Fisher Forward Logistics Final

★ Bullwhip effect

Uncertainty in the supply chain from using forecasts, which is then exaggerated by lead-time effects and differences in lot sizes as material moves through the supply chain

★ What exaggerates the bullwhip effect? (red on slide)

Lead-time effects (plus differences in lot sizes)

Importance of bullwhip effect

One of the most challenging problems in SCM; demonstrated by the Distribution Game

★ Causes of the bullwhip effect (7)

• Lack of communication among SC members;

• ability to influence while being influenced by others;

• procurement and manufacturing delays (lead times);

• forecast inaccuracy;

• lead time variance; demand variance; return allowance

★ Mitigating factors for the bullwhip effect

Enhanced communication (ERP systems, vendor managed inventory (VMI), sharing point-of-sale (POS) data); lead time reductions (eliminating middlemen); lead time variance reductions; demand variance reductions

Bullwhip example: toilet paper

Customers rush to buy; retailers over-order; manufacturers buy more; suppliers see the biggest swings, then everyone under-orders

★ How could AI or another breakthrough logistics technology help the Distribution Game?

Better demand visibility, forecasting and information sharing across partners could dampen order swings

Supply chain complexity examples on slides

Nike selling out of Kobe Bryant gear online, 3M respirators and Peloton bikes: sudden demand shocks that strain supply chains

★ Measure

Requires no calculations and has simple dimensions (e.g., units of inventory, backorder dollars, sales volume)

★ Metric

Involves a calculation or a combination of measurements, often in the form of a ratio (e.g., inventory turns, inventory days of supply, sales dollars per SKU)

★ Index

Combines two or more metrics into a single indicator

★ Internal metrics

Focus on the performance of the logistics firm

★ External metrics

Measure the experience of the customer

★ Effectiveness

The quality of output and the revenue generated

★ Efficiency

The cost of the output

Perfect order fulfillment (index components)

On-time delivery, complete order, accurate product selection, damage-free, accurate invoice

★ Characteristics of good performance measures (10)

Quantitative, understandable, promotes good behavior, visible, defined, looks at outputs and inputs, takes important stats into account, multidimensional, facilitates trust, uses economies of effort

Is the measure visible? (Amazon example)

Amazon shows visual dashboards of facility, client and company-wide data on screens, refreshed every 20 seconds, so managers can monitor productivity and spot bottlenecks in real time

Raising the performance bar: key measures by decade

1960s production costs; 1970s manufacturing and inventory costs; 1980s transport costs; 1990s distribution and logistics costs; 2000s supply chain and customer service costs

Successful supply chain metrics program

Team effort; involves customers and suppliers; tiered structure; metric owners tied to performance evaluation; procedure to mitigate conflicts; consistent with corporate strategy; top management support

★ Four principal categories of performance metrics

Time, quality, cost, and miscellaneous/supporting

Time metrics (examples)

On-time delivery/receipt, response time, forecasting/planning cycle time

Quality metrics (examples)

Overall customer satisfaction, processing accuracy, perfect order fulfillment

Cost metrics (examples)

Finished goods inventory turns, days sales outstanding, cost to serve, cash-to-cash cycle time, total delivered cost, cost of excess capacity

★ SCOR model: five performance attributes

Reliability, responsiveness, agility, costs, asset management

★ SCOR attributes and their metrics

Reliability: perfect order fulfillment. Responsiveness: order fulfillment cycle time. Agility: upside SC flexibility, upside/downside SC adaptability, overall value at risk. Costs: total cost to serve. Asset management: cash-to-cash cycle time, return on SC fixed assets, return on working capital

★ Supply chain-finance connection

The cost of providing logistics service affects the marketability of the product (via landed cost/price) and its profitability

JIT and vendor-managed inventory use case

To Reduce inventory levels and the capital required

Lead times and customer service (finance link)

Consistent, short lead times help inventories and can build customer satisfaction and loyalty

★ Order processing time and the order-to-cash cycle

Longer order-to-cash cycle = higher accounts receivable and higher investment in 'sold' finished goods

★ Profit equation

Profit = Revenue - Costs.

★ Sales equivalent of a cost saving

Sales = Profit / Profit margin

★ Return on assets (ROA)

ROA = Profit / Capital employed

Supply chain effectiveness vs. efficiency (ROA diagram)

Effectiveness links to revenue; efficiency links to costs

Supply chain service failure

Annual orders = correctly filled + service failure orders. Service failures are rectified orders (invoice deductions and rehandling cost) or refused orders (lost sales revenue)

How supply chain management affects ROA

Through decisions on channel structure, inventory management, order management and transportation management

★ Why information matters: what does it connect?

