Logistics Management

Logistics Management Logistics - Strategy Formulation & Implementation Anand Subramaniam

“You miss 100 percent of the shots you never take."

- Wayne Gretzky

Highlights

Linking – Firm’s & Logistics Strategy

Logistics – Goals & Decisions

Logistics – Networks

Logistics – Strategy Formulation

Logistics – Channel Strategy

Logistics – Strategy Implementation

Measuring Logistics Performance

Link – Firm’s & Logistics Strategy

Firm’s - Strategies / Business Model Business Strategy Market Entry / Exit / Compete External PEST Factors Internal Vision Competencies Financial Order Winner / Qualifiers (Competing Priorities) Cost, Quality, Delivery, Flexibility, Service Make To Stock Structural Decisions Infra -structural Decisions Facility / Location Capacity Make To Order Process / Layout Techno-logy SC Design Logistic Design Quality Sourcing People Planning Systems Inventory Org Structure Alignment Alignment

Link – Business & Functional Strategies

Purchasing

Supplier Selection

Supplier Development

Design Involvement

Supplier Capabilities

Capacity, Quality

Competencies

Process, Quality

Management

Planning & Control

Technology

Improvement

Operations

Technology

Facility

Supply Chain Design

Process Flow Layout

People

Sourcing

Quality

Planning & Scheduling

Inventory

Organisation Structure

Logistics

Inbound Transport

Outbound Transport

Transport Mode

Data / Information

Warehouse

Material Management

Distribution Planning

Quality Management

Carrier Management

Customs

Marketing

Brand Management

Category Management

Segmentation

Products / Services

Marketing Mix

Range / Assortment

Volumes

Customisation

Relationships

Channels

Geography / Region

Business Strategy Cost Price - Purchase / Lifecycle Delivery – Speed, Reliability, NPD Quality – Performance, Conformance Flexibility – volume, Product Service – Customer Services Human Resources Product Develop Leadership Team Finance / IT Functional Strategies

Logistics – Goals / Decisions

Is this your current situation ? SEND TO “ RIGHT” LOCATIONS MANAGE WAREHOUSES BUY “ RIGHT” PRODUCT MANAGE REPAIRS COMPUTE REQUIRE- MENTS

Or have this problem? SEND TO “ RIGHT” LOCATIONS MANAGE WAREHOUSES BUY “ RIGHT” PRODUCT MANAGE REPAIRS No Inventory Or Inventory Obsolescence COMPUTE REQUIRE- MENTS

Logistics Definition The task of coordinating Material & Information Flow acros the supply chain

Logistics – A Coordinator Carrier Customs broker Customer Receiving location Supplier Distribution center Freight forwarder Manufacturing plant Logistics - A Coordinator Assembly plant Cross dock

Align Goals – Firm’s & Logistics Logistics Goals Facility / Location Material Handling Operations & Firm’s Strategy Information Systems Investment Management Planning & Control Performance Measures Logistics Simulation Optimisation Drive Regulatory Compliance Reduce Time to Market Improve Uptime Optimise Operations Supply chain Visibility Traceability Fulfill, Flexible Accurate Improve Capacity, quality Improve Asset, Performance Improve Visibility. Inventory

Logistics Objectives

Cost Reduction

Minimising the variable costs associated with movement and storage

Service Improvement Pre-transaction Elements Transaction Elements Post-transaction Elements Capital Reduction Minimising the level of investment in logistics system. Maximising the return on logistics assets

Logistics Challenges Inventory / Materials Inventory levels Control methods Forecasting Inventory Planning Planning & Procurement Wave Management Transport Strategy Modes of transport Routing / scheduling Shipment size / consolidation Distribution Requirements Planning Customer Service Written statement of CS policy Technical services System Accuracy Installation, warranty, alterations, repairs, parts Customer claims/ complaints Facility / Location Number, size & location of facilities Assignment of stocking points to sourcing points Assignment of demand to stocking or sourcing points Location & Yard Management

