Supply Chain Logistics Management Chapter 2: Lean Logistics

United States Logistics Costs 1980 GDP $2.88 trillion Logistics Cost $451 billion 15.7% of GDP Trans. Cost $214 billion 47.5 % of Logistics Cost $ Billions 100 200 300 400 500 600 700 800 900 1980 1999 1000 Year $ billion 1999 GDP $9.26 trillion Logistics Cost $921 billion 9.9% of GDP Trans. Cost $554 billion 60.2 % of Logistics Cost Logistics Transportation Source: Robert V. Delaney, 11th Annual “State Of Logistics Report” © June 5, 2000 Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Integrated Logistics Order Processing Facility Inventory Network Warehousing Material Handling Packaging Transportation Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistical Integration Customers Enterprise Market Distribution Manufacturing Support Procurement Suppliers Information Flow Inventory Flow Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Market Distribution Operating Concerns Activities related to providing customer service. Requires performing order receipt and processing, deploying inventories, storage and handling, and outbound transportation within a supply chain. Includes the responsibility to coordinate with marketing planning in such areas as pricing, promotional support, customer service levels, delivery standards, handling return merchandise, and life-cycle support. The primary market distribution objective is to assist in revenue generation by providing strategically desired customer service levels at the lowest total cost. Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Manufacturing Support Operating Concerns Activities related to planning, scheduling, and supporting manufacturing operations. Requires master schedule planning and performing work-in-process storage, handling, transportation, and time phasing of components. Includes the responsibility for storage of inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement between manufacturing and market distribution operations. Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Procurement Operating Concerns Activities related to obtaining products and materials from outside suppliers. Requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, receiving and inspection, storage and handling, and quality assurance. Includes the responsibility to coordinate with suppliers in such areas as scheduling, supply continuity, hedging, and speculation, as well as research leading to new sources or programs. The primary procurement objective is to support manufacturing or resale organizations by providing timely purchasing at the lowest total cost. Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistics Information Requirements Strategic Objectives Capacity Constraints Logistics Requirements Manufacturing Procurement Order Processing Assignment Distribution Operations Transportation and Shipping Inventory Deployment Management PLANNING - COORDINATION OPERATIONS Forecasting Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Echeloned Structured Logistics Supplier Industrial Distribution or Consolidation Warehouse Manufacturer Wholesaler or Distribution Center Retailer Customer INFORMATION FLOWS Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Echeloned Structured Logistics Supplier Industrial Distribution or Consolidation Warehouse Manufacturer Wholesaler or Distribution Center Retailer Customer Support for Direct Delivery INFORMATION FLOWS Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Flexible Echeloned Structured Logistics Supplier Industrial Distribution or Consolidation Warehouse Manufacturer Wholesaler or Distribution Center Retailer Customer Support for Direct Delivery Flow Through Service Supplier Arrangements INFORMATION FLOWS Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistical Performance Cycles Node Transportation Links Communication Material Source Lead Supplier (Tier 1) Manufacturing Plant Distributors Customer Purchasing Cycle Support Physical Distribution Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Multi-Echeloned Flexible Network Material Source Manufacturing Plant Warehouse Distribution Customer 1 2 3 Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Basic Market Distribution Performance-Cycle Activities Order Processing Transmission Customer Selection Transportation Delivery Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Procurement-Cycle Activities Sourcing Order Placement and Expediting Receiving Transportation Supplier Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Performance-Cycle Uncertainty Order Transmission Time Range - Days 1/2 3 1 Customer Delivery Transportation 2 10 4 Selection 20 Processing Total Performance Cycle 5 40 Delivery Cycle Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.