Logistics and Supply Chain

Management

Presentation at IIT Chennai

Logistics &Supply Chain Management

Recap on Definitions
Importance of Supply Chain in todays
environment
Integrated Supply Chain Operations a
few examples
 Definition of a Supply Chain

The different firms involved in creating and

delivering a product or a service to customers.

The entire link between suppliers,

manufacturers, distributors, retailers and
customers.
Functional Definition of a Supply
Chain
The processes from the initial raw
materials to the ultimate
consumption of the finished product
linking across suppliers and users.

The functions within and outside a

company that enable the value chain
to make products and provide
services to the customer.
Flow within Supply Chains
Material Flow

Financial Flow

Supplier Mfg. Retailer Consumer

Supplier Wholesaler Retailer

Information Flow
 Activities in a Supply Chain

Plan
Make
Buy
Move
Store
Sell
Return
 Supply Chain Decisions

Location
Production
Sourcing
Inventory
Transportation
Pricing
Importance of Supply Chain in
todays environment

The Last Frontier of

Competition
Short Product Life Cycles
Heightened Expectations
Integrated Supply Chain Operations
Examples

Inbound
Outbound
Event Management
 An Auto OEM

Assignment
Consolidation from south bound vendors for
supplying to the Jamshedpur plant

Aim
To reduce the inventory levels at the plant
warehouse
 Issues

Excise

Plan for optimal inventory at the

plant and in-transit

Co-ordination with vendors for

delivering as per planned
inventory

Consolidation and transportation

 Significant features

Inventory planning
Optimum batch size
Scheduled daily pick up from
vendors
One container load despatched
daily: constituting 4 days of
inventory
 Significant features

Set a record transit time of 4 days

from Chennai to Jamshedpur

Dramatic reduction in inventory

levels

Delivery directly to assembly unit

 Out Bound Distribution
Company: A Large FMCG Manufacturer

Segment: Body Care/Hair Care/Laundry

Manufacturing Locations:
Goa
Bhopal
Hyderabad
Trichy
 Out Bound Distribution

Distribution : All Over India

C&F Operations : All State Capitals

and Major Trading
Centres

Wholesale : Over 100

Distributors :
 Out Bound Distribution

Distribution: All Over India

C&F Operations: All State Capitals and

Major Trading Centres
Redistribution
Stockists: Over 200
 Pattern of Distribution

Factory CFA : Stock Transfer

CFA Wholesaler: First Sale

Wholesaler Retailer: Second Sale

Retailer Customer: Final Sale

 Type of Movement

Factory CFA : Full Truck Loads 9 T HCVs

CFA Wholesaler: HCVs/ LCVs

Wholesaler - Retailer : Milk Run/Smaller Vans

Retailer Customer: Over the Counter

Door Delivery
Common Issues - Primary Movement
Minimum Quantity of Movement to CFAs
was a truck load. Hence inventory holding
at the CFA was always a multiple of a
truck load.

Truck availability between Specific Factory

and CFA was a constraint.

Huge effort in transport administration

over 20 transporters.
Common Issues- Secondary
Movement

Dispatch to the wholesalers was also

a unit load, there were requirements
for topping up leading to space
issues.
80% of the retail sales took place
with the top 50 wholesalers.
However, management time was
spent on all wholesalers equally.
Common Issues- Secondary
Movement
Manufacturer wanted fresh stocks at
all retail locations.

Given varied retail off take different

age stocks coexisted.
 Common Issues- General

Inventory was over 40 days in the

Chain. The Company wanted to
drastically bring down the same.

Other supply chain initiatives like

transit time improvements and
consolidation of transporters also
became imperative
 New Dispensation

Rationalization of Wholesale Stockists

Aim was to have only one stockist

per State or for a desired turnover.
Many existing stockists became
sub-stockists .
Total number of stockists after the
reorganization: around 45.
 New Dispensation

Creation of Hub/Distribution Centres

Two hubs created in Bhopal and in Hyderabad to

service northern and southern markets.
Except in rare instances, all movements from
Factories were to Hubs only.
All CFAs received stocks from Hubs only
 New Dispensation - IT

Factories/Hubs/CFAs & Wholesalers

completely connected on ERP.

