total supply chain management n.
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unit i



  • The customer is the main factor for whom the business is run and due to his satisfaction the business is flourishing.
  • Earlier it was seller’s market and the importance of customer satisfaction is rarely understood.
  • As the situation turns to the buyer’s market, the customer importance increases.
customer service performance
Customer service performance

Customer service is defined as

  • An activity or function to be managed such as order processing or handling of customer complaints.
  • Actual performance on parameters such as ability to ship orders within a certain period.
  • Part of an overall corporate philosophy.
  • The essence of demand management is to improve the ability of firms throughout the supply chain particularly manufacturing through the customer by considering their satisfaction.
The number of ways in which effective demand management will help the common goal of providing efficient customer service and thereby satisfying customers and solving their problems are as below:
  • Gathering and analyzing knowledge about consumers, their problems and their unmet needs.
  • Identifying partners to perform the functions needed in the demand chain.
  • Assigning the functions that need to be done to the channel member that can perform them mostly effectively and efficiently.
Sharing with other supply chain members knowledge about consumers and customers, available technology and logistics challenges and opportunities.
  • Delivering and executing the best logistics, transportation and distribution methods to deliver product and services to consumers in the desired manner.
the customer service dimension
The customer service dimension
  • It highlights the importance of managing the marketing and logistics interface on an integrated basis, emphasizes the need to understand the multiple elements of service from the customers’ perspective.
  • From the point of view of logistics function, customer service can be viewed as having four dimensions:
    • Time
    • Dependability
    • Communication
    • Convenience
  • The time factor is usually order cycle time from the perspective of seller looking at customer service.
  • The buyer usually refers to the time dimension as the lead time or replenishment time .
  • Some customers consider dependability as more important than lead time.
  • The customer firm can minimize its inventory level if lead time is fixed.
  • This means there is no need to keep safety stock to ground against stock outs resulting from fluctuating lead times.
  • Cycle time provides a dependable lead time reduces some of the uncertainty a customer faces.
  • Lead time dependability directly affects customers inventory level and stock out costs.
  • The two logistics activities vital to order filling are the communication of customer order information to the order – filling area and the actual process of picking out of the inventory, the items ordered.
  • Communication must be a two – way process.
  • The seller must be able to transmit vital logistics service information to the customer.
  • Say for eg., information concerning shipment date, the carrier, the route etc.
  • This means the logistics service level must be flexible.
  • Convenience recognizes customers different requirements.
  • a seller can group custom requirement by such factors as customer size, market area and the product line the customer is purchasing.
  • This level market segmentation enables the logistics manager to recognize customer service requirements and to attempt to fulfill those demands economically as possible.
the customer service elements
The customer service elements
  • There are three customer service elements:
    • Pre – transaction elements
    • Transaction elements
    • Post – transaction elements
pre transaction elements
Pre – transaction elements
  • Written customer service policy
    • Is it communicated internally and externally
    • Is it understood
    • Is it specific and quantified where possible?
  • Accessibility
    • Are we easy to contact or do business with?
  • organization structure
    • Is there a customer service management structure in place?
    • What level of control do they have over their service process?
  • System flexibility
    • Can we adapt our service delivery systems to meet particular customer needs?
transaction elements
Transaction elements
  • Order cycle time
    • What is the elapsed time from order to delivery?
    • What is the reliability / variation?
  • Inventory availability
    • What percentage of demand for each item can be met from stock?
  • Order fill rate
    • What proportion of orders are completely filled within the stated lead time?
  • Order status information
    • How long does it take us to respond to a querry with the required information?
    • Do we inform the customer of problems or do they contact us?
post transaction elements
Post – transaction elements
  • Availability of spares
    • What are the in-stock levels of service parts?
  • Call – out time
    • How long does it take for the engineer to arrive?
    • What is the first call fix rate?
  • Product tracing / warranty
    • Can we identify the location of individual products once purchased?
    • Can we maintain/ extend the warranty to customers’ expected levels?
  • Customer complaints, claims etc.
customer satisfaction
Customer satisfaction
  • Customer satisfaction is the customer’s overall measurement of all elements of the logistics management, such as product, price, promotion and place.
  • Customer service is also a part of the customer satisfaction.
the 3 r s in customer service
The 3 R’s in customer service
  • Many companies have the concept of following the 3 R’s in the customer service. They are
    • Respect your customer
    • Take Responsibility for your actions and products
    • Give your customer a full Refund when it just isn’t right
7 unhealthy attitudes of disrespect
7 unhealthy attitudes of disrespect
  • Unprofessional greetings.
  • Staff who do not know the company mission statement.
  • Staff who do not know the product.
  • Staff who do not understand that the customer is the only reason they are getting a paycheck.
  • Management who don’t listen to staff on how to “fix” customer service
  • Giving the front line staff the authority to “fix” a customer problem on the spot
  • Respect customer’s time
7 steps for customer retention
7 steps for customer retention
  • Offer only proven and quality services and / or products.
  • Demonstrate customer appreciation.
  • Provide responsive and pro – active customer service.
  • Give instruction on how to get the most use from products and / or service.
  • Share testimonials from customers with other customers and potential customers.
  • Educate the customer about the industry or market and about the value of the business.
  • Invite customer’s opinion and feedback on products and / or services.

retaining more customers can result in significantly higher profits to the organizations.

customer service and levels of product
Customer service and levels of product
  • Customer service can be thought of as something a firm provides to those who purchase its products or services.
  • According to market there are three levels of products:
    • The core benefit or service which constitutes what the buyer really buying.
    • The tangible product or the physical product or service itself.
    • The product which includes benefits that are secondary to it but an integral enhancement to the tangible product the customer is purchasing. Say features like installation, warranties and after-sales-service.
Customer service
  • Is a concept whose importance reaches far beyond the logistics area.
  • Customer service frequently affects every area of the firm by attempting to ensure customer satisfaction through the provision of service to the customer.
  • Examples of customer service are
    • Providing financial and credit terms.
    • Guaranteeing delivery within specified time period.
    • Installing a product.
    • Maintaining satisfactory spare parts inventory.
    • Revamping a billing procedure to accommodate a customer’s request.
levels of customer service
Levels of customer service
  • There are 3 levels of customer service,
  • Customer service as an activity:
    • This level treats customer service as a particular task that a firm must accomplish to satisfy the customers needs.
  • Customer service as performance measures:
    • This level emphasizes customer service in terms of specific performance measures such as the percentage of orders delivered on time and complete and the number of orders processed within acceptable time limits.
  • Customer service as philosophy:
    • This level elevates customer service to a firm wide commitment to providing customer satisfaction through superior customer service.
implementing customer service standards
Implementing customer service standards

The key for successfully developing and implementing customer service standards are:

