Fundamentals of Logistics and Supply Chain Management

1
Fundamentals of Logistics and Supply Chain
Management

• Dr. Mary Collins Holcomb
• Associate Professor
• November 16th and 18th, 1999

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Agenda

• The Role of Logistics
• Integrated Logistics Management
• Information Management
• Implementing Logistics Strategy
• Supply Chain Management
• Issues and Challenges

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The Role of Logistics
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Logistics Management

• That part of supply chain management which deals
  with the process of planning, implementing and
  controlling the efficient, effective flow and
  storage of goods, services, and related
  information from point of origin to point of
  consumption for the purpose of conforming to
  customer requirements.
• -- Council of Logistics Management

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move
MOVE
move
Tangible goods still have to move (and be
stocked) through space and time. . . new
strategies and methods must create new value.
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Logistics Management
Transportation costs comprise the single largest
element in most physical distribution systems
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The
New Logistics
Excellence in distribution transportation adds
value at all levels.
Asset Management
Inventory Deployment/ Reduction
Shared Services
Basic Service
Revenue Enhancement
Operational Efficiency
Planning/Operational
Strategic
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The
New Logistics
To improve deployment management of assets . .
.
Reduce
1. Rationalize distribution networks 2.
Outsource select processes 3. Explore shared
facilities 4. Understand supply chain tax
implications 5. Consolidate warehouses
6. Replace inventories with information 7. Reduce
distribution cycle time 8. Implement
demand-driven planning
capital expenditures by improving usage of fixed
assets
Reduce
working capital by minimizing inventories
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Drivers Behind Increase in Transportation
Expenditures

• Accelerating trend toward leaner, more flexible
  logistics networks
• Less inventory in the pipeline
• Increasing demand for synchronized service
• Increasing requirement for faster more reliable
  transportation service over longer distances

Pressure to reduce cost and improve service
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Integrated Logistics Management
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Integrated Logistics

• PRODUCT FLOW
• Physical Supply
• Manufacturing Support
• Procurement
• Physical Distribution

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Integrated Logistics (cont.)

• INFORMATION FLOW
• Coordination flows
• Strategic objectives
• Capacity constraints
• Logistical requirements
• Forecasting

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Integrated Logistics (cont.)

• INFORMATION FLOW
• Operational Flows
• Order management
• Order processing
• Distribution operations
• Inventory management
• Transportation

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Operating Objectives

• Rapid response
• Minimum variance
• Minimum inventory
• Movement consolidation
• Quality
• Life-cycle support

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Barriers to Integration

• Organizational structure
• Measurement systems
• Inventory ownership
• Information technology
• Knowledge transfer capability

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Measuring Performance

• Several different approaches may be used to
  measure the functional performance of logistics
• cost criteria
• productivity criteria
• service criteria

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Measuring Performance

• Firms evaluate logistics managers primarily on
  the basis of three factors
• line management ability
• problem-solving ability
• project management ability

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Best of the Best Logistics Firms

• Organizationally positioned to guide logistics
  activities at all levels - strategic, tactical,
  and operational
• Internal integration has enabled the development
  of operational excellence, and boundary spanning
  relationships

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Best of the Best Logistics Firms (cont.)

• Demonstrated agility in terms of the firms
  competency with respect to relevancy,
  accommodation, and flexibility.
• Measured performance both internally and
  externally.

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Information Management
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Electronic Commerce

• Examples
• Electronic data interchange (EDI)
• e-mail
• Electronic funds transfer
• Electronic publishing
• Shared databases
• Internet / Web sites

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(No Transcript)
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Electronic Commerce Levels

• LEVEL 1
• One-way communication
• LEVEL 2
• Database access
• LEVEL 3
• Data exchange
• LEVEL 4
• Sharing processes

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The Internet Changes Everything!

• The Internet is ubiquitous.
• The Internet is user friendly.
• The Internet is inexpensive.
• The Internet is global.

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How Long Until Your Company...

• Receives over 64 of its 8.5 billion in sales
  over the Internet
• 70 of all technical support questions are asked
  over the Internet
• 55 of its employee resumes come over the
  Internet
• Cisco Systems, USA Today, Sept. 23, 1998

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Implementing Logistics Strategy
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If logistics managers do not understand corporate
strategy, they will not be able to make decisions
that are in the best interest of the organization.
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The Hierarchy of Planning
Strategic Tactical Operational _______
_____________________________ What is the
organizations overall customer service
strategy and what should it be? What are the
best opportunities for cost reduction in
the organizations logistics system? What are
the core competencies of the logistics function,
I.e. which activities should be outsourced?
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The Strategic Issues and Challenges

• How to help the firm and its customers deal with
  big changes -- globalization, restructuring,
  competition
• How to improve profitability (growth) and value
  creation - for the firm and its customers
• How to raise the performance of all services to
  competitive advantage levels
• How to integrate/leverage logistics within the
  firm and the supply chain

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Supply Chain Management
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The supply chain encompasses all activities
associated with the flow and transformation of
goods from the raw materials stage, through to
the end user, as well as the associated
information flows.
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How to Achieve Profitable Growth and Value
Creation
i
Cost Minimization
ProfitableGrowth
TaxMinimization
Value
WorkingCapitalEfficiency
Fixed CapitalEfficiency
Time
Based on Supercharging Supply Chains, a new
book by EY/J. Wiley, Inc.
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Stages of Supply Chain Development

• STAGE 1 - Fundamentals
• Focus on quality
• STAGE 2 - Cross Functional Teams
• Serve our customers
• STAGE 3 - Integrated Enterprise
• Drive business efficiency

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Stages of Supply Chain Development (cont.)

• STAGE 4 - Extended Supply Chain
• Create market value
• STAGE 5 - Supply Chain Communities
• Be a market leader!

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Supply Chain Cost Categories

• Manufacturing
• Purchased materials, labor, equipment charge, and
  suppliers margin
• Movement
• Transportation, inventory in the pipeline
  (cycle), safety stock, and duty
• Incentives and subsidies

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Supply Chain Cost Categories(cont.)

• Intangibles
• Quality, product adaptation or performance,
  coordination
• Overhead
• Total current landed costs
• Long-term
• Productivity and wage changes, exchange rates,
  product design, and core competencies

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Sluggish Supply Chains

• Lack of synchronization in materials management
• Ambiguous goals and objectives
• Poorly designed procedures and forms
• Outdated technology
• Lack of information

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Sluggish Supply Chains

• Poor communication
• Limited coordination
• Limited cooperation
• Lack of / ineffective training

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The Strategic Issues and Challenges

• How to help the firm and its customers deal with
  big changes -- globalization, restructuring,
  competition
• How to improve profitability (growth) and value
  creation - for the firm and its customers
• How to raise the performance of all services to
  competitive advantage levels
• How to integrate/leverage logistics within the
  firm and the supply chain