MGMT 486 Test 1

5. Define and give examples of the profit leverage effect of logistics.

Definition:Decrease in spending is more advantageous than an equivalent percentage increase in revenue (Sales) ● Logistics is not only a high cost area, it's also an area that is inefficient in many firms. ● Lowering logistics costs has a bigger effect on profits than a comparable increase in sales. ● This is highlighted in the equation (Cost Savings / Profit Margin = Needed Sales Increase) ● Suppose a company has a profit margin of 11%. If it implements a logistics method that saves them $500, they have saved $4,545 in needed sales.

1. Discuss how logistics adds value.

Logistics contributes to the concept of economic utility. Economic Utility is the value or usefulness of a product in fulfilling customer needs or wants. These are the Utilities that are provided by logistics that add value to the product. Logistics takes the raw material, adds utility to it, and then delivers it to the customer. ●The Right Product ● In the Right Quantity ● To the Right Place ● For the Right Customer ● At the Right Time ● In the Right Condition ● At the Right Cost/Price

4. Define materials management and physical distribution.

MM SV. PD Materials Management Physical Distribution Product Value: Relatively low /More Valuable Consumption: Large, Concentrated, Homogeneous / Small, Geographically Dispersed, Heterogeneous Cost of Stockouts: Very High / Backorder, Lost Sales, lost Customers Inventory Levels: Depends / Smaller Uncertainty: Short-term, Demand, Bullwhip / Depends on Customer Shipments: Fewer Intermediaries / Longer Channels

8. Define a channel of distribution. Explain how and why channels are split into two parts.

● A channel of distribution is: The set of institutions which performs all of the activities used to move a product and its title from the source of supply to the point of consumption. ● Two parts: ● Transaction Channel: Moves the ownership of the product ● Logistics: Moves the the actual physical product.

Information Technology 14. List the 6 general types of information management systems and give one logistics application for each.

System Type / Logistics Examples Office Automation System: Provides effective ways to process personnel and organizational business data, to perform calculations, and create documents. / Spreadsheet applications to calculate optimal order quantities, facility location transport cost minimisation, among others. Communication System: Helps people work together by interacting and sharing information in many different forms. / Virtual meetings via computer technology, voice based order picking. Transaction Processing System (TPS): Collects and stores information about transactions, controls some aspects of transactions / Electronic data interchange, Automatic identification technologies such as bar-codes, Point of sale Systems. Management Informations Systems (MIS) and Executive Informations Systems (EIS): Converts TPS data into information for monitoring performance and managing an organization, provides executives information in a readily accessible format. / Logistics Information System Decision Support System (DSS): Helps people make decisions by providing information, models, or analysis tools. / Simulation, Application-Specific software such as warehouse management systems, Data mining Enterprise Systems: Creates and maintains consistent data processing methods an integrated database across multiple business functions. / Logistics modules of enterprise resource planning systems.

3. Define logistics

That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point-of-origin to the point-of-consumption in order to meet customer's requirements.

2. Discuss how the utilities provided by logistics help create efficiency and effectiveness in the supply chain. (5)

Time: Christmas Morning Place: Under your tree, not the warehouse Form: In usable form, we can't use crude oil, it must be converted to gasoline. Also delivered in the right condition not broken Assortment/Quantity: A 6 pack of soda vs. a pallet of soda. Stores must have the right quantity, we don't want stockout. Information and Possession: Useful information, Sales, closeout sales, end of year, conformity, Email.

Logistics Interfaces and the Environment 6. Discuss the interactions between logistics and each element of the marketing mix. pg 12 The four P's

Place: ● Logistics decisions concern the most effective way to move and store the product from where it is produced to where it is sold. ● Co-Branding, which refers to an alliance that allows customers to purchase products from two or more name-brand retailers at one store location. ○ Starbucks located within Marriott Hotels, Subway restaurants located in some Walmart stores, and colocated Dunkin' Donuts and Baskin Robbins Stores. Price: ● Trade offs of marketing and operations between price: ● FOB: Freight on Board: Transfer of Ownership Occur ● FOB Origin: Ownership is put on the customer. Eggs bought at the Grocery Store. Treasure Hunter affect, more likely to get impulse purchases, cheaper ● FOB Destination: Ownership does not transfer until it reaches its destination. More Control Product: ● a. Product Mix: All the products you offer: Width: Different Products and Depth: Variety of those products. Ex: Walmart is Wide but not deep. Starbucks is not Wide by Deep. The more you grow the width and depth of a product the harder it is for the log to keep from having stockouts. ● b. Product Design: Stand out from competitors, looks cool. For log=simple easy to handle. Log and Marketing are constantly fighting over this. ● c. Substitutability: How easy is it for the consumer to buy something else. A competitor's product. The more convenience your products are the more important it becomes that you never stock out. ● d. Risk: Products that are hard to move through the logistics channel. Required more handling so risk is increased but bigger profit margins. ● e. Value: As the product becomes more valuable, the more risk you take on. ● f. Density: More product-reduce your costs per unit Promotion: ● Push: large orders, cheaper more predictable but also less responsive more efficient. ● Pull: Smaller orders, more expensive to produce but more responsive less efficient.

