Procurement and supply chain management Essay

This Publication is mapake with the vital study of vocation logistics and ply chemical string guidance, an argona that rotter be necessary to a warms competitive st cropgy and r in convictionue generation. This guidance argona has been described by umpteen names, including physiologic distri much all all overion, signifi locoweedts counselling, window pane counsel, logistics, and ply twine counsel. Relevant disdain activities whitethorn admit sensation or to a greater extent of the sideline argonas transit, stock-taking, state serve uping, purchasing, w behousing, real(a)s discussion, packaging, node armed gain prototypes, and step to the foreput signal.The guidance of this Publication is on the prep ardness, organizing, and controlling of these activities gravest wiz elements for successful maintenance in all(prenominal) organization. Special tension is given to strategicalal planning and finis reservation as an burning(preno minal) vocalisation of the attention work at. motorcoachial efforts be directed towards dance bandting the aim of the logistics activities so as to reconstruct crossings and function available to guests at the era and step forward controld, and in the condition and form lustd, in the just rough profitable and bell- hard-hitting way.logistic activities w be of all time been vital to organizations, and so line of descent logistics and lend grasp caution represents a synthesis of m both creations, principles, and methods from the much(prenominal) usageal argonas of merchandiseing, business organization, accounting, purchasing, and passage, as well as from the disciplines of utilise mathematics, organisational behaviour, and scotchs. This Publication attempts to fuse these elements to assist in the useful watchfulness of the sum string.The Publication aims to present ideas, principles and techniques that ar fundamental to intact business logistic s work bulge. It concentrates on important activities of focusing much(prenominal) as planning, organizing, and controlling, and comparablewise on a triangle of interrelated transportation, stock certificate, and location strategies, which atomic act 18 at the heart of good logistics planning and decision make. Contemporary tr arrests that affect the grasp and practice of business logistics and tack grasp management derive been integrated into the body of the text.Firstly, emphasis is placed on logistics and come egress cosmic string management in a cosmea-wide condition to reflect the growing internationalisation and sphericalization of business in everyday. Secondly, the switching towards overhaul-oriented economies by industrialise nations is empha coatd by showing how logistics fantasys and principles be applicable to twain swear out-producing tirms and crossroad-producing mavins. Thirdly, attention is given to the integrated management of put up strand activities. 1 LSCTMMOD1 come in for a forfeit reduplicate of our course catalogue check by airmail, teleph mavin, tele autotype or email, or via our web pose Britain. piece(prenominal) headquarter College House, Leoville, jersey JE3 2DB, Britain tele autotype +44 (0)1534 485485 telecommunicate entropycambridgetraining. com Website www. cambridgecollege. co. uk The Publication contains umteen realistic and present-day(a) types that show the applicability of the textual bodily and assist in the belowstanding and acquire of the signalize points and thoughts.Each Chapter in this Cambridge transnational College Publication on Logistics, orbit planninging & Transport Management let ins An installation section Examples and/or figures and diagrams to explain the concepts creation covered A summary of terminal comments Re study Questions designed to re selective schoolingrce training and contemplation of what is covered in the Chapter Advic e on How to Study this Program Every unmatchableness-on-one CIC fellow member approaches his/her sight in a antithetical manner, and different people whitethorn fix a especial(a) study method that they find most efficacious for them.However, the checking is a tested and make up Study Method, suggested to you as a CIC Member in enjoin to assist in making your study and learning easier and gratifying and to assist you to alertly master the content of this CIC Publication on Logistics, range supplement & Transport Management yard 1 Set yourself a compromising study schedule, depending on the season you nurse available and what is scoop up for you. For illustration, the train stage set could be to study for 1 or 2 hours a night, or for 8 or 9 hours a week, or to complete one Chapter every 2 weeks.Thither is no set or compulsory schedule, only if simply setting a schedule or close is a lot an important action in ensuring that study is under guide onn succe ssfully and at bottom the under betroth clipframe. tonicity 2 Read the undivided of the first Chapter at your normal cultivation pace, without trying to defraud every result covered or occurrence stated, but trying to get the retrieve of what is get awayt with in the Chapter as a whole. rate 3 Start reading the Chapter again from the beginning, this quaternityth dimension reading more slowly, paragraph by paragraph and section by section. wanton brief nones of any points, sentences, paragraphs or sections which you olfactory property need your further study, regardation or thought. You whitethorn wish to keep any nones in a fracture read or none oblige. Try to absorb and memorise all the important topics covered. Step 4 Start reading the Chapter again from its start, this snip profiting particular attention to and if infallible studying more thoroughly those move on which you earlier wrote nones for further study. It is trump that you do non pass on to former(a) break off or topics until you argon certain you fully understand and recollect those parts you earlier tonusd as requiring your special attention.Try to fix everything taught hard in your mind. 2 LSCTMMOD1 propagate for a excess sham of our course catalog arrest by airmail, telephone, fax or email, or via our website Britain. realnesswide home plate College House, Leoville, island of island of jersey JE3 2DB, Britain telefax +44 (0)1534 485485 electronic mail infocambridgetraining. com Website www. cambridgecollege. co. uk Step 5 thither ar self-assessment reassessment questions at the end of the Chapter, and you argon strongly advised to try to answer or presuppose rough them as best you tail assembly but do non send your answers to the College.If these questions/exercises utmostlight any beas that you feel you need to revise or re-read in the Chapter, then go ahead and do that sooner locomote on to Step 6. Step 6 Once you gestate completed step s 1 to 5 above, move on to the next Chapter and borrow steps 1 to 5 for all(prenominal) subsequent Chapter. 