INTERNATIONAL MARKETING
SUPPLY CHAIN MANAGEMENT
HIGHER NATIONAL DIPLOMA
Supply Chain Logistics: An
Introduction : DL5E 34 / VSC 116
EĞİTİMCİ HAKKINDA BİLGİ
ÖMER PESEN
 Darüşşafaka Lisesi mezunu
 Makine Mühendisi
 Tekstil & Pazarlama yüksek lisans –
Bradford Üniversitesi / UK
 29 yıldır dış ticaret ile uğraşıyorum
 22 yaşında bir firma sahibiyim – ATCO
Dış Ticaret Ltd. Şti.
 12 yıldır eğitim veriyorum
 İzmir Ekonomi Üniversitesi’nde öğretim
görevlisiyim
 Cep : 0542 533 15 35
 E-mail : opesen@superonline.com
DURING THE COURSE ……
 1xMid-term Exam  20%
 ( Questions + Cases )
 Class / Homework Assignments  20%
 Single or Group work – evaluated
as quizes ( Q1,Q2,Q3,Q4,....)
 1xPresentation  30%
 Sectoral Project – Field work
 Final Exam  30%
 ( Questions + Cases )
DURING THE COURSE ……
 Attendance is very very important for
you . We will learn in the class . You
will be responsible from everything
discussed and said in the class .
 No talking in the class .
 Anybody wants to talk with friends can
do this without any problems outside .
I need people who wants to learn
something from a businessman .
 No attendance in class work , no
evaluation and no second chance .
WHAT IS THE COURSE
ABOUT ?
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Supply Chain Logistics
Logistics and Service Operations
Logistics and Customer Scheduling
Materials Management in Services
Supply Chain Management
Supply Chain Relationships
Logistics and Customer Needs
Logistics and Operations Management
The Marketing Mix
Customer Relationship Management
Logistics: The Value Chain
Logistics and Cost Classification
Distribution Logistics
Warehouse Operation
Reverse Logistics
INTRODUCTION
 This unit Supply Chain Logistics: An
Introduction will assist you to become
familiar with the basic logistics’ concept and
have an understanding of how they are
used in the management of the supply
chain.
 You should also be able to demonstrate the
role played by the customer in organising
the logistics to meet customer needs as
well as the importance of managing the
supply chain operations to provide value to
the organisation.
INTRODUCTION
There are three outcomes
for this unit:
 Identify the competitive advantages that
can be obtained through the application of
logistics.
 Describe the customer role in determining
how the logistics are organized to meet the
customer needs.
 Explain how logistic costs can be managed
to provide value to the stakeholders
HOW TO FOLLOW .....
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Sections 1- 6
This first part of the Unit should enable you
to describe the competitive advantages that
can be achieved through the application of
Logistics. This part will cover:
Definition, structure and purpose of a supply
chain
Relationships in a supply chain
Customer needs
Definition of logistics
Performance objectives of the supply chain
Competitiveness of the supply chain
Logistics strategy
HOW TO FOLLOW .....
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Sections 7- 10
The second part of the Unit should enable
you to describe how the customer has a
strong influence on the design and
organisation of the Logistics process to
meet their needs. This part will cover:
Customer service levels
Marketing mix
Order winners and qualifiers
Logistics contribution to marketing
Customer relationship management
Customer retention
HOW TO FOLLOW .....
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Sections 11-15
The third part of the Unit should enable
you to explain the management and
control of Logistics costs in order to
provide value to the stakeholders. These
sections will cover:
Return on assets (current assets, fixed
assets, sales, profit margin, price)
Value added
Standard costing
Activity based costing
Supply
Chain
Logistics
Logistics and Supply Chain
Management: Typical Definitions
Supply Chain Management
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 co-ordination 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.
Logistics and Supply Chain
Management: Typical Definitions
Supply Chain Management:
Boundaries & Relationships
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Supply Chain Management is an integrating function with
primary responsibility for linking major business functions
and business processes within and across companies into a
cohesive and high-performing business model.
It includes all of the Logistics Management activities, as well
as manufacturing operations.
In addition it drives co-ordination of processes & activities
with and across:
Marketing
Sales
Product design
Finance
Information technology.
Logistics and Supply Chain
Management: Typical Definitions
Logistics Management
Logistics Management is that part of Supply
Chain Management 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.
Logistics and Supply Chain
Management: Typical Definitions
Logistics Management: Boundaries
& Relationships
Logistics Management activities typically
include:
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inbound and outbound transportation management
fleet management
warehousing
materials handling
order fulfilment
logistics network design
inventory management
supply/demand planning
management of third party logistics services providers.
Logistics and Supply Chain
Management: Typical Definitions
 To varying degrees, the logistics function also includes
sourcing and procurement, production planning and
scheduling, packaging and assembly, and customer
service.
 It is involved in all levels of planning and execution:
strategic, operational and tactical.
 Logistics Management is an integrating function,
which co-ordinates and optimises all logistics
activities, as well as integrating logistics activities with
other functions including marketing, sales
manufacturing, finance and information technology.
 So in essence Logistics presents a big challenge to
organisations, but done right a source of competitive
advantage.
Logistics and Supply Chain
Management: Typical Definitions
Example
A large supermarket chain continues to grow in an
intensely competitive market.
Why is this the case? This organisation describes its
core purpose as being to create value for customers
to earn their lifetime loyalty.
To do this the organisation must:
 understand its customer needs and how they can best
be served
 ensure their products are recognised by its customers
as representing outstanding value for money
 ensure that the products, required by its customers,
are available on the shelf at each of its stores at all
times, day and night.
Logistics and Supply Chain
Management: Typical Definitions
The task of planning and controlling the
purchase and distribution of this
organisation’s huge product range from
suppliers to stores falls to Logistics.
Logistics is the task of providing:
 Material Flow of the physical goods from
suppliers through the distribution centres to
stores
 Information Flow of the demand data
from the consumer back to purchasing and
to suppliers so that material flow can be
accurately planned and controlled.
Logistics and Supply Chain
Management: Typical Definitions
 The logistics task of managing material
flow and information flow is a key part
of the overall task of supply chain
management.
 Supply chain management is
concerned with managing the entire
process of raw material supply: the
manufacturing, packaging and
distribution to the end customer.
 This particular supermarket chain
supply chain structure comprises three
main functions:
Logistics and Supply Chain
Management: Typical Definitions
 Distribution is the operations and support task of
managing the distribution centres (DC’s), and the
distribution of products from the DC’s to the
associated stores
 Network and Capacity Planning is the task of
planning and implementing sufficient capacity in the
supply chain to ensure that the right products can be
procured in the right quantities now and in the future
 Supply Chain Development is the task of improving
the overall supply chain so that its processes are
stable and in control, that it is efficient, and that it is
correctly structured to meet the logistics needs of
material flow and information flow.