It connects the extended supply chain with insight on demand, customer orders, delivery status, inventory stock levels and production schedules

★ Three principal supply chain information requirements

Meet quality standards; support multidirectional flows; provide decision support

Quality information is…

Accessible, relevant, accurate and timely

★ Process effectiveness (systems capabilities)

Makes data transparent, accurate and accessible to decision makers so they make BETTER decisions, and relieves them of lower value-adding tasks (e.g., queries)

★ Process efficiency (systems capabilities)

The primary benefit of technology: making decisions with LESS effort

Systems must facilitate excellent performance across…

The plan, make, buy, move and return processes of a supply chain

★ Linking network elements (cohesive network)

Integrated technologies, skilled people and robust processes - capabilities include visibility, velocity, agility, adaptability, optimization, segmentation, synchronization

★ Visibility (SC information system)

cross-chain view of the supply chain; facilitating tools create a holistic view of the supply chain

★ Four logistics software categories

Supply chain planning, supply chain execution, business intelligence, and event management

★ Planning applications

Help organizations shift from autonomous planning activities to synchronized planning processes that use real-time data for collaboration across departments

★ Enterprise resource planning (ERP) systems

A suite of applications using a common data management system; integrates functions within the organization, for long term usage

★ Execution applications

Software that facilitates the day-to-day operating tasks required to support customer demand

Execution software examples

Warehouse management (WMS), transportation management (TMS), order management, distributed order management, global trade management, manufacturing execution systems

★ Event management tools

real-time data from multiple sources across the network and convert it into information day to day

★ Business intelligence tools

Data collection and 'big data' analytics, self-service reporting, performance scorecarding versus goals, graphical dashboards, activity monitoring that supports event management, and access to data on multiple supply chain information systems ex 7brew

Planning vs. execution vs. BI vs. event management

Planning = synchronized plans; Execution = day-to-day operations; BI = analytics/dashboards/scorecards; Event management = real-time monitoring and automated alerts

Supplier relationship management (SRM)

A controlled, systematic approach to managing an organization's sourcing activities for goods and services

Customer relationship management (CRM)

Practices, strategies and technologies used to manage and analyze customer interactions and data throughout the relationship lifecycle

Auto-ID and data capture technologies

Recognize objects, collect relevant information and feed the data directly into the supply chain information system (e.g., RFID)

★ Key to harnessing supply chain technology

Informed decision making with a clear vision of how technology spending will facilitate supply chain strategy and satisfy specific requirements

★ Three steps of technology implementation

1) Need assessment (understand the supply chain the technology supports); 2) software selection; 3) mitigate implementation issues

Software selection decisions

Off the shelf vs. in-house development; individual applications vs. integrated suite; on-premise vs. SaaS

Implementation issues to mitigate

Training, cultural change, systems interoperability, data synchronization, data standardization, application integration

★ Technology risks / pitfalls

Unrealistic assumption that technology will fix flawed supply chains; weak technology-process alignment; technology gaps from piecemeal purchases; cross-chain integration challenges; poor planning and preparation (Hershey and Coors are slide examples)

★ 10 golden rules: the boxed rule

7: Take a step-by-step approach for incremental value gains (the most important rule for a successful technology implementation)

10 golden rules for technology implementation

1 senior management commitment; 2 not just an IT project; 3 align with business goals; 4 understand software capabilities; 5 select partners carefully; 6 proven methodology; 7 step-by-step for incremental gains; 8 be prepared to change business processes; 9 keep end users informed and involved; 10 measure success with KPIs

★ Internet of Things (IoT)

Network of connected, sensor-enabled everyday devices that collect and exchange data (examples: smart home devices like Alexa and Ring)

Mobile connectivity

Recent innovation: mobile devices and RFID that connect people and items to supply chain information

Functional automation

Recent innovation: robots and automated equipment (and autonomous trucks) performing logistics tasks

★ Cloud computing (NIST)

A model for on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort

★ SaaS vs. PaaS vs. IaaS

SaaS = applications that reside in the cloud, rented pay-for-use; PaaS = software development tools to create customized processes or tools; IaaS = shared server capacity (computing power and storage) accessed pay-for-use

★ Online reverse auction

Online, real-time, declining-price auction for goods or services between one buying organization and a group of prequalified suppliers; suppliers bid against each other and see their bid status in real time; the lowest bid (or lowest total cost bid) usually wins

