Unit 5

Supply Chain integration

• An integrated supply chain can be defined

as an association of customers and
suppliers who, using management
techniques, work together to optimize
their collective performance in the
creation, distribution, and support of an
end product.
 Supply chain restructuring
• Supply chain restructuring is the process of redesigning or
reorganizing the components of a supply chain to improve its
efficiency, reduce costs, enhance agility, and increase customer
satisfaction. The goal of supply chain restructuring is to optimize the
flow of goods and services across the supply chain by reconfiguring
the relationships, processes, and technology that connect the various
entities involved.
Supply chain restructuring involves:

1.Network design: The first step in supply chain restructuring is often to redesign the
network to optimize the flow of goods and services. This may involve changing the
number and location of warehouses, transportation modes, and the allocation of
resources across the supply chain.

2.Process redesign: Supply chain restructuring may also involve redesigning the processes
involved in manufacturing, logistics, and delivery to improve efficiency and reduce costs.
This may involve the adoption of new technologies or the automation of certain tasks.

3.Supplier management: Restructuring the supply chain may also involve reviewing and
renegotiating supplier contracts to ensure that they are aligned with the company’s
strategic goals and objectives.
1.Technology adoption: The adoption of new technology, such as IoT
devices, artificial intelligence, and blockchain, can also play a
significant role in supply chain restructuring. These technologies can
enable greater transparency, accuracy, and efficiency across the
supply chain.

2.Collaborative partnerships: Restructuring the supply chain may also

involve forming collaborative partnerships with other companies in
the supply chain to enhance agility and reduce costs. These
partnerships may involve sharing resources, knowledge, and expertise
to optimize the supply chain for mutual benefit.
 LOGISTICS
MANAGEMENT
 Logistics Vs Supply
Chain Management
Logistics management, is that part of supply chain management
that plans, implements, and controls the efficient, effective
forward and reverse flow and storage of goods, services and
related information between the point of origin and the point of
consumption in order to meet customers' requirements.

Supply chain management, encompasses the planning and

management of all activities involved in sourcing and
procurement, conversion, and all logistics management activities.
Importantly, it also includes coordination and collaboration with
channel partners, which can be suppliers, intermediaries, third
party service providers, and customers. In essence, supply chain
management integrates supply and demand management within
and across companies
LOGISTICS FUNCTIONS

• Purchasing / Procurement
• Inventory Control
• Warehousing
• Materials Handling
• Facility Location / Network
Design
• Transportation
• Customer Service
• Order Processing
 NATURE AND
CONCEPTS
• Logistics is the management of the flow of goods, information and
other resources, including energy and people, between the point of
origin and the point of consumption in order to meet the
requirements of consumers (frequently, and originally, military
organizations).
• Logistics involves the integration of information, transportation,
inventory, warehousing, material-handling, and packaging, and
occasionally security. Logistics is a channel of the supply chain
which adds the value of time and place utility.
• Today the complexity of production logistics can be modeled,
analyzed, visualized and optimized by plant simulation software
 TYPES OF LOGISTICS

A. Inbound Logistics
B. Outbound Logistics
C. Third Party Logistics
D. Fourth Party Logistics
E. Reverse Logistics
 A. INBOUND LOGISTICS

• Inbound logistics refers to the transport, storage and delivery of

goods coming into a business.
• Sourcing and vendor selection for supply of raw materials and
manufacturing parts

• Inbound transportation and procurement planning

• Raw materials warehousing including consolidation warehousing
• Management of Inventory
• Information system for effective support strategic alliances with
the supplies and transporters
 B. OUTBOUND LOGISTICS

• Outbound logistics refers to the same for goods going out of a

business. Inbound and outbound logistics combine within the
field of supply-chain management, as managers seek to
maximize the reliability and efficiency of distribution networks
while minimizing transport and storage costs.
• Outbound logistics system is concerned with the flow of finished products from
factory warehouse to the customers through a distribution network comprising:
• The wholesalers
• Distributors
• Retailers
• Regional warehouses
• Transporters
• The inventory at all levels
• Sales order processing
• Sales return processing
• Accounts receivable realization and
• Counter flow of information from the customers to the factory
 C. THIRD PARTY LOGISTICS

• A 3PL (third-party logistics) is a provider of outsourced logistics

services. Logistic services encompass anything that involves
management of the way resources are moved to the areas where
they are required. The term comes from the military.
 D. FOURTH PARTY LOGISTICS

