Module 6 -Introduction IT in SCM

• Role of computer/ IT in supply chain

management, Benchmarking concept,
features and implementation.
• Vendor Managed Inventory, CPFRP, and
Customer Service Logistics and Environment,
Methods and tools facilitating International
Logistics, challenges, Integrated Supply Chain
and Logistics
• [Link]
kmbib02-international-logistics/
 Role of computer/ IT in supply chain
management
• [Link]

• IT provides the tools which can pick up relevant

information, break it down for proper analysis
and execute it for optimum performance of the
supply chain.
• Real-time or almost real-time information is the
key to proper supply chain management.
• With information about the various stages of the
supply chain, decision-makers can plan, manage,
and adjust processes to achieve goals in
procurement, inventory, manufacturing, etc.
Role of computer/ IT in supply chain management
 The Role of IT in Supply Chain Management…

1. Integrated and Coordinated Supply Chain

2. Increased Productivity
3. Cost Reduction
4. Product Improvement
5. Supply Chain Visibility
 The Functional Roles of IT in SCM

1. Transaction Execution
2. Collaboration and Coordination
3. Decision Support
 Software for Supply Chain Management

1. Enterprise Resource Planning

2. Electronic Data Interchange
3. Supply Chain Management Systems
4. Customer Relationship Management
 Benchmarking SCM

• First, pick an area within the supply chain to

focus on.
• Supply chain management can be broken
down into five components: planning,
sourcing, manufacturing, delivery, and
returning.
• Focusing on an individual segment of your
SCM help you develop specific key
performance indicators (KPIs).
 Components of a Benchmarking Study

• Financial benchmarking
• Functional benchmarking
• Performance benchmarking
• Product benchmarking
• Strategic benchmarking
Levels of Benchmarking

• Internal Benchmarking
• External Benchmarking
• Competitive Benchmarking
 Vendor Managed Inventory
[Link]

• Vendor managed inventory (VMI) is an

arrangement where suppliers manage
inventory levels that have been pre-
determined.
• The supplier takes decisions on behalf of the
retailer wherein the supplier replenishes the
inventory continuously.
 Vendor Managed Inventory…
• Vendor managed inventory or VMI is an
integrated inventory management approach that
offers relief from the inventory concerns.
• In VMI, the inventory at the buyer’s end is
managed and monitored essentially by the
supplier/vendor or the upstream supply chain
partner.
• “Vendor Managed Inventory is the term for
inventory management systems where the
supplier manages the day to day inventory
activity.
 Vendor Managed Inventory…
• In a VMI relationship, the manufacturer
becomes responsible for the management of
his customer’s inventory.” (Pol, Inamdar, 2012)
• VMI is a reverse inventory replenishment
process that electronically connects supply
chain partners to felicitate demand and
inventory replenishment planning based on
real-time demand information sharing
between them.
 VMI - Benefits to the Customer

• Better visibility will make it possible to change from

air-to-sea freight.
• Improvement in Fill Rates from the supplier and to
the end customer as well as a decrease in stock-outs
and a decrease in inventory levels.
• Planning and ordering cost will decrease due to the
responsibility being shifted to the supplier.
• The overall service level is improved by having the
right product at the right time.
• The supplier is more focused than ever in providing
great service.
 VMI - Benefits to the Supplier

• Visibility of the customers’ point-of-sale (POS) data

makes forecasting easier.
• Incorporating promotions into the inventory plan
becomes easier.
• A reduction in customer ordering errors – which in the
past would probably lead to a return.
• Visibility of the stock levels helps to identify priorities
such as allowing to replenish for stock or cater to a
stock-out.
• With the VMI system in place, the supplier can see the
potential need for an item before the item is ordered.
CPFRP - Collaborative Planning Forecasting Replenishment Process
Customer Service Logistics and Environment
[Link]
 Why is customer service important in
logistics?
• It helps build an impactful brand image
• It helps close more deals
• It improves customer loyalty and satisfaction
How to take your customer service to the next level

• Focus on communication
How to take your customer service to the
next level…
• Ensure transparency and information
visibility
• Use different communication channels
• Use one platform to manage communications
• Use technology and analyze
– Analyze the customers’ behavior
– Analyze the supply chain
How to take your customer service to the
next level…
• Make internal changes
– Make internal changes
– Provide continual learning
– Monitor performance
– Find new transportation routes
 Methods and tools facilitating International
Logistics
[Link]

