Unit 1: Introduction to B usiness Logistics and Supply Chains

1. Faculty of Management Sciences Facilitator/Lecturer: Ms. Ester Kalipi (M.LSCM.; B. Hons Logistics; B-tech. BA.; Dip. BA.; Cert. BA.) Introduction to supply Chain Management (ISM511S) Unit 1: Introduction to Business Logistics and Supply Chains 6 February 2018

2. Table of contents • Objectives of the lesson • Evolution of Supply Chain Management • Supply Chain Management • Integrating Process of Operation • Co-coordinating the functions to be efficient and effective • Process Planning, Implementation and Controlling

3. Objectives of the Lesson • By the end of this unit, students should be able to: • Explain the evolution of Supply Chain Management; • Explain the relationship between business logistics and supply chain management • Discuss integration of process operations • Define planning, implementation and controlling as elements in Logistics

4. Evolution of SCM • Stage 1: Fragmentation- Disintegration • Purchase Management is focused on internal improvement, including taking costs out of sourcing and logistics-suppliers centered. • Stage2: Evolving Integration-Evolving of new concepts of logistics • Supply chain Management where businesses start to take an external view that includes a closer focus on the customer. Customer satisfaction becomes one of the metrics that measure the supply chain’s success. It became a buyers’ market • Stage 3: Total Integration-current & future scenarios (technological advances) • Integrated Supply chain Management is a move toward truly automated connections between businesses. Partners share information electronically, which lowers production cycle times. Inventory can be viewed on a real-time basis so forecasting errors can be diminished.

5. Evolution of SCM (Cont’d..)

6. Evolution of SCM (Cont’d..) Dr. Jean-Paul Rodrigue, 2017

7. Relationship between Business Logistics & Supply Chains • Logisticsis that part of supply chain that involves planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in- process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. • Logistics Management includes inbound and outbound logistics, transportation management, fleet management, warehousing, Materials handling, inventory management, Supply/Demand Planning, Procurement, sourcing, Third party logistics. Logistics Management is an integration function. • Supply chain covers the entire physical process from obtaining Raw material through process steps until the finished product reaches the end consumer. Supply chain may consist of various companies, connected to each other with the aim of satisfying a requirement.

8. Evolution of logistics • The concept of “Logistics” started many years before Christ and was used by Greek generals (Leon the Wise, Alexander the Great) in order to describe all the procedures for the army’s procurement on food, clothing, ammunition, etc. • Alexander the Great was a big fan of the mobility of his troops and he didn’t want his troops to stay in one place waiting for supplies from Macedonia. Thus, he tried to resolve the issues of supplies by using supplies from the local resources of his defeated enemies. • For many years, logistics were always an issue in war affairs. Kingdoms and generals with strategic planning on logistics were those who won the war. • World War II was the major motivation of logistics to increase recognition and emphasis, following the clear importance of their contribution toward the Allied victory. • Starting from the early ‘60s, many factors, such as deregulation, competitive pressures, information technology, globalization, profit leverage, etc., contributed to the increase of logistics science in the form we now it today.

9. Logistics activities of a firm

11. SCM DEFINED • Supply chain management (SCM) is the integrated management and control of the flow of information, goods and services from the point of origin to point of consumption. Organized and interlinked networks, channels are involved in the provision of products and services required by end customers in a supply chain. • Supply Chain Process involves the network of activities, flow and movement of people, materials and information linking organisations together to serve a consumer.

12. What happen in a SC • A supply chain is a function of activities (transportation, inventory, warehousing), people, information and resources as involved in an input- output -transformation process.

