Logistics - PROC 5850 Walden Syllabus Class 1 (Mar 29): SCOR Model Class 2: (Apr 5): Chapters 1 and 2; supply chain security Class 3: (Apr 12): Chapters 3 and 4 Class 4: (Apr 19): Chapters 5 and 6 Class 5: (Apr 26): Chapters 7 and 8 Class 6: (May 3): Chapters 9, 10 and 12 Class 7: (May 10): Chapter 13, 15 and Reverse Logistics

Logistics - PROC 5850 Walden Grading Mid term 45% Final exam 45% Class Attendance 10%

CHAPTER 1 Logistics’ Role in the Economy and the Organization

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Importance of Supply Chain Management and The Art of War “War is a matter of vital importance to the state; the province of life or death; the road to survival or ruin. It is mandatory that it be thoroughly studied.” Supply Chain Management is a matter of vital importance to the company – the road to survival or ruin for the company. It is mandatory that it be thoroughly studied.

Logistics - PROC 5850 Walden Business Logistics/Supply Chain—A Vital Subject The supply chain is simply another way of saying “the whole process of business.”

Logistics - PROC 5850 Walden Logistics Defined Supply Chain Management Defined

Logistics - PROC 5850 Walden Logistics and Supply Chain Importance >$1 Trillion annually on supply chains in US ~$600 Billion on transportation alone in US 70% of all goods in US are transported at some point in supply chain by trucks

Logistics - PROC 5850 Walden Significance of Logistics

Logistics - PROC 5850 Walden 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

Logistics - PROC 5850 Walden Logistics: the right product, in the right quantity, in the right condition, at the right time, at the right place. These are the components of the Logistics metric for perfect order fulfillment.

Logistics - PROC 5850 Walden Components of Logistics Management Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Management actions PlanningImplementationControl Raw materials In-process inventory Finished goods Natural resources Human resources Financial resources Information resources Time and place utility Efficient movement to customer Proprietary asset Competitive advantage Logistics management Suppliers Customers Inputs into logistics Outputs of logistics Customer service Demand forecasting Inventory management Logistics communications Material handling Order processing Parts and service support Plant & warehouse site selection Procurement Packaging Reverse logistics Traffic and transportation Warehousing and storage Logistics activities

Logistics - PROC 5850 Walden Relationship of Logistics Activities to Logistics Costs Customer service levels Transportation costs Warehousing costs Order processing/information systems costs Inventory carrying costs

Logistics - PROC 5850 Walden Key Logistics Activities Customer service Demand forecasting Inventory management Logistics communications Material handling Order processing Packaging Parts and service support Plant and warehouse site selection Procurement Reverse logistics Traffic and transportation Warehousing and storage

Logistics - PROC 5850 Walden Flow through the Supply Chain Customer Supplier Distribution center Distribution center Manufacturing site Carrier

Logistics - PROC 5850 Walden Future Challenges and Areas for Performance Improvement Supply Chain Management Strategic Planning Total Quality Management Just-in-Time Quick Response Efficient Consumer Response Logistics as a Competitive Weapon

Logistics - PROC 5850 Walden Future Challenges and Areas for Performance Improvement (cont.) Accounting for logistics costs Logistics as a boundary-spanning activity Global logistics Increasing skill requirements Logistics information systems Strategic alliances, partnerships, and outsourcing Green marketing and reverse logistics

CHAPTER 2 Supply Chain Management

Logistics - PROC 5850 Walden Supply Chain Management The integration of key business processes from end user through original suppliers, that provides products, services, and information that add value for customers and other stakeholders.

Logistics - PROC 5850 Walden Evolution of Supply Chain Management CR (2004) Prentice Hall, Inc.

Logistics - PROC 5850 Walden Customer Relationship Management Customer service teams develop and implement customer partnering programs. Product/service agreements are established. New customer interfaces lead to improved communication and better predictions of customer demand and improve the way customers are serviced. Teams identify and eliminate sources of production variability. Key performance evaluation criteria (both level of service and customer profitability) are used to measure results. Similar to first step in Six Sigma process

Logistics - PROC 5850 Walden Customer Order Fulfillment “Customer need dates” and requirements drive the process. Manufacturing, distribution, and transportation plans are integrated. Strategic alliances with key supply chain members and carriers are formed to meet requirements and to reduce total-delivered-cost to customers Key metrics: Required Delivery Date; Time Definite Delivery; On time delivery rates; perfect order fulfillment

Logistics - PROC 5850 Walden Perfect Order Fulfillment Right product Right Place Right Quantity Right time Right condition Is 99% good enough?

Logistics - PROC 5850 Walden Perfect Order Fulfillment Right Product % x Right Place % x Right Quantity % x Right Time % x Right Condition % Example: 99% x 99% x 99% x 99% x 99% = 95% Perfect Order Fulfillment 95% = 77.37% Perfect Order Fulfillment

Logistics - PROC 5850 Walden Procurement Strategic plans of suppliers and company are aligned to focus resources on holding down costs and developing new products. Supplier categorization and management is implemented on a corporate global basis, with purchasing in a strategic contracting role. Purchase order transactions are integrated with the supply process to improve productivity and all areas of supplier performance.

