GROUP 3 MGT104 BS ACCOUNTANCY 1ST YEAR

SUPPLY CHAIN MANAGEMENT

Supply Chain ------------------------------------------------------------------------------------------------------------------------

What is supply chain?

A supply chain is the sequence of organizations that are involved in producing and delivering a product or
service. It begins with the producers of the raw materials, then those materials are handed over to a
manufacturer, and it ends when the finished good is delivered to the user.

Components of Supply Chain:

• Producers – They create the raw materials needed for a business to create their product.
• Manufacturers – They create the product and use the raw materials provided by the
producers.
• Warehouses – A commercial space where raw materials or finished goods are stored.
• Transportation companies – Provide service to transport goods from one location to
another.
• Distribution centers – These are logistic facilities that store finished goods before they’re
picked up and packed to fulfill customer orders.
• Vendors – These are the people who sell the finished products to the end users.
• Consumers – The end users or the ones who consume or use the product.

Steps in the Supply Chain:

1. Sourcing raw materials. 4. Order fulfillment/sales

2. Refining those materials into basic parts 5. Product delivery
3. Combining those basic parts into products 6. Customer support and return services

Supply Chain Challenges

1. Potential lack of transparency – Stakeholders may not be able to understand the supply chain’s
status if there is no transparency.
2. Waste due to inadequate production cycle - Overestimate or forecast of the business’ supplies,
demand, and capabilities can cause an overstock
in inventory and thus leading to waste or spoilage.
3. Unsatisfied business partners and customers – Like every other business, the ultimate goal is
to meet customer expectations. To do so,
realistically manage those expectations while
delivering a quality product.

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4. Lost/delayed goods – Lost or delayed goods can greatly affect the whole process which can
therefore bring a negative impact on customers.
5. Increasing customer expectations - The business must create and meet new customer
expectations, especially with the rising of new and
advanced technology, that must be met carefully and
strategically.
6. Resiliency to sudden supply chain changes – Factors outside the supply chain can come at the
most unexpected times. Expect the unexpected
since Plan A to C may not be enough for the
business to react and go through changes.

Supply Chain Management------------------------------------------------------------------------------------------------------

What is supply chain management?

Supply chain management is the strategic coordination of the supply chain for the purpose of integrating
supply and demand management as it encompasses all business and operational processes it is involved
with. It oversees everything as it moves in a supply chain order. A goal of supply chain management is to
improve efficiency by coordinating the efforts of the various entities in the supply chain.

4R’s and 1C:

• Right product - How are you going to develop a successful and quality product?
• Right time - Is your product aligned with the trend or season? Do you have adequate quality
materials for you to create your product without any delays or that can fix mistakes?
• Right place - Is your product appropriate for the place you are supplying it to? Are you using the
right transportation or delivery service to deliver your products?
• Right cost - Are the costs you incurred to make the products and the quantity of products you sold
are enough to meet or maximize your return on investment or ROI?
• Customer - The one who will use your product, and the one who will provide feedback.

Supply Chain Management Best Practices:

1. Use lean SCM and logistics techniques – Supply chain management of a business should be
flexible, quick to adapt to changes, and minimize
inventory waste.

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2. Increase inventory velocity – Inventory should not outweigh demand, nor should it be inadequate for
demand so that the business can capitalize from every changing
demand. Using lean supply chain management is one way to this.
3. Collaborate with other businesses – Relationships with suppliers are important, so, improve those
relationships, not limited to a company’s processes, to
optimize the entire supply chain.
4. Shorten cycles - When a supply chain becomes complex, it gets longer, as well as each process in
the supply chain, causing a delay for the company to deliver their products to their
vendors and bring their products into the market.
5. Use supply chain technology – New technologies and software are now available for businesses to
combine, collaborate, and monitor their supply chain efficiently.
6. Implement useful metrics – Accurate measurements, both failure and success of each step in the
supply chain, and results obtained from said measurements can most
importantly improve the company’s supply chain and operations.

