integrated logistics & supply chain lect2

8/9/2019 Integrated Logistics & Supply Chain Lect2

1/37

Lecture 2


2/37

Different types of trade-offs:

1.Within distribution components

2.Between distribution components

3.Between company functions

4.Between company and external organizations


3/37

Customer serviceChannels of distribution

Supply points

Production locations

Depot configurationDepot types

Location and size of depots

Transport modal choice

Third party or ownDirect delivery

Stock levels


4/37

Vehicle types/sizes/numbers Contract hire

Primary routes

Delivery schedules Support facilities

Design and layout

Space allocation

Handling methods Information support systems

Monitoring procedures/order processing


5/37

Goods receipt and checkingBulk storage

Order picking

Stock replenishment

Load scheduling

Stock update

Vehicle maintenanceVehicle workshop activity.


6/37

Logistics

Strategy

The objectives of logistics strategy are:- Minimize cost- Minimize investment- Maximize customer service

Levels of logistical planning:- Strategic- Tactical- Operational

The 4 problem areas of supply chain planning

- Customer service levels- Facility location- Inventory decisions- Transportation decisions

When to plan?- No distribution network currently exists.- There has been no re-evaluation in 5 years.- When costs are changing rapidly, especially transport & inventory.- When markets have shifted.- When current distribution economics encourage shifts.- When there has been a major policy shift in logistics such as in price,

customer service, or investment level.


7/37

Corporate to Functional

Strategic Planning

EconomicRegulatoryTechnologicalCompetitive

External factorsCorporate

strategic plan

Marketing

Finance

Manufacturing

Logistics

Functional strategic plans


8/37

Flow of Logistics Planning

Facility location Operations strategy Inventory management

Information systems

Material handling Traffic and transportation Planning and control methods Organization

Individual Link of

Logistics SystemBusiness goals and

strategies

Customer service

requirements

Integrated logistics

planning

Design of integrated

logistics management

system

Overall performance

measures


9/37

Logistics Objective

Maximize return on logistics

assets (ROLA)

Assets

CostsRevenueROLA =

Logisticscontribution

to sales

Investment

in logistics

assets

Costs of

logisticsoperations


10/37

Decision area Strategic Tactical Operational

Transportation Mode selection Seasonal equip-ment leasing

Dispatching

Inventories Location, Control policies Safety stock levels Order filling

Order

processing

Order entry, transmittal,

and processing systemdesign

Processing

orders, Fillingback orders

Purchasing Development of supplier-

buyer relations

Contracting,

Forward buying

Expediting

Warehousing Handling equipment

selection, Layout design

Space utilization Order picking

and restocking

Facility

location

Number, size, and

location of warehouses

Strategic, Tactical, and Operational

Decision Making


11/37

Six Concepts for Logistics Strategy

FormulationTotal cost concept

Tradeoff conflicting costs at optimum

Differentiated distribution Not all products should be provided the same level of

customer service

Mixed strategy A pure strategy has higher costs than a mixed strategy

Postponement Delay formati on of the final product as long as possible

Shipment consolidationSmaller shipment sizes have disproportionately higher

transportation costs than larger ones

Product standardizationAvoid product variety since it adds to inventory


12/37

Cost of

transportation

serviceInventory cost

(includes

storage and

intransit

Total cost

Rail Truck Air

Cost,indollars

Transportation service

(greater speed and dependability)

A Cost Conflict in Logistics


13/37

Choosing the Right Supply Chain

Strategy

FunctionalProducts--Predictable

demand

InnovativeProducts--

Unpredictabledemand

Efficient supplychain

Staple foodproducts

Responsivesupply chain

Electronicequipment

Low margin

High margin


14/37

Classification of Products

Predictable/Mature Products

Corn FlakesLawn fertilizerBall point pens

Light bulbsAuto replacement tiresSome industrial chemicalsTomato soup

Unpredictable/IntroductoryProducts

New music recordingsNew computer games

Fashion clothesArt worksMoviesConsulting servicesNew product offerings ofexisting product lines


