FIATA Higher Diploma in SCM (FHD)

INTRODUCTION TO
LOGISTICS & SUPPLY CHAIN MANAGEMENT 1. Introduction to LSCM
2. Global Marketing management
3. Global purchasing management
4. Production operation management
5. Contract management in SC
6. International transportation management
7. Market and Finance management
8. Insurance and Risk management
9. Sea and Air transport
Pgs, Ts Nguyễn Thị Thu Hà
Email: [email protected] 10. Multimodal transport
ĐT/Zalo: 090219557
1 2
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Subject planning and assessment

CONTENT
• 15 sessions
Chapter 1: Introduction to Logistic & Supply Chain Management
+ Lectures + group presentations 12
Chapter 2: Warehousing Strategy and Materials-Handling
+ Guest speaker 01 Chapter 3: Inventory Management & Bullwhip Effect
+ Midterm test 01 Chapter 4: Information Technology in Supply Chain
+ Revision: 01 Chapter 5: Strategic Alliances in Supply Chain
• Marking (%): 10/30/60 Chapter 6: Efficient Transport and Distribution Strategy
Attendance/(Contribution in class + midterm test+ Group Chapter 7: Quality Management System in SCM
presentation)/ Final exam Chapter 8: SCM Performance Measurement
Chapter 9: Security of Supply Chains
• References: slides and books

3 4
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Chapter 1: Objectives
Introduction to LSCM
By the end of this chapter, you would be able to…
− Differentiate between logistics management and supply
chain management
− Establish an overall understanding and appreciation of
the impact that supply chain management has on
organizations’ performances
− Understand the supply chain relationship and some of
the barriers to effective supply chain collaboration

6
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

1
 Table of contents 1.1. Overview about SC, SCM

1.1. Overview about supply chain, SCM

1.2. Logistics
1.3. Drivers for development of SCM
1.4. New concept of SCM
1.5. The SCORE Model

7
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Example of a supply chain and SCM

What is Supply Chain? SCM Management?
$
• Supply chain (SC) is the system by which organizations
source, make, and deliver their products and services
according to the market’s demand.
Retailer
• SC consists of independent and interdependent
firms/organizations working together to control, manage and
improve the flow of materials, information, and finance
from the first suppliers to final consumers.
• The supply chain is the network of organizations that are
Supplier
involved, through upstream and downstream linkages, in the
Supplier
different processes and activities that produce value in the form
of products and services in the hands of the end consumers
Supplier’s suppliers
9
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Supply Chain Management

− In a SC firms collaborating to leverage strategic positioning
and to improve operating efficiency, effectiveness
− Supply chain strategy is a channel arrangement based on
acknowledged dependency and relationship, where
customers treat their suppliers as partners, not sellers
− Value Chain vs Demand Chain

11
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

2
 • Scope of Supply Chain Management • Scope and Goals of Supply Chain management
– SCM is defined as the integration of activities along the supply chain
– Scope: (1) integration of departments /functional areas within an
linking customer orders, distributor orders, inventory ordering,
placement of manufacturing orders, cash flows and ultimately supplier
organization; (2) integration and coordination among trading
orders partners accomplished through information sharing
– Goal: to achieve seamless flow of products/services with the
lowest total costs and achieve the highest customer satisfaction:
Finance + Right product
+ Right customer
+ Right time
+ Right quantity
+ Right quality
+ Right place
+ Right price: the Lowest total cost of ownership – TCO

13 14
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

1.2. Logistics
- The work required to move and position inventory throughout a
supply chain. Logistics creates value by timing and positioning
inventory;
- Logistics includes information and material flows
- Logistics includes inbound – in-process – outbound and reverse
logistics

How much profit would Nike

and Adidas make?

15 16
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Classification of logistics Classification of logistics

• Logistics activities vs logistics services?

Reverse logistics
Raw material + Order placement
Equipment
+ Transport: Inbound and outbound
Customers

Manufacture/ Pack- Ware- + Receiving – storage - Inventory controlling

DC
Machinery assembly
aging housing + Order picking - Material handling – labeling – coding – assembling –
sorting, break bulk, consolidation….
Parts
+ Distribution management
Services Material flow Information flow + Reverse logistics
+ Positioning of distribution centers, manufacturing plants,
Inbound Logistics + Information management
In process
Logistics + ………………
Outbound logistics

Logistics 18
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

3
 Business logistics Classification based on logistics providers

Physical supply Physical distribution Management of all parties of the

(Materials management) supply chain in conjunction with
(E-business) 5PL e-business

Management of different stages

(Supply Chain
Management) 4PL in a supply chain
Source Plants/
of supply Operations Customers

3PL (Forwarding/ Management of complex service

• Transportation chain
• Transportation Contract Logistics)
• Inventory maintenance
• Inventory maintenance
• Order processing
• Order processing
• Product Scheduling 2PL - Asset-Based Traditional transport and
• Acquisition (purchasing)
• Protective packaging Logistics warehouse operators
• Protective packaging
• Warehousing
• Warehousing • Materials handling
• Materials handling
• Information maintenance
• Information maintenance 1PL (Producer) Logistics performed by producer
• ……………………….
• …………..

19
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

1.3. Drivers for development of SCM

1. What is TCO? How to achieve the lowest TCO?
2. What is Lead-Time? • Customers requirements:
3. What are flows in SCM and Logistics Management? Primary determinant of the shape and form of future SC
4. List any 5 logistics activities? requirements will be nature of demand and needs of customers
5. What are differences between inbound and outbound (quality, cost, experience upon buying…)
logistics? • Changes in market and business environment
6. What are differences b/t 3rd PL Provider and 4th PL + Competition and changes in business model
Provider? + Globalization, outsourcing – offshoring
+ Security issues, Ethical and Green issues
+ Internet of things and E-commerce,
+ Risks of economic and social-political instability, nature
disasters….
21 22
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

What do customers need?

• What are “rights” in SCM?

• Share your opinion on how customers’ requirements
can change a company’s management.

23 24
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

4
 Anticipatory vs responsive
Business Model Characteristics of Push, Pull strategies

Criteria PUSH PULL

Buy
Forecast components Manufacture Warehouse Sell Deliver
and materials Minimize cost/ Maximize service level/
Objective
Price based competition time based competition

Complexity Low High

Demand forecasting and forecast reliance reduction

Focus
resource allocation and Responsiveness
Receive Buy components Manufacture/
Deliver Lead time Short Long
orders/sell and materials Assemble

Processes Supply chain planning Order fulfillment

© Copyright 2018, Vietnam Logistics Research Source: Simchi-Levi

© Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Push or Pull Strategies Advantages/Disadvantages

Pull High
Anticipatory/Push Responsive/Pull
• High Customization • Low Customization
• Uncertain demand • Uncertain demand
Demand uncertainty

• Low scale of economy • High scale of economy

Computer equipment Furniture

• Low uncertainty • Low customization

• Low scale of economy • Stable demand
• Push-Pull supply chain • High scale of economy

Books, CD’s Beverage, grocery

Push Low
Low Scale of economy High

Pull Push
Source:
© Copyright Simchi-Levi
2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Business models and Hybrid model and Push-Pull strategies

manufacturing strategies
• Early stages of product assembly are done in “push” way: Partial
assembly of product based on aggregate demand forecast
Business • Final product assembly is done in “pull” way: based on customer demand
model for specific product configuration
• Supply chain timeline determines push-pull boundary

Anticipatory Responsive Push

(Push) (Pull) - Pull
Generic boundary Customized
product product

Make to Make to Push Strategy Pull Strategy

Assembly Raw End
plan order
materials customer
Supply Chain timeline

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

5
 Cost per unit of product in different strategies
Total cost per unit
Manufacturing
Business Transport Inventory Total cost
+
strategy costs costs per unit
order costs
Total cost

Cost per unit

The The
MTO High High
Lowest highest
Inventory/warehouse
ATO Average Average Average Average
Procurement/manufacturing
Average/ The High/
MTP The lowest
Low highest Average Transportation

MTO ATO MTP

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Mixed, Efficiency - oriented SC Strategies Mixed, responsive-oriented SC Strategy

(push oriented SC strategy)
- Consumer Customization: Using mass customization
- Logistics Optimizer: Emphasizing a balance of supply to build and maintain close relationships with end
chain efficiency and effectiveness (Toyota) customers through direct sales (Dell)
- Trade Focused: Prioritizing “low price, best value” for the - Operationally Agile: Configuring assets and
consumer (Target, Costco…) operations to react nimbly/quickly to emerging
- Market Saturation Driven: Focusing on generating high consumer trends along lines of product category or
profit margins through strong and ubiquitous marketing geographic region (H&M, Zara, Forever 21)
and distribution and/or offering creative, innovative - Freshness Oriented: Concentrating on earning a
products (Electrical appliances market) premium by providing the consumer with product
that is fresher than competitive offerings
33 34
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Changes in global trade environment

Globalization – outsourcing – offshoring

- What is globalization? What are ways for a company

to enter international markets?
- What are reasons for companies to move their
production/operation overseas?
- What is different between outsourcing and offshoring?
- What are possible opportunities and challenges for
companies that outsource from/offshore their
production overseas?
- Discussion the case of the US company?

35 36
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

6
 Logistics and SCM in globalization Economic benefits of sourcing from/
offshoring to low cost locations
• Since 1998 many Japanese companies producing Profit Profit
automobile parts moved to US. Marketing
• One American manufacturer of automobile parts Marketing

Foreign sources
decided to sell its plant in the US and totally moved

Domestic sources
Logistics
Logistics
to the Philippines. Overhead
• The company built a new production plant and Tariffs
invested to a modern production line
Materials
• The Philippines’ government policy for foreign Overhead

investors: No taxes for the first six years, low land

Materials
rental fees
Labor
Labor

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Drivers for SCM (continue….) 1.4. New concept of SCM

+ Security issues, Ethical and Green issues

- Collaborative chains based on collaborative
+ Internet of things and E-commerce, planning, forecasting, replenishment (CPFR)
+ Risks of economic and social-political instability, - Functional to Process integration
nature disasters…. - Vertical to Virtual integration
- Postponement and Mass customization
+ https://www.reuters.com/article/us-foxconn-
vietnam-apple-exclusive-idUSKBN2860VN

39 40
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

New concept of SCM - The Future SC Functional to Process integration

CPFR programs apply some specific techniques:

- QR (quick response): cooperative efforts b/t retailers and
suppliers to improve inventory velocity to match customers’
requirements
- Vendor Managed Inventory (VMI): the buyer provides
information to a vendor about product and the vendor takes
full responsibility for maintaining an agreed inventory of the
material, usually at the buyer's consumption location.
- Continuous Replenishment (CR): retailer set replenishment
level of inventory and make restocking decisions

41
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

7
 Vertical to Virtual integration
• Postponement and customization

Virtual integration

- What is postponement? What are types of

postponement
- What is customization? What are Advantages and
disadvantages of customization?
43 44
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Postponement and mass customization

SC inaction - price
Items No of options ▪ Leaders created competitiveness advantages for the
1. What business model
Processor 5
does Dell pursue?
industries: Dell, Hewlett Packard, Walmart….
OS 15 2. What kind of ▪ Implementation of CPFR:
Monitor 14 postponement does + Johnson and Johnson reduced out-of- stock level (65%),
Memory 4 Dell implement? improved overall service level (4%), increased fill rate (4%)
HD 2 3. What is mass
+ Cisco systems eliminated most of paperwork on the supply
customization? What
Network card 3
are conditions for side, saved up to 250 mill USD per year
Speaker 3 company to ▪ US postal Service (USPS) vs United Parcel Service (UPS)
Keyboard 2 implement mass and Federal Express
Mouse 2 customization?
▪ Future challenges for SCM: customer requirements,
Graphic options 3 4. Pros and cons of MC?
shortage of natural resources/raw material, ecological
PSU 2 considerations, slow changes in SCM of companies….
46
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Barriers to Effective Supply Chain Relationships • Overcoming the Barriers

– Develop a New Breed of Manager
- Widespread resistance to change
- Lack of trust and reluctance to share information and – Build Relationship-Management Skills
fear of losing control – Establish Inter-organizational Teams
- Inadequate Information systems and poor – Create new performance measures (new KPI)
communication
– Invest in information technology and Internet of things
- Different goal and objectives
– Engage in more practical and applied research
- Short term “wall-street” focus on outcomes
- Involvement in too many SC

47 48
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

8
 1.5. Supply Chain Operation Reference SCOR Model
(SCOR Model)
• Plan:
- Score model was introduced in 1996 by SC Council of 69 + Demand and supply planning and management
members (Dow Chemical, Merck, Texas Instruments, Compaq, + Balancing resources with requirements and determining communication
Fedex…) along the entire chain
- The model introduced the best practice examples of SCM, + Determining business rules to improve and measure supply chain
benchmarked performance data and optimal software applications efficiency (inventory, transportation, assets, regulatory compliance…)
=> It’s a tool for: + Aligns the supply chain plan with the financial plan of the company