Logistics and Supply Chain
Management: Typical Definitions
 So we can see logistics plays a
large part in the overall supply
chain challenge acting as a key
enabler.
 The alignment of the various
partners in a supply chain is
critical in order to deliver
superior value to the end
customer at less cost to the
supply chain as a whole.
Logistics and Supply Chain
Management: Typical Definitions
Management Strategy
The focus of management strategy for the
supply chain as a whole is on alignment
between supply chain members, of which
the end customer is the key one. As
Gattorna (1998) puts it:
Materials and finished products only flow
through the supply chain because of
consumer behaviour at the end of the
[chain].
Logistics and Supply Chain
Management: Typical Definitions
 The proper management, of material
flow and information flow, along the
supply chain is critical in influencing
the consumer satisfaction with the end
product.
 Late or wrong delivery, or missing bits
from a product, can put the whole
supply chain at risk from competitors
who can perform the logistics task
better.
Logistics and Supply Chain
Management: Typical Definitions
If we go back to our example we can see
the large supermarket chain is in no doubt
about the opportunities here. A
breakdown of costs in their UK supply
chain is as follows:
Supplier delivery to distribution centre (DC)
DC operations and deliver to store
Store replenishment
Supplier replenishment systems
18%
28%
46%
8%
Logistics and Supply Chain
Management: Typical Definitions
 Nearly half of the supply chain costs are
incurred in-store.
 In order to reduce these in-store costs, they
have realised that the solution is to spend
more upstream and downstream to secure
viable trade-offs in store replenishment.
 In simple terms if a product is not available
on the shelf, then the sale is lost.
 By aligning external manufacturing and
distribution processes with its own, they
seek to deliver superior value to the
consumer at less cost to the supply chain as
a whole.
Logistics and Supply Chain
Management: Typical Definitions
Material Flow
The aim within a supply chain must be to
keep materials flowing from source to end
customer in a timely and regulated manner.
Supply Chains can be complex with many
organisations involved, therefore it is
essential that the material flow be properly
managed as a process.
This will help prevent local build-ups of
inventory and material shortages at points
in the chain.
Logistics and Supply Chain
Management: Typical Definitions
 A company that produces motorcars,
for example, will have thousands of
components and sub-assemblies
distributed through the supply chain,
at any point in time.
 Yet these must be co-ordinated to
come together for final assembly in
order to ultimately deliver a gleaming
car to the end consumer.
Figure1: Simple example of a
Supply Chain
Figure1: Simple example of a
Supply Chain
 Figure 1, above illustrates in simple terms
the supply chain and its lower level suppliers.
 In real terms for a motorcar it is probably
much larger which in turn introduces
complexity.
 A key challenge is managing this complexity
through the effective co-ordination of the
different suppliers to deliver material on time
to the next step in the chain.
 A key enabler to reducing the complexity is
the effective management of information
flow between the various tiers of suppliers.
Logistics and Supply Chain
Management: Typical Definitions
Information flow
Synchronising material flow and movement
however is only part of the equation.
Another fundamental requirement is the
timely and accurate flow of data and
information down and across the various
levels of the supply chain.
Ultimately it is the demand of the end
customer that triggers the supply chain to
respond.
Logistics and Supply Chain
Management: Typical Definitions
By sharing the end-customer demand
information across the supply chain, we
create a demand chain, directed at providing
enhanced customer value.
Information technology enables the rapid
sharing of demand and supply data at
increasing levels of detail and sophistication.
The aim is to integrate such demand and
supply data so that an increasingly accurate
picture is obtained about the nature of
business processes, markets and consumers.
Such integration provides increasing
competitive advantage.
Logistics and Supply Chain
Management: Typical Definitions
 The greatest opportunities for
meeting demand in the marketplace
with a maximum of dependability and
a minimum of inventory come from
implementing such integration across
the supply chain.
 In today’s integrated world
organisations cannot become ‘world
class’ by themselves.
Let us look again at the motorcar
example to see how this is applied.
Figure 2: Example of a Demand Chain
Logistics and Supply Chain
Management: Typical Definitions
 The data and information is often
referred to as the glue that binds
the supply chain processes
together.
Competing through Logistics
 Organisations of today have to be adept at managing
a number of goals and objectives to be successful.
 Often these goals and objectives appear to be at
conflict with one another.
 For example an organisation does not want to incur
the monetary cost of carrying a high level of inventory
but at the same time it must carry enough in order to
be responsive on delivery to any reasonable rise in
unforecasted customer demand.
 Against this backdrop customers, once they have
decided to purchase, typically want the product or
service now and at minimum cost.
 These factors have a strong influence on the design of
the supply chain.
Competing through Logistics
 To be successful and gain that crucial
competitive advantage the various
partners must come together to
identify the critical success factors for
the supply chain as a whole and the
key capabilities they must each
individually have or develop through
investment in training, processes,
quality etc.
Competing through Logistics
 Organisations cannot do everything all of
the time.
 They have a finite level of resource that
means they have to develop their ability to
prioritise and focus on the right activities.
 This brings us back to the need for
alignment across the supply chain.
 Let us look at the competitive priorities that
can be delivered by logistics in the supply
chain.
Competitive Advantage
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There are various ways in which
products compete in the
marketplace. For example;
Quality
Price
Technical features
Brand name
Competitive Advantage
 Product availability in the marketplace at
low cost is a key advantage provided by
logistics, as shown in the supermarket
chain example.
 Logistics supports competitiveness of the
supply chain as a whole by:
 …meeting end customer demand
through supplying what is needed, in
the form it is needed, when it is
needed, at a competitive cost.
The Quality Advantage
 The most fundamental objective, in that it
is a foundation for all the other, is to carry
out all processes across the supply chain so
that the end product does what it is
supposed to do.
 Quality is the most visible aspect of the
supply chain.
 Business processes must be designed to
not just meet the needs of customers, but
to delight them.
The Quality Advantage
Many things influence customer
loyalty:
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product does what it is supposed to do
value for money
quality of processes
way the customer is treated
quality of the staff in the organisation
organisation makes a commitment and
keeps that commitment
The Quality Advantage
 Product unavailability,
defects and
late deliveries
are all symptoms of quality problems
in supply chain processes.
 Such problems are visible to the end
customer, and negatively influence
that customer’s loyalty.
The Quality Advantage
 Robust processes are at the heart of supply
chain performance.
 Through the adherence to process
management, defects or errors will be
highlighted earlier reducing the impact on
customer and cost.
