Available Balance
Reverse Logistics In Supply Chain Management
November 15, 2014


Define Reverse Logistics

Reverse logistics is the last part of the SCOR model. By definition it means from the point of consumption to the point of initiation, but what?

It can even be a customer’s feedback on a product after consuming or utilizing it so that the company can utilize that feedback in a positive manner in order to improve its product. Secondly, it can also be waste materials that are left over by the consumers, like empty cans, etc and can be utilized by the company in one of or the other.

This is how the loop is of a product cycle is completed, that is from point of initiation to the point of consumption and then finally back to the point of initiation and this is known as closed loop logistics.


Reverse Logistics-closed loop logistics-In Supply Chain Management


What is reverse logistics?

Reverse logistic is a procedure or process which deals the flow of product and service in a backward direction, that is, from the customer to the respective company domains with the help of supply chain to achieve maximum value and customer satisfaction. Some of the examples of reverse logistics are, return of product, repair of a product, recycling, disposal, customer feedback, etc. The advancement in the importance of Green Logistics and Green Supply chain management has created an urge of having reverse logistic.

Forward logistics or simply logistics deals with the movement of product from the point of initiation towards the point of consumption, however, reverse logistics deals the movement of product in an inverse direction. It can also be from customer back to distributor or even back to the manufacturer. Any procedure that is executed after the product is sold to the customer or the final end involves reverse logistics. Sometime reverse logistic can be executed before the product reaches to the customer, for example a defect product is identified at the distributor end or some damage is there. In such scenarios, products can move back to the manufacturer.


Importance of reverse logistics

Reverse logistics plays an important role in not just creating customer satisfaction, but also plays a pivotal role in minimizing environmental issues by reducing waste, recycling and proper disposal of products that can harm the environment.


Return of surplus goods

Some companies provide their downstream members in supply chain with goods in excess, that is, more than their requirement, with a common understanding that the left over goods that are not sold will be taken back by the company providing these goods. In this way the downstream member in the supply chain carry more stocks with the option of returning the surplus goods back. On the other hand, the producer or the company that provides the goods makes their channels / end point more fertile and hence they get an advantage of more sales by reducing or minimizing the probability of having stock outs in the market and an additional advantage of storing their additional productions by downstream members, rather than spending or wasting resources on their own warehouses.


Green reverse logistics – Reusable packaging

One of the major advantage of reverse logistics is usage of reusable packaging. Packing materials that are left over after the consumption of the goods can be brought back to the company to be reused with the help of closed loop logistic system. Some example are, plastic bottles, cylinder, cans, etc.


For Further details


Logistic Procurement
November 15, 2014


Logistic procurement is all about purchasing of logistic services. For example, car rental service, carrier service, etc.

This area is now a day’s very commonly used in organizations in order to reduce cost (especially fixed cost and maintenance cost) by outsourcing its department, but it is also very important to keep a contingency plan and not always completely depend upon your logistic partners.


Green Logistics – Supply chain management
November 15, 2014


What is green logistics?


As discussed in previous sessions, logistics is the movement of products, services and information throughout the supply chain with the help of interconnected and integrated management system.

Green logistics defines the methods or ways of minimizing the impact of logistics on our ecological systems. This method covers entire supply chain, that is, the forward and reverse flow of product, services and information from the point of initial to the point of consumption and vice versa, that is, reverse logistics. This will ultimately result in green supply chain management.


Now a day’s environmental changes, social and political demands are considered to play a vital role to force companies to focus more on the implementation and execution of Green logistics throughout their Supply chain.

Logistics has a strong interaction with Economy, Environment, Society and natural resources. If the logistic and supply chain strategies are designed in such a method focusing more on reducing fats than this will save help companies to generate more profit by reducing expenses.

More profit means more provision for investment. More investment mean more business, more employment and this will ultimately improve the whole Economy Cycle.

Reducing fats mean you are also saving natural resources, such as Water, gas, crude oil, etc. Hence, this will have a positive impact on the society and environment.

If Green Logistics is properly implemented then the benefits is not just for the company but it is for everyone.


Green Logistics - Green Supply chain management


Green Supply chain management


Green logistics is a method used in order to save the environment by the worst effects of logistic by taking following measures:

  • Reducing carbon footprints, which will automatically save unnecessary emission of carbon from vehicles.
  • Hence fuel will also be save and therefore protecting our natural resources.
  • Reduce the usage of paper, which will save the cutting of treas.
  • Save water and electricity.
  • Implement CSR (corporate social responsibility) as much as possible.

