Supply Chain Management and Logistics

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Supply Chain Management and Logistics

• Henry C. Co
• Technology and Operations Management,
• California Polytechnic and State University
• Read Coyle, et al, Supply Chain Management A
  Logistics Perspective, Ch. 1 2

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• Five major external forces seem to drive the rate
  of change and shape our economic and political
  landscape
• globalization
• technology
• organizational consolidation
• the empowered consumer
• government policy and regulation

Coyle, et al, Supply Chain Management A
Logistics Perspective
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• Globalization
• Global marketplace concept
• Global network sourcing, manufacturing, marketing
  and distribution
• Global alternatives have blossomed
• No geography --- access available to the world
• Supply chain challenges
• Wal-Marts challenges
• New supply sources

Coyle, et al, Supply Chain Management A
Logistics Perspective
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• Technology
• Information Age provides new and unrestricted
  access to the place aspect of business.
• My time, my place
• Warehouse technology has changed dramatically
  with computer devices in use from the office
  space to the forklifts.

Coyle, et al, Supply Chain Management A
Logistics Perspective
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• Organizational consolidation
• Large retailers more demanding and commanding.
• Focus upon distribution costs and their impact on
  everyday low prices.
• Changing logistics and supply chain strategies
  resulted from shifts in the balance of economic
  power.

Coyle, et al, Supply Chain Management A
Logistics Perspective
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• The Empowered Consumer
• Impact on logistics is more direct.
• Informed consumers have low tolerance for poor
  quality in products and services.
• Changing demographics commands 24/7 service.
• Increased customer service increases the
  importance of logistics and supply chains.

Coyle, et al, Supply Chain Management A
Logistics Perspective
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• Government policy and regulation
• Changing economic controls empowered creativity
  and competition.
• Changes in transportation fewer or no economic
  controls over rates and services.
• Change in financial institutions blurred
  traditional differences and increased
  competition.
• Change in the communications industry also
  resulted in more competition.
• Changes in the utility industry allows more
  competition.

Coyle, et al, Supply Chain Management A
Logistics Perspective
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What is a Supply Chain?

• Supply Chain the sequence of organizations -
  their facilities, functions, and activities -
  that are involved in producing and delivering a
  product or service.

Stevenson
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• Management of flow of materials, information, and
  funds across the entire supply chain.

Coyle, et al, Supply Chain Management A
Logistics Perspective
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• Supply chain management is involved with
  integrating three key flows across the boundaries
  of the companies in a supply chain
• Product/materials,
• Information,
• Financials/cash.
• Successful integration or coordination of these
  three flows has produced improved efficiency and
  effectiveness for companies.
• The key factors of successful supply chain
  management include inventory, cost, information,
  customer service, and collaboration
  relationships. Focusing on the management of
  these factors is critical to the implementation
  of a supply chain strategy

Coyle, et al, Supply Chain Management A
Logistics Perspective
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The 4 Rs

• Right products
• Right quantities
• Right place
• Right moment
• at minimal cost.

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Major Supply Chain Issues

• Supply Chain Networks
• The network facilities and supporting
  transportation is important
• Increased complexity for organizations is a
  problem
• Inventory Deployments
• inventory duplication
• the bullwhip effect
• Collection and storage of vast amounts of data
• Cost/Value
• efficiency (cost) and effectiveness (value)
  prevention of suboptimization
• Organizational Relationships
• Tradeoffs and optimization
• Performance Measurement
• Why and how

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• Technology
• challenge is to evaluate and successfully
  implement the technology
• Transportation Management
• right product, right time, right quantity, right
  quality, right cost, right destination
• Supply Chain Security
• concern and potential challenge since 9/11
• Global Issues
• Global issues examines how all of the above
  categories are affected when companies operate in
  multiple countries.

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Development of the Supply Chain Concept

• Started in the 1960s with the development of the
  physical distribution concept
• Initial focus on physical distribution or
  outbound logistics was logical since finished
  goods
• During the 1980s, the logistics or integrated
  logistics management concept developed in a
  growing number of organizations
• The underlying logic of the systems or total cost
  concept was also the rationale for logistics
  management
• Supply chain management can be viewed as a
  pipeline or conduit for the efficient and
  effective flow of products/materials, services,
  information, and financials

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Figure 1-4, p. 17 Coyle, et al, Supply Chain
Management A Logistics Perspective
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What is Logistics?

