2. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

3. LO1 Recognize the relationship between marketing channels, logistics, and supply chain management. Describe how a company’s supply chain aligns with its marketing strategy. LO2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 16, YOU SHOULD BE ABLE TO: 16-2

4. LO3 Identify the major logistics cost and customer service factors that managers consider when making supply chain decisions. Describe the key logistics functions in a supply chain. LO4 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 16, YOU SHOULD BE ABLE TO: 16-3

5. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT KEY CONCEPTS LO1  Supply Chain Supply Chain  Supply Chain Management Supply Chain Management  The Automotive Supply Chain 16-4

6. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT KEY CONCEPTS LO1  Logistics Logistics  Logistics Management Logistics Management Cost-Effective Flow Customer Requirements = Service 16-5

7. FIGURE 16-1 FIGURE 16-1 Relating logistics management and supply chain management to supplier networks and marketing channels 16-6

8. The Supply Chain

9. Logistics You are here

10. FIGURE 16-2 FIGURE 16-2 The automotive supply chain includes thousands of firms that provide the 5,000 or so parts in a typical car 16-9

11. FIGURE 16-A FIGURE 16-A Paint industry supply chain 16-10

12. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY LO2  Aligning a Supply Chain with Marketing Strategy Understand the Customer Understand the Supply Chain Harmonize the Supply Chain with the Marketing Strategy 16-11

13.  Aligning a Supply Chain with Marketing Strategy Wal-Mart: An Efficient Supply Chain Dell: A Responsive Supply Chain SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY LO2 16-12

14. INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN LO3  Information’s Role in Supply Chain Responsiveness and Efficiency Extranet Electronic Data Interchanges (EDIs) Electronic Data Interchanges (EDIs) 16-13

15. Click to Play Radio Ad UPS Radio Ad How is information technology applied to supply chain management? 16-14

16. INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN LO3  Total Logistics Cost Concept Total Logistics Cost Concept  Customer Service Concept Customer Service Concept 16-15

17. Slide 16-21 OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN Total Logistics Cost ConceptTotal Logistics Cost Concept

18. FIGURE 16-3 FIGURE 16-3 How total logistics cost varies with the number of warehouses used based on inventory costs and transportation costs 16-17

19. Slide 16-21 OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN Customer Service ConceptCustomer Service Concept –Customer Service – ability to satisfy users in terms of time, dependability, communication, and convenienceCustomer Service – ability to satisfy users in terms of time, dependability, communication, and convenience

20. Slide 16-21 OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN  Time Lead Time (Order Cycle or Replenishment Time) Lead Time (Order Cycle or Replenishment Time) Recognition of need to order Order transmittal Order processing Documentation Transportation Quick Response or Efficient Consumer Response Quick Response or Efficient Consumer Response Reduce retailer’s delivery time

21. OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN Customer Service Concept, cont…  Dependability – consistency of replenishment and has 3 elements: consistent lead time, safe delivery, and complete delivery  Communication – two-way link between buyer and seller using status reports to monitor service and anticipate future needs  Convenience – minimum effort on part of buyer in doing business and seller must remove unnecessary barriers

22. Slide 16-25 OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A SUPPLY CHAIN Customer Service Standards –Firms develop set of written standards that serve as objective and provide benchmark against which results are measured –Information is collected on customers’ needs and competitors’ practices to establish standards and ongoing monitoring programs

23. FIGURE 16-4 FIGURE 16-4 Supply chain managers balance total logistics cost factors against customer service factors 16-22

24. INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE FACTORS LO3  Time Lead Time  Order Cycle Time  Replenishment Time Quick Response Efficient Consumer Response

25.  Dependability  Communication  Convenience INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE FACTORS LO3 16-24

26. INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE STANDARDS LO3 16-25

27. USING MARKETING DASHBOARDS Diagnosing Out-of-Stocks and On-Time Delivery for Organic Produce Out-of-Stock (%) and On-Time-Delivery (%) 16-26

28.  Third-Party Logistics Providers Third-Party Logistics Providers Costs  Service Criteria Dependability Accessibility KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4 Time Capability Frequency 16-27