  • To be wary of adopting easily achievable performance standards.
  • Emphasis on total quality or on creation of the “perfect order” are very critical to any acceptable quality level set below 100 percent.
  • The firm should develop customer service policies and standard through customer consultation.
  • The firm should develop procedures to measure, monitor and control the customer service quality called for by the firm performance measures and standards.
customer service issues
Customer service issues

The questions guide in developing a sound customer service policy and standard performance:

  • What do customers feel about present levels of service?
  • Do their perceptions match up with ours?
  • How do our services compare to those of our competitors?
  • Are we using appropriate standards and measurements to monitor our service performance?
  • Is it possible to segment our customers according to the varying degrees of service they require?
  • Can we produce the same levels of service we are presently providing in amore cost – effective manner?
  • Can improved customer service be used as a strategic weapon to provide an important competitive advantage?
  • In the minds of our customers, how important is service compared to other elements of the marketing like price, promotion and products?
improving customer service performance
Improving customer service performance

The levels of customer service a firm achieves, often can be improved through one or more of the following actions:

  • Thoroughly researching customer needs.
  • Setting service levels that make realistic trade – offs between revenues and expenses.
  • Making use of the latest technology in order of processing systems.
  • Measuring and evaluating the performance of individual logistic activities.
improving customer service performance1
Improving customer service performance

Automation improves customer service by providing the following benefits to the customer:

  • Better product availability
  • More accurate invoices
  • The ability to reduce stock levels and their associated inventory carrying costs
  • Improved access for information on order status.
  • Automated order processing systems enhance the firs’s ability to perform all the transaction and post – transaction elements of customer service.
improving customer service performance2
Improving customer service performance

Finally the development of an effective customer service program requires the establishment of customer service standards which performs the following functions:

  • Reflect the customer’s view point
  • Provide an operational and objective measure of service performance
  • Provide management with cues for corrective action and improvement of customer service.
methods to give customer service
Methods to give customer service
  • Hire people who have a service attitude.
  • Make the customer’s time with you an experience.
  • Regularly inform all your employees about what’s going on in your company.
  • Make every decision with the customer in mind.
  • Make the customers know an agenda item at every staff meeting.
  • Empower your employees to do the right thing.
  • Continually ask yourself how you can improve and add value.
  • Create an atmosphere of excellence.
  • Continually do the unexpected.
  • Never let an untrained employee have customer contact.
unit 2



  • Supply chain management is the systematic, strategic coordination of the traditional business functions within a particular company and across the business within the supply chain, for the purpose of improving performance.
  • It consist of a company, immediate supplier, immediate customer directly linked by one or more of the upstream and downstream flows of product , services, finance and information.
scm concept
SCM concept
  • Successful companies smartly manage the 4 key business resources of Man, Material, Money and Information.
  • Proper planning and efficient management of flows of material and related information from supplier to the customer through the organization forms the major responsibility of supply chain management.
  • SCM consists of developing smarter ways to choose, buy from and sell to the business partners of the organization.
  • Every interface in the supply chain represents movement of goods, information flow, transfer of documents and purchase and sale.
activities of scm
Activities of SCM
  • This is an extended enterprise that spreads across company encompassing the logistics related activities of all the firm involved in the supply chain.
  • This extended enterprise integrates the flow of materials, services, information and finances into a coordinated flow across all the enterprises,
  • This integration across the company means that the supply chain functions like a single company satisfying the ultimate customer.
  • The suppliers in SCM got many advantages in developing ‘partnership’ with customer firms.
objectives of scm
Objectives of SCM
  • Solving supplier’s problems and beyond his level.
  • Customer service performance improvement
  • Reduction of pre and post production inventory.
  • Minimizing variance by means of activities like standardization, variety reduction, etc.
  • Minimum total cost of operations and procurement.
  • Product quantity control.
  • Achieving maximum efficiency in using labor, capital and plant throughout the company.
  • Flexible planning and control production.
supply chain characteristics
Supply Chain Characteristics

Service response

Integration of information

Technology assimilation

Workflow coordination


The trust

Quick response

Efficient customer response

advantages of scm
Advantages of SCM
  • Benefits to the customer:
    • The benefits the customer will get by dealing with a well-managed vendor due to an effective supply chain organization are as follows:
    • Improved customer service through fewer shortages.
    • Improved product cost.
    • Better delivery performance.
    • Quicker response to changes in demand.
    • Optimal purchase cost due to possibility of long-term purchase contracts.
advantages of scm1
Advantages of SCM
  • Benefits to the company
    • A company with a well functioning supply chain organization has the competitive edge.
    • It is capable of satisfying customer needs for flexibility, competitive price, quicker response time and shorter lead times.
    • The company gets the following benefits:
    • Reduction in tied-up capital and administrative costs due to reduction / elimination of inventory at all levels.
    • Reduction in time and money lost through production line stoppage.
    • More flexibility in planning.
    • Sustained growth of sales and company business.
    • Increased shareholder value.
unit 3



modern concept of business
  • The modern concept of business is more progressive, liberal and consumer oriented.
  • There is a modern concept of consumer – centered / service – orientation to business activities.
  • It starts and ends with the consumer
features of modern business
Features of modern business
  • Large scale production and distribution of goods and service
  • Mass production and mass marketing
  • Diversification and globalization of business
  • Decentralization of production and E-commerce techniques of marketing
features of modern business cond
Features of modern business cond…
  • Cutthroat competition at national and global levels on the basis of cost, quality, attractiveness and publicity to products and services.
  • Extensive use of computers and other information technology techniques in business management.
  • Increasing participation of government in business and widening the scope of regulatory role of the government.
features of modern business cond1
Features of modern business cond…
  • Emergence of consumerism, environment protection movement and consumer protection laws.
  • Modern business is dynamic.
  • It is flexible to change due to technological and other factors relating to production activities
recent business trend
Recent business trend
  • Work anywhere for any body
  • Big organization no longer needed
  • Small business undertaking one activity in depth
  • Work form home
  • Outsourcing – is partnership with a company who’s responsibility is to resolve any problems.
  • Globalization of business
benefits of out sourcing
Benefits of out sourcing
  • Cost saving
  • Leads to lean organization
  • Responsibility to the outsider
  • Better controls on quality and schedules
  • Can be done at several places in the country
  • Provides flexibility as it can be stopped at any time
  • Reduced liability
  • Expansion can be done easily.
globalization of business
Globalization of business
  • Globalization of business means expansion of business activities to cover the entire world within its scope.
  • Globalization leads to integration of economies of different countries in a new global economic order.
  • Globalization is a process of integrating country’s economy with global economy with a view to capturing global opportunities for long term growth and development.
features of global business
Features of global business
  • Large scale production and marketing.
  • Connecting of economies of countries.
  • Importance of developed countries an MNC’s.
  • Advantageous for participating countries.
  • Tough competition among companies.
  • Important role played by science and technology.
features of global business cond
Features of global business cond…
  • World – wide restrictions on products, technology and capital.
  • Sensitive nature of global business.
  • Participation of global agencies.
  • Interdependence at global level.
  • Revolutionary changes in manufacturing and marketing concepts.
need of globalization
Need of Globalization
  • Expansion of production and exports.
  • Making domestic industries competitive.
  • Effective utilization of surplus production.
  • Securing benefits of research and develop activities.
  • Changed global situation
benefits of globalization
Benefits of globalization

