Topic 10 – Strategic Logistics Planning Outline 1.1What is Strategic Planning? 1.2The Importance of Planning 1.3The Corporate Planning Process

1.1 What is Strategic Planning?  Definition of strategic planning: “The process of identifying the long-term goals of the entity (where we want to be) and the broad steps necessary to achieve these goals over a long-term horizon (how to get there), incorporating the concerns and future expectations of the major stakeholders.” Source: Cooper, M.C., Innis, D.E. and Dickson, P., (1992), Strategic Planning for Logistics, Oak Brook, Illinois : Council of Logistics Management : p. 3.

1.1 What is Strategic Planning?  Definition of logistics strategic planning: “A unified, comprehensive, and integrated planning process to achieve competitive advantage through increased value and customer service, which results in superior customer satisfaction (where we want to be), by anticipating future demand for logistics services and managing the resources of the entire supply chain (how to get there). This planning is done within the context of the overall corporate goals and plan” Source: Cooper, M.C., Innis, D.E. and Dickson, P., (1992), Strategic Planning for Logistics, Oak Brook, Illinois : Council of Logistics Management : p. 4-5.

1.1 What is Strategic Planning?  Definition covers three major elements: a.long-term goals – customer satisfaction, competitive advantage, supply chain management b.the means to achieving these goals – value, customer service c.the process for achieving these goals – anticipate, manage, relate to company goals  The strategic plan covers a period of five or more years.

1.2 The Importance of Planning  Minimizes risk in a Changing Environment a.anticipating change and developing strategies to deal with it  Basically two types of plans: a.Operating Plan – covers a period of one or two years b.Strategic Plan – covers a period of five or more years

1.2 The Importance of Planning (con’t)  Strategic plan “can be thought of as a set of guideposts which keeps the operating plan on the path to meeting objectives. It is the operating plan which must be programmed in fine detail to demonstrate how the objectives will be reached and to justify the expenditures of the … budget.” Source: Stern, M.E., (1966), Marketing Planning : A Systems Approach, New York : McGraw-Hill : p.4.

1.3 The Corporate Planning Process  Planning must take place within the following constraints: a.Political & legal environment b.Social & economic environment c.Technological environment d.Competitive environment

1.3 The Corporate Planning Process  Evaluation of the Consumer & Identification of Potential Target Markets a.Who, when, what, why, how analysis b.Competitive analysis by market segment is more meaningful than an overall competitive analysis.

1.3 The Corporate Planning Process  Evaluation & Selection of Target Markets a.Requires a preliminary profitability analysis b.Only those costs that would change by adding or dropping a segment should be included in the profitability analysis.

1.3 The Corporate Planning Process  Formulation of Supply Chain Objectives & Strategies a.Supply chain objectives flow from a firm’s marketing objectives, e.g market coverage and customer service levels. b.Supply chain strategy is the specific plan to achieve these objectives, e.g. push versus pull inventory strategy.

1.3 The Corporate Planning Process  Identification & Evaluation of Supply Chain Structure Alternatives a.Supply chain structure affects:  Speed and consistency of delivery & communication  Control of performance  Cost of operations b.Evaluate alternatives available for in-house versus outsourcing

1.3 The Corporate Planning Process  Selection of Supply Chain Structure a.Potential profitability is important when selecting structure b.Program various components of marketing mix – time, place and possession utility

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan a.Marketing Input  Proposed product  Pricing  Promotional strategies  Sales forecasts by geographic area, by account type, by customer  Customer service policies by account type and geographic area

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan b.Manufacturing Input  Location of production facilities  Manufacturing capabilities at each facility  Planned production for each product

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan c.Purchasing Input  Supplier network  New technologies  Potential new materials or services  New sources of supply for existing materials & services

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan d.Finance/Accounting Input  Cost data required to perform segmental analysis  Cost data required to perform logistics trade-off analysis  Availability of capital to finance logistics assets  Corporate hurdle rates

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan e.Logistics Input  Existing product storage locations  Current transportation links  Operating characteristics of distribution centers : size, volume, product mix  Fixed & variable costs associated with materials flow & storage

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan f.Requirements of a strategic logistics plan:  Alignment with corporate strategies & marketing plans  Competitive customer service study  Total cost analysis

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan Components of the strategic logistics plan:  Management overview  Statement of logistics objectives  Description of individual customer service, inventory, warehousing, order processing & transportation strategies to support the overall plan  Outline of major logistics program or operational plans  Forecast of workforce & capital requirements

1.3 The Corporate Planning Process  Formulation of the Strategic Logistics Plan (Components of the strategic logistics plan)  Logistics financial statement  Description of business impact of the logistics strategy

1.3 The Corporate Planning Process  Evaluation & Selection of Supply Chain Members a.Selection criteria must support operational objectives and procedures.

1.3 The Corporate Planning Process  Performance Evaluation & Supply Chain Modification a.Measure by customer segments using profitability analysis b.Modification can involve:  Changing existing processes  Changing supply chain members  Changing supply chain structure c.A logistics audit program should be conducted on a routine basis.

Topic 10 Summary and Conclusion

1.Logisticians must be become involved in the corporate strategic planning process in order to meet and overcome the challenges placed on logistics to facilitate the achievement of corporate objectives. 2.Generally, a strategic logistics plan flows from and support an organization’s marketing objectives. 3.Strategic logistics planning must seek and consider inputs from marketing, manufacturing, purchasing, finance/accounting and the various logistics functional areas. 4.The planning process is a dynamic one and requires logisticians to continuously audit and measure performance against efficiency and profitability goals. 5.Changes may be made to existing processes, supply chain members or the logistics structure itself to correct gaps in performance.