ARM 304 Supply Chain Management(2+0)

Theory Lecture After Midsemester

T18. Material Handling Equipment for Warehouses

Material handling equipment is any tool used to aid in the movement, protection,
storage, and control of materials and products. Without the proper equipment and
systems in place, your company is more likely to damage products or fall behind in
productivity. By understanding material handling equipment, you can better
equip warehouse or distribution centres with the proper equipment and systems for
company’s needs.
The 4 Categories of Material Handling Equipment
1) Storage and Handling Equipment
This equipment category is self-explanatory. Storage and handling equipment is
used to hold materials while they aren’t being used. The material commonly stored on
this type of equipment is usually waiting to enter the production cycle or waiting to be
transported. Here are some of the most common pieces of storage and handling
equipment:
 Drawers, bins, and shelves: These are the most basic storage items commonly
used to store smaller materials in an organized manner.
 Racks: Racks help companies store materials in accessible locations, and they
save floor space.
 Stacking Frames: These are interlocking units that enable materials to get
stacked without being crushed.
2) Bulk Handling Equipment
Bulk handling equipment refers to equipment that transports, stores, and controls
bulk materials. This type of equipment is generally used to move and store materials
in a loose form. Common examples of this type of equipment include:
 Stackers: Like forklifts, stackers help lift and stack heavy loads on the dock or
in the warehouse.
 Reclaimers: These are large machines used to recover bulk materials from a
stockpile.
 Bucket elevators: These elevators (also known as grain legs) assist with
hauling bulk materials vertically.

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  Silos: Silos are towers that hold materials. Materials that are typically stored in
silos include grain, woodchips, coal, and sawdust.
3) Industrial Trucks
Industrial trucks are essential for warehouses and distribution centers. These
powered trucks, such as forklifts, move large quantities of materials around the
manufacturing floor. They are also utilized to load or unload heavy objects onto
delivery trucks efficiently.
 Hand trucks: Hand trucks (also called dollies) are a simple piece of equipment
designed to give operators the leverage they need to move heavy materials to
new locations.
 Sideloaders: Sideloaders are built to fit in narrow aisles. They pick up items
from different directions, making them ideal when a warehouse has aisles
close together.
 Pallet trucks: Otherwise known as forklifts, pallet trucks are machines
operators use to lift heavy pallets. The forks slip under the pallet, lift it, and
secure it as the operator takes it to a new location.
4) Automated Systems
Automated or engineered systems refer to automated material handling
equipment made to help transport and store materials. Rather than a single piece of
equipment, an automated system is generally made out of several units. Here are
some examples of automated systems:
 Conveyor systems: Automated conveyor systems carry heavy materials to
specified destinations using belts, flexible chains, or live rollers. It is highly
efficient equipment to move large volumes of material quickly.
 Automated guided vehicles: These vehicles are mobile robots that follow
specific markers or wires in the floor to move large materials around a
manufacturing facility or warehouse. Vision, magnets, or lasers can be used as
methods for AGV navigation.
 Robotic delivery systems: Robotic delivery systems transport goods and
materials around a facility. These systems usually help move goods along an
assembly line.

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 [Link] – Importance types and uses

Packaging is the basic necessity of every product. Without packaging the

product cannot be stored or moved from one location to another. Packaging provides
an identity to the product.
Packaging is the process of providing a protective and informative covering to
the product in such a way that it protects the product during material handling, storage
and movement and also provide useful information to all the concerned parties about
the content of the package.
Thus, in other words, packaging can be defined as the wrapping material
around a consumer item that serves to contain, identify, describe, protect, display,
promote and otherwise make the product marketable and keep it clean.
Definition of Packaging
Packaging: Packaging is the process of providing a protective and informative
covering to the product in such a way that it protects the product during material
handling, storage, and movement and also provides useful information to all the
concerned parties about the content of the package.
Characteristics of Good Packaging
Packaging is more than just your product’s pretty face. Your package design may
affect everything from breakage rates in shipment to whether stores will be willing to
stock it. These are the characteristics of good packaging:
1. Labeling
2. Opening
3. Size
4. Durability
Labeling
This is important to include certain information on the label of your product when it is
distributed in specific ways. For example, labels of food products sold in retail outlets
must contain information about their ingredients and nutritional value.
Opening
If the product is one that will be distributed in such a way that customers will
want to–and should be able to–sample or examine it before buying, your packaging
will have to be easy to open and to reclose. If, on the other hand, your product should

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not be opened by anyone other than the purchaser–an over-the-counter medication,
for instance- -then the packaging will have to be designed to resist and reveal
tampering.
Size
The product must be shipped a long distance to its distribution point, then bulky
or heavy packaging may add too much to transportation costs.
Durability
Many products endure rough handling between their production point and their
ultimate consumer. If the distribution system can’t be relied upon to protect your
product, your packaging will have to do the job.

Functions of Packaging
There are many of the functions of packaging of the product performs. Some of the
important ones are mentioned below:
1. Protection
2. Unitize
3. Convenience
4. Contain
Protection
Protection of product during handling, movement and storage. Prevents any damage
by avoiding shifting, movement or collision of products inside the package during
handling and movement. There should be protection of the product from environmental
effects such as heat, cold, moisture etc. It should also be tamper proof to prevent any
kind of adulteration.
Unitize
Unitize to convert the package in to a unit load. It helps in ease of storage and
handling. There is fuller utilization of storage space and also time and efforts can be
saved during handling, loading and unloading if the packages are of uniform size.
Convenience
Convenience the package should be convenient from logistical and consumer point of
view. Logistical convenience deals with handling and storage. Consumer convenience
deals with easy to open, easy to carry, etc.
Contain

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Contain the package should be designed in such a way that it contains the
predetermined volume or quantity of the product comfortably.

Factors Affecting Packaging

Along with the functions mentioned above, there are some other factors which also
affect the packaging such as:
1. Purpose of packaging
2. Nature of Product
3. Distance
4. Material Handling System
5. Product Sensitivity
Purpose of packaging
Type of packaging will depend on the purpose of packaging. Packaging for logistical
purpose will be different from packaging for marketing (i.e. consumer) purpose.
Nature of Product
Packaging for different types of products will be different. Physical form of the product
(i.e. solid, liquid, gas) will decide which type of packaging would me more appropriate.
Even for product having same physical form say liquid, different types of packages
e.g. cans, bottles, tetra packs etc. will be available.
Distance
Packaging may also depend upon transportation distance. Longer distance would
require tougher as well as more protective packaging.
Material Handling System
Packaging should be decided keeping in mind what type of material handling system
is to be used. Mechanized and automated systems are capable of handling large-sized
packages whereas manual material handling will require the size of the packages to
be smaller.
Product Sensitivity
Sensitivity of the product towards, physical environment and outside elements should
also be considered. Some products are more sensitive to temperature (heat and cold),
moisture (humidity), dust, chemicals, etc.
Types of Packaging
These are types of packaging which is mentioned below:
1. Paper and Carton Packaging

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2. Film Packaging
3. Foam Packaging
4. Textile Packaging
5. Plastic Boxes and Containers
Paper and Carton Packaging
Paper and carton packaging is used for different types of goods (food, electronics,
toys, shoes, kitchenware and even other packaging materials). Paper and carton
packaging companies produce wrapping paper, inflated paper, sheets, boxes, tubes,
pallets, interlayers, corners, edges and custom protective systems (depending on the
dimension and shape of the packed good, the carton is cut and modeled to fix and
protect the product).
Paper can be used to laminate other materials in order to make them stronger. There
is also anticorrosive paper that can be used to wrap goods or to laminate other
materials.
Film Packaging
There are multiple types of films used in the packaging industry, most commonly
polyethylene (PE), polypropylene (PP), polyolefin and polyvinyl chloride (PVC) films.
The films usually come on a roll and are used to wrap goods, cover goods, protect
boxes and make other packaging products (such as bags, tubes, bubble wrap and
sheets).
Films can be used for lamination, printed or perforated. They can be anticorrosive,
antistatic, shrinkable or nonshrinkable, and slippery or nonslippery.
Foam Packaging
Foam used for packaging can be produced on a roll or in sheets of different
thicknesses. The foam is used to wrap goods or make bags (usually laminated with
high-density PE), corners, edges and custom systems. The corners and edges are
used to protect flat glass, furniture and sharp edges.
Foam can be cut and modeled on the product’s shape to fix and protect it. It can be
antistatic and has good insulation properties.
Textile Packaging
There are some goods that are best protected by textiles. For example, there are
custom-made textile insertions used in the automotive industry to protect car parts
during transportation. The textile insert is put on a metal frame that fits into a metal
container. There is also textile material used for box covers.

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Plastic Boxes and Containers
Multiple types of plastic boxes and containers are used in all industries. For example,
in the food industry there are plastic containers for goods like ketchup, yogurt, milk
and juices. Plastic boxes are mainly used for transporting goods and are reusable.

T20. Packaging – Materials and Labeling

Types of Packaging Material
These are the types of packaging material which mentioned below:
1. Glass
2. Metals
3. Rubbers
4. Plastics
5. Fibrous Materials
6. Foils, Films and Laminates
7. Blister Pack
8. Textile
Glass
 Glass has been widely used as a drug packaging material.
 Glass is composed of sand, soda ash, limestone, and cullet.
 Si, Al, Na, K, Ca, Mg, Zn & Ba are generally used in the preparation of the glass.
The production of glass containers involves heating a mixture of silica (the glass
former), sodium carbonate (the melting agent), limestone (calcium carbonate) and
alumina (stabilizers) to high temperatures until the materials melt into a thick liquid
mass, which is then transferred to molds.
Metals
 Metals are the most versatile of all forms of packaging.
 They offer the combination of excellent physical protection and barrier properties,
formability, decorative potential, recyclability, and consumer acceptance.
 Metal containers are vacuum-sealed and thermally sterilized under low oxygen
pressure.
 The decomposition of nutrients is kept to a minimum in metal containers, since
metals are a perfect barrier to oxygen, light and moisture.
 The major limitations of metal containers are cost, the weight of the containers and
the fact that they are difficult to crush.

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 Aluminum and steel are the most predominantly used metals in food packaging.
Rubbers
Excellent material for forming seals, used to form closures such as bungs for vials or
in similar applications such as gaskets in aerosol cans.
 Natural Rubbers: Suitable for multiple use closures for injectable products as rubber
reseals after multiple insertion of needle.
 Synthetic Rubber: Have fewer additives and thus fewer extractable and tends to
experience less sorption of product ingredients. Are less suitable for repeated
insertions of needle because they tend to fragment or small particles of the rubber
into the product.
Plastics
 Plastics are synthesized by condensation, addition or crosslinking polymerization
of monomer units.
 In condensation polymerization, the polymer chain grows by condensation
reactions between molecules and is accompanied by the formation of water or
alcohol.
 The thermal and mechanical properties can be partially modified in order to
manufacture retortable packages with plastics that have a high melting point, or
thermostable packages making use of plastics with a low melting point and to
develop very flexible structures (sachets and wrappings), semirigid structures (trays
and tubs) and rigid structures (bottles, closures, and tanks).
Fibrous Materials
 The fibrous materials are the important part of pharmaceutical packaging.
 Fibrous materials include: Papers, Labels, Cartons, Bags, Outers, Trays For Shrink
Wraps, Layer Boards On Pallets, etc.
Foils, Films and Laminates
 Foils: The most important metal for pharmaceutical application is aluminium.
 Films: Cellophane is an attractive transparent film which can be colored and
printed upon so it useful as outer wrap.
 Laminates: are used to combine the properties of individual foil and films and
strictly are made by bonding the layer with adhesive.
Blister Pack
 Blister packs are commonly used as unit dose packaging for pharmaceutical
tablets, capsules.

