Logistics and supply chain management
•Examples include natural disasters, pandemics, financial market collapses, power outages and blackouts, and transportation accidents • •Organizations such as the American Logistics Aid Network (ALAN) have formed to post-disaster humanitarian relief • •The impacts of disasters can be short-lived or extend for many months or years
how can disaster preparedness and releif impact supply chains?
Collaborative planning, forecasting, and replenishment (C P F R) software is used by companies
how do you prevent stockouts and optimize customer service?
-Bar codes -Radio frequency identification (RFID)
two main forms of automated data capture:
(Production) *utility- perceived value (marketing) *possession-creating desire *form- repackaging, refurbishing, break bulk (logistics) *time- when needed *place-exactly where needed
what are economic utilities?
•An increasing number of supply chain executives will have international responsibility • •Reduction in the amount, and increased standardization of, international paperwork • •More smaller firms engaged in exporting • •More 3PLs owned and operated on a global scale • •Increasing vertical integration of the supply chain • •Continuation of omni-channel commerce
what are some globalization trends surrounding supply chain
•Customer relationship management •Demand management •Finance •Forward logistics •Information technology •Life cycle support •Manufacturing operations •Marketing and sales •Order fulfillment/service delivery •Procurement •Product/service development and launch •Reverse logistics •Sourcing •Supplier relationship collaboration
what are some important components of SCM?
Back Orders -•occurs when a seller has only a portion of the products ordered by the buyer Lost Sales -•some customers will turn to alternative supply sources Lost Customers -•customer permanently switches to another supplier
what are some of the costs of stockouts?
right product to the right customer at the right time in the right condition in the right quantity at the right place for the right cost
what are the 7 rights of logistics?
•Reduced administrative costs •Fewer complaints •Better industry reputation •Better competitive intelligence •Higher profitability •Future growth
what are the benefits of fair and efficient relationships?
•Grow with Loyal Customers •Measure Lifetime Customer Value •Remember Empathy
when defining relationship intensity in order to balance short and long term needs...
•Not all customers are created equal •Not every fulfillment experience is equally critical ** match service offering to real service requirements
when designing an order fufillment system two points apply:
•The Disconnect: •Customers say it is primarily due to poor customer service. •Companies say it is primarily due to price and not being the lowest-cost provider. Knowing which one is correct depends on the company having the right data!
why do companies lose customers?
•Business world is changing ... faster than ever before • •New issues - such as security and technology - impacting how business is conducted • •Organizations streamlining and restructuring; no corporation is immortal • •New relationships with customers, suppliers, associates/employees, and even competitors • •Evolution to customer-responsive organizations...... and reduce cost at the same time
why does supply chain matter?
•Schedule deliveries; receive, verify, and transfer product; and authorize supplier payments to optimize service levels. • •Identify and select supply sources that are capable of providing consistently high levels of customer service. • •Manage business rules, assess supplier performance, and maintain data on customer service and satisfaction attributes. • •Manage inventory, capital assets, incoming product, supplier network, import/export requirements, and supplier agreements that have a direct influence on the delivery of various service components to customers.
with customer satisfaction and scor what is the source- sourcing stocked, make-to-order, and engineer to order product?
-trucks, inventory, pallets, containers, and lift trucks
•A supply chain manager controls assets belonging to firms in the supply chain This includes items such as...
•No! Customer service is created by logistics activities and is a component of customer satisfaction. Customer satisfaction is a more expansive term encompassing all aspects of the customer interface. • •Customer satisfaction is directly related to the marketing concept, which consists of customer satisfaction integrated effort, and long-term profitability.
•Are customer service and customer satisfaction the same thing?
defined metrics
•Companies must have ---------in order to determine if service and satisfaction goals and objectives are being met.
