Supply Chain Management 3B Workshop 1

Section 2: Introduction to Logistics

Logistics and the Supply Chain Logistics and the supply chain are concerned with physical and information flows, and storage from raw materials through to the final distribution of the finished product. Supply chain = a network of partners who collectively convert a basic commodity into a finished product which is valued by customers. Logistics = the task of coordinating material flow and information flow across the supply chain to meet end-customer needs.

Supply Network Upstream Downstream Inputs Outputs Focal Firm End Customers Second-tier suppliers First-tier suppliers First-tier Customers Second-tier Customers Focal Firm Primary Manufacturers Inbound Logistics Internal Logistics Outbound Logistics Supply Chain Management

Second-tier suppliers Material Flow The flow of physical goods from suppliers to final customers- KEEP IT FLOWING! “Synchronous” Upstream Focal Firm: Manufacturer Inputs Lead time/ MOQ Second-tier suppliers First-tier suppliers Production Requirements Lead time MOQ Primary Manufacturers 2 weeks/ 1000 $2 R35 24 hours 2,000 10,000 R100 5 weeks/ 5000 R475 2 days 500 450 R655 8 weeks/ 300 $500 3 weeks 1,000 300 EUR25 8 weeks/100 Inbound Logistics Internal Logistics Supply Chain Management

What happens if materials don’t flow? Material Flow What happens if materials don’t flow? Build-up of inventory Storage costs Production line delays Possible production switching costs Unable to manufacture/deliver final product to customer Penalty clauses Emergency shipments- airfreight/road Too much inventory due to emergency orders Miss the boat- expos, shows, deadlines, departure dates Lose customers

Second-tier suppliers Information Flow Flow of demand data from the end customer to purchasers and suppliers; and supply data from suppliers to the retailer so that material flows can be accurately planned, controlled and optimised. Focal Firm: Manufacturer Lead time/ MOQ Second-tier suppliers First-tier suppliers Production Requirements Lead time MOQ Primary Manufacturers 2 weeks/ 1000 $2 R35 24 hours 2,000 10,000 R100 5 weeks/ 5000 R475 2 days 500 450 R655 8 weeks/ 300 $500 3 weeks 1,000 300 EUR25 8 weeks/100 Supply Data Demand Data Information Integration

Information Flow Benefits of Information Technology Increased speed Accuracy and consistency Supply Chain sophistication Visibility- where are raws/goods in-transit etc.? Eliminate mundane and time-consuming data capturing Immediate access to required data across departments Search functions vs. manual checking of archived files Planning- short/medium/long term; contingency Integration- info sharing

Section 3: Channels of Supply and Distribution

Channels of Distribution Organisations who participate in the flow of goods, services, information and money from the point of production to the final point of consumption. Logistics Channel- Network of intermediaries engaged in the transfer, storage, handling, transportation and communication functions that contribute to the efficient flow of goods.

Marketing Channels The way in which goods and services are made available for use/consumption by the consumer Direct selling Selling through intermediaries Manufacturer to Retailer to Customer Manufacturer to Wholesaler to Customer Manufacturer to Agent to Retailer to Wholesaler to Customer Dual distribution Reverse channels- waste, recycling, returns

Marketing and Logistics 4 Ps of Marketing PRODUCT PRICE PLACE PROMOTION 7 Rs of Customer Service The right PRODUCT, in the right QUANTITY, in the right CONDITION, at the right PLACE, at the right TIME, for the right CUSTOMER, at the right PRICE ***Logistics has a direct impact on these aspects of Marketing and Customer Service***