The above methods will surely help you in implementing green supply chain management.

You can further read green supply chain management by clicking on the link: “Green Logistics – Supply chain management


Drivers of supply chain excellence
November 15, 2014

 Drivers of supply chain excellence


In order for a company to achieve excellence in its supply chain, they need to follow and implement six drivers of supply chain excellence.


The six drivers of the supply chain excellence are:


1. Optimization:

Finish all the fat from the business. By fat means eliminate those resources which are of no use and are unnecessarily consuming time or money.


2. Speed:

Speed is one of the most important drivers. One should always be ahead of their competitor and therefore should bring new innovations before their competitors.


3. Connectivity:

All supply chain parts should be interconnected with each other in order to achieve excellence. For example your supplier, customer should all be interconnected with each other. Suppose you have 2 product of X left out of 10 from your stock, your customer should know that you have a stock of product X and on the other hand your supplier should know when to provide with new stocks before any stock out occurs.


4. Visibility:

Every part of your supply chain should be in your knowledge. For example, you should be well aware that where your fleets are? Which routes they are moving? What is the capacity they are carrying? How much more can be stored in your warehouses? Etc.


5. Collaboration:

Focus on your core areas of the supply chain and remaining areas which are not your specialty can be outsourced. For example, a company can outsource its logistics to another company.


6. Execution:

Your implementation of plans should be flawless in order to achieve excellence.


Third party Logistics (3PL), Services & Quality
November 15, 2014


Third party Logistics (3PL):

Third party logistic is a concept in which a company outsource its logistics to another company or makes them a strategic partner whose core competency is providing a logistic support.

This has multiple benefits such as:

  • Less or no investment in working capital. This means that the company’s do not have to invest on procuring vehicles, other stuffs related to logistics, as this has a high fixed cost. Therefore, these companies can outsource their logistic parts to those logistic companies who have already invested in their core business.
  • Since the logistic company’s core competencies is to provide smooth and efficient logistic support, therefore this automatically enhances the performance of the partner company.
  • The logistic company properly utilizes its assets pertaining to the concept of low container load or full container load, depending on the volume stocks to be transferred.
  • Since, the partner company do not have to invest in fixed cost, therefore this also helps then in saving / reducing prices of their products and hence they can also focus more on production, which is their core competency.


Logistic Services:

The services provided by the logistic unit should be reliable, which means quality and quantity should both exist together. If the services are reliable then this means that the services are readily available when required and there is a timely delivery of the product without or minimum level of damage.


Dimensions of a product Quality:

The dimension of a product quality depend on two things:

  1. Aesthetics: Visible criteria, for example it beauty, its packaging, etc.
  2. Conformance: Which states that is a product developed according to the pre-defined specifications or not.


Logistic Service standards:

Following are some key important standards that needs to be included in a service level agreement which outsourcing logistic services:

  • No stock out should occur. This means that your product stock should always be available where required.
  • Order size constraints is another important factor. Minimum order for delivery should be as low as possible.
  • There should be technological integration using IT services in order to automatically gauge the requirement for logistics. Some of the example can be using ERP system.
  • Frequency of the delivery should be predefined.
  • On time delivery of the product.
  • Make simple and easy methods for any claims.


TOSS (Town wise order split system):

Toss is basically a calculation that decides which distribution routes should be used in order to stocks with respective to towns.


Buyer and Supplier agreement in SCM
November 15, 2014


There are 5 different scenarios when considering buyer and supplier agreement. Usually, in such scenarios, the buyer and the seller belongs to different countries.

These scenarios are as follows:


1. EX-Work:

Supplier will give the required stocks to the buyer at his own factory exit.


2. Free on board (FOB):

Supplier will place the stocks on the port and from there the buyer has to take care of the stocks.


3. Cost & Freighting (C&F):

Supplier in this case is responsible to deliver the stocks on the port of the buyer. All risk and duties till the port will be paid by the supplier.


4. Cost insurance & Freight (CIF):

It is similar to the cost and freight (C&F) case, but the supplier will pay for the insurance of the stocks. Huge multinational companies do not go for CIF, because they cover the insurance part by themselves.


5. Delivered duty paid (DDP):

The supplier pays everything till the delivery of the product is done to the doors of the buyer.


