logistics scm

1. MEL SY JR., DBM (CAR)
SUPPLY
CHAIN
MANAGEMENT
& LOGISTICS

2. LEARNING OBJECTIVES
After completing this chapter, students will be able to:
1. describe SCM and Logistics from modern
versus historical perspectives (in
distribution). Identify similarities and
differences.
2. Identify Logistics Performance Measures
in a Supply Chain Structure and learn
applications of measures in business.
3. Appreciate the global and future trends in
Logistics

3. EXECUTIVE SUMMARY
1. Supply Chain Versus Logistics
2. Logistics Principles

4. Logistics

5. Introduction—Chapter 1
Supply Chain Management is a network of
manufacturing & distribution sites that interact
to procure & transform raw materials for
producing finished goods to satisfy customers.
SCM AND LOGISTICS

6. Introduction—Chapter 1
SUPPLY CHAIN
Raw
Material
Manufacturers
Assemblers
Warehouses
Customers
Procurement Production Distribution
Stages

7. Introduction—Chapter 1
SUPPLY CHAIN FOR BEVERAGE PROVIDER
Suppliers
Bottling Plants
Distribution Centers
Customers
Concentrate Plant
Information
and
Money
Flows
Physical
Flows

9. Introduction—Chapter 1
SUPPLY CHAIN DECISIONS
Strategic level
Tactical
Operational
Long term
Mid term
Near term
• Corporate objectives
• Capacity
• Facilities – size/location
• Mode selection
• Design of order entry
• Inventory positioning
• Resource allocation
• Seasonal service mix
• Contracting, vendor
Selection
• Routing and dispatching
• Order filling
• Replenishment quantities
And timing

10. Warehousing
Warehousing
Transportation
Transportation
Vendors/plants/ports
Transportation
Factory
Transportation Customers
Information
flows
The Immediate Supply Chain for an Individual Firm

11. 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.
Council of Logistics Management
Supply Chain Management Defined
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.
Handfield and Nichols

12. 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
Physical
Distribution
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
Physical
Distribution
Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+
Evolution of Supply Chain Management

13. Introduction—Chapter 1
Supply Chain Schematic
1-5

15. Introduction—Chapter 1
The Logistics/SC 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.

16. A Revised Strategy is Generating
Great Top Management Interest
Historical perspective of distribution:
“The last frontier of cost economies”
The contemporary view:
Distribution is a new frontier for demand
generation—a competitive weapon.
Peter Drucker, 1962
Both views are n
ow important!

17. Introduction—Chapter 1
Customers
Transportation
Inventory
or supply source
Customer order processing (and
transmittal)
Customers
Transportation
Inventory
or supply source
Customer order processing (and
transmittal)
Critical Customer Service L
oop

18. Introduction—Chapter 1
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
Physical Distribution Costs
Add one-third for inbound supply co
sts
Source: Herb Davis & Company
Logistics cost ar
e about 10% of sa
les w/o purchasin
g costs

19. Introduction—Chapter 1
4
5
6
7
8
9
10
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
Year
Days
82
84
86
88
90
92
94
96
%
Order Cycle Time,
Days
Product
Availability--%
orders
Product
Availability--%
line items
Customer Service Performance
Source: Herb Davis & Company

20. Introduction—Chapter 1
 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
 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
Significance of Logistics

21. Introduction—Chapter 1
•Costs are lower than K-Mart or
Target Stores
•CEO is a former logistician
•Wal-Mart is the largest retailer in
the world!

22. Introduction—Chapter 1
Effect on Logistics Foreign Outsourcing
Profit
G & A
Marketing
Logistics
Overhead
Materials
Labor
Profit
G & A
Marketing
Logistics
Overhead
Materials
Labor
Tariffs
Increase
Reduction
Increase
Domestic sourcing Foreign sourcing

23. Introduction—Chapter 1
Scope of Supply Chain for Most Firms
Physical distribution
Physical supply
(Materials management)
Business logistics
Sources of
supply
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
Focus firm’s internal supply chain 1-14
Inbound logi
stics
Outbound lo
gistics

24. Introduction—Chapter 1
 Primary
- Setting customer service goals
- Transportation
- Inventory management
- Location
 Secondary, or supporting
- Warehousing
- Materials handling
- Acquisition (purchasing)
- Protective packaging
- Product scheduling
- Order processing
Key Activities/Processes

25. Introduction—Chapter 1
Focus
Company
Suppliers
Supplier’s
suppliers
Customers
Customers/
End users
Acquire Convert Distribute
The Supply Chain is Multi-Enterprise
Product and information flow
Scope in
reality

