Exam 2- Global Logistics Management

(Murphy Ch 7- Demand management, order management, and customer service) Demand Management: Definition

"the creation across the supply chain and its markets of a coordinated flow of demand."1

(Murphy Ch 7- Demand management, order management, and customer service): Order Management

Order management refers to management of the various activities associated with the order cycle Order cycle (replenishment cycle or lead time) refers to the time from when a customer places an order to when goods are received Order to cash cycle refers to the length of time it takes an organization to receive payment for an order Some organizations include order to cash cycle in their order management model -The order cycle should be analyzed not only in terms of total cycle time but in cycle time variability (reliability). Just as longer order cycles necessitate increased levels of inventory, so, too, does greater cycel time variability require additional levels of inventory (regardless of cycle time length). -Order Management has been profoundly affected by advances in information systems

(Murphy Ch 10: Warehousing Management):Own or Rent Warehousing Space?

Organizations must decide the proper mix in terms of warehouse ownership Owning: -Private warehousing Renting: -Public warehousing -Contract warehousing -Multiclient warehousing

(Murphy Ch8: Inventory Management): Inventory Management: Special Concerns: Substitute Products

Products that can fill the same need or want as another product -the substitutability can occur at a specific product level (e.g., one brand of cola is viewed as a substitute for another brand of cola), or it can occur across product classes (e.g., potatoes may be viewed as a substitute for rice). - knowledge of substitutability has important implications with respect to stockout costs and the sizes of safety stock to be maintained. -its also important that companies have a thorough understanding of substitution patterns.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Natural Resources

Pure materials- materials that lose no weight in processing, the processing point can be anywhere near the raw material source and the market Weight-losing products- materials that lose considerable weight in processing, processing point should be near the point where they are mined or harvested. Weight-gaining products- raw materials that gain weight in processing, processing point should be close to the market. -land requirements are another natural resource consideration in facility location, and distribution and production facilities may require large parcels of land to facilitate effective and efficient operations. - Historically, the relationship between natural resources and facility location revolved around how the natural resources would be incorporated into products making their way toward consumers.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Quality of Life Considerations

Quality-of-life considerations Cost of living Educational opportunities Crime rates Employment opportunities Weather Cultural amenities Others -Incorporate nonbusiness factors into the business decision of where to locate a plant or distribution facility. -First, employees who are able to live a reasonable lifestyle tend to be happier and more loyal; happy and loyal employees are less likely to eave their jobs and less likely to offend prospective customers. -Second, because many organizations now compete nationally and internationally for talent, less-than-desirable geographic locations might hinder the recruiting process. - Quite simply, the quality of life region, is it a nice place to live?- impacts both employee retention and the ability to attract new employees.

(Murphy Ch 7- Demand management, order management, and customer service) :Demand Management: Demand (sales) Forecasting

Refers to an effort to project future demand Is a key component in demand management Is helpful in make-to-stock situations: when finished goods are produced prior to receiving a customer order Is helpful in make-to-order situations: when finished goods are produced after receiving a customer order. Generally involve some combination of standard and custom components, and forecasting could be quite helpful in projecting the standard components needed.

(Murphy Ch 9: Facility Location): Facility Location

Refers to choosing the locations for distribution centers, warehouses, and production facilities to facilitate logistical effectiveness and efficiency Facility location decisions are strategically important - The initial focus is on the region, the delineation of which can vary depending on whether a company has multinational or domestic focus. -The next focus is more precise; it usually involves a selection of the area(s) in which the facility will be located; once this has been determined, a detailed examination of various locations within the selected area is appropriate.

(Murphy Ch 7- Demand management, order management, and customer service): 4 dimensions of customer service: Time

Refers to the period between successive events (e.g., order cycle)

(Murphy Ch 7- Demand management, order management, and customer service): 4 dimensions of customer service: Dependability

Refers to the reliability of the service encounter Consists of three elements: Consistent order cycles Safe delivery Complete delivery -Order fill rate: the percentage of orders that can be completely and immediately filled from existing stock, is one way of measuring the completeness of delivery.

(Murphy Ch 7- Demand management, order management, and customer service): 4 Stages of of the Order Cycle: Order Delivery

Refers to the time from when a transportation carrier picks up the shipment until it is received by the customer Three key order delivery issues: Variety of options in terms of transit time are now available, such as delivery by 12 noon and delivery by 4:30 p.m. -When the book was published in the 1970s, transportation carriers provided a limited number of options in terms of transit times, and shippers thus had to incorporate the rather inflexible transit times into calculations of the length of an order cycle. A number of shippers are emphasizing both elapsed transit time as well as transit time reliability/variability (which is important because increases in order cycle variability translate into higher inventory levels) Transportation carriers are revamping their operations to provide faster transit times to customers

(Murphy Ch 7- Demand management, order management, and customer service): 4 Stages of of the Order Cycle: Order Transmittal

Refers to the time from when the customer places an order until the seller receives the order Methods of order transmittal In person: greatly reduce the potential for order errors, but isn't always convenient (or practical) in situations where the supplier is geographically distant. Mail: more convenient than in-person ordering, but is considered to be relatively slow form of order transmittal, and there are occasions when the order never reaches the intended destination (lost in the mail) Telephone: can be relatively fast and convenient, but order errors may not be detected until the order is delivered. Fax: can be fast, convenient, and unlike the telephone, provides hard copy documentation of an order. However, the seller's fax machine can be cluttered with junk (unwanted) faxes, and the quality of the fax transmission can result in hard-to-read orders- which increases the chances of of order errors in the form of incorrect product or incorrect quantity. Electronically: includes EDI, the Internet, and mobile technology, can be fast, convenient, and accurate, particularly those orders involving scanners and bar codes. Concerns with ordering via the Internet and mobile technology include the security of the information being transmitted (particularly with respect to payment info) and the potential loss of privacy (due to cookies and tracking software).

