supply chain logistics management chapter 15: logistics integration
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Supply Chain Logistics Management
Chapter 15: Logistics Integration
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
North American Logistics Geography
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Distribution NetworkTotal Cost Dimensions
Expense Components
Handling
+
Inbound Transport
+
DC Handling
+
Inventory
+
Customer Transport
____________
Total Cost
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Definition of Systems Analysis
• Total integrated effort to accomplish the desired objective
• A set of interrelationships designed to achieve the desired objective
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Principles of System Integration
• Total system performance is singularly important
• Components or parts of system need not have optimum construction
• A functional relationship exists between components called trade-offs which may enhance or hinder system performance
• Components linked together in a balanced system will produce greater end results than the sum of individual components
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Key Trade-Offs
• Cost to cost– Increase transportation to reduce inventory– Lot-size -- Inventory– Inventory -- Transportation
• Cost to service– Increased logistics cost to obtain increased service
and the potential for more revenue– Lead time -- Transportation– Product variety -- Inventory– Overall SC cost -- SC service
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Transportation Cost Integration (Spatial)
• Basic economies– Economy of size (quantity discount)
– Economy of distance (tapering principle)
• Activity based cost– Loading and unloading
– Movement
– Information
• Generalized relationship
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Transport Cost
Number of Distribution Locations
Outbound
Inbound
Total Transport
Transport Cost as a Function of Distribution Locations
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Inventory Cost Integration (Temporal)
• Basic economies– Single location
– Multiple location
• Activity based cost– Inventory risk
– Inventory management
– Storage and handling
• Generalized relationship
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Graphical Illustration of Locational Impact of Inventory
Cycle Stock
Safety Stock
Total Inventory
Average Inventory
Stocking Locations
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Total Cost Integration
• Threshold service (Least cost assignment)
• Sensitivity analysis
• Science vs. art
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Logistics Total Cost Curve
Total Cost
Number of Distribution Locations
Inventory Carrying Cost
Transportation Cost
Total Cost
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Market Strategy
• Mass marketing
• Focused marketing
• One to one marketing
Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Launching Supply Chain as a Strategic Resource
• Focus service to customer segments
• Emphasize flexibility
• Leverage through alliances