Logistics Future Trends

Jurusan Teknik Industri

Universitas Brawijaya
Late 1800’s
1904
1905
Is it easy to see what the future
holds?
John Elfreth Watkins did 1900
Prediction 1
Prediction 2
Prediction 3
What is needed?
Logistics Profile: Creating a State-of-the Art VW
Beetle Production Facility in Mexico

• In 1998, at Volkswagen’s Mexican assembly plant in

Puebla, Exel implemented the JIT sequencing operation.
• Currently, the Mexican plant produces 1,600 vehicles daily,
including the Beetle and Jetta.
• Parts delivery to a specific place on the line takes place
within 40 minutes of an order, with one car built every 40
minutes, 24/7.
• Exel provides Volkswagen with expert logistics and supply
chain management ported from a similar VW plant in
Spain, proving that transfer of technology, human
resources, and best practices is possible on a global basis.

Chapter 16 12
Introduction
• Logistics and supply chain management are changing quickly,
and are characterized by:
• Many innovations and improvements
• Movement towards being considered as players in strategic,
competitive advantage
• Prime candidates for application of tried and proven approaches
to strategic planning

Chapter 16 13
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Historical Perspective on Strategy:
• Has become an appropriately meaningful and
integrated activity in most globally competitive firms.
• Evolutionary development phases:
• In the 50s and 60s, was referred to as investment
planning.
• In the 70s, began to focus on internal growth
opportunities.
• In the 80s, a combination of outside investment
and internal growth opportunities was used.

Chapter 16 14
Overview of Strategic Planning for Logistics
and Supply Chain Management
• In the 80s, a combination of outside investment
and internal growth opportunities was used.
• In the 90s, refocused on gaining strategic advantage
in the marketplace and for defending against
competitors.
• In the early 2000s, strategic focus clearly moved
toward the development of effective, interfirm
relationships that would create maximum value for
the firm’s products and/or services.

Chapter 16 15
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Definitions:
• Strategy – a course of action, a scheme, or a principal idea
through which an organization hopes to accomplish a specific
objective or goal.
• Tactics – refers to the operational aspects that are necessary to
support strategy.

Chapter 16 16
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Examples:
• Cross-docking – a term that describes moving goods through a
distribution center in less than a day, a tactic used by Wal-Mart
among others to both lower prices while increasing customer
service.
• Rapid inventory turns contribute to the lower costs, and the
speed of the flow of inventory results in the increase in customer
service.

Chapter 16 17
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Examples:
• Internet capabilities – employed by Best Buy to let customers
order over the Internet and pickup items at a retail store location.
• Best Buy is combining its technological competencies with its
logistics and supply chain capabilities of customer service and
market positioning.

Chapter 16 18
Best Buy: Integrating Retail, Catalog, and
Online Sales

Chapter 16 19
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Examples:
• Inventory availability – Benneton is another retailer that has
used good logistics to accomplish increased market share and
higher profit levels
• By developing a QR system utilizing bar coding of cartons and
linking production to retail locations, Benneton achieves low in-
store inventory, right stock availability, and high levels of
customer service.

Chapter 16 20
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Strategy Classification
• Porter’s model of basic strategies, namely, cost,
differentiation, and focus is the most popular scheme.
• Strategies based on low cost essentially stress offering
a product or service in a market at a price or cost
lower than that of competitors.
• Automobiles and electronic products are two
examples of this strategy, as are the general operations
of retail firms such as Wal-Mart, Target, and
McDonalds.

Chapter 16 21
Strategies for Creating Value

Chapter 16 22
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Strategy Classification
• Strategies based on differentiation attempt to make a product or
service look unique, such that consumers are willing to par a
premium price.
• Perceptions based on better fit, higher quality, long product life,
better service, and other similar attributes are typical of
strategies based on differentiation.

Chapter 16 23
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Strategy Classification
• Strategies based on focus attempt to make a product
or service fit a niche or small market segment where
either cost or differentiation is then employed.
• Offering delivery, 24/7 hours, multiple offerings of
similar products into differentiated segments and
other similar strategies are typical of focus-based
models of classification.

Chapter 16 24
Overview of Strategic Planning for Logistics
and Supply Chain Management
• Strategy Classification
• Porter’s value chain suggests that a company can be
disaggregated into five primary activities and four support
activities.

Chapter 16 25
The Generic Value Chain

Chapter 16 26
Time-Based Strategies

• Reducing Cycle Time

• Logistics activities that shorten the length of the
order/replenishment cycle have been the focus of
much recent attention.
• Reductions in cycle time are based on three factors:
processes, information, and decision making.
• If logistics is seen as a series of processes,
performing those processes faster will reduce cycle
time.