 Commitment to quality and a customercentred attitude must start at senior
management and permeate down through,
all levels of the organisation and every
organisation in the supply chain.
The Speed Advantage
 The time a customer has to wait to receive
a given product or service is measured.
 Volkswagen calls this time the customer
lead-time: that is, the time it takes from
the moment a customer places an order to
the moment that customer receives the car
they have specified.
 Such lead-times can vary from zero (the
product is immediately available, such as
goods on a supermarket shelf) to months
or years (such as the construction of a new
building).
The Speed Advantage
 Companies that have learned that some customers
don’t want to wait can use time to win orders.
 They are prepared to pay a premium to get what they
want quickly.
 An example is Vision Express, which offer prescription
spectacles, ‘in about one hour’. Technicians machine
lenses from blanks, on the premises. Staff are given
incentives to maintain a 95% service level against the
one-hour target.
 Vision Express has been successful in the marketplace
by re-engineering the supply chain so that parts and
information can flow rapidly from one process to the
next.
 Compare this with other opticians in the high street,
who must send customer orders to a central factory.
The Speed Advantage
 Under the remote factory system, orders
typically take about 10 days to process.
 An individual customer’s order must be
dispatched to the factory and then compete
in a queue with orders from all the other
high street branches around the country.
 Once it has been processed, it must return
to the branch that raised the order.
 While this may be cheaper to do (a single,
remote factory replaces many small
factories in the branches), it takes much
longer .
The Dependability Advantage
Time is not just about speed. It is also about
meeting promises. Organisations can do
themselves a power of good by adopting one
clear but very simple message: make a promise
and keep that promise. Questions an
organisation should be asking itself:
 are we always meeting our delivery promises
 do we answer calls when we said, how we said and
answer what the customer wanted
 reflect the right standards and commitments, can I
make promises knowing that the company will be able
to fulfil them.
The Dependability Advantage
 Firms who do not offer instantaneous
availability need to tell the customer when
the product or service will be delivered.
 Delivery dependability measures how
successful the firm has been in meeting
those promises.
 For example, the UK based Royal Mail offers
a first class service for letters where there
is a 92% chance that a letter posted today
will reach its destination tomorrow.
The Dependability Advantage
 It is important to measure dependability in the same
end to end way that speed is measured.
 Although Vision Express offers a one-hour service for
prescription glasses, the 95% service level target is a
measure of the dependability of that service.
 Dependability measures are widely used in industries
such as train and air services to monitor how well
published timetables are met.
 In manufacturing firms, dependability is used to
monitor a supplier’s performance in such terms as:
> On time (% orders delivered on time)
> In full (% orders delivered complete)
The Dependability Advantage
 An organisation needs robust and
predictable processes to provide the
foundation for supply chain processes.
 This is no different for dependability if the
organisation wants to gain an important
advantage.
 Toyota UK manages inbound deliveries of
parts from suppliers in southern Europe by
a process called chain logistics.
 Trailers of parts are moved in four-hour
cycles, they are then exchanged for the
returning empty trailer on its way back
from the UK.
The Flexibility Advantage
 While doing things the same way at the
same time may be good from a point of
view of keeping costs down, few markets
are in tune with such an idealised way of
doing business.
 A supply chain needs to be responsive, to
new products and markets, and to changing
customer-demand.
 This means in turn that it must be
capable of changing what is done.
The Flexibility Advantage
Flexibility takes four forms:
 Product Flexibility which measures how quickly a new
product can be introduced
 Mix Flexibility which measures the time it takes to change
between different products in a given range.
 Volume Flexibility which measures the time it takes to
respond to increases or decreases in overall demand
 Delivery Flexibility which measures the ability to change
deliveries (intentionally) by bringing them forward or
pushing them back.
The Productivity Advantage
 Cost is important for all supply chain
processes.
 Low costs translate into advantages in the
marketplace in terms of low prices or high
margins, or a bit of both.
 Many products compete specifically on the
basis of low price.
 From a supply chain point-of-view this may
translate into low-cost manufacture,
distribution and servicing.
The Productivity Advantage
 Examples of products that compete on low
price are supermarkets’ own brand goods
that reduce the high margins and heavy
advertising spend of major brands.
 They also perhaps cut some of the corners
in terms of product specification in the hope
that the customer will consider low price as
being more important than minor
differences in product quality.
The Productivity Advantage
 The pressure to reduce prices at car
component suppliers is intense.
 The assemblers have been setting annual
price reduction targets for their inbound
supply chains for some years.
 Unless a supplier can match reduced prices
for which products are being sold, by
reducing costs, that supplier will gradually
go out of business.
 As a result, many suppliers are cynical
about the price down policies of the
assemblies.
The Productivity Advantage
 The benefit of cutting costs is reduced
prices, often a collaborative effort on the
part of several partners in the supply chain.
 Tesco can make only limited in-roads into
its in-store costs without collaboration from
its supply chain partners.
 Many small UK dairy farmers are being
forced out of business, because the price of
milk in supermarkets is less than the price
of water. For them, there are few
opportunities to cut costs.
The Productivity Advantage
 Logistics is not the only way in which
product competitiveness in the marketplace
can be enhanced.
 The five performance objectives listed
above can be added to (and in some cases
eclipsed by) other ways in which products
may win orders, such as design and
marketing features.
 Thus superior product or service design,
often supported by brand image, may
create advantage in the marketplace, as it
does for BMW cars and the Dorchester
Hotel, for example.
The Productivity Advantage
 Here, the logistics task is to support the
superior design.
 BMW’s supply chain is one of the most
efficient there is, mainly because its
products are sold (at least in Europe) as
soon they have been made.
 Finished cars do not accumulate in storage
on airfields like those of the mass
producers.
 Storing finished products adds cost, with no
value to the end consumer.
Logistics
and
Service
Operations
The Design of Service
Operations
 In terms of “what, how, how much and where”, the
designer of a service has to confront similar issues to
that faced in manufacture.
 It is necessary though, to think through the
consequences of having the customer as part of the
delivery system.
 If the Operations Manager can reduce the sources of
uncertainty in the delivery system, by making it more
predictable, then the system becomes easier to
manage and control.
 What then, are the sources of this uncertainty, and to
what extent can they be reduced?
The Design of Service
Operations
We must also differentiate
between the
 Front Shop Operations, which for the
customer represent the organisation, where
service encounters must be sensitively
managed, and the
 Backroom Operations, the other 90% of
the organisational iceberg, which has more
in common with manufacture, and of which
the customer is blissfully unaware.
Service as Product
 We have already referred to the service
bundle in terms of the tangible benefits,
sensory benefits and psychological benefits
it seeks to provide.
