OBS 210: Chapter 1 – Intro to logistics & supply chain management:

Class notes:
 Logistics management = understanding the process between point of origin for a product (raw
material) to the final destination (customer) and how to make it more efficient and effective.
 Types of logistics:
- Military
- Engineering
- Business
- Product
- Reverse
- Construction
- City
- Humanitarian

 Supply chain management = Everything involved in sourcing, procurement, conversion, and all
logistics management. As well as coordination and collaboration between Org. and 3rd party service
providers (suppliers, customers, etc…)

 Megatrends = major pattern, trend within the macroenvironment

- Globalisation
- Empowered customers
- Global economic shift in power
- Demographic shift (population trends and changes)
- Rise in tech.
- COVID-19
- Climate change
- Resource scarcity

 Third-Party logistics (3PL):

- Supplier = 1st party
- Customer = 2nd party
- Outside Org. performing certain roles or responsibilities within the logistics process = 3rd party
[Diagrams on slides – read over]
 Fourth-Party logistics (4PL)
- When an Org. outsources their entire logistics structure to a 3rd party.
 Primary activities:
- Inbound logistics:
o Receiving inputs
o Storing inputs
o Listing inputs
o Grouping inputs
o Material handling
o Warehousing
o Inven. Management
o Transportation schedules
o Managing suppliers
- Operations:
o Machining
 o Packaging
o Assembly
o Maintenance of equipment
o Testing
o Operational management
- Outbound logistics:
o Order processing
o Warehousing
o Scheduling transportation
o Distribution management
- Marketing and sales:
o Advertising
o Promotion Ways in which an Org. will
o Selling convince customers to
o Pricing purchase their product of
o Channel selection service.
o Retail management
- Service:
o Installation
o Training Maintaining the
o Servicing product after sale
o Spare parts provided
o Upgrading
 Secondary activities:
- Procurement:
o Raw materials
o Servicing
o Supplies
o Negotiations with suppliers
o Building leases
- Tech. development:
o Process & pr0duct improvement
o (re) design
o Create new and improved services and products
- HR management:
o Recruitment
o Education
o Compensation
o Employee retention
- Infrastructure:
o General management
o Planning
o Finance
o Accounting
o Public affairs
o Quality management
 OBS 210: Chapter 2 – Customer service:
Class notes:
“CS” = Customer service
 Customer preference can determine what competitors offer
 Differentiation and uniqueness of what is being offered is important
 Logistics done right provides products at the right place at the right time leading to satisfied
customers

 Who are the customers?

- Party that exchanges their money for an org. product or service
- All parties involved in the logistics process should be treated equally in terms of accessibility and
timely delivery.
[Elements of customer service in slides]

Pre-transaction Transaction Post-transaction

elements: elements: elements:

 Statement of policy = Guide  Stockout level = customer  Installation, warranties,

to how org. approaches CS.
 Customer
acknowledgement = Let
customer know they are
heard and important.
 Org. Structure = Report,
authority, and responsibility
structure.
 Capacity flexibility =
Prioritise customer needs
and plan for unexpected
events.
 Technical service = Support
provided to customers
before sale and to
understand technical aspects
of product.
relationship should be and repairs.
prioritised to be good. If item  Product tracking
is sold out, suitable solution  Customer follow-ups
should be done.  Product packaging =
 Backorder ability = product is protection, enhances
out of stock, but dates are perception and ability to
available for when item will be return if needed.
next available.  Product returns.
 Order cycle time = time
between customer placing
order and receiving service or
product.
 Trans-shipment = products
shipped to various locations to
prevent out-of-stock.
 System accuracy = info
received by customer regarding
an order should be accurate.
 Order convenience = how easy
is it for customer to place
  Elements of customer service:
- Time
- Communication
- Dependability
- Convenience
[Examples in slides]
 Dimensions of CS:
- Inven. Availability = can not get product or service if it is unavailable
- Operational performance = Speed (cycle time), Consistency (achieve certain service level),
Flexibility (adapt to customer specific needs), Recovery (prepare for unexpected events and have
solutions)
- Service reliability = Ability to reassure customers that their needs and expectations will be met.
 Four methods:
1. Customer strategy (based on stockout) = Substitute chosen -> manufacturer effected, Customer
wants that product -> retailer effected
2. Customer/Revenue trade-offs
3. Customer- product contribution
4. CS audit

 CS audit:
1. External CS audit:
o Det. Customer expectations
o Det. Customers key determinants to their decision
o Value hierarchy
o Performance rating of Org. compared to competitors
2. Internal CS audit:
o What is org. doing in terms of CS
o Det. Customer performance standard on org. and weather these standards are being
met.
3. Development of potential solutions:
o Compare first 2 audits to see shortcomings or are exceeding customer expectations
o Develop solutions for shortcomings and improve performance levels
4. Establishment of CS levels:
o System to monitor and measure performance:
- Turnaround times = time taken for company to respond to customer
- # of customer complaints
- Queuing times
- Shipment time ratio
- # of items in back order = item not available now but will be available at a later date
- % of product availability
- Order cycle time = time between customer ordering product and customer receiving
product
 OBS 210: Chapter 4 – Supply Management:
Class notes:
“SM” – Supply Management