Supply Chain Management Process:

1. Demand Management

Three elements of demand management:

• Demand planning – Forecasting the demand of a certain product, as well as accurately

forecasting revenue that will be earned, aligning inventory with the
current demand, and maximize profit.
• Merchandise planning – This is the planning, buying, and selling of merchandise that can
maximize return on investment (ROI). At the same time, it makes
sure that merchandise is available, by time, place, and quantity, that
will meet the demands.
• Trade promotion planning – The technique used to increase short-term demands for products
in retail store by doing special promos, special prices, actual
demonstration of the product (if applicable), etc.

2. Supply Management

Five areas of supply management:

• Supply planning – The process on how to best fulfill the requirements of the demand plan to
meet a balanced supply and demand that can assist the business in
meeting their goals.

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• Production planning – It encompasses everything that has to do with production – allocating

resources or materials to each department of the business and its
employees, the number of labor men needed and labor hours worked,
and production capacity.
• Inventory planning – This determines the satisfactory quantity and timing of inventory to align
with demand, sales, and production.
• Capacity planning – This refers to the production capacity of the production staff and
equipment available that can meet the product demands.
• Distribution planning – It oversees the movement of goods, starting from the supplier, to the
manufacturer, down to the selling of the finished products that is under
distribution management that refers to the packaging, warehousing,
and etc. processes.

3. Sales and Operations Planning (S&OP)

It is the monthly integrated business management process that empowers leadership to focus on key
supply chain drivers, which includes sales marketing, production, demand management, inventory
management, and new product introduction. The goal of S&OP is to enable top managers or executives
do better decision-making through a variety of strategies and plans for the business.

4. Production Portfolio Management

This is the process of going from the initial product idea to the introduction of the product into the market.
Product portfolio management includes new product introduction, end-of-life planning, cannibalization
planning, commercialization and ramp planning, contribution margin analysis, portfolio management,
and brand, portfolio, and platform planning.

Logistics-------------------------------------------------------------------------------------------------------------------------------

What is logistics?

Logistics is the overall process of managing how resources are acquired, stored, and transported to their
final destination. Logistics is the backbone of the supply chain and supply chain management. Logistics
management refers to the process of identifying reliable distributors and suppliers and their efficiency and
accessibility.

7R’s of Logistics:

• Right product • Right quantity

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• Right condition • Right time

• Right product • Right customer
• Right quantity • Right price
• Right place

1. Third Party Logistics (3PL)

These are the outsourcers that handle warehousing, fulfillment and returns of certain goods for a fee. As
its name suggests, a company hires logistics to handle other processes in the supply chain and operations,
and this helps the company reduce operational burdens.

Types of Services Offered by 3PL:

• Transportation Management • Orders Fulfillment

• Warehousing Solutions • Returns Processing
• Inventory Management

2. Inbound Logistics

This is the receiving and storing of raw materials and components that are needed for production. It is
the entering of materials components, equipment, etc. into the business that needs it to manufacture
their products.

3. Outbound Logistics

Outbound logistics is the storing and moving of goods to the customers or the end users. This focuses
on the demand side of the supply-demand equation. Finished goods are stored, moved, and inventoried
into their respective warehouses, waiting for orders to be fulfilled, then packed and be delivered to the
vendors that will sell the goods to the customers.

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Illustration 1. The Logistics Process

The Three Flows of Suply Chain-----------------------------------------------------------------------------------------------

1. Material (Product) Flow

This is the flow of the physical product from the supplier all the way down to the customer. This flow is
usually unidirectional, that is, it only flows one direction from supplier to customer; however, in certain
instances, when the customer returns the product, the flow occasionally goes in the other direction
(reverse product flow).

2. Information Flow

Information flow is the flow of information from supplier to customer and from customer back to supplier.
This flow is bi-directional, that is, it goes both directions in the supply chain. The type of information
that flows between customers and suppliers include quotations, purchase orders, delivery status,
invoices, customer complaints and so on. For a supply chain to be successful there has to be constant
interaction between supplier and Customer. In many cases, other partners like distributors, dealers,
retailers, logistic service providers are involved in the information network.

