CHAPTER III

LACK OF SUPPLY CHAIN COORDINATION AND THE BULLWHIP EFFECT

Supply chain coordination all stages in the supply chain take actions together (usually
results in greater total supply chain profits)
SC coordination requires that each stage take into account the effects of its actions on the
other stages
Lack of coordination results when:
Objectives of different stages conflict or
Information moving between stages is distorted
Bullwhip Effect
Fluctuations in orders increase as they move up the supply chain from retailers to
wholesalers to manufacturers to suppliers (shown in Figure)
Distorts demand information within the supply chain, where different stages have very
different estimates of what demand looks like
Results in a loss of supply chain coordination
Examples: Proctor &Gamble (Pampers); HP (printers); Barilla (pasta)


THE EFFECT OF LACK OF COORDINATION ON PERFORMANCE
Manufacturing cost (increases)
Inventory cost (increases)
Replenishment lead time (increases)
Transportation cost (increases)
Labor cost for shipping and receiving (increases)
Level of product availability (decreases)
Relationships across the supply chain (worsens)
Profitability (decreases)
OBSTACLES TO COORDINATION IN A SUPPLY CHAIN
Incentive Obstacles
Information Processing Obstacles
Operational Obstacles
Pricing Obstacles
Behavioral Obstacles
Incentive Obstacles
When incentives offered to different stages or participants in a supply chain lead to
actions that increase variability and reduce total supply chain profits misalignment of
total supply chain objectives and individual objectives
Local optimization within functions or stages of a supply chain
Sales force incentives
Information Processing Obstacles
When demand information is distorted as it moves between different stages of the supply
chain, leading to increased variability in orders within the supply chain
Forecasting based on orders, not customer demand
o Forecasting demand based on orders magnifies demand fluctuations moving up
the supply chain from retailer to manufacturer
Lack of information sharing
Operational Obstacles
Actions taken in the course of placing and filling orders that lead to an increase in
variability
Ordering in large lots (much larger than dictated by demand)
Large replenishment lead times
Rationing and shortage gaming (common in the computer industry because of periodic
cycles of component shortages and surpluses)
Pricing Obstacles
When pricing policies for a product lead to an increase in variability of orders placed
Lot-size based quantity decisions
Price fluctuations (resulting in forward buying)
Behavioral Obstacles
Problems in learning, often related to communication in the supply chain and how the
supply chain is structured
Each stage of the supply chain views its actions locally and is unable to see the impact of
its actions on other stages
Different stages react to the current local situation rather than trying to identify the root
causes
Based on local analysis, different stages blame each other for the fluctuations, with
successive stages becoming enemies rather than partners
No stage learns from its actions over time because the most significant consequences of
the actions of any one stage occur elsewhere, resulting in a vicious cycle of actions and
blame
Lack of trust results in opportunism, duplication of effort, and lack of information sharing
MANAGERIAL LEVERS TO ACHIEVE COORDINATION
Aligning Goals and Incentives
Improving Information Accuracy
Improving Operational Performance
Designing Pricing Strategies to Stabilize Orders
Building Strategic Partnerships and Trust
Aligning Goals and Incentives
Align incentives so that each participant has an incentive to do the things that will
maximize total supply chain profits
Align incentives across functions
Pricing for coordination
Alter sales force incentives from sell-in (to the retailer) to sell-through (by the retailer)
Improving Information Accuracy
Sharing point of sale data
Collaborative forecasting and planning
Single stage control of replenishment
o Continuous replenishment programs (CRP)
o Vendor managed inventory (VMI)
Improving Operational Performance
Reducing replenishment lead time
o Reduces uncertainty in demand
o EDI is useful
Reducing lot sizes
o Computer-assisted ordering, B2B exchanges
o Shipping in LTL sizes by combining shipments
o Technology and other methods to simplify receiving
o Changing customer ordering behavior
Rationing based on past sales and sharing information to limit gaming
o Turn-and-earn
o Information sharing
Designing Pricing Strategies to Stabilize Orders
Encouraging retailers to order in smaller lots and reduce forward buying