Benefits to participation countries:

  • Integration of countries.
  • Faster economic growth.
  • Transfer of capital and technology.
  • New global economic order.
  • Opportunities to expand business and promote exports
  • Optimum utilization of resources
  • Higher status
benefits of globalization1
Benefits of globalization

Benefits to participating companies / enterprises:

  • High profit
  • Benefits of liberal government facilities
  • Expansion in business activities
  • Spreading business risks
  • Better utilization of resources
  • Raises competitive capacity
  • Contribution to national economy
disadvantages of globalization
Disadvantages of globalization
  • Free entry of foreign companies in domestic markets
  • Expansion in the activities of MNC’s
  • Difficulties before domestic companies
  • Adverse effects on national economy
  • Brain drain
  • Liberal trade policies may prove harmful to poor/developing countries.
  • Extensive use of capital intensive technology is harmful
india s participation in global business
India’s participation in global business
  • Our participation in global business is expected to give certain benefits such as:
    • Promotion of exports.
    • Inflow of foreign capital and technology.
    • Modernization of Indian industries.
    • Generation of employment opportunities within the country.
    • Easy repayment of foreign debts.
    • Creation of favorable balance of payments position with comfortable foreign exchange balance.
policy of the government on globalization
Policy of the government on globalization
  • Continuous efforts for linking Indian economy with global economy.
  • Wider exposure given to Indian economy.
  • Supportive policy.
  • Step in the right direction.
  • Let us discuss some cases of day–to–day problems taking place in different fields.
  • This helps us to understand the subject matter in good clarity.
  • It may give us some idea by which we can understand the importance and simplicity of the subject.
unit 6



  • Is the expenses incurred by the company on the activities of logistics.
  • These may be high or low on the basis of the efficiency of these activities.
  • The expenses involved in logistics activities are
    • Transportation cost
    • Inventory cost
    • Warehousing cost
    • Local delivery cost
    • Order processing cost
conventional costing method
Conventional costing method
  • The expenses are collected in such a way that all the factory expenses are apportioned to calculate the product cost.
  • This method of costing is difficult to find the expenses of logistic activities.
  • In this method direct expenses are easy to get but indirect expenses are difficult to get.
  • In this method the product price only can be calculated.
activity based costing
Activity based costing
  • The expenses are collected by the persons working in the related areas.
  • The logistics cost is identified in the areas as follows:
    • No. of days material is in the stores waiting for order.
    • No. of receipts in the receiving stores.
    • No. of man hours spent by persons in the material handling section.
    • No. of packing done for dispatches.
    • No. of new customers developed.
    • No. of errors in invoice.
performance measurement
Performance measurement
  • Measurements are the key to success.
  • Lowering cost, improving service, etc are the needs.
  • People behave based on the way they are measured.
  • Do grading methods influence your actions?
  • What gets measured typically improves.
  • Creates focus and attention.
  • Reduce their operating costs.
  • Drive their revenue growth
  • Enhance their shareholder value.
methodology for measurement
Methodology for measurement
  • Have a scoreboard
  • Use standardized methods
  • Fix and stick with the targets
  • Adopt a holistic approach
  • Work on the right things
logistics performance measures
Logistics performance measures
  • It is classified as either effectiveness measures or efficiency measures.
  • Logistics performance of a company can be improved in the following areas.
  • Trading problem
    • On time delivery
    • Customer complain
    • Over delivery
    • Short delivery
    • Damages in delivery

Returns and allowances

    • Longer cycle time
    • Customer satisfaction
    • Sales outstanding in days
    • Accuracy of the forecast
    • Accuracy of invoice
    • Perfect order fulfillment
    • Inquiry response time
  • Utilization problem
    • Space utilization against capapcity
    • Equipment down time
    • Equipment utilization against capacity
    • Labor utilization against capacity

In company problems

    • Inventory count accuracy
    • Order fill
    • Out of stocks
    • Line item fill
    • Back order
    • Inventory obsolescence
    • Incoming material quality
    • Processing accuracy
    • Case fill
    • Cash cycle time


    • Finished goods inventory turnover
    • Order processing / labour
    • Products units processed per warehouse
    • Number of products made against time
    • Order processing / time
    • Product units processed per transportation
  • Cost
    • Out bound freight cost
    • Inbound freight cost
    • Inventory carrying cost
    • 3rd party storage cost
    • Logistics cost against budget
    • Cost of servicing inventory
performance measure
Performance measure
  • Financial measures
  • Productivity measures
financial measures
financial measures
  • As a great deal of money in spent on logistics operations, it is necessary to monitor and control related costs.
  • Some formulas to measure logistics expense (LE)

Logistics Assert Value (LAV)

= sum total value of logistics assets deployed

Return on Logistics Asserts (RLA)

= Profit / LAV

Logistics Asset Turnover (LAT)

= Revenue / LAV


Logistics Capital Charges (LCC)

= LAV * Asset Carrying Rate

Total Logistics Cost TLC

= LE + LCC

Logistics Cost to Sales (LSCR)

= TLC / Revenue

Logistics Value Added (LVA)

= After tax profit – Logistics capital charges

productivity measures
Productivity measures
  • This is a measure of how well resources are performing and managed.
  • The resources are as shown.