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3. Financial Flow

Financial flow involves the movement of money from the customer to the supplier. Usually, when the
customer receives the product and verifies it, the customer pays and the money travels back to the
supplier.

Illustration 2. Supply Chain Flow

Push and Pull in Supply Chain-------------------------------------------------------------------------------------------------

Push vs Pull in Supply Chain

In supply chain management, a push strategy and a pull strategy are two different approaches to managing
the flow of goods and materials.

• Push strategy - It focuses on predicting demand and producing products in advance to meet that
demand. Example: A manufacturer of canned goods produces a certain number of
cans each week based on forecasts of demand. The cans are then pushed through
the supply chain to distributors and retailers.

Advantages of Push Strategy:

• Better inventory control • Alignment of supply and demand

• Forecasting accuracy • Focus on standard products

• Reduced lead time

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Limitations of Push Strategy:

• Customer demand variability • Production planning

• Inventory management • Information sharing in the supply

chain

• Pull strategy - It focuses on responding to actual customer demand by producing goods only when
they are ordered. Example: A manufacturer of custom-made furniture only begins
production of a piece of furniture once it has received an order from a customer.

Advantages of Pull Strategy:

• Enhanced customer • Better quality control

relationships
• Sustainable supply chain
• Dynamic response to customer
demand • Better resource allocation

Limitations of Pull Strategy:

• Increase lead times

• Risk of stockouts

MRP vs MRP II vs ERP------------------------------------------------------------------------------------------------------------

What is Material Requirements Planning (MRP)?

It is a system for calculating the materials and components needed to manufacture a product. Its three
primary steps are taking inventory of the materials and components on hand, identifying which additional
ones are needed and, scheduling their production or purchase.

MRP uses information from the bill of materials (a list of all the materials, subassemblies and other
components needed to make a product, along with their quantities), inventory data and the master
production schedule to calculate the required materials and when they will be needed during the
manufacturing process.

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The primary objective of MRP is to make sure that materials and components are available when needed
in the production process and that manufacturing takes place on schedule. This approach can help achieve
a better matching of supply and demand. Which can reduce product costs and increase revenues as
customer demand is fully met and no revenue opportunities are lost from missed ship dates or inventory
shortfalls.

MRP is considered a "push" system – inventory needs are determined in advance, and goods produced to
meet the forecasted need.

What is Manufacturing Resource Planning (MRP II)?

An extension of MRP, it broadened the planning process to include other resources in the company, such
as financials and added processes for product design, capacity planning, cost management, shop-floor
control and sales and operations planning, among many others.

What is Enterprise Resource Planning (ERP)?

Still more expanded and generalized type of MRP II that took into account other major functions of a
business, such as accounting, human resources and supply chain management, all of it managed in a
centralized database. Both MRP and MRP II are considered direct predecessors of ERP. ERP quickly
expanded to other industries, including services, banking and retail that did not need an MRP component.
However, MRP is still an important part of the ERP software used by manufacturers.

Supply Chain Performances----------------------------------------------------------------------------------------------------

What is supply chain performance?

The term "Supply Chain Performance" refers to the ability of the entire supply chain to meet the
requirements of end customers. It includes aspects such as product availability, on-time delivery, and
maintaining the necessary inventory and capacity to deliver efficiently. In order to thrive in the current
business landscape, supply chains must constantly strive for improvement. To achieve this, it is crucial to
have performance measures, or metrics. These measures help businesses identify strengths and areas
needing improvement in their supply chain operations, ultimately aiming for efficiency, cost-effectiveness,
and customer satisfaction.

