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Chapter 16:

Chapter 16:. Logistics and Supply Chain Challenges for the Future. Logistics Profile: Creating a State-of-the Art VW Beetle Production Facility in Mexico. In 1998, at Volkswagen’s Mexican assembly plant in Puebla, Exel implemented the JIT sequencing operation.

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Chapter 16:

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  1. Chapter 16: Logistics and Supply Chain Challenges for the Future

  2. Logistics Profile: Creating a State-of-the Art VW Beetle Production Facility in Mexico • In 1998, at Volkswagen’s Mexican assembly plant in Puebla, Exel implemented the JIT sequencing operation. • Currently, the Mexican plant produces 1,600 vehicles daily, including the Beetle and Jetta. • Parts delivery to a specific place on the line takes place within 40 minutes of an order, with one car built every 40 minutes, 24/7. • Exel provides Volkswagen with expert logistics and supply chain management ported from a similar VW plant in Spain, proving that transfer of technology, human resources, and best practices is possible on a global basis. Management of Business Logistics, 7th Ed.

  3. Introduction • Logistics and supply chain management are changing quickly, and are characterized by: • Many innovations and improvements • Movement towards being considered as players in strategic, competitive advantage • Prime candidates for application of tried and proven approaches to strategic planning Management of Business Logistics, 7th Ed.

  4. Overview of Strategic Planning for Logistics and Supply Chain Management • Historical Perspective on Strategy: • Has become an appropriately meaningful and integrated activity in most globally competitive firms. • Evolutionary development phases: • In the 50s and 60s, was referred to as investment planning. • In the 70s, began to focus on internal growth opportunities. • In the 80s, a combination of outside investment and internal growth opportunities was used. Management of Business Logistics, 7th Ed.

  5. Overview of Strategic Planning for Logistics and Supply Chain Management • In the 80s, a combination of outside investment and internal growth opportunities was used. • In the 90s, refocused on gaining strategic advantage in the marketplace and for defending against competitors. • In the early 2000s, strategic focus clearly moved toward the development of effective, interfirm relationships that would create maximum value for the firm’s products and/or services. Management of Business Logistics, 7th Ed.

  6. Overview of Strategic Planning for Logistics and Supply Chain Management • Definitions: • Strategy – a course of action, a scheme, or a principal idea through which an organization hopes to accomplish a specific objective or goal. (long term) • Tactics – refers to the operational aspects that are necessary to support strategy. (Middle term) Management of Business Logistics, 7th Ed.

  7. Overview of Strategic Planning for Logistics and Supply Chain Management • Strategy Classification • Porter’s model of basic strategies, namely, (1)cost, (2)differentiation, and (3)focus is the most popular scheme. (1) low cost essentially stress offering a product or service in a market at a price or cost lower than that of competitors. • Automobiles and electronic products are two examples of this strategy, as are the general operations of retail firms such as Wal-Mart, Target, and McDonalds. Management of Business Logistics, 7th Ed.

  8. Figure 16-2 Strategies for Creating Value Management of Business Logistics, 7th Ed.

  9. Overview of Strategic Planning for Logistics and Supply Chain Management (2) differentiation attempt to make a product or service look unique, such that consumers are willing to par a premium price. • Perceptions based on better fit, higher quality, long product life, better service, and other similar attributes are typical of strategies based on differentiation. Management of Business Logistics, 7th Ed.

  10. Overview of Strategic Planning for Logistics and Supply Chain Management (3) focus attempt to make a product or service fit a niche or small market segment where either cost or differentiation is then employed. • Ex 24/7 Speed delivery between Taiwan and HK • Stage 1: delivery at a spot • Stage 2: door to door delivery Management of Business Logistics, 7th Ed.

  11. Overview of Strategic Planning for Logistics and Supply Chain Management • Strategy Classification • Porter’s value chain suggests that a company can be disaggregated into • fiveprimary activities and • foursupport activities. • Examine Figure 16-3. Management of Business Logistics, 7th Ed.

  12. Figure 16-3 The Generic Value Chain Management of Business Logistics, 7th Ed.

  13. Logistics and supply chain strategies • Time-based • Asset productivity • Technology-based • Relationship-based Management of Business Logistics, 7th Ed.

  14. 1. Time-Based Strategies • Here we refer to trade off Capitals spent on: • Transportation • Inventory, and • Warehousing cost • Question needed to address is that how do we reduce our operations time and inventories such as to: • max our ROI and ROA • max our cash flow Management of Business Logistics, 7th Ed.

  15. Two general aspect to reduce time in SCM • (a) Reducing Cycle Time – reduce operations time • (b) Time-Reduction Logistics Initiatives – flow of the products Management of Business Logistics, 7th Ed.

  16. (a) Reducing Cycle Time • Logistics activities that shorten the length of the order/replenishment cycle by reducing: • cycle time are based on three factors: • processes, • information, and • decision making. • How to achieved them? Management of Business Logistics, 7th Ed.

