1. Chapter 1Management of Business Logistics, 7 th Ed.1 BUS 3620 Logistics and SCM We start our lecture to firstly gain the understanding of the following two fundamental questions: What is Supply Chain Management (SCM)? What is Logistics?

2. Chapter 1: Supply Chain Management

3. Chapter 1Management of Business Logistics, 7 th Ed.3 Supply Chain Management: Introduction Why do we need to know SCM?

4. Chapter 1Management of Business Logistics, 7 th Ed.4 Supply Chain Management: Introduction 4 Reasons: 1. Supply chain management now part of the business vocabulary. 2. Impact of global marketplace drastically changed the landscape of business. 3. Change was rapid and continuous in the 1990s. 4. Doing business in the comfort zone was no longer synonymous with success.

5. Chapter 1Management of Business Logistics, 7 th Ed.5 The Changing Business Landscape: Five Driving Forces 1. The Empowered Consumer The Empowered Consumer 2. Power Shift in the Supply Chain Power Shift in the Supply Chain 3. Deregulation Deregulation 4. Globalization Globalization 5. Technology Technology

6. Chapter 1Management of Business Logistics, 7 th Ed.6 The Changing Business Landscape: Five Driving Forces 1. The Empowered Consumer Impact on logistics is more direct. Informed consumers have low tolerance for poor quality in products and services. Changing demographics commands 24/7 service, become less royal Increased customer service increases the importance of logistics and supply chains.

7. Chapter 1Management of Business Logistics, 7 th Ed.7 The Changing Business Landscape: Five Driving Forces 2.Power Shift in the Supply Chain Large retailers more demanding and commanding. Focus upon distribution costs and their impact on “everyday low prices”. Changing logistics and supply chain strategies resulted from shifts in the balance of economic power.

8. Chapter 1Management of Business Logistics, 7 th Ed.8 The Changing Business Landscape: Five Driving Forces 3. Deregulation (4 main legs) Changing economic controls empowered creativity and competition. 1. Changes in transportation – fewer or no economic controls over rates and services. 2. Change in financial institutions blurred traditional differences and increased competition. 3. Change in the communications industry also resulted in more competition. 4. Changes in the utility (energy) industry allows more competition.

9. Chapter 1Management of Business Logistics, 7 th Ed.9 The Changing Business Landscape: Five Driving Forces 4. Globalization Global marketplace concept Global network sourcing, manufacturing, marketing and distribution Global alternatives have blossomed No geography --- access available to the world Supply chain challenges Wal-Mart’s challenges New supply sources

10. Chapter 1Management of Business Logistics, 7 th Ed.10 The Changing Business Landscape: Five Driving Forces 5. Technology Information Age provides new and unrestricted access to the place aspect of business. My time, my place Warehouse technology has changed dramatically with computer devices in use from the office space to the forklifts.

11. Chapter 1Management of Business Logistics, 7 th Ed.11 Success of story of SCM How SCM helps to enhance the expansion of a business ventures?

12. Chapter 1Management of Business Logistics, 7 th Ed.12 On the Line: Extreme Enterprise Integrating new enterprise and supply chain management solutions allowed Columbia Sportswear to keep up with sales that increased from $3 million in 1984 to $470 million in 1999. With one store and a handful of outlets, distribution to its customers is where the rubber meets the road. Columbia’s president was determined not to let distribution restrain growth, and backed it with money. A 1 million square foot distribution center receives more than 2 million units/month and set a record by shipping 172,000 items in one day, and more than 2 million items in a month.

13. Chapter 1Management of Business Logistics, 7 th Ed.13 The Changing Business Landscape: The Supply Chain Concept 1. Definition Definition 2. Development of the Concept Development of the Concept 3. Business Case for Supply Chain Management Business Case 4. Characteristics of Supply Chain Management Characteristics

14. Chapter 1Management of Business Logistics, 7 th Ed.14 1. The Supply Chain Concept: Definition An extended enterprise that crosses over the boundaries of individual firms to span the logistical related activities of all the companies involved in the supply chain.