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 Blister packs consist of two principal components.
 A formed base web creating the cavity inside which the product fits and.
 The lidding foil for dispensing the product out of the pack.
 There are two types of forming the cavity into a base web sheet: thermoforming and
cold forming
Textile
There are some goods that are best protected by textiles. For example, there are
custom-made textile insertions used in the automotive industry to protect car parts
during transportation. The textile insert is put on a metal frame that fits into a metal
container. There is also textile material used for box covers.

What Is Labeling?

Product labeling means displaying information about your product on its

packaging. Other than the name of the item and your brand, it should also show all
the details that your customers need to know to influence their buying decision.

Labeling is more than just a title—it is the first point of contact with the buyer.
Any business that sells something needs its products labeled to be able to
communicate its items’ value effectively.

Why Is Product Labeling Important for Branding?

Product labels are a major component of branding. How a product is presented

is a vital factor in spreading brand awareness and making your product more desirable
to the public.

The label can increase the visibility of your brand and secure customer loyalty.
With a memorable product label, you easily become a familiar sight, which creates
trust between you and the consumer.

Provides Identification

A label serves as identification to an otherwise nameless item. This helps a

customer differentiate the product from other items, especially if it’s placed next to
similar options.

Gives a Description

Labels also provide descriptive information, such as the size, ingredients,

instructions on how to use the product, how to store the product properly, and more.

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All of this helps bring the product to life while at the same time supplying the customer
with useful details.

Makes Product Comparison Easier

Product labels contain everything necessary to set it apart from every other
product. By distinguishing your product from a competing one, you are helping
customers decide which one to go with.

Helps in Marketing

Marketing is all about grabbing the attention of a customer, and that’s exactly
what a label does. Combined with design elements on the packaging, labels can
encourage new potential buyers to make a purchase.

Protects Customers from Getting Cheated

Labels protect your customers from buying the wrong product. It must contain
all the correct and pertinent information to ensure that they are getting exactly what
they’re looking for, instead of having to guess.

Provides Information as per Law

In some cases, product labels are actually mandated by law. You may see this
often in food items or pharmaceutical products, as consumer products are required to
state their ingredients or components for their buyers’ safety. These will often come
with instructions for use as well.

Labeling goes way beyond just putting a name on a product. It is a means of

communicating with your customer while creating trust and familiarity. There are
endless possibilities on how you can label your product and what you can do to
enhance its branding.

T21. Application of Technologies in SCM- RFID, Barcodes, GPS, GIS

One of fertile fields for the application of RFID is in supply chain management
(Supply Chain Management). The functionality of RFID enable developing more
flexible and intelligent logistics applications.
Applications RFID
In hospitals, the use of RFID tags allows the temperature sensor to send the
temperature of the patient at short intervals of time. Data can be monitored through

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software that can send an alert or make an alert call led to the infirmary control
board.
The application of RFID with temperature sensor is not limited to hospitals. It
can be used both in the manufacturing process and in logistics. The refrigerators may
use the RFID tag to monitor the temperature of perishable products during delivery
and to ensure that were delivered in perfect conditions of use.
Airport baggage with RFID tag relates to the owner, flight and destination. Thus,
the luggage can be monitored every passage through checkpoints preventing
baggage loss. Moreover, it can be easily located and redirected in case of flight
change, safely and in less time.
As the RFID adds value to products and services in the logistics chain:
These examples show that the benefits of RFID in logistics go well beyond that to
control the movement and storage of materials throughout the supply chain. Well
applied, RFID technology can change the way they do business, contribute to the
improvement of services, better serve customers, improve product quality, reduce
time, cost distribution and materials handling.
The main features that allow to go beyond the boundaries of management activities
and add value to the products and services are:
 Store product data in addition to the item code.
 RFID asset type can send data, moist situation indicative, temperature and
even the exact location is combined with a GPS.
 RFID UHF can reach more than 10 meters, depending on environment.
 Reading ability and writing data (read-write).
 RF capture objects in non-uniform motion.
 Reading does not have to be static and straight as the barcode.
 Capture greater distance than the optical reader (Range of reading).
 Recording single source product or part not changeable (Read only).
 Reuse of the RFID tag.
Benefits of using RFID in logistics:
Improved service levels adding flexibility and intelligence in the processes.
 In manufacturing: Integrated Automated Receiving PCP allows to continue
without wasting time waiting for the receipt of notification of the material.
 Assembly Line: Production of customized products.

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  Retail: Automatic Filling of missing items, control of the expiration date,
expediting the checkout, inventory control, returns control.
 To avoid tampering with the recording of the unique code not changeable
product.
 Check boxes, pallets and shelves on top without having to open or without eye
contact.
 Reduction in total cycle time order until delivery of the goods.
 Speed gains in material movements.
 Error reduction in deliveries of customer orders.
 Elimination of reading processes one by one from the bar code and the
consequent gain in reading speed by simultaneously capturing multiple tags.
 More agility and speed in locating materials.
 Tracking people, animals and objects.
 Inventory control: Automatic recording of the inputs and outputs of materials.
 Monitoring and control of logistics operations increasing security.
 Sure what was done to capture the RFID tag, recording the date / time of
reading.
 Inventory of products and materials quickly with less manpower.
Barcodes
Barcode technology, an automatic identification technology developed and
generated computer application for data collection, in an effective way achieved by
automatic scanning of information. There is a wide scope of advantages with barcode.
Business integration process in supply chain management has become very
simple and more useful with the use of barcodes. It’s an effective identification tool to
track products and also to curtail errors. Different types of supermarkets in the country
are into the usage of barcode management and identification system. Barcode was
first introduced in supermarkets along image recognition system of mostly used EAN
(European Article Number), for this the barcode generation and recognition software
is developed. Recognition system generates and identifies barcodes simultaneously
making it more convenient and competent for good management and material
circulation of medium along with other stores/ outlets. Being affordable, accurate and
simple to handle it is widely used, even for personnel management.

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 Supply chain management has been influenced almost every aspect by
barcodes, making it simpler and efficient. For timely and accurate information to
operate with better warehouse efficiency and lower inventory on hand employing
barcode technology in inventory practices are good.
There are multiple advantages in upgrading barcode scanners. The following are
those:
 Increased read rates: A laser scanners have their limitations as it can capture
only single lines at a time, thus limiting the ability to “read” information. The new
barcode reads using image technology, similar to the one found in digital
cameras and microprocessors, thus even the poorly printed or damaged codes
are read. The maintenance of the equipment is also minimal.
 Improved Productivity: Supply chain network such as warehouse,
transportation providers,retailers and others scans barcodes as per the
entering and exit of packagesfrom their facilities. There are sophisticated
barcode that can read codedpackages and parcels from a moving conveyor
belts. Improved productivity,accuracy and efficiency can be seen in a large
warehouses and shipping companies depending on the type of scanner used,
these improvements inefficiency plays a vital role in retaining a customer base.
 Improved real time visibility: Data on a product are transmitted to a host
computer, or cloud server by the latest digital barcode scanner. Managers,
Sales executives, customers and employees- the main stakeholders are able
to track the products’ movement and can be ready to take any action if required
at their end. The multiple benefits of improved visibility and transparency
o Bottlenecks can be identified and resolved the mangers.
o Reduction is calls from customers as they can track their shipments
o Scheduling and tracking of inventory replenishments on the storefront
can be done, leading to better sales.
o To understand/ predict the root cause of delays in the supply chain can
be done by storing images and data for later retrieval and analysis.
 Reduced cost: The new improved and advanced technology, the devices are
compact and affordable. Even small organisations can also set up without any
investment. Modern barcode scanners are compact, powerful devices, have
sleek designs, good user interface and in-built flexibility. For the stakeholders
to invest on these upgraded machines are always a better proposition.

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 GPS
Effective supply chain management is becoming a crucial competitive
advantage today, there are automated solutions to manage supply chain activities and
it is none other than GPS tracking system.
GPS now has been a part of supply chain visibility, which entails an information
system that provides more diligent and detailed tracking details of assets across a
whole network. GPS thus benefits highly in logistics operations, especially for
businesses dealing with fleet vehicles. Businesses that operate with just-in-time
principles could find great value in having more exact data on the whereabouts of their
vehicles status of orders and much more with GPS.
GPS Tracking system for Supply Chain Management will benefit the
organizations in several ways like.,
 Effective utilization of the supply vehicles
 Inventory management
 Automated fleet maintenance
 Increased visibility between various stake holders
 Faster ROI from vehicles
 Comprehensive fleet management
 Decreased Overtime
 Smooth handling in-turn provides customer references
 Reduced Operational Costs
GIS
Geographical Information Systems (GIS) offer a valuable supply chain risk
management tool. GIS analysis provides the opportunity to represent this information
visually. GIS analysis allows the decision maker to visualize a complete company
profile to include manufacturer, office and warehouse locations, and employee, client,
customers, distributor and supplier locations. Relationships can be drawn between
these locations, allowing for the company’s supply chain to be identified and
monitored. Various types of risks-either man-made or natural threats can be mapped,
layered and presented. Historical risk trends such as earthquake, floods, strikes etc.
can be over layered against the network to additionally determine an operating risk
environment.
GIS helps businesses to answer supply chain management questions like
1. What is my drive time from the central facility?

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2. How long will it take to reach delivery locations?
3. Which customer should be in separate service areas?
4. How can I track goods through my supply chain?
GIS is a excellent technology to apply for supply chain management. Supply
Chain Management(SCM) is the process of proper planning for materials
management, information and financial flow in a network consisting of manufacturers,
distributors, suppliers and customers. It helps to reduce the costs, increasing the
business and improving the customer service.
GIS application is used as a tool to map manufacturing products, processing
units, supplier locations, distribution centers, and routing of vehicles etc. Improving
supply chains for better flow of logistics becomes a challenging part of a trade. With
GIS technology, hundreds of constraints for a geographically distributed supply chain
can be collected and analyzed; better contingency plans can be developed; forecast
and balance of supply and demand; and risk management can be done.
By managing both processes and resources, supply chain management (SCM)
professionals can integrate GIS information, to find:
 Potential impact of product location
 Transportation delays at distribution hubs
 Geopolitical turmoil on transit routes
 Availability and arrival time of materials
 Projected requirements of customers.

GIS can be of vital use for supply chain management professionals as it manages
massive amounts of location-based data to produce information that helps taking

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better decisions. Often used in such diverse areas as utilities planning, construction,
government services, and retail location planning,

T22 23PL &4PL

1PL, 2PL, 3PL, 4PL, 5PL Definitions

1PL - First-Party Logistics

An enterprise that sends goods or products from one location to another is a
1PL. For example, a local farm that transports eggs directly to a grocery store
for sale is a 1PL.
2PL - Second-Party Logistics
An enterprise that owns assets such as vehicles or planes to transport products
from one location to another is a 2PL. That same local farm might hire a 2PL to
transport their eggs from the farm to the grocery store.
3PL - Third-Party Logistics
In a 3PL model, an enterprise maintains management oversight, but outsources
operations of transportation and logistics to a provider who may subcontract out
some or all of the execution.
Additional services may be performed such as crating, boxing and
packaging to add value to the supply chain. In our farm-to-grocery store

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 example, a 3PL may be responsible for packing the eggs in cartons in addition
to moving the eggs from the farm to the grocery store.
4PL - Fourth-Party Logistics
In a 4PL model, an enterprise outsources management of logistics activities as
well as the execution across the supply chain. The 4PL provider typically offers
more strategic insight and management over the enterprise's supply chain.
A manufacturer will use a 4PL to essentially outsource its entire logistics
operations. In this case, the 4PL may manage the communication with the
farmer to produce more eggs as the grocery store's inventory decreases.
5PL - Fifth-Party Logistics
A 5PL provider supplies innovative logistics solutions and develops an optimum
supply chain network. 5PL providers seek to gain efficiencies and increased
value from the beginning of the supply chain to the end through the use of
technology like blockchain, robotics, automation, Bluetooth beacons and Radio
Frequency Identification (RFID) devices.
What is a Third-Party Logistics Provider?