 It is vital that the organisation does not
take too narrow a view of what it does,
otherwise what the customer wants (in the
holistic sense), may not be what is
supplied.
 Charles Revlon of Revlon summed it up
in saying:
“…in the factory we make cosmetics, in
the store we sell hope…”
Service as Product
 It is particularly important that service
encounters are properly managed,
requiring appropriate levels of social and
technical competence on the part of the
staff delivering the service.
 It is essential that there is an overall
coherence in terms of the expectations
created, and what is actually delivered in
terms of the components of the service
bundle, not all of which are completely
within the gift of the organisation’s
management.
Service as Product
 Manufacturing has learned the lesson
of attention to detail being a
prerequisite for a successful product,
of identifying needs, that sometimes
the consumer has been unable to
articulate, and of carefully monitoring
feedback on a product’s acceptability.
 The service sector needs to apply a
similar approach.
Capacity
 The operations manager in a high contact
system is faced with managing uncertainty on
two fronts.
 Firstly, the initiative in establishing contact
with the service provider lies with the
customer, leading inevitably to lumpy and
unpredictable demand.
 Secondly, although there are expectations, the
time the customer spends within the system is
often at the customer’s discretion.
 In services, you cannot buffer yourself from
demand uncertainty by using stock as can
manufacturing.
Capacity
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The implication is that the organisation
has four pure strategies open to it:
maintain slack capacity (fire service)
adjust capacity to meet demand where
possible (DIY Warehouse)
manage demand by for instance differential
pricing
substitute capital for labour (auto-tellers)
Capacity
 In practice firms use a mix of the above
strategies.
 In manufacturing, there is the dilemma of,
lost business due to a lack of capacity,
against the costs of maintaining excess
capacity.
 Organisations should be aware of the costs’
sensitivity of the trade-off, in terms of the
probabilities of particular levels of demand
and revenue, against the costs of carrying
capacity.
Technology of
Transformation
 As the drive for improved service and greater
productivity continues, we can be quite sure that
organisations will be making greater use of
increasingly sophisticated technology.
 Technology can either enhance or compromise the
service encounter, depending on the context and the
nature of technology employed.
 It can for instance empower the customer, allowing
them to conduct the encounter at their own pace, and
in privacy.
 For example computer-based diagnostics, where the
patient responds to a series of gentle prompts from
the screen, have proved surprisingly acceptable.
Technology of
Transformation
 Library book search packages are another
good example.
 Technology can also be a barrier in the
transaction if the user is unfamiliar with it,
or if perhaps information is accessible to
the service provider rather than the user.
 Have you ever wondered what information
the bank teller has on you and your
account on the screen that only he/she can
see?
It would be useful at this
point to use the
classification of productive
systems to the service
context:
1- Job Shop
2- Line
3- Location
Job Shop
 Volume for a service that has low volumes
of identical outputs and considerable
variety in characteristics
 Service Change Service changes readily
accommodated.
 Demand Variation Lumpy or uncertain
demand accommodated
 Market Type Custom service to order
 Task Characteristics Tasks with low
specifically accommodated, difficult to
acquire skills and uncertain, variation
completion times.
Job Shop
 Technology of Transformation Permits capital
intensity using general purpose equipment
 Labour Skills Broad & variable skills and high
degree of flexibility required
 Work Environment Un-paced individual work,
craft skill specialist, long-term assignments
 Productivity Labour is inevitably less efficiently
utilised in a variety of tasks
 Capacity Capacity is ill-defined but flexible
within broad limits. As demand approaches
capacity limits, in-process inventory tends to
block system
Line
 Volume Suited to high volume
standardised service
 Service Change Change is costly since the
entire process must be changed or at least
rebalanced with each service change
 Demand Variation Best suited to stable
demand without heavy cyclic influences
 Market Type Standardised service
 Task Characteristics Tasks with high
specificity, well-defined, divisible, teachable
and of predictable duration
Line
 Technology Of Transformation Permits
process automation via custom built equipment
 Labour Skills Tolerance of repetition
 Work Environment Highly visible, paced
performance, productive unit tightly coupled
 Productivity Given stable demand, typically
high due to division of labour and specialisation
 Capacity Capacity is well defined and
understood, but expensive to change due to
the pervasiveness of any change made
Location
 Location is crucial to the high-contact
service organisation.
 There is no escape from a sub-optimal
location decision; it must by definition
(unless the service provided is very
specialised indeed) be driven by market
requirements.
 Low-contact services can be more readily
characterised as footloose, as information
technology releases them of the
requirement to be physically close to their
customer.
Location





Firms in the high-contact sector will
carry out exhaustive analysis on:
Customer behaviour and their willingness to
travel
The demographic makeup of a designated
catchment area
Forecast changes over the next decade or
so
Availability of communications, such as
road access (the local shopping centre)
The existence of competition
Location
 The existence of providers of
complementary services to provide
synergy. For example, many retail
multiples will only locate to a new shopping
development if they know that firms such
as Marks & Spencer’s have taken the
decision to locate there.
It is sometimes said that the three
most important factors in retailing are
location, location and location. An
oversimplification, perhaps, but with
more than a grain of applicability to
high contact services.
WHAT
IS
A CASE ?
What is a case ?
 A case is a written description of a business
situation or problem .
 It generally provides factual information about a
company’s background , which often includes
organizational or financial data related to the
present situation .
 The use of case analysis in teaching was
developed by the Harvard Business School in the
1920s with the purpose of introducing the
highest possible level of realism into teaching
management decision making .
What is a case ?
 A case raises contemporary issues and provides
information to analyze from a business
perspective .
 Also , often included in a case is information that
is outside of the immediate company , which is
related to the sociocultural , political , legal ,
technological and competitive environments .
 Data related to such industry sectors as apparel
or fashion are described to give the reader a
better understanding of the circumstances
surrounding the situation .
What is a case ?
 It is your job to propose solutions to the problems .
 In some circumstances , the case authors have
purposely presented cases with no readily identifiable
problem , just facts to sift through to arrive at the
problem .
 The case study method is an active , problem-solving
way of learning in which you have to think about the
problem , use the facts provided in the case and then
decide on the most appropriate action to take .
 External environmental factors (those outside the
company) should also be considered , along with the
specific internal facts about the company and the
situation .
What is a case ?
 The cases themselves can also help you to
improve your reading , writing and speaking
abilities , which are vitally important for good
communication in business .
 Additionally , exposure to others’ thoughts and
reasoning (such as those characters portrayed
in the cases) can open your mind to other
views .
CASE
ANALYSIS
Case Analysis
 When analyzing a case , you should assume
the role of the challenged individual in the
case and react as you believe that person
should , to best remedy the problem .
