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Basics of logistics and supply chain.ppt
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- 2. Supply Chain Overview DicksonChiu 2006 SCM-2 CR (2004) Prentice Hall, Inc. 1-2 Warehousing Warehousing Transportation Transportation Vendors/plants/ports Transportation Factory Transportation Customers Information flows
- 3. Logistics vs SupplyChain 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-3 CR (2004) Prentice Hall, Inc.
- 4. Common Contemporary LogisticsTerms 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 Dickson Chiu 2006 SCM-4
- 5. 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 Dickson Chiu 2006 SCM-5
- 6. Evolution of SupplyChain Management Dickson Chiu 2006 SCM-6 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+ CR (2004) Prentice Hall, Inc.
- 7. Supply Chain Schematic DicksonChiu 2006 SCM-7 CR (2004) Prentice Hall, Inc. 1-5
- 8. A Revised Strategyis Generating Great Top Management Interest Historical perspective of distribution (Peter Drucker, 1962): “The last frontier of cost economies” The contemporary view: Distribution is a new frontier for demand generation— a competitive weapon. Both views are important! Dickson Chiu 2006 SCM-8
- 9. Critical Customer ServiceLoop Customers Transportation Inventory or supply source Customer order processing (and transmittal) Customers Transportation Inventory or supply source Customer order processing (and transmittal) Dickson Chiu 2006 SCM-9
- 10. Physical Distribution Costs DicksonChiu 2006 SCM-10 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 CR (2004) Prentice Hall, Inc.
- 11. Customer Service Performance 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 % OrderCycle Time, Days Product Availability--% orders Product Availability--% line items Dickson Chiu 2006 SCM-11 Source: Herb Davis & Company
- 12. Traditional Scope ofthe Supply Chain Dickson Chiu 2006 SCM-12 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 Internal supply chain CR (2004) Prentice Hall, Inc. 1-14
- 13. 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 Dickson Chiu 2006 SCM-13
- 14. Logistics Strategy andPlanning The objectives of logistics strategy Minimize cost Minimize investment Maximize customer service Levels of logistical planning Strategic Tactical Operational Dickson Chiu 2006 SCM-14
- 15. The Logistics StrategyTriangle (4 problem areas) Dickson Chiu 2006 SCM-15 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 CR (2004) Prentice Hall, Inc.
- 16. Strategic, Tactical, andOperational Decision Making Dickson Chiu 2006 SCM-16 Decision area Strategic Tactical Operational Transportation Mode selection Seasonal equip- ment leasing Dispatching Inventories Location, Control policies Safety stock levels Order filling Order processing Order entry, transmittal, and processing system design Processing orders, Filling back orders Purchasing Development of supplier- buyer relations Contracting, Forward buying Expediting Warehousing Handling equipment selection, Layout design Space utilization Order picking and restocking Facility location Number, size, and location of warehouses CR (2004) Prentice Hall, Inc.
- 17. Relationship of Logisticsto Marketing and Production Dickson Chiu 2006 SCM-17 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 Internal Supply Chain CR (2004) Prentice Hall, Inc.
- 18. Relationship of Logisticsto Marketing Dickson Chiu 2006 SCM-18 Product Price Promotion Place-Customer service levels Inventory carrying costs Lot quantity costs Order processing and information costs Transport costs Warehousing costs Logistics CR (2004) Prentice Hall, Inc.
- 19. Relationship of Logisticsto 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 Dickson Chiu 2006 SCM-19
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- 21. Wal-Mart Wins withLogistics Costs are lower than K-Mart or Target Stores CEO is a former logistician Wal-Mart is the largest retailer in the world! Dickson Chiu 2006 SCM-21
- 22. Logistics/SCM in DiverseAreas 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! Dickson Chiu 2006 SCM-22
- 23. Supply Chain isMulti-Enterprise Dickson Chiu 2006 SCM-23 Focus Company Suppliers Supplier’s suppliers Customers Customers/ End users Acquire Convert Distribute Product and information flow Conventional Scope CR (2004) Prentice Hall, Inc.
- 24. Effect on LogisticsForeign Outsourcing Dickson Chiu 2006 SCM-24 Profit G & A Marketing Logistics Overhead Materials Labor Profit G & A Marketing Logistics Overhead Materials Labor Tariffs Increase Reduction Increase Domestic sourcing Foreign sourcing CR (2004) Prentice Hall, Inc.
- 25. Reality of SCMScope Dickson Chiu 2006 SCM-25 CR (2004) Prentice Hall, Inc.
- 26. The Multi-Dimensions ofSCM Dickson Chiu 2006 SCM-26 SUPPLY CHAIN MANAGEMENT Activity and process administration CR (2004) Prentice Hall, Inc.
- 27. Increasing Significance ofLogistics 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 Dickson Chiu 2006 SCM-27
- 28. Contemporary IT Applicationsin 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 Dickson Chiu 2006 SCM-28
- 29. Some Useful ContemporaryIT 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. Dickson Chiu 2006 SCM-29
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- 31. Summary The logisticprocess 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. Dickson Chiu 2006 SCM-31