LSCM U3 NOTES FEB2022_23 - Copy.pdf

ǁ• PVPSIT •ǁ Logistics and Supply Chain Mgt. (LSCM) – U3
ǁ• Dept. of ME •ǁ chkishore@pvpsiddhartha.ac.in >>> 7382219990
UNIT- III: Logistics and Supply chain relationships: Benchmarking the
logistics process and SCM operations –Mapping the supply chain
processes – Supplier and distributor benchmarking–identifying logistics
performance indicators – Channel structure.
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❖ Logistics and Supply chain relationships: Supply chain and logistics focus
on the flow of goods from the point of origin to the endpoint. Both disciplines require
careful coordination of supplies, labor and facilities to make sure items can move through
the supply chain as required. Logistics is a key component of supply chain management.
❖ Key common aspects of logistics and supply chain management:
➢ They focus on information, goods, services.
➢ They have the ultimate aim of supporting the success of the company.
➢ They have the ultimate aim of distinguishing the company from competitors.
➢ They seek to increase the customers’ satisfaction.
➢ They revolve around the same flow of goods and services, from suppliers to the
manufacturers, to the retailer or final consumer.
❖ Key differences between logistics and supply chain management:
➢ Logistics are activities inside the supply chain management and SCM covers activities
that include: production, inventory planning, labor planning, materials, facilities
management, manufacturing and delivering goods and services.
➢ Logistics focus is on the efficient and cost-effective delivery of goods to customers while
supply chain management controls the development of raw materials into finished goods
in order to move into their delivery.
➢ Logistics emphasizes meeting customer needs and expectations while supply chain
management works toward improving processes to create competitive advantages.
❖ Benchmarking the logistics process and SCM operations:
Benchmarking is referred to as the process of comparing performance; it is a concise
form of performance measurement which not only externally evaluates the individual
performance of companies against each other; but also uses the same analysis to determine
the performance of different operations within the same company.
➢ Identifying high-performance, and best-in-class operations and analysing how these are
best achieved – Benchmarking can be useful to help companies better understand how
their operations compare to their competition.
➢ Benchmarking serves as a critical performance indicator within logistics and supply
chain operations, such comparisons of course need to be analysed in context.
➢ For example, when examining performance of logistics costs, as % of sales, overall cost
is perceived as the average selling price as much as by logistics costs, of which both need
to be fairly assessed. Accurate Benchmarking can help a business to determine whether it
best to base comparisons on a cost per unit or cost per case, basis.

❖ Importance of benchmarking in logistics management:
Benchmarking provides a true view of your supply chain performance compared with
similar operations. It helps you identify and set realistic but stretching objectives.
Benchmarking can be used to set a baseline for continuous improvement. You can identify
metrics to suit your specific improvement requirements.
Benefits of logistics and Supply Chain Benchmarking:
➢ It provides a true view of your supply chain performance compared with similar operations
➢ It helps you identify and set realistic but stretching objectives
➢ Benchmarking can be used to set a baseline for continuous improvement
➢ You can identify metrics to suit your specific improvement requirements
➢ Benchmarking can help you identify best practices for adoption
➢ It also highlights gaps separating your operational performance from that of best-in-class supply
chains.
❖ Benchmarking process:
8 Steps of the benchmarking process
1. Select a subject to benchmark: What to benchmark is just as important as how to
benchmark it. Executives and other senior management should be involved in deciding
which processes are critical to the company’s success.
2. Decide which organizations or companies you want to benchmark: Determine if you
are going to benchmark processes within your own company, a competitor, or a company
outside of your industry.
3. Document your current processes: Map out your current processes so you can identify
areas that need improvement and more easily compare against the chosen organization.
4. Collect and analyze data: This step is important—but it can prove difficult when you
are trying to gather data from a competitor because a lot of that information may be
confidential.
5. Measure your performance against the data you’ve collected: Look at the data
you’ve collected side by side with the metrics you gathered from your analysis of your
own processes.
6. Create a plan: Create a plan to implement agreed-on changes that you have identified as
being the best to close performance gaps. Implementation requires total buy-in from the
top down.
7. Implement the changes: Closely monitor the changes and employee performance. If
new processes are not running smoothly as expected, identify areas that need to be
tweaked.
8. Repeat the process: After successfully implementing a new process, it’s time to find
other ways to improve. The benchmarking process is one of continual improvement and
iteration. Review the new processes you’ve implemented and see if there are any
changes that need to be made. If everything is running smoothly, look to other areas or
more ambitious projects that you may want to benchmark and start the process again.