3 LSCTMMOD1 calculate for a FREE reduplicate of our prospectus declargon by airmail, telephone, fax or email, or via our website Britain. International home office College House, Leoville, Jersey JE3 2DB, Britain telefax +44 (0)1534 485485 e-mail infocambridgetraining.com Website www. cambridgecollege. co. uk LOGISTICS, proviso CHAIN & TRANSPORT c atomic bit 18 PROGRAM MODULE ONE personal line of credit LOGISTICS/SUPPLY CHAIN A bouncy SUBJECT (based on Chapter 1 of Logistics, tot Chain and Transport Management by Ronald H Ballou) Contents basis business enterprise Logistics Defined The cede Chain The exercise Mix Importance of Logistics/ translate Chain (SC) Costs Are Signifi arseholet Logistics guest divine service Expectations Are change magnitude Supply and Distribution Lines Are Lengthening with greater Complexity Logistics/SC Is Important to sche maLogistics/SC Adds Significant Customer shelter Customers progressively Want Quick, Customized Response Logistics/SC in Non-Manufacturing Areas Service Industry forces machine milieu strain Logistics/SC in the Firm Objectives of trade Logistics/SC Questions and Problems Introduction As far back as history records, the goods that people cherished were not always arrived where they wanted to consume them, or these goods were not accessible when people wanted to consume them. Food and near other commodities were wide dispersed and were entirely available in abundance at certain succession of the year.Early peoples had the choice of consuming goods at their flying location or moving the goods to a preferred site and storing them for after use. However, because no well developed transportation and storage administrations yet liveed, the case of goods was trammel to what an singular could personally move, and storage of spoilable commodities was practical for only a im forgetnt time. This limited movement-storage dodging chiefly encumber people to live close to the ascendants of yield and to consume a kind of assign range of goods.Even today, in nigh beas of the world usage and growthion take place only indoors a very limited geographic kingdom. hit examples can suave be sight in the developing nations of Asia, southmost America, Australia, and Africa, where near of the population live in sensitive, independent villages, and most of the goods require by the residents argon produced or acquired in the flying vicinity. few goods atomic number 18 imported from other parts. Therefore, occupationion efficiency and the stinting standard of aliment are generally low.In this compositors case of economy, a well-developed and inexpensive logistics system would instigate an exchange of goods with other producing areas of the country, or so far the world. 4 LSCTMMOD1 vent for a FREE re cropion of our course catalog book by airmail, telephone, fax or email, or via our website Britain. International home College House, Leoville, Jersey JE3 2DB, Britain telefax +44 (0)1534 485485 e-mail infocambridgetraining. com Website www. cambridgecollege. co. uk As logistics systems amend, expending and output signal began to separate geographically.Regions would specialize in those commodities that could be produced most efficiently. Excess proceedsion could be shipped economically to other producing (or consuming) areas, and necessitate goods not produced topical anestheticly were imported. This exchange process follows the principle of comparative avail. This monovular principle, when employ to world marketplaces, helps to explain the high level of international trade that takes place today. high-octane logistics systems allow world businesses to take gain of the fact that lands, and the people who occupy them, are not evenly returnive.Logistics is the very scent of trade. It contributes to a high economic standard of living for us all. To the somebody blind drunk in operation(p) in a high-level economy, good management of logistics activities is vital. Markets are lots national or international in image, whereas merchandiseion whitethorn be surd at relatively few points. Logistics activities provide the bridge amidst resultion and market locations that are separated by time and distance. Effective management of these activities is the major(ip) concern of this Program. Business Logistic DefinedBusiness logistics is a relatively clean orbital cavity of integrated management study in comparison with the traditional heavenss of finance, selling, and crossroadion. As antecedently noted, logistics activities draw been carried out by exclusives for more historic cessation. Businesses alike sire continually engaged in movestore (transportation- arsenal) activities. The raw(a)ness of the discipline results from the concept of coordinated management of the related activities, sooner than the historical practice of managing them separately, and the concept that logistics adds tax to harvest-times or operate that are essential to customer satisfaction and sales.Although co-ordinated logistics management has not been generally practiced until recently, the idea of co-ordinated management can be traced back to at least 1844. In the writings of Jules Dupuit, a French engineer, the idea of trading one comprise for some other (transportation be for stock certificate address) was evident in the picking among road and water transport The fact is that carriage by road organism quicker, more reliable and less subject to loss or damage, it possesses improvement to which businessmen often attach a huge cherish.However, it may well be that a redeeming(a) induces the merchant to use a canal he can barter for warehouses and plus his floating not bad(p) in sight to view as a fitting run of goods on hand to foster himself agai nst slowness and irregularity of the canal, and if all told the saving in transport gives him a bell advantage, he provide decide in favour of the unexampled route. The first textbook to suggest the benefits of co-ordinated logistics management appeared approximately 1961, in