WK9 Logistics Lecture

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WK9 Agenda

• Revised homework• Logistic lecture and exercise• Pacademy Case Study

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Logistics Myths

True or false• Logistics mean logic.• Logistics is about transportation cost.• 3PL logistics company handle custom for its

customers.

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Logistics Exercise

• In three groups, choose your product.• Write the process flow of supply chain starting

from raw material to customers.• What are the issues to consider?• Where are the cost incur?• Where can we add value?• How can we improve efficiency?

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Logistics

• Council of Logistics Management definition:“Logistics is that part of the supply chain process that

plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”

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Logistics

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© 2008 Prentice Hall 1-6

Activities in the Logistical Channel1) Customer service2) Facility location decisions3) Inventory management4) Order management5) Production scheduling6) Returned products7) Transportation management8) Demand forecasting9) Industrial packaging10) Materials handling11) Parts and service support12) Procurement13) Salvage and scrap disposal14) Warehousing management

© 2008 Prentice Hall 1-7

The Systems and Total Cost Approaches to Logistics

• Total Cost Approach– Cost trade-offs: changes to one activity cause

some costs to increase and others to decrease

– Total Logistics Concept: to find the lowest total cost that supports an organization’s customer service requirements

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Logistical Relationships within the Firm

• Finance– LIFO– FIFO

• Production• Marketing– Place Decisions– Price Decisions

• FOB origin/FOB destination pricing systems

• Landed costs• Phantom freight• Freight absorption

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© 2008 Prentice Hall 1-9

Responsibilities of Logistics Managers

• A specialist– Freight rates–Warehouse layouts– Inventory analysis– Production– Purchasing– Transportation law

• A generalist – Understands functional

relationships– Relates logistics to

other firm operations, suppliers, customers

– Controls large expenditures

The CEO of Wal-Mart began his Wal-Mart career in the logistics area!

© 2008 Prentice Hall 2-10

Different Supply Chain Configurations

© 2008 Prentice Hall 2-11

Supply Chain Management and Integration

• Third-Party Logistics (3PL)– Logistics outsourcing– Contract logistics– 3PL provides transportation, warehousing, cross-docking,

inventory management, packaging, and freight forwarding.• Fourth-party logistics (4PL) primarily used in global

companies: assembles and manages the resources, capabilities, and technology to deliver a comprehensive supply chain solution.– Lead logistics provider (LLP)

• Supply chain software

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General Types of Information Management Systems

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Electronic Commerce and Logistics• Internet impacts include:– Logistics functions

• Transportation• Order management

– Channel design– Intermediaries

• 4 categories of logistics exchanges– Enhancing procurement services– Matching shippers and carriers– Executing relevant transactions– Transacting with partners

– What are the differences between Electronic and Traditional Fulfillment? Think about your online purchasing. MIB, BBA 2010

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Order Management• Order management is the

activities that take place in the period between the time a firm receives an order and the time a warehouse is notified to ship the goods to fill that order– Order planning-connected

to sales forecasting– Order transmittal– Order processing– Order picking and assembly– Order delivery

• Order cycle defined by the buyer: time from when an order is placed to when the goods are received. Also called replenishment cycle– Getting shorter– More precise delivery

times– Customer can track

orders– Quality is important and

is benchmarked

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Customer Service• Activity to make customers

happy• Value-added activities provided

by customer service include:– Placing bar code labels on

cartons– Arranging a carton, pallet, or

truck in the sequence the customer would like to unload it

– Shrink-wrapping– Inserting documents into cartons– Blending products– Adding price tags– Adding graphics for export goods– Assembling kits

• Establishing a customer service program– Ask the customer what is

important to them– Investigate the service

offered by competitors– Consider the cost of

alternative service programs

– Analyze the information and write the objectives

• Using the Internet to improve customer service

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Element of Logistics System1) Protective Packaging and

Materials Handling• Product

characteristics :physical, chemical, environmental, etc.

• Packaging: box, wooden pallet, label, etc.

• Material Handling: automation, flexibility, safety, layout, cost, maintenance, unit load, ergonomic, requirement, JIT, energy, etc.

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Element of Logistics System2.) Transportation(domestic):

node, links, air, water, motor carriage, rail, pipeline, intermodal transportation, routing guides

• Small volume shipper: Fedex, UPS, DHL, NTC, TNT, Post office <150 pound

• LTL shipper(less than truckload, <150<10,000 pounds): Yellow Freight, Roadway, ABF

• Truckload and carload shipper: Schneider National Van Carriers, J.B. Hunt Transport

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Element of Logistics System3.) Distribution Center,

Warehouse, and Plant Location

• Number of facilities: service level, software, time to customers

• Facilities location: natural resource, labor, market, tax, subsidies, transportation, customers, trade pattern

• Lowest cost location: grid system, center of gravity approach

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Element of Logistics System4) Inventory management• Inventory Turnover=

Cost of goods sold/average inventory

• Turnover, carrying costs, and stock out costs

• Reorder point ROP = Daily Demand x Replenish Cycle + Safety Stock under uncertainty

• Economic order quantity EOQ= √2AB/C

• JIT, Inventory Tracking, Vendor manage inventory,

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Element of Logistics System5) Warehousing• Public, private, contract

warehousing • Design warehousing:

quantity, character of goods, purposelayout

• Safety, security and stock control

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Element of Logistics System6) Procurement E-Procurement

ISO 9000, ISO14000

Six sigma

Ethical concern: handling confidential information, bribing

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Element of Logistics System7) International logistic

Documentation: government control, inspection, tax, port etc.

Finance: payment, currency

Air cargo and ocean cargo

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Element of Logistics System

8) Financial and accounting control• Worker productivity: scheduling, monitoring• Goal to achieve lowest cost per volume of

output• Product recall: Batch ID, Six Sigma• Security: building, computer, document, etc.• Energy saving

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Element of Logistics System

9) System Analysis• Customer profitability analysis• Warehousing productivity analysis• Transportation cost analysis• Consolidation analysis• Direct product profitability analysis• Benchmarking• Industry standards analysis

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Pacademy Case & Homework

• Revised homework due this Friday• Read Pacademy case and apply our strategy

formulation concepts. Draw the diagrams.• What other information would be beneficial

for your case analysis?• What are your recommendations?