❖ Mapping the supply chain processes:
➢ Mapping supply chain means gathering information about the suppliers, their own
suppliers, and the people who work in the supply chain to create a global map of supply
network. This information can be held in a single data platform for ease and to
facilitate analysis.
➢ Supply chain mapping isn’t just a one-off exercise – it’s an ongoing activity as we get more
information and as the supplier base and supply chain changes.
➢ Importance of supply chain mapping:
• Mapping the supply chain can help the business learn more about how their products or
services are produced, where, and by whom. It is the foundation for building a risk
management, due diligence, and responsible sourcing programme in the supply chain.
• The process of supply chain mapping brings numerous benefits to a business that go far
beyond simply providing visibility and meeting legal requirements.
➢ Process/ Steps of Mapping the supply chain:
There are four key steps in the
supply chain mapping process:
1.Learn where suppliers and
their suppliers are located by
working with procurement and
using existing supplier lists.
2.Integrate information on
your suppliers from different
sources using a spreadsheet or
data platform. Supply chains
can change rapidly; a system
for managing supplier data will
help you to keep information
current and in one place.
3. Conduct an initial risk
assessment to help you
prioritise where to focus next.
4. Use several tools to research
your suppliers. Collect
information about what is
happening at supplier
worksites, and research the
inherent risks associated with
the countries and sectors they
operate within.
Continue this process as the supply chain grows – the more information we have, the more
insight gain. Once we have a good idea of the top tier sites, start looking at the sites that supply
to them.
➢ Benefits of supply chain mapping:
• Create supply chain transparency and visibility: Investors and consumers expect a
business to know how and where their products are made.
• Identify and understand inherent risks within the supply chain and protect
operations and reputation against them: For example, some countries have higher

rates of exploitative practices like child labour and are therefore higher risk to source
from. Knowing where suppliers are located helps to understand the magnitude of these
risks.
• Make informed business decisions and prevents risks: Using insight about their
supply chains, businesses can prevent and reduce risk, build long-term supplier
partnerships, upskill, and support suppliers.
• Take action to remediate issues and protect workers: Having more information about
suppliers and workers allows a business to understand the human rights and
environmental impacts their decisions may have throughout their supply chain.
• Comply with legislation: Modern Slavery Acts and other laws require companies to
demonstrate how they address modern slavery, including within their supply chains. To
do this effectively companies must know who their suppliers are, the risk of modern
slavery, and what action is being taken to prevent and remediate it if or when identified.
• Supports reporting on ESG criteria and attracts investors: Environment, social, and
governance criteria (ESG) are of increasing interest to investors seeking to understand
the potential environmental and social risks of an investment prospect. Incorporating
supply chain mapping into a comprehensive due diligence programme is key to
reassuring investors that businesses understand their supply chains and have true
visibility of the risks within them.
❖ Supplier and distributor benchmarking: Supplier benchmarking is a process of
comparing the performance of different suppliers to identify areas of improvement
and to ensure that only the most qualified supplier is chosen. It allows companies to
evaluate their current suppliers and compare them against their competitors and
industry standards. It is important for businesses to perform supplier benchmarking in
order to gain a competitive edge, reduce costs, and improve customer service
➢ Supplier benchmarking is the process of comparing the performance of one’s own
supplier against other suppliers within the same industry. The purpose of supplier
benchmarking is to identify areas in which one’s own supplier falls short, and to make
improvements in order to match or exceed the performance of other suppliers.
➢ Different types of supplier benchmarking:
1. Cost benchmarking: This involves comparing the costs of similar products or
services from different suppliers. This can help you to identify potential savings
opportunities.
2. Quality benchmarking: This involves assessing the quality of products or services
from different suppliers. This can help you to ensure that you are getting value for
money.
3. Delivery benchmarking: This involves assessing the delivery times and reliability of
different suppliers. This can help you to ensure that your operations are not disrupted by
late or unreliable deliveries.
4. Service benchmarking: This involves assessing the level of customer service offered
by different suppliers. This can help you to ensure that you are dealing with a company
that provides a good level of service.
➢ Benefits/ Advantages of supplier benchmarking:
• Supplier benchmarking can help to identify areas where the company’s performance
lags behind the competition, and thereby focus the attention on those areas needing
improvement.
• Understand how the company’s performance compares against others in the industry.

