1-1 business logistics/supply chaina vital subject the supply chain is simply another way of saying...
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1-3 Logistics Defined Supply Chain Management Defined CR (2004) Prentice Hall, Inc.TRANSCRIPT
1-1
Business Logistics/Supply Chain—A Vital Subject
The supply chain is simply another way of saying “the whole process of business.”
Chapter 1CR (2004) Prentice Hall, Inc.
Warehousing
Warehousing
Transportation
Transportation
Vendors/plants/portsTransportation
Factory
Transportation Customers
Informationflows
The Immediate Supply Chain for an Individual Firm
CR (2004) Prentice Hall, Inc. 1-2
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Logistics DefinedLogistics is the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements.
Council of Logistics Management
Supply Chain Management DefinedSCM is the integration of all activities associated with the flow and transformation of goods from raw materials through to end user, as well as information flows, through improved supply chain relationships, to achieve a sustainable competitive advantage.
Handfield and Nichols
CR (2004) Prentice Hall, Inc.
1-4
Demand forecasting
Purchasing
Requirements planning
Production planning
Manufacturing inventory
Warehousing
Material handling
Packaging
Finished goods inventory
Distribution planning
Order processing
Transportation
Customer service
Strategic planning
Information services
Marketing/sales
Finance
Supply Chain Management
Supply Chain Management
Logistics
Purchasing/Materials
Management
PhysicalDistribution
Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+
Demand forecasting
Purchasing
Requirements planning
Production planning
Manufacturing inventory
Warehousing
Material handling
Packaging
Finished goods inventory
Distribution planning
Order processing
Transportation
Customer service
Strategic planning
Information services
Marketing/sales
Finance
Supply Chain Management
Supply Chain Management
Logistics
Purchasing/Materials
Management
PhysicalDistribution
Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+
Evolution of Supply Chain Management
CR (2004) Prentice Hall, Inc.
Supply Chain Schematic
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The Logistics/SC Mission
Getting the right goods or services to the right place, at the right time, and in the desired condition at the lowest cost and highest return on investment.
CR (2004) Prentice Hall, Inc.
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A Revised Strategy is Generating Great Top Management Interest
Historical perspective of distribution: “The last frontier of cost economies”
The contemporary view: Distribution is a new frontier for demand generation—a competitive weapon.
Peter Drucker, 1962
Both views are now important!
CR (2004) Prentice Hall, Inc.
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C ustom ersT ransporta tion
Invento ryor supp ly source
C ustom er o rder p rocess ing (and transm itta l)
C ustom ersT ransporta tion
Invento ryor supp ly source
C ustom er o rder p rocess ing (and transm itta l)
Critical Customer Service Loop
CR (2004) Prentice Hall, Inc.
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Category Percent of sales $/cwt.
Transportation 3.34% $26.52Warehousing 2.02 18.06
Order entry 0.43 4.58Administration 0.41 2.79
Inventory carrying 1.72 22.25
Total 7.65% $67.71
Physical Distribution Costs
Add one-third for inbound supply costs
Source: Herb Davis & Company
Logistics cost are about 10% of
sales w/o purchasing costs
CR (2004) Prentice Hall, Inc.
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Costs are high About 10.5% of GDP domestically About 12% of GDP internationally A range of 4 to 30% of sales for individual firms, avg. about 10% A high as 70-80% of sales if purchasing and production are
included
Customers are more demanding of the supply chain Desire for quick response Desire for mass customization
An integral part of company strategy Generate revenue Improve profit
Logistical lines are lengthening Local vs. long distance supply
Logistics is a key to trade and an increased standard of living Law of comparative economic advantage applies
Logistics adds value Time and place utilities
Importance of Logistics
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Effect on Logistics Foreign Outsourcing
ProfitG & A
Marketing
Logistics
Overhead
Materials
Labor
ProfitG & A
Marketing
Logistics
Overhead
Materials
Labor
Tariffs
Increase
Reduction
Increase
Domestic sourcing Foreign sourcing
CR (2004) Prentice Hall, Inc.