• Logistics was originally a military term used
  to describe the organization of moving, lodging
  and supplying troops and equipment. It was
  clearly somewhat broader in scope than transport,
  since it covered everything needed to deliver
  troops and equipment to the right place, at the
  right time, and in the right condition.

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Logistics Definitions

• Inventory
• Management of materials in motion and at rest
• Customer
• Getting the right product, to the right customer,
  in the right quantity, in the right condition, at
  the right place, at the right time, and at the
  right cost (called the dictionary seven Rs of
  logistics)
• International Society of Logistics
• The branch of military science having to do with
  procuring, maintaining, utility/ value and
  transporting material, personnel, and facilities
• Council of Supply Chain Management
• The art and science of management, engineering,
  and technical activities concerned with
  requirements, design, and supplying and
  maintaining resources to support objectives,
  plans, and operations

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Logistics Definitions

• Component support
• Providing time and place utility/value of
  materials and products in support of Functional
  management organization objectives
• Common culture
• That part of the supply chain process that plans,
  implements, and controls the efficient, effective
  flow and storage of goods, services, and related
  information from point of origin to point of
  consumption in order to meet customer
  requirements
• Supply management for the plant (inbound
  logistics) and distribution
• Management for the firms customers materials
  requirements, purchasing, transportation,
  inventory management, warehousing, materials
  handling, industrial packaging, facility location
  analysis, distribution, return goods handling,
  information management, customer service, and all
  other activities concerned with supporting the
  internal customer (manufacturing) with materials
  and the external customer (retail stores) with
  product

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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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Figure 1-1, p.15 Coyle, et al, Supply Chain
Management A Logistics Perspective
Physical supply Physical distribution material
s management outbound logistics inbound
logistics
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Integrated Logistics Management
Figure 1-2, p.16 Coyle, et al, Supply Chain
Management A Logistics Perspective
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Logistics Costs as a of GDP
Logistics Costs as a Percentage of GDP
13 12 11 10 9 8 7 6 5 4 3 2 1 0
12.3
Year
Figure 2-3, p.44 Coyle, et al, Supply Chain
Management A Logistics Perspective
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Figure 2-5, p.46 Coyle, et al, Supply Chain
Management A Logistics Perspective
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• As indicated in Figure 2-3, logistics costs as a
  percentage of GDP have declined from 16 percent
  in 1980, to under 10 percent.
• In early to mid-1970s, the percentage was close
  to 20. This reflects a serious improvement in
  the efficiency of logistics systems.

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Inventory to Sales Ratios

• The Federal Reserve measure of inventory to sales
  ratios from 1991 to 1999 clearly indicate that
  companies are getting better at managing
  inventory.
• Companies have been supporting larger amounts of
  sales with decreasing amounts of inventory.

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Transportation/Inventory Cost Trade-off

• The two largest cost categories in logistics
  systems are transportation and inventory.
• Motor carriers share of total freight
  expenditures is 450 billion versus 99 billion
  for all other carriers.
• The most frequent trade-off in logistics is
  between transportation and inventory cost.

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Learning by Doing Exercises

• Visit the following web sites and, based on the
  information you find, answer the following
  questions
• CSCMP
• What is CSCMP and what is its purpose?
• What is CSCMP's definition of logistics and how
  does it compare with the text?
• The American Society of Transportation and
  Logistics
• What is the Society and what is its purpose?
• How does it differ from the other groups listed
  in the section?
• What is their certification program?
• Discuss how these groups support the growth and
  recognition of logistics as a critical management
  skill.
• Logistics World
• Visit this web site and describe its purpose.
• Explore at least three of the links and explain
  how this web site might assist you.
• Supply Chain Management Review
• Click on the career tab, and find 3 job listing
  that interest you.
• Supply Chain Council
• What is SCOR and what is its purpose?