Business Logistics and Transportation (Exam #1)

Supply Chain Management

consists of firms collaborating to leverage strategic positioning, and to improve operating efficiency

Supply Chain Strategy

a channel and business organizational arrangement, based on acknowledge dependency, and collaboration

Logistics

work required to move and geographically position inventory

What are the 6 aspects of logistics?

-Order Management

-Inventory

-Transportation

-Warehousing

-Material Handling

-Packaging

What are the 3 types of integrative management value propositions?

Economic value, market value, relevancy value

Economic Value

-lowest cost

-economies of scale

-product/service creation (known as procurement/manufacturing strategy)

Market Value

-attractive assortment

-economy of scope effectiveness

-product/service presentation (known as a market/distribution strategy)

Relevancy Value

-customization

-segmental diversity

-product/service positioning (Supply Chain Strategy)

End-to-End Supply Chain Management

plan, source, make, deliver, return (and then back to deliver)

Most supply chains are ___________ through various types of technologies

Enabled

Eight Processes of Integrative Management

1. Demand planning responsiveness

2. Customer relationship collaboration

3. Order fulfillment/service delivery

4. Product/service development launch

5. Manufacturing customization

6. Supplier relationship collaboration

7. Life cycle support

8. Reverse logistics

Focus of integrated management?

lowest total process cost (differs from lowest cost of each function)

What do integrated service providers (ISP) do?

provide a range of logistics services to accommodate customers, ranging from order entry to product delivery

What makes up the supply chain information system functionality?

1. Transaction System

2. Management Control

3. Decision Analysis

4. Strategic Planning

What is enterprise resource planning?

it maintains an integrated database of current/historical data and processes most transactions across all functions (backbone of most firm's logistical information systems)

Most common ERP software packages

SAP & Oracle

What are examples of transactions in ERP?

- Order entry & order management

- Inventory assignment

- Shipping & receiving

what are the components of enterprise integration and administration?

1. general administration

2. accounts receivable/payable

3. financial inventory planning

4. general ledger

5. Human Resources

What are the modules in Enterprise Planning and Monitoring?

1. Sales & Operations Planning (S&OP)

2. Supply chain visibility and event management (EMS)

3. Supply chain compliance

Enterprise Operations Modules

1. Customer relationship management

2. Logistics

3. Manufacturing

4. Purchasing

5. Inventory Deployment

What are the two basic supply chain capabilities models?

Efficient and Responsive

Efficient Supply Chain Capabilities Model

designed to minimize cost

- predictable supply

- low cost

- highly utilized capacity

- high inventory turns

- ideal for functional products (staples people buy everywhere, don't change over time, stable predictable demand)

Responsive Supply Chain Capabilities Model

designed to respond quickly to market demand

- fast

- minimal stock outs

- flexible capacity/volume

- inventory of parts

- minimize lead time

- ready to buy items

- ideal for innovative products (rapidly changing, short life-cycle products, great variety, unpredictable demand)

Anticipatory Business Model

1. Forecast

2. Buy components and materials

3. Manufacture

4. Warehouse

5. Sell

6. Deliver

Push or Make-to-Stock

producing stock on basis of anticipated demand

Responsive Business Model

1. Sell

2. Buy components and materials

3. Manufacture

4. Deliver

Pull or Make-to-Order

producing stock in response to actual demand

Manufacturing (or form) Postponement

- mfg one order at a time

- base modular construction of product

- no customization until customer order

- balances economy of scale with responsiveness

- requires forethought

Example of Manufacturing Postponement

keeping car panels a base color until order is received (then painting color ordered)

Geographic (or Logistics) Postponement

- build or stock a full-line inventory at 1 or few locations

- forward deployment of inventory is postponed until orders made

- then specific item is expedited to local distributor

- economies of scale goes along with responsiveness to customer

- used for high cost part/assemblies

Example of Geographic Postponement

keeping full inventory in a central warehouse and releasing customer orders to local distributors or direct shipping to order

Combined Postponement

keeping basic products centralized and performing customization at destination distributor (autos, computers)

Barriers to Implementing Responsive Systems

- need for publicly held corps to maintain planned quarterly profits

- need to establish collaborative relationships

Cash-to-Cash Conversion

time required to convert raw material or inventory purchases into sales revenue

Dwell Time Minimization

ratio of time that an asset sits idle to the time required to satisfy its supply chain mission

Cash Spin

reducing assets in supply chain can "spin" cash for reinvestment into other projects

Strategic Sourcing

identifying and matching sources of raw materials and components to manufacturers and distributors

Offshoring

moving mfg and distribution operations to countries with favorable labor costs and tax laws

Significant Differences for Global Logistics

- distance is longer for order-to-delivery

- complex documentation is required

- deal with diversity

- accommodate cultural variations

Globalization

expanding international supply chain in mature and emerging markets, with breadth and depth

Breadth

foreign manufacturing, office & retail sites, foreign suppliers & customers

Depth

second and third tier suppliers and customers

Flexibility & Responsiveness

firms will increasing need to be more flexible and responsive to customer needs adapting to unexpected changes and circumstances; necessitating closer integration and collaboration

Cost reduction and Continuous Improvement

reducing purchasing costs, waste, excess inventory, non-value added activities; Improving demand planning; increased outsourcing of non-core competencies

Sustainability and "Greening" the Supply Chain

minimizing business' social, economic, and environmental impact on society and enhancing positive effects

Logistics

design and administration of systems to control movement and geographical positioning of raw materials, work in process, and finished inventories at the lowest total cost

What does logistics include the integration and management of?

