INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT

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CHAPTER
INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT
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AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO

• Recognize the relationship between marketing
  channels, logistics, and supply chain management.

• Describe how a companys supply chain aligns with
  its marketing strategy.

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AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO

• 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.

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SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS
MANAGEMENT

• Relating Marketing Channels, Logistics, and
  Supply Chain Management

• Logistics

• Logistics Management

• Supply Chains versus Marketing Channels

• Supply Chain

• Supply Chain Management

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FIGURE 16-1 Relating logistics management and
supply chain management to supplier networks and
marketing channels
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SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS
MANAGEMENT

• Sourcing, Assembling, and Delivering a New Car
  The Automotive Supply Chain

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FIGURE 16-2 The automotive supply chain
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FIGURE 16-A Paint industry supply chain
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SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS
MANAGEMENT

• Supply Chain Management and Marketing Strategy

• Aligning a Supply Chain w/ Marketing Strategy

• Understand the Customer

• Understand the Supply Chain

• Harmonize the Supply Chain with the
  Marketing Strategy

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Concept Check
1. What is the principal difference between a
marketing channel and a supply chain?
A A supply chain also includes suppliers who
provide raw materials to a manufacturer as well
as the wholesalers and retailersthe marketing
channelwho deliver the finished goods to
ultimate consumers.
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Concept Check
2. The choice of a supply chain involves what
three steps?
A (1) Understand the customer.(2) Understand
the supply chain.(3) Harmonize the supply chain
with the marketing strategy.
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OBJECTIVE OF INFORMATIONAND LOGISTICS
MANAGEMENTIN A SUPPLY CHAIN

• Informations Role in Supply Chain Responsiveness
  and Efficiency

• Electronic Data Interchanges (EDIs)

• Extranet

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OBJECTIVE OF INFORMATIONAND LOGISTICS
MANAGEMENTIN A SUPPLY CHAIN

• Total Logistics Cost Concept

• Customer Service Concept

• Time

• Lead Time (Order Cycle or Replenishment Time)

• Quick Response or

• Efficient Consumer Response

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FIGURE 16-3 How total logistics cost varies with
numbers of warehouses used
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FIGURE 16-4 Supply chain managers balance total
logistics cost factors against customer service
factors
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OBJECTIVE OF INFORMATIONAND LOGISTICS
MANAGEMENTIN A SUPPLY CHAIN

• Customer Service Concept

• Dependability

• Communication

• Convenience

• Customer Service Standards

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Concept Check
1. The objective of information and logistics
management in a supply chain is to _________.
minimize logistics costs while deliveringmaximum
customer service
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Concept Check
2. How does consumer demand information increase
supply chain responsiveness and efficiency?
A Demand information improves supply chain
responsiveness because customers will find the
products when and where they want them. Demand
information improves supply chain efficiency
because firms are better able to forecast
customer needs and to produce, transport, and
store the required amount of inventory.
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Concept Check
3. What is the relationship between the number of
warehouses a company operates, its inventory
costs, and its transportation costs?
A As the number of warehouses increases,
inventory costs rise and transportation costs
fall. Because more inventory is warehoused,it
is transported in larger volumes closer to
customers. The net effect is to minimize the
total costs of logistics.
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KEY LOGISTICS FUNCTIONS INA SUPPLY CHAIN

• Third-Party Logistics Providers

• Transportation Service Criteria

• Cost

• Dependability

• Time

• Accessibility

• Capability

• Frequency

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FIGURE 16-5 Advantages and disadvantages of five
modes of transportation
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KEY LOGISTICS FUNCTIONS INA SUPPLY CHAIN

• Third-Party Logistics Providers

• Transportation

• Railroads

• Unit Train

• Intermodal Transportation

• Piggyback or Trailer on Flat-Car (TOFC)

• Containers

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KEY LOGISTICS FUNCTIONS INA SUPPLY CHAIN

• Transportation

• Motor Carriers

• Air Carriers and Express Companies

• Freight Forwarders

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KEY LOGISTICS FUNCTIONS INA SUPPLY CHAIN

• Warehousing and Materials Handling

• Storage Warehouses

• Distribution Centers

• Materials Handling

• Order Processing

• Back Order

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KEY LOGISTICS FUNCTIONS INA SUPPLY CHAIN