COST
Cost-related measures in supply chain management are like financial health check-ups for businesses.
They help companies see how efficiently they're spending money on things like buying materials,
transporting goods, storing inventory, and fulfilling orders. Here are some key cost-related measures:

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• Inventory turnover

Refers to the metrics used to assess how effectively and efficiently inventory is managed within the
supply chain. It specifically measures how many times inventory is sold or used over a period, indicating
how quickly inventory is being replenished and sold, as well as measuring how often a company
replaces inventory relative to its cost of sales. The higher ratio, the better.

o A low inventory turnover ratio may be a sign of weak sales or excessive inventory, also
known as overstocking. It could indicate a problem with a retail chain’s merchandising strategy
or inadequate marketing. In simpler terms, the product is not flying off the shelf, so demand for
the product may be low.

o A high inventory turnover ratio, on the other hand, suggests strong sales. Alternatively, it
could be the result of insufficient inventory. As problems go, ensuring a company has sufficient
inventory to support strong sales is a better one to have than needing to scale down inventory
because business is lagging.

• Total supply chain cost

The sum of the costs associated with the processes to plan, source, deliver, and return (explicitly
excluding make). It comprises five key elements: transportation (fuel, driver salaries, and other costs
associated with moving goods from point A to point B), inventory, warehousing, order processing, and
administration. Below are the importances of utilization of supply chain management:

1. Improves efficiency - Optimize operations, streamline processes, and reduce costs.

2. Enhances visibility - Improve inventory and visibility of supply chain operations, enabling
informed decision-making.

3. Increases flexibility - Helps companies respond quickly to customer demand, changes in the
market, and new business opportunities.

4. Enhances customer service - Helps companies deliver products faster and with higher quality,
improving customer satisfaction and loyalty.

• Weeks of inventory

Also known as "weeks of supply," is a supply chain performance measure that indicates how long
inventory is expected to last based on current inventory levels and average usage or sales. his allows
retailers to know how much of a product to order and when because different product sell at different
rates. It is calculated by dividing the average inventory level by the average daily usage or sales volume,

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and then converting the result into weeks. It is the ratio of the average inventory to the average weekly
sales.

Weeks of supply formula:

Weeks of Supply = current inventory / average weekly units sold

Problem example: If a company has 1,000 units of a product in inventory and typically sells 100 units
per day, the weeks of supply would be 10 (1,000 units / 100 units per day = 10 days).

CUSTOMER SERVICE

This is the most important and critical thing for any organization. The following is the general performance
indicator by which it can be measured:

• Average response time

This refers to the average amount of time it takes for a supply chain to respond to changes in demand

or supply. It is also referred as the time of delay in the middle of the placement of order by a customer

and the delivery of products to the customer. It typically includes the time taken to recognize a

change, make decisions, and implement necessary adjustments in production, procurement, logistics,

or distribution.

Achieving a low average response time is often a goal in supply chain management because it allows

companies to better meet customer demands, reduce excess inventory, optimize resource allocation,

and improve overall responsiveness to market dynamics.

Average Response Time formula:

(Total time taken to respond to tickets over a given time / (Total number of tickets (responses)

over a given time)

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• On-time delivery

This metric measures the percentage of deliveries that were made on time. It’s mainly useful for
understanding your supply chain’s ability to fulfill orders by the promised date. On-time delivery (OTD)
is a crucial performance metric in supply chain management.

The formula for measuring on-time delivery (OTD) is:

OTD = (On-time deliveries) / (Total deliveries) x 100

An example of this, let’s say that out of 600 orders that were delivered, only 450 were delivered before
the promised delivery date. In this case, your on-time delivery date would be:

OTD = 450/600 x 100 = 75%

In this example, the OTD is quite low. To satisfy and retain customers, strive to maintain at least a 95%
OTD rate. Therefore, on-time delivery is a crucial metric that directly impacts customer satisfaction,
operational efficiency, and overall supply chain performance. It demonstrates the organization's ability
to consistently meet commitments and fulfill customer expectations.

Inventory Turns----------------------------------------------------------------------------------------------------------------------

What is inventory turns?

Inventory turns can be a very meaningful metric for a retail company or an industrial company. Other terms
for inventory turnover are inventory turns, stock turn, and stock turnover. Answers the most basic question:
How many times was I able to turn my inventory into cash, buy more, and turn that into cash? It
measures the number of times inventory is sold or used in a strictly defined period.

