Chapter 16 Customer Driven Supply Chain and Logistics Management I The P G Wal Mart Example a Traditionally the relationship between supplier and merchant has been adversarial b Wal Mart recognized that the traditional relationship had become outmoded and was often hurting BOTH parties c Wal Mart invited its major suppliers to jointly develop powerful supply chain partnerships i to increase product flow efficiency and consequently profitability for both firms d The Wal Mart Procter Gamble alliance incorporated vendor managed inventory category management and other intercompany innovations e P G had a dedicated account team f The team members represented key P G functions i sales marketing distribution supply chain management IT and finance ii Wal Mart s CFO became a key customer as P G s objective became maximizing Wal Mart s internal profitability II Logistics a involves those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost III Logistics Management a is the practice of organizing the Cost Effective Flow of raw materials in process inventory i ii iii finished goods and iv related information v from the point of origin to point of consumption to satisfy customer requirements IV Supply Chain a is a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users i It includes suppliers that provide raw material inputs the manufacturer the wholesalers and retailers that deliver finished goods 166 V Trinetti on Supply Chain Management a Supply Chain Management is a new term working with procurement and logistics b Think about retailers like Home Depot and Wal Mart and all the things that need to happen to get those items on the shelf c A truck has to deliver it to the store of course d But peel back the layers of what happened before that e The items all come from different raw materials with different manufacturing processes coming from all over the world f The opportunity for managing all of these processes is tremendous g Think of the opportunities from the time the material is grown harvested manufactured all the way to point of sale h There are opportunities for efficiencies profitability and firms to facilitate i Wal Mart has developed expertise in distribution and transportation j Supply chain crosses over from raw materials to manufacturing production to airplanes barges trucks and rails to getting the item on the these shelf VI Significance of Supply Chain and Logistics Management a Supply Chain Management i the integration and organization of information and logistic activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to consumers ii Requires the application of information technology to allow companies to share and or operate systems for order processing transportation scheduling and inventory and facility management b Supply Chain management does NOT i A chain is only as strong as it s weakest link ii BEFORE attempting to deal with supply chain issues the firm must be able to provide 1 Quality products and services 167 2 Timely 3 Cost effective manner c SCM usually requires significant changes in the firm s organizational structure i because it cuts across functional areas and even across different firms 1 SO the responsibility and authority for implementing SCM must be placed at the highest level of organization d SCM requires firms to put in place information systems and metrics that focus on performance across the entire supply chain i WHY Because without such measures we may miss people which are trying to maximize performance without regard to supply chain 1 This can cause problems for all e SCM means that you not only need to do better than your competition to succeed but you actually need to compete against Multi firm supply chains f SO you need to not only work better among the functional areas of your firm but think about how you will partner with other firms to succeed VII Supply Chain Activities 168 a Relating logistics management and supply chain management Figure 16 1 text page 407 Logistics Management Suppliers Producer Consumers Supply Network Marketing Channel Supply Chain Management b Here we see that it is no longer enough to have good relationships with individual suppliers 169 Store s point of sale scanner system records each day s sales When stock falls below a minimum level the system automatically generates a replenishment order Supplier Network Mktg Channel Supply Chain Management 170 VIII Supply Chain Management and Marketing Strategy a Aligning a Supply Chain with Marketing Strategy b The PROBLEM results i In real life our supply chain team may focus on short term operational ii This focus does not produce the intended positive profit results c An Example of Non Aligned SCM Objectives and Marketing Strategies Customer Needs Efficiency Asset Utilization 171 d An Example of Aligned SCM Objectives and Marketing Strategies Customer Needs Efficiency Asset Utilization 172 Curing the PROBLEM i Understand our customer s needs 1 How important and what VALUE do our customers put on a Lead Time b Quick Response c Efficient Consumer Response d Dependability e Communication f Convenience ii Understand our supply chain and its strengths and weaknesses iii Harmonize the supply chain strengths with our marketing strategies 1 Redesign the supply chain if necessary IX Information s Role in Supply Chain Responsiveness and Efficiency a Electronic Data Interchanges EDIs i combine proprietary computer and telecommunication technologies to exchange electronic invoices payments and information among suppliers manufacturers and retailers ii Easily said but think about what that means b The Need for Information in a Customer Driven Supply Chain 173 c We not only need information to Manage the Supply Chain but to allow us to balance the total costs of our logistics efforts with the value we provide to our customers X Key Logistics Functions in a Supply Chain Transportation a 3 rd Party Logistics Providers i firms that perform most or all of the logistics functions that manufacturers suppliers and distributors would normally perform themselves 1 http outsourced logistics com logistics services index html ii Outsourcing RISKS 1 Outsourcing undesirable functions instead of the ones that give you the greatest competitive advantage 2 Not having clear goals and