• Expanding your e-commerce business globally requires

a solid understanding of international logistics.
• With over 72% of small businesses venturing into new
markets, understanding the process, importance, and
benefits is crucial.
• This guide provides direct answers on how international
logistics can propel your business forward.
• Discover the strategies that lead to efficient shipping,
cost savings, and seamless distribution logistics. Stay
competitive in the global e-commerce market with the
power of international logistics.
 What is international logistics?
• International logistics refers to managing and
coordinating the shipping, transportation, and
distribution of goods across global markets.
• In the context of e-commerce, it plays a crucial
role in facilitating cross-border trade and
ensuring that products reach customers
worldwide.
• According to a DHL whitepaper, renewed
economic growth in ASEAN countries will give
rise to a demand for cross-border road
transportation as trade recovers.
 International logistics
• The significance of international logistics in e-
commerce cannot be overstated.
• It encompasses a range of activities, including
inventory management, order fulfillment,
transportation planning, customs clearance,
and last-mile delivery.
• Businesses can overcome the complexities
and challenges associated with global trade
by effectively managing these processes.
 What is the role of logistics strategies in
International Shipping?
• Logistics strategies are instrumental in streamlining
cross-border shipping.
• They involve careful planning, optimisation of
routes, selection of appropriate transportation
modes (such as air, sea, or land), and efficient
coordination with outsourced logistics partners and
carriers.
• These strategies aim to minimise costs, reduce
transit times, and ensure the safe and timely
delivery of products to customers around the world.
Key Components of International Logistics

• Supply Chain Network

• Handling of Goods
• Modes of Transportation
• Goods Transportation Process
• Customs and Import Duties
Supply Chain Network
• Establishing a global supply chain is crucial for
successful international logistics.
• It allows businesses to source, produce, and
distribute their products globally efficiently.
• By establishing strategic partnerships with
e-commerce suppliers, manufacturers, and
distributors worldwide, businesses can ensure
a steady supply of goods and optimise their
operations.
Handling of Goods
• When it comes to international orders, evaluating
physical distribution and warehousing options is
crucial.
• Businesses need to assess factors such as
proximity to target markets, transportation
infrastructure, storage capacity, and fulfillment
capabilities.
• Utilising fulfillment centres in target countries
offers several benefits, including reduced shipping
costs, faster delivery times, and localised
inventory and fulfillment management.
Modes of Transportation
• Choosing the appropriate mode of transportation is a
critical decision in international logistics.
• Air, sea, and ground shipping each have their advantages
and considerations.
• Air freight offers speed and reliability, making it suitable
for time-sensitive shipments.
• Sea freight is cost-effective for large volumes but has
longer transit times.
• Ground transportation provides flexibility and
accessibility for local distribution.
• Selecting the most cost-effective and reliable
transportation mode depends on factors such as
shipment size, urgency, destination, and budget.
Goods Transportation Process
• Understanding the journey of goods from the seller to
the end consumer is essential in international
logistics.
• It involves various stages: order processing, packaging,
labelling, documentation, customs clearance, and last-
mile delivery.
• Each stage presents unique challenges, such as
navigating customs regulations, coordinating with
multiple stakeholders, and managing potential delays.
• Businesses must address these complexities and
communicate transparently with customers about
varying delivery times and expectations.
Customs and Import Duties
• Cross-border trade entails additional costs and
paperwork, primarily related to customs and import
duties.
• Businesses must understand the regulations and
requirements of target markets to ensure compliance
and avoid delays or penalties.
• Shippers are responsible for accurately declaring
goods, providing necessary documentation, and paying
applicable import duties or taxes.
• Informing customers about potential fees in advance
helps avoid surprises and ensures a smooth delivery
process.
 Innovating International Logistics:

