Key points: logistics; demand; competitive advantage Difficult points: logistics
Requirements:
By the end of this lesson, you should be able to understand the definition of logistics. understand the history of logistics.
Chapter 1
An Introduction to Logistics
1.1 What Is Logistics?
In the early part of 1991 the world was given a dramatic example of the importance of logistics. As a precursor to the Gulf War it had been necessary for the United States and its allies to move huge amounts of material great distances in what were thought to be impossibly short time-frames. Half a million people and over half a million tones of material and supplies were airlifted 12,000 kilometers with a further 2.3 million tones of equipment moved by sea - all of this achieved in a matter of months.
Throughout the history of mankind wars have been won and lost through logistics strengths and capabilities-or the lack of them. It has been argued that the defeat of the British in the American War of Independence can largely be attributed to logistics failure. The British Army in America depended almost entirely upon Britain for supplies. At the height of the war there were 12,000 troops overseas and for the most part they had not only to be equipped, but fed from Britain. For the first six years of the war the administration of these vital supplies was totally inadequate, affecting the course of operations and the morale of the troops. An organization capable of supplying the army was not developed until 1781 and by then it was too late.
In the Second World War logistics also played a major role. The Allied Forces’ invasion of Europe was a highly skilled exercise in logistics, as was the defeat of Rommel in the desert. Rommel himself once said that “... before the fighting proper, the battle is won or lost by quartermasters. ”
However while the Generals and Field Marshals from the earliest times have understood the critical role of logistics, strangely it is only in the recent past that business organizations have come to recognize the vital impact that logistics management can have in the achievement of competitive advantage. This lack of recognition partly springs from the relative level of understanding of benefit of integrated logistics. Arch Shaw, writing in 1915, pointed out that:
The relations between the activities of demand creation and physical supply ... illustrate the existence of the two principles of interdependence and balance. Failure to co-ordinate any one of these activities with it group-fellows and also with those in the other group, or undue emphasis or outlay-put upon any one of these activities, is certain to upset the equilibrium of forces which means efficient distribution.
The physical distribution of the goods is a problem distinct from the creation of demand ... Not a few worthy failures in distribution campaigns have been due to such a lack of co-ordination between demand creation and physical supply...
Instead of being a subsequent problem, this question of supply must be met and answered before the work of distribution begins.
It has taken a further 70 years or so for the basic principles of logistics management to be clearly defined.
What is logistics management in the sense that it is understood today? There are many ways of defining logistics but the underlying concept might be defined as follows:
Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders.
This basic definition will be extended and developed as the book progresses, but it makes an adequate starting point.
New Words And Terms
frame n. [freim] ᵘᶊǃ偼ᶊǃ㒧ᵘ˗Ḛᶊǃ㒧ᵘ time-frames ˄џᚙথ⫳ᯊⱘ˅ᯊ䯈㣗ೈ logistics n. [l[5dVistiks] ⠽⌕ᄺǃৢࢸᄺ˗˄⫳ѻ⌏ࡼㄝ˅᳝ᬜᅝᥦǃ⠽⌕㒘㒛 strength n. [streNW] 䞣ǃᅲ attribute v. [5Atribju:t] ᡞĂĂᔦѢ˗䅸ЎĂĂሲѢ administration n. [Edminis5treiFEn] ㅵ⧚ǃ㒣㧹˗㸠ᬓǃ㸠ᬓᴎ݇ vital a. [5vBitl] ⫳ੑⱘ˗᳝⫳ੑⱘ˗㟈ੑⱘ inadequate a. [in5Adikwit] ϡܙߚⱘǃϡ䗖ᔧǃϡ㛑㚰ӏ allied a. [5AlBid] 㒧ⲳⱘ Allied Forces ˄ϔϪ⬠ⱘ˅ण㑺ݯ䯳˗˄ѠϪ⬠ⱘ˅ ৠⲳݯ䯳 invasion n. [in5veiVEn] ܹ։˗։ᆇ quartermaster n. [7kwC:t[5mB:st[] ݯ䳔ݯᅬ recognize v. [5rekEgnBiz] 䅸䆚˗ᡓ䅸 impact n. [5impAkt] ކߏ˗⫼