 As in all problem situations , there never is a
single solution , nor a right or wrong answer .
 So, your recommended best alternative relies
on and should be based on the facts contained
within the case , along with the basic concepts
and/or priciples provided in the case .
Case Analysis
 Often it may seem that you don’t have
enough information to solve the case
problem .
 Welcome to the real world of
business !
 Often , decision makers do not have all
the information needed for a “good”
decision . But they must make a
decision with the information available
at the time .
Case Analysis
 When a group approach to case analysis is used ,
students must understand that participation by
everyone is absolutely necessary for this
approach to be effective .
 Assuming that you are a part of a management
team charged with a problem to solve may also
help to motivate everyone in the group to
participate .
Case Analysis
 It is also important to remember that using
common sense may help you to realize what is
relevant for solving a case .
 Logic is another tool you will find helpful .
 Used in tandem with management concepts
and principles , logic will also assist you in
formulating your plan of action and your
arguments and justifications for the selection
of the best alternative solution .
A
RECOMMENDED
APPROACH
FOR
CASE SOLUTION
A Recommended Approach
 Read the case completely through , along with the major
question .
 Reread the case and any accompanying illustrations or data
carefully and do the following :
 Clearly define the immediate problem to be solved , if it
is not already done for you
 Develop several alternative solutions to the problem
and that could be applied to the situation
 Evaluate each alternative by listing its advantages and
disadvantages ( This may include consistency with
company mission or strategy , long-term implications ,
resources available or impediments )
 Identify the recommended solution along with any
further justification
 Develop a recommended course of action if needed
Case Study Methods
Individual
Group or
Collaborative
Brainstorming
Role Playing
SAMPLE
CASE
STUDY
The Classification
Conundrum
Logistics and
Customer
Scheduling
Introduction
 Scheduling is the matching of orders (or
customer demand) against the capacity of
the transformation system, and the
reconciliation of conflicts between these
orders for available capacity.
 For scheduling to be successful, there must
be a measure of what capacity is available
(and in reserve), and the effect of the
orders in terms of their consumption of
capacity resource.
Introduction
 The presence of the customer in a
service situation, and the ability of
manufacturing to insulate itself from
the customer by the use of stock,
presents us with very different
problems in terms of scheduling
within each of the two sectors.
 For that reason, it is better to deal
with each separately.
Scheduling in
Manufacture
Aggregate Scheduling
 Manufacturing requires a planning horizon
of reasonable length to ensure that core
operations are protected from the day-today turbulence of the order book, as
operations cannot be turned on and off like
a tap.
 Typically, a rolling demand forecast for the
next 12-month period is used to construct
an aggregate schedule, which as the term
suggests is a broad-brush approach to the
problem.
Aggregate Scheduling
 The month-by-month forecast demand for
various product groups (appliances), rather
than individual products (washers, dryers, dishwashers), impacts on aggregate capacity
(workers and processes) over the required
time-frame.
 Constraints need to be identified at a stage
when adjustments can be made on a costeffective basis.
 For instance, the effect of resource trade-offs,
holding stocks, working overtime or
subcontracting can be identified at this stage.
 The output of the aggregate scheduling process
is the production plan.
Production Planning
 The production plan examines the
capacity/demand situation in more detail,
de-segregating the demands and the
resource capacity, so that the effect of the
product mix can be determined.
 At this stage there is a feasible balance
between forecast demand and capacity.
 Constraints have been identified, and
adjustments made, either, to demand or to
capacity, ensuring compatibility.
Master Production
Scheduling
 At this point actual orders are incorporated into
the scheduling system, and quantities set
against specific end items for particular time
periods.
 The Master Production Scheduling (MPS) acts
as senior management’s handle on the
business.
 By altering the MPS, product mix, and
inventory levels, capacity demands can all be
changed.
 Any attempts to squeeze more production out
of the system may be counterproductive, as it
could seize, if capacity constraints are
exceeded.
Master Production
Scheduling
 The MPS will be used in conjunction with
Requirements of Materials (ROM) to
explode the component requirements
implied by end item requirements.
 It is at this point that actual component
requirements are calculated, aggregating
additional requirements for spare parts and
scrap.
Master Production
Scheduling
 At some point, typically after one month,
the MPS is frozen, no more changes are
allowed, since critical components (usually
those with a long lead-time) will already
have been obtained.
 It is at this point that detailed
manufacturing scheduling takes place,
when the schedule, job by job is loaded on
capacity.
Scheduling
Approaches
Forward Scheduling
 Forward Scheduling, occurs when
production activities commences as
soon as the order is received.
 Material and production capacities are
allocated to the order on its arrival.
 This is typical of jobbing-shop
operations where custom-made
products are the norm, and the
customer will not (or cannot) give
advance notice of his requirements.
Backward Scheduling
 Backward Scheduling, occurs when
production activities are scheduled by
their due-dates, working backward
from the dates of end item
requirement by progressively
offsetting lead times to derive a
schedule for the acquisition of
materials and components.
 This situation is rather more typical of
manufacture.
Scheduling Activities
 We know the recipe for the product bill of
material (BOM).
 We know the routes from process to
process for the individual components
(route cards).
 We now have to load these jobs into the
various processes in a logical and efficient
manner, ensuring that capacity constraints
are respected and that required output
levels will be achieved.
Scheduling Activities





This means that the order in which jobs will be
processed (sequenced) will have to be
determined, using prioritising rules, examples of
which are given below:
First Come-First Served Jobs are processed in strict
order sequence
Earliest Due Date Priority is given to jobs required
soonest
Longest Processing Time Jobs with longest
processing time are assumed to have maximum
added value
Shortest Processing Time Priority is given to
maximising flow of jobs
Critical Ratio Method Priority is given to jobs where
the ratios of time until due date against total process
time is smallest
Optimised Production
Technology (OPT)
 An MRP based scheduling system assumes
for instance that lead times for parts
acquisition and builds are fixed, and that
capacity is not a constraint, which can lead
to problems.
 Just-in-time (JIT) too has its problems in
maintaining an appropriate balance
between resource utilisation and the
flexibility that a very short planning horizon
implies.
Optimised Production
Technology (OPT)
 The Optimised Production Technology (OPT)
approach recognised the real work limitations on
production resources and incorporated them as
production constraints to schedules in the future.
 It recognises that lead times are not fixed, that
capacity is finite, and that unlike JIT, sometimes it
can be beneficial to increase batch sizes.
 The OPT system is a computer-based simulation
that allows managers to ask the “what if”
questions in addressing the problem of developing
a feasible and acceptable schedule.
