Logistics and Supply Chain Management - Principles of Management - ثالث ثانوي

Lothair www.len.edu.v 4.2 Logistics and Supply Chain Management KEY TERMS Supply Chain Supply Chain Management Logistics Just-In-Time LEARNING OBJECTIVES Once you have completed this lesson, you should be able to 4.2.1. Discuss what supply chain management is 4.2.2 Explain the difference between logistics and supply chain management 4.2.3 Describe the supply cham management process. التعليم 190 REALITY CHECK From A to B Khalid is the owner of a small business who has enjoyed success by creating innovative smartphone accessories that solve problems for customers. There is a busy sales period coming up due to bd Al-Fitr season, and he is expecting his latest gadget to perform particularly well. However, he has run into a problem Khalid has invested a lot of time and effort in building good relationships with his suppliers and negotiating the best deals. However, one of his local suppliers of the electronic components used in his products can't keep up with the quantity of orders Khalid is now placing. Khalid has found a new supplier, although the factory is based in another province, which will impact on his shipping costs and production speeds. Khalid is frustrated. He knows that his new product is great and has potential to make substantial profits over the holliday, provided he has enough units in stock. However, if he doesn't manage his supply chain effectively the business will suffer He must also ad- dress the problem quickly to prevent delays in production. What's Your Reaction? How do you think Khalid can resolve this situation? Chapter 4 Challenges of Contemporary Management

3 LO 4.2.1 What is Supply Chain Management? A supply chain is all of the activities involved from the time raw materials are obtained until finished products are sold and deliv ered (see Figure 4-6). No 8 Figure 4-6 A Supply Chain A supply chain is comprised of a series of links from origin (Step 1) to destination (Step 13) 10 12 Lean 4 2 Logistics and Supply Management 191 13

التعليم " 192 A supply chain can be small scale, such as the journey of locally-grown dates to a village market to a bakery that sells sweet treats directly to customers. However, a supply chain can be a large, complex global net- work, stretching several continents, with raw materials sourced in one country, manufactured into finished goods in another, before being sold to customers all around the world. Consider a laptop computer. That laptop might be assembled in a factory in one country, using components produced in another country from raw materials that originate from the other side of the world. Once the laptop is assembled, it is shipped to warehouse in a neighbouring province before being sold to customers all around the world. Custom- ers might then download software for the laptop from the regional supplier for their country. Each of these steps represents a separate link in the chain, and each link is critical to the process. Supply chains are absolutely essential to the everyday running of businesses. Yet, when supply chains are operating smoothly and effec- tively, they tend to be taken for granted. It is often only when there is a problem within the chain that many consumers might stop to consider the complex process involved in delivering products and services to the end customer. These challenges are highlighted in the global supply chain issues that have affected most countries as a result of the global Coronavirus pandemic. In order to contain the spread of infection, compulsory lock- downs were instigated worldwide, halting production and the move- ment of goods from one country or region to another. Many shelves in supermarkets across the world were either empty or missing the usually extensive range of products that customers expected. Retailers had to limit how many units of essential items that customers could buy. In turn, these challenges have led to price rises in raw materials and fin- ished goods, as demand has exceeded supply. Supply chain management is the overarching activity of managing the entire process around the functioning of a supply chain. The role encompasses a wide range of activities including: ■ building and maintaining successful partnerships and relation- ships with suppliers and stakeholders in the supply network Chapter 4 Challenges of Contemporary Management

دارت التعليم " ■ negotiating competitive rates with suppliers, distributors and warehousing to reduce expenditure ⚫ devising strategies for reviewing and improving the functioning of the supply chain, such as identifying and resolving ineffi- ciencies ■ anticipating challenges in the supply chain and creating contin- gency plans coordinating information systems used in operations of the supply chain working closely with other departments within the business. such as sales and manufacturing, to ensure that the supply chain is working effectively within the organization and aligns with the organization's wider strategic objectives factoring in ethical considerations, such as the impact that the organization's supply chain has on the environment and ensuring that all suppliers throughout the chain have accept- able working conditions and receive fair compensation for their contributions. As illustrated in the Reality Check scenario featuring Khalid, effective supply chain management is critical and can be the difference between the success or failure or a business. The most innovative product or service will not succeed without an effective supply chain management process in place to facilitate it production and distribution. Saudi Arabia's Role in the Global Supply Chain Due to its strategically important geographic position, straddling three continents (Europe, Africa and Asia), and its wealth of natural resources, Saudi Arabia is positioned as a gateway to world busi- ness. As part of the Saudi Vision 2030 plans, the Saudi government established the Global Supply Chain Resilience Initiative (GSCRI) in 2022. It aims "to position Saudi Arabia as a key link in global supply chains" by making the kingdom "a location of choice for leading global industrial companies looking to drive competitive advantage and improve business resilience." Lesson 4.2 Logistics and Supply Chain Management 193

التعليم 194 ? CHECKPOINT What is supply chain management? LO 4.2.2 Logistics and Supply Chain Management An important aspect of supply chain management is logistics. While the terms logistics and supply chain management are often used inter- changeably, there is a key difference. Logistics is concerned with the movement and storage (that is, the flow' and delivery) of goods or services, whereas supply chain management is more comprehensive and includes the whole process of management, taking in strategy and co-ordination of partnerships. Logistics, is just one element of supply chain management. Logistics Large quantities of products and materials move in, around, and out of a business on a daily basis. Logistics is managing the acquisition, movement, and storage of supplies, materials, and finished products in a business. Logistics has become a very important part of business operations The process of logistics can be illustrated in the example of a cus- tomer, Nora. Step 1. Nora orders a product from an online store on her smart- phone Step 2. An order is placed, assigned an order number, and is sent to the warehouse Step 3. The item is packaged and prepared to be shipped Step 4. Later, a courier picks up the packages and takes it to the central depot Step S. The package is then transferred to local depot Step 6. Next, the package is sent out for delivery with a driver and arrives at Nora's home Chapter 4 Challenges of Contemporary Management

