Business Logistics/Supply ChainA Vital Subject

The supply chain is simply another way of saying the whole process of business.

Chapter 1
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Immediate Supply Chain for an Individual Firm

Transportation

Warehousing

Transportation

Customers

Factory

Information flows

Transportation

Vendors/plants/ports Warehousing
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Transportation
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Logistics Defined
Logistics 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.

What is Supply Chain

Physical supply channel : between a firms immediate material resource and its processing points. Physical distribution channel : between the firms processing points and its customer.
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Supply Chain Management Defined

Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements. SCM 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.

Evolution of Logistics

The Flows of SCM

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Other Names of SCM

Physical distribution Distribution Distribution engineering Business logistics Marketing logistics Distribution logistics

Material management Material logistics management Logistics Quick-response systems Supply chain management Industrial logistics

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Reverse logistics
Products become obsolete, damaged, or nonfunctioning and are returned to their source points for repair or disposition .
Forward logistics channel
Manufacturer Central return center Retailer Customer

Reverse logistics channel

Buy toaster

(D)
Retailer Central return center
Chargeback (D)

Customer

Defective toaster(D)

Refunds

Toaster Manufacturer

Scan toaster UPC Return-to-vendor

Scans the toaster into its database 8and 1-8 repair

Evolution of Supply Chain Management

Activity fra
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Supply Chain Schematic

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The Logistics/SC Mission

Gettin
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Critical Customer Service Loop

Customer order processing (and transmittal)

Transportation Customers Inventory or supply source

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Physical Distribution Costs

Category Transportation Warehousing Order entry Administration Inventory carrying Total Percent of sales 3.34% 2.02 0.43 0.41 1.72 7.65% $/cwt. $26.52 18.06 4.58 2.79 22.25 $67.71
Logistics cost are about 10% of sales w/o purchasing costs
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Add one-third for inbound supply costs

Source: Herb Davis & Company
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Importance of logistics

Logistics adds time and place utility Form utility: making materials available in a completed state Time utility : at the right time Place utility : in the right place Possession utility : allowing the customer to take ownership of the item

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Importance of Logistics

Cost are significant Supply and distribution lines are lengthening Logistics is important strategy Logistic adds significant customer value Customers increasingly want quick customized response Logistics in non-manufacturing areas Service industry Military Environment

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Effect on Logistics Foreign Outsourcing

Domestic sourcing Foreign sourcing Profit G&A Marketing Logistics Overhead Materials Materials Labor Labor Profit G&A Marketing Logistics Tariffs Overhead

Toyota has 35 plants in 25 countries outside of Japan. Exports were down 9%, overseas production was up 16%. Uses the JIT concept to supply parts across the pacific. Outsourcing adds value, but it requires more careful management of logistics costs and product-flow times in the supply channel.

Quick customized response

Customers increasingly want quick customized response. Fast food retailer, ATM, fast package delivery, internet, can be made available in increasingly shorter times. Improved information system, Financial Mgt Systems have led marketplace toward mass customization. EX: Gateway 2000, a desktop computer company, will configure a PC to exact hardware requirement of the customer and even install requested software. L.L. Bean offers a wide assortment of clothing sizes.

Scope of the Supply Chain for Most Firms

Business logistics

Physical supply (Materials management) Sources of supply Plants/ operations Transportation Inventory maintenance Order processing Acquisition Protective packaging Warehousing Materials handling Information maintenance

Physical distribution

Customers Transportation Inventory maintenance Order processing Product scheduling Protective packaging Warehousing Materials handling Information maintenance

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Focus firms internal supply chain

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Key Activities/Processes
Primary

Setting customer service goals Transportation Inventory management Location

Secondary, or supporting - Warehousing - Materials handling - Acquisition (purchasing) - Protective packaging - Product scheduling - Order processing
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The Supply Chain is Multi-Enterprise

Scope in reality
Focus Company Suppliers Suppliers suppliers Customers Customers/ End users

Acquire

Convert
Product and information flow

Distribute

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Reality of SC Scope

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The Multi-Dimensions of SC
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SUPPLY CHAIN MANAGEMENT

Activity and process administration

The Multi-Dimensions of SC

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Study Framework
CONTROLLING
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Location Strategy Location decisions The network planning process

The focus is here

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PLANNING

Customer service goals The product Logistics service Ord. proc. & info. sys.

ORGANIZING

Inventory Strategy Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions

Transport Strategy Transport fundamentals Transport decisions

Global Apparel Value Chain

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The Logistics Strategy Triangle

Inventory Strategy Forecasting Transport Strategy Storage fundamentals Transport fundamentals Inventory decisions Transport decisions Purchasing and supply scheduling decisions Customer Storage decisions service goals The product Logistics service Information sys. Location Strategy Location decisions The network planning process
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Relationship of Logistics to Marketing and Production

PRODUCTION/ OPERATIONS Sample activities: Quality control Detailed production scheduling Equipment maint. Capacity planning Work measurement & standards LOGISTICS Sample activities: Transport Inventory Order processing Materials handling Interface activities: Customer service standards Pricing Packaging Retail location MARKETING Sample activities: Promotion Market research Product mix Sales force management

Interface activities: Product scheduling Plant location Purchasing

Productionlogistics interface

Marketinglogistics interface

Internal Supply Chain

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Relationship of Logistics to Marketing

Marketing
Product Price Place-Customer service levels Promotion

Logistics

Inventory carrying costs Lot quantity costs

Transport costs Warehousing costs

Order processing and information costs

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Relationship of Logistics to Production

Coordinates through scheduling and strategy
make-to-order or make-to-stock An integral part of the the supply chain Affects total response time for customers Shares activities such as inventory planning Costs are in tradeoff Production lot quantities affect inventory levels and transportation efficiency Production response affects transportation costs and customer service Production and warehouse location are interrelated
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Logistics in non-manufacturing areas

s

Move and store a physical product (narrow view) logistics can be applied to service industries, the military, and even the management of the environment.

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Service industry

Ex:McDonald, Dow Jones, Sears, Roebuck, Hospital emergency medical care: distribution activities and make decision. FedEX must locate terminals and UPS route pickup and delivery trucks.

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Military

WWII (inventory, transportation) U.S. v.s. Irag. The logistics support in that war is yet another illustration of what world-class companies good logistics can be a source of competitive advantage.

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Environment

Recycle, reuse, refurbished reduce waste. Reverse logistics: Box 1.9 example. In Germany, the government requires retail grocers to collect cereal boxes at the point of sale. The seller has the responsibility for recovery of the spent materials and their repackaging and reuse or their disposal.

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