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LM 008 Course Outline

Part 1 – Introduction
• Chapter 1 – Logistics and the Supply Chain
• Part 1 – Introduction to Logistics
• Part 2 – Competing Through Logistics
• Chapter 2 – Serving the Customer
• Chapter 3 – Value and Logistics Cost
Part 2 – Leveraging Logistics Operations
• Chapter 4 – Managing Logistics internationally
• Chapter 5 – Managing the Lead-time Frontier
• Chapter 6 – Just – in – Time and Lean Thinking
• Chapter 7 – The Agile Supply Chain
Part 3 – Supplier Interfaces
• Chapter 8 – Managing the Supply Chain
• Chapter 9 – Partnerships in the Supply Chain
Part 4 – Changing the Future
• Chapter 10 – Logistics Future Challenges
Logistics and the Supply Chain
(Part 1)
Chapter 1
Chapter Objectives
After this chapter you should be able to:
1. Understand how supply chains are
structured
2. Understand different ways in which supply
chains may choose to compete in the
marketplace
3. Understand the need to align supply chain
capabilities with the needs of the end
customer
Fact and FAQ
A car takes only 17 hours to assemble and a
couple more days to ship to the customer via the
dealers.

So why does it take a month for a manufacturer to


make and deliver the car I want?
Answer

Supply chains are slow, costly and do not


deliver particularly good value to the end
customer
Key Issues To Be Discussed
• Logistics and the Supply Chain:
definitions, structure, tiering
• Material and information flow:
the supply chain and the
demand chain
• Competing through Logistics:
competitive criteria in the
marketplace
• Supply Chain strategies:
aligning capabilities across the
supply chain
Supply Chain Defined

A Supply Chain consist of a series of


activities and organizations that materials
move through on their journey from initial
suppliers to final customers.
Supply Chain

MATERIAL FLOW

THE
COMPANY
SUPPLY DEMAND
SIDE SIDE
INFORMATION FLOW
Supply Chain Performance
Objectives

1.Quality
2.Flexibility
3.Dependability
4.Speed
5.Cost
Essential Points in Supply Chain
Management
 SCM views the supply chain as a
single entity
 It demands strategic decision-making
 It views balancing inventories as a last
resort
 It demands system integration
Logistics and the Supply Chain
• Questions:
• How is a supply chain structured?
• What is the purpose of a supply chain?

..\Word Files\CASE STUDY


1.1 (TESCO).doc
Using Intermediaries to Simplify
the Supply Chain
Without a wholesaler With a wholesaler

Factories Factories

4 routes
inwards

Wholesalers
32 routes
Outwards
8 routes
Outwards

Customers Customers
Activities in a Supply Chain
Upstream Activities Downstream Activities

Initial 3rd tier 2nd tier 1st tier 1st tier 2nd tier 3rd tier Final
Supplier Supplier Supplier Supplier customer customer customer customer

Organization
Supply Chain Structure & Tiering
3rd tier 2nd tier 1st tier 3rd tier 2nd tier 3rd tier
supplier supplier supplier customers customers customers

Material Component Sub-assembly


suppliers makers providers Wholesalers Retailer End users

Organization
Supply Chain Structure & Tiering

Raw Materials

Supplier
Manufacturer

Supplier NDC

Organizations RDC

Organizations
Back Store

p. 13
Key Logistics Processes at Tesco

Order
Processing

Customer Service
Facility Demand Forecasting
Inventory
Network Communications
Procurement
Reverse Logistics
Parts & Service
W”housing,
Support Traffic &
Mat’ls
Transportati
Handling &
on
Packaging
Logistics
Logistics is the process of planning, implementing and
controlling the efficient, cost-effective flow and storage
of raw materials, in-process inventory, finished goods
and related information from point of origin to point of
consumption for the purposes of conforming to
customer requirements.
Logistics Process

Supply Points
Materials
Management
Production
Facilities
Logistics
Distribution
Facilities Distribution

Demand Points
Why is Logistics Important

Without logistics, no materials move, no operations can be


done, no product can be delivered, and no customers are
served.
Aim of Logistics
The overall aim of logistics is to achieve high
customer satisfaction. It must provide a high quality
service with low-acceptable costs.
What Does Logistics Provide

• Material Flow

• Information Flow
What is Material Flow
Material flows from primary manufacture through various
stages of the network to the end customer.
Material flow represents the supply of product through the
network in response to demand from the next
(succeeding) organization.
What is Information Flow

