1. MCQ QUIZ 1 MONDAY, JUNE 10:45

2. Saturday, June 13 Case Presentations
Group 30: OUTSOURCING OF HOSPITAL SERVICES page 213
Group 31: HELLO, WAL-MART? Page 395

3. SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Dr. Charles Amoatey
GIMPA Consultancy Services
Tel:

4. Learning objectives
Explain what supply chain and logistics management are and how they relate to marketing strategy
Understand the distinction between supply chain responsiveness and efficiency
Explain how managers trade off between different “logistics costs” relative to customer service in order to make a supply chain decision.
Recognise how customer service in logistics decision contributes to customer value and successful marketing programs
Describe the key logistics function of transportation, warehousing and material handling, order processing and inventory management and the role of third party logistics providers

5. Relating marketing channels logistics management, and supply chain management

6. Logistics 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 cost

7. Logistics Management Organising the cost-effective flow of
raw materials
in-process inventory
finished goods
related information
from point of origin to point of consumption to satisfy customer requirements.

8. Elements of this logistic management
Flow of the product
Cost-effective manner
Satisfying customer requirements

9. Supply Chain
Sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users.
Differs from marketing channel
Includes
suppliers of raw materials
wholesalers
Retailers

10. Supply Chain Management
is the integration and organization of information and logistics activities across firms in a supply chain
For the purpose of
creating and delivering
goods and services
that provide value to consumers.

11. Supply chain activities
Strategic
Strategic network optimisation
Stragetic partnership
Information technology infrastructure
Make-or-buy decisions
Alignment of organisation strategy with supply strategy
Tactical
Sourcing contracts
Production decisions
Inventory decisions
Transportation strategy
Operational
Daily production and distr. Planning
Demand planning and forecasting
Order promising

14. Relating marketing channels logistics management, and supply chain management

15. Generalized Supply Chain Model
SUPPLIER
NETWORK
INTEGRATED
ENTERPRISE
DISTRIBUTIVE
Information, Product, Service, Financial and Knowledge Flows M A T E R I L S
Capacity, Information, Core Competencies, Capital and Human Resources
Relationship Management
Procurement
Manufacturing
Distribution N D C O U

16. Sourcing, Assembling and Delivering a New Car: The automotive supply chain
Logistical activities are an integral part of the supply chain, including
transportation,
order processing,
inventory control,
materials handling,
information technology.

17. Sourcing, Assembling and Delivering a New Car: The automotive supply chain
Logistics are also critical to marketing of automobiles–including
Transportation of cars and parts to dealers,
Operation of distribution centers
Management of finished good inventories
Order processing for sales.
Logistics cost an estimated 25% to 30% of the retail price of a typical new car

18. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Supply Chain Management and Marketing Strategy
Determine if supply chain needs to be
More responsive
More efficient
in meeting customer requirements

19. Aligning a Supply Chain with Marketing Strategy
Understand the customer
Identify the needs of the customer segment being served.
Needs help to define the relative importance of efficiency and responsiveness
Understand the supply chain
Understand what a supply chain is designed to do well.
Some emphasize being responsive to customer requirements and demand
Some emphasize efficiency with a goal of supplying products at the lowest possible delivered cost.

20. Aligning a Supply Chain with Marketing Strategy
Harmonize the supply chain with the marketing strategy
Ensure that what the supply chain is capable of doing well is consistent with the targeted customer’s needs and its marketing strategy.
If a mismatch exists
Company will either need to redesign the supply chain to support the marketing strategy
Change the marketing strategy.
A poorly designed supply chain can do serious damage to an otherwise brilliant marketing strategy.
Dell Computer Corporation: A Responsive Supply Chain
Wal-Mart, Inc.: An Efficient Supply Chain
Cross docking

21. INFORMATION & LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN
Information’s Role in Supply Chain Responsiveness and Efficiency
Electronic data interchanges
Total Logistics Cost Concept
Customer Service Concept and Standards

22. Information’s Role in Supply Chain Responsiveness and Efficiency
Data and analysis regarding
Inventory
Transportation
Distribution facilities
Customers
Throughout the supply chain.

23. Information’s Role in Supply Chain Responsiveness and Efficiency
Data information
Improves efficiency and responsiveness
Able to forecast customer needs and
produce
transport
store
the required amount of inventory

24. Information’s Role in Supply Chain Responsiveness and Efficiency
Electronic data interchanges (EDI)Inventory
Combine proprietary computer and telecommunication technologies
Exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers.
Linked with store scanning equipment and systems
Electronic link from a retail checkout counter to suppliers and manufacturers.
WHAT ARE THE BENEFITS OF EDI?
Enterprise resource planning (ERP) technology

25. EDI Benefits EDI provides speed EDI reduces paper work
EDI improves accuracy
EDI reduces costs
EDI improves operational efficiency

26. Information’s Role in Supply Chain Responsiveness and Efficiency
Extranet
Internet based network
Permits secure communication between
Manufacturer
Suppliers
Distributors
Other partners.
Less expensive and more flexible than EDI
Because of their connection to the public Internet
Enterprise resource planning (ERP) technology
Manage information in a supply chain.
Track logistics cost and customer service variables.
Enterprise resource planning (ERP) technology

27. Total logistic cost concept
Includes expenses associated with
Transportation
Materials handling
Warehousing
Inventory
Stockouts (being out of inventory)
Order processing
Return goods handling
Costs are interrelated
Changes in one will impact the others.
Efforts to maximize service and minimizing cost

28. How total logistics cost varies with number of warehouses used

29. Customer Service Concept
To provide adequate customer service whiles controlling logistics costs
Customer service is the ability of logistics management to satisfy users in terms of
Time
Convenience
Dependability
Communication

30. Customer Service Concept – 3 components
Lead time
Lag from ordering an item until it is received and ready for use.
Also called order cycle time or replenishment time.
Enhanced by electronic data and inventory systems

31. Customer Service Concept – 3 components
Dependability
Consistency of replenishment
Consistent leadtime,
Safe delivery
Complete delivery.
Essential for just-in-time inventory strategies.
Communication
Two-way link between buyer and seller
Monitors service
Anticipates future needs.