• Identify best practices that can adopt to improve the company’s performance.
• Generate ideas for process improvements.
• Facilitate communication between different departments within company.
• Encourage innovation and creativity.
➢ Process / Methods of supplier benchmarking:
• Supplier benchmarking is the process of comparing a company’s performance against other
similar companies in order to identify areas where improvements can be made. The aim
of supplier benchmarking is to improve the quality of products and services, reduce costs and
improve customer satisfaction.
• There are a number of different methods to carry out supplier benchmarking. One
common method is to use a supplier performance index (SPI). This involves assessing
a range of factors such as delivery time, quality, price and customer service.
• Another method is to conduct a customer satisfaction survey. This involves asking
customers how satisfied they are with the products or services they have received.
• Once the data gathered from either own company or from other companies, one can start
to identify areas where improvements can be made. It is important to set realistic goals
and targets when carrying out supplier benchmarking. Trying to achieve perfection is not
realistic and will only lead to frustration. Set achievable targets that will make a real
difference to your business.
❖ Logistics performance indicators / Key Performance Indicators (KPIs) / Metrics:
➢ A logistics KPI or metric is a performance measurement that is used by logistics
managers to track, visualize and optimize all relevant logistic processes in an efficient
way. Among others, these measurements refer to transportation, warehouse and supply chain
aspects.
➢ The logistics industry produces huge amounts of data on a daily
basis coming from warehousing processes, orders transportation,
picking and packing, among others.
➢ To extract deeper insights from these metrics/ KPIs, put them
together in a logistics dashboard with the help of a professional
dashboard tool and take advantage of powerful data visualizations.
➢ Here is the list of the most important logistics KPIs and metrics,
that everywhere adopted:
• Shipping Time: Spot potential issues in your order fulfilment
process.
• Order Accuracy: Monitor the degree of incidents
• Picking Accuracy: How many orders are picked without errors?
• Delivery Time: Track your average delivery time in detail
• Pick & Pack Cycle Time: Track the time it takes to pick and pack your orders
• Equipment Utilization Rate: Is your equipment enough for your workforce?
• Transportation Costs: Analyze all costs from the order placement to delivery
• Warehousing Costs: Optimize the expenses of your warehouse
• Pick & Pack Costs: Monitor all costs related to your pick & pack process
• Use of Packing Material: Optimize your materials usage.

