1. INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT
CHAPTER 16

2. AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
Explain what supply chain and logistics management are and how they relate to marketing strategy.
Understand the distinction between supply chain responsiveness and efficiency.

3. AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
Explain how managers trade off different “logistics costs” relative to customer service in order to make a supply chain decision.
Recognize how customer service in logistics decisions contributes to customer value and successful marketing programs.

4. AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
Describe the key logistics functions of transportation, warehousing and materials handling, order processing, and inventory management and the role of third-party logistics providers.

5. INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT
SNAP! CRACK! POP! EVEN WORLD-CLASS COMPANIES CAN FEEL THE BULLWHIP’S STING

6. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Relating marketing Channels, Logistics, and Supply Chain Management
Logistics
Logistics management
Supply chain
Supply chain management

7. FIGURE 16-1 Relating marketing channels, logistics management, and supply chain management

8. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Sourcing, Assembling, and Delivering a New Car: The Automotive Supply Chain

9. FIGURE 16-2 The automotive supply chain

10. Build Your Own Saturn

11. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Supply Chain Management and Marketing Strategy
Aligning a Supply Chain with Marketing Strategy
Understand the customer
Understand the supply chain
Harmonize the supply chain with the marketing strategy

12. SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT
Supply Chain Management and Marketing Strategy (cont)
Dell Computer Corporation: A Responsive Supply Chain
Wal-Mart, Inc.: An Efficient Supply Chain
Cross docking

13. Dell Computer Corporation
Emphasizes responsiveness in its supply chain

14. Emphasizes efficiency in its supply chain
Wal-Mart, Inc.
Emphasizes efficiency in its supply chain

15. Concept Check
1. What is the principal difference between a marketing channel and a supply chain?
A: The supply chain differs in membership because it includes suppliers of raw materials as well as those suppliers which deliver finished products to a company.

16. 2. The choice of a supply chain involves what three steps?
Concept Check
2. The choice of a supply chain involves what three steps?
A: 1. Understand the customer
2. Understand the supply chain
3. Harmonize the supply chain with the marketing strategy

17. INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN
Information’s Role in Supply Chain Responsiveness and Efficiency
Electronic data interchanges
Total Logistics Cost Concept

18. FIGURE 16-3 How total logistics cost varies with number of warehouses used

19. INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN
Customer Service Concept

20. FIGURE Supply chain managers balance total logistics cost factors against customer service factors

21. INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN
Customer Service Concept (cont)
Lead Time
Quick response
Efficient consumer response
Dependability
Communication
Convenience
Customer Service Standards

22. Concept Check
1. The objective of information and logistics management in a supply chain is to ___________________ ____________________________ _______________
minimize logistics cost while delivering maximum customer service.

23. Concept Check
2. How does consumer demand information increase supply chain responsiveness and efficiency?
A: Because firms are better able to forecast customer needs and produce, transport, and store the required amount of inventory.

24. Concept Check
3. What is the relationship between the number of warehouses a company operates, its inventory costs, and its transportation costs?
A: As the number of warehouse increases, its inventory costs increase and its transportation costs decrease.

25. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Third-party logistics providers
Transportation

26. FIGURE 16-5 Advantages and disadvantages of five modes of transportation

27. Full service logistics provider
FedEx Ad
Full service logistics provider

28. Focus on supply chain and logistics management
UPS TV Ad
Focus on supply chain and logistics management
UPS TV ad in its “What Can Brown Do For You” campaign, focusing on supply chain and logistics management. (TRT: 0:30)

29. Focus on supply chain management
UPS TV Ad
Focus on supply chain management
UPS TV ad in its “What Can Brown Do For You” campaign, focusing on supply chain management. (TRT: 0:30)

30. UPS Print Ad NASCAR sponsorship
UPS print ad in the “What Can Brown Do For You” campaign. This ad identifies UPS’s sponsorship of NASCAR.

31. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Transportation (cont)
Railroads
Intermodal transportation

32. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Transportation (cont)
Motor Carriers
Air Carriers and Express Companies
Freight Forwarders
Warehousing and Materials Handling
Order Processing

33. KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN
Inventory Management
Reasons for Inventory
Inventory Costs
Supply Chain Inventory Strategies
Just-in-time (JIT) concept
Vendor-managed inventory
CLOSING THE LOOP: REVERSE LOGISTICS

34. Key to Saturn’s JIT System A key-shaped floppy disk from Ryder

35. Online delivery instructions
Ryder System, Inc.
Online delivery instructions

36. CLOSING THE LOOP: REVERSE LOGISTICS
Estee Lauder Companies: Reverse logistics and green marketing go together

37. 1. What are the basic trade-offs between the modes of transportation?
Concept Check
1. What are the basic trade-offs between the modes of transportation?
A: A comprehensive comparison is shown in Figure A general trade-off is cost versus time and dependability.

38. Concept Check
2. What types of inventory should use storage warehouses and which type should use distribution centers?
A: Goods which will not be needed for substantial periods of time, such as excess or seasonal inventory, are best suited for storage warehouses which hold goods for substantial periods of time. Distribution centers are used when products need to keep moving toward the consumer.

39. 3. What are the strengths and weaknesses of a just-in-time system?
Concept Check
3. What are the strengths and weaknesses of a just-in-time system?
A: Strengths: Save money on inventory; forces better planning of vendor selection, transportation selection, forecasting, scheduling, etc.
Weaknesses: Can cause stockouts, production disruptions, and higher costs if weak links appear.

40. Internet Exercise
1 Visit Learn more about the bullwhip effect. What are the principal contributors to the bullwhip effect?

41. Internet Exercise
2 How have companies reduced the sting of the bullwhip?

42. VIDEO CASE 16-1 Amazon: Delivering the Goods Millions of Times Each Day
1 How do Amazon.com’s logistics and supply chain management activities help the company create value for its customers?

43. VIDEO CASE 16-1 Amazon: Delivering the Goods Millions of Times Each Day
2 What systems did Amazon develop to improve the flow of products from suppliers to Amazon distribution centers? What systems improved the flow of orders from the distribution centers to customers?

44. VIDEO CASE 16-1 Amazon: Delivering the Goods Millions of Times Each Day
3 Why will logistics and supply chain management play an important role in the future success of Amazon.com?

45. Logistics
Those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible price.

46. Logistics Management
The practice of organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements.

47. Supply Chain
A sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users.

48. Supply Chain Management
The integration and organization of information and logistic activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to customers.

49. Cross Docking
Practice of unloading products from suppliers, sorting products for individual stores, and quickly reloading products onto trucks for a particular store.

50. Electronic Data Interchange (EDI)
Combine proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers.

51. Total Logistics Cost
Expenses associated with transportation, materials handling and warehousing, inventory, stockouts, order processing, and return goods handling.

52. Customer Service
The ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience.

53. Lead Time
Lag from ordering an item until it is received and ready for use or sale. Also called order cycle time or replenishment time.

54. Quick Response
An inventory management system designed to reduce the retailer’s lead time, thereby lowering its inventory investment, improving customer service levels, and reducing logistics expense.

55. Third-Party Logistics Providers
Firms that perform most or all of the logistics functions that manufacturers, suppliers, and distributors would normally perform themselves.

56. Vendor-Managed Inventory
An inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items.

57. Reverse Logistics
A process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or sue for repair, remanufacturing, redistribution, or disposal.

58. Intermodal Transportation
Combining different transportation modes to get the best features from each.

59. Freight Forwarders
Firms that accumulate small shipments into larger lots and then hire a carrier to move them, usually at reduced rates.

60. Materials Handling
Moving goods over short distances into, within, and out of warehouses and manufacturing plants.

61. Just-In-Time Concept
An inventory supply system that operates with very low inventories and requires fast, on-time delivery.