Logistics and distribution Introduction - BeePOM 03 intro... · •“The procurement, maintenance,...
Transcript of Logistics and distribution Introduction - BeePOM 03 intro... · •“The procurement, maintenance,...
Programme Outline
• What does logistics mean• Definition of logistics
• The logistics execution• Military and Industrial logistics• The importance of logistics• The main trends in logistics
• Two main performance dimensions• The total logistic cost
• The service level
• The service level / costs trade‐off
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Programme Outline
• What does logistics mean• Definition of logistics
• The logistics execution• Military and Industrial logistics• The importance of logistics• The main trends in logistics
• Two main performance dimensions• The total logistic cost
• The service level
• The service level / costs trade‐off
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Definition of LogisticsSupply Chain Management is a process‐oriented approach to managing product, information and funds flows across the overall supply network, from the initial suppliers to the final end consumers
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Integration and co-ordination (partnership) reduce logistics costs and increase service level
Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. The customer remains the primary focus of the process
Logistics Management is the process of planning, implementing and controlling the efficient flow and storage of materials and the information flow from point of origin to point of consumption for customer requirements
Is there any difference ???
Metz P., 1998CLM, 1986
Lambert and Cooper, 2000
Definition of LogisticsSupply Chain Management is a process‐oriented approach to managing product, information and funds flows across the overall supply network, from the initial suppliers to the final end consumers
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Logistics is that part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements.
Logistics Management is the process of planning, implementing and controlling the efficient flow and storage of materials and the information flow from point of origin to point of consumption for customer requirements
Is there any difference ???
Metz P., 1998CLM, 1986
CLM (Council of Logistics Management)
Definition of Logistics
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1. Internal supply chainsProcesses Company
2. Customer-supplier relationships
3. External supply chains
4. Networks of companies
Increasing fragmentationand outsourcing
1982Oliver & Webber
1984Hayes &
Wheelwright
1998Tan et al.
Metz
2000ICFCE,
Ballou et al.,Lambert &
Cooper
1994Berry et al.,
ICFCE
1991Ellram
1992Christopher,
Lee & Billington
1995Saunders
1997Kopczak,Lee & Ng
1985Jones &
Riley
1960s/70sNCPDM, CLM
Definition of Logistics
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Customer Relationship Management
Customer Service Management
Demand Management
Order Fulfillment
Manufacturing Flow Management
Supplier Relationship Management
Product Development and Commercialization
Reverse Logistics
Global Supply Chain Forum, 2000
Delivery
The logistics execution• Material flows:
• receiving• stocking• (manufacturing)• picking• packaging• dispatching
• Information flows:• orders processing• elaboration and printing of bills• printing of transportation
documents• …
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STOCKSTOCK
Availability check
Input
Order
Controls
Delivery programOrder processing
Dispatching
Transportation to customer
Loading
PickingQuality control
Consolidation
Packaging
Military logistics• “The procurement, maintenance, and transportation of military material, facilities, and personnel”.
• Webster’s seventh new collegiate dictionary,1963
• “The science of planning and carrying out the movement and maintenance of forces”.
• In its most comprehensive sense, those aspects of military operations which deal with:
• Design and development, acquisition, storage, movement, distribution, maintenance, evacuation and disposal of materials
• Movement, evacuation and hospitalization of personnel• Acquisition or construction, maintenance, operation and disposition of facilities
• Acquisition or furnishing of services• NATO : north Atlantic treaty organization
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Industrial logistics• RAM LOGISTICS (repairable systems logistics)
• All the levers needed to effectively and efficiently support a complex system during its life cycle (ex.: machine tool)
• BULK LOGISTICS• The management of bulk material flows, usually row materials (for instance cereal, sand, carbon, liquids,
…) Flows with a great amount of low value products and no packaging
• AFTER‐SALES LOGISTCS• All the activities tied with the after‐sales services (ex.: mobile phones)
• PROJECT LOGISTICS• The management and control of all the needed activities in not‐repetitive processes (ex.: the building of a
new warehouse or a new plant)
• REVERSE LOGISTICS• Activities with the aim to dismiss, separate, dispose and recycle components or materials at the end of
the product life cycle. The logistics of material flows in the reverse direction, from customers back up the supply chain.
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Industrial logistics
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Project
Production(Implementation)
Distribution
Use (After-salesservice)
Row materials
Bulk materials
Consumer goods(foodstuffs, clothing, …)
Durable goods (cars, fridges, ovens, …)
Complex goods(airplanes, machines, plants, …)
Life cycle
Technological complexity
Bulk Logistics
Industrial / Business Logistics
After-sale logistics
(RAM Logistics)
Industrial/ Business Logistics
Industrial/ Business Logistics
DismissalReverse Logistics
RAM Logistics
Project Logistics
The importance of logistics
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Two main difficulties in Integrated Logistics Management: Different facilities (often different companies) with different and sometimes conflicting objectives The supply chain is a dynamic system that evolves over time:
Demand variations Production and distribution capacities Relationships along the network …
Some figures: $862 Billion (10% of U.S. GNP) spent in U.S. on supply related activities in 1997 (movement,
storage and control) It takes a typical box of cereal more than 3 months to get from the factory to the supermarket It takes a typical new car, on average, 15 days to travel from the factory to the dealership. The
actual travel time is no more than 4 to 5 days P&G saved retail customers $65 million over the past 18 months National Semiconductor reduced distribution costs by 2.5%, decreased delivery time by 47%, and
increased sales by 34% Wal-Mart best practices have cut the cost of sales by 3% compared to the industry average ….