Non Negotiable Documents (NND):

Nonnegotiable documents are the documents required for any shipment to be cleared from the customs. The most important NND documents are as follows:


  1. Commercial invoice
  2. Bill of lading
  3. Packing list


Methods of Payment for shipments / imports:

For payment of the products that are transported from one country to another are as follows:

  1. Letter of credit (L/C).
  2. Telegraphic transfer (TT)
  3. Bank contract (B/C)

Letter of credit is the safest mode of payment as it is backed up by the state bank of both (Supplier and buyer) country.


There are two types of letter of credit which are as follows:

1. Usance: In this type of L/C the buyer pays its supplier within 45 days after receiving the stocks.

2. Sight: is a type of L/C in which the buyer needs to pay the supplier just after receiving all the documentations.


Plant facility, Plan and Location in SCM
November 15, 2014


When a company decides to build an industrial plant it needs to take care for the following things:

  • The plant should be near to port (if available) or it should be near to the exit point of that country.
  • Company should make sure that all production facilities including labor, raw material, etc. should be easily available in that vicinity.
  • Coverage area and infrastructure requirement should be properly designed before constructing a plant keeping provisions for future requirement as well.


Plant facility, Plan and Location in SCM



According to the above figure there are few points that needs to be considered which are as follows:

  • Plant / factory location. (as discussed previously)
  • OFD (Over flow distribution center) required or not. OFD is also a warehouse which is near or in the vicinity of the plant / factory.
  • Location of DCs should be designed in a way that it should easily cover the target regions within a country. Therefore, for DC’s market coverage is very critical and important.
  • LCL (Low container load) / FCL (full container load): This will be covered in later sections.
  • Strategic Alliances (already covered in previous section)
  • Again, carbon foot prints should be minimized.
  • Cross docks. Suppose, there are two points ‘A & B’ which comes after a factory. Suppose a factory send stocks for Point B, which comes after passing point A, and the container drops some of the stocks at point A as well during its transit to point B, so that A region also gets the supply of that stock, then this concept is called cross docks.
  • Master DC: Is the main DC which is further providing stocks to other small DCs.


Container load:

Container are the empty vessels that are attached to the vehicles carrying goods in it. There are two kind of container carrying goods:

  1. Low container load: This type of container contains goods of other companies as well. This kind of transportation may cause delay issues as the owner of the container will wait for other company’s stocks to be filled in till entire container is occupied.
  2. Full container load: In such kind of container the entire load is dedicated to one company and therefore has less issues as compared to the LCL. But at least 75% to 80% of the container should be filled up in order to increase the economy of scale.

Container are of different sizes, some of the mostly used containers are: 20, 40 and 60 feet containers.


OFD (Over flow distribution center):

OFD is a warehouse which is near or inside the vicinity of the plant / factory. Those stocks whose destination are not decided are stored in OFD, in order to avoid back freighting and inter depot transfer.


Logistic Management & Deliver driver of SCOR Model
November 9, 2014


Logistic Management:

The movement of goods / services from one point to another point or from the point of initiation to the point of consumption by proper forecasting, by defining sequential flow along with quality checks under a supervision of process ownership and right person at the right place.

Logistics is involved in every part of the SCOR model. For example, we need to move feedstock from supplier to our production house. Feedstock is basically another name for raw material. For example, XYZ company makes a bottle caps by using polypropylene, the small pieces of plastic (polypropylene) is a feedstock for bottle caps.


Deliver driver Of SCOR Model:

Deliver driver of the SCOR model can be further divided into three parts:


  1. Warehouse or DC: Warehouse is also known as distribution center (DC). They are responsible for primary sales. Primary customer for XYZ Company are the distributors, whereas the secondary customer or secondary sale are from distribution and onwards.


Following are some important points to be considered pertaining to a warehouse:

  • Location of warehouse is very critical and should be at a place where all the resources are easily available. It should be at the central location depending on the requirement of the company.
  • Covered are of a warehouse is another important factor. This depends on the storage requirement of the company. When designing a warehouse, a company must also consider its future requirement as well.
  • Proper demarcation / segregation of different types of goods is also very important inside a warehouse. For example, the goods can be arranged in Alphabetical order or as per the property of a good.
  • When designing a warehouse, the company also needs to consider that how many number of docks should be available in it. Docks are simply points of loading and unloading in a warehouse.
  • Height of the warehouse is also another important factor, which also depends on the company’s storage requirement or stack height. Stack height tells that how much the containers can be piled up on top of each other. For example a stack height of 7 means that 7 container can be piled up on top of each other.
  • Machinery’s required also depends on the company’s requirement, that is how much of folk lifter, stacker, etc. required.
  • Aging report should be maintained in order to keep a track of products that are near to the expiry level of requirement.


