LOGISTICS & SUPPLY CHAIN

MANAGEMENT
:

References:
1.
Supply chain management; Strategy, planning and operation; Sunil Chopra and Peter Meindl, 2004
2.
Logistics and Supply chain Management, Martin Crestopher, 2000
3.
Business Logistics Management, Ronald H. Ballou, 1999
4.
Logistics Engineering and Management, Benjamin S. Blanchard, Prentice Hall, 1996
5.
Improving Quality and Productivity in the Logistics Process; A.T. Kearney, Inc., 1991
6.
Logistics in service organizations, Arthur D. Little and PSU, for CLM, 1991


.1
.2
.3
.4
.5
.6
2

EVOLUTION OF MANAGEMENT FOCUS

1990-2000

1980s

1970s

1960s

1950s
1951
-1950
- - - - - - -- -- -- -- - - - - - -

Production

1961
-1960
- - - - - - -- -- -- -- - - - - - -

Marketing

1971
-1970
- - - - - - -- -- -- -- - - - - - -

1981
-1980
- - - - - - -- -- -- -- - - - - - -

Quality

1991
-1990
- - - - - -- -- -- -- -- - - - - - -

Customer Value

Strategy

IN THE WORLD MARKAT

.
.
.
.
.
.

TRADING THROUGH LOGISTICS

COUNTRY

A
B

COUNTRY

A
B

PRODUCT X($) PRODUCT Y($))

250
400

500
300

PRODUCT X($) PRODUCT Y($))

250
300

350
300

TOTAL ($)

750
700
1450

TOTAL ($)

600
600
1200

BENETTONS DELIVERY CHANNEL

30
8

80

5000 60
230000

NATURE OF THE LOGISTICS PRODUCT

)(Consumer Products
)(Convenience Products

( )
( (
( (
( (

)(Shopping Products

( (
( (
( (

NATURE OF THE LOGISTICS PRODUCT

)(Consumer Products
) (Specialty Products

( )

)(Industrial Products

.
:

10

PRODUCT LIFE CYCLE

Sales volume

Introduction Growth

Maturity

Decline

Time

11

BUSINESS GOAL

:
*

*
*
12

-1
-2
-3
-4
-5
-6
-7
13

LOGISTICAL CONSTRAINTS

*
*

14

THE LOGISTICS PROCESS

SPANS MOST FUNCTIONS OF THE BUSINESS

15

Result

LOGISTICS IMPACT ON ROI

16

17

6%

9%

5%

10%

100%

18

19

20

21

22

OBJECTIVES OF BUSINESS LOGISTICS

.
: (
)

23

LOGISTICS EVOLUTION

2000

1980

24

1960

( )
/

25

THE SUPPLY CHANNEL

.


:

:

26

LOGISTICS ACTIVITY MIX

27

LOGISTICS ACTIVITY MIX

28

THE CRITICAL CUSTOMER SERVICE LOOP

29

LOGISTICS SUPPLY PIPELINE

30

LOGISTICS SUPPLY CHAIN

( )
( )

31

FIRM SUPPLY CHAIN

Transportation

Warehousing

Transportation

Customers

Factory

Material and information flows

Transportation

Warehousing

Transportation

Vendors / Plants / Ports

//

32

LOGISTICS NETWORK

33

LOGISTICS (CLM) DEFINITION

( (

34

THE LOGISTICS PROCESS

(
)

35

THE EXTENDED VALUE CHAIN

36

LOGISTICS (7 RS( DEFINITION

:







37

LOGISTICS IN SERVICE INDUSTRIES

%70

:
( )
38

LOGISTICS 4 KEY FINDINGS

.1

* %65 :

* %75 :

.2
()%20
.3

.4

39

TWO-PART DEFINITION OF LOGISTICS

: (:)Supply chain logistics

(
/
)
: ()Service response logistics


( : )

40

ALTERNATIVE LOGISTICS DEFINITION

41

SUPPLY CHAIN LOGISTICS IN SERVICE ORGANIZATIONS

( Marketing
)mix
(

(
(

)
:
:
:
:
24 ()

42

FOCUS OF SERVICE RESPONSE LOGISTICS

.1

(
)

:


)
43

FOCUS OF SERVICE RESPONSE LOGISTICS

.2

.3

:
-1 (
)
-2 ( 24
)

44

45

LOGISTICS INTERFACES IN THE FIRM

46

LOGISTICS SUPPORT

:
/ / 47

PRODUCT ACQUISITION & LIFE CYCLE

48

LIFE CYCLE COST

60 %

30 %

49

10 %


( (

.1
.2
.3
.4
.5
.6
.7
.8


50

51

COMMITMENT OF LIFE CYCLE COST

100%

50%

52

IMPORTANCE OF LOGISTICS

10.5 % 12
4 %30

PUZZLE
( . : (

53

THE CHANGING LOGISTIC ENVIRONMENT

.