part explaining why a generally accepted rendering of business logistics is still emerging.Therefore, it is worthwhile to explore several explanations for the ambit and content of the subject. A dictionary ex gear up of the term logistics is The branch of force acquirement having to do with procuring, maintaining, and transporting bodily, personnel, and facilities. This exposition puts logistics into a military context. To the extent that business objectives and activities differ from those of the military, this rendering does not capture the essence of business logistics management.A better representation of the field may be reflected in the definition promulgated by the Council of Logistics M anagement (CLM), a professional organization of logistics 5 LSCTMMOD1 load for a FREE copy of our prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk managers, educators, and practitioners formed in 1962 for the purposes of continuing instruction and fostering the interchange of ideas.Its definition Logistics is that part of the come forth arrange process that plans, go through with(predicate)s, and controls the efficient, effective flow and storage of goods, operate, and related training from the point of origin to the point of consumption in order to touch on customers requirements. This is an thin definition, conveying the idea that product flows are to be managed from the point where they exist as barren materials to the point where they are concludingly discarded. Logistics is also relate with the flow of functions as well as corporeal goods, an area of growing opportunity for avail.It also suggests that logistics is a process, meaning that it includes all the activities that kick in an impact on making goods and serve wells available to customers when and where they wish to acquire them. However, the definition implies that logistics is part of the show compass process, not the entire process. So, what is the impart orbit process or, more popularly, tack on chain management? Supply chain management (SCM) is a term that has emerged in recent years that captures the essence of integrated logistics and even goes beyond it.Supply chain management empha coats the logistics interactions that take place among the functions of market, logistics, and production at bottom a satisfying and those interactions that take place mingled with the legally separate pisseds within the product-flow highroad. Opportunities for hail or customer service improvement are discoverd through co-ordination and collaboration among the transmission line members where some essential translate chain activities may not be under the direct control of the logistician.Although early definitions much(prenominal) as sensual dispersion, materials management, industrial logistics and convey management all call employ to describe logistics have promoted this broad scope for logistics, at that place was little attempt to implement logistics beyond a high societys own enterprise boundaries, or even beyond its own inherent logistics function. Now, sell riotouss are showing success in sharing education with suppliers, who in turn equal to maintain and manage inventories on retailers shelves.Channel inventories and product stockouts are let down. Manufacturing upstandings operating under in force(p)-in-time production scheduling work out births with suppliers for the benefit of both companies by trim back inventories. Defi nitions of the supply chain and supply chain management reflecting this broader scope are The supply chain (SC) encompasses all activities associated with the flow and duty period of goods from the raw materials stage (extraction), through to the end user, as well as the associated schooling flows.Materials and tuition flow both up and down the supply chain. Supply chain management (SCM) is the integration of these activities, through improved supply chain relationships, to deliver the goods a sustainable competitive advantage. After calculated study of the various definitions be offered, Mentzer and other writers propose the broad and kinda general definition as followsSupply chain management is defined as the systematic, strategic coordination of the traditional business functions and the tactics crosswise these business functions within a particular company and crossways businesses within the supply chain, for the purposes of improving the long-term mental process of t he idiosyncratic companies and the supply chain as a whole. 6 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining.The supply chain management model in opine 1-1 viewed as a pipeline shows the scope of this definition. It is important to note that supply chain management is intimately the co-ordination of product flows across functions and across companies to achieve competitive advantage and profitability for the individual companies in the supply chain and the supply chain members jointly. It is difficult, in a practical way, to separate business logistics management from supply chain management.In so many respects, they promote the same mission To get the set goods or services to the right place, at the right time, and in the desired condition, while making the greatest contributi on to the self-coloured. roughly occupy that supply chain management is just another name for integrated business logistics management (IBLM) and that the broad scope of supply chain management has been promoted over the years. Conversely, others hypothecate that logistics is a subset of SCM, where SCM considers growthal issues beyond those of product flow. For example, SCM may be concerned with product pricing and manufacturing whole step.Although SCM promotes viewing the supply channel with the broadest scope, the reality is that debaucheds do not exertion this ideal. Fawcett and Magan found that companies that do practise supply chain integration limit their scope to one tier upstream and one tier downstream. The focus seems to be concerned with creating seamless processes within their own companies and applying new information technologies to improve the quality of information and speed of its exchange among channel members. The demarcation amid the logistics and supp ly chain management harm is fuzzy.Even then, logistics activities are recurrent once again as utilise products are recycled upstream in the logistics channel. A single firm generally is not able to control its entire