• Number of Shipments: Understand how many orders are shipped.
• Inventory to Sales Ratio: Identify a potential overstock
❖ Channel structure in Logistics: “Channel of distribution or trade channel for a
product is the route taken by the title of the goods as they move from the producer to the
ultimate consumers or industrial user.”
➢ A channel of distribution or trade channel is the path or route along which goods move
from producers to ultimate consumers or industrial users. It is the distribution network
through which a producer puts his products in the hands of actual users.
➢ A trade or marketing channel consists of the producer, consumers or users and the various
middlemen who intervene between the two. The channel serves as a connecting link between
the producer and consumers. By bridging the gap between the point of production and the
point of consumption, a channel creates time, place and possession utilities.
➢ Types of channel structure:
I) Classification based on the direction of flow:
(a) Goods flow downwards from producer to consumers
(b) Cash flows upwards from consumers to producer as payment for goods
(c) Marketing information flows in both directions.
(a) Goods flow downwards from producer to consumers: The downward flow includes
information on new products, new uses of existing products, etc. The upward flow of
information is the feedback on the wants, suggestions, complaints, etc. of ultimate consumers
or users.
(b) Cash flows upwards from consumers to producer as payment for goods: The
downward flow includes information on new products, new uses of existing products, etc. The
upward flow of information is the feedback on the wants, suggestions, complaints, etc. of
ultimate consumers or users.
(c) Marketing information flows in both directions: Most companies try to forge long term
partnership with their distributors to create a marketing system that meets the need of both the
manufacturer and the distributor. They jointly plan merchandising goals and strategies,
inventory levels, advertising and promotion plans etc.
II) Classification based on the number of stages:
(a) Zero Stage Channel of Distribution: Zero stage distribution channel exists where there is
direct sale of goods by the producer to the consumer. This direct contact with the consumer
can be made through door-to-door salesman, own retail outlets or even through direct mail.
For example, Eureka Forbes, sells its water purifiers directly through their own sales staff.
(b) One Stage Channel of Distribution: In this case, there is one middleman i.e., the retailer.
The manufacturers sell their good to retailers who in turn sell it to the consumers. This type of
distribution channel is preferred by manufacturers of consumer durables like refrigerator, air
conditioner, washing machine, etc., where individual purchase involves large amount.
(c) Two Stage Channel of Distribution: This is the most commonly used channel of
distribution for the sale of consumer goods. In this case, there are two middlemen used,
namely, wholesaler and retailer. This is applicable to products where markets are spread over
a large area, value of individual purchase is small and the frequency of purchase is high.
(d) Three Stage Channel of Distribution: When the number of wholesalers used is large and
they are scattered throughout the country, the manufacturers often use the services of
mercantile agents who act as a link between the producer and the wholesaler, i.e., distributors.

➢ Role / Functions / Activities of Distribution Channel structures (in business logistics):
1. Confers distribution efficiency to the manufactures.
2. Channels supply products in required assortments, (combination of products of different
manufactures) and help in assembling also.
3. Channels provide salesmanship (word of mouth) by being physically close to customers
4. Helps merchandising the products at retail shop by display, selling effort, awareness etc.
5. Helps in implementing price mechanism (setting price level from both sides) making a
bridge between user and manufacturer
6. Physical distribution and financial functions
7. After sale and presale services
8. Help in sub distribution
9. Selling to sub distributors etc.
10. Helps in stock holding
OOOOO # *** # OOOOO
LSCM Questions_ UNIT3:
1. Differentiate between Logistics and supply chain management (SCM). (CO3)
2. What do you mean by Benchmarking the logistics process and SCM operations? Explain
the benefits of Benchmarking. (CO3)
3. Explain various steps of the benchmarking process. (CO3)
4. How ‘Mapping of supply chain process’ can be done? Explain the importance of
Mapping of the supply chain processes. (CO3)
5. Explain the Logistics performance indicators /Key Performance Indicators (KPIs). (CO3)
6. Define Channel structure in Logistics? Give their classification. (CO3)
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HOME ASSIGNMENT QUESTIONS:
1. Differentiate between Logistics and supply chain management (SCM).
2. Explain the importance of Mapping of the supply chain processes. What
are it benefits.
3. Give the list of various Performance Indicators (KPIs) in Logistics.
4. Define the Benchmarking in logistics process. Explain the benefits of
Benchmarking.

LSCM U3 NOTES FEB2022_23 - Copy.pdf

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