integrated a. [5intigreitid] ᭈԧⱘ˗ѦⳌण䇗ⱘ illustrate v. [5ilEstreit] ˄⫼՟ᄤㄝ˅䇈ᯢ interdependence n. [7int[di5pend[ns] ѦⳌձ䌪ǃѦⳌձᄬ co-ordinate n. [kEu5Cdinit] ৠㄝⱘџ⠽ group-fellows ಶ䯳៤ਬ equilibrium n. [i:kwi5libriEm] ᑇ㸵˗ഛ distribution n. [distri5bju:FEn] ߚ䜡˗ߚ䫔 physical distribution ᅲԧߚ䜡 underlying a. [7Qnd[5laiiN] ϟ䴶ⱘ strategically adv. [str[5ti:dVikli] ⬹Ϟഄ
procurement n. [pr[7kju[5m[nt] 㦋ᕫǃᅲ⦄ storage n. [5stC:ridV] ټᄬǃֱㅵ˗ᑧᄬ䞣˗ҧᑧǃ䋻ᷜ inventory n. [5inv[ntri] 䋶ѻⳂᔩ˗ᄬ䋻 information flows ֵᙃ⌕ marketing n. [5ma:kitiN] Ꮦഎ㧹䫔 channel n. [5tFAnl] ⏴䘧 fulfillment n. [ful7fil5m[nt] ሹ㸠ǃᅲ⦄˗ᅠ៤ order n. [5C:dE] ᅮ䋻ǃᅮ䋻ऩ
Sentence Explanations
1ˊAs a precursor to the Gulf War it had been necessary for the United States and its allies to move huge amounts of material great distances in what were thought to be impossibly short
time-frames. Ў⍋ѝⱘޚˈ㕢݊ৠⲳ㗙㹿䅸Ўϡৃ㛑ⱘᯊ䯈ݙˈᖙ乏䍙䖰䎱⾏
ഄ䖤䕧䞣ݯ䳔કDŽ
2ˊHowever while the Generals and Field Marshals from the earliest times have understood the critical role of logistics, strangely it is only in the recent past that business organizations have come to recognize the vital impact that logistics management can have in the achievement of competitive
advantage. ሑㅵᇚݯ䰚ݯܗᏙᕜᮽህ䅸䆚ࠄњৢࢸⱘ݇䬂⫼ˈҸҎ༛ᗾⱘᰃӕϮϡЙП
ࠡᠡ߮߮䅸䆚ࠄ⠽⌕ㅵ⧚ᵘㄥゲѝӬᮍ䴶ⱘ䞡㽕⫼DŽ
3ˊFailure to co-ordinate any one of these activities with it group-fellows and also with those in the other group, or undue emphasis or outlay-put upon any one of these activities, is certain to upset the equilibrium of forces which means efficient distribution. བᵰϢ⌏ࡼЁӏԩϔϾ䚼ߚҹঞ݊ Ҫ䚼ߚϡ㛑ⳌѦण䇗ˈ㗙ϡᙄᔧഄ䞡⚍ᔎ䇗ᭈԧ⌏ࡼЁⱘӏԩϔϾ䚼ߚˈ㚃ᅮӮᠧх᳝ᬜ⥛ ߚ䫔ⱘഛ㋴DŽ
Questions
1ˊWhat is the logistics?
2ˊHow do you comprehend the sentence “logistics encompasses much more than just the transportation and warehouse”?
Reading
8IBU*T-PHJTUJDT
-PHJTUJDTNFBOTIBWJOHUIFSJHIUUIJOH BUUIFSJHIUQMBDF BUUIFSJHIUUJNF Logistics - (business definition) Logistics is defined as a business planning framework for the management of material, service, information and capital flows. It includes the increasingly complex information, communication and control systems required in today’s business environment. ˉ (Logistics Partners Oy, Helsinki, FI, 1996)
Logistics - (military definition) The science of planning and carrying out the movement and maintenance of forces... those aspects of military operations that deal with the design and development, acquisition, storage, movement, distribution, maintenance, evacuation and disposition of material; movement, evacuation, and hospitalization of personnel; acquisition of construction, maintenance, operation and disposition of facilities; and acquisition of furnishing of services. ˉ (JCS Pub 1-02 excerpt)
Logistics - The procurement, maintenance, distribution, and replacement of personnel and materiel. ˉ (Websters Dictionary)
Logistics - 1. The branch of military operations that deals with the procurement, distribution, maintenance, and replacement of materiel and personnel. 2. The management of the details of an operation. ˉ (American Heritage Dictionary)
Logistics - “...the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.” Note that this definition includes inbound, outbound, internal, and external movements, and return of materials for environmental purposes. ˉ (Reference: Council of Logistics Management, http://www.clm1.org/mission.html, 12 Feb 98)
Logistics - The process of planning, implementing, and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of meeting customers’ requirements. ˉ (Reference: Canadian Association of Logistics Management, http://www.calm.org/calm/AboutCALM/ AboutCALM.html, 12 Feb, 1998)
Logistics - The science of planning, organizing and managing activities that provide goods or services. ˉ (MDC, LogLink / LogisticsWorld, 1997)
Logistics - Logistics is the science of planning and implementing the acquisition and use of the resources necessary to sustain the operation of a system. ˉ (Reference: ECRC University of
Scranton / Defense Logistics Agency Included with permission from: HUM - The Government Computer Magazine “Integrated Logistics” December 1993, Walter Cooke, Included with permission from: HUM - The Government Computer Magazine.)