1. order processing

2. inventory management

3. transportation

4. warehousing/materials handling

(to support procurement, manufacturing, and customer accommodation)

Logistics is necessary to...

-move goods/materials from suppliers to buyers

-move goods and materials between sites

-move finished goods to the customer

Products have little value to the customer until they are

moved to customer's point of consumption

Logistical Value Proposition

consists of a commitment to key customer expectations and requirements at a min. cost

Two Elements of Logistical Value Proposition

service & cost minimization

Availability

having inventory to consistently meet customer material

Operational Performance

time required to deliver a customer's order

- key metric involve delivery speed & consistency

- flexibility

- malfunction & recovery time - logistical failures + corrections

Service Reliability

quality attributes of logistics

- key to quality is accurate measurement of availability + operational performance over time

Traditional Cost

- focused on achieving lowest possible cost for each individual function of logistics

- expected lowest cost based on decisions that were cheapest for individual functions

- ignored impact of cost decisions across logistics functions

Total Cost

- focused on achieving lowest total cost across each function of logistics

- cost decision in one function should consider impact to costs of all other functions

Total Cost Method Equation

Daily Cost of holding product = (Annual Holding Cost * Product Value)/ 365 days per year

Logistics includes these major functions

1. order processing

2. inventory, transportation

3. warehousing

4. materials handling, packaging

Customer Relationship Management

movement of finished products to customers; it's the objective of logistics

Manufacturing Production

concentrates on managing work-in-process inventory as it flows between stages of manufacturing; Master Production Schedule (MPS)

Procurement

concerned with purchasing and arranging inbound movement of materials, parts, and/or finished inventory from suppliers into manufacturing or assembly plants, warehouses, or retail stores

Procurement includes

- purchasing

- procurement

- sourcing or strategic sourcing

- supply management

- material planning & purchasing

Achieving 6 objectives simultaneously

1. responsiveness

2. variance reduction

3. inventory reduction

4. shipment consolidation

5. quality

6. life-cycle report

Logistical Operating Arrangements

Echelon Structured Logistics, Direct Delivery (manufacture to customer), Combined Echelon and Direct Delivery

Logistics Performance Cycle

performance cycle represents elements of work necessary to complete logistics related to customer accommodation, manufacturing or procurement; dynamic; may involve single or multiple firms

Performance Cycle Consists of:

- Nodes/links in logistics supply chain

- Inventory (base and safety stock)

- Input (demand-orders)/output (level of performance) requirements

Customer from Perspective of Total SC?

-end user of product in consumer market

- company is customer in business market

Customer from Perspective of Specific Firm within a SC?

intermediate customer orgs exist between firm and end users

Customer from Perspective of Logistics Manager?

Any delivery location (ex. consumer's home)

Overview of Customer Relationship Management

- customer focused marketing

- customer service

- customer satisfaction

- customer success

- developing customer relationship management strategy

Focal point of a business strategy?

customers that it intends to serve

What do companies have to do when serving their customers?

- match products to needs

- segments

- products/services be positioned from the customer's perspective

- profit is more important than sales volume

Transactional Marketing

traditional strategy with focus on creating successful individual transactions between company and customers

Relationship Marketing

new strategy with a focus on development of long-term relations with key supply chain participants in effort to develop and retain long-term preference and loyalty

Micromarketing or One-to-One Marketing

recognizes that each individual customer may indeed have unique requirements

One to One relationships can

- significantly reduce transaction costs

- better accommodate customer requirements

- move individual customer transactions into a matter of routine

Discrepancy in space

refers to the fact that the location of production activities and location of consumption are seldom the same

Discrepancy in time

refers to difference in timing between production and consumption

Discrepency in quantity and assortment

refers to mismatch between customer and manufacturing supply

Spatial convenience

amount of shopping time and effort will be required on the part of the customer

Lot size

number of units to be purchased in each transaction

Waiting time

amount of time the customer must wait between ordering and receiving products

Product variety and assortment

differs by supply chain - companies have different items

3 Levels of Customer Accommodation

1. Customer Service

2. Customer Satisfaction

3. Customer Success

Basic customer services provides customers (7 R's)

- with right amount

- of right product

- at right time

- and at right place

- in right condition

- at right price

- with right information

Basic elements of customer service

1. availability

2. operational performance

3. service reliability

Fill Rate (availability)

measures magnitude or impact of stockouts over time

Stockout (availability)

occurs when firm has no product available to fulfill customer demand

Orders Shipped Complete (availability)

requires shipping everything that a customer orders to count as a complete shipment

Operational Performance

deals with time required to deliver customer's order

Speed (operational performance)

elapsed time from when a customer established a need to order until the product is delivered

Consistency (operational performance)

measured by number of times that actual cycles meet the time planned for completion

Flexibility (operational performance)

firm's ability to accommodate special situations and unusual or unexpected customer requests

Malfunction Recovery (operational performance)

firm's ability to quickly implement contingency plans when a failure occurs in the supply chain

Service Reliability

ability to perform all order-related activities + provide critical info; involves a combination of logistics attributes beyond simply availability and operational performance

Damage Free (service reliability)

measures how many shipments arrive w/o damaged products

Error-Free Invoices (service reliability)

measures what % of invoices contain no errors

Shipment Matches (service reliability)

measures how many shipments contain exact amount of product ordered

Shipped to Correct Location (service reliability)

measure how many shipments are made to customer's selected location

Perfect Order is an order that is

delivered complete, delivered on time, delivered at the right location, delivered in perfect condition, delivered with complete and accurate documentation (zero defects)