SUPPLY CHAIN MANAGEMENT

It’s a cycle, we start by the supplier and his primary product flow to the
producer and his primary product flow to customer.

Example: apple

Three entities: producer, supplier and customer

Different entities that perform the process: government or organizations,
individuals

Vendor is a generic term referring to all sellers in the marketplace. The

supplier provides materials, energy, services or components to produce a
product or service.

Producer receives services, materials, supplies (approvisionnement),

energy to create finished products such as dress shirts, packaged dinners.

Customer receives shipment of finished products to deliver to its

customers, who wear tee shirts, eat the packaged dinners, fly the planes

There are 5 phases of SCM :

A supply chain consists of the flow of products and services from :

 Raw materials manufacturers
 Intermediate products manufacturers
 End product manufacturers
 Wholesalers and distributors
 Retailer
 End customers

 Connected by agents, transportation and storage activities

 Integrated through sharing of information, planning and processing
activities

(SCHEMAS – FIGURES )

What is the supply chain ? wo definitions

Supply chain: the design and management of seamless, value-added

process across organizational boundaries to meet the real needs of the
end customer. (Institute for Supply Management)
What are the goal of supply chain management?

Is concerned with the efficient integration of suppliers, factories,

warehouses and stores so that merchandise is produced and distributed:
 Right quantities
 Right locations
 Right time

In order to :
 Minimize system costs

What is the importance of supply chain management?

For large company, with lot of suppliers, no sense to implement a supply

chain management service for a small company, need to find a balance

Start with key suppliers

Move on to other suppliers, customers, shippers (expediters)
Integrate second tier suppliers and customers

Cost savings and better coordination of resources are reasons to

employ Supply chain management

 Bullwhip Effect

Reducing the bullwhip effect occurs through

 Process integration

Important elements of SCM

PURCHASING : supplier alliances, supplier management, strategic sourcing

OPERATIONS : demand management, MRP, ERP, JIT,

Tools and strategies for optimization

- Decision support systems
- Inventory control
- Network Design

Sequential optimization vs global optimization

Sequential optimization
Global optimization: more intelligence support (software, datas)
GLOBAL SUPPLY CHAIN MANAGEMENT (GSC)

SOURCE : https://aims.education/study-online/global-supply-chain-
management/

GLOBAL SUPPLY CHAIN MANAGEMENT (GSC)

= link the whole world, inventories from different places, every location
involved

Assembly = manufactory (finish the products): transfer raw materials into

finished products

Global system: try to manufacture locally but many flight, shipping and
export companies involved in GSC

Many vendors ERP (Enterprise, Resource, Planning) / MRP (Material,

Resource, Planning)
Block chain (AI – driven technology for information transfer)

Materials are taken in highly specialized companies and then they are
assembled locally

Labor costs high in America & Europe rather do in Asia and it’s not
necessary to manufacturing into home country (more taxations, more
energy costs, more wages…)
Prices lower if the Supply chain is globally integrated = more profit margin

Customers are the receiving end (all former costs will be mirrored in the
product price)

Geopolitical topics and international concerns should be considered in a

GSC
Get products globally and manufacture locally

What is the demand? What is the customer market?

Trying to find the customer segmentation, product segmentation
(important to think with the customer perspective: customer must be
attracted in the product: meet preferences of customers with different
products). Need an analysis of the market and the customers (data
analysis)

Some companies are Supplying, processing products from Ireland around

Europe
Ex: meat, potatoes…
All countries have traded an agreement all over the world (Qatar: gas-oil),
we need a mix of products and sources because it’s secure, less
dependency

SUPPLY CHAIN DESIGN AND PLANNING

SCM without planning

Main company (parent)  subsidiaries companies (kids)

1930 – 1940s: no real model, just exporting = loose model

Loose configuration / semidetached: When they allow their subsidiaries

(sub-companies) to do operating independence on its own product
development, manufacturing and marketing, there is no architecture. =
child model
 very expensive and takes too long

1950s: ongoing parents-offspring model

1970s – 1980s: Japanese challenges all over the world (Toyota,

Honda…)
Dynamic strategy notion of one site fits all: global/domestic strategy, using
network model, more adaptative.