+ Measuring SC performance and effectiveness of SC re-engineering; • Source:

+ Testing and planning for future process improvement + How to manage inventory, the supplier network, supplier agreements,
and supplier performance
- The model focuses on five areas of the supply chain: plan,
+ How to handle supplier payments and when to receive, verify, and
source, make, deliver and return that repeat again and again transfer product.
along SC
49 50
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

SCOR Model SCOR Model

• Make: • Benefits of Using the SCOR Model
+ To answer question: make-to-order, make-to-stock, or assemble -to-order?
+Help a company analyze its supply chain.
+ Production activities, packaging, staging product, and releasing
+ Managing the production network, equipment and facilities, and transportation. +Gives companies an idea of how advanced its supply chain is.
• Deliver: The process helps companies understand how the 5 steps
+ Order management, warehousing, and transportation.
repeat over and over again between suppliers, the company, and
+ Receiving orders from customers and invoicing them once product has been customers. Each step is a link in the supply chain that is critical
received. in getting a product successfully along each level.
+ Management of finished inventories, assets, transportation, product life cycles, +To identify supply chain problems.
and importing and exporting requirements (3).
The model enables full leverage of capital investment, creation of
• Return
a supply chain road map, alignment of business functions, and
+ Return of containers, packaging material, or defective products.
increase return on investment.
+ Management of business rules, return inventory, assets, transportation, and
regulatory requirements

51 52
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

CHAPTER 2
1. List as much as possible characteristics of the SCM? WAREHOUSING STRATEGY
2. What is logistics? How does logistics differ from SCM? AND MATERIALS-HANDLING
3. What are drivers of SCM?
4. What is a MTO business model and what are logistics • Objectives
characteristics of the MTO model? (MTP, ATO) – To establish the role of warehousing as a strategic competitive
5. What is manufacturing postponement? advantage
6. What is geographical/logistics/time postponement? – To understand the importance of warehouse design for
7. How does postponement relate to customization? improving productivity
8. What is mass customization? – To establish the role of material handling equipment in
9. What are the most cost-burden elements in SCM? warehousing
10. What are barriers of SCM improvement? (at least 3 barriers) ….
11. What is the purpose of launching and using the SCOR model?
53 54
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

9
 2.1. Strategic Warehousing
Table of contents - In the past:
+ Warehouse was the place where inventory was hold and it
2.1. Overview about warehouse/strategic was a cost-adding element
warehouse + Inventory was hold in big quantity at manufacturers’ and
retailer’s warehouses => high cost and slow response to
2.2. The benefits of warehouse customers’ requirement in term of product diversification
2.3. Warehouse operations - Now:
+ Warehouse is the place where inventory is hold and value-
2.4. Warehouse ownership added services are performed;
2.5. Warehouse decisions and planning + WH is an integrated logistics element providing different
value-added services
+ WH can facilitate JIT and reduce total logistics costs
55 56
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Strategic Warehouse
Warehouse is an integrated logistics component

Order
processing

Facility Retailers/
Inventory Suppliers
Network Manufacturers

Intermediate
Warehouse

Warehouse
Materials handling Transportation
Packaging
Short to moderate distance
58

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Strategic Warehousing • Distribution Facilities

- In manufacturing, strategic warehousing enables to reduce quantity

and holding time of materials and parts, to support JIT and lean
production strategy.
+ JIT
+ Lean/Stockless production
- Role of warehousing has changed – Warehouse becomes value
adding element of SCM offering diversified services beside storage:
mixing, sorting, consolidation, assembling….as a vital extension of
manufacturing
- Application of IT in warehouse management makes it flexible, creates
new and better ways to perform storage and handling, quickly and
efficiently to respond to changing customer requirements…

59 60
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

10
 Retailer
Retailer
2.2. Warehouse benefits
supplier
Retailer
supplier Retailer
distribution Economic benefits Service benefits
center
supplier
Consolidation and Reverse logistics
Regional
break-bulk
Global National
Manufacturer Consolidation Consolidation Consolidation
Center Center Center Assortment Spot stocking,
(cross-docking, mixing Full line stocking
supplier and assembly)
Manufacturer Manufacturer
Retailer Production support
supplier distribution
supplier supplier center Postponement
supplier Retailer Transportation support
supplier supplier (unitization)
Retailer Retailer Stockpiling for seasonal
production or demand Market presence
A typical map of warehouse operation in a global SC

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute
62

• Consolidation and Break-bulk

– Reduce transportation cost by using warehouse capability to increase
economies of scale
• Assortment
- Cross-docking: Combine inventory from multiple origins
Consolidation into an assortment for a specific customer; It is used
Plant A
Customer
extensively by retailers – no storage at the WH
Plant B Consolidation
A B C - Mixing: Mix an arriving inventory with some inventory that
warehouses
is stored at the warehouse before delivering to the last
Plant C
customer
- Assembly: To support manufacturing –products and
Break - bulk
Customer A components from a variety of second-tier suppliers are
Break-bulk
assembled at a warehouse located close to the
Plant A Customer B
warehouses manufacturing plant
Customer C

63 64
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Processing / Postponement
- Postpone finalizing product configurations by delaying packaging,
labeling and light manufacturing….
- Economic benefits
Cross - Dock Customer A
• Reduce risks as products are finalized only when customers place an order
Plant A
Distribution
• Reduce total inventory
Plant B Customer B
warehouses - Overall reduction of warehousing cost and therefore cost per unit of
Plant C Customer C product will be reduced

Mixing Customer X
Plant A
A B C D
Plant B Transit Mixing
point Customer Y
Plant C A B D
Product D
Customer Z
A D
Vendor A Assembly
Lead supplier
Vendor B Customer
warehouse
Vendor C
65 66
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

11
 Service benefits
• Stockpiling
- Accommodates seasonal production or demand
• Reverse logistics
- Is required to support marketing efforts + Physical work related to product recall, refurbishment, disposal
of overstock and damaged, defective inventory as well as
- Provides an inventory buffer which allows production efficiencies
within constraints imposed by material sources and consumers recall of controlled inventory that is performed at warehouses
- Serves as safety stock, in-transit stocks + Controlled inventory = hazardous materials, products that
have potential consumer health and environmental
Examples of need for stockpiling
consideration
- Lawn furniture is produced year round but is sold only during a
short marketing period + Reverse movement consists of non-uniform individual
- Agriculture products are harvested at specific times but are
packages and cartons => manual sortation and inspection to
consumed throughout the year. determine appropriate disposal
=> Reverse logistics provide economic, environmental and
service benefits to companies

67 68
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Service benefits ….. Service benefits …..

- Spot stocking: to support market distribution of highly - Production support: stock inventory to support manufacturing
seasonal products – usually just prior to a maximum period operations due to long lead time and/or potential supply
of seasonal sale rather than maintaining inventory in disruption and/or variation in demand
warehouse year-round. Companies can use temporary Production support warehouses usually have higher average
warehouses inventory level and slower inventory turnover
Ex? - Market presence: Local warehouse can respond faster to
- Full line stocking: deploy at a few strategic locations and customers requirements=> increase customer service level, sales
operates year-round. Full line stocking improves service by and profitability.
reducing the number of suppliers that customers must deal Technology-based order processing and reliable transportation
with and combined assortments to make economical larger shorten response time gap regardless distance => Companies
shipment. will consider establishing local warehouse unless it is
economically and service justified
69 70
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Additional material Return logistics

1. What is the wall of shame?
• Which operations are executed at Amazon DC 2. What is a return abuser? What is Kiva?
✓https://www.youtube.com/watch?v=Yiafb0-gqF4 3. What is “Happy return”?
• How Amazon provides fast delivery of goods to it’s customers? 4. What is customers’ survey result on return? And how
do companies meet customers’ expectation about
✓https://www.youtube.com/watch?v=Y-lBvI6u_hw return?
✓Seller requirements from Amazon 5. How often do customers return products?
https://sellercentral.amazon.com/gp/help/external/200978400
6. What are the reasons for a product return?
7. Define the volume of return in the E-commerce?
Return volume of Amazon?
72
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

12
 2.3. Warehouse Operations
Return logistics……
Analysis
8. What is Amazon’s policy to customers that return
items?
Information
9. What are the goals of Amazon for return
10. How can customer return products to Amazon?
11. How does Amazon process returned products
Receiving Put away Storage Picking Shipping
12. What are the challenges in handling the issue of Data
Base

returned goods, and discuss Amazon’s policies/

solutions in response to them?
Data
Stock-taking
13. What are learning opportunities that product return Maintenance

can bring for business? System for Warehouse Information Flow

73
© Copyright 2018, Vietnam Logistics Research 74
© Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Warehouse operations
• 3 typical handling activities: What should we do
+ Receiving inbound inventory and put away when shopping bags
+ In-storage operations arrive?
+ Shipping outbound inventory.
Video: warehouse operation
• Goal of WH: to facilitate efficient material handling.
+ Movement continuity: Provides longer moves of inventory
from place to place .
+ Scale Economy through out the warehouse: move unitized
shipment (pallets, containers instead of separate cases)

75 76
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Receiving • In-Storage operation: In-storage handling and storage

- In-storage handling involves lower volume movement than
- Characteristics of arrived inventory: large quantity of
receiving but still relatively similar products.
similar products
- In-storage handling includes Transfer movement and order
- Activities: selection
+ unloading from arriving transportation – performed by + Transfer movements:
mechanized equipment or mix of a lift truck/conveyors (1) From place of unloading -> place of storage;
and manual processes (2) From place of storage to
+ Breaking bulk (a) shipping docks or
+ Sorting inbound inventory (b) From the place of storage => the place of order
selection => to the shipping docks.
+ Recording information about inbound inventory
+ Order selection: according to specific customer order
How Amazon receives your inventory
https://www.youtube.com/watch?v=dAXdeqcHBp4 requirements.
77 78
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

13
 Warehouse operation
Type of storage
➢ Active storage relates to inventory for the
periodic demands of the service area and for
achieving transportation/ handling economies
Active of scale
storage
➢ Material handling processes and technologies
for active storage focus on quick movement,
flexibility

➢ Extended storage relates to inventory that

excesses normal replenishment of customer
Extended
stocks.
Storage
➢ Example: speculative, seasonal, obsoleted/off-
season, discounted inventory or product
conditioning…

79 80
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Picking and Shipping: https://www.youtube.com/watch?v=HlSD22YHTRQ

2.4. Warehouse Ownership Classification
+ order verification record of outbound inventory,
+ consolidation for shipment: unitization into standardized – Private
units such as pallets, containers to facilitate quick and more • Operated by firm owning products
safe handling processes • Decision to own or lease is essentially financial, or
+ Loading into transportation vehicles. constrains by physical nature of an available building
+ Warehouse Managed System (WMS) can provide real-time • Benefits of a private WH include control, flexibility, cost,
visibility of the inventory flow and the shipment accuracy and a range of intangibles
• Requires substantial investment and depreciation, Private
WH may lead to increase of product unit cost.

81 82
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Warehouse Ownership Classification

• Warehouse Ownership Classification – Contract warehouse
+ Long-term contractual relationship results in lower total cost
– Public warehouse: general merchandise, refrigerated,
+ Offers services such as transportation, inventory control, order
special commodity, bonded, and household goods and processing, customer service, and return merchandise
furniture processing
+ Able to achieve lower WH operating cost than private facilities + Benefits of contract WH
+ Do not require capital investment ➢ Customers: Expertise services, flexibility, lower capital

+ Offers flexibility of size and number of warehouses, time of investment in short term.
storage, type of products ➢ WH operator: long-term contract, higher service quality as

+ Able to achieve lower transportation cost by combined they know customer/stored goods very well, having deep
delivery and consolidation understanding about business specification/needs to
+ Disadvantages? provide customized services
+ Disadvantages: High dependence, results in high cost in long
term
83 84
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

14
• Mixed Warehouse strategy
– Organizations may use a combination of private, public,
and contract facilities
– The best WH utilization rate of the time/space is 75-85%
– 15 - 25% of the time/space is reserved for peak
requirements
– Private and/or contract warehouse cover 75%
requirement while public facilities to accommodate peak
demand

85 86
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

2.5.1. Site selection

2.5. Warehouse Planning
2.5.1. Site Selection and future expansion ❑ General principles
- Close to customers
2.5.2. Layout and sizing
- Close to suppliers
2.5.3. Materials Handling Considerations
- Intermediate location with labor advantages (low labor cost
2.5.4. Product-Mix Analysis (DG? Value? Competitor? …) and skilled workers), reliable sources of raw materials and
affordable transportation costs
❑ Future expansion: should be considered upon initial
planning stage and provide WH to function at least 5-10
years; the future expansion shouldn’t affect ongoing
operations (move some walls, build new spaces….