Moving from lot size-based to volume-based quantity discounts (consider total purchases
over a specified time period)
Stabilizing pricing
o Eliminate promotions (everyday low pricing, EDLP)
o Limit quantity purchased during a promotion
o Tie promotion payments to sell-through rather than amount purchased
Building Strategic Partnerships and Trust in a Supply Chain
Background
Designing a Relationship with Cooperation and Trust
Managing Supply Chain Relationships for Cooperation and Trust
Trust-based relationship
o Dependability
o Leap of faith
Cooperation and trust work because:
o Alignment of incentives and goals
o Actions to achieve coordination are easier to implement
o Supply chain productivity improves by reducing duplication or allocation of effort
to appropriate stage
Greater information sharing results
There are two views regarding how cooperation and trust can be built into any supply chain
relationship:
1. Deterrence based view In this view the parties involved use a variety of formal contracts to
ensure cooperation.
2. Process-based view With this view, trust and cooperation are built over time as a result of a
series of interactions between the parties involved.
A trust-based relationship between two stages of a supply chain includes dependability of the
two stages, and the ability of each stage to make a leap of faith. Trust involves a belief that each
stage is interested in the others welfare and will not take actions without considering their
impact on the other stages.
Building Strategic Partnerships and Trust within a Supply Chain
Coordination and trust within the supply chain help improve performance for the following
reasons:
1. When stages trust each other, they are more likely to take the other partys objectives into
consideration when making decisions.
2. Action oriented managerial levers to achieve coordination become easier to implement.
Sharing of information is natural between parties that trust each other.
Management phase Interactions based on the ground rules occur and the relationships as well
as the ground rules evolve.
Designing a Relationship with Cooperation and Trust Key Steps in designing a relationship
Step I Assessing the value of the relationship The first step in designing a supply chain
relationship is to clearly identify the contribution of each party as well as the mutual benefit that
the relationship provides. The next step is to identify the criteria used for evaluating the
relationship as well as the contribution of each party. Equity defined as fair dealing measures the
fairness of the division of the total profits among the parties involved. Thus, a supply chain
relationship is likely to be sustainable only if it increases total profits and
Design phase Ground rules are established and the relationship is initiated.here are two
phases to any long-term supply chain relationship.
Step II. Identifying operational roles and decision rights for each party When identifying
operational roles and decision rights for different parties in a supply chain relationship, managers
must consider the resulting interdependence between the parties. A source of conflict may arise
if the tasks are divided in a way that make one party more dependent on the other. The allocation
of tasks results in a sequential interdependence if the activities of one partner precede the other.
In reciprocal interdependence, parties come together and exchange information and inputs in
both directions.
Step III. Creating Effective Contracts Managers can help promote trust by creating contracts that
encourage negotiations as unplanned contingencies arise. Contracts are most effective for
governance when complete information is available and all future contingencies can be
accounted for. Over time, the informal understandings and commitments between the individuals
tend to be formalized when new contracts are drawn up.
Continuous Replenishment (CRP) and
can be dampened by 2 practices:
1. CRP (Continuous Replenishment Programs)
replenishment across the supply chain to a single entity. A single point of replenishment
decisions ensures visibility and a common forecast that drives orders across the supply chain.
nishes a
Driven by Actual withdrawals of inventory from retailer warehouses rather than POS data at the
is owned by the Retailer 29. Vendor
managed Inventory- VMI
a result, the control of the replenishment decision moves to the manufacturer instead of the
ret
profit for the entire SC, if both
retailer and manufacturer margins are considered, while making inventory decisions.
production accordingly. Helps improve manufacturer forecasts.
-Mart (with about 50 suppliers) has seen inventories drop by 30 to 40 percent after
