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Transcript of Logistics - PROC 5850 Walden Logistics - PROC 5850
Logistics - PROC 5850 Walden
•Personal Background•Educational Background•Books, Articles, Presentations•Contact: Joe Walden [email protected] (760) 447-3651
Logistics - PROC 5850 Walden
Syllabus• Class 1: Jan 7 – Chapters 1 & 2, Supply Chain
Security • Class 2: Jan 14 – Chapter 3 & 4• Class 3: Jan 21 – Chapters 5 & 6 • Class 4: Jan 28 – review and mid term • Class 5: Feb 4 – Chapters 7 & 8• Class 6: Feb 11 - Chapters 9 & 10• Class 7: Feb 18 – Chapters 11, 13• Class 8: Feb 25 – Chapter 15 and Reverse Logistics • Class 9: Mar 4 - Course Critique, Review, Final
Exam
Logistics - PROC 5850 Walden
Class Slides and Information
• www.supplychainresearch.com
• Slides will be posted/updated week prior to class – therefore the slides currently on the website may change as new stuff comes available
Logistics - PROC 5850 Walden
Grading
• Mid term 35%
• Final exam 35%
• Case Study 15%
• Paper 15%
CHAPTER 1
Logistics’ Role in the Economy and the
Organization
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Importance of Supply Chain Management and The Art of War
• “War is a matter of vital importance to the state; the province of life or death; the road to survival or ruin. It is mandatory that it be thoroughly studied.”
• Supply Chain Management is a matter of vital importance to the company – the road to survival or ruin for the company. It is mandatory that it be thoroughly studied.
Logistics - PROC 5850 Walden
Business Logistics/Supply Chain—A Vital Subject
The supply chain is simply another way of saying “the whole process of business.”
Logistics - PROC 5850 Walden
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 Supply Chain Management
Practitioners
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
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Logistics and Supply Chain Importance
• >$1 Trillion annually on supply chains in US
• ~$600 Billion on transportation alone in US
• 70% of all goods in US are transported at some point in supply chain by trucks
Logistics - PROC 5850 Walden
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% 70-80% of sales if purchasing and production are included
Customers are more demanding of the supply chain Desire for quick response Access to information and ordering online Desire for mass customization
An integral part of company strategy Generate revenue Improve profit Up to $12 dollars of increase in sales to = $1 saved in supply chain
Logistical lines are lengthening Local vs. long distance supply – global supply chains
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
Significance of Logistics
Logistics - PROC 5850 Walden
Chapter One: Logistics Role in the Economy and Organization
To identify how logistics affects the economy and
the performance of organizations
To briefly explore how logistics has developed over time
To understand how logistics contributes to value
creation (value-added)
To understand the concept of the systems approach
as it relates to logistics and marketing, the total cost
concept and profitability
To show how to recognize areas in which logistics
performance can be improved
Logistics - PROC 5850 Walden
Table 1-1: The Cost of the Business Logistics System In Relation to Gross Domestic Product (GDP) In $ Billion
Year Inventory Carrying
Costs
Transportation Costs
Administrative Costs
Total U.S. Logistics
Cost
Logistics As a Percentage of
GDP
1960 31 44 3 78 14.7
1965 38 64 4 106 14.7
1970 56 91 6 153 14.7
1975 97 116 9 222 13.5
1980 220 214 17 451 16.1
1985 227 274 20 521 12.4
1990 283 351 25 659 11.4
1995 302 441 30 773 10.4
2000 377 590 39 1,006 10.1Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001
Logistics - PROC 5850 Walden
Category Percent of sales $/cwt.
Transportation 3.34% $26.52
Warehousing 2.02 18.06
Order entry 0.43 4.58
Administration 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
Logistics - PROC 5850 Walden
Logistics: the right product, in the right quantity,in the right condition, at the right time, at the right place. These are the components of the Logistics metric for perfect order fulfillment.