(Murphy Ch 7- Demand management, order management, and customer service): 4 Stages of of the Order Cycle: Order Processing

Refers to the time from when the seller receives an order until an appropriate location (i.e., warehouse) is authorized to fill the order Order processing activities include: Checking for completeness and accuracy Checking the buyer's ability to purchase Order entry into the computer system Crediting salesperson with the sale Recording the transaction Determining inventory location Arranging for outbound transportation -One way to reduce order cycle time is to identify activities that can be performed simultaneously and then perform the relevant activities simultaneously, rather than sequentially. -Companies differ in their approaches to managing order processing and its activities, and these different approaches can have important implications for order cycle effectiveness and efficiency. -With respect to order receipt, figure 7.1 indicates that incoming orders can be divided into categories, one category for EDI orders that are allowed to bypass checking for completeness and accuracy and one category for all others. It could be argued that all orders, regardless of transmission method, should be checked for completeness and accuracy; incomplete or inaccurate orders can negatively affect customer satisfaction and increase costs associated with addressing order irregularities. However, checking all orders for completeness and accuracy add costs and time to the order cycle. -Order Traige: refers to classifying orders according to pre-established guidelines so that a company can prioritize how orders should be filled. Not all companies prioritize orders, and those that do must decide the attribute(s) used to prioritize. Although there is no one right attribute to use for order prioritization, you should recognize that the chosen attribute(s) are likely to delight some customers and disappoint others. -Another key order processing decision involves determining the location(s) from which the order is filled. As was the case with order triage, companies should have clear, consistently applied rules to help in making this decision, but there are companies that decide which facility to use on an order-by-order basis-which can lead to inconsistent order cycle time and cost. A common sense approach would be to fill an order from the facility location that is closest to the customer, with the idea that it should generate lower transportation costs as well as shorter order cycle time. Alternatively, an order could be filled from the facility location that currently has the largest amount of requested product; this likely will increase both order cycle time and transportation costs, but it could help the seller by reducing excess inventory at a particular location.

(Murphy Ch8: Inventory Management): Inventory Management: Contemporary Issues with Managing Inventory: Just-in-time approach (JIT)

Seeks to minimize inventory by reducing (or eliminating) safety stock while having the required amount of materials arrive at the production location at the exact time they are needed -has a number of important implications for logistical efficiency, one of which is that suppliers must deliver high-quality materials to the product line; because of JITs emphasis on low (no) safety stock, defective materials result in product line shutdown. -JIT emphasizes minimal inventory levels, as a result, customers tend to place smaller, more frequent orders. As such it is imperative that suppliers' order systems be capable of handling an increased number of orders in an error-free fashion. -In addition, because the transit time reliability tends to decrease with distance, suppliers need to be located relatively close to their customers. -The combination of smaller, more frequent orders and close supplier location means that trucking is an important mode of transportation in the JIT approach. As such, production and distribution facilities should be designed to support truck shipments.

(Murphy Ch 7- Demand management, order management, and customer service): Demand Forecasting Issues

Selection of forecasting technique(s) depends on many factors(such as the situation at hand, forecasting cost in terms of time and money, and the accuracy of various forecasting techniques) Selecting an inappropriate technique will reduce forecast accuracy Forecast accuracy can have important logistical implications Computer forecasting software unable to completely eliminate forecast errors -Software packages should not be viewed as a panacea to an organizations demand forecasting, although this software can provide fast and detailed data. -Forecasting Accuracy: refers to the relationship between actual and forecasted demand, and the accuracy can be affected by various considerations -Collaborative planning, forecasting, and replenishment(CPFR): Supply chain partners share planning and forecasting data to better match up supply and demand. Suggests that supply chain partners will be working from a collectively agreed-to single demand forecast number as opposed to each member working off its own demand forecast projection, and that supply chain partners will be working from a collectively agreed-to order forecast, which considers both forecasted demand and current inventory levels.

(Murphy Ch 10: Warehousing Management): Ideal Cross-Docking Facility for Pure Supplier Consolidation (Full Pallet Movement)

This "I" shaped facility uses the least amount of space internally (to discourage products from being stored) while still maximizing the number of inbound (receiving) and outbound (shipping) doors that can be added to the facility

(Murphy Ch 7- Demand management, order management, and customer service): 4 dimensions of customer service: Communication

To be effective, should be a two-way exchange between seller and customer Goal is to keep both parties informed Requires correct parties to be involved in the process -customer service can be enhanced if complete information is exchanged between the participants; a delivery address can be helpful, but detailed characteristics of the delivery address would be even more helpful. -Two way communication between seller and customer has certainly benefited from technological advances such as cell phones, smart phones, and the Internet. These technological advances allow for less costly and more frequent contacts between the two parties. However, technology such as text messaging and the Internet can depersonalize the communication process, which is why periodic telephone interaction and even face-to face contact between seller and customer are recommended.

(Murphy Ch 9: Facility Location): Facility Relocation and Facility Closing

Two specialized situations regarding location choice Facility relocation: -Associated with business growth Facility closing: -Associated with business contraction

(Murphy Ch 7- Demand management, order management, and customer service): Demand Forecasting Models (3): Time Series Forecasting

Underlying assumption is that future demand is solely dependent on past demand Some techniques include: Simple moving averages Weighted moving averages -The Simple Moving Average: is calculated by summing the demand across different time periods and then dividing by the number of time periods. Because each time period is assigned the same importance (weight), the simple moving average may not adequately reflect recent upturns or downturns in demand. -To address this shortcoming, the Weighted Moving Average Technique: assigns greater importance (weight) to more recent data.

(Murphy Ch 10: Warehousing Management): The Role of Warehousing in a Logistics System

Warehousing -(key reason for warehousing)Serves to match different rates or volumes of flow when patterns of production and consumption do not coincide Facilitates the regrouping function in a supply chain: -Involves rearranging the quantities and assortment of products as they move through the supply chain

(Murphy Ch8: Inventory Management): Inventory Classifications: Psychic Stock

- Inventory carried to stimulate demand (retail) - this type of inventory is associated with retail stores, and the general idea is that customer purchases are stimulated by inventory that they can see. This concept helps explain, in part, why some retailers stock huge amounts of certain merchandise.

(Murphy Ch8: Inventory Management): Inventory Classifications: Pipeline, or in-transit stock

- Inventory that is en route between various fixed facilities in a logistics system such as a plant, warehouse, or store.

(Murphy Ch8: Inventory Management): Inventory Classifications: Speculative stock

- Refers to inventory that is held for several reasons, including seasonal demand, projected price increases, and potential shortages of a product.

