Overview: Supply Chain Management SCM evolved over the years from multiple business streams. SCM comprises of 3 streams: 1. Traditional transport management, distribution management, sales management and logistics management are part of 1 stream. 2. Traditional purchase management, materials management, procuring or sourcing management are part of the 2nd stream. 3. Manufacturing management is the 3rd stream. SCM is looked at by various organizations for smooth and effective functioning/integration between departments within. Many Indian companies are currently facing a problem with deployment/functioning of SCM as they cover either one or two areas of SCM and not the complete SCM concept. Chapter 1 – Introduction to SCM Since the industrial revolution and enhancement in factory machinery, dawned the culture specific schools, non-acceptance attitude, change of view by marketing from product orientation to market orientation. All these changes were due to change occurring globally. This lead to a rapid growth and enhancement post World War II. The situation today is on the part of constant change, learning and efficiency. Porter categorized these changes under 4 headings causing such an occurrence: 1. Global elements 2. Government‟s influence 3. Macro-economic reference 4. Technological innovations To exist in such environment, Porter suggested a five process model: (a) Threat to new entrants (b) Rivalry among current players (c) Bargaining power of buyers (d) Bargaining power of suppliers (e) Threat of substitute Hence for organizations to exist and grow, the following 4 strategies should be adopted: (a) Expansion of its business (b) Merger with another company (c) Acquisition of another company (d) Formation of strategic alliances Therefore, effective SCM is the result of powerful alliance between customer, manufacturer and the supplier. SCM: Present Need: In the current scenario the focus of every organization has shifted to customer services. Customer today is very demanding and asks for more and more value. The capability required for market entrance and leadership has changed from ability to supply to add more and more value to the customer. This has lead to the evolution of SCM. Customer Service is not solely achieved by motivated and customer oriented employees but also on the JIT concept. Certain organizations have followed SCM in its entirety and found themselves in a very comfortable position vis-à-vis other companies. Conceptual Model of SCM: Supply chain is understood as a bridge between demand and supply. Supply chain management can be seen as the process of strategically managing the procurement, movement and storage of materials, parts and finished goods through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost effective fulfillment of orders. According to APICS (American Production and Inventory Control Society), supply is understood as the quantity of goods available for use or the actual (or planned) replenishment of a product (or component). In a nutshell it means from the customer to the customer. SCM exists in both service and manufacturing organizations, although its complexity differs between them. Multiparty net-logistics Multi-tier supplier partnerships Highly sophisticated IT Systems Supply Chain Mgmt Non-core outsourcing Make/Engineer to order philosophy Diagram: Pillars of SCM Evolution of SCM: Supply Chain existed right from the evolution of trade and could be traced back upto 5000 BC in India. Similarly, in the world supply chain and efficient operations vestiges can be found thousand of years back. After the 1st inductions revolution, corporates followed factory system with fragmented supply chain approach. The scenario changed after the 2nd Industrial Revolution (Toyota). This was accelerated by MRP, MRP-II and ERP. This lead to SCM function as an outgrowth of the unified evolution of manufacturing management and logistics management functions. Supply Chain Management Manufacturing Management Logistics Management Sales & Distribution Management Material Management Diagram: Evolution of SCM SCM Approach: Traditional SCM Approach: S U P P L I E R O T H E R S P U R C H S E - P L A N N I N G P R O D U C T I O N S A L E S C U S T O M E R S Diagram: SCM approach in MRP Age (Level 1) Primary focus was application of integration philosophy through MRP and purchase and production planning were seen as one functionality. P U R C H S E - S U P P L I E R O T H E R S P L A N N I N G P R O D U C T I O N S A L E S C U S T O M E R S Diagram: SCM approach in MRP-II Age (Level 2) In the MRP-II age, purchase planning and production departments were seen as one functionality and MRP-II was primarily focused on materials and capability integration. In ERP age, all the departments were seen as on entity Retailer Manufacturer Supplier Manufacturer Supplier Manufacturer D C D C Retailer Retailer C U S T O M E R S Retailer Subcontractor Diagram: SCM approach in ERP age (Level 3) However, this only integrated internal functions but did not tightly knot the external supply chains. Modern SCM Approach: SCM in modern age is referred as CPFR (Collaborative Planning Forecasting Replenishment), all the organized players are seen as one entity. Retailer Manufacturer Supplier Manufacturer Supplier Manufacturer D C D C Retailer Retailer C U S T O M E R S Retailer Subcontractor Diagram: SCM approach in E-ERP (CPFR) Age (Level 1) In the Global E-Biz age, SCM organizes the complete solution for the overall global systems dynamics and closely operates with the trading partners