SCM Innovation and Optimization Material

Master in International
e-Supply Chain
Management
Module: SCM Innovation and

Optimization
03/02/2017
BEBS Barcelona Executive Business School
Professor Javier Penelo
Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Telfono: +34 93 788 85 99 www.bebs.org
Table of Contents
1. Introduction ....................................................................................................... 3
2. The Operation Pipe ............................................................................................ 4
3. Competing starting from the Operations ............................................................ 5
4. The Key Success Factors within the Operation Pipe ............................................. 7
5. Defining our Operation Model ......................................................................... 10
6. Outsourcing and its Types, Onshoring, Offshoring, 3PL, 4PL, SCM Selection and
Integration ............................................................................................................. 15
7. Foreign direct investment (FDI) ........................................................................ 21
8. SCM Effective Management ............................................................................. 26
9. SCM Planning and Control................................................................................ 31
10. E-logistics: ICTs contributions, e-Business, e-Commerce .................................... 32
11. SCM and e-SCM, Planning, Process and Information, Flow Management, SCM
Software ................................................................................................................ 34
12. Scheduling, WMS/SGA, CRM, Cloud computing, Mobility ................................. 39
13. References ....................................................................................................... 48

1. Introduction
Currently, innovation is one of the strategic pillars of every organization,

essential to guarantee its medium-term competitiveness.
But innovation is not having a good idea (by chance or inspiration) and that's it,
it's much more than that, it comes to be able to generate good ideas
systematically and take advantage of them in the form of products and/or
services commercially successful.
The term innovation is usually related to the market introduction of new (or
significantly improved) products or services (product or service innovation).
However, besides product innovation, there are other ways of innovation that
can have a big impact on the competitiveness of our company.
Another way of innovating is to change the way we do things within the

company (process innovation). For instance: improve production processes can
reduce manufacturing cost (improving margins) or improve the service to the
customer (shorter delivery times, better quality).
Another example of innovation is to redefine or add new management

processes (management innovation). This way of innovating is about improving
procedures or adding new ones in order to organize a more systematic and
efficient operations, including internal procedures such as purchasing, quality
control, security, but also those related to suppliers management, marketing,
customers service or how to take advantage of new information and
communication technologies (ICTs).
In this document, we will focus on the meaning and importance of innovation

and improvement of operations along the supply chain, through the creation (or
review) of a new operations model sustainable, competitive and flexible enough
to adapt to such a volatile environment like the one we face.
Naturally, when it comes to optimizing our operating model and improve supply
chain efficiency, we have to talk about key points such as outsourcing, foreign
direct investment (FDI) and, of course, about the impact that ICTs have had in
supply chain management.

2. The Operation Pipe
It is usual to talk about "operations" or "operations management" in the
literature related to business management. However, the term "operations" is
not always clearly defined.
A simple and useful way to explain what means "operations" and therefore to
represent an operating system, is to use the analogy of the "operations pipe" or
operations tube (Moscoso P., Lago, A., Sachon M., 2009). Products or
customers flow through the tube, where the transformation and value-adding
activities take place (see Figure 1).
Operations Pipe
1. Activities
2. Items
3. Processors
Figure 1. Elements of an operating system
In any operating system we must consider three basic elements:
Items: All elements that are processed and flow through the system (tube).
They can be people, products, parts, files, information, etc.
When an item comes into the process we call it input, and when it leaves the
process output. Processors of the system will operate the sequence of
activities pre-assigned to each item (always in the defined order).
Activities: Elementary transformation or processing units (specific for each

item). Through these activities and using processors, the system adds value to
the items which we process.
Processors: Elements of an operating system capable of performing the

activities in items. For instance: labor, machinery, equipment, etc.
A processor may perform one or more activities in the process.
Given the above, we define "operations" as those parts of the organization that
creates and/or provides products or services to their customers.

Every organization produces a mixture of products and services, therefore
every organization has an operations function, which uses resources and
processes available to transform inputs into outputs to its customers, this is
called operating model "input-processing-output" (Slack N. and Lewis M., 2002).
3. Competing starting from the Operations

Operations management has five major purposes in order to contribute to the
success of an organization:
Increase sales, promoting customer satisfaction through its ability to

provide exceptional quality, ability to respond (responsiveness), reliability
and flexibility.
Improve production costs of goods and services, increasing efficiency in
the transformation of inputs into outputs.
Improve the working capital necessary to produce the type and quantity of
products/services required. This can be achieved by improving the effective
capacity of resources and being innovative in the way in which physical
resources are used (for instance, reducing stocks).
Reduce risk associated with operations and promote resilience (ability to
recover after failure in any process).
Provide the basis for future innovation, building a solid base of
operations based on skills, competencies, and knowledge.
When an organization manages their resources and materials/information flows,
it is managing operations. This management can contribute significantly to the
success of the company, provide what it needs to endure and prosper over
time; for example, with innovative products, better customer service, lower
costs, unique skills, etc.
Therefore, competitiveness can be improved through good management

operations. Good management operations need to deploy an operations model
that responds efficiently and meets the needs of customers. Anyway, whatever
the strategy, it is increasingly necessary to innovate intensively in operations if
you want to be competitive (Meredith J., 2001).
Competitive factors
Operations management must meet the requirements of customers/market in

terms of quality, time, reliability, flexibility and costs.
Quality: Provide products according to (or even exceeding) customer

specifications through consistent operations.

Time: Deliver our products or services at the moment required by the
customer.
Reliability: Proving to your clients that you are reliable by doing what you
say 100% of the time is one of the most fundamental aspects of customer
retention.
Flexibility: The organization must be capable of adapting itself to the
customer needs and its variations, and be able of changing volumes,
composition or timing of the orders or even the groups or product ranges
offered.
Cost: Reducing cost make us able to offer the same quality product as our
competitors, but at a lower price (or getting a higher margin)
In recent years companies have been fighting looking for a greater efficiency
in order to maintain the same customer service level with a lower cost or
trying to improve the service with no cost increase. The goal? Increase the
organization competitiveness to keep (or improve) its position in the market,
which is getting more and more complicated in an increasingly globalized
world.
This is the puzzle to be solved daily by the operations function, besides
ensuring that the production plant works properly and supply chain is not
interrupted.
The ability to respond to new demands from our customers is what determines
the competitive advantage of every company. Currently, customers demand
quality products (or services), with a high customization and with a very short
delivery time, but of course keeping a reasonable price. That means a huge
effort for every organization in terms of organization, efficiency, and flexibility.
Optimize processes and create value
In this context, Operations and Supply Chain functions play a decisive role:
ensure accomplish what promised to customers and provide a unique buying
experience and in addition, in an efficient way.
Effectiveness and efficiency are the key parameters for the operations
management, every organization must develop a strategy looking for the perfect
balance between both. What does mean? It means that we have to add value to
the customer, but not at any price (we must control the accounts but taking into
consideration that numbers are not the only thing).
To achieve this difficult balance, and more in an economic situation like the
present one, it is more important than ever understand the customer needs and
what he values the most, in order to focus the efforts and resources of the
whole organization there. Depending on the market, the customer the most
important can be a short delivery time, or a high quality, or a low price

Explore New Business
However, not everything is about effectiveness and efficiency, the organization

needs also generating new business from innovative solutions in order to
ensure future of the company.
For instance, the company Ferrovial, after developing a technology capable of

measuring energy losses of buildings, proposed to several companies to
rehabilitate their facilities for free, getting its payment from energy savings
obtained.
4. The Key Success Factors within the Operation Pipe

Studying the worlds most successful companies for decades, business
consultants and authors have analyzed the most successful companies in
America and the world and attempted to define what separates the winners
from the losers. Almost daily someone will come up with his or her own list of
what he thinks are the main factors for success, here we will mention 5 Key
Success Factors, all connected in a powerful system (Buck E., 2011).
Over time it became apparent that many of these consultants and authors were
saying basically the same thing, just using different language. Thats because
the Key Success Factors for any organization are directly related to what an
organization is, and how it operates in the world. Its sort of like saying that to
survive as a human you need food, water, the right temperature range and
protection from danger. Once you understand what an organization needs to
survive, you can better understand the Key Success Factors.
Essentially five things are needed by any organization wanting to succeed:
1. People: Those who make up the organization

2. Purpose: A reason for organizing and working together
3. Processes: Operations, activities which the people undertake to fulfill their
purpose
4. Physical Resources: A place to work, the right equipment, money to pay
the bills and the people who work there, etc.
5. Customers: People outside the organization who are willing to pay money
in return for the products and/or services the organization provides.
But its not just the existence of these five basic factors that enables success, it
is what you do with them. It is the same as having a body, it will not make you a
successful athlete, you have to train, learn the skills, practice, eat right, sleep
enough and much more. So, how we can translate these five basic needs into
5 Key Success Factors?

ENVIRONMENT
CUSTOMERS
STRATEGIC
FOCUS
PHYSICAL OPERATIONS
RESOURCES MANAGEMENT
PEOPLE
ORGANIZATION
Figure 2. Success Factors
1. Managing and developing people

People today want some direction and structure, but they also want freedom
and encouragement to develop their skills and knowledge. Effectively
managing people requires balancing constraining forces (providing direction,
structure, organization, some rules) with liberating forces (encourage
personal growth, development, and creativity). If you as manager/leader err
too much in one direction or the other, your organization will be either too
rigid or too chaotic. To make it more complicated, each person has a
different set of needs for structure vs. freedom, order vs. opportunity, logic
vs. personal values, factual information vs. meaning and connections, and
so on. Effective managers do not manage all people the same, except for
some basic rules. They manage each person according to what he or she
needs, what motivates them to do their best. This can be complicated but is
essential for success.

2. Strategic focus
In todays rapidly changing world, its not just enough to have a purpose for
existing. Leaders have to prioritize and focus the organizations resources
on the greatest opportunities, which can change very often. Major customers
or income sources can change or even go out of business at any time. So
its necessary for leaders to keep focused on the desired end results such as
increased sales and profits, or more satisfied customers, while constantly
steering the organization across the stormy waters of the marketplace.
3. Operations management
What the people in your organization do day in and day out to create value
for customers, to earn or justify income, strongly determines whether you
succeed or fail. Like the other Top 5 Success Factors, you cant separate
operations from strategic focus which gives direction, people who do the
work, customers who pay the money and physical resources to do the work.
This is why communication is the true lifeblood of a successful organization,
a high flow of information in order to connect everyone and everything.
Effective operations ensure that customers get exactly what they want at the
right time, the right price and the right quality. Thus effective operations
management focuses on lead time, cost and quality control (with the
corresponding measurements, indicators)
4. Physical resources
Finances, facilities, and equipment are the big 3 physical resources. If you
dont have enough money, you cant start or sustain an organization. In
addition, usually providing adequate facilities and equipment to people is
one of the biggest expenses.
Experienced managers learn that cash flow is the key. It doesnt matter how
much customers owe you, the important thing is when their money enters
your bank account and can be used by the organization. A non-effective
management of cash flow is one of the most common reasons for business
failure.
5. Customer relations
Customers are the raison d'etre of the organization, the beginning and end
of our operations (and where the money comes from), so in many ways, this
is the most important success factor. As the famous business guru Peter
Drucker said years ago, the purpose of a business is to get and keep
customers.

Getting customers involves marketing (indeed this success factor includes
all kinds of marketing and sales). The key to successful customer relations is
to give them what they need, not just what you want to sell. Effective sales
and marketing begin with a good understanding of what customers need,
what problem they want solved or deficiency filled. By keeping in touch with
customers and asking these questions very often, you will improve customer
loyalty and keep competitors away. Relations with customers can be
considered as the organizations relationships with the external world, but
not the only one, providers and other environmental parameters interact with
our operations.
5. Defining our Operation Model

In order to find a sustainable competitive advantage for the company, we must
define how we will work, how we will be organized, and which actions
envisaged in the strategic plan are aimed at creating value through the
production process of goods or services increasing quality, productivity,
customer satisfaction and reducing costs.
Operations model must be defined customized for each company, depending

on its intrinsic characteristics, resources, industry, market and other unique
variables. However, as the economic, political and social environment are
factors that strongly influence the development of the strategy, it is possible that
at a certain time some organizations are oriented towards common strategies.
For example, after World War II, US companies focused on standardized mass
production to cover a large unmet demand for products. However, Japanese
companies, in order to attend the depressed local market and therefore with the
need of opening new markets outside its borders, aligned to produce quality
items at a lower cost through more efficient processes applying new
optimization techniques (what we know today as Lean Manufacturing).
In its simplest form, an operating model dictates where and how the critical work
gets done across a company (see Figure 3). It serves as the vital link between a
companys strategy and the detailed organization design that it puts in place to
deliver on the strategy. But what many companies have learned is that its
necessary to define a consistent and appropriate operating model before
making detailed changes to an organizations design.

Figure 3. Operating models are a critical link between strategy and detailed
organizational design
Imagine that you want to build a house. You would likely start with a vision for
the lifestyle you want to live and the activities that matter most to you. You
would think about how much space you need and what you can afford. If you
have a large family and enjoy cooking, you would likely dedicate space
differently than if you had a passion for film or cars. Think of this as your house
strategy. If you started purchasing countertop materials or sofas based only on
that strategy, you would probably make costly errors. Before that, you need to
figure out a floor plan, the flow of the house and how different rooms would be
used. Think of an operating model as that floor plan and flow. It needs to be in
place before you make detailed design decisions.
It is common that companies competing in similar sectors, markets,

environment have 70% of their respective operating models look remarkably
similar. For example, many consumer goods companies have centralized their
supply chain and IT functions and have moved manufacturing to the most cost-
effective locations. But the 30% of the operating model that is different (the
companys particular strategy, portfolio, and culture) can make or break the
company. The best operating models suit a companys unique profile: its
categories and brands, strategy to win, culture and heritage (see Figure 4).
Most important, winning companies adapt their operating model to their

repeatable routines for success (how they apply their core assets, greatest
strengths and processes in new contexts) thereby generating further growth
and profits.

Figure 4. The right model will vary based on the nature of the companys
Even within the same category, there can be widely different operating models.
Pernod Ricard and Diageo both compete in alcohol-based spirits, but each has
a different brand and selling approach. Diageo developed a few big global
brands. Pernod has a relatively larger collection of smaller local brands, and
even for its global brands, the company permits more local customization. As a
result, the two companies developed different operating models. A far more
centralist model at Diageo helps the company make the most of its scale. A far
more decentralized model at Pernod provides the flexibility to meet local needs.
Each model is appropriate not only for each companys unique strategy but also
for their brand development, differentiated capabilities, and culture.
Design Principles
Definition of an operating model starts by describing the strategy in sufficient

detail that one can articulate a set of design principles: Design principles are
simple specific statements defining what the organization must do to enable
execution of the strategy.
Effective design principles should be concise and clear; for example: Facilitate
integration of future acquisitions; Enable the creation and delivery of solutions
instead of standalone products; Enable a lower-cost position.
These principles also provide the criteria for testing and adjusting the model
over time, bringing objectivity to what can be a politically charged process.
Practical use of design principles comes when a senior executive team

evaluates different operating model options.
Example:
One service company had spent a decade acquiring businesses to build a
global powerhouse, but its operating model did not fully leverage the companys
scale or global capabilities in activities such as common purchasing or
branding. The executive team split into two factions, one arguing for a strong
country-based model while the other pushed for a more centralized model.
So the team drew up and aligned on, seven principles aimed at improving local
strength and flexibility while using a global scale to better advantage. Based on
those principles, senior leaders could objectively evaluate four operating model
options (see Figure 5), and the process allowed them to make a clear choice of
a matrix model with functions leading in select areas where scale and expertise
mattered, such as procurement and branding.
Figure 5. Design principles provide the basis for evaluating operating model
alternatives
Essential Areas to be defined
Based on the design principles, the operating model takes shape through
choices in five areas (Blenko M., Garton E. y Mottura L., 2014):
Structure: It involves drawing appropriate boundaries for lines of

business and defining shared services, centers of expertise and other
coordinating mechanisms that allow a company to leverage scale and
expertise. It also specifies the size and shape of the organization with
indicative resource levels and locations. Think of this high-level org chart
as the hardware of the operating model, with the next four dimensions
serving as the software that makes the hardware run.

Accountabilities: It describes the roles and responsibilities of the main
organizational entities, including ownership of P&Ls and a clear, value-
adding role for the corporate center. There should be clear guidelines for
the roles each organizational unit will play in critical decisions. A rewards
framework linked to these accountabilities reinforces strong execution.
Governance refers to executive forums and management processes that

yield high-quality decisions on strategic priorities, resource allocation,
and business performance management. A management dashboard with
the key metrics keeps the focus on the companys top priorities.
Ways of working describe the expected cultural norms for how people
collaborate, especially across the boundaries between functions or
teams. This dimension goes beyond communicating values such as
trust and respect to being explicit about which behaviors make for
effective decisions and execution. Establishing an appropriate decision-
making style (through consensus, a single point of accountability or
another approach) provides an important context for behaviors.
Capabilities refer to how the company combines people, process and

technology in a repeatable way to deliver desired outcomes. Where
capabilities lead the design, all other aspects of the operating model
must support them. In many other situations, the redesign looks first at
structure and accountabilities that can only operate with the appropriate
talent, processes, and systems in place. In either situation, the elements
are highly interdependent.
Do you need to modify your operating model?
Sometimes its obvious that you need to adjust an operating model when, for
instance, your company changes significantly its strategy or makes a major
acquisition. At other times, though, its less clear.
Several questions can serve as leading indicators that a partial or full redesign
of the current operating model may be needed:
Do you persistently see execution gaps between your strategic ambitions

and business results?
Are you set up to capture your biggest growth opportunities?
Are you able to consistently meet the needs and priorities of target
customers, or does your organization get in the way?
Have complexity or costs grown faster than you can mitigate them within the
current model?
Do you make decisions at the pace required by the market, or are you held
back by a constant swirl of revision?
Do you have the key capabilities, including talent, that you need for future
success, and will your model help deepen the capabilities that matter most?
Do your leaders commit the right focus and time to the top strategic
priorities?

Do you have a culture of accountability and collaboration to enable you to
execute effectively?
If the answers to some of these questions cause concern, then it could be time
to revisit your operating model to ensure it is providing a sturdy bridge between
your strategic ambition and execution.
6. Outsourcing and its Types, Onshoring, Offshoring, 3PL,

4PL, SCM Selection and Integration
In the 19th and early 20th centuries, companies did not use Outsourcing as a
business practice like today; in fact, outsourcing was not even formally identified
as a business strategy until 1989. The only type of Outsourcing that really
occurred during this period was when companies hired external suppliers for
ancillary services. This early Outsourcing only occurred because most
organizations were not completely self-sufficient; they outsourced the functions
for which they had little to no competency internally.
Outsourcing as a business strategy only started to emerge during the Industrial

Revolution. The way of doing business was changing and a growing market
created a need of increasing production volumes, bringing benefits like never
before. This led more and more managers to discover benefits of outsourcing
and companies started to externalize accounting, insurance, engineering, and
legal needs of specialized firms. At this point in time, outsourcing to such
specialized firms only took place within the home country, unlike today where
offshoring is a popular business practice.
Support services were the next round of outsourcing services. By the 1990s,
organizations began to focus more on cost-saving strategies. This entailed
functions necessary to run a company, but not specifically related to the core
business. Here, managers contracted emerging specialized companies to
deliver services such as human resources, data processing, internal mail
distribution, security or maintenance work. These specific outsourcing services
are still highly relevant today.
Today, outsourcing is taking over the business environment. Companies and

businesses can virtually outsource any business function (legal, accounting,
administrative, IT, help desk, manufacturing). This massive demand for
outsourcing company is tied to one huge factor: cost-saving, as well as tons of
other benefits such as competitive advantage and leveraging skills that are
lacking in-house.
Types of outsourcing
There are many different types of outsourcing, often grouped into four main
categories depending on the kind of service involved: professional,
manufacturing, process-specific and operational outsourcing.

Professional Outsourcing
The business functions listed under professional outsourcing services

include legal, accounting, information technology, purchasing, as well as
other specialized services. Outsourcing in these areas is very popular
because it can give a company access to high-quality resources without
paying beyond the services used. This substantially reduces the
organization's overhead costs.
Manufacturing Outsourcing
This type of outsourcing service is often industry-specific in its nature. A

typical example is a car manufacturing company that can decide to contract
an outsourcing service for making and installing windows in their
automobiles. The biggest advantage that comes from using manufacturing
outsourcing service is cost saving, plus decreased assembling time.
However, there are also some concerns such as quality issues and potential
stops in production line if the supplier fails.
Process-specific
Outsourcing service can also be specific to an internal procedure or unique

process. In many cases, it is more cost-effective to have different parts or
components manufactured by other companies. This simplifies the assembly
process, reducing costs and the total amount of time required to create a
complete unit.
This is also a suitable option for service organizations where the specific
areas of the service can be contracted to another organization so that the
business can concentrate on the core areas of the service. A typical
example is a bakery company; here, the delivery aspect of the business can
be outsourced to a distribution company, providing it with customer contacts,
delivery contacts as well as costs. This type of business arrangement allows
each company to focus on its respective strengths and improves customer
service.
Operational Outsourcing
This type of outsourcing arrangement is common in the manufacturing

industry. This is because there are tons of specific operational functions
required in the manufacturing industry (cleaning, landscaping, facilities
maintenance and property management). For instance, equipment repairs
and machine maintenance can be easily outsourced to a specialized
company.

These types of outsourcing services can also now be found outside of the
country. Today, companies from all around the world outsource to specialized
units, organizations, and individuals from all over the globe. This type of
outsourcing can be referred to as offshoring, nearshoring or reshoring
depending on the location.
Onshoring, Offshoring, and Nearshoring
The key difference between these three terms is based on the location of
outsourcing.
Onshoring
Onshoring refers to the relocation of business processes to a lower-cost

location inside the national borders.
For decades, "outsource offshore" has been the cost-cutting referent of the
business world (mainly because of lower labor costs). But lately, that trend
has changed a bit.
There are many reasons for this shift. First, wages in China and India (most
common locations for offshore outsourcing) are on the rise, which lowers the
labor savings associated with offshoring. Without the advantage of cost
savings, the disadvantages of outsourcing (long delivery times, transport
cost, quality issues) at such a physical and cultural distance have a
greater net effect on companies. It's no wonder more companies are
choosing to restore (transfer of a business operation back to its home
country) more of their own operations, as well as the functions they
outsource to other businesses.
Offshoring
The practice of offshoring means having the outsourced business functions

done in another country.
Sometimes outsourcing is used as a strategic way to enter new markets and

tap talent unavailable domestically, or as an attempt to overcome current
regulations within the home country that prohibit certain activities, but the
main reason for offshoring is to reduce labor expenses. India, Indonesia,
and China have emerged as dominant countries for outsourcing offshore.
Nearshoring
A recent and rapidly growing outsourcing trend is the process of

nearshoring. Rather than restore services back to the US, companies have
begun to move business functions to a country geographically closer with a
closer time zone or economic structure to the company's home country.
Basically, nearshoring combines the benefits of outsourcing offshore and the
benefits of reshoring to create a strategy that cuts costs and improves
services.
Clear examples are countries such as Cost Riva, Colombia, Chile and
specially Mexico, Brazil and Argentina (even with some political, economic
and social risks), dominant players in this type of Outsourcing for US
companies. Proximity to the US offers lower costs, greater speed-to-market,
and ease of doing business like shorter travel times and no early or late
work hours.
3PL, 4PL and SCM Integration
This acronym corresponds to Third Party Logistics and Fourth Party Logistics
respectively, and the concept behind it is the outsourcing of logistics processes
of a company.
Third Party Logistics (3PL)
The Council of Supply Chain Management Professionals glossary defines

3PL as follows:
Outsourcing all or much of a companys logistics operations to a specialized

company. The term "3PL" was first used in the early 1970s to identify
intermodal marketing companies (IMCs) in transportation contracts. Up to
that point, contracts for transportation had featured only two parties, the
shipper, and the carrier. When IMCs entered the pictureas intermediaries
that accepted shipments from the shippers and tendered them to the rail
carriersthey became the third party to the contract, the 3PL. The definition
has broadened to the point where these days, every company that offers
some kind of logistics service for hire calls itself a 3PL. Preferably, these
services are integrated, or bundled, together by the provider. Services they
provide are transportation, warehousing, cross-docking, inventory
management, packaging, and freight forwarding. In 2008 legislation passed
declaring that the legal definition of a 3PL is A person who solely receives,
holds, or otherwise transports a consumer product in the ordinary course of
business but who does not take title to the product.
Third-party logistics providers facilitate the movement of parts and materials

from suppliers to manufacturers, and finished products from manufacturers
to distributors and retailers. For instance: freight forwarders, courier
companies and any other company integrating & offering subcontracted
logistics and transportation services
This model can be associated directly with hiring a logistics operator (Sole
Sourcing strategy) for storage, transportation, and distribution of goods to
name just a few examples of typical processes that are outsourced to these
companies. Normally a new figure in the organization is created, the Chief
Resources Officer (CRO) whose job is to manage the outsourcing instead of
managing own logistics processes.

The advantages of this type of model can be summarized in cost
competitiveness, lower investment than with own logistics (in many cases),
possibility of global presence and no geographical nor language barriers,
proposed added value for customers and obtaining support from a logistics
specialist. On the other hand, the disadvantages are the same as in almost
all outsourcing processes: loss of control and risk of captivity.
In most of the world, this type of model has been widely adopted by
organizations conducting e-commerce activities. However, nor everywhere,
in the special report recently published by the consultancy DBK, a study
from 150 interviews with Spanish companies that make electronic commerce
shows that only 4% have outsourced the management to logistics operators
of this type.
Fourth Party Logistics (4PL)
The Council of Supply Chain Management Professionals glossary defines

4PL as follows:
Differs from third party logistics in the following ways; 1) 4PL organization is
often a separate entity established as a joint venture or long-term contract
between a primary client and one or more partners; 2) 4PL organization acts
as a single interface between the client and multiple logistics service
providers; 3) All aspects (ideally) of the clients supply chain are managed by
the 4PL organization, and 4) It is possible for a major third-party logistics
provider to form a 4PL organization within its existing structure.
However, 4PL was originally defined by Accenture as a trademark in 1996

and defined as "A supply chain integrator that assembles and manages the
resources, capabilities, and technology of its own organization with those of
complementary service providers to deliver a comprehensive supply chain
solution.", but is no longer registered.
4PLs have also been referred to as "Lead Logistics Providers". Now a new
crop of companies has emerged who are actual transportation companies
too. While a 4PL is sometimes described as a non-asset-owning service
provider, their role is to provide broader scope managing of the entire supply
chain.
The goal of a 4PL is to outsource supply chain from an operational, tactical

and strategic point of view. That is, from transport to indicators
management, through warehousing and inventory management, but
including also the design of processes and technology strategy. The 4PL is
an integrator of the supply chain: it advises, designs, builds and implements
global solutions.
The 4PL combines the capabilities of 3PLs, suppliers of technology services

and business process managers. Traditionally, 3PLs have focused only on
the operational side, a consulting companies on the strategic split. And the

controversy has arisen here in recent times, who should assume the role of
4PL? A logistics operator who internalize the part of strategic consulting? Or
a consulting company who also take also the operational role?
Other logistic layers
In the "PL" terminology, it is important to differentiate the 3PL vs. 4PL from
the other logistics layers:
Figure 6. Logistics Layers and SCM Integration
First Party Logistics (1PL): Concerns beneficial cargo owners which can
be the shipper (such as a manufacturing firm delivering to customers) or the
consignee (such as a retailer picking up cargo from a supplier). They dictate
the origin (supply) and the destination (demand) of the cargo with
distribution being an entirely internal process assumed by the firm. With
globalization and the related outsourcing and offshoring of manufacturing,
distribution services that used to be assumed internally tend to be
contracted to external service providers.
Second Party Logistics (2PL): Concerns the carriers that are providing a
transport service over a specific segment of a transport chain. It could
involve a maritime shipping company, a rail operator or a trucking company
that is hired to haul cargo from an origin (e.g. a distribution center) to a
destination (e.g. a port terminal).
Now, along comes the 5PL who sometimes define themselves as

broadening the scope further to e-business.

7. Foreign direct investment (FDI)
Foreign direct investment (FDI) is an investment made by a company or
individual in one country in business interests in another country, either
establishing business operations or acquiring business assets in the other
country, such as ownership or controlling interest in a foreign company.
Direct investment vs. portfolio investment
Both direct investment and portfolio investment are international capital flows,
however, between the two forms of investment, there is a key difference in the
degree of control in the management of the company.
Foreign direct investments are distinguished from portfolio investments in which

an investor merely purchases equities of foreign-based companies. The key
feature of foreign direct investment is that it is an investment made that
establishes either effective control of or at least substantial influence over, the
decision making of a foreign business.
Consider the following two examples:
On the one hand, a manufacturing company of China automobile

acquires the shares of a company of American automobile components.
On the other hand, a Chinese investor buys 5,000 shares (0.1% stake) in
a similar American company that also produces the same products.
Both cases are international capital flows, but while we can consider the first
one as a direct investment because the Chinese company acquires control of
the US company, the second is solely a portfolio investment because the
Chinese investor has no influence on the direction of the US company.
Sometimes is easy to distinguish direct investment of portfolio investment (as in

the example above) but not always. What happens if the investor acquires only
a part of the shares of a foreign company (but not entirely)?
Obviously, if you have more than 50% of the capital there is no doubt that can
exercise control over the company. However, normally even possessing less it
is possible to exercise control of the company. In that circumstance, what % of
shares is required to give an investor the ability to influence the direction of
another foreign company?
There is no unequivocal answer about it but according to international

standards, for considering an investment as a foreign direct investment you
need ownership of least 10% of the capital of the foreign company in question.

Capital flows included as FDI
Foreign direct investment is any investment either a loan or purchase of a

property, as long as the investment firm owns (or acquire) more than 10% of the
foreign company.
For instance, international capital flows that the Bank of Spain considers direct
investment when drawing up the balance of payments of the Spanish economy
are:
Shares; subscriptions and purchases of shares are included when the

amount of the investor's share is equal to or greater than 10% of the capital
stock of the issuing company.
Other forms of participation; the acquisition and sale of securities
representing capital other than shares are included.
Benefits reinvested; Spanish companies benefits abroad reinvested (and
vice versa) are included as direct investments
Financing between related companies; includes loan transactions between
companies and their subsidiaries or affiliated companies, and between
subsidiaries of the same group (while they are no credit institutions).
Investment in real estate; it includes the acquisition of ownership of all kind
of real estate.
FDI and Multinational companies
FDI is used by multinational companies to create or finance foreign subsidiaries.

However, foreign affiliates of multinationals, in addition to obtaining funding
from the matrix company (or other parts of the corporation) often obtain
financing within the country where they operate (eg through banking
institutions). Only the first type of investment is considered foreign direct
investment (and usually it is a small amount of the total funding of the
subsidiary). For instance, according to estimations, around 50% of the financing
of the subsidiaries of US multinationals is obtained in the host countries (Pal
Gutirrez, J.).
It make sense, financing locally their subsidiaries (instead of doing it 100%

internally) Multinational companies reduce the risk in front of unexpected
variations in exchange rates or undesired political changes (such as
expropriation or nationalization of the subsidiary)

Types of FDI
There are different ways of classifying by types the FDI depending on the
parameter considered:
By Direction:
Inward FDI: A foreign company establishing business operations or

acquiring business assets in the local country.
Outward FDI: The opposite, a local company establishing business
operations or acquiring business assets in a foreign country.
By Motive:
Resources seeking: looking for resources at a lower cost (labor, raw

materials)
Market seeking: Secure market share and sales growth in target foreign
market.
Efficiency-seeking: Establish efficient structure through useful factors,
cultures, policies, markets
Strategic asset seeking: Acquires assets in foreign firms that promote
corporate long-term objectives.
By Entry Mode:
Greenfield investments: Investments in a manufacturing, office or other

physical company-related structure or group of structures in an area where
no previous facilities exist. Mostly in developing countries.
Mergers and acquisitions: These are quicker to execute, normally
because the foreign firms have valuable strategic assets and/or investor
believe he can improve the efficiency of the acquired firm. More prevalent in
developed nations.
By Target:
Horizontal: Investing in the same industry abroad as a form operates at

home.
Vertical: Investing in an industry abroad that provides inputs for the local
firms production processes (Backwards Vertical FDI) or investing in which
an industry abroad sells the outputs of the domestic firms production
processes (Forward Vertical FDI).

Restrictions on FDI
Virtually all governments restrict foreign direct investments in certain business

lines. Restrictions vary from one country to another, but usually, the restrictions
affect those activities that the government considers of particular importance to
the national economy, and are vulnerable to the influence of outside capital:
Energy, Banking, Media and Defense industries.
Sometimes governments may also regulate the actions of foreign investors in

various ways. They may require national ownership or management of local
businesses, or require training, sourcing, research in the country, etc. They may
also use fiscal policy to influence both direct investment flows and profit sharing
between business and government.
Foreign Direct Investment in the world
If we analyze the stock of foreign direct investment, we can see that the
industrialized countries account for an overwhelming majority of the countries of
origin of FDI (around 85% of the world total). However, recently there is a
significant growth in foreign direct investment from some emerging economies,
especially China (Pal Gutirrez, J.).
.
Destinations of most of the FDI are industrialized countries, that is, we find that
FDI involves companies from industrialized countries also investing in other
industrialized countries, with the peculiarity that the main countries of origin are
also the main recipient countries with some exceptions as Japan (which does
not receive much direct investment).
Destination of FDI has also changed over the years, while in the early seventies
investments was around 25% in the primary sector (particularly mining and
mineral products), around 50% in the manufacturing sector and the service
sector the remaining 25%. Currently, the participation of both manufacturing
and primary sectors has fallen, increasing the importance of direct investment in
services (especially in banking and financial and business services).
Benefits of FDI for recipient country
This question has generated an intense debate in recent decades, since the
foreign capital flows began to have a decisive influence on Western economies,
and currently very focused on the impact of FDI on economic and social growth
of developing countries.
FDI helps to cover the financing needs of a country (with little capital) for
productive investments. Generally, FDI is more stable than other more
speculative capital flows that can be found in financial markets. Why? Because
generally, FDI goes to long-term projects.

In principle, more FDI means more economic growth, more exports, more jobs,
and more per capita income in the receiving country. There are some very
specific advantages of FDI flowing from more developed to less developed
countries (Pampilln R., 2015)
Resource transfer effects
If the foreign subsidiary introduces new technologies, products or processes

in the local market, local workers acquire knowledge that raises the human
capital of the country. At the same time, companies that are suppliers,
customers and even competitors from foreign companies indirectly feel the
effects of technology diffusion.
This greater participation of foreign capital in the economy not only improves
the performance of the company receiving the investment but also to other
companies, which may be favored by the spread of knowledge and new
technologies incorporated in these capital flows.
Productivity
In addition to providing new technologies, FDI generally raises the

productivity of the economy that receives it. The reason is that these
companies, with more experience, better technology, and more
sophisticated capital show higher productivity than their local competitors
and their presence forces the other companies in the sector to raise their
own levels of productivity (Haussman R. and Ferndez-Arias E., 2000).
We say generally because the situation is a bit complex and results less
conclusive because there is a bias due to the fact that multinationals tend,
first, to invest in the most productive sectors. It is also possible that this
effect is given only in the same sector or investment in sectors where
suppliers and customers operate.
Employment
Despite the many current topics, there is abundant evidence that

multinationals typically pay higher wages than local firms, thus raising the
income of the population.
Political changes
It can also be a very beneficial factor in the process of reform and economic
liberalization since FDI has shown a clear tendency to flow towards
countries with more open, more transparent and less corrupt markets. Thus,
FDI can have a healthy "pressure" on governments to undertake the reforms
that are beneficial to the country and its citizens.
Balance of payments
FDI has a positive effect on the balance of payments of the recipient

country, besides the initial capital inflows, the new production of goods and
services will substitute partially imports and brings the possibility of start
exporting to other countries.

The mentioned benefits are more important and visible if we talk about
developing countries, because they can be caught in the vicious circle of
poverty, and because the impact of FDI in local economy can be much higher.
8. SCM Effective Management

Effective supply chain management is as crucial as the strategic advantage for
businesses. An organizations success is greatly dependent on its supply chain.
Effective supply chain management is all about delivering the right quantity of
the right product in the right conditions, with the right documentation to the right
place at the right time at the right price.
Figure 7. Supply Chain
However, managing and controlling supply chain costs while delivering

acceptable service is the never-ending goal. With increasing competition in the
global market, there is a need to ensure transparency to optimize and enhance
the efficiency of the supply chain process.
In order to implement an efficient global supply chain for customers around the
world, we must implement efficient solutions that span across the entire value
chain. Even simple rules and best practices can help to increase customers
satisfaction and keep the cost under control.
To ensure that the supply chain is operating as efficiently as possible and

generating the highest level of customer satisfaction at the lowest cost,
companies have adopted Supply Chain Management processes and associated
technology. Effective supply chain solutions can maximize customer value and
achieve a sustainable competitive advantage.
These effective supply chain solutions must use adequate metrics to measure
performance levels, lead to a clear accountability and to an effective
collaboration and communication between employees, customers, and

suppliers for smooth movement of goods and information (one of the keys).
Ideally, the supply chain solution that you choose must be capable of
responding to a situation faster than any of the competitors in the market, using
the latest technology when needed.
As in other fields as technology, machinery, management companies have to

also evaluate constantly new ideas and solutions in the supply chain
management to remain ahead in the market place. It is essential to respond
quickly and efficiently to changes in both demand and supply (increasingly
frequent and fast).
Supply Chain Efficiency vs. Effectiveness
Supply chain efficiency is related to whether a companys processes are

harnessing resources in the best way possible, whether those resources are
financial, human, technological or physical. On the other hand, we can define
effectiveness as an external standard of how well an organization is meeting
the demands of the different stakeholders (customers, partners, suppliers,
vendors...)
Notice that the definition of efficiency says nothing about improving customer
service. You might have a very efficient supply chain that minimizes costs for
materials and packaging but leaves your customers fuming when the product
they receive is not up to their specifications. However, to measure your supply
chain effectiveness you have to take a look at not just what is going on within
the walls of your own company, but how this is ultimately impacting customers
and the supply chain as a whole.
When considering the efficiency or effectiveness of a supply chain, we are

evaluating it from two different perspectives, both critical for the company
competitiveness. The supply chain is efficient when we are able to get products
at the lowest cost, but this is useless if we are not able of providing what the
customer wants. Same thing, if we are able to provide exactly what our
customers want but at a too high cost, the market will never accept the price.
During the last years, there were important improvements in supply chain
technology which have allowed more efficient processes, better coordinated
for many companies, but it has not always resulted in an overall reduction in
prices paid by customers or in higher margins for companies themselves. Why?
It is true that labor productivity improved significantly, but there other factors
such as increased commodity costs and increased reliance on outsourcing.
Boeing 787 Dreamliner
A well-publicized case in point is The Boeing Company, to stimulate revenue

growth and market response, Boeing decided to develop the 787 Dreamliner.
The 787 Dreamliner is not only a revolutionary aircraft, but it also utilizes an
unconventional supply chain (large-scale outsourcing of its manufacturing
processes) intended to drastically reduce development cost and time.

However, despite significant management efforts and capital investment, 787
Dreamliner program resulted in nearly three years of delays in delivering
product to customers, and billions of dollars in cost overruns.
Boeing enthusiastically embraced outsourcing, both locally and internationally,

as a way of lowering costs and accelerating development. The approach was
intended to reduce the 787s development time from six to four years and
development cost from $10 to $6 billion. The end result was the opposite. The
project is billions of dollars over budget and three years behind schedule
(Denning S., 2013).
Figure 7. Supply Chain
Outsourcing is a common practice within highly complex industries such as

aerospace and automotive, but this is typically out of necessity. Boeings 787
supply chain strategy was envisioned not just as a necessity but as a way to be
more competitive against its major rival, Airbus, by keeping manufacturing and
assembly costs low while sharing risk with Boeings suppliers.
What happened? Errors in design, supply chain coordination and different

quality problems (before and after starting production) such as overheating in
lithium-ion batteries (see picture below) made these program a disaster.
Figure 8. A burnt auxiliary power unit battery removed from a Japan Airlines Boeing
787 Dreamliner jet. Photograph: Handout/Reuters
Initially, the 787 was intended to be the aircraft of the future. The Dreamliner is
made of carbon-fiber-reinforced plastic composite. More radically still,
pneumatic and hydraulic systems have been ditched for electric systems.
The technological leap was always likely to cause issues, but these were
exacerbated by Boeing's decision to massively increase the percentage of parts
it sourced from outside contractors. The wing tips were made in Korea, the
cabin lighting in Germany, cargo doors in Sweden, escape slides in New
Jersey, landing gear in France
It is clear it didnt work, outsourcing parts led to three years of delays, parts
didn't fit together properly, different parts needed intensive rework... The
company ended up buying some suppliers, to take their business back in the
house. All new projects, especially ones as ambitious as the Dreamliner, face
issues but the 787's woes continued to mount.
It seems that each supplier did what it was asked, but there was a failure to
bring the whole thing together, the big problem is about integration, which
means a huge communication and organization challenge in a so complex
product as a Dreamliner.
It is not only about technology, there were other external errors which didnt
help at all to improve the situation and should make the industry sector think
about how it is working. Boeing's clout (very powerful in Washington) put
pressure on the Federal Aviation Authority (FAA) to speedily approve the
Dreamliner, despite its radical design and manufacturing process (even when
there were an electrical failure and an emergency landing during the test-flight
program, that was blamed on a 'foreign object').
Another example of this relaxed attitude to regulation brings us back to that

charred battery. Lithium-ion batteries are the preferred power source for a range
of modern technology but they have a spotty safety record (laptops, electric
cars, cell phones have caught fire thanks to their lithium-ion batteries). Federal
air regulation specifically limits the size and number that can be carried by
passengers. Boeing was able to obtain a waiver for the size, quantity, and
manner of use of its batteries in September 2007, after the FAA received
assurances and extensive test data, much of which was provided by Boeing.
What is clear is that the cost-cutting way that Boeing went about outsourcing
both in the US and beyond did not include steps to mitigate or eliminate the
predicted costs and risks that have already materialized. Based on our
definitions of supply chain efficiency vs supply chain effectiveness, this strategy
was efficient in that it met internal company needs for a lean supply chain, yet
not effective due to its negative impacts on customers and other stakeholders.
Supply chain systems are extremely complex. In general, it is very difficult to

improve efficiency in meaningful ways, unless we look at both efficiency and
effectiveness.

We must look beyond our internal company requirements to how improvements
in our processes will impact external partners and customers. In other words,
not only must we do things right, we must also do the right things.
Building Efficiency Into Your Supply Chain
Following some advises about key points to take into considerations when
looking for an efficiency improvement in a supply chain (Catalano D., 2011).
1. Seek opportunities to optimize. Optimization can provide reliable decision

support for supply chain challenges such as network design, route mapping,
and load building.
2. When in doubt, simulate. Although the time and expense required to run
simulations make them impractical for some supply chain functions, they
provide value by showing how solutions will play out in the real world. Don't
waste a single dollar or minute on a solution that works in theory, but not in
reality.
3. Pay for carrier quality. Using the cheapest carrier can backfire if it results in
significantly increased damages or delivery delays. Some carriers' performance
records justify the slightly higher rates they command.
4. Invest in 20/20 visibility. The earlier and more frequently you begin using
visibility systems (preferably at the order management level) the better you'll be
able to avert supply chain disruptions, reduce the need for excess inventory,
and limit substandard supply chain performance.
5. Implement cross docking. Flow-through warehousing facilities allow you to

seamlessly receive, organize, and precisely time the delivery of most key
components in your supply chain. These facilities can also provide value-added
services, such as sequencing or sub-assembly.
6. Inspect and protect. Hire a logistics representative to inspect products for

exceptions before they're transferred from the production to the logistics phase.
Charge professionals with preventing damage and removing compromised
shipments at key hand-off points, such as during loading and tie-down, and at
the end of a transit.
7. Make your claims pay their way. Damage claims are a valuable source of
insight that can lead to better performance. Invest in systems that help your
company collect and analyze claims data so you can identify damage trends,
determine root causes, and pinpoint responsibility. Use what you've learned to
perfect your operations.
8. Establish a formal safety program. Although most logistics locations have

safety and accident-prevention efforts in place, that's no guarantee your
employees are as safety-minded as they should be. Increase your "safety
spend," and your company could dramatically reduce incidents.

9. Institute formal quality-improvement programs. Invest in Lean, Six
Sigma, and other initiatives. These programs often don't require a huge capital
commitment for training, especially if you adopt a grassroots approach to
training a few key employees, then let them educate the others.
10. Get help where you need it. From freeing up capital to getting a faster start
in a key market, there are many reasons why it may be more expedient or cost-
effective to outsource part of your supply chain to an outside provider. Choose
a 3PL that employs supply chain efficiency strategies designed to benefit your
company.
9. SCM Planning and Control

Supply chain management is concerned with running and monitoring different
types of activities to ensure that all processes and operations are working
effectively. This will include plans, schedules, and resources to provide enough
materials and equipment to the operation. Supply chain planning and control
systems must be the link between the capacity of the organization to supply
products and services, and the demand of the customers.
The control process faces every day with variables and changes in demand,
conditions, environment... In order to adapt operations and avoid affecting
customers' service level with external or internal issues, system must be flexible
(and fast) enough to allow the needed adjustments
CPFR
CPFR (Collaborative Planning Forecasting and Replenishment) is a

management tool used by the members of the supply chain to collaborate on
developing sales forecasts and replenishment plans and to share data and
have a more accurate visibility of forecast demand in order to meet future
demand. This process allows better synchronization of actions relating to sales
forecasts and supplies planning of all participants, reduces stock levels and
improves the service rate against the end customer.
Its mission is to create partnerships in the framework of a win-win philosophy

between suppliers and customers through joint business plans and information
exchange.
CPFR principles:
Strengthening trust relationships: Exchange of information between

business partners.
Measure together (sharing data) objectives, strategies, tactics, and
indicators: In order to obtain flexible organizations and succeed in a
fluctuating market.

A common objective, the consumer: Establish processes to listen to the
voice of the customer from every link in the supply chain.
CPFR is based on collaborative processes by providing a scenario in which
processes can be handled co-managed through the supply chain, so every
member of that supply chain can perceive benefits such as availability of online
information and communication of critical data and an improvement of demand
forecasting and replenishment planning processes.
A simple but clear example of these benefits is easily noticeable for example in
supermarkets, where the main benefit for the customer is the reduction of out of
stock products thank an optimal visibility of the actual demand for the entire
supply chain.
What is true is that the biggest advantage of this type of system, collaboration,
is sometimes also the biggest obstacle when implementing. Changing the way
traditional organizations see their customers and suppliers is certainly a radical
change when implementing CPFR model. The goal is to establish a culture of
partnership built on trust and to achieve this goal it is imperative that the
company adopts above all a win/win attitude which can contribute to the growth
of the supply chain.
10. E-logistics: ICTs contributions, e-Business, e-

Commerce
As a simple definition of e-logistics, we can say that e-logistics comprehend all
logistics processes of an e-commerce. The e-logistics has a proper business
relationship between a buyer and a seller as a target.
E-Commerce (electronic commerce or EC) is the buying and selling of goods

and services, or the transmitting of funds or data, over an electronic network,
primarily the internet. These business transactions occur either as business-to-
business, business-to-consumer, consumer-to-consumer or consumer-to-
business.
The beginnings of e-commerce can be traced to the 1960s when businesses

started using EDI (Electronic Data Interchange) to share business documents
with other companies. In 1979, the American National Standards Institute
developed ASC X12 as a universal standard for businesses to share
documents through electronic networks. After the number of individual users
sharing electronic documents with each other grew in the 1980s, in the 1990s
the rise of eBay and Amazon revolutionized the e-commerce industry.

Figure 9. Example of e-logistics
Today, all processes of an enterprise (internal or external) can run and

culminate on the Internet. This medium has allowed centralizing all activities
carried out by two different companies or activities of a specific company with its
consumers. This involves the integration of the logistics company and the seller,
and between the seller and the buyer.
This new distribution channel allows us to improve all processes related to

receive online orders, stock management "just in time", order preparation,
product traceability, product delivery, after-sales care...
The main objective of logistics in the e-Commerce is based on the approach the
seller with the buyer, reducing the distance to a single click. That allows us to
buy from home, at the moment we want, a huge variety of products and of
course, paying competitive prices.
ICTs contribution
Today the world's leading companies, which have large physical distribution
chain, have an online platform to offer their products. Also, small companies just
entering the market, see it as a competitive advantage online distribution, as it
cuts operating and structural costs. An effective management of ICTs
(Information and Communication Technologies) can bring great opportunities
for benefits and business expansion.
Today, we have websites and specialized applications that facilitate the location
of the products we buy or sell, which also allows increasing the confidence of
customers who can accurately track your purchases with just one click from
their computers personal or smartphones.
For all the above, we can say:

ICTs have become an instrument to facilitate the competitiveness of
international sales of products and services, so they help improving
business productivity (promotes and optimizes production processes)
ICTs can allow the development of a country, so its use affects the growth of
its productive sectors.
It is clear that ICTs have changed completely the way in which both goods
and services are produced, bought and sold (and even consumed).
ICTs are tools that allow SMEs compete into the global economy, by
providing information, communication, and knowledge that was long ago out
of reach and only available for companies with large amounts of resources
11. SCM and e-SCM, Planning, Process and Information,

Flow Management, SCM Software
SCM and e-SCM
In order to define e-SCM, we need to establish what we understand by SCM.

The members of Global Supply Chain Forum defined SCM in 1998 as the
integration of key business processes from end user through original suppliers
that provides products, services, and information that add value for customers
and other stakeholders.
Definition entails a supply chain perspective from the first supplier to end-user
and a process approach. Companies have realized that is not only the logistics
process that cuts across supply chains but in principle, all business processes.
According to this, SCM ideally embraces all business processes cutting across
all organizations within the supply chain, from the initial point of supply to the
ultimate point of consumption (Cooper M. C. and Lambert D. M., 1998).
For Cooper and Lambert, SCM embraces the business processes identified by
the International Center for Competitive Excellence (see Figure 10).

Figure 10. Supply Chain Management
We understand e-SCM the impact that Internet has on traditional SCM: e-SCM
will refer to the impact that Internet has on the integration of key business
processes from end user through original suppliers that provide products,
services, and information that add value for customers and other stakeholders.
The same happens with the term e-logistics, which will refer to impact that
Internet has on the supply chain process that plans, implements, and controls
the efficient, effective flow and storage of goods, services, and related
information from the point-of-origin to the point-of-consumption in order to meet
customers requirements. Logistics is a subset of SCM, and accordingly, e-
logistics is a subset of e-SCM. When talking about e-SCM e-logistics will be one
of the aspects to be analyzed, but not the only one, Internet has a very
important effect on SCM that has been very often forgotten: the coordination
and integration aspects.
The Internet has created the opportunity to access and share information
across the supply chain in a faster and more reliable way. It provides common
communication protocols and standards for system inter-operability, enabling
reliable and low-cost inter-business connectivity. This flow of information leads
to the improvement of productivity, the increase of efficiency and the
achievement of better collaboration between the supply chain partners.
However, to take full advantage of the Internet, organizations must restructure

their internal and external processes across the supply chain and improve their
collaboration. The first step in this collaboration is just information sharing (it
seems easier than it is sometimes), but a further step consists of sharing
knowledge to enable a better planning and decision making across the supply
chain.

The Internet enables better collaboration, but at the same time, it has opened
up a new commercial channel to many firms. Now, customers can buy products
and services without going to the store. This new form of selling products and
services has a very big impact on firms and it requires major changes to
organizations that embrace e-commerce.
Some differences between SCM and e-SMC
e-SCM can increase in partnership opportunities comparing to traditional

SCM
The cost savings opportunities are more effective in e-SCM.
e-SCM places less relative value on long-term partnerships and strategic
alliances, when compared to traditional supply chain organizations because
of the reduction in technological expenditures associated with forging new
relationships in the Internet-based e-SCM.
Short-term, cost-driven benefits can be realized, and long-term partnerships
can be developed as needed. The need for partnerships may not be as
forceful as in the traditional supply chain but it allows firms to implement
short-term competitive relationships that may have opportunities for ongoing
relationships.
Autocratic leadership will be cost-effective, highly responsive but structurally
ineffective when operating in an e-SCM environment.
Participative leadership will be structurally effective and cost ineffective
when operating in an e-SCM environment.
Transformational leadership will be both cost and structurally effective when
operating in an e-SCM environment.
SCM systems and Information
Different companies in a supply chain have different objectives, so members in

a supply chain often use different types of Software and IT systems. The use of
appropriate IT systems and Software through the supply chain members makes
the development of information sharing resource allocation and customer
responsiveness much simpler. As mentioned, many companies have already
pursued e-business integration as a way to gain a competitive advantage, and
the use of Internet is the key to success.
The major distinction between the e-SCM and the traditional supply chain is that
the e-SCM, while structurally based on technology-enabled relationships,
makes decisions based upon efficiency benefits. As e-SCM was created using
electronic linkages, it thereby provided low switching costs, which allows for the
supply chain design to be very adaptable to changing trends, consumer
preferences, and competitive pressures
IT can help reduce production times and costs by increasing the flow of
information, as a way to integrate different supply chain activities. Through
doing this, the supply chain can be made more efficient and the services
delivered to customers more readily. The low-cost connectivity makes it
possible for small and mid-sized companies to take advantage of SCM
techniques.
The systems used to control the flow of information to buyers and then on to
vendors have become quite sophisticated. Retailers have developed data
warehouses that provide them with intimate knowledge of who their customers
are and what they like to buy. The data warehouses are being used to
strengthen the relationships with their customers and improve the productivity of
their marketing and inventory management efforts.
Most large retailers own and operate their own distribution centers. Some of the
activities performed by the center are managing inbound and outbound
transportation, receiving and checking merchandise shipments, storing and
cross-docking, and getting merchandise floor-ready.
In designing their supply chain management systems, retailers make decisions

about what activities to outsource, when to use a push and pull system for
replenishing stores, what merchandise to cross-dock, and whether to ship
merchandise to stores through a distribution center, use direct store delivery, or
have products drop-shipped to customers.
Retailers and vendors are collaborating to improve supply chain efficiency.

Electronic data interchange enables retailers to communicate electronically with
their vendors. The Internet has accelerated the adoption of EDI. Other, more
involving and effective collaborative approaches include information sharing,
VMI, and CPFR. These approaches represent the nexus of information systems
and logistics management. They reduce lead time, increase product availability,
lower inventory investments, and reduce overall logistics expenses.
Finally, RFID has the potential of further streamlining the supply chain. The
small RFID devices are affixed to pallets, cartons, and individual items and can
be used to track merchandise through the supply chain and store information,
such as when an item was shipped to a distribution center. Although still
relatively expensive to be placed on all items, RFID technology can reduce
labor, theft, and inventory costs.
SCM Software
Supply chain management (SCM) software is used to track and monitor

products and services. Organizations typically focus their selection of supply
chain management software on applications that are able to mirror the
architecture and functionality of critical supply operations presently in place.
What is reasonable, but not always the best option. It is highly recommendable
before going through this process make a deep analysis of the processes
involved in order to optimize BEFORE starting any kind of automatization.

Most of the processes that occur in a supply chain system are called events.
Events include anything from the internal movement of inventory from a supply
line to the surplus, or scrapping of defective stock.
There are many types of SCM software, for instance:
Supply chain event management software is designed to capture data about

events and produce information in the form of reports so supply managers can
evaluate their inventory operations.
Inventory management software must also address the various functional

areas of supply chain automation such as lot and serial number tracking,
binning, blanket supply, annual demand forecasting, batch picking, and order
and returns processing.
The cost of SCM software is an additional consideration. Prices of supply chain

management software can range from thousands to millions of dollars, with
applications predominantly in manufacturing, supply, and transportation.
The market for supply chain management (SCM) software, maintenance and
services generates billions every year and keeps growing. The extreme
complexity of modern supply chains calls for strong central management tools
and better visibility, which are two of SCM softwares biggest promises. An SCM
solution helps companies establish and automate pricing, transportation, and
payment models to better manage their supply and distribution network, all
while staying responsive to the ebb and flow of customer demand.
There are several different solutions available for supply chain IT buyers:
Best-of-breed programs provide specific functionality for localized

aspects of SCM, such as inventory, freight brokerage, or procurement,
but usually wont function as a company-wide solution.
Integrated SCM suites support end-to-end management of supply chain

processes from demand planning to materials sourcing, procurement,
transportation, and delivery. SCM suites can be purchased as an all-in-
one solution or as-needed in discrete modules.
Enterprise resource planning (ERP) systems often provide built-in

supply chain management and offer the additional benefit of
synchronizing business processes in one system. This can include SCM,
customer relationship management, human resources, business
intelligence, accounting, and more.
Common Features of Supply Chain Management Tools

The software will vary from vendor to vendor according to pricing, scale, and
use intent, but most supply chain management companies will focus on the
following areas of functionality:
Inventory optimization: Keeping the appropriate amount of items stocked

in the right locations (warehouse, distribution center, store) in a supply
network to minimize overhead cost and enable uninterrupted delivery.
Inventory can be tracked using barcodes, serial numbers, or even RFID
(radio frequency identification) tags.
Warehouse management: Used for tracking goods and materials within a
warehouse or distribution center as a closed environment, to include stock
picking and shelving, as well as shipping and receiving. This feature
(sometimes its own dedicated system) is especially important for companies
with larger networks of warehouses in multiple locations.
Demand forecasting: SCM solutions can use algorithms based on sales
history and/or customer variables to help companies anticipate fluctuations
in supply and demand.
Procurement: Manage and automate your purchase orders from suppliers,
including placement, payment, and receipt; integrations with financial
management systems approve and log expenses to create a clear audit trail
and a baseline for future cycles.
Order fulfillment and returns: Order fulfillment tools help your supply chain
centers streamline the fulfillment process from inquiry to quote, invoice,
shipment, and delivery. In addition, it makes possible more accurate
decisions about determining the best fulfillment option based on the order
type and configuration: engineer-to-order (ETO), build-to-order (BTO),
assemble-to-order (ATO), make-to-stock (MTS), or digital copy (DC).
Supplier management: Sometimes referred to as supplier relationship
management (SRM), this functional area helps companies monitor and
curate their relationships with suppliers. This can include performance and
compliance tracking, risk measurement, supplier segmentation, and other
capabilities.
According to the consultancy Gardner, in terms of turnover, the market of SCM

Software is led by seven vendors: SAP, Oracle, JDA Software, Manhattan
Associates, Epicor, and Infor. These firms together have more than 50% market
share of SCM software.
12. Scheduling, WMS/SGA, CRM, Cloud computing,

Mobility
Scheduling
Optimal production planning and scheduling are essential for manufacturing

companies, and synchronize it with the rest of members of the value chain is
essential for the whole supply chain. It ensures efficient production, reliable
delivery, and lower costs.
Some companies, in order to be "safer", increase the level of stocks (with the
corresponding extra cost and risk), while what is needed is working in a more
efficient and quick materials and information flow, with emphasis on eliminating
every non-adding-value activities in order to reduce the throughput time to the
minimum. In order to avoid stops and waste in that flow, we need to streamline
the supply chain planning process with powerful procurement scheduling,
production scheduling, and replenishment planning functionality.
Procurement Scheduling: Create procurement requirements for all raw

materials as production schedules are developed. Calculate raw material
needs and recommend purchase/procurement orders, integrate raw
material planning with production scheduling, receive notifications of
pending orders and raw material stock-outs....
Production Scheduling: Sequencing, controlling and optimizing work

and workloads in a production process according to supply chain needs.
Scheduling is used to allocate plant and machinery resources, plan
human resources, plan production processes and purchase materials,
and adapt it to the rhythm of the demand. Schedule changes should be
automatically incorporated into the monitor systems used by Supply
Chain Managers.
Replenishment Planning: Use product formulations and replenishment

algorithms to compute and recommend just-in-time replenishment orders
for raw materials that consider the lead time and typical lot size from
each supplier. Raw material inventories and replenishment information is
included in the scheduling systems, so if there is any unexpected
problem with raw materials it will be visible and we will be able of solving
that issue changing the replenishment plan or the production schedule.
Having sales and production planning and order fulfillment synchronized can
give some of the following results:
Increase flexibility
Transparency about all processes (and online data) due to an integrated IT
system
Reduction of in-process inventory
Improved resources efficiency
There are many scheduling solutions in the market, as a single tool or

integrated into ERPs.
Warehouse Management System (WMS)
A warehouse management system - WMS (or Sistema de Gestin de

Almacenes - SGA in Spanish) is a software application that supports the day-to-
day operations in a warehouse. WMS programs enable centralized
management of tasks such as tracking inventory levels and stock locations.
WMS systems may be standalone applications or part of an Enterprise
Resource Planning (ERP) system.
Early warehouse management systems could only provide simple storage

location functionality. Current WMS applications can be so complex and data
intensive that they require a dedicated staff to run them. High-end systems may
include tracking and routing technologies such as Radio Frequency
Identification (RFID) and voice recognition.
Figure 11. WMS operations example
No matter how simple or complex the application is, the goal of a warehouse
management system remains the same: to provide management with the
information it needs to efficiently control the movement of materials within a
warehouse.
Benefits of WMS:
Inventory reduction.
Increase storage capacity.
Increase inventory accuracy.
Reduction of labor costs.
Better customer service.

CRM (Customer Relationship Management)
Forming and maintaining relationships with customers is one of the most

important aspects of any business. Without positive relationships, its hard to
thrive in any industry and long-term success can be at risk. That is the main
reason for implementing a CRM (customer relationship management)
system into your operations.
Increasing competitiveness has led the companies to a new approach to sales,

attraction of new customer, and loyalty of the current ones. The goal of CRM is
to predict the behavior of the client by capturing as much information as
possible in relation to the customers and their needs, anticipating their wishes
and thus creating loyalty towards the company or organization. The aim is to
offer customers what they need and when they need it.
Definition of CRM: "CRM is the set of strategic actions, of organizational and

technological processes that helps to improve the management of the business
targeting the behavior of their customers. This involves acquisition and
development of knowledge about clients for later use on the key points, getting
higher revenue and greater efficiency".
The CRM approach tries to analyze data about customers' history with a
company, to improve business relationships with customers, specifically
focusing on customer retention, and ultimately to drive sales growth
Figure 12. CRM

Some of the things that a CRM solution allow your organization are:
Increase business productivity by controlling all the information of your

current and potential customers and improve efficiency by replacing manual
processes.
Thanks to the ability of popular CRM platforms to integrate with other
systems, such as marketing automation tools, CRM can enable companies
to interact with customers in ways that they wouldn't be possible otherwise.
Facilitate collaboration and make communication between the different
employees and departments much more effective.
Information is one of the most valuable strategic assets, and CRM systems
house some of the most valuable data. Of course, data itself are not useful if
the organization doesnt analyze them in a proper way. Popular CRM
platforms typically offer a variety of tools that enable companies to
understand their CRM data and learn things about their customers.
Avoid assumptions when making a decision by having your business data in
real time.
Customers are more easily and accurately segmented and their needs
identified, so companies can interact with them meaningfully at the right
times through, for instance, specific marketing campaigns.
Streamline your customer service and increase their loyalty by reducing the
response time to any consultation
That's why adoption of modern CRM systems like Salesforce, NetSuite, and
SugarCRM has skyrocketed in recent years, even amongst SMBs that often
lack the resources to adopt enterprise-style technologies.
Cloud Computing
Cloud computing, often referred to as simply the cloud, is the delivery of on-
demand computing resources (everything from applications to data centers)
over the Internet on a pay-for-use basis.
Some advantages:
Elastic resources: Scale up or down quickly and easily to meet demand

Metered service so you only pay for what you use
Self-service: All the IT resources you need with self-service access
Types of Cloud computing
Cloud computing services can be private, public or hybrid:
Private cloud services: Private cloud services are delivered from a business'
data center to internal users. This model offers versatility and convenience
while preserving management, control, and security.
In the public cloud model, a third-party provider delivers the cloud service
over the Internet. Public cloud services are sold on-demand, typically by the
minute or the hour. Customers only pay for the CPU cycles, storage or
bandwidth they consume.
Hybrid cloud is a combination of both; companies can run mission-critical
workloads or sensitive applications on the private cloud while using the
public cloud for bursty workloads that must scale on-demand.
Common Cloud Examples
The cloud is part of almost everything on our computers these days. You can
easily have a local piece of software (for instance, Microsoft Office) that utilizes
a form of cloud computing for storage (Microsoft OneDrive).
That said, Microsoft also offers a set of Web-based apps, Office Online, that are
Internet-only versions of Word, Excel, PowerPoint, and OneNote accessed via
your Web browser without installing anything. That makes them a version of
cloud computing (Web-based=cloud).
Some other major examples of cloud computing commonly used are:
Google Drive: This is a pure cloud computing service, with all the storage found
online so it can work with the cloud apps: Google Docs, Google Sheets, and
Google Slides. The drive is also available on more than just desktop computers;
you can use it on tablets like the iPad or on smartphones. In fact, most of
Google's services could be considered cloud computing: Gmail, Google
Calendar, Google Maps, and so on.
Apple iCloud: Apple's cloud service is primarily used for online storage, backup,
and synchronization of your mail, contacts, calendar, and more. All the data you
need is available to you on your iOS, Mac OS, or Windows device. Apple offers
cloud-based versions of its word processor (Pages), spreadsheet (Numbers),
and presentations (Keynote) for use by any iCloud subscriber.
Amazon Cloud Drive: Storage at the big retailer is mainly for music, preferably
MP3s that you purchase from Amazon, and images. Amazon Cloud Drive also
holds anything you buy for the Kindle. It's essentially storage for anything digital
you'd buy from Amazon, baked into all its products and services.
Hybrid services like Dropbox say they work in the cloud because they store a
synchronized version of your files online, but they also sync those files with
local storage. Synchronization is a cornerstone of the cloud computing
experience, even if you do access the file locally.