The term "third-party logistics provider," or 3PL, has been around since the
1970s. It simply means that a third party is involved in a company's logistics
operations, in addition to the shipper/receiver and the carrier.

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 A 3PL does not take ownership of (or title to) the products being shipped. This
third party comes into play as an intermediary or manager between the other two
parties.
The first 3PLs were intermodal marketing companies that accepted loads from
shippers and tendered them to railroads, becoming a third party in the contract
between shippers and carriers, according to the Council of Supply Chain Management
Professionals (CSCMP) glossary. Today, any company that offers some form of
logistics services for hire is known as a 3PL. This includes facilitating the movement
of parts and materials from suppliers to manufacturers, as well as finished products
from manufacturers to distributors and retailers.
A 3PL may or may not have its own assets, such as trucks and warehouses. In
some cases, the role of 3PL and broker overlap, but typically a broker is used to
engage trucking capacity for a specific shipment. A 3PL may act as a broker or use
brokers to move clients' freight.
Most 3PLs offer a bundle of integrated supply chain services, including:
 Transportation
 Warehousing
 Cross-docking
 Inventory management
 Packaging
 Freight forwarding
A 3PL can scale and customize services to meet customers' needs based on their
strategic requirements to move, store, and fulfill products and materials. Companies
turn to 3PLs when their supply chain becomes too complex to manage internally. For
example, a company may grow through mergers and acquisitions, so a supply chain
that was manageable at one time outgrows the in-house capability.
The 3PL offers experience gained from working for multiple clients across many
different industries. They also offer technology solutions — in some cases, proprietary
tools — such as transportation and warehouse management systems beyond what
the shipper could afford to invest in independently. Long-term relationships with
carriers can result in better pricing and service during periods when capacity may
come at a premium. The economy of scale can lower prices on everything from
packing tape to ocean shipping rates.

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Advantages of 3PL
 A 3PL will offer innovative strategies to transform your supply chain into a cost-
effective, responsive model.
 This decentralized, hyper-connected model provides the responsiveness
needed to meet customers' expectations for timely delivery.
 The Warehouse Anywhere system can optimize your inventory per location to
ensure stock is on hand in areas of highest demand.

Disadvantages of 3PL
While the 3PL model has been successful for decades, there are some things to
consider. Perhaps the most significant caveat is the lack of direct oversight and
control. After all, a 3PL is an outsourced service provider. That means some activities
will take place outside of your direct supervision. Ensuring quality control and customer
service requires an extra level of diligence. If a 3PL fails to deliver on a customer's
expectation, the customer will blame your company, not the 3PL.

What is a Fourth-Party Logistics Provider?

A fourth-party logistics provider, or 4PL, represents a higher level of supply chain

management for the customer. The 4PL gives its clients a “control tower” view of their
supply chains, overseeing the mix of warehouses, shipping companies, freight
forwarders and agents.
The goal is to have the 4PL act as the single interface between all aspects of
the supply chain and the client organization. Consulting firm Accenture originally
copyrighted the term in the mid-1990s, but it has since fallen into generic use.
In some cases, a 4PL may be established as a joint venture or long-term
contract between a primary client and multiple partners, often to manage logistics for
specific locations or lines of business. The structure of a 4PL can vary, as there may
be a 4PL component within a larger 3PL relationship. A 4PL is a form of business
process outsourcing, similar to contracting out human resources or financial functions.

What's the Difference Between 3PL and 4PL Logistics?

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 Typically, the 4PL does not own transportation or warehouse assets. Instead,
it coordinates those aspects of the supply chain with vendors. The 4PL may coordinate
activities of other 3PLs that handle various aspects of the supply chain. The 4PL
functions at the integration and optimization level, while a 3PL may be more focused
on day-to-day operations. A 4PL also may be known as a Lead Logistics Partner (LLP),
according to the CSCMP.
The primary advantage of a 4PL relationship is that it is a strategic relationship
focused on providing the highest level of services for the best value, as opposed to a
3PL that may be more transaction focused. A 4PL provides a single point of contact
for your supply chain. With a 3PL, there may be some aspects that you still have to
manage. The 4PL should take over those processes for you, acting as the intermediary
for 3PLs, carriers, warehouse vendors and other participants in your supply chain.
The 4PL relationship simplifies and streamlines the logistics function using
technology for greater visibility and imposing operational discipline across many
partners and suppliers. The enterprise can focus on its core competencies and rely on
the 4PL partner to manage the supply chain function for maximum value. Basically,

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

the 4PL acts as the enterprise would if the supply chain functions were managed in-
house.
As companies transition their supply chain model to forward deployment or
decentralized distribution, a 4PL partner can step in and manage that complexity.
Retailers, in particular, are shifting toward a more nimble model to support e-
commerce and omnichannel services. A 4PL can manage the multiplying number of
resources that it takes to compete at that level. The days of the million-square-foot
super regional DC may be over, as companies opt for shared warehouse space near
major customer centers to speed up responsiveness. The 4PL can manage those
relationships, as well as optimize the network to use parcel carriers or couriers to
support e-commerce, rather than LTL or truckload services.
Fourth-Party Logistics Advantages
Choosing a 3PL vs. a 4PL can be a complicated decision that depends on the
complexity of your supply chain and your company's strategic goals.
A 3PL relationship works well when the organization has a solid, high-
performance supply chain strategy in place and requires support to execute the plan.
Working with a 3PL will typically require a high level of internal management
commitment and oversight to ensure performance meets your standards. However,
many day-to-day decisions are out of your hands as you count on the providers
selected by the 3PL to meet your service commitments. An asset-based 3PL may
focus too much on ensuring that its own assets are fully utilized at the expense of
lower rates or better services from other providers. For smaller companies, a 3PL can
provide an immediate level of scale that would otherwise be cost prohibitive.
A non-asset based 4PL is agnostic in choosing suppliers, concentrating on
finding the best combination of value and service. Typically, a 4PL will have
integrated technology offerings that deliver a high level of visibility into the
supply chain for tactical and strategic analysis. Of course, internal resources
are still necessary to manage the 4PL performance, but it should be a higher
level of oversight than a 3PL.
Warehouse Anywhere has performed as both a 3PL and 4PL for our clients. Recently,
we've seen great success in acting as a 4PL in managing forward-deployed
inventories in a variety of vertical markets. We can localize your inventory in hundreds
of U.S. cities in a very short period of time.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 T24. Reverse logistics

What Is Reverse Logistics?

Reverse logistics is a type of supply chain management that moves goods from
customers back to the sellers or manufacturers. Once a customer receives a product,
processes such as returns or recycling require reverse logistics.

Reverse logistics start at the end consumer, moving backward through the
supply chain to the distributor or from the distributor to the manufacturer. Reverse
logistics can also include processes where the end consumer is responsible for the
final disposal of the product, including recycling, refurbishing or resale.

When Is Reverse Logistics Used?

Organizations use reverse logistics when goods move from their destination
back through the supply chain to the seller and potentially back to the suppliers. The
goal is to regain value from the product or dispose of it. Worldwide, returns are worth
almost a trillion dollars annually and have become increasingly common with the
growth of ecommerce.

The objectives of reverse logistics are to recoup value and ensure repeat
customers. Less than 10% of in-store purchases are returned, compared to at least
30% of items ordered online.

Reverse Logistics vs. Traditional Logistics

Traditional product flow starts with suppliers and moves on to a factory or
distributor. From there, the goods go to retailers and customers. Reverse logistics

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

management starts at the consumer and, moving in the opposite direction, returns
products to any point along the supply chain.

Well-designed supply chains are responsive to changes and can handle some
reverse logistics requirements. This reverse process can return products one step
back in the chain or to the original supplier. They can even send returned products
back to regular sales or discount channels (like liquidators).

How Reverse Logistics Works

Reverse logistics moves goods from the traditional endpoint of the supply chain
at least one step backward. This process can involve various plans and controls. Some
companies prefer to outsource this work.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

Reverse Logistics Process
The reverse logistics process involves managing returns and buying surplus
goods and materials. The process is also responsible for dealing with any leases or
refurbishments. Reverse logistics vary across different industries, and there are
different economic incentives for improving reverse logistics management.

For example, in the beverage industry, the reverse logistics process uses empty
tap containers. Beverage production companies want to recapture the value of their
containers by reusing them. This requires planning transportation, managing shipping
loads and cleaning the containers.

In the construction industry, reverse logistics moves and recycles salvaged

materials to new sites. As the construction industry adopts more sustainable practices
to reduce waste, there is an opportunity for cost savings by using reverse logistics.

In the food industry, reverse logistics is responsible for returning packaging

materials and pallets. Companies also must deal with rejected food shipments.
Rejections can create logistical challenges due to delays that lead to food spoilage
and concerns over tampering. The Reverse Logistics Association is developing
secure, quick, reliable, login (SQRL) codes on packaging to provide detailed product
information and address these logistical challenges.

5 Steps to Good Reverse Logistics

1. Process the Return

The return process starts when the consumer signals they want to return a
product. This step should include return authorization and identify the
product’s condition. This process also involves scheduling return shipments,
approving refunds and replacing faulty goods.
2. Deal with Returns
Once a returned product arrives at your location or centralized processing
center, inspect it and determine its return category. (Note: If you have
optimized reverse logistics, you should know where the product should go
before it arrives.) Sort products into the disposition options: fix, resell as new,
resell as a return, recycle, scrap or refurbish.
3. Keep Returns Moving
Reduce your daily waste by sending repairable items to the repair
department.
4. Repair
After reviewing the returned item/equipment and determining whether it can
be repaired, move it to the repair area. If not possible, sell any sellable parts.

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 5. Recycle
Any parts or products that you cannot fix, reuse or resell should be sent to the
area for recycling.

Types of Reverse Logistics

The different types of reverse logistics are also known as reverse logistics
components. They focus on returns management and return policies and procedures
(RPP) and account for remanufacturing, packaging, unsold goods and delivery issues.
Other types of reverse logistics account for leases, repairs and product retirement.

