Logistics Final Quen

Measure

Simple value requiring no calculations (e.g., units of inventory, backorder dollars).

Metric

Calculation or ratio of measurements (e.g., inventory turns, days of supply).

Index

Combines two or more metrics into a single indicator to track process trends (e.g., perfect order).

Data vs. Information vs. Understanding

Data = raw facts; Information = organized data; Understanding = actionable insight for decision-making.

Qualities of good performance measures

Quantitative, easy to understand, encourages appropriate behavior, visible, mutually understood, encompasses outputs/inputs, measures only what's important, multidimensional, economies of effort, facilitates trust.

Internal vs. External metrics

Internal: focuses on logistics firm performance. External: measures the customer's experience.

Effectiveness vs. Efficiency

Effectiveness: quality of output and revenue generated. Efficiency: cost of the output.

SCOR 5 Performance Attributes

Reliability, Responsiveness, Agility, Costs, Asset Management.

SCOR: Reliability metric

Perfect order fulfillment.

SCOR: Responsiveness metric

Order fulfillment cycle time.

SCOR: Agility metrics

Upside flexibility, upside/downside adaptability, overall value at risk.

SCOR: Costs metric

Total cost to serve.

SCOR: Asset Management metrics

Cash-to-cash cycle time, return on SC fixed assets, return on working capital.

Profit equation

Profit = Revenue - Costs. (A cost saving equals a larger sales increase based on profit margin).

Supply chain impact on ROA

ROA = Profit / Capital Employed. increases Return on Assets by simultaneously increasing net profit and reducing total assets

Order processing time & order-to-cash cycle

Longer cycle = higher accounts receivable and higher investment in "sold" finished goods.

JIT and VMI financial impact

Reduces inventory levels and the capital required.

Make-to-Stock (MTS) vs. Make-to-Order (MTO)

MTS: built before order based on forecast. MTO: production begins only after order is received.

Assemble-to-Order (ATO)

Standard components made ahead; final assembly after customer order (Smallest customization/cost, days-weeks).

Build-to-Order (BTO)

Built to customer specs from standard options after order (High customization/cost, weeks-months).

Engineer-to-Order (ETO)

Unique design/engineering begins after order (Total customization, very high cost, months-years).

Transactional relationship

Short-term, price-focused, minimal information sharing (e.g., buying office supplies).

Partnership relationship

Collaborative, shared goals, moderate information sharing, mutual benefit (e.g., retailer and key supplier).

Strategic Alliance

Deep integration, long-term commitment, high trust, shared risks/rewards (e.g., Allegiant & Sun Country acquisition).

2PL vs. 3PL vs. 4PL

2PL: Asset-based carrier/warehouse. 3PL: Outsourced logistics functions. 4PL: Non-asset-based integrator managing multiple 3PLs and the entire supply chain.

Strengths of 3PLs

Focus on core competency, flexibility, access to advanced tech, lower capital investment.

Weaknesses of 3PLs

Loss of control, potential goal misalignment, dependency, hidden costs.

4 Logistics Software Categories

Planning, Execution, Business Intelligence, Event Management.

Planning applications

Synchronize planning processes using real-time data across departments/partners (e.g., ERP).

Execution applications

Facilitate day-to-day operating tasks to support customer demand (e.g., WMS, TMS).

Business Intelligence (BI) tools

Analyze data, self-service reporting, graphical dashboards, and performance scorecards.

Event management tools

Collect real-time data to automate monitoring of supply chain events and trigger preemptive/reactive alerts.

Most important rule for tech implementation

Rule #7: Take a step-by-step approach for incremental value gains.

Internet of Things (IoT)

Network of connected, sensor-enabled devices collecting and exchanging data.

Cloud Computing: SaaS vs. PaaS vs. IaaS

SaaS: rented cloud applications. PaaS: cloud software development tools. IaaS: shared server capacity/storage.

Online reverse auction

Real-time, declining-price auction: 1 buyer, many prequalified sellers bidding against each other.

Forward vs. Reverse auction

Forward: 1 seller, many buyers, price goes UP. Reverse: 1 buyer, many sellers, price goes DOWN.

Blockchain

Shared, tamper-resistant digital ledger recording transactions across partners; improves traceability and financial flows.

Hyperloop

Proposed high-speed transport using pods in low-pressure tubes; high speed/low emissions, but massive infrastructure cost.

Levels of supply chain analytics sophistication

Descriptive (what happened), Predictive (what will happen), Prescriptive (what should we do), Cognitive (AI-driven autonomous decisions).

Status of logistics jobs (talent shortages)

Truckers, pilots, facility operations managers, and analysts/IT professionals.

Triple bottom line of sustainability

People (social), Planet (environmental), Profit (economic).

4 Rs: Reuse

Repeated use of an item without significant processing (e.g., travel mugs, grocery bags).

4 Rs: Remanufacturing

Product/part is returned to the market as "good as new" (e.g., auto parts, electronics).

4 Rs: Reconditioning

Returned to working order but NOT "as good as new" (e.g., "refurbished" or "renewed").

4 Rs: Recycling

Secondary use of raw materials (e.g., glass, cans, paper, tires).

Four primary reasons firms promote sustainability

Cost savings, regulatory compliance, customer/brand demand, risk management/competitive advantage.

Rivian: Steps to profitability

Scale volume (e.g., R2 model), reach economies of scale (~500k vehicles/yr), cut costs, build supply chain relationships, grow software/services.

Rivian: April 2025 tariffs impact

Better than import-heavy rivals (built in IL), but worse on costs due to imported parts/steel/aluminum tariffs and potential loss of EV tax credits.

Amazon: Biggest threat / Stretched too thin?

Labor disputes and growing union tensions. Not stretched thin - infrastructural products

Amazon: AI and electric semis impact

AI: better inventory placement, robotics, route optimization. Electric semis: lower emissions/operating costs, but high upfront cost and charging infrastructure needs.

CEA 3: Logistics Technology

Aurora autonomous trucking, lowered costs, fixed talent shortage, requires steep regulations, needs teams to help fix them if something goes wrong

CEA 4: Supply Chain Relationship

USPS and Amazon have a collaborative relationship with their pilot program expanding same day delivery - consumers benefitted, USPS takes more risk, but beneficial to show innovation.

Allegiant and Sun Country relationship change

Changed from competitors to an integrated acquisition. Allegiant acquired Sun Country ($1.5B) to fill network voids and add highly profitable cargo operations. Could become the next budget airline

KONE and TKE deal

Finnish KONE acquired German TK Elevator ($34B) to create the world's largest lift maker. (Ties to tech implementation rule #1: conduct a thorough need assessment).

Bullwhip effect

Uncertainty in the supply chain from using forecasts, exaggerated by lead-time effects and differences in lot sizes as material moves upstream.

Bullwhip effect causes

Lack of communication, procurement/manufacturing delays (lead times), forecast inaccuracy, lead time variance, demand variance, return allowance.

Bullwhip effect mitigating factors

Enhanced communication, lead time reductions (eliminating middlemen), lead time variance reductions, demand variance reductions.

Distribution Game: communication rule

No communication between supply chain partners, which is a key cause of the bullwhip effect.

Distribution Game: goal

Achieve the lowest total supply chain cost (lower overall SC cost = higher performance).

Omnichannel retailing

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

SCOR model includes

reliability, responsiveness, agility, costs, and asset management