implementing VMI
combines the intelligence of multiple partners in the planning and fulfilment of consumer
demand According to Voluntary Inter Industry & Commerce Standards Association VICS,
built on a foundation in which the two parties synchronize their data and establish standards for
of the following four supply chain activities:
In a Joint Business plan, they identify significant events such as
promotion, new product introduction, store opening/ Closing, Inventory plan that affect demand
and supply.
- Collaborative Sales forecast is first done which projects
the best estimate of customers demand at the point of sale and then converted to collaborative
order plan that determines future orders and delivery requirements.
After forecasts, converted to actual orders- then production, shipping,
- Identifying Exceptions and evaluating
metrics that are used to assess performance.
Common Scenarios Deployment ofCPFR1. Retail event Collaboration Promotions and other
retail events have a significant impact on demand. In such a setting, collaboration between
retailers and suppliers to plan, forecast and replenish promotions is very effective.2. DC
Replenishment collaboration The two trading partners collaborate on forecasting DC
withdrawals or anticipated demand from the DC to the manufacturer.3. Store Replenishment
Collaboration Trading partners collaborate on store level point of sales forecasts.4.
Collaborative assortment Planning Fashion apparel and other seasonal goods follow a seasonal
pattern of demand. Thus collaborative planning in these categories has a horizon of a single
season and is performed at seasonal intervals and forecasts rely more on industry trends,
macroeconomic factors and customer tastes.
Implementation of CPFR
on & Johnson and Super drug, a chain in UK implemented CPFR over the three month
trial period and observed: Inventory level at its DCs dropped by13% Product availability
- Stock
levels improved by 4.3% - DCs to store fill rate improved by10.7% - Overall Inventory levels
fell by 25%.
CHAPTER IV
Performance measures,
The Framework for Performance measurement on Supply Chain
Supply chain is an important element in logistics development for all industries. It can improve
efficiency and effectiveness of not only product transfer, but also information sharing between
the complex hierarchy of all the tiers. The performance measurement on supply chain is an
appraisal on the performance including overall operation level, the node enterprises in the supply
chain, the cooperation relationship between the node enterprises, etc. Hence it is essentially a
business-process-based performance measurement framework.
1. Principles that should be followed
With the continuous development of theories for supply chain management and advancement of
practice, a more effective Index system to be used for performance measurement should follow a
few main principles as follows,
It should focus on the key points and a thorough analysis on the key performance indices
should be undertaken.
Performance rating indices which reflect the real business process should be adopted.
Performance rating indices should be able to reflect the operation status of the overall supply
chain, instead of reflecting just the operation status of single node enterprises of supply chain.
The rating methodology should be as far as possible combined with real-time analysis so as to
be able to extend the scope of measurement to a level within which the real time operation
information can be reflected.
During performance measurement on supply chain, the rating indices which reflect the
relationship between suppliersmanufacturers and the clients should be adopted, so as to be
able to extend the scope of measurement to a level which involves the relative enterprises of the
supply chain.
2. Features of performance measurement indices
According to the aims and basic features of supply chain management system, performance
measurement indices should be able to reflect the overall operation status of supply chain and the
operation relationship between enterprises of adjacent nodes in a supply chain properly, instead
of evaluating the operation of single provider without taking the organizational performance of
supply chain into consideration.
Take a raw material supplier with attractive price in the supply chain as example, the supplier
would probably be evaluated as one which should be chosen if we take an isolated look. But if
we evaluate it from a perspective of cross-functional level in a whole supply chain, more indices,
such as matchability, flexibility etc. must be taken into account.
3. Index System of Performance Measurement for supply chain