Reverse Logistics Components:

 Returns management: This process deals with product returns from

customers or avoiding returns in the first place. These activities should be fast,
controllable, visible and straightforward. Customers judge a company on its
return flow and re-return policies. A re-return is the return of an item a second
time. Often, these returns trigger the extended return policies, such as offering
store credit. For example, a customer buys a returned product on clearance,
takes it home and discovers it broken. The store policy would not normally
accept the return, but it does allow for a store credit for the faulty product. A re-
return can also occur when a vendor rejects the return and gives it back to the
purchaser without a refund. This scenario could happen with custom-made
items.
 Return policy and procedure (RPP): The policies about returns that a
company shares with customers is its RPP. These policies should be visible
and consistent. Employees should also adhere to them.
 Remanufacturing or refurbishment: Another type of reverse logistics
management includes remanufacturing, refurbishing and reconditioning. These
activities repair, rebuild and rework products. Companies recover
interchangeable, reusable parts or materials from other products, also known
as the cannibalization of parts. Reconditioning involves taking apart, cleaning
and reassembling products.
 Packaging management: This type of reverse logistics focuses on reuse of
packing materials to reduce waste and the disposal.
 Unsold goods: Reverse logistics for unsold goods handles returns from
retailers to manufacturers or distributors. These types of returns can be due to
poor sales, inventory obsolescence or a delivery refusal.
 End-of-life (EOL): When a product is EOL, it is no longer useful or does not
work. The product may no longer meet a customer's needs or be replaced by a
newer, better version. Manufacturers often recycle or dispose of products that
are end-of-life. These goods can create environmental challenges for
manufacturers and countries.
 Delivery failure: With failed deliveries, drivers return products to sorting
centers. From there, the sorting centers return the products to their point of
origin. While rare, some sorting centers may have the staff available to identify
why a delivery failed, correct the problem and resend.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  Rentals and leasing: When a piece of equipment comes to the end of its lease
or rental contract, the company that owns the product can remarket, recycle or
redeploy it.
 Repairs and maintenance: In some product agreements, customers and
companies maintain equipment or repair it if issues arise. In some cases, the
company sells damaged returned products to another consumer after repair.

What Are the Five R’s of Reverse Logistics?

The five Rs of reverse logistics are returns, reselling, repairs, repackaging and
recycling. Companies apply metrics to each of these options to track improvement and
success. Your business may want to take a closer look at the Five Rs to streamline its
reverse logistics processes and reduce losses there.

Benefits of Optimized Reverse Logistics

Optimized reverse logistics produce financial benefits while positively impacting the
environment and business culture. Refining the processes for what happens to
products after delivery helps retain customers and save money.

The product data collected when engaging with customers after delivery is an
advantage of well-executed reverse logistics. Data provides insight into an
organization’s supply chain and an opportunity to improve products and/or the
customer experience.

Optimized reverse logistics also leads to better supply chain visibility, which leads to
benefits like:

1. Cost reduction
2. Greater customer satisfaction
3. Better customer retention

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 4. Faster and better service
5. Loss reduction
6. Improved brand sentiment
7. Waste reduction and greater sustainability
T25. Green Supply Chain
Green Supply Chain Management (GSCM) is the adoption of processes that
are sustainable and effective in minimising the ecological impact. It refers to the recent
innovations in supply chain management making these processes green, such as
green purchasing, green manufacturing/materials management, green distribution and
reverse logistics.

Types of green supply chain practices

Green supply chains use ethical and environmentally sound practices at every stage,
with the goal of reducing air, water, and waste pollution.

Green purchasing:

Green purchasing, which means finding suppliers with environmentally sustainable

products and services, is just as important as greening your own operations. After
all, sourcing your materials sustainably is the foundation on which the rest of your
supply chain rests.

For some brands, seeking recycled or remanufactured materials is the way to

go. Others will need to find sustainably harvested raw materials, such as lumber
from suppliers that take steps to conserve wildlife habitat.

Green manufacturing:

Green manufacturing focuses on using fewer nonrenewable natural resources,

reducing pollution and waste, and keeping emissions to a minimum, among other
green practices. The most critical component of going green at this stage is reducing
energy use. Everything from powering equipment and lighting to keeping your factory
warm or cool requires significant energy output.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 Fortunately, alternative energy sources like hydropower, wind energy, solar
energy, and biofuels can help reduce your reliance on fossil fuels. Newer
manufacturing technologies and even changes as simple as installing light-emitting
diode lights can also make a big difference in your energy usage.

Green packaging:

Green packaging considers every phase of a package’s life cycle. That includes
everything from how your supplier sources materials to how consumers dispose of the
packaging. Using boxes and packing materials made of postconsumer recycled
materials is a good start. Another option is biodegradable packing material. Made of
everything from corn to mushrooms, this material will easily decompose in consumers’
gardens—or in a landfill.

Green warehousing:

Green warehousing focuses on ensuring warehouses run more efficiently, reducing

waste and energy use. One big challenge is that warehouses grow obsolete quickly.

Installing installation, using alternative energy sources like hydro and wind
power, and adding windows to maximize natural light are just a few ways to improve
your facility. And today, many organizations work with a third party to take advantage
of managed warehouses in strategic locations. The closer to warehouse is to key
distribution hubs, the less energy you’ll need to expend when transporting goods.

Green transportation:

According to the EPA, transportation caused 28.2 percent of 2018 greenhouse gas
emissions—more than any other source. Fortunately, there are ways to make
transportation greener, such as consolidating goods to minimize your total number of
air freight shipments or truck trips.

Trains carry far more cargo than trucks, use less fuel per ton-mile, and tend to
cost less. And finally, choose a freight forwarder that prioritizes green transportation.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

Life-cycle management:

Green product design always considers the complete life cycle of the item. For
example, say you design backyard playground equipment for children. If the material
is sturdy enough, your customer can pass on the playground equipment to another
child after the first child outgrows it. And if the playground consists of recyclable
materials, such as wood, those materials can have a second (and third, and fourth)
life as outdoor furniture, paper, or mulch after the original product is no longer in use.

What is the difference between green and sustainable supply chain practices?

Green supply chain management and sustainable supply chain management

share many features in common, but the two fields are not interchangeable. Whereas
green supply chain practices have the goal of improving environmental health,
sustainable supply chains focus on reducing their impact across many areas of life to
ensure industry can continue to operate into the future. Naturally, environmental
concerns factor into sustainability. But organizations also have to consider areas of
social responsibility that include fair trade, ethical labor practices, and the effects of
industry on surrounding communities. They also need to consider economic issues,
like managing sustainable growth.

Leading examples of green supply chain practices, such as actively working to switch
to biofuels, incorporate recycled materials into the manufacturing process, and reduce
energy use, are also sustainable. But not all sustainable supply chain practices are
explicitly green. For example, instituting better labor practices and fair pay for workers
helps promote a higher quality of life, overall. But these practices don’t have a direct
impact on the environment.

Trends in green supply chain practices

Green supply chain practices are working themselves into the greater
consciousness because they’ve arisen in response to pressing need. Each year,
measurable human demand and activity exceed the regenerative capacity of the
planet’s natural ecosystem. It’s a phenomenon known as “ecological overshoot.” In

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

2020, for example, overshoot occurred on August 22. For the rest of the year, human
activities operated in ecological deficit, drawing on resources needed for the future.

The latest green supply chain practices

The following supply chain trends and practices are helping organizations
achieve greener operations and promote a more sustainable future for our planet:

 Minimizing air freight:

Shipping by air is extraordinarily efficient in terms of transporting goods quickly.

Unfortunately, it’s far from energy efficient. Developing the right freight and
transportation mix helps ensure you’re equipped to meet customer demand
while minimizing your environmental impact.

 Investing in transportation infrastructure:

Improvements to ports, railways, and roads, especially in emerging markets like

Southeast Asia, are enabling more efficient transportation. That, in turn, has led
to fewer carbon emissions.

 3D printing:

3D printing is more energy efficient and cost efficient than other equipment and
processes used in the manufacturing industry. Every day, 3D printing gains new
applications across a range of industries—from aerospace to medical device
manufacturing.

By minimizing energy use and waste, 3D printers help lower carbon emissions.
It’s even possible to turn recycled materials into new products using a 3D
printer.

 Circular supply chains:

Circular supply chains focus on recovering and recycling waste materials to turn
them into saleable products. This approach can take many forms—from

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 refurbishing old products for resale, as Apple does with its iPhones, to
reprocessing old components to make brand-new products. Needless to say,
adopting the circular economy model reduces waste and helps keep valuable
materials out of landfills. And it can also be quite profitable for companies.

 Carbon emissions trading:

Carbon trading is the process of exchanging carbon credits among nations to

minimize CO2 emissions. Each country has a cap on the amount of CO 2 it can
release. Nations with higher carbon emissions can then buy carbon credits from
countries with lower carbon emissions, gaining the right to release more
CO2 into the atmosphere. Individual companies can also engage in trading. The
idea behind this system is that using fossil fuels comes with many hidden
costs—from environmental degradation to health care needs resulting from
poor air quality.

Technology developments that are impacting green supply chain practices

The advent of supply chain technology innovations makes it easier to achieve green
results by optimizing efficiency at every leg of a product’s journey:

 The Internet of Things (IoT):

IoT enables organizations to monitor equipment, inventory, and energy use in

real time. For example, sensors can track the temperature and lighting inside a
warehouse, making it possible to control these aspects from far. Organizations
gain greater awareness of energy waste, overstocking, and other missteps.
That leads to a clearer picture of what needs to change throughout the supply
chain.

 Digitization of the supply chain:

Improved digital tools, such as smarter WMS, make it possible to increase

supply chain efficiency and automate processes—from stock reordering to
optimizing warehouse picking paths. This helps supply chain leaders increase

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 accuracy, avoid rush orders that require expedited shipping solutions like air
freight, and prevent overordering. In turn, these improvements help reduce
waste and energy use.

 Artificial intelligence (AI):

AI helps automate processes, boost efficiency, and prevent human error. These
capabilities are useful throughout the supply chain—from streamlining
manufacturing processes to using data to forecast product demand to analyzing
delivery routes and planning the quickest journey. By helping people work faster
and more accurately, AI leads to less wasted effort and resources. For example,
say route optimization tools enabled by AI help shave an average of a few
minutes off each truck haul. Over the course of a year, that could add up to a
significant reduction in fuel expenditure and CO 2 emissions.

 Robotics:

Robots hold great potential for streamlining operations throughout the supply
chain—particularly when it comes to logistics. For example, drones could one
day make small deliveries much more efficient than large vehicles. In addition,
self-driving trucks could automate traffic decisions, optimizing everything from
delivery route to fuel efficiency.

 Materials engineering:

In recent years, advances in materials engineering have led to greener and

more efficient manufacturing and product packaging. For example, new
processes make it easier to turn recycled materials into durable products or
develop new materials that are lightweight but strong. In addition, life cycle
planning tools help organizations optimize products for a future beyond their
initial use.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 T26. IT Applications in SCM

Companies that opt to participate in supply chain management initiatives accept

a specific role to enact. They have a mutual feeling that they, along with all other supply
chain participants, will be better off because of this collaborative effort.
The advancement of inter organizational information system for the supply chain
has three distinct benefits. These are −
 Cost reduction − The advancement of technology has further led to ready
availability of all the products with different offers and discounts. This leads to
reduction of costs of products.
 Productivity − The growth of information technology has improved productivity
because of inventions of new tools and software. That makes productivity much
easier and less time consuming.
 Improvement and product/market strategies − Recent years have seen a
huge growth in not only the technologies but the market itself. New strategies
are made to allure customers and new ideas are being experimented for
improving the product.
It would be appropriate to say that information technology is a vital organ of supply
chain management. With the advancement of technologies, new products are being
introduced within fraction of seconds increasing their demand in the market.
Here we will be discussing the role of some critical hardware and software
devices in SCM. These are briefed below −

Electronic Commerce

Electronic commerce involves the broad range of tools and techniques used to
conduct business in a paperless environment. Hence it comprises electronic data
interchange, e-mail, electronic fund transfers, electronic publishing, image processing,
electronic bulletin boards, shared databases and magnetic/optical data capture.

Electronic commerce helps enterprises to automate the process of transferring

records, documents, data and information electronically between suppliers and
customers, thus making the communication process a lot easier, cheaper and less
time consuming.