Logistics Resources

Working persons


Transportation system


Logistics Operation


Supply to customer

Inventory management

Customer response


Logistics output

Perfect orders

Storage capacity information



unit 7



performance measures
Performance measures
  • Performance measures of successful BPR should provide
    • A basis for understanding
    • A means to focus efforts on areas for improvements in effectiveness, efficiency and adaptability.
  • Constructing a performance measurement systems in
    • Financial
    • Customer
    • Internal
    • Innovation & learning
    • Customer profitability analysis
    • Analysis of value addition
  • Is a concept of reviewing and making probable changes to the organization's infrastructure.
  • Steps to restructure the organization
    • Review the organization’s people resources: structure, competence and motivation
    • Review structure and technological capability
    • Formulate new organizational form
    • Define new roles, coach and train employees
    • Build new technological infrastructure and application
advantages of measurement
Advantages of measurement
  • Reduction of manpower in a process
  • Improvement in turnover of the company
  • Improvement in the profits
  • Reduction in the cycle time of specific activity
  • Solving the points of hindrances in a process
  • Reduction in point area in a process
  • Improving market share of the company
  • Improvement in the customer services
  • Increase in the satisfaction for the employees
  • Improvement in the accuracy of data and information of the employees
  • Improvement in the company share value
  • Reducing new product introduction period
  • It can highlight areas for improvement by pointing out what is possible.
  • Benchmarking can be undertaken by comparing between
    • Different departments within a division
    • Different divisions within a company or organization
    • Different organizations within the same industry
    • Different organizations in different industries
benchmarking cond
Benchmarking cond…
  • The comparisons can be made across a range of activities and they are:
    • Budgetary or financial performance
    • Customer service delivery systems and measures
    • Productivity measures
    • Use of technology
    • Planning and project management practices
    • Human resources management
    • Financial control systems
merits of benchmarking
Merits of benchmarking
  • Understand existing process
  • To set Goals and Measures
  • To measure the current status
  • To set the benchmark there by increasing the output of the organization
unit 8



  • Material is the central item and the activity of any organization
  • The main purpose of any organization is to make profit
  • This profit or loss gets generated due to material
  • Organization exists for material, works for material and due to material
the organization of material
The organization of material
  • The materials department is generally having following subsections:
    • Office and administration activities
    • Purchase
    • Receiving the incoming material
    • Stores and warehousing
    • Transport and internal material movement
    • Dispatching the semi-finished and finished material
  • The functions of 2 – 6 are coordinated and headed by 1.
objectives of material management
Objectives of material management
  • To buy materials and services
    • of the right quality,
    • in the right quantity,
    • at the right price,
    • from the right source and
    • at the right time.
objectives cond
Objectives cond…
  • Keep the department expense low.
  • Development of good suppliers
  • Development of good relations with suppliers
  • Development of personnel.
  • Development of good records
  • Favorable reciprocal relations
  • Participating in development of new materials and products
objectives cond1
Objectives cond…
  • Economic make or buy
  • Standardization
  • Product improvement
  • Interdepartmental relations
  • Forecasts
  • Expansion of business by acquisitions
  • Regulating inventory
  • Cutting operating cost
place of material department
Place of material department
  • The place of materials department in any industry is quite equally placed to the important department like design department, manufacturing department etc.
  • Every department has dealing and concern with the materials department.
  • As the department in contact with the outside world the suggestions for the departments in the organization.
place of material department in the organization
Place of material department in the organization

Marketing department

Engineering department

Production department

Manufacturing shops

Materials department

Product design

Industrial engineering


Plant management

functions of materials management
Functions of materials management
  • Production department indicates what material is required.
  • Design department indicates what is required.
  • Quality control department checks what is required
  • To achieve the goals and the objectives of the materials department the functions of materials management are as follows
functions cond
Functions cond…
  • Make or buy the subassemblies and component.
  • Facilities procurement
  • Calculating quantities for scheduling
  • Ordering of materials
  • Packing the finished goods and storing and dispatch
  • Distribution of material
  • Inventory control activity
function cond
Function cond…
  • Material movement
  • Participation in the product development
    • Cost estimates
    • Using standard components
    • Manufacturability of the components
    • Supplier development
    • Guiding design decisions
    • Introducing new materials
  • Functions in Non=manufacturing organization
advantages of integrated materials management
Advantages of integrated materials management
  • Better accountability
  • Better coordination
  • Better performance
  • Adaptability of EDP (Electronic Data Processing system)
  • Miscellaneous advantages like
    • Team sprit
    • Opportunities for growth and development
unit 9



  • The purchase is a main activity in the area of materials management.
  • It is the most important function in any organization.
  • It decides the profitability of the company
  • It is proved that 1% saved in the purchase function improves the profit of the company as much as 2% to 3%.
principles of purchase seven r s
Principles of purchase (seven r’S)
  • Buying the material at right price.
  • Buying materials of right quality.
  • In the right quantity.
  • At the right time.
  • From the right source.
  • At the right place.
  • With right mode of transport
objectives of purchase department
Objectives of purchase department
  • To procure at the lowest possible cost consistent with quality and service requirements.
  • If the quality of the company’s product is decided by the quality of the input material then this is the area, where the quality begins.
  • The purchase activity plays important role in keeping the production line flowing.
  • Purchase department controls the inventory control activity.
objectives cond2
Objectives cond..
  • It integrates the requirements of all department of the company.
  • Help the design and development departments to develop new products and related new components of those products.
  • To develop good and continuing vendor relationships.
  • To train and develop highly competent personnel who are motivated to make the company as well as their department succeed.
organization of purchase
Organization of purchase
  • Organization by function.
    • Processing of purchase needs.
    • Sending out enquiries.
    • Negotiating with the vendors and selection of suppliers.
    • Preparation of purchase orders.
    • Receipt of material, inspection and storing.
    • Dealing with accounts section.
    • Maintenance of records.
  • Organization by product.
  • Organization by location.
  • Organization by process.
methodology of evaluation of purchase department
Methodology of evaluation of purchase department
  • Cost – purchase comparison
    • Annual cost of purchasing department divided by the total value of purchase.
  • Cost per order
    • Total purchasing department cost divided by the number of orders.
  • Return on investment
    • Net savings per rupee spent on purchasing.
  • Quality criteria
    • Measured by the number of rejects.
  • Quantity criteria
    • Measured by downtime.
functions of purchase department
Functions of purchase department
  • Activities of placement of order
    • Analyzing quotations received from different vendors.
    • Planning and scheduling purchases and deliveries of the item to avoid excess inventory.
    • Issuing proper purchase orders to the vendor.
    • Selecting capital equipments.
    • Negotiate prices with the vendor before order is placed.
    • To get the item at right price.
    • Checking and approving invoices
functions cond1
Functions cond…
  • Purchase records
    • Vendor registration files
    • Closed purchase orders
    • Open purchase orders
    • Material record
    • Imported items record
    • Different law codes of purchase , sales tax, octroi laws, import duty, etc..
functions cond2
Functions cond…
  • Purchase reports
    • The budget to be made before the year starts for expenditure under different heads.
    • Total expenditure done for different types of purchase.
    • Purchase value for major items.
    • Purchases made for each planning department.
    • Revisions of budget proposals for running year.
    • Vendor performance report
    • Inventory and consumptin pattern of materials
    • Pattern of market prices.
    • Development of new components for new products.
functions cond3
Functions cond…
  • Maintenance of vendor relations
    • Communication of essential and helpful information, design, specifications, standards, practices etc.
    • Communication of engineering changes and changes in specifications etc.
    • Developing methods for detecting deviations from standards
    • Helping the vendor in resolving quality problem.
    • Providing for use of vendor quality data during inspection.
    • Developing methods for identifying the qualified vendors.
functions cond4
Functions cond…
  • Maintenance of vendor relations cond…
    • Reviewing the performance of the vendor through vendor rating.
    • The guiding principle in vendor relations is the sprit of what best for the partnership.
  • Forecasting and planning.
  • Selection of best vendors
  • Fixing price, checking invoices
  • inspection
role of purchase in total customer satisfaction
Role of purchase in total customer satisfaction








Product design


Information system


Top Management


unit 10

Unit 10

Procurement Procedure and Policy

procedures in purchase department
Procedures in purchase department
  • There are steps in which a purchase transaction is carried through from its inception to its conclusion.
  • Since there are wide variations among industries, companies, organizations, products and personnel, there will be some slight deviation in the procedure to suit the particular set up of the company.
  • The procedure of the purchase is shown as per the flow chart shown in the figure below.

