Lecturer: Ho Trung Thao (thao.hotrung@hoasen.edu.vn)*

1. The way that logistics has developed over time2. The benefits of creating a single, integrated logistics function3.The benefits of further integration along the supply chain AND different approaches to this integrationAims of this chapter

1.Development of logisticspressures to the use of logisticsChanges of Customers.Changes of CompetitionOther changes in retail markets International trade continues to grow.Organizations become to outsource peripheral activities and concentrate on their core operations.

1.Development of logisticsCurrent Trends In LogisticsImproving communications-----EDI (electronic data interchange), EPOS (electronic point-of-sales data), e-purchasing or e-procurement, B2B (business-to-business) and B2C (business-to-customerImproving customer service----lead time, synchronized material movement, mass customizationOther trends----NEXT SLIP PLEASE!

1.Development of logisticsOther TrendsGlobalizationReduced number of suppliersConcentration of ownershipOutsourcingPostponementCross-docking:Direct deliveryMore collaboration along the supply chain

1.Development of logisticsconclusions based on the trend:

b. Agile logistics- more sensitive a. Lean logistics- without useless thing

c.Integration - more cooperation

2. INTEGRATING OF LOGISTICSImaging it and Say something !

Can you remember the activities in the logistics?What will happen if each activities works separately?

Summary of logistics activities

CASE STUDY

What is the aims of different department?

CASE RP Turner Corp. makes pipeline valves for the oil industry in western Canada. It buys materials from Japan, the USA and eastern Canada, manufactures valves in Edmonton, Alberta and ships the finished products to oil fields in the North. The company grew by emphasizing the high quality of its products, which work reliably in the harsh weather conditions of the Arctic. Transport to remote customers is expensive, and in 2000 the company looked for ways of reducing the cost of logistics.

CASE It soon found that separate functions worked more or less independently. This was sometimes all too obvious when the three main departments Marketing, Production and Finance were in different locations. Production was in Edmonton, as the nearest major city to the oil fields; Marketing was in Calgary near to oil company headquarters; Finance (including procurement) was in Vancouver near the port and financial centre.

CASE To appreciate the potential problems, you have to remember that Canada is a big country, so Production was a thousand kilometers away from Finance, 500 kilometers away from Marketing and over two thousand kilometers from delivery points. The company was rewarding different departments for different types of performance. Not surprisingly, when the departments were asked for their priorities, they had different views

2. INTEGRATING OF LOGISTICS

What is the aims of different department?

Marketing wanted:high stocks of finished goods to satisfy customer demands quicklya wide range of finished goods always held in stocklocations near to customers to allow delivery with short lead times production to vary output in response to customer ordersemphasis on an efficient distribution systeman optimistic sales forecast to ensure production was geared up for actual demand.

Production wanted:high stocks of raw materials and work in progress to safeguard operationsa narrow range of finished goods to give long production runslocations near to suppliers so that they could get raw materials quicklystable production to give efficient operations emphasis on the efficient movement of materials through operationsrealistic sales forecasts that allowed efficient planning.

Finance wanted: low stocks everywhere few locations to give economies of scale and minimize overall costs large batch sizes to reduce unit costs make-to-order operations pessimistic sales forecasts that discouraged underused facilities.

conclusionDespite good communications, the company felt that it was too widely spread out. It decided to centralize operations at its main plant in Edmonton. This brought the logistics functions geographically closer together, and major reorganization over the next two years brought a unified view of the supply chain.

2. INTEGRATING OF LOGISTICSDisadvantages of logistics seperationdifferent, often conflicting of objectives duplicating effort and reducing productivityworse communications and information flows reducing co-ordination customer serviceincreasing uncertainty and delays along the supply chainintroducing unnecessary buffers between the parts

The consequence of the seperation of logisticsThe Bullwhip effectretailerwholesalerdistributionmanufacturer

2. INTEGRATING OF LOGISTICS Integrating Logistics within an organization has all the related activities working together as a single function.1.This is responsible for all storage and movement of materials throughout the organization.2.It tackles problems from the viewpoint of the whole organization, and looks for the greatest overall benefit.

How to understand the overall benefit?Stock

Big order

By air shortage and transport

Warehousing cost

Stock in supply chain (compared with by sea)

2. INTEGRATING OF LOGISTIC3 stage of Logistics Integration----a,b,c

2. INTEGRATING OF LOGISTIC

2. INTEGRATING OF LOGISTIC

2. INTEGRATING OF LOGISTICSBenefits of integrationgenuine co-operationlower costsimproved performanceimproved material flowbetter customer servicemore flexibilitystandardized proceduresreliable quality and fewer inspections

3.integration along the supply chainHow to ACHIEVING INTEGRATION So the way is use collaboration instead of conflictionThe first problem with external integration is overcoming the traditional view of organizations as adversaries

3.integration along the supply chainDifferent types of co-operation:

1.Strategic alliances SUPPLIER PARTNERING is an ongoing relationship between firms, which involves a commitment over an extended time period, and a mutual sharing of information and the risks and rewards of the relationship.

3.integration along the supply chainmain features of alliancesworking closely togethershared business culture, goals and objectivesopenness and mutual trustlong-term shared information, expertise, planning and systemsflexibility and willingness to solve shared problemscontinuous improvements joint development of products guaranteed reliable and high quality goods and services agreement on costs and profits

readingPerman Frre is a small manufacturer based in Brussels. It exports most of its products and has a finished goods warehouse near the port of Ostende. Van Rijn is one of its customers, also based in Brussels. It imports most of its materials and has a raw materials warehouse near the port of Rotterdam. The two companies have traded for many years and in 2001 they started looking for ways of increasing co-operation. It was soon obvious that they could make a number of small adjustments to improve logistics.

As an example, some parts were made by Perman Frre in Brussels, sent to their warehouse in Ostende, delivered to van Rijns warehouse in Rotterdam, and then brought back to Brussels. It was fairly easy to organize deliveries directly between the companies. This gave a much shorter journey across Brussels, reduced transport and handling costs, removed excess stocks, simplified administration, and reduced the lead time from five days to three hours. They also co-coordinated deliveries to towns in northern France, so that one vehicle could deliver products from both companies.

readingBoth companies benefited from these changes. When they were introduced people in both companies said that they had been aware of the problems for a long time, but could not find any mechanism for overcoming them.

3.integration along the supply chain 2.VERTICAL INTEGRATION describes the amount of a supply chain that is owned by one organization.Different level of vertical integration---------next slip please!

3.integration along the supply chain

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3.integration along the supply chainDo you got it?If the organization owns a lot of the supply side it has backward or upstream integration; if it owns a lot of the distribution network it has downstream or forward integration.Generally , the high level of integration is not so necessary!

QUESTIONS DISSCUSIONWhen logistics is divided into separate functions, each is likely to have its own objectives. Is this necessarily a bad thing, or can there be positive benefits?

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