Introduction to

Supply Chain
Management 1

Punnry Kang
MSc. Logistics and SCM
Burapha University, Thailand.
 Contents

1 Definition of Logistics and SCM

2 Evolution of Logistics and SCM

3 Theory development in logistics and SCM

4 Applications to Manufacturing and Services

2
 Origins of LSCM

• There are various views with regard to the linguistic origins of the word:
• some pointing to the Greek adjective logistikos which means ‘skilled in calculating’ (and
which most likely gave us the mathematical term logistic).
• It has also been noted that in Roman and Byzantine times there was a military official
called Logista.
• In more recent times we have seen, as in the above definition, the French words
logistique and loger.
• Most agree that the word entered the English language in the 19th century, with its
application generally seen in military terms and concerned with the organization of
moving, lodging and supplying troops and equipment.

3
 Origins of Logistics and Supply Chain
Management
• In the past, bulky raw materials were transported
using traditional means.
• The word “Logistics” originates from the French
word “logistique” or “loger”, meaning storage.
• Modern-day logistics and Supply Chain as we
know it can arguably be traced back to the US
during World War 2.
• The Allies during world war 2 constructed
sophisticated system of supply and transportation
Source: Warfare History Network that heavily aided their victory over the Axis.
• Thus, the modern system of logistics and supply
chain management was born.

4
 What is Logistics?

• These origins suggest then that logistics has something to do with applications
of mathematics and is primarily a military concern. Indeed the field of
military logistics has evolved quite considerably and is now quite sophisticated.
• Similarly there are many useful applications of mathematics to logistics. Today,
however, logistics spans beyond the military and mathematical domains.
It was in fact only in the latter decades of the 20th century that the term
logistics entered into common non‐military use.

5
SO, WHAT EXACTLY IS
LOGISTICS AND SCM?
Definition and Difference
Logistics
• According to the New Oxford Dictionary of English, Logistics means: “the
detailed coordination of a complex operation involving many people,
facilities, or supplies. Origin late 19th century in the sense ‘movement and
supplying of troops and equipment’, from French logistique…”.
• Oldest surviving records were from both Greek and Roman times,
concerning variations of logistikos (meaning skilled in calculating), and
logista respectively.
• These evidences suggest that logistics has to do with calculations
involving military operations such as moving troops and supplies.

7
Logistics
• In this course, we define the modern-day logistics as:
“the process of planning, implementing , and controlling procedures for the efficient and
effective transportation and storage of goods including services, and related information
from the point of origin to the point of consumption for the purpose of conforming to
customer requirements.”

Source: customodal.com

8
 What is Logistics?
• Logistics is the process of planning, implementing, and controlling procedures for the efficient
and effective transportation and storage of goods including services, and related information from
the point of origin to the point of consumption for the purpose of conforming to customer
requirements. This definition includes inbound, outbound, internal, and external movements.
• Logistics involves getting
… the right product
… in the right way
… in the right quantity and right quality
… in the right place at the right time
… for the right customer at the right cost

9
 What is Logistics?

• For example, the right customer: in many industrial locations today typically
many different companies will be co‐located on the one site.
• Even on the one production line there may be various subcontractors
collaborating with the manufacturer and there will be clear demarcation lines
with regard to who has ownership of what, where and when.
• Therefore getting the product to the right place may be only half the journey; the
challenge would be to get it to the right customer at this right place.

10
Supply Chain Management (SCM)
• Supply Chain was
fragmented during the 1960s
and 1970s, meaning that
various functions of it that we
see today were thought to be
separate and distinct from
each other, and thus, had to
be managed differently.
• It wasn’t until 1980s and
beyond that SCM is
integrated into one uniform
concept.
Evolution of integrated Supply Chain
11
 What is Supply Chain Mgt?

Supply Chain is the network of organizations that are involved, through upstream
and downstream linkages, in the different processes and activities that produce
value in the form of products and services in the hands of the ultimate consumer.

SCM was originally introduced by

consultants in the early 1980s and, since
then, has received considerable attention.
The supply chain is a much wider,
intercompany, boundary‐spanning concept,
than is the case with logistics.
Figure. 1 The evolution of the integrated supply
12
chain
 What is Supply Chain Mgt?

Supply chains encompass a number of key flows:

• Physical flows of materials
• Flows of data and information that inform the supply chain
• Resources (especially finance, but also others such as people and equipment)
which help the supply chain to operate effectively. Furthermore, not all
resources in the supply chain are tangible, for example good quality
intercompany relationships are often cited as a highly important – yet intangible
– ingredient of effective supply chains.

13
 What is Supply Chain Mgt?

Definition by Prof. Martin Christopher: Supply chain management (SCM) is

the management of a network of relationships within a firm and between
interdependent organizations and business units consisting of material suppliers,
purchasing, production facilities, logistics, marketing, and related systems
that facilitate the forward and reverse flow of materials, services, finances and
information from the original producer to final customer with the benefits of adding
value, maximizing profitability through efficiencies and achieving customer
satisfaction.