Optimised Production
Technology (OPT)
 It forms the basis of an approach
(sometimes known as constraint
management) that focuses
management’s attention on the
effective scheduling of bottleneck
resources, as time lost on these
cannot be recouped elsewhere in the
production sequence.
Input-Output Control
 One planning technique that helps control
the flow of production activity at the shop
floor level of control is input-output control.
 This approach seeks to monitor the planned
versus actual output of work centres on a
cumulative basis.
 What it does is to highlight discrepancies
between theoretical and actual capacity,
and should ensure that particular processes
are not being overloaded.
Gantt Charting
 The Gantt chart is one of the simplest (and
most effective) scheduling tools available.
 It has a time-based horizontal axis, with
work centres shown on the vertical axis.
 Set-up and process times for jobs can be
shown as colour coded bars of lengths
proportional to the time taken against the
centres in question.
 Lead times and bottlenecks become readily
apparent using this simple visual approach.
Scheduling in Job
Operations
 The custom and low-volume nature of job
orders results in considerable variation in
materials used, order processing, work-inprogress (WIP), capacity planning and setup time requirements.
 Much of management’s tactical objectives
in scheduling focus on, efficiently,
eliminating variation in production factors.
 Scheduling methods used in these types of
operations include Gantt charts, job
sequencing methods, critical ration and
input-output control.
Scheduling in Repetitive
Operations
 The high volume and continuous nature of
repetitive operations results in the need to
closely control the flow of materials and
application of labour resources to maximise
flow and worker utilisation.
 Much of management’s scheduling effort is
focused on attempting to synchronise
demand with production activity.
 Scheduling methods similar to those used
in jobbing can be used, but it is more likely
that push-based MRP or pull-based JIT
systems will be employed.
THE
PROJECT
Project Subjects







Onur Afacan  Electronic Equipment
Berkin Altın  Automotive Spare Parts
Burak Bilgili  Furniture
Anıl Çamdereli  Edible Oils
Pınar Karatop  Fish Products
Sıla Kasalı  Milk Products
Oya Ertuğrul  Organic Children’s Wear
Name of the Project
“A
Supply Chain
Story
from Production
to Customer”
How To Prepare The
Project ?
 Make a research for the product and the market
 You have to establish a company
 Start from Manufacture till Delivery of the goods to target
market .
 You can use the library or Internet
 You have to pay visits to companies to get information .
 But don’t forget ; it is not a “copy & paste” project
 You must input vision and try to make something
interesting and different .
 You must like and admire what you have done .
 Prepare your project in ppt and present it to me on a flash
memory . Also present a file of your ppt .
 You can add extra film or music or speech to your ppt .
 The minimum number of slides will be 30 and for the
above you are free , no limit .
 Mention your references at the end of the ppt .
What do we expect from the
project ?
You will establish a company
Give details about your company
Give details about the product
Tell me about your market and how
you are going to sell to that market
 Give details about the distribution
channel(s)
 Tell me about the logistics operations




Scheduling in
Services
Scheduling in Services
 The key issue in scheduling of services is
the feasibility of encouraging the
customer to give advance notice of his
intention to use a particular service.
 This will clearly depend on the
substitutability of the service and the
degree of importance that the customer
attaches to the service and to having it
provided at a particular time.
Appointment Systems
 Appointment systems are intended to control or
alter the timing of customer arrivals (customer
demand).
 The purpose of an appointment system is to
maximise the utilisation of the limited time a
service facility (or person) can be used, and
minimise the inconvenience to the customer in
terms of time spent waiting.
 An appointment system does not guarantee that
the customer will not have to wait.
 Providers of specialist services, for example music
teachers, may be fully booked for months in
advance.
Appointment Systems
 Appointment systems are ideal in non-emergency
service situations; in periods of emergency, an
appointment system usually breaks down.
 For instance, a consultant called away to deal with
a crisis, will undoubtedly fail to meet
appointments scheduled for the relevant period.
 Organisations using appointment systems and
facing the occasional emergency usually build
slack time into the schedule, which acts in the
same way as buffer inventory in a manufacturing
context in ironing out unexpected demands.
Appointment Systems
 The schedule will normally consist of
a list of names of customers requiring
the service, with allocated time-slots
and perhaps some detail on the
nature of the service to be
performed.
Reservation Systems
 While reservation systems are generally used to
schedule an organisation’s resources to meet an
individual’s demand requirement, reservation
systems are concerned with scheduling facilities
and multiple resources to meet customer demand.
 For example, a hotel represents the multiple
resources of bedrooms, leisure facilities,
restaurant, etc.
 We do not make reservations with each of the
resource providers in turn, but expect our
requirements to be co-ordinated centrally.
Reservation Systems
 Where a resource is particularly expensive
to provide, for instance an aircraft, it is
important to ensure that it is operated at as
near maximum capacity as possible.
 Airlines bedevilled with the problem of no
shows (intending passengers who do not
turn up), may indulge in the practice of
overbooking, where, for instance, 355
reservations may be accepted for an
aircraft with only 350 seats.
Reservation Systems
 Provided the airline has a good
understanding of the probability distribution
governing the likelihood of all the
customers turning up, they can strike what
they would regard as an effective balance
between keeping their planes adequately
loaded, and occasionally having to placate
disappointed passengers.
 Whether this is ethical is another matter
entirely, but no doubt the airlines would
defend themselves by saying that without
this practice, fares would have to rise.
Forecast-based Systems
 Where the customer is not able, or willing, to give
advance notice of his intention to consume a
service, we are thrown back on the requirement to
schedule the availability of capacity on forecast.
 Key planning information for the electricity
generators would be the weather forecast, and the
TV schedules, particularly party political
broadcasts!
 Base load is met from relatively efficient thermal
stations, with demand peaks supplied by
(expensive) gas turbine, or (limited supply)
hydropower.
Forecast-based Systems
 While hospital Accident and Emergency
departments may not formally undertake
forecasting, the patterning of demand
throughout the week is well understood.
 Since they are at their busiest on weekend
nights, they would schedule extra resources
to meet these anticipated demand peaks.
 Extra capacity would additionally be
available on standby.
Modelling Approaches to
Scheduling
 In situations where appointment or
reservation systems are
inappropriate, it is important to
collect data on customer demand
patterns so that probability
distributions can be constructed.
 The effect of service level choice on
capacity can be readily determined.
Modelling Approaches to
Scheduling
 For example, knowing the distribution of
evening demand by patients for community
nurses, we can calculate that with ‘x’
nurses, we will require extra capacity on
average one night in a hundred.
 With ‘x+1’ nurses, the extra capacity
requirement might drop to one night in
three hundred.
