Logistics and Supply Chain
• Logistics and supply chain management
refer to the art of managing the flow of
materials and products from source to user.
• Thelogisticssystem includesthetotal flow
of materials, from theacquisition of raw
materialsto delivery of finished productsto
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Supply Chain Activities
• sourcing and purchasing
• conversion (manufacturing)
– Capacity planning, technology solution, operations
management, production scheduling, and materials
• Distribution planning and management industry
• Inventory management and inbound and outbound
• Linkagewith thecustomer service, sales,
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• Portion of alogisticssystem concerned with
theoutward movement of productionsfrom
theseller to customer or consumer.
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• Theportion of alogisticssystem concerned
with inward movement of materialsor
productsfrom sourcesor thesuppliers.
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Manufacturing Planning and
• Themanagement of materialsthrough a
• Generally involvesraw-material inventory
control, capacity planning, production
scheduling, shop-floor control, work-in-
processinventory control, and purchasing.
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• Thecombination activitiesand institutions
associated with theadvertising, sale, and
physical transfer of productsand services.
• It isconcerned with broader mattersthan
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Extended supply chain
• Theintegrated set of activitiescompleted
by thefull supply chain participants.
– suppliers, manufacturers, distributors,
retailers/customers, and consumers/end users
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• Integrated logisticsmanagement can improveboth
cost and customer serviceperformance.
• Thetotal cost concept of logisticsisbased on the
interrelationship of supply, manufacturing, and
– Ordering, inventory, transportation, production setup,
warehousing, customer serviceand other logisticscosts
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• Seasonal demand (400, 700, 500, 300)
• Inventory level (450, 750, 550, 350)
– To meet the inventory level, the production should be
changed. (450, 700, 500, 300)
– Inventory cost $10 per 50 units
• Level of production
– Production costs $1,000 per 600 units
• Decide the method either inventory level model or
level of production model.
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• Regional stocking
– Warehouse cost vs. bulk transportation price
• Transportation cost
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• Businessesmanagetheir activitiesthrough
– sales, marketing, manufacturing, finance,
• Thefunctional excellencecould be
measured by higher sales, lower
transportation costs, lower inventories, or
better control of operations.
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Two typesof business
– demand certainty, low seasonality, longer product life
cycles, and low competitiveintensity
– it isbest to organizefor functional excellence.
• Dynamic environment
– Demand uncertainty, significant seasonality, short
product lifecycles, or high competitiveintensity
– Companiesthat organizefor functional integration tend
to outperform thosethat areorganized for functional
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Strategies for Better Performance
• Mangetheprocess, not thefunction.
• Align measurement systemsand incentiveswith
• Utilizeintegrating mechanismssuch asthesales
and operationsplanning meeting, cross-functional
teams, and team problem- solving approaches.
• Work to develop aculturethat encourages
teaming and cross-functional collaboration.
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• Activities in an integrated pipeline
• Supply: sourcing, purchasing, inbound
transportation, raw materials, and parts inventory.
• Operations: production planning, production
scheduling, work-in-process inventory.
• Distribution: forecasting, customer service,
finished-goodsinventory, warehousing, outbound
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Variables for Integrated Pipeline
• Cost – The full cost of processing and
moving materials from source to point of
• Service-Including issues such as delivery
reliability, in-stock performance, and
delivery lead time.
• Velocity-Thetimeit takesto moveproducts
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• The effect of long production runs and
manufacturing lead times on system inventory.
• The impact of marketing promotions on operating
costs and on effective net margins.
• The cost of or savings available from
• Thecost of multiplehandling through amulti-
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• Inventory visibility
– point-of-saleinformation to monitor usagertesat the
• Manageflow, not replenishment
– Cross-dock operationsand plant-direct shipments
– Delivery lead time, amount of freight
• JIT (Just in Time) manufacturing
• Advanced information systems
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Seven Principlesof Supply Chain
1. Begin with the customer by understanding the
customer’s values and requirements.
2. Mange logistics assets across the supply chain, not
just within the enterprise.
3. Organize customer management so that it provides
one “face’ to the customer for information and
4. Integrate sales and operations planning as the basis
for a more responsive supply chain.
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Seven Principlesof Supply Chain
5. Leverage manufacturing and sourcing for
flexible and efficient operations.
6. Focus on strategic alliances and
relationship management across channel
7. Develop customer-driven performance
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• Logisticsstrategy involvesthe
determination of what performancecriteria
thelogisticssystem must maintain-more
specifically, theservicelevelsand cost
objectivesthelogisticssystem must meet.
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• Critical inputs
• Visioning session
• Logisticsstrategic analysis
– summarized, outlining objectives, programs,
milestones, and key measuresof performance
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– What arethebasic and distinctiveserviceneeds
of your customers?
– What must logisticsdo to meet thoseneeds?
– Can weuseour logisticscapabilitiesto provide
uniqueservicesto our customers?
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– Should weservethemarket directly or should weuse
distributorsor other intermediariesto reach our
– What should our logisticsnetwork look like?
– What productsshould besourced from which
– How many warehousesshould wehave?
– Whereshould they belocated, and what isthemission
of each facility?
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