(Murphy Ch8: Inventory Management): Stockout Costs

- Stockout costs are an estimated cost or penalty for a stockout - Involve an understanding of a customer's reaction to a company being out of stock when a customer wants to buy an item -Having an understanding of how to calculate stockout costs highlight several key managerial issues: -The higher the average cost of a stockout, the better it is for the company to hold some amount of inventory (safety stock) to protect against stockouts -The higher the probability of a delayed sale, the lower the average stockout costs and the lower the inventory that needs to be held by a company

(Murphy Ch8: Inventory Management):Determination of the Average Cost of a Stockout

- assume for simplicity's sake that customer responses to a stock out can be placed into three categories: Delayed sale (brand loyalty), lost sale (switches and comes back), and lost customer. - Generally speaking if the cost associated with a stockout is significant then the firm should hold inventory to prevent a stockout from happening

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Taxes

- calculated on the basis of the inventory on hand on a particular date; considerable effort is made to have that day's inventory be as low as possible.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Insurance costs

- insure inventory against fire, flood, theft, and other perils - these costs are not uniform across products; diamonds, for example, are more costly to insure than shampoo.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Handling costs

- involve the costs of employing staff to receive, store, retrieve, and move inventory. - note that specialized storage requirements may also increase handling costs; a refrigerated warehouse requires workers to wear gloves, head coverings, and coats to protect them from the cold temperatures.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Storage costs

- refers to those costs associated with occupying space in a plant, storeroom, or warehousing facility. - you should recognize that specialized storage requirements, such as refrigeration, result in higher storage costs.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Other types of carrying costs

- some inventory items have other types of carrying costs because of their specialized nature (e.g., tropical fish must be fed and have oxygen added in the water) - Generally excluded cost is opportunity costs, which is the cost of taking a position in the wrong materials. This can be an issue for those companies that engage in speculative inventory. -Opportunity costs are also incurred by firms that hold too much inventory in reserve for customer demand.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Interest costs

- take into account the money that is required to maintain the investment in inventory. - In the United States, the prime rate of interest has traditionally provided a convenient starting point when estimating the interest charges associated with maintaining inventory.

(Murphy Ch 10: Warehousing Management): Facilities Providing Warehousing

- warehousing can be provided by warehouses, distribution centers, fulfillment centers, or cross-docking facilities.

(Murphy Ch 10: Warehousing Management): The Role of Warehousing in a Logistics System: Regrouping can take place in 4 forms: Sorting Out Definition

-"Separating products into grades and qualities desired by different target markets" -Example: a department store chain may sell $1,000 men's suits only in stores located in high-income areas, whereas $600 men's suits might be the highest prices suit sold in less-affluent areas.

(Murphy Ch 10: Warehousing Management): The Role of Warehousing in a Logistics System: Regrouping can take place in 4 forms: Allocating Definition

-(bulk breaking): Involves breaking larger quantities into smaller quantities. -Example: continuing with the suit example, whereas the department store might buy 5000 suits in size 42 short, and individual store might only carry 15 to 20 suits in this size

(Murphy Ch 10: Warehousing Management): The Role of Warehousing in a Logistics System: Regrouping can take place in 4 forms: Accumulating Definition

-(bulk making): Involves bringing together similar stocks from different sources -Example: as might be done by a department store that buys large quantities of men's suits from several different producers

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Proximity to industry clusters

-Agglomeration concept, better known today as the industry cluster concept: refers to the net advantages which can be gained by a sharing of common locations by various enterprises. -Industry clusters Differ in shape and size -One type focused on a particular industry -Another type of clusters offers organizations proximity to key suppliers - Proximity to key suppliers has been the Catalyst in the development of supplier parks: a concept that developed around auto-makers and their suppliers in Europe and has spread to other countries, including North America. -Industry clusters can provide potential advantages to prospective participants in terms of facility and transportation considerations. -With respect to facilities, the relative proximity of manufacturers in a particular cluster would allow for capacity pooling in the sense that a manufacturer with excess capacity could produce goods for a manufacturer with an excess of orders. - From a transportation perspective, industry clusters could allow for faster and more consistent deliveries, particularly in a the case of supplier parks where many suppliers are located a short distance from their customers.

(Murphy Ch 10: Warehousing Management):Own or Rent Warehousing Space?: Contract Warehousing

-Also referred to as third-party (3PL) warehousing or dedicated warehousing -Refers to "a long term, mutually beneficial arrangement which provides unique and specially tailored warehousing and logistics services exclusively to one client, where the vendor and client share the risks associated with the operation"6 -Less costly than private warehousing and more costly than public warehousing -Allows a company to focus on its core competencies (with warehousing management provided by experts-experts who solely focus on the client's wants and needs) -Potentially offers the same degree of control as private warehousing due to contract specifications -Viewed as more flexible than private warehousing but less so than public warehousing: this flexibility depends in part of the length of the contract; as the contract increases, the flexibility to respond to change decreases. Three-to-five year contracts appear to allow sufficient time for the warehousing provider to learn the client's business while allowing the client some flexibility in case the agreement fails to produce acceptable results. - is a preferred alternative for many organizations because it simultaneously mitigates the negative aspects of and accentuates the positive aspects of public and private warehousing.

(Murphy Ch8: Inventory Management): Inventory Costs

-Assets cost money, which means that inventory costs money -Inventory costs between 2010 and 2014 represent approximately one-third of total logistics costs -Inventory cost should factor into an organization's inventory management policy -Logistics manager must understand nature of each cost as well as trade-offs - Inventory tends to be one of the largest assets (in terms of dollar value) on the balance sheets. As such, it is important for logisticians to have an understanding of inventory costs.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Transportation Considerations

-Availability: -Refers to the number of transportation modes (intermodal competition) and -#of carriers within each mode (intramodal competition) -Cost -Limited competition generally leads to higher transportation costs and means that users have to accept whatever service they receive. Thus, a poor location can significantly increase transportation costs as well as negatively affect customer service. -Geographically central facility locations are often the result of transportation costs and service considerations. With respect to transportation costs, centralized facilities tend to minimize the total transit distances, which likely results in minimum transportation costs. -A centralized location can also maximize a facility's service area.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Trade Patterns

-Commodity flow data studied to determine changes occurring in the movement of raw materials and semi-processed goods - With respect to commodity flows, logisticians are primarily concerned with: -How much is being produced? -Where is it being shipped? -Trade agreements (e.g., NAFTA) -Trade patterns have also been influenced among those countries that are members of the European Union (EU).

