OMGT2085 Introduction to Logistics & SCM

Topic 1 Overview of Logistics & Supply Chain Management

VpLyonII_0182 (2008), Available: flickr, http://www.flickr.com/photos/titlap/2779796068/ [accessed 1 October 2012]. Photo by Julien Haler.

Topic Areas
Supply Chain Supply Chain Management Logistics Logistics Adds Value Logistics Activities Integrated Logistics

Logistics Systems

Intro to Logistics & Supply Chain Management

Intro to Logistics & Supply Chain Management

Supply Chain

Series (chain) of firms in a coordinated / integrated system (pipeline) firms activities resources Move product, material or service from supplier (inbound) to customer (outbound) Parts of the chain vendors/suppliers manufacturers wholesalers service providers sales channels (retailers) consumers

Intro to Logistics & Supply Chain Management

Supply Chain

Definition an extended enterprise that crosses the boundaries of individual firms to span the related activities of all the companies involved in the total supply chain this extended enterprise should attempt to execute or implement a coordinated, two-way flow of goods/services, information, and financials integration across the boundaries of several organizations in essence means that the supply chain needs to function similar to one organization in satisfying the ultimate consumer

Intro to Logistics & Supply Chain Management

Supply Chain

Intro to Logistics & Supply Chain Management

Supply Chain Management

Definition coordination / integration of 3 key flows (products / materials or services, information and financials) within and between firms in the supply chain to fulfil the final customers demands through the most efficient use of resources SCM in a nutshell
Youtube link: http://www.youtube.com/watch?v=Mi1QBxVjZAw

Source: Center for Supply Chain Research, Penn State University (2008).
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Supply Chain Management

Primary objective fulfil customer demands through most efficient use of resources Success factors (resources) inventory (stock) cost information customer service collaboration relationships

Intro to Logistics & Supply Chain Management

Supply Chain Management

Effectiveness value chain concept : An approach to evaluating the overall performance of the organization in terms of value contribution to profit margin of the various primary and supporting areas in an organization.

Efficiency total cost concept: An approach to managing systems where potential changes are evaluated on the impact of the change on total cost of the system.

Intro to Logistics & Supply Chain Management

Supply Chain Management

What customer-driven value strategically drives the supply chain of your product? Lean Flexible Agile Responsive Innovative Reliable Risk-averse Green practices Source: http://omiusajpic.org/issues/investing/supply-chain/ Safety-conscious What other values could be important to a supply chain? Customized output Accessibility to different types of customers Other values important to customers in the supply chain A hybrid of many different values
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Supply Chain Management

Foundations of Supply Chain Management

Supply Operations

Supply base rationalization, supplier alliances, SRM, global sourcing, ethics and sustainability

Demand management, CPFR, MRP, ERP, inventory visibility, lean systems, Six Sigma quality systems
Logistics management, customer relationship management, network design, RFID, global supply chains, sustainability, service response logistics Risk and security management, performance measurement, green supply chains
Source: Wisner et al., 2012
ALL ELEMENTS DRIVEN BY DEMAND

Logistics

Integration

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Supply Chain Management

Supply Foundation Supplier management - improve performance through Supplier evaluation (determining supplier capabilities) Supplier certification (third party or internal certification to assure product quality and service requirements) Strategic partnerships - successful and trusting relationships with top-performing suppliers Ethics and sustainability recognizing suppliers impact on reputation and carbon footprint

Source: Wisner et al., 2012

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Supply Chain Management

Operations Foundation Demand management - match demand to available capacity Linking buyers & suppliers via MRP and ERP systems Use lean systems to improve the flow of materials to reduce inventory levels Employ Six Sigma to improve quality compliance among suppliers

Source: Wisner et al., 2012

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Supply Chain Management

Logistics Foundation Transportation management - tradeoff decisions between cost & timing of delivery / customer service via trucks, rail, water & air Customer relationship management - strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements Network design - creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system

Source: Wisner et al., 2012

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Supply Chain Management

Integration Foundation Supply Chain Process Integration - when supply chain participants work for common goals Requires intra-firm functional integration. Based on efforts to change attitudes & adversarial relationships Supply Chain Performance Measurement - Crucial for firms to know if procedures are working

Source: Wisner et al., 2012

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Supply Chain Management

Major Supply Chain Issues responsiveness of supply chain networks to the market

increase complexity of organizations

inventory deployments collection and storage of large amounts of data achieving total cost and value organizational relationships performance measurement evaluation and successful implementation of technology transportation management supply chain security
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Logistics

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Logistics
Primary objective how to get resources in the right quantity, at the right location, and at the right time? Definition part of the supply chain process that plans, implements and controls the efficient and effective flow and storage of resources from the point of origin to the point of consumption in order to meet the final customers demands

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Logistics
Increased recognition news, promotions and advertisements Increased sensitivity product quality service quality Types of logistics business military event services

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Logistics Adds Value

Source: Center for Supply Chain Research, Penn State University (2008).