87
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Site selection decision Considerations for site selection

 Execution, transportation costs

Business strategy New site
 Labor costs, labor skills, language barrier
 Competitors
Culture, policy, labor  Potential customers
Country, Region
cost, suppliers…
 Reliability of the suppliers
 Infrastructure
Conditions, policy of
the local authority Province, City  Legal framework for investors
 Potential economic development of the region/city
 …….
Feasible location City or province

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

15
 91 92
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Site selection Marking method

• Fortune 500 company Hewlett Packard Enterprise is
relocating its global headquarters to Texas from San
California with plans to open in early 2022.  Site selection is based on criteria that are
• One of Toyota’s main drivers to move from Torrance,
important for company
California to Plano, Texas was housing costs
• Elon Musk confirmed moving to Texas over a dispute with  Prioritize and rank criteria with certain point
local officials who stopped the company from reopening its according to their importance
electric vehicle factory due to coronavirus restrictions.
=> High housing costs, high tax rates, and strict  Compare total marks of all sites to choose the
regulations, climate,… are drives for companies to move best one
out of Silicon Valley to Texas where there is no state
income tax – compare to maximum California’s personal
income tax of 13.3% for anything above $1 million a year

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Example
Criteria Maximum A B C D E Options for WH expansion
Climate 10 8 6 9 7 5
 Extending the existent site
Infrastructure 20 12 16 15 8 13

Accessibility 10 6 8 7 9 9
 Acquiring a new plant/warehouse and keeping the
existent facilities
Establish costs 5 3 1 4 2 1
 Changing to a totally new location
Relationship with local 10 6 8 7 4 8
authority  45/45/10
Relationship with local 5 2 2 3 4 3
citizens => Advantages and disadvantages of each options
Closeness to customers 15 10 10 13 13 10

Closeness to suppliers 20 12 10 15 17 10

High quality of labor 5 1 2 4 5 3

Total 100

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

16
 Case for discussion
2.5.2. Warehouse layout and planning
Company A produces Instant noodles. It has a main
manufacturing plant in the South of Vietnam and distribution 3 considerations driving WH layout: product volume-weight,
centers in the South, in the Central and in the North of VN product demand and specific storage requirements.
- Advantages: (1) keeping the secret of production; (2) having a Example:
good control over quality (3) utilizing economies of scale + high volume and heavy product should be positioned so
- Disadvantages: (1) Transportation by sea (to the Northern DC) that the movement distance is minimum
and trucks (To the central DC) can causes noodles to break; (2) + high-velocity products should be positioned near doors, at
The demand for instant noodles is highly seasonal and primary aisles and at lower racks
unpredictable while expired date is 3-6 months. Company’s goal
+ Receiving docks and shipping docks should be separated
is to supply the newest noodles to their distributors and
and convenient for transport vehicles to move in and
customers – within 1 month after production (3) Distributors get a
move out
very thin profitability – especially if noodles are expired or Warehouse Optimization Case Study: https://www.youtube.com/watch?v=gIXNTebJOe8
damaged
98
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Warehouse layout

Receiving

Shipping docks
Storage space for docks
Storage space for high-volume product Storage space for
Receiving docks

low-volume product low-volume product

Primary
aisle

Shipping
docks

99 100
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Warehouse layout • Basic Warehouse Design

• 3 consideration for WH design: the number of floors,

cube utilization plan and product flow.
- The general rule is one floor WH except for WH in the Unitization
business centers where land is restricted or expensive must be
defined
- WH should maximize cube utilization – appropriate
height is 20-30 feet
- WH design and WH layout should facilitate continuous
straight product flow through the building: Receiving =>
mixing/order selecting => shipping

101 102
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

17
 •Warehouse Layout

103 104
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Initiating Warehouse Planning

Prior to operations, there are activities and work • Stocking: Which type of inventory, in which quantities
procedures must be developed and how to store?
- Stocking (how to store, how many to store,…) - Plan initial stocking before operation: Schedule and
- Material handling equipment and storage equipment sequence of product arrival and receive inbound inventory
=> takes 2-4 weeks to complete initial stocking
- Training: video
- Warehouse slotting: 2 methods of slot assignment
- Installing WMS
+ Fixed slotting
- Product deterioration level (perishable…)
+ Random/Dynamic slotting:\
- Safety and Maintenance
WMS with real-time track on inventory
- Security and Pilferage protection plan (internal
people, …)
Big Warehouse Improvements through Small Changes:
- Customer service level https://www.youtube.com/watch?v=ThL9N7mvaiQ&t=361s
105 106
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Product ABC analysis • How to do classification?

– List all items that need to be analyzed
- Using pareto rules to classify products to A, B, C classes – Multiply annual usage in units by unit cost to obtain value of annual usage
- Analyze products assortment based on sales/ profitability/ – Rank items in descending order of value of annual usage
demand…. – Calculate the cumulative percentage of value of annual usage and
percentage range of inventory items
- Classify products into fast – medium – slow moving:
– Plot a graph of percentage of cumulative value of annual usage against
+ A class items contribute 75% - 80% to annual sales the percentage of inventory items
+ B class items contribute 15% - 20% – Divide the items into groups based on management criteria I e A class
70%, B class 25%, and C class 5%
+ C class items contribute 5% – Plot a graph of percentage cumulative value of annual usage against the
- WH design, space, layout, material handling equipment, percentage of inventory items
operating procedures and control should prioritize the most – Divide the items into groups based on management criteria I e A class
70%, B class 25%, and C class 5%
profitable/fast moving products
107 108
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

18
• Product classification • A Class
– High value item that typically accounts for 75 –80% of
What are the reasons for product classification?
the value of the total inventory but only represents 15 –
20% of inventory in terms of quantity or volume
• B Class
– Lesser value items that accounts for 10 –15% of the
value of the total inventory but only represents 20 –25%
of inventory in terms of quantity or volume
• C Class
– Low value items that account for 5 –10% in terms of
value and 60 –65% in terms of quantity or volume of
total inventory
109 110
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Example -ABC Analysis

– Step 1

• The same degree of control is NOT justified for all items!

– Class A items should have the greatest attention
– Class C items should have the least attention
• there is no need for special calculations of order qty
• order qty might be a one-year supply with periodic review

111 112
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Example -ABC Analysis • Example -ABC Analysis

– Step 2 – Step 3

113 114
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

19
 • Security
• Hiring and training + Pilferage Protection (internal people, …)
+ Product Deterioration (perishable…): FIFO, FILO….
- WH is the single largest labor intensive element:
+ Safety and Maintenance
administrator, supervisor, selectors, equipment
operators, support workers such as maintenance. + Customer service level

- Labor requirements: Physical strong, not addicted to

drugs or alcohol drinks, disciplinary to follow certain
rules, able to interface with computers, honest and
hardworking…
- Training both theoretical and practical aspects by
simulating the work of each position to avoid possible
mistakes in future

- https://www.youtube.com/watch?v=n9syC93m_cM 115 116

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Conclusion on Warehousing: 1. What are consolidation and unitization?

✓ Temporary storage of goods before consumption
2. What are the economic/service benefits of WH? Explain 1 of
them.
✓ Performs movement, storage and information transfer
3. What is the controlled inventory?
4. What are the differences between extended and active WH?
5. What is fixed/dynamic slotting?
6. List some risks of inventory storage at the warehouses?
7. What are factors that should be considered while planning
WH layout?
8. Discuss trade-off between number of warehouses and
transportation costs/service level? Pros and cons of
centralized and decentralized warehouse management
117 118
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

CHAPTER 3
INVENTORY MANAGEMENT
& BULLWHIP EFFECT 3.1. An overview about inventory
3.2. The inventory strategy
• Objectives
- To provide an understanding and appreciation of inventory 3.3. Planning inventory
management
- To provide an overall understanding of the various costs involved
3.4. Managing uncertainty
in maintaining and carrying inventory 3.5. Inventory reduction strategies
- To craft common inventory control management techniques
- To study the Bullwhip effect and its impact on inventory

119 120
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

20
 3.1. What is inventory
• Inventory flow and role of Inventory in SCM
• Inventory - any material/component parts or goods that a firm
- Logistical operations start with initial shipment of material/
holds in order to satisfy internal needs and/or customer components & are finalized when finished products are
demand delivered to a customer
• Inventory is an accumulation and standby of the material flow
- Logistics process adds value by moving inventory when,
in logistics chain where needed – material and component parts gain value
at each step of their transformation into finish inventory.
Inventory of - For providing continuous flow of material/parts inventory
Inventory of Work-in- finished goods
Inventory of
raw materials
component process
inventory in
must be properly positioned and inventory movement
parts inventory
transit becomes part of the value added process.
- Consequences of shortage or overstock of inventory?
122
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Inventory Flow

• Inventory – A Critical Supply Chain Component

Information flow
- Inventory requirements link to the facility network and the
desired customer service level
Enterprise
- Objective of inventory strategy: to achieve desired customer
service level with the minimum inventory commitment/costs
- Excessive inventories: (+) compensate for the deficiencies in
Market Manufacturing
SC design, (+) increase customer service level; (-) lead to
Customers Procurement Suppliers
distribution support higher total supply chain cost
=>SC strategies aim to maintain the lowest possible
financial investment in inventory while achieving the highest
Information flow customer service level by maximizing inventory turnover.

124
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Inventory Functionality and related terms • Inventory-Related Definitions

– Inventory Policy consists of:
- Geographical specialization: allows a firm to
manufacture and distribute products where it has more + Guidelines concerning: whether to purchase or manufacture
or inventory? when to take action, and in what quantity?
advantages decisions regarding geographical inventory positioning
Example? ex: where to store inventory? at a manufacturing plan, at the
- Decoupling = specialization within a single facility regional or local distribution center (CD),…
Example? + Inventory management practice:
➢ Decentralized inventory management
- Supply /demand balancing – regular inventory
➢ Centralized inventory management
- Buffering uncertainty - safety stock
+ Service level

125 126
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

21
 • Inventory-Related Definitions Demand = 10 units/day
- Service Level: performance target specified by management such as: Cycle time = 20 days
Demand = 10 units/day
Safety stock = 50
+ performance cycle/cycle time = elapsed time between order Cycle time = 20 days
placement and goods delivery;
Order
+ case fill rate/line fill rate/order fill rate: % of cases/lines/order that were Order
Order
??? arrival
placement
filled completely as requested arrival

+ Ontime delivery, safety of good delivered, inventory turnover… Average inventory

Inventory
Average ???
- Average Inventory = average quantity of stocked inventory for a certain inventory
period of time (year, quarter, month, cycle…)
Days
Average Inventory = (max Inventory+ min Inventory)/2
Days
50
- Safety stock: inventory maintained in a logistical system to protect
Transit/Damaged stock
against demand and performance cycle uncertainty . Speculative stock
- Re-order point: level of inventory when a replenishment order is Average inventory =??? Safety stock

initiated/time

127 128
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Average inventory over multiple performance cycle

Order Arrival and order Inventory-Related Definitions (cont…)

placement
200
Performance cycle = 20 days
D= 10 units/day ▪ Inventory risk
Q = 200
- Inventory risk is measured by time duration, depth and
100 Average inventory
width of inventory commitment.
- Inventory risk depends on position of a firm in the
20 40 60 Day
distribution channel
400
Order Arrival
Performance cycle = 20 days
- How is inventory risk commitment of:
D= 10 units/day
Q = 400
+ a manufacturer?
200
+ a wholesalers?
Average inventory
+ a mass merchandiser?
days
+ a specialty retailers?
40 80
130
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Inventory-Related Definitions (cont…) Example of Inventory carrying costs

▪ Inventory carrying costs consist of:

Element Percent ranges Average percent (%)
- Capital costs: costs of investment in inventory
Cost of money/
4 – 40 % 15
- Tax capital cost
- Insurance Tax 0,5 – 2 % 1

- Storage (Capital costs of warehouses, equipment, Insurance 0–2% 0,05

product holding/handling, labor costs…) Obsolescence… 0,5 – 2 % 1,2
- Obsolescence, damage,…. Storage 0–4% 2
- Transportation between warehouses (if any)
Total 5- 50% 19,25

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

22
 Inventory risk commitment
- Inventory management is risky as inventory cost directly impact
Inventory carrying costs on profitability of a company (example in the table)