Getting the Turnover Ratio

Business owners must go beyond, not just by knowing the sales volume or inventory levels. It is also critical
to relate sales to inventory investment. A sales volume of ₱60,000,000 a year on an average inventory of
₱30,000,000 is one thing, but when one’s business is usually at an average inventory ₱15,000,000 is quite
another. It is the difference between turning your inventory over twice and turning it over four times.

The formula for calculating inventory turnover:

Inventory Turnover = Sales / Average Inventory Value (both at retail value)

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Alternatively, if your system only carries inventory value at cost, you can calculate inventory turnover this
way:

Inventory Turnover = Cost of Goods Sold / Average Inventory (at cost)

To get the value of COGS: Cost of Goods Sold = Sales x (1 – margin)

To get the value of Average Inventory: Average Inventory = (beginning inventory + ending inventory)/2

Example, your business has the following:

Sales = 125,000 Ending inventory = 60,000

Beginning inventory = 50,000 Margin = 45%

Average inventory = (50,000 + 60,000) / 2 = 55,000

Cost of goods sold = 125,000 x (1 – 0.45) = 68,750

Inventory turnover = 68,750 / 55,000 = 1.25

The Inventory turnover is 1.25. For some businesses, it is considered a low inventory turnover and this is a
problem. It might indicate that the company is LOW ON SALES or OVERSTOCK. Moreover, when sales
are low, it is associated with the level of inventory you are buying whereas, being overstock is for the sales
your business can produce. Thus, as the owner of the business, one must check and find out whether this
is because of the sales and marketing effort (sales performance) or the stock levels are too high and are
holding back a lot of cash in the form of merchandise in the business.

What is good inventory ratio?

A good inventory ratio differs from one category to the other based on the nature of products and how fast
they need to be turned, such as having an inventory turnover at 14 is usually high when one is in the
supermarket or pharmacy industry where at fashion stores, 3 to 4 is already considered good. Therefore,
when computing the inventory turnover for one’s business, compare it with the benchmark for similar
categories in the industry to know whether you have good inventory turns.

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Inventory Productivity-------------------------------------------------------------------------------------------------------------

A measure of how efficiently inputs is being converted into outputs is called productivity. Productivity
quantifies the efficient utilization of resources. It is calculated as the ratio of inputs, such as labor and
materials, to outputs, such as goods and services. An organization is more productive when it uses its
resources more effectively.

What is inventory productivity?

Inventory productivity, at its simplest, can be defined as the amount of sales and gross profit an inventory
investment generates over a period of time, that usually for a span of one year. Inventory productivity refers
to the efficiency with which inventory resources are utilized to generate revenue or provide value within a
business. It typically involves metrics and analysis aimed at optimizing inventory levels, turnover rates, and
costs while ensuring that sufficient stock is available to meet demand and operational requirements. The
most basic measures of inventory productivity are inventory turnover and gross margin return on investment
(GMROI).

Key aspects of inventory productivity:

1. Inventory turnover - Measures how quickly inventory is sold or used up within a specific period.

2. Days Inventory Outstanding (DIO) - This metric calculates the average number of days it takes
for inventory to turn into sales. A lower DIO suggests better
inventory productivity.

3. Inventory accuracy - Ensuring that recorded inventory levels match physical inventory counts
helps in preventing overstocking or stockouts.

4. Cost of Goods Sold (COGS) to Inventory Ratio - This ratio compares the cost of goods sold to
the average inventory level. A lower ratio
indicates efficient inventory management.

5. Service levels - Balancing inventory levels to ensure products are available to meet customer
demand without excess or shortages.

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Little’s Law

Illustration 3. Little’s Law

Little's law is a basic concept in factory physics and is used to calculate waiting periods, work progress, the
number of procedures that must be carried out, and other related things, despite its simplicity. This law is a
basic description of the relationship between the duration (time) of a job, the time it takes to produce a
product or work on an order, and the amount of time the product orders spends on the queues and the
throughput. This is the number of products called ORDERS that are made in a production system.

