decision it makes. We call this approach “continuous evolvement.”

Continuous evolvement starts with a clear, coherent baseline of a company’s supply chain
infrastructure. Creating that baseline involves two main actions.

The first is to construct an inventory of infrastructure assets. This requires two steps:

• Compile information about all facilities, equipment, and information technology applications
within the supply chain.
• Characterize each asset in terms of its economic life, as well as the location and function of
each within the supply chain.

The second is to profile the flow of goods and human resources through the supply
chain. This effort comprises three steps:

• Characterize the physical assets in terms of capacity utilization.

• Evaluate labor productivity, service levels, and inventory accuracy.
• Perform an activity-based costing exercise to understand the operating expenses associated
with flowing volumes through these assets. Activity-based costing is the exercise of assigning
operating expenses to specific activities in the supply chain, such as picking orders or
manufacturing finished goods.
Profiling product flows and human resources is a critical part of developing a baseline for supply
chain infrastructure because these elements inform the key performance indicators (KPIs) that
tell managers how well their supply chains are operating. Low labor productivity or poor service
levels are symptoms of bad infrastructure. Without these benchmarks, an accurate assessment
of the current infrastructure is not possible.

Note that for very large, multinational organizations, this exercise may quickly become unwieldy.
In these instances, the effort should be focused on individual business units or geographic
regions, where supply chains are largely independent.

With the baseline complete, the next step is to project operating requirements for five to seven
years out. These must be defined in terms of increases or changes in order volumes, product
variety, lines of business and/or markets, customer service levels, and inventory management
practices. Understandably, the task of trying to project what a business will need five to seven
years from now may seem daunting, if not impossible. However, the time frame for
implementing new infrastructure is long (realistically speaking, constructing a new building is a
24-plus-month project). Using a shorter planning horizon, therefore, would mean putting in place
assets that are near obsolescence almost as soon as they come on stream.

These projections are set against the infrastructure in order to develop a five-to-seven-year
capital-investment road map for all infrastructure, including facilities, equipment, and information
technology. The road map should consider all major investments (for example, facility
expansions or new IT applications) as well as minor investments (replacing aging mobile
equipment, for instance).

Simply going through the exercise of building a comprehensive infrastructure road map will tear
down silos that might exist, as everyone responsible for the various assets under consideration
will have to collaborate to create that single, all-encompassing plan. Moreover, as the road map
takes shape, members of the executive management team will begin to see missing links in the
company’s infrastructure. They will see how weaknesses in IT capabilities impact decision
making in facilities and equipment—or the opposite: that past IT decisions were made to
compensate for bad material handling systems and facility layouts.

As different parts of the company or external parties propose new capital investments, it’s
important to always ask, “How does this fit into our infrastructure road map?” If it doesn’t fit into
that long-term, holistic plan, then don’t make the investment.

Unilever has reinforced that point with the findings in the report mentioned at the beginning of
this article. The global consumer goods manufacturer learned that substantial changes in supply
chain costs and service levels would only be made possible through a restructuring of its supply
chain infrastructure. For any company, recognizing this fact is the first step toward creating a
culture of continuous evolvement, in which every capital-investment decision meets the
objectives set out in a company’s infrastructure road map.

Unilever understands this, and it is no coincidence that the research firm Gartner has ranked it
number 4 in its annual report listing the 25 best supply chains in the world. In fact, the top 10
companies on Gartner’s list, including Amazon, Wal-Mart Stores, and McDonald’s, all think very
carefully about their supply chain infrastructure and commit capital only to those investments
that serve their infrastructure goals. Any company that wants to achieve world-class financial
and service performance should follow their lead.

SCLM/U5 Topic 3

Functions Components for CRM

Salesforce Automation

Salesforce Automation is the most essential components of customer relationship management.

This is one such component that is undertaken by the maximum business organizations. It
includes forecasting, recording sales processing as well as keeping a track of the potential
interactions.

It helps to know the revenue generation opportunities better and that makes it very significant.
The component also includes analyzing the salesforecasts and the performances by the
workforce. To achieve an overall improvement in the development and growth of the industry,
numerous components work hand in hand to form salesforce automation as a consequent unit.
Some of the major elements of the same are Lead Management, Account Management,
Opportunity Management, Forecasting, Pipeline Analysis, Contact Management, Activity
Management, Email Management and Reporting.

Human Resource Management

Human Resource Management involves the effective and correct use of human resource and
skills at the specific moment and situation. This requires to be make sure that the skills and
intellectual levels of the professionals match the tasks undertaken by them according to their job
profiles. It is an essential component not only for the large scale corporations but the medium
industries as well. It involves adopting an effective people strategy and studying the skills or the
workforce and the growth being generated thereby designing and implementing the strategies
needed accordingly with the aim of achieving development.