Companies Sale Net Net income as Total Inventory Inventory as

ICC= Average inventory x price x % of inventory costs income a % of sale Asset investment a % of Asset
Albertson’s 37,478 10,314 27,52 15,701 3,249 20,69
Example:
Kroger 28,200 12,200 43,26 17,966 3,938 21,92
- Average inventory = 100 units or 200 units Safeway 28,859 8,511 29,49 14,900 2,445 16,41
- Price = 10 $/unit Fleming 14,646 1,437 9,81 3,573 998 27,93
- Percent of inventory costs = 19,25% Spartan store 3,050 407 13,34 571 82 14,36
ICC=? Supervalu 20,339 2,128 10,46 6,495 1,491 22,96
Which are the factors impacting inventory carrying Hershey 3,971 1,616 40,70 3,347 602 17,99
costs? Kellogg 6,984 3,659 52,39 4,809 503 10,46

Nabisco 8,268 3,766 45,55 11,961 898 7,51

134
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

3.2. The inventory Core

strategy customer
segmentation 1.Core customer segmentation
- Companies usually have different customers bringing
Product different level of profitability
profitability
- Highly profitable customers constitute the core market of
The every company => company’s inventory strategy should
inventory focus on them.
strategy
- Customer’s business profitability depends upon products
Competitive Transport purchased, volume, price, value-added services required
performance integration
and supplemental activities/costs necessary to develop
and maintain ongoing relationship
Time-based
performance - The key to effective logistical segmentation is inventory
priority dedicated to support core customers
135 136
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

2. Product profitability 3. Transportation integration

- Pareto Principle (20/80): <20% of all products marketed - Economy of scale in transportation:
account for >80% of total profit + The size/distance of shipment is inversely proportional to
Inventory strategy should be based on analysis of product transportation rate.
assortments, fine-line product classification
+ Stocking sufficient range and assortment of products at a
What strategy should company focus on? WH for consolidated shipment may cause higher
+ High availability and consistent delivery of profitable inventory carrying cost and at the same time result in
products? lower transportation cost
+ High-level support of less profitable items for core  Inventory management strategy should provide the
customers? equilibrium of transportation and inventory carrying costs.
+ High-level support of less profitable items for non-core
customers?
137 138
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

23
 4. Time-based performance 3.3. Planning inventory
Inventory strategy of the company should be relevant to its Planning inventory is the process of making a decision
commitment to deliver products rapidly to meet customer’s relating to inventory: When to order and How much to
inventory requirement. order?
Ex: Company promised to deliver products every 10 days =>
customer will keep 10-day inventory without holding safety
stock.
5. Competitive performance
Inventory strategy should provide the positioning inventory
in a specific warehouse to satisfy their core customers, to
gain and maintain competitive advantage over their
competitors

139
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Re-order point?
When to order? and average inventory over multiple performance cycle

• Re-order point – the level of inventory when a replenishment Inventor arrival

Performance cycle = 20 days
order is initiated 200 D= 10 units/day
Q = 200
ROP = D x T
100 Average inventory
Where:
- ROP = periodical/cycle inventory 20 40 60 Day

- D = demand per period (unit per day/week/month…) ROP=?

Inventory arrival
400
- T = performance cycle (days/weeks/months) Performance cycle = 20 days
D= 10 units/day
Q = 400
• Inventory control systems: systems that continuously
monitor inventory levels and initiate an order when the 200 Average inventory

inventory is depleted to a reorder-point

days

40 80
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

ROP with safety stock

Assuming that: LT = 10 days
ROP = (D x T )+ SS
- 1nd cycle: the daily demand = 20 units pd
Where: - 2nd cycle: the daily demand = 16 units pd
- ROP = Periodical inventory (units) - 3rd cycle: the daily demand = 25 units pd
- D = Demand per period (units per day/week…)
When orders arrive? When to order?
- T = Performance cycle (days/weeks…)
- SS = safety stock

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

24
 Planning inventory (continue…)
Inventory Order
placement
• Number of orders
250
• Size of orders
Average Inventory =? • Inventory strategy

50 SS 10 20 ? ? days

ROP = ? And when to order?

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

How many orders to place?

How many orders to place
and how much inventory to order?
Total costs
800
1 order of the size of 800 units?
2 orders of the size of 400 units?
4 orders of the size of 200 units?
Total costs

Ordering cost
400

200 Holding/Carrying costs

days
Most economical
No of orders per year
10 20 30 40 Number of orders

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

How much to order? EOQ?

• EOQ is the size of the order when annual total cost is
Total costs minimum or Annual Inventory carrying cost = Annual
Total costs

ordering cost
• Annual carrying cost = % of carrying cost (Ci ) x Price
Holding/Carrying costs per unit (Pu) x Average Inventory
• Average inventory = EOQ/2
• Annual ordering cost = Number of order x ordering cost
Minimum
cost (cost to place 1 order)
• Number of order = Annual demand/EOQ
Ordering cost
EOQ D
Economical Order quantity (EOQ) Order size
• Ci x Pu x ------- = --------- x Co => EOQ =?
2 EOQ
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

25
 Economical Order Quantity = EOQ Transportation costs and order volume

EOQ =
√ 2 Co D
Ci Pu
= √ 2 x19 x2400
0,2 x 5
= 302
• The economic scale of an order depends on discount for
transportation, order volume…
• Assuming: transportation costs are as follow:
Q = 300 units – Transportation costs = 1$/unit
Annual demand volume D 2400 units Q = 480 units – Transportation costs = 0.75 $/unit
Price per unit Pu 5 $/unit
Order size
Transportation cost Inventory costs *
Inventory carrying cost per year (%) Ci 20% annually ($/unit) ($)
300 1 150
Ordering cost Co 19 $/per order
480 0.75 240

Which size of order will be more economical?

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Example: Discount for big orders

Annual demand volume D 2400 units
Unit value at cost Pu 5 $/unit
Inventory carrying cost percent Ci 20% annually Some considerations when
Order size Price
defining an order size: (unit) ($/unit)
Ordering cost Co 19 $/per order
Transportation cost for Q = 300 1 $/ unit
- Discount for big orders
- Capital for procurement 1 - 100 5
Transportation cost for Q = 480 0,75 $/ unit
The Comparison of two cases - Economical scale of 101 – 200 4,5
Carrying costs Case1 = 300 Case2 = 480 manufacturing
201 – 300 4,0
Number of orders 8 5 - Economical scale of
transportation 301 – 400 3,5
Inventory cost 150 240
Ordering cost 152 95 401 – 500 3,0
Transportation cost 2400 1800
Total costs 2702 2135
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

3.4. Uncertainty management Uncertainty of demand

• Uncertainty of demand
• Uncertainty of lead time
• Combined uncertainty
Inventory

Reasons?
How to manage uncertainty?
How much safety stock to keep for covering
uncertainty? days
0 20 30
10
Forecast Actual
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

26
 Example of actual demand
Uncertainty in supply chain

Cycle 1 Cycle 2 Cycle 3

Day Accumulated Accumulated Accumulated
Demand Demand Demand
demand demand demand
1 9 9 0 0 5 5
2 2 11 6 6 5 10
3 1 12 5 11 4 14
4 3 15 7 18 3 17
5 7 22 10 28 4 21
6 5 27 7 35 1 22
7 4 31 6 41 2 24
8 8 39 9 50 8 32
9 6 45 Stock out 50 3 35
10 5 50 Stock out 50 4 39
158
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Safety stock Safety stock

• Role of safety stock?
• Stockless inventory: a company intentionally set the
stock to zero until customers place the order
• Stock-out situation: Unplanned situation – zero stock is
undesirable as it can increase customer dissatisfaction
• Safety stocks is a tool to minimize stock-outs.
• The choice of safety stocks depends on:
+ Company’s customer service strategy
+ Customer service level
+ Stock investment
+ Cost of stock-out versus cost of non-stock-out.
159 160
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Safety stock and production life cycle Safety stock technique – 3 methods

Further reduce • Statistical Method: SS is computed using statistics,

SS to lower
obsolescence
risk
based on the historical demand/lead-time or both
Carry SS to
minimize
stock-out
+ Safety stock = Z x σD x √LT
Carry sufficient SS Where: Z = service level,
σD, σLT = standard deviation of demand, lead-time
- Support production
- EC

Volume
Reduce SS
LT = lead-time
- CS level
- LT
DA = Average demand
- Product mix

+ Safety stock = Z x σLT x DA

+ Safety stock = Z x √[LT x (σD )²] + [(σLT)²x DA²]
• Fixed Method
Introduction Growth Maturity Decline
Time
• Time Method: looking at the future demands
161 162
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

27
 Historical Analysis of demand history Calculation of standard deviation

σ = √∑ Fi Di2
Number of days

Where:
- σ: Standard deviation
- Fi: Frequency of event i
- Di = Deviation of event from mean for event i
Average sale (mean) = the median (middle) = The most Frequently
observed (the mode) = 5 units/day
- N = Total observations available
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Calculation of standard deviation of daily demand

Lead time variability
Frequency Deviation Deviation
unit FiDi2
(Fi) (Di) square Actual
Frequency Deviation Deviation
lead time FiDi2
(Fi) (Di) square
0 1 -5 (day)
-Calculate Standard

√
6 1
1 2 -4 ∑ Fi Di2 deviation of lead time?
σ = = ???
2 2 -3 n 7 3
-Calculate SS based on
3 3 -2 8 7 LT variable assuming that
4 4 -1 9 5 average demand is 20
Calculate safety stock
5 5 0 for if the firm sets the unit/day?
10 13
6 3 +1 target service level = -Calculate SS based on
95%? 11 9
7 3 +2 demand and lead-time
12 6 variables assuming that
8 2 +3
9 2 +4 13 4 average demand is 20
unit/day?
10 1 +5 14 2
N=28= Mean = 5
166
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Homework 3.5. Inventory reduction strategies

• Reduce lead time: time of production, time of

Using tables to calculate safety stock (service level =
order processing, time of storage/delivery time
85%)
• Pool inventory
1. To cover uncertainty of demand?
• Reduce variation
2. To cover uncertainty of lead-time?
• Just-in-time inventory system (JIT)
3. To cover uncertainty of demand and lead-time? • Delayed product differentiation
• Transit inventory reduction: Reduce lead times
If the service level increases to 90%, how much safety • Warehouse reduction for in-transit inventory:
stock will increases? Mobile/rolling warehouses - cross-docking

167
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

28
 - Causes of long lead time?
• Lead-time and inventory + Waiting time between processed steps
+ Non-value added activities/Repeating Process activities
- Lead time/Cycle time = total elapsed time required
+ Serial vs Parallel Operations
to complete a business process
+ Batching (waiting until order/material is accumulated )
- Companies must be able to compete on the basis + Excessive controls/lengthy procedures
of time so that they can respond to customers’ +Outdated technologies
needs faster than their competitors + Poor communication, coordination, cooperation within a
company and along SC
- How does Apple manage their inventory
+ …..
=> Solution? Case study?

169 170
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Inventory flow types

Inventory flow types

• Base flow inventory: core business products/

product with stable demand Fad products
• Wave flow inventory: Seasonal fashion products Surge Flow inventory

• Surge flow inventory: Fad products Seasonal

products Wave Flow inventory

Core business Base flow inventory

products

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• JIT
Stockholding policies
for alternative inventory flows
Types Characteristics Stockholding Policy
− Minimum stocks, regular
Base flow Predictable high flow rates replenishment
− Direct delivery from the suppliers
Slow moving flow rates − Minimize stockholdings, building
High criticality. Perishable. them during peak demand period
Wave flow
Peaks are relatively − Direct delivery from the suppliers
predictable where possible
Highly critical - Low value
Surge flow (1) Long lead time - Hold high level of stock
Small physical size
− Minimize stockholding, building
Low critical - High value
them only during peak period
Bulky physical characteristics
Surge flow (2) − Direct delivery from supplier where
Peaks are relatively
possible
predictable

174
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

29
 Cisco’s
Inventory Write-down Cisco had never experienced anything but growth management was unable
to recognize the impending downturn.
Description Furthermore, because production had been outsourced to ECM, who had
no incentive to tell Cisco that Cisco projections were wrong. Cisco
At one time, Cisco Systems Inc was expected to become the world's first continued planning for growth until it was too late.
trillion-dollar company. Its business model was based on a virtual supply
chain with apparently limitless capacity, and an emphasis on high customer At the roof of Cisco’s problem was its push system. Component orders
reliability. Cisco referred to this approach as global virtual manufacturing. were driven by demand forecasts without any mechanism to limit the
amount of inventory growth that could build up at the various levels in the
But when the telecoms industry hit a downturn, Cisco was one of the worst chain.
affected -perhaps in part because of the high gearing that had served it well
on the way up. Customer orders fell, production orders continued to go out, Adding to the problem, competition for materials and contract
raw-parts inventory increased by more than 300% between the third and manufacturing capacity led Cisco to forecast and purchase huge quantities
fourth quarter of 2000. Cisco was forced to write down $2.25 billions. in advance of actual demand.
According to Lakenan, Boyd and Frey, "Cisco simply wasn't able to scale up As long as demand grew, the huge inventory build-up was OK. But when
or down as quickly as it thought it could." demand fell abruptly, inventory became a huge liability.