13. Take note Each member in the supply chain is performing a value added activity in the chain like: • Demand Management • Distribution • Engineering • Marketing • Materials management • Production • Purchasing • Third Party Logistics

14. SUPPLY CHAIN MANAGEMENT ACTIVITIES

15. Supply chain partners • Suppliers: provide raw materials like steel, fuel or other commodities to manufacturers who need these to run their operations or incorporate into the goods that they manufacture. They also sell raw materials to others in the supply chain for resale or consumption. • Manufacturer: manufacture or produce their own off-the-shelf products or custom products based on third-party specifications. • Distributor: middlemen that purchase goods from manufacturers or other middlemen for their own account with the intention of reselling them to others in the supply chain. • Logistics providers/ Service providers-These entities provide a variety of services on behalf of other participants in the supply chain to move the goods between the participants. Logistics providers may take temporary custody of the goods, but do not take title to the goods. Distributors perform inventory management, warehouse operations, product transportation, customer support and post sales services. • Wholesaler: an intermediary entity in the distribution channel that buys in bulk and sells to resellers rather than to consumers. • Retailer: Retailers consist of small and large for-profit businesses that sell products directly to consumers. • Customer: These include any participant in the supply chain who purchases goods for their own use or consumption; or incorporation as raw materials or components into their own products.

16. Supply chain of the paper

17. Mcdonalds Supply Chain

20. Types of Supply Chains • Every process in the SC adds value to the next process, this called value chain. Organizations have different levels of customers and suppliers, depending on the complexity of product. There are two components of SC: • Supply component, which starts at the beginning of the value chain and ends at the internal operations of the organization. • Demand component starts at the beginning of the value chain and ends where the product is delivered • Demand chain is part of the value chain andexists in the sales and distribution parts. It is thus important for an organization to have the abilities to efficiently and effectively supply the market demand.

21. Uncertainty in demand and/or supply Changing customer requirements Decreasing product life cycles Fragmentation of supply chain ownership Conflicting objectives in the supply chain Conflicting objectives even within a single firm Marketing/Sales wants: more FGI inventory, fast delivery, many package types, special wishes/promotions Production wants: bigger batch size, depots at factory, latest ship date, decrease changeovers, stable production plan Distribution wants: full truckload, low depot costs, low distribution costs, small # of SKUs, stable distribution plan Why so Difficult to Match Supply and Demand?

22. Losing Sight of the Common Objective I'm glad that the hole is not on our side!

23. The purpose of Supply Chain Management Supply chain management in essence constitutes a dual purpose namely: • To provide quality products and services in an effective and efficient manner to customers. This implies that quality goods and services are provided in a timely and cost effective manner at the right place and the right time. Quality of a product or service also relates to its usefulness, originality, need for previously existing knowledge to be able to use the product or service, whether it is adapted for reality and its adaptability for other usages; and • To achieve a sustainable competitive advantage in the marketplace. This sustainable competitive advantage should be created to ensure the long-term survival and growth of the supply chain and that of its individual members. This can only be achieved if all members in the supply chain act responsible with regards to environmental, social, biological, and legal issues.

24. The Logistics/SCM Mission • Getting the right goods or services to the right place, at the right time, and in the desired condition at the lowest cost and highest return on investment. Effective SCM – 7 Rs • Right product • Right quantity • Right condition • Right place • Right time • Right customer • Right cost • Product / Service Utility • Possession Utility - the value or usefulness that comes from a customer being able to take possession of a product • Form Utility - in a form that can be used by the customer and is of value to the customer • Place Utility - available where they are needed by customers • Time Utility - available when they are needed by customers • Logistics obviously help time and place utility Dickson Chiu 2006

25. The importance of the supply chain management • Supply Chain Management (SC) is an essential element to operational efficiency. SCM can be applied to customer satisfaction and company success, as well as within societal settings, including medical missions; disaster relief operations and other kinds of emergencies; cultural evolution; and it can help improve quality in operations. • Basically, the world is one big supply chain. Supply chain management touches major issues, including the rapid growth of multinational corporations and strategic partnerships; global expansion and sourcing; fluctuating gas prices and environmental concerns, each of these issues dramatically affects corporate strategy and bottom line. Because of these emerging trends, supply chain management is the most critical business discipline in the world today. • Supply chain is necessary to the foundation and infrastructure within societies. SCM within a well-functioning society creates jobs, decreases pollution, decreases energy use and increases the standard of living. Two examples of the effect of SC within societies include: • Efundja: ( flooding in the northern regions) leaving residents without access to food or clean water. As a result, a massive rescue of the inhabitants had to be made. During the rescue effort, meals litres of water were delivered. • Namport: A society with a highly developed supply chain infrastructure that includes interstate highways, a large railroad network, ports and airports is able to trade many goods at low cost. Business and consumers are able to obtain these goods quickly, resulting in economic growth.

