Supply Chain Management Harcourt, Inc. S.C

16-2Supply Chain Management

16-3Supply Chain Management Typical Supply Chains Typical Supply Chains Purchasing ReceivingStorageOperationsStorage ProductionDistribution

16-4Supply Chain Management Elements of Supply Chain Management Deciding how to best move and store materials Logistics Predicting quantity and timing of demandForecasting Typical IssuesElement

16-5Supply Chain Management  Logistics  Refers to the movement of materials and information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain Logistics

Logistics concept DefinitionDefinition The task of coordinating material flow and information flow across the supply chain.

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible price. Logistics

Minimize cost Minimize investment Maximize customer service The objectives of logistics strategy

16-9Supply Chain Management Materials Movement RECEIVING Storage Work center Work center Storage Work center Storage Shipping

Increasing Significance of Logistics Costs are high About 10.5% of GDP domestically About 12% of GDP internationally Customers are more demanding of the supply chain Desire for quick response Desire for mass customization Logistical lines are lengthening Local vs. long distance supply Globalization of trade Logistics is a key to trade and an increased standard of living Logistics adds value Time and place utilities

 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

Creating logistics advantage: three basic ways Logistics advantage quality time cost

Customer service goals  The product  Logistics service The Logistics Strategy Triangle (4 problem areas)

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Expenses associated with transportation, materials handling and warehousing, inventory, stockouts, order processing, and return goods handling. Total Logistics Cost

16 Outsourcing Logistics Services The systematic outsourcing of logistics capabilities is a third option. By collaborating with transportation firms, private warehouses, or other specialists, corporate resources can be concentrated on the firm’s core product.

PRODUCTION/ OPERATIONS Sample activities:  Quality control  Detailed production scheduling  Equipmentmaint.  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 Relationship of Logistics to Marketing and Production

Product Price Promotion Place-Customer service levels Inventory carrying costs Lot quantity costs Order processing and information costs Transport costs Warehousing costs Marketing Logistics Relationship of Logistics to Marketing

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 Costs are in tradeoff Production lot quantities affect inventory levels and transportation efficiency Production response affects transportation costs and customer service Production and warehouse location are interrelated