Customers Transportation Inventory or supply source Customer order processing (and transmittal) Customers Transportation Inventory or supply source Customer order processing (and transmittal) Dickson Chiu 2006 SCM-2 Category Percent of sales Rs./cwt. Transportation 3.34% Rs.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% Rs.67.71 Add one-third for inbound supply Prices Source: Herb Davis & Company Logistics Price are about 10% of sales w/o purchasing Prices CR (2004) Prentice Hall, Inc. Physical Distribution Prices Dickson Chiu 2006 SCM-3 Customer Service Performance 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 D a y s 82 84 86 88 90 92 94 96 % Order Cycle Time, Days Product Availability--% orders Product Availability--% line items Source: Herb Davis & Company Dickson Chiu 2006 SCM-4 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 Internal supply chain CR (2004) Prentice Hall, Inc. 1-14 Traditional Scope of the Supply Chain Dickson Chiu 2006 SCM-5 Key Activities/Processes Primary Setting customer service goals Transportation Inventory management Location Secondary, or supporting Warehousing Materials handling Acquisition (purchasing) Protective packaging Product scheduling Order processing Dickson Chiu 2006 SCM-6 Logistics Strategy and Planning The objectives of logistics strategy Minimize Price Minimize investment Maximize customer service Levels of logistical planning Strategic Tactical Operational
Dickson Chiu 2006 SCM-7 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
CR (2004) Prentice Hall, Inc. The Logistics Strategy Triangle (4 problem areas) Dickson Chiu 2006 SCM-8 Decision area Strategic Tactical Operational Transportation Mode selection Seasonal equip- ment leasing Dispatching Inventories Location, Control policies Safety stock levels Order filling Order processing Order entry, transmittal, and processing system design Processing orders, Filling back orders Purchasing Development of supplier- buyer relations Contracting, Forward buying Expediting Warehousing Handling equipment selection, Layout design Space utilization Order picking and restocking Facility location Number, size, and location of warehouses CR (2004) Prentice Hall, Inc. Strategic, Tactical, and Operational Decision Making Dickson Chiu 2006 SCM-9 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 Internal Supply Chain CR (2004) Prentice Hall, Inc. Relationship of Logistics to Marketing and Production Dickson Chiu 2006 SCM-10 Product Price Promotion Place-Customer service levels Inventory carrying Prices Lot quantity Prices Order processing and information Prices Transport Prices Warehousing Prices L o g i s t i c s
CR (2004) Prentice Hall, Inc. Relationship of Logistics to Marketing Dickson Chiu 2006 SCM-11 Relationship of Logistics to Production Coordinates through scheduling and strategy make-to-order make-to-stock An integral part of the supply chain Affects total response time for customers Shares activities such as inventory planning Prices are in tradeoff Production lot quantities affect inventory levels and transportation efficiency Production response affects transportation Prices and customer service Production and warehouse location are interrelated 12 Contemporary IT and Logistics Dickson Chiu 2006 SCM-13 Wal-Mart Wins with Logistics Prices are lower than K-Mart or Target Stores CEO is a former logistician Wal-Mart is the largest retailer in the world!
Dickson Chiu 2006 SCM-14 Logistics/SCM in Diverse Areas Manufacturing - most common Service - emerging opportunities Environment - causing restrictions Non-profits / Government - little explored Military - long history
Note the global evolvement into a service-oriented economy! Dickson Chiu 2006 SCM-15 Focus Company Suppliers Suppliers suppliers Customers Customers/ End users Acquire Convert Distribute Product and information flow Conventional Scope CR (2004) Prentice Hall, Inc. Supply Chain is Multi-Enterprise Dickson Chiu 2006 SCM-16 Profit G & A Marketing Logistics Overhead Materials Labor Profit G & A Marketing Logistics Overhead Materials Labor Tariffs Increase Reduction Increase Domestic sourcing Foreign sourcing CR (2004) Prentice Hall, Inc. Effect on Logistics Foreign Outsourcing Dickson Chiu 2006 SCM-17 CR (2004) Prentice Hall, Inc. Reality of SCM Scope Dickson Chiu 2006 SCM-18 SUPPLY CHAIN MANAGEMENT Activity and process administration CR (2004) Prentice Hall, Inc. The Multi-Dimensions of SCM Dickson Chiu 2006 SCM-19 Increasing Significance of Logistics Prices 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 Globalization of trade 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 Dickson Chiu 2006 SCM-20 Contemporary IT Applications in Logistics Focus of this Course Tremendous technological advances in past decades Logistics management relies on analysis over massive information from heterogeneous sources Disparate business functions in service-oriented economy Internet and mobile technologies has further improved logistical effectiveness and efficiency Enabled logisticians and management to make timely, informed, and accurate decisions but create new dimensions of complexity IT people work closely with logistician and management Understand complex requirements Choose the right technology and design appropriate IT infrastructures, architectures, and systems Explain how contemporary IT can help to others Dickson Chiu 2006 SCM-21 Some Useful Contemporary IT in Logistics eXtended Markup Language (XML) Service-oriented architecture Process integration and interaction management Exceptions, alerts, and relationship management in logistics Information integration Facilitating decision support Mobile technologies Radio Frequency Identification (RFID)
=> The key is to achieve information and process integration for efficient and effective decision support. 22 Summary Dickson Chiu 2006 SCM-23 Summary The logistic process plans, implements, controls the flow and storage of goods, services, and related information between the point of origin and the point of consumption to satisfy customer requirements Logistics addresses the time utility & place utility out of the four economic utilities Logistics becomes more important and complex because of new requirements of the service-oriented economy, disparate business functions, and the impact of various contemporary IT Logistics involves the interaction with multiple departments within a company as well as now also across business partner organizations and customers Application of contemporary IT, especially information and process integration for efficient and effective decision support, is a critical success factor and therefore the focus of this course.