  1. Distribution Planning: It is done in order to make decision as to how the goods are going to be distributed, which warehouses and DC are need to be covered, etc.


  • Distribution of a product should be on timely manner. For example, we have one or two months in hand for winter to arrive then the company should make distribution plan, after receiving winter products from the manufacturing department, in such a way that all winter products are readily available in the market just before the start of the winter, in order to supersede other competitor.
  • They need to ensure that no wrong dispatch across, else this will give the company a great loss, inters of product unavailability in the market, etc.
  • If the old product is still in stock and new product of the similar type has been produced, then the distribution planner has to make sure that the old stock is first distributed and then the new stock.


Inter DC (Distribution Center) Transfer:


Inter DC (Distribution Center) Transfer



Considering the above figure, suppose 1000 boxes of a product ‘X’ was produced in a factory. 500 boxes were transported to DC-C and 500 boxes to DC-D. Due to an unforeseen situation, the demand of product ‘X’ increased near the region of DC-D. Later on, 100 boxes of the product X had to be transferred from DC-C to DC-D. This concept is known as inter DC transfer.


Back Freighting:  Considering the same scenario, suppose we have a deficiency of 20 boxes in DC-C, due to which we had to transfer back 20 boxes of product X from DC-D to DC-C, is called back freighting. Back freighting usually occurs due to wrong analysis done on the demand and supply of any product.


3. Logistics: This unit should needs to keep in mind following challenges:


  • Road Congestion: They need to avoid congested roads, where traffic are mostly high in order to avoid delay in delivery of a product.
  • Fuel Prices: Fuel prices plays an important role in logistics. Companies providing logistical support, should make sure that they have adequate supply of fuel on the same price they have strategically negotiated with their partners to deliver the product, else rise in price may affect the cost of distribution.
  • Safety and Security: Logistic companies should make sure that the products are delivered with safety and security.
  • Carbon Foot Prints: This terminology is used to make sure that the carbon emission of vehicles should be as minimum as possible, so that environment is not effected much and the fuel consumption is also low.
  • Proper human resources should be available in order to handle whole logistic part.
  • No logistics means no business.


There are two types of transportation:

A. Dedicated: In dedicated transportation, the transporter is bound to provide you services as per your need and requirement.

B. Non Dedicated: In non-dedicated transportation, you need to request for transportation as and when required by the company.


Logistic Strategic Alliance:


In order to reduce carbon footprints, companies (Logistic / nonlogistic) can make a strategic alliance with each other. For example, the XYZ Company has to move product from point A to B only and on return it has to come empty (without carrying any product) from point B to A. This is going to result in unnecessary consumption of fuel with no return. On the other hand an ABC company has to move product from B to A only and back to B with empty vehicle. Both companies (ABC and XYZ) can have a strategic alliance with each other that one of them can carry its own product from one point to another and on the way back it can carry other company’s product instead of coming back empty. This will reduce carbon footprint by saving fuel and also reducing price of transportation for both companies.


Demand Planning and Supply Planning
November 9, 2014


Demand Planning:

Demand planning (DP) is the initial part of the SCOR model. It pulls the chain of supply chain. Basically, demand planning covers the forecasting part of any product. Which means, how much a product should be made.


There are three important pillars in demand planning:

1. Horizon: horizon means time period. Horizon defines for how long a furcating should be done for a particular product or so. For example, an XYZ company produces Coffee. This company has to forecast for more production during the horizon of winter period as the demand of coffee is high during this period. The period of horizon are of three type (Short, medium and long). Considering another example, an XYZ company produces 2000 tons of shampoo for the horizon of 2 years.

2. Granularity: Granularity means intervals. Taking above example of a company producing shampoo, has also to make a decision that in what interval the company is going to produce 2000 tons of shampoo within these 2 years, whether they are going to distribute according to quarterly basis (250 tons in each quarter) or may be fiscal basis (1000 tons yearly).

3. Hierarchy: This basically defines bifurcation of a product at SKU level. Taking same example of 2000 tons of shampoo and 250 tons in a quarter, it is further bifurcated that 100 tons should be anti-dandruff and 100 tons should be anti- hair fall and 50 tons should be of oily scalp. It can be further bifurcated as 100 tons of anti-dandruff in 25 tons (red, yellow, white & green) bottles each, and so on.


Stock Keeping Unit (SKU):

SKU’s are differentiation of a product on the basis of size, color and variants. Suppose we have 3 different caps of a bottle (Red, yellow and blue), this means we need to have three different SKU’s for each to maintain three different inventories.