Scope of the Supply Chain for Most Firms
Physical distributionPhysical supply(Materials management)
Business logistics
Sources ofsupply
Plants/operations Customers
• Transportation• Inventory maintenance• Order processing• Acquisition• Protective packaging• Warehousing• Materials handling• Information maintenance
• Transportation• Inventory maintenance• Order processing• Product scheduling• Protective packaging• Warehousing• Materials handling• Information maintenance
Focus firm’s internal supply chainCR (2004) Prentice Hall, Inc. 1-14
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Primary- Setting customer service goals- Transportation- Inventory management- Location
Secondary, or supporting- Warehousing- Materials handling- Acquisition (purchasing)- Protective packaging- Product scheduling- Order processing
Key Activities/Processes
CR (2004) Prentice Hall, Inc.
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FocusCompany
Suppliers
Supplier’ssuppliers
Customers
Customers/End users
Acquire Convert Distribute
The Supply Chain is Multi-Enterprise
Product and information flow
Scope in reality
CR (2004) Prentice Hall, Inc.
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Reality of SC Scope
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SUPPLYCHAIN
MANAGEMENT
Inte
rfunc
tiona
l coo
rdin
atio
n
Interorganizational coordination
Activity and processadministration
The Multi-Dimensions of SC
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PLAN
NIN
G
OR
GAN
IZIN
G
CO
NTR
OLL
ING
Transport Strategy• Transport fundamentals• Transport decisionsCustomer
service goals• The product• Logistics service• Ord. proc. & info. sys.
Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply
scheduling decisions• Storage fundamentals• Storage decisions
Location Strategy• Location decisions• The network planning process
PLAN
NIN
G
OR
GAN
IZIN
G
CO
NTR
OLL
ING
Transport Strategy• Transport fundamentals• Transport decisionsCustomer
service goals• The product• Logistics service• Ord. proc. & info. sys.
Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply
scheduling decisions• Storage fundamentals• Storage decisions
Location Strategy• Location decisions• The network planning process
Study Framework
The focus is here
CR (2004) Prentice Hall, Inc.
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Customer service goals The product Logistics service Information sys.
Inventory Strategy Forecasting Storage fundamentals Inventory decisions Purchasing and supply
scheduling decisions Storage decisions
Transport Strategy Transport fundamentals Transport decisions
Location Strategy Location decisions The network planning process
The Logistics Strategy Triangle
CR (2004) Prentice Hall, Inc.
PRODUCTION/OPERATIONSSample activities: Quality control Detailed production scheduling Equipment maint. Capacity planning Work measurement & standards
LOGISTICSSampleactivities:Transport Inventory Order processing
Materials
handling
Interfaceactivities: Product scheduling Plant location Purchasing
MARKETINGSampleactivities: Promotion Market research Product mix Sales force management
Interfaceactivities: Customer service standards Pricing Packaging Retail location
Production-logisticsinterface
Marketing-logisticsinterface
Relationship of Logistics to Marketing and Production
Internal Supply ChainCR (2004) Prentice Hall, Inc. 1-21
Relationship of Logistics to MarketingProduct
Price Promotion
Place-Customer service levels
Inventory carrying costs
Lot quantity costs Order processing
and information costs
Transport costs
Warehousing costs
Mar
ketin
gLo
gist
ics
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Relationship of Logistics to ProductionCoordinates through scheduling and strategy—make-to-order or make-to-stock
An integral part of the the supply chainAffects total response time for customersShares activities such as inventory planning
Costs are in tradeoffProduction lot quantities affect inventory levels and transportation efficiency
Production response affects transportation costs and customer service
Production and warehouse location are interrelated
CR (2004) Prentice Hall, Inc.
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Logistics/SC in Diverse Areas
Manufacturing—most common
Environment—causing restrictions
Service—emerging opportunities
Non-profits—little explored
Military—long history
CR (2004) Prentice Hall, Inc.