Electronic Data Interchange

Electronic Data Interchange (EDI) involves the swapping of business

documents in a standard format from computer-to-computer. It presents the capability
as well as the practice of exchanging information between two companies
electronically rather than the traditional form of mail, courier, & fax.
The major advantages of EDI are as follows −

 Instant processing of information

 Improvised customer service

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  Limited paper work
 High productivity
 Advanced tracing and expediting
 Cost efficiency
 Competitive benefit
 Advanced billing
The application of EDI supply chain partners can overcome the deformity and
falsehood in supply and demand information by remodeling technologies to support
real time sharing of actual demand and supply information.

Barcode Scanning

We can see the application of barcode scanners in the checkout counters of

super market. This code states the name of product along with its manufacturer. Some
other practical applications of barcode scanners are tracking the moving items like
elements in PC assembly operations and automobiles in assembly plants.

Data Warehouse

Data warehouse can be defined as a store comprising all the databases. It is a

centralized database that is prolonged independently from the production system
database of a company.
Many companies maintain multiple databases. Instead of some particular business
processes, it is established around informational subjects. The data present in data
warehouses is time dependent and easily accessible. Historical data may also be
accumulated in data warehouse.

Enterprise Resource Planning(ERP) Tools

The ERP system has now become the base of many IT infrastructures. Some
of the ERP tools are Baan, SAP, PeopleSoft. ERP system has now become the
processing tool of many companies. They grab the data and minimize the manual
activities and tasks related to processing financial, inventory and customer order
information.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 ERP system holds a high level of integration that is achieved through the proper
application of a single data model, improving mutual understanding of what the shared
data represents and constructing a set of rules for accessing data.
With the advancement of technology, we can say that world is shrinking day by
day. Similarly, customers' expectations are increasing. Also companies are being
more prone to uncertain environment.

The strategic and technological interventions in supply chain have a huge effect in
predicting the buy and sell features of a company. A company should try to use the
potential of the internet to the maximum level through clear vision, strong planning and
technical insight. This is essential for better supply chain management and also for
improved competitiveness.

Computerized Shipping and Tracking

With the aid of modern technologies and web-based software, like
a transportation management system (TMS), you can simplify the supply
process and dramatically reduce shipping errors. Utilizing systems like
TMS, ERP, and even CRM enables savvy business owners to consolidate all
aspects of their supply chain in one place. The software will allow you to digitally
organize inventory data, monitor and manage shipping, and tracking
information, and create electronic bills of lading or invoices with ease. Through
the use of supply chain management technologies, you can greatly reduce the
time spent shipping, receiving, tracking, and compiling order data, which will
save your company both time and money.

2. Radio Frequency Identification (RFID)

Radio Frequency Identification (RFID) is a vital piece of technology that
can provide innumerable benefits to the business owner. RFID chips are placed
on every product and provide a way for business owners to easily track their
inventory. Due to the increased visibility RFID chips provide, they will

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

substantially improve your supply chain efficiency by detecting any order
anomalies as they occur, enabling employees to immediately correct mistakes.
In addition, it allows for easier and more consistent tracking, enabling business
owners to have maximum control and visibility over their products at all times.
Since RFID chips provide computerized product management, they can
eliminate the potential for errors, simplify the supply chain, and reduce operating
costs.

3. Use Social Media to Streamline Supply Chain

Social media is a popular technology that has swept the world. With over
288 million Twitter users and 1.23 billion Facebook users, it’s no wonder many
businesses are turning to social media to gain visibility for their company. In
fact, over 70 percent of all Fortune 500 companies rely on social media as part
of their marketing strategy and supply chain management. Through the use of
social media, you can create more open communication with customers,
increase the visibility of your company, improve the demand on your products,
utilize cost-effective and time-efficient marketing strategies, lower your
operational costs, and enhance your company’s overall productivity. Social
media can be used to interact with customers, respond to questions, report
accidents or weather conditions that may impede delivery schedules, and
create automated updates about your inventory.

INFOGRAPHIC: Streamline Supply Chain Using Social Media

Social Media has been widely used in general business and marketing
but the application in supply chain management context seems to be lagging
behind. As a matter of fact, social media can be utilized to improve various
aspects of supply chain and business results can be achieved rapidly.

The purpose of this infographic is to illustrate 10 actions across 4

categories, namely, – Supply chain event management – Relationship
management – Supply chain collaboration – Information technology.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

4. Big Data Will Envelope and Empower all Other Supply
Chain Technology Applications
The scale, scope and depth of data supply chain technology applications are
generating today is accelerating, providing ample data sets to drive contextual
intelligence.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 Big
Data also allows more complex supplier networks that focus on knowledge
sharing and collaboration as the value-add over just completing
transactions. Big data is revolutionizing how supplier networks form, grow,
proliferate into new markets and mature over time. Transactions aren’t the only
goal, creating knowledge-sharing networks is, based on the insights gained
from big data analytics.

Simplify Your Supply Chain with Supply Chain Technology

Applications
By simplifying the supply chain and disposing of unnecessary links, you can
improve efficiency and reduce expenditures. Work directly with the
manufacturers whenever possible, rather than purchasing through an
intermediary source.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 T27. SCM in E Business

With the wide spread of computer network, communication technology and the
internet, ecommerce, as an advanced transaction method, which is based on the
computer network, is fashionable all over the world. Supply chain management under
e-commerce environment is a combination of e-commerce and supply chain
management. It focus on customers, integrates whole the process of supply chain,
makes full use of external resources, realizes rapid and sharp reaction, immensely
reduce the level of stock. The development of ecommerce provides good situation for
the implement of supply chain management, and at the same time, it also raises higher
requirement, electronic supply chain management will truly become the main format
of enterprise supply chain management, and will be known and applied by more and
more enterprises. Supply chain management becomes an important way for enterprise
to improve adaptability and competitiveness, and also is the important direction and
filed in international business management.

Advantage of SCM

Supply Chain Management (SCM) software can offer tremendous value to any
company that relies on the smooth planning and execution of related operations to
achieve long-term profitability and maintain a solid competitive edge.

Improved Supply Chain Network

Supply chain management software provides complete, 360-degree visibility across

the entire supply chain network. It allows users to monitor the status of all activities
across all suppliers, production plants, storage facilities, and distribution centers. This
enables more effective tracking and management of all related processes, from the
ordering and acquisition of raw materials, to manufacturing and shipping of finished
goods to customers or retail outlets.

Minimized Delays

Many supply chains – particularly those that haven’t been enhanced with a supply
chain application – are plagued by delays that can result in poor relationships and lost
business. Late shipments from vendors, hold-ups on production lines, and logistical
errors in distribution channels are all common issues that can negatively application a
company’s ability to satisfy customer demand for its products. With SCM software, all

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

activities can be seamlessly coordinated and executed from start to finish, ensuring
much higher levels of ontime delivery across the board.

Enhanced Collaboration

Imagine having the ability to know exactly what your suppliers and distributors are
doing at all times – and vice versa. SCM software makes that possible by bridging the
gap between disparate business software systems at remote locations to dramatically
improve collaboration among supply chain partners. With SCM software, all
participants can dynamically share vital information – such as demand trend reports,
forecasts, inventory levels, order statuses, and transportation plans – in real-time. This
type of instantaneous, unhindered communication and data-sharing will help keep all
key stakeholders informed, so that supply chain processes can run as smoothly as
possible.

Reduced Costs

Supply Chain Management software can help reduce overhead expenses in a variety
of ways. It can, for example:

 Improve inventory management, facilitating the successful implementation of just-

intime stock models and eliminating the strain on real estate and financial resources
incurred by the storage of excess components and finished goods

 Enable more effective demand planning, so production output levels can be set to
most effectively address customer requirements – without the shortages that result in
lost sales or wastes that drain budgets

 Improve relationships with vendors and distributors, so that purchasing and logistics
professionals can identify cost-cutting opportunities such as volume discounts

Advantage of E-Commerce

 Using E-Commerce, organization can expand their market to national and

international markets with minimum capital investment. An organization can easily
locate more customers, best suppliers and suitable business partners across the
globe.

 E-Commerce helps organization to reduce the cost to create process, distribute,

retrieve and manage the paper based information by digitizing the information.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 E-commerce improves the brand image of the company.

 E-commerce helps organization to provide better customer services.

 E-Commerce helps to simplify the business processes and make them faster and
efficient.

 E-Commerce reduces paper work a lot.

 E-Commerce increased the productivity of the organization.

T28.E-business application in SCM

Role of E-business in a Supply Chain

The term e-Business to describe businesses run on the internet, or businesses that
use internet technologies to improve the productivity or profitability of a business.

E-business refers exclusively to internet businesses. IBM was one of the first to use
this term when it launched a campaign built around the term.

E-Business is one of the easiest ways to reach out to the people involved in the supply
chain. A business can put all information regarding their products, services, contact
number on the site. Once done, the website is available for the customers and other
participants of the supply chain to be viewed. The customers or suppliers can then
view all the types of products and services available and accordingly make an offer.

E-commerce vs E-business

Many a times we use the term e-commerce and e-business interchangeably, but
clearly they are distinct concepts. In e-commerce, information and communications
technology (ICT) is used in inter-business or inter-organizational transactions
(transactions between and among firms/organizations) and in business-to-consumer
transactions (transactions between firms/ organizations and individuals).

Primary processes in E-business

1. Production processes – Production processes includes procurement, ordering

and replenishment of stocks, processing of payments, electronic links with
suppliers and production control processes amongst others.
2. Customer-focused processes: Customer-focused processes includes
promotional and marketing efforts, selling over the internet, processing of
customers’ purchase orders and payments and customer support amongst
others.
3. Internal management processes – Internal management processes include
employee services, training, internal information-sharing, video-conferencing,
and recruiting. Electronic applications enhance information flow between
production and sales forces to improve sales force productivity. Workgroup

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 communication and electronic publishing of internal business information are
likewise made more efficient.

We shall now discuss how e- business can provide a virtual supply chain over the
internet. It performs the following functions –

1. Provides information on the products to all the participants of the supply chain.
2. Allows placing orders with suppliers.
3. Allows customers to place orders.
4. Filling and delivering the orders to customers.
5. Receiving payments from customers

All these transactions are traditional, but with the use of e-business, these transactions
are now performed more efficiently and quickly, thereby providing high levels of
customer response. E- Business allows transactions round the clock which no other
mode of payment can provide. In this chapter we are going to learn about the two most
important models of e- Business i.e. B2C e- business and B2B e- business.

Business to Consumer e-business (B2C)

 E-Business of this type takes place between a company and a consumer.

 But in case, the consumer comes directly in contact with the company and can
view the company brochure or prospectus online along with their product and
services and thus, make an order. This type of business reduces the trouble of
the consumers going to the retail outlets and buying their goods.

Business to Business (B2B)

 E-Business of this type takes place between a company and a company.

 Many a time, one company is dependent on another company for raw material,
spare parts or other products which they require to manufacture their goods.

The supply chain managers must note that the value provided by e-business is huge.
However, its correct implementation is very necessary or else it may even turn the
other way round for the company, e-business implementation is not an easy process
and the failure to exercise proper implementation has even resulted in large
companies closing down.

