Shorter life cycles make timing crucial Market Sales Late Entrant Obsolete stock Time Less time to make profit Higher risk of obsolescence
Breaking free of the classic service/cost trade-off Time compression Service enhancement Cost reduction
The order cycle Customer places order Order entry Order processing assembly Order received Transport Source: Stock, J.R and Lambert, D.M., Strategic: Logistics Management, 2nd edition, Irwin, 1987
How long is the logistics pipeline? Cumulative Lead-Time (Procurement to Payment) Raw Material Stock Sub-Assembly Stock Intermediate Stock Product Assembly Finished Stock at Central Warehouse In-Transit Regional Distribution Centre Stock Customer Order Cycle (Order-Cash)
Which activities add cost and which add value? Customer Order Cycle Finished Product Regional Stock In- Transit Production Value- Added Time, Place & Form Utility Raw Material Stock Cost-Added Production, Storage & Transport costs & the Time Cost of Money
Value added through time 6.2% of value added time over a 40-weeks supply chain Buffering against business process and variability at each stage - no single buffer is unreasonable 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 Supplier Lead Time Inbound Material Primary Conversion Secondary Conversion Packaging Shipment Distribution Centre Pick Distributor Ship to Customer 10% 20% 30% 40% 50% 60% 70% 80% Weeks in the Supply Chain % of Total Cost Added by Logistics Processes
Plot of Variety Through the Supply Chain Variety through time 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 1 10 20 Longest period is spend at the maximum variety level Greatest flexibility is available when the product is generic Plot of Variety Through the Supply Chain Weeks Through the Supply Chain Number of Variants
Cost-added versus value-added time Finished Stock Regional Stock Customer Delivery Production In- Transit Value- adding time Time, place & form utility Raw Material Stock Cost-adding time Production, storage & transport costs & the time cost of money
Reducing non-value-adding time improves service and reduces cost Finished Stock Regional Stock Customer Delivery In- Transit Raw Material Stock Value- adding time Production Regional Stock In- Transit Customer Delivery Finished Stock Production Cost-adding time Raw Material Stock
Supply chain mapping - an example Commodity Market End User (20) (10) (5) (15) Spinning (15) Knitting (10) Dyeing & Finishing (7) (2) Sewing (18) Fibre Yarn finished goods store Yarn store Grey stock Finished fabric Raw material store Cut work buffer goods warehouse Distribution centre Store Spinning Fabric Supplier Underwear Manufacturer Retailer Length 60 Days Volume 175 Days Component cutting (5)