The importance of logistics
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Logistics costsProfits
Industrial costs
Added value
TotalSC
10 1,83,223
43,3
35
11,58
69
14,5
16,5
15,3
30,3
54,5 100
Supplyer Manufacturer Distributors
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15,51,5
22,8
6,84,5
6
43
22,3
12,7
6,5
55,2 100
Financial costs of stocksObsolescence costs
Other costs (adm., quality, …)
Transport and handling
23
5
15,5
49,5
6,2
TotalSC
Supplyer Manufacturer Distributors
The importance of logistics
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Better service level
Lower costs (transports, stocks, etc.)
Lower stocks (finished goods, work in
progress and row materials)
Less resources and infrastructures
(warehouses, vehicle, etc.)
Value for shareholders
(ROI)
EBIT
Invested capital
Sales
Costs
Operating working capital
Fixed capital
ROI =
+
-
The importance of logistics
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Transportation costs
ProductPrice Promotion
People
Logistics process
Costs of inventories
Handling and stocking costs
Setup costs
Order planning costs
Marketing Mix
The importance of logistics
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Product
Price
People
Promotion
Food Chemical Pharmac. Auto Paper Electronic Textiles Total
34,8
25,8
20,0
19,4
33,0
34,8
19,1
13,1
36,9
29,4
17,3
16,4
26,8
29,8
33,5
9,9
23,2
35,8
28,9
12,1
41,3
26,5
21,8
10,4
34,7
22,0
22,8
20,5
33,3
29,9
22,4
14,4
“Importance of Marketing Variables by Industry”Council of Logistics Management 1988
The main trends in logistics
• Globalization• Outsourcing• Supply Chain Management / Supply Chain integration Projects
• Innovation in ICT (ERP, DRP, …)• e‐Commerce• Environment• Mass customization
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The main trends in logistics
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0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
Local Europe World Local Europe WorldRef. +5 y +10 y
MARKETS SOURCES- 11- 15
+33
+33 +33
+27
Global selling Global sourcing
The main trends in logistics
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Transport
Stocking
Transports management
Information Technology
Added value services
Billing
Logistics management
50%
18%
23%
12%
20%
40%
39%
76%
300%
160%
44%
2%
5%
16%
Outsourcing 1998
Expected 1998-2003
Source: AT-Kearney "Insight to Impact", 1998
The main trends in logistics
• Transportation
• Warehousing
• Operations
• Inventories
• Stock‐outto trace back to poor service level
• Lost sales; lost customers; delayed cash flow; backorders; penalty clause; reputation
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3PL
Easy to outsource
Difficult to outsource
Impossibleto outsource
Consignmentstock
Programme Outline
• What does logistics mean• Definition of logistics
• The logistics execution• Military and Industrial logistics• The importance of logistics• The main trends in logistics
• Two main performance dimensions• The total logistic cost
• The service level
• The service level / costs trade‐off
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Two performance dimensions
• TOTAL LOGISTIC COST• to provide a certain service level
• SERVICE LEVEL• multidimensional concept
• (7Rs: the Right product, the Right quantity, the Right condition, the Right place, the Right time, the Right customer, the Right cost)
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The total logistic cost
• Components• Plants and warehouses
• Inventory
• Transportation
• Forecast
• Admins
• Handling and packaging
• Direct labor
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Organizational Functions Purchasing Warehousing Materials management, Production
planning and control … Information systems Customer Care Marketing/sales, Subsidiaries ….. Integrated logistics units
The total logistic cost
Distribution costs (% of turnover)
USA Europe
Inventories 1,64% 1,51%
Admins 0,35% 0,52%
Order management 0,59% 0,94%
Fixed assets 1,90% 2,22%
Transportation 2,84% 2,72%
Total 7,22% 7,80%
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Herbert Davies (400 companies)
The service level• The logistics process is one of the most important lever for many key factors of the customer service. Thus these key factors can be used as dimensions to measure the performance in effectiveness of the logistic process.
• For instance: • Cycle time order‐delivery• Delivery accuracy• Inventory coverage• Quality of available information on work in progress
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Input(resources)
Output Clients
CUSTOMER SERVICECUSTOMER SERVICE
LOGISTICS PROCESSLOGISTICS PROCESS
The service level
Behaviour
Product
Buy same brand, different
package(%)
Buy another brand (%)
Delayed purchase (%)
Search in another store
(%)
Buy a substitutive product (%)
Coffee 19 41 15 21 4
Tea 2 34 12 48 4
Soft Drinks 10 29 15 36 10
Butter 3 55 16 24 2
Detergents 8 37 17 38 0
Canned vegetables 18 61 8 12 1
Toilet paper 0 20 40 39 1
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The effects of a poor service level
Service level / costs trade‐off
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FACTORS THAT INFLUENCE THE SERVICE - REVENUES RELATIONSHIP• Product uniqueness• Purchasing behavior• Brand loyalty• Competitors’ strategies• Distribution channels’ behaviors
Revenues
Service
Costs
Trade off between service level and logistic costs
Service level / costs trade‐offThree approaches
• BudgetingTotal cost is negotiated and fixed, then logistic managers strive to squeeze the maximum service level
• MarketingService level is determined as a part of a marketing strategy, then logistic managers try to minimize costs while keeping the service level
• AnalyticalJoint evaluation of service and costsEvaluation of stock‐out costsTrade off optimization
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R, C
Service level