E-Business Framework

E-business framework consists of the role it plays in all the functions of a supply chain
like marketing, sales, research and development, logistics etc. The values that e-
business provides to a supply chain by providing clear visibility of every stage in a
supply chain –

General values

 Exchange and share data across the world

 Send messages faster and cheaper
 Approve and proof work quickly

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  Introduce collaborative working
 Update employees instantly new policies or procedures
 Hold Web meetings or data conferencing
 Take advantage of time difference
 Send out e-mail automatically
 Use the internet to improve business administration
 Getting trained on the Web

E-Supply Chain Management SCM Decision Framework

Research & Development Value

 Expedite market and product research – Almost all the information is available
on the web and most of it is free. Finding information to assist in product
development is usually much quicker using e-commerce methods, thereby
significantly reducing product development time.
 Trade intellectual assets on the web – Also patents and other intellectual assets
can be bought, sold, and licensed in e- markets, making the whole process of
acquiring licensing rights, and marketing them much easier.

Marketing Value

 Look bigger
 Use the internet to deliver products and services
 Provide an extensive business profile and online information centre
 Track response on the internet
 Send e-newsletters to customers and save time, postage and packaging
 Clearly position your business

Sales value

 Introduce another channel to market

 Automate interactive business processes

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  Lower the cost of order processing
 No physical space limitations
 Buy and sell quicker
 Boost sales with exports
 Close sales faster
 Use a website for direct and indirect selling

Procurement value

 Reduce procurement costs and improve efficiency

Logistics value

 Optimize inventory levels

 Provide information by self-service

Efficiently improving supply chain efficiency

E-commerce together with internet methods enable real-time communications, and

dynamic interchange of data, up and down the supply chain. All the information can
be shared through emails, extranets, or by using middleware such as Microsoft Biz
Talk, to enable legacy systems to transform an EDI document into an XML-readable
format, so that every e- commerce system can understand and interact with it, and
vice versa.

B2B E-Business and B2C E-Business

B2B e-business

B2B e-business is defined as e-business between companies. This is the type of e-

business that deals with relationships between businesses. nearly 80% of e-
businesses are of this type, and B2B e-business will continue to grow faster than the
B2C segment. The B2B market has two primary components –

 E-infrastructure
 E-markets

E- infrastructure is the architecture of B2B, primarily consisting of –

 Logistics – transportation, warehousing and distribution (e.g- Procter and

Gamble)
 Application service providers – deployment, hosting and management of
packaged software from a central facility (e.g., Oracle and Linkshare)
 Outsourcing of functions in the process of e-business, such as Web-hosting,
security and customer care solutions (e.g., outsourcing providers such as
eShare, NetSales, iXL Enterprises and Universal Access)
 Auction solutions software for the operation and maintenance of real-time
auctions in the Internet (e.g., Moai Technologies and OpenSite Technologies)
 Content management software for the facilitation of Web site content
management and delivery (e.g., Interwoven and ProcureNet)

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  Web-based business enablers (e.g., Commerce One, a browser-based, XML
enabled purchasing automation software)
 E-markets are simply defined as websites where buyers and sellers interact
with each other and conduct transactions.

Benefits of B2B E-business in developing markets

There are four important benefits of B2B e-business in developing markets, like India,
especially in the field of:

 reduced transaction costs

 Disintermediation
 Transparency in pricing
 Economies of scale and network effects,

B2C E- Business

Business-to-consumer (B2C) e-business (or business between companies and

consumers) involves customers gathering information, purchasing physical goods
(i.e., tangibles such as books or consumer products) or information goods (or goods
of electronic material or digitised content, such as software, or e-books); also for
information goods, receiving products over an electronic network. It is the second
largest and the earliest form of e- business. Its origins can be traced to online retailing
(or e-tailing).

Practicing E-Business

A supply chain manager, before setting up an e-business in practice, should consider

 Integration of the internet with the existing physical network: You will
agree a company cannot do business with the internet alone. It has to also take
into consideration the other channels of distribution. E-business should be well
integrated with other channels of distribution in order to gain maximum
advantage because no physical network can take the burden of running a
business alone.
 Devise shipping pricing strategies that reflect costs: Companies selling
products online, must charge shipping costs to the appropriate customers
based on their orders. Different orders will have different shipping costs, based
on the total volume of the order, the size and the place of destination of the
order.
 Optimizing e- business logistics: Optimizing e- business logistics, asks the
companies to deliver the smallest of packages to their customers in a cost
effective way. With smaller packages containing small products, it becomes
critical for companies to exploit every possible opportunity to consolidate
shipments to lower the costs.
 Designing the e- business supply chain to easily handle returns: Since it
makes a lot of difference for a customer to buy a product online, and when he
is buying the product from a retail outlet.
 Keep the customers informed throughout the order fulfillment process:
When designing a business online a customer should places an order, it is the

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 duty of the company to inform the customer about the status of his (customer)
order.

T29. Coordination in Supply Chain Management

Coordination implies actions by various agents in the supply chain that are
aimed at increase in total supply chain profits. It also implies that supply chain agents
avoid actions that improve their local profits but hurt total profits. Hence supply chain
coordination principles requires each stage of the supply chain to take into account
the impact its actions have on other stages.

The Importance of Supply Chain Management

It is well known that supply chain management is an integral part of most

businesses and is essential to company success and customer satisfaction.

Boost Customer Service

 Customers expect the correct product assortment and quantity to be delivered.

 Customers expect products to be available at the right location. (i.e., customer
satisfaction diminishes if an auto repair shop does not have the necessary parts
in stock and can’t fix your car for an extra day or two).
 Right Delivery Time – Customers expect products to be delivered on time (i.e.,
customer satisfaction diminishes if pizza delivery is two hours late or Christmas
presents are delivered on December 26).
 Right After Sale Support – Customers expect products to be serviced quickly.
(i.e., customer satisfaction diminishes when a home furnace stops operating in
the winter and repairs can’t be made for days)

Reduce Operating Costs

 Decreases Purchasing Cost – Retailers depend on supply chains to quickly deliver

expensive products to avoid holding costly inventories in stores any longer than
necessary.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  Decreases Production Cost – Manufacturers depend on supply chains to reliably
deliver materials to assembly plants to avoid material shortages that would
shutdown production.
 Decreases Total Supply Chain Cost – Manufacturers and retailers depend on
supply chain managers to design networks that meet customer service goals at
the least total cost. Efficient supply chains enable a firm to be more competitive
in the market place.

Improve Financial Position

 Increases Profit Leverage – Firms value supply chain managers because they
help control and reduce supply chain costs. This can result in dramatic
increases in firm profits.
 Decreases Fixed Assets – Firms value supply chain managers because they
decrease the use of large fixed assets such as plants, warehouses and
transportation vehicles in the supply chain..
 Increases Cash Flow – Firms value supply chain managers because they speed
up product flows to customers.

Societal Roles of SCM

Ensure Human Survival

 SCM Helps Sustains Human Life – Humans depend on supply chains to deliver
basic necessities such as food and water. Any breakdown of these delivery
pipelines quickly threatens human life. For example, in 2005, Hurricane Katrina
flooded New Orleans, LA leaving the residents without a way to get food or
clean water. As a result, a massive rescue of the inhabitants had to be made.
During the first weekend of the rescue effort, 1.9 million meals and 6.7 million
liters of water were delivered.

 SCM Improves Human Healthcare – Humans depend on supply chains to deliver

medicines and healthcare. During a medical emergency, supply chain
performance can be the difference between life and death. For example,
medical rescue helicopters can save lives by quickly transporting accident
victims to hospitals for emergency medical treatment. In addition, the medicines
and equipment necessary for treatment will be available at the hospital as a
result of excellent supply chain execution

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  SCM Protects Humans from Climate Extremes – Humans depend on an energy
supply chain to deliver electrical energy to homes and businesses for light, heat,
refrigeration and air conditioning. Logistical failure (a power blackout) can
quickly result in a threat to human life. For example, during a massive East
Coast ice storm in January 1998, 80,000 miles of electrical power lines fell
resulting in no electricity for 3,200,000 Montreal, Quebec residents. Due to
extreme cold, 30 died and 25% of all Quebec residents left home to seek heated
shelter. In addition, economic costs included $3 billion in lost business, $1
billion in home damage and $1 billion in government expenditures.

Improve Quality of Life

 Foundation for Economic Growth – Societies with a highly developed supply

chain infrastructure (modern interstate highway system, vast railroad network,
numerous modern ports and airports) are able to exchange many goods
between businesses and consumers quickly and at low cost. As a result, the
economy grows. In fact, the one thing that most poor nations have in common
is no or a very poorly developed supply chain infrastructure.

 Improves Standard of Living – Societies with a highly developed supply chain

infrastructure (modern interstate highway system, vast railroad network,
numerous modern ports and airports) are able to exchange many goods
between businesses and consumers quickly and at low cost. As a result,
consumers can afford to buy more products with their income thereby raising
the standard of living in the society.
 Job Creation – Supply chain professionals design and operate all of the supply
chains in a society and manage transportation, warehousing, inventory
management, packaging and logistics information. As a result, there are many
jobs in the supply chain field.

 Opportunity to Decrease Pollution – Supply chain activities require packaging

and product transportation. As a by-product of these activities, some
unwanted environmental pollutants such as cardboard waste and carbon
dioxide fuel emissions are generated.

 Opportunity to Decrease Energy Use – Supply chain activities involve both human
and product transportation. As a by-product of these activities, scarce energy
is depleted. For example, currently transportation accounts for 30% of world
energy use and 95% of global oil consumption.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

Protect Cultural Freedom and Development

 Defending Human Freedom – Citizens of a country depend on military logistics

to defend their way of life from those who seek to end it. Military logisticians
strategically locate aircraft, ships, tanks, missiles and other weapons in
positions that provide maximum security to soldiers and other citizens. Also,
superior logistics performance yields military victory.
 Protects Delivery of Necessities – Citizens of a country depend on supply chain
managers to design and operate food, medicine and water supply chains that
protect products from tampering. Sophisticated packaging techniques, state of
the art surveillance cameras, global positioning systems and RFID inventory
tracking are some of the methods used to deter terrorists from accessing these
vital logistics systems.

Lack of Supply Chain Coordination and the Bullwhip Effect

A lack of coordination creates "bullwhip effect" in the supply chain. Due to this
effect, fluctuations in sales become larger and larger fluctuations in orders at higher
stages in the supply chain. This leads to situations wherein large shortages or large
surplus capacities are felt in the supply chain cyclically.

Bullwhip effect reduces the profit of a supply chain by making it more expensive
to provide a given level of product availability.

In what way bullwhip effect increases costs for the supply chain?
1. In increases manufacturing cost.
2. It increases inventory cost.
3. It increases replenishment lead times.
4. Increases transportation cost.
5. Increases labor cost in shipping and receiving. All items of cost increase because
excess capacity has to be installed to take care of unnecessary peaks in demand.
6. It reduces product availability due to some orders not getting filled when demand
peaks. So some retail outlets may go out of stock.
7. Leads to problems of relationships - every body claims that they have done right.
But still there is problem in the supply chain either as unfilled orders or excess
inventory not having the order from down stream side.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

The main reasons for coordination problems in supply chain are distributed owners of
various stages of production & distribution, and product variety.

The fundamental challenge is for supply chains to achieve coordination in spite of

multiple ownership and increased product variety.

Obstacles to Coordination in a Supply Chain

 Incentive Obstacles
If a transport manager's incentive compensation is based on average transport cost,
he tries to optimize his incentive objective without considering its effect on other supply
chain stages.

If sales force has incentive for selling to dealers, they push sales to dealers even
though there is no sale in the period to customers. This will reduce orders from the
dealers in the subsequent periods.

 Information Processing Obstacles

If each supply stage depends on orders from its previous stage without considering
the ultimate sales to the consumer bull whip effect will appear.

 Operational Obstacles
Economic batch quantities result in large lot sizes which are released periodically.

