Logistics

LOGISTICS & SUPPLY CHAIN
MANAGEMENT
:
References:
1.
Supply chain management; Strategy, planning and operation; Sunil Chopra and Peter Meindl, 2004
2.
Logistics and Supply chain Management, Martin Crestopher, 2000
3.
Business Logistics Management, Ronald H. Ballou, 1999
4.
Logistics Engineering and Management, Benjamin S. Blanchard, Prentice Hall, 1996
5.
Improving Quality and Productivity in the Logistics Process; A.T. Kearney, Inc., 1991
6.
Logistics in service organizations, Arthur D. Little and PSU, for CLM, 1991
1.
2.
3.
4.
5.
6.
2
EVOLUTION OF MANAGEMENT FOCUS
1990-2000
1990-2000
1980s
1980s
1970s
1970s
1960s
1960s
1950s
1950s
---
1951
1951
- -1950
-- -- -- -1950
-- -- -- -- -- -- -- -- -- --- -- -- -- --
-----
Production
Production
1961
1961
- -1960
-- -- -- -1960
-- -- -- -- -- -- -- -- -- --- -- -- -- --
-----
Marketing
Marketing
1971
1971
- -1970
-- -- -- -1970
-- -- -- -- -- -- -- -- -- --- -- -- -- --
-----
Strategy
Strategy
1981
1981
- -1980
-- -- -- -1980
-- -- -- -- -- -- -- -- -- --- -- -- -- --
-----
1991
1991
- -1990
-- -- -- -1990
-- -- -- -- -- -- -- -- -- --- -- -- -- --
Customer
CustomerValue
Value
Quality
Quality
---
IN THE WORLD MARKAT
.
.
.
.
.
.
TRADING THROUGH LOGISTICS

COUNTRY
A
B
COUNTRY
A
B
PRODUCT X($) PRODUCT Y($))
250
400
500
300
PRODUCT X($) PRODUCT Y($))
250
300
350
300
TOTAL ($)
750
700
1450
TOTAL ($)
600
600
1200
BENETTONS DELIVERY CHANNEL

30
8
80
5000 60
230000
NATURE OF THE LOGISTICS PRODUCT

)( Consumer Products
)( Convenience Products

) (
) )
) )
) )
) )
) )
) )

)( Shopping Products
NATURE OF THE LOGISTICS PRODUCT

)( Consumer Products

)( Specialty Products

) (

)( Industrial Products

.
:
10
PRODUCT LIFE CYCLE

Sales volume
Introduction
Growth
Maturity
Decline
Time
11
BUSINESS GOAL

.

:
*
*
*
12
-1
-2
-3
-4
-5
-6
-7
13
LOGISTICAL CONSTRAINTS
*

*
*
*
14
THE LOGISTICS PROCESS

SPANS MOST FUNCTIONS OF THE BUSINESS
Result
15
LOGISTICS IMPACT ON ROI
16
17
*
*
*
*
*
*
**
*
**
**
18
19
20
21
22
OBJECTIVES OF BUSINESS LOGISTICS
: )
(

23
LOGISTICS EVOLUTION

****

****
24
****
25
) (
THE SUPPLY CHANNEL

.

:

:
26
LOGISTICS ACTIVITY MIX

:
27
LOGISTICS ACTIVITY MIX
28
THE CRITICAL CUSTOMER SERVICE

LOOP
29
LOGISTICS SUPPLY PIPELINE
30
LOGISTICS SUPPLY CHAIN

) (
) (
31
FIRM SUPPLY CHAIN
Transportati
on
Factor
y
Warehousing
Transportati
on
Custome
rs
Material and
information flows
Transportati
on
Warehousin
g
Transportati
on
Vendors / Plants /
Ports
32
//
LOGISTICS NETWORK
33
LOGISTICS (CLM) DEFINITION
) (

.
34
THE LOGISTICS PROCESS
)
(
35
THE EXTENDED VALUE CHAIN

36
LOGISTICS (7 RS) DEFINITION

:

37
LOGISTICS IN SERVICE INDUSTRIES
70%

:
) (
38
LOGISTICS 4 KEY FINDINGS

* %65 :

* %75 :

)(%20

39
TWO-PART DEFINITION OF LOGISTICS

: ):(Supply chain logistics
)
/
(
: )(Service response logistics

) : (

40
ALTERNATIVE LOGISTICS DEFINITION
41
SUPPLY CHAIN LOGISTICS IN SERVICE ORGANIZATIONS

)Marketing
(mix
)

)
)

(
:
:
:
:
24 )(
42
FOCUS OF SERVICE RESPONSE LOGISTICS

1.

