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Logistics & SCM

Major elements
Order processing
Order department prepares multi copy invoices and dispatches them to various departments Order is checked with available stock. Items out of stock are backordered Items are shipped. They are accompanied by shipping and billing documents

Decide on a number of stocking locations depending upon cost and market to serve Choose the type of warehouses (private, public, automated, climate controlled, distribution center)

Level of stock Time of ordering Safety stock

Speed Frequency Dependability Capability Availability cost

Elements of logistics service

Delivery time Delivery reliability Order accuracy Information access (ability to respond to inquiries about order status and product availability) Damage Ease of doing business ( handling reverse logistics, credits, billing etc) Value added services (packaging, drop shipment etc)

Supply chain stages

Manufacturer-Supplier Procurement Cycle Order based manufacturers production schedule Supplier production scheduling Component manufacturing and shipping Receiving at manufacturer Order arrival Production scheduling Manufacturing and shipping receiving Retail order trigger Retail order entry Retail order fulfillment Retail order receiving


Manufacturing cycle

Retailer distributor

Replenishment cycle

Customer retailer

Customer order cycle

Customer arrival Customer order entry Order fulfillment Order receiving

Causes of bullwhip effect

Demand signal processing (each stage has its own forecasting) Order batching (trying to achieve economies of scale) Price fluctuations (through forward buys through price reductions) Allocation gaming (when shortages loom, over orders are placed through multiple channels)

Service expectation
Integrated supply or total solution

Design implication
Reseller assistance required to bundle the offer alongwith complementary products/services Reseller has to hire third party service provider to make final modification in the product or supplier owned assembly facilities Reseller has to maintain a stock and either have his own delivery service or tie up with somebody Reseller has to hire sales enginners and technical personnel Frequent deliveries reseller has to maintain stock or tie up with a delivery service provider Central warehouse, direct enquiries

Local customization-postponement strategy

Emergency delivery-logistics speculation strategy Technical support Lot sizes small- logistics speculation strategy Product standardization and low price-speculation strategy

Efficient vs Responsive
Functional Goods
Objective Cut costs of mfg, inv, transport & location

Innovative Goods
Respond quickly

Consequences of failure
Mfg Goods

low prices & higher costs create margin squeeze

Run at high capacity utilization rate

stock-outs of high margin goods

Be ready to alter quantity & type of prodn swiftly, keep excess cap. Keep buffer of parts


Minimize everywhere

Efficient Vs Responsive
Lead times Can be long because demand is predictable Low cost & reqd. quality Must be short


Fast, flexible reqd. quality

Product Design

Design for ease of mfg & to meet performance standards

Design in modules to delay final production

The Trade off

Responsiveness Efficiency


Excess Capacity Flexible mfg. Many smaller factories

High levels Wide range of items Many locations Frequent shipments Fast & flexible mode Collect & share timely & accurate data

Little excess capacity Narrow focus Few central plants

Low levels Fewer Few central locations serve wide areas Few & large shipments Slow, cheaper modes Cost of info drops while other costs rise


Location Transportation Information