including customers (redefined as Points of Demand) at one side and suppliers (redefined as Points of Supply) at the other side. First Level Suppliers Third Level Suppliers Second Level Suppliers Manufacturing license/patent holder Logistic Suppliers Fourth Level Suppliers C U S T O M E R S First Level Suppliers Diagram: SCM approach in Global & E-Biz Age (Level 2) Elements in SCM: SCM consists of two major elements namely, SCM planning and SCM execution. SCM helps optimize and utilize every resource efficiency through integration of all internal and external entities by the right - planning, production, purchase, manufacturing, demand and supply forecast, appropriate/suitable costing and transportation of its goods and services. Chapter 2 – Demand in Supply Chain Demand Planning and Forecasting: Demand planning is an important process involving forecasting and other activities such as promotions planning. Demand can be 2 types: - Independent demand - Dependent or derived demand Independent demand items are generally finished goods while dependent items are generally components or subassemblies. e.g.: Refrigerator and drawers. Forecasting: Forecasting in necessary to reduce costs and prevent customer dissatisfaction. The goal is to increase profitability through better optimization of sales channels, inventory management and product promotions. Any business can benefit from accurate forecasts to: Optimize the business for reducing the costs of operations Increase sales opportunities for maximizing profits Provide accurate information for making better decisions Poor data visibility Low forecast accuracy Low planning cycle Skewing of sales Unreliable and unresponsing, production and distribution data High inventory and stockouts in China High delivery costs High inventory and stockouts Poor response to market dynamics Low attention to smaller brands Diagram: Forecasting effects On the other hand, inaccurate or nonexistent forecasts lead to misguided business plans, errant decisions and a lack of collaboration and consensus, which limits buyin across the organization. With better demand forecast management, cost of storing raw material, inventory management, customer dissatisfaction and overstocking can be stabilized. Production and distribution decisions can help forecast demand for Personnel, Finances, Marketing and Production. Characteristics of Forecasts: 1. Forecasts are always wrong: It implies that forecasts should include both the expected values and the measure of forecasting error (demand uncertainty). It must form a major element in the supply chain decision. 2. Long-term forecasts are usually less accurate than short-term forecasts: It means that long-term forecasts have a higher standard deviation of error relative to the mean than short-term forecasts. 3. Aggregate forecasts are usually less accurate than disaggregate forecasts: Aggregate forecasts have a lower standard deviation of error relative to the mean. For example, it is more accurate to forecast the GDP of a country than forecast the earnings of a specific company. The company must also be knowledgeable about numerous factors that may be related to the demand forecast, including the following: Past demand Planned advertising and marketing efforts Display position in a catalog State of the economy Planned price discounts Actions competitors have taken Need for SCM in the Market Today Businesses the world over are struggling to sustain competitiveness in a global zing economy. They are at present in the midst of a revolutionary transformation: that of competition shifting from industrial age to information age. During the industrial age the companies succeeded by how well they could capture the benefits from economies of scale and scope. However, information age does not allow all this and has initiated following unique challenges, which the businesses have to cope up with such as: 1. Managing Uncertainty 2. Understanding Customers 3. Understanding globalization of business The role of supply chain has changed considerably over the last three decades. In the 70‟s supply chain focused on integration of warehousing and transportation within the firms. In the 80‟s the focus of supply chain management shifted to re-engineering of cost structures. At the end of the 80‟s the focus again shifted from cost reduction to improving customer service. Today successful supply chain requires recognition of being a SCM market player starting from suppliers and includes transporters, manufactures and customers. Supply Chain Strategy Supply Chain strategy will have a major impact on creating value for a company and its supply chain partners. An effective supply chain strategy helps to meet market requirements, achieve technology collaboration and highest level of customer satisfaction, leading to share holder value. Supply chain is based on Collaboration strategy Demand flow strategy Customer Service strategy Technology Integration strategy Demand flow strategy Demand flow strategy Supply chain strategy framework Demand flow strategy Demand flow strategy Diagram: Supply chain strategy framework Collaboration Strategy Opportunities for collaboration among business partners will vary depending upon the organizations perspective role in the supply chain. The three main types of collaboration are as follows: Manufacturer/Supplier Collaboration Manufacturer/Customer Collaboration Collaboration with Third Party and Fourth Party Logistics Providers Demand Flow Strategy Traditionally, in supply chain management, the key focus and scope has