Logistics - PROC 5850 Walden
Components of Logistics Management
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Management actions
Planning Implementation Control
Raw materials
In-process inventory
Finished goods
Natural resources
Human resources
Financial resources
Informationresources
Time and place utility
Efficientmovement to customer
Proprietary asset
Competitive advantage
Logistics management
Suppliers Customers
Inputs into logistics
Outputs of logistics
Customer serviceDemand forecastingInventory managementLogistics communicationsMaterial handlingOrder processingParts and service support
Plant & warehouse site selectionProcurement PackagingReverse logisticsTraffic and transportationWarehousing and storage
Logistics activities
Logistics - PROC 5850 Walden
Customer serviceDemand forecastingInventory managementLogistics communicationsMaterial handlingOrder processingParts and service support
Plant & warehouse site selectionProcurement PackagingReverse logisticsTraffic and transportationWarehousing and storageSecurityCustoms Clearance
Logistics activities
Logistics - PROC 5850 Walden
Marketing/Logistics Management Concept
Customer satisfaction
Integrated effort Company profit
•Suppliers•Intermediate customers•Final customers
•Maximize long-term profitability•Lowest total costs given an acceptable level of customer service
•Product•Price•Promotion•Place (distribution)
Logistics - PROC 5850 Walden
Cost Trade-offs in Marketing and Logistics
Product
Order processing and information
costs
Inventory carrying costs
Place/customer service levels
Order processing and information
costsPrice
Lot quantity costs Warehousing costs
Transportation costs
LO
GIS
TI C
SM
AR
KE
TIN
G
Logistics - PROC 5850 Walden
Relationship of LogisticsActivities to Logistics Costs
• Customer service levels
• Transportation costs
• Warehousing costs
• Order processing/information systems costs
• Lot quantity costs
• Inventory carrying costs
Logistics - PROC 5850 Walden
Key Logistics Activities
• Customer service• Demand forecasting• Inventory
management• Logistics
communications• Material handling• Order processing• Packaging
• Parts and service support
• Plant and warehouse site selection
• Procurement
• Reverse logistics
• Traffic and transportation
• Warehousing and storage
Logistics - PROC 5850 Walden
Flow through the Supply Chain
Customer
Customer
Customer
Customer
Customer
Customer
Supplier
Supplier
Supplier
Distribution center
Distribution center
Manufacturingsite
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Logistics - PROC 5850 Walden
Future Challenges and Areas for Performance Improvement
• Supply Chain Management
• Strategic Planning
• Total Quality Management
• Just-in-Time
• Quick Response
• Efficient Consumer Response
• Logistics as a Competitive Weapon
Logistics - PROC 5850 Walden
Future Challenges and Areas for Performance Improvement (cont.)
• Accounting for logistics costs• Logistics as a boundary-spanning activity• Global logistics• Increasing skill requirements• Logistics information systems• Strategic alliances, partnerships, and
outsourcing• Green marketing and reverse logistics
CHAPTER 2
Supply Chain Management
Logistics - PROC 5850 Walden
•To show how supply chain management can
play a key role in achieving corporate success
• To familiarize with the concept of supply
chain management
•To describe the factors that influence supply
chain network structure, supply chain business processes,
and supply chain management components
• Supply Chain Security issues
Goals of this chapter:
Logistics - PROC 5850 Walden
Supply Chain Management
The integration of key business processes from end user through original suppliers, that provides products, services, and information that add value for customers and other stakeholders.
Logistics - PROC 5850 Walden
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.
Logistics - PROC 5850 Walden
Su
pp
ly C
hai
n B
usi
nes
s P
roce
sses
Tier 1Supplier
Tier 2Supplier
SUPPLY CHAIN MANAGEMENTIntegrating and Managing Processes Across the Supply Chain
LogisticsPurchasing Marketing & Sales
R&D
Customer Consumer/End-user
CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER SERVICE MANAGEMENT
DEMAND MANAGEMENT
ORDER FULFILLMENT
MANUFACTURING FLOW MANAGEMENT
PROCUREMENT
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
RETURNS
PRODUCT FLOWProduction Finance
Manufacturer
Information Flow
Source: Douglas M. Lambert, Martha C. Cooper, Janus D. Pagh, “Supply Chain Management: Implementation Issues and Research Opportunities”, The International Journal of Logistics Management, Vol. 9, No. 2, 1998, p. 2.
