The

Logistics/Supply
Chain Product
“Logistics/Supply Chain managers are
‘owners’ of the product-flow process from raw
material sources to final consumers, not
activity administrators.”
Social Value Stimulant
Strategic, Tactical, and Operational Decision Making
Decision area Strategic Tactical Operational

Transportation Mode selection Seasonal equip- Dispatching

ment leasing

Inventories Location, Control policies Safety stock levels Order filling

Order Order entry, transmittal, Processing

processing and processing system orders, Filling
design back orders

Purchasing Development of supplier- Contracting, Expediting

buyer relations Forward buying

Warehousing Handling equipment Space utilization Order picking

selection, Layout design and restocking

Facility Number, size, and

location location of warehouses
Choosing the Right Supply Chain Strategy

Functional Innovative
Products-- Products--
Predictable Unpredictable
Low margin
demand demand
Efficient Staple food
supply chain products

Responsive Electronic
supply chain equipment

High margin
 Classification of Products
Predictable/Mature Unpredictable/Introductory
Products Products

•Jelly •New music recordings

•Corn Flakes •New computer games
•Lawn fertilizer •Fashion clothes
•Ball point pens •Art works
•Light bulbs •Movies
•Auto replacement tires •Consulting services
•Some industrial chemicals •New product offerings of
•Tomato soup existing product lines
Choosing the Right Supply Chain Strategy
Efficient  Economical production runs
supply chain  Finished goods inventories

 Economical buy quantities

Supply-  Large shipment sizes

to-stock  Batch order processing

Responsive  Excess capacity

supply chain  Quick changeovers

 Short lead times

Supply-
 Flexible processing
to-order  Premium transportation

 Single order processing

Actions for Misclassified Products
Product Characteristic
Supply Chain Predictable/ Unpredictable/
Design Type Mature Introductory
Supply-to-Stock/ Tomato Soup If product is here
Efficient
Supply-to-Order/ If product is here Personal
Responsive Computer Models
 Seven Principles
of Supply Chain Management
Differentiated distribution
•Segment customers based on service needs
•Listen to signals of market demand and plan
accordingly Design to customer needs
•Develop a supply-chain-wide technology
strategy Boundary spanning
info. systems
•Customize the logistics network
•Differentiate product closer to the customer
•Source strategically Postponement
•Adopt channel-spanning performance measures
Source: Accenture Consulting
Framework for structuring drivers
Competitive Strategy

Supply Chain
Strategy
Efficiency Responsiveness
Supply chain structure

Logistical Drivers

Facilities Inventory Transportation

Information Sourcing Pricing

Cross Functional Drivers

Drivers of supply chain performance
Facilities
places where inventory is stored, assembled, or fabricated
production sites and storage sites
(centralized vs. decentralized)
Inventory
raw materials, WIP, finished goods
inventory policies
(high inventory vs low inventory)
Transportation
moving inventory from point to point in a supply chain
combinations of transportation modes and routes
(slower/cheap vs faster & costly transportation modes)
Drivers of Supply Chain Performance
Information
data and analysis regarding inventory, transportation,
facilities throughout the supply chain
potentially the biggest driver of supply chain
performance (expansive or cheap IT infrastructure)
Sourcing
functions a firm performs and functions that are
outsourced (in-house vs outsource decision)
Pricing
Price associated with goods & services provided by a
firm to the supply chain (varying prices i.e. low or high)
ABC Classification for 14 Products
Product Monthly Cumulative Cumulative An ABC
Product Rank by Sales Percent of Percent of Classifi-
a b c
Number Sales (000s) Total Sales Total Items cation
D-204 1 $5,056 36.2% 7.1%
D-212 2 3,424 60.7 14.3 A

D-185-0 3 1,052 68.3 21.4

D-191 4 893 74.6 28.6 B
D-192 5 843 80.7 35.7
D-193 6 727 85.7 42.9
D-179-0 7 451 89.1 50.0

D-195 8 412 91.9 57.1

D-196 9 214 93.6 64.3
D-186-0 10 205 95.1 71.4 C
D-198-0 11 188 96.4 78.6
D-199 12 172 97.6 85.7
D-200 13 170 98.7 92.9
D-205 14 159 100.0 100.0
$13,966
CR (2004) Prentice Hall, Inc.
 Cumulative 80-20 Curve
100
90
80
Total sales (%)

70
60
50
40
30
A items B items C items
20
10
0
0 20 40 60 80 100
Total items (%)
 Customer Service Elements
Customer
service

Pretransaction Transaction Posttransaction

elements elements elements
• Written statement Stockout level • Installation, warranty
of policy • Ability to back alterations, repairs,
• Statement in hands order parts
of customer • Elements of order • Product tracking
• Organizational cycle • Customer claims,
structure • Time complaints
• System flexibility • Transship • Product packaging
• Technical services • System accuracy • Temporary
• Order conveniences replacement of
• Product substitution product during repairs
Common Customer Service
Complaints
31%
Product or quality
mistakes

12% Damaged
goods

7%
Other

6%
Frequently cut
items

44%
Late delivery
 Penalties for Customer Service
Failures 29%
Reduced the
2%
volume of
Refused to
business
support
promotion

16%
Discontinued
items

18%
Stopped all
purchases
with supplier

9% 26%
Refused to Called in
purchase new salesman or
items manager
CR (2004) Prentice Hall, Inc.
Most Important Customer
Service Elements

•On-time delivery
•Order fill rate
•Product condition
•Accurate documentation
 Customer Service Strategies
• Traditional customer service focused on
internal service levels and goals:
– Percent defective products
– Percent on-time delivery
– Fill rate
• Without feedback, we can only provide
customer service ….. A One Way customer
service that leads to …
– Service Gaps
 Customer Satisfaction Strategies
Customer satisfaction strategies require direct
input from a customer. Questions to be
addressed should include:
– How do important customers define quality, on-time
delivery, responsiveness and other key value areas?
– Are our internal measures consistent with customers’
measures?
– Does our current performance meet our customers’
requirements?
– Would an improvement in our performance be valued
by our customers?
 Barriers to Customer Fulfillment
• Customers identify the following as the cause of
dissatisfaction in almost 80% of “horror stories”:
– Training - employees do not know how their behavior and
performance affects customer perceptions.
– Measurement - measures do not reinforce appropriate
attitudes and behavior toward customers.
– Empowerment - employees do not have authority to
solve problems and respond to customer needs.
– Policies - policies and procedures are inflexible and often
run counter to real service and satisfaction.
 Process
• Regularly and routinely receiving
information on customer end about
demand
• Vital information only
• On-hand inventory balances
• Order schedules and statuses
• Point of sales data sharing is key
• Forecasts to be shared
• All kinds of system updates or changes anywhere to be shared
everywhere.

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