Performance measurements and metrics in SCM
1. Metrics for order planning
1.1. The order entry method
1.2. Order lead-time
1.3. The customer order path
2. Evaluation of supply link
3. Measures and metrics at production level
4. Evaluation of delivery link
4.1. Measures for delivery performance
4.2. Total distribution cost
5. Measuring customer service and satisfaction
5.1. Flexibility
5.2. Customer query time
5.3. Post transaction measures of customer service
6. Supply chain and logistics cost
Metrics for order planning

Order lead-time
The customer order path

Evaluation of supply link

Measuring customer service and satisfaction
Supply chain and logistics cost
Measures and metrics at production level
Measures for delivery
performance

Total distribution cost

Flexibility
Customer query time
Post transaction measures of
customer service
Information processing cost
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6.1. Cost associated with assets and return on investment
6.2. Information processing cost
Dimensions of performance measures-
The Council of Logistics Management defines Supply Chain Management as "the process of
planning, implementing and controlling efficient and cost effective flow of materials, in-process
inventory, finished goods and related information from point-of-order to point-of-consumption,
for the purpose of conforming to customer requirements" The fundamental objective of a high
performance of supply chain is to produce products to match customers' demand cycle, while
producing the greatest value possible to the customers. The increasingly competitive
environment calls for speedy, cost efficient, accurate and reliable supply chain. Supply Chain
Management is no longer a matter of operational and functional areas of the firm. Today, it is a
strategic issue demanding top-level management attention. The supply chain can have huge
leverage on the creation of customer value. Supply chains will fight the new battle for market
dominance; as such, measurements around the supply chain are critical. If we look at competition
today, it is "supply chain versus supply chain" This brings out a situation that competitors might
focus on developing superior supply chain performance. Accordingly, companies will have to
find or develop metrics to measure performance of supply chain. A number of technologies and
managerial attention have gone into improving supply chain performance.
One benefit of a rigorous approach to supply chain benchmarking is that there are a number of
critical measures of performance that need to be continuously monitored through 'Key
Performance Indicators' (KPI). In this framework the three key outcomes of success are better,
faster, cheaper. Since "what gets measured, gets managed" it is inevitable that once such
measures are put in place, management attention will be directed to these key issues.
Measurement is important, as it affects behavior that impacts supply chain performance. As such,
measurement provides means by which a company can assess whether its supply chain has
improved or degraded.
Performance measurement in supply chain management
A variety of measurement approaches have been developed, including the following important
approaches, as reported in the AMR Research.
The Balance Score Card
It recommends the use of Executive Information Systems (EIS) that track a number of balanced
metrics that are closely aligned to strategic objectives. The approach would recommend that a
small number of balance supply chain measures be tracked on the following four perspectives:
Financial perspective
Customer perspective
Internal business perspective
Innovative and learning perspective
Supply Chain Council's SCOR Model
It advocates a set of supply chain performance measures comprised of a combination of:
Cycle time metrics
Cost metrics
Service/quality metrics
Asset metrics
The Logistics Scoreboard
It recommends the use of an integrated set of performance measures under the following
categories:
Logistics financial performance
Logistics productivity performance
Logistics Quality performance
Logistics cycle time performance
While the above approaches provide guidance for measurement, they provide less help in
assessing specific metrics to be used. Supply chain strategy differs for every company and
depends upon its current competencies and strategic direction.
Ten Dimensions of Service Quality
The recommended metrics for evaluating the Supply Chain's effectiveness in delivering
'value to a customer' is the following:
Tangibles: A company should evaluate the appearance of the facilities, equipment and
personnel
Reliability: It reflects a company's ability to keep its promises.
Responsiveness: A company's willingness to help customers and provide prompt service
Competence: It refers to employees' mastery Of the skills and knowledge to perform
specified services
Courtesy: This relates to politeness, respect, consideration and friendliness the company's contact
personnel show to customers
Credibility: This monitors how well the company delivers on promises to customers
Security: This refers to freedom from danger, risk and conflict
Access: This relates to approachability and ease of contact with members of the company
Communication: This refers to commitment to keep customers informed in a language they can
understand and listening to them
Understanding: This relates to how well the company understands it's customers
As difficult as the task might be, businesses will have to find ways to incorporate some of the
metrics listed above in their supply chain measurement programs.
SCOR Level 1 Metrics Average Best
Delivery Performance 85% 95%
Fill Rates 94% 98%
Perfect Order Fulfilment 80% 90%
Order Fulfilment Lead Times 7 days 3 days
Production Flexibility 30 days 20 days
Total Logistics Costs 13% 3%
Inventory Days of Supply 55 days 22 days
Cash-to-Cash Cycle Time 80 days 28 days
Net Asset Turns 8 turns 1 9 turns
Supply Chain Scorecard
The Supply Chain Operations Reference Model, better known as SCOR, is a reference that has
been 'developed and endorsed by the Supply Chain Council, as the cross-industry standard
diagnostic tool for supply chain management [3] It enables users to address, improve and
communicate supply-chain practices within and between all interested parties. It is a
management tool spanning form the supplier's suppler to the customer's customer and a tool kit
that can be used to define, measure and manage supply-chain processes. The SCOR model is a
pyramid of four levels that represents the path a company takes on the road to supply chain
improvement.
