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Dr. Mary Collins Holcomb Associate Professor November 16th and 18th, 1999. Fundamentals of Logistics and Supply Chain Management. Agenda. The Role of Logistics Integrated Logistics Management Information Management Implementing Logistics Strategy Supply Chain Management

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agenda
Agenda
  • The Role of Logistics
  • Integrated Logistics Management
  • Information Management
  • Implementing Logistics Strategy
  • Supply Chain Management
  • Issues and Challenges
logistics management
Logistics Management

“That part of supply chain management which deals with the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.”

-- Council of Logistics Management

slide5

move

MOVE

move

Tangible goods still have to move (and be stocked) through space and time. . . new strategies and methods must create new value.

slide6

Order

Management

DistributionCenterOperations

Transportation Management

Production

Management

Demand

Forecasting

CustomerService

Inventory

Management

Purchasing

logistics Cost Components

Weighted Average

Transportation 44.3%

Warehousing 19.9%

Inventory Carrying Cost 19.2%

Order Processing 6.5%

Other 6.0%

Administrative 4.1%

100%

Source: Herbert W. Davis & Co.

Logistics Management

Transportation costs comprise the single largest element in most physical distribution systems

slide7

Outsourcing

Strategy

Distribution

Network

Configuration

Delivery

Service

Customer-Supplier

Relation/Partnership

Value-Added

Services

Distribution

Planning

Warehouse

Management

3rd Party Service

Provider Relation/

Partnership

Inter-Facility/

Outbound Transportation

Management

The

New Logistics

Excellence in distribution & transportation adds value at all levels.

Asset

Management

Inventory

Deployment/

Reduction

Shared Services

Basic Service

Revenue

Enhancement

Operational

Efficiency

Planning/Operational

Strategic

slide8

The

New Logistics

To improve deployment & management of assets . . .

Reduce

capital expenditures by

improving usage of fixed assets

1. Rationalize distribution networks

2. Outsource select processes

3. Explore shared facilities

4. Understand supply chain tax implications

5. Consolidate warehouses

6. Replace inventories with information

7. Reduce distribution cycle time

8. Implement demand-driven planning

Reduce

working capital by minimizing inventories

slide9

Drivers Behind Increase in Transportation Expenditures

  • Accelerating trend toward leaner, more flexible logistics networks
  • Less inventory in the pipeline
  • Increasing demand for synchronized service
  • Increasing requirement for faster more reliable transportation service over longer distances

Pressure to reduce cost and improve service

integrated logistics
Integrated Logistics

PRODUCT FLOW

  • Physical Supply
  • Manufacturing Support
  • Procurement
  • Physical Distribution
integrated logistics cont
Integrated Logistics (cont.)

INFORMATION FLOW

  • Coordination flows
      • Strategic objectives
      • Capacity constraints
      • Logistical requirements
      • Forecasting
integrated logistics cont13
Integrated Logistics (cont.)

INFORMATION FLOW

  • Operational Flows
      • Order management
      • Order processing
      • Distribution operations
      • Inventory management
      • Transportation
operating objectives
Operating Objectives
  • Rapid response
  • Minimum variance
  • Minimum inventory
  • Movement consolidation
  • Quality
  • Life-cycle support
barriers to integration
Barriers to Integration
  • Organizational structure
  • Measurement systems
  • Inventory ownership
  • Information technology
  • Knowledge transfer capability
measuring performance
Measuring Performance

Several different approaches may be used to measure the functional performance of logistics:

  • cost criteria
  • productivity criteria
  • service criteria
measuring performance17
Measuring Performance

Firms evaluate logistics managers primarily on the basis of three factors:

  • line management ability
  • problem-solving ability
  • project management ability
best of the best logistics firms
“Best of the Best” Logistics Firms
  • Organizationally positioned to guide logistics activities at all levels - strategic, tactical, and operational;
  • Internal integration has enabled the development of operational excellence, and boundary spanning relationships;
best of the best logistics firms cont
“Best of the Best” Logistics Firms (cont.)
  • Demonstrated “agility” in terms of the firm’s competency with respect to relevancy, accommodation, and flexibility.
  • Measured performance both internally and externally.
electronic commerce
Electronic Commerce
  • Examples:
    • Electronic data interchange (EDI)
    • e-mail
    • Electronic funds transfer
    • Electronic publishing
    • Shared databases
    • Internet / Web sites
electronic commerce levels
Electronic Commerce Levels
  • LEVEL 1

One-way communication

    • LEVEL 2

Database access

      • LEVEL 3

Data exchange

        • LEVEL 4

Sharing processes

the internet changes everything
The Internet Changes Everything!
  • The Internet is ubiquitous.
  • The Internet is user friendly.
  • The Internet is inexpensive.
  • The Internet is global.
how long until your company
How Long Until Your Company…...
  • Receives over 64% of its $8.5 billion in sales over the Internet
  • 70% of all technical support questions are asked over the Internet
  • 55% of its employee resumes come over the Internet

Cisco Systems, USA Today, Sept. 23, 1998

slide27

If logistics managers do not understand corporate strategy, they will not be able to make decisions that are in the best interest of the organization.

slide28

The Hierarchy of Planning

Strategic Tactical Operational

____________________________________

What is the organization’s overall customer service strategy and what should it be?

What are the best opportunities for cost reduction in the organization’s logistics system?

What are the core competencies of the logistics function, I.e. which activities should be outsourced?

slide29

The Strategic Issues and Challenges

  • How to help the firm and its customers deal with big changes -- globalization, restructuring, competition
  • How to improve profitability (growth) and value creation - for the firm and its customers
  • How to raise the performance of all services to competitive advantage levels
  • How to integrate/leverage logistics within the firm and the supply chain
slide31

The supply chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information flows.

slide32

How to Achieve Profitable Growth and Value Creation*

i

Cost Minimization

ProfitableGrowth

TaxMinimization

Value

WorkingCapitalEfficiency

Fixed CapitalEfficiency

Time

  • * Based on “Supercharging Supply Chains,” a new book by E&Y/J. Wiley, Inc.
stages of supply chain development
Stages of Supply Chain Development
  • STAGE 1 - Fundamentals

Focus on quality

  • STAGE 2 - Cross Functional Teams

Serve our customers

  • STAGE 3 - Integrated Enterprise

Drive business efficiency

stages of supply chain development cont
Stages of Supply Chain Development (cont.)
  • STAGE 4 - Extended Supply Chain

Create market value

  • STAGE 5 - Supply Chain Communities

Be a market leader!

supply chain cost categories
Supply Chain Cost Categories
  • Manufacturing
    • Purchased materials, labor, equipment charge, and supplier’s margin
  • Movement
    • Transportation, inventory in the pipeline (cycle), safety stock, and duty
  • Incentives and subsidies
supply chain cost categories cont
Supply Chain Cost Categories(cont.)
  • Intangibles
    • Quality, product adaptation or performance, coordination
  • Overhead
    • Total current landed costs
  • Long-term
    • Productivity and wage changes, exchange rates, product design, and core competencies
sluggish supply chains
“Sluggish” Supply Chains
  • Lack of synchronization in materials management
  • Ambiguous goals and objectives
  • Poorly designed procedures and forms
  • Outdated technology
  • Lack of information
sluggish supply chains38
“Sluggish” Supply Chains
  • Poor communication
  • Limited coordination
  • Limited cooperation
  • Lack of / ineffective training
the strategic issues and challenges
The Strategic Issues and Challenges
  • How to help the firm and its customers deal with big changes -- globalization, restructuring, competition
  • How to improve profitability (growth) and value creation - for the firm and its customers
  • How to raise the performance of all services to competitive advantage levels
  • How to integrate/leverage logistics within the firm and the supply chain