Channel Selection
•Determine which channels to use to bring products to market •A manufacturer or importer may select a: -direct to consumer channel - wholesale based channel - direct to retail channel (often combinations of channels are chosen) •many customers can be in a physical store while getting additional information from their mobile devises
Strategic Profit Model
•Developed by the DuPont Company. • •Return on net worth (R O N W) is the most important financial factor and is a measure of the return on shareholders' investment plus retained earnings. • •R O N W is impacted by three major factors: •Net profit. •Asset turnover. •Financial leverage.
not having the item. retail out of stocks are 7-10% out of stock cost retailers $435 bill in 2010
•In retailing, the biggest single customer-service complaint is
-Financial performance: traditional financial measures such as R O I, R O A, cost reduction, asset utilization, and productivity levels. • -Internal business process: focuses on company metrics such as waste reduction, product quality, and order cycle time variability. • -Customer service: measures that focus on customer requirements and satisfaction such as order response time, customer retention, customer profitability, and customer satisfaction ratings. • -Education and learning: measures concerned with employees, systems, and procedures.
•The Balanced Scorecard consists of four components, only one of which is financial:
automation
•is the only way to quickly capture large volumes of data. •
Performance Measures
•metrics that measure specific aspects of customer satisfaction (for example: market share percentage, on-time delivery, net profit margins).
Supply Chain Planning
•refers to decision making related to future operations in the supply chain -The objective is to meet service and quality requirements with the lowest possible use of resources
Data Capture
•the process by which data enters an information system. -This may be accomplished by manual or automated processes
Corporate Strategy
refers to the use of resources to gain a competitive advantage
Inputs: Natural resources(land, facilities, equipment) HR, Financial resources, informational resources Management actions: planning, implement, control Logistics management: raw materials, in-process inventory, finished goods Logistics activities: customer service, demand forecasting, distribution communications, inventory control, order processing, procurement, parts and service support, plant and warehouse site selection, packaging, return goods handling, salvage/scrap disposal, traffic and transportation, warehouseing and storage
***know role of logistics in scm chart
•Supply Chain Operations Reference Model (S C O R Model).
-most widely know -frequent periodic updating -includes the following components: plan, source, make, deliver, return ,enable these components include: -customer interactions, (quote to cash) -physical material transactions (procure to payment, equipment, supplies, spare parts, bulk product, software etc.) - marketing interactions (manufacturing from the understanding of aggregate demand to fufillment of each order) -significant practitioner involvement in development of the model
corporate philosophy
: incorporates the first two perspectives and is a philosophy that treats customer satisfaction as an integral part of a firm's total supply chain activities.
supply chain
A set of three or more organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer.
customer service
Activities between the buyer and seller that enhance or facilitate the sale or use of the seller's products or services the act of taking care of the customer's needs by providing and delivering professional, helpful, high-quality service and assistance before, during, and after the customer's requirements are met
•capturing the actual costs related to serving customers.
Activity-based costing can be useful in...
Service Logistics
All the people, facilities and supplies in place to effectively deliver services to customers. ex: hair salon, hospital operations
•within cost centers; and between cost centers.
Cost-service trade-offs can be of two types:
•Non-Metric Data .Metric Data •Nominal. . interval •Ordinal. . ratio information is data that are useful
Data vs Information
Humanitarian Logistics
Effective planning, flow and storage of goods, information to alleviate the suffering of people ex: red cross assistance to people of Haiti in the aftermath of the 2010 earthquake
SCM (Supply Chain Management)
Encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies
declined since the early 1980's
Generally, logistics costs as a % o GDP have
product stockout
Knowing how customers will behave when experiencing a___________ is important
interest rates, inflation, productivity, energy costs and availability, employment, and other aspects of the economy
Logistics has an impact on...
customer service failure
Most of the time when a customer experiences a product stock-out, it is due to a
Millitary logistics
Moving groups of people and supplies, setting up camps, replenishing supplies and people, and breaking camp them down again and moving it out. ex: Australia's regional assistance mission to the Solomon Islands to help provide security.
passenger logistics
Moving people ex: Scheduled or private airplane flights, bus rides, highway travel
•This is where a decision is made regarding the number and size of nodes in the supply chain, particularly plant and warehouse sizes and locations • •Network design decisions require a substantial amount of cost and customer service information • •May follow a centralized, national distribution strategy -A few warehousing locations to support a national distribution effort - •Or a decentralized strategy with far more warehouses supporting their strategy
Network design
-Cost leadership •Being a low-cost leader -Differentiation •Firms seek to offer unique products and services to customers -Focus •Resources are concentrated on a narrow segment of the market
Per Porter, there are three basic strategic choices...
key performance indicators (K P I s). There are usually less than 20 K P I s that are important.