Logistics - PROC 5850 Walden
Supply Chain Network Structure
Members of the Focal Company’s Supply Chain
n
n
n
n
n
n
n
Con
sum
ers
/ E
nd
-Cu
sto
me
rs
Tie
r 3
to
n c
ust
ome
rs
1
2
1
1
2
n
1
2
Initi
al S
upp
liers
Tie
r 3
to
n s
up
plie
rs
1
2
3
1
2
1
2
3
1
Focal Company
Tier 1Customers
Tier 2Customers
Tier 3 toConsumers/
End-CustomersTier 2
SuppliersTier 1
Suppliers
Tier 3 toInitial
suppliers
n
1
Logistics - PROC 5850 Walden
Types of Business Process Links
• Managed Process Links – important from company perspective
• Monitored Process Links – not as critical• Not-Managed Process Links – not
actively involved – often overlooked and may cause problems
• Nonmember Process Links – part of supply chain but not direct supply chain
Logistics - PROC 5850 Walden
Underlying Process Vision
Customer Relationship Management
Procurement
FulfillmentCustomer
Service Management
Manufacturing FlowManagement
Demand Management
Customer
Source: 3M
Supply Chain Management Vision
The key to achieving an integrated flow of product and information throughout the supply chain is to create a focused customer interface, a focused supplier interface, and an integrated, process-oriented, supply chain which is driven by the customer.
Logistics - PROC 5850 Walden
Customer Relationship Management
• Customer service teams develop and implement customer partnering programs.
• Product/service agreements are established.
• New customer interfaces lead to improved communication and better predictions of customer demand and improve the way customers are serviced.
• Teams identify and eliminate sources of production variability.
• Key performance evaluation criteria (both level of service and customer profitability) are used to measure results.
• Similar to first step in Six Sigma process
Logistics - PROC 5850 Walden
Customer Service Management
• Provides a single source of customer information, a point of contact for administration of the product/service agreement.
• Conveys real-time information through interface with product and distribution operations.
• Requires an on-line/real-time product and pricing information to assist customers with inquiries, order placement, and after-sales service.
• Includes front line technical service that assists customers with product applications and recommendations.
Logistics - PROC 5850 Walden
Customer Order Fulfillment
• “Customer need dates” and requirements drive the process.
• Manufacturing, distribution, and transportation plans are integrated.
• Strategic alliances with key supply chain members and carriers are formed to meet requirements and to reduce total-delivered-cost to customers
• Key metrics: Required Delivery Date; Time Definite Delivery; On time delivery rates; perfect order fulfillment
Logistics - PROC 5850 Walden
Perfect Order Fulfillment
• Right product
• Right Place
• Right Quantity
• Right time
• Right condition
• Is 99% good enough?
Logistics - PROC 5850 Walden
Perfect Order Fulfillment
• Right Product % x Right Place % x Right Quantity % x Right Time % x Right Condition %
• Example: 99% x 99% x 99% x 99% x 99% = 95% Perfect Order Fulfillment
• 95% = 77.37% Perfect Order Fulfillment
Logistics - PROC 5850 Walden
Manufacturing Flow Management
• Product is pulled through the plant based on customer needs.
• Manufacturing processes must flexibly respond to market changes with rapid changeover capabilities for mass customization.
• Minimum lot sizes are planned to move toward a make to order environment.
• Production priorities are driven by required delivery dates.
• Managers concentrate on keeping setup/changeover costs very low.
Logistics - PROC 5850 Walden
Procurement
• Strategic plans of suppliers and company are aligned to focus resources on holding down costs and developing new products.
• Supplier categorization and management is implemented on a corporate global basis, with purchasing in a strategic contracting role.
• Purchase order transactions are integrated with the supply process to improve productivity and all areas of supplier performance.
Logistics - PROC 5850 Walden
Product Development
• Design what the customer wants/needs
• Create a need for the product – 3M/iPod
Logistics - PROC 5850 Walden
Reengineering SCM Process Flow Chart
Assess:• Culture
• Strategies• Practices
• Processes
Assess:• Culture
• Strategies• Practices
• Processes
Mission statementMission statement
Business requirementsBusiness requirements
Implement business solution in supply chain
Implement business solution in supply chain
New enterprise design for integrated processNew enterprise design for integrated process
Revise/reengineerRevise/reengineer
Strategic partnerships
Strategic partnerships
Organizationstructure
Organizationstructure
Humanresource
capabilities
Humanresource
capabilities
Informationsystems
Informationsystems
Acceptable
Not acceptable
Source: Douglas M. Lambert, Larry C. Guinipero, and Gary J. Ridenhower, “Supply Chain Management: A Key to Achieving Business Excellence in the 21st Century,” unpublished manuscript. All Rights reserved.