 Supply management related concepts:

o Purchasing -> Buying products/services from other firms legally
- Supplier identification & selection
- Buying, negotiating, and contracting
- Supply market research
- Supplier measurement & improvement
- Purchasing systems development
o Sourcing -> Wider concept of purchasing
- Identifying
- Evaluating
- Selecting Supplier
- Managing s
o Supply management:
- Identification
Forms part of
- Acquisition (Acquiring of something -> Skill, object, habit etc…)
Strategic
- Positioning
Objective
- Management of resources
[Figure 4.1 in textbook
 Role of Supply management in Logistics & Supply chain management:
o SM role in increasing sales:
- Faster to market
- Improve quality
- Pricing flexibility
- Innovation
- Enhance customer satisfaction
o SM role in reducing total costs:
- Reducing acquisition costs
- Better product design
- Reduce quality & downtime costs
- Less risk costs
- Shorter cycle times
- Lower overall costs of supply chain
- Part-ownership costs
[Strategic sourcing process – Slides & textbook]

1. Conduct a spend analysis:

o Det. What the firm is spending its money on
o Whom are the suppliers that you are spending money on
o Internal departments spending
2. Analyse the supply market:
o
 OBS 210: Chapter 5 – Inventory Management:
 Def. Inven: Raw material
o Raw materials = stored for use later on to create finished products. [oil -> gas -> chemicals]
o Work-in-progress = items stored to be used within the next step of the manufacturing process
o Parts/equipment = Stored to prepare for maintenance, repair & operations tasks
o Finished items = Kept as stock for customers to meet their demands
 Common types of inventory:
1) Cycle stock:
- Section of Inven. Meant to for recuring orders
- Manufacturing
- Sales
2) Safety stock:
- Inven. Used as a cushion to absorb impact of uncertainties in demand or supply.

3) Anticipation stock:
- Stock of Inven. at higher quantities than normal due to anticipated future events such as;
strikes, price increases or upcoming maintenance.

4) Seasonal stock:
- Stock that is only kept for certain times of the year. (Winter = no swimsuits will be sold) -
> [Look out for diff. between seasonal stock & anticipation stock]

5) Promotional stock:
- Inven. of items on promotion will be of much higher amount than that of Inven. that is not
on promotion. (promotion = High demand -> more stock is needed)
 6) Deadstock:
- Stock company can no longer use to full capacity
- Such as; Expired, outdated, Recall, etc…

7) Non-conformance stock:
- Similar to deadstock, but instead of it being almost useless to Org. it can be used by other
parties.

 Purpose of holding Inventory:

1. Creating a cushion for uncertainties:
- 3 major kinds:
 Uncertainty in demand = Can not anticipate or determine demand
 Uncertainty in supply = Can not determine when stock from supplier will
be delivered.
 Uncertainty in yield = How much is needed of one material is
undeterminable.
2. Holding batch stock:
3. Providing for seasonal/anticipation stock:
4. Providing for strategic stock:
5. Enabling smooth production processes:
6. Compliance with legal/contract requirements:
- Guarantee stock
7. Overcoming supply disappointments:
8. Compensating for shutdown in production:

 Inven. holding costs:

- Capital cost = funds used to purchase inventory (opportunity cost -> could have used
funds elsewhere)
- Cost of obsolescence (outdated) = cost of items that become outdated and can not be sold
- Handling & storage costs =
 Mortgage on or rent of warehouse
 Warehouse workers salaries
 Equipment used to handle Inven.
[Table 5.1 – Holding costs of diff. wholesalers -> In slides & book]

 Demand & Inventory:

- Independent demand = Demand levels equal to customer requirements
- Dependant demand = demand for item A is dependant on demand of item B.
[Reorder level = Safety stock + Demand during lead time]

 Forecasting:
 - Qualitative forecasting:
 Panel consensus method -> 5 phase process

Phase one: Phase two: Phase three: Phase four: Phase five:

Large number of
participants used to
develop a demand
forecast.
Taking all the data Creating 3 or 4 Supply chain Selection of best
collected from phase independent management experts forecast by top-
one and getting rid of panels to take what’s left and management team.
unnecessary data to a analyse data to further decrease the
more manageable choose between amount of forecasts to
number. only a few most accurate based off
forecasts (most of their knowledge and
accurate) of experience.
future demands.

 Delphi method:
o Makes use of panel selection process similar to that of panel consensus
method (PCM) but instead uses one panel of experts rather than multiple
like PCM.
[Read about in book – pg. 111]
- Quantitative forecasting:
 Simple average -> pg.112 July forecast = 343
 Year – to – date -> pg.112 July forecast = 308
 Moving average -> pg.112 July forecast = 352
 Weighted average -> pg.112 July forecast = 346 -> {forecast & Actual % given}

Cumulative % from 0 – 74.99 = A

Cumulative % from 75 – 94.99 = B

 Value of inventory item: Cumulative % from 95 – 100 = C

[Table 5.9 is initial table, Table 5.10 is table in descending (high to low) order -> pg.117]
 Economic order quantity:
- Aim = keep Inven. costs minimum
- Ordering costs (OC) = cost of placing order
- Holding costs (HC) = cost of keeping item in Inven. { HC = Value of item (V) x Holding
% (H) }

Formula: -> Diff. from textbook

[Go over question 1 in slides]