(Murphy Ch8: Inventory Management): Inventory Carrying costs

-Costs associated with holding inventory -In general, expressed in percentage terms and this percentage is multiplied by the inventory's value -Resulting number represents dollar value associated with holding the particular inventory -Not surprisingly, an increase or decrease in carrying cost percentage will affect the relevant inventory expense. -Generally speaking, companies prefer to carry lower inventory as the carrying cost percentage increases, in part because there is greater risk (e.g., obsolescence) to holding the inventory

(Murphy Ch8: Inventory Management): Trade-off Between Carrying and Ordering Costs

-Costs respond in opposite ways to the number of orders or size of orders -An increase in the number of orders leads to higher order costs and lower carrying costs -Calculations: -Ordering Cost = # of orders per year x ordering cost per order -Carrying Cost = average inventory x carrying cost per unit - Because of the assumption of an even outward flow of goods, inventory carrying costs are applied to one-half of the order size, a figure that represents the average inventory. - Average inventory is multiplied by the carrying costs of the inventory (expressed as a percentage of the dollar value).

(Murphy Ch8: Inventory Management): Inventory Classifications

-Cycle, or base stock -Safety, or buffer stock -Pipeline, or in-transit stock -Speculative stock -Psychic stock -It is important to understand the various classifications of inventory because the classification can influence the way that inventory is managed.

(Murphy Ch8: Inventory Management): When to Order and How Much to Order continued: Economic Order Quantity (EOQ)

-Deals with calculating the proper order size with respect to two costs: Costs of carrying the inventory Costs of ordering the inventory -Determines the point at which the sum of carrying costs and ordering costs is minimized, or the point at which carrying costs equal ordering costs -" is the quantity of product that will minimize your total costs of inventory per piece"

(Murphy Ch 10: Warehousing Management): Facilities Providing Warehousing: Distribution Centers

-Emphasize rapid movement of products through the facility -Attempt to maximize throughput -Throughput is defined as the amount of product entering and leaving a facility in a given time period

(Murphy Ch 10: Warehousing Management): Facilities Providing Warehousing: Warehouses

-Emphasize the storage of products -Primary purpose is to maximize the usage of available storage space

(Murphy Ch 9: Facility Location): Determining the Number of Facilities

-Facilities are generally added when service levels become unacceptable -Software packages exist to help in determining the number and location of facilities -Key issue - time it takes to get from facility to majority of the U.S. (or target) population -Moving from 1 to 3 facilities saves 1 day lead time -Moving from 3 to 10 facilities saves ¼ day lead time -Most analytical procedures for determining the number of facilities are computerized because of the vast number of permutations involved and the complementary relationships between current facilities in a distribution network.

(Murphy Ch 7- Demand management, order management, and customer service): 4 dimensions of customer service: Convenience

-Focuses on the ease of doing business with a seller -different customers may have different perceptions of the "ease of doing business" concept. -from the sellers perspective, certain costs may be associated with convenience. As a result, sellers must asses the extent to which their customers are willing to pay for convenience. -also plays a key role in a consumer's purchasing decision. Today's consumer likes to have multiple purchasing options at her/ his disposal and organizations have responded by developing multi channel marketing systems, i.e., separate marketing channels to serve customers.

(Murphy Ch 7- Demand management, order management, and customer service): Managing Customer Service: Measuring customer service

-Grandiose statements and platitudes regarding a firm's level of customer service represent little more than rhetoric unless the customer service standards to support them are actually implemented. -To accomplish this, a systematic program of measurement and control is required, because you cant manage what you cant measure. -Control is the process of taking corrective action when measurements indicate that the goals and objectives of customer service are not being achieved. -One key issue involves determining the data sources to be used. -A second key issue associated with customer service measurement is determining what factors to measure. -In addition, the metrics that are chosen should be relevant and important from the customer's perspective.

(Murphy Ch 10: Warehousing Management):Own or Rent Warehousing Space?: Private Warehousing potential drawbacks include:

-High fixed cost of private storage -Necessity of having high and steady demand volumes -Less attractive when interest rates are high -May reduce an organization's flexibility -Internally (through acquisition of other companies a firm might have too many facilities) -Externally (changing demand patterns might mean a facility is no longer well located) - may also reduce an organization's flexibility in responding to changes in the external environment. For example, companies that utilize this are susceptible to changing demand patterns, such as those experienced with the passage of multicountry trade alliances. Like wise, organizational flexibility can be affected by mergers with, or acquisitions of, other companies.

(Murphy Ch 9: Facility Location): Specialized Location Characteristics: Free Trade Zones

-Highly specialized sites in which to locate Also known as: Foreign trade zones Export processing zones Special economic zones -Nondomestic merchandise may be stored, exhibited, processed, or used in manufacturing operations without being subjected to duties and quotas until goods/products enter the customs territory of the zone country Have become extremely popular in recent years Often located at, or near, water ports, although they can also be located at, or near, airports -Free trade subzones refer to specific locations at an existing free trade zone -Particularly popular with automotive manufacturers

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location

-Influences on location of manufacturing, processing, or assembly facility Raw materials Component parts Labor Markets -Location of warehouses, distribution centers, and cross-docking facilities are influenced by locations of plants whose products they handle and markets they serve

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Taxes and Incentives

-Inventory tax: analogous to personal taxes paid by individuals. As a general rule, the inventory tax is based on the value of inventory that is held on the assessment date(s) -Incentive packages: governments may offer incentive packages as an inducement for firms to locate facilities in a particular location. -Can also be important for location decisions.

(Murphy Ch8: Inventory Management): Inventory Management: Contemporary Issues with Managing Inventory: Service Parts Logistics

-Involves designing a network of facilities to stock service parts -Deciding upon inventory ordering policies -Stocking the required parts -Transporting parts from stocking facilities to customers -Challenges for logisticians: -It can be extremely difficult to forecast demand for the necessary parts. Leads to challenges with respect to what parts to carry, the appropriate stocking levels for the parts that are carried, and higher inventory levels, among others. -The number of warehousing facilities that should be used in service parts logistics. One possibility is to locate the parts at numerous warehousing facilities. Alternatively, the parts could be located at one centralized facility. -These and other challenges have lead some organizations to outsource their service part logistics to companies that specialize in this area.

