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Logistics Management

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The part of the supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information btw the point of origin and the point of consumption in order to meet customer's requirements.

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7 Rights of Logistics

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1) Right Product 2) Right Customer 3) Right Time 4) Right Place 5) Right Quantity 6) Right Cost 7) Right Condition

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Why are executives giving logistics more focus?

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- Increased competitive behavior, customer service - Shift in channel power, category killer stores (Walmart) - Increased globalization (supply chain is longer, less inventory levels) - Development of IT systems, increased importance of information - Increase product proliferation, increase in the number of products available - Increased number of delivery points, smaller orders

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Utility

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an economic term used to describe perceived value

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5 Economic Utilities- 1

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1) Possession Utility - created by marketing

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5 Economic Utilities- 2

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2) Form Utility - responsibility of purchasing and operations managers Ex.) Repackage products during distribution into special sizes (Costco)

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5 Economic Utilities- 3

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3) Time Utility - logistics, product arrives when needed Ex) just-in-time manufacturing

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5 Economic Utilities- 4

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4) Place Utility - logistics, delivering prouct where it's needed Ex) delivery to home/office

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5 Economic Utilities- 5

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5) Quantity Utility- logistics, delivering the right amount of product Ex) breaking bulk, sorting

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How does logistics create value?

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Through the movement, storage, and processing of goods/services. Value can only be assessed through the eyes of the customer.

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Logistics connections to marketing and production

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Marketing- Logistics satisfies the demand that marketing creates. They intersect through "place", from the 4 p's. Production- product scheduling, plant location, and purchasing

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CSCMP definition of supply chain manangment

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The planning and management of all activities involved. Integrates supply and demand management w/i and across the company.

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GSCF def. of supply chain managment

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Process from origin to end user to add value. Supply chain is broader, logistics is a part of the supply chain management.

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U.S. Logistics costs makeup

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Logistics as a percent of GDP has declined, but total logistics costs are increasing (as we near 100% efficiency)

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The biggest single expense for U.S. logistics

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Truck Transportation (63%), then inventory carrying costs. In the past, inventory carrying costs were the largest expense.

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Different types of logistics

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1) Passenger 2) Military 3) Event 4) Service 5) Humanitarian

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Logistics cost tradeoffs - Increasing # of warehouses

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Increasing number of warehouses -- Increased inventory costs, decreased transportation, and sometimes decreased cost of lost sales

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Logistics cost tradeoffs - Faster transportation

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Faster transportation -- decrease the cost of lost sales

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Logistics cost tradeoffs - Increased lot quantity costs

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-- decrease inventory carrying costs, and vice versa

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Logistics cost tradeoffs - Investments in IT

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-- decrease the cost of lost sales

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Total Cost Concept

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The sum of logistics operations as a system and seek to minimize the total cost of the system rather than the individual functions. All costs and service elements are interlinked.

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Lean Processes

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Eliminate all processes, steps, and material that do not add value

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The Eight Wastes

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1) Defects 2) Overproduction 3) Waiting 4) Not Utilizing Staff Talent 5) Transportation 6) Inventory 7) Movement 8) Excess Processing

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Lean 5S Methodolgy

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1) Sort- eliminate unneeded items, store, and organize 2)Simplify- have a place where everything belongs 3)Sweep- Clean and organize each day, put away 4)Standardize- standard process and procedure, easy to train new people 5)Sustain- Follow approach and implement it through out the company

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What do logistics systems provide?

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delivered goods and services on time, at a low cost

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Aspects of delivery that customers care about

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The 7 rights

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Definition of customers service

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The output of the logistics and is the 'place' component of the 4p's, providing customers what they expect.

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Importance of excellent logistics customer service

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crucial to customer loyalty, competitive weapon to secure customers and keep customers coming back (5x more expensive to acquire new customers)

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Deliverables of order fulfillment (operational targets)

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1) Product availability: basic and essential. Some factors out of our control, weather and natural disasters. Use Data Management and Inventory Management 2) Timely Delivery: (speed. consistency, and agility) 3) Transparency: tracking orders. Improves planning, execution, and evaluation. 4) Protection Against Disruption: contingency plans, 'what-if' scenarios, and service recovery paradox 5) Operational Efficiency: provide the service customers need, take cost out of order fulfillment

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The perfect order

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Order is received, processed, picked, packed, shipped, documented, and delivered on time without damage (85-90%)

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Methods for establishing a customer service strategy

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-Determine service levels -cost/revenue tradeoffs -ABC analysis -Customer service office

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Segmented service offerings

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Tailored Logistics: Transactional-- cost driven, and arms length (80% of customer relationships) -need and expect efficient service, don't have resources to waste, want treated fairly, more forgiving Strategic Alliances-- account for disproportionate sales and profits (5-10%) -the most important customers, key customers, keep them happy

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How to measure lifetime customer value

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the projected revenue that a customer will generate over their lifetime

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Pareto's Law

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-80/20 Rule: -80% of profits are driven by your most important 20% of customers -"A" customers (5-10%) -- MOST IMPORTANT, customized service -"B" customers -- VERY high level of service -"C" customers -- high level of standardized service

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80/20 Steps

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1) Classify companies by sale 2) Modify classifications based on strategic issues

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Customer Profitability Analysis

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Segment customers based on profitability. Some customers buy higher margin strategies, others cost to serve

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Four questions for tracing costs

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1) what are cost objects? 2) what process does does each customer initiate? 3) what activities comprise each process? 4) what resources are used by each activity?