been in managing flow of good from suppliers through the manufacturing and distribution channel to the customers. A good demand flow strategy enables companies to predict unknown customer demands. Customer Service Strategy Customer satisfaction level is directly proportional to the service provided by the company. Customer service strategy involves 3 steps: Customer Segmentation Cost to Serve Revenue Management Technology Integration Strategy Developments in IT enabled the integration of business information systems and lead to provisioning of various intelligent decision support and execution management SCM tools. Customer Analysis Demand and lead time management Purchasing / supplier partnering Demand and lead time management Supply Chain Management Transportation Materials Management Cost benefit and analysis Inventory management and control Diagram: Integrated supply chain management approach Note: Please refer to Case Study in Prof. Altekars textbook inorder to understand Supply Chain Strategy‟s practical approach. CPFR (Collaborative Planning Forecasting Replenishment) Definition: Collaborative Planning, Forecasting and Replenishment (CPFR) is the sharing of forecast and related business information among business partners in the supply chain to enable automatic product replenishment. Function: CPFR is designed to To improve the flow of goods between supplier, manufacturer and retailers To quickly identify any discrepancies in forecast, inventory and orders To share relevant information between manufacturer and business partners To provide profitability for all concerned departments/parties Supply Chain to CPFR Chapter 3 – Operations Management in Supply Chain Although operations management and production management have the similar meaning, the team operations management is more frequently used where inputs are transformed into intangible services. Operations management covers service organizations such as banks, airlines, utilities, super bazaars, educational institutions, libraries, consultancy firms and police departments in addition to manufacturing enterprises. Basic principles of Manufacturing Management In early days, humans used to manufacture goods on their own to fulfill their requirements, but as time past, humans started specializing in manufacturing of certain goods and then began to manufacture these goods for the outside world at a price. Slowly industries developed, which employed people to manufacture specific goods. Manufacturing is thus defined as “To make or process (a raw material) into a finished product, especially by means of a large-scale industrial operation”. Manufacturing management includes the management of personnel, raw materials, planning for production, etc. Manufacturing System A system is defined as a relatively complex assembly of physical elements characterized by measurable parameters. To model a system, we need: To defined the system‟s boundaries or constraints. To predict, through the system parameters, its behavior in response to excitations and disturbances. Models are used to describe how the system works. A manufacturing system inputs materials, information, workers and energy to a complex set of elements known as machines or machines tools, which can be characterized. Role of Production in Business Business is defined at the activity of providing goods and services involving financial, commercial and industrial aspects. Production, is the transformation of raw materials and operational inputs into “outputs‟ that, when distributed, meet the needs of customers. Hence, production and marketers in business must ensure that a business sells products that meets customer needs and wants in accordance with the plan. The plan for production is developed taking into consideration the 5 P‟s, which are: 1. Product, which deals with areas like a. Performance b. Aesthetics c. Quality d. Reliability e. Quantity f. Production costs g. Delivery dates 2. Plant, which deals with the making of the product. It includes areas likea. Future demand b. Health and safety c. Productivity and reliability of equipment d. Environmental issues 3. Processes, which deals with the different ways of producing a product. It includes areas likea. Available capacity b. Available skills c. Type of production d. Safety e. Production costs f. Maintenance requirements 4. Programmes, which deals with the dates and times of the products that are to be produced and supplied to customers. It includes areas likea. Purchasing systems b. Cash flow c. Need for/availability of storage d. Transportation 5. People, which deals with key personnel decisions likea. Wages and salaries b. Safety and training c. Work conditions d. Leadership and motivation e. Unionization f. Communication Mass Production System Mass production can be defined as, manufacture of goods on a large scale, a technique that aims for low unit cost and high output. In factories, mass production is achieved by a variety of means, such as division and specialization of labour and mechanization. These speed up production and allow the manufacture of near identical, interchangeable parts. Such parts can then be assembled quickly into a finished product on an assembly line. While Ford was the first to introduce mass production to the Industrial age, the idea was first developed in Venice several hundred years earlier, where ships were mass produced using pre-manufactured parts, and assembly lines. The advantages of Mass Production System are: 1. It permits very high rates of production per person and therefore provides very inexpensive products. 