The most important metrics are referred to as...
perfect order
The optimization of customer satisfaction through supply chain management is referred to as the____
Logistics
That part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements.
take the customer response (back order, lost sale and lost customer) multiply by the probability by the cost per incident to get the expected cost add all three together and that is the expected cost per stockout -Back order .50 $100 $50 _Lost sale .30 $3750 $1125 -Lost customer.20 $50,000 $10000 the expected cost per stockout is $11,175
The Cost of Stock outs: sample problem •Customer Response and Consequences: •50% backorder @ $100 •30% substitute one time @ $3,750 •20% switch permanently @ $50,000
Number of repeat customers
The degree of satisfaction provided by the goods or services of a company as measured by
You can't manage what you don't measure.
The management adage is correct
Event Logistics
The resources (facilities, people, and infrastructures) used to organize, deliver and execute an event from initial schedule through teardown and clean up. ex: • Oktober Fest in Munich, Germany • Chinese New Year in Beijing, China • Summer Olympic Games
Forum Model
a type of SCM model that has been developed utilizing practitioner/company input. the model illustrates the structure of the supply chain, product and information flows, scm components, and major processes occuring in the supply chain, including: -customer relationship management -customer service management -demand management -order fufillment -manufacturing flow management -procurement -product development -commercialization -product returns
Activity or Process
activities and processes that must be managed such as product delivery, reverse logistics, order processing, sourcing, and procurement
service failure is inevitable and service recovery is vital contingency planning helps recovery disruption scanning--> risk assessment--> recovery plan--> enact/execute--> evaluate--> improve
contingency planning and service recovery
•Long-term focus. •Senior leadership involvement •Cross-organizational teams •Shared resources •Shared risks and rewards. •Open communication
customer alliances build on the following:
customers expect time delivery •delivery capability is cross functional. If anyone who touches an order drops the ball, delivery is negatively affected. •Customers care about three dimensions •Speed; i.e., length of order cycle •Consistency; i.e., variability of order cycle •Flexibility; i.e., responsiveness of order cycle
deliverables of order fufillment--> delivery
customers expect transparency •Transparent service can help customers compensate when the unexpected happens. •Modern technology enables you to track shipments in real-time •Order transparency improves planning, execution, and evaluation.
deliverables of order fufillment--> transparency
movement-> transportation Storage-> warehousing, in transit Planning-> flow of info, tracking, visibility *when aligned to support customer value = Delivering your promises to your customer
explain movement, storage, and processing
•product Availability is the most basic output of an order fulfillment system. •Availability costs money. •Analyze tradeoffs; i.e., between inventory and stockout costs. Key Measures: •Stockout Frequency •Fill Rate •Orders Shipped Complete
explain one of the deliverables of order fufillment-->Availability
•As firms become leaner and more technology dependent, disruptions can cause more serious problems than ever before • •Organizations must develop contingency plans for possible disruptions • •Many factors have made supply chains more vulnerable, including longer supply lines, outsourcing from suppliers worldwide who may be invisible to the firm, natural disasters, labor strikes, product recalls, business failures, and political unrest
explain supply chain disruptions
•Organizations of all types have become more concerned with sustainability issues • •Energy availability and cost will continue to vary over time • •Emissions from manufacturing, transportation and other logistics and supply chain activities will continue to be an issue for supply chain executives • •Many firms are adopting environmental standards such as ISO 14000
how has sustainability played a part of SCM?
-Some firms attempting to be all things to all people -This strategy places greater pressure on the supply chain, as it must be flexible, adaptive, effective and efficient
how has the digital economy made answering certain questions regarding strategy more challenging?
Customer Expectation: • Outstanding service at low costs! Your Service Offering: • Near 100% availability • Near 100% On-time Delivery • Real-time Transparency • Low Risks, Rapid Recovery • Best-cost Solutions
in a strategic alliance what are the customer expectations? youre service offering?
