Post on 12-Sep-2015
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Introduction to Logistics/Supply Chain ManagementChapter 1
The Supply ChainAll activities (transportation, inventory control...) associated with the flow and transformation of goods from the raw materials stage through the end user, as well as the associated information flows
What is Logistics?Seven Rs
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.
CSCMP Definition of Logistics Management Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements. CSCMP Definition of Supply Chain Management Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.
Components of Logistics Management
Integrated Supply Chain Model
Stages of a Detergent Supply Chain
Supply Chain Stages
Other names for LogisticsBusiness logisticsSupply chain management DistributionChannel managementLogistics managementMaterials managementPhysical distributionQuick response and flexible manufacturing
The Relationship between Logistics and Supply Chain ManagementSCM = Integrated Business Logistics Management
Costs can be reduced by integrating such logistics-related activities as customer service, transportation, warehousing, inventory management, order processiong and information systems, and production planning and purchasihg.
A model of Supply Chain Management
Supply Chain ManagementSCM is about the coordination of product flows across business functions and across companies to achievecompetitive advantage and profitability for the individual companies in the SC and the SC members collectively
The Business Logistics/Supply Chain Concept
Within the SC there are two types of logistics:- Inbound logistics - is about the receiving of materials, storing and distribution to manufacturing premises and it is part of the companys supply side (physical supply materials management); - Outbound logistics - is about storing and distributing products and it is part of the companys demand side (physical distribution).
A view of Business Logistics in a company
Scope of BL/SC for an individual firmA single firm is not able to control its entire product flow channel from raw material source to points of the final consumptionBL/SC for the individual firm has a narrower scope: the immediate physical supply and distribution channels
Evolution of Logistics towards Supply Chain
Typical Supply Chain for a Manufacturer
SC for a plastic homewares manufacturer (kitchen bowls, food containers, etc.)Second tier suppliersChemical companyPaper and card board supplierInk supplierFirst tier suppliersPlastic stockistPackaging supplierPlastic homewares manufacturerFirst tier customerWholesalerSecond tier customersRetailers
Typical Supply Chain for a Service
Customers are Suppliers
The bullwhip effect
Logistics/Supply Chain Management and Competitive Advantage
The experience curve
Logistics and competitive advantage
Gaining Competitive Advantage through Logistics and Supply Chain Management
Generic Value Chain
The Immediate Supply Chain for an Individual Firm
Supply Chain Macro Processes in a FirmCustomer Relationship Management (CRM): All processes that focus on the interface between the firm and its customers.Internal Supply Chain Management (ISCM): All processes that are internal to the firm.Supplier Relationship Management (SRM): All processes that focus on the interface between the firm and its suppliers.
Reverse logisticsthe reverse distribution of products;the return of unsold goods;product returns;product recalls; andwaste management.
Scope of the Supply Chain for Most FirmsFocus firms internal supply chain
Primary- Setting customer service goals- Transportation- Inventory management- Information flows and Order processing Secondary, or supporting- Warehousing- Materials handling- Acquisition (purchasing)- Protective packaging- Product scheduling- Information maintenance BL Key Activities/Processes
Elements of Supply Chain Management
Importance of Logistics/SCM-Logistics is about creating value, both for customers and suppliers of the firm, and for the stakeholders.Business creates four types of value in products or services:form, time, place and possession.Marketing, Engineering and FinanceManufacturing LOGISTICSLogistics can help penetrating new markets, increasing market share and increasing profit, i.e. it generates sale, not just reduce costs.SCM
Significance of Logistics
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%
As 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
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
Physical Distribution CostsAdd one-third for inbound supply costsSource: Herbert Davis & CompanyLogistics cost are about 10% of sales
CategoryPercent of sales$/cwt.Transportation3.34%$26.52Warehousing2.0218.06Order entry0.434.58Administration0.412.79Inventory carrying1.7222.25Total distrib. costs 7.65%$67.71
Benefits of Supply Chain Management
OrganizationBenefitCampbell SoupDoubled inventory turnover rateHewlett-PackardCut supply costs 75%Sport ObermeyerDoubled profits and increased sales 60%National BicycleIncreased market share from 5% to 29%Wal-MartLargest and most profitable retailer in the world
Costs trade-offs in Marketing and Logistics
PRODUCTION/OPERATIONSSample activities: Quality control Detailed production scheduling Equipment maint. Capacity planning Work measurement & standardsLOGISTICSSampleactivities:Transport Inventory Order processing Materials handlingInterfaceactivities: Product scheduling Plant location PurchasingMARKETINGSampleactivities: Promotion Market research Product mix Sales force managementInterfaceactivities: Customer service standards Pricing Packaging Retail locationProduction-logisticsinterfaceMarketing-logisticsinterfaceRelationship of Logistics to Marketing and ProductionInternal Supply Chain
Logistics ObjectiveMaximize return on logistics assets (ROLA)Logistics contribution to salesInvestment in logistics assetsCosts of logistics operations
Study FrameworkThe focus is here
The Logistics Strategy Triangle
AssignmentsChapter 1Class assignmentsDraw a supply chain for a product of your own choice.Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding inventory level, changing customers needs, transport capacity, operational performance, delivery speed and reliability, and occurrence of failures.Explain how logistics and SCM can help in gaining competitive advantage.What are the different types of utility, and how does logistics directly, or indirectly affect each one?
Assignments
Suppose that a manufacturer of mens shirts can produce a dress shirt in its Houston, Texas plant for $8 per shirt (including the cost of raw materials). Chicago is a major market for 100,000 shirts per year. The shirt is prices at $15 at the Houston plant. Transportation and storage charges from Houston to Chicago amount to 5$ per hundredweight (cwt.). Each packaged shirt weighs 1 pound.As an alternative, the company can have the shirts produced in Taiwan for $4 per shirt (including the cost for raw materials). The raw materials, weighing about 1 pound per shirt, would be shipped from Houston to Taiwan at a cost of $2 per cwt. When the shirts are completed, they are to be shipped directly to Chicago at transportation and storage cost of $6 per cwt. An import duty of $0.50 per shirt is assessed.From a logistics-production standpoint, should the shirts be produced in Taiwan?What additional considerations, other than economic ones, might be considered before making a final decision?
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