19. List and explain the benefits associated with transportation management and warehouse management systems.

● A transportation management system is a software package that automates the process of building orders, tending loads, tracking shipments, audits, and payments. ● Organizations that have implemented TMS software have reported decreases in empty vehicle miles, reduced fuel consumption, and reduced transportation expenditures. ● TMS is now being seen as a way to improve environmental sustainability of their logistics activities, by using the information provided, companies can get their freight to where and when it is needed in a more environmentally efficient manner. ● Warehouse management systems are software packages that provide oversight of the storage and flow of material within a company's operations. ● Potential benefits to WMS include dramatic reductions in data entry errors as well as dramatic reductions in the travel distances for ordering picking. Other benefits to WMS include reduced operating expenses, fewer stockouts, increase inventory accuracy, and improved service to customers.

17. Discuss the relationship between automatic identification technologies and point-of-sale systems. pg 28

● Automatic Identification Technology (AIT) have the ability to: optical character recognition (which can read letters, words, and numbers), machine vision (which can scan, inspect, and interpret what it views), voice-data entry (which can record and interpret a human voice), radio-frequency identification (which can be used where there is no line of sight between scanner and label), and magnetic strips. ● Point of Sale (POS): AIT are an essential component in point-of-sale (POS) systems and the idea behind POS systems is to provide data to guide and enhance managerial decision-making. POS systems involve scanning Universal Product Code (UPC) labels. The UPC is read and recorded into a database that supplies information such as the products price applicable taxes, whether food stamps can be used, and so on. ● Also RFID

16. Discuss the benefits and drawbacks of EDI. (electronic data interchange) pg 27

● Benefits: Reduction in document preparation and processing time, Inventory Carrying Costs (ICC), Personnel Costs, Information Float, Shipping Errors, Returned Goods, Lead Times, Order Cycle Times, and Ordering Costs. ● Potential Drawbacks: Lack of Awareness of its benefits, High Setup Costs, Lack of Standard Formats, and Incompatibility of computer hardware and software.

9. Discuss why intermediaries are used in marketing channels pg.14

● Buying directly from the manufacture is cheaper, but not always possible. Hence the reason for intermediaries. ● Transactional Efficiency: Intermediaries help us become more efficient. Ex: Grocery Store 1000 of products 100 companies. It would be impractical and hugely inefficient to order all of the products needed in a household directly from the manufacturer. The grocery store acts as an essential intermediary by providing products from various manufacturers into one place. ● Sorting Activities: Cannot be elevated, someone has to do it. Done by intermediaries. ● Quantity: manufacturer's: Limited products, large quantity. ● Assortment: Consumers: many products: small quantity

20. Explain the advantages and disadvantages of enterprise resource planning systems.

● ERP systems lets a company automate and integrate the majority of its business processes, share common data and practices across information in a real-time environment. In theory ERP systems allow all prospective users access to a single database when making decisions. ● Advantages: potential for lower costs (such as inventory reductions), as well as increased productivity and increased customer satisfaction. ● Disadvantages: involves the costs of installation which is relatively expensive. Also costs include training, upgrades, data conversion, maintenance costs and consultant fees. ● Implementation of ERP systems can be very time-consuming process. ● ERP systems initially lack strong application-specific logistical capabilities such as TMS and WMS.

