1. McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 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

3. 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

4. APPLE INC.: SUPPLYING THE IPHONE 3G TO THE WORLD 16-4

5. UPS TV Ad What does “Brown” do? LO1 16-5

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

7. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT KEY CONCEPTS LO1  Logistics Logistics  Logistics Management Logistics Management Cost-Effective Flow Customer Requirements = Service 16-7

8. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT KEY CONCEPTS LO1  Supply Chain Supply Chain  Supply Chain Management Supply Chain Management  Global Suppliers and Supply Chains  The Automotive Supply Chain 16-8

9. FIGURE 16-2 FIGURE 16-2 A Kellogg’s Nutri-Grain cereal bar’s ingredients come from global suppliers and supply chains 16-9

10. FIGURE 16-3 FIGURE 16-3 The automotive supply chain includes thousands of firms that provide the 5,000 or so parts in a typical car 16-10

11. GOING ONLINE Build Your Own Jetta with a Mouse LO1 16-11

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

13. MARKETING MATTERS IBM’s Integrated Supply Chain— Delivering a Total Solution for Its Customers LO2 16-13

14.  Dell: A Responsive Supply Chain SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY LO2  Wal-Mart: An Efficient Supply Chain 16-14

15. OBJECTIVE OF INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN LO3  Information’s Role in Supply Chain Responsiveness and Efficiency Extranet Electronic Data Interchange (EDI) Electronic Data Interchange (EDI) 16-15

16. OBJECTIVE OF 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 16-16

17. FIGURE 16-4 FIGURE 16-4 How total logistics cost varies with the number of warehouses used based on inventory costs and transportation costs 16-17

18. FIGURE 16-5 FIGURE 16-5 Supply chain managers balance total logistics cost factors against customer service factors 16-18

19. 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 16-19

20. MARKETING MATTERS For Fashion and Food Merchandising, Haste is as Important as Taste LO3 16-20

21.  Dependability  Communication  Convenience INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE FACTORS LO3 16-21

22. INFORMATION AND LOGISTICS MANAGEMENT IN A CUSTOMER-DRIVEN SUPPLY CHAIN CUSTOMER SERVICE STANDARDS LO3 16-22

23. USING MARKETING DASHBOARDS Diagnosing Out-of-Stocks and On-Time Delivery for Organic Produce Out-of-Stock (%) and On-Time-Delivery (%) LO3 16-23

24.  Third-Party Logistics Providers Third-Party Logistics Providers Cost  Service Criteria Dependability Accessibility KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4 Time Capability Frequency 16-24

25. FedEx and Ryder What are third-party logistics providers? LO4 16-25

26. FIGURE 16-6 FIGURE 16-6 Advantages and disadvantages of five transportation modes 16-26

27. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4  Railroads Containers Intermodal Transportation Piggy-Back or Trailer on Flatcar (TOFC) 16-27

28. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4  Motor Carriers (Trucks)  Air Carriers and Express Companies  Freight Forwarders 16-28

29. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION LO4  Pipelines  Water Carriers 16-29

30. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN WAREHOUSING AND MATERIALS HANDLING LO4  Storage Warehouses  Distribution Centers  Materials Handling 16-30

31. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN ORDER PROCESSING LO4  Back Order  EDI/EFT 16-31

32. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT LO4  Reasons for Inventory Capital Costs Inventory Service Costs  Inventory Costs Storage Costs Risk Costs 16-32

33. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT LO4  Supply Chain Inventory Strategies Just-in-Time (JIT) Concept Vendor-Managed Inventory (VMI) 16-33

34. CLOSING THE LOOP: REVERSE LOGISTICS LO4  Reverse Logistics Reverse Logistics 16-34

35. MAKING RESPONSIBLE DECISIONS Reverse Logistics and Green Marketing Go Together at Hewlett-Packard: Recycling E-Waste LO4 16-35

36. AMAZON: DELIVERING THE GOODS…MILLIONS OF TIMES A DAY VIDEO CASE 16 16-36

37. VIDEO CASE 16 AMAZON 1. How do Amazon.com’s logistics and supply chain management activities help the company create value for its customers? 16-37

38. VIDEO CASE 16 AMAZON 2. What systems did Amazon develop to improve the flow of products from suppliers to Amazon distribution centers? What systems improved the flow of orders from the distribution centers to customers? 16-38

39. VIDEO CASE 16 AMAZON 3. Why will logistics and supply chain management play an important role in the future success of Amazon.com? 16-39

40. 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. 16-40

41. 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. 16-41

42. Supply Chain A supply chain consists of a sequence of firms that perform activities required to create and deliver a product or service to consumers or industrial users. 16-42

43. 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 products and services that provide value to consumers. 16-43

44. Electronic Data Interchange (EDI) Electronic data interchange (EDI) combines proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers. 16-44

45. 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. 16-45

46. Customer Service Customer service is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. 16-46

47. Lead Time Lead time is the time lag from ordering an item until it is received and ready for use or sale. Also called order cycle time or replenishment time. 16-47

48. Quick Response Quick response involves inventory management systems that 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. 16-48

49. Efficient Consumer Response Efficient consumer response involves inventory management systems that are designed 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. 16-49

50. 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. 16-50

51. 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. 16-51

52. 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. 16-52

53. 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. 16-53