SCM Unit 4
SCM Unit 4
SCM Unit 4
Reduce Costs
Operating a business is a costly affair already. With meticulous planning and plotting, one can
save a lot of money with a good transportation strategy in place. Transportation can involve a
number of different modes (air, water, or land), fuel costs, and weight. To keep the cost of such
logistics to a minimum, it is suggested to conduct a full-scale freight audit.
The customer should be the top-most priority of a business and by proxy, also the supply chain.
Tightening up your transportation lines is one way to ensure that shipments reach your
customer on time and in good condition. For a large-scale operation, this tiny little detail is even
more important.
A business must understand the varying degrees of priority that shipments might have.
Sometimes getting some packages quicker might be more important than getting all the
packages at a moderate regular time. This is why, segmenting shipments based on factors such
as different customers, type of products, suppliers etc. is highly essential.
TMS or Transportation Management System is software that allows for regular and efficient
tracking of your transportation network. This helps you a great deal when it comes to analyzing
and making informed decisions. With a TMS, you can track route planning, fleet management,
fuel costing, cargo handling, and customer communications, all using one platform.
Various Modes of Transportation
One way for businesses to grow is by expanding their reach globally. For that to happen, they
would need to figure out ways to transport shipments everywhere in the world. This means
adopting a combination of various modes of transportation and figuring out the fastest
combined way to get the product available worldwide.
This is an extension of the previous point. Trucks have been the preferred mode of transporting
shipments in every country. They are tangible and on the land level, can go beyond what the
railway lines allow. A fleet of trucks is the best way for local businesses to manage their
transportation needs.
With transportation methods getting flexible and stretching across borders, global trade is at an
all-time healthiest. Businesses in every country, with some meticulous planning, can not only
expand their reach but also help their country’s economy while doing so. Global trade, due to the
possibilities of various modes of transportation, has made the world smaller in the best way.
Choosing the right transportation mode depends on many factors such as the
type of consignment, the budget, and the speed at which the delivery needs to be
made. Each of these methods comes with its own advantages and
disadvantages.
1. Cost/Budget
The budget should always be one of the most important factors to consider while
shipping goods. Costs vary based on the type and volume of goods that need to
be transported. It is important to keep in mind that the cost of transport can in
turn influence the cost of goods.
Businesses need to consider the cost of transportation, keeping other costs such
as insurance premiums and finance charges in consideration.
2. Characteristics of goods
The size and weight of the cargo play a crucial role. Land and air transport
primarily cater to fragile and smaller shipments. Rail and sea transport are more
suitable options for high-volume shipments. For fragile, high-value products, air,
and land transport are the best options.
3. Reliability
The reliability parameters of different modes differ from each other. The urgency
by which the cargo needs to be delivered influences the decision. All modes of
transport, land, ocean, and air, can be affected by natural hurdles like bad
weather, which may cause delays.
3. Safety
Shipping via sea mode is the riskiest, as it is often more exposed. Transportation
through roads can be considered safer than railways in comparison. The safest
method of shipping mode is considered to be air transport. Some goods also
require special facilities such as refrigeration or special security measures that
need to be considered.
4. Characteristics of goods
The size and weight of the cargo play a crucial role. Land and air transport
primarily cater to fragile and smaller shipments. Rail and sea transport are more
suitable options for high-volume shipments. For fragile, high-value products, air,
and land transport are the best options.
5. Flexibility
Road transport is the most flexible mode, as it is not dependent on factors such
as flight times, shipping routes, or pre-scheduled timetables. Motor transport can
operate day and night, at one’s convenience, and has the added advantage of
last-mile delivery.
• rail;
• maritime (sea);
• road;
• inland waterways
• air.
• passenger car;
• powered two-wheelers;
• bus;
• coach;
• tram;
• metro.
• pipelines.
The modal split of transport describes the relative share of each mode of transport, for example by
road, rail or sea. It is based on passenger-kilometres (p-km) for passenger transport and tonne-
kilometres (t-km) for freight or goods transport. The modal split is usually defined for a specific
geographic area and/or time period.
Channel Structures
While channels can be very complex, there is a common set of channel structures that
can be identified in most transactions. Each channel structure includes different
organizations. Generally, the organizations that collectively support the distribution
channel are referred to as channel partners.
