BUSML 3380 Final Exam 02 18 2014 LOGISTICS 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 Economic Impacts of Logistics Macroeconomic impacts Economic Utilities o Possession Utility o Form Utility o Place Utility o Time Utility First Vietnam 22 5 Last United States 9 4 FACTS Cost of Business Logistics System in Relation to Country s GDP More than 1 TRILLION spent on logistics in the U S each year Healthcare is the largest employer Logistics is the SECOND largest employer Logistics costs represent 5 40 of the total landed cost of typical products OSU ranked very highly in logistics Logistics is an advantage to companies 1 Latin America 97 2 Asia Pacific 90 3 Europe 87 4 North America 87 ALL 88 7 INCREASED Importance of Logistics Reduction in economic regulation Changes in consumer behavior Technological advances The growing power of retailers and consumers Globalization of trade Logistics and Supply Chains 02 18 2014 GOAL of Logistics To meet specified customer service levels at the least total cost to optimally balance service effectiveness and cost efficiency The Bill of Rights Transactional elements of logistics embody the effort to deliver these outcomes RIGHT product RIGHT quantity RIGHT condition RIGHT place RIGHT time RIGHT customer RIGHT cost Where does Logistics OCCUR up to consumption Throughout the supply chain from the sources of raw materials supply right Raw Materials Materials Procurement or Inbound Work in Process Materials Management Finished Goods Physical Distribution or Outbound Logistics Logistics Returns And Recyclables Reverse Logistics Supporting Information Materials Management V Physical Distribution Balanced Heavy Inbound Heavy Outbound Reverse Whether balanced heavy in or outbound flows must be viewed holistically as a system 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 Marketing Product Price Promotion Place Logistics Place Customer Service Levels o Loss of customers because of dissatisfaction o Challenging to quantify o Revenue lost to dissatisfaction IS opportunity cost o Parts and service support o Returned goods collection Inventory Carrying Cost o Inventory management o Packaging o Returned goods inventory Lot Quantity Costs o Materials handling o Procurement o Production setup Transportation Costs o Inbound and outbound transportation Warehousing Costs o Warehousing and storage o Plant and warehouse site selection Order Processing and Information Costs o Order processing o Information exchange Supply Chain Management The integration of key business processes from end user through original suppliers that provides products services and information that add value for customers and other stakeholders Involves ALL business functions The Global Supply Chain Forum OSU Integration of key businesses processes from end user through original suppliers that provides products services and information that add value for customers and other stakeholders VERSUS Supply Chain Operations Procurement SOURCE Production MAKE Logistics DELIVER Functions of physical materials Supply Chain Analysis Suppliers UPSTREAM Customers DOWNSTREAM Motivation for Supply Chain Management The systems concept applies to multiple organization channels as Movement toward partnering with choice suppliers and customers well as within the firm o BEST suppliers o BEST customers The way business will dominantly be conducted in the future o Supply chain competition o Partner with other supply chain entities now before a competitor approaches NOT all customers are created equal Identify BEST customers and give them what they want o Preferential treatment KELSEY Lean Polaris Heavy Inbound Cardinal Balanced Inbound and Outbound Lean Toyota o Reducing waste Time Non value added activities to the customer downstream o Manufacturing o Logistics Identify waste in logistics Inventory LIABILITY Safety net Asset on balance sheet Skills Knowledge Soft Skills Observe innovate Demand Management Order Management and Customer Service 02 18 2014 Demand sales Forecasting Refers to an effort to project future demand Is a key component in demand management Is helpful in managing all forms of supply chain strategy o Fear of Bias Development People Over enthused OVER forecasting Marketing People UNDER forecast personal gain Use middle man to AVOID bias Supply Chain Strategies 1 Ship to Stock LOW product variety and demand volatility Produced and distributed BEFORE purchased o Ex American made cars Complete speculation o Dependent on good demand forecasting 2 Make to Stock 3 Assemble to Order Step up from ship to stock on product variety and demand volatility Wait to see where orders come from THEN ship Step up from make to stock on PV and DV Create your generic base then customize once order is made Form postponement REDUCES instant gratification o Ex Scion only sold in US customized in US but from Asia 4 Make to Order 5 Buy to Order Limited options but still custom made HIGH product variety and demand volatility NO limitation built from the ground up Still forecasted Product Lifecycle 1 Development 2 Introduction difficult to forecast 3 Growth most increase in sales 4 Maturity 5 Decline Demand Management Three basic types of demand forecasting models 1 Judgmental Qualitative NON quantitative 2 Time Series Uses historical data on the item 3 Cause and effect associative Looks at related factors to determine anticipated sales for an item ISSUES with Demand Forecasting Selection of forecasting technique s depends on many factors Selecting an inappropriate technique will reduce forecast accuracy Forecast accuracy can have important logistical implications Computer forecasting software unable to completely eliminate forecast errors Order Management Refers to management of the various activities associated with the order cycle Order Cycle Replenishment Cycle or Lead Time Refers to the time from when a customer places an order to when goods are received Order Placed Goods Received Four Stages of the Order Cycle 1 Order Transmittal Series of events that occur between the time a customer places