Logistics - PROC 5850 Walden Product Development Design what the customer wants/needs Create a need for the product – 3M/iPod

Logistics - PROC 5850 Walden IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT

Logistics - PROC 5850 Walden Just In Time - Logistics or Supply Chain?

Logistics - PROC 5850 Walden Just -in-Time According to APICS Dictionary: “A philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity.”

Logistics - PROC 5850 Walden Just in Time The process is important not the actual “zero inventory” concept First Step - document the existing flow of products or services - see the actual flow and determine which are value added Second Step - determine the reasons for variations in flow and why a new flow may be needed Implement change Mistake proof Start again at step 1

Logistics - PROC 5850 Walden 7 Wastes Waste of overproduction Waste of waiting Waste of transportation Waste of Stocks Waste of motion Waste of making defects Waste of processing - when product should not be made or process not used (added by Walden) Waste of Meetings Source : Just-in-Time: Making it Happen

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Supply Chain Security “the single biggest threat facing American traders is supply chain security” Website for C-T PAT

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Why should you care about SC Security? Is it a US problem? Global Problem Heathrow Airport delays Superbowl weekend 2005 RFID – is this the solution? ISO Guidelines for SC Security Terrorism Insurance

Logistics - PROC 5850 Walden Supply Chain Security What’s the cost of 9/11 to the Supply Chain? Fortune Magazine - $50-80 billion a year inefficient supply chains higher transportation costs increased inventory

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Problem? Terrorism/Piracy Obsolescence Pilferage Information Breach Proprietary Data – Camera Phones; Thumb Drives Cyberspace Security RFID Data Security 66% of Sealift Containers arrive at 20 Major Ports >58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach ~44% through Los Angeles/Long Beach in 2003 Lengthening of Supply Chains – coupled with Globalization 3/11/2016

Logistics - PROC 5850 Walden Recent Headlines IMB identifies rash of false shipments into North AfricaIMB identifies rash of false shipments into North Africa Pirates intensify attacks in new areas, with first Somali hijacking reported in Red SeaPirates intensify attacks in new areas, with first Somali hijacking reported in Red Sea Maersk Alabama Captain Held by Pirates Peanut Corporation of America Somali piracy is worst in world – BBC News Russia Sends Warship to Somali Coast to Fight Piracy – Bloomberg.com UN adopts new Somalia piracy resolution

Logistics - PROC 5850 Walden 3/11/ Supply Chain Headlines “New Budget includes $10.2 Billion for Border Security.” “Battling the Bad Guys: 2005 Was a Tough Year” Dec 2005 Baseline Magazine “Major Data Theft Leads to Major Legal Problems” Baseline Magazine “Polo Ralph Lauren – Lost Point of Sale Data” “Somali pirates hijack fourth vessel in a week,” January 2, 2010

Logistics - PROC 5850 Walden More Headlines “Somali pirates hijack cargo ship near Seychelles,” April 11, 2010, AP News “Somali pirates attempt attack on Dutch warship,” March 17, 2010 “New suite of ISO supply chain management standards to reduce risks of terrorism, piracy and fraud” 3/11/201643

Logistics - PROC 5850 Walden Examples Major Distributor, Dec 2006 Locks on trucks SAFE Port Initiative Scanning of Containers C-TPAT ISO Standards for Supply Chain Security Threats in the international market- place know no borders.

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Terrorism Risk Insurance U.S. Terrorism Risk Insurance Act (TRIA)U.S. Terrorism Risk Insurance Act (TRIA) – property and casualty insurance experts are helping clients with interests in the United States make informed decisions about terrorism coverage. U.S. President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) into law in November 2002 to stimulate business investment that had slowed to a trickle after the events of September 11, The law creates a three-year federal program that backs up insurance companies and guarantees that certain terrorist-related claims will be paid. TRIA is a short-term measure designed to give the insurance market time to recover and develop new solutions.

Logistics - PROC 5850 Walden On December 26, 2007, the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 which extends the Terrorism Risk Insurance Act through December 31, The law extends the temporary federal Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.

Logistics - PROC 5850 Walden Supply Chain Security “We have proved to our management that good security is good business.” — Ann Lister of Texas Instruments

Logistics - PROC 5850 Walden Risk Supply Chains are inherently complex, dynamic, and fluid, characterized by uncertainty, ambiguity, and friction. These characteristics cloud the operating environment: they create risks

Logistics - PROC 5850 Walden Risk Assessment Terrorism Port Security – over 12 million containers annually to the US; 200 million world wide Port Security – 300 US Ports Longshoremen Strike – 2002 Potential Airport Attack – LAX; MPS; LGA

Logistics - PROC 5850 Walden Risk Assessment “If you do things the way you’ve always done them, you’ll get the same things you’ve always got.” -Darrell Waltrip This is not your Dad’s Supply Chain! Security is an integral part of the Supply Chain and Homeland Defense

