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

    1-2

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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 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

    Study Framework

    The focus ishere

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    Customerservice goals The product Logistics service Information sys.

    Inv entor y Strategy

    Forecasting

    Storage fundamentals

    Inventory decisions

    Purchasing and supply

    scheduling decisions Storage decisions

    Transpo rt Strategy

    Transport fundamentals

    Transport decisions

    Lo cat ion Strategy

    Location decisions

    The network planning process

    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

    1-22

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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