product flow channel from raw material source to points of the final consumption, although this is an emerging opportunity. For practical purposes, the business logistics for the individual firm has a compacter scope. Usually, the maximum managerial control that can be expected is over the ready fleshly supply and physical dissemination channels, as shown in Figure 1-2.The physical supply channel refers to the time and billet gap amidst a firms straightaway material sources and its affect points. Similarly, the physical diffusion channel refers to the time and space gap between the firms processing points and its customers. Due to the correspondingities in the activities between the two channels, physical supply (more commonly referred to as materials manage ment) 8 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain.International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk and physical dispersal comprise those activities that are integrated into business logistics. Business logistics management is now popularly referred to as supply chain management. Others have used equipment casualty much(prenominal) as apprise nets, range stream, and lean logistics to describe a similar scope and purpose. The evolution of the management of product flows toward SCM is captured in Figure 1-3.Although it is easy to think of logistics as managing the flow of products from the points of raw material acquisition to end customers, for many firms thither is a reverse logistics channel that moldiness be managed as well. The life of a product, from a logistics viewpoint, doe s not end with words to the customer. ingatherings become obsolete, damaged, or nonfunctioning and are returned to their source points for repair or disposition. Packaging materials may be returned to the shipper collectable to environmental regulations or because it makes good economic sense to reprocess them.The reverse logistics channel may utilise all or a distribute of the forward logistics channel or it may require a separate design. The supply chain terminates with the final disposition of a product. The reverse channel must(prenominal)iness be considered to be within the scope of logistics planning and control. The Activity Mix The activities to be managed that make up business logistics (supply chain process) change from firm to firm, depending on a firms particular organizational structure, managements honest divergences of opinion about what constitutes the supply chain for its business, and the splendor of individual activities to its trading operations.Follow along the supply chain as shown in Figure 1-2 and note the important activities that take place. Again, according to the CLM 9 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. ukThe components of a typical logistics system are customer service, implore forecasting, scattering communications, gunstock control, material handling, order processing, parts and service declare, plant and warehouse site extract (location synopsis), purchasing, packaging, return goods handling, salvage and junk disposal, traffic and transportation, and warehousing and storage. Figure 1-4 organizes these components, or activities, according to where they are most apt(predicate) to take place in the supply channel. The list is further divided into key and leap o ut activities, along with some of the decisions associated with apiece occupation.Customer service standards co-operate with selling to a. go through customer needs and wants for logistics customer service b. Determine customer chemical reaction to service c. Set customer service levels 2. battery-acid a. Mode and transport service option b. Fr cardinal consolidation c. Carrier routing d. vehicle scheduling e. Equipment selection f. Claims processing g. charge per unit auditing 3. Inventory management a. Raw materials and ideal goods stocking policies b. Short-term sales forecasting c. Product intermingle at stocking points 10 LSCTMMOD1Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk d. Number, size, and location of stocking points e. Just-in -time, push, and draw strategies 4. Information flows and order processing a. Sales order-inventory port wine procedures b. align information transmittal methods c. Ordering rules clog Activities 1. Warehousing a. Space determination b. job layout and dock design c.Warehouse word form d. Stock placement 2. Materials handling a. Equipment selection b. Equipment replacement policies c. Order-picking procedures d. Stock storage and retrieval 3. get a. Supply source selection b. Purchase timing c. Purchase quantities 4. restrictive packaging designed for a. Handling b. repositing c. Protection from loss and damage 5. Co-operate with production/operations to a. Specify aggregate quantities b. period and time production output c. inscription supplies for production/operations 6. Information guardianship a. Information collection, storage, and manipulation b. Data analysisControl procedures name and support activities are separated because certain activities give generally t ake place in every logistics channel, whereas others will take place, depending on the circumstances, within a particular firm. The key activities are on the critical loop within a firms agile physical distribution channel, as shown in Figure 1 to 5. They contribute most to the total cost of logistics or they are essential to the effective co-ordination and completion of the logistics task. 11 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our websiteBritain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk Customer service standards set the level of output and degree of tact to which the logistics system must respond. Logistics cost increase in proportion to the level of customer service provided, such that setting the standards for service also affects the logistics be to support that level of service. Se tting very high service requirements can force logistics cost to extremely high levels. transfer of training and inventories maintenance are the primary cost-absorbing logistics activities. Experience has shown that each will represent one-half to two-thirds of total logistics cost. Transportation adds place measure to products and services, whereas inventories maintenance adds time foster. Transportation is essential because no innovative firm can operate without providing for the movement of its raw materials or its finished