Little’s Law: Production Process (using the Kingman’s Equation):

1. Processing job - Transforms inputs to outputs. For instance, the assembly of parts into a total
product, or the treatment of patients or whatever production process you could
think of small or large.

2. Queue - Raw products that come into the system and that cannot be transformed immediately, can
wait here. The number of parts in the queue depends on the time it takes to process a
product and how much product enters to tell the process in a certain amount of time. The
products enter the system or if the processing job takes a longer time, there is a need for
this queue to store products until processing.

Little’s law: Work in progress

[Queue] number of items = Work in Progress = [Processing job] WIP, and Little call this L. One does want
to know how much items are in this queue.

• Processing Time/Job Time - The time it takes to do the work on one single product.

• Queueing Time - The time one single product waits in a queue.

• Total (Throughput) Time - The time it takes for one product to go through the queue and the
processing job.

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Efficient Supply Chain: Procurement----------------------------------------------------------------------------------------

What is procurement?

Procurement encompasses a range of activities involved in obtaining goods or services. The purpose of
procurement, with procurement teams, is to obtain competitively priced supplies that deliver the most value.
Some companies consider that procurement encompasses all the stages, from gathering business
requirements and sourcing suppliers to tracking the receipt of goods and updating payment terms, while
others define procurement as a narrower range of activities, such as issuing purchase orders and making
payments.

In situations where timestamp data is not easily accessible, Little's law is a useful tool for estimating the
length of time a project or set of parts have been waiting. According to this law, the amount of labor in
process is equal to the throughput, or the total number of products passing through the system, multiplied
by the duration of the process.

Procurement is an important step in understanding the supply chain because it helps a company find
reliable suppliers that can provide competitively priced goods and services that match the company’s needs.
That’s the case whether the company is seeking raw materials for manufacturing, a marketing services
provider or new office supplies.

Stages of Procurement:

1. Sourcing Stage

This covers the initial steps in which the business identifies its needs, creates a purchase request and
assesses vendors. Even after the initial sourcing steps are complete, it’s a good practice to build strong
relationships with suppliers. They can establish grounds for suppliers to learn from partners, improve
products and processes and develop trust.

2. Purchasing Stage

This stage includes negotiating terms, creating orders and receiving and inspecting goods and services.

3. Payment Stage

Accounts payable conducts three-way matching to ensure order and invoice accuracy. The invoice can
then be approved and the payment is arranged. Records of all invoices, orders and payments should
be kept and carefully maintained.

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Procurement vs. Supply Chain

Procurement covers one aspect of supply chain management. Procurement includes sourcing, obtaining
and paying for goods and services. Supply chain management also covers the logistics involved in obtaining
goods, such as shipping and warehouse management, as well as transforming the procured goods into
products and distributing them to customers.

Effective Supply Chain: Production Assortment-------------------------------------------------------------------------

In a supply chain, deciding which products to sell and how many to stock is part of the planning
stage. Product assortment, also called merchandise mix, refers to the variety of products a business offers
that is crucial in supply chain management for an efficient supply chain. This product assortment then
guides how the whole supply chain works, from getting products from suppliers to making sure they are
available when customers want them. This means that having the right mix of products and managing them
well is key to a successful supply chain and business overall.

Product Assortment Components:

• Breadth/Width – Nmber of product lines that a business carries.

• Product line – A group of related products sold by the company.
• Length – Number of items within a specific product line.
• Depth – Number of variations each product line.
• Consistency – Degree of relatedness between different product lines within the mix.

Product Assortment Strategies:

1. Wide Assortment

A wide assortment strategy is used when retailers aim to offer a wide range of different product lines or
categories, but with lesser depth in each category. It aims to provide more variety in the types of product
lines offered but does not provide a high number of products in each product line.

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2. Deep Assortment

A smaller number of product lines but with greater product variety. It attracts a loyal customer base and
it aims to provide a larger number of options within a particular product category. It is common for
specialty stores that focus on one or a few products to utilize a deep assortment strategy.