175 176
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Exercise Exercise
Given the following information: Given the following information for a purchased part,
Annual requirements (D) = 5,000 units compute the (a) EOQ, (b) total purchase cost, (c) Total
Order cost (Co) = $100 per order annual inventory holding cost, (d) annual order cost, (e)
Holding rate (Ci) = 20% annual total cost, (f) reorder point, (g) number of orders
Unit cost (Pu) = $20 per unit placed per year and (h) time between orders.
Lead time (LT) = 6 days Monthly demand (d) = 3,500 units
Number of days per year = 360 days Order cost (Co) = $250 per order
Compute the (a) EOQ, (b) total cost of purchased inventory,
Holding cost (Ci) = $8.65 per unit per year
(c) annual inventory holding cost, (d) annual order cost, (e) Unit cost (Pu) = $85 per unit
annual total cost, (f) reorder point, (g) number of orders Lead time (LT) = 12 days
placed per year and (h) time between orders. Number of days per year = 365 days
177 178
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

CHAPTER 4
INFORMATION TECHNOLOGY
1. What is inventory? Which function does the inventory play? IN SUPPLY CHAINS
2. Define the average inventory/ inventory carrying cost/ re-order
point/ EOQ/inventory risk • Objectives
3. What is safety stock? Which factors should be considered upon – Explain the importance of IT in supply chain
safety stock planning? integration
4. What are 5 factors that should be considered while planning
– Analyze the impact of information visibility on cycle
inventory?
time in supply chain management
5. How does lead-time relate to the inventory level? How does the
inventory relate to the service level? How to reduce inventory level – Analyze impact of e-business on supply chain
(explain at least 5 ways to do it) – Apply e-business strategy in supply chain
management.
179 180
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

30
 4.1. Supply chain information system

4.1. Introduction to logistics/SC information system • The SC Information system is a system of records
and reports (paper based or electronic form) used to
4.2. IT system infrastructure aggregate, analyze, validate and display data from all
4.3. Application of Information technology for SCM supply chain stages that can be used for logistics
decision making and SC management
4.4. IT and E-business

181 182
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

The functions of the SC information

• Paper-based vs electronic format of information
Planning
• Demand forecasting - Ease of Recording and storage of information
• Strategy planning
• Materials requirement - Sharing ability
planning (MRP – ERP)
• Sales/Marketing planning
- Accuracy-Reliability
- Visibility
Co-ordination
Databases Customer service - Accessibility
communication
• Production scheduling • External data
• Customer order status
=>Impacts of the information technology on SM
- Customer orders
• Stock/WH management • Inventory availability performances?
- Inbound shipments
- By products/ customers - By product
• Internal data
- By location - Production, Inventory, - By stock location
• Transportation management - Outbound shipment • Outbound shipment status

Control
• Customer service levels
• Vendor performance
• Carrier performance
• System performance 184
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Key drivers of the development

Ford motor
of SC information technologies

- Increasing information complexity Order Inventory Ford

Procurement Supplier
Warehouse
- Increasing information proliferation
- Increasing information diffusion
- Increasing information velocity Invoice money
- Increasing information accuracy

Accounting
Department
(500 ->125)

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

31
 • Information visibility
• Goals of Information system and application of
Information technology
• Information visibility = ability to see information at the
- Collect information on each product at each process various points across the SC as and when required
to provide complete visibility for all participants • Information visibility helps to manage complexity
involved;
benefits:
- Access any data in the system from a single-point of - Reduced schedule variability
contact;
- Shorter planning periods
- Analyze, plan activities for decision making at - SC synchronization and coordination
strategic, Operational and Tactical levels
- A single point of control
 To have visible information trail that follows the
- Integrated information systems
product’s physical movement

187
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Information visibility
Shipment visibility
• Order visibility: provides information for customer to know
about their order status
• Shipment Visibility: Provides tracking in-transit movement
of the product through web-based tracking system. The
tracking system can also serve as an exception
management tool to alert supplier or distributor if there is
delay during the in-transit movement.
• Inventory Visibility: provides exact information about
product availability and stock level to make replenishment
as required. The inventory visibility can be achieved
through the use of warehouse management system
(WMS). http://www.pier2pier.com/
190
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Barriers to information visibility

• Cultural barriers: a reluctance to share information with

other supply chain partners
• Financial barriers: The high costs of implementing and
maintaining supply chain spanning information
technologies
• Technical barriers: information system across the supply
network should have the ability to talk/communicate/
compatibility to each other
• Organizational barriers: To align the numerous disparate
processes across multiple supply chain echelons is a
highly complex program of activities
191
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

32
 Information supports decision making 4.2. Information technology infrastructure

1. Interface devices: PC, Terminal, Internet devices, Bar-

code/RFID readers
2. Communication devices: LAN/WAN, Intranet or external
network (internet)
- Wireless communication: satellite, EDI, Bar coding, Radio
Frequency Identification (RFID)
- Single point of contract for communication (phone, email,
fax)
- Electronic data exchange (EDI), GPS
3. Databases
4. System architecture
193 194
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

IT System Architecture IT System Architecture

195
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Electronic Data Interchange (EDI) EDI example

• EDI = computer - to - computer exchange of business

document in a standard format
• EDI = communicating information between two or more
organizations electronically
• EDI links SC participants in terms of order processing,
production planning, inventory management, accounting,
transportation management
=> Benefits of EDI?

198
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

33
• Principle of EDI Barcode system
– To exchange information using EDI, Search
documents must be translated into a
Pre-Sale • Bar code = machine-
Negotiate
format that complies with an EDI readable representation of
standard Order data relating to the object to
Execution
– Mapping is the initial process that Deliver EDI which it attached
describes how each element of the
original document, such as a Invoice • Bar code reader?
purchase order or invoice, relates to Settlement
Payment • Standard of bar codes
an "EDI transaction" that complies
with the standard being used After Sales After Sale • QR code
– The translation software uses this
mapping to translate the EDI
transactions so they can be used by
the receiving organization

199
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

RFID - Radio Frequency Identification

Basic RFID System consists of: • RFID – Radio Frequency Identification Tags
- An antenna or coil
- A transceiver (with decoder) - RFID tags have different shapes and sizes
- A transponder (RF tag) electronically programmed with - Active and passive tags:
unique information. + Active tags are powered by an internal battery and are
https://www.youtube.com/watch?v=gEQJxNDSKAE&t=8s typically read/write, i. e. tag data can be rewritten and/or
modified
+ Passive tags are operated with a separate external power
source - operating power of the reader
Passive tags are lighter, less expensive, and offer a virtually
unlimited operational lifetime
Passive tags have shorter read ranges than active tags and
require a higher powered reader

201 202
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

The advantages of RFID applications in SCM RFID can enhance competitiveness

• RFID tags are very secure, can be hidden • Lowering cost: US national retail security: 2001 – inventory lost
• RFID can be read through non-metallic materials without due to administrative errors was US$ 5.8 billion
touching to a tag at a very fast speed • Increasing revenue: lost due to stock-out inventory was 3.8%.
• Multiple RFID label can be read at one • Decreasing working capital thank to shorter amount of time for
 Application of RFID results in:
order processing, material handling => shorter cycle time
+ Improving asset tracking and management
+ Increasing security of freight • Reducing fixed capital: tracking asset such as containers,
+ Improving stock management and availability pallets and reducing their loss or under-utilization, cutting back
+ Speeding data collection redundant equipment...
+ Reducing errors in product data handling • Improving customer service level
+ Reducing labor costs, time Uniqlo: https://www.youtube.com/watch?v=Ay8cZfe8S_o

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

34
 RFID can enhance competitiveness Financial Barrier to RFID implementation
Walmart is expected to save US$8.35 billion (5% of its total Tags:
revenue) by implementing RFID across all their operation: - Basic passive RFID: 10¢ USD each – Good for paper or other
- 6.7 billion = 15% of labor cost by eliminating the need to have non-metal, liquid material.
people scan bar codes on pallets, cases in the SC and on items in - Metal passive RFID: $1.50 USD each – Larger passive tags that
the store work on metal surfaces.
- 600 million – using smart shelf to monitor on-shelf availability of - Active RFID: $15-$20 USD each
inventory for avoiding out-of-stock situation
Readers:
- 575 million – by reducing inventory loss
- Handheld – Passive RFID handheld readers - $3,000
- 300 million by better tracking more than 1 billion pallets, cases that
- Fixed Position passive RFID: $10,000–20,000 per portal for
move through its DC each year
hardware, installation and configuration
- 180 million by improving visibility of SC resulting in reducing
- Active RFID readers: $1,250-$1,500 each.
inventory and inventory carrying costs
- Active RFID Rack/Room Locators: $150-$200 each.
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Databases 4.2. Application of Information technology for SCM

• Relation databases. 4.2.1. Enterprise Resource Planning (ERP)

• Object databases • An application that spans an enterprise to integrate the
• Data warehouses various business functions across multiple
• Data-marts: smaller version of data warehouses locations
• ERP is used for planning and control of resources
Generic system Architecture
• Commonly requires business process reengineering to
• GSA = configuration of various components like
align work organization with the technology
databases, interface devices and communications.
• The most current system design is client/server • Not supply chain spanning
structure
•
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Collaborative
planning-forecasting-Replenishment

4.3.2. Collaborative planning forecasting CRM

CPFR solution
and replenishment (CPFR)
Generate
demand
Promotion
Trading
• Not just an information technology partner 1

• IT-enabled CPFR is essential in high velocity SC such EDI Forecasts

Collaboration

as those of the major supermarket Trading

Determine
requirements
partner 2
• Commonly offered as a “bolt-on” to ERP to enable Item catalog
Internet
ERP to extend beyond a single organization
Trading Make to
partner 3 Orders demand

© Copyright 2018, Vietnam Logistics Research

Supplier ERP
© Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

35
 • WMS Functionalities
4.3.3. WMS – Warehouse Management System
• Audit trails
- A WMS= a software application that helps control and 1. Inventory Control: • Query
manage the day-to-day operations in a warehouse. • Lead time calculation
- A WMS can be a standalone application or part of an
ERP system. • Random put-away algorithms
- WMS - to control the movement and storage of materials • Integrates storage of products by
2. Storage Location velocity
within an operation Management: • Assigns location by size, weight, status
- The system can provide visibility of the inventory back to the • Stores by types
manufacturing environment for replenishment and forward to
order processing and management for allocation to a
customer's order • Quality control hold
3. Quality Control
- The main functions: to determine where to stock, where to • Lot and batch tracking by SKU/customer
Interfacing:
• Notification
pick, and in what sequence to perform these operations.

211 212
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

WMS Functionalities (cont’d)

• WMS Functionalities (cont’d)
• Batch pick plan
• Shipping documentation creation
4. Order Selection • Query that permits access to the status of any 7. Shipping
product by FIFO, lot, order number • ASN (Advanced Shipping Notice)
• Inventory Allocation • Notification of special handling requirements

• Stock replenishment • Task performance records

5. Automatic Inventory
• Product ‘movement’ reports 8. Operator Productivity • Interleaving tasking
Replenishment
• Let down schedule • Random order checking

• ASN receipt (Advanced Shipping Notice) • Management report

6. Receiving • Blind receipt 9. Report Generation • Productivity report
• ‘Instant routing’ for backordered product • Inventory report

213 214
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Vendor managed inventory

4.3.4. Vendor Managed inventory
Remote access Collaborative supply Optimizing supply
to collected data chain initiative chain performance
- It is a software package as a module of WMS
- Customers outsource their inventory management to
their suppliers
Manufacturer has access to
- VMI provides a mutual beneficial relationship where Collection and
distributor inventory data
both sides will be able to more smoothly and and are responsible for
VMI centralization of
inventory data
accurately control the availability and flow of goods generating purchase order

- VMI requires information visibility

Manufacturer is responsible Integration of
for maintaining distributors inventory data and
inventory level business systems

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

36
 • 4 Levels of e-Commerce
4.4. IT and E-business
– One-way communication (other party does not need
E-Commerce/E-business to respond):
- E-Business involves the execution of business + Email
transactions over the electronic way (internet, email, + FTP (File Transfer Protocol)
television…)
+ Browsing
- Activities that are performed online: – Database access:
+ Offering products/services + Personal inquiry of product catalogue, order status,
+ Negotiating prices and contracts inventory level
+ Placing and receiving orders – Data Exchange:
+ Tracking orders + Business to business transactions
+ Paying and receiving payment + EDI
+ Warranty registration – Sharing Processes: CPFR, WMS, VMI
+ …. 217
© Copyright 2018, Vietnam Logistics Research
218
© Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Example of E-commerce system Vertical Hubs Horizontal Hubs

• Covisint: automotive • BidCom: project
Strategies of E-Business • Altra Energy: energy management
• E-Steel: steel • CarrierPoint: global
of Supply Chain
• PlasticsNet: plastics logistics
(E-Marketplace, • SciQuest.com: life • The Return
Exchanges and Hubs) sciences Exchange: reverse
• ChemConnect: logistics
chemicals

Using Auctions in
Procurement

219 220
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

E-Business
• Conclusion - benefits of ITS
Advantages?
- Facilitate effective competition
- Global access - Direct sales to customers - Faster time to market
- Cost saving (Business launching, facility, processing, inventory
- Improve supply chain process
costs…) and price reduction - Achieve seamless information sharing
- Easy availability through search engines quick and affordable
marketing (learning of customers’ habits) - Reshape the tradition model of SCM in the areas of:
- Improved SC coordination - Mass customization …..
+ Customer order processing
- customer service – easier inventory management
+ Inventory management
Disadvantages + Purchasing
• Reduces profits to suppliers + Transportation
• Contrary to integrated supply chain philosophy of long term alliances and trust + Warehousing
• security (for both customer and seller)
• dependency on the website/ risk of site crush/hack
+ Information management
• High tech personnel – no testing, trying - high % of return – Competition + Others…
• poor customer buying experience, product delivery…..

