Supply Chain Management

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
MANAGEMENT
SUPPLY CHAIN
DEFINING SUPPLY CHAIN
The Supply Chain Council uses the definition: “The

supply chain—a term increasingly used by logistics
professionals—encompasses every effort involved in
producing and delivering a final product, from the

supplier’s supplier to the customer’s customer. Four
basic processes—plan, source, make, deliver—broadly
define these efforts, which include managing supply and
demand, sourcing raw materials and parts,
manufacturing and assembly, warehousing and inventory
tracking, order entry and order management,
distribution across all channels, and delivery to the
customer.”
SUPPLY CHAIN MANAGEMENT
 Supply chain management is “an integrating philosophy to

manage the total flow of a distribution channel from
supplier to ultimate customer”
 “Supply Chain Management encompasses the planning and

management of all activities involved in sourcing and
procurement, conversion and all Logistics Management
activities. Importantly it also includes coordination and
collaboration with channel partners, which can be suppliers,
intermediaries, third party service providers and customers.
In essence, Supply Chain Management integrates supply
and demand management within and across companies”.
RETAIL SUPPLY CHAIN
THE OBJECTIVES OF A
THE COMPONENTS OF A
SUPPLY CHAIN
SUPPLY CHAIN
MANAGEMENT

LOGISTIC DISTRIBUTION WAREHOUSING
A SIMPLY SUPPLY CHAIN
THE NEED FOR
SUPPLY CHAIN MANAGEMENT
 To cut down on cost
 Increased national and international
competition

 Increasing pressures on the profit margins
earned.
 Advances in technology
A SUPPLY CHAIN IN TODAY’S WORLD
APPAREL SECTOR RETAIL
CHARACTERISTICS
SHORT LIFE HIGH

CYCLE VOLATILITY

LOW HIGH IMPULSE
PREDICTABILITY PURCHASE
LEAD TIMES
TO COMPETE SUCCESSFULLY IN RETAIL BUSINESS
 Time-to-market: The time taken by an organisation, to recognise

that an opportunity for a product or service exists in the market
and the time that it takes to actually bring the product into the
market.

 Time-to-serve: Retailers had to place orders on suppliers for
products many months in advance. This gives rise to the risk of
obsolescence and high stock outs as well as increased cost of
inventory. The lead-time may be long, not necessarily due to the
process of manufacturing and shipping and transit period but due
to excessive documentation at each stage.
 Time-to-react: This is the time span taken by the company to react
to changes in demand or changes in the market environment.
SUPPLY CHAIN INTEGRATION
 The aim of each department (demand

management, Resource management and supply
management) different and while they may
individually excel, the organisation as a whole

would benefit only when they share a common
approach and information.
 This creates the need for an integrated supply
chain where information is shared between
departments, suppliers and vendors.
VENDOR MANAGED
INVENTORY (VMI)
 In Vendor Managed Inventory, the vendor/supplier
undertake the inventory management of the stores. This is
also called QRIS or the Quick Response Inventory System.
 It is the supplier who takes the inventory replenishment

decisions for the customer.
 For a successful VMI process to function, a great amount
of information sharing is required and reliability on data is
required.
 For a successful system to operate, it is necessary that all
parties involved in the process communicate their
expectations well.
COLLABORATIVE PLANNING
FORECASTING AND REPLENISHMENT
(CPFR)
 CPFR is a business practice that reduces

inventory costs while improving product

availability across the supply chain. The
process begins with an agreement between
the trading partners to share information with
each other and to collaborate on planning,
with the ultimate goal of delivering products
based on true market demand.
COLLABORATIVE PLANNING
FORECASTING AND REPLENISHMENT
(CPFR)
 CPFR aims at aligning the forecasts of a retailer and a

vendor and thereby, offering an opportunity to
increase in-stock positions, gross margins and sales,

while reducing inventory investments and stock-outs.
 CPFR is based on managing forecasts and inventory
levels on an exception basis, alerting participating
organisations to potential problems, while allowing
them to concentrate on further developing their
businesses.
RETAIL LOGISTICS
 The Council of Logistics Management defines

logistics as “that part of the supply chain process
that plans, implements, and controls the efficient,
effective forward and reverse flow and storage of

goods, services, and related information between
the point of origin and the point of consumption in
order to meet customers’ requirements.”
 The main objective of logistics management is to
reduce inventory-holding costs and improve profits.
RETAIL LOGISTICS
Retail logistics is the organised process of managing

the flow of merchandise from the source of supply to
the customer. Thus it incorporates the following
functions:
 Physically moving the goods from one location to

another, where location may be a distribution
centre, warehouse, store or manufacturer.
 Stocking the goods at the locations needed in the
quantities needed.
 The management of this entire process
EMERGING CONCEPTS IN LOGISTICS
THIRD FOURTH
PARTY PARTY
LOGISTIC LOGISTIC

CROSS
REVERSE
DOCKIN
LOGISTIC
G
THIRD PARTY LOGISTIC
 A third party logistics provider can be defined as the
supply of logistics related operations between traders by
an independent organisation.
 A third party logistics provider (3PL) may provide the

logistics services to companies for part or sometimes all
of their supply chain management function.
 Third party logistics providers typically specialize in
integrated warehousing and transportation services that
can be scaled and customized to customer’s needs based
on market conditions and the demands and delivery
service requirements for their products and materials.
FOURTH PARTY LOGISTIC
 It refers to the evolution in logistics from

suppliers focused on warehousing and
transportation (third-party logistics providers) to
suppliers offering a more integrated solution.

 It include supply chain management and
solutions, change management capabilities, and
value-added services in their offering
CROSS DOCKING
 Cross docking is a system in which the vendors

ship merchandise to a distribution centre pre-
packed in quantities required by each store.

REVERSE LOGISTICS
 The reverse logistics executive council defines

reverse logistics as “the process of planning,
implementing, and controlling the efficient, cost
effective flow of raw materials, in-process inventory,

finished goods and related information from the
point of consumption to the point of origin for the
purpose of recapturing value or proper disposal”.
REVERSE LOGISTICS
 Reverse Logistics is a broad term referring to the
logistics management and disposing of hazardous or
non-hazardous waste from packaging and products. It
includes reverse distribution which causes goods and
information to flow in the opposite direction of

normal logistics activities.”
 “Reverse logistic often used to refer to the role of
logistics in recycling, waste disposal, and
management of hazardous materials; a broader
perspective includes all relating to logistics activities
carried out in source reduction, recycling,
substitution, reuse of materials and disposal.”

Supply Chain Management

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Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

The Supply Chain Council uses the definition: “The

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.