2. Each worker repeats one or a few related tasks that use the same tool to perform identical or almost identical operations on a stream of products. 3. Mass production systems are organized in assembly lines. 4. Factory‟s can purchase very large amounts of materials, reducing the overhead costs (shipping, purchasing negotiations, paperwork, etc.) associated with purchasing the parts. Nowadays, rather than assembling everything, factory managers choose which assemblies to produce based on the return on investment (ROI) that each assembly process can produce. Lean Manufacturing Lean manufacturing is a business initiative to reduce waste in manufactured products. This waste may be from the production process or from any part of the organization. The idea is to reduce cost systematically, throughout the product and production process, by means of a series of engineering reviews. Often an engineer will specify familiar, safe materials and processes rather than inexpensive, efficient ones. This reduces project risk, that is, the cost to the engineer, while increasing financial risks, and decreasing profits. Good organizations develop and review checklists to review product designs. At the system engineering level, requirements are reviewed with marketing and customer representatives to eliminate costly ones. Shared modules may be developed, such as multipurpose power supplies or shared mechanical components or fasteners. For example, choose connection or power transport methods that are cheap or that need standardized components that become available in a competitive market. In mechanical engineering, the process usually begins with a team review of the materials and processes. The team will include a cost accountant, manufacturing and design engineers. In electrical engineering, the process begins with a team review of the circuit requirements. The circuit is examined to reduce adjustments and expensive parts. In software engineering the process beings with the requirements review, to eliminate unnecessary requirements, and substitute software for mechanical and electrical components. Agile Manufacturing Lean manufacturing is very good at doing the things that can be controlled. Agile manufacturing deals with the things which cannot be controlled. Agility is the ability to thrive and prosper in an environment of constant and unpredictable change. Some of the reasons for the fact that the manufacturing paradigm is changing from mass production to agile manufacturing are: Global competition is intensifying. Mass markets are fragmenting into niche markets. Cooperation among companies is becoming necessary, including companies who are in direct competition with each other. Customers expect low volume, high quality, custom products. Very short product life cycles, development time and production lead times are required. Customers want to be treated as individuals. The swift trend towards multiplicity of finished products with short development and production lead times has led many companies into problems with inventories, overheads and inefficiencies. They are trying to apply the traditional mass production approach. To deal with such problems/conditions, agility of the organization becomes a fundamental requirement and approaches such as rapid prototyping (RP), rapid tooling (RT) and reverse engineering are helping the organizations to overcome some of problems/conditions. Rapid Prototyping: Rapid prototyping is a relatively new class of technology used for building physical models and prototype parts from 3D computer-aided design (CAD) data. Rapid Tooling: Rapid tooling falls into two categories: (i) advanced methods of making tools using RP technology, and additive process (ii) advanced methods of making tools using milling technology, a subtractive process. Both are driven from a digital database, which is the key to making it rapid. Reverse Engineering: Reverse engineering encompasses a variety of approaches to reproduce a physical object with the aid of drawings, documentation or computer model data. In the broadest sense, reverse engineering is whatever it takes – manual or under computer control – to reproduce something. Quick Response Manufacturing (QMR) In today‟s world of competitive environment, one of the key success factors for manufacturing firms is speed – not only speed of delivery, but of concept, design and production. New opportunities open for those manufacturing firms, who can get products to market before the competition and success hinges on the ability to move quickly. Quick response manufacturing (QMR) is a companywide strategy to cut lead times in all phases of manufacturing and office operations. Benefits of QRM for the manufacturing firm: Decreases the manufacturing costs Increases the market share Fills customer orders faster Boosts product quality Introduces new products rapidly Eliminates waste and inefficiency Secures the manufacturing future of the firm Thus we see, that even though it is imperative to apply lean manufacturing to any manufacturing firm, the manufacturing world is moving towards agile manufacturing and quick response manufacturing which is the next step for survival in this competitive era. Mass Customization In the early 1900‟s, the introduction of the assembly line and the development of automation changed the manufacturing environment around the world. Companies were able to produce large quantities of goods at a reasonable cost, dramatically changing the economics behind manufacturing. Today, the consumer is