supply chain logistics management chapter 15: logistics integration

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Supply Chain Logistics Management Chapter 15: Logistics Integration

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Page 1: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management

Chapter 15: Logistics Integration

Page 2: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

North American Logistics Geography

Page 3: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Distribution NetworkTotal Cost Dimensions

Expense Components

Handling

+

Inbound Transport

+

DC Handling

+

Inventory

+

Customer Transport

____________

Total Cost

Page 4: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Definition of Systems Analysis

• Total integrated effort to accomplish the desired objective

• A set of interrelationships designed to achieve the desired objective

Page 5: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Principles of System Integration

• Total system performance is singularly important

• Components or parts of system need not have optimum construction

• A functional relationship exists between components called trade-offs which may enhance or hinder system performance

• Components linked together in a balanced system will produce greater end results than the sum of individual components

Page 6: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Key Trade-Offs

• Cost to cost– Increase transportation to reduce inventory– Lot-size -- Inventory– Inventory -- Transportation

• Cost to service– Increased logistics cost to obtain increased service

and the potential for more revenue– Lead time -- Transportation– Product variety -- Inventory– Overall SC cost -- SC service

Page 7: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Transportation Cost Integration (Spatial)

• Basic economies– Economy of size (quantity discount)

– Economy of distance (tapering principle)

• Activity based cost– Loading and unloading

– Movement

– Information

• Generalized relationship

Page 8: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Transport Cost

Number of Distribution Locations

Outbound

Inbound

Total Transport

Transport Cost as a Function of Distribution Locations

Page 9: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Inventory Cost Integration (Temporal)

• Basic economies– Single location

– Multiple location

• Activity based cost– Inventory risk

– Inventory management

– Storage and handling

• Generalized relationship

Page 10: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Graphical Illustration of Locational Impact of Inventory

Cycle Stock

Safety Stock

Total Inventory

Average Inventory

Stocking Locations

Page 11: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Total Cost Integration

• Threshold service (Least cost assignment)

• Sensitivity analysis

• Science vs. art

Page 12: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Logistics Total Cost Curve

Total Cost

Number of Distribution Locations

Inventory Carrying Cost

Transportation Cost

Total Cost

Page 13: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Market Strategy

• Mass marketing

• Focused marketing

• One to one marketing

Page 14: Supply Chain Logistics Management Chapter 15: Logistics Integration

Supply Chain Logistics Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Launching Supply Chain as a Strategic Resource

• Focus service to customer segments

• Emphasize flexibility

• Leverage through alliances