University of Transport

Ho Chi Minh City

INTRODUCTION TO LOGISTICS &

SUPPLY CHAIN MANAGEMENT

Lecturer: MSc. Huy Quang Le

Email: [email protected]
Phone : (+84) 936 791 640

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 MODULE STRUCTURE

CHAPTER 1. GENERAL INTRODUCTION TO SUPPLY CHAIN AND SUPPLY CHAIN MANAGEMENT

CHAPTER 2. GENERAL INTRODUCTION TO LOGISTICS (LOGS)

CHAPTER 3. INFORMATION TECHNOLOGY IN LOGS AND SCM MANAGEMENT

CHAPTER 4: DISTRIBUTION CHANNEL AND RELATED COMPONENTS

CHAPTER 5: CURRENT AND FUTURE MODE OF TRANSPORTATION

CHAPTER 6: E-COMMERCE AND E-LOGISTICS

MSc. Huy Quang Le 2

 University of Transport
Ho Chi Minh City

CHAPTER 1:
GENERAL INTRODUCTION TO SUPPLY CHAIN
AND SUPPLY CHAIN MANAGEMENT

Lecturer: MSc. Huy Quang Le

Email: [email protected]

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 CONTENTS

1.1. General Introduction

1.2. The past, present and future of SCM
1.3. Benefits of SCM for businesses
1.4. Aligning the Supply Chain with Business Strategy
1.5. Participants in the Supply Chain
1.6. Supply Chain Operations
1.7. Supply Chain Coordination

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 1.1 General Introduction

1.1.1. Basic concepts of SC and SCM

“A supply chain consists of all stages involved, directly or indirectly, in fulfilling a
customer request. The supply chain not only includes the manufacturer and suppliers,
but also transporters, warehouses, retailers, and customers themselves . . .”
- Chopra Sunil & Peter Meindl (20)-

“Supply chain management encompasses the planning and management of all

activities involved in sourcing and procurement, conversion, and all logistics
management activities. Importantly, it also includes coordination and collaboration
with channel partners, which can be suppliers, intermediaries, third party service
providers, and customers. In essence, supply chain management integrates supply
and demand management within and across companies.”
- Council of Supply Chain Management Professionals (2010)-

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1.1 General Introduction

Example of a typical supply chain

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THE SUPPLY CHAIN
OF STARBUCK

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 1.2 The past, present and future of SCM

A/ Supply chain development in the past

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 1.2 The past, present and future of SCM

B/ Present Supply Chain

- The current supply chain has been facing many crises.
- The supply chain has seen the sign of recovering.
C/ Future Supply Chain
- Near future: To solve existing problems as the result of the Covid epidemic and
economic crisis such as:
1/ Redefine the supplier
2/ Reform the operation
3/ Switch from global to national/domestic supplier
4/ Strengthen network security
- The distant future: Digital technology will change all SCM around the world

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 1.3 Benefits of SCM for businesses

• Reduce business costs by up to 25-50%

• Reduce inventory by up to 25 - 60%

• Improved order cycle by 30 - 50%

• Increase accuracy in production forecasting up to 25 - 80%

• Better customer service

• Increase profit after tax by more than 21%

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 1.4 Aligning the Supply Chain with Business Strategy

Establish a supply chain consistent with the business strategy

of the business:

Develop the
capabilities
Identify the
needed in the
company's core supply chain to
Understand the strengths or support your
market your competitiveness and company's
company serves the role the company chosen role.
can play in serving
the market

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 1.4 Aligning the Supply Chain with Business Strategy

Understand the market your company serves:

To meet customer requirements, it is necessary to set answer these questions:

 What volume of product is needed for each shipment?

 Response time to meet customer satisfaction?

 Is product diversification necessary?

 Service level required?

 Price of the product?

 What is the level of desire to change products?

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 1.4 Aligning the Supply Chain with Business Strategy

Identify the company's core strengths:

 Which participant in the supply chain is the company: manufacturer, distributor, retailer, or
service provider?

 What can a company do to become part of the supply chain?

 What is the company's core competitiveness?

 How can the company make profits?

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 1.4 Aligning the Supply Chain with Business Strategy

Develop the capabilities needed in the supply chain

 Manufacture

 Inventory

 Location

 Transportation

 Information

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 1.5 Participants in the Supply Chain

MANUFACTURER

DISTRIBUTOR

RETAILER

CUSTOMERS

SERVICE SUPPLIER

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 1.6 Supply Chain Operations

Four categories of Supply Chain Operation

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PLAN

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 1.6 Supply Chain Operations

A, PLAN

Demand forecasting: is the most basic factor for companies to determine their own action plans
to meet market needs.
Forecasting in supply chain management aims to answer the following questions:

 Quantity?

 Categories?

