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Supply Chain ManagementA Logistics Approach

Supply Chain ManagementA Logistics Approach

COURSE FACILITATOR

Muhammad Tariq Yousafzai Assistant Professor

MS in Innovation and Business CreationMBA Imsciences (Distinction Holder)

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Role of Role of Logistics in Logistics in

Supply Supply ChainsChains

Five types of Utility

Session Objectives Session ObjectivesUnderstand the role and importanceOf logistics

Types of logistics utilities

Value added role of Logistics

Logistics and functional departments interface

Approaches to Analyzing logistics systems

LOGOLOGOLogistics

(From Customer Perspective)Logistics

(From Customer Perspective)

Getting the right product, to right customer, in the right quantity, in right condition, at right Place, at right time, & at right cost

Also called the “Seven Rs of Logistics”

LOGOLOGO Logistics DefinedLogistics Defined

• “Logistics is the process of anticipating customer needs and wants;

• Acquiring the capital, materials, people, technologies, and information necessary to meet these wants and needs;

• Optimizing the goods or service-producing network to fulfill customer requests;

• And utilizing the network to fulfill customer requests in a timely manner”

LOGOLOGO Four Sub divisions of LogisticsFour Sub divisions of Logistics

Business logistics

(flow and storage of goods, service and related information from point of origin to point of consumption)

Military Logistics (support operation capability such as in Operation Rah-e-Rast in Swat and Rah-e-Nijat)

(food, fuel, spare parts) as well as personnel and ensure readiness, reliability, & efficiency)

LOGOLOGO Event logistics: Event logistics: The network of activities, facilities, &

personnel required to organize, schedule, & deploy the resources for an event to take place & to efficient withdraw after the event

Such as Huner Mela by SDC or IMS welcome part last week or Valentine Day for Chocolate candy industry and cut flowers

LOGOLOGO Service LogisticsService Logistics

The acquisition, scheduling, & management of the facilities/assets, personnel, & materials to support & sustain a service operation or business.

LOGOLOGO Value-Added Roles of LogisticsValue-Added Roles of Logistics

Five Types of Utilities add value to a product or service

(1) Form Utility (Mftg or assembly process)

(2) Time Utility (Reducing lead time & JIT inventory control)

(3) Place Utility (Primarily via transportation)

(4) Quantity Utility (Suzuki Mehran example)

(5) Possession Utility (created via marketing)

LOGOLOGO Form Utility Form Utility

• Manufacturing or assembly process

For example: Dell (change of form)

• Breaking bulk

• Place Utility:

• Logistics create place utility mainly through transportation

LOGOLOGO Time UtilityTime Utility

• Heavy advertising

• Reducing lead time (JIT)

• The time that elapses from when a customer places an order until the customer receives a satisfactory fulfillment of orders.

• (Bad butter)

LOGOLOGO Quantity UtilityQuantity Utility

• “When” and “ Where” should be accompanied by “How much”

• Mehran Motors assembling 1000 cars in a day, the tire supplier should provide 4000, tires be delivered

• What if the supplier provides 200 tires

LOGOLOGO Possession UtilityPossession Utility

• AIDA concept (desire issue)

• The role of logistics in the economy depends on the existence of possession utility, for time, place and quantity utilities make sense only if demand for the product or service exists

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LOGOLOGO Logistics ActivitiesLogistics Activities

(1) Transportation

(2) Warehousing and Storage

(3) Industrial Packaging

(4) Materials Handling

(5) Inventory Control

(6) Order Fulfillment

(7) Demand Forecasting

(8) Production Scheduling

LOGOLOGO Logistics activities continued…Logistics activities continued…

(9) Procurement

(10) Customer Service

(11) Facility-Location

(12) Return Goods Handling

(13) Parts and Service Support

(14) Salvage and Scrap Disposal

These activities and now explained one-on- -one basis

LOGOLOGO (1) TRANSPORTATION(1) TRANSPORTATION

• Important activity in logistics and often the largest variable cost

• Global Transportation options are-- OCEAN

Accounting for two thirds of all international movements, low rates, long transit times (slow speed), low accessibility and higher potential for shipment damage.

--

LOGOLOGO OCEANOCEAN

• Normally, containers are used

• “FCL” stands for Full Container Load and “LCL” stands for Less than Container Load

• FCL is door-to-door concept

• LCL is terminal-to-terminal concept

LOGOLOGO AIR FREIGHTAIR FREIGHT

• Fast Transit Time, High Rates

• Suitable for High value Low Density

For Example: Diamonds, Time sensitive documents, spare parts etc

• Mostly “Belly Cargo”

• Less/Convenient Packaging

• Lower Insurance

LOGOLOGO MOTORMOTOR

• If the transit distance is less than 1,000 km using road freight is competitive compared to rail and airfreight

• Widely used in the inland delivery of goods to port of export

• The delivery charge is called the cartage or trucking fee

LOGOLOGO Continued…Continued…

• Oresund Bridge Between Sweden and Denmark (Malmo –Copenham)

• 7,455 Meters Long

LOGOLOGO RAILRAIL

• Different track gauges in various countries prevent long-distance shipments

• For example, a shipper using a land bridge substitutes land transportation for part of containers ocean voyage, taking several days off the transit time and saving in-transit inventory costs.