 The manager is then in a position to make
a rational choice in terms of capacity and
scheduling alternatives.
Simulation
 An extension of the above approach enables us to
construct (computer-based) models of dynamic
service (and manufacturing) situations using the
technique of Monte-Carlo simulation.
 The variation in customer arrivals, in service
provision times can be readily represented as a
dynamic graphic image on the computer screen,
so that alternative strategies to managing the
customer queuing, resource utilisation dilemma,
can be explored quickly, and without disturbing an
existing operational set-up.
Materials
Management
in Services
Introduction
 Facilitating goods play a vital role in the
provision of services.
 It follows therefore that the provision of
these goods in terms of quantities and
timing needs to be carefully managed to
strike a calculated balance between the
problems of over provision and stock-out of
materials, particularly where limited shelflives are involved.
Perishables in Service
Inventories
Life of Items
Very short 
Short

Medium

Long

Items
Concert tickets,
transplant organs
Fruit, meat, dairy
products, commemorative items
(jubilee mugs)
Certain vaccines, seasonal
clothing
Books, postage stamps,
hardware
Role of Inventory
 Inventory is held in anticipation of known demand,
where it is said to be dependent, and to buffer the
service system against unexpected peaks, where
an independent demand regime is operating.
 Inventory also has to protect the system during
the time when stocks are being replenished.
 Intuitively you will recognise that where a
replenishment system is fast and responsive, with
a short lead-time, less protection is required, and
therefore safety checks can be correspondingly
lower than in situation where lead-times are
greater.
Lumpiness of Input Materials
in Services
Lumpiness
Smooth
Items
Provision of central
heating oil
Minor lumpiness
Office supplies, paint
Moderate lumpiness Timber cut to order, floor
coverings
Major lumpiness
Clothing, cosmetics,
printing to special order
Inventory Control
Systems for
Independent
Demand Items
Fixed Quantity System
 A fixed quantity system adds the same
amount to the item’s inventory each time it
is ordered.
 Orders are placed when the stock level
drops to a critical level called the reorder
point.
 Each time an item is withdrawn from stock,
the amount of inventory on hand should be
compared with the reorder level, and only
when it has reached that level is an order
for replenishment (of a fixed quantity)
triggered.
Fixed Quantity System
 Where a fixed order size is desirable,
perhaps because of quantity discounts, or
where material has to be delivered in
certain quantities, by the lorry load or in
pallets, this method of controlling stocks
can have certain advantages.
 It should be noted that the period of
uncertainty which safety stock has to
provide protection for only extends to the
lead-time for replenishment.
Fixed Period System
 In a fixed period system, the
decision to replenish is time
triggered, rather than event
triggered, as described above.
 On-hand inventories are only checked
when the reorder period is due, and
only the amount of material to bring
the stocks up to some predetermined
maximum level is ordered.
Fixed Period System
 The main advantage of this system is
the elimination of the requirement to
count and recount stock after each
inventory transaction.
 For ease of administration, it also
provides blocks of orders, on a
weekly, monthly or quarterly basis to
be generated for processing.
Inventory
Planning
The Economic Order
Quantity Model (EOQ)
 There are costs associated with the holding of
inventory, capital tie-up, spoilage, provision of
storage, etc.
 There are also costs associated with the placement
and receipt of orders, the raising of paperwork,
transportation and handling of materials.
 It follows that if we place orders for modest quantities
frequently our ordering costs will be relatively low.
 What we have here is a classic operations trade-off.
 It can be shown that the costs of operating the
system are minimised when:
The Economic Order
Quantity Model (EOQ)
Q* =
Where:
2DS
H
Q* is the Economic Order Quantity
(EOQ)
D is the period demand rate
S is the costs of placing a single order
H is the unit holding costs per period
Calculation for Economic Order Quantity
The Economic Order
Quantity Model (EOQ)
 The EOQ approach may have some validity
in service sector applications, where basic
consumables are concerned, and shelf life
is not an issue.
 It has however been vigorously criticised by
Professor John Burbridge, among others in
that it regards costs as a given, and does
not seek strategies for their reduction,
permitting more frequent ordering, and
lower stock holding costs.
Requirement Planning
for Dependent Demand
 We may tend to regard the Bill of Materials
as a concept with application only in the
manufacturing sector.
 End-use items are exploded, layer by layer
into their constituent sub-assemblies,
components and materials to create an
overall recipe for the product.
 The term recipe Is quite an apt one, as in
cooking we have to ratio the quantities
required for a given dish according to the
number of guests.
 The quantities are dependent on the
number of end-times.
Requirement Planning
for Dependent Demand
 The BOM approach is used in mass catering, for
instance, in the provision of airline food, and also in
hospitals.
 A particular health authority in the UK was having a
problem, controlling inventory in its hospitals.
 Lots of unofficial stocks were being squirreled away,
on a just-in-case basis, giving the culprits the security
of their own supplies, without any control from central
stores.
 This had several effects.
 Stocks had to be generally higher to give a particular
level of protection, as each unofficial store was only
protecting its own area.
Requirement Planning
for Dependent Demand
 Some of the items were shelf life dependent, and as a
result, unused stocks had to be scrapped on date
expiry.
 Now, a more rigid central stores system has been
introduced.
 For example the theatre operations programme, with
its master schedule (feasible for elective surgery),
drives the provision of kits of material for particular
procedures (dressings, sutures, etc).
 The authority claims a dramatic reduction in stock
holdings, with service levels in no way impaired or
compromised.
Supply
Chain
Management
Purchasing
Introduction
 Raw materials and bought-in components
typically account for 60%-70% of the final
cost of manufactured goods.
 Indeed in some sectors, for instance the
manufacture of personal computers, this
figure can be as high as 95%.
 If we include the cost of services that
support manufacturing operations, this
figure can be pushed even higher.
 The search for competitive advantage
focuses on the main cost burden.
Introduction
 Current thinking shows that the most
effective way to reduce that burden is
to improve the value received for
purchasing expenditures (thus
lowering total costs) by having better
suppliers.
 This means that much more attention
is being placed on the purchasing
function and its related activities.
Introduction
 Service organisations are beginning to realise the
strategic implications of securing more effective
management of their purchasing activities.
 Government bodies, local authorities, hospital
trusts, and private sector service firms seek highquality suppliers.
 The buyer, working in isolation, leafing through
catalogues, searching for the best price deal, is
increasingly being supplanted by teams of
purchasing professionals, throughout the
organisation, working towards quality-oriented
partnership arrangements with a handful of
preferred suppliers.
The Changing Role of
Purchasing
 Traditionally, purchasing has tended to be
regarded as a low-level, mundane activity,
heavily routinised, and not offering much in
the way of intellectual challenge.