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Logistics Adds Value

The five principal types of economic utility which add value to a product or service are: form (what) time (when) place (where) quantity (how much) possession (why)

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Logistics Activities
Transportation Warehousing and storage Industrial packaging

Materials handling
Inventory control Order fulfillment Demand forecasting

Production planning/scheduling
Procurement Customer service Facility location Return goods handling Parts and service support Salvage and scrap disposal
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Reverse Logistics

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Integrated Logistics
Definition: A comprehensive, system-wide view of the entire supply chain as a single process, from raw materials supply through finished goods distribution. All functions that make up the supply chain are managed as a single entity, rather than managing individual functions separately.

Vitasek K 2010, Supply Chain Management Terms and Glossary, Council of Supply Chain Professionals, Illinois, United States, viewed 18 June 2010, <http://cscmp.org/digital/glossary/glossary.asp >.

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Integrated Logistics

Role of information information is the lifeline of business and supply chains, driving effective planning, decisions, and actions management of logistics operations 7Rs/8Rs (including the right format) forecasting performance management

present-day information technologies allows for timely, relevant, accurate, cost efficient sharing of information between suppliers, manufacturers, customers, partners, and logistics service providers

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Integrated Logistics

Role of information

Wiebe C 2004, Evolving toward Supply Chain Excellence, Teradata, viewed on 6 October 2012, < http://www.teradata.com/resources/white-papers/Evolving-toward-Supply-Chain-Excellence-eb3199/>.

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Integrated Logistics

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Integrated Logistics

Physical Supply Materials Management Inbound Logistics

Physical Distribution Outbound Logistics

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Logistics Systems
Comparing two systems which option should we choose?

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Logistics Systems

Figure 2-12 Logistics and Spatial Relations

Which of the two options is less costly, A or B?

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Logistics Systems
Materials Management v. Physical Distribution frequently the movement and storage of raw materials is far different from the movement and storage of finished goods 4 different types of logistics systems balanced system - e.g., consumer products heavy inbound - e.g., aircraft, construction heavy outbound - e.g., chemicals reverse systems - e.g., returnable products

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Logistics Systems
Cost Centers by examining logistics activities as cost centers, trade-offs between them can be analyzed to determine the lowest total cost or highest service logistics systems trading off one logistics cost center against another (ex. spending more on transportation against spending more on warehousing)
Change to higher Cost Mode of Transport Cost Centers Transportation Inventory Packaging Warehousing Cost of Lost Sales Total Cost Rail $3.00 5.00 4.50 1.50 2.00 $15.00 Motor $4.20 3.75 3.20 0.75 1.00 $13.00 Change to more Warehouses Cost Centers Transportation Inventory Warehousing Cost of Lost Sales Total Cost 3 warehouses 5 warehouses $850,000 1,500,000 600,000 350,000 $3,300,000 $500,000 2,000,000 1,000,000 100,000 $3,600,000

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Logistics Systems
Nodes v. Links nodes are spatial points (warehouses, plants) links are the transportation network (rail, motor, air, pipe, water)

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Logistics Systems
Logistics Channel the network of intermediaries involved in the logistics system

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Logistics Systems
Cost Perspective the most efficient systems are not always comprised of each system component operating at its lowest possible cost the critical concern is to have the entire system operating at its lowest total cost while aiming simultaneously to create value for customers and the supply chain

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Logistics Systems
Levels of Optimality

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Logistics Systems
Level of Optimality External operational constraints may result in sub-optimal outcomes Internally, logistics systems must work in harmony with marketing, finance, production, and other business units, which may also result in sub-optimal logistics performance

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Summary

What did you learn in this topic? Summarize.

Challenge Questions for Topic 1: (1) (2)

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