:
-1 /
-2
-3
-4
54

THE CHANGING LOGISTIC ENVIRONMENT

-1

.


.

.

.

55

THE CHANGING LOGISTIC ENVIRONMENT

-2

( )Just in time delivery
.
( )Logistics lead time :



.



.

56

THE CHANGING LOGISTIC ENVIRONMENT

-3

.

.


(: Caterpillar

.
)

( )Standardization
( : Whirlpool

)
57

THE CHANGING LOGISTIC ENVIRONMENT

-4

.


.
Puzzle




.

.
58

TRADITIONAL, FUNCTIONAL ORGANIZATION

Input focused, budget driven

59

Output focused, market driven

MARKET - FACING ORGANIZATION

60

LOGISTICS STRATEGY TRIANGLE

*
*
*

61

2

THE TRANSITION TO
SUPPLY CHAIN MANAGEMENT

62

SUPPLY CHAIN EVOLUTION

63

LOGISTICS SUPPLY CHAIN

( )
( )

64

LOGISTICS NETWORK

65

THE MOVE TO SUPPLY CHAIN CONCEPT

:



:




66

) (

30 years

10 years

4 years

1 Year or less

Word
processors

67

68

) )

69

( )

) )

70

( )

THE SUPPLY CHAIN AND COMPETITIVE PERFORMANCE

( )

.



.

.
.


.
71

DIFINITION OF SUPPLY CHAIN MANAGEMENT

:
( )

(
) ()



( )Demand Chain Management
() ()

72

SUPPLY CHAIN MANAGEMENT Vs LOGISTICS MANAGEMENT

.

.
:
( )Co-Managed Inventory


73

SUPPLY CHAIN MANAGEMENT (CLM, CSCMP) DEFINITION

)(CLM, CSCMP

:

.

.


74

75

/

/

76

SUPPLY CHAIN ARCHITECTURE

77

:

: ( )
( )
:

:
/

78

( )

( )

( )

79

:


:
:

:
:


80


)Partnerships(
Partnerships

Arm's-length
relationships

Type I

Type II

Type III

Joint
Ventures

Vertical
integration

81

( )Type 1

( )Type 2

( )Type 3
()Coke, and McDonalds

82

:


:

:
(
)
:
:

83

:


:
(
)
:

:


84

3

ORDER PROCESSING &
TRANSPORTATION DECISION

85

LOGISTICS STRATEGY TRIANGLE

*
*
*

86

ORDER PROCESSING

%70-50

.
= +
:
) ( 1- Order Preparation
) ( 2- Order Transmittal
) ( 3- Order Entry
) ( 4- Order Filling
) ( 5- Order Status Reporting

87

/ /

88

ORDER PROCESSING

)(Order preparation

:
.

)(Order transmittal

() .
: ( ) (
)

89

ORDER PROCESSING

)(Order entry
:
)(Back order
) (scanning
.

90

ORDER PROCESSING

)(Order Filling

:


.

:

)(Tacit rules

91

ORDER PROCESSING

)(Order Status Reporting
.
.

( )
) (Order batching
) (Shipment consolidation

92

( (

93

THE ROLE OF TRANSPORTATION IN LOGISTICS

.

.

.


.

.

94

TRANSPORTATION SYSTEM

/

.

( )
.

.

.


.
95

TRANSPORTATION SYSTEM

.
.
.

.

Piggyback .


.


.

96






.




97

Birdyback

Piggyback

Fishyback

98

LAND BRIDGE

99



.
(
) .





.

.
100

TRANSPOTATION DECISIONS

:

101

TRANSPORTATION SERVICE CHOICES

:
)(Piggyback, Fishyback, Birdyback
( (


*
*
*
*
*
*
102

BASIC TRANSPORTATION COST TRADE-OFFS

:

.

.
(
).

.

103

TRANSPORTATION SERVICE
COMPETITIVE CONSIDERATIONS

( ) :
/
.
.

.
104

APPRAISAL OF TRANSPORTATION SERVICE SELECTION METHODS

:



( ).

.
.

105

4

INVENTORY IN THE LOGISTICS SYSTEM

106

LOGISTICS STRATEGY TRIANGLE

*
*
*

107

108


A B

109

THE IMPORTANCE OF INVENTORY

0
0

1974 ) (Manufacturing and Trade Inventory
%20 %14
:
*

* ) (EDI
)( JIT Just In Time
*
*

110

THE IMPORTANCE OF INVENTORY

( :
(

.
2 % 50 .
: % 25 500000
125000= %25 500000 %5
2500000 = %5 /125000

( % 40 %38
) %35 .

.

111

RATIONAL FOR CARRYING INVENTORY

)(Physical Supply Inventory

)( Purchase Economics

) (Transportation Savings
.
) ( Safety Stock
.
) (Speculative Purchase
.
)(Seasonal Supply
.
) (Maintenance of Supply Sources
.