Logistics - PROC 5850 Walden What are Supply Chain Hazards? Theft/Pilferage Competition Information Systems Cell Phones Thumb Drives Camera Phones Disgruntled Employees Lack of Training

Logistics - PROC 5850 Walden Problems? 66% of Sealift Containers arrive at 20 Major Ports >58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach ~44% through Los Angeles/Long Beach in 2003 Lengthening of Supply Chains – coupled with Globalization Top 5 “Hottest Global Markets”: China, Mexico, Eastern Europe, Southeast Asia, India

Logistics - PROC 5850 Walden What is a Catastrophic Risk? Inaccurate receipts? Customer Satisfaction? Sloppy Warehousing? National Emergency? Hurricane? Or, Only when it makes it to CNN?

Logistics - PROC 5850 Walden Important? September 11, $2 billion per day lost Longshoremen Strike, 2002 – ships backed up Potential loss of attack to major port - $20 billion estimate 2008 estimate ~ 12 million containers into US; up to 490 million containers world wide; ~10 million containers

Logistics - PROC 5850 Walden New Problem? “There were no ‘secure’ rear areas.” G eneral Joseph Heiser on Vietnam Logistics Sun Tzu – Chapter 1, The Art of War Native Americans American Civil War – Great Train Chase Pirates of the Caribbean

Logistics - PROC 5850 Walden Supply Chain Security A Global Perspective

Logistics - PROC 5850 Walden Top 5 European Ports Rotterdam – million TEUs in 2009 Rotterdam Hamburg – million TEUs (9.7 mil in 2008) Antwerp – 7.3 million TEUs (8.6 in 2008) Bremen – million TEUs (5.5 in 2008) Valencia – 3.65 million (3.6 in 2008)

Logistics - PROC 5850 Walden Other Key Ports Singapore – million TEUs Shanghai – 25 million Hong Kong – 20.9 million Shenzhen – million Pusan – million

Logistics - PROC 5850 Walden Rotterdam > 900 intermodal barge moves daily to 72 locations > 200 rail moves 220 million people within 600 miles of Rotterdam

Logistics - PROC 5850 Walden Rail > 15% of cargo to Germany via rail ~ 13% of Belgium cargo ~ 14 of French cargo US Rail – 4 major bridges over the Mississippi River

Logistics - PROC 5850 Walden Other issues 9000 distribution centers in the Netherlands $64.4 billion USD in logistics and distribution in The Netherlands

Logistics - PROC 5850 Walden SAFE Port Act The SAFE Port Act codified into law a number of programs to improve security of U.S. ports, such as: Additional requirements for maritime facilities Creation of the Transportation Worker Identification Credentials Establishment of interagency operational centers for port security

Logistics - PROC 5850 Walden Safe Port Act Container Security Initiative Foreign port assessments Customs Trade Partnership Against Terrorism

Logistics - PROC 5850 Walden Container Security Initiative CSI consists of four core elements: Using intelligence and automated information to identify and target containers that pose a risk for terrorism. Pre-screening those containers that pose a risk at the port of departure before they arrive at U.S. ports. Using detection technology (X-Rays) to quickly pre-screen containers that pose a risk. Using smarter, tamper- evident containers.

Logistics - PROC 5850 Walden Containers - Concerns Cost to X-Ray containers Manpower Delays Radiation

Logistics - PROC 5850 Walden Transportation Worker Identification Credentials Port Employees Long Shoremen Unescorted access personnel

Logistics - PROC 5850 Walden C-TPAT Voluntary November members Canada has a program very similar to C-TPAT named FAST – Free and Secure Trade.

Logistics - PROC 5850 Walden C-TPAT According to US Customs and Border Protection Agency, the benefits of participating in C-TPAT could include: – Playing an active role in the war against terrorism – A reduced number of CBP inspections. – Priority processing for CBP inspections.

Logistics - PROC 5850 Walden Orlando International Airport No staffing of doors for employee entrance to baggage claim areas Guns smuggled into planes by employees “no requirement for us to staff those doors” OIA Spokesperson; TSA – “not my job!” Identified as security issues in – ½ of TSA Screeners failed test that measured how well employees could identify explosives, guns and other weapons on the scanner – but can identify bottles of mouthwash and toothpaste Source: Mike Thomas, Orlando Sentinel, Mar 15, 2007, p. B-1

Logistics - PROC 5850 Walden Food Security

Logistics - PROC 5850 Walden BioTerrorism? Peter Pan Peanut Butter – e coli – 2007 E-coli from fresh Spinach – 2006 Chi Chi’s e-coli – from green onions – 2003 Taco Bell – e coli 2005 None were terrorist attacks but impacted supply chains US Salmonella/e-coli scare 2008 Salmonella epidemic >3921 separate items recalled

Logistics - PROC 5850 Walden Summary Direct link between supply chain security and homeland security Logistics costs are large part of manufacturing costs Savings in supply chain costs to bottom line

Logistics - PROC 5850 Walden Next Class Chap 3 & Chap 4