Logistics - To perform logistics functions or processes. The act of planning, organizing and managing activities that provide goods or services. ˉ (MDC, LogLink / LogisticsWorld, 1997)
Logistics Functions - (classical) planning, procurement, transportation, supply, and maintenance. ˉ (United States Department of Defense DOD)
Logistics Processes - (classical) requirements determination, acquisition, distribution, and conservation. ˉ (United States Department of Defense DOD)
Business Logistics - The science of planning, design, and support of business operations of procurement, purchasing, inventory, warehousing, distribution, transportation, customer support, financial and human resources. ˉ (MDC, LogLink / LogisticsWorld, 1997)
Acquisition Logistics - Acquisition Logistics is everything involved in acquiring logistics support equipment and personnel for a new weapons system. The formal definition is “the process of systematically identifying, defining, designing, developing, producing, acquiring, delivering, installing, and upgrading logistics support capability requirements through the acquisition process for Air Force systems, subsystems, and equipment.” ˉ (Reference: Air Force Institute of Technology, Graduate School of Acquisition and Logistics.)
Integrated Logistics Support (ILS) (1) - ILS is a management function that provides planning, funding, and functioning controls which help to assure that the system meets performance requirements, is developed at a reasonable price, and can be supported throughout its life cycle. ˉ (Reference: Air Force Institute of Technology, Graduate School of Acquisition and Logistics.)
Integrated Logistics Support (ILS) (2) - Encompasses the unified management of the technical logistics elements that plan and develop the support requirements for a system. This can include hardware, software, and the provisioning of training and maintenance resources. ˉ (Reference: ECRC University of Scranton / Defense Logistics Agency Included with permission from: HUM - The Government Computer Magazine “Integrated Logistics” December 1993, Walter Cooke.) Logistics Support Analysis (LSA) - Simply put, LSA is the iterative process of identifying support requirements for a new system, especially in the early stages of system design. The main goals of LSA are to ensure that the system will perform as intended and to influence the design for supportability and affordability. ˉ (Reference: Air Force Institute of Technology, Graduate School of Acquisition and Logistics.)
$PNQFUJUJWF"EWBOUBHF ቤ͖̂ҹ
⬅㕢Ҏ⊶⡍˄Michael E. Porter˅ 1985 ᑈߎ⠜ⱘljCompetitive AdvantageNJϔкЁ ᦤߎDŽゲѝӬᰃᣛӕϮⱘѻક᳡ࡵϢゲѝ㗙᳝᠔ऎ߿ᑊѿ᳝Ӭˈᑊ㛑ᦤկ㒭ᅶ᠋ ⱘӋؐDŽ
1.2 The Logistics of Business Is Big and Important
It is through the logistical process that materials flow into the manufacturing capacity of an industrial nation and products are distributed to consumers. The recent growth global commerce and the introduction of e-commerce have expanded the size of complexity of logistical operations.
Logistics adds value to the supply chain process when inventory is strategically positioned to achieve sales. Creating logistics value is costly. Although difficult to measure, most experts agree that the annual expenditure to perform logistics in the United States was approximately 10.1 percent of the $9.96 billion Gross Nation Product (GNP) or $1.006 billion. As further illustrated by Dell, the logistics of business is truly big business!
DELL GOES TO THE EXTREME
According to industry legend. Henry Ford’s manufacturing philosophy was “You can have any color you want as long as it’s black.” The manufacturing strategy that has fostered unprecedented success for Dell Computers is the exact opposite of Ford’s mindset: “Build every order to order.” Essentially, it spawns the ultimate manufacturing oxymoron: mass customization.
The critical component to facilitate mass customization is a logistics program built upon a concept of “extreme warehousing” and a superior software platform. Ryder Integrated Logistics, a subsidiary of Ryder Systems, Miami, Florida, houses supplier-owned inventory for Dell at locations in Austin, Texas, and Nashville, Tennessee. The Austin facility is fed by 50 global suppliers and the Nashville site is fed by 60 vendors worldwide.
“Dell requires suppliers to respond with order fulfillment within two hours. The only way suppliers can meet this expectation is to utilize our logistics management,” explains Dave Hanley, director of business development for Ryder. “Dell maintains less than six days of inventory, and turns work-in-process approximately 264 times annually. The company uses our services to minimize investment in inventory, and to abolish ‘dead space’ or ‘nonproductive storage areas’.”