26. The importance of the supply chain management (Cont’d..) • Clearly, the impact that SC has on business is significant and exponential. Two of the main ways SCM affects business include: • Boost Customer ServiceSCM impacts customer service by making sure the right product assortment and quantity are delivered in a timely fashion. Additionally, those products must be available in the location that customers expect. Customers should also receive quality after-sale customer support. • Improves Bottom LineSC has a tremendous impact on the bottom line. Firms value supply chain managers because they decrease the use of large fixed assets such as plants, warehouses and transportation vehicles in the supply chain. Also, cash flow is increased because if delivery of the product can be expedited, profits will also be received quickly. • Supply chain management helps streamline everything from day-to-day product flows to unexpected natural disasters. With the tools and techniques that SCM offers, you’ll have the ability to properly diagnose problems, work around disruptions and determine how to efficiently move products to those in a crisis situation.

27. Why is supply chain management so important? • To gain efficiencies from procurement, distribution and logistics • To make outsourcing more efficient • To reduce transportation costs of inventories • To meet competitive pressures from shorter development times, more new products, and demand for more customization • To meet the challenge of globalization and longer supply chains • To meet the new challenges from e-commerce • To manage the complexities of supply chains • To manage the inventories needed across the supply chain

28. Why is supply chain management difficult? • Different organizations in the supply chain may have different, conflicting objectives • Manufacturers: long run production, high quality, high productivity, low production cost • Distributors: low inventory, reduced transportation costs, quick replenishment capability • Customers: shorter order lead time, high in-stock inventory, large variety of products, low prices • Supply chains are dynamic - they evolve and change over time

29. Supply Chain Challenges • Typical pain points in Supply Chain: • Unreliable forecasting, • Slow customs clearing, • Bad inventory tracking, • Weak (cold) storage and distribution capabilities, • Lack of qualified staff, • Wrong storage conditions, • No waste treatment, • No or unreliable returns management, • Theft and counterfeiting • In most case wholesalers do not provide last miledistribution; manyhandovers • Poor inspectoratesurveillanceofrulesandregulations (if at all existing) • Intransparent businessbehaviours, high costsfor end consumer

30. Material Management and Physical Distribution

31. Material Management • It is concerned with planning, organizing and controlling the flow of materials and storage process from their initial purchase through internal operations to the service point through distribution. Concerned with Planning, Organizing & Control of flow of materials, from their initial purchase to destination with the aim to get: The Right quality, Right quantity of supplies, At the Right time, At the Right place, For the Right cost Purpose of material management • To gain economy in purchasing • To satisfy the demand during period of replenishment • To carry reserve stock to avoid stock out • To stabilize fluctuations in consumption • To provide reasonable level of client services

32. Physical distribution Management • The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer.Physical distribution refers to the movement of the firm’s finished products to its customers, consisting of transportation, warehousing, inventory, customer service/order entry, and administration. • Physical Supply • goods moving from supplier to manufacturer • “inbound” • Physical Distribution • goods moving from manufacturer to customers • “outbound”

33. Business logistics Physical supply Physical distribution (Materials management) Sources of Plants/ Customers supply operations • Transportation • Transportation • Inventory maintenance • Inventory maintenance • Order processing • Order processing • Acquisition • Product scheduling • Protective packaging • Protective packaging • Warehousing • Warehousing • Materials handling • Materials handling • Information maintenance • Information maintenance Traditional Scope of the Supply Chain Internal supply chain 1-14 CR (2004) Prentice Hall, Inc. Dickson Chiu 2006

34. REVERSE LOGISTICS • A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling. Can represent major costs to a company, Amount of goods returned • It is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. Therefore, reverse logistics is the process of moving goods from their distinctive 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. The reverse logistics process includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business. For instance, goods move from the customer to the distributor or to the manufacturer.