Logistics – Decision Focus Order Releasing & Expediting Suppliers Contracting, Vendor Selection, Forward Buying Developments of Suppliers-Buyer Relationships Purchasing Order Picking & Restocking Seasonal Space Choices & Space Utilisation Equipment Selection, Layout Design Warehousing Expediting Deliveries Priority Rules for Customer Orders Setting Standards Customer Services Processing Orders, Filling Backorders Order Entry, Transmittal & Processing System Design Order Processing Routing, Dispatching Seasonal Equipment Leasing Mode Selection Transportation Replenish Quantities & Timing Safety Stock Levels Stocking Locations & Control Policies Inventories #, Size & Location of Warehouses, Plants & Terminals Facility Location Operational Tactical Strategic Decision Area

Logistics - Networks

Logistics Networks – Product Flow Links The movement of materials between various inventory storage points ( nodes ). Nodes Points where the flow of inventory is temporary stopped (e.g. retail stores, warehouses, factories, vendors).

Logistics Networks – Information Flow Links (Non)/Electronic Methods - Revenues, Product costs, Inventory. levels, Warehouse, Utilisation, Forecasts, Transportation Rates Nodes Data collection & processing points - computerised or manual

Logistics Network Appraisal

Demand

Level of Demand & Geographical Dispersion

Expansion / Reduction at the current facilities

Open/Close facilities

Customer Service

Inventory Availability, Speed of Delivery, Order-Filling Speed & Accuracy

Re-planning when service levels are changed due to competitive forces, policy revisions, etc.

Product Characteristic

Logistics costs & sensitivity to viz., weight, volume, value, risk.

Alter package design or finished state of the product during shipment and storage.

Re-planning when substantial changes are made.

Logistics Cost

High logistics costs can be reduced via frequent re-planning

Pricing Policies

Depends on who pays for the delivery of goods

Logistics – Strategy Formulation

Logistics Cycle

Logistics – Approach / Framework Current Approach to Market Segmentation Measure Logistics Strategy Drivers Specific Approach to Market Segmentation (Channel) Identify Key Buying Behaviours Customer Value Analysis

Logistics – Strategy Drivers Differentiated Distribution Total Cost Concept Mixed Strategy Standardisation Postponement Consolidation

Distributed Differentiation ABC Analysis = Product Costs, Sales Volume Shipment = Direct from warehouse or direct to customer Warehouse Movement = Fast (Field), Slow (Centralised) , Medium (Regional) Order = Regular, Back Orders

Postponement Types Labeling Packaging Assembly Manufacture Timing

High unit value products

Large # of distribution WHS

High product value fluctuations

High proportion of ubiquitous materials

High unit value products / value fluctuations

Products with several versions

Product whose cube is greatly reduced if shipped unassembled

High unit value products with price fluctuations

Several package sizes

Product under several brand names

Postponement Characteristics

Technology/ Process

Feasible to decouple primary and postponed operations

Limited complexity of customising

Modular product design

Sourcing from multiple locations

Product

High commonality of modules

Specific formulation of products / specific peripherals

High value density of products

Product cube and/or weight increases through customisation

Market

Short product life cycles

High sales fluctuations

Short & reliable lead times

Price competition

Varied markets & customers

Logistics – Channel Strategies

Logistics – Channel Strategy

Supply to Order

Responsive Supply Chain

Excess capacity

Quick changeovers

Short lead times

Flexible processing

Premium transportation

Single order processing

Supply to stock

Efficient Supply Chain

Economical production runs

Finished goods inventories

Economical buy quantities

Large shipment sizes

Batch order processing

Supply – To Stock or To Order ?

Predictable / Mature

Predictable : Stable demand pattern

Mature : competition is keen & profit margins are low.

Low-cost supply channel

Unpredictable / Introductory

Often innovative, new product development incorporating new technology leading to higher profit margin

Logistics – Strategy Implementation

Implementation Framework Form the Team Understand Current Requirements Baseline The System Understand Business Needs Identify Performance Outcomes Business Case Analysis Establish Agreement/ Business Model Develop Business Model Manage Change Process Implement And Oversight Manage Implementation

Measuring Logistics Performance

Measure Strategy Performance