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SCM and Logistics: Dickson K.W. Chiu
SCM and Logistics: Dickson K.W. Chiu
1
Learning Objectives
To familiarize with basic concepts of logistics
and supply chain management
To understand recent evolvement of logistics
To understand the reasons for its recent growth
in importance
To understand the importance of IT in logistics
3
Supply Chain Overview
Information
flows
Factory
Transportation
Vendors/plants/ports
Warehousing Transportation
Demand forecasting
Purchasing
Requirements planning
Purchasing/
Production planning Materials
Management
Manufacturing inventory
Warehousing
Logistics
Material handling
Packaging
Order processing
Transportation
Customer service
Strategic planning
Information services
Marketing/sales
Finance
CR (2004) Prentice Hall, Inc.
Dickson Chiu 2006 SCM-8
Supply Chain Schematic
T ransp o rtatio n
C ustom e rs
In ventory
o r supp ly source
7 orders
%
88 Product
6 Availability--%
86 line items
5 84
4 82
Source: Herb Davis & Company
Year
Dickson Chiu 2006 SCM-13
Traditional Scope of the Supply Chain
Business logistics
Sources of Plants/
Customers
supply operations
• Transportation • Transportation
• Inventory maintenance • Inventory maintenance
• Order processing • Order processing
• Acquisition • Product scheduling
• Protective packaging • Protective packaging
• Warehousing • Warehousing
• Materials handling • Materials handling
• Information maintenance • Information maintenance
Inventory Strategy
Forecasting
Storage fundamentals Transport Strategy
Inventory decisions Transport fundamentals
Purchasing and supply Transport decisions
scheduling decisions
Customer
Storage decisions
service goals
The product
Logistics service
Information sys.
Location Strategy
Location decisions
The network planning process
LOGISTICS
Sample
activities: MARKETING
PRODUCTION/ Transport Interface Sample
OPERATIONS Inventory
Interface activities: activities:
Sample activities: Order Customer
Quality control activities: Promotion
Product processing service Market
Detailed production
scheduling Materials standards research
scheduling Plant Pricing
Equipment maint. handling Product
location Packaging
Capacity planning mix
Purchasing Retail Sales force
Work measurement
location management
& standards
Production-
logistics Marketing-
interface logistics
interface
Promotion
Price
Place-Customer
service levels
Transport
Logistics
Inventory
carrying costs costs
22
Wal-Mart Wins with Logistics
Costs are lower than K-Mart or Target Stores
CEO is a former logistician
Wal-Mart is the largest retailer in the world!
Suppliers Customers
Supplier’s Customers/
suppliers End users
Logistics Increase
Logistics
Overhead Tariffs
Overhead
Materials
Materials
Labor Reduction
Labor
CR (2004) Prentice Hall, Inc.
Dickson Chiu 2006 SCM-26
Reality of SCM Scope
on
Int
ati
er-
n
org
rdi
oo
an
c
iza
al)
tio
on
na
niz al
SUPPLY
a ti
-or ion
lc
CHAIN
oo
tra nct
ga
MANAGEMENT
rdi
(In er-fu
n
at i
Int
on
Activity and process
administration
CR (2004) Prentice Hall, Inc.
Dickson Chiu 2006 SCM-28
Increasing Significance of Logistics
Costs are high
About 10.5% of GDP domestically
About 12% of GDP internationally
A range of 4 to 30% of sales for individual firms, avg. about 10%
A high as 70-80% of sales if purchasing and production are included
Customers are more demanding of the supply chain
Desire for quick response
Desire for mass customization
An integral part of company strategy
Generate revenue
Improve profit
Logistical lines are lengthening
Local vs. long distance supply
Globalization of trade
Logistics is a key to trade and an increased standard of living
Law of comparative economic advantage applies
Logistics adds value
Time and place utilities
Dickson Chiu 2006 SCM-29
Contemporary IT Applications in Logistics
– Focus of this Course
Tremendous technological advances in past decades
Logistics management relies on analysis over massive
information from heterogeneous sources
Disparate business functions in service-oriented economy
Internet and mobile technologies has further improved
logistical effectiveness and efficiency
Enabled logisticians and management to make timely, informed,
and accurate decisions
but create new dimensions of complexity
IT people work closely with logistician and management
Understand complex requirements
Choose the right technology and design appropriate IT
infrastructures, architectures, and systems
Explain how contemporary IT can help to others
Dickson Chiu 2006 SCM-30
Some Useful Contemporary IT in Logistics
eXtended Markup Language (XML)
Service-oriented architecture
Process integration and interaction management
Exceptions, alerts, and relationship management in logistics
Information integration
Facilitating decision support
Mobile technologies
Radio Frequency Identification (RFID)
32
Summary
The logistic process plans, implements, controls the flow
and storage of goods, services, and related information
between the point of origin and the point of
consumption to satisfy customer requirements
Logistics addresses the time utility & place utility out of
the four economic utilities
Logistics becomes more important and complex because
of new requirements of the service-oriented economy,
disparate business functions, and the impact of various
contemporary IT
Logistics involves the interaction with multiple
departments within a company as well as now also
across business partner organizations and customers
Application of contemporary IT, especially information
and process integration for efficient and effective
decision support, is a critical success factor and
therefore the focus of this course.
Dickson Chiu 2006 SCM-33