products. This importance is underscored by the financial strains placed on many firms by such disasters as a national railroad coin or independent truckers refusal to move goods because of rate disputes.In these circumstances, markets cannot be served, and products back up in the logistics pipeline to deteriorate or become obsolete. Inventories are also essential to logistics management because it is usually not feasible or practical to provide inst pr oduction or ensure speech communication time to customers. They serve as buffers between supply and demand so that needed product availability may be maintained for customers while providing flexibility for production and logistics in seeking efficient methods for pay off and distribution of the product. Order processing is the final key application.Its be usually are minor compared to transportation or inventory maintenance costs. Nevertheless, order processing is an important element in the total time that it takes for a customer to receive goods or services. It is the action triggering product movement and service delivery. Although support activities may be as critical as the key activities in any particular circumstance, they are considered here as contributing to the logistics mission. In addition, one or more of the support activities may not be a part of the logistics activity mix for every firm.For example, products such as finished automobiles or commodities such as coal, iron ore, or inconvenience not needing the weather and security justification of warehousing will not require the warehousing activity, even though inventories are maintained. However, warehousing and materials handling are typically conducted wherever products are temporarily halted in their movement to the marketplace. 12 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain.International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk antifertility packaging is a support activity of transportation and inventory maintenance as well as of warehousing and materials handling because it contributes to the efficiency with which these other activities are carried out. Purchasing and product scheduling often may be considered more a concern of production than of logistics.However, they also affect the ov erall logistics effort, and specifically they affect the efficiency of transportation and inventory management. Finally, information maintenance supports all other logistics activities in that it provides the needed information for planning and control. The extended supply chain refers to those members of the supply channel beyond the firms immediate suppliers or customers. They may be suppliers to the immediate suppliers or customers of the immediate customers and so on until raw material source points or end customers are reached.It is important to plan and control the previously noted activities and information flows if they affect the logistics customer service that can be provided and the costs of supplying this service. Management of the extended supply chain has the potence of improving logistics performance beyond that of just managing the activities within the immediate supply chain. Importance of Logistics/Supply Chain Logistics is about creating value value for customers and suppliers of the firm, and value for the firms stakeholders. Value in logistics is primarily expressed in terms of time and place.Products and services have no value unless they are in the bullheadedness of the customers when (time) and where (place) they wish to consume them. For example, concessions at a sports event have no value to consumers if they are not available at the time and place that the event is occurring, or if inadequate inventories dont meet the demands of the sports fans. Good logistics management views each activity in the supply chain as contributing to the process of adding value. If little value can be added, it is questionable whether the activity should exist.However, value is added when customers are willing to pay more for a product or service than the cost to place it in their hands. To many firms throughout the world, logistics has become an progressively important value-adding process for a number of reasons. Costs Are Significant oer the years, several studies have been conducted to determine the costs of logistics for the whole economy and for the individual firm. There are widely varying estimates of the cost levels. According to the International Monetary caudex (IMF), logistics costs average out about 12 partage of the 13 LSCTMMOD1Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk worlds gross domestic product. Robert Delaney, who has track logistics costs for more than two decades, estimates that logistics costs for the U. S. economy are 9. 9 part of the U. S. gross domestic product (GDP), or $921 billion. For the firm, logistics costs have ranged from 4 share to over 30 percentage of sales.The results from a cost survey of individual firms are shown in Table 1-3. Although the result s show physical distribution costs at about 8 percent of sales, this survey does not include physical supply costs. believably another ternion may be added to this total to represent average logistics costs for the firm at about 11 percent of sales. Over the concluding decade, physical distribution costs have ranged between 7 percent and 9 percent of sales. There may be a trend of increasing costs for individual firms, although Wilson and Delaney show over the same period that logistics costs as a percent of U. S.GDP have declined by about 10 percent. Logistics costs, substantial for most firms, coterie second only to the cost of goods change (purchase costs) that are about 50 percent to 60 percent of sales for the average manufacturing firm. Value is added by minimizing these costs and by passing the benefits on to customers and to the firms shareholders. Logistics Customer Service Expectations Are Increasing The profit, just-in-time operating procedures, and continuous replen ishment of inventories have all contributed to customers expecting rapid processing of their requests, quick delivery, and a high degree of product availability.According to the Davis Survey of hundreds of companies over the last decade, world-class competitors have average order cycle generation (the time between when an order is placed and when it is received) of seven to eight days and line item concern rates of 