24. Define e-logistics and explain how it adds value.

● Helps generate price efficiency ● Improves asset utilization ● Reduce business interaction costs ● Improve return on investment

7. Discuss the interactions between logistics and specific productions/operations considerations.

● Length of Runs: How many units of one item do you produce before you change over. ● Long runs are better for operations: lower costs are gained by achieving economies of scale. However, there are problems with long product runs. The Product may become obsolete making it extremely hard to sell. Companies could be forced to discount the item and or lose money on it. Long production runs also amount to huge inventory costs, which can lead to assortment problems. ● Timing: Producing to meet demand or in anticipation of demand. ● Location of Production: What happens during the production process. ● Companies that may accumulate lots of waist or deal with raw materials may chose to locate close to their source of material. Ex: lumber industry. ● Soda/Del=postponement-companies wait till the last moment to fulfill customer orders. Delay in value added activities. ● Lumber=speculation-companies use speculation of demand to carry out what is needed. ● Speculation=high inventory costs, lower manufacturing costs, might not be where you need it or demand may not be there. ● Postponement=more form utility, lower inventory, but stockouts

13. Define the total cost concept. pg 10

● Managers use TCA to coordinate materials management and physical distribution in a cost-efficient manner. Use of the TCA requires an understanding. of Cost Trade-Offs, in other words, changes to one logistics activity cause some costs to increase and others to decrease.

10. Define basic types of intermediaries.

● Merchant Middlemen: actually own the products they sell. They pay the producers for the goods and take ownership of them, thus relieving the manufacturer of any further responsibility in the selling procedure Takes ownership of your inventory: high risk, but higher rewards. Set your own price, sell it to whoever and wherever. Example: Stubhub. ● Agent Middlemen: In contrast to merchant wholesalers, agent middlemen do not purchase the goods they sell. Their purpose is to bring together buyers and sellers, and they make their money as a commission of the sale price. Many agents specialize in specific kinds of products. They can offer expertise. Example Real Estate Agent ● Facilitators: Companies: Make the transaction easier to do. Credit card companies. Don't own the product

21. Explain the key differences between in-store and online logistics systems.

● Powerful differences exist between online and in-store retailing with respect to the execution of logistic activities. For example, the orders associated with online shopping tend to he more plentiful and in much smaller quantities than those associated with in-store retailing. ● Online retailing requires an order management system capable of handling high volumes of orders, and it's also essential that the information management system be capable of correctly transmitting each order so that it can he filled in a timely fashion. ● Because of smaller order quantities, online shopping is characterized by open-case, rather than full-case, picking: open-case picking is facilitated by materials handling equipment. ● Online retailing's smaller order quantities have important packaging implications as well, in the sense that companies need containers-small cartons, envelopes, bags, that are well suited to holding small quantities of product. ● Companies using online retailing must also consider "last mile" delivery, often making products more expensive. In-store Retailing ● Fewer, larger orders ● Orders from resellers, not consumers ● Full-case picking ● Warehouse set up to handle large volume orders ● Return rates much lower

11. Discuss the interactions between logistics and technology (see chapter 2) pg 37

● Six general types of information management systems were examined, with a particular emphasis on relevant logistical applications: global positioning system, electronic data interchange, application specific software, and enterprise resource planning systems. ● The internet's influence on logistics in terms of three issues, online retailing, cloud computing, and electronic procurement.

22. Discuss how the internet influences the functions of channel intermediaries.

● Sorting activities ● Transactional efficiency ● Facilitate searching

12. Specifically discuss the tradeoffs that result from logistics activities and why it is important to understand these tradeoffs.

● Span Normal Boundaries: Because of this logistics activities must communicate with all departments. Cross boundaries among organizations. So logisticians must interact with all departments because Driving costs down in one area may drive costs up in another. Must look at the big picture, utilize the total cost approach. ● Use of the total cost approach requires an understanding of cost tradeoffs, in other words, changes to one logistics activity cause some costs to increase and others to decrease. Importantly, an understanding of logistical activities generally move in opposite directions. ● A decrease in transportation costs often associated with an increase in warehouse costs.

18. Discuss the importance of timely and accurate information to a logistics information system. pg.29

● Timely refers to the up-to-date status of information, which can be influenced by a company's collection and analysis procedures. ● Timely can also refer to how quickly managers receive the information requested this is affected by each company's retrieval and dissemination procedures. A manager's ability to quickly received information can be influenced by technology hardware and software, and faster and more powerful technology has helped reduce retrieval and dissemination times. However this can be slowed by hardware and software glitches, power outages, system crashes, and computer viruses. ● Accurate information may also reflect the effectiveness and efficiency of a company's logistics information system. LIS must be concerned with the nature and quality of the relevant data. GIGO-Garbage in Garbage out principle. Information that is erroneous, misrepresented, or unclear will likely result in poor decisions by logisticians.