International Supply Chain Management 2
Guide to Supply Chain Management
Compiled by: Rassie Esterhuizen
,Table of Contents
Chapter 2: Guide to Plan in Supply Chain Management......................................................1
2.1 Inventory and Supply chains...................................................................................................1
2.1.1 Different types of inventory..................................................................................................................1
2.1.2 Cycle Stock.............................................................................................................................................2
2.1.3 Safety Stock............................................................................................................................................2
2.1.4 Reducing Inventory................................................................................................................................2
2.2 Demand and supply planning.................................................................................................3
2.2.1 Describing demand................................................................................................................................3
........................................................................................................................................................................3
2.2.2 Forecasting methods.............................................................................................................................3
2.2.3 Planning the demand and supply..........................................................................................................4
2.2.4 Order cycle management......................................................................................................................4
2.2.5 The Economic Order Quantity...............................................................................................................5
2.3 Sales and Operations planning................................................................................................5
2.3.1 Sales and Operations process................................................................................................................5
2.3.2 Guiding principles for successful S&OP implementations.....................................................................6
2.3.4 Failing in implementing S&OP...............................................................................................................7
Chapter 7: Guide to Strategy in Supply Chain Management...............................................8
7.1 Corporate strategy..................................................................................................................8
7.1.1 What is corporate strategy?.................................................................................................8
7.1.2 What is competitive strategy?...............................................................................................................8
7.2 Strategic alliance.....................................................................................................................8
7.3 Three methods of strategic decision-making..........................................................................9
7.3.1 The four drivers of supply chain performance:.....................................................................................9
7.3.2 Five inventory strategies........................................................................................................................9
7.3.3 Lean and agile......................................................................................................................................10
7.3.4 Postponement.....................................................................................................................................10
Chapter 9: Guide to Finance in Supply Chain Management...............................................12
9.1 Supply chain finance.............................................................................................................12
9.1.1 The business process...........................................................................................................................12
9.1.2 Gearing.................................................................................................................................................12
9.1.3 Returns.................................................................................................................................................12
9.1.4 Hurdle rates (WACC)............................................................................................................................12
9.2 How companies cascade financial information.....................................................................13
9.3 How to add value and improve corporate financial performance........................................14
9.3.1 Supply Chain Impact on ROCE.............................................................................................................14
9.3.2 Applying Six Supply Chain Performance Levers...................................................................................14
Chapter 11: Guide to Outsourcing in Supply Chain Management......................................16
11.1 What is outsourcing?..........................................................................................................16
11.1.1 Growth drivers for outsourcing.........................................................................................................16
11.1.2 Common reasons for outsourcing.....................................................................................................16
11.1.3 Outsourcing concerns........................................................................................................................16
11.2 The tendering process.........................................................................................................17
11.3 Improved service through better 3PL management............................................................18
, 11.3.1 Why outsourcing relationships fail....................................................................................................18
11.3.2 Managing expectations......................................................................................................................19
11.3.3 Managing the relationship.................................................................................................................19
Chapter 5: Choosing an entry strategy..............................................................................20
5.1 Three entry strategies...........................................................................................................20
5.1.1 Three principles...................................................................................................................................20
5.1.2 Choosing an entry strategy (The distribution policy)..........................................................................20
5.2 Direct and indirect export.....................................................................................................20
5.2.1 Direct export........................................................................................................................................20
5.2.2 Indirect export (Individual)..................................................................................................................21
5.2.3 Indirect export (Collective)..................................................................................................................21
5.2.4 Indirect export (Foreign production)...................................................................................................22
5.3 Strategic alliance...................................................................................................................23
5.4 Risks in international business..............................................................................................24
Chapter 6: Financial policies in exports.............................................................................25
6.1 Organization of financial reports...........................................................................................25
6.2 Various financial characteristics of an export business.........................................................25
6.3 Covering against currency risk..............................................................................................25
6.4 International payments........................................................................................................27
Chapter 7: Exports, logistics and customs policy...............................................................29
7.1 Logistics at strategic level.....................................................................................................29
7.1.1 Operating results and logistics.............................................................................................................29
7.1.3 Trends in international logistics..........................................................................................................29
7.2 Customs policy......................................................................................................................30
7.3 Logistics at the tactical level.................................................................................................30
7.3.1 Decide which external party to cooperate with intermediaries:........................................................30
7.4 Customs at the tactical level................................................................................................31
7.4.1 Customs value......................................................................................................................................31
7.4.2 Tariffs...................................................................................................................................................31
7.4.5 Specific customs regulations...............................................................................................................31
7.5 Logistics at the operational level...........................................................................................31
7.5.2 Packaging.............................................................................................................................................32
7.6 Customs at operational level................................................................................................32
Chapter 13: Sustainable Supply Chain...............................................................................33
13.1 Triple bottom line...............................................................................................................33
13.2 Greenhouse gases and the supply chain.............................................................................33
13.3 Reducing transport intensity...............................................................................................33
13.4 Peak oil...............................................................................................................................33
13.5 Beyond the carbon footprint...............................................................................................34
13.6 Reduce, reuse, recycle........................................................................................................34
13.7 Congestion..........................................................................................................................34
, Chapter 2: Guide to Plan in Supply Chain Management
2.1 Inventory and Supply chains
Inventory is the quantity of goods that is available on hand or in stock and consists of three
main formats: raw materials, work in progress and finished goods.