“Customer is the king; he is defining your approach”

2 different network models:

- Stable network: suppliers are fixed, reliable in long term (only
supplier and distributor). More control over its suppliers and
distributors operations.
- Dynamicd

 Which network configuration is better?

Depends on the products, the location, no best solutions

Extent of Vertical Integration

= single ownership of consecutive activities along the supply chain
(suppliers, distributors…). Narrow (only the manufacturer) VS wide (the
whole supply chain) Span.

A well-integrated supply chain may not have a large extent or vertical

integration.
If an OEM does not have an ownership of its suppliers and customers, it is
regarded as having a narrow span of vertical integration.

OUTSOURCING AND OFFSHORING

Outsourcing or strategic outsourcing is commonly known as the “make or
buy” decision.
Organizations may want to contract some of its in-house operations such
as design, manufacturing and marketing to its external suppliers.

Most often such decision to “buy” the operation instead of “make” itself is
aiming at a reduced cost.
MAKE
Offshore manufacturing: manufacturing outside
Local Production/insourcing: sourcing locally

BUY
Offshore outsourcing: manufacturing dlocally
Onshore outsourcing: sourcing outside

There are companies who’s doing four of them, it’s a combination of

everything

Outsourcing = you ask other people (outside of the company) to do the job

3 types of outsourcing:

1. BUSINESS PROCESS OUTSOURCING: (long term activities)

- Marketing/call center outsourcing
- R&D process outsourcing
- Engineering process outsourcing
- HR and recruitment process outsourcing
- Knowledge process outsourcing

2. BUSINESS FUNCTION OUTSOURCING: (daily activities)

- Financial auditing
- IT services (ex: bank)
- Logistics services (ex: agreement with transport company)

3. FACILITY AND MANPOWER OUTSOURCING:

- Capital equipment leasing
- Free length experts hiring (ex: cleaning services…)

 If there are no experts in the company: they can upgrade

employees, recruit or outsource, they must be aware about sensitive
information = TRADE-OFF
 MATRIX DECISION TOOL FOR OUTSOURCING

Outsourcing’s Risks:
- Negative impact on company’s personnel
- Loss control over key strategic design task (impact on company’s
competitiveness)
- Severe business disruption due to failed supply from single sourced
suppliers
- Tactical, short-term approach to outsourcing may inhibits continuous
improvement and long-term investment
- Intellectual property right
- Foreign currency exchange risk if involves overseas suppliers

LOCATION DECISIONS:

Factors influencing the operational location decision:

Supply Chain cost = Physical cost + Market cost

- Physical costs: production cost, labor cost, inventory cost, actual
cost
- Market costs: very variable, not in our hand, depends on
marketplace
https://www.track-pod.com/blog/functions-of-logistics/

1. Order processing

Setups for processing orders

TMS: transport management system

Processing of order sets the tone for the whole of transportation

management: warehousing, customer service, shipment analytics,
movement itself.

2. Inventory management

Inventory control: stocking finished goods in a storage facility, in order

to support the transport and delivery processes, inventory control requires
information for maintaining inventory records, ensuring safety (damage or
not), predicting demand for goods and reordering stock.

(If you see the time in a shopping center or supermarket, you’ll buying less
product than you could)

Inventory logistics: remains on the borderline between inbound and

outbound logistics as it involves both suppliers relationship management
= storing, stocking, managing

Therefore, inventory management is an important part of supply chain

management and needs to be used efficiently. This means careful, data-
driven assortment planning and timely restocking. There is a sign how do
we arrange the inventory, it’s a science, need to manage the space
properly because the space is very costly and permit no time lost when
you’re looking for a product

OEM: original equipment ma…

3. Warehousing

Warehouse management is a natural extension of inventory activities.

While inventory covers all locations and, hence, all inventory for order
fulfillment, warehousing is limited to tracking stock movement within a
warehouse.

One of the biggest trends in order fulfillment in 2023 will be micro

warehousing and micro fulfillment. By strategically placing inventory in
small warehouses located in densely populated areas, retailers are
planning to cut transportation costs and encourage more pickups.

4. Packaging

Packaging includes all the activities and operations implemented to

prepare goods for handling and transportation to and from customers - in
case of reverse logistics and returns specifically. Packaging is one major
logistic function as it determines delivery success.