32. Customer Service Standards
Effective supply chains usually develop written customer service standards,
Objectives and provide a benchmark against which results can be measured for control purposes.
Customer service standards will vary by type of firm.
Type of firm Customer service standard
Wholesaler at least 98% orders filled accurately
Manufacturer order cycle time <5 days
Retailer returns accepted within 30 days
Airline at least 90% of arrivals on time
Trucker a max of 5% loss/damage per year
Restaurant lunch served within 5min of order

33. Concept Check
How does consumer demand information increase supply chain responsiveness and efficiency?
What is the relationship between the number of warehouses a company operates, the inventory costs and its transportation costs?

34. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Transportation
Warehouse and material handling
Order processing
Inventory management

35. Evaluating Transportation
Cost
Total price to move the product from the point of origin to the destination.
Time
Speed of transit
Capability
Ability of the carrier to
provide the appropriate equipment and
provide conditions for moving goods.
What can be realistically carried with this mode?

36. Evaluating Transportation
Dependability
Reliability of service regarding time, loss, and damage;
Accessibility
Carrier’s ability to move goods over a specific route or network.
Relative ease with which a shipment can be located and transferred.
Frequency
Scheduling

37. Railroads Unit train Dedicated to one commodity (often coal)
Permanently coupled cars that run a continuous loop from a single origin to a single destination and back.
Keep to a specific schedule
Customers can plan on reliable delivery
Usually carry products that can be loaded and unloaded quickly and automatically.

38. Unit trains

39. Railroads Intermodal transportation
Combining different transportation modes to get the best features of each.
Attracts high-valued freight that would normally go by truck.
Truck-rail, called piggyback or trailer on flatcar (TOFC).
Containers in place of trailers.
Containers can be loaded on ships, trains, and truck trailers.
Containers are used in international trade because they occupy less space on ocean-going vessels.

41. Motor Carriers Pickup and delivery nearly everywhere.
Carry higher-valued shipments that are time-sensitive & costly to carry
Limitations are size and weight
Rates are substantially higher than rail

42. Air Carriers and Express Companies
Costly
Speed may create savings in lower inventory.
Usually valuable, time-sensitive, and lightweight.
Specialized firms provide ground support.

43. Freight Forwarders Accumulate small shipments into larger lots
Hire a carrier to move them
Usually at reduced rates.
Shipment receives improved service at lower cost.

44. Freight forwarders

46. Advantages and disadvantages of five modes of transportation

47. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Warehousing
In storage warehouses
Distribution centers

48. In storage warehouses
Goods are intended to come to rest for some period of time, as in the aging of products or in storing household goods

50. Distribution Centers
Designed to facilitate the timely movement of goods
Second most significant cost in a supply chain after transportation.
Allow holding stock in decentralized locations
Facilitate sorting and consolidating products from different plants or suppliers.
Some physical transformation can also take place

52. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Material handling

53. Material handling Storage helps manufacturers manage supply and demand
Provides time utility to buyers and sellers.
Moves inventory into, within, and out of the warehouse.

54. Material handling The two major problems with this activity are:
High labor costs.
High rates of loss and damage.
Every time an item is handled, there is a chance for loss or damage.
Materials handling in warehouses is automated by using computers and robots to reduce the cost of holding, moving, and recording inventories

55. Material Handling

56. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Order processing

57. Order processing
Critical to providing good service and accurate record flows
Processing systems are evaluated in terms of speed and accuracy.
Electronic order processing dominates for most large companies
Processes the requirements of the customer
Sends the information into the supply chain
Electronic data interchange (EDI) uses computer technology to replace the paper documents

59. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Inventory Management
Reasons for Inventory
Inventory Costs
Supply Chain Inventory Strategies
Just-in-time (JIT) concept
Vendor-managed inventory

60. Reasons for Holding Inventory
To create a buffer against uncertainties in supply & demand
To take advantage of lower purchasing and transportation cost associated with high volume
To take advantage of economies of scale associated with manufacturing products in batches
To build up seasonal demand for promotional sales
To accommodate product flowing from one location to another (work in process or in transit)
To exploit speculative opportunities for buying and selling commodities and other products

61. Inventory Costs Capital costs Inventory service costs Storage costs.
Opportunity costs of the investment; these are related to interest rates.
Inventory service costs
Taxes and insurance
Storage costs.
Warehousing space and materials handling.
Risk costs.
Possible loss, damage, pilferage, perishability, and obsolescence

62. Supply Chain Inventory Strategies
Just-in-time (JIT)
Operates with very low inventories
Requires fast, on-time delivery.
Requires accurate demand forecasting, and is
Not suitable for inventories that are to be stored over significant periods of time
vendor-managed inventory (VMI)
Supplier determines the product amount and assortment a customer (such as a retailer) needs and
Automatically delivers the appropriate items.

63. CLOSING THE LOOP
Reverse supply chain

64. Reverse Logistics
Reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use
for repair, remanufacturing, redistribution, or disposal.
Its effect can be seen in reduced waste in landfills and lowered operating costs for companies.

65. Monday, June 15 Case Presentations
Group 32: MASTERTAG page 545
Group 33: PRESENT THE SUPPLY CHAIN OF A LOCAL FIRM OF YOUR CHOICE

66. Next Week Topic: Customer Accommodation Quiz : Sessions 1, 2 and 3
Overview of SCM