14
 What is Supply Chain Mgt?

SCM involves taking an ‘end‐to‐end’ perspective depending upon the sector

being looked at and terminology are used:
• Farm to fork (Food)
• Sketch to store (Clothing)
• Dust to rust (Cars and Machinery)
• Teeth to tail (Military)
• Spore to store (Mushroom industry)

15
 DISTINGUISHING LOGISTICS AND SCM

• Traditionalist view: SCM is a subset of logistics, as if it were an add-on to

logistics.
• Re-labelling view: logistics has been re-labelled by the more recent term
SCM. Indeed it is worth noting here that sometimes transport gets re‐labelled
as logistics, for example the authors have observed heavy goods vehicles
(HGVs) where the word ‘logistics’ is painted over the word ‘transport’ on the
side of the vehicle! Becoming a professional logistics company requires more
than just a name change.

16
 DISTINGUISHING LOGISTICS AND SCM

• Unionist view: logistics is seen as part of a wider entity, SCM. the supply
chain is a much wider, intercompany, boundary‐spanning concept, than is
the case with logistics.
• Intersectionist view: there is overlap between parts of both logistics and
SCM, but also that each has parts that are separate and distinct.

17
 DISTINGUISHING LOGISTICS AND SCM

Figure 2 Four perspectives on logistics versus SCM (Source: Larson, P. & Halldorsson,
A. 2004; reproduced with permission of Taylor and Francis.)

18
 DISTINGUISHING LOGISTICS AND SCM

Figure 3 Logistics is a key component of Supply Chain Management

19
 Evolution of
Logistics and SCM
• Not only are logistics and SCM key aspects of today's business world, but they
are also of importance in the not‐for‐profit and public sectors. In addition, while
the origins of much logistics thinking and practice are in a manufacturing context,
we are witnessing increased and highly successful application of logistics
and SCM principles in a services context also (just think of the efficiencies
which have been driven into many service‐based activities such as banking and
hospitals where the emphasis has shifted to serving more customers, better,
faster, cheaper).
• Six separate and important developments, each of which evolved largely
independently, can be identified and are detailed.
20
 Evolution of
Logistics and SCM
1. Reduced transport intensity of freight
Higher value freight is better able to ‘absorb’ transport costs than is lower
value freight, with the ‘transport cost penalty’ imposed by having to move
freight over greater distances often being somewhat offset by the fact that
the freight is of higher value. Hence, we refer to a generally reducing
transport cost sensitivity of freight.
2. Falling product prices
Increased competition and falling prices, particularly in electronics and
automobiles, have pushed companies to cut costs. As product quality
improves but prices remain flat or decline, businesses are focusing on
reducing storage and transportation expenses. They aim to configure
products, including design and packaging, to minimize transport costs,
especially for items with decreasing value.
21
 Evolution of
Logistics and SCM
3. Deregulation of transport
Transport plays a key role in logistics, with five main modes: air, road,
water, rail, and pipeline (plus the Internet as a sixth mode). Many
countries have deregulated transport markets, aiming to reduce prices
and improve services by increasing competition. While results vary,
deregulation has generally led to cheaper and more efficient transport
services, making global freight movement easier.

4. Productivity improvements
Before the mid-1950s, most maritime freight was carried on bulk
vessels, but this changed with the introduction of containerized
transport by Malcom McLean in 1956. Containers allowed for
efficient space utilization, easier handling across multiple transport
modes, and reduced costs.
22
 Evolution of
Logistics and SCM

5. Emphasis on inventory reduction

A major trend in recent decades has been the shift in management focus
toward analyzing where funds are tied up, revealing poor inventory
management in many firms. Historically, inventory functions like
transport, warehousing, and purchasing were handled separately, but
companies began integrating these areas to achieve cost savings and
efficiency. With rising competition and customer demands, improved
inventory management, including just-in-time (JIT) deliveries, became
essential for firms to gain a competitive edge and respond flexibly to
market changes.

6. Change in company structure

Recent trends show companies becoming less vertically integrated and more specialized, with outsourcing playing a key role.
Functional or silo-based thinking is being replaced by more integrated operations across departments. Time-based competition,
23
such as order-to-delivery speed, has become crucial for success. These trends have emphasized the importance of transport and
 Evolution of
Logistics and SCM
6. Change in company structure
• Recent trends show companies becoming less vertically integrated and more
specialized, with outsourcing playing a key role.
• Functional or silo-based thinking is being replaced by more integrated
operations across departments. Time-based competition, such as order-to-
delivery speed, has become crucial for success. These trends have emphasized
the importance of transport and inventory, contributing to the supply chain
revolution.
It's also important to distinguish between freight (goods) and cargo (freight + mail),
with mail remaining vital for trade. A consignment refers to goods shipped from the
consignor (sender) to the consignee (receiver).

