Introduction to Supply Chain and Logistic Management

Books
§ Branch, A. E. (2009) Global Supply Chain Management and International Logistics, Routledge
§ Christopher, M. (2011) Logistics and Supply Chain Management, FT Press; 4th edition
§ Lancaster, G. and Massingham, L. (2011) Essentials of Marketing Management, Routledge
§ Ross, D. F. (2011) Introduction to Supply Chain Management Technologies, CRC Press; 2nd
edition
§ Chopra and Meindl (2016) Supply Chain Management, Strategy, Planning, and Operation
§ Waters, D. (2002) Supply Chain Management: An Introduction to Logistics, Palgrave; 2nd
edition
§ Engell, S. (2008) Logistic Optimization of Chemical Production Processes, Wiley-VCH Verlag
GmbH & Co. KGaA

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
Journal Articles
§ Atkinson, A. A., Waterhouse, J. H., & Wells, R. B. (1997). A stakeholder approach to
strategic performance measurement. Sloan Management Review, 38, 25–37.
§ Harland, C. M. (1996). Supply chain management: Relationships, chains and networks.
British Journal of Management, 7, S63-S80.
§ Kersten, W., & Saeed, M. A. (2014). A SCOR based analysis of simulation in supply chain
management. In F. Squazzoni, F. Baronio, C. Archetti, & M. Castellani (Eds.), 28th
European Conference on Modelling and Simulation (pp. 461–469). Brescia, Italy.
§ Lambert et al. (1998) Supply Chain Management: Implementation Issues and Research
Opportunities. The International Journal of Logistics Management, 9, 1-20.
§ Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z. G.
(2001). Defining supply chain management. Journal of Business Logistics, 22, 1–25.
§ Saeed and Kersten (2017) Supply chain sustainability performance indicators - a content
analysis based on published standards and guidelines. Journal of Logistics Research, 10
(12), 1-19
§ Seuring, S., & Müller, M. (2008a). From a literature review to a conceptual framework
for sustainable supply chain management. Journal of Cleaner Production, 16, 1699–
1710.

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
What is a Supply Chain?

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
Supply Chain of a Paper

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Waters (2002, p.8) Supply Chain Management: An Introduction to Logistics,
© Dr. Saeed Palgrave; 2nd edition
Introduction to Supply chain and Logistic Management
Supply Chain

§ “…….. all activities associated with the flow and transformation of goods from
raw materials stage (extraction), through to the user, as well as the associated
information flows.

§ Material and information flow both up and down the supply chain.”

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© Dr. Saeed Handfield and Nicholas, Introduction to supply chain management (1999, p. 2)
Introduction to Supply chain and Logistic Management
Supply Chain Example

Freshly
Metro
TGS
Euro store
Lahore
Pepsi Cash n Carry
Rahim Store

End customer
Rainbow
Youngs Islamabad Carrefour
Unilever
Karachi
P&G

Tier 1
suppliers
Regional Local stores
distributors Super market chains

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
Supply Chain: International Examples

• The movement of cars manufactured in South America to Europe/North

America

• Clothing made in Pakistan, Vietnam, Portugal, Turkey and brought to markets in

Europe, the Americas, or Asia

• Electronic components manufactured in China, South Korea, Japan, Thailand;

used in assembly locally or shipped to other areas for assembly and further
distribution

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© Dr. Saeed Handfield and Nicholas, Introduction to supply chain management (1999, p. 2)
Introduction to Supply chain and Logistic Management
What does Supply Chain look like?

Simple Variant

More complex
variant

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Illustration courtesy of
© Dr. Saeed Metin Cakanyildirm, 2015
Introduction to Supply chain and Logistic Management
Generalized Supply Chain Model

E
N
M D
A
T C
E Focal company U
R S
I T
A O
L M
Purchasing Physical
and supply distribution E
Supply side Demand side
R

Supply Chain Management

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Waters (2002, p.9) Supply Chain Management: An Introduction to Logistics,
© Dr. Saeed Palgrave; 2nd edition
Introduction to Supply chain and Logistic Management
Supply Chain Business Processes
Information flow
Manufacturer
Suppliers Suppliers Logistics Consumer/
Tier 2 Tier 1 Customer
Purchasing Marketing/sales End-user

Product flow

Production Finance
R&D
Supply chain business processes

Customer relationship management

Supplier relationship management

Customer service management

Demand management

Order fulfillment

Manufacturing flow management

Product development and commercialization

Returns

13 | Supply chain and logistic management Lambert et al. (1998) Supply Chain Management: Implementation Issues and
© Dr. Saeed Research Opportunities.
The International Journal of Logistics Management, 9, 1-20.
Introduction to Supply chain and Logistic Management
The Supply Chain Flows
Tier 3 to
Tier 3 to Tier 2 Tier 1 Tier 1 Tier 2
Consumers/
Initial suppliers Suppliers Suppliers Customers Customers
End-Customers

