Test 2

Importance Weight Results

Importance Ranking of Service Dimensions: Service Dimension / Ranking - Outside Salesperson 5 (M = 3.54) - Billing/Invoicing Processing 4 (M = 3.03) - Inside Salesperson 3 (M = 2.07) - Delivery (e.g., on time, updates for changes) 2 (M = 1.53) - Product Quality 1 (M = 1.23)

Which of the following statements is untrue of distributor metrics?

The lower the service standards are, the greater the cost is to the firm in order to maintain those relationships

Elements of Just-in-Time

- - Reduction of waste ---waste encompasses wait times, inventories, material & people movement, processing steps, variability, any other non-value-adding activity

Four-Party Logistics Providers (4PLs)

- 4PL organizations act as a single interface between the client and multiple logistics service providers - Essentially manage all existing supply chain needs for the client (including existing 3PL services)

JIT "Rules of Thumb"

- Develop collaborative relationships with suppliers & customers for enhancing co-design efforts. - Provide continuous data on changes in supply & demand. - Ensure the logistics systems can react to unexpected needs. - Put together a management team that knows how to invoke contingency plans.

Which of the following best describes a total cost approach?

- Distributor attempts to achieve the desired level of customer service at the lowest cost

Warehousing

- Holding products until they are ready to be sold. Simple in concept, difficult to manage. Issues: 1. The location of warehouse facilities 2. The number of warehousing units 3. The size of the units 4. The design of the units 5. The question of ownership

Evaluating the Logistics Program

- If included as a major component of the manufacturer's overall approach for supporting distributor needs, the program may be the key feature of the strategic alliance. Key issue: Ensuring that the evaluation program is what the customers and channel members deem as important.

__________________ is the relationship between the cost of goods sold and the average inventory on hand, at cost.

- Inventory Turnover

Order Processing

- Its importance in logistics lies in its relationship with order cycle time—the time between when an order is placed & when it is received by the customer. - Issue: Developing an efficient order processing system

Which of the following ideas is(are) true of JIT inventory management system?

- JIT inventory management system aims to lower inventory costs - JIT systems tend to use only a few, nearby suppliers that receive more frequent, smaller lot deliveries than non-JIT delivery systems - Due to irregular customer demand, full implementation of JIT system is not practical for many distributors - JIT system relies on a "pull-oriented" demand schedule

Transportation

- Most fundamental and necessary component - Accounts for the highest percentage of the total cost of logistics (but not the highest percentage for a distributor) - Overriding issue facing the firm: Choosing the optimum mode of transportation to meet customer service demands

The systems approach to distributor operations includes which factor(s)?

- Packaging - Order Processing - Materials Handling - Warehousing

Packaging

- Packaging & its associated costs can affect the other components of the system Issue: Using packaging to make a significant difference in the effectiveness & efficiency of the logistics system

Materials Handling

- Range of activities and equipment involved in the placement and movement of products in storage areas - Issues: 1. Minimizing the distances products are moved within the warehouse during the course of receiving, storage, & shipping 2. Choosing the kinds of mechanical equipment & technology that should be used 3. Making the best use of labor when receiving, shipping, & handling products

Elements of Just-in-Time:

- Reduction of waste - Continuous improvement - Synchronization of material flows within the organization - Channel integration - extending partnerships in the supply chain • Building relationships within the channel (e.g., building channel equity) • ABC Inventory Analysis

Third-Party Logistics Providers (3PLs):

- Services they provide include transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. - In 2008 legislation passed declaring that the legal definition of a 3PL is "A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product."

Third-Party Logistics Providers (3PLs)

- Specialize in performing most or all of the logistical tasks that manufacturers or other channel members would normally perform themselves - Provide service at lower cost than the firms who hire third-party providers - Currently growing rapidly into a major industry

Dock Level Decisions

- Tactical planning and control activities concerned with making and receiving shipments and loading and unloading freight - Benefits include: • Greater vehicle utilization • Improved and more responsive customer service • Reduced transportation expenses • Reduced capital investment in equipment

Economy of Distance

- The cost per unit of distance (e.g., miles) decreases as distance increases. - Because: The tapering principle spreads fixed costs over a larger distance base.

Economy of Scale

- The cost per unit of weight (e.g., lb.) decreases as the size of the shipment increases. - Because: Fixed costs can be spread over a larger weight base.

Inventory Control:

- The firm's attempt to hold the lowest level of inventory that will still enable it to meet customer demand. - Issue: Keeping inventory at the lowest possible level while concurrently placing orders for goods in large quantities.

Order processing

- The time between order placement and customer receipt

Economic Order Quantity Formula

- To calculate the appropriate order quantity, a manager would use the EOQ formula: the square root of Q = (2 x Dy x Cp) / (Ch) - where Dy = Demand for year. • Cp = Cost to place a single order. • Ch = Cost to hold one unit of inventory for a year (i.e., carrying cost rate e.g., 20% x purchase cost per unit).

Inherent Risks Associated With JIT

- Toyota plants hold several hours worth of inventory for many parts, relying on a steady feed from suppliers. - By keeping as little inventory on site as possible, storage costs can be cut and component quality can be consistent. - If suppliers suffer a disaster (e.g., earthquake), Toyota can quickly run out of components.

Inventory Control

- Typically, the majority of a distributor's working capital is invested in its inventory. - Jodi Parnell, VP of Supply Chain at O'Neal Steel, emphasizes the importance of inventory management to the success of the firm.

Hub-and-spoke distribution system

- a distribution center that serves a regional market by consolidating large volumes of inventory and providing stock to smaller regional warehouses that service customers

Total cost approach

- a distributor attempts to achieve the desired level of customer service at the lowest cost - the separate costs of individual functions are measured by the extent to which an increase (or decrease) in one cost affects the other components and the overall costs

Transportation

- accounts for a high % of overall logistics costs - typically more than 60% of total logistics expenditures

Transportation brokers

- function as intermediaries between shippers and carriers and typically do not take possession of the product

Freight forwarders

- move cargo from one point to another and assume responsibility from the place of receipt (origin) to destination

Systems Concept

- transportation - materials handling - order processing - packaging - inventory control - warehousing

High inventory turnover numbers also could imply that the firm:

1. Is not taking full advantage of quantity discount opportunities 2. Has lost sales due to frequent stockouts 3. Uses poor sales forecasting and therefore must respond reactively by placing frequent inventory orders

Key Elements of Customer Service

1. Product availability 2. Order cycle time 3. Distribution system flexibility 4. Distribution system information, including informing of problems 5. Post-sale support

Typical Logistics Service Standards

1. Time from order receipt to order shipment 2. Order size & assortment constraints 3. Percentage of items out of stock 4. Percentage of orders filled accurately 5. Percentage of orders filled within a given number of days from receipt of the order 6. Percentage of orders filled 7. Percentage of customer orders that arrive in good condition 8. Order cycle time 9. Ease & flexibility of order placement

Inventory Turnover

= COGS / Average Inventory

Warehousing:

• A single warehouse can serve a market area of 200 miles within one travel day • 450 to 500 miles within two days, and • 700 to 750 miles within three days (depending on weather and road conditions).

Distributor Metrics for Measuring Service Standards

• The higher the service standards, the higher the costs. • Key issue for Managers: - Determining precisely the desired types and levels of logistics service standards.