Lead Management

Lead Management as the name suggests, refers to keeping the track of the sales leads as well
as their distribution. The business that are benefitted by this component of CRM the most are
the sales industries, marketing firms and customer executive centres. It involves an efficient
management of the campaigns, designing customized forms, finalizing the mailing lists and
several other elements. An extensive study of the purchase patterns of the customers as well as
potential sales leads helps to capture the maximum number of sales leads to improve the sales .

Customer Service

Customer Relationship Management emphasizes on collecting customer information and data,

their purchase informations and patterns as well as involves providing the collected information
to the necessary and concerned departments. This makes customer service an essential
component of CRM.

Almost all the major departments including the sales department, marketing team and the
management personnel are required to take steps to develop their awareness and
understanding of the customer needs as well as complaints. This undoubtedly makes the
business or the company to deliver quick and perfect solutions and assistance to the customers
as well as cater to their needs which increases the dependability and trust of the customers and
people on the organization.

Marketing

Marketing is one of the most significant component of Customer Relationship Management and
it refers to the promotional activities that are adopted by a company in order to promote their
products. The marketing could be targeted to a particular group of people as well as to the
general crowd. Marketing involves crafting and implementing strategies in order to sell the
product. Customer Relationship Management assists in the marketing process by enhancing
and improving the effectiveness of the strategies used for marketing and promotion.

This is done by making an observation and study of the potential customers. It is a component
that brings along various sub-elements or aspects. Some of the major elements of marketing
are List Management, Campaign Management, Activity Management, Document Management,
Call Management, Mass Emails and Reporting. The use of the aforesaid elements varies from
business to business according to its nature and requirements as well as the target crowd.

Workflow Automation

A number of processes run simultaneously when it comes to the management and this requires
an efficient cost cutting as well as the streamlining of all the processes.The phenomenon of
doing so is known as Workflow Automation. It not only reduces the excess expenditure but also
prevents the repetition of a particular task by different people by reducing the work and work
force that is getting wasted for avoidable jobs. Routing out the paperwork and form filling are
some of the elements of the process and it aims at preventing the loss of time and excess effort.

Business Reporting

CRM comes with a management of sales, customer care reports and marketing. The customer
care reports assist the executives of a company to gain an insight into their daily work
management and operations.This enables one to know the the precise position of the company
at any particular instance. CRM provides the reports on the business and that makes it play a
major role here. It is ensured that the reports are accurate as well as precise. Another significant
feature is the forecasting and the ability to export the business reports on other systems. In
order to make comparisons, one can save historical data as well.

Analytics

Analytics is the process of studying and representing the data in order to observe the trends in
the market. Creating graphical representations of the data in the form of histograms, charts,
figures and diagrams utilizing the current data as well as the one generated in the past is
essential to achieve a detailed understanding and study of the trends. Analytics is an extremely
significant element of Customer Relationship Management as it allows to make in-depth study
of information that is required to calculate the progress in the business.

Different components of Customer Relationship Management are associated with different

elements mainly, the customer acquisition, improved customer value and customer retention.
Various marketing applications are carved out to acquire more customers whereas data
warehousing and analytical tools help the business to hold customers with a better
communication and relationship. In order to enhance the customer value among the existing
and future customers, there is a number of data warehousing and analytical tools.

Overall, each of the discussed components of Customer Relationship Management is very

essential to improve the work structure as well as the market response to the business and their
products.

SCLM/U5 Topic 4

Green Supply Chain Management

As the public becomes more aware of environmental issues and global warming, consumers will
be asking more questions about the products they are purchasing. Companies will have to
expect questions about how green their manufacturing processes and supply chain are, how big
their carbon footprint is, and how they recycle.

Profiting From Being Green

Some companies have seen consumer interest in the environment as a plus, and have even
been able to convert the public’s interest in all things green into increased profits. A number of
companies have shown that there is proof of the link between improved environmental
performance and financial gains. Companies have looked to their supply chain and seen areas
where improvements in the way they operate can produce profits.

General Motors, for example, reduced disposal costs by $12 million by establishing a reusable
container program with their suppliers. Perhaps General Motors may have been less interested
in green issues if they were making record profits, but in an attempt to reduce costs in their
supply chain, GM found that the cost reductions they identified complemented the company’s
commitment to the environment.

Many Companies Are Unaware of Potential Cost Benefits

Companies can find cost savings by reducing the environmental impact of their business
processes. By re-evaluating the company’s supply chain, from purchasing, planning, and
managing the use of materials to shipping and distributing final products, savings are often
identified as a benefit of implementing green policies.
 Despite the public’s focus on the environment, benefits attributed to reducing a company’s
environmental impact are not at the forefront of supply chain executive’s minds. It appears that
many executives are still unaware that improved environmental performance means lower
waste-disposal and training costs, fewer environmental-permitting fees, and, often, reduced
materials costs.

