Global Supply Chain Management notes

Module 1: Introduction and objectives

1.1 Basic concepts associated to supply chain and production
- What is supply chain:
o Global network (is not international, because international is only between two)
o It is used to deliver products or services.
o Covers all, from ram materials to end customers.
o Manufacturers- the one that transform the raw material into goods
o Distribution Chain- the ones that bring the finish good to the selling network.
o It happens to engineer flow information, physical distribution, and cash.

- Supply chain purpose:

- Efficiency: Produce at lowest possible cost
- Effectiveness: Produce the product with the highest value to the customer, normally
higher value is opposite to higher efficiency.
- Value: Quality obtained by the price paid (= Quality/price)
- Depends on what customer wants or is willing to pay.

- Products vs services:
- Produce= products or services
- Using a pull or push and/or integration or horizontal strategies
o Product (assets):
 Tangible: Physical dimensions or weight
 PURPOSE: effective, efficient, has/adds value
 Can be patented
 Can be tested prior purchase
 Produced without customer interaction:
 According to manufacturing plan that requires efficiencies
  Produced according to standard specifications with no variation
o Services:
 Intangible
 Is not physical
 Can NOT be patented
 Proof of concept, but service per se can’t be tested prior purchase
 Requires interaction with customers to be delivered
 1:1 delivery
 Customized according to customer needs
 Can NOT be stored, have timing specifications

- Distribution strategies:
o Proactive:
 Push:
 Chains focused on execution, efficiencies and cost performance
 Planned proactively
 Uncertain, based on forecasts, needing real time info
 Use scale production and dedicated capital assets, making stock.
 Quicker response, because has inventory available
 E.g- Bakery Store
o Reactive
 Pull:
 Reactive to demand
 Demand is “certain”
 Build to order
 Requires more time to fulfill demand
 Less cost (build only what is needed)
 Offers higher customization
 May take more time to complete the order
 E.g. Wedding invitation, uniforms.
o Cost, price and value are totally different.
o Customization: the less customization, the less the cost.

- Supply Chain Flows

o Information flow:
 Specifications
 Flyers or literature that supports sales
 Orders
 Invoices
 Receipts
 Regulations & rules
o Primary product flow:
 Materials
 Components
 Supplies
  Services
 Finished products
o Primary cash flow:
 Payments
 credits
 refunds
o Reverse product flow:
 Returns for repair
 Replacements
 Refunds
 Recycling
 Disposals

- Supply chain in services:

o Supplies: Electricity, Phone, TV on demand, Internet
o Legal advisors
o Real State
o Software
o Federal services (Government)
o Traveling services
o Except:
o Farming
o Mining
o Manufacturing
- Integration Strategy:
o Vertical
 Self-sufficient enterprise
 Supply chain of the Company is owned by the same company
  Each member of the supply chain Produces a different product or Specific
service for a market
 Products combined, satisfy a common need
o Exmpl: Ford
 Iron mines
 Steel mills
 Fleet of ships
 Manufacturing plants
 Showrooms
 BENEFIT
 Control
 No dependency
 Internal synchronization
 Control to reduce its Production costs
 Capture the entire Profit
o Horizontal
 Expand business acquiring similar companies
 In the same business
 Company produces different items related to one product, through internal
expansion, acquisition, or merger
o Exmp: HP
 Purchase Compaq
 Purchase Poly
 Purchase 3D Printer companies
 … to expand its market share
 BENEFIT
 Economies of scale and scope
 Focus on business
 Market knowledge – market share expansion
 Reduce competition
 Diversify its product or service
 Increase its size
- Supply Chain vs. Logistic
o SUPPLY CHIAN
 Transform RAW MATERIALS into PRODUCTS/SERVICES
 And get it to Customers
o LOGISTICS
 Obtain, Produce, and Distribute material and products/services, in the
proper place and in proper quantities.
o LOGISTICS 7 Rs (Logistics management principles that are Foundation to
provide services)
o 7 R-s are a Set of ideals and principles used by organizations that can be a
foundation to be successful in the trucking and logistics industry. (Logistics
management principles)
 Right Product
  Right Quantity
 Right Condition
 Right Place
 Right Time
 Right Customer
 Right Price
o Quick response to changes in market or customer order changes
o Minimum variance in Logistics services
o Minimize inventory to reduce cost
o Consolidate shipments (Grouping material)
o Maintain high quality consistently and maintain continuous improvement
o Support the entire lifecycle, including reverse distribution

o Logistics Management is part of SCM that

 Plans
 Implements
 Controls
o Efficient and effective
 Flows (Forward, Reverse)
 Storage of goods/services
 Related information
o Between the points
 Of origin, and
 Consumption
 In order customer requirements are met
- Logistics Types/Functions: Contribute to the Logistics integrated approach
o Transportation:
 Move the goods through the chain
 AIR
 OCEAN
 GROUND
 TRAIN
 PIPELINES (GAS)
 Right selection will add value to the customer
 Inbound Logistics
 Outbound Logistics
o Warehousing:
 When material is not in motion, it has to be stored.
 Warehousing components:
 Receive
 Store
 Ship
 Material, to and from Production and/or distribution locations

o 3 & 4 PL Logistics:
 3rd Party logistics
  Manage one or more logistic
services
 E,g, Maersk, DVS, CEVA
 4 Party logistics
th