The direct channel is the simplest channel. In this case, the producer sells directly to
the consumer. The most straightforward examples are producers who sell in small
quantities. If you visit a farmer’s market, you can purchase goods directly from the
farmer or craftsman. There are also examples of very large corporations who use the
direct channel effectively, especially for B2B transactions. Services may also be sold
through direct channels, and the same principle applies: an individual buys a service
directly from the provider who delivers the service.
From a consumer’s perspective, the wholesale channel looks very similar to the retail
channel, but it also involves a wholesaler. A wholesaler is primarily engaged in buying
and usually storing and physically handling goods in large quantities, which are
then resold (usually in smaller quantities) to retailers or to industrial or business
users. The vast majority of goods produced in an advanced economy have wholesaling
involved in their distribution. Wholesale channels also include manufacturers
who operate sales offices to perform wholesale functions, and retailers who operate
warehouses or otherwise engage in wholesale activities.
• Christmas-tree wholesalers who buy from growers and sell to retail outlets
• Restaurant food suppliers
• Clothing wholesalers who sell to retailers
The agent or broker channel includes one additional intermediary. Agents and brokers
are different from wholesalers in that they do not take title to the merchandise. In other
words, they do not own the merchandise because they neither buy nor sell. Instead,
brokers bring buyers and sellers together and negotiate the terms of the transaction:
agents represent either the buyer or seller, usually on a permanent basis; brokers bring
parties together on a temporary basis. Think about a real-estate agent. They do not buy
your home and sell it to someone else; they market and arrange the sale of the home.
Agents and brokers match up buyers and sellers, or add expertise to create a more
efficient channel.
It’s important to note that the larger and more complex the flow of materials from the
initial design through purchase, the more likely it is that multiple channel partners may
be involved, because each channel partner will bring unique expertise that increases
the efficiency of the process. If an intermediary is not adding value, they will likely be
removed over time, because the cost of managing and coordinating with each
intermediary is significant.
In the Vehicle Routing Problem (VRP), the goal is to find optimal routes for multiple
vehicles visiting a set of locations. (When there's only one vehicle, it reduces to the
Traveling Salesperson Problem.)
But what do we mean by "optimal routes" for a VRP? One answer is the routes with the
least total distance. However, if there are no other constraints, the optimal solution is to
assign just one vehicle to visit all locations, and find the shortest route for that vehicle.
This is essentially the same problem as the TSP.
Exact Approaches
As the name suggests, this approach proposes to compute every possible solution until one of the
bests is reached.
Heuristic methods perform a relatively limited exploration of the search space and typically produce
good quality solutions within modest computing times.
Constructive Methods
Gradually build a feasible solution while keeping an eye on solution cost, but do not contain an
improvement phase per se.
During supply chain network design facility related decisions are made. The decisions are:
4. Market and supply allocation - What markets should each facility serve? Which supply
sources should feed each facility?
Decision regarding role become important in providing flexibility. If facilities can serve
demand in a region globally there is more flexibility. Similarly in a multi-product firm, if
facilities can produce large number of products, there is flexibility.
Strategic Factors
Technological Factors
Instead, if fixed costs are low, many local facilities are preferred.
These include taxes, tariffs, exchange rates and other economic factors that are not internal
to an individual firm.
Political Factors
The political stability of the country is an important criterion for locating facilities.
Infrastructure
Key infrastructure elements that effects costs of sourcing, making and distributing are
availability land and buildings, labor availability, proximity to transport terminals, rail
service, proximity to airports and sea ports, highway access, ease of goods traffic and local
utilities.
Competition
• Capacity Planning
o ForecastingURL
Forecasting and the various methods used by organizations. Pay attention to the
approaches used to improve the accuracy of a forecast, and consider the different
methods that could be applied to various industries. Take the time to answer the
questions at the end of the chapter to apply your new knowledge.
o Forecasting DemandURL
Pay attention to the inputs to capacity planning and the determinants and steps in
the capacity planning process. This is important to understanding how to use this
information to increase the quality of your forecasts. In addition, this helps you
understand your organization's capability to meet the forecast needs.
Many factors can determine where an organization will locate its facilities. Why is it
important to choose a location to match an organization's requirements?
o Facilities LayoutPage
There are three types of workflow layouts that managers can choose from and how
office and factory facilities are approached differently. What are the criteria of
creating an effective and efficient workflow and building a high standard of
production?
Line Balancing and how to minimize workstations and cycle time, while maximizing a
smooth operation. Pay attention to the sections about the different types of
assembly lines and the benefits of assembly line balancing.