Introduction to Logistics and Supply chain Management Demand Management AND Customer Service

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Introduction to Logistics and Supply chain Management This presentation includes selected slides from Coyle, Langley, Gibson, Novack & Bardi (2008), Supply Chain Management: A Logistics Perspective (with Student CD- ROM)Eighth Edition, Cenage Learning.

Introduction to Logistics and Supply chain Management Learning Objectives Define demand and demand management Identify the key steps in the order fulfillment process, and understand how effective order management can create value for a firm and its customers. Understand the difference between logistics and marketing channels, and understand that goods may reach their intended customer via a number of alternative channels of distribution.

Introduction to Logistics and Supply chain Management Learning Objectives Understand the critical importance of outbound-to- customer logistics systems. Realize the meaning of customer service, and understand its importance to logistics and supply chain management. Appreciate the growing need for effective demand management. Know the types of forecasts that may be needed, and understand how collaboration among trading partners will help the overall forecasting and demand management process.

Introduction to Logistics and Supply chain Management Demand –Consumer Demand –Business Demand or Derived Demand

Introduction to Logistics and Supply chain Management Demand Consumer Demand An economic principle that describes a consumer’s desire and willingness to pay a price for a specific good or service. accessed 2 August,

Introduction to Logistics and Supply chain Management Demand Management The demand curve is usually downward sloping, since consumers will want to buy more as price decreases. ( )demand curvebuy

Introduction to Logistics and Supply chain Management Demand Management Demand for a good or service is determined by many different factors other than price, such as the price of substitute goods and complementary goods.factorssubstitute goodscomplementary goods Along with supply, demand is one of the two key determinants of the market price.supplydeterminantsmarket price

Introduction to Logistics and Supply chain Management Business Demand or Derived Demand Demand for capital goods and/or labor (which are used in production).capital goodslabor Since production depends upon demand for the finished output, demand for goods and services used in production is derived from demand for finished goods. 1.html

Introduction to Logistics and Supply chain Management Demand Management Demand Management is concerned with these questions and the core “disconnects” between the traditional supply chain management activities and the demand generation and management processes. –Studies show that average perfect order fill rates vary drastically and are as low as 80% or less in some manufacturing industries. –Others show that retailers experience an average of over 30% loss in sales due to markdowns and over 10% from stock outs on the shelf. –What explains the wide range of perfect fulfilment and why can't companies get closer to 100% fulfilment and 0% waste?

Introduction to Logistics and Supply chain Management Detailed Demand Management Focus The major question being addressed is: "What strategies, principles, and methods can be leveraged to optimally match supply and demand over time?"

Introduction to Logistics and Supply chain Management Supply-Demand Misalignment

Introduction to Logistics and Supply chain Management

The Bullwhip Effect in supply chains and how to avoid themhttp:// OR Type Bullwhip Effect in Google or Yahoo for further references or discussionBullwhip Effect Look at the research articles such as –Fransoo, J.C, & Wouters, M.J.F (2000), Measuring the bullwhip effect in the supply chain, Supply Chain Management: An International Journal, 5,2, pp Supply Chain Management: An International Journal OR Search for a good research article on Bullwhip Effect from ABI/InformBullwhip Effect

Introduction to Logistics and Supply chain Management Detailed Demand Management Focus The processes within the scope of DM include: –Segmenting the customer base to optimally offer tailored programs and differentiated services. –Optimally leveraging the Sales and Operations Planning (S&OP) and Merchandize Planning and Allocation processes. –Optimally promising a customer order fulfillment date. –Using decision support and supply chain visibility information to enable the above processes. –Integrating the above processes

Introduction to Logistics and Supply chain Management Demand Management Objectives Gathering and analyzing knowledge about consumers, their problems, and their unmet needs. Identifying partners to perform the functions needed in the demand chain. Moving the functions that need to be done to the channel member that can perform them most effectively and efficiently.

Introduction to Logistics and Supply chain Management Demand Management Objectives Sharing with other supply chain members knowledge about consumers and customers, available technology, and logistics challenges and opportunities. Developing products and services that solve customers’ problems. Developing and executing the best logistics, transportation, and distribution methods to deliver products and services to consumers in the desired format.

Introduction to Logistics and Supply chain Management Demand Management: Related Issues Lack of communication between departments results in little or no coordinated response to demand information. Too much emphasis is often placed on forecasts of demand with little attention paid to collaborative efforts and strategic and operational plans that need to be developed from the forecasts.

