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MARIUS M. SOLOMONCRT, University of MontrealMarch, 2000Logistics EvolutionNationalRegionalLocalGlobalProgression of Competitive AdvantageLow WageRatesScaleFacilitiesFocusedProductionIncreased VarietyFast ResponseTimeQualityCost BasedManagementTime BasedManagement50s60s70s80s80s90s E-BusinessTechnology EnabledManagement2000Source: Adapted from Stalk and Hout, Competing Against Time, 1991Competitive AdvantageSource: Adapted from Gunn, Manufacturing for Competitve Advantage, Ballinger, 1987Global MarketsGlobal CompetitorsWorld-Class ManufacturingTechnologyQualityPeoplePlanningStrategic VisionManagement ResourcesDistributionProduction ProcessPlanning and ControlProduct and Process DesignAftersale Service and SupportSuppliersTQC JITIntegrationCustomersCIM/CILSpeedRecent EvolutionDemand ForecastingPurchasingRequirements PlanningManufacturing InventoryMaterials HandlingDistribution PlanningProduction PlanningWarehousingIndustrial PackagingInventoryOrder ProcessingTransportationCustomer ServiceMaterials Management Supply ChainPhysical DistributionFragmentation1960sEvolving Integration1980sTotal Integration2000sSource: Adapted from Coyle, Bardi, and Langley, The Management of Business Logistics, West 1992Logistics IntegrationDemand Forecasting PurchasingRequirements PlanningProduction PlanningManufacturing InventoryWarehousingMaterials HandlingIndustrial PackagingInventoryDistribution Planning Order ProcessingTransportationCustomer ServiceInformation TechnologyThe physical, financial, and information networks thatmove the materials, funds, and related information through the full logistics process . from acquisition of raw materials to delivery of finished products to the end user.Jim Kelly, Chairman and CEO of United Parcel Service, American Chamber of Commerce, Beijing, China, May 4, 1999 Production Storage CustomerMaterial Flow and StorageInformation Flow and StorageF PlanF ImplementF ControlThe Supply ChainRaw MaterialsNodes and Linksin a Logistics SystemRetailerPlantWarehouseRetailerWarehouseNodeNodeNodeNodeNodeLinkLinkLinkLinkLinkTypical Supply Chain NetworkSuppliers PlantsDistributionCentersCustomersThroughput levels Employment levels Distribution routesVehicle scheduling Order tracking Inventory replenishmentHierarchy of Logistics Management DecisionsSTRATEGICTACTICALOPERATIONALLocation Choice Transport Mode Selection Vendor Choice UncertaintyScopeTime frameLogistics EnvironmentsExternal -Macro Intrafirm-MicroValue-added Role Time Utility Place Utility Economic Impacts Economic ImportanceInterfirm - Distribution Channels Channel Structure RelationshipsCompetitive Advantage Value Chain Logistics Interfaces with Value ActivitiesSource: Adapted from Coyle, Bardi, and Langley, The Management of Business Logistics, West , 1992. ProductionForm UtilityLogisticsPlace UtilityMarketingPossession Utility Fundamental Utility Creation in the EconomyTime UtilitySource: Adapted from Coyle, Bardi, and Langley, The Management of Business Logistics, West, 1992.Human Resource ManagementThe Generic Value ChainSource: Michael E. Porter, Competitive Advantage, Free Press, 1985.Support ActivitiesInbound Logistics OperationsOutbound LogisticsMarketing and Sales ServiceProcurementTechnology DevelopmentFirm InfrastructurePrimary ActivitiesMarginMarginCost leadership Differentiation FocusConflicting ObjectivesFewerObjectivesHigh revenues through:High levels of product availabilitySales and MarketingCost-effective production through:High, capacity utilizationLong production runsProductionReduce investments and costs through:Fewer facilitiesLower inventory levelsFinance and accountingImplicationsCustomer ServiceDisrupting factors in productionInventoriesHigherHigherLowerLowerMoreSource: Magee, Copacino, Rosenfield, Modern Logistics Management, Wiley, 1985.Few set-upsLogisticsCost Trade-offs in Logistics ProductPrice PromotionPlace / Customer Service LevelsTotal Cost =Transportation costs + Inventory carrying costs +.Source: Lambert and Stock, Strategic Logistics Management, Irwin, 1993.Inventory carrying costsLot quantity costOrder processing and information costsWarehousing costs (throughput cost not storage)Transportation costsLogisticsMarketingDistribution ChannelsRetailersFarm and Raw MaterialsWholesalersConsumers and GovernmentManufacturers and Industrial UsersInventory RepositioningDistribution Channel - Loose Links, Independent BusinessesSource: Adapted from Bowersox and Closs, Logistical Management McGraw-Hill, 1996.Inventory management by each channel participantDistributorRetailerCompany TruckCommon CarrierLocal DeliveryManufacturerManufacturerThe Supply Chain Textile Production Apparel RetailRawMaterials CustomersApparel PipelineInformation sharing Joint planningPipeline inventory managementOrganization of Production-Distribution System3226InventoryInventoryInventory1 11110.50.5FactoryFactoryWarehouseDistributorsRetailersOrders FromCustomers Delivery of GoodsTo CustomersWeeksForrester, J.W. (1958) Industrial Dynamics: A Major Breakthrough for Decision Makers. Harvard Business Review.The Apparel PipelineTextileProduction Apparel RetailMaterialCustomerRawSource: Blackburn, Time Based Competition, 1991Average Time:66 WeeksPipeline inventory managementInformation sharing Joint planningEffect of Lead Time on Retailers Stocking DecisionFORECAST ERROR(%)TIME+/-20% +/-40% +40-40+20-200 +/-10% -26 Weeks-16WeeksStart ofSeasonSource: Blackburn, Time Based Competition, 1991Two-Way Flows in Apparel ChainTextiles Apparel Retail Point ofSaleProductOrders andCapacityCommitmentsInventory andOrder InformationSalesInformationSource: Blackburn, Time Based Competition, 1991Keys to Fast-Cycle LogisticsInformationSharingCulturalChange FromTop DownInformationTechnologyPartnerships ShorterManufacturingCyclesFast CycleLogisticsSource: Blackburn, Time Based Competition, 1991OR ContributionsFEconomics Game theoryInformation ManagementFInventory ModelsFInventory Control and Vehicle Routing FDistribution Requirements Planning FEnterprise Resource PlanningFMultiobjective Decision Support SystemsEconomicsFCapacity Choice and Allocation: Strategic Behavior and Supply Chain Performance, G. Cachon and M. Lariviere, Management Science/Vol. 45, No. 8, August 1999Truth telling provides some advantages to the supply chain that should be weighed against the costs of inducing itFCompetitive and Cooperative Inventory Policies in a Two-Stage Supply Chain, G. Cachon and P. Zipkin, Management Science/Vol. 45, No. 7, July 1999 Competition generally lowers supply chain inventory relative to the optimal solutionEconomicsFThe Role of Returns Policies in Pricing and Inventory Decisions for Catalogue Goods Authors: H. Emmons and S. Gilbert, Management Science /Vol. 44, No. 2, February 1998Relationship of such policies return policies on both retailers and manufacturers profitsFCapacity Allocation Using Past Sales: When to Turn-and-Earn G. Cachon and M Lariviere, Management Science/Vol. 45, No. 5, May 1999Turn-and-earn allocation does not generally coordinate the system, and in certain cases is a means for the supplier to increase profits at the expense of retailersEconomicsFCentralization of Stocks: Retailers vs. Manufacturer, R. Anupindi and Y. Bassok, Management Science/Vol. 45, No. 2, February 1999Shows that centralizing stocks by retailers increases profits for the manufacturer up to a certain level of “market search” in the supply chain FValue of Information in Capacitated Supply Chains, S. Gavirneni, et al., Management Science/Vol. 45, No. 1, January 1999Examine benefits of partial vs complete information sharing in a supplier-retailer settingEconomicsFThe Quantity Flexibility Contract and Supplier-Customer Incentives, A. Tsay, Ma
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