15/37

Efficient

supply chain

s Economical production runs

s Finished goods inventories

s Economical buy quantities

s Large shipment sizes

s Batch order processing

Responsivesupply chain

s Excess capacity

s Quick changeovers

s

Short lead timess Flexible processing

s Premium transportation

s Single order processing

Supply-

to-stock

Supply-

to-order

Choosing the Right Supply Chain Strategy


16/37

Seven Principles

of Supply Chain Management

Segment customers based on service needsListen to signals of market demand and plan

accordingly

Develop a supply-chain-wide technologystrategy

Customize the logistics network

Differentiate product closer to the customerSource strategicallyAdopt channel-spanning performancemeasures

Differentiated distribution

Design to customer needs

Postponement

Boundary spanninginfo. systems


17/37

New

Product

Development

Marketing

and

Sales

Operations Distribution Service

Finance, Accounting, Information Technology, Human Resources

Business Strategy

New Product

StrategyMarketing

Strategy Supply Chain Strategy


18/37

Strategic fit:Consistency between customer

priorities of competitive strategyand supply chain capabilities

specified by the supply chain

strategyCompetitive and supply chain

strategies have the same goals


19/37

Facilitiesplaces where inventory is stored,

assembled, or fabricatedproduction sites and storage sites

Inventory

raw materials, WIP, finished goodswithin a supply chain

inventory policies


20/37

Transportationmoving inventory from point to point in a supply chain

combinations of transportation modes and routes

Informationdata and analysis regarding inventory, transportation,facilities throughout the supply chain

potentially the biggest driver of supply chain

performance


21/37

Efficiency Responsiveness

Facilities Transportation Inventory Information

Supply chain structure

Drivers


22/37

Strategy

(Design)

Planning

Operation


23/37

Cycle inventorySafety inventory

Seasonal inventory

inventory built up to counter predictable variability in

demandcost of carrying additional inventory versus cost offlexible production

Overall trade-off: Responsiveness versus efficiency

more inventory: greater responsiveness but greater cost

less inventory: lower cost but lower responsiveness


24/37

Mode of transportationRoute and network selection

route: path along which a product is

shippednetwork: collection of locations and routes

In-house or outsourceOverall trade-off: Responsiveness versusefficiency


25/37

Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation /

Dedicated

Proximity /

FlexibilityInformation What information is best suited for

each objective


26/37

Distribution: the steps taken to move and

store a product from the supplier stage to

the customer stage in a supply chain

Distribution directly affects cost and thecustomer experience and therefore drives

profitability

Choice of distribution network can achievesupply chain objectives from low cost to high

responsiveness


27/37

Distribution network performance evaluatedalong two dimensions at the highest level:

o Customer needs that are met

o Cost of meeting customer needsDistribution network design options must

therefore be compared according to their impacton customerservice and the cost to provide this

level of service


28/37

Elements of customer service influenced by network structure:Response timeProduct varietyProduct availability

Customer experienceOrder visibilityReturnability

Logistics costs affected by network structure:InventoriesTransportationFacilities and handlingInformation


29/37

Number ofFacilities

Response Time


30/37

Local FG

Mix

Regional FG

Local WIP

Central FG

Central WIP

Central Raw Material and Custom production

Custom production with raw material at suppliers

Cost

Response Time HiLow

Low

Hi


31/37

TransportationTransportation

Total Costs Related to

Number of Facilities

TotalC

osts

TotalC

osts

Number of FacilitiesNumber of Facilities

InventoryInventory

FacilitiesFacilities

Total CostsTotal Costs


32/37

Manufacturer Storage with Direct Shipping

Manufacturer Storage with Direct Shipping

and In-Transit Merge

Distributor Storage with Carrier DeliveryDistributor Storage with Last Mile Delivery

Manufacturer or Distributor Storage with ConsumerPickup

Retail Storage with Consumer Pickup


33/37

Manufacturer Storage with

Direct Shipping

Manufacturer

Retailer

Customers

Product Flow

Information Flow


34/37

In-Transit Merge Network

Factories

Retailer

Product Flow

Information Flow

In-Transit Merge byCarrier

Customers


35/37

Distributor Storage with

Carrier Delivery

Factories

Customers

Product Flow

Information Flow

Warehouse Storage by

Distributor/Retailer


36/37

Distributor Storage with

Last Mile Delivery

Factories

Customers

Product Flow

Information Flow

Distributor/Retailer

Warehouse


37/37

Manufacturer or Distributor Storage

with Customer Pickup

Factories

Retailer

Pickup Sites

P d t Fl

Cross Dock DC

Customer Flow

Customers

integrated logistics & supply chain lect2

Documents