★ Forward auction vs. reverse auction

Forward: single seller, many buyers, bidding drives the price UP (e.g., Sotheby's). Reverse: single buyer, many sellers, bidding drives the price DOWN

3-D printing

Recent innovation: building parts from digital designs (slide examples: Ohio State IT and RPS Manufacturing Solutions' farm of printers making glove components)

Logistics technology at Amazon

Warehouse robots (Kiva) bring shelves to workers (video: 3:10-6:45)

★ Omnichannel retailing

Integrates all sales channels (online, in-store, mobile, etc.) into one seamless customer experience, unlike multichannel, which keeps channels separate

★ Rivian: facts from the slide

First electric truck to market; R1T won 2022 Motor Trend Truck of the Year; deal with Amazon to build a fleet of electric delivery vehicles; loses money on every vehicle it sells

★ How should Rivian measure its performance? (discussion)

Use several measures, not just revenue like gross profit per vehicle, production volume vs. scale target, cost per vehicle, cash burn/runway, delivery and quality metrics, and ROA

★ Rivian: steps to become profitable

Scale volume (R2 at about $45,000), reach economies of scale (rule of thumb about 500,000 vehicles/yr), cut costs, build supply chain relationships, grow software and services (VW partnership)

Rivian: why negative gross profit?

It builds at low volumes on production lines designed for higher volumes, so labor, depreciation and overhead costs weigh heavily

★ Rivian and the April 2025 tariffs: better or worse?

Better vs. import-heavy rivals , Worse on costs: imported parts, steel and aluminum tariffs, loss of EV tax credit.

★ Amazon: what is regionalization?

Splitting a national fulfillment network into eight self-sufficient regions with popular items stocked in several places, so orders ship from closer to the customer

Amazon regionalization: results

Shorter distances to customers (about 15% less), fewer middle-mile touch points, more than 76% of orders filled within the customer's region; supported by smaller Same-Day Sites

★ Amazon: biggest threat over the next decade? (prepare an answer)

Pick a position and support it: regulation/antitrust, labor, competitors, or overextension. Say whether it is stretched too thin

★ Amazon: impact of AI and electric semis (prepare an answer)

AI: inventory placement, robotics, route optimization, demand forecasting. Electric semis: lower emissions and operating cost vs. charging infrastructure and upfront cost

★ What is blockchain?

A shared, tamper-resistant digital ledger that records transactions across partners; improves traceability, information and financial flows. Challenges: cost, partner adoption, data standards, scalability

★ What is the hyperloop?

Proposed high-speed transport using pods in low-pressure tubes for passengers and freight. Benefits: speed, lower emissions. Barriers: huge infrastructure cost, regulation and land, unproven at scale

★ Allegiant and Sun Country: how has the relationship changed?

They were competitors; in January 2026 Allegiant agreed to acquire Sun Country (about $1.5B). Combined network of 650+ routes; Sun Country adds cargo and charter diversification; moves toward the most integrated relationship

CEA 3: the logistics technology I wrote about

Aurora Innovation's autonomous trucking - lowered costs, but facing regulation issues

CEA 4 main idea

USPS-Amazon same-day delivery pilot (afternoon package drop-off, launched late Sept 2026), partnership, easy scaling for amazon, usps is reliant on amazon’s funds

Triple bottom line of sustainability (verify w/ slides)

People (social), planet (environmental), profit (economic)

The 4 Rs of sustainability (verify w/ slides)

Reuse, remanufacturing, reconditioning, recycling

Remanufacturing vs. reconditioning vs. recycling

Remanufacturing = returned to the market as 'good as new'; Reconditioning = returned to working order but not 'as good as new'; Recycling = secondary use of materials (glass bottles, cans, newspapers, corrugated material, tires, etc.)

Reasons firms promote sustainability

cost savings, regulatory compliance, customer and brand demand, risk and competitive advantage

Assemble to order (ATO)

Standard components or modules are made ahead of time; final assembly begins only after a customer order

Build to order (BTO)

The product is built to the customer's specifications from standard options after the order is received

Engineer to order (ETO)

Unique design and engineering begins after the order; the most customized (e.g., custom ships or specialized machinery)

Types of collaborative relationships (final guide)

Transactional, partnership, strategic alliance (add an example of each from your slides)

Measures the experience of the customer.

External metrics

The cost of the output.

Efficiency

Sales volume, units of inventory, etc.

Measure

The quality of output and the revenue generated.

Effectiveness

Combines measures in the form a ratio.

Metric

Focus on the performance of the logistics firm.

Internal metrics