Logistics & Supply Chain Management

1. Logistics & Supply Chain Management

2. Logistics • Oxford dictionary definition: • “Art of moving, lodging and supplying • troops and equipment” • Translating to business environment: • “Art of getting the right goods, in the right place, • at the right time and at the right cost”

3. Materials Logistics • Directing and regulating the orderly movement of material • and • related information through the entire manufacturing cycle • i.e. from acquisition of raw material to delivery of finished goods

4. Definition of Business Logistics (RH Ballou) • Business logistics deals with all move store activities that facilitate product-flow from one point of raw material acquisition to the point of final consumption, as well as the information flows that set the product in motion for the purpose of providing adequate levels of customer service at a reasonable cost

5. What is supply chain? - Definitions • “a system whose constituent parts include material suppliers, production facilities, distribution services and customers, linked together by the feed-forward flow of materials and the feed-back flow of information” (Slack 2000) • “a network of connected & interdependent organisations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users” (Christopher 1998)

6. Elements of Supply Chain Second-tier Customer First-tier Supplier First-tier Customer Second-tier Customer The Product Purchasing & Supply Physical Distribution Management Management Logistics Materials Management Supply Chain Management

7. Strategy in the extended enterprise Corporate Strategy Supply Market Supply SourcesDistribution Market Sales Market The organisation The extended organisation

8. A Supply Chain Model Towill, 1994

9. Aspects of Supply Chain Management Second-tier Customer First-tier Supplier First-tier Customer Second-tier Customer Design & Plan Supply chain Organise & Control Supply chain The Product Improve Supply chain Purchasing & Supply Physical Distribution Management Management Logistics Materials Management Supply Chain Management

10. Logistics & SCM • Entails: • Planning • Ordering • Procurement • Manufacture • Distribution • Maintenance • Management of materials

11. Terms explained • Purchasing & Supply management- the function that deals with the operation’s interface with its supply markets • Physical distribution management- the operation of supplying immediate customers • Logistics - the management of materials & information flow from a business, down through a distribution channel, to end customers • Materials Management- the management of the flow of materials & information through the immediate supply chain • Supply Chain Management- a concept with a much broader span of concern and an holistic approach to managing across company (Inter & intra) boundaries(substantial benefits to be gained by strategically trying to drive a whole chain in the direction of satisfying end customer).

12. History of Logistics • Engineers continually attempting to improve movement of materials • Henry Ford - model ‘T’ in 72 hours • World War II - the role of logistics gained greater importance • In the 1950s and 60s emphasis on Product Innovation and Marketing. The efficiency in Manufacturing and Distribution became secondary • Oil shock and emergence of Japanese Production Technology • In the 1990s the significance of Logistics & Supply Chain increasingly realised

13. How Has Our Landscape Changed? • From vertical organizations to more partner/relationship driven organizations • Increase in outsourcing in non-core competency areas (1998 – 15% in 2000 – 40%) • Time-to-market acceleration(the five day car) • Higher demand for customization(Custom Car) • Enabling technologies, driving business efficiencies and adding competitive pressure Business Week – Hambrecht & Quist

14. How Do Organizations Respond?Organizations Rated By Performance Best in Class World Class Winners Country Class Above average, but think they are good or very good Survivors Below average, but think they are average or better Slipping Organizations Losers Troubled Organizations “High Performance Benchmarking: 20 Steps to Success” H. James Harrington

15. Competitive Manufacturing and Logistics • Growth in manufacturing by Pacific Rim countries birth of global manufacturing means successful management of international logistics essential • Competitive advantage gained by efficient and effective logistics & SC process • Production technology available is identical. Ability to select, integrate and operate this technology will lead to success • A home market is safe if the cost of manufacturing is less than competitors cost for export - transport - import • Competitive material logistics is the integration of materials and information flow into a total system

16. Supplier/customer Relationship • Japanese have participative approach with suppliers • Not always true for Western countries • Obtaining dependable supplies of material critical for successful competitive manufacture • Having a ‘good’ working relationship can be mutually beneficial hence companies become more resilient and less vulnerable to change • Periodic economic swings are inevitable, resulting in time delays, planning distortions and problems in inventory movements throughout the supply chain • Even greater problems when trading internationally

17. Supply Chain Logistics & the Economy • 10-20% of total ‘value-added’ due to logistics • various studies emphasise the importance of improved productivity in logistics • greater awareness of significance of logistics costs in manufacturing • a large proportion of total cost due to non-manufacturing activities (i.e... R&D, marketing, customer service) • increasing emphasise on horizontal integration of manufacturing activities • UK & Europe some way behind the Far Eastern economies

18. Figure - Value-Delivery chain Manufacturing is a Small part of the Value-Delivery chain Sales Order Entry Engineering Specification Scheduling Manufacturing Distribution & Customer Service Elapsed Time

19. Personal Computers Toys & Games Athletic Footwear Semiconductors Cosmetics Bicycles Automobiles Operating Systems Agriculture Fast Food Beer Brewing Clockspeed - the Evolutionary Lifecycle of Business By Charles F. Fine Product Clockspeeds Fast < 6 months to 3 years Medium 4 to 15 years Slow 10 to 100 years • Aircraft • Steel • Shipbuilding • Paper • Electricity • Oil How Temporary is your Advantage?

20. Recent Developments • Institute of Logistics (& Transport) set up in 1988 & current membership >20K • Senior appointments in Logistics & SC, especially in retail sector • Often retailer sector more advanced than manufacturing • Retail sector demanding, flexible, fast & frequent deliveries from their suppliers • Pressure to be lean, agile and responsive • the internet accelerating changes • competition between supply chains not between manufacturers

21. Integrated Business Chain End to End Business Optimization Collaborative Business Chain Management Supply Planning Demand Planning Product Brand Co. Consumption Conception Sup. Suppliers Supplier MFG Distributor Retailer End-User Technology, Capabilities and Capacity for Integration

22. Customer End-User Distributor Retailer Technology, Capabilities and Capacity for Integration Must Influence Consumer Decides Integration RealitiesBusiness Chain Relationships Product Brand Co. Conception Consumption Supplier Customer Service Providers Sup. Suppliers Supplier MFG You have the power

23. Future Directions • Rapid changes occurring due to: • 1) Pressure for change from managerial and technical development from within the LSC systems itself. • increased speed and intelligence of computing systems for the control of the information flow in LSC - “Time Compression” • availability of flexible computer facilities will enable companies to engage in ‘Dynamic Simulation’ • These will enhance accuracy of decisions

24. Future Directions cont....... • 2) Pressure for change comes from the wider economy, due to: • future uncertainty in consumer markets - hence need to develop effective flexible strategies • market structures changing - increasing fragmentation & specialisation and growth in specialised retailing • life cycles are shortening with more focus on selective and critical customers • trend towards FMS as opposed to mass production to cater for changes in demand etc... • competitive pressures in market place growing

25. Business Survival in Today’s Competitive Landscape • “Companies, like species, are competitive beings, and while evolving on an absolute basis is nice, relative evolution is the only thing that really counts. If you only improve as much as your natural enemy, you’ve done nothing to ensure your survival!” • J. William Gurley – Benchmark Capital • Lead analyst on Amazon.com IPO