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Confidentiality/date line: 13pt Arial Regular, white Maximum length: 1 line Information separated by vertical strokes, with two spaces on either side Disclaimer information may also be appear in this area. Place flush left, aligned at bottom, 8-10pt Arial Regular, white Indications in green = Live content Indications in white = Edit in master Indications in blue = Locked elements Indications in black = Optional elements Copyright: 10pt Arial Regular, white Integrating the Supply Chain
Pressures to Improve Logistics Customers are more knowledgeable, and demand higher quality, lower costs and better service. Competition is getting fiercer, and organizations must look at every opportunity to remain competitive. There is changing power in the supply chain. Very large retail chains demand customized logistics from their suppliers. Other changes in retail markets include the growth of 24- hour opening, home deliveries, out-of-town malls, retail parks, telephone and on-line shopping. International trade continues to grow Organizations are introducing new types of operation, such as JIT, flexible manufacturing, etc.
Pressures to Improve Logistics (cont’d) Some organizations are turning from a product focus to a process focus. This encourages improvement to operations, including logistics. There have been considerable improvements in communication. Organizations are increasing cooperation through alliances, partnerships, and other arrangements. Managers are recognizing the strategic importance of the supply chain. Attitudes towards transport are changing, because of increased congestion on roads, concerns about air quality and pollution, broader environmental issues, etc.
Current Trends in Logistics Improving Communications Improving Customer Service Other significant trends: –Globalization –Reduced number of suppliers –Concentration of ownership –Outsourcing –Postponement –Cross-docking
Current Trends in Logistics –Direct delivery –Other stock reduction methods –Increasing environmental concerns –More collaboration along the supply chain
Three Important Themes for Logistics to Consider Lean Logistics Agile Logistics Integration
Integrating Logistics within an Organization Integrating logistics within an organization has all the related activities working together as a single function. This is responsible for all storage and movement of materials throughout the organization. It tackles problems from the viewpoint of the whole organization, and looks for the greatest overall benefit. In practice, it is difficult to integrate all the logistics within an organization. The supply chain consists of many different activities, with different types of operation, using different systems and geographically dispersed
Stages in Integration 1.Separate logistics activities are not given much attention or considered important 2.Recognizing that the separate activities of logistics are important for the success of the organization 3.Making improvements in the separate functions, making sure that each is as efficient as possible. 4.Internal Integration – recognizing the benefits of internal cooperation and combining the separate functions into one. 5.Developing a logistics strategy, to set the long-term direction of logistics..
Stages in Integration 6.Benchmarking - comparing logistics’ performance with other organizations, learning from their experiences, identifying areas that need improvement and finding ways of achieving this. 7.Continuous Improvement – accepting that further changes are inevitable and always searching for better ways of organizing logistics.
Benefits of Integration Genuine cooperation between all parts of the supply chain, with shared information and resources Lower costs – due to balanced operations, lower stocks, less expediting, economies of scale, elimination of activities that waste time or do not add value Improved performance – due to more accurate forecasts, better planning, higher productivity of resources, rational priorities, and so on Improved material flow, with coordination giving faster and more reliable movements
Benefits of Integration Better customer service, with shorter lead times, faster deliveries and more customization More flexibility, with organizations reacting faster to changing conditions Standardized procedures, becoming routine and well- practiced with less duplication of effort, information, planning, and so on Reliable quality and fewer inspections, with integrated quality management programs.
Integration can be difficult and involve major changes. There are, however, many benefits, and most companies have moved in the direction of internal integration. There are also the benefits of extending integration to more organizations in the supply chain. There are several ways of organizing this external integration, ranging from informal agreements to vertical integration. The most popular has some form of strategic alliance or partnership.
Logistics and Supply Chain Logistics Management
Seven-eleven convenience store –Describe the key logistics processes at –What differences between the early reform and the regional distribution center at –What do you think are the main logistics challenges in running the 7-11 operation. Case study
Centralized distribution No distribution center Built its own distribution center---joint distribution First stageSecond stageThird stage
Key issues 11 What is supply chain, and how is it structured? 22 What is the purpose of a supply chain?
The Supply Chain Concept Development of the Concept –Total systems cost - remains an important element of logistics analysis. –Outbound logistics – the warehousing and distribution of finished goods. –Inbound logistics – the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. –Value chain analysis integrated logistics activities.
Business Logistics in a Firm
A supply chain is a group of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by end-customers, and who manage returns at each stage. The Supply Chain management Concept DefinitionDefinition Planning and controlling all of the processes that link partners in a supply chain together in order to serve needs of the end-customer.
The process starts with several external suppliers that move milk, cardboard, and plastic to the processing plant. After the milk is processed and packaged, it is delivered to retailers, who sell it to customers. The alternative delivery system is delivery from a warehouse directly to customers’ homes. Supply chain: structure and tiering
Supply chain can be fairly complex. The supply chain for a car manufacturer includes hundreds of suppliers, dozens of manufacturing plants (for parts) and assembly plants (for cars), dealers, direct business customers, wholesalers, customers, and support functions such as product engineering and purchasing.
Logistics concept DefinitionDefinition The task of coordinating material flow and information flow across the supply chain.
Key issue 11 What is the relationship between material flow and information flow?
Case study: Seven-eleven
Case study: Seven-eleven’s distribution strategy Delivery arrives from over 200 plants Delivery is cross docked at DC (over 80 DCs for food) Food DCs store no inventory Combined delivery system: frozen foods, chilled foods, room temperature and hot foods 11 truck visits per store per day (compared to 70 in 1974) No supplier (not even coke!) delivers direct
Case study: Seven-eleven ’ s Information Strategy Quick access to up to date information (as contrasts with data) –High speed data network linking stores, headquarters, DCs and suppliers –Store hardware –Store computer –POS registers linked to store computer –Graphic Order Terminals –Scanner terminals for receiving
Integrated Logistics Management
Material and information flow
Material flow Information flow
Key issues 11 How do products win orders in the marketplace? 22 How does logistics contribute to competitive advantage?
Creating logistics advantage: three basic ways Logistics advantage quality time cost
Creating logistics advantage: controlling variability Variability undermines the dependability with which a product or service meets target.
Order winners and order qualifiers Order winners are factors that directly and significantly help products to win orders in the marketplace. Customers regard such factors as key reasons for buying that product or services. Different logistics performance objectives Order qualifiers are factors that are regarded by the market as an ‘entry ticket’. Unless the product or service meets basic performance standards, it will not be taken seriously.
The value chain: Linking supply chain and business strategy New Product Development Marketing and Sales Operations Business Strategy New Product Strategy Marketing Strategy Supply Chain Strategy New product Development Ope ratio ns Distri butio n Se rvi ce Finance, Accounting, Information Technology, Human Resources Mark eting and Sales
How to Achieve Strategic Fit Understanding the Customer –Lot size –Response time –Service level –Product variety –Price –Innovation How to measure? Implied Demand Uncertainty
Levels of Implied Demand Uncertainty Detergent High Fashion Low High Price Responsiveness Customer Need Implied Demand Uncertainty
Understanding the Supply Chain: Cost- Responsiveness Efficient Frontier High Low Cost Responsiveness
Achieving Strategic Fit Implied uncertainty spectrum Responsive supply chain Efficient supply chain Certain demand Uncertain demand Responsiveness spectrum Zone of Strategic Fit