(Murphy Ch8: Inventory Management): When to Order and How Much to Order

-Key issue involves when product should be ordered -Can order a fixed amount of inventory (fixed order quantity system) - Or, orders can be placed at fixed time intervals (fixed order interval system) - Reorder (trigger) point (ROP) - Level of inventory at which a replenishment order is placed - Necessary for efficient fixed order quantity system - The fact that a fixed order quantity system works best when there is a predetermined reorder point indicates that this system requires relatively frequent, if not constant, monitoring of its inventory levels. - In most fixed order interval systems, by contrast, inventory levels are measured much less frequently, often just before the scheduled order time. The infrequency of inventory monitoring makes the fixed interval system much more susceptible to stockout situations, and one is more likely to see higher levels of safety stock in a fixed interval system. - It's entirely possible that a company could have some of its inventory under a fixed order quantity system, whereas other inventory uses a fixed order interval system.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Locating in other countries

-Many of these considerations are governmental in nature and deal with: Relevant legal system Political stability Bureaucratic red tape Corruption Protectionism Nationalism Privatization Expropriation (confiscation) Treaties and trade agreements

(Murphy Ch8: Inventory Management): Inventory Carrying costs components

-Obsolescence costs -inventory shrinkage -storage costs -handling costs -insurance costs -taxes -interest rates

(Murphy Ch 10: Warehousing Management):Own or Rent Warehousing Space?: Private Warehousing

-Owned by the firm storing goods in the facility -Generates high fixed costs -Should only be considered by companies dealing with large volumes of inventory -Retail chain stores are the largest users of private warehousing -Offers control to owner -Assumes both sufficient demand volume and stability so that warehouse remains full - In addition to large volumes, private warehousing also tends to be feasible when demand patterns are relatively stable. Fluctuating demand patterns could at times lead to insufficient storage space for product, in which case the company might need to use public warehousing as a supplement, thus increasing total warehousing costs. At other times, by contrast, there could be too much space (excess capacity), which costs money as well. -Assuming both sufficient demand volume and stability of demand, private warehousing offers users a great deal of control over their storage needs: The storage facility can be constructed to the user's specifications, which is a particularly feature when a company has unique storage or handling requirements. Moreover, companies can control product placement with a facility. Another aspect of control is that it offers access to products when an organization needs or wants them.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Population Characteristics- Market for Goods

-Population can be viewed as both a market for goods and a potential source for labor. -Planners for consumer products pay extremely close attention to various attributes of current and potential consumers - Not only are changes in population size of interest to planners, but so are changes in the characteristics of the population- particularly as those characteristics influence purchasing habits. -with respect to population characteristics, longer life spans can increase the demand for health-related products such as prescription medications. -In an effort to learn about population size and characteristics, many countries conduct a detailed study, or census, typically once every ten years or so. The resulting data can provide valuable insights for distribution planners in terms of where populations are growing and at what rates.

(Murphy Ch 9: Facility Location): General Factors Influencing Facility Location: Population characteristics- Labor

-Population characteristics—market for goods -Population characteristics—labor -Maquiladora (plants): assembly plants located just south of the U.S.-Mexican border. Provided much needed jobs to Mexican workers and allowed for low-cost, duty-free production so long as all the goods were exported from Mexico. -Sweatshops: which can be viewed as organizations that exploit workers and that do not comply with fiscal and legal obligations toward employees. -Right-to-work laws: which mean that an individual cannot be compelled to join a union as a condition of employment. -Expatriate workers: employees who are sent to other countries for extended periods of time. These workers often present unique managerial challenges. Leading cause of expatriate turnover involves health related issues of family members that cannot be addressed in the country of assignment. -Organizations can be concerned with a number of labor-related characteristics: the size of the available workforce, the unemployment rate of the workforce, the age profile of the workforce, its skills and education, the prevailing wage rates, and the extent to which the workforce is, or might be, unionized. - Labor wage rates are a key locational determinant as supply chains become more global in nature.

(Murphy Ch8: Inventory Management): Ordering Costs

-Refer to those costs associated with ordering inventory, such as order costs and setup costs -Ordering costs examples: Costs of receiving an order (wages) Conducting a credit check Verifying inventory availability Entering orders into the system Preparing invoices Receiving payment - Note that a number of ordering costs involve the order transmittal and order processing components of the order cycle. - Setup costs are those necessary to modify production processes to make the products to satisfy particular orders.

(Murphy Ch 10: Warehousing Management): The Role of Warehousing in a Logistics System: Warehousing Definition

-Refers to "that part of the firm's logistics system that stores products (raw materials, parts, goods-in-process, finished goods) at and between points of origin and point of consumption"1 -Warehousing and transportation are substitutes for each other, with warehousing having been referred to as "transportation at zero miles per hour" - Placing a warehousing facility between the producer and customers adds a new layer of costs (those associated with warehousing) into the system. - Moreover, the warehousing facility generates shorter-haul transportation routes (from the producer to the facility; from the facility to the customers); as a general rule, short-haul transportation tends to be more costly per mile than long-haul transportation. - However, the increased costs of short-haul transportation may be offset by lower transportation costs per unit of weight associated with volume shipments.

(Murphy Ch 10: Warehousing Management): The Role of Warehousing in a Logistics System: Regrouping can take place in 4 forms: Assorting Definition

-Refers to building up a variety of different products for resale to particular customers - Example: Department store example might want to supply individual stores with a number of different suit sizes (e.g., size 36, size 38, size 40, etc.) and styles (e.g., two-button suits, three-button suits, etc.)

(Murphy Ch8: Inventory Management): Inventory Classifications: Safety, or buffer stock

-Refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand or lead time. -As pointed out in Chapter 7, higher levels of uncertainty lead to higher levels of safety stock.

(Murphy Ch8: Inventory Management): Inventory Classifications: Cycle, or base stock

-Refers to inventory that is needed to satisfy normal demand during the course of an order cycle. -Recall that Chapter 7 indicated that order cycle times continue to decrease in length, meaning that the associated levels of cycle stock continue to decrease as well.

(Murphy Ch8: Inventory Management): Inventory Management: Inventory Definition

-Refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns -Inventory decisions drive other business activities like: Warehousing Transportation Materials handling -Objectives can differ for different functional areas of an organization -Must consider inventory costs(more on later slides) -It is important to note here that inventory carries its greatest cost after value has been added through manufacturing and processing. Finished goods inventory are, therefore, much more expensive to hold than raw materials or work in progress. - Carrying costs for inventories can be significant and the return on investment to a firm for the funds it has tied up in inventory should be as high as the return it can obtain from other, equally risky uses of the same funds.

