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Topic 1 Logistics and SCM (1).pptx
- 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
- 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