“We replenish to kanbans and maintain a working inventory at the production facility,” Hanley says. “Dell does an incredible job of estimating what products will be selling, and different products peak at various times. Laptops are big now and business machines are more popular in the first quarter of the
Key points: supply chain; competitive advantage Difficult points: competitive advantage
Requirements:
By the end of this lesson, you should be able to understand the importance of the logistics.
year than in the last.”
Currently, Ryder has responsibility for the inventory from the time it arrives at its facilities until it delivers to Dell. Hanley is confident that incorporating Ryder’s processes and logistics management across all inbound shipments from suppliers, beginning at every point of origin, would bring tremendous additional value to Dell.
While he acknowledges Dell is the master of execution in manufacturing, Hanley says the software used by Ryder to manage the extreme warehousing requirements is one of the computer manufacturer’s “top three critical success factors.”
The software had to satisfy many requirements—from open architecture to a scalable platform that would grow with Dell. The solution has done precisely that, expanding with the Austin facility as it grew from 12,000 square feet in 1997 to more than 600,000 square feet by 1999.
“Extreme warehousing demands fast response and critical management,” says Hanley. “There’s a live customer waiting for the order, and a mistake today means a disappointed customer in just two days.”
This rapid fulfillment doesn’t allow recovery time for mistakes, so the WMS has to execute perfectly and flawlessly on every order, he notes.
(Source: Anonymous, “Dell Goes to the Extreme”, Inbound Logistics, January 2000, p. 122.)
Despite the sheer size of logistical expenditure, the excitement of lean logistics is not cost containment or reduction. The excitement generates from understanding how select firms use logistical competency to achieve competitive advantage. Firms that have developed world-class logistical competency enjoy competitive advantage as a result of providing important customers superior service. Leading logistical performers typically implement information technology capable of monitoring global logistical activity on a real time basis. Such technology identifies potential operational breakdowns and facilitates corrective action prior to delivery service failure. In situations where timely corrective action is not possible, customers can be provided advance notification of developing problems, thereby eliminating the surprise of an unavoidable service failure. In many situations, working in collaboration with customers and suppliers, corrective action can be taken to prevent operational shutdowns or costly customer service failures. By performing at above industry average with respect to inventory availability, speed and consistency of delivery, and operational efficiencies, logistically sophisticated firms are ideal supply chain partners.
New Words And Terms
consistency n. [k[n5sist[nsi] ϔ㟈ǃϔ䌃˗⌧ᑺǃമᑺǃ⹀ᑺ
capacity n. [k[5pAs[ti] ᆍ㒇ǃᄺдǃ⧚㾷˗㛑䞣ǃᆍ䞣ǃᬜ㛑
position v. [p[5ziFn] ᅝ㕂䗖ᔧⱘԡ㕂ǃއᅮĂĂПԡ㕂
reduction n. [ri5dQkF[n] ޣᇥǃޣᇣǃ㓽ޣ
Gross Nation Product(GNP) ⇥⫳ѻᘏؐ
sheer a. [ Fi[] 㒃㊍ⱘǃܼ✊ⱘ identify v. [ ai5dentifai] 䅸ߎǃ䆚߿ǃ䡈ᅮ notification n. [7n[utifi5keiFn] 䗮ⶹ˄к˅ǃᏗਞ availability n. [ [veil[5biliti] ᳝ᬜ˄ᗻ˅ǃৃᕫᗻ sophisticated a. [ s[5fistikeitid] 㗕ѢϪᬙⱘǃ催㑻ⱘ implement v. [5implim[nt] 䌃ᕏ real time ᅲᯊ breakdown n. [5breikdaun] ዽǃצภǃ༅䋹 collaboration n. [ k[5lAb[reFn] ড়
Sentence Explanations
1ˊIt is through the logistical process that materials flow into the manufacturing capacity of an industrial nation and products are distributed to consumers. 䗮䖛⠽⌕䖛ˈॳᴤ᭭䖯ܹϔϾᎹϮ ᆊᔶ៤ࠊ䗴㛑ˈᑊϨᇚѻકߚ䫔㒭⍜䌍㗙DŽ
2ˊThe recent growth global commerce and the introduction of e-commerce have expanded the size of complexity of logistical operations. 䖥ᴹܼ⧗ଚϮⱘ䭓⬉ᄤଚࡵⱘᓩܹᏆ㒣ᠽњ ⠽⌕䖤㧹ⱘᴖᑺDŽ
3ˊIn situations where timely corrective action is not possible, customers can be provided advance notification of developing problems, thereby eliminating the surprise of an unavoidable
service failure. ϡ㛑ঞᯊ䞛পℷ⹂㸠ࡼⱘᚙᔶϟˈ乒ᅶৃҹ乘ܜᕫࠄߎ⦄䯂乬ⱘ䗮ⶹˈ⬅ℸ
ϡӮՓ乒ᅶᇍѢϔϾϡৃ䙓ܡⱘ᳡ࡵ༅䋹ᛳࠄ䆊DŽ
4ˊIn many situations, working in collaboration with customers and suppliers, corrective action can be taken to prevent operational shutdowns or costly customer service failures. ᕜᚙމϟˈϢ 乒ᅶկᑨଚϔ䍋ড়ˈ݀ৌৃҹ䞛পℷ⹂ⱘ㸠ࡼᴹ䰆ℶ䖤㧹ⱘذ⒲催ҷӋⱘ乒ᅶ᳡ࡵⱘ༅䋹DŽ
5ˊBy performing at above industry average with respect to inventory availability, speed and consistency of delivery, and operational efficiencies, logistically sophisticated firms are ideal supply
chain partners. ᔧᄬ䋻᳝ᬜˈѸ䋻ⱘ䗳ᑺϔ㟈ᗻҹঞ᪡ᬜ⥛䛑䍙䖛㸠Ϯᑇഛ∈ᑇᯊˈ䙷М
䖭ᆊӕϮⱘ⠽⌕Ꮉ∈ᑇህ催ˈᅗህᰃ⧚ᛇⱘկᑨ䫒ড়ӭԈDŽ
Questions
1ˊDiscuss the functions of the logistics.
2ˊGive some examples to illustrate the importance of a firm’s logistical activities.
3ˊCould you explain how a firm can achieve competitive advantage by using logistical competency?
Reading
-PHJTUJDTBOE4VQQMZ$IBJOBT$PNQFUJUJWF#VTJOFTT8FBQPOT
If you do not already consider and treat Logistics and Supply Chain Management as a weapon in your company’s competitive business arsenal, now is the time to take a sober second look at this rapidly advancing area. Existing competition, or new wave online competitors may already be taking aim at your firm and your customers as you read this article.
It is indeed absolutely astounding how fast change is now occurring in Logistics and Supply Chain Management. This week represents the first in a series of features here on About.com focusing on the three major reasons Logistics and Supply Chain Management is rapidly becoming one of the most central of business issues as we enter the new millennium.
In this feature, we explore the major impact the more slowly growing Internet Home Shopping and Consumer Direct business models will have over time on traditional distribution methods and channels, and end with descriptions of two related future features outlining the other important reasons why keeping up to date on Logistics and Supply Chain Management is critical to the future health and success of your company.
Traditional players ignore this threat at their peril and must rapidly begin to adjust their networks to support and defend against these challenges from surviving online pioneers like Amazon.com, Net Grocer and Peapod.com to name a few. Any traditional firms who do not rise to this challenge will sooner or later face significant negative business fallout and increasing percent to sales expense ratios as this growth occurs.
Much of the change we speak of is driven by the concept of Disintermediation which basically represents the removal of all “middlemen” which add no real value between the process of manufacturing a product and its’ movement and ultimate sale to the end consumer. In the purest form, application of this concept challenges the need for a manufacturer to use distributors and even retailers as channels to move their products to end consumers. In most cases, traditional distributors and retailers only add cost and their profit margins to the total “to end consumer” cost.
Companies who are current intermediaries that ignore this reality and do not ensure that their involvement adds true value will be cut out of the consumer delivery channel by savvy Manufacturers and/or ultimately the direct price market forces caused by consumers demanding the lowest total end consumer price.
Wal-Mart is one firm which has already identified this key challenge and are moving rapidly to provide true value add for the manufacturers who work with them to give consumers better ultimate value. In interviews before stepping aside, ex-Wal-Mart CEO David Glass said that although their online business only represented a very small part of their current total revenues, they consider it to be a key part of Wal-Mart’s future strategy. If you visit their website through the link above you will notice that it is now a prime time business site which less than a few years or so ago wasn’t much more than an outlet for clearance merchandise.
like the US Postal Service or UPS Express Delivery as examples, giving the consumer control of the end cost to themselves based on the actual level of service and speed they desire. Given the coming dramatic shift to Direct to Home Delivery and associated smaller order sizes, courier companies are incredibly well positioned with current high levels of delivery density in all markets. This means that companies like Wal-Mart with huge volumes of business and low rates with these courier companies will be very well positioned. As well, tight business interfaces between these firms add even more efficiency to the mix and a company like Wal-Mart which actually has named Courier Departments in all of their Distribution Centers across the country are even further advantaged.
