Business Logistics

1
Business Logistics

• Chapter 4
• The Outbound Logistics System
• Adam Conrad

2
Learning Objectives

• Understand the important role of outbound
  logistics in the logistics supply chain
• Explain the differences that exist among
  companies in terms of the scope complexity and
  significance of their outbound logistics system
• Understand major trends in outbound logistics
  strategies
• Discuss the importance contribution and role of
  customer service in outbound logistics systems

3
Learning Objectives (cont.)

• Define customer service from different
  perspectives
• Understand the basic elements of customer service
  that are important to logistics managers
• Explain the standards of performance that are
  used to measure and evaluate customer service
• Discuss how companies use customer service to
  achieve and sustain competitive advantage

4
Learning Objectives (cont.)

• Understand the nature and role of channels of
  distribution in outbound logistics systems and
  the relationships among channels of distribution
• Discuss alternative channel systems
• Explain the strategic impact of integrating
  channel systems

5
Outbound Logistics

• Early interest
• Higher inventory costs due to higher value
  products
• Inbound systems important
• Customers touched by outbound complaints
• Managing makes it easier to achieve and sustain
  market share
• Synergism of inbound and outbound
• Must be coordinated due to reduced cycle times

6
Outbound Logistics

• National Semiconductor
• 45 day turnaround for 95 of orders not good
• Four day service
• Lower cost higher revenue

7
Outbound Logistics

• Richfood
• Logistics Profile
• Cross Docking
• McKesson and Fleming suppliers
• New method of distribution less on hand
• Educate stores on new procedure
• More doors for trailers to wait for cross dock

8
OL Along the Supply Chain

• Food supply chain
• Retail stores only concerned with half of the
  logistics system inbound
• Customers assume logistics role (Sams)
• Steel Company
• Outbound receives more attention
• Food Producer
• Most challenging outbound due to number of SKUs

9
OL Along the Supply Chain

• Efficient Consumer Response
• Potential to improve this area of the supply
  chain is significant
• Packaged goods industry estimated savings of
  30B / year

10
Customer Service

• Getting close to customers
• Peters and Waterman
• ALIGN yourself with the BUYER
• Market driven quality
• IBM bundle of quality related services
• Complete solution customer satisfaction
• Consumer awareness
• Mass Customization
• Neal Stephenson
• Diamond Age Matter Compiler/Decompiler
  Ractives

11
Logistics/Marketing Interface

• Traditional view
• Increasing level of customer satisfaction should
  equal cost increases
• New vision
• Competitive advantage

12
Defining Customer Service

• Levels of product - 3
• 1. Core benefit or service
• 2. Tangible product physical product or service
• 3. Augmented product secondary benefits
• Installation warranties service after sale

13
Defining Customer Service

• Types of customer support/service
• Examples
• Revamp billing procedures EBPP
• Credit terms
• Repair parts inventories -Sears
• Levels of involvement
• CS as an Activity
• Order processing / Billing / Handling returns
• CS as Performance Measure
• Percentage of orders shipped on time
• Calls answered in 1 hour NOTE ACTUAL benefits
  must be double checked (telephone support example)

14
Defining Customer Service

• CS as a Philosophy
• Company wide dedication to customer satisfaction
  through superior CS

15
Elements of Customer Service

• Food Industry Example
• Four Main dimensions
• Control over lead time
• Use of Computers
• Productivity Gains
• Transit Times

16
Defining Customer Service

• Inventory level and stockout costs
• Stockout costs
• Claims
• Lost sales or lost production

17
Defining Customer Service

• Order Information
• Seller-customer channel
• Two-way street
• Flexibility
• Different customer requirements
• Customer Profitability

18
Performance Measures for CS

• Setting standards
• Levels of quality
• Communication with customers
• Control of customer service

19
A Note on Inbound System Service Levels

• Cost of physical supply stockout
• Overview of Customer Service
• If the basics of CS arent in place nothing else
  matters
• Customers define service differently
• All customer accounts are not the same
• Relationships are not one-dimensional
• Partnerships and added value can lock up
  customers

20
Channels of Distribution

• Channel efficiency
• Growth and Importance of Channels of Distribution
• A special Note on Inventory for Outbound Systems
• Expected Cost of Stockouts

21
Channels of Distribution

• Back Order
• Nature of Cost
• Lost Sales
• Direct Loss
• Special explanation
• Calculation
• Lost Customer
• Difficult Nature

22
Channels of Distribution

• Determining the Expected Cost of Stockouts
• Procedure
• Distribution Resource Planning (DRP)
• DRP develops a projection for each SKU and
  requires
• Forecast of demand for each SKU
• Current inventory level of the SKU (balance on
  hand BOH)
• Target safety stock
• Recommended replenishment quantity
• Lead time for replenishment