112

RATIONAL FOR CARRYING INVENTORY

)(Physical Distribution Inventory

)(Production Savings
.
) (Transportation savings
.
) (Seasonal Demand
.

) (Customer Service
.
) (Stable Employment
.

113

FUNCTIONAL TYPES OF INVENTORY

) (Cycle Stock

) ( In-Process Stock
)(Goods in transit
) (Buffer Stock or Safety Stock
.

) (Seasonal Stock

) ( Promotion Stock
( : )
) ( Speculative Stock
( :
)
/ ) (Dead Stock
.

114


) (Marketing
.
) (Production
.
) (Finance
) (Current Assets
.
:

) (Inventory Tradeoffs

.

115

INVENTORY COSTS

* .
* .
* ) (Trade off
.
:
)(Inventory carrying cost / )( Order / Setup cost )(Stock out cost- )(In-Transit inventory carrying cost

116

INVENTORY CARRYING COSTS

1 )(Capital Cost ) (Interest or Opportunity Cost

.

2 )(Storage Space Cost

00 .


.
(
) .

117

INVENTORY CARRYING COSTS

3 )(Inventory Service Cost .

4 )(Inventory Risk Cost

.

1 .
2 .
3- .

118

INVENTORY ORDER / SETUP COST

/
)(Order cost
.
( :
(
:
. 119

INVENTORY ORDER / SETUP COST

/
)(Setup cost

( (
( )
/
) . .
.

120

INVENTORY CARRYING COST VS ORDER COST

.
( + ) .






121

EXPECTED STOCKOUT COST

.
:



.

)(Safety Stock

.
( ) .
.

122

EXPECTED STOCKOUT COST

)(Cost of lost sales

.
) ( JIT

: 1000 100
4 400
)( Overhead costs

: ) (Back order

123

124

*Q

125

INVENTORY IN TRANSIT CARRYING COST

( )

.
FOB

.
(
(
* ( (
* ( (
* ((
* ( (

126

SAFETY STOCK

.

.
:
( ) = ( -1 ) /

.
( )
%95 %95( %77 5
)
127

B1
A1

B2

A2

A3

Plant

B3

128

A
B

EVALUATING THE EFFCTIVENESS OF INVENTORY MANAGEMENT

)(Customer satisfaction
* .
* .
* .

.

Back ordering / expediting

*
* )(Reordering
) (Resupplying
ABC

129

EVALUATING THE EFFCTIVENESS OF INVENTORY MANAGEMENT

)(Inventory turnover velocity

:
5- 10
10-20


)( Ratio Of Inventory to sales



:
.
130

5

THE STORAGE & HANDLING SYSTEM

131

LOGISTICS STRATEGY TRIANGLE

*
*
*

132

THE STORAGE & HANDLING SYSTEM

.
.
%26
.
:
.
(
)
133

?WHY FIRMS USE INVENTORIES

.
(

)

.

.

.

134

REASONS FOR STORAGE

-1 +
.

.

-2
( )
(
)

( )

135

REASONS FOR STORAGE

-3
( )
.

-4




136

STORAGE SYSTEM FUNCTIONS

() :
-1 )(Holding

.

:
( ( ( ( ( (

137

STORAGE SYSTEM FUNCTIONS

-2 )(Consolidation

) (Holding warehouses
) (Distribution warehouse

-3 )(Break-Bulk

-4 )(Mixing

) (ORDERS

138

MOVE-STORE ACTIVITIES

Inbound point
Unload, sort, classify, and inspect

Warehouse

Semi- permanent
storage bay
Move to picking area

Order - picking bay

Move to dock

Check order and classify

Move to storage

Outbound point

139

DISTRIBUTION WAREHOUSE USED TO CONSOLIDATE SMALL

INBOUND SHIPMENTS INTO LARGER OUTBOUND SHIPMENTS
10.000 I b.

Manufacturer A
8.000 I b.

40.000 I b.

Manufacturer B

Customer

A,B,C,D
15.000 I b.
Distribution
warehouse

Manufacturer C
7.000 I b.

Manufacturer D

140

DISTRIBUTION WAREHOUSE USED TO BREAK-BULK LARGE INBOUND

SHIPMENTS INTO SMALER OUTBOUND SHIPMENTS

Customer A
LTL

Manufacturer

Low rate TL
shipment

Distribution
warehouse

Customer B

Customer C

141


Manufacturer A

Product B

Manufacturer B

Customer X

Distribution
warehouse

Customer Y

Manufacturer C

GENERALIZED EXAMPLE OF USING A DISTRIBUTION WAREHOUSE

FOR PRODUCT MIXING

142

MATERIAL HANDLING CONSIDERATIONS

) (Compatibility
.
.

