Logistics Management Introduction

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Logistics and Supply Chain

Logistics Management

Prof. Rushen Chahal

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logistics and Supply chain1

Material and information flow2

Competing through logistics3

Logistics strategy4

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Seven-eleven convenience store

 ± Describe the key logistics processes at 7-

11.

 ± What differences between the early reform

and the regional distribution center at 7-11.

 ± What do you think are the main logistics

challenges in running the 7-11 operation.

Case study

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Case study

Centralized

distribution

No

distributioncenter

Built its owndistribution

center---jointdistribution

First stage Second stage Third stage

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Key issues

1111 What is supply chain, and

how is it structured?

2222 What is the purpose of asupply chain?

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The Supply Chain Concept

Development of the Concept ± Total systems cost - remains an important element

of logistics analysis.

 ± Outbound logistics  ± the warehousing and

distribution of finished goods.

 ± Inbound logistics  ± the receiving and warehousing

of raw materials, and their distribution tomanufacturing as they are required.

 ± Value chain analysis integrated logistics activities.

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Business Logistics in a Firm

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A supply chain is a group of partners whocollectively convert a basic commodity (upstream)into a finished product (downstream) that is

valued by end-customers, and who managereturns at each stage.

The Supply Chain management Concept

DefinitionDefinitionDefinitionDefinitionPlanning and controlling all of the processesthat link partners in a supply chain together inorder to serve needs of the end-customer.

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The process starts with

several external suppliers

that move milk, cardboard,

and plastic to the processingplant.

 After the milk is processed

and packaged, it is delivered

to retailers, who sell it to

customers. The alternativedelivery system is delivery

from a warehouse directly to

customers¶ homes.

Supply chain:

structure and tiering

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Supply chain:

structure and tiering Supply chain can be fairly

complex. The supply

chain for a car 

manufacturer includes

hundreds of suppliers,

dozens of manufacturingplants (for parts) and

assembly plants (for cars),

dealers, direct business

customers, wholesalers,

customers, and supportfunctions such as product

engineering and

purchasing. 

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Logistics concept

DefinitionDefinitionDefinitionDefinitionThe task of coordinating material flowand information flow across the supplychain.

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 Activity 1

Wheat Flour  

Praline Wafers

ChocolateConfectionery

manufacturer Packing

Creamery

(milk)

Cocoa

beansSugar 

Vegetable

oil

Cocoa

butter Lecithin

Emulsifiers,

Salt, etc.

Printed

materialsAluminium Fiberboard

Multiple

retailers

Wholesalers

Others

(hospital etc.)

End

customers

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logistics and Supply chain1

Material and information flow2

Competing through logistics3

Logistics strategy4

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Key issue

1111What is the relationship between

material flow and information

flow?

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Case study: Seven-eleven

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Case study: Seven-eleven¶s distribution

strategyDelivery arrives from over 200 plantsDelivery is cross docked at DC (over 80 DCs for

food) Food DCs store no inventory Combined delivery system: frozen foods, chilled

foods, room temperature and hot foods

11 truck visits per store per day (compared to 70in 1974) No supplier (not even coke!) delivers direct

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Case study: Seven-eleven¶s

Information Strategy

Quick access to up to date information (ascontrasts with data)

 ± High speed data network linking stores, headquarters,

DCs and suppliers

 ± Store hardware

 ± Store computer 

 ± POS registers linked to store computer 

 ± Graphic Order Terminals

 ± Scanner terminals for receiving

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Integrated Logistics Management

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Material and information flow

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Material and information flow

Material flow

Information flow

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 Activity 2

Describe the material and information flow in thesupply network affecting one of the major

products in Activity 1.

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logistics and Supply chain1

Material and information flow2

Competing through logistics3

Logistics strategy4

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Key issues

1111How do products win orders in

the marketplace?

2222How does logistics contributeto competitive advantage?

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Creating logistics advantage: three

basic ways

Logistics advantageLogistics advantage

quality time

cost

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Creating logistics advantage:

controlling variability

Variability undermines the dependability with which a product or 

service meets target.

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Order winners and order qualifiers

Order winnersare factors that directly and

significantly help products to

win orders in the

marketplace.

Customers regard such

factors as key reasons for buying that product or 

services.

Different logistics

performance

objectives

Order qualifiersare factors that are regarded

by the market as an µentry

ticket¶.

Unless the product or service

meets basic performance

standards, it will not be taken

seriously.

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 Activity 3

Compare the details for characteristics of 

both household appliance and mobile

phone¶s product lines.

Go on to identify the principal order 

winners and qualifiers for each product. 

Vs.

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logistics and Supply chain1

Material and information flow2

Competing through logistics3

Logistics strategy4

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The value chain: Linking supply chain

and business strategy

 New

 Product  Development 

 Marketing 

and  Sales Operations

 Business Strategy

 New Product 

 Strategy

 Marketing 

 Strategy

 Supply Chain Strategy

New product

Development

Ma

rk

et

in

g

an

d

s

al

e

s

Ope

rations

Distri

bution

Se

rvice

 Finance, Accounting, Information Technology, Human Resources

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How to  Achieving Strategic Fit

Understanding the Customer ± Lot size

 ± Response time

 ± Service level

 ± Product variety

 ± Price

 ± Innovation

How to measure?Implied Demand 

Uncertainty 

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Levels of Implied Demand Uncertainty

Detergent High Fashion

 Low High

 Price  Responsiveness

Customer Need

Implied Demand Uncertainty

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Understanding the Supply Chain: Cost-

Responsiveness Efficient Frontier 

 High

 High

 Low

 Low

Cost

Responsiveness

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 Achieving Strategic Fit

Implied

uncertainty

spectrum

Responsive

supply chain

Efficient supplychain

Certain

demand

Uncertain

demand

Responsivenessspectrum

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Strategic Scope

Suppliers Manufacturer Distributor Retailer Customer

Competitive

Strategy

Product Dev.

Strategy

Supply Chain

Strategy

Marketing

Strategy

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Drivers of Supply Chain Performance

 E   fficiency Responsivenes

  Inventory Transportation Facilities Information

 Supply chain strategy and structure

Drivers

Competitive strategy

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Considerations for Supply Chain Drivers

 Driver  E   fficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation /

Dedicated

Proximity /

FlexibilityInformation What information is best suited for 

each objective