© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT 16 C HAPTER

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Explain what supply chain and logistics management are and how they relate to marketing strategy. Understand the distinction between supply chain responsiveness and efficiency. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Explain how managers trade off different “logistics costs” relative to customer service in order to make a supply chain decision. Recognize how customer service in logistics decisions contributes to customer value and successful marketing programs. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Describe the key logistics functions of transportation, warehousing and materials handling, order processing, and inventory management and the role of third-party logistics providers. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin SNAP! CRACK! POP! EVEN WORLD-CLASS COMPANIES CAN FEEL THE BULLWHIP’S STING. INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Relating marketing Channels, Logistics, and Supply Chain Management  Logistics Logistics  Logistics management Logistics management  Supply chain Supply chain  Supply chain management Supply chain management SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Sourcing, Assembling, and Delivering a New Car: The Automotive Supply Chain SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Supply Chain Management and Marketing Strategy Aligning a Supply Chain with Marketing Strategy  Understand the customer  Understand the supply chain  Harmonize the supply chain with the marketing strategy SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Supply Chain Management and Marketing Strategy (cont) Dell Computer Corporation: A Responsive Supply Chain Wal-Mart, Inc.: An Efficient Supply Chain  Cross docking Cross docking SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What is the principal difference between a marketing channel and a supply chain? A: The supply chain differs in membership because it includes suppliers of raw materials as well as those suppliers which deliver finished products to a company.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. The choice of a supply chain involved what three steps? A:1. Understand the customer 2. Understand the supply chain 3. Harmonize the supply chain with the marketing strategy

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Information’s Role in Supply Chain Responsiveness and Efficiency Electronic data interchanges Total Logistics Cost Concept INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Customer Service ConceptCustomer Service INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Customer Service Concept (cont)Customer Service Lead Time  Quick response Quick response  Efficient consumer response Dependability Communication Convenience Customer Service Standards INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1. The objective of information and logistics management in a supply chain is to ____________________ _____________________________ _____________________________ minimize logistics cost while delivering maximum customer service. Concept Check

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. How does consumer demand information increase supply chain responsiveness and efficiency? A: Because firms are better able to forecast customer needs and produce, transport, and store the required amount of inventory.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. What is the relationship between the number of warehouses a company operates, its inventory costs, and its transportation costs? A: As the number of warehouse increases, its inventory costs increase and its transportation costs decrease.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Third-party logistics providers Transportation KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Transportation (cont) Railroads  Intermodal transportation Intermodal transportation KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Transportation (cont) Motor Carriers Air Carriers and Express Companies Freight Forwarders Warehousing and Materials HandlingMaterials Handling Order Processing KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Inventory Management Reasons for Inventory Inventory Costs Supply Chain Inventory Strategies  Just-in-time (JIT) concept Just-in-time (JIT) concept  Vendor-managed inventory Vendor-managed inventory CLOSING THE LOOP: REVERSE LOGISTICS REVERSE LOGISTICS KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CLOSING THE LOOP: REVERSE LOGISTICS

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What are the basic trade-offs between the modes of transportation? A: A comprehensive comparison is shown in Figure A general trade-off is cost versus time and dependability.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What types of inventory should use storage warehouses and which type should use distribution centers? A: Goods which will not be needed for substantial periods of time, such as excess or seasonal inventory, are best suited for storage warehouses which hold goods for substantial periods of time. Distribution centers are used when products need to keep moving toward the consumer.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. What are the strengths and weaknesses of a just-in-time system? A: Strengths: Save money on inventory; forces better planning of vendor selection, transportation selection, forecasting, scheduling, etc. Weaknesses: Can cause stockouts, production disruptions, and higher costs if weak links appear.

© 2003 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

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The practice of organizing the cost- effective flow of raw materials, in- process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements. Logistics Management

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users. Supply Chain

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The integration and organization of information and logistic activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to customers. Supply Chain Management

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Practice of unloading products from suppliers, sorting products for individual stores, and quickly reloading products onto trucks for a particular store. Cross-Docking

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Combine proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers. Electronic Data Interchange (EDI)

© 2003 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

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. Customer Service

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Lag from ordering an item until it is received and ready for use or sale. Also called order cycle time or replenishment time. Lead Time

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin An inventory management system designed to reduce the retailer’s lead time, thereby lowering its inventory investment, improving customer service levels, and reducing logistics expense. Quick Response

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Firms that perform most or all of the logistics functions that manufacturers, suppliers, and distributors would normally perform themselves. Third-Party Logistics Providers

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin An inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items. Vendor-Managed Inventory

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or sue for repair, remanufacturing, redistribution, or disposal. Reverse Logistics

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Combining different transportation modes to get the best features from each. Intermodal Transportation

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Firms that accumulate small shipments into larger lots and then hire a carrier to move them, usually at reduced rates. Freight Forwarders

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Moving goods over short distances into, within, and out of warehouses and manufacturing plants. Materials Handling

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin An inventory supply system that operates with very low inventories and requires fast, on-time delivery. Just-In-Time Concept