26. Introduction—Chapter 1
Reality of SC Scope

27. Introduction—Chapter 1

28. Introduction—Chapter 1
PLANNING
ORGANIZING
CONTROLLING
Transport Strategy
• Transport fundamentals
• Transport decisions
Customer
service goals
• The product
• Logistics service
• Ord. proc. & info. sys.
Inventory Strategy
• Forecasting
• Inventory decisions
• Purchasing and supply
scheduling decisions
• Storage fundamentals
• Storage decisions
Location Strategy
• Location decisions
• The network planning process
PLANNING
ORGANIZING
CONTROLLING
Transport Strategy
• Transport fundamentals
• Transport decisions
Customer
service goals
• The product
• Logistics service
• Ord. proc. & info. sys.
Inventory Strategy
• Forecasting
• Inventory decisions
• Purchasing and supply
scheduling decisions
• Storage fundamentals
• Storage decisions
Location Strategy
• Location decisions
• The network planning process
Study Framework
The focus is
here

29. Introduction—Chapter 1
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
The Logistics Strategy Triangle

30. Introduction—Chapter 1
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:
 Product
scheduling
 Plant
location
 Purchasing
MARKETING
Sample
activities:
 Promotion
 Market
research
 Product
mix
 Sales force
management
Interface
activities:
 Customer
service
standards
 Pricing
 Packaging
 Retail
location
Production-
logistics
interface
Marketing-
logistics
interface
Relationship of Logistics to Mark
eting and Production
Internal Supply Chain
1-21

31. Introduction—Chapter 1
Relationship of Logistics to Mark
eting
Product
Price
Promotion
Place-Customer
service levels
Inventory carry
ing costs
Lot quantity
costs Order processing
and information
costs
Transport
costs
Warehousing
costs
Logistics
1-22

32. Introduction—Chapter 1
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 le
vels and transportation efficiency
Production response affects transportation
costs and customer service
Production and warehouse location are
interrelated

33. Introduction—Chapter 1
Logistics/SC in Diverse Areas
Manufacturing—most common
Environment—causing restrictions
Service—emerging opportunities
Non-profits—little explored
Military—long history

34. Introduction—Chapter 1
Contemporary Logistics Terms
Value stream/logistics process
Quick response and flexible manufa
cturing
Mass customization
Supply chain management/ collabo
rative logistics
Reverse logistics
Service logistics
Continuous replenishment
Lean logistics
Integrated logistics

35. Introduction—Chapter 1
LOGISTICS PRINCIPLE #1
▶ LOGISTICS BENEFITS SOCIETY
▶ MAKES GOODS & SERVICES AVAILABLE
▶ IT INFLUENCES PRICE OF GOODS & SERVICES
▶ IT HELPS SOCIETY RESPOND TO NEEDS OF CITIZENS
▶ STANDARD OF LIVING
▶ EMERGENCY NEEDS FOR FOOD, MEDICAL CARE, & SHELTER

36. Introduction—Chapter 1
LOGISTICS PRINCIPLE #2
▶ LOGISTICS IS PERVASIVE
▶ AFFECTS EVERY ASPECT OF BUSINESS
▶ REACH CUSTOMERS
▶ CREATE BRAND LOYALTY
▶ MANUFACTURERS NEED PARTS & SUPPLIES
▶ RETAILERS NEED GOODS TO SELL
▶ SERVICES NEED EQUIPMENT & SUPPLIES
▶ NOT-FOR-PROFIT ORGANIZATIONS MUST REACH CLIENTS &
SERVICES

37. Introduction—Chapter 1
LOGISTICS PRINCIPLE #3
▶ LOGISTICS CONTRIBUTES TO COMPANY’S REVENUES &
GROWTH
▶ POSITIVE EFFECT ON ROI
▶ SUBSTANTIAL PORTION OF COSTS IN MANY INDUSTRIES
▶ GOOD LOGISTICS PRACTICES PROVIDES
▶ BETTER CUSTOMER SERVICE
▶ LOWER COSTS
▶ HIGHER PROFITS
▶ EXTENDS MARKET REACH

38. Introduction—Chapter 1
LOGISTICS PRINCIPLE #4
▶ LOGISTICS PLAYS KEY ROLE IN MARKETING STRATEGY
▶ SUPPORTING STRATEGIES
▶ PRICE
▶ PRODUCT DEVELOPMENT
▶ SERVICE
▶ PROMOTION
▶ PROMOTE CUSTOMER LOYALTY
▶ REACH NEW MARKETS
▶ SEGMENT MARKETS
▶ COMPETITIVE ADVANTAGE

39. Introduction—Chapter 1
LOGISTICS PRINCIPLE #5
▶ LOGISTICS ACTIVITIES AFFECT ONE ANOTHER & OTHER
FUNCTIONS OF MARKETING
▶ NOT A SINGLE ACTIVITY
▶ COMBINATION OF INTEGRATED FUNCTIONS

40. Introduction—Chapter 1
LOGISTICS PRINCIPLE #6
▶ LOGISTICS FULFILLS PROMISES MADE BY OTHER FACETS
OF MARKETING
▶ PROMISES TO CUSTOMERS
▶ PERFORMANCE
▶ AVAILABILITY
▶ PRICE
▶ CREATES DEMAND

41. END OF PRESENTATI
ON