24
 THEORY DEVELOPMENT IN LOGISTICS AND SCM
• As the disciplines of logistics and SCM have developed they have received increasing attention
from researchers.
• Collins English Dictionary: A theory is a set of ideas, or suppositions, to explain something. Many
theories used in LSCM research are rooted in other disciplines such as Economics (e.g.
transaction cost economics (TCE)) and Business Strategy (e.g. resource‐based view).
• Some scholars have proposed additional theories that supply chain researchers can use to help
address supply chain phenomena.
• Other scholars too – such as Britta Gammelgaard from Copenhagen Business School and
Theodore Stank at the University of Tennessee – have noted that while general, or grand, theories
will of course always be important, so‐called middle range theory (i.e. theories that are concrete
and specific) that delves deeply into the inner workings of logistics management is also needed.

25
 THEORY DEVELOPMENT IN LOGISTICS AND SCM
An example of theory development in SCM is that of Craig Carter and colleagues at Arizona
State University who – using a conceptual theory building approach – introduced six
foundational premises (FPs) as a basis for a theory of the supply chain:
• FP1 – The supply chain is a network, consisting of nodes and links.
• FP2 – The supply chain as a network operates as a complex adaptive system, where
every agent grapples with the tension between control and emergence.
• FP3 – The supply chain is relative to a particular product and agent.
• FP4 – The supply chain consists of both a physical supply chain and a support supply
chain.
• FP5 – The supply chain is bounded by the visible horizon of the focal agent.
• FP6 – The visible horizon of the focal agent is subject to attenuation, where distance is
based on factors including physical distance, cultural distance and closeness centrality.
26
 APPLICATIONS TO MANUFACTURING AND SERVICES

 Manufacturing
• Much of the early application of both logistics and supply chain thinking has been in a
manufacturing context.
• It is now generally agreed that for those who take a supply chain view, two dimensions of
value often arise, namely cost savings and service enhancements.
• This is evident in the Dell where the PC maker uses robust logistics strategies and
competes using its entire supply chain. Not only does Dell sell relatively cheap PCs, but it
also competes on the basis of certain service attributes (for example the ability for
customers to purchase their products online and the fast delivery of purchased products to
customers).

27
 APPLICATIONS TO MANUFACTURING AND SERVICES

 Manufacturing
• More and more then manufacturers are using service criteria (for example after sales
service and delivery add‐ons) in order to compete. Such has been their success that now
many service companies are waking up to the advantages that can be gained from
adopting best‐in‐class logistics practices and taking an end‐to‐end supply chain view.

28
 APPLICATIONS TO MANUFACTURING AND SERVICES
 Healthcare
• In the healthcare sector, for example, expensive increases in medical technology and
increasing life expectancy are leading to greater demands on healthcare services with
hospitals striving to offer better services at less cost.
• The average length of stay of patients within hospitals is declining, partly due to
technological advances in healthcare, but partly also because increasingly hospitals take a
more holistic supply chain perspective on all aspects of patient care and also increasingly
apply core logistics principles to their everyday activities.
• By eliminating unnecessary blockages and delays (for example by ensuring that
required expertise in terms of medical skills and equipment is available when needed),
patients get faster access to a range of services allowing them to get better sooner and
leave hospital earlier, thus leading to improvements in whole system efficiency.
29
 APPLICATIONS TO MANUFACTURING AND SERVICES
 IKEA
The Scandinavian home furnishings retailer IKEA is a good example of a company that uses best
practice logistics and SCM in the manufacturing and services aspects of its business. Many
products are manufactured for self‐assembly by the customer. They are ‘flat packed’, making them
easier to ship and store. Self‐assembly is generally straightforward, with many products comprising
components which easily assemble together. Even the instruction leaflets often have no words,
only pictures, cutting down on the need for copies in multiple languages. Its network of worldwide
stores are usually easily accessible and have similar layouts, making the shopping experience as
easy and user friendly as possible for customers.

30
 APPLICATIONS TO MANUFACTURING AND SERVICES
 TRIAGE
The concept of triage, originally devised by the French military, is now widely applied in medical
emergency situations. Triage involves rapid assessment of patient needs and thus allows those
most in need of care to be attended to first. The concept has evolved considerably and has moved
beyond merely deciding between those who are critically ill and those who are not, into an activity
which tries to match patients with the right care stream. This may involve various downstream activities
from trauma care to bypassing hospital emergency departments completely and going straight to an
appropriate community care facility. Importantly, more recent applications of triage involve not just
assessment once the patient reaches the hospital, but also triage at other upstream points of contact
(for example via telephone or when an ambulance first arrives at an accident scene). Medical triage is
a good example of the application of logistics thinking in a services context and is especially relevant
given the pressures on many modern healthcare systems.
31
 APPLICATIONS TO MANUFACTURING AND SERVICES
 TRIAGE (Con’t)

Source: https://medium.com/@saljanssen/triage-9f593c8bb17b
32
Thank You

33