SUPPLY CHAIN

MANAGEMENT
GERENCIA
LOGÍSTICA
Basic Concepts

CARLOS A. MARINO DEL ROSARIO

Director Ingeniería Logística y de Transporte
Coordinador Master Supply Chain Engineering
 ABOUT ME
Doctorado en Industrial and Systems Engineering, Mississippi State University (USA);
Master of Science Industrial Engineering & Operations Research, Mississippi State University (USA),
Master of Science Engineering Management, California State University East Bay (USA);
Master Transportation and Logistics Management Reverse Logistics, American Military University (USA);
Magister en Administración de Empresas, Universidad del Pacifico (PERU);
Ingeniero Industrial, Universidad de Lima (PERU).
Licenciado como Professional Industrial Engineer (P.E.) en el Estado de California (EE.UU.), ha seguido
especializaciones avanzadas en proyectos en la Universidad de Stanford (EE.UU.) y Total Quality Management
(Japón).

Director de la Carrera de Ingeniería Logística y de Transporte en la Universidad San Ignacio de Loyola

Coordinador de la Maestría en Supply Chain Engineering
Profesor de la Maestría MBA UQAM-USIL

Cuenta con más de 25 años de experiencia a nivel directivo en la gestión del transporte, operaciones y logística
para compañías norteamericanas como MFC Project Engineers, Índigo Piping Systems, ambas con operaciones
globales en Asia, Medio Oriente, Latinoamérica, así como en empresas peruanas como la Embotelladora
Latinoamericana S.A. y Nestlé Perú. Ha sido Gerente General de la RED IDI (Investigación, Desarrollo e
Innovación) en Perú. Consultor de empresas como PWC, DHL, empresas de transporte y operadores logísticos.

Correo electrónico: cam828@msstate.edu

Learning Objectives
After this lecture, you should be able to do the following:

● Discuss basic concepts of supply chain,

and logistics.

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BASIC CONCEPTS

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 What is a Supply Chain?

Image source: Managing the Complex Supply-Chain Ecosystem http://www.lnsresearch.com/research-library/research-articles/managing-the-complex-supply-chain-ecosystem

The Omni-channel Landscape

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e-Commerce, m-Commerce

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 THE CONCEPT OF SUPPLY CHAIN

“a set of facilities, suppliers, customers, products and methods of

controlling inventory, purchasing and distribution”; it links suppliers and
customers in all processes involved to transform raw materials into the
finished products. (Chen, T. & Gong, X. 2013)
Source: SUPPLY CHAIN MANAGEMENT: A FRAMEWORK OF UNDERSTANDING D. du Toit & P.J. Vlok1*

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 THE CONCEPT OF SUPPLY CHAIN
MANAGEMENT

“a set of approaches utilized to efficiently integrate suppliers,

manufacturers, warehouses, and stores, so that merchandise is produced
and distributed at the right quantities, to the right locations, and at the right
time, in order to minimize system-wide costs while satisfying service level
requirements” Stock, J.R., Boyer, S.L. & Harmon, T. 2010.
Source: SUPPLY CHAIN MANAGEMENT: A FRAMEWORK OF UNDERSTANDING D. du Toit & P.J. Vlok1*

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 Logistics versus Supply Chain

PERSPECTIVES ON LOGISTICS VS. SCM: A SURVEY OF SCM PROFESSIONALS Paul D Larson; Richard F Poist; Árni
Halldórsson Journal of Business Logistics; 2007; 28, 1; ABI/INFORM Global
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 Logistics vs. SCM
Logistics is the design and administration of systems to control movement
and geographical positioning of raw materials, work-in-process, and
finished inventories at the lowest total cost (Bowersox, et.al 2013).
Managing the flow of items, information, cash and ideas through the
coordination of supply chain processes and through the strategic addition
of place, period and pattern values.” (MIT Center for Transportation &
Logistics)

Supply Chain Management is the systemic, strategic coordination of the

traditional business functions and the tactics across these business
functions within a particular company and across businesses within the
supply chain, for the purposes of improving the long-term performance of
the individual companies and the supply chain as a whole (Mentzer, et.al.
2001)
 Different perspectives on cost
minimization
Traditional Cost Logistics Model Total Cost Logistics Model
Minimize order processing cost Minimize (order processing +
+ inventory + transportation +
Minimize inventory cost warehousing, materials
+ handling and packaging +
Minimize transportation cost facility) cost
+ _________________________
Minimize warehousing, materials Lowest total logistics cost
handling and packaging cost
+
Minimize facility cost
__________________________
Lowest logistics cost
 The Objective of a Supply Chain

● Maximize overall value created

Supply Chain Surplus

= Customer Value – Supply Chain Cost
The integrated value-creation process must be
managed across firms from end to end
Customer the only
source of revenue

STAGES

• Customers
• Retailers
• Wholesaler/Distributors
• Manufacturers
• Component/Raw
Material Suppliers

Effective supply chain management is the

management of flows between and among supply
chain stages to maximize total supply chain surplus
 Supply Chain Challenges

Metrics – How do you measure a

system?