Requirement form user department

Send ENQUIRT to the vendors

Get QUOTATION from vendors

Study and compare the quotations with our estimated cost

Procedure in purchase functions

Negotiate the quotation to fix the price

Place the ORDER to the right vendor

Follow up with vendor

Get the material

Inspect the material

Stores credit the material

purchase cycle
Purchase cycle

Follow up


Other user department

PO request

PO Acceptance



Purchase department


Inspection reports





Stores department inventory control

Accounts department

Inspection reports

purchase cycle cond
Purchase cycle cond…
  • Purchase requisition
  • Request of quotation (Enquiry)
  • Purchase order
  • Planning and follow-up
  • Receiving and inspection
purchase policy
Purchase policy
  • For proper working, perfect guidelines and policy is required.
  • The purchase policy keeps good transparency for vendors who are regularly interacting with the company.
  • The purchase policy should conver important subjects like quality, inventory, price, credit to vendor, payment system to vendor etc..
contents of operating policies
Contents of operating policies
  • Policies include the following points:
    • Pricing policies
    • Quality of materials
    • Policies of inventory management
    • Selecting suppliers, their properties
the policy manual
The policy manual
  • A policy manual has 2 distinct sections:
  • Company policies:
    • This indicates the terms, the responsibility and authority of the purchase department different, as the responsibility and authority of all other departments.
    • It is essential that policies carry top management approval and that they become responsibility to every department head.
the policy manual cond
The policy manual cond…
  • Department policies:
    • Has complete guidelines for the purchase department operations
    • Transportation and price
    • Discounts
    • Petty cash purchases
    • Employee purchases
    • Vendor payment
    • Ethics
    • procedures
the policy manual cond1
The policy manual cond…
  • Producers:
    • Receipt
    • Inspection
    • Invoices
    • Receiving and storage
    • Surplus and scrap disposal
    • Transportation
    • Purchases for employees
    • Records and reports
      • Departmental records
      • Internal reports
      • External reports
unit 11



searching for a good supplier
Searching for a good supplier

Suppliers are found through following ways:

Inviting quotations

Purchasing directories

Catalogue and vendor files

Through magazines

Through personal contacts with suppliers, salesman or other buyers

suppliers requirements to be a good supplier
Suppliers requirements to be a good supplier
  • Facilities to fulfill the orders received
  • List of equipment
  • Plant visit
    • Is the equipment up to date?
    • Is there effective material control?
    • Is the plant well lighted and well ventilated and that has guards on machines to prevent accident?
    • What are the suppliers fire protection facilities?
    • Does the supplier has the equipment to handle the buyer’s order?
    • If the supplier has efficient receiving and dispatching facilities


suppliers requirements con
Suppliers requirements con…


Financial resources


Assistance to suppliers from the company for satisfactory quality.

Is vendor registered?

vendor evaluation
Vendor evaluation
  • It is required to measure the performance of the vendor.
  • The work of purchase dept. is to establish procedure and system for vendor rating.
  • Factors for rating of vendors are as follows:
    • Financial capability
    • Technical capability
    • Morale of employees
    • Lead time required to supply the item
    • Motivation for serving the buyer’s firm before and after the supply.
    • Managerial ability



Cost controlling ability

    • Type of machinery in the plant, condition, maintenance
  • Objectives of rating:
    • Reviewing the orders for better profitability
    • Comparing the placement of the order
    • Selecting vendors for new product development or changing the suppliers for running product for better results.
  • Vendor performance rating:
    • The standards can be based on past performance of the vendor.
      • For quality
      • For service
      • For price

For Vendor rating the following questions can help:

    • Reliability in all the fields like
      • Is the supplier reputable, stable an financially strong?
      • Is the supplier going along with product improvement?
    • Technical capabilities of vendor like
      • Can the supplier provide assistance to application engineering?
      • Can the supplier provide assistance to design engineering?
    • Convenience to deal with, say,
      • Can the supplier offer other related products or materials?
      • Is the supplier qualified to help in solving difficult problems like reducing acquisition costs through personal visits, telephone calls rejection of defects etc.?
    • Delivery index like
      • Does the supplier assure delivery in time?
      • Can the supplier plan his supply to minimize inventory?
      • Can the supplier be depended on for a steady flow of materials?

After sales services like

      • Does the supplier have a service organization?
      • Is an emergency service available?
      • Are parts available when needed?
    • Sales assistance like
      • Can the supplier help building mutual markets?
      • Will the supplier recommend our products?
      • Does the use of suppliers product enhance appearance of out product?
  • Vendor evaluation:
    • Evaluating the performance before the vendor has delivered anything. (called ad vendor evaluation)
    • Evaluating the performance after the vendor has delivered the materials. (called ad vendor monitoring)
    • The evaluation also includes
      • General reputation of vendor
      • Historical information from other buyers
      • Vendor surveys

Evaluation by quality rating:

      • Q = total quantity supplied
      • Q1 = quantity accepted
      • Q2 = quantity accepted with concession
      • Q3 = quantity accepted with rectification
      • Q4 = quantity rejected
    • Q = Q1 +Q2 + Q3 + Q4
    • Quality rating = [(Q1 + Q2 + Q3)/Q] * 100
  • Evaluation by price rating:
    • Rp = [(lowest price quoted / price agreed by vendor)] * 100
  • Evaluation by delivery rating:
    • Rd = [(promised delivery time / actual delivery time)] * 100

Evaluation by service rating:

    • Service rating is judgment on the basis of following 5 points:
      • S1 = readiness to help in emergencies
      • S2 = readiness to replace rejected materials
      • S3 = providing support documents in time
      • S4 = promptness in reply
      • S5 = acceptance of terms without complaints
    • Where S1 + S2 + S3 + S4 + S5 = 100
  • The cost ratio plan:
    • It includes 3 cost ratio such as
    • Quality cost ratio – includes relative cost of quality.
    • Delivery cost ratio – includes relative cost of placing and receiving an order.
    • Service cost ratio – includes technical, managerial and field service competence of the vendor.
cost estimation process
Cost estimation process
  • The cost estimating system is used to find the following major components:
    • Direct – material cost
    • Direct – operation cost
    • Overheads
      • Manufacturing overhead
      • Administrative overhead
    • Other expenses like taxes etc.
direct material cost
Direct material cost
  • It includes any purchased part or material that is used directly in the product.
  • it is the one, which goes in to the component of the product.
  • In-direct material cost
    • Are those which are consumed for the processing like lubricating oil or the cutting oil without which the production process is not possible or the process performance or tool efficiency improves.
    • All maintenance, repair and operating supplies are considered indirect cost and are part of the manufacturing overhead.
    • They are not directly incorporated into the product.
direct operational cost
Direct operational cost
  • This is called direct labor cost.
  • Errors are made even more frequently in estimating labor costs.
  • Direct labor cost includes all work performed directly on the component which includes machine operations.
  • The operations like inspection, materials handling, maintenance, supervision are some of the indirect operational cost
  • These are companies expense, which are the type of fixed expenses.
  • It is of 2 types
    • Manufacturing overheads
      • Expenses associated with factory supplies, indirect labour, depreciation and so on.
    • Administrative overheads
      • Expenses associated with office clerical and executive salaries, office supplies, rent and so on.
  • These overheads can be either
    • Fixed overheads
    • Variable overheads
other expenses
Other expenses:

Some of these are also considered as overheads:

  • Excise duty
  • Sales tax (SST)
  • Sales tax (CST)
  • Octroi
  • Dispatching charges (for transport)
  • Handling charges
  • Insurance
  • Vendor’s surcharge
ordering quantity levels
Ordering quantity levels
  • EOQ formula
    • Let us assume
    • A = Annual consumption
    • Q = Order Quantity
    • B = Cost per order
    • C = carrying cost per cent
    • P = price per unitT = total ordering and carrying cost
  • Total inventory cost = ordering cost + inventory carrying cost
    • T = (A/Q) * B + (Q / 2) * P * C
  • Solving above to economic order quantity Q
    • Q = sqrt [2BA /( P * C)]
use of eoq methodology
Use of EOQ methodology
  • Reasonable steady and predictable usage
  • Relatively low cost
  • Short lead – time
just in time jit
Just In Time (JIT)
  • This is a technique from TQM activity
  • Basically this is waste control method.
  • It is not the inventory control method.
  • It is organized approach to introduce in manufacturing cycle
    • Timeliness
    • Quality
    • Productivity
    • Flexibility
    • Work simplification and waste reduction
waste reduction problems
Waste reduction problems
  • The waste reduction exposes problems in organizations like
    • Improper methods
    • Waiting or delays
    • Machine or system breakdowns
    • Rejections or rework
    • Low demand for product in markets
    • Poor supervision

The waste of several types are main reason for hiding the problem

  • As we reduce the waste the problems get exposed.
  • They are some like
    • Inventory
    • Down time
    • Inspection
    • Material movement
    • Low quality
    • Over production
    • Lack of system
    • Procedures
    • Poor planning
techniques used in jit
Techniques used in JIT
  • Kanban – an integrated JIT system
  • SMED – Single digit Minute Exchange Die
  • Poka yoke
kanban an integrated jit system
Kanban – an integrated JIT system
  • It was developed at Toyota in the 1950s as a way of managing material flow on the assembly line, and identifies as ‘ a highly efficient and effective factory production system.
  • Kanban process involves more than JIT deliveries and inventory control.
  • Its concept is that a suppler or the warehouse should only deliver components to the production line as and when they are needed, so that there is no storage in the production area.
advantages of kanban process
Advantages of Kanban process
  • A simple and understand process.
  • Provides quick and precise information
  • Low costs associated with the transfer of information
  • Provides quick response to change
  • Limits the over capacity in processes
  • Avoids over production
  • Minimizing the waste
  • Control can be maintained
  • Delegates responsibility to the workers
group technology
Group technology
  • This contributes to the efficiency of kanban.
  • This is modular manufacturing, which involves organizing machinery so that related products can be manufactured in a continuous flow.
  • The secret of the kanban’s success is its requirements that each part of an organization be totally interdependent management and workers believe that productivity and quality come form people rather than systems.
advantages of gt
Advantages of GT
  • Number of new parts are less
  • Any new part required are designed to suit the manufacturing.
  • Manufacturing standards are set, so that just some minor modification is to be done for new process plan rather than buying new tools.
  • Set up time is reduced.
  • Flexible manufacturing systems and computer aided manufacturing.
s m e d technique
S M E D Technique
  • It stands for Single Minute Exchange of Die.
  • It is a theory and techniques for performing setup operations in fewer than ten minutes, i.e., in number of minutes expressed in a single digit
methodology adopted
Methodology adopted
  • Form the setup time reduction team.
  • Conduct training and education.
  • Study the setup process ( manual, video tape)
  • Classify setup operations into waste, internal setups and external setups.
    • Waste – operations which do not add values to setup.
    • Internal setup – operations that can only be performed while the machine is shut down. This is basically to be reduced.
    • External setup – operations that can be performed without shutting down the machine.
  • Eliminate the waste

Convert as many internal setups as possible to external setups.

  • Improve internal setups
  • Improve external setups
  • Develop the standard operating procedure.
  • Evaluate the performance of setup reduction
  • Prepare for the next setup reduction project.
jidoka automation
JIDOKA ( Automation)
  • It is a concept of adding an element of human judgment to automated equipment.
  • By this the equipment can identify unacceptable items and the automated process becomes more reliable.
  • Objective:
    • Ensuring quality 100% of the time.
    • Preventing equipment breakdowns.
    • Using manpower efficiently.
poka yoke mistake proofing
Poka yoke (Mistake Proofing)
  • The principles of poka yoke advocate designing or developing tools, techniques and processes such that it is impossible or very difficult for people to make mistakes.
  • Ti is simple principle that can lead to massive savings.
  • This principle was invented in the year 1960 by Japanese.
8 principals of improvement by pokayoke
8 principals of improvement by Pokayoke
  • Build quality in processes
  • All inadvertent errors and defects can be eliminated.
  • Stop doing wrong and start doing right
  • Don’t think of excuses. Think about how to do right
  • 60% chance of success is good enough. Implement idea now.
  • Mistakes and defects can e reduced to zero when every one works together to eliminate.
  • Ten heads are better than one.
  • Seek out true cause using 5Ws and one H.