 Logistics Specialists/ General

contractors
 Offer their core E2E services
 As Outsourcers for companies
 E.g. Amazon, DHL
o Reverse Logistics:
 How to handle
 Return
 Re-Use
 Recycle
 Dispose
 Products to make reverse journey from Customer to Supplier.
 Including options as Refund or material replacing
o The right balance of Logistics functions and types will have major incidence on
the Operational costs that will influence the Price, and how our offer will satisfy
Customer needs. These two elements are what will define our Value Proposition.
- Supply Chain- Operational processes
o Planning:
 Strategic processes
 How the demand should be satisfied
 Proactive or Reactive?
 Consider capacity, capabilities, resources
 KPI (Key Performance Metrics) – efficiency
 Deliver quantity and value added to customers
o Sourcing:
 Raw material/services Provider selection, Procurement
 Process that will determine the price, delivery methods, and
payment/collection processes.
 KPI – measure relation with Providers/Partners
o Manufacture:
 Transform raw material/service into the finished goods offered by the
company
 Production processes (including worker ability development)
 Materials management
 Production tools
 KPI – efficiency, effectiveness, speed, quality,
o Logistics:
 Delivery processes> Inbound, Outbound, RMA, 3PL
 Carrier selection – to move material
 Delivery schedule. Warehouse management.
 Invoicing and Payment processes
  RMA = Refund/Returns – Receive defectives, remorse, excess, used.
Provide customer support in case of issues – post sales claims

Homework 1- Logistic services

List 1- Maersk
- Maersk:
o Is a Danish business conglomerate that consists of integrated logistics and
transports activities. Their vision is to transform the flow of the foods, goods,
data, and materials that sustain people, businesses, and economies the world, they
also want to be part of the contribution of exchanging ideas, culture, and trust to
have and integrated world where value is created for everyone. This has made this
company to be now the number one logistic company in the world.
- Logistic services from ASIA to US:
o Maersk has a fast and reliable shipping service from Asia Pacific to North
America, the routes are:
 Sydney- Charleston
 Xiamen- Vancouver
 Xiamen- Newark
 Xiamen- Tampa
 Singapore- Savannah
 Shanghai- Freeport
 Shanghai- Tacoma
 Vung Tau- Newark
 Ningbo- Los Angeles
 Yokohama- Seattle
 Rantian- LA
 Haiphong- LA
 Qingdao- Jacksonville
 Yantian- Baltimore
 Hong Kong- Freeport
 Shekou- Long Beach
 Vung Tau- Norfolk
 Vung Tau- LA
 Qingdao- Oakland
 Kaohsiung- Seattle
 Haiphong- LA
- Classification of services according to the four logistic types/functions reviewed in class:
o Return- You can only request for a refund if it is posted under your ledger.
o Re-Use- They reuse containers that are used for product transportation.
o Recycle- They have a responsible ship recycling standard (hereafter: RSRS)
describes the conditions under which ships can be recycled.
o Dispose- They have longstanding cargo disposal procedures, “unclaimed
cargo disposal to release the empty container. Means cargo can be sold for
covering of occurred expenses or destruction procedure”.

List 2- DHL
 - DHL:
- Is an international courier, shipping, and packaging services. The name DHL is derived
from the names of its founders, it was stablished in 1969, their purpose is to facilitate and
simplify the lives of their customers and contribute to making the world better.
- Local services that this company provides in the us:
o They offer domestic shipping services- They have a workshare partnership with
the United States Postal Service, which allow customers to benefit from network
reliability, postal expertise, and an array of value-added services. The local
carriers handle both final-mile delivery and return pickups, enabling you to
reliably reach more than 160 million addresses in the U.S.
- Classification of services according to the four logistic types/functions reviewed in class:
o Return- they offer return pickups
o Re-Use- they offer reusable boxes in circular economy.
o Recycle- 14% of the plastic used for packaging is recycled.
o Dispose- they have an attention line so they help you dispose things.

