Page 277 - DMGT501_OPERATIONS_MANAGEMENT

Unit 13: Supply Chain Management and JIT

house to meet quick demands by the customer. It is wise to keep in mind that since 30% of Notes
the cost of a product is encompassed by transportation, using the correct transport mode
is a critical strategic decision. Above all, customer service levels must be met, and this
often times determines the mode of transport used. Often times this may be an operational
decision, but strategically, an organization must have transport modes in place to ensure
a smooth distribution of goods.
5. Supply: An organization must determine what their facility or facilities are able to produce,
both economically and efficiently, while keeping the quality high. But most companies
cannot provide excellent performance with the manufacture of all components. Outsourcing
is an excellent alternative to be considered for those products and components that cannot
be produced effectively by an organization's facilities. Companies must carefully select
suppliers for raw materials. When choosing a supplier, focus should be on developing
velocity, quality and flexibility while at the same time reducing costs or maintaining low
cost levels. In short, strategic decisions should be made to determine the core capabilities
of a facility and outsourcing partnerships should grow from these decisions.

6. Information: Effective supply chain management requires obtaining information from
the point of end-use, and linking information resources throughout the chain for speed of
exchange. Overwhelming paper flow and disparate computer systems are unacceptable in
today's competitive world. Fostering innovation requires good organization of
information. Linking computers through networks and the internet, and streamlining the
information flow, consolidates knowledge and facilitates velocity of products. Account
management software, product configurations, enterprise resource planning systems, and
global communications are key components of effective supply chain management
strategy.

13.3 Logistics

Logistics focuses on the physical movement and storage of goods and materials. This involves
evaluating and selecting various transportation options, developing and managing networks of
warehouses when needed, and managing the physical flow of materials into and out of the
organization.

These physical flows are often called in-bound and out-bound logistics, respectively. In-bound
logistics is the movement of materials from suppliers and vendors into production processes or
storage facilities. Outbound logistics is the process related to the movement and storage of
products from the end of the production line to the end user.

Logistics decisions are often tightly intertwined with production and inventory decisions,
particularly when businesses must decide where to hold inventory in the supply chain. In some
cases, logistics help decide on the appropriate type of packaging for products. Logistics personnel
also must work closely with marketing to determine the channels (e.g., wholesalers, retailers,
and mail-order) by which to distribute the firm's products and services. Material and products
can also flow back up the supply chain. For example, customers might need to return damaged
or outdated products. This process is called reverse logistics. An important new trend is the
recovery and recycling of products after they have reached the end of their useful lives.
There is a new trend due to the increasing concern for the environment where supply chains
often extend beyond the final customer to include the acceptance and "disassembly" of final
products for re-use in new products. In this sense, this is an attempt by organizations to "close
the loop", so that they can avoid harming the environment. With increasing demand for this
type of service, reverse logistics presents a different set of logistics challenges that organizations
have to meet in the future.

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