Key points to memorize

Session 9 – Jan 13, 2021

Coordination in a Supply Chain (cont.)

&
Dimensions of Logistics

Coordination in a Supply Chain (cont.)

Continuous Replenishment Program (CRP)

It is a method of replenishing products in real time as needed only for the sold amount.

CRP aims to match product flow with consumer demand.

The goals of CRP are to:

‚. increase inventory turns
‚. reduce inventory levels
‚. decrease stock-outs
‚. improve customer service levels
‚. boost warehouse efficiency
Vendor Managed Inventory (VMI)
With Vendor Managed Inventory (VMI) it is the supplier, not the customer, who decides when and
how much of the customer’s stock is replenished.

VMI focuses on assuring that products are replenished to stock in the most efficient way, without
manual information such as orders having to be transferred between customer and supplier. Instead,
Automatic electronic messages are used to
keep track of the current stock situation and planned sales forecasts, so it can be determined when it is
time to refill the stock and avoid stock-outs.

The objectives of VMI are to:

‚. increase in-stock inventory
‚. increase sales
‚. improve customer service
‚. reduce overall inventory in the supply chain
‚. stabilize vendor’s production

Collaborative Planning, Forecasting and Replenishment (CPFR)

The CPFR reference model provides a framework for planning, forecasting and replenishment process.
A buyer and a seller work as collaboration partners to satisfy the customer demand which is at the
centre of the model.

 CPFR comprises of four main collaboration activities:

‚. Strategy and planning: establishing the ground rules for the collaborative relationship and developing
event plans.

‚. Demand and supply management: estimation of consumer demand and order and shipment
requirements over the planning horizon

‚. Execution: orders and shipments are placed and delivered, products are received and stocked, sales
transactions are recorded and payments are made

‚. Analysis: planning and execution are monitored, results are aggregated and key information is shared
between the partners and plans and are adjusted for improving results
Dimensions of Logistics

Logistics refers to how resources are handled and moved along the Supply Chain.

In other words, Logistics refers to the overall process of managing how resources are
acquired(procured), stored, and transported to their final destination.

Effective logistics system contributes immensely to the achievements of the business and marketing
objectives of a firm.

Logistics brings down the cost of carrying inventory, material handling, transportation and other related
activities of distribution.

An efficient system of physical distribution/logistics has a great potential for improving customer
service.

Macro and Micro Dimension

The dimensions of logistics are categorized as:
• Macro dimension
• Micro dimension

A. Macro Dimension
The macro dimension of logistics are categorized as value added role and economic impacts.
 Value-added role of logistics
The value-added role of logistics includes utilities that are also referred to as the seven ‘R’s
namely, Right product, Right quantity, Right condition, Right place, Right time, Right customer,
and Right cost.

 Economic impacts of logistics

The economic impacts of logistics include the economic development and specialization, variety
of goods, prices and land values.