221 222
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

37
 IT system CHAPTER 5:
1. Discuss the goals of SC information system? Why IT is STRATEGIC ALLIANCES
important for L&SCM? IN SUPPLY CHAIN
2. What are the 4 components of a IT system?
3. Discuss drives for companies to build their IT system? • Objectives
4. Discus the advantages of RFID over barcodes
– To conceptualize strategic alliances between
5. What is information visibility in SCM? Discuss the importance companies
of information visibility for logistics and supply chain
management? What are barriers to achieve information – To understand the role of 3rd PLP, 4th PLP
visibility?
6. How does IT impact the commerce? Explain the differences
between buyers’ and sellers’ bidding.
7. Pros and cons of ecommerce?
224
8. © Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

CN Railway
5.1. Introduction to a Strategic Alliance
– A close, trustful, long term, cooperative relationship ❑ 60 purchasing points with 1400 staff
formed for the purpose of ❑ Strategy: big order from low-cost suppliers (discount 10-35%)
+ gaining synergies to improve performance of partners ❑ 1994 – stopped buying from 500 suppliers on the west of
Canada
+ offering a broader set of skills or services to improve
❑ Established the alliance with distributor Aucklands: 6000
customers satisfaction
invoices were replaced by 1 payment report per month =>
+ creating and strengthening an advantage over saved 1,2 mill CAD
competitors ❑ Business Re engineering with 23,000 staff
+ gaining mutual benefits ❑ 1995: 25 purchasing points - 280 staff => saved 14 mill CAD
on purchasing & 3.4 mill CAD on inventory
❑ Objective of the year 1996: cut down 40 mill CAD of
purchasing costs and 34mil AUD on inventory
225
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Relationship • The concerns of Strategic

Characteristics alliance
- Trusting relationship - Loss of control over L channel
- Long term goal - Fear of being out of the LC
- Complementary to each other - Concern of logistics failure and
- Broader skills, products and no direct way to handle them for
services customers
- Impacting end results - Not enough trust to try such an
arrangement
- Synergy along the chain
- Partners may not be viewed as
- Competitive advantage
equals
- Win-Win relationship
- Difficulty of identifying the
- New value chains through economies to be achieved as
collaboration compared with the partner’s
current logistics cost

227 228
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

38
 Logistics partnership decision
• Ex: at Cisco, strategic alliances engage in impact partnering that
is differentiated by 8 unique but integrated characteristics:

229 230
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

General Alliances development model

5.2. Conceptual Model of Alliance Development

• Strategic Component
Stage 1 =>
Examines how strategic expectations and evaluations of
alliance effectiveness evolve as an alliance progresses in Stage 2 =>
the development stage
• Process Component Stage 3 =>

Outlines the stages of alliance development –e g Stage 4 =>

formation, implementation, maintenance or termination
• Operational Component
Standard operating procedure for managing an alliance

231 232
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Conceptual Model: Horizontally there are 4 stages: 5.3. Developing a trusting relationship

Alliance conceptualization
- Discovering a need for a special arrangement with a certain partner
- Joint planning
Reliability
- Functional competence
Alliance pursuance - Interpersonal
- There is a decision to form an alliance Loyalty Competence competence
- The firm establishes operational and strategic criteria to select the strategic - Business sense
alliance partner competence
Developing
Alliance confirmation a trusting
- Determining the strategic and operational expectations for the arrangement relationship
- Joint planning
- Opportunity for interaction can result in better partner relationship Vulnerability Affect- - Openness
based trust - Faith/goodwill
Alliance implementation and continuity
- Focus on performance assessment to determine whether an
alliance will be sustained, modified or get terminated
- Conflict resolution process is required
233 234
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

39
 Competence = ability
Reliability
- Functional competence – the ability to know,
The ability to produce a consistent and predictable understand and find a solution to a specific area.
outcome over a period of time
- Interpersonal competence – the ability to work with
The act of integrity and honesty of parties in even
others and the ability to listen, negotiate,
unusual situations
communicate, make a presentation, reach an
agreement with a group, and other related skills to
deal with people on a day-to-day basis.
- Business sense competence – is about individual’s
experience, wisdom and common sense.

235 236
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Vulnerability
Affect-Based Trust (“Goodwill”) • Adverse selection –the inability to evaluate accurately the
quality of the assets the other partner brings to the
- Openness –being open with other party on relationship.
problem or information. For example, a buyer may not know exactly whether the
For example, a supplier who provides information supplier’s production system can meet his requirements.
on internal costs or a buyer who provides
• Moral hazard –the inability to evaluate the assets
information on future forecasts. committed when a relationship exists.
- Benevolence –the acknowledgement of duty by For example: a supplier based on a buyer’s request,
one party to protect the rights and interests of the increase its production capacity. However, there is no
other party. means to ascertain that the supplier has indeed invested in
the plant and increase the production capacity. There will
be asymmetric investment by partner that commits more to
the relationship than other.
237 238
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Loyalty = Strong commitment to each other

In loyal relationship, there is the belief of one party that the
other party will perform well in unusual situations, when it
really counts.

239 240
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

40
 Growth drivers of 3PL, 4PL
5.4. Logistics Providers as a strategic partner
• Globalization-global sourcing and selling
Logistics provider is:
• Supply Chain management requirements
- An organization that manages and executes
particular logistics functions, using its own assets − Trust
and resources, on behalf of another company − Information
- Outside firms perform materials management − Capital utilization
and logistics functions − Expense control

241
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

All North Asia Latin

Outsourced services Europe
regions America Pacific America
Domestics transportation 83% 75% 94% 89% 80%
Reasons to outsource logistics activities
International transportation 75 62 89 86 74
Warehousing 74 73 82 77 63 • Concentrate on core competences
Customs brokerage 58 57 54 68 65
• Avoid large capital investment
Forwarding 53 47 54 70 48
Cross-docking 38 33 47 42 34 • Reduce labor costs
Product labeling, packaging, assembly… 36 32 41 41 34
• Improve standard of services
Reverse logistics (defective, repair, return) 35 27 47 46 25
Transportation planning and management 31 32 32 30 26 • Enjoy a greater logistical expertise offered by 3PL
Freight bill auditing and payment 28 40 22 23 15 and lower costs
Information technology (IT) services 20 20 15 19 25
SC consultancy services provided by 3PLs 18 20 11 25 17
• Have wider geographical coverage and product
Order entry, processing and fulfillment 16 17 11 21 14
range offered by 3 PL
Fleet management 15 15 17 14 20
Customer service 13 9 10 21 15
LLP/4PL services 13 9 13© Copyright 2018,
16 Vietnam Logistics
19 Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Economic benefits of sourcing from

Benefits of outsourcing logistics services
low cost offshore locations
Profit Profit
Result All region
Marketing
Logistics cost reduction 15% Marketing
Domestic sources

Logistics fixed asset reduction 25% Logistics

Foreign sources

Inventory cost reduction 11% Logistics

Average order cycle length Changed from 17 days Overhead

Changed to 12 days Tariffs

Order fill rate Changed from 73% Materials
Overhead
Changed to 81%
Order accuracy Changed from 83%
Materials
Changed to 89%
Labor
Labor
Source: Langley and Capgemini Consulting (2010)

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

41
 Advantage and disadvantage of 3PL outsourcing

Advantages Disadvantages
• Cost reduction • Span of control
• Non-Core business • Pricing
• Leverage on 3PL’s logistics • Confidential information
network sharing
• Cut down asset investment • Gaps in expectations
• Improve customer service • Implementation timeline
• Short lead time
• Flexibility of business:
expansion and reduction

247
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

IT systems provided by 3PL 4PL - 5PL

• Shipment and Inventory tracking

• A 4PL = an integrator that assembles the resources,
• Cross dock management capabilities and technology of its own organization and
• Inventory and warehouse management other organizations to design, build and run
• Customer relationship management comprehensive supply chain solution
• Vendor/supplier management • Globalization-global sourcing and selling
• Returned material authorization • Evolution of supply chain outsourcing:
• Transportation planning and scheduling
- 4PL delivers comprehensive supply chain solution
• Order fulfillment
- 4PL delivers values through the ability to impact the
• SC design and planning
entire supply chain
• …………..
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Characteristics and fundamental of 4PL

Key services of 4PL
• Neutrality
• Transportation and warehousing
• Specific Know-hows
• Manufacturing
• Extensive IT competence
• Procurement/sourcing
• Management capacity
• Supply chain IT
• Task of designing, coordinating and controlling supply
networks • Demand forecasting
• Delivering comprehensive SC solutions • Network management
• Managing an integrated material and information flow • Customer service management
• Taking over operative responsibilities for the clients • Inventory management
• Offering a portfolio of different service modules by • Administration
cooperating with other service providers
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

42
 Specific set of SC initiatives and goals Benefits of 4PL Disadvantages

• 4PL common services (invoice management, call • Revenue growth • Span of control
centers, warehouse/distribution facilities) • Reduction of supply chain • Pricing
• Implementation center (business process analysis/ cost • Confidential information
scoping, and development of all activities into an open • Reduction in working sharing
system framework) capital requirement • Gaps in expectations
• Product/Skill training centers (SC engineering) • Supply chain related • Implementation timeline
• IT system center (Pure IT selection for design and capital reduction
• Limited choices of 4PL
implementation/connectivity) • Leveraging high
technology in a 4PL • Dependence on 4PL
• 4PL backstage operation (Functional support in solution
administration, quality, finance, legal)
• Knowledge transfer, Business development,

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Levels of 4PL solutions Challenges for 4PL

Reinvention: aligning business strategy with SC strategy

and using technology to integrate and optimize operations • Enterprises do not outsource controlling tasks
both within and across participating SC
• Lack of clear cost allocation in outsourcing projects
Transformation: improving internal SC functions such as • Inadequately developed supply network
sales and operation planning, distribution management,
procurement strategy and customer support. • 4PL concept and benefits are not well known
• Fragmented implementation of 4PL along supply
Implementation = business process realignment, chain
technology and system integration
• Comprehensibility of the enterprise
Execution: at the tactical level. An organization can
outsource the entire range of its supply chain
activities to a 4PL provider for execution.