Cloud Computing and SCM
Although cloud technology has been around for almost 20 years, supply chain
professionals are relatively hesitant to migrate their systems. Though the
industrys move to cloud computing is still in its youth, cloud technology makes
a lot of sense for supply chain managers. Computing in the cloud makes it
possible to closely track a product throughout its lifecycle. Cloud-based supply
management can also significantly cut down on lost product as it can locate a
shipment during any stage of transport. And it enables you to make quick
decisions and communicate effectively if you need to reroute a misdirected
shipment.
Figure 13. Cloud Computing in SCM
Though it can be challenging to transition to cloud systems from traditional

management systems, there are many benefits of cloud-based management
(Clervi A., 2015):
Scalability. Cloud services allow you to scale without having to overhaul an

entire system. Even if your company expands rapidly, a cloud provider has
the off-site computing power to accommodate your needs.
Immediacy. It can take months to implement new software within existing IT
systems, but you can contact one of the many cloud supply chain
management software providers, and expect a new service to be up and
running within a couple of weeks. Data migration can take a while, but some
providers assist with the process.
Cost containment. Because resources are on demand and immediate,
scalability doesnt come with the hefty price tag often associated with IT
system changes.

Efficiency. By converting to a cloud service, information management no
longer taxes internal resources, allowing you to shift team members from
system management to ongoing needs, such as research and product
development. Expect product innovations and improvement to come more
quickly and without the need to hire more employees.
Accessibility. Physical systems come with limitations, often employees
must be on site to access information. With cloud computing, everyone can
download all the necessary files on virtually any device, making it much
easier to conduct business from anywhere.
Onboarding. Difficulties often arise for supply chains during the onboarding
process of new trade partners. The reason is that it can take months to
merge large quantities of data into internal IT systems. Access to new
information is made much easier with cloud-based services, making
onboarding processes much smoother.
Flexibility. Cloud-based services can connect everyone in the supply chain,
providing a more strategic approach for inventory deployment. Cloud
computing can enable you to monitor delivery networks and prioritize slow-
moving shipments.
Optimization. Cloud-based service providers tailor solutions to your
industry, allowing you to accelerate the integration and adoption of their
services across all parts of your organization. This can help optimize product
development, market expansion and delivery times while reducing overall
costs by improving the agility of your operating model.
By moving systems beyond your four walls, you allow the different members of
the supply chain communicate and share information in a highly efficient
manner.
Mobility
Developing a streamlined and leaner supply chain is the primary need for
organizations in order to survive in an extremely volatile environment, with more
demanding customers, global competition, and shorter product life-cycle.
Mobility allows the supply chain professionals to access significant data and
information at any point of time and at any place. This improves workers
productivity, so they can be equally productive round the clock irrespective of
their place.
Mobile devices and applications have become an integral part of the supply
chain, logistics, and transportation professionals who need to stay connected
and manage operations from anywhere. Mobility had a big impact in different
processes of the supply chain management:

Warehousing & Distribution Management Process: The importance of
mobility first came in the usage of hand held mobile computers in warehouses
and distribution centers. Some benefits of mobility in warehousing and
distribution processes are:
Improved productivity and reduction of breakage of stock.

Real-time inventory visibility
Reduction in errors, cost, and handling time (and materials)
Efficient returns management
Improved order fulfillment, vehicle utilization and driver productivity leading
to better customer satisfaction
Transportation Management Process: Enterprise mobility solutions provide

real-time visibility of the entire transportation process and connect all the assets
and resources involved in the processes to the central business system,
thereby enabling:
Increased speed and efficiency
Elimination of time-consuming paper works
Real-time exception management
Optimized asset utilization
Increased Energy efficiency
Real-time proof of delivery
Yard Management
Improved load sequencing and gate throughput
Increased productivity
Superior workforce management
Better asset management
Labor Management
Increased visibility of workforce productivity
Identification of performance metrics
Regular automated feedbacks
Better management and resource planning
It can be concluded that by developing a flexible and easy to integrate platform

for mobilizing the supply chain an organization can surely improve customer
service, reduce order cycle time, and improve growth rate in terms of sales and
revenue.

13. References
Blenko M. y Root J. (2015) Design Principles for a Robust Operating Model
Bain & Company - Business Insights.
Blenko M., Garton E. y Mottura L. (2014) Winning Operating Models That
Convert Strategy to Results Bain & Company - Business Insights.
Buck E. W. (2011) The 5 Key Success Factors: A Powerful System For
Total Business Success
Catalano D. (2011) Building Efficiency Into Your Supply Chain Inbound
Logistics.
Clervi A. (2015) Cloud Computing Is Transforming Supply Chain
Management Supply and Demand Chain Executive.
Cooper D., Dhiri S. and Root J. (2012) Winning operating models Bain &
Company - Business Insights
Cooper M. C. and Lambert D. M. (1998) "Supply Chain Management: More
than a new name for Logistics" The International Journal of Logistics
Management.
Council of Supply Chain Management Professionals glossary (August 2013)
Denning S. (2013) What Went Wrong At Boeing? Forbes.
Haussman R. and Ferndez-Arias E. (2000) Foreign Direct Investment:
Good Cholesterol? IADB.
Meredith J. (2001) Hopes for the future of operations management Journal
of Operations Management.
Moscoso P., Lago A., Sachon M. (2009) Conceptos y parmetros
fundamentales de la direccin de operaciones Nota tcnica IESE Business
School y CIIL (Centro Internacional de Investigacin Logstica).
Norall E. (2013) Layers of Logistics Explained
Pampilln R. (2015) Ventajas de la inversin extranjera directa para el pas
receptor Weblog Instituto de Empresa.
Pal Gutirrez J. Inversin Extranjera Directa Diario Econmico Expansin
Robles P. (2015) The five biggest benefits of CRM systems Econsultancy
blog.
Slack N. y Lewis M. (2002) Operations Strategy. Upper Saddle River, NJ
Prentice Hall.


SCM Innovation and Optimization Material

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

SCM Innovation and Optimization Material

Загружено:

Авторское право:

Доступные форматы

Master in International

Module: SCM Innovation and

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Currently, innovation is one of the strategic pillars of every organization,

Another way of innovating is to change the way we do things within the

Another example of innovation is to redefine or add new management

In this document, we will focus on the meaning and importance of innovation

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

In any operating system we must consider three basic elements:

Activities: Elementary transformation or processing units (specific for each

Processors: Elements of an operating system capable of performing the

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

3. Competing starting from the Operations

Increase sales, promoting customer satisfaction through its ability to

Therefore, competitiveness can be improved through good management

Operations management must meet the requirements of customers/market in

Quality: Provide products according to (or even exceeding) customer

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Optimize processes and create value

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

However, not everything is about effectiveness and efficiency, the organization

For instance, the company Ferrovial, after developing a technology capable of

4. The Key Success Factors within the Operation Pipe

Essentially five things are needed by any organization wanting to succeed:

1. People: Those who make up the organization

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Figure 2. Success Factors

1. Managing and developing people

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

5. Defining our Operation Model

Operations model must be defined customized for each company, depending

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

It is common that companies competing in similar sectors, markets,

Most important, winning companies adapt their operating model to their

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Definition of an operating model starts by describing the strategy in sufficient

Practical use of design principles comes when a senior executive team

Essential Areas to be defined

Structure: It involves drawing appropriate boundaries for lines of

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Governance refers to executive forums and management processes that

Capabilities refer to how the company combines people, process and

Do you need to modify your operating model?

Do you persistently see execution gaps between your strategic ambitions

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

6. Outsourcing and its Types, Onshoring, Offshoring, 3PL,

Outsourcing as a business strategy only started to emerge during the Industrial

Today, outsourcing is taking over the business environment. Companies and

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

The business functions listed under professional outsourcing services

This type of outsourcing service is often industry-specific in its nature. A

Outsourcing service can also be specific to an internal procedure or unique

This type of outsourcing arrangement is common in the manufacturing

Avda. Meridiana 354, 8-D, 08027 (Barcelona), Espaa

Onshoring, Offshoring, and Nearshoring

Onshoring refers to the relocation of business processes to a lower-cost

The practice of offshoring means having the outsourced business functions

Sometimes outsourcing is used as a strategic way to enter new markets and

A recent and rapidly growing outsourcing trend is the process of

3PL, 4PL and SCM Integration

Third Party Logistics (3PL)

The Council of Supply Chain Management Professionals glossary defines