Logistics - PROC 5850 Walden
IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT
Information Architecture, Data Base Strategy, Information Visibility
Technical Logistics Purchasing Finance &Accounting
Sales &Marketing
BusinessProcesses
Typical Functions
Silos
Manufac-turing
CUSTOMERS
DemandManagement
NetworkPlanning
CapabilityPlanning
SourcingDemandPlanning
CustomerRelationshipManagement
RequirementsDefinition
ManufacturingStrategy
SourcingStrategy
CustomerProfitability
AccountManagement
RequirementsDefinition
Customer ServiceManagement
PerformanceSpecifications
CoordinatedExecution
AccountAdministration
TechnicalService
Manufacturing FlowManagement
ProductionPlanning
IntegratedSupply
ManufacturingProcessStability
Fulfillment DistributionManagement
PlantDirect
SelectedSupplier(s)
DistributionCost
SpecialOrders
ProductDevelopment andCommercialization
ProcessSpecifications
MaterialSpecifications R & D Cost
ProductDesign
BusinessPlan
MovementRequirements
PriorityAssessment
CostTo Serve
TradeoffAnalysis
ProcessRequirements
EnvironmentalRequirements
PackagingSpecifications
PrioritizationCriteria
SUPPLIERS
Procurement IntegratedPlanning
SupplierManagement
MaterialsCost
MaterialSpecifications
OrderBooking
InboundFlow
Cost
Note: Process sponsorship and ownership must be established to drive the attainment of the supply chain vision and eliminate the functional barriers that artificially separate the process flows.
Logistics - PROC 5850 Walden
Overview Presentation
Supply Chain Operations Reference-model
(SCOR)
Logistics - PROC 5850 Walden
• The SCC is an independent, not-for-profit, global corporation with The SCC is an independent, not-for-profit, global corporation with membership open to all companies and organizations interested in membership open to all companies and organizations interested in applying and advancing state-of-the-art supply chain management applying and advancing state-of-the-art supply chain management systems and practices.systems and practices.
• Over 800 Company Members Over 800 Company Members
• Cross-industry representation Cross-industry representation
• Chapters in Australia/New Zealand, Brazil, Europe, Japan, Chapters in Australia/New Zealand, Brazil, Europe, Japan, North America, Southern Africa, and South East Asia with North America, Southern Africa, and South East Asia with petitions for additional chapters pending.petitions for additional chapters pending.
•The Supply-Chain Council (SCC) has developed and endorsed the The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference-model (SCOR) as the cross-Supply Chain Operations Reference-model (SCOR) as the cross-industry standard for supply chain managementindustry standard for supply chain management
Logistics - PROC 5850 Walden
SCC Organization - Chapters and Staffing
Australia/New Zealand Chapter Australia/New Zealand Chapter Sydney, AustraliaSydney, Australia
Australia/New Zealand Chapter Australia/New Zealand Chapter Sydney, AustraliaSydney, Australia
South East Asia Chapter South East Asia Chapter SingaporeSingapore
Venture Inc.Venture Inc.
South East Asia Chapter South East Asia Chapter SingaporeSingapore
Venture Inc.Venture Inc.
