jw logandscm

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INTRODUCTION TO LOGISTICS AND SUPPLY CHAIN

MANAGEMENT

Prof. Jarosaw Witkowski, PhdVice -rector for International Co-operation

Wroclaw University of Economics

Komandorska Street 118/120, 53-345 Wroclaw,

PolandTel. 0048713680151, Cell phone: 48501090903

E-mail:[email protected]
mailto:[email protected]:[email protected]


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Lecture outline

1.Definition and main activities of businesslogistics

2. Trade-offs analyses

3. Idea of supply chains

4. Supply Chain Management matrix

5. Supply chain performance and efficiencyimprovement (SCOR and GSCF models)

6. Japanese and European supply chainnetworks

7. Simple EOQ formula

8. Center of Gravity Technique


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Logistics (according to CLM) is the process of

planning, implementing and controlling theefficient, cost-effective flow and storage of rawmaterials, in- process inventory, finished goodsand related information from point of origin to

point of consumption for the purpose ofconforming to customer requirements

The mission of logistics is to get the right goods

or services to the right place, at he right time, andin the desired condition and quantity in relation tocustomers order


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Main logistics activities and decisions:

cooperate with marketing to set customer servicelevels,

facility location decisions,

transportation activities (eg. transportation modeselection, vehicle scheduling, carrier routing),

inventory management (inventory short -termforecasting, planning and control, cooperate withproduction to calculate EOQ, sequence and timeproduction ),

information collection and flows and order processing, warehousing and materials handling,

packaging and packing.


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Cost- revenue trade- offs

Profits at different levels of customer serviceRevenue, costs, profit

Logistics costs

85% 91% 95%

Customer service

Revenue


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Inventory costs trade- off

Inventory carring costs (space costs, capital

costs, inventory risk and services costs)

Procurement costs (acquisition costs,

transportation costs, manufacturing and

handling costs)

Out of stock costs (lost sales and back

order costs)


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Supply chain (since 80s of XXc.)

In broader sense SC is any combination of processes,activities, relationships and pathways along whichproducts, services, information and financial transactionsmove in and between enterprices (Gattorna 2006, p. 2)

In narrow sens SC is restricted to materials andinformation flows from suppliers, through manufacturesand distribution centers to retailers and final customerse.g. M. Christopher (2005) defines SC as a network of

connected and independent organizations mutually andcooperatively working together to, control, manage andimprove the flow of materials and informations fromsuppliers to end users.


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Council of Supply Chain ManagementProfessionals (former Council of LogisticsManagement ): Supply ChainManagement is the systemic, strategiccoordination of the traditional business

functions and the tactics across businessfunctions within a particular company andacross businesses within the supply chainfor the purposes of improving the long-

term performance of the individualcompanies and a supply chain as a whle(CSCMP 2005).


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According to the new definition of

CSCMP

SCM encompasses the planning andmanagement of all activities involved insourcing and procurement, conversion, and all

logistics management activities (includingcoordination and collaboration with channelpartners).

In essence SCM integrates supply chain anddemand management within and acrosscompanies


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GSCMF (Lambert and others)

SCM is the integration of key business

processes from end user through original

supplier that provides products, services and

information that add value for customers and

other stakeholders.

GSCMF vs. SCOR model (8 vs 5 key processes)


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Supply Chain Operations Reference Model
http://localhost/var/www/apps/conversion/tmp/scratch_4//upload.wikimedia.org/wikipedia/en/2/2d/SCC_processes_1.jpg


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Global Supply Chain Managgement

Forum Model (from 1996)

Customer Relationship Management (key)

Demand Management

Order Fulfillement

Manufacturing Flow Management

Supplier Relationship Management (key)

Product Development

Commercialization

Returun Management


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Based on the product relationship matrix Cooper and

Slagmulder(1999, p.10) distinguished four key

decisions and activities areas in the integrated supply

chains, such as:

- configuration of product and network, which covers

the decisions concerning the main rules of cooperation,

- formation of the production network, mainly thechoice of production facility and warehousing locations

as well as their capabilities,

- product design with involvement the research and

development abilities of suppliers,- process optimization in order to reduce cycle times

and inventory level in the cost-effective way.