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Stockout

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occurs when demand for an item cannot be filled from existing inventory

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Stockout Costs

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Backorders, lost sales, and lost customers

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Impediments to an effective customer service strategy

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-failing to segment markets -misuse of customer service -cost effectiveness mismeasure -inability to determine competitive service -inadequate customer service

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Logistics System (module 3)

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the network of organizations and activities engaged in managing the movement and storage of products and services as well as the flow of information from the source to the customer--- high service at a low cost

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Hierarchy of Business Strategy

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Corporate Strategy - Marketing Strategy - Supply Chain Strategy (Supply, Operations, Logistics)

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Intensive Distribtution

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getting products in the hands of all customers across a broad market geography. -relies on scale, produce and ship huge volumes ex.) Apple, LG, Coke, P&G

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Selective Distribution

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occupying a strategic position among a small number of customers or in a select region. -limit to a geographic region ex.) craft beer, some pop

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Exclusive Distribution

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intentionally reaching a limited number of customers to maintain prestige-- luxury goods ex.) Rolex, Ferrari

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Four broad supply chain strategies

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1) Planning based fulfillment supply chain: -Forecast driven, known demand, push to customer, blind to market changes, low-cost commodities 2) Lean fulfillment: -push to DC and pull from DC, inventory and replenish, consistent/stable demand, inventory problems 3) Agile fulfillment: -pull from material supply, fast and accommodating, very lean, customization, make to order, direct distribution, hard to forecast 4) Leagile Fulfillment: -tailored customization in less time, eliminate waste, differentiated products

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Decoupling point

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the point/balance btw push and pull

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Definition of resilience

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capacity to survive, adapt, and grow in the face of turbulent change the ability of the supply chain to bounce back after a major disruption

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Four-step risk management process

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1) Risk Identification 2) Risk Assessment 3) Risk Prioritization 4) Risk Mitigation

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Three types of risk

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1) Known-knowns are events with a track record. They occur fairly frequently. You can thus look at the data to assess the probability they will occur and the severity of their impact. 2) Known-unknowns are events that you know can happen, but they have no consistent pattern or history. Assessment is thus speculative. As you evaluate likelihood and potential impact, you ask a lot of "what-if" questions. 3) Unknown-unknowns are conceivable but unusual and unexpected events (think: the break up of the Soviet Union or 9/11 attacks). Because they are very rare—even surprising—they are sometimes called black swan events. Black swans have a major effect on operations. Although you can't predict them with any accuracy, you can build a resilient supply chain.

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OSU Resiliency framework

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Vulnerabilities--balance--Capabilities = Optimal Resilience

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Supply chain vulnerabilities

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factors that make a company suseptible to disruptions, caused by forces of change, must balance with capabilities or company may be exposed to risk ex.) turbulence, sensitivity, connectivity, supplier and customer disruptions

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Supply chain capabilities

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attributes that enable an enterprise to anticipate and overcome disruptions, management controls, must balance with vulnerabilities or company ex.) visibility, recovery, flexibility in sourcing

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Definition of partnership

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A tailored business relationship built on mutual trust, openness, shared risk, shared rewards that result in performance greater than the absence of a partnership

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Why partner?

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-To gain the advantages of vertical integration while still maintaining organizational independence -To take advantage of "best in class" expertise -To achieve service improvements -To gain operational efficiencies -To respond to competition

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The partnership model

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-The Partnership Model and the Collaboration Framework developed by The Global Supply Chain Forum are tools for developing and managing partnerships -Partnership strategy driven by overall corporate strategy

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Partnership Strategy

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-focused on a companies 'best' relationships -costly to implement -scale value -not all should be partnerships

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Uses of the model

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-Evaluate a potential new partnership -Analyze a portfolio of relationships -Diagnose relationships -Review of relationship management

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Components of the Partnership Model

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Made up of-- -Partnership drivers: compelling reasons to partner, benefits to partnering--the stronger the drivers the more successful the partnership -Partnership Facilitators: Supportive environmental factors that enhance partnership growth, increase the likelihood of partnership success (The strength of the drivers and facilitators determine the type of partnership) -Partnership Components: joint activities and processes that build and sustain the partnership (managerial elements) -Outcomes: the extent to which performance meets expectations

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Five Key relationship lessons

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1) A well strucutured plan that is well monitored is key for ensuring results 2) Mistakes happen, must learn from them 3) Visibilty is the key to building trust 4) Most companies have a lot more in common than they think 5) You must be willing to look at things differently

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