Japan Chapter Japan Chapter Tokyo, JapanTokyo, Japan
NECNEC
Japan Chapter Japan Chapter Tokyo, JapanTokyo, Japan
NECNEC
SCC Global Headquarters SCC Global Headquarters Pittsburgh, Pennsylvania, Pittsburgh, Pennsylvania,
USAUSA
DisneyDisney
SCC Global Headquarters SCC Global Headquarters Pittsburgh, Pennsylvania, Pittsburgh, Pennsylvania,
USAUSA
DisneyDisney
EuropeEurope
Oslo, NorwayOslo, Norway
Modus MediaModus Media
EuropeEurope
Oslo, NorwayOslo, Norway
Modus MediaModus Media
Southern Africa Southern Africa Johannesburg, South AfricaJohannesburg, South Africa
UTiUTi
Southern Africa Southern Africa Johannesburg, South AfricaJohannesburg, South Africa
UTiUTi
North America North America ChapterChapter
North America North America ChapterChapter
Brazil ChapterBrazil Chapter
Effective 9/1/03Effective 9/1/03
Brazil ChapterBrazil Chapter
Effective 9/1/03Effective 9/1/03
Logistics - PROC 5850 Walden
Supplier
Plan
Customer Customer’sCustomer
Suppliers’Supplier
Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliver
Internal or External Internal or External
Your Company
Source
SCOR is structured around five distinct management processes
SCOR Model SCOR Model
Return Return ReturnReturn Return Return Return Return
Building Block Approach
Processes Metrics
Best Practice Technology
Logistics - PROC 5850 Walden
Performance Attribute
Performance Attribute Definition Level 1 Metric
Supply Chain Delivery Reliability
The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer.
Delivery Performance
Fill Rates
Perfect Order Fulfillment
Supply Chain Responsiveness
The velocity at which a at which a supply chain provides products to the customer.
Order Fulfillment Lead Times
Supply Chain Flexibility
The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage.
Supply Chain Response Time
Production Flexibility
Supply Chain Costs
The costs associated with operating the supply chain.
Cost of Goods Sold
Total Supply Chain Management Costs
Value-Added Productivity
Warranty / Returns Processing Costs
Supply Chain Asset Management Efficiency
The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.
Cash-to-Cash Cycle Time
Inventory Days of Supply
Asset Turns
Linking Supply Chain Performance Attributes and Level 1 Metrics
Logistics - PROC 5850 Walden
Just In Time - Logistics or Supply Chain?
Logistics - PROC 5850 Walden
Just -in-Time
According to APICS Dictionary:
“A philosophy of manufacturing based on
planned elimination of all waste and on
continuous improvement of productivity.”
Logistics - PROC 5850 Walden
Just in Time
• The process is important not the actual “zero inventory” concept
• First Step - document the existing flow of products or services - see the actual flow and determine which are value added
• Second Step - determine the reasons for variations in flow and why a new flow may be needed
• Implement change
• Mistake proof
• Start again at step 1
Logistics - PROC 5850 Walden
7 Wastes• Waste of overproduction
• Waste of waiting
• Waste of transportation
• Waste of Stocks
• Waste of motion
• Waste of making defects
• Waste of processing - when product should not be made or process not used
• (added by Walden) Waste of Meetings
Source : Just-in-Time: Making it Happen
Logistics - PROC 5850 Walden
Supply Chain Security
Logistics - PROC 5850 Walden
Supply Chain Security
What’s the cost of 9/11 to the Supply Chain?
Fortune Magazine - $50-80 billion a year
• inefficient supply chains• higher transportation costs• increased inventory
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Efficient supply chain
• Economical production runs
• Finished goods inventories
• Economical buy quantities
• Large shipment sizes
• Batch order processing
Responsive supply chain
• Excess capacity
• Quick changeovers
• Short lead times
• Flexible processing
• Premium transportation
• Single order processing
Supply-to-stock
Supply-to-order
Choosing the Right Supply Chain Strategy
Logistics - PROC 5850 Walden
Supply Chain SecurityAnd Homeland Defense
Logistics - PROC 5850 Walden
Recent Headlines
• “New Budget includes $10.2 Billion for Border Security.”
• “Battling the Bad Guys: 2005 Was a Tough Year” Dec 2005 Baseline Magazine
• “Major Data Theft Leads to Major Legal Problems” Baseline Magazine
• “Polo Ralph Lauren – Lost Point of Sale Data”
• “No One Stop Shopping to Stop Database Pilferages” E-Week, Dec 21, 2005
Logistics - PROC 5850 Walden
Recent Headlines
• GAO Report: “Container Security – Expansion of Key Customs Programs Will Require Greater Attention to Critical Success Factors”
• “Security and Risk Strategy Become Integrated” – Top Trends for 2006, CIO Magazine, January 2006
• “Computer Security Becomes More Critical” CIO Magazine, January 2006
• “Supply Chain and Security Remain in the Forefront”
• “ISO Publishes Supply Chain Security Guidelines” Plant Engineering Magazine, Sep 06
• New Budget Includes $10.2 Billion Increase for Border Protection
Logistics - PROC 5850 Walden
• “Supply Chain Security Poses Opportunities, Obstacles” E-Week, Sep 23, 2005
• “Supply Chain Risks Threaten the World’s Biggest Companies” Logistics Today – “Financial executives at some of the world’s biggest companies believe supply chain risks post the top threat to companies revenues.”
