1-1 Business Logistics/Supply Chain—A Vital Subject The supply chain is simply another way of saying “the whole process of business.” Chapter 1 CR (2004) Prentice Hall, Inc.

Warehousing Transportation Vendors/plants/ports Transportation Factory Transportation Customers Information flows The Immediate Supply Chain for an Individual Firm CR (2004) Prentice Hall, Inc. 1-2

1-3 Logistics Defined Supply Chain Management Defined CR (2004) Prentice Hall, Inc.

1-4 Evolution of Supply Chain Management CR (2004) Prentice Hall, Inc.

Supply Chain Schematic CR (2004) Prentice Hall, Inc. 1-5

1-6 The Logistics/SC Mission CR (2004) Prentice Hall, Inc.

1-7 A Revised Strategy is Generating Great Top Management Interest Historical perspective of distribution: “The last frontier of cost economies” The contemporary view: Distribution is a new frontier for demand generation—a competitive weapon. Peter Drucker, 1962 Both views are now important! CR (2004) Prentice Hall, Inc.

1-8 Critical Customer Service Loop CR (2004) Prentice Hall, Inc.

1-9 CategoryPercent of sales$/cwt. Transportation3.34%$26.52 Warehousing Order entry Administration Inventory carrying Total7.65%$67.71 Physical Distribution Costs Add one-third for inbound supply costs Source: Herb Davis & Company Logistics cost are about 10% of sales w/o purchasing costs CR (2004) Prentice Hall, Inc.

1-10 Customer Service Performance Source: Herb Davis & Company CR (2004) Prentice Hall, Inc.

1-11 Significance of Logistics

1-12 CR (2004) Prentice Hall, Inc. Costs are lower than K-Mart or Target Stores CEO is a former logistician Wal-Mart is the largest retailer in the world!

1-13 Effect on Logistics Foreign Outsourcing Profit G & A Marketing Logistics Overhead Materials Labor Profit G & A Marketing Logistics Overhead Materials Labor Tariffs Increase Reduction Increase Domestic sourcing Foreign sourcing CR (2004) Prentice Hall, Inc.

Scope of the Supply Chain for Most Firms Physical distribution Physical supply (Materials management) Business logistics Sources of supply Plants/ operations Customers Transportation Inventory maintenance Order processing Acquisition Protective packaging Warehousing Materials handling Information maintenance Transportation Inventory maintenance Order processing Product scheduling Protective packaging Warehousing Materials handling Information maintenance Focus firm’s internal supply chain CR (2004) Prentice Hall, Inc. 1-14

1-15  Primary - Setting customer service goals - Transportation - Inventory management - Location  Secondary, or supporting - Warehousing - Materials handling - Acquisition (purchasing) - Protective packaging - Product scheduling - Order processing Key Activities/Processes CR (2004) Prentice Hall, Inc.

1-16 Focus Company Suppliers Supplier’s suppliers Customers Customers/ End users AcquireConvert Distribute The Supply Chain is Multi-Enterprise Product and information flow Scope in reality CR (2004) Prentice Hall, Inc.

1-17 Reality of SC Scope CR (2004) Prentice Hall, Inc.

1-18 SUPPLY CHAIN MANAGEMENT Interfunctional coordination Interorganizational coordination Activity and process administration The Multi-Dimensions of SC CR (2004) Prentice Hall, Inc.

1-19 Study Framework The focus is here CR (2004) Prentice Hall, Inc.

1-20 Customer service goals  The product  Logistics service  Information sys. The Logistics Strategy Triangle CR (2004) Prentice Hall, Inc.

PRODUCTION/ OPERATIONS Sample activities:  Quality control  Detailed production scheduling  Equipmentmaint.  Capacity planning  Work measurement &standards LOGISTICS Sample activities:  Transport  Inventory  Order processing  Materials handling Interface activities:  Product scheduling  Plant location  Purchasing MARKETING Sample activities:  Promotion  Market research  Product mix  Sales force management Interface activities:  Customer service standards  Pricing  Packaging  Retail location Production- logistics interface Marketing- logistics interface Relationship of Logistics to Marketing and Production Internal Supply Chain CR (2004) Prentice Hall, Inc. 1-21

Relationship of Logistics to Marketing Product Price Promotion Place-Customer service levels Inventory carrying costs Lot quantity costs Order processing and information costs Transport costs Warehousing costs Marketing Logistics CR (2004) Prentice Hall, Inc. 1-22

1-23 Relationship of Logistics to Production  Coordinates through scheduling and strategy— make-to-order or make-to-stock  An integral part of the the supply chain  Affects total response time for customers  Shares activities such as inventory planning  Costs are in tradeoff  Production lot quantities affect inventory levels and transportation efficiency  Production response affects transportation costs and customer service  Production and warehouse location are interrelated CR (2004) Prentice Hall, Inc.

1-24 Logistics/SC in Diverse Areas  Manufacturing—most common  Environment—causing restrictions  Service—emerging opportunities  Non-profits—little explored  Military—long history CR (2004) Prentice Hall, Inc.

1-25 Contemporary Logistics Terms  Value stream/logistics process  Quick response and flexible manufacturing  Mass customization  Supply chain management/ collaborative logistics  Reverse logistics  Service logistics  Continuous replenishment  Lean logistics  Integrated logistics