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

What need to be a 4PL? 4PL Cross Border Integration of Supply Chain

• Trained and competent supply chain professionals

• Global capability/Regional capability in terms of geographical 4 PL - Solution
presence, resources, technology Co-ordination

• Ability to manage multiple service providers Supply of an integrated platform and cross company ICT system

• Strong program management skill, people relationship and 3 PL 3 PL 3 PL

teaming skill
• Ability to deliver of world class SC strategy formulation and Supplier OEM Distribution Customer
business process redesign
• Substantial experiences in integrating SC technologies and
outsourcing capabilities
• Understanding and management of organizational changes, issues
and challenges The 4 PL concept provider integrated, process-orientated
• Ability to anticipate and prepare customers for future SC planning, coordination and control of complete supply chains
development, trends, standards
258
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

43
 CHAPTER 6: EFFICIENT TRANSPORT
AND DISTRIBUTION STRATEGY
1. What are the purposes and the characteristics of
strategic alliances?
6.1. The importance of transport in a supply chain
2. What are the benefits for a company to partner with
6.2. Functions, principles and participants of a transport
3PL, 4PL, 5PL? system
3. What are the disadvantages of strategic partnership 6.3. Structure of a transport system
in LSCM?
6.4. Transport operations (Pricing, Operation management,
4. What are the factors impacting decision on Utilization of different modes of transport
strategic partnership in logistics? 6.5. Guidelines for distribution strategy
5. What are the stages of developing a strategic
partnership?
6. What are differences between 3PL and 4PL?
259 260
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

6.1. The importance of transport The importance of transport

• Provide the movement of material flow from the first

supplier to the hands of consumer.
• Transport is one of the most cost absorbing element
of SCM and transport cost takes a certain share in
product cost
• Successful SC is linked to successful and
appropriate use of transportation
• Transport creates place and time utility

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Role of time and place utilities in transportation 6.2. Transport functions

❑ Product movement
Warehouse/ + Transport material from suppliers
Storage
+ In house transport
Time utility
+ Transport finished products to the final customers
Time in transit
Transportation + Transport returned goods

Place of ❑ Product storage

Place utility
consumption

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

44
❑ Method of providing transport
– Owned transport fleet/Operates transport fleet
– Outsource to professional carriers
– Outsource when needed (contract based)
❑ Efficiency of transport system
– Cost of delivery
– Lead time
– Reliability
– Security/safety
– …..
266
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

6.3. Transport structure

Relationship among transportation participants

Public
Sea

Government
Pine
Air
line
Multimodal
Carriers and
Shipper Consignee transport
agent

Rail Truck
Internet

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Advantages and disadvantages of

five modes of transportation

Longest train: https://www.youtube.com/watch?v=DmEfQxg9whI

https://www.marineinsight.com/know-more/top-10-worlds-largest-
container-ships-in-2019/
Ever given: https://www.youtube.com/watch?v=8RxmRw1kCrc

installation, limited types of goods

270
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

45
 6.4. Transport operation 6.4.1. Pricing

❑ Pricing • Principles of transport costing

❑ Operating • Factors affecting transport costs
❑ Transport documents • Transportation cost structure
• Strategy of pricing
• Types of freight
• Transport services

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Principle of transport costing Factor affecting transport cost

- Economic scale of volume: + Volume/Density

+ Cost per unit of weight decreases as the size of a + Capacity of the means of transport
shipment increases + Distance
+ Cost per unit of weight decreases as the capacity + Reputation of the carrier
of the means of transport increases
+ Packaging, sizing, shape of the packages
- Economy of distance
+ Handling method
+ Transport cost per unit of weight decreases as
+ Liability of the carrier
distance increases.
+ Demand and competition of the transport market

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Costs and volume Transport cost structure

Total cost
Cost
Cost per transport unit

Variable cost

Fixed cost

Distance/Volume/capacity of the mode of transport

Distance
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

46
 Components of the transport cost Pricing strategy
• Direct carrier cost associated with movement of
Variable
cost
each load (labor, fuel, maintenance) ❑ Cost of service = cost of service + profit
• Measured by S/mile, per unit of weight
- Based on minimum charges
• Constant cost that carrier should spend anyway
- Applied for low value goods, in a highly competitive market
Fixed cost • Vehicle, terminal, right of way, information system,
support equipment ❑ Value of service
- Based on the value perceived by the shipper
Joint cost • Expenses created by the decision to provide a
particular service
- Used for high value goods or in a limited competitive
market
❑ Mixed
Common • Terminal, management… expenses that
cost incurred on behalf of all selected shippers ❑ Net-Rate Price

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Some services of the carrier

Types of freight rate

• COD: Collect payment on delivery

• General cargo rates • Inside delivery: Deliver products inside the building
• Commodity rates • Notify before delivery
• FCL, LCL freight rate • Re-consignment of delivery: Redirect to a new
• Time volume rates destination while in transit
• Redeliver: second delivery
• Special rates and service
• Sorting and segregating: sort prior delivery
• Storage

© Copyright 2018, Vietnam Logistics Research

(Bowersox, Bixby)
© Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

6.4.2. Transport operation

❑ Pricing
❑ Operation management
❑ Transport documentation

© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

47
 Operational management Modal choice matrix

– Order consolidation
Larger shipment Smaller shipment
– Route optimization Shipment Size
– Carrier rate management Slower Faster
Speed
– EDI link with the carrier
– Internet-based shipment tracking Sea/Rail Intermodal Truckload LTL Parcel Air
– Integrated claims management
– Identify most economical modes Less expensive More expensive
Transport cost
– Calculate best route
– Carrier selection Slower
Service response
Quicker

– Yard management More expensive Less expensive

Inventory cost
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Selecting the carrier

• Traditional carriers
• Contracting carriers
• Intermediaries
- Freight forwarders
- Agents
- Brokers

286
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

An example of assessing the carrier • Transport Cost Characteristics

The importance Effectiveness of the
Criteria Mark
of the criterion carrier 1
(1) (2) (3) (4) = (2) X(3)
Cost 1 1 1
Time 3 2 6
Credibility 1 2 2
Technical capacity/
2 2 4
Service
Availability 2 2 4
Security 2 3 6
Total 23

-Importance: 1 = very important, 2 = important, 3 = less important

-Effectiveness: 1 = very effective, 2 = Average, 3 = less effective

288
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

48
 6.5. Guidelines for distribution strategy formulation •Total Cost Concept and trade-off analysis
from transportation perspective

• Total cost concept

• Differentiated distribution
• Mixed strategy
• Postponement
• Consolidation

289 290
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

291 292
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

293 294
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

49
 Trade-off analysis and total cost concept Differentiated distribution

• Central scope and design of SC and Logistics • As transportation rates depend on volume, speed/time of
system is trade-off analysis as cost patterns of transportation, distance then the distribution policies should
different activities are in conflict be established based on customer service level, sale,
profitability, characteristics of the product
• The conflict of costs pattern is managed by
balancing the activities so that they are collectively => Examples
optimized - Fast moving, vulnerable, high-profitable, high-service level,
• The best economic choice occurs at the point low-volume… items should be placed in the field WHs with
where the sum of both costs is lowest. the most forward location
• The logistics decision of one company may effect - Medium-volume items – in fewer regional locations
the logistics costs of other companies - Slow moving, high-volume items, low-profitable items – only
at centralized stocking point/plant
295 296
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Mixed strategy Postponement

• The concept of a mixed strategy is similar to that of • Postponement = delaying in delivery until customer’s order is
differentiated distribution: A mixed distribution strategy will received
have lower costs than a pure, or single strategy. • Time postponement = delaying in distribution
• A mixed strategy allows an optimal strategy to be Example: Product is stocked at centralized WH and it will be
established for separate product groups having varied cube, shipped to local WH only when customer order is received
weight, order size, sales volume, and customer service • Form postponement = delaying in finalizing products (labeling,
requirements. packaging, assembly and manufacturing)
• This often has lower costs than a single, global strategy that Example: automobile won’t be colored until the order is
must be averaged across all product groups received
• Advantages? Disadvantages?

297 298
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Postponement Types
Consolidation
• Consolidation = Creating large shipments from small ones
Benefits? Disadvantages?
Example?

299 300
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

50
 Standardization
1. Discuss the roles of transportation in LSCM
• Product variety can increase inventories and decrease 2. What are participants of transport system? How do they impact
shipment size supply chain logistics in general?
• Adding 1 item to the product line that is similar to an 3. Is transportation just a movement of inventory? Discuss
advantages and disadvantages of each mode of transport? How
existing one can increase the combined inventory levels
transportation can impact supply chain logistics effectiveness?
of both items by 40% while total demand does not
increase 4. How a company can provide transportation? Discuss Amazon’s
transportation strategy?
Standardization + postponement
5. Explain economy of transport distance, volume/density. What
• Standardization = creating interchangeable parts,
are factors influencing transportation rates? Discuss structure of
modularized products and labeling the same product
the transportation cost? What is the purpose of freight
under different brand name
classification?
301
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

CHAPTER 7:
QUALITY MANAGEMENT SYSTEM IN SCM
1. General understanding of quality/quality
• Objectives management system
Provides an understanding and appreciation of the
importance of quality management in SCM, supplier
capability assessment, and corrective action process in
a supply chain environment.

303 304
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

7.1. Quality and quality management system

• What is quality management system (QMS)?
- A QMS includes the company's policies, requirements
and process documents that reflect the best practices
of the company
- A QMS provides organization with a set of processes
that ensure a common sense approach to the
management of organization
- A QMS ensures consistency and improvement of
working practices
- A QMS provides products and services that meet
customer’s requirements

305 306
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

51
 QC? QA? TQM

Quality QMS/TQM
Quality • Processes • Organization
assurance Total Quality
• Products • Products • Processes
control Management
• Products

TQM is structured
QC is product QA is process approach to
oriented and oriented and focus organizational
focus is on defect is on defect management that
identification prevention improves quality

307 308
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Benefits of QMS
- Greater understanding of
+ Customer’s requirements with a view to achieving
customer satisfaction
+ Organization’s processes
+ How statutory and regulatory requirements impact on the
organization and customers
- Improving internal and external communications;
- Establishing clearer responsibilities and authorities among
staff and management
- Improving time and resource usage
- Providing greater consistency and traceability of products
and services
309 310
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

What are barriers to a QMS? 7.2. ISO 9000 and the ISO adoption

• ISO 9000 = a set of international standards on quality

management and quality assurance
• ISO 9000 is not specific to any one industry, it can be
applied to organizations of any size.
• ISO 9000 can help a company satisfy its customers,
meet regulatory requirements, and achieve continual
improvement.
• ISO 9000 is considered to be a first step or the base
level of a quality system.

311 312
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

52
 What is ISO 9000 What is ISO 9000

• ISO 9000 is a series/family of quality management The ISO 9000 family contains these standards:
standards, while ISO 9001 is a standard within the • ISO 9001:2015: Quality Management Systems -
family. Requirements
• The ISO 9000 family of standards also contains an • ISO 9000:2015: Quality Management Systems -
individual standard named ISO 9000 - the fundamentals Fundamentals and Vocabulary (definitions)
and vocabulary for quality management systems (QMS). • ISO 9004:2018: Quality Management - Quality of an
• ISO 9000 was first published in 1987 by the ISO. Organization - Guidance to Achieve Sustained
• ISO 9000 underwent the major revisions in 2000, 2008 Success (continuous improvement)
and 2015. • ISO 19011:2018: Guidelines for Auditing Management
Systems

313 314
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

7 Quality Management Principles

ISO 9001:2015 Requirements for a QMS
of ISO 9000-2015 and 9001-2015

315 316
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Requirements of QMS 1. General Requirements

1. General Requirements - Identify the processes needed for the QMS and their
application throughout the organization;
2. Document Requirements
- Determine the sequence and interaction of these
3. Management Responsibility processes
4. Resource Allocation - Ensure the availability of resources and information
5. Product Realization necessary to support the operation and monitoring of
these processes
6. Measurement Analysis and Improvement
- Monitor, measure and analyze these processes
- Implement actions necessary to achieve planned
results and continual improvement of these processes
317 318
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

53
 • 2. Documentation Requirements
• Principles and Guidelines of ISO for SC (Cont…)
• General Requirements
– QMS documentation needs to include: – Quality Manual
» Documented statements of a quality policy and quality • Organization shall establish and maintain manual
objectives that includes:
» A quality manual - The scope of the QMS, including details of and
» Documented procedures required by the International justification for any exclusions
Standard - The documented procedures established for the
» Documents needed by the organization to ensure the QMS, or reference to them, and
effective planning, operation and control of its
processes - A description of the interaction between the
processes of the QMS
» Records required by the International Standard

319 320
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

3. Management Responsibilities
• Principles and Guidelines of ISO for SC
• Management Commitment: Top management shall
– Control of Documents
provide evidence of its commitment to the development
✓Documents required by the quality management and improvement of the quality management system by:
system shall be controlled
» Communicating to the organization the importance of
✓ A documented procedure shall be established to meeting customer as well as regulatory and legal
define the controls needed to: requirements
» Approve documents for adequacy prior to issue » Establishing the quality policy and quality objectives
» Review and update as necessary and re-approve » Conducting management reviews
documents
» Ensure that changes and the current revision status of » Ensuring the availability of necessary resources
documents are identified
321 322
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Customer Focus
4. Resource Allocation:
Customer needs and expectations are determined and
+ The organization shall determine and provide the resources
converted into requirements, obligation to products including
needed to: (1) implement and maintain the quality
regulatory and legal requirements management system and continually improve its effectiveness,
- Management Review and (2) enhance customer satisfaction by meeting customer
requirements
The organization's quality management system is
reviewed at planned intervals, to ensure its continuing + Internal courses development: When the organization develops
suitability, adequacy and effectiveness internal training courses, it should provide a process of
planning, developing, and implementing these courses
This review includes assessing opportunities for
+ Quality Improvement Concepts: employees that have a direct
improvement and the need for changes to the quality
impact on the quality of the product, including leadership, shall
management system, including the quality policy and be trained in the fundamental concepts of quality improvement,
quality objectives problem solving, and customer satisfaction
323 324
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

