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Business Logistics

Business Logistics. Chapter 4 The Outbound Logistics System Adam Conrad. Learning Objectives . Understand the important role of outbound logistics in the logistics supply chain

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Business Logistics

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  1. Business Logistics Chapter 4 The Outbound Logistics System Adam Conrad

  2. Learning Objectives • Understand the important role of outbound logistics in the logistics supply chain • Explain the differences that exist among companies in terms of the scope, complexity, and significance of their outbound logistics system • Understand major trends in outbound logistics strategies • Discuss the importance, contribution, and role of customer service in outbound logistics systems

  3. Learning Objectives (cont.) • Define customer service from different perspectives • Understand the basic elements of customer service that are important to logistics managers • Explain the standards of performance that are used to measure and evaluate customer service • Discuss how companies use customer service to achieve and sustain competitive advantage

  4. Learning Objectives (cont.) • Understand the nature and role of channels of distribution in outbound logistics systems and the relationships among channels of distribution • Discuss alternative channel systems • Explain the strategic impact of integrating channel systems

  5. Outbound Logistics • Early interest • Higher inventory costs due to higher value products • Inbound systems important • Customers ‘touched’ by outbound – complaints • Managing makes it easier to achieve and sustain market share • Synergism of inbound and outbound • Must be coordinated due to reduced cycle times

  6. Outbound Logistics • National Semiconductor • 45 day turnaround for 95% of orders – not good • Four day service • Lower cost, higher revenue

  7. Outbound Logistics • Richfood • Logistics Profile • Cross Docking • McKesson and Fleming – suppliers • New method of distribution – less on hand • Educate stores on new procedure • More doors for trailers to wait for cross dock

  8. OL – Along the Supply Chain • Food supply chain • Retail stores only concerned with half of the logistics system – inbound • Customers assume logistics role (Sam’s) • Steel Company • Outbound receives more attention • Food Producer • Most challenging outbound due to number of SKU’s

  9. OL Along the Supply Chain • Efficient Consumer Response • Potential to improve this area of the supply chain is significant • Packaged goods industry – estimated savings of $30B / year

  10. Customer Service • Getting close to customers • Peters and Waterman • ALIGN yourself with the BUYER • Market driven quality • IBM – bundle of quality related services • Complete ‘solution’ – customer satisfaction • Consumer awareness • Mass Customization • Neal Stephenson • Diamond Age – Matter Compiler/Decompiler & Ractives

  11. Logistics/Marketing Interface • Traditional view • Increasing level of customer satisfaction should equal cost increases • New vision • Competitive advantage

  12. Defining Customer Service • Levels of product - 3 • 1. Core benefit or service • 2. Tangible product, physical product or service • 3. Augmented product – secondary benefits • Installation, warranties, service after sale

  13. Defining Customer Service • Types of customer support/service • Examples • Revamp billing procedures – EBPP • Credit terms • Repair parts inventories -Sears • Levels of involvement • CS as an Activity • Order processing / Billing / Handling returns • CS as Performance Measure • Percentage of orders shipped on time • Calls answered in 1 hour – NOTE, ACTUAL benefits must be double checked (telephone support example)

  14. Defining Customer Service • CS as a Philosophy • Company wide dedication to customer satisfaction through superior CS

  15. Elements of Customer Service • Food Industry Example • Four Main dimensions • Control over lead time • Use of Computers • Productivity Gains • Transit Times

  16. Defining Customer Service • Inventory level and stockout costs • Stockout costs • Claims • Lost sales or lost production

  17. Defining Customer Service • Order Information • Seller-customer channel • Two-way street • Flexibility • Different customer requirements • Customer Profitability

  18. Performance Measures for CS • Setting standards • Levels of quality • Communication with customers • Control of customer service

  19. A Note on Inbound System Service Levels • Cost of physical supply stockout • Overview of Customer Service • If the basics of CS aren’t in place, nothing else matters • Customers define service differently • All customer accounts are not the same • Relationships are not one-dimensional • Partnerships and added value can ‘lock up’ customers

  20. Channels of Distribution • Channel efficiency • Growth and Importance of Channels of Distribution • A special Note on Inventory for Outbound Systems • Expected Cost of Stockouts

  21. Channels of Distribution • Back Order • Nature of Cost • Lost Sales • Direct Loss • Special explanation • Calculation • Lost Customer • Difficult Nature

  22. Channels of Distribution • Determining the Expected Cost of Stockouts • Procedure • Distribution Resource Planning (DRP) • DRP develops a projection for each SKU and requires • Forecast of demand for each SKU • Current inventory level of the SKU (balance on hand, BOH) • Target safety stock • Recommended replenishment quantity • Lead time for replenishment

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