Level 1 - it provides a broad definition of the plan, source, make and deliver process types and is
the point at which a company establishes its supply chain competitive objectives.
Level 2 - it defines the 17 core process categories that are possible components of a supply chain,
A company can configure both its actual and ideal supply chain by selecting from the core
processes.
Level 3 - it provides a company with the information it needs to successfully plan and set goals
for its supply chain improvements. Planning elements include process definitions, target
benchmarks, best practices and system software capabilities to enable best practices.
Level 4 - it focuses on implementation, when companies put specific supply chain improvements
into play. It defines practices to achieve competitive advantage and to adapt to changing business
conditions.
The Supply Chain Council has published a supply chain Scorecard representing the performance
metrics as under fig 1.
Survey of Top Performers
The Performance Measurement Group (PMG), a subsidiary of PRTM Management Consultants,
have released results of the first survey in its 1900-2000 Supply Chain Management
Benchmarking Series [4] The survey is based on "Level 1" metrics from the industry standard
framework, SCOR model. These process performance measures have a wide-ranging strategic
significance to organisations. PMG examined best-in-class industry performance of customer-
facing and internal-facing measures in Supply Chain Management. Customer facing measures,
such as upside production flexibility and delivery performance to request, quantify how well a
supply chain delivers products to the customer. Internal-facing measures, including total supply-
chain costs and Cash-to-cash cycle time, quantify how effectively an organisation uses resources
in creating value to the customer or how efficiently a supply chain operates. These measures help
companies to evaluate the full scope of their supply chain performance against best-in- class
performers. The results are based on data from 110 subscriber organisations from North
America, Europe and Asia, in chemical and Pharmaceuticals, computers and electronic
equipment, defence and industrial, telecommunications equipment and packaged goods sectors.
The key performance metrics chosen for the study were:
Delivery Performance to Request: the percentage of orders that are fulfilled on or before the
customer's requested date.
Upside Production Flexibility/ Material availability: the number of days required to achieve an
unplanned sustainable 20% increase in production.
Total Supply Chain Costs: the total cost as a percent of sales to manage order processing, acquire
materials, manage inventory and manage supply chain finance, planning and MIS costs.
Cash-to-Cash Cycle Time: the number of days between paying for raw materials and getting paid
for product, as calculated by inventory days of supply plus days of sales outstanding minus
average payment period for material.
Best-in-class: the PMG selects the top 20% of a population and averages the results to calculate
the best-in-class measure.
A typical finding of the performance of 'Consumer Packaged Goods' sector, was:
Major findings of the survey were:
Manufacturers are more accurately adjusting forecasts and production cycles to respond to rapid
changes in demand. Best-in-class performers now operate with less 40 days of inventory
throughout the supply chain. Leading companies have cut their supply-chain management costs
between 4% to 5% of sales. They are adopting innovative practices such as exploiting the
Internet to integrate information and decision-making around the globe.
Cash-to-Cash cycle time for the best-in-class companies is less than 30 days. Companies pay
their suppliers quickly, collect from their customers just as quickly and move inventory
continuously. Best-in-class Upside Production Flexibility has dipped below two weeks and in
some industries it is less than a week.
Best-in-class Median
Delivery Performance 97.6 81.2
Production Flexibility 8.3 42.0
Total Supply Chain Costs 4.9 9.2
Cash-to-Cash Cycle Time 24.7 66.6
Performance of Indian Industries
Prof. M. G. Korgaonkar, Head-School of Management, IIT Bombay [5] has reported his findings
as under:
The total logistics cost in the country is estimated at 4.59% of sales.
Nearly 60% of the logistics cost is in transportation (35%) and inventory costs (25%); the rest is
due to losses (14%), packaging (11%), handling and warehousing (9%) and customers' shipping
(6%) growing number of manufacturers are taking proactive and reactive steps to control
logistics cost and improve customer service.
There is major transportation and other infrastructure bottlenecks related to SCM in India,
including roads, railways, ports, shipping etc.
Several new SCM related activities have started in India, these include, emergence of trucking
companies, information technology including service, containerization, private warehousing,
multi modal transport operators, inland container depots, container freight stations and third-
party logistics providers.
The average inventory turns is 4.5 per year. Over 50% of the inventories are of raw materials,
due to inadequate control on the supply side.
Supply chain performance is far satisfactory, in respect of lead times, inventories and deliveries.
However, several action programmes have been undertaken by firms to improve supply chain
performance.
There is a growing trend to outsource supply chain related services; these include inventory
management, transportation, warehousing, forwarding and clearing, information technology etc.
However, service providers with adequate skills, competency and technology are limited.
Conclusion
Indian companies are yet to leverage the supply chain for competitive advantage and as such
there are no initiatives to measure the performance of their existing supply chain systems.
However, multinationals dealing in FMCG are fully exploiting the benefits and are also moving
towards web-enabled supply chains.
In view of globalisation and liberalisation of the economy including EXIM policies, Indian
companies are being forced to change their ways of doing business to meet the competitive
pressure. In the recent past, many progressive companies are re-engineering their business
processes and exploiting the use of Information Technology to challenge the ever-increasing
competitive pressures in the market place. In this context, Supply Chain Management initiatives
could be a competitive tool and measuring the performance against industry standards would go
a long way in achieving international standards.