Module 2: Supply management

- Forecast and Planning:

o How to determine what/how much to purchase = avoiding shortages/excess

Market Demand
REAL

Forecast
Study demand
Produce projection model
Estimated Demand
Usage, Yield, Availability
Future
Innovation
External influences
Seasonality

Planning
Current inventory
Production plan
Components needed
Suppliers Material requirements
Location To Procurement department
Incoterms
MOQ, STO, lead time
Supplier Constraints
Carrier services
Time to transport and deliver
- FORECASTING = An efficient logistics process produce coincidence between
customer requirement of a product with the company capacity and its supply chain.
- Forecast is needed: to support planning, to produce the basis that improve resources
administration.
- Support planning is to avoid excess or shortages
o Shortages: may stop production, delay service delivery, generate backlog 
Impact customer satisfaction
o Excess: Impact cost of production and profit  Impact product price (Worst case
scenario)  Lose market
- Bad forecast may create impacts to transport, logistics, insurances, storage.
- Forecast components
- Ft = (Bt x St x T x Ct x Pt ) + I
Ft = Forecast quantity for period t
Bt = Basic level demand for period t
St = Seasonality factor for period t
T = Trend index for the component that will induce increase or reduction for the period
Ct = Cyclical factor for the period t
Pt = Promotional factor for the period t
I = Random or exceptional quantity (like backlog)
- Forecasting techniques (Probability and statistics)
o Qualitative: relay on people experience
o Time series: Statistical method, based on historical data. Useful when you have
real/historical data available. Appropriate for short run predictions. This technique
analyzes the patterns and historical data variation to determine the trends:
1. Mobil average
2. exponential smoothing
3. Extended leveling,
4. adaptative leveling
- Causal: Like relation between price – consumption for certain product. AKA Regression.
Requires definition of the main variable that creates impact in the forecast
o Simple and multiple regression
o Components:
 Material to produce finished good
 Material to pack the finished good
 Material to transport the finished good

o MOQ = Minimum Order quantity

o STO = Stock to order
o Lead time = time between receiving the order and complete manufacturing
process

- Constraints: Frequency and increase condition

- E.g.
o x% month over month
 o two production cycles per year (Feb and June) or 1 per Q, first month of each
quarter
o 30 days according to plan that must be delivered 3 months ago / combined with 3
frozen month forecast

- EDI = ELECTRONIC DATA INTEGRATION

o Automated connection with providers = My system connected and exchanging
info automatically with my provider’s system
- MANUAL
o When no EDI, the interaction is Manual and will be subject to errors
(communication, process, etc.) and delays

- Uncertainty in the performance cycle:

- Random variations induced
- Operative conditions
- Infrastructure
- Operation quality

- Inventory deliveries (FG)

- Distribution during cycle / quantities
- History / demand during cycle
- Time to complete the cycle: From ordering to Manufacturing and distribution
- MANUAL process or EDI

Concept Description

Procurement Obtaining supplies and/or services by different means: Loan, transfer, hire, purchase
Getting material to the place it will be used
Encompasses: Purchasing, store, traffic/transportation, incoming inspection, quality
control and assurance. Some firms include environmental management.
FOCUS: physical material or service delivery control aspects after the contract has
been let or the order placed
Purchasing Purchasing is the process by which a company (or other organization) contracts with
third parties to obtain goods and services required to fulfil its business objectives in the
most timely and cost-effective manner
Purchasing has two main purposes:
Purchase for resale> Merchants and speculators
Know final market for commodities. Regardless cost, it will produce positive profit
Purchase for consumption or for conversion> More complex, involving long term
decisions, with associated risks
FOCUS: more concerned with establishing and managing a commercial relationship
 Outsourcing Contract out services and activities, traditionally provided in house, when out services
are more cost competitive than internal services
FOCUS: Cost Reduction
Supply AKA Materials management
Management Encloses: Procurement activities; inventory management; receiving activities; stores
and warehousing; in-plant materials handling; production planning scheduling and
control; traffic and transportation
Currently includes Sustainability strategies
Supply Chain Integrative philosophy used to manage the total flow through a distribution channel
Management from the supplier to the ultimate user.
Extends from the raw material extraction or raw concept origination through many
processes to the ultimate sale of the final product, whether goods or services, to the
consumer
2.1 Supplier management and Purchasing goals
- Sustainable supply Chain Cycle:

- The supply chain starts with the extraction of raw material (or origination of
raw concepts for services) and each link in the chain processes the material or the
concept in some way or supports this processing. Arguably, it should also cover
the disposal of waste associated with the consumed product.
- The globalization of some sources of supply and a need to ensure local
economic development make it essential that professional practice is improved
and regarded as a key element in the preparation of company or organizational
strategies
- Strategy is usually formulated to gain competitive advantage at some point in
the value chain.

- Procurement- Supply´s chain heart

- What are the Company's objectives?

- How the Company operates?
- What resources are required?
- How are the resources managed?
- What are the influences that create success or failure?
- Corporate Plan:
 - Objectives
- Products and markets
- Finance
- Material resources
- Human resources
- Technical facilities
- Management and administration
- PROCUREMENT PLAN:
- Manage short supply and raising prices
- That grant production and competitiveness
- Corporative planning:

Corporate plan- What to do, how to do it, when to do it, who.

 Purchasing plan & strategies

Procurement, purchasing, outsourcing, supply management and supply chain

management.
Procurement strategy:

Debate: