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Supply Chain Management
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Now that we understand the various physical elements of a retail supply chain, let us examine the basic types of supply chains …
Copyright: Raja Shuja-ul-Haq (2010)
Key Types of Supply Chains
Copyright: Raja Shuja-ul-Haq (2010)
Type 1Complex Supply Chains
Copyright: Raja Shuja-ul-Haq (2010)
Manufacturing Plant
Sortation Depot
Regional Distribution Centre
Local Distributors
Superstore Shelves
Retailer’s Warehouse
Manufacturer-owned UnitsDistributor-owned UnitsRetailer-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Manufacturing Plant
Sortation Depot
Regional Distribution Centre
Local Distributors
Convenience Store
Manufacturer-owned UnitsDistributor-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Type 2Manufacturer-Controlled Supply Chains
Copyright: Raja Shuja-ul-Haq (2010)
Manufacturing Plant
Sortation Depot
Regional Distribution Centre
Superstore Shelves
Retailer’s Warehouse
Manufacturer-owned UnitsDistributor-owned UnitsRetailer-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Large retailers like superstores have their own warehouses and can maintain a small inventory
Manufacturing Plant
Sortation Depot
Regional Distribution Centre
Retailer’s Warehouse
Manufacturer-owned UnitsDistributor-owned UnitsRetailer-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Retailer’s Store 1
Retailer’s Store 2
Retailer’s Store 3
Convenience Stores
Convenience store chains can operate a common warehouse for more than one stores in a geographic location and get supplies from the distribution centre rather than from distributors
Manufacturing Plant
Sortation Depot
Regional Distribution Centre
Discount Store
Manufacturer-owned UnitsDistributor-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Discount stores usually get their products directly from the distribution center at cheaper rates rather than paying the distributor’s profit margin …
Type 3Simple Supply Chains
Copyright: Raja Shuja-ul-Haq (2010)
Manufacturing Plant
Local Distributors
Convenience Stores
Manufacturer-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Convenience stores or high-street stores require small consignments of goods on a daily basis (since they lack storage space and can not maintain an inventory of goods) … Distributors ideally serve their needs …
Manufacturing Plant
Non-store Distribution Center
Customer’s Home
Manufacturer-owned Units
Retailer-owned Units
Copyright: Raja Shuja-ul-Haq (2010)
Non-store format (www.amazon.com)
Websites like Amazon.com follow this distribution channel strategy where books are stored in a distribution centre …
Orders are taken online and books are shipped directly to the customers …
Type 4: Temperature-Controlled
Supply Chain(TCSC)
Copyright: Raja Shuja-ul-Haq (2010)
Cost of Production (@ Unilever):
Rupees 5/-
Sales Price:
Rupees 30/-
A bulk of price charged to the customers covers the cost of the “unbroken” cold chain of distribution … including temperature-controlled trucks, storage facilities, loading bays and even fridges given to individual retailers …
Simple Economics:
?
Copyright: Raja Shuja-ul-Haq (2010)
Celsius Scale of Temperature
Freezing and Melting Point of Water
In Pakistan:Peak Summer Day Temperatures can vary between
38 degrees Celsius to 50 degrees Celsius
Peak Winter Day Temperatures can vary between 15 degrees Celsius to 25 degrees Celsius
The importance of TCSCs in Pakistan is on a much higher scale as compared to Europe and the US, since there are extreme ambient temperatures
(i.e. temperature differentials of 54 degree Celsius)
Copyright: Raja Shuja-ul-Haq (2010)
Many products in Pakistan require a “TCSC” (Temperature-Controlled Supply Chain) so as to maintain maximum shelf-life once the product reaches the retailer’s shelf …
Copyright: Raja Shuja-ul-Haq (2010)
A TCSC is an “unbroken” supply chain
A proper inventory of temperature-controlled items is not maintained because of their short shelf-life and the supply chain is in a continuous phase of transportation …
Copyright: Raja Shuja-ul-Haq (2010)
The ultimate objective of a TCSC is to maximize a product’s shelf-life once the product reaches the retailer’s shelf …
(exposure to the ambient temperature can reduce some products’ shelf-life)
Copyright: Raja Shuja-ul-Haq (2010)
Products which require a TCSC for distribution in Pakistan …
Copyright: Raja Shuja-ul-Haq (2010)