(Murphy Ch8: Inventory Management): When to Order and How Much to Order continued

-Reorder point (ROP) calculations: -ROP = DD x RC = under certainty -ROP = (DD x RC) + SS = under uncertainty -Where: -DD = daily demand -RC = length of replenishment cycle -SS = safety stock

(Murphy Ch8: Inventory Management): Inventory Flows

-Safety stock can prevent against two problem areas Increased rate of demand Longer-than-normal replenishment -When fixed order quantity system like EOQ is used, time between orders may vary -When reorder point is reached, fixed order quantity is ordered - with continuing technological advances, many firms have the capability to constantly monitor their inventory and hence have the option of using a fixed order quantity system such as the EOQ. A reorder point for each item can be established electronically so it can indicate when the stock has been depleted to the point where a new order should be placed. Increasingly, these orders are transmitted electronically.

(Murphy Ch 10: Warehousing Management):Own or Rent Warehousing Space?: Public Warehousing

-Serve all legitimate users -Require no capital investment on the user's part(important consideration when the cost of borrowing money (interest rates) is high) -Allow users to rent space as needed (thus avoiding the costs of unneeded space) - A related advantage is that users should have a fairly exact determination of their warehousing costs: Can be rented on a month-to-month basis -Warehousing companies have responsibility for personnel decisions and regulatory issues -Warehousing labor safety practices are monitored by Occupational Safety and Health Administration (OSHA): (from a managerial perspective, because OSHA standards are complex and lengthy, it can be quite costly and challenging to comply with OSHA regulations. As was the case with personnel decisions, when using public warehousing, regulatory issues are the responsibility of the warehousing provider and not the warehousing customer). -Offer more locational flexibility than do company-owned facilities, and this can be important when a company is entering new markets. -May provide specialized services -Potential drawback is lack of control by the user

(Murphy Ch8: Inventory Management): Inventory Management: Contemporary Issues with Managing Inventory: Vendor-Managed Inventory (VMI)

-Size and timing of replenishment orders are the responsibility of the manufacturer -Allows manufacturers to have access to a distributor's or retailer's sales and inventory data -Benefits include reduced inventories, fewer stockouts, and improved customer retention - One drawback is inadequate data sharing between the relevant parties, in part because of trust and control concerns. In addition, organizations that adopt VMI must recognize that the process will not produce immediate benefits and that its adoption will likely result in some errors in the short run.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Obsolescence costs

-refer to the fact that products lose value through time. -Note that some products (perishables) lose their value much more quickly than others (e.g., pencils).

(Murphy Ch 7- Demand management, order management, and customer service): Managing Customer Service: Customer Profitability Analysis (CPA)

-refers to the allocation of revenues and costs to customer segments or individual customers to calculate the profitability of the segments or customers. -explicitly recognizes that all customers are not the same, and some customers are more valuable than others to an organization. -Thorough customer profitability analysis only works if it is grounded in activity-based costing in the sense that activity-based costing suggests that different products are characterized by differences in the amount and types of resources consumed.

(Murphy Ch8: Inventory Management): Inventory Carrying costs components: Inventory Shrinkage

-refers to the fact that more items are recorded entering than leaving warehousing facilities. - theft, both by employees and customers accounts for a majority of inventory shrinkage -administrative error, such as inaccurate inventory counts when receiving shipments, continues to account for approximately 10% of inventory shrinkage.

(Murphy Ch 7- Demand management, order management, and customer service): Managing Customer Service: Service Failure and Recovery

-regardless of how well run an organization is, some situations will occur in which actual performance does not meet the customer expected performance (i.e., a service failure). -from a logistics perspective, service failure is particularly relevant to the order cycle. -Service Recovery: refer to a process for returning a customer to a state of satisfaction after a service or product has failed to live up to expectations. - excellent response to a service failure can sometimes result in the service recovery paradox. -Service Recovery Paradox: in which a customer holds the responsible company in higher regard after the service recovery than if a service failure had not occurred in the first place. - There is no set formula for service recovery, in part because each service failure is unique in its impact on a particular customer.

(Murphy Ch8: Inventory Management): When to Order and How Much to Order continued: Economic Order Quantity (EOQ) model assumptions

1. a continuous, constant, and known rate of demand 2. a constant and known replenishment or lead time 3. a constant purchase price that is independent of the order quantity 4. all demand is satisfied (no stockouts are allowed) 5. no inventory in transit 6. only one item in inventory or no interaction between inventory items 7. an infinite planning horizon 8. unlimited capital availability

(Murphy Ch 7- Demand management, order management, and customer service): 4 Stages of of the Order Cycle

1.Order transmittal 2.Order processing 3.Order picking and assembly 4.Order delivery

(Murphy Ch8: Inventory Management): Inventory Management: Special Concerns: ABC Analysis of Inventory

ABC analysis of inventory -Recognizes that inventories are not of equal value to a firm -As such, all inventory should not be managed in the same way - one common rule of thumb is the 80/20 rule, is that 80 percent of a company's sales come from 20 percent of of its products (conversely, 20 percent of sales come from 80 percent of its products). From a managerial perspective this suggests that the primary pf focus should be on the 20 percent of products that generate 80 percent of sales. - measures that can be used to determine ABC status include sales volume in dollars, sales volume in units, the fastest-selling items, item profitability, or item importance. - one issue with ABC analysis involves a determination of what percentage of items should be classified as A, B, or C. - it's important to recognize that either too high or too low a percentage of A items may reduce the potential efficiencies to be gained from this classification technique. - a second issue involves how it can be used by managers. One use is that it can determine stocking patterns in warehousing facilities, and it could be used to determine how frequently inventories get monitored.

(Murphy Ch 9: Facility Location): Finding the Lowest-Cost Location Using Grid Systems: Grid systems

Allow one to analyze spatial relationships with mathematical tools Checkerboard patterns Placed so that they coincide with north-south and east-west line on a map - the grid is numbered in two directions: horizontal and vertical - Center-of- Gravity Approach: can be used for locating a single facility so that the distance to existing facilities is minimized. - because it is not likely that each store will place equal demands on a prospective warehousing facility, the center of gravity approach can be easily modified to take volume into account- the weighted center of gravity approach. The idea behind the weighted center of gravity approach is that a prospective warehousing facility will be located closer to the existing sites with the greatest current demand. - Because neither the center of gravity approach or the weighted center of gravity approach are very sophisticated, adjustments have to be made to take into account real world considerations such as taxes, wage rates in particular locations, volume discounts, the cost and quality of transport services, and the fact that transport rates taper with increased distances.