)
(
:

(
43
FOCUS OF SERVICE RESPONSE LOGISTICS

2.
3.
:
-1 )
(
-2 ) 24
(
44
45
LOGISTICS INTERFACES IN THE FIRM
46
LOGISTICS SUPPORT

:
/ / 47
PRODUCT ACQUISITION & LIFE CYCLE
48
LIFE CYCLE COST
60 %
30 %
49
10 %

) )
1.
2.
3.
4.
5.
6.
7.
8.
50
51
COMMITMENT OF LIFE CYCLE COST

100%
50%
52
IMPORTANCE OF LOGISTICS
* ** . ** %
* ** %

PUZZLE
53
THE CHANGING LOGISTIC ENVIRONMENT

.

:
-1 /
-2
-3
-4
54

-1

.

.

.

.
55

-2

) (Just in time delivery
.
) (Logistics lead time :

.

.
56

-3

.

.

): Caterpillar

.
(

) (Standardization
) : Whirlpool

(
57

-4
.

.
Puzzle

.

.
58
TRADITIONAL, FUNCTIONAL ORGANIZATION
Input focused, budget driven

59
60
Output focused, market driven
MARKET - FACING ORGANIZATION
LOGISTICS STRATEGY TRIANGLE

*
*
*
61
2

THE TRANSITION TO
SUPPLY CHAIN MANAGEMENT
62
SUPPLY CHAIN EVOLUTION
63
LOGISTICS SUPPLY CHAIN

) (
) (
64
LOGISTICS NETWORK
65
THE MOVE TO SUPPLY CHAIN CONCEPT

:

:

66
( )
30 years
10 years
4 years
1 Year or less
Word
processors
67
68

( (
69
) (

( (
70
) (
THE SUPPLY CHAIN AND COMPETITIVE PERFORMANCE
) (

.

.
.

.
71
DIFINITION OF SUPPLY CHAIN MANAGEMENT
:
) (

)
( )(

) (Demand Chain Management
)( )(
72
SUPPLY CHAIN MANAGEMENT Vs LOGISTICS MANAGEMENT

.

.
:
) (Co-Managed Inventory

73
SUPPLY CHAIN MANAGEMENT (CLM, CSCMP) DEFINITION
()CLM, CSCMP
:

.

.

74
75
/

/
76
SUPPLY CHAIN ARCHITECTURE
77
:

: ) (
) (
:

:
/
:
78
) (
) (
) (
79
:

:
:

:
:

80

(Partnerships)
Partnerships
Arm's-length
relationships
Type I
Type II
Type III
Joint
Ventures
Vertical
integration
81
) (Type 1

) (Type 2

) (Type 3
)(Coke, and McDonalds
82
:

:
:
)
(
:
:

83
:

:
)
(
:

:

84
3

ORDER PROCESSING &
TRANSPORTATION DECISION
85

*
*
*
86
ORDER PROCESSING

** * ** -

.
= +

:
87
) ( 1- Order Preparation
) ( 2- Order Transmittal
) ( 3- Order Entry
) ( 4- Order Filling

/ /

88
ORDER PROCESSING

)( Order preparation

:
.
) ( .
: ) ( )
(
)( Order transmittal
89
ORDER PROCESSING

)( Order entry
:
) ( Back order
) ( scanning
.
90
ORDER PROCESSING

)( Order Filling
:

.
:

)( Tacit rules

91

ORDER PROCESSING

)( Order Status Reporting

.
.

) (
) ( Order batching
) ( Shipment consolidation
92
) )
93
THE ROLE OF TRANSPORTATION IN LOGISTICS

.

.

.

.

.
94
TRANSPORTATION SYSTEM
/

.

) (
.

.

.

.
95
TRANSPORTATION SYSTEM

.
.
.

.

Piggyback .

.

.
96

.

97
Birdybac
k
Piggybac
k
Fishybac
k
98
LAND BRIDGE
99

.
)
( .

.

.
100
TRANSPOTATION DECISIONS
101
TRANSPORTATION SERVICE CHOICES
:
)(Piggyback, Fishyback, Birdyback
) )

*
*
*
*
*
*
102
BASIC TRANSPORTATION COST TRADE-OFFS

:

.
)
(.

.
103
TRANSPORTATION SERVICE
COMPETITIVE CONSIDERATIONS

) ( :
/
.
.

.
104
APPRAISAL OF TRANSPORTATION SERVICE SELECTION METHODS
:

) (.

.