• This evolution in supply chain outsourcing is Fourth-party

Logistics or 4PL. A 4PL provider is a supply chain
integrator. The 4PL assembles and manages all resources,
capabilities and technology of an organization's Supply
Chain and its array of providers.
 E. REVERSE LOGISTICS

• Reverse logistics is for all operations related to the reuse of

products and materials. It is "the process of moving goods from
their typical final destination for the purpose of capturing value, or
proper disposal.
 MAJOR FEATURES of
logistics management
• Smooth flow of all types of goods such as raw mareials, work-in-
process and finished goods
• Meeting customer expectations about product and related
information requirements
• Real time flow of information about products’ demand and
availability
• Delivery of quality product in required quantity without excessive
safety stock
• Best possible customer service at the least possible cost
• Integration of various managerial functions for optimization of
resources
• Movement and storage of goods in appropriate quantity
• Enhancement of productivity and profitability
Seven elements of logistics are:
• Order Placing
• Materials Handling
• Warehousing
• Inventory Management
• Transport
• Packaging
• Monitoring
 Order Placing
• A logistics company must complete order processing. Order
processing is the first step in logistics.
• This may fall under the purview of the company’s commercial
department.
• Before processing orders within the company, the commercial
department makes sure that payment terms and delivery terms are
met.
• Materials Handling
• Material handling is the act or process of moving goods around a
warehouse. This involves managing inventory so that orders can be
fulfilled quickly and accurately. Although it may seem like a simple
job, it is crucial and must be done frequently.
• Warehousing
• The warehouse must be located near the distributor or retailer
to deliver goods quickly. A branded product may take longer to
arrive than a product with a similar name. Therefore, it makes
sense for a branded company to set up a more convenient
warehouse to deliver the products quickly.
• Inventory Management
• One of the most important functions of a logistics business is
inventory management. It is about managing sufficient inventory
to satisfy client demand while keeping the cost of carrying goods
minimum.
• Transport
• The logistics company’s most important activity is
transportation. It is also one of the most resource-intensive and
revenue-generating logistics segments.
• Packaging
• The packaging found in supermarkets and hypermarkets is
divided into two types. One is the one customers see on the
shelf. It appeals to them and makes them want to buy the
package. The second type is transport packaging. This allows the
product to be transported safely from one place to the next
without being broken or spilled.
• Monitoring
• Logistics companies must keep track of inventory management,
transportation, warehousing, and other information. Each site,
for example, requires continuous information about its supply
status, future commitments, and replenishment capacities.
Unit 5
SCOR
 supply chain operations reference model
(SCOR)
• The supply chain operations reference model (SCOR) is a
management tool used to address, improve, and communicate supply
chain management decisions within a company and with suppliers
and customers of a company
• The model describes the business processes required to satisfy a
customer’s demands.
• It also helps to explain the processes along the entire supply chain
and provides a basis for how to improve those processes.
 supply chain operations reference model
(SCOR)
• Plan: Demand and supply planning and management are
included in this first step. Elements include balancing resources
with requirements and determining communication along the
entire chain. The plan also includes determining business rules to
improve and measure supply chain efficiency
• Source:This step describes sourcing infrastructure and material
acquisition.
• Make: The make step includes, production activities, packaging,
staging product, and releasing. It also includes managing the
production network, equipment and facilities, and transportation
 supply chain operations reference model
(SCOR)
• Delivery includes order management, warehousing, and
transportation. It also includes receiving orders from customers
and invoicing them once product has been received.
• Return: Companies must be prepared to handle the return of
containers, packaging, or defective product.
 Six sigma
• What Is Six Sigma?
• Six Sigma is a set of techniques and tools used to improve
business processes. It was introduced in 1986 by engineer Bill
Smith while working at Motorola. Six Sigma practitioners use
statistics, financial analysis, and project management to identify
and reduce defects and errors, minimize variation, and increase
quality and efficiency.
• 3.4 defects per million
 Key concept
• Six Sigma is a quality-control methodology that businesses use to
significantly reduce defects and improve processes.
• The model was developed by a scientist at Motorola in the 1980s.
• Companies often use the Six Sigma model to increase efficiency and
boost profits.
• Six Sigma practitioners can earn certifications modeled on the color
belts used in martial arts.
The 5 Steps of Six Sigma(DMAIC)