(Murphy Ch 7- Demand management, order management, and customer service): Demand Forecasting Models (3): Cause-and-Effect Forecasting

Also referred to as associative forecasting Assumes that one or more factors are related to demand and that the relationship between cause and effect can be used to estimate future demand Some techniques include: Simple regression Multiple regression -In Simple Regression: demand is dependent on only one variable -In Multiple Regression: demand is dependent on two or more variables

(Murphy Ch8: Inventory Management): Inventory costs include

Carrying cost Ordering cost Stockout cost

(Murphy Ch 9: Facility Location): Factors Influencing Facility Location Decisions: Cost Considerations

Cost considerations -Consumers sensitized to buy only when prices are low -Low price/low cost framework led companies to operate in countries with low-cost labor -In recent years, organizations are reexamining the low-cost labor paradigm -As a result of low cost/low price framework, organizations are reconfiguring their network designs. -Alternatively, some organizations have adopted nearsourcing, in which companies reconfigure their logistics networks to bring some production facilities closer to key consumer markets. -Customer service expectations -Expectations continue to increase over time -Customers looking for faster and more reliable order cycles

(Murphy Ch8: Inventory Management): Trade-off Between Carrying and Stockout Costs

Costs move in opposite directions Higher inventory levels (higher carrying costs) result in lower chances of a stockout (lower stockout costs)

(Murphy Ch 10: Warehousing Management): Facilities Providing Warehousing: Cross-Docking cont.

Cross-docking facility is differentiated from a distribution center by the length of time a product is in a facility (24 hours or less for cross-docking facility) -Design of the facility is an important consideration to facilitate quick movement of product -Should be designed with a minimal amount of storage space and truck doors on two or more sides5 -Some designs include "H," "L," "T," "U," and "E" configurations, and their applicability depends on the spatial configuration of the land used to build the cross-dock as well as the number of docks being used. -Cross-Dock Design can also include "I-Shaped": rectangular, long, and as narrow as possible.

(Murphy Ch 9: Facility Location): Specialized Location Characteristics

Current zoning of the land: -There may be limits on how the land can be used Local unions -Have areas of jurisdiction -Firm's labor relations manager may have distinct preferences with which locals they are willing to work -Different supplemental agreements provide companies with differing levels of managerial flexibility (or inflexibility) Title search: -May be needed to make sure a parcel of land can be sold and that there are no liens against it -Engineers examine site for proper drainage and to determine load-bearing characteristics of the soil -A second site-specific characteristic involves due diligence of environmental factors like brownfields: or locations that contain chemicals or other types of of industrial waste. -Environmental factors that can be considered in facility location include air pollution, water pollution, biodiversity protection, energy consumption, and waste generation, among others. -Another specialized location characteristic involves weather.

(Murphy Ch8: Inventory Management): Inventory Management: Special Concerns: Dead Inventory (Dead Stock)

Dead inventory (dead stock) Is a fourth category, D, to ABC analysis where D stands for either "dogs" or dead inventory (dead stock) Refers to product for which there are no sales during a 12-month period -dead inventory increases carrying costs and takes up space in warehousing facilities, and a structured process should be in place for managing it (make items to order as opposed to make items in stock). -companies might also market their dead stock more aggressively, perhaps through drastic price reductions or bunching it with more attractive merchandise. - companies might also attempt to sell their dead inventory to companies that specialize in selling such items. -some dead items can be donated to charitable causes (e.g., grocery items). This allows businesses to qualify for federal income tax reductions. This also allows organizations to focus on its better selling products, freeing up warehousing space, and eliminating the challenges of managing problematic products.

(Murphy Ch 7- Demand management, order management, and customer service): Customer Service

Defined as "the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience."2 Customer service is much more difficult for competitors to imitate than other marketing mix variables such as price and promotion -Macroenvironmental changes, such as globalization and advances in technology, are causing organizations and individuals to demand higher levels of customer service. Reliable service enables a firm to maintain lower inventory levels, especially of safety stocks, which produces lower inventory holding costs. Third, in an increasingly automated and computerized world, the relationships between customers and vendors can become dehumanized. This situation is both frustrating and inefficient from the customer's viewpoint. The firm that can offer a high level of customer service, especially on a personal basis, will find that it has a powerful sales advantage in the marketplace. -The increased use of vendor quality-control programs necessitates higher levels of customer service.

(Murphy Ch 10: Warehousing Management): Facilities Providing Warehousing: Cross-Docking

Defined as "the process of receiving product and shipping it out the same day or overnight without putting it into storage"3 -Key benefits include improved service by allowing products to reach their destinations more quickly as well as reduced inventory carrying costs from less stock because of faster product delivery -Has grown due to the increased emphasis on time reduction in supply chains - because cross-docking is predicated on time reduction, the design of cross-dock facilities is an important consideration. More specifically, cross-docs emphasize extremely rapid product movement, and they should be designed with a minimal amount of storage space and truck doors on two or more sides.

(Murphy Ch8: Inventory Management): When to Order and How Much to Order continued: Economic Order Quantity (EOQ) calculation in dollars

Economic order quantity (EOQ) in dollars - EOQ= the square root of 2AB divided by C - Where: EOQ = the most economic order size, in dollars -A = annual usage, in dollars -B = administrative costs per order of placing the order -C = carrying costs of the inventory (%)

(Murphy Ch8: Inventory Management): When to Order and How Much to Order continued: Economic Order Quantity (EOQ) calculation in units

Economic order quantity (EOQ) in units - EOQ = the square root of 2DB divided by 1C -Where: EOQ = the most economic order size, in units -A = annual demand, in units -B = administrative costs per order of placing the order -C = carrying costs of the inventory (%)I = dollar value of the inventory, per unit

(Murphy Ch 7- Demand management, order management, and customer service): Managing Customer Service: Establishing customer service objectives

Establishing customer service objectivesMeans by which goals are to be achieved Should be "SMART":SpecificMeasurableAchievableRealisticTimely -Goals tend to be broad, generalized statements regarding the overall results that the firm is attempting to achieve. -A central element in establishing customer service goals and objectives is determining the customers viewpoint. This means asking the customer their viewpoints about customer service. -Because customer service is a competitive tool, it is also important to learn how the customer evaluates the service levels of competing sellers. Many companies evaluate their service performance through benchmarking. -Benchmarking: refers to a process that continuously identifies, understands, and adapts outstanding processes found inside and outside an organization. -for maximum results, organizations should engage in performance benchmarking, which compares quantitative performance (e.g., fill rate performance), as well as process benchmarking, which is qualitative in nature and compares specific processes. - the nature of the product also affects the level of the customer service that should be offered. Sustainability, which refers to the number of products from which a firm's customers can choose to meet their needs, is one aspect. - Another product-related consideration when establishing customer service goals and objectives is where the product is in its life cycle.

