EVOLUTION OF THE CONCEPT OF LOGISTICS

Integration scope
Supply chain management Integrated logistics (material management, physical distribution) Physical distribution management, materials management Value chain management

External supply chain

Internal supply chain

Distribution of finished products

1960

1970

1980

1990

2000

2010

Time

EVOLUTION OF THE CONCEPT OF LOGISTICS Until late 1980s:

Materials management: forecasting, master scheduling, material requirements planning, purchasing, inventory management, transportation Physical distribution: distribution planning, customer orders processing, packaging, shipment, management of goods inventory, transportation, customer service

Late 1980s:
Logistics intra-integration

Since early 1990s:

Supply chain logistics external integration (interorganizational integration)

XXIst century logistics:

Value creation / delivery systems
2

LOGISTICAL FLOWS AND PROCESSES

Material processes (transportation, stockkeeping, cross-docking, packaging, manufacturing, recycling, quality control, postponement processes etc.) Information flows and decision making Cash-flows, funding and capital flows (financial flows) Legal-flows (transfer and arrangements of property and warranties, insurance, certifications etc.) Engineering processes

WHAT IS SUPPLY CHAIN?

From www. Supplychain.org

SUPPLY CHAIN: DEFINITIONS

The alignment of firms that bring products or services to market (Lambert, Stock and Ellram)
All stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves (Chopra and Meindl) A set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer (Mentzer et al.) The integrated processes of Plan, Source, Make, Deliver and Return, spanning your suppliers supplier to your customers customer, aligned with Operational Strategy, Material, Work & Information Flows (Supply Chain Council)

SUPPLY CHAIN MANAGEMENT: DEFINITIONS

The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. (APICS Dictionary) The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer (Institute for Supply Management)

Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer (Supply Chain Council)

SUPPLY CHAIN MANAGEMENT?

Old paradigm
Firm gains a synergy as a vertically integrated firm, encompassing the ownership and coordination of several supply chain activities.

New paradigm
Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms.

SUPPLY CHAIN MANAGEMENT APPROACH

Three items that flow through the supply chain: Information Money Materials Three areas of decision-making: Materials Processes Logistics Two types of tools: Information Technology Operational Analysis

KEY DECISIONS OF SUPPLY CHAIN MANAGEMENT

Supply chain configuration on a global scale

KEY PROCESSES OF SUPPLY CHAIN MANAGEMENT

Customer Relationship Management The prioritization of a firms marketing focus on different customer groups according to each groups long-term value to the company or supply chain; designed to identify and build relationships with good customers. Customer Service Management - A multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced; designed to ensure that customer relationships remain strong. Demand Management Process- The alignment of supply and demand throughout the supply chain to anticipate customer requirements at each level and create demandrelated plans of action prior to actual customer purchasing behavior.

Order Fulfillment Process- A supply chain management process that involves generating, filling, delivering, and providing on-the-spot service for customer orders.

KEY PROCESSES OF SUPPLY CHAIN MANAGEMENT

Manufacturing Flow Management Process A process that ensures that firms in the supply chain have the resources they need Supplier Relationship Management Process A supply chain management process that supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers Product Development and Commercialization Process- The group of activities that facilitates the joint development and marketing of new offerings among a group of supply chain partner firms

Returns Management Process- A process that enables firms to manage volumes of returned product efficiently, while minimizing costs and maximizing the value of the returned assets to the firms in the supply chain.

SUPPLY CHAIN STRATEGIES

Demand variability
LOW (standard products) HIGH (innovative products)

Process stability

LOW

Lean (efficient) supply chain

Responsive supply chain

HIGH

Risk hedging supply chain

Agile supply chain

SUPPLY CHAIN TRENDS

ROLES WITHIN NETWORKS

Plant (manufacturing unit) Certifying / quality controlling unit Forwarder (transportation unit) Depot (stock-keeping unit) Logistics services provider Representative Wholesaler Retailer Commissioner Agent Dealer Coordinating unit Information forwarder / network Funds transferring unit Franchiser Custom office
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THIRD-PARTY LOGISTIC PROVIDERS

3PLs are external suppliers that perform all or part of a companys logistics functions, including: Transportation Warehousing Distribution Financial services Terms contract logistics and outsourcing are sometimes used in place of 3PL.

15

FOURTH-PARTY LOGISTICS PROVIDERS

Thought of as supply chain integrator, a firm that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution. 4PLs manage and direct the activities of multiple 3PLs, serving as an integrator. 4PLs are not asset based like 3PLs

16

We are providers of outsourced transportation solutions. Using the power of ever improving technology we eradicate any waste or spare capacity within a transport operation. We simplify the complexity of the transportation process; in short, we take your model and improve it. [] (www.3t-europe.com)

Offered services:
Transportation means planning Transportation planning Transportation control services Goods invoicing Accounting and reporting Customized solutions for transportation problems

EVOLUTION OF THE LOGISTICS OUTSOURCING

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OPERATIONAL EXCELLENCE - 3 MU Muda ()

- activity that is wasteful and doesn't add value or is unproductive; Muda is avoided through elimiation of seven wastes

Mura ( or )
- unevenness, inconsistency in physical matter or human spiritual condition; Mura is avoided through production leveling (heijunka ) and frequent deliveries

Muri ()
- overburden, unreasonableness or absurdity; Muri can be avoided through a standardized work

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LOGISTICAL EXCELLENCE SEVEN RIGHTS (LOGISTICAL MIX) Right product Right quantity

Right delivery
Right destination

Right time
Right client Right cost
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WHAT IS VALUE ?
Value needs to be created in the eyes of customer, who is, after all, paying for the products or services he/she consumes. The concept of value added is consistent and complementary to the economic concept of value for customer.

The focus of value is therefore translated across functional and company boundaries in both, the design and delivery of the appropriate product-service bundle.
Dimensions of customer value:
Conformance to requirements. Product selection. Price and brand. Value-added services. Relationships and experiences.

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VALUCE CHAIN AND VALUE SYSTEM

Value Chain - Value chain is a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. It includes all the value creating activities. Value Chain Analysis Examines the processes and costs related to each element of the chain. It provides management with an understanding of which activity(ies) create or can create the companys competitive advantage(s). The Value System A firms value chain is part of a larger system that includes the value chains of upstream suppliers and downstream channels and customers. Business Strategy Is how the company is going to create a competitive advantage within the Value System that it is competing in.

VALUE CHAIN
SUPPORT PROCESSES
BUSINESS MANAGEMENT HUMAN RESOURCES MANAGEMENT INFORMATION PROCESES DEVELOPMENT PROCESES

PRIMARY PROCESSES

Porters value chain

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VALUE CHAIN (1) Company activities are divided into the technologically and economically distinct activities that the company performs in doing business Value Activities are nine generic activities (split in two categories: primary and support) which value is the amount that buyers are willing to pay for a product or service Primary activities are those involved in the physical creation of the product or service Support activities provide the inputs and infrastructure that allow the primary activity to take place

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VALUE CHAIN (2)

A companys value chain is a system of interdependent activities A value chain for a company in a particular industry is embedded in a larger stream of activities that it is called Value System Linkage among activities not only connect value activities inside a company but also create interdependence between its value chain and those of its suppliers and channels

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VALUE SYSTEM
Value System

Supplier Value Chain

Firm Value Chain

Channel Value Chain

Buyer Value Chain

The companys value chain links to the value chains of upstream suppliers and downstream buyers.

Competitive advantage is obtained by optimizing and coordinating the linked activities between the various value chains.
The success of a companies business strategy depends on how effectively firm can influence and create a competitive advantage within the value system it chooses to compete in. a

VALUE SYSTEMS
NETWORKS Many participants Collaboration of competitors possible Low repetitiveness of business processes

Lack of central governance and dominating leader

Non-exclusive (non-strategic) participation, i.e possible participation in more than one network Information sharing Outsourcing of logistical, informational and financial infrastructure

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VALUE SYSTEMS
SUPPLY CHAINS / PIPELINES

Driven by the leader at the downstream operations Common operational strategy and policies Highly repetitive work- and material-flows Fixed sequential activities and known products catalogues Predefined participants Strategic sourcing - tend to reduce number of participants Predefined operational rules Information sharing (consumption and stock data given to all participants) Balancing (trade-off) cost and service Strategic imperative of speed and reduced exposure to inventory costs and products obsolescence

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TWO ALTERNATIVE VALUE SYSTEMS OF POP-MUSIC DELIVERY

New technology enables new business process
Composer Songwriter

Singer
Instrumentalists

Producer

CD manufacturer

Distributor

Retailer

Me

Recording studio

Sound engineer

Artist

Internet

Me

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WHAT IS CUSTOMER SERVICE ? Martin Christopher: Customer service is to provide time and place utility in the transfer of goods and services between buyer and seller. La Londe: Customer service is a process for providing significant valueadded benefits to the supply chain in a cost-effective way.

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CUSTOMER SERVICE MANAGEMENT Identifying pre-transaction, transaction and posttransaction elements of customer service Measuring customer service and retention (criteria, measures) Setting priorities (customer service optimization)

Customer service system (responsibilities, methods,

reporting)

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TYPICAL COMPONENTS / CRITERIA OF CUSTOMER SERVICE

Lead time Terms of ordering Terms of payment Warranties Terms of delivery Product accessibility Product customization Values added Delivery reliability Demand flexibility Delivery cost Discounts Product information Instructions / manuals Installation support Certifications Packagings Product follow up Post-sale service ...

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EXAMPLE CUSTOMER SERVICE STANDARDS

Order cycle time Stock availability Order-size constraints Ordering convenience Frequency of delivery Delivery reliability Documentation quality Claims Procedure Order completeness Technical support Order status information
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ORDER CYCLE TIME It is the sum of the time taken by all the activities performed
within the active cycle
Order processing
Order confirmation Deliveries planning Availability check Checks Insertion

Order preparation

Picking
Check

STOCK Consolidation
Packing Loading Transfer to customer

Order shipment

ORDER CYCLE TIME

It is always directly perceived by the customer It consists of different elements that are not directly visible to the customer It depends on the specific set of performed activities and on the available organizational and technological supports It could depend on the size and on other order features

TRADE-OFFS
Cost / Sales Sales growth

B
Cost

Service level / quality

36

 SCOR

Supply Chain Operations Reference model

SUPPLY CHAIN COUNCIL

(www.supply-chain.org)

The SCC is an independent, not-for-profit, trade association Membership open to all companies and organizations Focus is on research, application and advancement and advancing state-of-theart supply chain management systems and practices Developer and endorser of the Supply Chain Operations Reference (SCOR) as a cross-industry standard for supply chain management Offers Training, Certification, Benchmarking, Research, Team Development, Coaching, and Cross-standard Integration focused on the SCOR framework Founded in 1996 Approaching 1000 Association Members Chapters in North America, Europe, Japan, South Africa, Latin America, Australia/New Zealand, South East Asia and Greater China, with developing Chapters India and Middle East

Driving value through 38 the use of SCOR

38

MEMEBERS OF SC COUNCIL
China
Australia/New Zealand South Africa Latin America Southeast Asia

Member Location
North America

Japan

Member Affiliation

Europe

Government
SME End User Enabling Technology

Also developing chapters in India and the Middle East

Consultant Non-Profit/Academic
0% 10% 20% 30% 40% 50%

39

Some members

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SCOR: A REFERENCE MODEL

Integrates Business Process Reengineering, Benchmarking, and Process Measurement into a cross-functional framework.
Business Process Re-Engineering Capture the As-is business activity structure and derive the future To-be state Quantify the operational performance of similar companies and establish internal targets based on best in class results Characterize the management practices and software solutions that result in superior 41 performance Benchmarking Best Practices Analysis Process Reference Framework Capture the As-is business activity structure and derive the future To-be state Quantify the operational performance of similar companies and establish internal targets based on best in class results Characterize the management practices and software solutions that result in superior performance

SCOR: A REFERENCE MODEL

The Primary Use of SCOR: To describe, measure and evaluate supply chain configurations. SCOR contains: Standard descriptions of management processes A framework of relationships among the standard processes Standard metrics to measure process performance Management practices that produce best-in-class performance Enables the companies to: Evaluate and compare their performances with other companies effectively Identify and pursue specific competitive advantages Identify software tools best suited to their specific process requirements

SCOR: BOUNDARIES
SCOR spans: All customer interactions, from order entry through paid invoice. All product (physical material and service) transactions, from suppliers supplier to customers customer, including equipment, supplies, spare parts, bulk product, software, etc. All market interactions, from the understanding of aggregate demand to the fulfillment of each order SCOR does not attempt to describe every business process or activity, including: Sales and marketing (demand generation) Research and technology development Product development Some elements of post-delivery customer support