Chapter 16 27
Time-Based Strategies

• Utilization of faster, more efficient forms of order

transmission---EDI or the Internet---can significantly reduce
the time needed to complete the transaction.
• Finally, empowering individuals to make decisions can be
one of the most important ways to speed cycle time.
• Pre-approvals and other delegated decision making models
can lead to making mistakes, but the experience of Proctor
& Gamble, among others, is that the risk is justified in
terms of time saved and improvement in customer
responsiveness.

Chapter 16 28
Time-Based Strategies

• Time-Reduction Logistics Initiatives

• Push to pull
• Cross-docking, JIT, VMI, and CRP are all contemporary approaches
that help logistics systems move from push to pull.
• Each strategy reduces the order cycle by shortening the total time
from vendor to delivery to customers.

Chapter 16 29
Time-Based Strategies

• Time-Reduction Logistics Initiatives

• Anticipate customers’ needs
• Improved ability to anticipate through collaborative
planning, forecasting, and replenishment (CPFR)
enables the logistics and supply chain processes to
make a more valuable contribution to corporate
objectives.
• The switch from push to pull is a more demand-
responsive system, but requires changes that may be
difficult to achieve depending on the corporate
culture in place.

Chapter 16 30
Time-Based Strategies

• Time-Reduction Logistics Initiatives

• Manufacturing impacts
• Pull approach requires a fast manufacturing system.
• Risk of low or no inventory depends on fast and
frequent replenishment.
• Responding to demand
• Consistent with time-compression strategies
• Produce to order now being tried by furniture and
farm implement manufacturers, both traditional
“produce for stock” companies.

Chapter 16 31
Time-Based Strategies

• Time-Reduction Logistics Initiatives

• Postponement involves not completely
finishing a product until an order arrives.
• Food processors that can “brights” and do
not label until an order is received
• Auto manufacturers that pre-wire electronic
harnesses to take any option, not knowing
what a particular car order will specify.

Chapter 16 32
Asset Productivity Strategies

• Inventory Reduction
• Much evidence that companies have been
successful in reducing inventories.
• Time reduction strategies have contributed.
• Facility Utilization
• Strategy to keep the goods moving throughout the
logistics and supply chain system has contributed to
effective use of logistics facilities thus squeezing
more productivity from these assets.

Chapter 16 33
Asset Productivity Strategies

• Equipment Utilization Strategies

• Some reductions have occurred here as a result of contraction
of this equipment and smarter, more sophisticated equipment
dispatching software.
• Doing more with less is a result of leaner enterprises.

Chapter 16 34
Asset Productivity Strategies

• Third-Party/Contract Logistics Services

• Use of 3PLs has resulted in dramatic positive impact on
asset productivity.
• DuPont, Nabisco, Proctor & Gamble, General Electric
and General Motors and others are users of 3PLs,
focusing on managing logistics services rather than on
the assets themselves.
• Examine Figure 16-4 on 4PLs potential impact.

Chapter 16 35
Fourth-Party™ Logistics

Chapter 16 36
Technology-Based Strategies

• Disruptive technologies are those will help make firms

more competitive, but will change the basis of
competition.
• Examine Table 16-1
• Implications are that logistics and supply chain areas of
the future will differ significantly from those of today.
• E-commerce e-procurement and electronic marketplaces
will continue to grow in importance.

37
Disruptive Information Technologies

Chapter 16 38
Shifts in Technology

Chapter 16 39
Strategic Sourcing and Procurement

Chapter 16 40
Relationship-Based Strategies

• Collaboration
• Parties involved dynamically share and
interchange information.
• Group benefits more than individual benefits.
• All parties modify their business practices.
• All parties conduct business in new and visibly
different ways.
• All parties provide a mechanism and process for
collaboration to occur.

Chapter 16 41
Types of Collaboration

Chapter 16 42
Relationship-Based Strategies

• Value Nets
• Taking the place of the old supply chain, the value net starts with
the customer and is built around three powerful value
propositions:
• High levels of customization
• Super service
• Convenient solutions

Chapter 16 43
Relationship-Based Strategies

• Value Nets
• Combines strategic thinking with the latest advances in
digital supply chain management.
• Every customer is unique.
• Customers choose products or services they value
most.
• Capture real choices in real time and transmit them
digitally to other net participants.

Chapter 16 44
Gateway’s Value Net

Chapter 16 45
End of Lesson