(Murphy Ch 10: Warehousing Management): Facilities Providing Warehousing: Fulfillment Centers

Focused on e-commerce orders - represent a special type of distribution center that is focused on e-commerce orders

(Murphy Ch8: Inventory Management): Inventory Management: Contemporary Issues with Managing Inventory: Lean Manufacturing

Focuses on the elimination of waste and the increase of speed and flow Identifies seven major sources of waste including inventory Just-in-time (JIT) is one of the best-known lean inventory practices

(Murphy Ch 7- Demand management, order management, and customer service): Managing Customer Service

Four specific customer service considerations include: Establishing customer service objectives Measuring customer service Customer profitability analysis (CPA) Service failure and recovery

(Murphy Ch 7- Demand management, order management, and customer service): 4 Stages of of the Order Cycle: Order Picking and Assembly

Includes all activities from when an appropriate location is authorized to fill the order until goods are loaded aboard an outbound carrier Often represents the best opportunity to improve the effectiveness and efficiency of an order cycle Can account for up to two-thirds of a facility's operating cost and time Order picking and assembly examples include: Handheld scannersRadio-frequency identification (RFID)Voice-based order pickingPick-to-light technology -The effectiveness and efficiency of order picking and assembly can often be improved without large expenditures. For example, one low cost method to improve effectiveness and efficiency is to analyze order pickers' travel time (reduce travel time), in part because because travel time often accounts for more than 50% of order picking hours. Another low cost suggestion for improving the effectiveness and efficiency of the pick process is to match the picker to the order picked. -Order picking and assembly has been greatly affected by advances in technology such as hand-held scanners, radio-frequency identification (RFID), and voice-based order picking. -Voice-based order picking: refers to the use of speech to guide order-picking activities. -Another order picking technique that has grown in popularity in recent years is Pick-to-Light Technology: in which orders to be picked are identified by lights placed on shelves or racks. Simplify the pick process because the worker simply follows the lights from pick to pick, as opposed to the worker having to figure out an optimal picking path.

(Murphy Ch8: Inventory Management): Inventory Management: Special Concerns: Complementary Products

Inventories that can be used or distributed together (e.g., razor blades and razors) -These products may only intensify the pressures on retailers or wholesalers concerned with inventory maintenance - another key issue involves the amount of inventory to be carried

(Murphy Ch 7- Demand management, order management, and customer service): Demand Forecasting Models (3): Judgmental Demand Forecasting Model

Involves using judgment or intuition Preferred in situations where there is limited or no historical data, such as with a new product introduction. Techniques include surveys, the analog technique, and others Surveys used to learn about customer preferences and intentions An analog (similar item to that being forecasted) is used as the basis for demand history. -Analog forecasting involves determining an analog (similar item) to the item being forecast and then using the analog's demand history as a basis for the relevant forecast. A key challenge is selecting the appropriate analog to use. -A strong understanding of of survey design and population sampling methodologies is necessary in survey forecasting, and you should recognize that customer intentions don't always translate into actual behavior.

(Murphy Ch 9: Facility Location): Factors Influencing Facility Location Decisions: Location of Customer or Supply Markets

Location of customer or supply markets -Population shift (people are moving out of the northeast) -Economic growth (companies may consider growing markets and the need to be located near them) -Sustainability (more firms seek to use "local" components whenever possible to minimize transportation) -A key sustainability issue involves sourcing of products and an emerging concept involves a locavore strategy, that is, purchasing locally grown or produced foods. A locavore strategy is desired from a sustainability perspective because it minimizes the transportation of products and allows one to support local economy. -Improvements in transportation and technology (e.g., air conditioning) allow consumers to migrate relatively easily from one region or country to another.

(Murphy Ch8: Inventory Management): Inventory Management: Special Concerns: Inventory Turnover

Number of times that inventory is sold in a one-year period (compare with competitors or benchmarked companies) Inventory turnover = cost of goods sold /average inventory -can provide important insights about an organizations competitiveness and efficiency. - with respect to efficiency, low turnover indicates that a company is taking longer to sell its inventory, perhaps because of product obsolescence or pricing problems. - high inventory turnover may signal low inventory levels, which can increase the chance of product stockouts. - most organizations today strive to increase their inventory turnover. One can do this by reducing average inventory. ABC Analysis and Dead inventory can help reduce average inventory. - the inventory turnover concept provides an excellent example of trade-offs involving multiple organizational functions such as finance, logistics, and marketing.

(Murphy Ch 9: Facility Location): Facility Closing

Occurs when a company decides to discontinue operations at a current site because the operations may no longer be needed or can by absorbed by other facilities Examples leading to facility closure include: -Eliminating redundant capacity in mergers and acquisitions -Improving supply chain efficiency -Poor planning -Insufficient volume of business - It is important for employers to be contingent of relevant legislation at the federal and state levels: Worker Adjustment and Retraining Notification (WARN) Act: mandates that employers give 60 days notice about plant closings and mass layoffs. Human impact must be considered: -Employees should be kept informed -Individuals are losing jobs and pay -Individuals suffer a loss of self-esteem -Poorly handled closings can lead to negative publicity

(Murphy Ch 9: Facility Location): Facility Relocation

Occurs when a firm decides that it can no longer continue operations in its present facility and must move operations to another facility to better serve suppliers or customers Common reason for facility relocation: -Lack of room for expansion at current site -Decision involves a comparison of the advantages and disadvantages of a new site to the advantages and disadvantages of an existing location -Must also consider the potential consequences of relocation on their human resources (consequences that may not be easily quantified) -Must keep current employees informed -Must be prepared for unplanned glitches during transition to prevent customer service issues