.
105
4

INVENTORY IN THE LOGISTICS SYSTEM
106

*
*
*
107
108

A B
109
THE IMPORTANCE OF INVENTORY
*

*

**** ) Manufacturing and Trade
( Inventory ** %
** % :
*

* ) ( EDI
) ( JIT Just In Time
*
*
110
THE IMPORTANCE OF INVENTORY
) :
)

.
* -
** % .
: ** %
****** ** *
******
* ****** * %
****** * * * * *******

) ** % ** * *
** ( % .

111

RATIONAL FOR CARRYING INVENTORY
)( Physical Supply Inventory
) ( Purchase Economics

) ( Transportation Savings

.
) ( Safety Stock
.
) ( Speculative Purchase
.
) ( Seasonal Supply

.
112 ) ( Maintenance of Supply Sources
RATIONAL FOR CARRYING INVENTORY

)( Physical Distribution Inventory
) ( Production Savings

.
) ( Transportation savings
.
) ( Seasonal Demand
) ( Customer Service
.
) ( Stable Employment
.
113
FUNCTIONAL TYPES OF INVENTORY
) ( Cycle Stock

) ( In-Process Stock
)( Goods in transit
) ( Buffer Stock or Safety Stock

) ( Seasonal Stock

) ( Promotion Stock
) :
(
) ( Speculative Stock
) :
(
/ ) ( Dead Stock
114 .
) ( Marketing
.
) ( Production
.
) ( Finance
) ( Current Assets
.
:

) ( Inventory Tradeoffs

.
115
INVENTORY COSTS

*
.
* .
* ) ( Trade off
.
:
)( Inventory carrying cost / ) ( Order / Setup cost )( Stock out cost )( In-Transit inventory carrying cost116
INVENTORY CARRYING COSTS
* - )( Capital Cost
) ( Interest or Opportunity Cost

.

** .

.

) (
117
* - )( Storage Space Cost
INVENTORY CARRYING COSTS
* - )( Inventory Service Cost
* - )( Inventory Risk Cost

* -
.
* -
.
* -
.
118
INVENTORY ORDER / SETUP COST
/
)( Order cost
.
) :
)
:
. -
119
INVENTORY ORDER / SETUP COST
/
)( Setup cost

)
)
) (
*
.
( -
.
.
120
INVENTORY CARRYING COST VS ORDER COST

.
) + ( .

121
EXPECTED STOCKOUT COST
.
:

.

.
) ( .
.
)( Safety Stock
122
EXPECTED STOCKOUT COST

)( Cost of lost sales

.
) ( JIT

: ****
*** *
*** ) Overhead
( costs

: ) ( Back order

123
124
*Q
125
INVENTORY IN TRANSIT CARRYING COST
) (

.
FOB

.
)
)
* ) )
* ) )
* ) )
* ) )
126
SAFETY STOCK

.

.
:

.
) (
** % ** * ) ** *
* (
127
) ( = ) * - ( /

B1
A1
B2
A2
A3
Plan
t
B3

128
A
B
EVALUATING THE EFFCTIVENESS OF INVENTORY MANAGEMENT

)( Customer satisfaction
* .
* .
* .

*
Back ordering / expediting
*
) ( Reordering ) ( Resupplying
ABC

129
EVALUATING THE EFFCTIVENESS OF INVENTORY MANAGEMENT

)( Inventory turnover velocity

:
* ** -
** ** -

) ( Ratio Of Inventory to sales

:
.
130
THE STORAGE & HANDLING SYSTEM
131

*
*
*
132
THE STORAGE & HANDLING SYSTEM

.
.
** %
.
:
.
)

(
133
?WHY FIRMS USE INVENTORIES
.
)

(

.

.

134
.
REASONS FOR STORAGE

-1 +
.

.
-2
) (

) (

) (
135
REASONS FOR STORAGE

-3
) (
.
-4

136
STORAGE SYSTEM FUNCTIONS
) ( :
-1 )(Holding

.

:
) ) ) ) ) )
137

STORAGE SYSTEM FUNCTIONS

-2 )(Consolidation

) ( Holding warehouses
) (Distribution warehouse
-3 )(Break-Bulk
-4 )(Mixing

) (ORDERS

138
MOVE-STORE ACTIVITIES

Inbound point
Unload, sort, classify, and
inspect
Move to
storage
Move to picking
area
Order - picking
bay
Move to
dock
Check order and

classify
Semipermanent
storage bay
Warehou
se
Outbound point
139
DISTRIBUTION WAREHOUSE USED TO CONSOLIDATE