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The product- relationship SCM matrix


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K E I R E T S U

JIT

TQM

Kanban

JIT

TQM

Kanban

JIT

TQM

Kanban

JIT

TQM

Kanban

Supplier Producer Wholeseler Retailer

K a i z e n

Keiretsu and Kaizen as a source of the development of Supply Chain Management in Japan


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The traditional role and place of small firms within integrated

supply chains was mostly limited):- delivering rawmaterials, parts or modules for the final

goods producers,

- delivering customer goods to wholesalers or selling small

quantities of this goods to the final customers,

- providing transportation and forwarding services,

- manufacturing goods and providing other services for

market niches which are considered as not enough profitable

for big companies (also as a subcontractor),

- trading under well known brand name of large distributionnetworks (franchising)


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Table:

The directins f SMEs changes as a links in supply chains and netwrks

Scope of changes in SMEs Hierarchical supply chains Polycentric supply network

Competences and skills

Flexibility

Role of small retailers

Key intermediary

Dominant logistics services

model

Small truck companies

Surce: Authrs wn discri tin

Narrow in particular

technological or functional

areas

Low or middle

Low and passive

Wholesaler or large retail

network

Self- or combined- service

model

Large number of

independent firms

Wide based on process

orientation, ability to

performance evaluation and

outsourcing

Middle or high

Increasing and active

Brokers or third party

logistics providers

Public logistics service

providers

Subcontractors dependent

on market leaders


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New vs. Traditional logistics

Integration (within organizational structures,

computer systems, supply chain and network)

Strategic approach

Outsourcing

Globalization and virtualization

Customer orientation City logistics and non- conventional

applications


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EOQ simple formula (Harris, Wilson)

Economic order quantity formula helps to find

the optimal number of units which should be

ordered or made in order to minimize the

total inventory costs

Developed in 1913 by Harris and applied in

industry by Wilson

Many disadvantages and several extensions


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Main assumptions (disadvatages) of

EOQ formula

Demand and ordering cost are constant

Maximum inventory is equal to order quantity,

new order is delivered when the inventory is zero

Lead time is fixed

No discount is avaliable for bigger orders

Replenishment is delivered at once

Lack of inflation


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The required parameters to calculate

EOQ: D demand quantity (units per year, month, day)

P purchase cost per each item

S fixed cost per order

i inventory carring cost rate related to capital invested in

inventory Q order quantity

D/Q number of orders


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How to calculate EOQ based on total

cost function?

Total cost of inventory TC= inventory carring cost +procurement cost

Q x P x i s x D

TC = ------------ + -------- min2 Q

2xDx s

Q = ---------P x i


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Facility location factors:

A.Weber, Polander, Thunen classical theories

Labour cost, land cost, transportation cost

Aviability and cost of materials, energy, water Socio- economic factors (taxes, political

stability, import and export restrictions,

enviromental regulations, quality of life, etc.)


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Analytical techniques for facility

location decisions:

Heuristic approach (e.g. factor rating by

weights reflecting the importance of each

factor)

Simulation models

Cost- benefit analisis

Center of gravity technique

Center of gravity (to find single


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Center of gravity (to find single

location that minimizes of

transportation cost)Technika Centrum Grawitacji

X

c (x,y)

0 Y

S3(x3; y3)S1(x1; y1)

Z2(x2 ; y2)

S2(x2; y2)Z1(x1 ; y1)

How to calculate the coordinates for


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How to calculate the coordinates for

CX and CYthe new facility

location?(Ballu, p.487) Parameters:

Vi volume at point i

Ri transportation rate to or from point i Xi and Yi coordinates of existing locations

Vi Ri Xi Vi Ri Yi

CX = -------------------- CY= ------------- Vi Ri Vi Ri


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Assumptions (disadvantages) of center

of gravity technique

Transportation rate is a linear function of

transported volume (units, tons, etc.) and the

traveling distance,

It deset cnsider real traveling distance

which is depended on the roads availability


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References:

[1] Ballu R.H.: Business logistics management, Prentice Hall International,New Jersey 1999

[2] Christopher M.: Logistics and Supply Chain Management. CreatingValue Adding Networks, Prentice Hall 2005

[3] Gattorna J.: Living Supply Chains. How to Mobilize the EnterpriseAround Delivering What Your Customers Want, Prentice Hall, 2006

[4] SCOR model http://supply-chain.org/

[5] CSCMP Supply Chain Management Definitions , www.cscmp.org

[6] Cooper R., Slagmulder R.: Supply Chain Development for the LeanEnterprise Inter- organizational Cost Management, Productivity PressPortland 1999

[7] Witkwski J.: Zarzdzanie aocuchem dstaw. Kncepcje, prcedury,dwiadczenia, PWE, Warszawa 2010

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