Mc GrawHillIrwin Copyright 2009 by The Mc GrawHill
Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. All Rights Reserved.
LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 16, YOU SHOULD BE ABLE TO: LO 1 Recognize the relationship between marketing channels, logistics, and supply chain management. LO 2 Describe how a company’s supply chain aligns with its marketing strategy. 16 -2
LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 16, YOU SHOULD BE ABLE TO: LO 3 LO 4 Identify the major logistics cost and customer service factors that managers consider when making supply chain decisions. Describe the key logistics functions in a supply chain. 16 -3
LO 1 SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT KEY CONCEPTS Supply Chain Management The Automotive Supply Chain 16 -4
LO 1 SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT KEY CONCEPTS Logistics Management • Cost-Effective Flow • Customer Requirements = Service 16 -5
FIGURE 16 -1 Relating logistics management and supply chain management to supplier networks and marketing channels 16 -6
The Supply Chain
Logistics You are here
FIGURE 16 -2 The automotive supply chain includes thousands of firms that provide the 5, 000 or so parts in a typical car 16 -9
FIGURE 16 -A Paint industry supply chain 16 -10
LO 2 SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY Aligning a Supply Chain with Marketing Strategy • Understand the Customer • Understand the Supply Chain • Harmonize the Supply Chain with the Marketing Strategy 16 -11
LO 2 SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY Aligning a Supply Chain with Marketing Strategy • Dell: A Responsive Supply Chain • Wal-Mart: An Efficient Supply Chain 16 -12
LO 3 INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN Information’s Role in Supply Chain Responsiveness and Efficiency • Electronic Data Interchanges (EDIs) • Extranet 16 -13
LO 3 INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN Total Logistics Cost Concept Customer Service Concept 16 -15
FIGURE 16 -3 How total logistics cost varies with the number of warehouses used based on inventory costs and transportation costs 16 -17
OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN • Customer Service Concept – Customer Service – ability to satisfy users in terms of time, dependability, communication, and convenience Slide 16 -21
OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN § Time • Lead Time (Order Cycle or Replenishment Time) • Recognition of need to order • Order transmittal • Order processing • Documentation • Transportation • Quick Response or Efficient Consumer Response • Reduce retailer’s delivery time Slide 16 -21
OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN • Customer Service Concept, cont… § Dependability – consistency of replenishment and has 3 elements: consistent lead time, safe delivery, and complete delivery § Communication – two-way link between buyer and seller using status reports to monitor service and anticipate future needs § Convenience – minimum effort on part of buyer in doing business and seller must remove unnecessary barriers
OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN • Customer Service Standards – Firms develop set of written standards that serve as objective and provide benchmark against which results are measured – Information is collected on customers’ needs and competitors’ practices to establish standards and ongoing monitoring programs Slide 16 -25
FIGURE 16 -4 Supply chain managers balance total logistics cost factors against customer service factors 16 -22
LO 3 INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE FACTORS Dependability Communication Convenience 16 -24
LO 3 INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE STANDARDS 16 -25
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION Third-Party Service Logistics Providers Criteria • Costs • Dependability • Time • Accessibility • Capability • Frequency 16 -27
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN • Third-Party Logistics Providers – provide most or all of logistics functions of manufacturers, suppliers and distributors – Transportation – Warehousing an materials handling – Order processing – Inventory management Slide 16 -29
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN • Transportation Service Criteria § Cost § Dependability § Time § Accessibility § Capability § Frequency Slide 16 -29
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN • Warehousing and Materials Handling § Storage Warehouses § Distribution Centers § Materials Handling – high labor costs, loss and damage Slide 16 -36
CLOSING THE LOOP: REVERSE LOGISTICS • Reverse Logistics – process of reclaiming recyclable and reusable materials, returns, and reworks from point of consumption or use for repair, remanufacturing, redistribution, or disposal – Ecological and economical Slide 16 -41
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN • Transportation Modes 1. 2. 3. 4. 5. 6. Railroads Motor carriers Air carriers Pipeline Water carriers Intermodal Slide 16 -29
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION Railroads • Intermodal Transportation • Piggy-Back or Trailer on Flatcar (TOFC) • Containers 16 -33
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN LO 4 TRANSPORTATION Motor Carriers Air Carriers and Express Companies Freight Forwarders/ Express Companies 16 -34
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION Pipelines Water 16 -35
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN WAREHOUSING AND MATERIALS HANDLING Storage Warehouses Distribution Materials Centers Handling 16 -36
FIGURE 16 -5 Advantages and disadvantages of five modes of transportation 16 -37
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN ORDER PROCESSING Order Processing • Backorder • EDI/EFT 16 -38
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN • Inventory Management § Supply Chain Inventory Strategies • Just-In-Time (JIT) Concept • Vendor-Managed Inventory (VMI) Slide 16 -39
KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN • Order Processing – Order transmitted – Internet, extranet, or EDI – Entered into appropriate databases and sent to those needing it – Inventory checked for availability – If out of stock, backorder is created – Customer credit checked, all documentation prepared, transportation arranged, and order confirmation sent Slide 16 -36
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT Reasons for Inventory Costs • Capital Costs • Storage Costs • Inventory Service Costs • Risk Costs 16 -41
LO 4 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT Supply Chain Inventory Strategies • Just-in-Time (JIT) Concept • Vendor-Managed Inventory (VMI) 16 -42
LO 4 CLOSING THE LOOP: REVERSE LOGISTICS Reverse Logistics 16 -43
Logistics consists of those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost. 16 -44
Logistics Management Logistics management is the practice of organizing the costeffective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements. 16 -45
Supply Chain A supply chain consists of a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users. 16 -46
Supply Chain Management Supply chain management is the integration and organization of information and logistic activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to consumers. 16 -47
Electronic Data Interchanges (EDIs) Electronic data interchanges (EDIs) combine proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers. 16 -48
Total Logistics Cost Total logistics cost consists of expenses associated with transportation, materials handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return goods handling. 16 -49
Customer Service Customer service is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. 16 -50
Lead Time Lead time is the lag from ordering an item until it is received and ready for use or sale. Also called order cycle time or replenishment time. 16 -51
Quick Response Quick response, in inventory management systems, are designed to reduce the retailer’s lead time for receiving merchandise which then lowers a retailer’s inventory investment, improves customer service levels, and reduces logistic expenses. Also called efficient consumer response. 16 -52
Efficient Consumer Response Efficient consumer response, in inventory management systems, are designed to reduce the retailer’s lead time for receiving merchandise which then lowers a retailer’s inventory investment, improves customer service levels, and reduces logistic expenses. Also called quick response. 16 -53
Third-Party Logistics Providers Third-party logistics providers are firms that perform most or all of the logistics functions that manufacturers, suppliers, and distributors would normally perform themselves. 16 -54
Just-In-Time (JIT) Concept The just-in-time (JIT) concept is an inventory supply system that operates with very low inventories and requires fast, on-time delivery. 16 -55
Vendor-Managed Inventory (VMI) Vendor-managed inventory is an inventory-management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items. 16 -56
Reverse Logistics Reverse logistics is a process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution, or disposal. 16 -57
- Slides: 53