driving an even more dramatic change, one that is affecting almost every manufacturing plant around the globe. Over the past century as competition intensified, technology advanced, and the global market became a reality, consumers were presented with an array of choices once deemed unimaginable, which caught large manufacturers were caught flatfooted. In response, manufacturers started to develop new policies, techniques and practices to address the rapidly changing market. This customer driven paradigm shift has been called mass customization. Over the past two decades, manufacturers have started to take the first steps towards reach the goal of mass customization. Concepts and tools such as Just-in-Time, Kanban, Enterprise Resource Planning (ERP) systems, Quality Functional Deployment and Design for Manufacturing, have moved manufacturers closer to giving customers what they want, when they want it. Chapter 4 - Procurement Management in Supply Chain Vendor Managed Inventory (VMI) VMI can be defined as: It is a streamlined approach to inventory and order fulfillment. With it, the supplier and not the retailer, is responsible for managing and replenishing inventory using an integral part of VMI, i.e. EDI, but electronic transfer of data over a network. It can also be seen as a mechanism where the supplier creates the purchase orders based on the demand by the retailer/customer. Vendor Managed Inventory (VMI) is basically evolved to facilitate the operations at retail stores. In this program, the retailer supplies the vendor with the information necessary to maintain just enough merchandise stock to meet customer demand. This enables the supplier to better project and anticipate the amount of product if needs to produce or supply. The manufacturer has access to the supplier‟s inventory data and is responsible for generating purchase orders. VMI was first applied to the grocery industry, between companies like Procter & Gamble (supplier) and Wal-Mart (distributor). Conventional Business Model Store inventory levels Sales history Retail Stores Prdt Rank SKU based on sales (excess Prdt) NO No replenishment YES Decide if SKU to be present at a store (excess Prdt) Retail warehouse Compare available QTY with MIN QTY < MIN QTY Create PO To vendors for Store replenishment PO Info Vendors Diagram: Conventional business model. In this model, the sales are typically forecasted in their replenishment systems using the historical sales data. The retailer/customer tracks the sales information and inventory information (usually on-hand and available quantities) and forecasts the orders. The corporate buyers keep watch on the ordered data and perform order pushes for items they are responsible for. The created purchase orders will be communicated to the vendor using the EDI 850 document. The vendor looks at the available inventory and determines whether or not the order can be fulfilled. If the inventory is available at the vendor, the product will be shipped to the retailer‟s warehouse or store and an “Advance Shipment Notice‟ (EDI 856 document, ASN) will be communicated to retailer. The vendor sends the invoice to the retailer using the EDI 810 document. Upon receiving the product, the retailer does the invoice matching and handles payment through their account payable systems. VMI Business Model In the fulfillment process using VMI, typically the activities of forecasting and creating the purchase orders are performed by the vendor/supplier and not by the retailer. Electronic data interchange (EDI) is an integral part of VMI process and takes vital role in the process of data communication. In VMI, the retailer is free of forecasting and creating the orders as the vendor generates the order. VMI is a backward replenishment model where the supplier does the demand creation and demand fulfillment. In fact it‟s a methodical way to transfer the ownership of the inventory to the vendors but still ascertaining the smooth material flow as and when required. Store inventory levels Sales history Retail Stores Product activity – EDI 852 (excess Prdt) Prdt Rank SKU based on sales Update stock plan Forecasting Review suggested order/agreed upon inventory quantities Store/DC order notification Pick and ship product Retail warehouse (excess Prdt) Vendors Retailer received-EDI 861 Payment advise-EDI 820 PO ackn – EDI 855 ASN – EDI 856 Invoice-EDI 810 PO EDI 850 Marketing buyers at corporate offices Diagram: VMI business model In VMI, the vendor tracks the numbers of products shipped to distributors and retail outlets. Suppliers and buyers use written contracts to determine payment terms, frequency of replenishment and other terms of the agreement. VMI is enabled by information technology, which often allows for a direct project payoff. The most prevalent technology in VMI is electronic data interchange (EDI), an ordering system traditionally conducted over private value-added networks. The VMI concept provides improved visibility across the supply chain pipeline that helps manufacturers, suppliers and retailers reduce inventory and improve production planning, inventory turnover and stock availability. With information available at a more detailed level, it allows the manufacturer to be more customer-specific in its planning. Steps in Setting up VMI The following diagram shows an example of a typical VMI process using oracle applications: (Refer textbook for diagram) Benefits of VMI Dual Benefits 1. Data entry errors are reduced due to computer-to-computer communications. Speed of processing is also improved. 