SMALL INBOUND SHIPMENTS INTO LARGER OUTBOUND
SHIPMENTS
10.000 I b.
Manufacturer
A
8.000 I b.
40.000 I b.
Manufacturer
B
Custome
r
A,B,C,
D
15.000 I b.
Distributio
n
warehouse
Manufacturer
C
7.000 I b.
Manufacturer
D
140
DISTRIBUTION WAREHOUSE USED TO BREAK-BULK

LARGE INBOUND SHIPMENTS INTO SMALER OUTBOUND
SHIPMENTS
LT
L
Custome
rA
LT
L
Manufacturer
Low rate
TL
shipment
Distributio
n
warehouse
LT
L
Custome
rB
Custome
rC
141
Pr
od
u
A ct
Manufacturer
A
C
B
A
Product
B
Manufacturer
B
Manufacturer
C
ct
u
od
r
P C
A B
C
Distributio
n
warehouse
Custome
rX
Custome
rY
GENERALIZED EXAMPLE OF USING A DISTRIBUTION

WAREHOUSE FOR PRODUCT MIXING
142
MATERIAL HANDLING CONSIDERATIONS

) (Compatibility
.
.

: + +
+
/ 4:
-1 )(Load unitization
-2 )(Space layout
-3 )(Storage equipment choice
-4 )(Movement equipment choice
143
MATERIAL HANDLING DIMENSIONS & OBJECTIVES
-1
-2
-3
-4
144
-1
-2
-3
-4
-5
LOAD UNITIZATION
.
.

.

.
)(Containerization
.
.
.
.
.

145
LOAD UNITIZATION

)(Palletization

) 4840( :
. .

.
.
146
SPACE LAYOUT

-1 : Bays
.

-2 :

147
SPACE LAYOUT

)(Area system

((Modified area system

)Sequencing,
.(Zoning, Batching
148
149
SPACE LAYOUT
150
SPACE LAYOUT
STORAGE EQUIPMENT CHOICE

:
) (Racks
)(FIFO )(Shelf boxes

)(Horizontal and vertical dunnage
)(Bins
)(U-farms
151
MOVEMENT EQUIPMENT CHOICE
)(Manual equipment
)(Power-assisted equipment
) (output

) (fork lift
) (Fork lift truck
12
) 3000 )
+ +
152
MOVEMENT EQUIPMENT CHOICE

)(Fully mechanized equipment
)Automated storage
(& Retrieve system, AS/RS
:
)(Bar coding )(Scanning technology
) (

.
153
Private
warehousing
automated
handling
Cost
Leased
warehousing
Public
warehousi manual handling
ng
Private
warehousing
pallet - forklift
truck handling
a
b
c
a Economical range for public warehousing
Annual system
throughput
b Economical range for public (leased) warehousing, manual

handling
c Economical range for public warehousing, pallet - forklift
truck handling
d Economical range for public warehousing, automated
handling.
GENERALIZED
TOTAL COST CURVES FOR FOUR ALTERNATIVE
STORAGE SYSTEM
154
PRODUCT PACKAGING

*
*
*
*
* ) (
*
*
155
PRODUCT PACKAGING

:
*
*

.

*
*
*
*
156
6
PURCHASING AND SUPPLY SCHEDULING DECISIONS

(JIT, MRP, DRP)
157

*
*
*
158
COORDINATION IN THE SUPPLY CHAIN
/ )
(..

159
160
SUPPLY SCHEDULING

:
-1
)(Just In Time, JIT
-2
161
162
JUST-IN-TIME SUPPLY SCHEDULING
) (JUST-IN-TIME

.
:
-1
-2
-3

-4
-5

:
163
) (JIT
)(JIT

164
MRP MECHANICS
) (MRP

)(MRP

165
) )

Clock style - K
36
Clock style - M
21
Salem
Clock mechanism - R
1063
166
MRP
() aInitial MRP form
week
1
2
3
4
5
6
7
8
100 150 120 150 100 90 110 120
400
week
1
2
3
4
5
6
7
8
100 150 120 150 100 90 110 120
350
350
400 300 150 30 230 130 40 280 160
350
350
167

)( Completed
b
MRP form

JIT DISTRIBUTION SCHEDULING

168

2
8
200 200
200
200
1
7
300 300
300
1
300
500
300
200
500
200
169
1
300
INTEGRATED SUPPLY CHAIN MANAGEMENT
) ( MRP
) (DRP