3. Localized Assortment

A localized assortment strategy allocates the product mix based on preferences of the local population
and the characteristics of the geographical region. This allows the retailer to cater to different demands
according to the geography and thereby increase sales.

4. Mass-Market Assortment

Appeals to broad demographics with extensive product categories and variations. It is used by stores
with large physical store capabilities. It aims to appeal to the mass market and offer as many products
and varieties as possible, catering to a much bigger customer base.

5. Scrambled Assortment

Retailers using scrambled assortment strategies aim to offer products that are outside of their core
business operations in order to attract more clients from different markets.

Product Assortment Challenges:

• Assortment balance – Finding the ideal balance between the company’s product range’s width
and depth is one of the key problems of product assortment design.
• Seasonality and trends – Managing the effects of seasonality and trends on your product demand
and supply is another difficulty in arranging product selection.
o Seasonality – Describes the cyclical changes in consumer seasonal demand brought on
by the weather, special occasions, or the changing of the seasons.
o Trends – Refer to the popularity and importance of particular items or categories that are
affected by changes in consumer preferences, tastes, or fashions.
• Planning product range – This range faces a third challenge; adjusting to the input and the
clients’ unpredictable behavior. For the purpose of developing
product assortment, consumer feedback and behavior are important
data sources since it lets the business know the needs, wants, hates,
and likes of their customers.
• Planning product assortment – Planning this might be difficult, but with the help of technology
and tools, a company can make the best choices. To provide

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forecasts and suggestions, data analysts and AI may gather,

process, analyze data from the collected sources.
• Managing Large Inventories - Large inventories may be challenging to manage, and if the
company attempts an overly ambitious product lineup, they can
find themselves inundated with the sheer number of things that
need to be stored, replenished, and delivered.

Tips to Optimize Product Assortment:

1. Optimizing Assortment with Point of Sale (POS)

Understanding the target market’s wants is the first step to optimizing product selection. Retail shops
may gather all customer and inventory information from all sales channels with a sophisticated POS
system. Additionally, the system aids in the generation of POS data analyses that display consumer
insights, best-selling goods, sales patterns, etc. The depth and breadth of the product assortment may
then be chosen.
2. Supplier Selection Impact
The optimization of the product assortment also depends on selecting the proper providers. When
suppliers can’t provide enough goods on time or give low-quality goods, which result in sales losses
and damaged customer relations, a bad supply can interrupt business operations.

3. Inventory Analysis Insights

A company can determine what is selling and what is not by using inventory analysis. They may then
use that information to decide if they need to narrow or widen assortments. They may make a better
choice about their product mix with the aid of an accurate and timely report from POS software.

4. Loss Leader Strategy

Offering a product at an unprofitable price in order to draw in new customers or upsell to current ones
is known as a loss leader approach. Staples are items that customers commonly purchase out of
necessity rather than want. Examples of staples are diapers, laundry detergent, and shaving cream. To
attract more customers, this product selection approach focuses on broadening and deepening product
diversity. It also aids in extending the size of clients’ baskets by adding more profitable and pertinent
goods.

5. Seasonal Product Mix

Depending on the season, a business might need to broaden their selection in certain categories while
limiting it in others. It would be beneficial to select a product mix that is appropriate for the various
seasons and client expectations.

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Supply Chain Design--------------------------------------------------------------------------------------------------------------

What is supply chain design?

Supply chain design refers to the strategic planning and configuration of all interconnected activities
involved in producing, sourcing, and delivering products or services to customers. It encompasses
decisions related to network structure, facility locations, transportation routes, inventory management, and
information flow.

The Importance of Supply Chain Design

• Cost Efficiency - An optimized supply chain design can lead to cost savings by minimizing
transportation costs, reducing inventory holding costs, and streamlining
production processes.

• Customer Satisfaction - A well-designed supply chain ensures timely delivery, high product availability,
and responsiveness to customer demands.

• Competitive Advantage - Companies with efficient supply chains gain a competitive edge by offering
better service, faster delivery, and lower prices.

