1. Global Logistics Summary: –So What Should You Take Away From This Class?

2. The Global Corporation Fully integrates product design, material supply, production, distribution, accounting, marketing, and finance on a world-wide basis. Typically design their operating strategy objectives around four components: Technology, Marketing, Manufacturing, and Logistics.

3. Geographic SectorialFunctional RETAIL INDUSTRY EXAMPLES WAL MART C + Q C + S S + Q

4. FORMS OF ALLIANCE

5. WHAT TYPE OF ALLIANCE? LEVEL OF COMMITMENT STRATEGICIMPORTANCE Acquisition Minority Interest Joint Venture Joint Marketing Joint Development Projects Licensing Agreements Alliance/Consortia Commercial Contracts Technology Trials Low Medium High LowHigh

7. Criticality of the Part to Final Assembly LowHigh Low High Strategic Value of the Part in Isolation To-Make or NOT To-Make?

8. Criteria Used by BOSE to Select Categories for JIT II 1. There is a MATURE, TRUSTING Relationship with the BEST Supplier in the Category. 2. The Supplier has a GOOD ENGINEERING Capability. 3. The Volume in the Product Category exceeds $1 Million. 4. The Product Category involves a lot of TRANSACTIONS, creating a need for an in-plant representative. 5. The Technology in the Category is NOT changing at a Revolutionary Pace. 6. The Category DOES NOT involve Proprietary or Core Technologies (Such as Acoustics and Electronics).

9. PURCHASING * Selecting and qualifying Suppliers * Rating Supplier performance * Negotiating Contracts * Comparing price, quality, and service * Sourcing goods and services * Timing Purchases * Setting terms of sale * Evaluating the value received * Measuring inbound quality * Predicting price, service and Demand changes * Specifying the form in which goods are to be received Activities Associated with Purchasing:

10. VENDORS PLANTS DISTRIBUTION CENTERS CUSTOMER ZONES TWO EXTREMES OF LOGISTICS NETWORKS

11. CENTRALIZATIONBenefits Risk Pooling / Variance Reduction Effect Economies of Scale Economies of Scope Learning / Experience Curve Coordination Advantages

12. DECENTRALIZATIONBenefits Product / Process Improvements - Proximity to suppliers Customer Satisfaction - Proximity to markets/customers Cost Savings - Sourcing, Production, Logistics - Financing Risk Diversification / Portfolio Effect - Technology Risk - Financial Risk

13. Inventory * Inventory is Higher - Higher in-transit inventories - Pipelines are longer and slower - Higher Safety Stock levels - Longer lead times - Political uncertainty - Production uncertainties - More SKUs Control * Facilities Network More Difficult to Control - Several languages and cultures - Labor norms - Customs - Infrastructure DOMESTIC vs GLOBAL LOGISTICS Logistics Elements Transportation * Transportation is More Difficult and Costly - Freight rates - Intra-country transport - Different modes - Complex documentation and intermediaries - Consolidation Service * Service is Slower and More Costly - Lead times are longer - Pipelines are longer - Uncertainty about availability - Order processing is more difficult - Stockouts are more frequent

14. Economic Factors: a) Type of Product * Product Life Cycle and Perishability * Strategic classification b) Nature of Demand c)Proliferation of Products Environmental Factors a)Level of Customer Service required in the Market b) Routing Requirements c) Host Governments Regulations and Actions Organizational Factors a) Marketing-Manufacturing Interface b) Intra-Subsidiary Traffic and Accounting c)Strategic priorities (C,Q,S,F) and Metrics FACTORS AFFECTING YOUR LOGISTICS ROLE

15. Understand the Logistics Function and the Role you might play De-emphasize the Short Term Cost Advantage Emphasize the Long Term Service, Quality and Reliability Advantages Emphasize your willingness to adjust to the dynamics of market fluctuations Manufacturing Excellence is Fundamental Logistics Core Competence (i.e., is Logistics in your Core Competence?) ACTION PLAN

16. ADVANTAGES OF GLOBAL LOGISTIC * Rationalization of Resources * Increase Potential Market Size * Economies of Scale and Scope (i.e., minimization of Costs) * Flexibility: Operational, Financial, Responsiveness * Improve Internal and External Service * Risk reduction through diversification * Technology Development and R&D (i.e., upgrading Quality) * Faster Response to the Dynamic Forces of the Global Economy

17. KEY TAKEAWAYS 1) Logistics is the natural link between Operations and Marketing to make more efficient the flow of goods and information along the make more efficient the flow of goods and information along the logistics system. Optimization of individual linkages does not guarantee logistics system. Optimization of individual linkages does not guarantee global solutions and that is why you need a Global Logistics Approach. e.g., Resource Oriented Logistics, User Oriented Logistics, Information Oriented Logistics 2) When determining and forecasting future Demand, do not confuse historical sales with Real Demand. Try to incorporate substitution rates and information about stockouts. When measuring service, don’t confuse individual measures with order measures. e.g., mail orders versus POS information; link information with members of the logistics system via EDI, ECR, CR and CFAR; line fill rate versus order fill rate 3) Not all products (or customers) are equally important. Classify products according to logistics needs as well as financial indicators. Proliferation of SKU’s complicates the logistics management. e.g., ABC versus ORG, clear rules for introducing and retiring products from the market

18. 4) Outsourcing is a great alternative for rationalizing the existing resources of a company. However, do not outsource without analyzing the strategic fit with the core competence. e.g., strategic role of the part in isolation versus strategic role of the part to final assembly 5) 3PL companies are an excellent alternative for outsourcing logistics. However, make sure the needs as well as the specific measurement is determined in advance. e.g., show me the value measurement, determination of the base case for comparison 6) Cost, Quality, Service, and Flexibility are the dimensions that allow for a better understanding and management of the the logistics system. There are at most two winning criteria and two qualifying criteria. These criteria are dynamic and change with the nature of competition. The best alliances are the ones where your qualifying criteria are your partners winning criteria. KEY TAKEAWAYS Cont.

19. P - COST P - QUALITY P-SERVICEP-SERVICE P-FLEXIBILITYP-FLEXIBILITY The 4Ps of Operations and Logistics O P E R F R M A N CE