Pgdlscm Text Book-1 Final v2019 PDF

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POSTGRADUATE DIPLOMA

LOGISTICS & SUPPLY CHAIN MANAGEMENT

ABP POSTGRADUATE DIPLOMA IN

LOGISTICS & SUPPLY CHAIN MANAGEMENT CONTENTS UNIT 1: FUNDAMENTALS OF LOGISTICS & SUPPLY CHAIN MANAGEMENT ........................................ 1 Chapter 1 : Logistics Fundamentals ................................................................................................. 2 1.1. Introduction........................................................................................................................................................... 3 1.2. Economic impacts of Logistics ............................................................................................................................ 3 1.3. The Increased Importance of Logistics................................................................................................................ 4 1.4. Logistics Management: What it is .........................................................................................................................7 1.5. Concept of Total Logistics ................................................................................................................................... 8 1.6. Logistical Relationships within the Firm ............................................................................................................. 10 1.7. Activities in the Logistical Channel...................................................................................................................... 15

Chapter 2 : Logistics and Information Technology ......................................................................... 18 2.1 Introduction.......................................................................................................................................................... 19 2.2 Industry 4.0 .......................................................................................................................................................... 19 2.2 Logistics 4.0 ....................................................................................................................................................... 20 2.3 Artificial intelligence in Logistics ....................................................................................................................... 25 2.4 Internet of things (IoT) in logistics ...................................................................................................................... 30 2.5 Blockchain technology........................................................................................................................................ 33 2.6 Blockchain in Logistics ....................................................................................................................................... 35

Chapter 3 : Understanding the Supply Chain...................................................................................41 3.1. Introduction ........................................................................................................................................................ 42 3.2. Evolution of Supply Chain Management............................................................................................................. 42 3.3. Supply Chain Management Process Frameworks.............................................................................................. 43 3.4. Enablers of SCM implementation ...................................................................................................................... 45 3.5. Barriers to SCM Implementation........................................................................................................................ 50 3.6. Supply Chain Integration.................................................................................................................................... 52

Chapter 4 : Supply Chain Drivers and Metrics ................................................................................ 55 4.1. Introduction........................................................................................................................................................ 56 4.2. Drivers of Supply Chain Performance ................................................................................................................ 56 4.3. Framework for Structuring Drivers.................................................................................................................... 58 4.4. Obstacles to Achieving Strategic Fit ................................................................................................................. 69

UNIT 2: OPERATIONS MANAGEMENT............................................................................................... 71 Chapter 1 : Fundamentals of Operations Management .................................................................. 72 1.1. What is operations management? .......................................................................................................................73 1.2. Differences between manufacturing and service organisations ........................................................................75 1.3. Operations Management Decisions.....................................................................................................................76 1.4 Historical Milestones of OM ..................................................................................................................................79 1.5. Today’s OM environment..................................................................................................................................... 80 1.6. Within OM: How It All Fits Together ..................................................................................................................... 81

Chapter 2 : Operations Strategy .................................................................................................... 84 2.1. Introduction........................................................................................................................................................ 85 2.2. The Role of Operations Strategy ........................................................................................................................ 85 2.3. Developing a Business Strategy ........................................................................................................................ 86 2.4. Developing an Operations Strategy .................................................................................................................... 91 2.5. Strategic Role of Technology............................................................................................................................. 95 2.6. Productivity ........................................................................................................................................................ 96

Chapter 3 : Product design and service operations ....................................................................... 99 3.1. Introduction ....................................................................................................................................................... 100 3.2. The Product Design Process.............................................................................................................................. 101 3.3. Process Selection ............................................................................................................................................. 108

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3.4. Designing Processes .........................................................................................................................................112 3.5. Process Performance Metrics ...........................................................................................................................115 3.6. Linking Product Design and Process Selection ................................................................................................. 117 3.7. How Are Services Different from Manufacturing? ............................................................................................. 121

Chapter 4 : Turning Visibility with Supply Chain Analytics ........................................................... 127 4.1. Supply Chain Analytics ...................................................................................................................................... 128 4.2. Evolution of supply chain analytics................................................................................................................... 128 4.3. Importance of supply chain analytics ............................................................................................................... 129 4.4. Key features of effective supply chain analytics.............................................................................................. 130 4.5. How Visibility Creates Value ............................................................................................................................. 130 4.6. Building A New Analytics Solution: A Biopharma Example ................................................................................ 131 4.7. Creating Actionable Visibility ............................................................................................................................ 132 4.8. Capturing The Value Of Visibility ....................................................................................................................... 133 4.9. Supply Chain Analytics in Practice.................................................................................................................... 134 4.10. Supply Chain Optimisation and Simulation...................................................................................................... 135

UNIT 3: PLANNING FOR DEMAND & INVENTORY............................................................................140 Chapter 1 : Managing Demand, Order and Customer Service ........................................................ 141 1.1. Introduction........................................................................................................................................................ 142 1.2. Demand Management and Forecast.................................................................................................................. 142 1.3. Steps in the Forecasting Process..................................................................................................................... 142 1.4. Types of Forecasting Methods .......................................................................................................................... 143 1.5. Order Management ............................................................................................................................................ 154 1.6. Customer Service .............................................................................................................................................. 156 1.7. Managing Customer Service .............................................................................................................................. 159

