1 - Supply Chain

8/22/2019 1 - Supply Chain

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Business Logistics

Supply Chain


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Logistics DefinedLogistics is the process of planning, implementing and

controlling the efficient, cost-effective flow and storageof raw materials, in-process inventory, finished goodsand related information from the point of origin to pointof consumption for the purpose of conforming tocustomer requirements.

Council of Logistics Management

Supply Chain Management DefinedSCM is the integration of all activities associated with the

flow and transformation of goods from raw materialsthrough 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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Warehousing

Warehousing

Transportation

Transportation

Vendors/plants/portsTransportation

Factory

Transportation Customers

Information

flows

The Immediate Supply Chain for an Individual Firm

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Supply Chain Schematic

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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

Physical

Distribution

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

Physical

Distribution

Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+

Evolution of Supply Chain Management


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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.


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A Revised Strategy is Generating

Great Top Management Interest

Historical perspective of distribution:The last frontier ofcost economies

The contemporary view:Distribution is a new frontier fordemand

generationa competitive weapon.

Peter Drucker, 1962

Both views arenow important!


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Customers

Transportation

Inventory

or supply source

Customer order processing (and

transmittal)

Customers

Transportation

Inventory

or supply source

Customer order processing (and

transmittal)

Critical Customer Service

Loop


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Category Percent of sales $/cw t.

Transportation 3.34% $26.52

Warehousing 2.02 18.06

Order entry 0.43 4.58Administration 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

Hundredweight

100 lbs


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Effect on Logistics Foreign Outsourcing

ProfitG & A

Marketing

Logistics

Overhead

Materials

Labor

ProfitG & A

Marketing

Logistics

Overhead

Materials

Labor

Tariffs

Increase

Reduction

Increase

Domestic sourcing Foreign sourcing

Gastos generales

Gastosindirectos


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Scope of the Supply Chain for Most Firms

Physical distributionPhysical supply(Materials management)

Business logistics

Sources ofsupply

Plants/operations

Customers

Transportation Inventory maintenance Order processing Acquisition

Protective packaging Warehousing Materials handling Information maintenance

Transportation Inventory maintenance Order processing Product scheduling

Protective packaging Warehousing Materials handling Information maintenance

Focus firms internal supply chain 1-14


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Primary

- Setting customer service goals- Transportation- Inventory management- Location

Secondary, or supporting- Warehousing- Materials handling

- Acquisition (purchasing)- Protective packaging- Product scheduling-Order processing

Key Activities/Processes


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Focus

Company

Suppliers

Supplierssuppliers

Customers

Customers/End users

Acquire Convert Distribute

The Supply Chain is Multi-Enterprise

Product and information flow

Scope in

reality


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PLAN

NING

ORGANIZING

CONTRO

LLING

Transpo rt Strategy

Transport fundamentals

Transport decisionsCustomer

service goals

The product

Logistics service Ord. proc. & info. sys.

Inventory Strategy

Forecasting

Inventory decisions

Purchasing and supply

scheduling decisions

Storage fundamentals

Storage decisions

Lo cation Strategy

Location decisions

The network planning process

PLAN

NING

ORGANIZING

CONTRO

LLING

Transpo rt Strategy


Transport decisionsCustomer

service goals

The product

Logistics service Ord. proc. & info. sys.

Inventory Strategy

Forecasting

Inventory decisions


scheduling decisions


Storage decisions

Lo cation Strategy

Location decisions


Study Framework

The focus ishere


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Customerservice goals The product Logistics service Information sys.

Inv entor y Strategy

Forecasting


Inventory decisions


scheduling decisions Storage decisions

Transpo rt Strategy


Transport decisions

Lo cat ion Strategy

Location decisions


The Logistics Strategy Triangle


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PRODUCTION/OPERATIONSSample activities:Quality controlDetailed production

schedulingEquipment maint .Capacity planningWork measurement

& standards

LOGISTICSSampleactivities:TransportInventory

Orderprocessing

Materialshandling

Interface

activities:Product

schedulingPlant

locationPurchasing

MARKETINGSampleactivities:PromotionMarket

researchProduct

mixSales force

management

Interfaceactivities:

Customerservicestandards

PricingPackagingRetail

location

Production-logisticsinterface

Marketing-logisticsinterface

Relationship of Logistics to

Marketing and Production

Internal Supply Chain1-21


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Relationship of Logistics to Marketing

Product

PricePromotion

Place-Customer

service levels

Inventory

carrying costs

Lot quantity

costs Order processing

and information

costs

Transport

costs

Warehousing

costs

Lo

gistics

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Relationship of Logistics to Production

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

An integral part of the the supply chain

Affects total response time for customers

Shares activities such as inventory planningCosts are in tradeoff (compensacin)

Production lot quantities affect inventorylevels and transportation efficiency

Production response affects transportationcosts and customer service

Production and warehouse location areinterrelated


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Logistics/SC in Diverse Areas

Manufacturingmost common

Environmentcausing restrictions

Serviceemerging opportunities

Non-profitslittle explored (no lucro)

Militarylong history


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Contemporary Logistics Terms

Value stream/logistics processQuick response and flexiblemanufacturingMass customizationSupply chain management/collaborative logisticsReverse logistics

Service logisticsContinuous replenishmentLean logistics

Integrated logistics

Documents

1 - Supply Chain