 When?

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 1.6 Supply Chain Operations

A, PLAN

Product pricing: Companies often use prices to stimulate demand, increase revenue & profits for
business.

Question:

“Should a company reduce prices when it is at its peak to

increase revenue or during a stagnant period to offset
costs?”

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 1.6 Supply Chain Operations

A, PLAN

Inventory management

3 forms of inventory management:

 Cycle inventory management: Needed to meet product demand between orders

 Seasonal inventory management: Production and storage to meet future needs

 Safety Inventory: Replenish uncertain demand, ensure minimum stock

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SOURCE

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 1.6 Supply Chain Operations

B, SOURCE

Procurement

The purchasing function can be divided into the following five main activities:
 Purchasing

 Consumption Management

 Vendor Selection

 Contract Negotiation

 Contract Management

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 1.6 Supply Chain Operations

B, SOURCE

Purchasing:
 Directs or strategic materials that are needed to produce the products that the company sells
to its customers;
 Indirect or MRO (maintenance, repair & operations) products that a company consumes as
part of daily operations.

Consumption Management
Expected levels of consumption for different products at the various locations of a company
should be set and then compared against actual consumption on a regular basis

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 1.6 Supply Chain Operations

B, SOURCE

Vendor selection:

7 CRITERIA
 1. Supplier's reputation
 2. Quality of products/services provided
 3. Product/service delivery performance
 4. Product/service prices and payment methods
 5. Supplier customer service
 6. Supplier's longevity and sustainability
 7. Supplier's financial risks

A general rule is that a company must always gradually narrow down the number of suppliers
to choose the right business partner.

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 1.6 Supply Chain Operations

B, SOURCE

Vendor selection:

7 CRITERIA
 1. Supplier's reputation
 2. Quality of products/services provided
 3. Product/service delivery performance
 4. Product/service prices and payment methods
 5. Supplier customer service
 6. Supplier's longevity and sustainability
 7. Supplier's financial risks

A general rule is that a company must always gradually narrow down the number of suppliers
to choose the right business partner.

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 1.6 Supply Chain Operations

B, SOURCE

Contract Negotiation: Contract negotiations can address issues such as product categories,
pricing, service levels, etc.

PROVISIONS TO NOTE IN THE CONTRACT:

 Contract holder
 Subject of the contract
 Price, payment method and time
 About time when transfer of ownership & transfer of risk
 Goods warranty
 Potential risks

Contract Management: The company needs to be able to evaluate supplier performance and
control the level of service delivery agreed upon in the contract.

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MAKE

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 1.6 Supply Chain Operations

C, MAKE

Product Design: Product designs and selections of the components needed to build these
products are based on the available technology and product performance requirements.

Production Scheduling: Production scheduling allocates available capacity (equipment,

labor, and facilities) to the work that needs to be done.The goal is to use available capacity in the
most efficient and profitable manner

Production Scheduling is an activity that must ensure a balance between the following
goals:
 High Utilization Rates
 Low Inventory Levels
 High Levels of Customer Service

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 1.6 Supply Chain Operations

C, MAKE

Facility Management: Ongoing facility management takes location as a given and

focus on how best to use the available capacity. This involves making decisions in three
areas:

 The role each facility will play

 How capacity is allocated in each facility

 The allocation of suppliers and markets to each facility

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DELIVER

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 1.6 Supply Chain Operations

D, DELIVER

Order management: is the process of passing order information from customers back through
the supply chain from retailers to distributors to service providers and producers.

1. Enter the Order 2. Automate the Order

Data Once and Handling
Only Once
Order
manage
4. Integrate Order ment
Management Systems 3. Make Order Status
with Other Related Visible to Customers
Systems to Maintain Data and Service Agents
Integrity

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 1.6 Supply Chain Operations

D, DELIVER

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 1.6 Supply Chain Operations

D, DELIVER

Delivery Scheduling: strongly affected by the decisions made concerning the modes of
transportation that will be used.

For most modes of transportation there are two types of delivery methods: direct deliveries and
milk run deliveries:

 Direct deliveries are deliveries made from one originating location to one receiving location.

 Milk run deliveries are deliveries that are routed to either bring products from a single
originating location to multiple receiving locations or deliveries that bring products from
multiple originating locations to a single receiving location.

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1.7. Supply Chain Coordination

The “bullwhip” effect: a phenomena

that small changes in product
demand by the consumer at the
front of the supply chain translate
into wider and wider swings in
demand experienced by companies
further back in the supply chain.

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1.7. Supply Chain Coordination

Five major factors that cause the effect

Demand Forecasting

Order Batching

Product Rationing

Product Pricing

Performance Incentives

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CASE STUDY: FORD MOTOR COMPANY

(Essentials of SCM, p.22)

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