 Pricing Obstacles
Quantity discounts and sales promotion discounts to dealers create distortions in
orders.

 Behavioural Obstacles
Each stage of the supply chain thinks locally and it unable to see the effect on the total
supply chain and other supply chain stages.

Managerial Levers to Improve Coordination in Supply Chains

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

• Aligning goals and incentives
• Improving information accuracy
• Improving operational accuracy
• Designing pricing strategies to stabilize orders
• Building Partnerships and trust

Building Strategic Partnerships and Trust within a Supply Chain

Mutual Trust is a belief that each agent or party is interested in the other's welfare and
would not take actions without considering their impact on the other stage.

Cooperation and trust in a supply chain relationship leads to the following benefits:

1. They are more likely to take the other party's objectives into consideration
when making decisions.
2. Sharing of information is natural between parties that trust each other.
3. Operational improvements are easier to implement.
4. Pricing schemes are easier to design if both parties are aiming for common
good.
5. Supply chain productivity increases because inspection can be avoided at
many steps.

The key steps to be taken in the design of partnership are:

1. Assessing the mutual benefit of the partnership.

2. Identifying operations roles for each party in the partnership.
3. Creating effective contracts
4. Designing effective conflict resolution mechanism

Achieving Coordination in Practice

1. Quantify the bullwhip effect
2. Get top management commitment for coordination
3. Devote resources to coordination
4. Focus on communication with others stages
5. Try to achieve coordination in the entire supply chain network

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 6. Use technology to improve connectivity in the supply chain
7. Share the benefits of coordination equitably.

[Link] Chain Performance Analysis- Bench Marking

Supply chain performance measure can be defined as an approach to judge the

performance of supply chain system. Supply chain performance measures can broadly
be classified into two categories −
 Qualitative measures − For example, customer satisfaction and product
quality.
 Quantitative measures − For example, order-to-delivery lead time, supply
chain response time, flexibility, resource utilization, delivery performance.
The performance of a supply chain can be improvised by using a multi-dimensional
strategy, which addresses how the company needs to provide services to diverse
customer demands.

Quantitative Measures
Quantitative measures is the assessments used to measure the performance, and
compare or track the performance or products. We can further divide the quantitative
measures of supply chain performance into two types. They are −

 Non-financial measures
 Financial measures
Non - Financials Measures
The metrics of non-financial measures comprise cycle time, customer service level,
inventory levels, resource utilization ability to perform, flexibility, and quality. In this
section, we will discuss the first four dimensions of the metrics −

Cycle Time
Cycle time is often called the lead time. It can be simply defined as the end-to-end
delay in a business process. For supply chains, cycle time can be defined as the
business processes of interest, supply chain process and the order-to-delivery
process. In the cycle time, we should learn about two types of lead times. They are as
follows −

 Supply chain lead time

 Order-to-delivery lead time
The order-to-delivery lead time can be defined as the time of delay in the middle of the
placement of order by a customer and the delivery of products to the customer. In case
the item is in stock, it would be similar to the distribution lead time and order
management time. If the ordered item needs to be produced, it would be the
summation of supplier lead time, manufacturing lead time, distribution lead time and
order management time.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

Customer Service Level
The customer service level in a supply chain is marked as an operation of multiple
unique performance indices. Here we have three measures to gauge performance.
They are as follows −
 Order fill rate − The order fill rate is the portion of customer demands that can
be easily satisfied from the stock available. For this portion of customer
demands, there is no need to consider the supplier lead time and the
manufacturing lead time. The order fill rate could be with respect to a central
warehouse or a field warehouse or stock at any level in the system.
 Stockout rate − It is the reverse of order fill rate and marks the portion of orders
lost because of a stockout.
 Backorder level − This is yet another measure, which is the gauge of total
number of orders waiting to be filled.
 Probability of on-time delivery − It is the portion of customer orders that are
completed on-time, i.e., within the agreed-upon due date.
In order to maximize the customer service level, it is important to maximize order fill
rate, minimize stock out rate, and minimize backorder levels.

Inventory Levels
As the inventory-carrying costs increase the total costs significantly, it is essential to
carry sufficient inventory to meet the customer demands. In a supply chain system,
inventories can be further divided into four categories.

 Raw materials
 Work-in-process, i.e., unfinished and semi-finished sections
 Finished goods inventory
 Spare parts
It’s a must to maintain optimal levels of each type of inventory. Hence gauging the
actual inventory levels will supply a better scenario of system efficiency.

Resource Utilization
In a supply chain network, huge variety of resources is used. These different types of
resources available for different applications are mentioned below.
 Manufacturing resources − Include the machines, material handlers, tools,
etc.
 Storage resources − Comprise warehouses, automated storage and retrieval
systems.
 Logistics resources − Engage trucks, rail transport, air-cargo carriers, etc.
 Human resources − Consist of labor, scientific and technical personnel.
 Financial resources − Include working capital, stocks, etc.
In the resource utilization paradigm, the main motto is to utilize all the assets or
resources efficiently in order to maximize customer service levels, reduce lead times
and optimize inventory levels.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

Finanacial Measures
The measures taken for gauging different fixed and operational costs related to a
supply chain are considered the financial measures. Finally, the key objective to be
achieved is to maximize the revenue by maintaining low supply chain costs.
There is a hike in prices because of the inventories, transportation, facilities,
operations, technology, materials, and labor. Generally, the financial performance of
a supply chain is assessed by considering the following items −
 Cost of raw materials.
 Revenue from goods sold.
 Activity-based costs like the material handling, manufacturing, assembling rates
etc.
 Inventory holding costs.
 Transportation costs.
 Cost of expired perishable goods.
 Penalties for incorrectly filled or late orders delivered to customers.
 Credits for incorrectly filled or late deliveries from suppliers.
 Cost of goods returned by customers.
 Credits for goods returned to suppliers.

Bench Marking
Benchmarking measures the performance of the company’s supply chain by
considering quantity, value and time. Benchmarking formulates a tangible measure of
the efficiency of main processes in the supply chain and serves to create a solid
foundation of an organization’s performance.

It also measures the impact of each improvement made by managers subject

to proper measurement indicators.

Based on different purposes and outcomes, benchmarking can be divided into

qualitative and quantitative.

Qualitative benchmarking uses the best practices of competitors or similar

organizations and their data on successful techniques for improving supply chain
performance. It analyzes differences in strategies and practices in order to find fitting
opportunities.

Quantitative benchmarking consists of KPIs (key performance indicators),

estimation and analysis. Business metrics such as inventory turnover, revenue, and
profit are usually used – however, any custom KPI could work. Quantitative
benchmarking examines the supply chain by gathering data on performance and not
practice.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

After data and standards are projected, one can note which processes should be
improved. Main areas for benchmarking and improving supply chain management are:

 productivity
 warehouse management and inventory accuracy
 shipping/receiving accuracy
 storage density
 quality control

How to Benchmark Your Supply Chain

APQC’s benchmarking methodology has four main phases.

 Plan—Set strategic direction—In the planning phase of benchmarking, examine
the key business processes and issues across organizational lines (e.g.,
departments, functions, and geographies). Identify and select opportunities to
improve a key business process(es).
 Collect—Identify benchmarks and best practices—In the collection phase of
benchmarking, examine the key business processes and issues outside of the
organization or internally across units/divisions/departments. Gather quantitative
and qualitative data and insights. Identify specific organizations for in-depth
analysis. Download APQC's free Interactive Supply Chain Planning Tune-Up
Diagnostic.
 Analyze—Understand processes and opportunities—In the analysis phase of
benchmarking, analyze the collected data for an in-depth understanding of why and
how best-practice organizations execute the process to gain a competitive
advantage. Evaluate best practices to determine applicability.
 Adapt—Create a process improvement strategy—In the adaptation phase of
benchmarking, create an implementation plan with mechanisms to monitor and
report progress. As needed, organizations may recalibrate and recycle the
benchmarking activity as part of a plan for continuous improvement.

There are several levels of benchmarking:

1) Internal – benchmarking on a tactical level with the main focus on operations. It

allows companies with multiple facilities, divisions or branches to compare and
contrast the ways in which processes perform. For example, compare three different
warehouses within one organization.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

2) External – deliberate level of benchmarking that takes a company outside its own
industry and exposes it to different methods and techniques. This type of
benchmarking often requires hiring a consulting firm to perform proper research.

3) Competitive – compares a company’s operational performance against

competitors’. Obviously, it is unlikely for competitors to share their specific knowledge
on best industry practices, so using industry-standard metrics could be an option.

Advantages

Benchmarking the supply chain helps organizations determine their relevant

performance and amend operations to stay competitive. Although the process of
benchmarking could consume a lot of time, effort and resources, it provides a company
with unique knowledge on business activity, perspectives, opportunities and
weaknesses.

T31. Supply Chain Gap Analysis

The purpose of a supply chain gap analysis is to measure the differences
between the current situation and the desired situation. It compares “what is” with
“what ought to be”. When gaps are identified, you can work to close them.

What is a gap analysis?

A gap analysis is a method of assessing the performance of a business unit to

determine whether business requirements or objectives are being met and, if
not, what steps should be taken to meet them. A gap analysis may also be referred
to as a needs analysis, needs assessment or need-gap analysis.

How to conduct a gap analysis

 The first step in conducting a gap analysis is to establish specific target

objectives by looking at the company's mission statement, strategic business
goals and improvement objectives.
 The next step is to analyze current processes by collecting relevant data on
performance levels and how resources are presently allocated to these
processes. This data can be collected from a variety of sources depending on
what is being analyzed. For example, it may involve looking at documentation,

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 measuring key performance indicators (KPIs) or other success metrics,
conducting stakeholder interviews, brainstorming and observing project
activities.
 After a company compares its target goals against its current state, it can then
draw up a comprehensive plan. Such a plan outlines a step-by-step process to
fill the gap between its current and future states, and to reach its target
objectives. This is often referred to as strategic planning.

Gap analysis tools and examples

There are a variety of gap analysis tools and methodologies on the market, and the
particular tool a company uses depends on its target objectives. The following are
some common gap analysis methods:

McKinsey 7-S Framework

This gap analysis tool, introduced by consulting firm McKinsey & Co., is used to
determine specific aspects of a company that are meeting expectations. An analyst
using the 7-S model examines the characteristics of a business through the lens of
seven people-centric groupings:

 strategy
 structure
 systems
 staff
 style
 skills
 shared values

The analyst fills in the current and future state for each category, which would then
highlight where the gaps exist. The company can then implement a targeted solution
to bridge that gap.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

SWOT analysis

SWOT, which stands for strengths, weaknesses, opportunities and threats, is a gap
analysis strategy used to identify the internal and external factors that drive the
effectiveness and success of a product, project or person.

Once these factors are determined, the company can determine the best solution by
playing to its strengths and allocating resources accordingly, while avoiding potential
threats.

T32. Meaning and Applications of Balanced Score card

Supply Chain Performance Measurement

The managers focus on the primary goals of the organizations and relate it to the
Supply chain. The managers use Metrics, which are a standard measure that can be
used to measure performance, repeatedly. These metrics form the basics
of Balanced Scorecard.
Commonly used Metrics could be-customer satisfaction ratings, orders picked from
the warehouse per hour or the ratio of the operating assets to income. These metrics
vary from company to company, but all good metrics should have these five
characteristics:

 Metric must create an understanding of strategic objectives and tactical plans

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 It must promote behaviours that are consistent with achieving these objectives
 It must allow for the recording of actual outcomes so that the firm can monitor the
progress of attainment of these objectives
 It must allow companies to measure their own performance to competitors and
consumer expectations
 It must motivate continuous improvement

Supply chain measurement must address both chain evaluation and all of the
other processes occurring in the firm. We also know that the process is complex, and
managers use Metrics to measure this.
Balanced Scorecard approach, it was invented by Robert S. Kaplan and
David P Norton of the Harvard Business School.
What is a balanced scorecard?
It combines multiple different categories of measurements that can be used at
all levels of the supply chain.