LOGISTICS QUANTIFICATION PYRAMID
Logistics Quantification Pyramid
another categorization of performance metrics


A major financial objective for any organization is to produce a satisfactory return for
stockholders.
The absolute size of the profit must be considered in relation to the stockholders net
investment, or net worth.
An organizations financial performance is also judged by the profit it generates in
relationship to the assets utilized, or return on assets (ROA).
Return on assets (ROA) is a metric that is used as a benchmark to compare management
and organization performance to that of other firms in the same or similar industry.
The supply chain plays a critical role in determining the level of profitability in an
organization.

CHAPTER V
Strategic planning for logistics and supply chain management
2013 Trends and Strategies in Logistics and Supply Chain Management: Embracing Global
Logistics Complexity to Drive Market Advantage The key results of this study by BVL
International on trends and strategies in logistics and supply chain management are summarized,
as follows. They are based on 1757 responses collected in an international survey from supply
chain executives (including logistics service providers (LSPs), retailers, and manufacturing
companies).
Key Trends
The general observation from both the interviews and the study results is that logistics
complexity in the form of fragmented channels, increased product variations, and consumer
demands for customized solutions has increased. Several trends demonstrate that a number of
major challenges lie ahead, as the world becomes a more complex place to operate logistically.
Customer expectations:
In essence, logistics and supply chain management should primarily enable a company to satisfy
its customers needs. Increasing customer expectations were ranked by respondents of our study
as the most important trend, and meeting customer requirements has been ranked by more than
20% of therespondents as the number-one logistics objective. But, as customers are becoming
ever more demanding and critical, traditional measures often fail when pursuing strategies to
satisfy customers.
Networked economy:
In the past, companies have typically considered themselves to be independent players in the
market and, at best, managed interfaces to direct suppliers and customers. In
todays networked economies, this is just not enough anymore. Companies are often forced to
collaborate with partners both vertically and horizontally in their extended supply chain network,
and these partners expect them to integrate their processes and systems. Companies are forced to
adopt network thinking rather than company thinking.
Cost pressure:
Customers continue to expect low costs. Although other requirements such as sustainability,
social issues or risk-mitigation capabilities are increasingly discussed in the media, cost pressure
seems to remain the ultimate criterion for customers. Given the trend towards increased customer
expectations, it has become ever more difficult to reduce costs any further. Logistics costs are
playing an important role in reducing overall costs. Logistics costs share of overall revenue is as
low as 4% and 6% in the electronics and automotive industries, respectively. However, our
results show that costs are on the rise (larger than 8% on average for manufacturing industries).
A concerning result is that as many as 14% of the respondents cannot estimate their logistics
costs.
Globalization:
As global footprints expand, logistics performance as measured by delivery reliability has
deteriorated, due to increasing customer requirements, greater volatility, and problems with
infrastructure. Two out of three respondents stated that their companys logistics capability is
negatively influenced by poortransportation infrastructure, which is a problem particularly in
emerging markets. In sum, globalization clearly amplifies other trends and leads to an increase in
complexity, particularly in regions of growth such as Russia, Eastern Europe, India, and Africa.
Talent shortfalls:
Across all regions and sectors, talent shortages in logistics is considered one of the most
important challenges in the coming years. Shortages are being seen at both the operational level
as well as the planning and controlling function. In particular, about 70% of the respondents
experience a shortage of skilled labor. The most important strategies to cope with talent shortage
are training and qualification programs and strategic cooperation with universities
and research institutions. In the United States and Europe, talent shortages are also a function of
demographics. In emerging nations strong competition from other fields like finance, strategy