Why hold inventory?
To protect against uncertainty caused by variations
in demand or restrictions in supply.
Reduces costs by cutting on transportation costs
(decreases lead times).
To protect against quality defects and easily
substitute a faulty product.
Stabilizes manufacturing by keeping expensive
resources (e.g., technology resources) going for
good return on investments.
Anticipation stock which is demand driven rather
than supply driven.
Balances demand and supply.
2.1.1 Different types of inventory
Cycle or replenishment stock keeps the supply chain moving and is necessary to meet
the daily demand.
Safety stock buffers against forecast error and suppliers’ unreliability.
In-transit stock is stock in the process of being transported to a stocking or delivering
point.
Seasonal stock is built up in advance to meet increased sales volumes during a
particular time of the year (valentine’s day, easter, Christmas, etc.).
Promotional stock feeds into marketing campaigns and advertising.
1
Guide to Supply Chain Management
Compiled by: Rassie Esterhuizen
,Table of Contents
Chapter 2: Guide to Plan in Supply Chain Management......................................................1
2.1 Inventory and Supply chains...................................................................................................1
2.1.1 Different types of inventory..................................................................................................................1
2.1.2 Cycle Stock.............................................................................................................................................2
2.1.3 Safety Stock............................................................................................................................................2
2.1.4 Reducing Inventory................................................................................................................................2
2.2 Demand and supply planning.................................................................................................3
2.2.1 Describing demand................................................................................................................................3
........................................................................................................................................................................3
2.2.2 Forecasting methods.............................................................................................................................3
2.2.3 Planning the demand and supply..........................................................................................................4
2.2.4 Order cycle management......................................................................................................................4
2.2.5 The Economic Order Quantity...............................................................................................................5
2.3 Sales and Operations planning................................................................................................5
2.3.1 Sales and Operations process................................................................................................................5
2.3.2 Guiding principles for successful S&OP implementations.....................................................................6
2.3.4 Failing in implementing S&OP...............................................................................................................7
Chapter 7: Guide to Strategy in Supply Chain Management...............................................8
7.1 Corporate strategy..................................................................................................................8
7.1.1 What is corporate strategy?.................................................................................................8
7.1.2 What is competitive strategy?...............................................................................................................8
7.2 Strategic alliance.....................................................................................................................8
7.3 Three methods of strategic decision-making..........................................................................9
7.3.1 The four drivers of supply chain performance:.....................................................................................9
7.3.2 Five inventory strategies........................................................................................................................9
7.3.3 Lean and agile......................................................................................................................................10
7.3.4 Postponement.....................................................................................................................................10
Chapter 9: Guide to Finance in Supply Chain Management...............................................12
9.1 Supply chain finance.............................................................................................................12
9.1.1 The business process...........................................................................................................................12
9.1.2 Gearing.................................................................................................................................................12
9.1.3 Returns.................................................................................................................................................12
9.1.4 Hurdle rates (WACC)............................................................................................................................12
9.2 How companies cascade financial information.....................................................................13
9.3 How to add value and improve corporate financial performance........................................14
9.3.1 Supply Chain Impact on ROCE.............................................................................................................14
9.3.2 Applying Six Supply Chain Performance Levers...................................................................................14
Chapter 11: Guide to Outsourcing in Supply Chain Management......................................16
11.1 What is outsourcing?..........................................................................................................16
11.1.1 Growth drivers for outsourcing.........................................................................................................16
11.1.2 Common reasons for outsourcing.....................................................................................................16
11.1.3 Outsourcing concerns........................................................................................................................16
11.2 The tendering process.........................................................................................................17
