Scm & Logistics
Transcript of Scm & Logistics
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Overview of Logistics and Supply Chain Management
Dickson Chiu 2006 SCM-2CR (2004) Prentice Hall, Inc. 1-2
Supply Chain Overview
Warehousing
Warehousing
Transportation
Transportation
Vendors/plants/portsTransportation
Factory
Transportation Customers
Informationflows
Dickson Chiu 2006 SCM-3CR (2004) Prentice Hall, Inc.
Logistics vs Supply Chain Management
Council of Logistics Management “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.”
Handfield and Nichols 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.
Dickson Chiu 2006 SCM-4
Common Contemporary Logistics Terms
Value stream/logistics process Quick response and flexible manufacturing Mass customization Supply chain management/ collaborative logistics Reverse logistics Service logistics Continuous replenishment Lean logistics Integrated logistics
=> IT people have to deal with any related automation anyway
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Integrated logistics
customer
Physical distribution
Manufacturing support
Procurement
Suppliers
Inventory flow
Information flow
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The Logistics/SCM 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.
Product / Service Utility Possession Utility - the value or usefulness that comes from a
customer being able to take possession of a product Form Utility - in a form that can be used by the customer and
is of value to the customer Place Utility - available where they are needed by customers Time Utility - available when they are needed by customers
Logistics obviously help time and place utility
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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
PhysicalDistribution
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
PhysicalDistribution
Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+
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Evolution of Supply Chain Management
Dickson Chiu 2006 SCM-8CR (2004) Prentice Hall, Inc. 1-5
Supply Chain Schematic
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Critical Customer Service Loop
C ustom ers
T ransporta tion
Inven to ryor supp ly source
C ustom er o rder p rocess ing (and transm itta l)
C ustom ers
T ransporta tion
Inven to ryor supp ly source
C ustom er o rder p rocess ing (and transm itta l)
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Category Percent of sales $/cwt.
Transportation 3.34% $26.52
Warehousing 2.02 18.06
Order entry 0.43 4.58
Administration 0.41 2.79
Inventory carrying 1.72 22.25
Total 7.65% $67.71
Add one-third for inbound supply costs
Source: Herb Davis & Company
Logistics cost are about 10% of
sales w/o purchasing costs
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Physical Distribution Costs
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Customer Service Performance
4
5
6
7
8
9
10
Year
Day
s
82
84
86
88
90
92
94
96
%
Order Cycle Time,Days
ProductAvailability--%ordersProductAvailability--%line items
Source: Herb Davis & Company
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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
Internal supply chainCR (2004) Prentice Hall, Inc. 1-14
Traditional Scope of the 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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Logistics Strategy and Planning
The objectives of logistics strategy Minimize cost Minimize investment Maximize customer service
Levels of logistical planning Strategic Tactical Operational
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Customer service goals The product Logistics service Information sys.
Inventory Strategy Forecasting Storage fundamentals Inventory decisions Purchasing and supply
scheduling decisions Storage decisions
Transport Strategy Transport fundamentals Transport decisions
Location Strategy Location decisions The network planning process
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The Logistics Strategy Triangle (4 problem areas)
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Decision area Strategic Tactical Operational
Transportation Mode selection Seasonal equip-ment leasing
Dispatching
Inventories Location, Control policies Safety stock levels Order filling
Orderprocessing
Order entry, transmittal,and processing systemdesign
Processingorders, Fillingback orders
Purchasing Development of supplier-buyer relations
Contracting,Forward buying
Expediting
Warehousing Handling equipmentselection, Layout design
Space utilization Order pickingand restocking
Facilitylocation
Number, size, andlocation of warehouses
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Strategic, Tactical, and Operational Decision Making
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PRODUCTION/OPERATIONSSample activities: Quality control Detailed production scheduling Equipment maint. Capacity planning Work measurement & standards
LOGISTICSSampleactivities:Transport Inventory Order processing
Materials
handling
Interfaceactivities: Product scheduling Plant location Purchasing
MARKETINGSampleactivities: Promotion Market research Product mix Sales force management
Interfaceactivities: Customer service standards Pricing Packaging Retail location
Production-logisticsinterface
Marketing-logisticsinterface
Internal Supply ChainCR (2004) Prentice Hall, Inc.
Relationship of Logistics to Marketing and Production
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Logistic in Marketing
Marketing Process is successfully completed
only when
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1 Arrangements are made to supply the goods through selected distribution channels.
