Supply Chain Management

Harcourt, Inc.

S.C

16-2 Supply Chain Management

Supply Chain Management

16-3 Supply Chain Management

Typical Supply ChainsTypical Supply Chains

Purchasing Receiving Storage Operations Storage

Production Distribution

16-4 Supply Chain Management

Elements of Supply Chain ManagementElements of Supply Chain Management

Deciding how to best move and store materialsLogistics

Predicting quantity and timing of demandForecasting

Typical IssuesElement

16-5 Supply Chain Management

Logistics Refers to the movement of materials and

information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain

LogisticsLogistics

Logistics concept

DefinitionDefinitionDefinitionDefinitionThe task of coordinating material flow and information flow across the supply chain.

Minimize cost

Minimize investment

Maximize customer service

The objectives of logistics strategy

16-9 Supply Chain Management

Materials MovementMaterials MovementR

EC

EIV

ING

Storage

Workcenter

Work centerWork center

Storage

Workcenter

Storage

Shipping

Increasing Significance of Logistics

Costs are high About 10.5% of GDP domestically About 12% of GDP internationally

Customers are more demanding of the supply chain Desire for quick response Desire for mass customization

Logistical lines are lengthening Local vs. long distance supply Globalization of trade

Logistics is a key to trade and an increased standard of living

Logistics adds value Time and place utilities

Seven-eleven convenience store– Describe the key logistics processes at 7-11.

– What differences between the early reform and the regional distribution center at 7-11.

– What do you think are the main logistics challenges in running the 7-11 operation.

Case study

Case study

Centralized distribution

No distribution center

Built its own distribution center---joint distribution

First stage Second stage Third stage

Creating logistics advantage: three basic ways

Logistics advantageLogistics advantage

quality time

cost

Customer service goals The product Logistics service

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 (4 problem areas)

16

Outsourcing Logistics Services

The systematic outsourcing of logistics capabilities is a third option.

By collaborating with transportation firms, private warehouses, or other specialists, corporate resources can be concentrated on the firm’s core product.

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

Internal Supply Chain

Relationship of Logistics to Marketing and Production

Product

PricePromotion

Place-Customer service levels

Inventory carrying costs

Lot quantity costs Order processing

and information costs

Transport costs

Warehousing costs

Ma

rke

tin

gL

og

isti

csRelationship of Logistics to Marketing

Relationship of Logistics to Production

Coordinates through scheduling and strategy make-to-order make-to-stock

An integral part of the supply chain Affects total response time for customers Shares activities such as inventory planning

Costs are in tradeoff Production lot quantities affect inventory levels and

transportation efficiency Production response affects transportation costs and

customer service Production and warehouse location are interrelated