• DMAIC
• DMAIC is a data-driven approach used for optimizing and
improving the existing business designs and processes. It is an
effective method of controlled change management. The five
phases of DMAIC are listed below, and each phase involves tools
and tasks to help find the final solution.
1.Define the problem and the goals of the project
2.Measure the different aspects of the existing process in detail
3.Analyze data to find the main flaw in a process
4.Improve the given process
5.Control the way the process is implemented in the future
 DMADV

• DMADV focuses on the development of an entirely new process, product, or

service. It is used when existing processes, even after improvement, do not
satisfy the customer’s needs, and new methods are required to be
developed. It comprises five phases:

• Define the purpose of the project, product, or service

• Measure the crucial components of a process and product capabilities
• Analyze data and develop design alternatives, ultimately selecting the best
design
• Design the selected best alternative and test the prototype
• Verify the effectiveness of the design through several simulations and a pilot
program
Six Sigma Certification and Belt Rankings

• White belt: Individuals with a white belt have received some instruction in
the basics of Six Sigma, but have not yet gone through any formal training
or certification program. This gives them enough knowledge to become
team members.
• Yellow belt: This level can be attained after several training sessions, and
equips participants with the knowledge to lead small projects and assist
managers who hold more advanced belts.
• Green belt: To achieve this level, individuals take a more comprehensive
course that prepares them to become project leaders.
• Black belt: After reaching the green belt level, participants can move on to
black belt certification, preparing them for leadership roles in larger and
more complex projects.
5 principle of
six sigma
 Quality management system (QMS)
• Quality management system (QMS) is defined as a formalized system
that documents processes, procedures, and responsibilities for
achieving quality policies and objectives. A QMS helps coordinate and
direct an organization’s activities to meet customer and regulatory
requirements and improve its effectiveness and efficiency on a
continuous basis.

• ISO 9001:2015, the international standard specifying requirements for

quality management systems, is the most prominent approach to
quality management systems. While some use the term "QMS" to
describe the ISO 9001 standard or the group of documents detailing
the QMS, it actually refers to the entirety of the system. The documents
only serve to describe the system.
 BENEFITS OF QUALITY MANAGEMENT
SYSTEMS
• Implementing a quality management system affects every aspect of an
organization's performance. Benefits of a documented quality
management system include:

• Meeting the customer’s requirements, which helps to instill confidence

in the organization, in turn leading to more customers, more sales, and
more repeat business
• Meeting the organization's requirements, which ensures compliance
with regulations and provision of products and services in the most
cost- and resource-efficient manner, creating room for expansion,
growth, and profit
• These benefits offer additional advantages, including:
• Defining, improving, and controlling processes
• Reducing waste
• Preventing mistakes
• Lowering costs
• Facilitating and identifying training opportunities
• Engaging staff
• Setting organization-wide direction
• Communicating a readiness to produce consistent results
 ISO 9001:2015 AND OTHER QMS
STANDARDS
• ISO 9001:2015 is the most recognized and implemented quality
management system standard in the world. ISO 9001:2015
specifies the requirements for a QMS that organizations can use
to develop their own programs.

• Other standards related to quality management systems include

the rest of the ISO 9000 series (including ISO 9000 and ISO 9004),
the ISO 14000 series (environmental management systems), ISO
13485 (quality management systems for medical devices), ISO
19011 (auditing management systems), and IATF 16949 (quality
management systems for automotive-related products).
QMS principles
ESTABLISHING AND IMPLEMENTING A QMS
• Design and Build: The design and build portions serve to develop the structure of a QMS, its processes,
and plans for implementation. Senior management should oversee this portion to ensure the needs of
the organization and the needs of its customers are a driving force behind the systems development.

• Deploy: Deployment is best served in a granular fashion by breaking each process down into
subprocesses and educating staff on documentation, education, training tools, and metrics. Company
intranets are increasingly being used to assist in the deployment of quality management systems.

• Control and Measure Control and measurement are two areas of establishing a QMS that are largely
accomplished through routine, systematic audits of the quality management system. The specifics vary
greatly from organization to organization depending on size, potential risk, and environmental impact.

• Review and Improve: Review and improve detail how the results of an audit are handled. The goals are
to determine the effectiveness and efficiency of each process toward its objectives, to communicate
these findings to the employees, and to develop new best practices and processes based on the data
collected during the audit.