LS 5

Operations and Supply Chain Management
OPMC002
Aligning Products with SC and Strategy
• Fit between product characteristics and supply chain decisions is vital for supply chain
effectiveness.
• Customer Order Decoupling Point (CODP): The point in the supply chain for a product, where
the product is linked to specific customer order.
• Different Positions of CODP determine manufacturing situations to accommodate product

customization and types of supply chain decisions.
• In the view of CODP, Production systems can be of the following types:
a) Engineer-to-Order (ETO)
b) Make-to-Order (MTO)
c) Assemble-to-Order (ATO)
d) Make-to-Stock (MTS)
Different
Customer Order Engineer Fabricate Assemble Deliver
Decoupling Points
Engineer-to-Order CODP
(ETO) Customer-Order
Make-to-Order CODP Driven
(MTO)
Assemble-to-Order CODP
(ATO) Forecast-
Make-to-Stock Driven CODP
(MTS)
Push vs Pull View of Supply Chain
Supplier Manufacture Distributor Retailer Customer

r
Horizontal and Vertical Integration of Supply Chain
Supplier
Manufacturer
Distributor
Retailer
Customer
Horizontal Integration
• Refers to the business expansion of the firm that involves the acquisition of other companies that are in the
same business and at the same supply levels
• Reduces the competition and enhances the probabilities of monopoly or oligopoly in the industry.
Bakery A Horizontal Bakery B

(Involves Selling of (Involves selling of
cakes in Mumbai)
Integration cakes in Pune )
Vertical Integration
• Vertical integration involves the company acquiring various entities engaged in different stages of the
supply chain.
• Two firms operating at the different levels of the supply chain of the same product merge into a single
entity and concentrate their efforts.
• Vertical integration can be of two types-

• Forward integration
• Backward integration.
Global Supply Chain- Procurement
Global Supply Chain
Procurement
• The words- “Procurement”, “Purchasing” and “Sourcing” frequently utilized interchangeably.
• Procurement or sourcing is process of finding a source for the inputs for production and
subsequently managing that source.
• As a result of globalization, procurement implies a more complex process suitable for products
that are strategically important.
Traditional Procurement Process
Buyer Requirements Supplier Selection Contract Design Remittance Supplier Assessment
• Product Specification • Request for Proposal (RfP) • Terms- Price, Quantity, • Recieve • Rating and reevaluation
• Time Delivery • Pay
Moving to Global Procurement
• Supply chains have extended geo-graphically and businesses have crossed international boundaries.
• Managing the flows of materials, money, and information across borders is a highly complex, regulated,
and dynamic process.
• The trade barrier reduction along with a frequent search for lower-cost sourcing options have transformed
their local-for-local approach to the global platform.
Global Procurement
• Global procurement can be defined as the process in which goods and services are sourced from
the global market.
• Reasons for domestic to global procurement

• Domestic unavailability of some raw materials
• Poor quality of available raw materials in domestic markets
• Higher local prices and taxes
• Incompetent technology standards
• Benefits of Global Procurement

• Lower costs to purchase raw materials and services
• Greater access to new technologies and emerging markets
• Higher delivery speed and flexibility for the product variety
• Guaranteeing the availability of limited resources
• Introduction of competition to the domestic supplier base
Process Model of Global Procurement
Trade Documents for Global Supply Chain Procurements
Sr. No. Documents

1. Letter of credit
• For both buyers (importers) and
sellers (exporters) to make sure
2. Bill of Lading (BoL) that transactions follow the as
per International trade rules and
regulations.
3. Certificate of Origin
4. Certificate of Insurance
5. Packing list/ Proforma invoice
6. Commercial Invoices
Sr. No. Documents Description/Purpose
1. Letter of Letter of Credit L/c also known as Documentary Credit is a widely used term to make payment secure
credit in domestic and international trade. The document is issued by a financial organization at the buyer
request. Buyer also provide the necessary instructions in preparing the document.
2. Bill of Lading Bill of Lading is a document given by the shipping agency for the goods shipped for transportation
(BoL) form one destination to another and is signed by the representatives of the carrying vessel. The
parties involved in BoL are- a) Shipper, b) Consignee, c) Notify Party and d) Carrier
3. Certificate of Essentially required by the regulating customs authority. It normally include- i) Importers and
Origin Exporters information, ii) Package numbers, batch, weight, with signed and stamped by the chambers
of commerce.
4. Certificate of Also known as Insurance Policy, it certifies that goods transported have been insured under an open
Insurance policy and is not actionable with little details about the risk covered. It is necessary that the date on
which the insurance becomes effective is same or earlier than the date of issuance of the transport
documents.
5. Packing list/ Also known as packing specification, it contains details about the packing materials used in the
Proforma shipping of goods. It also include details like measurement and weight of goods.
invoice
6. Commercial Commercial Invoice document is provided by the seller to the buyer. Also known as export invoice or
Invoices import invoice, commercial invoice is finally used by the custom authorities of the importer's country
to evaluate the good for the purpose of taxation
INCOTERMS
INternational COmmercial TERMS
“INCOTERMS define the mutual obligations of seller and buyer arising from the movement of
goods under an international contract from the standpoint of risks, costs and documents.”
-United Nations Conference on Trade and Development , 1990
Simply- A set of international rules for the interpretation of the most commonly used
foreign trade terms.
INCOTERM Groups
• CFR- Cost and Freight
Contract for
carriage without • CIF- Cost, Insurance and Freight
assuming risk of • CPT- Carriage Paid To
loss during
shipment • CIP- Carriage and Insurance Paid To
Bear all costs and DAT- Delivered at Terminal

risks needed to
bring goods to
DAP- Delivered at Place
place of DDP- Delivered Duty Paid
destination
Make goods
EXW- Ex Works
available at own
premises
FCA- Free Carrier

Deliver goods to a FAS- Free Alongside Ship
carrier appointed
by buyer
FOB- Free on Board

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LS 5

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Operations and Supply Chain Management

• Different Positions of CODP determine manufacturing situations to accommodate product

• In the view of CODP, Production systems can be of the following types:

Supplier Manufacture Distributor Retailer Customer

Bakery A Horizontal Bakery B

• Vertical integration can be of two types-

• The words- “Procurement”, “Purchasing” and “Sourcing” frequently utilized interchangeably.

Buyer Requirements Supplier Selection Contract Design Remittance Supplier Assessment

• Reasons for domestic to global procurement

• Benefits of Global Procurement

Sr. No. Documents

5. Packing list/ Proforma invoice

INternational COmmercial TERMS

-United Nations Conference on Trade and Development , 1990

Bear all costs and DAT- Delivered at Terminal

FCA- Free Carrier

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