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Optimizing logistic cost in global supply chain

Supply chain is the handling of raw materials and services from dealers to manufacturer or service provider to purchaser and back with development of the communal and environmental impacts. The supply chain believes the contacts between a business and its purchasers and dealers. The greatest advantages are derived by expanding the focus as much as possible upstream towards the raw materials, downstream towards the customer and then back again as the manufactured goods and wastes are reprocessed.

The emphasis has moved from the ‘green customer’ to the ‘responsible retailer’ whereby the retailer or service provider and the brand owner takes for granted the accountability for ensuring that customers can purchase products and services with poise in their source and produce. Similarly the association between manufacturers and retailers has changed. In earlier period producers were the drivers of the supply chain, handling the rapidity at which products were produced and distributed.

Nowadays it is retailers that drive the schedule and successful producers are those who can meet purchaser demands for alternatives, styles or characteristics as well as carry out and deliver orders rapidly (Business Guide to a Sustainable Supply Chain, 2003, p. 6). The Supply Chain and Supply Chain Management: A steady augmentation

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in the intricacy of supply chains and an equivalent increase in the virtualization of the manufacturing procedure have produced several visible trends in organizational dynamics.

Over the decades, supervision of the supply chain has shifted through three separate phases, from decentralized (functional/departmental) to centralized (corporate planning and purchasing) and at last to an arrangement of both. The pendulum is presently swinging toward centralized planning merged with decentralized implementation. Technology now facilitates for the rapid proliferation of business details from all functional and geographical regions of the expanded enterprise, which facilitates decision makers to plan and carry out with the intention of maximizing enterprise-wide productivity.

Organizational arrangements and functional regions within organizations have altered considerably over the past 4 to 5 decades. Supply chain planning and implementation became more incorporated and driven by cross functional groups. These days with the initiation of the Internet and Web-facilitated technologies, the supply chain is morphing again (Muzumdar and Balachandran, 2001).

Supply chain management (SCM) is the expression applied to portray the management of the flow of materials, details, and funds across the complete supply chain, from dealers to component manufacturers to final assemblers to allocation (warehouses and retailers), and eventually to the customer. In fact, it often incorporates after-sales service and returns or recycling. In contradiction of multi-echelon inventory management, which organizes inventories at multiple sites, SCM typically entails harmonization of information and materials among numerous firms.

Supply chain management has produced much attention in recent years for several reasons. A lot of managers now comprehend that actions taken by one associate of the chain can manipulate the productivity of all others in the chain. Firms are ever more considering in terms of opposing as part of a supply chain against other supply chains, sooner than as a single firm against other individual companies. Also, as firms productively streamline their own processes, the next opportunity for development is through better harmonization with their dealers and purchasers.

The outlays of poor coordination can be tremendously high. In the Italian pasta industry, customer demand is quite stable throughout the year. However, on account of trade endorsements, volume discounts, long lead times, packed-truckload discounts, and end-of-quarter sales inducements the orders seen at the manufacturers are highly changeable. In fact, the variability amplifies in moving up the supply chain from customer to grocery shop to distribution center to central warehouse to factory, an occurrence that is often termed as the bullwhip effect (Johnson and Pyke, 1999, p.

2). The costs of this unpredictability are high — unproductive use of production and warehouse resources, high transportation expenditures, and high inventory expenditures, etc. Acer America, Inc. gave up $20 million in profits by disbursing $10 million for air freight to carry on with swelling demand, and then shelling out $10 million more later when that inventory became outdated (Johnson and Pyke, 1999, p. 2-3).

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