Seamless Integration:
• Locad’s state-of-the-art technology seamlessly
integrates with your existing systems and
platforms, ensuring a hassle-free transition
and minimising disruption to your operations.
• Our robust APIs and advanced technology
stack make integration effortless, empowering
you to focus on growing your business while
we handle the intricacies of the logistics.
Global Network:
• With a strategically positioned network of
fulfillment centres across key regions, Locad
enables efficient and cost-effective
distribution worldwide.
• Our extensive international coverage allows
you to reach new markets, reduce transit
times, and optimise shipping costs, giving your
business a competitive edge on a global scale.
Scalability and Flexibility:
• Locad understands that businesses come in all
sizes.
• Whether you’re a small startup or an
established enterprise, our agile infrastructure
scales with your business.
• This flexibility allows you to expand or
downsize your operations as needed, ensuring
you can adapt quickly to market demands and
seize growth opportunities without logistics
limitations.
Advanced Warehousing Solutions:
• Locad leverages state-of-the-art warehouse
management systems, automation, and AI-driven
analytics to optimise inventory management,
reduce errors, and increase overall efficiency.
• Our advanced warehousing capabilities will give
you real-time visibility into your stock levels,
manage returns seamlessly, and reduce storage
costs.
• We are constantly pushing the boundaries of
innovation to ensure your logistics operations are
at the forefront of industry standards.
Streamlined Order Fulfillment:
• Our dedicated team of logistics experts is
committed to ensuring your orders are fulfilled
accurately and swiftly.
• From picking and packing to labelling and
shipping, we prioritise speed and accuracy to
exceed your customers’ expectations and drive
repeat business.
• Our streamlined order fulfillment process
minimises lead times, maximises customer
satisfaction, and strengthens your brand
reputation.
Value-Added Services:
• Locad offers a range of value-added services
to enhance the customer experience and
reduce operational complexities.
• Our customised solutions include kitting,
bundling, customisation, and returns
management.
• By leveraging our value-added services, you
can increase order value, differentiate your
brand, and provide unique offerings that set
you apart.
 Logistics and Environment
• There are negative effects of Logistics on the
Environment
– Air Pollution
– Global Warming and Climate Change
– Loss of Natural Habitat
– Health Impacts
– Noise Pollution
• [Link]
 Logistics and Environment
• Planting trees.
• Usage of public transport
• Polling services
 Importance of international Logistics
• Increasing transportation cost.
• Achieving product efficiency at higher level.
• Changing perspectives of inventory management.
• Proliferating product lines ·
• Increasing uses of Information and
Communication Technology ·
• Increasing variations in customer needs and
demands ·
• Relaxing rules and regulations ·
• Strengthening distributional networks
 Objectives of International Logistics
• Right product
• Right quantities and assortments
• Right places
• Right time
• Right cost/price
• Right condition
 Objectives of International Logistics…
• Improving Customer Service.
• Increased Customer Response
• Reduction in Distribution Costs
• Increasing Sales
• Creating Time & Place Utilities
• Stabilizing Product Prices
• Quality Management
• Supporting Product Life-Cycle
• Consolidating Transportation Costs
 Tools facilitating International Logistics

1. The Scandit mobile application software

2. The Easy stock mobile application software.
3. The Web fleet Android application
4. Service Max mobile app
5. The Co-pilot Android mobile app
6. The Logistics mobile app
7. The Evernote online mobile application
8. The Cerasis Rater – A Web-Based Transportation
Management System with Companion Mobile
App
 Challenges in International logistics

1. Unknown Supply-Chain Risks

• [Link]

2. Supply Chain Digitization

3. On-Time Delivery
4. Dealing With the Climate Change
Crisis
 Sourcing Decisions in Global SCM
• [Link]
 The Role of Sourcing in a Supply Chain

• Purchasing, also called procurement.

• Is the process by which companies acquire
raw materials, components, products,
services, or other resources from suppliers to
execute their operations.
• Sourcing is the entire set of business
processes required to purchase goods and
services.
 Sourcing
• The most significant decision is whether to
outsource the function or perform it in-
house.
• Outsourcing results in the supply chain
function being performed by a third party.
• Essae Taeroka and GATI.
We address the outsourcing of supply chain activities
by a firm based on the following three questions:

• Will the third party increase the supply chain

surplus relative to performing the activity in-
house?
• To what extent do risks grow upon
outsourcing?
• Are there strategic reasons to outsource?
• For example, P&G has historically outsourced retailing of
its products to others.
• The third parties increase the supply chain surplus by
aggregating many products that customers need (not just
P&G products) in a single retail store.
• This aggregation allows them to spread facility costs,
selling costs, personnel costs, and transportation costs
across many consumer goods manufacturers.
• This aggregation also allows the retailer to increase
customer value by allowing them to purchase many
products they need in a single visit to the store.
• Clearly, outsourcing retailing to a third party increases the
value created by the supply chain to a greater extent
than if P&G managed its own retailing.
 Outsourcing
• A third party may be able to provide a sustainable
growth of the surplus by aggregating to a higher
level than the firm itself.
• The growth in surplus comes from aggregating
capacity.
• Inventory,
• Inbound or outbound transportation,
warehousing, procurement,
• Information, receivables, or
• Relationships to a level that the firm cannot
achieve on its own.
 Outsourcing…
• A growth in surplus may also occur if the third
party has lower costs or higher quality
because of specialization or learning.
 Risks of Using a Third Party

• The process is broken.

• Underestimation of the cost of coordination.
• Reduced customer/supplier contact.
• Loss of internal capability and growth in third-
party power.
 Risks of Using a Third Party…

• Leakage of sensitive data and information.

• Ineffective contracts
• Loss of supply chain visibility.
• Negative reputational impact.
 Strategic Factors in Sourcing

Support the business strategy:

• Harley-Davidson
 Harley-Davidson illustrates the importance of linking business
strategy to the make or buy decision.
• To maintain its strong “Made in America” brand image, the
company manufactures mostly in the United States even
though cheaper components may be found overseas.
An even more extreme example is:
• Brunello Cucinelli, a successful Italian luxury brand.
• The company positions itself as providing outstanding artisanal
Italian manufacturing and a culture of “ethical capitalism.”
• To support this strategy, the company has focused much of its
production at Solomeo, a medieval hamlet in Umbria, Italy.
• At Solomeo, the company has built what the founder calls a
“humanistic factory” where “employees are treated as
preciously as the clothes they create.”
 Strategic Factors in Sourcing…
• Improve firm focus.
• In today’s complex world, it is impossible for a
firm to do everything.
• A lack of focus because a firm is doing
everything in-house can be a major problem.
• A firm must identify those that are core and
provide a strategic advantage.
• Outsourcing all other activities helps improve
focus and, thus, performance.
 Supplier Selection—
Auctions and Negotiations

• A buyer looks to outsource a supply chain

function such as production or
transportation.
• Potential suppliers are first qualified and then
allowed to bid on how much they would
charge to perform the function.
• The qualification process is important: there
are multiple attributes of performance that
the buyer cares about.
 Case
• Consider a music store that sells compact discs.
• The supplier manufactures compact discs at $1 per unit and sells
them to the music store at $5 per unit.
• The retailer sells each disc to the end consumer at $10.
• At this retail price, market demand is normally distributed, with a
mean of 1,000 and a standard deviation of 300.
• Any leftover discs at the end of the sale period are worthless.
• How many discs should an independent retailer order?
• What are the supply chain profits with an independent retailer?
• If the manufacturer and the retailer are vertically integrated (they are
a single firm),
• How many discs should the retailer order?
• What are the supply chain profits when the manufacturer and retailer
are a single firm?
• Analysis: We first consider the case of the independent retailer.
• The retailer has a margin of $5 per disc and can potentially lose $5 for each
unsold disc.
• The retailer thus has a cost of overstocking Co = $5 and a cost of understocking
Cu = $5.
• Using Equation 13.1, it is optimal for the retailer to aim for a service level of 5>(5
+ 5) = 0.5 and order NORMINV(0.5, 1000, 300) = 1,000 discs.
• From Equation 13.3, the retailer’s expected profits are $3,803, and the
manufacturer makes $4,000 from selling 1,000 discs.
• The total supply chain profit with an independent retailer is thus $3,803 + $4,000
= $7,803.
• Now, consider the case in which the supply chain is vertically integrated. The
supply chain has a margin of $10 - $1 = $9 per disc and can potentially lose $1 for
each unsold disc.
• The supply chain thus has a cost of overstocking Co = $1 and a cost of
understocking Cu = $9.
• Using Equation 13.1, it is optimal for the supply chain to aim for a service level of
9>(1 + 9) = 0.9 and order NORMINV(0.9, 1000, 300) = 1,384 discs. From Equation
13.3, the supply chain’s expected profits are $8,474.