1 1
Tier 3 to n suppliers

Consumers / End-Customers
2 2
n n
1 1
1
Initial Suppliers

Tier 3 to n customers
n 1
2 2
n
1
2 3 1 n
1
3 n 2
n n
n
1 1

n n

Managed Process Links Focal Company

Monitor Process Links
Members of the Focal Company’s Supply Chain
Not-Managed Process Links
Non-Member Process Links Non-Members of the Focal Company’s Supply Chain

14 | Supply chain and logistic management Lambert et al. (1998) Supply Chain Management: Implementation Issues and
© Dr. Saeed Research Opportunities.
The International Journal of Logistics Management, 9, 1-20.
Introduction to Supply chain and Logistic Management
Internal and External Supply Chain
Executive
Management

IT R&D

Supply
Finance Management

Upstream Downstream
Suppliers Customers
Accounting Operations

HR Logistics
Marketing

Supplier´s Supplier Focal Customer´s

Custome
Supplier Firm customer
r

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© Dr. Saeed Fawcett et al. (2007)
 Introduction to Supply chain and Logistic Management
Achieving an Integrated Supply Chain
Stage One: Baseline

Purchasing Manufacturing Distribution Marketing Customers

Stage Two: Functional Integration

Materials Manufacturing
Distribution Customers
Management Management

Stage Three: Internal Integration

Materials Manufacturing
Distribution Customers
Management Management

Stage four: External Integration

Internal Supply
Suppliers Customers
Chain

Individual businesses no longer compete as stand-alone entities, but rather as supply chains
(Christopher 2011, p.213)
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© Dr. Saeed Christopher (2011), p.14
Introduction to Supply chain and Logistic Management
Goals of Supply Chain Management

The ultimate goal of global SCM is to link:

§ The market place

§ The distribution network

§ The manufacturing/processing/assembly process

§ Procurement (purchasing) activity

... so that customers receive a higher level of service but at a lower level of cost...
and yield the company higher profits

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© Dr. Saeed Ross (2011), p.12
Introduction to Supply chain and Logistic Management
Supply Chain Management

Supply Chain Management is the design and management of processes across

organizational boundaries with the goal of matching supply and demand in the
most cost effective way.

Supply Demand

Mission impossible: Matching Supply and Demand

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Introduction to Supply chain and Logistic Management
Why so Difficult to Match Supply and Demand?

§ Uncertainty in demand and/or supply

§ Changing customer requirements

§ Decreasing product life cycles

§ 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
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Introduction to Supply chain and Logistic Management
Issues in Supply Chain Management
Distribution network configuration
• How many warehouses do we need?
• Where should these warehouses be located?
• What should the transportation flows be between plants and warehouses?
Inventory control
• Why are we holding inventory?
• Uncertainty in customer demand?
• Uncertainty in the supply process?
• How good is our forecasting method?
Distribution strategies
• Direct shipping to customers?
• Classical distribution in which inventory is held in warehouses and then shipped as
needed?
• Cross-docking in which transshipment points are used to take stock from suppliers’
deliveries and immediately distribute to point of usage?

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
Issues in Supply Chain Management
Supply chain integration and strategic partnering
• Should information be shared with supply chain partners?
• What information should be shared?
• With what partners should information be shared?
• What are the benefits to be gained?
Product design
• Should products be redesigned to reduce logistics costs?
• Should products be redesigned to reduce lead times?
• Would delayed differentiation be helpful?
Information technology and decision-support systems
§ What data should be shared (transferred)?
§ How should the data be analyzed and used?
§ What infrastructure is needed between supply chain members?
§ Should e-commerce play a role?
Customer value
• How is customer value created by the supply chain?
• What determines customer value?
• How do we measure it?

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Introduction to Supply chain and Logistic Management
Successful Supply Chains

Here is how a University of San Francisco study summarized Gartner World

Leader Apple‘s supply chain:

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
2018 World’s Top 10 Supply Chains

1. 6.

2. 7.

3. 8.

4. 9.

5. 10.

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© Dr. Saeed Gartner and Industry Week, 2018 Review
Introduction to Supply chain and Logistic Management
2019 World’s Top 10 Supply Chains

1. 6.

2. 7.

3. 8.

4. 9.

5. 10.

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© Dr. Saeed Gartner and Industry Week, 2018 Review
Introduction to Supply chain and Logistic Management
Successful Supply Chains

Please check out Gartner and Industry Week‘s Top 25 Supply Chains. Notice there
is a Top 25 plus a selection of Master Class companies who sit above the rest.

http://www.industryweek.com/supply-chain/top-25-supply-chains-2019

Exercise:
§ Take a closer look at Samsung and at H&M.

§ Which positives does the study highlight about the supply chains on these two
companies?

§ How have the negatives they have experienced impacted their respective
supply chains?

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Introduction to Supply chain and Logistic Management
Successful Supply Chains

Assignment 1:
§ Take a closer look at the supply chain of a company which interests you

§ Prepare a graphic or diagram showing an overview of the firm’s various supply

chain elements

§ Have your view ready to present to the group at the next meeting?

§ Two participants per group

§ 1 to 2 pages in word form

Until Here
§ It is an option to present during the next lecture (PPT file)

§ 10 marks (weightage ??)