2 Products are produced and priced to satisfy the identified needs of the customers.
3 Goods are physically supplied to the buyers at the price and time selected.
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4 An awareness is created among the buyers about the availability of the goods through advertisement
5 Other than satisfying the customer’s needs, the marketing process must be profitable to the seller
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Trends in marketingPast expectation Today's expectation
Products Standardized products
Customized products
Forms Predefined Often configurated
Time Now as available When wanted
Quality Acceptable Exceed Expectation
Price Low Competitive
Value Added Minimal Complex
Services
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Product
PricePromotion
Place-Customer service levels
Inventory carrying costs
Lot quantity costs Order processing
and information costs
Transport costs
Warehousing costs
Ma
rke
tin
gL
og
isti
cs
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Relationship of Logistics to Marketing
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Elements of the logistics marketing mix
Product Price Promotion Place People
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Relationship of Logistics to Production
Coordinates through scheduling and strategy make-to-order make-to-stock
An integral part of 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/SCM in Diverse Areas
Manufacturing - most common Service - emerging opportunities Environment - causing restrictions Non-profits / Government - little
explored Military - long history
Note the global evolvement into a service-oriented economy!
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FocusCompany
Suppliers
Supplier’ssuppliers
Customers
Customers/End users
Acquire Convert Distribute
Product and information flow
Conventional Scope
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Supply Chain is Multi-Enterprise
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ProfitG & A
Marketing
Logistics
Overhead
Materials
Labor
Profit
G & A
Marketing
Logistics
Overhead
Materials
Labor
Tariffs
Increase
Reduction
Increase
Domestic sourcing Foreign sourcing
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Effect on Logistics Foreign Outsourcing
Dickson Chiu 2006 SCM-28CR (2004) Prentice Hall, Inc.
Reality of SCM Scope
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SUPPLYCHAIN
MANAGEMENT
Inte
r-fu
nctio
nal
(Intra
-org
aniz
atio
nal)
coor
dina
tion Inter-organizational coordination
Activity and processadministration
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The Multi-Dimensions of SCM
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Increasing Significance of Logistics
Costs are high About 10.5% of GDP domestically About 12% of GDP internationally A range of 4 to 30% of sales for individual firms, avg. about 10% A high as 70-80% of sales if purchasing and production are
included Customers are more demanding of the supply chain
Desire for quick response Desire for mass customization
An integral part of company strategy Generate revenue Improve profit
Logistical lines are lengthening Local vs. long distance supply Globalization of trade
Logistics is a key to trade and an increased standard of living Law of comparative economic advantage applies
Logistics adds value Time and place utilities
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Contemporary IT Applications in Logistics – Focus of this Course
Tremendous technological advances in past decades Logistics management relies on analysis over massive
information from heterogeneous sources Disparate business functions in service-oriented
economy Internet and mobile technologies has further improved
logistical effectiveness and efficiency Enabled logisticians and management to make timely,
informed, and accurate decisions but create new dimensions of complexity
IT people work closely with logistician and management
Understand complex requirements Choose the right technology and design appropriate IT
infrastructures, architectures, and systems Explain how contemporary IT can help to others
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Some Useful Contemporary IT in Logistics
eXtended Markup Language (XML) Service-oriented architecture Process integration and interaction management
Exceptions, alerts, and relationship management in logistics Information integration Facilitating decision support
Mobile technologies Radio Frequency Identification (RFID)
=> The key is to achieve information and process integration for efficient and effective decision support.
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Logistical sub-systems
Physical supply or management of flow of raw materials , spare parts , consumable stores and machinery and tools from suppliers
Physical distribution or mgt of finished goods from the factory to the customers
Logistical controls for managing the logistics system; these help in the efficient co-ordination of physical supply and distribution sub systems.
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The aim of an ideal logistic system is to ensure flow of supply to the customer
In the right quantity At the required location At the required time In a usable condition At the lowest total cost
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Summary The logistic process plans, implements, controls the
flow and storage of goods, services, and related information between the point of origin and the point of consumption to satisfy customer requirements
Logistics addresses the time utility & place utility out of the four economic utilities
Logistics becomes more important and complex because of new requirements of the service-oriented economy, disparate business functions, and the impact of various contemporary IT
Logistics involves the interaction with multiple departments within a company as well as now also across business partner organizations and customers
Application of contemporary IT, especially information and process integration for efficient and effective decision support, is a critical success factor and therefore the focus of this course.