: + +
+

/ 4:
-1 )(Load unitization
-2 )(Space layout
-3 )(Storage equipment choice
-4 )(Movement equipment choice

143

MATERIAL HANDLING DIMENSIONS & OBJECTIVES

-1
-2
-3
-4

144

-1
-2
-3
-4
-5

LOAD UNITIZATION

.
.

.

.

)(Containerization

.
.
.
.
.

145

LOAD UNITIZATION

)(Palletization

( 4840) :
. .

.
.
146

SPACE LAYOUT

-1 : Bays
.

-2 :

147

SPACE LAYOUT

()Area system

))Modified area system

( Sequencing,
Zoning, Batching).

148

149

SPACE LAYOUT

150

SPACE LAYOUT

STORAGE EQUIPMENT CHOICE

:
) (Racks
)(FIFO )(Shelf boxes
)(Horizontal and vertical dunnage
)(Bins
)(U-farms

151

MOVEMENT EQUIPMENT CHOICE

)(Manual equipment

)(Power-assisted equipment

) (output

) (fork lift
) (Fork lift truck
12
( 3000 (
+ +

152

MOVEMENT EQUIPMENT CHOICE

)(Fully mechanized equipment

(Automated
) storage & Retrieve system, AS/RS
:
)(Bar coding )(Scanning technology
( )


.
153

Private warehousing
automated handling

Public
warehousing

Cost

Leased warehousing
manual handling

Private warehousing
pallet - forklift truck
handling

a
b
c
a Economical range for public warehousing

Annual system
throughput

b Economical range for public (leased) warehousing, manual handling

c Economical range for public warehousing, pallet - forklift truck handling
d Economical range for public warehousing, automated handling.

GENERALIZED TOTAL COST CURVES FOR FOUR ALTERNATIVE STORAGE SYSTEM

154

PRODUCT PACKAGING

*
*
*
*
* ( )
*
*

155

PRODUCT PACKAGING

:
*
*


.

:
*
*
*
*

156

6
PURCHASING AND SUPPLY SCHEDULING DECISIONS

(JIT,

MRP, DRP)

157

LOGISTICS STRATEGY TRIANGLE

*
*
*

158

COORDINATION IN THE SUPPLY CHAIN

/ (
)..

159

160

SUPPLY SCHEDULING

:
-1
()Just In Time, JIT
-2

161

162

JUST-IN-TIME SUPPLY SCHEDULING

( )JUST-IN-TIME

.
:
-1
-2
-3

-4
-5


:
163

 ( )JIT
()JIT

164

MRP MECHANICS

( )MRP


()MRP

165

 ( )

Clock style - K 36

Clock style - M 21
Salem

Clock mechanism - R 1063

166

 MRP
( a ) Initial MRP form
7
8
110 120

6
90

7
8
110 120
350
280 160

6
90

week
1
2
3
4
5
100 150 120 150 100
400

( b ) Completed MRP form

167

40

week
1
2
3
4
5
100 150 120 150 100
350
400 300 150 30 230 130
350
350

JIT DISTRIBUTION SCHEDULING

168



2
8

5
200

200

200

200

1
8

300

300

300

1
300

169

500

300

200

500

200

300

INTEGRATED SUPPLY CHAIN MANAGEMENT

( )MRP
( )DRP

( )JIT()DRP

170

-1
-2 ( )MRP
()DRP
-3 ( )DRP

-4
-5 ( )DRP
( )ROP ()EOQ

171

PURCHASING

/
:
( ) ()terms of sale -

172



-1 ()
-2
-3
-4
-5 ()

-1
-2
-3

173

( %60-40
)




-1
-2
-3
-4
( )
(
) /
174

 %5

$500.000

5%
) ( 7.5%

10%

Divided
by

Multiplied
by

2
) ( 2.04

) ( $750.000

$10 million

( 9.25 million ) b

Divided
by

$5 million

) ( $4.9 million

%50
%5

175

40

Less

$9.5 million

$10 million

$10
million

$2 million
) ( $1.9 million




-1 ()JIT, hand-to mouth buying
-2 ( ( )Forward buying )anticipatory

( )Speculative buying
(
)
:
- ( )

176


-1 ()Mixed Buying Strategy
( )JIT
()JIT


( )JIT
( )JIT

()Dollar Averaging

(
)
( )
:

177


-3 ( )Quantity Discount
(
)

-1 ( )Inclusive

-2 ( )No inclusive

-3
+
178


-4 ( )Deal Buying

-5 ( )Contract Buying

( )Blanket order contracts
(
)stockless purchasing, JIT
179

 )(SOURCING
-1


( )linear programming

.

-2


/

180

TERMS OF SALE & CHAIN MANAGEMENT

:
( = )Terms of sale +





181

182

JIT

SUPPLIER SELECTION & EVALUATION

:
-

183

184