Not only satisfied with positioning such as described above, companies like Wal-Mart have also worked diligently for several years to integrate themselves with their manufacturer partners to together remove costs and time from the Logistics and Supply Chain parts of the business and are pioneers and leaders in initiatives such as CPFR.
Where do all of these developments point and what are the dynamics that may arise from the concepts described above? The author suggests that we will see the rise of Competing Supply Chains. In a nutshell, what may ultimately emerge are tightly knit competing supply chains which battle for the lowest costs and methods of serving the consumer on a worldwide basis. Specific Consumer Products Manufacturers and Retail/Order Delivery Entities will ultimately align themselves to develop the most collaborative, lowest cost and truly competitive supply chain.
Notes
4VQQMZ$IBJO Ιऄᩗ
䋻⠽Ң⫳ѻ㗙ࠄ⍜䌍㗙ⱘᭈϾ⌕䗮䖛DŽկᑨ䫒জ⿄䫔ଂ䫒˄sales chain˅ˈབᵰᔎ䇗 ⱘᰃᅶ᠋߭ৃ⿄Ў䳔∖䫒˄demand chain˅DŽ
1.3 The Work of Logistics
Key points: supply chain; order processing; inventory; transportation; warehousing; materials handling; packaging; facility network
Difficult points: logistical value Requirements:
By the end of this lesson, you should be able to
understand the interrelated nature of the five areas of logistical work. understand integrated logistical management.
In the context of supply chain management, logistics exists to move and position inventory to achieve desired time, place, and possession benefits at the lowest total cost. Inventory has limited value until it is positioned at the right time and at the right location to support ownership transfer or value-added creation. If a firm does not consistently satisfy time and place requirements, it has nothing to sell. For a supply chain to realize the maximum strategic benefit of logistics, the full range of functional work must be integrated. Decisions in one functional area will impact cost of all others. It is this interrelation of functions that challenges the successful implementation of integrated logistical management. Figure 1.3.1provides a visual representation of the interrelated nature of the five areas of logistical work: (1) order processing; (2) inventory; (3) transportation; (4) warehousing, materials handling, and packaging; and (5) facility network. As described below, work related to these functional areas combines to create the capabilities needed to achieve logistical value.
Figure 1.3.1 Integrated Logistics Order Processing
The importance of accurate information to logistical performance has historically been under appreciated. While many aspects of information are critical to logistics operations, the processing of orders is of primary importance. Failure to fully understand this importance resulted from a failure to understand how distortion and dynamics impact logistical operations.
Inventory
The inventory requirements of a firm are directly linked to the facility network and the desired level of customer service. Theoretically, a firm could stock every item sold in every facility dedicated to servicing each customer. Few business operations can afford such a luxurious inventory commitment because the risk and total cost are prohibitive. The objective in inventory strategy is to achieve desired customer service with the minimum inventory commitment. Excessive inventories may compensate for deficiencies in basic design of a logistics system but will ultimately result in higher-than-necessary total logistics cost.
Logistical strategies should be designed to maintain the lowest possible financial investment in Order processing Facility network Inventory Warehousing Materials handling Packaging Transportation
inventory. The basic goal is to achieve maximum inventory turn while satisfying service commitments. A sound inventory strategy is based on a combination of five aspects of selective deployment: (1) core customer segmentation, (2) product profitability, (3) transportation integration, (4) time-based performance, and (5) competitive performance.
Every enterprise that sells to a variety of different customers confronts uneven opportunity. Some customers are highly profitable and have outstanding growth potential; others do not. The profitability of a customer’s business depends upon the products purchased, volume, price, value-added services required, and supplemental activities necessary to develop and maintain an ongoing relationship. Because highly profitable customers constitute the core market of every enterprise, inventory strategies need to focus on them. The key to effective logistical segmentation rests in the inventory priorities dedicated to support core customers.
Transportation
Transportation is the operational area of logistics that geographically moves and positions inventory. Because of its fundamental importance and visible cost, transportation has traditionally received considerable managerial attention. Almost all enterprises, big and small, have managers responsible for transportation.
Transportation requirements can be satisfied in three basic ways. First, a private fleet of equipment may be operated. Second, contracts may be arranged with dedicated transport specialists. Third, an enterprise may engage the services of a wide variety of carriers that provide different transportation services on a per shipment basis. From the logistical system viewpoint, three factors are fundamental to transportation performance: (1) cost, (2) speed, and (3) consistency.