90 percent to 94 percent. LogFac summarizes world-class logistics performance for domestic companies as Error rates of less than one per 1,000 orders shipped Logistics costs of well under 5 percent of sales Finished goods inventory turnover of 20 or more times per year Total order cycle time of five operative daysTransportation cost of one percent of sales revenue or less, if products sold are over $5 per 500 gms As mightiness be expected, the average company performs below these cost and customer service benchmarks, when compared with the statistics in Tables 1-3 and 1-4. Supply and Distribution Lines Are Lengthening with greater Complexity The trend is toward an integrated world economy. Firms are seeking, or have developed, global strategies by designing their products for a world market and producing them wherever the low-cost 14 LSCTMMOD1Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk raw materials, components, and labor can be found (e. g. , Fords Focus automobile), or they simply produce locally and sell internationally. In either case, supply and distribution lines are stretched, as compared with the producer who wishes to manufacture and sell only locally.Not only has the trend occurred naturally by firms seeking to cut costs or expand markets, but it is also being encouraged by governmental arrangements that promote trade. Examples of the latter are the europiuman Union, the North America Free hand Agreement (NAFTA) between Canada, the fall in States, and Mexico, and the economic trade agreement among several countries of South America (MERCOSUR). Globalization and internationalization of industries everywhere will depend heavily on logistics performance and costs, as companies take more of a world view of their operations.As this happens, logistics takes on increased importance within the firm since its costs, especially transportation, become a oversizedr part of the total cost structure. For example, if a firm seeks foreign suppliers for the raw materials that make up its final product or foreign locations to build its product, the demand is to increase profit. Material and labor costs may be reduced, but logistics costs are likely to increase due to increased transportation and inventory costs. The trade-off, as shown in Figure 1-6, may trace to higher profit by reduci ng materials, labour, and overhead costs at the expense of logistics costs and tariffs.Outsourcing adds value, but it requires detailed management of logistics costs and product-flow times in the supply channel. Logistics/SC Is Important To dodge Firms spend a great deal of time finding ways to recite their product offerings from those of their competitors. When management recognizes that logistics/SC affects a significant portion of a firms costs and that the result of decisions make about the supply chain processes yields different levels of customer service, it is in a position to use this effectively to penetrate new markets, to increase market share, and to increase lolly.When a firm incurs the cost of moving the product toward the customer or making an inventory available in a punctual manner, for the customer value has been created that was not there previously. It is value as surely as that created through the production of a quality product or through a low price. It is generally recognized that business creates four types of value in products or services. These are form, time, place, and possession. Logistics creates two out of these four value. Manufacturing creates form value as inputs are converted to outputs, that is raw materials are alter into finished goods.Logistics controls the time and place values in products, mainly through transportation, information flows, and inventories. Possession value is often considered the accountability of marketing, engineering, and finance, where the value is created by helping customers acquire the product through such mechanisms as advertising (information), technical support, and terms of sale (pricing and credit availability). To the extent that SCM includes production, common chord out of the four values may be the right of the logistics/supply chain manager.Customers Increasingly Want Quick, Customized Response Fast diet retailers, automatic teller machines, overnight parcel of land delivery, an d electronic mail on the Internet have led us as consumers to expect that products and services can be made available in increasingly shorter times. In addition, improved information systems and compromising manufacturing processes have led the marketplace toward rush customization. Rather than consumers having to accept the one size fits all philosophy in their purchases, suppliers are increasingly offering products that meet individual customer needs.Companies too have been applying the concept of quick response to their internal operations in order to meet the service requirements of their own marketing efforts. The quick response philosophy has been used to create a marketing advantage. Saks Fifth Avenue applied it, even though fine-looking profits are made through big margins and not on cost reducings that might be achieved from good logistics management. Supply chain costs may even rise, although the advantage is to more than cover these costs through increased profits. Logi stics/SC in Non-manufacturing AreasIt is peradventure easiest to think of logistics/SC in terms of moving and storing a physical product in a manufacturing setting. This is too narrow a view and can live on to many missed business opportunities. The logistics/SC principles and concepts learned over the years can be applied to such areas as service industries, the military, and even environment management. Service Industry The service sector of industrialized countries is large and growing. In the fall in States, over 70 percent of all jobs are in what the federal government classifies as the service sector.The size of this sector unaccompanied forces us to ask if logistics concepts are not equally applicable here as they are to the manufacturing sector. If they are, there is a rattling(a) untapped opportunity yet to be fulfilled. Many companies designated as service firms in fact produce a product. Examples include McDonalds community (fast foods) Dow Jones & Co. , Inc. (n ewspaper publishing) and Sears, Roebuck and Co. (merchandise retailing). These companies await out all the typical supply chain activities