[ why , when , who , where , what and how ]

application of poka yoke
Application of Poka - Yoke
  • Manual operations where worker vigilance is needed.
  • Where misalignment can occur.
  • Where adjustment is required.
  • Where teams need common – sense tools.
  • Where attributes not measurements are important.
  • Where mixed model production occurs.
  • Where training costs and employee turnover are high.
the purchase functions
The purchase functions

The computer characteristics are as follows

  • High speed
  • Large storage
  • Quick processing of the data
  • Quick retrieval
  • Accuracy in calculations
  • Flexibility in working
things best done by computers
Things best done by computers
  • Determining economic lot size of each item.
  • Determining safety stock level.
  • Determining ordering level ad reorder level.
  • Inventory file for each item.
  • Inventory analysis.
  • List of the suppliers along with their rating
  • Master purchase file condensing the previous purchases
  • etc..
reports prepared by the system
Reports prepared by the system

Some of the reports that save time are

  • Inventory master details
  • Category of the item
  • Items not supplied in time
  • Items rejected or accepted
  • Excess supplies done by the vendor
  • Etc..
mrp concept
MRP concept
  • 1970 was the period when they invented the Material Requirement Planning (MRP).
  • MRP utilizes s/w applications for scheduling production processes.
  • MRP s/w generates schedules for the operations and the raw material purchases based on the production requirements of finished goods, the structure of the production system the current inventories levels etc.
  • MRP asks the following questions:
    • What products are we going to make?
    • What are the materials needed to make the products?
    • What are the materials that we have in stock?
    • What are the items that need to be purchased?

Sales forecost

Customer order

Product design

Inventory trans.

Mngt. policy

Master schedule

Bill of materials

Inventory records

MRP software



Production orders

Purchase request

Management reports

advantages of mrp
Advantages of MRP
  • Reduced inventory levels
  • Reduced shortages of components
  • Better manpower planning
  • Improved shipping schedules
  • Better customer service
  • Reduced purchase cost
  • Improve production schedules
  • Reduction in lead times
  • Improved quality products

Problems in MRP implementation

  • Need of high level of discipline
  • The procedures in the company have to be clear
  • Cost of software is high and further implementation is costly
different modules of mrp
Different modules of MRP
  • Accounting
  • Inventory program
  • Production control and planning
  • Purchasing
  • Receiving
  • Manpower planning
  • Sales and logistics
  • Invoicing
  • warehouse
analyzing inventroy
Analyzing inventroy
  • ABC Analysis
  • VED Analysis
  • XYZ Analysis
abc analysis
ABC Analysis
  • The basic of “ABC” approach to inventory control, which provides maximum overall protection against stock outs for a given investment in safety stocks.
  • The high value items have lower safety stocks because the cost of the protection is high.
  • The low value items have higher safety stocks because the cost of the protection is low.

The first step is to estimate average demand for each item in inventory and multiply this by unit cost to determine value of usage.

  • The ABC systems permits selective inventory control.
  • With ABC control, it is possible to risk fewer stock outs and reduce investment in inventories.

Inventories are divided into 3 classes:

    • A category items account for 10 % items for roughly 70% of the value.
    • B items for 20% of the total and about 20% of the value.
    • C items for 70% of the total and about 10% of the value.
ved analysis
VED Analysis
  • V – stands for vital items
  • E – stands of essential items
  • D – stands for desirable items

Vital items are the most critical having extremely high cost of shortage and must be available in the stock when demanded.

  • Essential items are quite critical with substantial cost associated with shortage and should be available in stock by and large.
  • Desirable items do not have very serious consequences if not available when demanded but can be stocked items

The classification of items should be done in 9 groups such as

A + V B + V C + V

A + E B + E C + E

A + D B + D C + D

  • For each of these 9 categories the inventories can be planned as FSN analysis
    • F – stands for fast moving items
    • S – stands for slow moving items
    • N – stands for non moving items (deadlocks)
xyz analysis
XYZ Analysis
  • In any company it is difficult to forecast the quantity for each item accurately.
  • The forecast ability is identified by “XYZ” analysis.
  • “X category” items are those which can be accurately forecasted.
    • These are about 20% of the total items.
  • “Y category” items are those which are less accurately forecasted.
    • These are about 50% of the total items.
  • “Z category” items are those which can be least accurately forecastable.
    • These are about 30% of the total items.
functions of warehouse
Functions of warehouse
  • Receive the material
  • Store the material properly
  • Mixing of material
  • Remove the material when required
  • Deliver the material to right place
  • Keep the records perfectly in discipline
  • Packing and waiting for the order
  • Maintaining good housekeeping
  • Keep proper control
  • Manage the people in perfect discipline
  • Avoid keeping surplus material
  • Verification of stocks at regular interval
  • Coordination and cooperation
  • Arranging transport
warehouse organization
Warehouse Organization


Material manager

Production manager







Finished goods


warehouse layout and design
Warehouse layout and design
  • Considerations for layout:
    • How well does the store meet the needs of its customer?
    • Is appropriate technology being used?
    • How well are the resources utilized in the store?
    • How manageable is the store?
    • How flexible is the store?

Resource of the warehouse

    • The space
    • The equipment
    • The information
    • The manpower.
  • Factors for warehouse design:
    • The type of material to be stored.
    • The variety of material stored.
    • The speed at which the material has to move.
    • The location of suppliers
    • The location of customers

A good layout must be as follows:

  • To achieve minimum waste of space and flexibility of arrangement
  • Supplying right material to customer as and when required.
  • Ensure easy movement of the material handling equipments.
  • Minimize of material handling requirements.
  • Minimize of material deterioration (wasting).
factors to be considered for layout and design
Factors to be considered for layout and design
  • The space for receipt and inspection should be provided adjacent to the main warehouse.
  • Clear markings should be made at the storage space to facilitate location and identification.
  • The layout should permit the use of modern material handling equipments.
  • Due space should be left for expansion purpose in each portion.
  • A pleasing and hygienic environment must be provided within the warehouse.
  • Adequate and clear lighting arrangement should be provided.
warehouse ownership
Warehouse ownership
  • Owned by company:
    • The company has its own warehouse
    • There is no restriction for keeping any material that company desires.
    • All the arrangements, facilities and design are done as per the needs of the company.
  • Rental warehouse
    • There are logistic companies who keep the warehouse on rent.
    • There are no capital expenses by the company like land cost, construction etc.
    • The arrangement can be kept for some specific period, if needed thereafter can be extended or closed.
types of warehouses
Types of warehouses
  • Private warehouse
    • It is owned and operated by a company for the aspects of the distribution and storage of products.
  • Public warehouse
    • It is essentially space that can be leased to solve short term distribution needs.
  • Automated warehouse
    • This warehouse have automated capabilities like conveyor belt for transporting products to a fully automated facility where only a few people are needed to handle storage activity for thousands of products.