Recent Headlines
Logistics - PROC 5850 Walden
Examples
• Major Distributor, Dec 2006
• Locks on trucks
• SAFE Port Initiative
• Scanning of Containers
• C-TPAT
• ISO Standards for Supply Chain Security
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Terrorism Risk Insurance
U.S. Terrorism Risk Insurance Act (TRIA) – Our property and casualty insurance experts are helping clients with interests in the United States make informed decisions about terrorism coverage.
U.S. President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) into law in November 2002 to stimulate business investment that had slowed to a trickle after the events of September 11, 2001. The law creates a three-year federal program that backs up insurance companies and guarantees that certain terrorist-related claims will be paid.
TRIA is a short-term measure designed to give the insurance market time to recover and develop new solutions.
Logistics - PROC 5850 Walden
Supply Chain Security
“We have proved to our management that good security is good business.”— Ann Lister of Texas Instruments
Logistics - PROC 5850 Walden
Risk
Supply Chains are inherently complex, dynamic, and fluid, characterized by uncertainty, ambiguity, and friction. These characteristics cloud the operating environment: they create risks
Logistics - PROC 5850 Walden
Important?
• September 11, 2001 - $2 billion per day lost
• Longshoremen Strike, 2002 – 300-500 ships backed up
• Potential loss of attack to major port - $20 billion estimate
Logistics - PROC 5850 Walden
Problem?• Terrorism• Obsolescence• Pilferage• Information Breach• Proprietary Data – Camera Phones; Thumb Drives• Cyberspace Security• RFID Data Security• 66% of Sealift Containers arrive at 20 Major Ports• >58 % of all inbound containers come through New
York/New Jersey, Los Angeles, Long Beach• ~44% through Los Angeles/Long Beach in 2003• Lengthening of Supply Chains – coupled with
Globalization• Top 5 “Hottest Global Markets”: China, Mexico, Eastern
Europe, Southeast Asia, India
Logistics - PROC 5850 Walden
Purpose of Risk Assessment
Identify those areas of the supply chain that are vulnerable to interruptions of support flow.
• People• Processes• Technologies• External events
Logistics - PROC 5850 Walden
Risk Assessment
• Terrorism• Port Security – over 12 million
containers annually to the US; 200 million world wide
• Port Security – 300 US Ports• Longshoremen Strike – 2002• Potential Airport Attack – LAX;
MPS; LGA
Logistics - PROC 5850 Walden
How do you identify Supply Chain Risks?
• You have to know your processes
• Process maps• Understanding processes• Understanding where risks are• Internal Risks• External Risks
Logistics - PROC 5850 Walden
What are Supply Chain Hazards?
• Theft/Pilferage• Competition• Information Systems• Cell Phones• Thumb Drives• Camera Phones• Disgruntled Employees• Lack of Training
Logistics - PROC 5850 Walden
What is a Catastrophic Risk?
• Inaccurate receipts?• Customer Satisfaction?• Sloppy Warehousing?• National Emergency?• Hurricane?• Or, Only when it makes it to
CNN?
Logistics - PROC 5850 Walden
New Problem?
• “There were no ‘secure’ rear areas.” General Joseph Heiser on
Vietnam Logistics• Sun Tzu – Chapter 1, The Art of War• Native Americans• American Civil War – Great Train
Chase• Pirates of the Caribbean
Logistics - PROC 5850 Walden
• Supply Chain Security must protect the path from the supplier to the customer.