Introduction to Logistics and Supply chain Management Demand Management: Related Issues Demand information is often used more for tactical and operations purposes than for strategic purposes. Primary emphasis should be on using demand information to create likely scenarios of the future as they relate to product supply alternatives. Resulting business successes will be a outcome of the better match of demand to product availability.

Introduction to Logistics and Supply chain Management Traditional Forecasting: Demand Forecasting A major component of demand management is forecasting the amount of product that will be purchased by consumers or end users. In the integrated supply chain all other demand will be derived from the primary demand. A key objective is to anticipate and respond to primary demand as it occurs in the marketplace.

Introduction to Logistics and Supply chain Management How Demand Management Supports Business Strategy

Introduction to Logistics and Supply chain Management Integration of Sales Forecasting and Production

Introduction to Logistics and Supply chain Management Collaborative Planning, Forecasting, and Replenishment CDFR is recognized as a breakthrough business model for planning, forecasting, and replenishment. Uses available Internet-based technologies to collaborate from operational planning through execution. Developed by Wal-Mart and Warner-Lambert in 1995.

Introduction to Logistics and Supply chain Management Collaborative Planning, Forecasting, and Replenishment Emphasizes a sharing of consumer purchasing data among and between supply chain partners. Creates a direct link between the consumer and the supply chain.

Introduction to Logistics and Supply chain Management Figure 3-3 CPFR Business Model

Introduction to Logistics and Supply chain Management Order Fulfillment and Order Management The order cycle traditionally includes those activities that occur from the time an order is placed to the time it is received by the customer.

Introduction to Logistics and Supply chain Management Major Components of the Order Cycle

Introduction to Logistics and Supply chain Management Order-Management Functions

Introduction to Logistics and Supply chain Management Customer Service

Introduction to Logistics and Supply chain Management What is Customer Service ? 1.An corporate activity which must be managed 2.A system of key performance indicators (KPIs) 3.A corporate philosophy

Introduction to Logistics and Supply chain Management Customer Service: Why we need to focus on this? For every customer who complains, there are 26 others who don’t The dissatisfied customer tells people 91% of dissatisfied customers will not purchase from you again If you attempt to remedy customers’ complaints, 82% - 95% will remain loyal It costs about 5 times as much to attract a new customer as it does to keep an old one

Introduction to Logistics and Supply chain Management Logistics and Customer Service Customer service can have many dimensions. Including: On-time delivery, In full (all items ordered by customer PPS) Zero* / minimal stock outs, Inventory levels Zero damage / condition Information, eg customer order status, ASN Special services for clients, eg “Track n Trace”, Accurate Invoicing Reverse logistics 7 Rs !!

Introduction to Logistics and Supply chain Management Logistics and Customer Service The concept of Customer Service Level in integrated logistics can and often is measured as a percentage, for example 95%. In a pure logistics context it can refer to a number of logistics activities including: Inventory Transportation Warehousing

Introduction to Logistics and Supply chain Management Service Level Customer service cost Cost A faster transport mode i.e. Air vs. Road Carry a higher level of inventory More DCs or warehouses

Introduction to Logistics and Supply chain Management Service Level Logistics Challenge Increasing customer service without increasing cost ! Improved transport contracts Faster responses Improved processes Improved systems cost

Introduction to Logistics and Supply chain Management A Model of Relationship between CS, profit and firms market value Wiles, M.A. (2007) The effect of customer service on retailers' shareholder wealth: The role of availability and reputation cues, Journal of Retailing, Greenwich, Vol. 83, Iss. 1; p. 20.

Introduction to Logistics and Supply chain Management Cultural Shift Needed: Demand- Driven Supply Networks (DDSN). DDSN as a system of coordinated technologies and processes that sense and react to real-time demand signals across a supply network of customers, suppliers, and employees. It enables organizations to improve operational efficiency, streamline new product development and launch, and maximize margin. A demand-driven supply network requires a rethinking of traditional supply chain concepts and a strong commitment to customer expectations and requirements. Cecere, L., O'Marah, K.O., Preslan, L, (2004) Driven by Demand, Supply Chain Management Review. New York: 8, Supply Chain Management Review

Introduction to Logistics and Supply chain Management Demand-Driven Supply Networks (DDSN): 3 Steps. Step 1: Evaluate your company's performance through the eyes of the customer. Step 2: Create a demand-driven culture. Step 3: Integrate product-innovation processes. Cecere, L., O'Marah, K.O., Preslan, L, (2004) Driven by Demand, Supply Chain Management Review. New York: 8, Supply Chain Management Review

Introduction to Logistics and Supply chain Management Questions?