Logistics and channel management

1. Logistics and channel management Week 12 Instructor: Jungwan Lee

2. What is logistics? • ..physical distribution • ..supply chain management • ..planning and implementing, and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer’s needs at a profit. (kotler)

3. Supply chain management • In more recent years, with the growing emphasis in marketing channels of firms cooperating in partnerships and strategic alliances, SCM describe logical systems that emphasize close cooperation to integrate the logistical operations of the different firms in the channel.

4. Logistic systems • Total cost approach • -> Minimize firm costs • -> Channel-wide cost efficiencies

5. Logistics system six basic components • Transportation • Materials handling;cross-docking • Order processing;order cycle time • Inventory control; • economic order quantity • Warehousing • Packaging

6. Third party logistics providers • This firm specialize in performing most or all of the logistical tasks. • As specialists in logistics, companies such as Strategic Distribution, which focuses on maintenance, repair, and operating supplies (MRO), are able to provide superior service at low cost than the firms who hire them.

7. Efficient consumer response (ECR) • ..seeks to provide consumers with better service and more value through cooperation of all firms in the supply chain. • In an effort to address logistics challenge, the grocery (food) industry in recent years has launched a massive effort to improve the logistics of food distribution from farm to consumer.

8. Role of logistics • ..getting the right amount, of the right products, to the right place, at the right time, at the lowest possible costs to the customer. • ..plays a critical role in channel management.

9. The output of the logistics system; key element of customer service • Product availability • Percentage in stock • Order cycle time • Elapsed time from order placement to order receipt • Distribution system flexibility • Response time to special request • Distribution system information • Speed, accuracy of response • Post-sale product support • Response time in providing product support

10. Economic order quantity • Inventory control refers to the firm’s attempt to hold the lowest level of inventory that still enable it to meet customer demand. • Inventory carrying costs: financing, insurance, storage, lost, damaged, stolen goods---about 25% • Trade-off: inventory carrying costs versus ordering costs=total costs • EOQ occurs at the point at which total costs are lowest, by balancing inventory carrying cost and ordering cost.

11. Four key areas of interface between logistics and channel management • Defining logistics service standards • Evaluating the logistics program • Selling the channel members on the logistics program • Minimizing out-of-stock occurrences • Reducing channel member inventory requirements • Strengthening the manufacturer-channel member relationship • Monitoring the logistics system

12. Discussion1 • Does this situation represent an interface between channel management and logistics management? • Timberland company case-retailers/scanning equipment • LG25 company case

13. Discussion 2 • Cross-docking system • …which eliminates storage in the warehouse and the subsequent need to pick stock to fill orders, can dramatically reduce labor and inventory carrying costs. • The concept is just move it across the loading docks to other trucks and send the merchandise on to its intended final destination. • What are some of the complicating factors that make challenging to implement?

14. Discussion 3 • What are your suggestions to solve the logistic challenges of Korea?