• End to End Security • End to End Visibility – RFID• Information Security• Personal Daily Obligation• Operational Security• Security and Velocity
Supply Chain Security
Logistics - PROC 5850 Walden
Supply Chain Security
A Global Perspective
Logistics - PROC 5850 Walden
Top 5 European Ports
• Rotterdam – 9.287 million TEUs in 2005
• Hamburg – 9.088 million TEUs
• Antwerp – 6.488 million TEUs
• Bremen – 3.735 million TEUs
• Giora Tauro – 3.161 million TEUs
• LA/Long Beach – 7.485 mil TEUsSource: Logistics Today, Feb 07, p.1, 20
Logistics - PROC 5850 Walden
Other Key Ports
• Singapore – 23.2 million TEUs
• Hong Kong – 22.602 million
• Shanghai – 18.080 million
• Shenzhen – 16.2 million
• Pusan – 11.94 million
Logistics - PROC 5850 Walden
Rotterdam
• > 900 intermodal barge moves daily to 72 locations
• > 200 rail moves
• 220 million people within 600 miles of Rotterdam
Logistics - PROC 5850 Walden
Rail
• > 15% of cargo to Germany via rail
• ~ 13% of Belgium cargo
• ~ 14 of French cargo
• US Rail – 4 major bridges over the Mississippi River
Logistics - PROC 5850 Walden
Other issues
• 9000 distribution centers in the Netherlands
• 2000 - $64.4 billion USD in logistics and distribution in The Netherlands
Logistics - PROC 5850 Walden
Containers
• Cost to X-Ray containers
• Manpower
• Delays
• Radiation
Logistics - PROC 5850 Walden
Why should you care about SC Security?
• Is it a US problem?
• Global Problem
• Heathrow Airport delays Superbowl weekend 2005
• RFID – is this the solution?
• ISO Guidelines for SC Security
• Terrorism Insurance
Logistics - PROC 5850 Walden
Transportation Worker Identification Credentials
• Port Employees
• Long Shoremen
• Unescorted access personnel
Logistics - PROC 5850 Walden
HR 1
• Air Cargo Bill – phase in inspection of all air cargo
• Sea Cargo – safe seal – shippers of >75K TEUs to US have 3 years to comply
Logistics - PROC 5850 Walden
C-TPAT
• Security Freight Initiative
• Inspection of high risk containers @ >50 ports
Logistics - PROC 5850 Walden
Other issues
• theTruecosts.com – costs of piracy and fakes
• Rotterdam – 19% of all European Volume
• Amsterdam – 440 million metric tonnes
• www.HIDC.com – Holland International Distribution Council
Logistics - PROC 5850 Walden
Orlando International Airport
• No staffing of doors for employee entrance to baggage claim areas
• Guns smuggled into planes by employees• “no requirement for us to staff those doors” OIA
Spokesperson; TSA – “not my job!”• Identified as security issues in 2004• 2006 – ½ of TSA Screeners failed test that
measured how well employees could identify explosives, guns and other weapons on the scanner – but can identify bottles of mouthwash and toothpaste
Source: Mike Thomas, Orlando Sentinel, Mar 15, 2007, p. B-1
Logistics - PROC 5850 Walden
Air Cargo World 2/07
• Bans on Russian Flights to Georgia
• Unfit Antonovs – on list published by the International Civil Aviation Organization – 462 aircraft considered not air worthy
• Not a terror threat but still a SC Threat
• Mostly used throughout Africa
Logistics - PROC 5850 Walden
International BioTerrorism
• Peter Pan Peanut Butter – e coli – 2007
• E-coli from fresh Spinach – 2006
• Chi Chi’s e-coli – from green onions – 2003
• Taco Bell – e coli 2005
• None were terrorist attacks but impacted supply chains
• US Salmonella scare 2008
Logistics - PROC 5850 Walden
Risk Assessment
“If you do things the way you’ve always done them, you’ll get the same things you’ve always got.”
-Darrell Waltrip
This is not your Dad’s Supply Chain!Security is an integral part of the Supply Chain and Homeland Defense
Logistics - PROC 5850 Walden
Leadership and Security
RISKMGMT
ASSESSMENT/
TRAINING
LEADERSHIP
VISION/DIRECTION
PURPOSE/MOTIVATION
SCSECURITY
Logistics - PROC 5850 Walden
Summary
• Direct link between supply chain security and homeland security
• Logistics costs are large part of manufacturing costs
• Savings in supply chain costs to bottom line
• Logistics
• Supply Chains
Logistics - PROC 5850 Walden
Next Class
• Chap 3 & Chap 4