Source: [Link]

The balanced scorecard approach contains four different metrics or the four
perspectives as we see. These are used to measure performance at all the levels in

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

the supply chain. These four metrics combines the strategy and vision for every aspect
of the supply chain.

The four metrics are given below, and firms always question themselves the
following before proceeding ahead:

 Financial: To succeed financially, how should firms appear to their shareholders.

 Customer: To achieve our vision, how should firms appear to their customers.
 Internal Business Processes: To satisfy their shareholders and customers, what
business processes firms must excel at.
 Learning and Growing: To achieve their vision, how will firms sustain their ability
to change and improve.

How to Create a Balanced Scorecard?

Balanced scorecard to actually measure these metrics using- Objectives,

Measures, Initiatives and Targets.

Perspectives Goals Objectives Measurements

Decrease lead time Average lead time

Increase on-time Percentage of deliveries on

Continuously delivery time
improve
customer Reduce customer Number of customer
Customer satisfaction complaints complaints

Decrease cycle time Average cycle time

Continuously Number of defects and the
improve Increase quality number of items reworked.
Internal business
Business processes Increase productivity Average output per employee

Continuously Increase sales of new Percentage of sales obtained

develop and products and services from new products & services
deliver new
innovative
Innovation & products & Reduce development Average time from initial
Learning services time design to production

Decrease costs Average unit costs

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 Increase sales growth The growth rate in sales
Continuously Increase market share Company’s market share
improve
financial Increase return on
Financial performance investment Return on investment

The manager wants to decrease the lead time from 30 minutes to 20 minutes
in a garment factory, the managers and workers will work on a solution to decrease
the lead time and can use the future data to measure how far or ahead are they of
their target.

How to Implement a Balanced Scorecard?

A balanced scorecard will help the firms to gain different types of feedback
related to their supply chain operations including strategic data for high-level decision-
makers, diagnostic feedback to guide process improvement, knowledge of trends in
metrics over time, feedback on the effectiveness of the performance measurements
themselves, and data which will be used for forecasting future business activities.

An organization more or less has tiers, and so does their supply chain. At each
tier of the supply chain, the balanced scorecard addresses the four metrics: Financial,
Customer, Internal Process and Learning and Growth.

Firms take repeated measurements in each of these categories and then

alternate through a system whereby they focus on weak performance and improve the
performance. Then they finally check the results after implementation and act again
based on new measurements.

T33. Supply Chain performance SCOR

Increasingly important in supply chain practice are attempts to improve supply

chain performance. These are usually attempts to understand the complexity of supply
chain processes; others focus on coordinating activities throughout the chain.

The SCOR model

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 The Supply Chain Operations Reference model (SCOR) is a broad, but highly
structured and systematic, framework to supply chain improvement that has been
developed by the Supply Chain Council (SCC), a global non-profit consortium. The
framework uses a methodology, diagnostic and benchmarking tools that are
increasingly widely accepted for evaluating and comparing supply chain activities and
their performance.

Just as important, the SCOR model allows its users to improve, and
communicate supply chain management practices within and between all interested
parties in their supply chain by using a standard language and a set of structured
definitions.

The SCC also provides a benchmarking database by which companies can

compare their supply chain performance to others in their industries and training
classes. Companies that have used the model include BP, AstraZeneca, Shell, SAP
AG, Siemens AG and Bayer. The model uses three well-known individual techniques
turned into an integrated approach. These are:

● Business process modelling

● Benchmarking performance

● Best practice analysis

Business process modelling

SCOR does not represent organizations or functions, but rather processes.

Each basic ‘link’ in the supply chain is made up of five types of process, each process
being a ‘supplier– customer’ relationship, see Figure

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

● ‘Source’ is the procurement, delivery, receipt and transfer of raw material items,
subassemblies, products and/or services.

● ‘Make’ is the transformation process of adding value to products and services

through mixing production operations processes.

● ‘Deliver’ processes perform all customer-facing order management and fulfilment

activities including outbound logistics.

● ‘Plan’ processes manage each of these customer–supplier links and balance the
activity of the supply chain. They are the supply and demand reconciliation process,
which includes prioritization when needed.

● ‘Return’ processes look after the reverse logistics flow of moving material back from
end-customers upstream in the supply chain because of product defects or post-
delivery customer support. All these processes are modelled at increasingly detailed
levels from level 1 through to more detailed process modelling at level 3.

 Benchmarking performance

Performance metrics in the SCOR model are also structured by level, as is process
analysis. Level 1 metrics are the yardsticks by which an organization can measure
how successful it is in achieving its desired positioning within the competitive
environment, as measured by the performance of a particular supply chain. These
level 1 metrics are the key performance indicators (KPIs) of the chain and are created
from lower-level diagnostic metrics (called level 2 and level 3 metrics) which are
calculated on the performance of lower-level processes. Some metrics do not ‘roll up’
to level 1, these are intended to diagnose variations in performance against plan.

 Best practice analysis

Best practice analysis follows the benchmarking activity that should have measured
the performance of the supply chain processes and identified the main performance
gaps.

Best practice analysis identifies the activities that need to be performed to close the
gaps. SCC members have identified more than 400 ‘best practices’ derived from their
experience. The definition of a ‘best practice’ in the SCOR model is one that: ● Is
current – neither untested (emerging) nor outdated. ● Is structured – it has clearly

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

defined goals, scope and processes● Is proven – there has been some clearly
demonstrated success. ● Is repeatable – it has been demonstrated to be effective in
various contexts. ● Has an unambiguous method – the practice can be connected to
business processes, operations strategy, technology, supply relationships, and
information or knowledge management systems. ● Has a positive impact on results –
operations improvement can be linked to KPIs.

Benefits of the SCOR model

Claimed benefits from using the SCOR model include improved process
understanding and performance, improved supply chain performance, increased
customer satisfaction and retention, a decrease in required capital, better profitability
and return on investment, and increased productivity. And, although most of these
results could arguably be expected when any company starts focusing on business
processes improvements, SCOR proponents argue that using the model gives an
above average and supply focused improvement.

T34. Best Practices in SCM

Best Practices for Supply Chain Management

There are many different ways companies can improve their supply chain
management to increase operational efficiency, reduce costs and provide a better
customer experience.

1. Recruit & Develop Supply Chain Professionals

Emerging technology and an increasingly globalized supply chain are driving
forces in the evolution of supply chain processes, but the skilled workers needed
to run these operations are in short supply.

To achieve this, many supply chain leaders are hiring staffing companies that
specialize in supply chain recruitment.

2. Align the Supply Chain Team

Effective cross-business execution is integral to establishing an efficient supply
chain. That often leads to information gaps, slow communication, errors and
inconsistent processes.

3. Establish Alliances with Suppliers

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

 Building strong partnerships with suppliers is vital to supply chain success, often
saving expenses and improving reliability.

4. Purchase Supplies in Volume to Reduce Costs

Taking advantage of economies of scale can be a cost-effective way to purchase
inventory.

5. Diversify Supplier Relationships to Avoid Delays

A lack of availability of raw materials, import/export issues, weather and natural
disasters, political and regulatory issues and other unforeseen obstacles can all
slow down or even cease the delivery of supplies.

The best way for businesses to overcome supplier delays is to invest in supply
chain software with predictive analytics.

6. Improve Demand Forecasting

Forecasting errors have an enormous effect on the bottom line. Accurate demand
forecasting enables businesses to have the correct quantities to meet both current
and future needs and takes into account historical sales, sales forecasts,
seasonality and promotions.

7. Optimize Inventory Management

In tandem with demand forecasting, inventory management is another crucial
part of an efficient supply chain.

Another important aspect of inventory management is ensuring that it aligns with

supply chain objectives.

Software that tracks inventory in real time, monitors the reorders stock per item-
and demand-specific criteria provide valuable insights and enable data-supported
planning and decision-making.

8. Track Supply Chain Metrics

Supply chain managers need to establish specific parameters by which they
can quantify supply chain performance. These key performance indicators (KPIs)
allow businesses to identify and analyze strengths and inefficiencies to enable
data-supported goals. Among the most critical metrics are:

 Perfect Order Rate - supply chain's ability to deliver error-free orders.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]

  Warehousing Costs- all of the costs related to warehouse operations, including
labor, rent and utilities, equipment, shelving and pallet racks and technology.
 Inventory-to-Sales Ratio: This KPI measures the amount of inventory available
for sale compared to how much is sold and helps businesses avoid over- or
under-stocking items.
 Inventory Velocity: This looks at the amount of inventory projected to sell within
a given time frame, often a quarter or year.
 Supply Chain Cycle Time: This metric calculates the overall efficiency of the
supply chain. Shorter cycles are more efficient & Longer cycles can indicate
bottlenecks that need to be addressed.
9. Increased Supply Chain Visibility
Constant communication, timely updates and reliable documentation are crucial
to an efficient supply chain. Real-time data sharing across the supply chain
provides a bird's-eye view of the entire chain and more granular information about
each node.

10. Centralize Document Management

Managing purchase orders, customs paperwork, inspection reports, bills of lading
and other supply chain documentation can be a complicated process.

Investing in a solution that provides a centralized hub for all supply chain
documentation can provide greater clarity over end-to-end processes.

11. Improve Order-to-Pay Process

The order-to-pay process, also known as the procure-to-pay process,
encompasses all of the steps involved in an order, from requisition to final
payment. This process usually includes various departments across the
company, including finance, sales, warehousing and logistics, all of which are
likely using different systems to fulfill their requirements.

Addressing these challenges might involve companies automating the order-to-

pay processes with a unified platform that can simplify the entire process by
addressing each step.

12. Invest in Environmental and Social Sustainability

The goal here is to actively minimize the environmental, social and economic
effects of the supply chain. That means finding innovative solutions to evolving
environmental and social issues and meeting and exceeding expanding
environmental regulations.

13. Practice Risk Mitigation & Compliance

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 Supply chains are inherently full of risks. Natural disasters, raw material
shortages, port disruptions, trade disputes, theft, cybersecurity breaches, non-
compliance with laws and regulations and reputational damage all represent
potential supply chain disruptions. Known risks such as distribution limitations,
demand fluctuations, supplier issues and regulatory non-compliance can be
identified, measured and managed, and it’s often possible to quantify their impact
on the supply chain.

Unknown risks, on the other hand, are both difficult to predict and difficult to
control. They include natural disasters and geopolitical events and are
challenging to quantify or incorporate into the supply chain management
framework.

14. Focus on Total Cost of Ownership (TCO)

The total cost of ownership (TCO) encompasses all of the costs associated with
every aspect of the supply chain. The key to making adjustments in this area is
to use the TCO to make informed decisions with all of the supply chain nodes and
other business units that take a part in strategic decisions. That's because there
are usually unforeseen consequences to cutting costs to simply achieve a lower
TCO.

15. Invest in Technology & Software

A successful, efficient supply chain relies on access to real-time information
and supply chain analytics to ensure data-driven strategies and enable swift
action when necessary. Automation, predictive analytics and digitized
documentation are already making supply chains more efficient and cost-
effective.

B.S(Hons)ABM ARM304 Supply Chain Management(2+0) [Link]