Logistics and Supply Chain Management Chapter 16with Duane Weaver
Marketing Channel Logistics Building Blocks • Inventory Management • Holding costs • Reducing inventory • Pseudo inventory reduction • Real inventory reduction • Fulfillment and Transportation • The Essentials • Third-Party Logistics Providers • Orders, Invoices, and Payments (Audit Control)
Origin and Practices ofSupply Chain Management (SCM) • Supply Chain: • set of entities that “collectively” manufactures a product and sell it to an endpoint (the ultimate customer). • Value-Added chains that include ONLY players that add value in Production and Distribution. • Effective unification of product flows in SCM requires: • Market orientation • Effective Channel Management • Effective Logistics
SCM techniques - ECR • Efficient Consumer Response (ECR): • Category Management and Efficient Promotions • Stock product category as a whole (vs. brand or individual product) • ABC (activity based costing) helps to manage by category • Good for commodity categories (diapers, toothpaste…) • Continuous Replenishment Planning (CRP) • Replace stock based on speedy knowledge of consumer “withdrawals” • Integrates push systems (stocking to forecast) with pull system (consumer withdrawals – Point of Purchase systems) • Obstacles • Stock coding agreements in the channel. • EDI choices and channel integration • Trusting other channel members • Opportunism degrades the cooperation and thus ECR success
SCM techniques - QR • Rapid Response (QR): • Originated in Fashion industry (‘80s) • Consumer drives channel – ship quickly on demand, like ECR • Involves keeping manufacturingflexible as to what and how much to make. • More common when “consumers don’t know what they need until they ‘try it’”. Often needed for perishables (fashionables) that require consumer reactions vs. ECR for commodities (toothpaste).
What is the right supply Chain? • Physical Efficiency vs. Market Responsiveness • Functional Brand (predictable volumes) or Innovative Brand (unpredictable volumes)? • See Figure 16.4, page 521 • What enables successful Supply Chain Management: • Pressure from market changes such as NAFTA and EEU • Industry EDI standardization (codes, templates, software...) • Heavy IT and EDI investment • Excellent cost accounting • Internal management incentives for system gains • Culture of cross-functional integration • Effective channel management fostering: trust, relationships, design, and judicious use of power
Group Discussion • P. 525, • Question 1 • Question 2 • Question 3