Moreover, it's important that packaging matches your storage and vehicle
needs, as well as meets the demand for sustainable materials and other
green logistics aspects. (important to know how to pack the products
depends on the kind of the products it will be different)

Green logistics: Everything has to be reusable, supply in a good condition

but also in a good package

5. Cargo handling

No company wants ever-rising shipping costs because couriers have to

make many trips to one customer to get the order right.

How to reduce the costs:

- QR/Barcode scanning: cost-efficient way to improve your delivery
success.
- Fleet optimization: Route optimization and fleet optimization both
serve the purpose of reducing your cost per delivery by maximizing
your logistical resources. (algorithm
- Contactless delivery:
 6. Transportation

It's required at every step of every supply chain, and the way companies
build their transportation management system and functions determines
the success of supply chain management.

Route optimization with ETA (Estimated Arrival Time) dynamic time for
dispatcher at the back office and

7. Monitoring

- IOT: Internet of things (all devices connected)

- Analytics tools: real time data analytics, used by managers

Ex: shipping reports, we can extract specialized reports: driver
statistics, trip summaries by routes, order and item overviews,
costs savings analysis and route costs.

SUPPLY CHAIN OPERATIONS

https://www.shipbob.com/blog/supply-chain-operations/

Why SC operations important?

= systems, activities and processes that work together to move goods
from supplier to the merchant to the end customer.

Coordination between

Operations are not usually glamorous, but absolutely essential to a

business
= Thankless job (nobody will appreciate you; everybody will blame you as
soon as something not functioning well.

Seamless (without break = continuous flow) order fulfilment, makes

customers happy
Not only about marketing/advertising, order fulfilment is important

Efficiency = improving the process

THE SEVEN SUPPLY CHAIN OPERATION COMPONENTS

DEMAND PLANNING
= products projection for raw materials (most vital component) to plan
production
Your demand planning operations may involve using historical sales data
to pinpoint purchasing patterns, which inform predictions on future
demand.
(each country has having their own factors for buying, they have different
conditions and different

Historical data
Demand patterns rooted in seasonality or trends (need seasonal/trends
predictions)

PURCHASING
Source: searching and evaluating suppliers (who are they, where are the
suppliers…), multiple suppliers, but you have to find how many do you
need (need different suppliers)
Negotiating: contracts with the suppliers which ensure the delivery of
raw materials, long term negotiation, prices points
Preparing and finalizing purchase agreements:
Assessing the number of raw materials required
Creating purchase orders
Coordination transportation of purchased materials to the
manufacturer or business’s warehouse of fulfillment centers

MANUFACTURING

Manufacturing involves converting or transforming raw materials

INVENTORY MANAGEMENT
Storage space:
Inventory (only stocking)
Warehouse (stocking, sorting, picking, packing)
 They are connected sometimes they are together

FULFILLMENT & WAREHOUSING

Finished inventory remains in storage until a customer place an order.
When an order comes in, fulfillment and warehousing operations
commence.

Fulfillment and warehousing operations include processing and confirming

orders, picking the units of inventory specified in each order, packing
those units into a box or poly mailer, and setting it aside to be shipped to
the end customer.

Confirming order = products should be there in the warehouse

E commerce business = difficult to fulfilled, need multiple fulfillment

centers in different locations

SHIPPING AND TRANSPORTATION

Involve software that provides Real time tracking information/updates on
where is the order.
Ex: UPS, FedEx…

CUSTOMER SERVICE
= assisting customers with complaints, returns, replacements, refunds and
repairs.
Marketing's role in Supply Chain Management
 $22 trillion global industry
 includes products from agriculture, healthcare, manufacturing, and
retail
 deals with planning, implementing and controlling the flow of goods
from the source to the consumer
 supply chains adopting technologies, Al insights, and efficient
management help steer their organizations to success
 involves all aspects of providing services and information from their
point of origin to their final destination

B2B marketing:

 suppliers -manufacturers is a typical B2B model build relationships with

companies to get them to buy your product
 Adopting B2B marketing strategies will help increase the demand for
your products while expanding your business
 Build a business relationship
 Build costumer relationships care the lifeblood of the business -
costumer relationship management (CRM)
 integrating supply chain management and B2B marketing helps
companies improve their costumer experience by providing real-time
insights the costumer experience,
 companies can make improvements on actual usage of data rather than
relying on assumptions
 CRM system will allow you to identify potential costumers early on
 Drives company growth and product innovation
 Build brand awareness → increase sales

 builds trust - become familiar with your brand

Final conclusion:

- Marketing is an inequal part of the supply chain

- Plays a significant role in success and growth
- Create brand awareness and increase brand loyalty
- Marketing deals with suppliers & costumers = loyalty through targeted
promotions
- Physical store only for a particular area = mostly online store as well
established - ecommerce really important - was advantageous during
pandemics

RFGen
https://www.rfgen.com/blog/understanding-lean-and-just-in-time-
manufacturing-methods/

Lean vs JIT : Understanding the differences and choosing the right

manufacturing methods for your business
Just in time manufacturing is a business-centric approach focused on
efficiency
Lean manufacturing emphasizes customer desires
Each type prioritizes the elimination of waste, improved efficiencies and a
focus on customer value

Lean = customer centric (post-production)

JIT = manufacturing centric (pre-production)

Customers are choosy, we need to buy what we like and what we want or
we’re going to another brand

7 Wasteful manufacturing practices:

- Overproduction
- Waiting
- Transportation
- Inappropriate Processing
- Excessive Inventory (warehouse issues)
- Unnecessary Motion
- Defects

Lean manufacturing : provide value for customers

Benefits of lean manufacturing

- 75% reduction in inventory
- 100% increase in production
- 50% in labor costs and quality improvement

Common implementation mistakes

- Lack of strategy
- Lack of employee participation: employees at all levels must be
involved in the process, but employees are not interest in doing these
methods because needs more work (new processes, new learning…)

Just in Time: looks after the pre-production (lowering cost and reducing log
times)

Benefits of just in time manufacturing

- Eliminate waste
- Remove variability
- Improve output

Rather than keep large amounts of components on hand to have when

needed, companies place orders more frequently in smaller quantities

Common implementation mistakes

- Methodology is fairly straightforward
- Success reliers on precise ordering and stocking between
suppliers/business
- Need coordination (if not there is no inventory buffer and production
can be delayed)
SIMILARITIES
- Need to eliminate waste and improve efficiency
- Removing unnecessary items, optimization for faster delivery (through
production process)
- Priority on customer demand

 Selection depends on the products that you make

DIFFERENCES
- People involved: individuals outside the manufacturing process such as
marketing, customer services (Lean manufacturing) VS employees and
partners (JIT)
- Production process: designed for processes that delivered one specific
item in various versions - processes and employee skill sets tend to be
more rigid (JIT) VS more flexibility, emphasizing the production of larger
or smaller amounts depending on fluctuating market needs, so
companies do not have to invest in specialized devices every time they
want to launch a new product (Lean manufacturing)
- Approach : Just-in-time manufacturing is more focused on specific
aspects of production, namely inventory. Lean manufacturing is much
more comprehensive and holistic. With lean manufacturing, a supplier
examines its manufacturing processes in search of ways to lengthen
the product lifetime. For instance, they select a higher cost, longer-
lasting element to make the product and meet those customer
expectations.

 Combination is possible, We can use JIT with the Lean or Lean and JIT

How to move forward with manufacturing methods

= Both of these methods help organizations evaluate and improve their
operations

Regardless of whether JIT or lean manufacturing works best for a

business, embracing automation from the shop floor to the warehouse is
important to move forward.
Exploring which manufacturing methodology is right for your company,
allows you to review your full supply chain model, outline key success
factors, and look to new strategies to help distinguish your business from
the competition.

What is Six Sigma ?

https://www.netlogistik.com/en/blog/six-sigma-in-the-supply-chain

Six Sigma is a continuous improvement methodology focusing on defect

reduction and process optimization. It relies on data collection and analysis
to identify areas for improvement. This philosophy centers around quality,
reduction of variations and customer satisfaction.
Implementing Six Sigma in the supply chain involves identifying critical
areas for improvement and applying the DMAIC methodology for
continuous optimization:
o Define = define the problem
o Measure = quantify the problem
o Analyze = identify cause of problem
o Improve = implement & verity solution
o Control = maintain the solution (make sure it’s not repeating)

KPI 3: Fill Rate – Efficiently Meeting Customer Demand

Measuring the proportion of orders immediately satisfied with available
inventory