of any manufacturing firm.However, for service companies such as Bank One (retail banking), Marriott Corporation (lodging) and Consolidated Edison (electric power), supply chain activities, 16 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk especially those associated with physical distribution, are not as obvious.Even though many service-oriented companies may be distributing an in manifest, nonmaterial product, they do engage in many physical distribution activities and decisions. A infirmary may want to extend tinge medical care throughout the community and must make decisions as to the locations of the centers. United Parcel Service and Federal fetch must locate terminals and route bracer and delivery trucks. The East Ohio Gas play along inventories natural gas in electron tube wells during the off-season in the region where demand will occur. Bank One must locate and have cash inventory on hand for its ATMs.The Federal backup man Bank must select the methods of transportation to move cancelled cheques among member banks. The Catholic Church must decide the number, location, and size of the churches needed to meet shifts in size and location of congregations, as well as to plan the inventory of its pastoral staff. turn backs repair service for write equipment is also a good example of the logistics decisions encountered in a service operation. The techniques, concepts, and methods discussed throughout this Program should be as applicable to the service sector as they are to the manufacturing sector.The key, according to Theodore Levitt, may be in transforming an intangi ble service into a tangible product. Problems will remain in carefully identifying the costs associated with the distribution of an intangible product. perhaps because of this, few service firms or organizations have a physical distribution manager on their staff, although they frequently do have a materials manager to handle supply matters. However, managing logistics in service industries does represent a new direction for the future ontogenesis of logistics practice. MilitaryBefore businesses showed much relate in co-ordinating supply chain processes, the military was well organized to carry out logistics activities. More than a decade before business logistics developmental period, the military carried out what was called the most complex, best-planned logistics operation of that time-the invasion of Europe during World War II. Although the problems of the military, with its extremely high customer service requirements, were not identical with those of business, the similarit ies were great enough to provide a valuable experience base during the developmental years of logistics.For example, the military alone maintained inventories valued at about one-third of those held by all U. s. manufacturers. In addition to the management experience that such large operations provide, the military sponsored, and continues to sponsor, research in the logistics area through such organizations as the RAND Corporation and the Office of Naval Research. With this background, the field of business logistics began to grow. Even the term logistics seems to have had its origins in the military.A recent example of military logistics on a large scale was the conflict between the United States and Iraq over Iraqs invasion of the small country of Kuwait. This invasion has been described as the largest military logistics operation in history. The logistics support in that war is yet another illustration of what worldclass companies have always go to sleep Good logistics can be a source of competitive advantage. Lt General William Pagonis, in charge of logistics support for Desert Storm, sight When the Middle East started heating up, it seemed like a good time to pull out some history books on desert warfare in this region .But there was nothing on logistics. Logistics is not a best seller. In a couple of his diaries, Rommel talked about logistics. He thought the Germans lost the battle not because they didnt have great soldiers or equipment in fact, the German tanks outfought ours almost throughout World War II but because the British had better logistics. 17 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our websiteThe first wave of 200,000 force and their equipment was deployed in a month and a half, whereas troop deployment took nine months in the Vietnam conflict. In addition, the application of many good logistics concepts was evident. labour customer service, for example We believed that if we took care of our troops, the objectives would be accomplished no matter any(prenominal) else happened. The soldiers are our customers. It is no different than a determined, single focus on customers that many successful businesses have.Now, you take care of your soldiers not only by providing them cold sodas, and burgers, and good food you make sure they have the ammunition on the front line, so that when they go fight the war they know they have what they need. This meant that when 120 mm guns rather than 105 mm guns were desired on tanks, they were changed. When brown vehicles were preferred over the traditional camouflage green, they were repainted at the rate of 7,000 per month. Environment Population growth and resultant economic development have heightened our awareness of environmental issues.Whether it is recycling, packaging materials, transporting hazardous materials or refurbishing products for resale, logisticians are involved in a major way. After all, the United Stat es alone produces more than 160 million tons of muff each year, enough for a convoy of 10-ton garbage trucks reaching halfway to the moon. In many cases, planning for logistics in an environmental setting is no different from that in manufacturing or service sectors. However, in a few cases supererogatory complications scratch, such as governmental regulations that make the logistics for a product more costly by extending the distribution channel.Business Logistics in the Firm It has been the tradition in many firms to organize around marketing and production functions. Typically, marketing way of life selling something and production means making something. Although few business people would agree that their organization is so simple, the fact frame that many businesses emphasize these functions while treating other activities, such as traffic, purchasing, accounting, and engineering, as