Warehousing, Materials Handling, and Packaging
The first three functional areas of logistics – order processing, inventory, and transportation can be engineered into a variety of different operational arrangements. Each arrangement has the potential to contribute to a specified level of customer service with an associated total cost. In essence, these functions combine to create a system solution for integrated logistics. The fourth functionality of logistics – warehousing, materials handling, and packaging – also represents an integral part of a logistics operating solution. However, these functions do not have the independent status of those previously discussed. Warehousing, materials handling, and packaging are an integral part of other logistics areas. For example, inventory typically needs to be warehoused at selected times during the logistics process. Transportation vehicles require materials handling for efficient loading and unloading. Finally, the individual products are most efficiently handled when packaged together into shipping cartons or other unit loads.
When distribution facilities are required in a logistical system, a firm can choose between the services of a warehouse specialist or operating their own facility. The decision is broader than simply selecting a facility to store inventory since many value-adding activities may be performed during the time products are warehoused. Examples of such activities are sorting, sequencing, order selection, transportation consolidation, and, in some cases, product modification and assembly.
Facility Network
efficient business operations. When economists originally discussed supply-and-demand relationships, facility location and transportation cost differentials were assumed either nonexistent or equal among competitors. In business operations, however, the number, size, and geographical relationship of facilities used to perform logistical operations directly impacts customer service capabilities and cost. Network design is a primary responsibility of logistical management since a firm’s facility structure is used to ship products and materials to customers. Typical logistics facilities are manufacturing plants, warehouses, cross-dock operations, and retail stores.
Network design is concerned with determining the number and location of all types of facilities required to perform logistics work. It is also necessary to determine what inventory and how much to stock at each facility as well as the assignment of customers. The facility network creates a structure from which logistical operations are performed. Thus, the network integrates typically combined into larger units. This larger unit, typically called the master carton, provides two important features. First, it serves to protect the product during the logistical process. Second, the master carton facilitates ease of handling, by creating one large package rather than a multitude of small, individual products. For efficient handling and transport, master cartons are typically consolidated into larger unit loads. The most common units for master carton consolidation are pallets, slip sheets and various types of containers.
When effectively integrated into an enterprise’s logistical operations, warehousing, materials handling, and packaging facilitate the speed and overall ease of product flow throughout the logistical system. In fact, several firms have engineered devices to move broad product assortments from manufacturing plants directly to retail stores without intermediate handling.
New Words And Terms
interrelation n. [7int[ri5leiFn] ⳌѦ݇㋏
distortion n. [di5stC:Fn] বᔶǃᡁ᳆ǃℾ᳆
dynamics n. [dBi5nAmiks] ᄺǃࡼᄺǃফݙᖗ䘧ᖋ䞣ⱘ偅Փ
theoretically adv. [ Wi[5retikli] Ѣ⧚䆎ϞഄǃҢ⧚䆎Ϟ䆆
dedicate v. [5dedikeit] ༝⤂ǃ⤂䑿 commitment n. [k[5mit7m[nt] ྨᠬǃ᠔ᡓ䇎Пџǃ䆌䇎ǃֱ䆕ǃᡓ㑺 prohibitive a. [pr[5hibitiv] ⽕ℶⱘ deploy v. [di5plCi] ˄Փ˅ሩᓔǃՓᓔሩ⌏ࡼᎹ uneven a. [Qn5i:vn] ϡᑇⱘǃϡᑇ㸵ⱘ priority n. [prBi5Criti] ܜˈࠡ˗Ӭܜˈ䞡⚍ carton n. [5kB:tEn] 㒌ᵓⲦ consolidation n. [k[n7sCli5deiFn] ড়ᑊ˗˄䲚㺙ㆅ䖤䕧Ё䳊ᢙ䋻⠽ⱘ˅ᣐㆅ pallet n. [5pAlit] ᠬⲬ sequence v. [5si:kwEns] 䖲㓁˗ᑣ˗ⳌѦ݇㘨ⱘϔ㒘
multitude n. [5mQltitju:d] ᡍǃ䞣ǃ㕸 facilitate v. [fE5siliteit] Փᆍᯧǃࡽ䭓 master carton Џㆅ slip sheets ⒥ࡼᵓৄ container n. [k[n5tein[] 䲚㺙ㆅ
Sentence Explanations
1ˊThe decision is broader than simply selecting a facility to store inventory since many value-adding activities may be performed during the time products are warehoused. 䖭Ͼއㄪ㽕↨ ㅔऩഄ䗝ᢽ䆒ᮑᄬᬒᄬ䋻ᆑ⊯ˈЎ䆌ѻકӋؐؐ⌏ࡼг䆌ӮѻકټᄬᳳЁᅠ៤DŽ
2ˊ Examples of such activities are sorting, sequencing, order selection, transportation consolidation, and, in some cases, product modification and assembly. 䖭ѯ⌏ࡼࣙᣀߚᢷǃᥦᑣǃ 䅶䋻䗝ᢽǃ䖤䕧ᣐㆅˈ᳝ᯊ䖬ࣙᣀѻકׂᬍ㒘㺙DŽ