29. Slide 16-29 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Third-Party Logistics Providers – provide most or all of logistics functions of manufacturers, suppliers and distributorsThird-Party Logistics Providers – provide most or all of logistics functions of manufacturers, suppliers and distributors –TransportationTransportation –Warehousing an materials handlingWarehousing an materials handling –Order processingOrder processing –Inventory managementInventory management

30. Slide 16-29  Cost KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Transportation Service Criteria  Time  Capability  Dependability  Accessibility  Frequency

31. Slide 16-36  Storage Warehouses KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Warehousing and Materials Handling  Distribution Centers  Materials Handling – high labor costs, loss and damage

32. Slide 16-41 CLOSING THE LOOP: REVERSE LOGISTICS Reverse Logistics – process of reclaiming recyclable and reusable materials, returns, and reworks from point of consumption or use for repair, remanufacturing, redistribution, or disposalReverse Logistics – process of reclaiming recyclable and reusable materials, returns, and reworks from point of consumption or use for repair, remanufacturing, redistribution, or disposal –Ecological and economicalEcological and economical

33. Slide 16-29 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Transportation Modes 1.Railroads 2.Motor carriers 3.Air carriers 4.Pipeline 5.Water carriers 6.Intermodal

34. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4  Railroads Containers Intermodal Transportation Piggy-Back or Trailer on Flatcar (TOFC) 16-33

35. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4  Motor Carriers  Air Carriers and Express Companies  Freight Forwarders/ Express Companies 16-34

36. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4  Pipelines  Water 16-35

37. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN WAREHOUSING AND MATERIALS HANDLING LO4  Storage Warehouses  Distribution Centers  Materials Handling 16-36

38. FIGURE 16-5 FIGURE 16-5 Advantages and disadvantages of five modes of transportation 16-37

39. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN ORDER PROCESSING LO4  Order Processing Backorder EDI/EFT 16-38

40. Slide 16-39  Supply Chain Inventory Strategies KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Inventory Management Just-In-Time (JIT) Concept Vendor-Managed Inventory (VMI)

41. Slide 16-36 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Order Processing –Order transmitted – Internet, extranet, or EDI –Entered into appropriate databases and sent to those needing it –Inventory checked for availability –If out of stock, backorder is created –Customer credit checked, all documentation prepared, transportation arranged, and order confirmation sent

42. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT LO4  Reasons for Inventory Capital Costs Inventory Service Costs  Inventory Costs Storage Costs Risk Costs 16-41

43. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT LO4  Supply Chain Inventory Strategies Just-in-Time (JIT) Concept Vendor-Managed Inventory (VMI) 16-42

44. CLOSING THE LOOP: REVERSE LOGISTICS LO4  Reverse Logistics Reverse Logistics 16-43

45. Logistics Logistics consists of 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. 16-44

46. Logistics Management Logistics management is 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. 16-45

47. Supply Chain A supply chain consists of a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users. 16-46

48. Supply Chain Management Supply chain management is 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 consumers. 16-47

49. Electronic Data Interchanges (EDIs) Electronic data interchanges (EDIs) combine proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers. 16-48

50. Total Logistics Cost Total logistics cost consists of expenses associated with transportation, materials handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return goods handling. 16-49

51. Customer Service Customer service is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. 16-50

52. Lead Time Lead time is the lag from ordering an item until it is received and ready for use or sale. Also called order cycle time or replenishment time. 16-51

53. Quick Response Quick response, in inventory management systems, are designed to reduce the retailer’s lead time for receiving merchandise which then lowers a retailer’s inventory investment, improves customer service levels, and reduces logistic expenses. Also called efficient consumer response. 16-52

54. Efficient Consumer Response Efficient consumer response, in inventory management systems, are designed to reduce the retailer’s lead time for receiving merchandise which then lowers a retailer’s inventory investment, improves customer service levels, and reduces logistic expenses. Also called quick response. 16-53

55. Third-Party Logistics Providers Third-party logistics providers are firms that perform most or all of the logistics functions that manufacturers, suppliers, and distributors would normally perform themselves. 16-54

56. Just-In-Time (JIT) Concept The just-in-time (JIT) concept is an inventory supply system that operates with very low inventories and requires fast, on-time delivery. 16-55

57. Vendor-Managed Inventory (VMI) Vendor-managed inventory is 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. 16-56

58. Reverse Logistics Reverse logistics is a process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution, or disposal. 16-57