2. Both parties provide better service to the end customer. 3. Partnership is formed between the manufacturer and the distributor. Supplier Benefits Vendor managed inventory reduces transaction costs such as: Purchasing Inventory Management Receiving Error Reduction Manufacturers Benefits 1. Improved visibility results in better forecasting 2. Reduces PO errors and potential returns 3. Improvement in SLA 4. Encourages supply chain cooperation 5. Incorporation of promotions into the inventory plan 6. Reduction in distributor ordering errors 7. Visibility to level of stock helps identify priorities Challenges and Limitations of VMI The VMI approach has the following challenges and limitations: Incorrect leveraging of customer-specific data with manufacturing stock for production planning. Reservation of inventory for priority service to VMI partners resulting in shortage to other customers. Lack of system integration results in incomplete visibility. High expectations from retailers. Resistance from sales forces affecting sales based incentive programs. Lack of trust and skepticism from employees. Limitation of overall collaboration. Overcoming the Limitations Effective implementation of VMI depends on smoothly overcoming the limitations and addressing the concerns of various stake holders. Some of the concerns can be addressed as explained below: Redefine incentive programs based on partnership building instead of sales volume. Build strong partnerships with management‟s commitment to effective communication, information sharing, problem solving and continued support. Conduct simulations and pilots before actual implementation. Organize trainings sessions before actual implementation. Set reasonable targets for benefits of VMI. Establish agreements on service levels and process to handle exceptions. Chapter 5 – Logistics Management Logistics can be defined as the science pertaining to the movement of materials and the services along with its information. Logistics can also be defined as the process of moving and positioning inventory to meet customer requirements at the lowest possible total landed cost. The concept of logistics first evolved from defense operations which was later applied in business operations. Logistics is a major element of SCM and it has emerged out of unionization of distribution (sales) and marketing (purchase) functions. History and Evolution of Logistics Logistics can be traced back to military operations. The word logistics was first associated with the military in 1905 as a brand of war which pertained to movement and supply for armies. During World War II, military forces made effective use of logistics models and forms of systems analysis to ensure that the required material was at the right place at the right time. The famous Dunkirk evacuation in World War II was regarded as the best ever logistics performance till today. Dunkirk Evacuation: Operation Dynamo When war broke out against Nazi Germany on September 3, 1939, British soldiers knows as the British Expeditionary Force were sent across the channel to help the French and later the Belgian armies against the invasion by the German. But the Allied forces underestimated Hitler‟s army, which used tank and bombers to smash the Allied defenses and rive them back into France. Overpowered, the BEF was ordered to retreat towards the port of Dunkirk. On entering Dunkirk, the troops found themselves stranded without shelter or supplies. On 26 May, the British Admiralty responded by lauching Operation Dynamo – the evacuation of the BEF by sea. This mission was led by Vice Admiral Ramsay, who rounded-up a huge fleet of vessels from tiny tugs and barges, to lifeboats and navy destroyers. The fleet assembled at Dover was the strangest ever seen. On May 29 1940, the strange flotilla of ships began to appear off the French coast; the Allied troops waited patiently and courageously on the beach while being shelled, bombed and machine gunned. They waited on the sand in lines and then up to the their waists in water until the boats came to take them off. By May 30/31 some 80,000 troops had been rescued. As the Allied ships approached Dunkirk they were easy targets for the German Stuka bombers. It was left to the smallest ships to pick up soldiers from the shallow beaches and transport them to the destroyers and transport ships waiting offshore. Of the 850 vessels, which took part in Operation Dynamo, 235 were sunk. Both small and large ships kept running over again running the gauntlet of German fire. They eventually evacuated 212,000 British officers and men, 113000 Allied troops mainly French and 13,000 wounded. The Allied forces had been snatched from destruction by not only their bravery but that of the many ship and boat crews who would not five up until every man was back on British soil. A memorial was erected at Dunkirk in 1957 to the memory of the 5,000 who fell during the campaign. Those covering the last stages of the retreat fell in enemy hands and were taken PoW most of which started what was called the „Great March‟. Business Application Although logistics was first practiced in early 50‟s, it formed a part of business operations during the 60‟s and 70‟s era where military logistics had found significant applications in the civilian sector, leading to the development of business logistics, logistical engineering and management, macro-logistics etc. People understood that the logistics process can be used by managers in all spheres of activity with the primary objective of being able to deliver not