Climate – controlled warehouse

    • It handles products which needs handling conditions such as freezers for storing frozen products, humidity – controlled environment for delicate products like flowers and dirt – free facilities for handling sensitive computer products etc..
  • Distribution center
    • It is where product storage is considered a very temporary activity.
    • It serve as center of distribution system at which products are received from many suppliers and quickly shipped out to many customers.
  • Storage warehouse
    • It store product for periodic delivery to a manufacturer or distribution center.
    • This is often associated with providing JIT delivery.

Cross docking and trans-loading warehouse

    • It provide cross dock and trans – loading services.
    • These services require temporary storage for a grace period.
  • Value added services
    • It provide a wide range of value added services.
    • The services like labour, special equipment to the customers product, like repackaging, labeling, etc..
  • Break bulk warehouses
    • It receive product in bulk and then repackage the product based on customer requirements.
  • Fulfillment / consolidation warehouse
    • It is where products are generally received in large quantities and shipped out in a large number of smaller mixed shipment.
inbound and outbound movement of material handling
Inbound and outbound movement of material handling
  • Definition:
    • In any organization the activity of transferring of goods in and out moving goods in various locations in the warehouse is called inbound and outbound movement.
  • Characteristics of material handling:
    • Speed – movement between the production unit and different warehouse.
    • Time – relates to period required for the material handling activities.
    • Quantity shifted – takes care of the amount of material moved between the places
    • Space - indicates the effective utilization of the available space in the warehouse
objectives of material handing
Objectives of material handing
  • Improve logistics management.
  • Space capacity of production as well as warehouse should be increased.
  • Reduce the number of handlings of the material.
  • Develop good working conditions (safe and secured).
  • Reduce manual handling of the material.
  • Cost reduction has to be achieved.
principles of materials handling
Principles of materials handling
  • Plan well the needs, performance objectives and functional specifications.
  • Standardization of material handling methods, equipment controls etc..
  • Minimize the work
  • Selection of equipment
  • Training for operation of new equipments
  • Adaptability of the equipments for variety of jobs
  • Unit load for free flow of material and inventory

Maintenance of the equipments

  • When new improved handling system is brought, then remove the old one by one to keep up the efficiency of operations.
  • Systematic coordination of receiving, keeping and dispatching the operating systems.
  • Appropriate automation reduce human unsafe manual labour operations.
  • Smooth flow of materials
  • Ensure safety of all operations for working persons as well as materials.
  • Controls are used to improve the order fulfillment, production and inventory.
equipments used for material handling
Equipments used for material handling
  • The equipments used in storeroom are :
    • Storing equipments
    • Material handling equipments
  • Selection of different equipment is a key to the successful operations of a storeroom.
common storeroom equipments
Common storeroom equipments
  • Cabinets
  • Stacking boxes
  • Special storage racks
  • Gravity feed racks
  • Outdoor platforms and racks
  • Open and closed shelves
  • Trays
  • Drums
  • Barrels pallets
  • Tote boxes – loose parts of the materials between operations
  • Wire bins loose parts of the materials in inventory
material handling equipments
Material handling equipments
  • Manual material handling
  • Manual equipments
  • Mechanized systems
  • Automated systems
manual material handling systems
Manual material handling systems
  • Trolleys
  • Monorails
  • Belt conveyor
  • Roller conveyor
  • Crane
  • ladders
manual equipments
Manual equipments
  • Hydraulic scissor lift tables
  • Stackers and portable cranes
  • Manual stacker
  • Hydraulic pallet trucks
  • Pallet trucks
  • Pallet trucks
  • Caster wheels
  • Fork lift truck
mechanized systems
Mechanized systems
  • Conveyors
  • Rollers
  • Cranes
  • Turntables
  • Trucks
  • Purpose of packing
    • The product should be protected from environment abuses till the time it reaches to the real customer.
    • Ease of handling the product is provided in the packing.
    • Efficient packaging help reduce the need to unpack and repack the products.
    • Instigating packaging design through engineering helps to attract customers
    • Developing universal packaging and pallet design can be used for number of different products.
packing cost
Packing cost
  • The packing cost comprises of
    • Material cost
    • Labour cost
    • Packaging equipment like machines, tables, tools fixture
    • Space and place for operations of packing
packing materials
Packing materials
  • The generally used materials for packaging:
    • Adhesives, fasteners, nails,
    • Containers, cartons, boxes, bags,
    • Wood, steel, plastic labels,
    • Tapes of different types, ropes, drums,
    • Specially shaped molded thermocol boxes,
    • Heat sink plastic bags,
    • Plastic spray to protect product from dust,
    • Crates to carry bottles in unitized way,
    • Pallets, bubble wrap, refuse sacks, strapping.
network design
Network design
  • The distribution involves the methods of transportation, with the combined effect of the IT and contribution of different s/w used as per the product.
  • When designing the logistics n/w, the strategic factors are to be determined to find the level of customer service.
    • Speed to market (time taken by the product to reach the market so that it can be delivered to customer)
    • Economic factors such as taxes and exchange rates.
    • Infrastructure such as water, electricity, transportation routes etc.
    • Logistics cost and network size.
functions of distribution
Functions of distribution
  • It is the internal service function for any firm
  • The distribution n/w is basically the infrastructure through which material, information and finances flow between suppliers, manufactures, distributors, transports, retailers and the customers.
distribution channels
Distribution channels
  • It represents the channel through which products or materials or services reach customers.
  • A single distribution channel can be assigned to one or more sales organizations
  • Eg. Wholesale, retail, direct sales etc..
factors for selection of location
Factors for selection of location
  • Land
  • Manufacturing facility
  • Taxation and regional concessions
  • Access to transport
  • Power / fuel / energy
  • Water / climate
  • Availability of work force
factors for selection of location1
Factors for selection of location
  • Union activities
  • Political pressure
  • Banks and finance facilities
  • Raw materials
  • Safety and social security
  • Supporting industries
  • Market site
  • People culture and environment
  • Information System is an interacting structure of people, equipment, and procedures that together make relevant information available to the supply chain manager for the purpose of planning, implementation, and control.
functions of information
Functions of information
  • Take proper decision at all levels in the organization.
  • Provide database at appropriate stage.
  • Support planning functions.
  • Provide controls in the operations.
  • Communication with concerned persons.
forms of information
Forms of information
  • Written form
  • Charts
  • Graphs
  • Columns sheets
  • Black board
  • Hoardings – very important information (1 line statement )
  • Verbal or telephonic
attributes of information
Attributes of information
  • Real time information
  • Accuracy
  • Regular availability
  • Relevant to right person
technologies for is
Technologies for IS
  • Internet connectivity
  • E – Commerce
  • S/w tools
  • Bar coding / scanning
  • EDI – Electronic Data Interchange
  • XML – Extensible Markup Language
  • Data management and imaging
  • RF (radio frequency) technology
  • Artificial Intelligence
  • Expert system
  • Knowledge management