support areas. Such an attitude is justified to a degree, because if a firms products cann ot be produced and sold, little else matters.However, such a innovation is dangerously simple for many firms to follow in that it fails to recognize the importance of the activities that must take place between points and times of production or purchase and the points and times of demand. These are the logistics activities, and they affect the efficiency and strong point of both marketing and production. Scholars and practitioners of both marketing and production have not drop the importance of logistics. In fact, each area considers logistics within its scope of action.For example, the following definition of marketing management includes physical distribution selling (management) is the process of planning and execution the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges with target free radicals that satisfy individual and organizational objectives. merchandises concern is to place its products or services in convenient d istribution channels to facilitate the exchange process. The concept of production/ operations management often includes logistics activities.Now, viewing product flow activities as a process to be coordinated, product flow aspects within marketing, production, and logistics are collectively managed to achieve customer service objectives. The difference in operating objectives (maximize revenue versus decrease cost) for marketing and production/operations may lead to a fragmentation of raise in, and responsibility for, logistics activities, as well as a lack of co-ordination among logistics activities as a whole. This, in turn, may lead to lower customer service levels or higher total logistics costs than are necessary.Business logistics represents a regrouping, either by ball organizational structure or conceptually in the minds of management, of the move-store activities that historically may have been partially under the control of marketing and production/ operations. If logi stics activities are looked upon as a separate area of managerial action, the relationship of logistics activities to those of marketing and production/ operations would be as is shown in Figure 1-7. Marketing would be primarily responsible for market research, promotion, sales-force management, and the product mix, which create possession value in the product.Production/ operations would be concerned with the creation of the product or service, which creates form value in the product. Key responsibilities would be quality control, production planning and scheduling, job design, capacity planning, maintenance, and work touchstone and standards. Logistics would be concerned with those activities (previously defined) that give a product or service time and place value. This separation of the activities of the firm into three groupings rather than two is not always necessary or advisable to achieve the coordination of logistics activities that is sought.Marketing and production/operat ions, when broadly conceived and co-ordinated, can do an effective job of managing logistics activities without creating an special organizational entity. Even if a separate functional area is created for logistics within the firm so as to achieve effective control of the firms immediate logistics activities, logisticians will need to view their responsibility as one of coordinating the entire supply chain process rather than being just a local logistics activity administrator. To do otherwise may miss substantial opportunities for cost reduction and logistics customer service improvement.The interface is created by the arbitrary separation of a firms activities into a limited number of functional areas. Managing the interface activities by one function alone can lead to sub-optimal performance for the firm by rate broader company determinations to individual functional goals-a potential danger resulting from the departmental form of organizational structure so common in companie s today. To achieve interfunctional coordination, some measurement system and incentives for cooperation among the functions involved need to be established.This is equally true of the inter-organizational co-ordination required to manage product flows across company boundaries. It is important to note, however, that establishing a third functional group is not without its disadvantages. Two functional interfaces now exist where only one between marketing and production/ operations previously existed. Some of the most difficult administrative problems arise from the interfunctional conflicts that occur when one is attempting to manage interface activities.Some of this potential conflict may be dissipated if a new organizational arrangement is created whereby production/ operations and logistics are merged into one group called supply chain. Just as managers are beginning to understand the benefits of interfunctional logistics management, inter-organizational management is being enco uraged. Supply chain management proponents who view the area more broadly than some logisticians have been strongly promoting the need for collaboration among supply channel members that are out of doors the immediate control of a companys logistician, that is, members who are legally separate companies.Collaboration among the channel members that are cogitate through buyer-seller relationships is essential to achieving cost-service benefits unable to be realized by managers with strictly an internal view of their responsibilities. Supply chain managers consider themselves to have responsibility for the entire supply channel of the scope as illustrated in Figure 1-8. Managing in this broader environment is the new challenge for the contemporary logistician. Objectives of Business Logistics/SCWithin the broader objectives of the firm, the business logistician seeks to achieve supply channel process goals that will move the firm toward its overall objectives. Specifically, the d esire is to develop a logistics activity mix that will result in the highest possible return on investment over time. There are two dimensions to this goal (1) the impact of the logistics system design on the revenue contribution, and (2) the operating cost and capital requirements of the design. Ideally, the logistician should know how much additional revenue would be generated through incremental improvements.