and IT contributes to the talent shortage. Volatility: In the last years, market turbulence on the
supply and demand side has increased. This was amplified by the economic and financial crisis,
which demonstrated how fluctuations in one part of the world can build up to dramatic problems
in other parts of the world. Respondents of this study believe that volatility will continue to
increase and more than 50% of them consider it to be a very important trend in five years.
Sustainability pressure:
This trend has emerged as a very serious topic. Already more than 55% of the respondents stated
that green issues are part of their logistics strategy. Corporate social responsibility has also
emerged as a highlight for debate. However, there remains a great deal of uncertainty in the
deployment of these strategies, especially relative to measurement systems, evaluation and
setting goals and strategies for logistics sustainability
Increased risk and disruption:
The majority of companies (irrespective of size, sector, country and position in the supply chain)
consider the mitigation of internal and external risks essential. Strategies for 2013 Trends and
Strategies in Logistics and Supply Chain Management 9 managing risk around demand and
planning are also considered important. Executives concur that strategic frameworks and tools
are needed for engaging the entire network in the management of risk and disruptions. Solutions
focused on improving transparency of tier two suppliers, inventory and demand impede
mitigation and force companies into reactive strategies. Proactive strategies should include
research and development, procurement, production and sales.
New technology:
The majority of companies are recognizing the growing need for investments in new technology,
with about 60% of the respondents planning to invest in big data analysis tools within the next
five years. Those tools seek to develop capabilities around the comprehensive handling and
intelligent connection of data to increase planning and control outcomes. The new wave of
decentralized automated network technologies are in their infancy. Predictions from the last
study concerning the use of those technologies have not yet materialized.
Strategic Supply Chain Management
Strategic supply chain management decisions are made at an enterprise level that determine
benefits and efficiencies of the supply chain. These articles and links examine these strategic
decisions and how they affect a company's supply chain.
Is It Time For The Chief Supply Chain Officer?
Companies today have CEO's and CIO's, some even have Chief Technology Officers, so is it
time that businesses look to the future and appoint a Chief Supply Chain Officer?
Purchasing Managers Index (PMI)
Purchasing Managers Index (PMI) is released on the first business day of each month and is a
key near-term indicator used by financial analysts and economists. Economists believe that the
PMI is the single best snapshot of the condition of the factory sector and helps predict industrial
production. this article looks at the PMI and how it is...
Project Methodology

Project management methodology is important when a company initiates a number of projects
across their enterprise. By either developing an in-house company methodology or adopting a
standard methodology, each project should operate along a given set of principles that can be
transposed from project to project. This article looks at what should be included in a project
methodology.

Total Productive Maintenance

In any modern manufacturing facility the equipment used requires a level of maintenance to
ensure that the manufacturing process is not disrupted and the production plan can be achieved.
World class organizations spend time and resources on maintaining their equipment using a
preventative maintenance plan. This article looks at the processes included in Total Productive
Maintenance (TPM).

Master Scheduling

Master scheduling is the detailed planning process that tracks manufacturing output and matches
this against customer orders that have been placed. The master schedule is the next step in
planning after the sales and operations planning (S&OP). This article will examine the master
scheduling process.
Project Management

A company will have any number of projects in progress at one time. These may be as complex
as installing a new enterprise wide computer system, creating a new warehouse, or as simple as
purchasing a new commercial vehicle. Project management incorporates all of the interactions
and interrelationships that need to occur to make the project successful. This article examines the
basics of project management.