 That attitude, and its accompanying
practices survived the upheaval brought
about by the introduction of tighter
material planning systems made possible
by the introduction of computing, such as
MRP.
The Changing Role of
Purchasing
 The second phase, featuring Just in Time
and Total Quality has necessitated a
complete rethink on the appropriateness of
traditional purchasing practices that
involved centralised purchasing
departments and commodity specialisation;
for instance one buyer being responsible for
purchase of electronics, another for paper.
 Fielding enquiries, dealing with problems of
late delivery, wrong quantities or items,
poor quality had led to a fire-fighting
mentality and prevented purchasers from
getting to know their suppliers properly.
The Changing Role of
Purchasing
 The alternative is to create broad
teams focused on products or
customers, including in their
membership engineers, marketers,
and quality specialists for example,
and having a much broader remit
than just material/service acquisition,
but encompassing all phases of the
product or service, from design to
eventual supply.
Supplier Partnerships
 Traditionally, buyers bought primarily on
price, with quality and delivery being of
secondary importance, and a supplier of
many years standing could find himself
dropped if a rival bidder was able to offer
more attractive terms.
 Buying companies distrusted their
suppliers, a feeling that was heartily
reciprocated by the suppliers, with the
result that they did not always do their best
for their customers, making their
replacement by other suppliers more likely.
Supplier Partnerships
 There is now a trend away from the
detached, adversarial relationships
that characterised the ‘70’s and much
of the ‘80’s, with large industrial
organisations and major retailers, for
example, General Motors, Marks and
Spencer’s leading the way.
 The following table makes this point.
Value-based Purchasing
 In a value-chain system, each link
must add value.
 This concept can be used in many
different contexts.
 For example, the following diagram
(Figure 5) shows the complete cycle
form extraction from the earth to
return to the earth for a
manufactured product.
Value-based Purchasing
 The value chain applied to an organisation represents
the organisation as a series of links in a chain.
 The firm is in the centre with its internal links.
 Upstream links involve the firm’s suppliers, whilst the
firm’s customers lie downstream.
 Value chain management identifies the interactions
between each link in the chain, and the role of the
links in improving value.
 When applied to purchasing, the value chain concept
attempts to create value through purchasing
decisions, rather than concentrating on cost savings
through vendor selection and contract negotiations.
Value-based Purchasing
Value may be added by:
 improving product quality
 speeding up the response between
the links
 better sourcing
 improving inventory control
 using higher quality materials.
Value-based Purchasing
 The Life-Cycle-Cost Model fits quite
comfortably with this concept,
whereby the cost of ownership (or at
least involvement with a product or
service) is not necessarily minimised
by squeezing acquisition costs down
to the bare minimum.
 The phrase ‘buy cheap – buy dear’
applies!
Supply Chain Management
 At one time, the key to a strategic
advantage and clout in the marketplace lay
in controlling the, largest resource base,
manufacturing plants and research
facilities.
 In today’s marketplace, this is no longer
sufficient to enable a company to sustain its
position.
 As IBM has discovered, competitors can
clone IBM’s most successful product, the
PC.
 They have bypassed and even surpassed
the best that IBM can offer.
Supply Chain Management
 Instead, maintainable, superior competitive
advantage is not simply product-based but lies
in, the effective design and control of the chain
of events, beginning with the sourcing of raw
materials and components and ending with the
delivery of the completed product (or service)
to the customer.
 It is possible for firms to add value and achieve
sustainable differentiation from the
competition, because competitors may find it
more difficult to acquire the in-depth know-how
required to manage logistics effectively.
Supply Chain Management
 Logistics provided the key
competitive advantage at Seagate
Technology, a leading manufacturer
of PC hard disc drives.
 In an effort to secure that lead,
particularly in Japan, Seagate decided
to absorb the cost of delivering its
product to customers, and
guaranteed delivery within four days.
Supply Chain Management
 Because the delivery guarantee was an
essential component of the package,
Seagate developed an alliance with an air
freight company to make deliveries from
Seagate’s Californian distribution centre to
customers all over the USA.
 Significantly, this initiative, so attractive to
its customers, only added 1% to the unit
cost of each disc drive.
 Seagate’s proportion of late deliveries was
also less than 1%.
Supply Chain Management
 In today’s saturated markets, customers
demand greater flexibility and faster
reaction from their suppliers.
 Terms such as quick response logistics and
turbo logistics systems are becoming
increasingly common in business literature.
 Essentially, the competition is compelling
companies to manage their material flows
better, from vendors right through the
pipeline to customers.
QR
Supply Chain Management
 Effectively managing the flow of
materials through the logistics
pipeline involves managing the
sequence of all material flow activities
from suppliers to customer that add
value to the final product.
Electronic Information Flow
 A supply chain links all stages, from raw
material through production to the customer.
 While many systems (such as MRP) push the
product out to the user, others pull it through
(such as JIT or Kanban based systems) where
the product is produced only when needed.
 In all cases, however, the frequency and speed
of communicating information has a marked
effect on, inventory levels, efficiencies and
costs, as the uncertainties due to time-lags in
information provision are reduced.
Electronic Information Flow
 Electronic Data Interchange (EDI) used by
banks and supermarket chains is one area
that is receiving much wider attention in
the current competitive climate.
 Several systems have been developed
and are discussed in more detail
below:
 Quick Response (QR) programmes have
grown rapidly. The approach is based on
bar-code scanning and EDI. Its intent is to
create a just-in-time replenishment system
between vendors and retailers.
Electronic Information Flow
 Efficient Consumer Response is a variation of QR
and EDI adopted by the supermarket industry as a
business strategy where distributors, suppliers, and
retailers work closely together to bring products to
consumers.
 It uses bar-code and EDI.
 Savings come from reduced supply chain costs and
reduced inventory.
 A study by Kurt Salmon Associates estimates a
potential reduction in supply chain dry-goods
inventory from 104 days to 61.
 McKinsey suggests that prices could on average be
reduced by almost 11% by wider adoption of ECR.
Electronic Information Flow
 Without ECR, manufacturers, aided and abetted by
the supermarkets, push products onto customers
where special offers and promotional techniques are
employed.
 Unsold products go back into store until the next big
push.
 ECR focuses on the customers to drive the system,
not the deals offered by the suppliers.
 Customers pull goods through the pipeline by their
purchases, thus reducing the inventory throughout
the system.
 One study suggests that distributors purchase 80% of
their merchandise during manufacturers’ sales.
 Until the industry frees itself from this addiction to
deal buying, all the great replenishment approaches
will be worthless.
THANK
YOU