Introduction to

Supply Chain
Management and
Logistics

Supply chain management (SCM) and logistics are integral parts of any
successful business. They involve the coordination of activities to ensure
the efficient flow of goods and services from the source to the final
customer.
by Baishnab Padhee
Definition of Supply Chain
Management
Supply chain management is a strategic approach to managing the flow of goods and
services, from raw materials to the end customer. It involves coordinating activities
across multiple organizations, including suppliers, manufacturers, distributors, and
retailers.

Planning Sourcing
Forecasting demand, establishing Selecting and managing suppliers,
production schedules, and managing negotiating prices, and ensuring
inventory. quality.

Production Delivery
Manufacturing products efficiently Transporting products to customers,
and effectively, managing managing transportation routes and
production processes and quality schedules.
control.
Key Components of Supply
Chain Management

Supply chain management encompasses various activities that ensure the

smooth and efficient flow of goods and services. Key components include
sourcing, production, inventory management, transportation, warehousing,
and customer service.

1 Sourcing 2 Production
Selecting and managing suppliers. Manufacturing and quality control.

3 Inventory 4 Transportation
Management
Moving goods to customers.
Optimizing inventory levels.
Definition of Logistics
Logistics focuses on the physical movement of goods and materials, including transportation, warehousing, and handling. It is a
subset of supply chain management, focusing on the efficient flow of goods from one point to another.

Transportation 1
Moving goods by truck, rail, air, or sea.

2 Warehousing
Storing goods until needed.

Inventory Management 3
Controlling the amount of inventory on hand.

4 Order Fulfillment
Processing orders and shipping goods to customers.
Differences between Supply Chain
Management and Logistics

While logistics is a crucial part of supply chain management, there are key differences. Supply chain
management is a broader concept that encompasses the entire flow of goods and services, while logistics
focuses specifically on the physical movement of goods.

Supply Chain Management Logistics

Strategic and long-term planning. Operational and tactical execution.

Focus on overall efficiency and cost optimization.

Focus on efficient and timely movement of goods.

Involves multiple organizations across the supply chain. Primarily concerned with internal processes within a company
What is a value chain?
A value chain is a concept describing the full chain of a business's activities in creating a product or service
-- from initial receipt of materials through its delivery to market.

The value chain framework encompasses five primary activities -- inbound operations, operations,
outbound logistics, marketing and sales, and service -- and four secondary activities -- procurement and
purchasing, human resource management (HRM), technological development and company infrastructure.

Value chain analysis occurs when a business identifies its primary and secondary activities and evaluates
the efficiency of each point. This analysis can reveal linkages, dependencies and other patterns.
The value chain concept emerged in 1985 when Harvard Business School professor Michael Porter
described it in his book, Competitive Advantage: Creating and Sustaining Superior Performance.
PRIMARY VALUE CHAIN ACTIVITIES
Primary activities contribute to a product's or service's physical creation, sale, maintenance and support.
These include the following:

• Inbound operations. This is the internal handling and management of resources coming from outside
sources, such as external vendors and other supply chain sources. These outside resources flowing in are
called inputs and may include raw materials.
• Operations. These are activities and processes that transform inputs into outputs -- the product or
service being sold to customers for a higher price than the cost of materials and production, generating a
profit.
• Outbound logistics. This is the delivery of outputs to customers. Processes involve systems for storage,
collection and distribution to customers. This includes managing a company's internal systems and
external systems from customer organizations.
• Marketing and sales. Activities such as advertising and brand building, which seek to increase visibility,
reach a targeted audience and communicate why a consumer should purchase a product or service.
• Service. Customer service and product support activities reinforce a long-term relationship with those
who have purchased a product or service.
SECONDARY ACTIVITIES

Secondary activities support the primary activities discussed in the previous section and include the
following:

• Procurement and purchasing. This involves finding new external vendors, maintaining vendor
relationships, and negotiating prices and other activities needed to obtain materials and resources
used to build a product or service.
• HRM. The management of human capital includes functions such as hiring, training, building and
maintaining an organizational culture, as well as maintaining positive employee relationships.
• Technology development. Activities like research and development, IT management and
cybersecurity, as well as anything that builds and maintains an organization's use of technology fall
in this category.
• Company infrastructure. This includes legal, general management, administration, accounting,
finance, public relations and quality assurance activities.
Benefits of value chains

The value chain framework helps organizations identify sources of their positive or
negative cost efficiency. Conducting a value chain analysis can help businesses with the
following:

• Support decisions for various business activities.