54
 Resource Allocation (cont…) 5. Product Realization
+ Training Requirements and Awareness: Training + The organization shall plan and develop the
requirements shall be defined for all positions that processes needed for product realization
have a direct impact on the quality of products
+ Planning of product realization shall be consistent
Employees shall be made aware of training
with the requirements of the other processes of the
opportunities
quality management system
+ Electrostatic discharge (ESD) Training is provided
for all employees with functions that involve any
handling, storage, packaging, preservation, or
delivery of ESD-sensitive products prior to
performing their jobs

325 326
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Customer Related Processes • Purchasing

- Requirements related to the Product: statutory and - The organization shall ensure that purchased product
regulatory requirement, requirements specified by the conforms to specified purchase requirements
customer in terms of delivery, post-delivery activities, - The control is extended to the supplier
intended use…. - Evaluation and selection of suppliers are based on their
- Review of requirements related to the Product: review ability to supply product in accordance with
should be conducted before product is introduced to requirements
customers - Criteria for selection, evaluation and re-evaluation shall
- Customer communication: Effective communication for be established
product information, inquiries, feedback - Records of the results of evaluations and any necessary
actions arising from the evaluation shall be maintained

327 328
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Production and Service Provision 6. Measurement, Analysis and Improvement

- Control of production and service provision during – The organization shall plan and implement the
production monitoring, measurement, analysis and improvement
- Organization’s support program processes needed to:
- Validation of processes for production and service • Demonstrate conformity of the product
provision • Ensure conformity of the quality management
system, and
- Identification and traceability: Product identification,
traceability for recall, traceability for design changes, • Continually improve the effectiveness of the quality
Preservation of product etc management system
Example of Apple guaranty process of Iphones – This shall include determination of applicable methods,
including statistical techniques, and the extent of their
use

329 330
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

55
 • Supplier Capability Assessment Logistics Audit and Control
- Purpose of SCA
Purposes:
+ to assess a supplier’s
+ to review the supplier’s capabilities, procedures,
+ to establish baseline data and the rating base of
documentation and effectiveness of actual
suppliers;
practices,
+ to drive suppliers development and improvement
+ to confirm requirement compliance using the SCA
- Scope of SCA: existing or potential suppliers,
Evaluation Audit,
- Content of SCA: assess suppliers’ quality system,
and critical processes; observe quality and + observe the overall effectiveness of each Element
workmanship of work in process, validate ISA (Initial in the SCA Evaluation Audit
Supplier Questionnaire) and survey data accuracy => To suggest corrective actions and improvement
=> The SCA is a risk assessment tool
331 332
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

CHAPTER 8:
• Logistics Audit and Control SCM PERFORMANCE MEASUREMENT,
CONTROL AND STRATEGIC LOGISTICS PLAN

• Objectives
– Understand the importance of SCM performance
measurement and control in driving company business
performance
– Discuss various approaches of supply chain performance
measurement systems
– Develop a strategic logistics plan to ensure long term viability
of company

333 334
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Typical performance metrics

8.1. The Importance of Performance Measurement

Finance
- Performance measurement and control of SC related management

costs offers significant potential for improving cash flow

and return on assets
- Objective performance of SCM: Quality Customer
service
+ Finance Management: Sales, Market share, Cost,
Performance
+ Quality, Inventory holdings metrics

+ Productivity: Cycle times, Delivery, Responsiveness

+ Assets management: Assets utilized
+ Customer service Asset
Productivity
management

335
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

56
 Materials management control process

Standard or goal
• Total Cost Analysis
Corrective Monitor - Total cost analysis is one of the key concepts of
action Comparison by managing supply chain functions
manager or computer
Corrective action - For a given level of customer satisfaction, the
management is required to understand the need
Input Progress to maintain overall cost visibility rather than just
Output
ongoing logistics focusing on individual cost element of individual
Physical supply and activities
Activity costs and activities
distribution activity and
customer service
customer service levels
External & Internal
changes

338
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Cost Trade off Due to Reduction of DC

• Cost Trade-off
- Profit for the overall supply chain system can be Annual savings from reduction in number of distribution centres $650,000.00
enhanced if the cost trade-off is managed Savings in inventory carrying costs with higher turnover $600,000.00
properly Gross savings $1,250,000.00
Less
- For example: the increase in inventory has a Increased distance $500,000.00
much greater impact on the customer service Premium transportation to maintain same service level $450,000.00
level and yields much better revenue over the Total cost increase $950,000.00
cost of investment incurred to stock goods, or Net savings from distribution centre reduction $300,000.00
inventory carrying cost => it is a good trade-off to
be made as there is a net benefit is doing so

339 340
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Methodologies for Measuring Performance

- The Balanced Scorecard
- The Supply Chain Council’s SCOR Model
- The Logistics Scoreboard
- Activity-Based Costing (ABC)
- Economic Value Analysis (EVA)

341 342
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

57
 • Balanced Scorecard
Balanced supply chain measures are based on four
perspectives:
- Financial perspective (ex: cost of manufacturing and
cost of warehousing…)
- Customer perspective (ex: on-time delivery and order
fill rate…)
- Internal business perspective (ex:… manufacturing
adherence-to-plan and forecast errors)
- Innovative and learning perspective (ex: new product
development cycle time..)

343 344
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• 5 Distinct Management Processes

• The Supply Chain Council’s SCOR Model
- The SCOR model was designed to enable
companies to communicate, compare and learn
from competitors and companies both within and
outside of their industry
- It not only measures supply chain performance but
also effectiveness of supply chain reengineering
- Further it has the ability to test and plan future
process improvements

345 346
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Benchmarking

• Benchmarking is a tool in performance assessment

system that compare company’s operations in
relation to leading companies within or outside the
industry
• It is important to choose a company to benchmark
and a set of measures.
• There are internal or external benchmarks
• Benchmarking is a continuous process

347
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

58
 Internal benchmarking Inventory turnover
(cost of good sold/average inventory)

Company 6/2013 6/2014

Average of the industry 2.51 2.57
Sapporo 1.9 1.85
Suntory 4.6 1.9
Heineken 3.52 3.56
Thanh Hóa Beer 2.8 3

Saigon Beer 3 3.5

349
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Example: % inventory/total asset • Logistics Scorecard

An integrated set of performance measures falling into
% inventory/ total asset the following general categories:
Company - Logistics financial performance measures (ex
Average of
Company expenses and return on assets)
industry
Toyota 6% 15% - Logistics productivity measures (ex orders shipped
per hour and transport container utilization)
Coca-cola và - Logistics quality measures (ex inventory accuracy
2,9% 34%
Retailing industry
and shipment damage)
McDonald’s 0,5% 2,9% - Logistics cycle time measures (ex in-transit time and
Home depot và order entry time)
25,7% 27%
Retailing industry
352
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Activity Based Costing (ABC)

• Activity Based Costing (ABC)
– The ABC approach was developed to overcome
- A procedure that measures the cost of objects,
some of the shortcomings of traditional accounting
such as products, services, and customers
methods in tying financial measures to operational
- ABC first assigns resource costs to the performance
activities performed by the organization
– The method involves breaking down activities into
- Then activity costs are assigned to the
individual tasks or cost drivers, while estimating the
products, customers and services that benefit
resources (i.e. time and costs) needed for each one
from or are creating the demand for the
activities – Costs are then allocated based on these cost
drivers rather than on traditional cost-accounting
methods, such as allocating overhead either equally
or based on less-relevant cost drivers
353 354
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

59
• Example of ABC
– Cost driver rates for selling and distribution activities • What is EVA?
- Economic Value Added is the financial performance
measure that captures the true economic profit
- EVA is the performance measure that most directly
linked to the creation of wealth over time
- EVA = after-tax operating profit - annual cost of all the
capital used
- From an accounting perspective:
• EVA = Net operating profit after taxes,
NOPAT –After tax dollar cost of capital used to support
operations
355 356
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

Inventory risk commitment

- Inventory management is risky as inventory cost directly impact
• Selecting of Measurements on profitability of a company (example in the table)

– Any measures that are to be selected, should be

Companies Sale Net Net income as Total Inventory Inventory as
aligned to strategic objectives of the company income a % of sale Asset investment a % of Asset
Albertson’s 37,478 10,314 27,52 15,701 3,249 20,69
– It should be in line with customer’s needs
Kroger 28,200 12,200 43,26 17,966 3,938 21,92
– Supply chain strategy, however, differs for every Safeway 28,859 8,511 29,49 14,900 2,445 16,41
company and depends upon its current competencies
Fleming 14,646 1,437 9,81 3,573 998 27,93
and strategic direction –this explains that the measures
Spartan store 3,050 407 13,34 571 82 14,36
of one company can be different from others though
they may be in the same industry (example: Table) Supervalu 20,339 2,128 10,46 6,495 1,491 22,96

Hershey 3,971 1,616 40,70 3,347 602 17,99

Kellogg 6,984 3,659 52,39 4,809 503 10,46

Nabisco 8,268 3,766 45,55 11,961 898 7,51

357 358
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Customer Service Measures:

– Number of complaints per period of time
– Respond to complaints within a period of time
– Provide resolution on time
– Customer returns
– Line/item fill rate, Quantity fill rate, Order fill rate
– Order entry times
– Accuracy of order entry
– Backorder / stock-outs
– Customer satisfaction

359 360
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

60
 • Process, Cross functional Measures • Extended Enterprise Measures
– Schedule changes – Percent of suppliers getting shared forecast
– Percent of perfect orders – Percent of customers sharing forecasts
– Planning process cycle time – % of EDI transactions successfully completed
– Forecast accuracy – Supplier inventories
– New product time-to-first make – Total landed cost
– New product time-to-market – Point of consumption product availability
– Percent of demand/supply on VMI/CRP (continuous
replenishment program)
– Total supply chain inventory

361 362
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Logistics-related Measures CHAPTER 9:

SECURITY OF SUPPLY CHAINS
– Warehousing costs – Transportation cost
– Inventory obsolescence – Shipment accuracy
– Inventory carrying costs – In-transit inventories • Objectives
– On-time delivery – Premium freight charges
– Warehouse space utilization − To discuss the various security frameworks
– Standard lead time per shipment
– Finished goods inventory turns
– Finished goods inventory days − To summarize the impact of security initiatives on
– Documentation accuracy
– Lines picked/hour supply chains
– Damaged shipments
– Pick accuracy
– Inventory accuracy

363 364
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

The importance of Security in SC The benefits of Security frame work

• 911 affair - September 11, 2001
• Faster customs clearance: participating companies will gain
- Security concern of air transportation and warehousing, access to the fast lane for import and fewer inspection
later – other modes of transportation
• Platform for collaboration: Programs provide a network of
- Countries implemented measures and initiatives to keep companies for higher level of coordination for tackling
their boarders safe: transportation and trade security common industry problem
- Consequences: • Improve supply chain efficiency: provide common practices
+Longer lead-time (more careful security checks, higher (ex: early warning system like e-notification of delay in
rate of inspection) customs clearance)
+Potential of production disruption • Create Security culture as voluntary firms allow security to
+Increased business costs integrate into firms’ standard processes
- Solution: security frameworks for companies to voluntarily • Decrease Security cost and increase visibility of SC
join
365 366
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

61
 Security framework
• Dual Purpose of Supply Chain Security Security Framework State Requirements
The International Ship and Port
- For cargo owners: Cargo security through various Facility Security Code
IMO Ship and Port security requirement

measures such as authorized exporter schemes, Regulated Air Cargo Agent

Singapore
All cargoes must be screened before loading.
Regime (RSCAR) For Regulated Cargo Agent – random screening
advanced electronic cargo data and system for Identify and target containers that pose a risk and
US Container Security initiatives
scanning of boxes (CSI)
USA pre-screen them at the port of departure, before
arrival to US
Example: the content of container of sport shoes C-TPAT (The US Customs-Trade
- Advanced Cargo declaration before departure
USA (weight, number of boxes, value of goods, seal
was replaced by scrap Partnership Against Terrorism)
number, container number…)
- High security seals
- For government: Minimize danger of international The Partnership in Protection Canada - Checked by importer’s assigned C-TPAT Freight
supply chain being used as a means to deliver Forwarder
A forum that unites global manufacturers, LP,
weapons, explosives or radioactive materials The Transported Asset Protection
freight carriers, law enforcement agencies…. to
Association (TAPA)
reduce losses from international SC.
=> Pros and cons of participating in SC security
An international high-level security management
initiatives? ISO/PAS 28000 ISO
standard for SC

367 368
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

• Consequences of Lack of Security

– Less FDI
– Trade diverted to countries with security Thank you
procedures
– Higher insurance premiums
– Customs delay
– Lose export competitiveness
– Lose international credibility

369 370
© Copyright 2018, Vietnam Logistics Research © Copyright 2018, Vietnam Logistics Research
and Development Institute and Development Institute

62