Hopefully, the interest in green issues and environmental concern by the public will not wane as
economic issues become more important due to the faltering economy.

Optimized Supply Chain

Optimizing your supply chain means getting your customers what they want when they want it
and spending as little money as possible while accomplishing that. Many in the supply chain
world assume that fast, low-cost supply chain options are incompatible with a green supply
chain. This, however, may not be the case. That’s because green initiatives can often be cost
savers. For example:

• Reduction in shipping typically means less fossil fuel is burned.

• By consolidating and optimizing material and packaging usage, fewer packing products are
consumed.
• When hazardous materials are taken out of the supply chain, lower costs are associated with
handling and disposing of the materials.
• When waste is minimized, so too are the costs associated with purchasing and disposal.

Improved Public Image

The more robustly green your supply chain becomes, the more it can become a public relations
and marketing boon. Imagine letting your customers know that you’re saving the planet x-
number of tons of packaging material and y-number barrels of oil every year through your green
supply chain initiatives.

That’s a metric that easily resonates with the public. And the cost reductions that you pass on to
the bottom line easily resonate with your chief financial officer, your board of directors, and your
shareholders.

Designing and implementing a greener supply chain is truly a win-win-win scenario for your
company, your shareholders and your planet. When a supply chain becomes greener, waste is
driven from it. When waste is driven from your supply chain (or any process), the cost of that
process is reduced. When costs are reduced – everybody’s happy. And of course, as a positive
side-effect of greening your supply chain, you’ll also be helping the planet.

If you want your company to strive for a greener supply chain, sell the green supply chain
initiative as a cost savings initiative. Consumers will notice, too, and you might see other
positive benefits.

SCLM/U5 Topic 5
 Supply Chain Sustainability

Supply Chain Sustainability (SCS) is a holistic view of supply chain processes, logistics and
technologies that addresses the environmental, social, economic and legal aspects of a supply
chain’s components. Factors that affect SCS include amount of waste, carbon footprint and
emissions, air pollution, labor violations, deforestation and the health and safety of workers.
SCS is based on the principle that socially responsible products and practices are not only good
for the planet and the people who live here, they are also good for building
positive brand awareness, minimizing environmental impact and improving long-term
profitability.

An organization’s supply chain connects inputs to outputs, outlining the process of producing
and delivering consumer goods. Focusing on the supply chain is one aspect of achieving
business sustainability as it covers a range of areas for improvement. This could include
identifying the source of raw materials or surveying the conditions of workers involved in every
process.

Historically, supply chain was simply about logistics and knowing when and where goods were
moving, but the rise of the digital supply chain and accompanying visibility and analytics tools
has provided companies with the ability to gather data about how well each component in the
supply chain demonstrates corporate social responsibility. This transparency has promoted the
concept of responsible sourcing and encouraged supply chain partners to develop and share
best practices for green operations and logistics. It has also allowed prospective partners to
demonstrate compliance with industry best standards for worker safety, environmental
protection and business ethics.

In large companies, the task of demonstrating supply chain sustainability may be given to
a supply chain analyst or sustainability officer. In addition to developing and implementing
programs and processes in support of sustainability, the job may also involve qualifying new
suppliers, ensuring delivery and quality performance targets are achieved and supporting
supplier diversity policies.

How to improve Supply Chain Sustainability

Companies should take the following measures in order to achieve a more sustainable supply
chain:

1. Identify critical issues and areas of improvement within the entire supply chain. The
environmental impact of a supply chain is a culmination of each step in the production and
operation process. Therefore, companies should understand where the most emissions and
risks are located in order to improve.
2. Use supply chain management and measurement tools to help track progress and find
weaknesses. Organizations such as The Sustainability Consortium, World Wildlife Fund and
The Sustainability Accounting Standards Board have created guidelines and key performance
indicators (KPIs) that can help consumer businesses move towards their environmental goals.
3. Set supply chain sustainability goals that reflect global sustainability goals. Companies should
model efforts around scientific recommendations and government regulations to contribute the
greatest impact to the global sustainability agenda and move towards being carbon neutral.
4. Choose and collaborate with other sustainable suppliers. The practice of collaboration and
combination of resources between manufacturers can help organizations reduce waste, cost
and environmental risks. For example, sharing modes of delivery can reduce pollution by
ensuring multiple half-empty vehicles are not sent out in the same direction.
5. Maintain accountability throughout the process. Processes that can be put in place to ensure
liability are routine audits, implementation of sustainability programs and teams, software tools
that track impact and customer-facing goals and progress reports.
6. Purchase carbon offsets. Organizations that have less control over supply chain or want to
begin making an immediate impact can also look into buying carbon offsets. These are credits
that help negate an organization’s carbon emissions by investing in environmentally-friendly
initiatives.