SCOR: PROCESSES
Plan

Plan
Deliver Return Source Return Make Deliver Return

Source Return

Make

Deliver
Return

Plan
Source Return Make Deliver Return Source Return

Suppliers Supplier

Supplier
Internal or External

Your Company

Customer
Internal or External

Customers Customer

SCOR reference model

Plan-Source-Make-Deliver-Return provide the organizational structure of the SCOR-model
44 44

SCOR: SCOPE OF BASIC MANAGEMENT PROCESSES

Plan (Processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production and delivery requirements) Balance resources with requirements Establish/communicate plans for the whole supply chain Source (Processes that procure goods and services to meet planned or actual demand) Schedule deliveries (receive, verify, transfer) Make (Processes that transform product to a finished state to meet planned or actual demand) Schedule production Deliver (Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management) Warehouse management from receiving and picking product to load and ship product. Return (Processes associated with returning or receiving returned products) Manage Return business rules

SCOR: THREE LEVEL OF PROCESS DETAIL

Supply Chain Operations Reference Model
Level

#
1

Description

Schematic Plan Source Return

Make

Comments Level 1 defines the scope and content for the Supply chain Operations Reference-model. Here basis of competition performance targets are set.

Top Level (Process Types)

Deliver Return

Configuration Level (Process Categories)

A companys supply chain can be configuredto-order at Level 2 from the core process categories. Companies implement their operations strategy through the configuration they choose for their supply chain. Level 3 defines a companys ability to compete successfully in its chosen markets, and consists of: Process element definitions Process element information inputs, and outputs Process performance metrics Best practices, where applicable System capabilities required to support best practices Systems/tools Companies implement specific supply-chain management practices at this level. Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions.

Process Element Level (Decompose Processes)

P1.1
Identify, Prioritize, and Aggregate Supply-Chain Requirements

P1.3
Balance Production Resources with Supply-Chain Requirements

P1.4
Establish and Communicate Supply-Chain Plans

P1.2
Identify, Assess, and Aggregate Supply-Chain Requirements

Not in Scope

Implementation Level (Decompose Process Elements)

SCOR: METRICS
Level 1 Metrics are primary, high level measures that may cross multiple SCOR processes. They do not necessarily relate to a SCOR Level 1 process (Plan-Source-MakeDeliver-Return). There is hierarchy among the metrics in different levels. Level 1 Metrics are created from lower level calculations (Level 2 metrics) Level 2 Metrics: Associated with a narrower subset of processes. Example: Metric related with Delivery Performance: Total number of products delivered on time and in full based on a commit date. Metric related with Production: Ratio Of Actual To Theoretical Cycle Time

SCOR: PERFORMANCE ATTRIBUTES AND METRICS

Performance Attribute
Supply Chain Delivery Reliability

Performance Attribute Definition

Level 1 Metric

Supply Chain Responsiveness Supply Chain Flexibility

The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. The velocity at which a at which a supply chain provides products to the customer.
The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. The costs associated with operating the supply chain.

Delivery Performance
Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Cost of Goods Sold Total Supply Chain Management Costs

Supply Chain Costs

Value-Added Productivity
Warranty / Returns Processing Costs Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turns

SCOR CODIFICATION
SCOR processes have unique identifiers: 1. One capital only are level 1 processes: P, S, M, D and R (5 in total) 2. A capital plus a number are level 2: P1, S2, M3, D2, D4 (15 in total) Two groups of exceptions for level 2: Enable: EP, ES, EM, ED and ER (5 in total) and Return: SR1, DR1, SR2, DR2, SR3, DR3 (6 in total) 3. A capital plus a number, a period and a number are level 3 processes:
P1.1, P1.2, S2.1, M1.5, D3.12 (108 processes in total) Two groups of exceptions for level 3: Enable: EP.1, ES.3, EM.4, ED.8, ER.1 (42 in total) Return: SR1.1, DR1.3, SR2.2, DR2.4, SR3.5, DR3.1 (27 in total) 49
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Plan
P2 Plan Source