Supply Planner (SP):

Supply planner is the one who gives MPS (master production schedule) based production plan on daily basis to the production department. MPS is a software which gives production plan based on the input given by supply planner. Supply planner also gives purchase requisition (PR) to Raw material supply management and package material supply management departments. Once, a purchase requisition is given, then the source department maintains a purchase order against that PR.

Purchase requisition (PR) is also generated by a software known as MRP (Material required planning).



MRP (Material required planning) Software


Supplier Lead Time:

Total time required after an order is placed by a customer till the delivery of that product is known as Supplier Lead Time.


Level Of Inventory:

This keeps  a record of each and every stock.


Bill of material (BOM):

BOM defines the ingredients / recipe required for making 1 unit of any product. BOM is defined by R&D department of a company.


Non production items (NPI)

Any item other than packaging material and raw material is known as non-production item. For example, pana-flex, gondolas, etc.



Following are some important responsibilities that comes under make driver of the SCOR model:

  • Execute and complete the production given by supply planner on the basis of production plan.
  • It also makes full efforts to reduce or decrease wastages.
  • They also focus on improving the quality by the help of continuous improvement plan (Kaizen)
  • Finally to achieve process capabilities.


TPM (Total productive maintenance) / OEE (Overall equipment efficiency):

This part is also known as medical science of machines. This is done to enhance the life of a machine and hence the efficiency of a plant is also improved.


Engineering and Project:

This domain is responsible to take care of all the projects which are related to engineering part, for example generator, compressor, machine, etc.


Scor model supply chain
November 9, 2014


Supply Chain Management:


Before getting into the details of Scor model supply chain, you first need to understand te definition of supply chain management. Supply chain management is a terminology which can be best explained by the help of understanding the meaning of each individual words.


Supply means needs, wants and demand of a customer or anything.
Chain means that everything is interconnected or linked with each other.
Management can be best explained with the help of basic principle that is (Planning, Organizing, Leading, Controlling and staffing).


By combining the above break ups, we can conclude that, supply chain management is basically to full fill customer’s needs, wants and demands by the help of interconnected drivers and using management tools in order to plan for current and future requirements, organizing things in a way to achieve the goal under a leadership that is a person or team taking responsibility by ensuring that all quality checks are intact with right person at the right place (Hire right person for right job).


These interconnected drivers can be best explained by the help of SCOR (Supply Chain Operational Reference) model or Scor model supply chain.


SCOR model supply chain


Scor model supply chain


Breakdown of SCOR model supply chain


1. Plan

– Demand planning (DP)

– Supply planning (SP)


2. Source

– Raw material supply management (RMSM)

– Packaging material supply management (PMSM)

– Non production items (NPI)


3. Make

– Production

– Engineering and projects

– Maintenance resource operation (MRO)


4. Deliver

– Warehousing / DC

– Distribution planning

– Logistics


5. Return


We will study the above SCOR model supply chain breakdown in detail in later chapters. Before moving further, we need to understand certain terminologies that will assist you in understanding supply chain management better.


Types of Market:


There are two types of market:


Developed and emerging market:

These kinds of market are usually found in Latin America, South Asia, etc. Taking an example of a product, we can still see powder detergents available in such markets.


Developed market:

These kinds of market are mostly found in China, USA, etc. Taking an example of a similar product, we can see that powder detergent are replaced with liquid detergent.


Classical conditioning:

To make the behavior of the consumer according to your product and not vice versa is called classical conditioning.


Modern Trade:


There are two types of modern trade:


1. Local modern trade: Super markets that has everything available in one premises (Clothing, groceries, electronics, etc.) and belongs to a local chain is known as Local modern trade.


2. International Modern Trade: Super markets that has everything available in one premises (Clothing, groceries, electronics, etc.) and belongs to an international chain is known as International modern trade.



There are two types of diversification:


1. Concentric diversification:

The literal meaning of concentric is same center. This means that the organization is diversifying or expanding its business in the same domain. For example, an XYZ company is specialized in making solid soap, now it is expanding its domain to liquid soap. This kind of diversification is known as concentric diversification.


2. Conglomerate diversification:

The literal meaning of concentric is having different center. This means that the organization is diversifying or expanding its business in a different domain. For example, an XYZ company is specialized in making dairy products, now it is expanding its domain to fertilizers and chemical products. This kind of diversification is known as conglomerate diversification.