Introduction
to SCM
MODULE 1
MEC702
LOGISTICS AND SUPPLY CHAIN MANAGEMENT
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 1
Syllabus
• Objectives of a Supply Chain Management, Stages of Supply Chain, Value
Chain Process, Cycle view of Supply Chain Process, Key Issues in SCM, Logistics
& SCM, Supply Chain Drivers / Decisions and Obstacles, Supply Chain
strategies, Strategic Fit, Best practices in SCM, Obstacles of Streamlined SCM.
• Supplier Selection, Supplier Quality Audits, Contract Management, Non-
Disclosure Agreement (NDA), Make and Buy Decision while in-out sourcing.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 2
Value Chain
• A value chain is a concept describing the full chain of a business's activities in
the creation of a product or service -- from the initial reception of materials all
the way through its delivery to market, and everything in between.
• The value chain framework is made up of five primary activities -- inbound
logistics, operations, outbound logistics, marketing and sales, service -- and
four secondary activities -- procurement and purchasing, human resource
management, technological development and company infrastructure.
• A value chain analysis is when a business identifies its primary and secondary
activities and sub-activities, and evaluates the efficiency of each point. A value
chain analysis can reveal linkages, dependencies and other patterns in the
value chain.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 3
Dr. Michael E. Porter
VALUE CHAIN ANALYSIS Professor at Harvard Business School
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 4
Value Chain
• The value chain concept was first described in 1985 by Harvard Business
School professor Michael Porter, in his book “Competitive Advantage:
Creating and Sustaining Superior Performance”.
• “Competitive advantage cannot be understood by looking at a firm as a
whole. It stems from the many discrete activities a firm performs in designing,
producing, marketing, delivering, and supporting its product. Each of these
activities can contribute to a firm’s relative cost position and create a basis for
differentiation … The value chain disaggregates a firm into its strategically
relevant activities in order to understand the behavior of costs and the existing
and potential sources of differentiation. A firm gains competitive advantage
by performing these strategically important activities more cheaply or better
than its competitors.”
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 5
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 6
Supply Chain Process Views
A 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.
There are two different ways to view the processes performed in a supply chain.
• Cycle View: The processes in a supply chain are divided into a series of cycles,
each performed at the interface between two successive stages of a supply
chain.
• Push/Pull View: The processes in a supply chain are divided into two
categories depending on whether they are executed in response to a
customer order or in anticipation of customer orders. Pull processes are
initiated by a customer order, whereas push processes are initiated and
performed in anticipation of customer orders.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 7
Cycle View
Given the five stages of a supply chain, all supply chain processes can be broken
down into the following four process cycles, as shown in Figure 1-3:
• Customer order cycle
• Replenishment cycle
• Manufacturing cycle
• Procurement cycle
Each cycle occurs at the interface between two successive stages of the supply
chain. The five stages thus result in four supply chain process cycles.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 8
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 9
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 10
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 11
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 12
Key Issues in SCM
Some Key challenges to modern Supply Chains
are mentioned below:
• Increased Costs Throughout the Supply
Chain
• Supply Chain Complexity Due to Multiple
Channels to Market
• Consumer Demands Drive Need for
Improved Speed, Quality and Service
• Risk in the Supply Chain Creates Pressure
Reference: https://www.blumeglobal.com/learning/supply-chain-challenges/
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 13
Key Issues in SCM
• The Impact of Supply Chain Volatility
• Speed to market based on just-in-time
manufacturing
• Demand for products based on sales and
marketing cycle
• Inventory management based on balancing
availability and costs
• New products require fast prototyping and
development
Reference: https://www.blumeglobal.com/learning/supply-chain-challenges/
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 14
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 15
Logistics
• Logistics management, encompasses logistics systems not only in the private
business sector but also in the public/government and non-profit sectors.
• In addition, service organizations such as banks, hospitals, restaurants, and
hotels have logistics challenges and issues.
• Logistics owes its origins to the military, which has long recognized the
importance of logistics activities for national defense.
• The definition of Logistics according to the Council of Supply Chain
Management Professionals is given as “That part of the supply chain process
that plans, implements, and controls the efficient, effective flow and storage
of goods, services, and related information from point of origin to point of
consumption in order to meet customer requirements.”
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 16
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 17
Logistics Activities
• Transportation • Procurement
• Warehousing and storage • Customer service
• Industrial packaging • Facility location
• Materials handling • Return goods handling
• Inventory control • Parts and service support
• Order fulfillment • Salvage and scrap disposal
• Inventory forecasting
• Production planning and scheduling
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 18
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 19
Logistics and SCM
• Logistics management is a subset of supply chain management, which is a
larger subject.
• From the point of origin to the point of consumption, supply chain
management plans, executes, and monitors the efficient movement of
storage, products, services, and related information.
• This is done in order to satisfy the needs of consumers. In the corporate
world, logistics management is used in a variety of industries. Its goal is to
manage project life cycles, supply chains, and the efficiencies that result.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 20
Airports and routes for the FedEx, UPS, DHL, Cargolux, and non-integrator sub-networks.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 21
Logistics and SCM
• Company logisticians have developed into supply
chain logisticians as markets have become more
complex and expanded into a global marketplace.
• Inbound logistics for internal functions and
outbound logistics for the outward movement
from point of origin to point of consumption are
the two main focuses of logistics management in
industry.
• Inventory control, ordering, shipping,
warehousing, consultation, and the coordination
and mapping of these processes are all areas
where logisticians specialize.
LOGISTICS AND SUPPLY CHAIN MANAGEMENT 22
