Logistics and Supply Chain Management - Essay Example

Contents Contents Introduction 3 Warehouses and Logistics: 5 Just-in-Time System 6 Coca Cola & Supply chain management: 6 References 8 IntroductionIt’s been a while we are listening about our world going to be a global village and shrinking boarders and distances. Revolution in technologies has a lot of contribution in this phenomenon but how logistics and supply chain managements evolved to support the increasing responsiveness of a business due to globalization. Today, logistics and supply chain management are among the crucial aspects for a firm to be taken cared of as they manage other divisions like finance and marketing. Logistics and supply chain management are the two words used interchangeably or supposed to have same meaning but there are differences. Logistics is the transportation of good on the physical level including freight management as compared to Supply chain management that not only includes logistics under its umbrella but also includes other processes for management of supply chain like information flow and communication, forecasting, inventory management, demand analysis and trade routes optimization etc that is directed to increase the value for the firm, building competitive edge over rivals, and facilitating global scale operations. Supply chain is the network through which a business or businesses get involved to make possible the distribution to the end customer Logistics have integral part to play in the process of supply chain management. Logistics management is the one made responsible for execution of six rights of supply chain. i.e. 1. getting the right good 2. in a right quantity 3. in the right condition 4. to the right place 5. at the right time 6. for the right cost Globalization raised a number of opportunities for the business along with lots of shaking challenges. Now days, a final product carries components that are created at different corners of the globe, gathered and assembled in one piece of final product for consumption. This entire new scenario gives supply chain management and Logistics importance of critical nature. As this supply chain management is a demand driven strategy and all matter is to do the things right at the first time. For example, just imagine if a consignment delivered to a customer’s carries defective products or wrong categories, the time is already lost in delivering wrong products along with the cost but reoccurring twice when shipping the consignment back and redeliver another triples the costs and effects along with damage done to reputation. And most important, demand for the respective products may no longer remain there and you lost the opportunity, as you not kept the fickle dynamics of market. Importance of supply chain remains there but its roles and responsiveness varies from business to business and process to process. It is not just maintaining the flow of products and information according to needs but maintaining relationships with a number of suppliers is also a point where firms need to focus. There are businesses that started calling suppliers and distributors as their partner of the business line and the efforts have been made to maintain the relationship strong and long term. By having a bunch of supportive partners helped each other in the time of crisis as all of them depend on the same industry and business nature. A global trade consortium for supply chain management has the name “The Supply Chain Council” with over 700 companies, governments, universities and other institutions is the body dedicated to carry out researches related to supply chain management techniques and it is the one who manages the SCOR (Supply chain operations reference) i.e. the basic model for supply chain including Design Planning, Research, Prototyping, Integration, Launch and Revision, and Sales including CRM, Service Support, Sales, and Contract Management. SOCR relies on the process modeling that is carefully monitored to record performance measurements and best practices are then listed out according to the observations. The basic of SCOR lies in the five distinct management processes: 1. Plan: planning and forecasting the demand and supply functions for future 2. Source: procurement of goods and services to supply 3. Make: manufacturing process to transform raw materials to finished goods 4. Deliver: the process of distribution to the customers 5. Return: Post sale services and return of product for repair or guarantee claims. There are a number of ways that have developed over the period of time that can be generally categorized in two: 1. Warehouse based Logistics 2. Just in time Inventory system Warehouses and Logistics: Warehouse bases logistics and inventory management is in practice since the age when people needed to store the food somewhere, inventing groceries. These methods has been refined over a period of time even today many business store the goods for future needs instead of venturing for just in time inventory system. Warehouses are used by the manufacturers, suppliers, distributors, wholesalers and transport agencies for the storage of goods. The main purpose is to store the goods that will be in demand in future. Production style usually follows economies of scale and mass production and then stored and then transported to the destinations. There is development in warehousing techniques and management software and is targeted to optimized the functioning. Warehouses remove the burden from the manufacturing unit to by making their production function smooth also it elements the ambiguities for the logistics. The transport freight knew where are the stored goods and deliver where when required. Its intentions is to incur the costs but smooth line the function of production, and supply chain by maintaining the buffer stock throughout the value chain. Warehousing is effective where the nature of product is not dynamic. The products life cycle is long and easy to store for example consumer products. Just-in-Time System Just in time system has been developed by Japanese firms over a period of time. In this method the whole value chain eliminate all the redundant and non value adding steps and integrate all the process so that there is no need for the buffer or inventory. And the production is carried out according to the needs as the raw materials also get delivered by the same required amount. It takes inventory as wastes and warehouse as luxury. It relies on the signals and communication based on Kanban. This process is intended to maximize the rate of return by cutting down the costs of inventory, storage and other buffer material and labour force. Everything is aligned with the demand. This system is exceptional in cutting down non-value adding steps from the process but it requires high synchronization throughout the chain. Moreover all the partner of that chain is supposed to be JIT capable. Any partner who still continues to work on traditional bases can make the whole system fail which has very critical effects. Therefore, every partner has to help each other to develop the JIT systems. If an unforeseen incident hits any of the player it create a trickledown effect to the all member is the value chain. This process if not led properly can lead to number of other costs for example increase number of product delivery trips. Coca Cola & Supply chain management: In my view the most critical partner in the supply chain of Coca Cola Company are the bottlers and the fleet for transporting good. As Coca Cola drinks production will be following mass scale production and saved in the proper conditions. Bottlers are the one responsible for the final bottling and packaging of the products. This make Bottlers responsible for Six Rights of supply chain management process along with the transportation fleet for the products delivery. As the nature of these product favors more the warehousing procedure as compared to the Just in time inventory systems, as the products life is long with the product development life cycle has a very large span. We have see Coke product dying even after decades. This makes these products can be stored by keeping in mind their respective lives. While taking about the canned products of Coca Cola Company, the vending machines and its management and location are of the importance for the customer’s interaction and supply chain perspective. Just in time inventory system needs high synchronization and needs every supplier to be capable where as Coca Cola company operates hundreds of manufacturing units deals with countless numbers of suppliers over the globe including the under developed companies of Asia and Africa. Moreover, by following JIT system the number of product delivery trips will increase exponentially because the demand of Coca Cola products is usually high. As every day, rise in the fuel cost has become a normal phenomenon; JIT is likely to be unfeasible to get implemented for Coca Cola business model. In these circumstances, warehousing is the preferable supply chain management technique. References Baganha, M. P., & Cohen, M. A. (1998). The Stabilizing Effect of Inventory in Supply Chains. Operations Research, 46(3 supp), S72-S83. Bowersox, D. J. (1990). The strategic benefits of logistics alliances. Harvard Business Review, July/Aug, 36-45. Carter, C. R., & Ellram, L. M. (1998). Reverse Logistics: A Review of the Literature and Framework for Future Investigation. Journal of Business Logistics, 19(1), 85-102. Cohen, M. A., & Huchzermeier, A. (1999). Global Supply Chain Management: A Survey of Research and Applications. In S. Tayur, M. Magazine, & R. Ganeshan (Eds.), Quantitative Models for Supply Chain Management (pp. 669-702). Boston, MA: Kluwer Academic Publishers. Graves, S., Rinnooy Kan, A., & Zipkin, P. (Eds.). (1993). Logistics of Production and Inventory. (Vol. 4) Amsterdam: Elsevier (North-Holland). Johnson, M. E., & Pyke, D. F. (Eds.). (2000b). Teaching Supply Chain Management: Production and Operations Management Society. Read More