Prince2 Project Methodology

In the United Kingdom the Office of Government Commerce has specified a project
management methodology to be used for projects that involve the agencies of the British
government. The methodology is called Projects in Controlled Environments, or more
commonly known as PRINCE. The methodology was updated to PRINCE2 in 1996, and in 2009
a new version was released of PRINCE2. This article looks at the new aspects of the latest
version of PRINCE2.

Agile Project Management

Agile project management is based on a set of ideals that have been adopted to overcome some
of the shortfalls of traditional project management methodology. The ideas behind Agile have
been developed over many years based on academic studies and real world experiences. This
article looks at the methodology of Agile and how successful projects can benefit.

Scrum Methodology

The Scrum project management methodology was developed in the 1990s alongside the Agile
methodology, as a method to allow teams to work together to get products developed. It offers
only a small number of rules within the framework but allows complex projects to be completed
in a short timeframe. This article looks at some of the highlights of the Scrum methodology.

Time-Based Strategies
Reducing Cycle Time
Logistics activities that shorten the length of the order/replenishment cycle have been the
focus of much recent attention.
Time-Based Strategies
Reducing Cycle Time
Reductions in cycle time are based on three factors: processes, information, and decision
making.
If logistics is seen as a series of processes, performing those processes faster will reduce cycle
time.
Utilization of faster, more efficient forms of order transmission- primarily the Internet-- can
significantly reduce the time needed to complete the transaction.
Finally, empowering individuals to make decisions can be one of the most important ways to
speed cycle time,
Pre-approvals and other delegated decision making models can lead to making mistakes, but
the risk is justified in terms of time saved and improvement in customer responsiveness
Time-Reduction Logistics Initiatives
Push to Pull
Cross-docking, JIT, VMI, ECR / QR and Continuous Replenishment are all contemporary
approaches that help logistics systems move from push to pull.
Each strategy reduces the order cycle by shortening the total time from vendor receiving orders
to customer delivery.
Anticipate customers needs

Improved ability to anticipate through collaborative planning, forecasting, and replenishment
(CPFR) enables the logistics and supply chain processes to make a more valuable contribution to
corporate objectives.
The switch from push to push is a more demand-
responsive system, but requires changes that may be difficult to achieve depending on the
corporate culture in place.
Time-Reduction Logistics Initiatives
Manufacturing impacts
Pull approach requires a very fast manufacturing / distribution system.
Risk of low or no inventory depends on fast and frequent replenishment.
Responding to demand
Consistent with time-compression strategies
Produce to order typically furniture, some white goods,motor car assemblers, local farm
implement manufacturers.
Time-Reduction Logistics Initiatives
Principle of Postponement involves not completely finishing a product until an order arrives.
Dell Computers classic example

Asset Productivity Strategies
Inventory Reduction
Much evidence that companies have been successful in reducing inventories.
Time reduction strategies have also contributed.
Facility Utilization
Strategy to keep the goods moving throughout the logistics and supply chain system has
contributed to effective use of logistics facilities thus squeezing more productivity from these
assets.
Equipment Utilization Strategies
Eg. transport vehicle asset management Some reductions have occurred as a result of
equipment dispatching software
Doing more with less is a result of leaner enterprises.
Third-Party/Contract Logistics
Services
Use of 3PLs has resulted in dramatic positive impact on asset productivity.
Companies focus on managing logistics services rather than on the assets themselves.Examine
next slide on 4PLs potential impact.







Fig16-4 - Fourth-Party Logistics


Technology-Based Strategies
E-Business, e-Commerce, e-Procurement and electronic marketplaces will continue to grow in
importance.
Fig 16-5 - Shifts in Technology





Relationship-Based Strategies
Collaboration
All parties involved actively share information.
Group benefits more than individual benefits.
All parties modify their business practices.
All parties conduct business in new and visibly different ways.
All parties provide a mechanism and process for collaboration to occur

Value Nets
Taking the place of the old supply chain, the value net starts with the customer and is built
around three powerful value propositions:
High levels of customization
Super service
Convenient solutions

Synthesis and Future Directions
Shift from Vertical to Virtual Integration (the e orientation)
Collaboration
Knowledge of Own Core Competencies
Expertise / detailed knowledge of costs
Strategic fit
Ability to trust
Technology and Connectivity
Managing-the-People Skills
Comprehensive Supply Chain Perspective