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1
Strategic Logistics Planning
Compiled by Rulzion Rattray
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Strategic Logistics Planning
• Understand & assess the macro environment.
• Analyse & understand the internal capabilities.
• Combines these to set objectives in consultation & with the support of major elements of the organisation
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The Resource EnvironmentThe Value Chain Michael Porter (1985)
Margin
Margin
Firm’s Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Operations Marketing
& Sales
Outbound
LogisticsService
Primary Activities
SecondaryActivities
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OverviewExternal Factors
•Social•Ecological•Political•Technological•Economic
Organisational Strategic Plan
Manufacturing
Physical Distribution
Logistics
Marketing
Functional Strategic Plans
Finance
Adapted from Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for Strategic Planning”, 15(3), pp47-61, Council of Logistics Management USA.
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Key Issues in Logistics Planning• Customer Service:
– Demand for improved service, quality a major element in competitive advantage
• Logistics costs:– Physical distribution, up to 30% of sales value
• External pressures– Regulatory change pressures, competitive pressures of
globalisation
• Trade offs:– Response to change requires complex adjustment.
• Organisational conflicts:– Often no clear responsibility for logistics
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Strategic Logistics Planning
Quality of Individual link of logistics system
1. Facility location2. Operations strategy3. Inventory management4. Information systems5. Material handling6. Traffic & transportation7. Planning & control8. Organisation
Business goals & strategies
Customer service requirements
Integrating logistics planning
Design of integrated logisticsmanagement system
Overall performance
Adapted from Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for Strategic Planning”, 15(3), pp47-61, Council of Logistics Management USA.
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Pressures Influencing System
Logistics System
Changing costs
Pressure forfinancial performance
Pressure to reduce inventory
Constantly improvingIT availability
Regulatory change
New customer Service requirements
Requirement for innovation and efficiency
Adapted from Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for Strategic Planning”, 15(3), pp47-61, Council of Logistics Management USA.
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Customer Service
Sales & Marketing
Production
Finance & Control
High revenue through:
High levels of availability
Rapid introduction of new products
Cost effective production:
High constant capacityutilisation
Longer production runs,Fewer set up costs
Tight budgets for:
Stocks Cost
Log
isti
cs
Higher
Lower
Disruptingfactors in
production
More
Fewer
StocksHigher
Lower
Conflicts of Interest
Adapted from Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for Strategic Planning”, 15(3), pp47-61, Council of Logistics Management USA.
Log
isti
cs
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• Decisions support systems– Advantage of quick analysis, & can incorporate
the complex trade offs.
• Logistics cost analysis by:– Channel, Product, type of customer, geographic
area, logistics function, etc.
• Use of simulations:– What if simulations, (I.think)– Optimisation
Analytical Methods
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DecentralisedInventory
CentralisedInventory
Breadth of product line
Narrow Broad
• Service consists of a range of dimensions
• A basis for competitor comparison on two dimensions
Shapiro Grid framework
Logisticscosts
Service costsor Delivery Time, etc
Cost Service Curves
• Elbows create concentration• away from elbow large increases
in delivery time and only moderate decrease in costs
• Straight steep curves variation and niches• more room for differentiators
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References
• Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for Strategic Planning”, 15(3), pp47-61, Council of Logistics Management USA.
• Christopher, M., (1995), “Logistics the Strategic Issues”, Chapman Hall, London.
• Aitken, J., “Supply Chain Integration within the Context of a Supplier Association”, Cranfield University PHD Thesis, 1998. Cited in Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London.
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Managing the Global Pipeline
Compiled by Rulzion Rattray
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The Globalisation of Markets.Levitt, T. (1983).
• Advances in Technology Driving the world to a converging commonality.– Proletarianisation of:
• Communication, transport, travel
• Global corporations which operate with resolute consistency at low relative cost using the entire world as a single market.
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Global
Costs
Localised
Inventory
Material
Production
Transport Source to User
Trade Offs in Global Logistics
• Important to recognise trade offs.
• Key to recognise the service needs of the market
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Globalisation in Supply Chains
• Liberalisation effect of WTO, etc.– No longer have to set up in target country, instead
can concentrate on developing economies of scale.– Emergence of new manufacturing economies has
resulted in increased competition and oversupply.– Companies will have to find new ways of
remaining competitive by lowering costs in other ways.
• Supply chain efficiency will become even more important
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The Myth of Globalisation. Susan Douglas & Yoram Wind.
• Attacks Levitt's view of global standardisation as naive and over simplistic. Homogenisation not a clear & universal trend.
• Contra Evidence of homogenisation:– Food firms adapt to national
characteristics.
– Growth of intra-country segmentation:
– growing demand for differentiated products.
• The myth of economies of scale:– Technical developments
lowering scale requirements.
– cost of production often only small part of total costs.
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• Focussed factories:– Economies of scale, one factory for the world?– May overlook crucial logistics trade offs:
• Transport costs & delivery times.
• Requirement for local packaging
• Centralised Inventories:– Centralising Inventory = less total inventory.
Global Manufacture & Supply
25 to 4 5:2 i.e. 60% reductionSquare root rule
– However may overlook benefit of local to customerChristopher, M., (1998),
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Postponement & Localisation• Localisation:
– Even in relatively homogeneous markets like Europe their can be considerable variety of local taste. This may be better catered for in a local assembly operation.
• Postponement:– Design products using simple common
platforms, using common components. Assembly does not take place until required.
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Customer Service Explosion
• Increasing perception that there is little technical difference between products.
• Service crucial source of differentiation and competitive advantage.– Requirements:
• Closely integrated marketing, manufacturing and supply strategies
• Logistics of service delivery crucial!
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Strategic Lead time Management
• Product and technology life cycles getting shorter.
• Requirements for success:– Ability to innovate.– Ability to bring new products to market.
• Logistical Lead time becomes crucial.– Time from sourcing and procurement though to
recovery of investment by selling
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Organisational Integration
• Recognition of the importance of taking a systems view of business.– Difficulty of achieving integration in functionally fixated
organisations.
• Move towards a requirement for generalists– Integration of all the different aspects of the organisation.
– Philosophy of integration beyond the confines of the organisation.
• Supply Chain Management.– Requires that all the players in the value system work
together.
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Throughput Management
• The process of linking manufacturing and procurement to the needs of the market.
• Requirement for reducing the length of the supply chain pipeline!
• Target:– Lower cost, higher quality, greater variety,
more flexibility, faster response times.
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Globalisation
• Move to commodity markets and component specialisation:– firms shop freely amongst the nations of the world
• Singer Sewing machines: Shells from US, motors from Brazil, drive shafts from Italy, machine assembled in Taiwan
– Increasing need for local customisation• Washing machines: Germans want fast spin & Italians
slow, British front loaders, French top loaders, etc
– Challenge how to achieve benefit of standardisation at the same time?
24
References
• Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London
• Levitt, T. (1983), “The Globalisation of Markets”, Harvard Business Review May/Jun.
• Douglas, S., & Wind, Y., (1987), “The Myth of Globalisation”, Columbia Journal of World Business, Winter.