• Risk Mitigation - Effective supply chain design considers risks such as disruptions, natural disasters,
and geopolitical factors.

• Innovation and Flexibility- A flexible supply chain design allows companies to adapt to changing
market conditions and technological advancements.

Impact on Business Performance:

• Cost Reduction - Efficient supply chain design minimizes costs associated with transportation,
warehousing, and inventory management.
• Revenue Growth - Improved supply chain responsiveness leads to better customer satisfaction, repeat
business, and increased sales.
• Profit Margins - Streamlined processes and reduced waste contribute to higher profit margins.
• Market Share - Companies with superior supply chain design can capture a larger market share due
to competitive advantages.
• Risk Management - Resilient supply chains mitigate risks and maintain business continuity during
disruptions.

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Challenges and Strategies

Challenge No.1: Fluctuations in customer demand can lead to overstocking or stockouts.

Strategies:

• Forecasting Models - Use statistical methods (e.g., moving averages, exponential smoothing) to
predict demand accurately.
• Safety Stock - Maintain safety stock to buffer against unexpected demand spikes.
• Collaboration - Work closely with sales and marketing teams to understand market trends and
adjust forecasts accordingly.

Challenge No.2: Long lead times from suppliers or production delays affect responsiveness.

Strategies:

• Supplier Collaboration - Build strong relationships with suppliers to reduce lead times.
• Dual Sourcing - Source critical components from multiple suppliers to mitigate risks.
• Nearshoring - Locate suppliers closer to production facilities to shorten lead times.

Challenge No.3: Balancing inventory costs with service levels.

Strategies:

• ABC Analysis- Classify items based on value and manage high-value items more closely.
• EOQ (Economic Order Quantity) - Calculate optimal order quantities to minimize total costs.
• VMI (Vendor-Managed Inventory) - Let suppliers manage inventory levels at your facility.

Challenge No.4: High transportation costs and inefficiencies.

Strategies:

• Route Optimization - Use software to optimize delivery routes and reduce mileage.
• Consolidation - Combine shipments to maximize truckload utilization.

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• Intermodal Transportation - Use a mix of modes (e.g., rail, truck, sea) for cost savings.

Challenge No.5: Disruptions (natural disasters, geopolitical events) impact supply chains.

Strategies:

• Scenario Planning - Anticipate risks and develop contingency plans.

• Diversification - Diversify suppliers and production locations.
• Resilience - Build flexibility into the supply chain to adapt quickly.

Tuna Supply Chain of the Philippines----------------------------------------------------------------------------------------

The Philippines is a top global producer of tuna due to its rich marine resources and strategic location.

Major tuna industry hub: General Santos City in Mindanao, known as the "Tuna Capital of the Philippines”.

Here’s a simple overview of the supply chain of tuna in the Philippines:

1. Government Regulation - Ensures sustainability, regulates industry practices, and promotes

responsible fishing through agencies like the Bureau of Fisheries and
Aquatic Resources (BFAR).

2. Fishing/Harvesting - Fishermen and fishing vessels are the primary sources, catching tuna in
Philippine waters.

3. Landing - Fishermen bring their catch to designated ports or landing sites for unloading and initial
quality assessments.

4. Processing - Processing plants, especially in General Santos City, handle cleaning, gutting, and
preserving tuna through chilling or freezing.

5. Distribution - Processed tuna is distributed to wholesalers, local markets, seafood distributors,

and export companies. Export companies handle shipments to international
markets, complying with regulatory requirements.

6. Domestic Market - Processed tuna products reach retail outlets, supermarkets, wet markets, and
food services like restaurants and hotels.

7. End Consumers - Tuna products are consumed by households and individuals both domestically
and internationally.

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Members:

• Armada, Frenz Earl

• Besinga, Liam Valerie
• Chua, Kristine Niña
• Dela Fuente, Christian Earl
• Dublas, Mae Kyllah
• Esquerdo, Arron Harvey
• Juanitez, Lea Abegail
• Subaan, Rochelle

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