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Introduction to Supply chain and Logistic Management
Supply Chain Performance Measures

§ Cost

- Total Supply Chain Cost is the sum of all supply chain costs for all products
processed through a supply chain during a given period

- Inventory Turnover is the ratio of the cost of goods sold to the value of
average inventory.

§ Customer Service

- Average Response Time is the sum of delays of ordering, processing, and

transportation between the time an order is placed at a customer zone and
the time the order arrives at the customer zone

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Introduction to Supply chain and Logistic Management
Inventory Turns

§ Excerpts from financial statements of Kmart and Wal-Mart

Kmart 1998 1999 2000 2001 2002

Inventory $6.367B $6.536B $6.350B $5.796B $4.825B
Tot.Revenue $33.674B $35.925B $37.028B $36.151B $30.762B
COGS $26.319B $28.161B $29.732B $29.853B $26.258B
Net Income $0.518B $0.364B ($0.268B) ($2.446B) ($3.219B)

Wal-Mart 1998 1999 2000 2001 2002

Inventory $16.497B $17.076B $19.793B $21.644B $22.749B
Tot.Revenue $117.958B $137.634B $165.013B $191.329B $217.799B
COGS $93.438B $108.725B $129.664B $150.255B $171.562B
Net Income $3.526B $4.430B $5.377B $6.295B $6.671B

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Source: Matching Supply with Demand: An Introduction to Operations
© Dr. Saeed Management, Cachon and Terwiesch
Introduction to Supply chain and Logistic Management
Inventory Turns

COGS
Inventory Turns=
Inventory
Inventory Turns for Kmart and Wal-Mart
1998 1999 2000 2001 2002
Kmart 4.15 4.34 4.68 5.14 5.45
Wal-Mart 5.70 6.40 6.63 7.01 7.60

• Inventory Turns is a common benchmark in retailing

• Inventory Turns≈10 for grocery retailers (Safeway, Kroger),
≈1.5 for jewelry (Tiffany), ≈ 4 department stores (JCPenny)

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Introduction to Supply chain and Logistic Management
Gateway and Apple

1. Why did Gateway choose not to carry any finished-product inventory at its retail
stores? Why did Apple choose to carry inventory at its stores?

2. Should a firm with an investment in retail stores carry any finished-goods inventory?
What are the characteristics of products that are most suitable to be carried in
finished-goods inventory? What characterizes products that are best manufactured to
order?

3. How does product variety affect the level of inventory a retail store must carry?

4. Is a direct selling supply chain without retail stores always less expensive than a supply
chain with retail stores?

5. What factors explain the success of Apple retail and the failure of Gateway country
stores?

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© Dr. Saeed
Introduction to Supply chain and Logistic Management
Zara

1. What advantage does Zara gain against the competition by having a very responsive
supply chain?

2. Why has Inditex chosen to have both in-house manufacturing and outsourced
manufacturing? Why has Inditex maintained manufacturing capacity in Europe even
though manufacturing in Asia is much cheaper?

3. Why does Zara source products with uncertain demand from local manufacturers and
products with predictable demand from Asian manufacturers?

4. What advantage does Zara gain from replenishing its stores multiple times a week
compared to a less frequent schedule? How does the frequency of replenishment
affect the design of its distribution system?

5. Do you think Zara’s responsive replenishment infrastructure is better suited for online
sales or retail sales?

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Introduction to Supply chain and Logistic Management
W.W. Grainger and McMaster-Carr
1. How many DCs should be built and where should they be located?

2. How should product stocking be managed at the DCs? Should all DCs carry all products?

3. What products should be carried in inventory and what products should be left with the supplier
to be shipped directly in response to a customer order?

4. What products should W.W. Grainger carry at a store?

5. How should markets be allocated to DCs in terms of order fulfillment? What should be done if an
order cannot be completely filled from a DC? Should there be specified backup locations? How
should they be selected?
6. How should replenishment of inventory be managed at the various stocking locations?

7. How should Web orders be handled relative to the existing business? Is it better to integrate the
Web business with the existing business or to set up separate distribution?

8. What transportation modes should be used for order fulfillment and stock replenishment?

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Introduction to Supply chain and Logistic Management
Toyota

1. Where should plants be located, what degree of flexibility should

each have, and what capacity should each have?

2. Should plants be able to produce for all markets?

3. How should markets be allocated to plants?

4. What kind of flexibility should be built into the distribution

system?

5. How should this flexible investment be valued?

6. What actions may be taken during product design to facilitate

this flexibility?
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© Dr. Saeed
Introduction to Supply chain and Logistic Management
Amazon.com

1. Why is Amazon building more warehouses as it grows? How many warehouses should
it have and where should they be located?

2. What advantages does selling books via the Internet provide over a traditional
bookstore? Are there any disadvantages to selling via the Internet?

3. Should Amazon stock every product it sells?

4. What advantage can bricks-and-mortar players derive from setting up an online

channel? How should they use the two channels to gain maximum advantage?

5. For what products does the online channel offer the greater advantage relative to retail
stores? What characterizes these products?

Until Here
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© Dr. Saeed