Customer Expectation: • Low Costs • Adequate Service Your Service Offering: • Efficient, Hassle-free Service • Perform to Promise • Treat Each Customer Fairly
in a transactional relationship what are the customer expectations? your service offering?
•Balance human and physical resources of the organization and supply chain with customer service requirements and establish/communicate customer satisfaction plans and strategies for the whole supply chain. • •Manage business rules, supply chain performance, data collection, inventory, capital assets, transportation, planning configuration, and regulatory requirements and compliance that have a direct influence on the delivery of various service components to customers. • Align customer service and satisfaction strategies with the overall financial plan of the organization
in customer satisfaction and the SCOR model how do you plan?
•requires timely information •Information sharing is critical both within individual firms and among firms in the supply chain -Internally, information is needed to coordinate activities within and among functions •This refers to traditional organizational specializations such as marketing, logistics, manufacturing or finance -Externally information among firms in the supply chain is equally important •Helps to reduce risk •Yet, it has been shown visibility decreases as one moves farther upstream to suppliers and supplier's supplier In today's digital economy, information about products has become almost as important as the products themselves
in regards to managing daily operations, why is information imortant? internal/external info?
CRM (Customer Relationship Management)
is an approach to managing customer relationships and serving customers using various types of information systems technology can be applied to organizations of any size/ or type
supply chain orientation
is defined as "the recognition by an organization of the systemic, strategic implications of the tactical activities involved in managing the various flows in a supply chain."
SCM
is the implementation of a supply chain orientation across suppliers and customers.
information
is the lifeline of a supply chain
customer satisfaction
measures how well the expectations of a customer concerning a product or service provided by your company have been met indicates the fulfillment that customers derive from doing business with a firm. In other words, it's how happy the customers are with their transaction and overall experience with the company
Supply Chain Strategy
must fit with the overall strategy
customers dont want to pay alot two step process to match service to needs: 1.) identify relevant cost-service tradeoffs 2.) calculate costs and benefits of service offerings
operational efficiency
"seven rights" right product right customer right time right condition right quantity right place right cost
order fufillment deliverables are...
•Many aspects of supply chain management are subject to some type of regulation (local, state, federal, and/or international) • •In the United States, the Sarbanes-Oxley Act has impacted both legal and ethical issues relating to supply chain management (internal process controls, offbalance sheet obligations, timely reporting of material changes) • •Environmental and sustainability regulations are increasing
regulatory rules impact scm how?
•There are five general categories of risk facing supply chain executives: economic (oil prices/energy supplies, trade deficits, demographic shifts) environmental (natural catastrophes, climate issues) geopolitical (terrorism, weapons of mass destruction, wars, middle east instability) societal- (pandemics, infectious diseases,) technological- (nanotechnology risks and breakdown of critical information infrastructure) •Risk mitigation strategies are important in supply chains •Cyber security has become a very important risk issue in domestic and global commerce
security and risk facing scm?
•Gross Domestic Product (GDP) •Globalization •Sustainability •Infrastructure •Regulatory issues •Security and risk •Disruptions •Disaster preparedness and relief
societal issues impacting supply chains
-Network design -The level of outsourcing -Which channels to use to bring products to market
supply chain strategy focuses on three issues...
•Customer service and satisfaction customer service-> a customer oriented philosophy that integrates and manages all elements of the customer interface within a predetermined optimum cost-service mix customer satifaction-> occurs if the organizations overall supply chain and marketing efforts are successful •Human resources •Organizational issues •Technology •Financial aspects and metrics
what are the business related issues impacting supply chains?
Demand Planning Transportation Production Warehousing Inventory Collaborative Planning
what are the key supply chain planning areas?
•Pre-transaction elements: all service aspects that must be completed prior to any transaction taking place. • •Transaction elements: service aspects that occur during the transaction. • •Post-transaction elements: all service aspects that must occur after a transaction or a sale has occurred.
what are the marketing exchanges with customer service
-Establish distinct supply chain activity cost centers. -Allocate costs to those centers. -Analyze cost and service variations from alternative volume projections and/or structural alternatives.
what are the steps in implementing cost-service trade-offs?