35. INTEGRATION PROCESS OF OPERATION • Is the degree to which the firm can strategically collaborate with their supply chain partners and collaboratively manage the intra- and inter-organization processes to achieve the effective and efficient flows of Product and services, Information , financial resources and decisionswith the objective of providing the maximum value to the customer at low cost and high speed. • Integration is the alignment and interlinking of business processes, and embodies various communication channels and linkages within a supply network • Collaboration is a relationship between supply chain partners developed over a period of time.

36. Supply Chain Integration Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements Internal Operations Integration A competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chain Customer Integration

37. Integration comprises of the following factors: • Supply chain uniformity • Information Technology • Information sharing- all key information is given to all parties • Connectivity –capability to exchange data timely, responsive and compatible format • Standardisation-Common operations designed to be efficient and effective • Simplifications • Discipline-doing the right action, at the right time, in the right way each time

38. BENEFITS OF AN INTEGRATED SUPPLY CHAIN

39. Coordination of functions: effective and efficient • Integrated supply chain improves customer satisfaction and loyalty as the end customers experience improved on-time delivery. • There is also a surge in the loyalty among partners, diminished inventory and an increase in flexibility to deal with disruptions. • The other benefits include: Partnership formation. The primary benefit of integrating a supply chain is the formation of partnerships. Sourcing and customer relationships are transformed into partnerships thereby increasing the trust levels. There is a steady performance and predictable sourcing due to this added trust, paving the way for even former rivals to become partners. • Facilitates prediction with the sharing of information, the supply chain achieves better integration. Companies along the supply chain begin to swap planning data in addition to real-time tracking. Keeping in mind the goal of increasing efficiency, companies can plan and execute inventory management, shipping, and production schedules with the deeper and more valuable information. For instance, a construction company can share information with a with a supply chain partner that produces doors to ensure there is adequate resources for a new housing development. • Decreases in inventory requirement, the most important benefits of supply chain system integration are increased on-time delivery and lower inventory requirements. • Flexibility-An integrated supply chain offers flexibility and a great amount of resilience in facing chaotic circumstances. A company can quickly acclimatize to the varying circumstances without delayed production by having true partners along the supply chain.

40. Process of Planning, Implementation & Controlling • Planning- Planning is the process that precedes the activities that will be involved in SC processes being designed to be attained. It is a process recognizing resources with objectives and opportunities by selecting a given path to the future from possible alternatives. Planning, therefore, involves selecting the best course of action from the alternatives available. Logistics planning attempts to answer the questions of what, when, and how and it takes place at three levels: strategic, tactical & operational. The major difference between is the time prospect. Strategic is long term( longer than 1 year),Tactical planning is usually less than a year and Operational planning is short range decisions , with decisions made on the hour or daily. The concern is how to move product effectively & efficiently through the strategically planned supply chains.

41. Process of Planning, Implementation & Controlling (Cont’d..) • Implementing- Implementation is the carrying out, execution, or practice of a plan, a method, or any design for doing something. Implementation is the action that must follow any preliminary thinking in order for something to actually happen. Implementation in the SC involves various SC activities brought together into operations in a sequenced fashion to enable the coordinated flow of materials and products • Controlling- Control is cross cutting through the entire Supply Chain Process and Logistics functions. It enhances efficiency, effectiveness, and differentiation throughout. To focus on value creation Supply chain managers should concentrate on Assesment and ensure quality control & Quality Assurance, Monitoring & Evaluation and Continuous improvement of operations.

42. References • Pienaar, W. J., & Vogt, J. J. (2009). Business logistics management: A Supply chain perspective (3rd Ed.). Cape Town: Oxford University Press. • Bowersox, D. J., Closs, D. J., Cooper, M. B. Bowersox, J. C. (2013). Supply Chain Logistics Management (4thed) . New York: McGraw- Hill • Savage, C. (2013). Lecture notes: Logistics and Service Management. Polytechnic of Namibia • Mukabi, J.H., (2010). Lecture Notes: Distribution and Transport Management. Polytechnic of Namibia