Supply Chain Logistics Management

Chapter 2: Lean Logistics

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Source: Robert V. Delaney, 11th Annual “State Of Logistics Report” © June 5, 2000

1980 GDP $2.88 trillion Logistics Cost $451 billion

15.7% of GDP Trans. Cost $214 billion

47.5 % of Logistics Cost

1999 GDP $9.26 trillion Logistics Cost $921 billion

9.9% of GDP Trans. Cost $554 billion

60.2 % of Logistics CostLogistics Transportation

$ b

illio

n $

Bil

lion

s

0

100

200

300

400

500

600

700

800

900

1980 1999

1000

Year

United States Logistics Costs

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Integrated Logistics

OrderProcessing

Inventory

Transportation

FacilityNetwork

WarehousingMaterial Handling

Packaging

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistical Integration

Customers

Enterprise

MarketDistribution

ManufacturingSupport

Procurement Suppliers

Information Flow

Inventory Flow

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Market DistributionOperating Concerns

Market Distribution:

Activities related to providing customer service. Requires performing order receipt and processing, deploying inventories, storage and handling, and outbound transportation within a supply chain. Includes the responsibility to coordinate with marketing planning in such areas as pricing, promotional support, customer service levels, delivery standards, handling return merchandise, and life-cycle support. The primary market distribution objective is to assist in revenue generation by providing strategically desired customer service levels at the lowest total cost.

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Manufacturing Support Operating Concerns

Manufacturing Support:

Activities related to planning, scheduling, and supporting manufacturing operations. Requires master schedule planning and performing work-in-process storage, handling, transportation, and time phasing of components. Includes the responsibility for storage of inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement between manufacturing and market distribution operations.

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

ProcurementOperating Concerns

Procurement:

Activities related to obtaining products and materials from outside suppliers. Requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, receiving and inspection, storage and handling, and quality assurance. Includes the responsibility to coordinate with suppliers in such areas as scheduling, supply continuity, hedging, and speculation, as well as research leading to new sources or programs. The primary procurement objective is to support manufacturing or resale organizations by providing timely purchasing at the lowest total cost.

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistics Information Requirements

StrategicObjectives

CapacityConstraints

LogisticsRequirements

ManufacturingRequirements

ProcurementRequirements

OrderProcessing

OrderAssignment

DistributionOperations

Transportationand Shipping

Procurement

InventoryDeployment

Inventory Management

PLANNING - COORDINATION

OPERATIONS

Forecasting

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Echeloned Structured Logistics

Supplier

IndustrialDistribution orConsolidation

Warehouse

ManufacturerWholesaler orDistribution

CenterRetailer Customer

INFORMATION FLOWS

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Echeloned Structured Logistics

Supplier

IndustrialDistribution orConsolidation

Warehouse

ManufacturerWholesaler orDistribution

CenterRetailer Customer

Support for

Direct Delivery

INFORMATION FLOWS

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Flexible Echeloned Structured Logistics

Supplier

IndustrialDistribution orConsolidation

Warehouse

ManufacturerWholesaler orDistribution

CenterRetailer Customer

Support for

Direct Delivery

Flow Through

Service Supplier Arrangements

Flow Through

Service Supplier Arrangements

INFORMATION FLOWS

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistical Performance Cycles

Node

Transportation Links

CommunicationLinks

MaterialSource

Lead Supplier(Tier 1)

ManufacturingPlant

Distributors

Customer

PurchasingCycle

ManufacturingSupport

Cycle

PhysicalDistribution

Cycle

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

MaterialSource

MaterialSource

MaterialSource

ManufacturingPlant

PlantWarehouse

DistributionWarehouse

Customer

ManufacturingPlant

Plant Warehouse

DistributionWarehouse

Customer

ManufacturingPlant

PlantWarehouse

DistributionWarehouse

Customer

1 2 3

Multi-Echeloned Flexible Network

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Basic Market Distribution Performance-Cycle Activities

OrderProcessing

OrderTransmission

CustomerOrder

OrderSelection

OrderTransportation

CustomerDelivery

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Procurement-Cycle Activities

SourcingOrder Placementand Expediting

Receiving Transportation

Supplier

Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.

Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Performance-Cycle Uncertainty

OrderTransmission

Time Range - Days1/2 31

CustomerDelivery

Time Range - Days1/2 31

OrderTransportation

Time Range - Days2 104

OrderSelection

Time Range - Days1 202

OrderProcessing

Time Range - Days

1 42

Total Performance Cycle

Time Range - Days

5 4010