15. Chapter 1Management of Business Logistics, 7 th Ed.15 2. Development of the Concept Five main elements: 1. Total systems cost - remains an important element of logistics analysis. 2. Outbound logistics - was the initial focus with higher value finished goods. 3. Inbound logistics – deregulation allowed new focus on coordination of inbound and outbound movements. 4. Value chain analysis integrated logistics activities. 5. Terminology growing as supply chain concept matures.

16. Chapter 1Management of Business Logistics, 7 th Ed.16 2. Development of the Concept A general view: Inbound Outbound Suppliers 1960s – physical distribution, emphasized on outbound – Figure 1.1Figure 1.1 1980s – inbound logistics added, thus need coordination between both inbound and outbound systems – value chain needed – Figures 1-2-1.4Figures 1-2-1.4

17. Chapter 1Management of Business Logistics, 7 th Ed.17 Figure 1-1 A View of Business Logistics in a Firm

18. Chapter 1Management of Business Logistics, 7 th Ed.18 Figure 1-2 Integrated Logistics Management Identifying activities, Figure 1-3 Figure 1-4

19. Chapter 1Management of Business Logistics, 7 th Ed.19 Figure 1-3 Generic Value Chain

20. Chapter 1Management of Business Logistics, 7 th Ed.20 Figure 1-4 Logistics Supply Chain

21. Chapter 1Management of Business Logistics, 7 th Ed.21 3. Business Case for Supply Chain Management: Why so much attention on supply chain management? ECR and Best-in-class studies (Figures 1.5, 1.6 )1.51.6 (ECR - Effective customer response) Complexity of the supply chain (Figure 1.7)1.7 Extended enterprise concept Two-way flow of: (Figure 1.7)1.7 Products Information Cash Inventory visibility (Figure 1.8)1.8

22. Chapter 1Management of Business Logistics, 7 th Ed.22 Figure 1-5: Comparison of Average Throughput Time of Dry Grocery Chain before and after ECR Implementation

23. Chapter 1Management of Business Logistics, 7 th Ed.23 Figure 1-6: Total Supply Chain Management Cost --- All Sectors Revenue %

24. Chapter 1Management of Business Logistics, 7 th Ed.24 Figure 1-7: Integrated Supply Chain

25. Chapter 1Management of Business Logistics, 7 th Ed.25 Figure 1-8: Running Lean Number of times Dell and Compaq turn inventory over in each quarter, calculated at an annual rate.

26. Chapter 1Management of Business Logistics, 7 th Ed.26 4. Five Main Characteristics of Supply Chain Management 1. Inventory Visibility – managing flow and reduce or eliminate uncertainty Pull systems – response to demand as opposed to pushing it to advance of demand 2. Landed Cost 1. Companies must realize that their strategies may affect the landed cost – ie the final cost 2. Coordination of supply chain activities may lower the landed cost.

27. Chapter 1Management of Business Logistics, 7 th Ed.27 4. Five Main Characteristics of Supply Chain Management 3. Real-time two way information flows 4. Customer service levels must be tailored to each customer – not to treat all customers the same not all customers require the same service – need to cater the special need of individual customers 5. Supply chain relationships 1. Collaborative planning 2. Share risks and rewards

28. Chapter 1Management of Business Logistics, 7 th Ed.28 Figure 1-9: Traditional Supply Chain/Pipeline Inventory Flow 1970s and 1980s

29. Chapter 1Management of Business Logistics, 7 th Ed.29 Contemporary Supply Chain Pipeline

30. Chapter 1: Summary and Review Questions Students should review their knowledge of the chapter by checking out the Summary and Study Questions for Chapter 1. This is the last slide for Chapter 1

31. End of Chapter 1 Slides Supply Chain Management