• Diagnose points of ineffectiveness for corrective action.
• Understand linkages and dependencies between different activities and areas. For example -- issues
in HRM and technology are broadly impactful.
• Optimize activities to maximize output and lower costs.
• Establish a cost advantage over competitors.
• Understand core competencies and areas of potential improvement.
The cycle view of supply chain processes is a way of
dividing supply chain processes into a series of
cycles that occur at the interface between two
stages of a supply chain. Each cycle is a sequence of
operations and transactions that takes place
between two stages.
Importance of Effective Supply
Chain Management

Effective supply chain management is crucial for businesses of all sizes. It can lead to lower costs,
improved efficiency, increased customer satisfaction, and enhanced competitiveness.

Cost Reduction Improved Efficiency

Minimizing waste and inefficiencies. Faster delivery times and reduced lead times.

Increased Customer Satisfaction Enhanced Competitiveness

Meeting customer demands and expectations. Staying ahead of the competition by offering
superior products and services.
Challenges in Supply Chain
Management
Supply chain management faces various challenges, including disruptions, volatility, complexity,
and sustainability concerns.

Disruptions
Natural disasters, political unrest, and pandemics.

Volatility
Fluctuations in demand and supply, impacting pricing and availability.

Complexity
Managing multiple suppliers, manufacturers, and distribution channels.

Sustainability
Minimizing environmental impact and promoting ethical sourcing practices.
 MAJOR TYPES OF LOGISTICS IN SUPPLY CHAIN MANAGEMENT

INBOUND LOGISTICS

Inbound logistics involves the management of resources that are necessary to make a product or
service of an organisation. It involves managing different suppliers/vendors, inventory, costing,
and transportation. Inbound logistics must ensure the right resources in quantity reach the
organisation at the right time. It is a complex process requiring connecting with various resource
providers to make one final product. Inbound logistics is mainly concerned with the movement of
resources from suppliers to production.

OUTBOUND LOGISTICS
Outbound logistics refers to delivering the right product at the right time to customers at the best
possible minimum cost. It focuses on the demand side of the supply-demand calculation.
Customer satisfaction is the main objective of outbound logistics. It is concerned with delivering
the product from the distribution centre to the customer. It involves procedures such as order
processing, packaging, and shipping to the destination.
Reverse Logistics
Reverse logistics is the process connected with managing product returns and refunds. It is the movement of
the product from customers back to the seller or manufacturer. The products returned may be received late
or not required by the customer, damaged in the delivery process or eligible for repair, refurbishing, or
recycling. Reverse logistics helps organisations properly dispose of products that can minimise penalties for
noncompliance with environmental regulations.

Procurement logistics
Procurement logistics is sourcing materials/services required to manufacture a product. Procurement is the
major element in inbound logistics, and the scope depends on the size and nature of procurement required by
an organisation. Procurement logistics aims to control supplies as per the requirement of the various
operational processes of the organisation. It involves monitoring quantities to be supplied, supply frequency,
inventory management, demand forecasting, quality of service delivery, vendor selection, types of packing
required, and mode of transportation required, among other factors.
Manufacturing logistics
Manufacturing logistics refers to the planning, coordination, and service tasks required to
carry out production activities within a manufacturing plant. It is organising and managing
the transportation, storage of materials and finished products within a manufacturing plant.
It also includes determining when to shut down the manufacturing plant for maintenance,
managing inventory levels, and meeting production schedules.

Distribution logistics
Distribution logistics, also known as sales logistics or transport logistics, deals with the
movement of goods from manufacturer to customer. Customers can either be final customers
or distributors. This logistics is the driving force behind order fulfilment services. Supply chain
management online courses enable professionals to learn more about the processes and
methods to run a lean and efficient supply chain management.
 THE ROLE OF LOGISTICS
Logistics services can be simple and complex at the same. It plays a determining role in successful
order implementation. Let's find out more about these roles:

 Order processing
The logistics department is responsible for processing all the orders placed by the customers. It is
essential for a fast and effective flow of information that surrounds the delivery process.

 Inventory management
Inventory involves stocking finished goods in a warehouse or storage facility. Inventory control and
maintenance are required to support the transportation and delivery processes. The stocked goods
should be stocked according to the demand or future predictions. Above all, they should be kept safe.
 Warehousing
Warehousing is an extension of inventory management. Unlike inventory, warehousing is
limited to tracking stock movement within a warehouse and not all locations. Operations take
place on the individual warehouse level.
 Packaging
Packaging includes all the activities that ensure the safety and quality of goods transported and
delivered to the customers. It is vital as several people would handle the products and store
them under various circumstances. It is one of the factors that determine delivery success.
 Cargo handling
Handling packaged goods form the basis for safe and timely delivery. Logistics services must
have an effective package and handling procedures. Customers should be delivered products of
desirable quality. The procedures for return are quite extensive, and returns due to damaged
products can result in a bad reputation.
 Transportation
Transportation is required at different stages and types of logistics services. A company's
transportation system defines the success of its supply chain management system. A few steps
to increase the transportation system include a shipper's portal, route optimisation with
Estimated Time Arrival (ETA), customer notifications and live tracking, analytics, and proof of
delivery.