just „in time‟ but also at „the desired place‟. Initially, logistics in industries was focused primarily on physical distribution or the distribution management era called the „push‟ era. This led to the assertion of improving corporate efficiency using logistics in the 1960‟s. The 1970‟s had limited focus on productivity within the four walls of the factory or manufacturing. Logistics was applied to the food-supply activity (Ethiopian famine) in the 1980‟s. In 1991, the international Council of Logistics Management (CLM), defined logistics as “the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements”. This brought forth 2 concepts related to material movements called „materials management‟ and „distribution management‟ having separate focus areas. Material management covered all the logistics functions within the factory and Distribution management covered all the logistics functions outside the factory. In India logistics was initially referred as transportation management function only. Currently with the advent of SCM concepts organizations started looking at all disparate functions of transportation, purchasing and supplies and physical distribution, and also sales management. The success of these activities lie in having a corporate vision that drives change thought a firm‟s internal and external linkages or interfaces. In fact logistics is a key competitive factor in business today, which directly affects service levels, costs and profits of the organization. Thus, logistics is seen as strategic rather than operational in these days. Elements of Logistics Management Logistics Management consists of eight elements called wings of logistics. These are: Customer Order Processing Location Analysis Inventory Control Material Handling Packaging Transportation Warehousing Customer Service Distribution Management Distribution refers to getting the right product to the right place at the right time. Distribution can be defined as “the channel structure used to transfer products from an organization to its customers”. Distribution organizations manage the activities associated with the movement of materials, usually finished goods or parts, from the supplier to the customer. Distribution decisions have significant implications on: Product margins and profits Marketing budgets Final retail pricing Sales management practices Distribution channels can include one or more of these options: Retail Wholesale Direct mail Telemarketing Cyber marketing Sales force Distribution planning helps organizations create their Distribution Requirement Plans (DRPs) and establish distribution lead times. Before a system can calculate the shipment plan it must understand what inventory is available to meet demand at any point in time and what demand might be unmet at any point in time. Many organizations are interested in building complete supply chain planning systems that can address these major application types. Inventory Management Inventory Management is the key to any successful distribution business. Effective inventory management allows a distributor to meet or exceed his customer‟s expectations of product availability with the amount of each item which in-turn helps maximize distributor profit. Reactive Inventory System In the reactive system, the retailer independently decides when and how much to order to the wholesalers. The wholesalers in turn order independently to their suppliers. This leads to a lot of uncertainty thus building the concept of maintaining „safety stock‟ for adequate performance. Planning Approach What is the relationship between ERP and SCM? Many SCM applications are reliant upon the kind of information that is stored in the most quantity inside ERP software. Theoretically you could assemble the information you need to feed the SCM applications from legacy systems (for most companies this means Excel spreadsheets spread out all over the place), but it can be nightmarish to try to get that information flowing on a fast, reliable basis from all the areas of the company. ERP is the battering ram that integrates all that information together in a single application, and SCM applications benefit from having a single major source to go to for up-to-date information. Most CIOs who have tried to install SCM applications say they are glad they did ERP first. They call the ERP projects "putting your information house in order." Of course, ERP is expensive and difficult, so you may want to explore ways to feed your SCM applications the information they need without doing ERP first. These days, most ERP vendors have SCM modules so doing an ERP project may be a way to kill two birds with one stone. Companies will need to decide if these products meet their needs or if they need a more specialized system. Applications that simply automate the logistics aspects of SCM are less dependent upon gathering information from around the company, so they tend to be independent of the ERP decision. But chances are, you'll need to have these applications communicate with ERP in some fashion. It's important to pay attention to the software's ability to integrate with the Internet and with ERP applications because the Internet will drive demand for integrated information. For example, if you want to build a private website for communicating with your customers and suppliers, you will want to pull information from ERP and supply chain applications together to present updated information about orders, payments, manufacturing status and delivery.
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