Supply Chain Logistics Management

Twenty-first Century Supply Chains

• Supply Chain Management– Consists of firms collaborating to

leverage strategic positioning and to improve operating efficiency

• Supply Chain Strategy– Is a channel arrangement based

on acknowledged dependency and relationship management

• Logistics– The work required to move and

geographically position inventory

The supply chain revolution has reshaped contemporary strategic thinking

Successful supply chain strategies Market Saturation Driven: Focusing on generating high profit,

through strong brands and ubiquitous marketing and distribution. Operationally Agile: Configuring assets and operations to react

nimbly to emerging consumer trends along lines of product category or geographic region.

Freshness Oriented: Concentrating on earning a premium by providing the consumer with product that is fresher than competitive offerings.

Consumer Customizer: using mass customization to build& maintain close relationships with end-consumers through direct sales

Logistics Optimizer: Emphasizing a balance of supply chain efficiency and effectiveness.

Trade Focused: Prioritizing "low price, best value" for the consumer (as with the logistics optimizer strategy but focusing less on brand than on dedicated service to trade customers).

SUPPLIERNETWORK

INTEGRATEDENTERPRISE DISTRIBUTIVE

NETWORK

Information, Product, Service, Financial and Knowledge Flows

MATERIALS

Capacity, Information, Core Competencies, Capital and Human Resources

Relationship Management

Procurement

Manufacturing

Distribution

END

CONSUMERS

Generalized Supply Chain Model

Forces driving supply chain strategies

• Integrative management• Responsiveness• Financial sophistication• Globalization

Concepts necessary for achieving integrated management

• Lowest total process cost is the focus of integrated management

• Collaboration cross-organizational sharing of operating information, technology, and risk as ways to increase competitiveness

• Enterprise extension includes expanded managerial influence and control beyond traditional ownership boundaries of a single enterprise (information sharing &process specialization)

• Integrated service providers (ISP) provide a range of logistics services to accommodate customers, ranging from order entry to product delivery– Commonly known as third or fouth party service providers

Responsiveness emerges as a competitive advantage

Figure 1.8 Anticipatory Business Model

Figure 1.9 Responsive Business Model

Postponement strategies keep supply chains responsiveness

• Types of Postponement– Manufacturing (or Form)– Geographic (or Logistics)– Combined

Manufacturing postponement• Manufacturing one order at a time• Base modular construction of product• No customization until the exact customer specs

and financial commitment is received• Objective is to maintain products in an

uncommitted status as long as possible• Balances economy of scale with responsiveness

– Can build a sufficient quantity of “ready to customize” basic units

• Requires a lot of forethought during product design

Example of manufacturing postponement

Keeping all the car panels a base color (white or gray) until the order is received, then painting to the color ordered

Geographic postponement• Build or stock a full-line inventory at one or a

few strategic locations• Forward deployment of inventory is

postponed until customer orders are received• Once orders received, specific item is

expedited to the local distributor• Advantages are manufacturing economies of

scale along with responsiveness to customer • Often used for critical, high cost parts and

assemblies (e.g. engines)

Example of geographic postponement

Keeping full inventory in a central warehouse and releasing customer orders to local distributors or direct shipping to customer

Combined postponement• Keeping the basic products centralized and

performing the customization at the destination distributor

• Historical example - Autos– Installing dealer options like sound systems,

GPS, sun roofs on new cars purchased• Contemporary example - Computers

– Dell Computers, doing final assembly or packaging additional system options like printers, digital cameras at a distribution center

Financial sophistication enables measurement of time-based supply chain

• Cash-to-Cash Conversion—the time required to convert raw material or inventory purchases into sales revenue

• Dwell Time Minimization—dwell time is the ratio of time that an assets sits idle to the time required to satisfy its supply chain mission

• Cash Spin—reducing assets in the supply chain can “spin” cash for reinvestment in other projects

Globalization offers firms several attractive opportunities

• Demand exceeds local supply– 90% of global demand is not satisfied by local supply

• Strategic sourcing– Identifying and matching the sources of raw materials

and components to manufacturers and distributors• Offshoring

– Moving manufacturing and distribution operations to countries with favorable labor costs and tax laws

Significant differences for global logistics

• Distance of typical order-to-delivery operations is significantly longer compared to domestic business

• Documentation requirements for business transactions is significantly more complex

• Operations must be deal with significant Diversity in work practices and local operating environments

• How consumers Demand products and services must accommodate cultural variations