11.3 Improved service through better 3PL management............................................................18
, 11.3.1 Why outsourcing relationships fail....................................................................................................18
11.3.2 Managing expectations......................................................................................................................19
11.3.3 Managing the relationship.................................................................................................................19
Chapter 5: Choosing an entry strategy..............................................................................20
5.1 Three entry strategies...........................................................................................................20
5.1.1 Three principles...................................................................................................................................20
5.1.2 Choosing an entry strategy (The distribution policy)..........................................................................20
5.2 Direct and indirect export.....................................................................................................20
5.2.1 Direct export........................................................................................................................................20
5.2.2 Indirect export (Individual)..................................................................................................................21
5.2.3 Indirect export (Collective)..................................................................................................................21
5.2.4 Indirect export (Foreign production)...................................................................................................22
5.3 Strategic alliance...................................................................................................................23
5.4 Risks in international business..............................................................................................24
Chapter 6: Financial policies in exports.............................................................................25
6.1 Organization of financial reports...........................................................................................25
6.2 Various financial characteristics of an export business.........................................................25
6.3 Covering against currency risk..............................................................................................25
6.4 International payments........................................................................................................27
Chapter 7: Exports, logistics and customs policy...............................................................29
7.1 Logistics at strategic level.....................................................................................................29
7.1.1 Operating results and logistics.............................................................................................................29
7.1.3 Trends in international logistics..........................................................................................................29
7.2 Customs policy......................................................................................................................30
7.3 Logistics at the tactical level.................................................................................................30
7.3.1 Decide which external party to cooperate with intermediaries:........................................................30
7.4 Customs at the tactical level................................................................................................31
7.4.1 Customs value......................................................................................................................................31
7.4.2 Tariffs...................................................................................................................................................31
7.4.5 Specific customs regulations...............................................................................................................31
7.5 Logistics at the operational level...........................................................................................31
7.5.2 Packaging.............................................................................................................................................32
7.6 Customs at operational level................................................................................................32
Chapter 13: Sustainable Supply Chain...............................................................................33
13.1 Triple bottom line...............................................................................................................33
13.2 Greenhouse gases and the supply chain.............................................................................33
13.3 Reducing transport intensity...............................................................................................33
13.4 Peak oil...............................................................................................................................33
13.5 Beyond the carbon footprint...............................................................................................34
13.6 Reduce, reuse, recycle........................................................................................................34
13.7 Congestion..........................................................................................................................34
, Chapter 2: Guide to Plan in Supply Chain Management
2.1 Inventory and Supply chains
Inventory is the quantity of goods that is available on hand or in stock and consists of three
main formats: raw materials, work in progress and finished goods.
Why hold inventory?
To protect against uncertainty caused by variations
in demand or restrictions in supply.
Reduces costs by cutting on transportation costs
(decreases lead times).
To protect against quality defects and easily
substitute a faulty product.
Stabilizes manufacturing by keeping expensive
resources (e.g., technology resources) going for
good return on investments.
Anticipation stock which is demand driven rather
than supply driven.
Balances demand and supply.
2.1.1 Different types of inventory
Cycle or replenishment stock keeps the supply chain moving and is necessary to meet
the daily demand.
Safety stock buffers against forecast error and suppliers’ unreliability.
In-transit stock is stock in the process of being transported to a stocking or delivering
point.
Seasonal stock is built up in advance to meet increased sales volumes during a
particular time of the year (valentine’s day, easter, Christmas, etc.).
Promotional stock feeds into marketing campaigns and advertising.
1