  17. 2 Ways to achieving them: (1) Use of technology for processing and Information • Eg. Use EDI or the Internet for fast order processing (2) Level of approval for decision making • empowering individuals to make decisions can be one of the most important ways to speed cycle time. • Pre-approvals and other delegated decision making models can lead to making mistakes, but the experience of Proctor & Gamble, among others, is that the risk is justified in terms of time saved and improvement in customer responsiveness. Management of Business Logistics, 7th Ed.

  18. (b) Time-Reduction Logistics Initiatives • Here, we emphasize on flow of products • Methods adopted include JIT, VMI (vendor-managed inventory, and CRP (continuous replenishment) • Each strategy reduces the order cycle by shortening the total time from vendor to delivery to customers. • Push to pull method in SCM • Push, reactive and wait for customer orders • Pull, proactive, inventory replenishment fo anticipate future demand so that .. each warehouse placing orders with the central distribution center Management of Business Logistics, 7th Ed.

  19. How to achieve them? • 4 ways: 1)Anticipate customers’ needs • Improved ability to anticipate through collaborative planning, forecasting, and replenishment (CPFR) enables the logistics and supply chain processes to make a more valuable contribution to corporate objectives. • The switch from push to pull is a more demand-responsive system, but requires changes that may be difficult to achieve depending on the corporate culture in place. Management of Business Logistics, 7th Ed.

  20. 2) Manufacturing impacts • Pull approach requires a fast manufacturing system when an order is received! • Risk of low or no inventory depends on fast and frequent replenishment. 3) Responding to demand • Produced only needed so to reduce storage spaces • Need to special care of “peak” demand session! Management of Business Logistics, 7th Ed.

  21. 4. Postponement • involves not completely finishing a product until an order arrives. • Food processors that can “brights” and do not label until an order is received • Auto manufacturers that pre-wire electronic harnesses to take any option, not knowing what a particular car order will specify. Management of Business Logistics, 7th Ed.

  22. 2. Asset Productivity Strategies Our focus here is to emphasize on ROA • How do earn the same level of revenues with a reduced investment in assets? Management of Business Logistics, 7th Ed.

  23. 4 ways to improve our asset productivities • Inventory reduction • Facility utilization • Equipment utilization • 3PL/Contract logistic services Management of Business Logistics, 7th Ed.

  24. 1) Inventory Reduction • Much evidence that companies have been successful in reducing inventories. • Time reduction strategies, JIT, QR, VMI, and ECR 2) Facility Utilization • Strategy to keep the goods moving throughout the logistics and supply chain system has contributed to effective use of logistics facilities thus squeezing more productivity from these assets. • Eg. Direct shipment of goods to eliminate storage facility together Management of Business Logistics, 7th Ed.

  25. 3) Equipment Utilization Strategies • To improve material-handling systems used in warehouse/transportation to reduce operations time • Ex: use of a smarter, more sophisticated equipment dispatching software. • Doing more with less is a result of leaner enterprises. Management of Business Logistics, 7th Ed.

  26. 4) Third-Party/Contract Logistics Services • Use of 3PLs has resulted in dramatic positive impact on asset productivity. • DuPont, Nabisco, Proctor & Gamble, General Electric and General Motors and others are users of 3PLs, focusing on managing logistics services rather than on the assets themselves. • Examine Figure 16-4 on 4PLs potential impact. Management of Business Logistics, 7th Ed.

  27. Figure 16-4Fourth-Party™ Logistics Management of Business Logistics, 7th Ed.

  28. 3. Technology-Based Strategies • Disruptive technologies are those will help make firms more competitive, but will change the basis of competition. • Examine Table 16-1 • Implications are that logistics and supply chain areas of the future will differ significantly from those of today. • E-commerce e-procurement and electronic marketplaces will continue to grow in importance. Management of Business Logistics, 7th Ed.

  29. Table 16-1Disruptive Information Technologies Management of Business Logistics, 7th Ed.

  30. Figure 16-5Shifts in Technology Management of Business Logistics, 7th Ed.

  31. Figure 16-6Strategic Sourcing and Procurement Management of Business Logistics, 7th Ed.

  32. 4. Relationship-Based Strategies Building relations between trading partners. • Collaboration • Parties involved dynamically share and interchange information. • Group benefits more than individual benefits. • All parties modify their business practices. • All parties conduct business in new and visibly different ways. • All parties provide a mechanism and process for collaboration to occur. (see next - Fig 16-7) Management of Business Logistics, 7th Ed.

  33. Figure 16-7 4 Types of Collaboration Management of Business Logistics, 7th Ed.

  34. Synthesis and Future Directions • Shift from Vertical to Virtual Integration (ERP) • Collaboration (CPER) • Knowledge of Core Competencies • Expertise • Strategic fit • Ability to trust • Technology and Connectivity • Managing-the-People Skills • Comprehensive Supply Chain Perspective Management of Business Logistics, 7th Ed.

  35. Chapter 16: Summary and Review Questions Students should review their knowledge of the chapter by checking out the Summary and Study Questions for Chapter 16.

  36. End of Chapter 16 Slides Logistics and Supply Chain Challenges for the Future

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