Logistics Management Ch 1 & 2 Exam

Echelon

(traditional) is a linear flow from origin to destination through buffers or warehouses/distribution centers

Demand Exceeds Local Supply

- 90% of global demand is not fully satisfied by local supply. Global supply market offers more options.

Basic Logistics Service

- Describes the level of service a firm provides all established customers, however, some customers require unique or special value-added services - Managers must realize that customers are different and that services provided must be matched to accommodate unique requirements and purchase potential

Significant Differences for Global Logistics

- Distance - Documentation - Diversity - Demand

Ways to Improve Performance Cycle Times

- EDI (Electronic Data Interchange) or Internet order management and tracking - RFID or Bar code material tracking - Automated inventory management - Automated order selection and picking - Communication with customers to determine their needs - Communication with suppliers to determine their capabilities

Traditional Cost Logistics Model

- Focused on achieving the lowest possible cost for each individual function of logistics - Expected lowest cost based on decisions that were cheapest for individual functions - Ignored the impact of cost decisions across logistics functions

Total Cost Logistics Model

- Focused on achieving the lowest total cost across each function of logistics - A cost decision in one function should consider impact to costs of all other logistics functions

Integrated Logistics Framework

- Goal is to achieve customer satisfaction at the lowest Total Cost - Decisions in one functional area will impact cost of all others - We integrate the logistical functions into a coherent framework starting with the customer (Order Processing) and ending with the customer (Transportation and Delivery)

Performance Cycle Uncertainty

- Major objective of logistics in all areas is to reduce performance cycle uncertainty - Operational variance is randomly introduced during the cycle through: the structure of the performance cycle itself, operating conditions, the quality of logistical operations

Types of Postponement

- Manufacturing (or Form) - Geographic (or Logistics) - Combined

Elements of a Performance Cycle

- Nodes - Links - Inventory: base stock, safety stock - Input and output requirements

Major Functions of Work

- Order Processing - Inventory - Transportation - Warehousing, Materials Handling, and Packaging - Integrated through a network of facilities

Goal of Logistics Management

- To satisfy customer expectations for delivery of products (or services) while minimizing the total cost - Managers must support the requirements for procurement, manufacturing and customer accommodation supply chain operations

Logistics Costs Trends

- Transportation Costs relative to the Total Cost of Logistics have gone up because of fuel prices and movement of manufacturing to Asia - Inventory Costs relative to the Total Cost of Logistics have gone down: adoption of JIT and Lean practices have reduced these - Administrative Costs relative to the Total Cost of Logistics have stayed the same

Transaction System

- consists of formalized rules and procedures - standardized communications focus on tracking and regulating day-to-day logistical transactions

Inventory Strategy is Based on

- core customer segmentation - product profitability - transportation integration - time-based performance - competitive performance

Management Control

- focuses on performance management and reporting - provides real time feedback on supply chain performance and resource utilization

Decision Analysis

- focuses on software tools to assist managers - software tools help to identify, evaluate and compare alternatives to improve effectiveness - also called decision support software in MIS departments

Forces Driving Supply Chain Strategies

- information technology - integrative management - responsiveness - financial sophistication - globalization

Inventory

- inventory requirements of a firm are directly linked to the facility network and the desired level of customer service - inventory strategy seeks to achieve the desired customer service with the minimum inventory commitment

Warehousing, Materials Handling, and Packaging

- inventory typically needs to be warehoused at selected times during the logistics process - transportation vehicles require materials handling for efficient loading and unloading - individual products are most efficiently handled when packaged together into shipping cartons

Transportation

- is the operational area that geographically moves and positions inventory

Order Processing

- is the transmission of customer requirements to the supply chain - accurate information is needed to achieve superior logistical performance - responsive supply chains require accurate and timely information about customer purchase behavior - fast information flow enables improved work balancing

Manufacturing (Or Form) Postponement

- manufacturing one order at a time - base modular construction of product - no customization until the exact customer specs and financial commitments is received - objective is to maintain products in an uncommitted status as long as possible

Integrated Service Providers (ISPs)

- outsourcing - transportation modes - public warehouses - value-added services - third- and fourth-party service providers - asset- or nonasset-based service providers

Enterprise Resource Management (ERP)

- the backbone of most firm's logistical information systems - maintains an integrated database of current and historical data - processes most (if not all) transactions across all business functions

Strategic Planning

- transforms transactional data to assist in strategy evaluation - organizes transaction and performance data into a relational database to assist in evaluating alternative business strategies

Geographic (or Logistics) Postponement

-Build or stock a full-line inventory at one or a few strategic locations -Forward deployment of inventory is postponed until customer orders are received -Once orders received, specific item is expedited to the local distributor -Advantages are manufacturing economies of scale along with responsiveness to customer -Often used for critical, high cost parts and assemblies (e.g. engines)

3 Areas of the Value-Added Logistic Process

-Customer Relationship Management -Manufacturing Production -Procurement

Barriers to Implementing Responsive Systems

-Need for publicly held corporations to maintain planned quarterly profits -Need to establish collaborative relationships

Service Benefits Are Created By Logistical Performance in 3 Areas

1. Availability: involves having inventory to consistently meet customer material or product requirements 2. Operational Performance: deals with the time required to deliver a customer's order- key metrics for this area involve delivery speed and consistency 3. Service Reliability: involves the quality attributes of logistics- key to quality is accurate measurement of availability and operational performance over time

3 Utilized Structures

1. Echelon 2. Direct 3. Combined

Supply Chain Information System Modules

1. Enterprise integration and administration 2. Enterprise supply chain operations 3. Enterprise planning and monitoring 4. Communication technology 5. Consumer connectivity