• Inventory Management

• Reasons for Inventory

• Inventory Costs

• Capital Costs

• Storage Costs

• Risk Costs

• Inventory Service Costs

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KEY LOGISTICS FUNCTIONS INA SUPPLY CHAIN

• Inventory Management

• Supply Chain Inventory Strategies

• Just-In-Time (JIT) Concept

• Vendor-Managed Inventory (VMI)

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CLOSING THE LOOPREVERSE LOGISTICS

• Reverse Logistics

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Concept Check
1. What are the basic trade-offs between the five
modes of transportation?
A Each mode of transportation can be evaluated
against six service criteria cost, time,
capability, dependability, accessibility, and
frequency.
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Concept Check
2. What types of inventory should use storage
warehouses and which type should use distribution
centers?
A Storage warehouses are best suited for goods
that will not be needed for substantial periods
of time. Distribution centers are used if
inventory needs to be in decentralized locations
to facilitate sorting or consolidating products
from different plants or suppliers, if different
ingredients needs to be blended, or if labeling
and repackaging need to be done before the goods
are shipped to customers.
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Concept Check
3. What are the strengths and weaknesses of a
just-in-time system?
A A JIT system saves money on inventory if
demand forecasting is reliable. However, it is
not suitable for inventories that are to be
stored over significant periods of time.
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TRACKING SUPPLYCHAIN TRENDS
GOING ONLINE
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Going Online
1. Visit the supplychainbrain.com website.
Choose a topic (such as vendor-managed inventory)
or a company (like IBM or Wal-Mart) featured in
the chapter and updatethe text.
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Going Online
2. Go to the Case Studies link and summarize a
specific companys application of one or more
concepts described in the chapter.
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DISTRIBUTING IN CHINA NOT DOUBLE THE FUN!
SUPPLEMENTALLECTURE NOTE 16-1
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VENDOR-MANAGED INVENTORY ON AGLOBAL SCALE
MENS SHIRTS AT JCPENNEY
SUPPLEMENTALLECTURE NOTE 16-2
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AMAZON DELIVERINGTHE GOODSMILLIONSOF TIMES A
DAY
VIDEO CASE 16
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VIDEO CASE 16 Amazon
1. How do Amazon.coms logistics and supply
chain management activities help the company
create value for its customers?
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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?
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VIDEO CASE 16 Amazon
3. Why will logistics and supply chain management
play an important role in the future success of
Amazon.com?
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DELL INC. A LEADER IN SUPPLY CHAIN MANAGEMENT
APPENDIX D CASE D-16
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APPENDIX D CASE D-16 Dell
1. Explain how Dells approach to supply chain
management satisfies the logistical objectives of
minimizing logistics costs while maximizing
customer service.
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APPENDIX D CASE D-16 Dell
2. What are the supply chain management
implications for Dells competitors that
primarily utilize an indirect channel strategy?
What supply chain and marketing recommendations
do you suggest for Dell given the competitive
environment?
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APPENDIX D CASE D-16 Dell
3. How does supply chain management relate to
the marketing concept at Dell?
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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.
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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.
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Supply Chain
A supply chain is a sequence of firms that
perform activities required to create and deliver
a good or service to consumers or industrial
users.
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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 goods and
services that provide value to consumers.
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Electronic Data Interchanges
Electronic data interchanges (EDIs) combine
proprietary computer and telecommunication
technologies to exchange electronic invoices,
payments, and information among suppliers,
manufacturers, and retailers.
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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.
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Customer Service
Customer service is the ability of logistics
management to satisfy usersin terms of time,
dependability, communication, and convenience.
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Lead Time
Lead time is the lag from ordering an item until
it is received and ready for use or sale. Also
called order cycle time or replenishment time.
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Quick Response
Quick response consists of reducing the
retailers lead time so that inventory levels of
customers may be minimized and to make the
process of reordering and receiving products as
simple as possible. Also called efficient
consumer response.
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Efficient Consumer Response
Efficient consumer response consistsof reducing
the retailers lead time sothat inventory levels
of customers maybe minimized and to make the
processof reordering and receiving products as
simple as possible. Also called quick response.
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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.
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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.
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Vendor-Managed Inventory
Vendor-managed inventory (VMI)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.
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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.
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