ورارد التعليم The major activities that make up logistics are locating sources of sup- plies, purchasing, transportation, and sales. In addition to the physical movement of resources, logistics is responsible for effective commu- nication and information among all participants in the supply chain. One important logistics process is using just-in-time. With just-in-time, goods amive when needed (just in time) for production, use, or sale rather than sitting in storage. Just-in-time logistics requires careful plan- ning and coordination among supply chain members. It also requires an effective information system. Can you think of an example when you have relied on legisties in your everyday life? Maximize value from the mining sector Localize promising manufacturing Industries Localize military Industry Key Objectives Rehabilitate economic cities Develop oil and gas adjacent industries Increase gas production and distribution capacity Figure 4-7 The Key Objectives of the NIDLP Some of the key objectives of the National Industrial Development and Logistics Program (source: Saudi Vision 2030 website) Lesson 4.2 Logistics and Supply Chain Management 195

التعليم 196 In Saudi Arabia, the National Industrial Development and Logistics Program (NIDLP) has been established as part of Saudi Vision 2030. Some of its key objectives are outlined in Figure 4-7. Another strategic Initiative is the Saudi Logistics Academy, which was created to prepare and support human capital in the field of logistics among the next generation of talent. Net Knowledge NIDLP Visit the Saudi Vision 2030 website and find the section on the National Industrial Development and Logistics Program (NIDLP): https://www.vision2030.gov.sa/v2030/vips/hidlp/. Write a short sum- mary of the information, including the commitments by end of 2025, the top achievements cited, and the key points of the delivery plan. ? CHECKPOINT What is the difference between logistics and supply chain management? LO 4.2.3 Supply Chain Management Process As has been highlighted, the supply chain management process takes many factors into consideration. A supply chain manager must be able to balance a range of skills. They need to be highly organized, practically-minded, able to build strong relations, yet equally willing to negotiate hard. They must also be able to handle and process a significant amount of data. Chapter 4 Challenges of Contemporary Management

ودارت التعليم " Using Technology to Manage Operations Using technology correctly to help manage operations will make planning and decision making more accurate, rapid, and timely. It also makes it easier to access, analyze, and exchange information. The exchange may occur within a company, with other business partners, or with customers Some of the most important software used in busi- nesses to manage operations is described in Figure 4-8. Various types of software are now available to assist with supply chain management and support virtual collaboration of team members. COMMON TYPES OF OPERATION SOFTWARE Project Management Budgeting Scheduling Inventory Computer Security Document and Management Manufacturing Automation Keeps track of project schedules, tasks, to-do lists, work assignments, and project resources Automates budget planning, compares budgets Trom one time period to another, and coordinates budgets among departments. Manages employees, facilites, resources, and production scheduling. Allows easy review of schedules as well as quick updating. Helps the management of sales, purchases, and payments, tracks producton; usage and sales levels, and prints bar codes. Provides access and permissions, privacy, and infor malo security for computers and networks. Controls the production, storage, management. and castribution of electronic documents. Monitors and often controls manufacturing machines, checks for errors and defects, and reports production levels. Figure 4-8 Common Types of Operation Software There are several types of operation software that help supply chain managers to work more effectively. Lesson 4.2 Logistics and Supply Chain Management 197

ات التعليم The Supply Chain of Services The examples illustrated have emphasized the role of supply chains in facilitating the processing of physical items, from raw materials to products and packaging. However, it is important to understand that supply chain management also relates to the distribution and supply of services in today's digital world, supply of electronic and telecom- munications services are critical to the success of businesses. One can imagine the challenges of running an online business without a reliable Internet connection or phonelines. A factory cannot operate without a regular supply of energy or power, such as electricity or water. Disruption to the delivery of services can cause longer waiting times for customers, reduced opening hours and limited access to online por- tals and applications, such as e-banking or teleconferencing tools. Supply Chain Innovations Lesson 4.1 addressed the importance of innovation and described different types of innovation. There have been many successful inno- vations in the management and structure of supply chains over the last decade that have radically changed how goods and services are supplied. These can be regarded as paradigm innovations and process innovations. One key example is the rise of the gig economy, in which independent traders, drivers, and operators or small businesses, are able to offer their services or products to a broader customer base through networks facilitated by computer-based apps. Technology has enabled local businesses to operate on a global scale, taking advantage of centralized supply chain networks that were previously only accessible to larger chains. For example, many new compa- nies have started, including ones offering taxi and logistics services operated by independent drivers, fast-food delivery obtained from local independent restaurants, or providing private accommodation. Equally, individual sellers can compete with larger retailers by selling their goods through online marketplaces. 198 Chapter 4 Challenges of Contemporary Management

عبارت التعليم ? CHECKPOINT How can technology help to support supply chain management? 4.2 Assessment UNDERSTAND MANAGEMENT CONCEPTS Determine the best answer for each of the following questions.. 1. Managing the acquisition. movement and storage of supplies. materials, and finished products in a business is known as 2. a. 2000 inhe b. legiones & marketing d. warehousing Which of the following is not an activity of supply chain management? a. Tunding storrelau mining will super and wine parters bewand immoving praces the supply chain Deciding when produce d. Nuginating yalpi formaterak atribuun, and wureliousing Think Critically Answer the following questions as completely as possible. 3. With increasing digitization and the onset of the Fourth Industrial Rev- olution do you think there will always be a need for delivering physical items? Give reasons for your answer. What is meant by the supply chain of services? Provide an example to illustrate your answer. Lesson 4.2 Logistics and Supply Chain Management 199