Politics and Power of Players

Visibility – Who can see what and how

quickly?

Uncertainty - Who knows what is going

to happen?

Global operations – Why don’t we ever

close?
Why is so important?

UNCERTAINTY

BUFFER

INTERLINK
Importance of Supply Chain Decisions

● In 2013 opened 1st store (followed Walmart, Target brand beloved by

Canadians)
● Huge customers’ expectations
● Grow too fast. In 2014 opened 124 stores, and three massive distribution
centers.
● Did not pay attention to local prices.
● Inventory problems.
● Problem with local suppliers
● Competition 17
 Decision Phases of a Supply Chain
Long-term decisions and expensive to reverse
How to structure the supply chain over the – must take into account market uncertainty
next several years
Locations and capacities of facilities
Products to be made or stored at
various locations Supply chain
Modes of transportation
Information system strategy or design

Decisions over the next quarter or year

Which markets will be supplied from Must consider in planning
which locations Supply chain decisions demand
Subcontracting, backup locations planning uncertainty
Inventory policies

Supply chain
operation

Daily or weekly operational decisions

Allocate an order to a particular shipment,
set delivery schedules, place replenishment Much less uncertainty (short time horizon)
orders
 Key Point

Supply Chain design, planning, and

operation play a crucial role in the success
or failure of a company. Supply chain must
adapt to changing technology and customer
expectation.

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 Home Depot

http://www.industryweek.com/top25supplychains2015#slide-0-field_images-167391
http://www.supplychain247.com/article/home_depots_flexible_picking_processes_achieve_same_day_order_fulfillment
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 OMNI CHANNEL STRATEGY

http://www.supplychain247.com/article/home_depot_builds_an_omni_channel_supply_chain/intelligrated 22
Push/Pull View of Supply Chains
 Push/Pull View of
Supply Chain Processes
● Supply chain processes fall into one of two
categories depending on the timing of their
execution relative to customer demand
● Pull: execution is initiated in response to a
customer order (reactive)
● Push: execution is initiated in anticipation of
customer orders (speculative)
● Push/pull boundary separates push processes
from pull processes
 Manufacturing strategies

● Engineer to Order (ETO) unique products and

extensively customized for the specific needs of
individual customers
● Build to Order (MTO) relies on relatively small
quantities, but more complexity
• Requires much interaction with customer to work out design
and specification
• Usually shipped direct to customer
● Assemble to Order (ATO) is when base components
are made, stocked to forecast, but products are not
assembled until customer order is received
• Manufacturing postponement practiced here
● Make to Stock (MTS) features economies of scale,
large volumes, long production runs, low variety, and
distribution channels
 Total cost of manufacturing
● Total cost of manufacturing (TCM)
includes:
• Procurement and production activities
• Inventory and warehousing activities
• Transportation activities
● TCM generally expressed as cost per
unit
● Procurement and production costs go
down as volume goes up
● Inventory and warehousing costs go
up as volume goes up
● Transportation costs go down as
volume goes up, but level off at high
volumes
TCM per unit ranging across strategic
alternatives

/MTS

Total Cost of Manufacturing

 Why hold inventory?
● Economies of scale
• Purchasing advantages
• Transportation advantages
• Manufacturing advantages
● Balancing supply and demand
• Seasonality/Speculative
• Maintaining supply sources
● Buffering against uncertainty
• Uncertainty in demand
• Uncertainty in supply
 Factors influencing inventory levels
● Average inventory
● Number of products
● Service level objectives
● Supply chain structure
● Financial implications of inventory
Companies rely on forecasts (demand/supply) to
assist in determining how much inventory to carry
 Functions of inventory
● Geographical specialization allows us to specialize
production across different locations
● Decoupling allows us to run processes for maximum
economic lot sizes within a single facility
● Supply/Demand balancing accommodates the elapsed
time between inventory availability and consumption
● Buffering uncertainty accommodates uncertainty
related to
• Demand in excess of forecast or
• Unexpected delays in delivery (aka safety stock)
Globalization offers firms several
attractive opportunities
● Demand exceeds local
supply
• 90% of global demand is
not fully satisfied by local
supply
● Strategic sourcing
• Identifying and matching
the sources of raw
materials and components
to manufacturers and
distributors
● Offshoring
• Moving manufacturing and
distribution operations to
countries with favorable
labor costs and tax laws
Significant differences for global logistics

● Distance of typical order-to-delivery operations

is significantly longer compared to domestic
business
● Documentation requirements for business
transactions is significantly more complex
● Operations must be deal with significant
Diversity in work practices and local operating
environments
● How consumers Demand products and services
must accommodate cultural variations
TRENDS

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Amazon
Amazon

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FORD

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 SUPPLY CHAIN
MANAGEMENT
GERENCIA
LOGÍSTICA

CARLOS A. MARINO DEL ROSARIO

Director Ingeniería Logística y de Transporte
Coordinador Master Supply Chain Engineering