) (JIT)(DRP
-1
-2 ) (MRP
)(DRP
-3 ) (DRP

-4
-5 ) (DRP
) (ROP )(EOQ
170

171
PURCHASING

/
:
) ( )(terms of sale -
172

-1 )(
-2
-3
-4
-5 )(

-1
-2
-3

173
) %60-40
(

-1
-2
-3
-4
) (
)
( /
174
%5

5%
) ( 7.5%

10%
Multiplie
d by

2
) ( 2.04
*****.
**
( $750.000 )Divided
by
***
million
***
million Divided
by

%50
175
%5
40
**
million
( $4.9
) million
***
million Less

***.
million
) ( 9.25 million
b
$2 million
( $1.9
) million

-1 )(JIT, hand-to mouth buying
-2 )) ( Forward buying (anticipatory

) ( Speculative buying
)
(
:
- ) (
176
-1 )(Mixed Buying Strategy

) (JIT
)(JIT

) (JIT
) (JIT

)(Dollar Averaging

)
(
) (
:

177

-3 )( Quantity Discount
)
(

-1 ) (Inclusive

-2 ) (No inclusive

-3
+
178

-4 )( Deal Buying
-5 )( Contract Buying

) ( Blanket order contracts
)
(stockless purchasing, JIT
179
)(SOURCING
-1

) (linear programming

.
-2

/

180
TERMS OF SALE & CHAIN MANAGEMENT
:
) = ( Terms of sale +

181
JIT
182
SUPPLIER SELECTION & EVALUATION

:
-
183
184

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LOGISTICS & SUPPLY CHAIN

EVOLUTION OF MANAGEMENT FOCUS

IN THE WORLD MARKAT

TRADING THROUGH LOGISTICS

PRODUCT X($) PRODUCT Y($))

PRODUCT X($) PRODUCT Y($))

BENETTONS DELIVERY CHANNEL

NATURE OF THE LOGISTICS PRODUCT

NATURE OF THE LOGISTICS PRODUCT

PRODUCT LIFE CYCLE

THE LOGISTICS PROCESS

LOGISTICS IMPACT ON ROI

OBJECTIVES OF BUSINESS LOGISTICS

THE SUPPLY CHANNEL

LOGISTICS ACTIVITY MIX

LOGISTICS ACTIVITY MIX

THE CRITICAL CUSTOMER SERVICE

LOGISTICS SUPPLY PIPELINE

LOGISTICS SUPPLY CHAIN

FIRM SUPPLY CHAIN

LOGISTICS (CLM) DEFINITION

THE LOGISTICS PROCESS

THE EXTENDED VALUE CHAIN

LOGISTICS (7 RS) DEFINITION

LOGISTICS IN SERVICE INDUSTRIES

LOGISTICS 4 KEY FINDINGS

TWO-PART DEFINITION OF LOGISTICS

ALTERNATIVE LOGISTICS DEFINITION

SUPPLY CHAIN LOGISTICS IN SERVICE ORGANIZATIONS

FOCUS OF SERVICE RESPONSE LOGISTICS

FOCUS OF SERVICE RESPONSE LOGISTICS

LOGISTICS INTERFACES IN THE FIRM

PRODUCT ACQUISITION & LIFE CYCLE

LIFE CYCLE COST

COMMITMENT OF LIFE CYCLE COST

THE CHANGING LOGISTIC ENVIRONMENT

THE CHANGING LOGISTIC ENVIRONMENT

THE CHANGING LOGISTIC ENVIRONMENT

THE CHANGING LOGISTIC ENVIRONMENT

THE CHANGING LOGISTIC ENVIRONMENT

TRADITIONAL, FUNCTIONAL ORGANIZATION

Input focused, budget driven

Output focused, market driven

MARKET - FACING ORGANIZATION

LOGISTICS STRATEGY TRIANGLE

SUPPLY CHAIN EVOLUTION

LOGISTICS SUPPLY CHAIN

THE MOVE TO SUPPLY CHAIN CONCEPT

THE SUPPLY CHAIN AND COMPETITIVE PERFORMANCE

DIFINITION OF SUPPLY CHAIN MANAGEMENT

SUPPLY CHAIN MANAGEMENT Vs LOGISTICS MANAGEMENT

SUPPLY CHAIN MANAGEMENT (CLM, CSCMP) DEFINITION

SUPPLY CHAIN ARCHITECTURE

LOGISTICS STRATEGY TRIANGLE

THE ROLE OF TRANSPORTATION IN LOGISTICS

TRANSPORTATION SERVICE CHOICES

BASIC TRANSPORTATION COST TRADE-OFFS

APPRAISAL OF TRANSPORTATION SERVICE SELECTION METHODS

LOGISTICS STRATEGY TRIANGLE

THE IMPORTANCE OF INVENTORY

THE IMPORTANCE OF INVENTORY

RATIONAL FOR CARRYING INVENTORY

)( Physical Supply Inventory

RATIONAL FOR CARRYING INVENTORY