LOGOLOGO Logistics Activities… STORAGE

Logistics Activities… STORAGE• Tradeoff relationship with transportation

• Involves two steps

(a) Inventory management and

(b) Warehousing (not a long term storage facility anymore)

• Slow mode (higher inventory) and greater warehousing space

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PackagingPackaging

• Depends on the goods to be sent, method of dispatch and conditions at final destination.

• Premium transportation reduces packaging costs (oftentimes)

• If several transfers are involved?

• Breaking down heavy packages

LOGOLOGO Packaging continued..Packaging continued..

• Desiccants (drying agents)

• Waxed paper and

• Laminated foil may be required in areas with high humidity levels

• Pallets are good for stackable items

• Standard Euro pallet 120X80 cm and US Palllets have 120X100cm dimensions

LOGOLOGO Materials HandlingMaterials Handling

• Important for warehouse design and efficient warehouse operations

• Concerned with materials handling equipment used for short-distance movement and includes equipment

• Example: Conveyors, forklift trucks, overhead cranes

• Minimize aisle space, reduce cost,

labor, and risk

LOGOLOGO Automated Storage and Retrieval Systems (ASRS)

LOGOLOGO Inventory ControlInventory Control• In warehouse and Manufacturing Facility• Inventory has two dimensions

(a) Assuring adequate inventory levels

(b) Certifying inventory accuracy

Fixed order quantity approach (filling)

Two bin system

To find out whether or not adjustments are needed? These impact order fulfillment (buffer stock)

• VMI

JIT and MRP are mostly used for dependent demand, and EOQ for independent demand where demand is known and no inventory is in transit

LOGOLOGO Order fulfillmentOrder fulfillment

• Order fulfillment 8 days• Order processing 4 days• Order preparation 2 days • Transportation 2 days• Reduce activity 2 and use a slow mode of

transportation• Front desk operations should be supported by

back end operations via coordination among, inventory control, manufacturing, warehousing, and transportation

LOGOLOGO ForecastingForecasting

• Accurate forecasting of inventory requirements and material components is essential to inventory control, manufacturing efficiency, and customer satisfaction.

• JIT, and MRP

• The above two are used as demand is depended on demand of something else.

LOGOLOGO Production planningProduction planning

• Closely related to forecasting

• Production managers

• Multiple product line, product line?

• Seasonality of business

• NEW BUY

• REBUY

• MODIFIED BUY

LOGOLOGO ProcurementProcurement

• Transportation costs directly related to procurement

• Total logistics costs (inventory and transportation)

• Buying from china would have a lead time of several weeks

• Premium mode of transportation needed

LOGOLOGO Kraljics MatrixKraljics Matrix

• Its purpose is to help purchasers maximize supply security and reduce costs, by making the most of their purchasing power.

• In doing so, procurement moves from being a transactional activity to a strategic activity – because, as Kraljic said, "purchasing must become supply management."

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Non Criticals– Office supplies such as stationery (Rethink)

Strategic Items– (Special branded clothes such as Bonanza) who use their own fabric and do not sell others (long Term)

Bottlenecks– Uranium for a nuclear plant (supplier will provide what they sell not what you like but what they sell)

Leverage Items

Leverage items- (Control) Low supplier with high profile customer

LOGOLOGO Facility locationFacility location

• Plant and warehouse location

• A site change can alter time and place relationships

• Such changes affects transportation costs and service, inventory requirements

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Pipeline routes are practically unlimited as they can be laid on land or under water. The longest gas pipeline links Alberta to Sarnia (Canada), which is 2,911 km in length.

Pipeline construction costs vary according to the diameter and increase proportionally with the distance and with the viscosity of fluids (from gas, low viscosity, to oil, high viscosity).

PipelinePipeline

LOGOLOGO Logistics interfaces with operationsLogistics interfaces with operations

• Relates to the length of production runs• Manufacturing economies concerned with long

production runs with infrequent manufacturing line changeovers

• Tradeoffs between (High inventory costs

and Limited supplies of others)

Chocolate candy on valentine day• A shift of responsibility from manufacturing to

logistics

LOGOLOGO logistics Interface With Marketinglogistics Interface With Marketing

• Logistics is sometimes referred to as other half of marketing

• The several {Rs}

• Place dimension• Organizations dealing with wholesalers probably have

less logistics problems• Larger quantities, manage inventories periodically• Retailers buy in small amounts, and do not allow for

sufficient lead time• Manufacturers might need to buy a premium

transportation service

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Size, Shape, Weight, Packaging and other dimensions affect the ability of logistics system to move and store productsLogistics should offer input into NPDFrequent refurbishingThe nature of the product can damage rate,storage ability, pallets etc IKEA transportation improvements

Size, Shape, Weight, Packaging and other dimensions affect the ability of logistics system to move and store productsLogistics should offer input into NPDFrequent refurbishingThe nature of the product can damage rate,storage ability, pallets etc IKEA transportation improvements

P Product

LOGOLOGO PromotionYour promotions affects demand and demand affects manufacturing, logistics and so on

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