-activity or process -performance measures -corporate philosophy
what are the three components of customer satisfaction?
1.) evaluate customer response •Delay purchase •Substitute items •Switch suppliers 2.) estimate consequence costs 3.) Calculate the expected stockout cost
what are the three steps to calculating stock out costs?
-event logistics -passenger logistics -millitary logistics -service logistics -humanitarian logistics
what are the types of logistics?
-To maintain asset visibility -Manage daily operations -Make planning and strategic decisions
what are the uses of information?
-At the right time (100% on-time delivery). -In the right quantity (100% fill rate). -In the right condition and packaging (100% quality related to fulfillment). -With the right documentation (increasingly electronic).
what conditions does a perfect order meet?
•Infrastructure often does not keep up with increases in freight traffic • •In many countries, spending on infrastructure as a percentage of GDP has declined • •The Panama Canal expansion completed in 2016 doubled throughput as larger ships were able to pass through it
what does infrastructure do to the SCM?
•Carry out all order management steps from processing customer inquiries and quotes to routing shipments and selecting carriers. • •Optimize warehouse management from receiving and picking product to loading and shipping product. • •Receive and verify product at customer site and install, if necessary. • •Invoice customer accurately and in a timely fashion. • •Manage DELIVER business rules, performance, information, finished product inventories, capital assets, transportation, product life cycle, and import/export requirements that have a direct influence on the delivery of various service components to customers.
what is in the "deliver" component of customer satisfaction in the SCOR model?
•Schedule production activities, issue product, produce and test, package, stage product, and release product to deliver so that customer service requirements are met. • •Manage rules, performance, data, in-process products (WIP), equipment and facilities, transportation, production network, and regulatory compliance for production that have a direct influence on the delivery of various service components to customers
what is in the "make" component in customer satisfaction and the scor model
•Carry out all order management steps from processing customer inquiries and quotes to routing shipments and selecting carriers. • •Optimize warehouse management from receiving and picking product to loading and shipping product. • •Receive and verify product at customer site and install, if necessary. • •Invoice customer accurately and in a timely fashion. • •Manage DELIVER business rules, performance, information, finished product inventories, capital assets, transportation, product life cycle, and import/export requirements that have a direct influence on the delivery of various service components to customers.
what is in the "return" component of customer satisfaction and the SCOR model?
•A supply chain manager controls assets belonging to firms in the supply chain -This includes items such as trucks, inventory, pallets, containers, and lift trucks - •The manager must maintain control and to make the best possible use of them • •Asset visibility is also important to support safety and security -The same wireless technology available to track trucks is used to enhance the protection of drivers against possible crimes
what is involved in asset visibility?
•Exceeding the service requirements of customers can result in misallocating resources on the wrong things and lower the R O I associated with various satisfaction strategies. • •Underperforming on customer service requirements results in unhappy customers and can provide competitors with an opportunity to take those customers away from your firm. • Matching customer requirements is the optimal approach to satisfying customers
what is the GAP analysis in customer satisfaction?
95.7- on time delivery 1.7- over/short/damage 2.3- Backorders 98.1- correct invoice 1.1- shipment complaints 96.95- perfect order
what is the best service for "Best Customers"
Uniting all of these inputs and experiences into a coherent whole
what is the focus of an omnichannel?
•Customers require consistent service and quality. • •Customers can plan when service is consistent; it is more difficult to plan when service is inconsistent. • •A major objective of supply chain management is to provide certainty to customers. • •While consistency and speed are essential to achieving customer satisfaction, consistency is much more important than speed.
what is the importance of Consistency?
90.4- on time delivery 2.45- over/short/damage 4.23- Backorders 96.8- correct invoice 2.41- shipment complaints 94.7- perfect order
what is the service for an "average customer"?
•Should the firm own its supply chain assets or should they outsource them to third party service providers? • • What is the type of relationship, or strategic sourcing business model, that firms in the supply chain should maintain with each other
what questions must a company ask in regards to level of outsourcing?