The Five Functions of Logistical Work

1. Facility Network 2. Order Processing 3. Inventory 4. Transportation 5. Warehousing, Material Handling, Packaging

Concepts Necessary for Achieving Integrated Management

1. Lowest total process cost 2. Collaboration 3. Enterprise extension 4. Integrated service providers (ISP)

6 Successful Supply Chain Strategies

1. Market Saturation Driven 2. Operationally Agile 3. Freshness Oriented 4. Consumer Customizer 5. Logistics Optimizer 6. Trade Focused

3 Basic Ways to Satisfy Transportation Requirements

1. Operate a private fleet of equipment 2. Contract with dedicated transport specialists 3. Engage carriers that provide different transportation services as needed on a per shipment basis

6 Objectives of Logistical Integration

1. Responsiveness 2. Variance Reduction 3. Inventory Reduction 4. Shipment Consolidation 5. Quality 6. Life Cycle Support

Two Elements of Logistical Value Proposition

1. Service 2. Cost Minimization - firms must make appropriate tradeoffs between service and cost for each of their customers

2 Common Characteristics of Logistical Arrangements

1. They are designed to manage inventory. 2. The range of logistics alternatives is limited by available technology.

Flexible Operations

Are preplanned contingency strategies to prevent logistical failures

Rise of EEC and Asia (1980-2000)

Both regions became major exporters and distributors

Manufacturing Production

Concentrates on managing work-in-process inventory as it flows between stages of manufacturing

Freshness Oriented

Concentrating on earning a premium by providing the consumer with product that is fresher than competitive offerings

Operationally Agile

Configuring assets and operations to react nimbly to emerging consumer trends along lines of product category or geographic region

Logistical Value Proposition

Consists of a commitment to key customer expectations and requirements at a minimum cost

Supply Chain Management

Consists of firms collaborating to leverage strategic positioning and to improve operating efficiency

Dwell Time Minimization

Dwell time is the ratio of time that an assets sits idle to the time required to satisfy its supply chain mission

Logistics Optimizer

Emphasizing a balance of supply chain efficiency and effectiveness

Market Saturation Driven

Focusing on generating high profit margins, through strong brands and ubiquitous marketing and distribution

Postwar U.S. (1945-1995)

Global leader in distribution and logistics, as a direct result of World War II

e-Commerce (1998-Present)

Global logistics capability almost everywhere

Information Flow

Identifies specific locations within a logistical system that have requirements

Strategic Sourcing

Identifying and matching the sources of raw materials and components to manufacturers and distributors

Supply Chain Strategy

Is a channel and business organizational arrangement, based on acknowledge dependency, and collaboration

Combined

Is a combination of Echelon and Direct, depending on the product, market, or customer

Procurement

Is concerned with purchasing and arranging inbound movement of materials, parts, and/or finished inventory from suppliers into manufacturing or assembly plants, warehouses or retail stores

Direct

Is designed to ship products to customer's destination from one or a limited number of centrally located inventories

Logistics

Is the design and administration of systems to control movement and geographical positioning of raw materials, work-in-process, and finished inventories at the lowest total cost

Supply Chain Synchronization

Is the operational integration of multiple firms across a supply chain - seeks to coordinate the flow of materials, products and information between supply chain partners to reduce duplication of effort - seeks to reengineer internal operations of individual firms to leverage overall supply chain capability

Postponement strategies

Keep supply chains responsive

Combined Postponement

Keeping the basic products centralized and performing the customization at the destination distributor

Usage, Decision Characteristics, and Justification

More opportunities exist for improvements at higher levels of functionality

Offshoring

Moving manufacturing and distribution operations to countries with favorable labor costs and tax laws

Trade Focused

Prioritizing "low price, best value" for the consumer (as with the logistics optimizer strategy but focusing less on brand than on dedicated service to trade customers)

Inventory Flow

Raw materials, work in process, finished goods - logistical operations should add value by moving inventory when and where needed: materials and components gain value at each step of their transformation into finished inventory

Cash Spin

Reducing assets in the supply chain can "spin" cash for reinvestment in other projects

Performance Cycle

Represents elements of work necessary to complete the logistics related to customer accommodation, manufacturing or procurement

Information Sharing Paradigm (Enterprise Extension)

Supply chain participants sharing operating information can achieve a high degree of collaboration and enhanced strategic planning

Process Specialization Paradigm (Enterprise Extension)

The commitment to focus collaborative arrangements on planning joint operations with a goal of eliminating nonproductive or non-value adding redundancy by firms in a supply chain

Customer Relationship Management

The movement of finished product to customers

Facilities Network

The number, size and geographical relationship of facilities used to perform logistical operations directly impacts customer service capability and cost

Cash-to-Cash Conversion

The time required to convert raw material or inventory purchases into sales revenue

Integrative Management Value Proposition

The total integration of the overall business process creates value

Logistics

The work required to move and geographically position inventory

Consumer Customizer

Using mass customization to build and maintain close relationships with end-consumers through direct sales

Enterprise Extension

includes expanded managerial influence and control beyond traditional ownership boundaries of a single enterprise

Lowest total process cost

is the focus of integrated management - differs from lowest cost of each function in the process

Collaboration

of operating information, technology and risk has been encouraged by national legislation to keep US-based firms competitive

Integrated Service Providers (ISP)

provide a range of logistics services to accommodate customers, ranging from order entry to product delivery - commonly known as third (or fourth) party service providers