Temperature-controlled supply chains (TCSC) is a food supply chain that requires that food products be maintained in a temperature-controlled environment rather then exposing them to whatever ambient temperatures prevail at various stages of the supply chain
There are several temperature levels to suit various product types: Frozen supply chain, cold chill supply chain, medium chill supply chain and exotic chill supply chain
Copyright: Raja Shuja-ul-Haq (2010)
Frozen Chill Supply Chain is maintained at -25 degrees Celsius for ice-creams and -18 degrees Celsius for other frozen food items
Cold Chill Supply Chain is maintained at 0 degrees to +1 degrees Celsius for fresh meat, dairy products, vegetables and some fruit types
Medium Chill Supply Chain is maintained at +5 degrees Celsius for butters, fats and cheese products
Exotic Chill Supply Chain is maintained at +10 to +15 degrees Celsius for poultry, potatoes, bananas and some exotic fruits
Failure to maintain these recommended temperatures throughout the supply chains reduces the shelf-life of the products
Copyright: Raja Shuja-ul-Haq (2010)
Factory: Cold StorageDistribution Centre: Cold Storage Facility
Refrigerated trucks
Refrigerated trucks
Ambient temperature endurance: 15 minutes
Loading Bays (with airbags)
15 minutes
15 minutes
Copyright: Raja Shuja-ul-Haq (2010)
Airbags
15 minutes
Retailer’s Refrigerated Shelves
Copyright: Raja Shuja-ul-Haq (2010)
Copyright: Raja Shuja-ul-Haq (2010)
Copyright: Raja Shuja-ul-Haq (2010)
Copyright: Raja Shuja-ul-Haq (2010)
Importance of TCSCs:
1) Increased shelf-life of perishable goods with very short expiry dates
2) Improved quality for the customers (customer satisfaction)
3) Food safety obligations set by the government (i.e. Food Safety Act of 1990 in the UK dealing with storage, handling and transporation requirements of food products)
4) Reduced wastage cost (low levels of expired products)
Copyright: Raja Shuja-ul-Haq (2010)
Temperature-controlled storage facilities have to be maintained at the appropriate temperature with accurate recording equipment and cooling equipment, including the capacity to cope with high ambient temperatures especially during transportation in summers
Vehicle loading bays need air bags that inflate around the vehicle to prevent exposure to ambient temperatures
For frozen food and ice-cream products, loading and unloading bays should be at 0 degrees Celsius temperature
Vehicles require appropriate insulation , refrigeration and control panels to manually set and maintain temperatures
Challenges of operating TCSC
Frozen food items like ice-creams in Pakistan, can not be left in ambient temperature for more than 15 minutes while loading or handling, according to Unilever Pakistan’s supply chain manual
Copyright: Raja Shuja-ul-Haq (2010)
In Pakistan, temperature-controlled trucks and vans from most Distribution Centres and Distributors deliver pallets of products to convenience stores twice a week
On delivery, the goods are not checked at the door of the convenience store, but are first shelved in refrigerated chambers and then the stock keeper records the delivered order
Challenges of operating TCSC
Even products we might take for granted may require temperature controls like bread and prepared sandwiches. Failure to maintain adequate controls can further reduce the product’s shelf life and increase wastage expense, adding up the total supply chain costs
Copyright: Raja Shuja-ul-Haq (2010)
Copyright: Raja Shuja-ul-Haq (2010)
Multi-temperature composite warehouses and vehicles
Such warehouses and vehicles are a cost-effective way for most companies to store and transport temperature-controlled products
Such warehouses and vehicles have up to five different temperature regimes, set-up as five different compartments in the same unit (i.e. frozen chilled, cold chilled, medium chilled, exotic chilled and ambient temperature compartments in one storage or transportation unit)
Benefits of composite warehouses and vehicles are:
a) better utilization of resources (i.e. transport and warehouses)
b) efficient service to the retailers (i.e. collective delivery of mixed temperature orders)
Copyright: Raja Shuja-ul-Haq (2010)
A Composite Transportation UnitA Composite Transportation Unit
-20 degrees Celsius
0 degrees Celsius
+5 degrees Celsius
+15 degrees Celsius
Copyright: Raja Shuja-ul-Haq (2010)
A Composite Transportation UnitA Composite Transportation Unit
Frozen Food, Ice Cream
Fresh Meat, Vegetables
Butter, Yogurt and Cheese Products
Poultry, Exotic Fruit, Potatoes
Copyright: Raja Shuja-ul-Haq (2010)