Logistics Management Week 2

LOGISTICS MANAGEMENT MARKETING CHANNELS LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Asst. Prof. Dr. Gül Denktaş Şakar

To start with…. “Logistics and supply chain management are not new ideas. From the building of the pyramids to the relief of hunger in Africa, the principles underpinning the effective flow of materials and information to meet the requirements of customers have altered a little” Martin Stopford

Before discussing the supply chain management concept, we need to understand the marketing channels… • “sets of interdependent organizations involved in the process of making a product or service available for use or consumption.” • Ownership channel – Manufacturers – Wholesalers – Retailers

Relationship of Logistics to Marketing and Production

PRODUCTION/ OPERATIONS Sample activities: • Quality control • Detailed production scheduling • Equipment maint. • Capacity planning • Work measurement & standards

Interface activities: • Product scheduling • Plant location • Purchasing

LOGISTICS Sample activities: •Transport • Inventory • Order processing • Materials handling

Interface activities: • Customer service standards • Pricing • Packaging • Retail location

Productionlogistics interface

MARKETING Sample activities: • Promotion • Market research • Product mix • Sales force management

Marketinglogistics interface

Internal Supply Chain

Five Business Systems - Tightly Interconnected Within The Organization Manageme nt Systems Strategic Decisions

Product Design Decisions

Measuremen t Decisions

Reward Decisions

Process Design Decisions

Product Decisions Price Decisions

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Logistics Systems

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Promotion Decisions Place (How, where, how much)

Inventory Decisions

Production Capacity Decisions

Transportation Decisions

Production Scheduling Decisions

Sourcing Decisions

Shop Floor Decisions

Engineering Systems

}

Marketin g Systems

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Manufacturin g Systems

Marketing

Relationship of Logistics to Marketing Product Promotion

Price

Logistics

Place-Customer service levels Transport costs

Inventory carrying costs Lot quantity costs

Order processing and information costs

Warehousing costs

Marketing Channels • Negotiations channel – Buy and sell agreements are reached

• Financing channel – Payments for goods

• Promotions channel – Promoting a new or existing product

• Logistics channel – Moving and storing throughout the channel

product

Channel Intermediaries/ Facilitators

• Ownership channel

– Banks, public warehouses

• Negotiations channel – Brokers

• Financing channel – Banks, insurance companies

• Promotions channel – Advertising agencies, public relations agencies

• Logistics channel – Freight forwarders

Main differences between marketing channels and the supply chain • Reengineering: While the marketing channel appears to concentrate on existing products, the supply chain includes more room for considering the reengineering of products and processes. • With the supply chain concept, it is desirable to negotiate engineering and design changes in products to make them more compatible with the needs of other chain members.

• Inventory management: • Inventories have shifted from push to pull systems. • Push strategy: – Manufacturers used long production runs to gain efficiencies of scale – This minimizes unit costs and optimizing utilization of their production and distribution assets. Although the push strategy can strengthen manufacturer’s profits, it also results in excess inventory and inefficient supply chain management

Push to pull systems… • Under the pull scenario, the system listens to the customer through the retailer, transmits preferences back up the information pipeline and quickly responds with the merchandise demanded. • The objective across the supply chain is to reduce the inventory buffer for all trading partners.

Any strategy that comes to your mind? • A postponement strategy aims at delaying some supply chain activities until customer demand is revealed in order to maintain both low system wide cost and fast response. • Logistics postponement • Products in semi-finished forms and can be customized quickly in production facilities close to customers

SUPPLY CHAIN MANAGEMENT DEFINITION: Supply chain management (SCM) refers to the integration of both transportation and logistics into a seamless flow of physical goods, associated information and funds as goods move from raw materials sourcing to the final delivery of final products to consumers.

Some more definitions….. SCM creates value through each of its steps, which take place across organizational boundaries as required by the market. The supply chain includes all participants in the transportation and commercial transactions of trade.

Some more definitions….. • Supply chain management is

“the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses in the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”

What is the difference? • Supply chain management is a wider concept than logistics. • Logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of product and information through a business. • Supply chain management builds upon this framework and seeks to achieve linkage and coordination between the processes of other entities in the pipeline such as suppliers, customers and the organization itself.

Evolution of Supply Chain Management

Activity frag

How shipping affects international logistics and supply chains? 1)During the first stage of supply chain evolution (fragmentation to physical distribution), international maritime industry restricted its activities to sea leg, concentrating on operating vessels, fleet scheduling and stowage planning (these were invisible to the shipper).

How shipping affects international logistics and supply chains? 2)With the advent of the second stage (integrated logistics management), the shipping industry started offer through transport services the IN WHAT WAYS including AND HOW? development of intermodal transport. 3) The third stage of supply chain management has seen the shipping industry becoming more integrated into the shipper’s supply chain.

Different Supply Chain Configurations

Supply Chain - Major Decisions Location Decisions

Production Decisions

Inventory Decisions

Transportation Decisions

All 4 decisions mentioned above are interlinked and are critical to the success of a modern organization. To make a supply chain successful one needs to take all location, production, inventory & transportation decisions based on facts providing concrete trade off between cost & service

Supply Chain Schematic

Successful Supply Chains have…

• an enterprise-to-enterprise point of view • a systems approach across all organizations in the supply chain – Companies recognize interdependencies (coordination) – Goals and objectives are compatible

SUPPLY CHAIN ELEMENTS Strategic

• Supply Chain Design • Resource Acquisition • Long Term Planning (1 Year ++)

Tactical

• Production/ Distribution Planning • Resource Allocation • Medium Term Planning (Qtrly,Monthly)

Operational

• Shipment Scheduling • Resource Scheduling • Short Term Planning (Weekly,Daily)

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Globalization of Supply Chains Increasing globalization – Lower priced materials and labor – Global perspective of companies – Development of global competition

• Extremely difficult to execute due to differences – Cultural, economic, and technological – Political, spatial, and logistical

How long is the supply chain? • For many firms, the supply chain extends from their suppliers’ suppliers to their customers’ customers and beyond. • In the textile and apparel industry, a company like Levi’s may manage a supply chain consisting of: • • • • • • • •

A fiber provider A yarn manufacturer A textile manufacturer A clothing design firm A textile launderer Distributors Retailers Firms supplying transportation, information or distribution services to any of Levi’s partners in the supply chain.

Supply Chain for Milk Products

Supply chain: structure and tiering Supply chain can be fairly complex. The supply chain for a car manufacturer includes hundreds of suppliers, dozens of manufacturing plants (for parts) and assembly plants (for cars), dealers, direct business customers, wholesalers, customers, and support functions such as product engineering and purchasing.

Barriers to Supply Chain Management • Regulatory and political considerations • Lack of top management commitment • Reluctance to share, or use, relevant data • Incompatible information systems • Incompatible corporate cultures

That’s all for today… Thanksss