P1 Plan Supply Chain P3 Plan Make P4 Plan Deliver P5 Plan Returns

Suppliers

Source
S1 Source Stocked Products
S2 Source MTO Products

Make
M1 Make-to-Stock

Deliver
D1 Deliver Stocked Products

M2 Make-to-Order

D2 Deliver MTO Products

S3 Source ETO Products

M3 Engineer-to-Order

D3 Deliver ETO Products

D4 Deliver Retail Products

Return Source

Return Deliver

Enable

Customers

SCOR BEST PRACTICES

SCOR has an encyclopedia of best practices Best practice: "A current, structured, proven and repeatable method for making a positive impact on desired operational results." Current Must not be emerging and can not be antiquated Structured Has clearly stated Goal, Scope, Process, and Procedure Proven Success has been demonstrated in a working environment and can be linked to key metrics Repeatable The practice has been proven in multiple environments.
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GREEN SCOR: AN EVOLUTION

A modification of the SCOR model that includes environmental elements

Environmental Management

SCOR Model

GreenSCOR modifies the existing SCOR structure to include environmental processes, metrics, and best practices.

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GreenSCOR maintains the integrity of the current SCOR model by adding to the existing elements.

GreenSCOR Model

GREEN SCOR: CHANGES

Best Practices to green the supply chain (examples) Collaborate with partners on environmental issues Minimize fuel/energy consumption Minimize and reuse packaging materials Metrics to measure the effects of greening (examples) Carbon and Environmental Footprint (proposed) Energy Costs Units per Shipment Processes to capture waste management M1.7, M2.7, M3.8Waste Disposal
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GREEN SCOR: ENVIRONMENTAL BEST PRACTICES

Supply Chain partners collaborate on environmental issues Plans created to minimize energy use
Select vendors with EMS system in place Establish environmental partnerships with suppliers Schedule peak production for of-peak energy demand times Minimize packaging material Route to minimize fuel consumption Retrieve packaging material for re-use Do not physically return product beyond economic repair Take back product for recycling Implement an EMS and track environmental performance Maintain equipment for fuel/energy efficiency
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Plan Source Make Deliver Return Enable

EMS=Environmental Management System

GREEN SCOR: ENVIRONMENTAL METRICS

Plan
Compliance costs Emissions cost per unit % of orders receives with correct packaging % of suppliers with current EMS system Energy costs as a per cent of production costs Waste produced as per cent of product produced Fuel costs as per cent of Deliver costs % of carriers meeting environmental criteria Products returned as percent of products delivered Return products disposed of vs. remanufactured Facility energy costs as per cent of total costs Down time due to non-compliance issues
EMS=Environmental Management System

Source
Make

Deliver
Return Enable

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GREEN SCOR: WASTE DISPOSAL PROCESS

M1: Make-to-Stock
M1.1
Schedule Production Activities

M1.2
Issue Product

M1.3
Produce and Test

M1.4
Package

M1.5
Stage Product

M1.6
Release Product to Deliver

M1.7

Activities associated with collecting and managing waste produced during the produce and test process including scrap material and nonconforming product.

Waste Disposal

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TOWARDS AN INTEGRATED BUSINESS REFERENCE FRAMEWORK FOR SCs

Product/Portfolio Management
Customer processes Supplier processes

Product Design DCOR

Sales & Support CCOR

Supply Chain SCOR

57 57

DCOR/SCOR/CCOR DCOR spans the activities between customer requirements and the design or specification of a product to meet customer demand. Organized around the processes of Plan, Research, Design, Integrate and Amend. SCOR spans the activities between recognition of demand through product delivery CCOR spans the activities associated with establishing and maintaining a customer relationship, identifying customer requirements and product support. Organized around the processes of Relate, Sale, Price, Assist. All xCOR frameworks are based on the same syntax rules.

THE INTEGRATED BUSINESS FRAMEWORK

59 59

EVOLUTION OF SCOR/DCOR/CCOR

60 60

VCOR VALUE CHAIN OPERATIONS REFERENCE MODEL

A framework proposed by the value chain group (www.value-chain.org) The VRM provides a common terminology and standard process descriptions to order and understand the activities that make up the value chain. It contains fully connected inputs and outputs to/from every activity, a metrics glossary, benchmarks and a collection of suggested practices. By configuring a VRM scenario, organizations see their entire value chain in a form to compare with other companies across multiple industries. The model also helps companies use benchmarking and best-practice information to prioritize their improvements, quantify the benefits of implementing change, and to pursue specific competitive advantages discovered in the process.

VCOR THE STRUCTURE

www.value-chain.org

VCOR THE STRUCTURE

www.value-chain.org

VCOR THE STRUCTURE

Metrics, Inputs/Outputs, Benchmarks and Best Practices are suggested in VRM following this logic:

www.value-chain.org