Information flow broadcasts


demand from the end
customer to preceding
organizations in the
network.
Activities of Logistics
• Procurement or purchasing
• Inward transport or traffic
• Receiving
• Warehouse or stores
• Stock control sets the policy for inventory
• Order picking
• Materials handling
• Outward transport
• Physical distribution management
• Recycling, returns and waste disposal
• Location
• Communication
Financial Dimension to Decision
Making
• The Bottom Line
• Cash Flow
• Resource Utilization specifically the use of fixed
and working capital
Return on Assets
Balance Sheet Income Statement
Short Term
Investments Receivables
Total Revenue
Fix Assets Other Current Sales
Assets
Property, Plant &
Equipment Less Cost of Revenue

90 days Gross Profit


Goodwill Cash and Less Operating Expenses
Assets Other Cash
Equivalents 60 days
15 days Capital Stock
Intangible Assets Operating Income (Loss)

Other Assets Other Income Expenses


Accounts Payables EBIT
Less Finance Charges
Retained
Long Term Earnings IBT
Investments Long Term Debt
Less Income Tax Expenses
Deferred Long Stockholders
Other Liabilities Adjustments
Term Asset Equity
Charges Deferred Long
Term Liability Profits
Net Income
Charges
Long Term Liabilities
Supply Chain Defined

Entire network of entities, directly or


indirectly interlinked and interdependent
in serving the same customer.
What is it composition

It is comprised of vendors that supply


raw materials, producers who convert
the material into products, warehouses
that store, distribution centers that
deliver to retailers and retailers who
bring the product to the ultimate user.
Supply Chain a Subset of Value
Chain
Supply chains underlie value chains because, without them,
no producer has the ability to give customers what they want,
when and where they want it, at the price they want.
Producers compete with each other only through their supply
chains, and no degree of improvement at the producer’s end
can make up for the deficiencies in a supply chain which
reduce the producer's ability to compete.
Diagram of a Supply Chain
Simple supply chains pull materials directly from their
origin, process them, package them, and ship them to
consumers.
Supply Chain Management
Management of material and information flow in a
supply chain to provide the highest degree of customer
satisfaction at the lowest possible cost.
SCM Essential Points
• SCM views the supply chain as a single entity
• It demands strategic decision-making
• It views balancing inventories as a last resort
• It demands system integration
What Does SCM Require
Supply chain management requires the commitment of
supply chain partners to work closely to coordinate order
generation, order taking and order fulfillment.

They thereby create an extended enterprise spreading


far beyond the producer’s location.
SCM Concern

Managing the entire process of raw material supply,


manufacture, packaging and distribution to the end
customer.
Based on this concern, the TESCO UK supply
chain structure comprises 3 main functions:
• Distribution which is concerned with the
operations and support task of managing
Tesco’s DC’s and the distribution of products
from the DC’s to the associated stores

• Network and Capacity Planning which is


concerned with the task of planning and
implementing sufficient capacity in the SC to
ensure that the right products can be procured
in the right quantities now and in the future

• Supply Chain Development which is the Raw Materials

task of improving Tesco’s SC so that its Supplier Manufacturere

processes are stable and in control, i.e. Supplier NDC


efficient and that it is correctly Organizations RDC
structured to meet the logistics needs of Organizations Back

material flow and information flow Store


..\Word Files\Case Study 1.2
Xerox.doc
Inventory
Traditional
Profile at Xerox
Just-in-Time Inventory
Location
Local Depot
Customer
National
Depot
International
Depot
WIP at Rank
Xerox
Parts Stores
Days of
In Transit Days of Stock
Stock
WIP at
Supplier Supplier

Rigid Flexible
Note: WIP = Work in progress, i.e. products being worked on but not yet ready for sale. Shaded areas indicated days of stock.
The wider the area, the more days of stock in that position.
Realization on Xerox inventory profile
• The impact of the new build philosophies on the
downstream supply chain processes can be summarized
as follows:
• While the traditional inventory profile shows a maximum
number of days of stock at finished product level, this is
risky. It always seems that demand is greatest for the
very items that are not available.
• Postponing the decision on exact specification until as
late as possible in the process helps create the much
flattened inventory profile to the right of the diagram.
Upstream and Downstream Activities
Alignment
It is the alignment of upstream and downstream
capabilities of supply chain partners to deliver
superior value to end customers at less cost to
the supply chain as a whole
End Of Presentation
Isoquant Curves
In economics, an isoquant is a contour line drawn through
the set of points at which the same quantity of output is
produced while changing the quantities of two or more
inputs.
Isoquant mapping deals with the cost-minimization problem
of producers.
Isoquants are typically drawn on capital – labor graphs,
showing the technological tradeoff between capital and labor
in the production function, and the decreasing marginal
returns of both inputs. Adding one input while holding the
other constant eventually leads to decreasing marginal
output, and this is reflected in the shape of the isoquant.

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