1. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 1 Logistics Planning, implementing, and controlling the effective flow and storage of goods and materials from the point of origin to the point of consumption (CLM)

2. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 2 Key Decision Areas  Transportation  Warehousing (and more generally, location)  Packaging  Material handling  Logistics information systems  Logistics service providers (And some would put inventory here as well!)

3. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 3 Why the Increasing Interest? Deregulation Globalization Technological breakthroughs Environmental concerns Performance impact

4. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 4 Deregulation Transportation providers –Elimination of artificial barriers –Unrestricted markets –Multi-modal solutions –Price, schedule, and terms flexibility Buyers have greater freedom –Negotiate prices, terms, and conditions –Ownership issues BUT…

5. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 5 Deregulation (continued) … With greater freedom comes new responsibilities Key point Logistics has evolved from being a “tactical” area to a “strategic” one

6. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 6 Technological Breakthroughs I Information Systems Global positioning systems Bar-coding applications –RFID on the horizon as replacement Real-time simulation and optimization Precise coordination of multi-modal solutions

7. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 7 Technological Breakthroughs II Transportation Systems Standardized containers for ease of transfer “Roadrailers,” etc. Multi-modal solutions –Ship  Truck  Train  Truck  ?

8. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 8 Environmental Concerns Even while certain aspects of logistics have been deregulated, other areas are being controlled more stringently  Fuel efficiency  Pollution  Recovery, recycling, and reuse of packaging, containers, and products

9. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 9 Performance Impact I Region Gross Domestic Product Logistics Expenditure Logistics % of GDP North America8,49591510.8 Europe7,98194111.8 Pacific5,60565211.6 Other7,08091612.9 Total29,1613,42411.7 Comparative GDP and Logistics Expenditures (billions of $, 1998) Source: D. Bowersox and R. Calantone, “Executive Insights: Global Statistics,” Journal of International Marketing, Vol. 8, no. 4, 1998, pp 83-93.

10. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 10 Performance Impact II Customer “touch points”  Delivery reliability  Delivery speed  Delivery tracking  Quality  “Ford is hiring UPS”

11. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 11 Performance Impact III 20002004 Manufacturing Time 2 days0.5 days Shipping Time 4 days Total Time to the Customer 6 days4.5 days Total time to the customer at WolfByte Computer 75% decrease in manufacturing time, but only 25% decrease in time to customer. Where is the leverage now?

12. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 12 The Evolution of Logistics Strategy From functional silos to strategic positioning

13. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 13 Strategic Disconnect

14. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 14 Who “Owns” Logistics?

15. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 15 Logistics Decision Areas Transportation… –Modes –Formats –Pricing Warehousing –Consolidation –Cross Docking and Break-Bulk –Hub and Spoke –Inventory

16. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 16 Major Transportation Modes Highway (truck) Water Rail Air Pipeline

17. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 17 Modal Shares of Shipments (within US, 1999) ModeValue (%)Tons (%)Ton Miles (%) Highway (trucking, parcel, postal, courier) 80.358.528.4 Water 2.511.120.4 Rail 4.811.226.7 Air 2.700.2 Pipeline 4.213.717.6 Other/Unknown 5.5 6.7

18. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 18 Highway Mode Strengths Flexibility to pick up and deliver where and when needed Often the best balance between cost/flexibility and delivery reliability/speed Can be available 24/7 Weaknesses Not the fastest Not the cheapest

19. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 19 Water Mode Strengths Highly cost effective for bulky items Most effective when linked into multimodal system Weaknesses Limited locations Relatively poor delivery reliability/speed Often limited operating hours at docks

20. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 20 Rail Mode Strengths Highly cost effective for bulky items Can be most effective when linked into multimodal system Weaknesses Limited locations, but better than for water. Better delivery reliability/speed than water

21. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 21 Air Mode Strengths Quickest delivery over longer distances Can be very flexible when linked to highway mode Weaknesses Often the most expensive, particularly on a per pound basis

22. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 22 Question How can businesses design solutions that exploit the strengths of each mode?

23. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 23 Multi-Modal Solutions North Carolina’s Global TransPark http://www.ncgtp.com/

24. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 24 Justification  Shift from domestic to global economies  Emergence of just-in-time, flexible and agile manufacturing practices requiring sophisticated logistics solutions  The rapid growth of distribution via air freighters (roughly four times the growth rate of passenger service by the airlines)  The need to use air cargo, shipment by sea, and delivery by trucks and trains in an overall distribution system  The need for a commercial distribution hub in the Eastern United States that can reach more than 60 percent of the nation’s population overnight and also provide a gateway to global markets.

25. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 25 Global TransPark 15,700 acres at full development with two parallel runways of 11,500 feet and 13,000 feet Integrated air, rail, road, and nearby sea transportation capabilities Free trade zone status

26. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 26 Kinston, NC

27. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 27 Transportation “Formats” Common carriers –Published rates and schedules –“Nondiscriminatory” pricing –Increased flexibility to partner Contract carriers –Service for select customers –Unlimited number of customers Private carriers

28. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 28 Pricing Transportation Services Economic factors –Pricing versus distance –Price/pound versus density –Stowability, handling, and liability –Market factors

29. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 29 Economic Factors I Stowability, handling, and liability versus

30. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 30 Economic Factors II Market factors What might this include? East Coast, USA West Coast, USA

31. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 31 Key Points Choosing a mode –Five choices –Speed? Cost? Flexibility? Choosing a format –Flexibility versus control Controllable factors affecting cost –Density, stowability, packaging, and containerization

32. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 32 Warehousing Any operation that stores, repackages, stages, sorts, or centralizes goods or materials

33. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 33 New View Warehousing a key piece of logistics strategy –Proctor & Gamble (See pages 44-46 and 309.) –Kraft (See page 336.) –Lowe’s (See page 346.) More than just storage –“Warehousing”  “Distribution Centers”

34. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 34 Warehousing Benefits Economic benefits:  Accrue directly to company  Must consider total system costs Service benefits:  Support customer service needs  May or may not reduce costs

35. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 35 Consolidation

36. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 36 Example 1 Dedicated truck from Los Angeles to Atlanta: $2,000 Cost to run consolidation warehouse: $9 per hundred-weight Local delivery in Atlanta: $200 per customer CustomerShipmentWeight Venetian Artist Supply100 boxes, artist supplies 3,000 lbs. Kaniko100 PC printers3,000 lbs. Ardent Furniture10 dining room sets4,000 lbs.

37. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 37 Cost Benefits of Consolidated Warehousing How does this compare to the cost of separate dedicated shipments? What about truck utilization (assume trucks hold 60,000 lbs.) Warehousing costs10,000 lbs × $ 9/100 lbs =$900 Cost of one truck to Atlanta$2,000 Delivery to final customer3 customers × $200 = $600 Total:$3,500

38. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 38 Cross-Docking What about supply / demand mismatches?

39. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 39 Break-Bulk Like cross-docking, but usually refers to a single source

40. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 40 Hub and Spoke Systems

41. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 41 Processing and Postponement Coca Cola syrup Bulk food products, paints, etc.  high volumes  containers Processing and Postponement Packaging Labeling, etc. Customer A Customer B Customer C Minimizes risk Minimizes inventory (how?)

42. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 42 Service Benefits: Spot stock Assortment

43. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 43 Spot Stock Time sensitive, seasonal items Often temporary, public storage Region 3 Region 2 Region 1

44. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 44 Weighted Center of Gravity A method to determine best location for central warehouse from n demand points. – Requires position of each demand point (X i, Y i ) – Requires weight of each demand point (W i ), based on importance, demand volume, market strategy, etc.

45. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 45 CupAMoe’s Coffee

46. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 46 Assortment Customer D Customer C Customer B Customer A Supplier E Supplier F Supplier G Supplier H Broad product line and good inventory control are keys to success. Assortment Warehouse

47. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 10, Slide 47 Packaging and Unitization What are the typical marketing criteria?

48. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 48 Packaging Implications Transportation –Class segmentation –Damage protection Material handling and warehousing –Storage requirements –Unitization –Container recycling –Ease of handling

49. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 11, Slide 49 Unitization Unit loads –Transport and handling efficiencies Non-rigid containers –pallets and unit load platforms –ropes, steel, shrink and stretch wrap Rigid containers –Maximum protection (Viper windshield frame) –Standard sizes? –Recycling?