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Chapter 13 Logistics & Channel Management. Definition: –Consists of the planning, implementing, and controlling of the physical flows of materials and.

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Presentation on theme: "Chapter 13 Logistics & Channel Management. Definition: –Consists of the planning, implementing, and controlling of the physical flows of materials and."— Presentation transcript:

1 Chapter 13 Logistics & Channel Management

2 Definition: –Consists of the planning, implementing, and controlling of the physical flows of materials and final goods/services from points of origin to points of use to meet customers’ needs/wants at a profit. 13 Logistics Objective 1:

3 Definition: –Logistical perspective* that emphasizes close cooperation and comprehensive interorganizational management to integrate the logistical operations of the different firms within the channel. * substituted “perspective” for “systems” 13 Supply-Chain Management Objective 2:

4 In essence… –Logistics is focused on the physical movement of product… In the right amount, Of the right product, To the right place, and At the right time. 13 The Role of Logistics Objective 3:

5 Specialize in performing most, if not all, of the logistical tasks that manufacturers or other channel members would normally perform themselves. Represent a growing industry because… –Provide services at lower costs than the firms could do themselves 13 3 rd Party Logistics Providers

6 13 The “Systems” Concept & Its “Core” Components Objective 4 & 5: The Logistical System Warehousing Order Processing Materials Handling Inventory Control Transportation Packaging

7 Given customers’ desired service levels… –The optimum combination of basic logistical components is sought while focusing on all the costs of logistics together, rather than the separate costs of the individual components together. Goal = minimize total costs rather than individual costs 13 The “Total Cost” Approach

8 The most fundamental & necessary component of logistics Accounts for the highest percentage of the total costs of logistics Key Issue(s): –Choose the optimum mode of transportation that will meet the customers’ service demands at the lowest price possible. 13 Logistical Component: Transportation

9 Consists of all the activities and equipment involved in the placement and movement of products within storage areas. Key Issue(s): –Choosing the correct mechanical equipment –Making the best use of labor –Minimizing the distances products are moved within the warehouse during the course of receiving, storage, and shipping. 13 Logistical Component: Materials Handling

10 The task of filling customer orders Its importance lies in its relationship with order cycle time, which is the time between when an order is placed & when it’s received by the customer. Key Issue(s): –Developing an efficient order processing center so that order cycle time (and possibly other logistical costs) is minimized 13 Logistical Component: Order Processing

11 Seeks to hold the least inventory as possible while still meeting customer demand Key Issue(s): –Keeping inventory at its lowest possible level while simultaneously placing orders in large quantities –Determining one’s economic order quantity, which lies at the point where ICC plus ordering costs (i.e., total costs) are at their minimum. 13 Logistical Component: Inventory Control

12 Concerned with the holding of products until they’re ready to be sold. Key Issue(s): –Locating warehouse facilities –Determining the number of warehouse units –Determining the size of each unit –Designing the units –Determining who should own the unit(s) 13 Logistical Component: Warehousing

13 Packaging and its associated costs significantly affect the other components of the system. Key Issue(s): –Designing packaging to enhance the efficiency and effectiveness of the logistical system beyond that of simply acting as a promotional or educational device for consumers. 13 Logistical Component: Packaging

14 Customer Service –The collection of activities performed in fulfilling orders and keeping customers happy or creating in the customer’s mind the perception of an organization that is easy to do business with. Enumerated or defined in terms of one’s “Service Standards” 13 The Output of a Logistics System Objective 6:

15 1.Time from order receipt to order shipment 2.Order size and assortment constraints 3.Percentage of items out of stock 4.Percentage of orders filled accurately 5.Percentage of orders filled within a given number of days from receipt of the order 6.Percentage of orders filled 7.Percentage of customer orders that arrive in good condition 8.Order cycle time 9.Ease and flexibility of order placement 13 Nine Common Categories of Service Standards

16 Product availability Order cycle time Distribution system flexibility Distribution system information Distribution system malfunction Post-sale product support 13 Key Elements of Customer Service

17 Logistics management –Concerned primarily with the product flow. Channel management –The administration of all the major channel flows (ref. Ch. 1). 13 Logistics Management vs. Channel Management Objective 7:

18 Interface 1: –Determining logistics' service standards Interface 2: –Evaluating whether the logistics program meets channel members’ service standards Interface 3: –Selling the logistics system Interface 4: –Monitoring the results of the logistics program 13 Interfaces Between Logistics and Channel Management Objective 8:

19 The higher the service standards, the higher the total costs associated with logistics. Key Issue for Channel Manager: –Determining accurately the types and levels of logistics service desired by channel members (including end-run customers). 13 Defining Logistics’ Service Standards

20 If considered a major component of the channel manager’s approach to supporting channel members’ needs, the logistics program may be the key feature of a strategic alliance. Key Issue for Channel Manager: –Ensuring that the program prepared is what the channel members want and need. 13 Evaluating the Logistics Program

21 Often a function of… –Minimizing stock-out occurrences –Reducing members’ inventory requirements –Strengthening relationship with members Key Issue for Channel Manager: –Extending superior logistics capabilities to help members improve their logistics and marketing capabilities. 13 Selling the Logistics Program

22 Logistics systems must be continually monitored, both in terms of how successful they perform for the channel manager as well as how they meet members’ changing needs. Key Issue for Channel Manager: –Continually monitoring members’ reactions to the logistical programs in place (e.g., through audits and internal research) 13 Monitoring the Logistics System

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