Chapter 2 : Inventory Management ...............................................................................................164 2.1. Introduction....................................................................................................................................................... 165 2.2. Inventory Classifications .................................................................................................................................. 165 2.3. Inventory Costs ................................................................................................................................................. 166 2.4. How Much to Order: Economic Order Quantity .................................................................................................. 171 2.5. Conditions of uncertainty ................................................................................................................................. 172 2.6. Inventory Management: Special Concerns ....................................................................................................... 173 2.7. Contemporary Issues with Managing Inventory ................................................................................................ 176

Chapter 3 : Warehouse Management ............................................................................................ 179 3.1. Introduction ....................................................................................................................................................... 180 3.2. The Role of Warehousing in a Logistics System ............................................................................................... 180 3.3. Public, private, contract, and multiclient warehousing .................................................................................... 182 3.4. Design Considerations in Warehousing ............................................................................................................ 185 3.5. Warehousing Operations .................................................................................................................................. 188

Chapter 4 : Supply Chain Cost Management ................................................................................. 193 4.1. Introduction....................................................................................................................................................... 194 4.2. Supply chain cost and control........................................................................................................................... 196 4.3. Budgetary control ............................................................................................................................................ 200 4.4. Activity-based cost and management systems .............................................................................................. 202 4.5. Total cost of ownership ................................................................................................................................... 204 4.6. Supply chain performance measurement metrics .......................................................................................... 207 4.7. Benchmarking .................................................................................................................................................. 208 4.8. Balanced scorecard .......................................................................................................................................... 210

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UNIT 1: FUNDAMENTALS OF LOGISTICS & SUPPLY CHAIN MANAGEMENT Chapter 1: Logistics Fundamentals Chapter 2: Logistics and Information Technology Chapter 3: Understanding the Supply Chain Chapter 4: Supply Chain Drivers and Metrics

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Chapter 1 : Logistics Fundamentals

Learning Objectives

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To explain the economic impacts of logistics To define and explain about logistics To analyse the importance of logistics in a competitive business setting To evaluate logistical relationship within the firm To describe logistical channel activities

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1.1. Introduction Logistics and supply chain management are not new ideas. From the building of the pyramids to the relief of hunger in Africa, the principles underpinning the effective flow of materials and information to meet the requirements of customers have altered little. Throughout the history of mankind wars have been won and lost through logistics strengths and capabilities – or the lack of them. It has been argued that the defeat of the British in the American War of Independence can largely be attributed to logistics failure. The British Army in America depended almost entirely upon Britain for supplies. At the height of the war there were 12,000 troops overseas and for the most part they had not only to be equipped, but fed from Britain. For the first six years of the war the administration of these vital supplies was totally inadequate, affecting the course of operations and the morale of the troops. An organisation capable of supplying the army was not developed until 1781 and by then it was too late. In the Second World War logistics also played a major role. The Allied Forces’ invasion of Europe was a highly skilled exercise in logistics, as was the defeat of Rommel in the desert. Rommel himself once said that ‘… before the fighting proper, the battle is won or lost by quartermasters. However, whilst the Generals and Field Marshals from the earliest times have understood the critical role of logistics, strangely it is only in the recent past that business organisations have come to recognise the vital impact that logistics management can have in the achievement of competitive advantage. Partly this lack of recognition springs from the relatively low level of understanding of the benefits of integrated logistics.

1.2. Economic impacts of Logistics Although the logistics discipline today is vastly different than in the 1970s, one thing that remains constant is the economic impact of logistics. Before defining what logistics is, we believe that it’s important to discuss the economic aspects of logistics and you might be surprised at its significant economic impact. Logistics can play an important role in a nation’s economic growth and development. For example, a poor transportation infrastructure and high levels of inventory are two key drawbacks that have limited the expansion of Vietnam’s economy. In a similar fashion, relatively high logistics costs (as a percentage of GDP) in the People’s Republic of China (China) continue to restrict the country’s economic development, and in particular the high costs of highway transportation have severely constrained the growth of China’s e-commerce market. Apart from the previous examples of macro-level economic impacts, the economic impacts of logistics can affect individual consumers such as you. These impacts can be illustrated through the concept of economic utility, which is the value or usefulness of a product in fulfilling customer needs or wants. The four general types of economic utility are possession, form, time, and place, and logistics clearly contributes to time and place utilities. Possession utility refers to the value or usefulness that comes from a customer being able to take possession of a product. Possession utility can be influenced by the payment terms associated with a product. Credit and debit cards, for example, facilitate possession utility by allowing the customer to purchase products without having to produce cash or a cash equivalent. Likewise, automotive leases allow customers to take possession of a more desirable model than would be possible with conventional automotive loans.

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Form utility refers to a product’s being in a form that (1) can be used by the customer and (2) is of value to the customer. Although form utility has generally been associated with production and manufacturing, logistics can also contribute to form utility. For example, to achieve production economies (i.e., lower cost per unit), a soft drink company may produce thousands of cases of a certain type of soft drink (e.g., diet cola). You’re not likely to purchase diet cola by the thousands of cases (unless you’re having a really big social event!) but rather in smaller lot sizes, such as a six- or twelve-pack. Through allocation, logistics can break the thousands of cases of diet cola into the smaller quantities that are desired by customers. Place utility refers to having products available where they are needed by customers; products are moved from points of lesser value to points of greater value. Continuing with the diet cola example, ...