Chapter 1 Management of Business Logistics, 7

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BUS 3620 Logistics and SCM
We start our lecture to firstly gain the
understanding of the following two
fundamental questions:

What is Supply Chain Management (SCM)?

What is Logistics?
Chapter 1:
Supply Chain Management
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Supply Chain Management:
Introduction
Why do we need to know SCM?
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Supply Chain Management:
Introduction
4 Reasons:
1. Supply chain management now part of
the business vocabulary.
2. Impact of global marketplace drastically
changed the landscape of business.
3. Change was rapid and continuous in the
1990s.
4. Doing business in the comfort zone was
no longer synonymous with success.
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The Changing Business
Landscape: Five Driving Forces
1. The Empowered Consumer
2. Power Shift in the Supply
Chain
3. Deregulation
4. Globalization
5. Technology
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The Changing Business Landscape:
Five Driving Forces
1. The Empowered Consumer
Impact on logistics is more direct.
Informed consumers have low tolerance
for poor quality in products and services.
Changing demographics commands 24/7
service, become less royal
Increased customer service increases the
importance of logistics and supply chains.
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The Changing Business Landscape:
Five Driving Forces
2. Power Shift in the Supply Chain
Large retailers more demanding and
commanding.
Focus upon distribution costs and their
impact on everyday low prices.
Changing logistics and supply chain
strategies resulted from shifts in the
balance of economic power.
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The Changing Business Landscape:
Five Driving Forces
3. Deregulation (4 main legs)
Changing economic controls empowered creativity
and competition.
1. Changes in transportation fewer or no economic
controls over rates and services.
2. Change in financial institutions blurred traditional
differences and increased competition.
3. Change in the communications industry also
resulted in more competition.
4. Changes in the utility (energy) industry allows
more competition.
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The Changing Business Landscape:
Five Driving Forces
4. Globalization
Global marketplace concept
Global network sourcing, manufacturing,
marketing and distribution
Global alternatives have blossomed
No geography --- access available to the world
Supply chain challenges
Wal-Marts challenges
New supply sources
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The Changing Business Landscape:
Five Driving Forces
5. Technology
Information Age provides new and
unrestricted access to the place aspect of
business.
My time, my place
Warehouse technology has changed
dramatically with computer devices in use
from the office space to the forklifts.
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Success of story of SCM

How SCM helps to enhance the expansion of
a business ventures?
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On the Line:
Extreme Enterprise
Integrating new enterprise and supply chain
management solutions allowed Columbia Sportswear
to keep up with sales that increased from $3 million in
1984 to $470 million in 1999.
With one store and a handful of outlets, distribution to
its customers is where the rubber meets the road.
Columbias president was determined not to let
distribution restrain growth, and backed it with money.
A 1 million square foot distribution center receives
more than 2 million units/month and set a record by
shipping 172,000 items in one day, and more than 2
million items in a month.

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The Changing Business Landscape:
The Supply Chain Concept
1. Definition
2. Development of the Concept
3. Business Case for Supply Chain Management
4. Characteristics of Supply Chain Management
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1. The Supply Chain Concept:
Definition
An extended enterprise that crosses over the
boundaries of individual firms to span the
logistical related activities of all the
companies involved in the supply chain.
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2. Development of the Concept

Five main elements:
1. Total systems cost - remains an important
element of logistics analysis.
2. Outbound logistics - was the initial focus with
higher value finished goods.
3. Inbound logistics deregulation allowed new
focus on coordination of inbound and outbound
movements.
4. Value chain analysis integrated logistics activities.
5. Terminology growing as supply chain concept
matures.

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2. Development of the Concept

A general view:
Inbound
Outbound
Suppliers
1960s physical distribution , emphasized on outbound Figure 1.1
1980s inbound logistics added, thus need coordination between both
inbound and outbound systems value chain needed Figures 1-2-1.4
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Figure 1-1
A View of Business Logistics in a Firm
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Figure 1-2
Integrated Logistics Management
Identifying activities, Figure 1-3
Figure 1-4
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Figure 1-3
Generic Value Chain
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Figure 1-4
Logistics Supply Chain
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3. Business Case for Supply Chain
Management:
Why so much attention on supply chain management?
ECR and Best-in-class studies (Figures 1.5, 1.6 )
(ECR - Effective customer response)
Complexity of the supply chain (Figure 1.7)
Extended enterprise concept
Two-way flow of: (Figure 1.7)
Products
Information
Cash
Inventory visibility (Figure 1.8)
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Figure 1-5: Comparison of Average Throughput
Time of Dry Grocery Chain before and after ECR
Implementation
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Figure 1-6: Total Supply Chain
Management Cost --- All Sectors
0
2
4
6
8
10
12
14
1996 1997
Best-in-class
Median


R
e
v
e
n
u
e

%

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Figure 1-7:
Integrated Supply Chain
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Figure 1-8:
Running Lean
0
5
10
15
20
25
30
35
40
45
50
1996
Qtr 4
1997
Qtr 1
1997
Qtr 2
1997
Qtr 3
1997
Qtr 4
Compaq
Dell


Number of times Dell and
Compaq turn inventory over
in each quarter, calculated
at an annual rate.
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4. Five Main Characteristics of
Supply Chain Management
1. Inventory
Visibility managing flow and reduce or eliminate uncertainty
Pull systems response to demand as opposed to pushing it to
advance of demand
2. Landed Cost
1. Companies must realize that their strategies may
affect the landed cost ie the final cost
2. Coordination of supply chain activities may lower
the landed cost.
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4. Five Main Characteristics of
Supply Chain Management
3. Real-time two way information flows
4. Customer service
levels must be tailored to each customer
not to treat all customers the same
not all customers require the same service
need to cater the special need of individual customers
5. Supply chain relationships
1. Collaborative planning
2. Share risks and rewards

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Figure 1-9: Traditional Supply Chain/Pipeline
Inventory Flow 1970s and 1980s


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Contemporary Supply Chain
Pipeline
Chapter 1:
Summary and Review Questions
Students should review their knowledge of the
chapter by checking out the Summary and Study
Questions for Chapter 1.

This is the last slide for Chapter 1

End of Chapter 1 Slides
Supply Chain Management