Exact Replenishment Model followed.

 Results:

Hubs (Distribution Centres):

Increased Inventory
Transportation became easier and
regular.
 Results:

Spokes (CFAs):

Reduced Inventory because of mixed

loads.

100% Replenishment ensured very

low levels of obsolescence and very
high levels of fresh stocks at the
stockist end.
 Results:

Inventory across the Chain:

Reduced to 17 days.
 Event Logistics

World Sport Nimbus

Bringing cricket to
Indian Homes
 Significant Features

Extensive Planning
Large number of Pre Approvals
Dynamic Decision Making.
 Results

No / low management time

involved

30% saving on cost

Improved service levels

Evolution of Supply Chain
Traditional 1980s

Supplier
Purchase Accounts

Customer
Production Sales
 Evolution of Supply Chain
Traditional 1980s

Linear
Single Organisation
Silo Mindset
Process Driven
 Evolution of Supply Chain
Traditional 1980s
Consequences:

Discrete Planning even internally.

Disconnect between Production,
Purchase and Sales.
Limited Product Range.
Huge Safety Stocks.
Delayed Response.
Inadequate Information Base.
 Evolution of Supply Chain
- ERP Enabled 1990s

Manufacturer
Supplier Customer
Purchase Accounts

Production Sales
Evolution of Supply Chain
- ERP Enabled 1990s

Non Linear
Single Organisation
Internally Focused
Flexible
Information Driven
Evolution of Supply Chain
- ERP Enabled 1990s
Consequences:

Integrated Planning within

Organisation.
Larger Product Range.
Very large Information Base
Evaluation of Supply Chain
Performance
Sharper Norms for Inventory
Supply Chain Todays Challenges

Competitive Markets.
Pricing Pressures
Low Product Differentiation.
Demanding and intolerant customers.
Globalisation.
What Should a Supply Chain deliver

ProductAvailability
Minimum Total Supply Chain Costs
Optimum Inventory
Current Trends and The Road Ahead

Information Integration

Manufacturer
Supplier Customer
Current Trends and The Road Ahead

Extended Supply Chain

Suppliers Supplier Manufacture Customer Customer

Supplier r s
Customer
Current Trends and The Road
Ahead

Non Linear
Multiple Organisations
Externally Focused
Highly Flexible
Fully Information Driven
Customer Responsive
Current Trends and The Road Ahead

Impact:

Seamless Planning across

Organisations
Fully Focused on Product Availability
Unlimited Product Range
Inventory replaced by Information
Fully Information driven
 The Road Ahead

Look Beyond the Organisation

The Extended Enterprise

Optimisation across organisations
Transparency
 The Road Ahead

Visibility Across the Chain

End to End Visibility

Real Time or Almost Real Time
Dynamic Exception Management
 The Road Ahead

Outsourcing

Transportation
Contract Manufacturing
Warehousing
In-plant Logistics
Consolidation
 The Road Ahead

Integration of Service
Providers:

End to End Solutions

Geographical Integration

Administrative Convenience
Metrics Management
Investment in Infrastructure by Service
Providers
 The Road Ahead

Information Integration:

Biggest Thrust Area

Strategic
Transactional
Connectivity
 The Road Ahead

E-Procurement

Cost Savings
Overhead Savings
Speed
 The Road Ahead

Reverse Logistics

Important Competitive Advantage

Eco-friendly requirement
Margin Management
 The Road Ahead

Hand Held Devices

Tracking
Data Integrity
Ease of Verification
Expiry and Batch Management
 The Road Ahead

Deferred Production or Made to

Order

Obsolescence Management
Enlarged Production Range
 International Logistics

Movement of products across

countries
Mainly by Sea and Air
In some places by Road as well
Multi Modal movement also in
vogue
International Logistics Features

Usually involve large distances

Additional documentation
Governmental Regulations on duties
and charges
Large infrastructure requirements
Large intermediation
International Logistics - Trends

Integration of Operations
End to End Management
Time Definite Deliveries
Tracking & Visibility
Standardization
International Logistics - Issues

Commoditisation
Back Haul Management
Differential Infrastructure