Supply Chain and Logistics Management 17 Supply Chain and Logistics Management

17 Objectives Supply Chain and Logistics Management 1. Relate the supply chain management to the other variables of the marketing mix. 2. Explain the role of supply chain and logistics management in an effective marketing strategy. 3. Describe the objectives of logistics. 4. Identify and compare the major components of the logistics system. 5. Discuss some of the basic concepts involved in making transportation decisions. 6. Relate the major transportation alternatives to such factors as efficiency, speed, dependability, and cost. 7. Discuss the problem of suboptimization in logistics. 17-1

17 Supply Chain and Logistics Management Supply Chain A network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. 17-2

17 Supply Chain and Logistics Management A Simple Supply Chain Figure 17.1 A Simple Supply Chain downstream upstream Legend Material flow/ Raw materials Manufacturing Distribution Retailers/ transportation supplier plant centre customers 17-3

Supply Chain Management (SCM) 17 Supply Chain and Logistics Management Supply Chain Management (SCM) The systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. 17-4

17 Supply Chain and Logistics Management Logistics That part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements. 17-5

17 Logistics Supply Chain and Logistics Management Customer service What level of customer service should be provided? Transportation. How will the products be shipped? Materials handling and protective packaging. How do we develop efficient methods of handling products in the factory, warehouse, and transport terminals? Order Processing How should orders be handled? Inventory control How much inventory should be maintained at each location? Warehousing Where will the products be located? How many warehouses should be used? 17-6

17 Supply Chain and Logistics Management Total-Cost Approach Holds that relevant factors in physically moving and storing products should be considered as a whole and not individually. 17-7

17 Supply Chain and Logistics Management Suboptimization A condition in which the manager of each physical distribution function attempts to minimize costs, but due to the impact of one physical distribution task on the others, the results are less than optimal. 17-8

17 Supply Chain and Logistics Management Cost Tradeoffs Approach that assumes that some functional areas of the firm will experience cost increases while others will have cost decreases. 17-9

17 Supply Chain and Logistics Management Logistics Concept The integration of the total-cost approach, the avoidance of suboptimization, and the use of cost tradeoffs. 17-10

Logistics Management: The Systems Concept and the Total-Cost Approach 17 Supply Chain and Logistics Management Figure 17.2 Logistics Management: The Systems Concept and the Total-Cost Approach Basic Components of a Logistics System Transportation Materials Handling Systems Concept Total-Cost Approach Management views Logistics as a system of Interrelated components Order processing Management attempts to minimize the cost of using the components taken as a whole Inventory control Warehousing Packaging Source: From Marketing Channels; A Management View, 6th ed., by Bert Rosenbloom, p 404. Copyright © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800-730-2215. 17-11

Third-Party Logistics Provider 17 Supply Chain and Logistics Management Third-Party Logistics Provider Specialist firm that performs virtually all of the logistical tasks that manufacturers or other channel members would normally perform themselves. 17-12

17 Classes of carriers Common Contract Private Supply Chain and Logistics Management Classes of carriers Common Contract Private 17-13

17 Supply Chain and Logistics Management Common Carrier Transportation carrier that provides service to the general public, and is subjected to regulatory authority including fee setting. 17-14

17 Supply Chain and Logistics Management Contract Carrier Transportation carrier that serves only customers it has contracts with. Contracts include rates to be charged. 17-15

17 Supply Chain and Logistics Management Private Carrier Transportation carrier that provides transportation services for a particular firm and may not solicit other transportation business. 17-16

Economic Order Quantity (EOQ) 17 Supply Chain and Logistics Management Economic Order Quantity (EOQ) A model that emphasizes a cost tradeoff between inventory holding costs and order costs. 17-17

17 The EOQ Model Supply Chain and Logistics Management Figure 17.3 Total Cost Inventory Holding Cost per Unit Costs Order Cost per Unit Quantity of Units 17-18

17 Supply Chain and Logistics Management Just in Time (JIT) An approach to minimizing inventory costs through identify minimal inventory levels and arranging with suppliers to replenish stocks just in time to be used in production. 17-19

Protective Packaging and Materials Handling 17 Supply Chain and Logistics Management Protective Packaging and Materials Handling Unitization Combining as many packages as possible into one load. Containerization Combining several unitized loads. 17-20

Distribution Warehouse 17 Supply Chain and Logistics Management Distribution Warehouse Designed to assemble and then redistribute products. 17-21

17 Supply Chain and Logistics Management Break-Bulk Warehouse Receives consolidated shipments from a central distribution centre, and then distributes them in smaller shipments to individual customers in more limited areas. 17-22

17 Supply Chain and Logistics Management Storage Warehouse Stores products for moderate to long periods of time in an attempt to balance supply and demand for products and purchasers. 17-23

17 Supply Chain and Logistics Management Freight Forwarder Wholesaling intermediary that specializes in international logistics. 17-24

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