3ˊWhen economists originally discussed supply-and-demand relationships, facility location and transportation cost differentials were assumed either nonexistent or equal among competitors. ᔧ㒣 ⌢ᄺᆊ᳔߱䇜䆎կ㒭䳔∖ⱘ݇㋏ᯊˈ䆒ᮑԡ㕂䖤䕧䌍⫼ⱘᏂ߿㹿؛䆒Ўϡᄬゲѝ㗙 Ё䛑ᰃϔḋⱘDŽ
4ˊWhen effectively integrated into an enterprise’s logistical operations, warehousing, materials handling, and packaging facilitate the speed and overall ease of product flow throughout the
logistical system. ᔧҧټǃ䋻⠽໘⧚ࣙ㺙㹿᳝ᬜഄᭈড়ࠄӕϮⱘ⠽⌕᪡ЁᯊˈᅗӀህӮᦤ
催ѻક⌕䕀ⱘ䗳ᑺҢ㗠Փ⠽⌕㋏㒳Ёⱘѻક⌕ࡼࡴ乎⬙DŽ
Questions
1ˊWhat are the five areas of logistical work?
2ˊDiscuss the reasons why we say the processing of orders is of primary importance.
3ˊWhich area of logistical work has traditionally received considerable managerial attention? Why?
4ˊDiscuss the three fundamental factors of transportation from the logistical system viewpoint. 5ˊDiscuss the ways to satisfy the transportation requirements.
6ˊGive some examples of value-adding activities performed during the time products are warehoused.
Reading
1SPDFTT7JFXPGB4VQQMZ$IBJO
A supply chain is a sequence of processes and flows that take place within and between different supply chain stages and combine to fill a customer need for a product.
Cycle View
The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain.
All supply chain processes can be broken into the following four process cycles: Customer order cycle
Replenishment cycle Manufacturing cycle Procurement cycle
Each cycle occurs at the interface between two successive stages of the supply chain. The five supply chain stages thus result in four supply chain process cycles. Not every supply chain will have all four cycles clearly separated. For example, a grocery supply chain in which a retailer stocks finished-goods inventories and places replenishment orders either with the manufacturer or the distributor is likely to have all four cycles separated. Dell, in contrast, sells directly to customers, thus bypassing the retailer and distributor.
A cycle view of the supply chain is very useful when considering operational decisions, because it clearly specifies the roles and responsibilities of each member of the supply chain. The cycle view provides clarity, for example, when setting up information systems to support supply chain operations, as process ownership and objectives are clearly defined. In the following sections, we describe the various supply chain cycles in greater detail.
Customer Order Cycle
The customer order cycle occurs at the customer/retailer interface and includes all processes directly involved in receiving and filling the customer’s order. Typically , the customer initiates this cycle at a retailer site, and the cycle primarily involves filling customer demand. The retailer’s interaction with the customer starts when the customer arrives or contact is initiated and ends when the customer receives the order. The processes involved in the customer order cycle are shown in Figure 1.3.2 and include the following:
Customer arrival Customer order entry Customer order fulfillment Customer order receiving
Figure 1.3.2 Customer Order Cycle Customer
Order Entry Customer Order Fulfillment Customer
Customer Arrival The term customer arrival refers to the customer’s arrival at the location where he or she access to his or her choices and makes a decision regarding a purchase. The starting point for supply chain is the arrival of a customer.
the customer walks into a supermarket to make a purchase, the customer calls a mail order telemarketing center, or
the customer uses the Web or an electronic link to a mail order firm.
From the supply chain perspective, a key goal is to facilitate the contact between the customer and the appropriate product so that the customer’s arrival turns into a customer order. At a supermarket, facilitating a customer order may involve managing customer flows and product displays. At a telemarketing center, in may mean ensuring that customers do not have to wait on hold for too long. It may also mean having systems in place so that sales representatives can answer customer queries in a way that turns calls into orders. At a Web site, a key system may be search capabilities with tools such as personalization that allow customers to quickly locate and view products that may interest them. The objective of the customer arrival process is to maximize the conversion of customer arrivals to customer orders.
Customer Order Entry The term customer order entry refers to customers telling the retailer what products they want to purchase and the retailer allocating products to customer. At a supermarket, order entry may take the form of customers loading all items that they intend to purchase onto their market. At a mail order firm’s telemarketing center or Web site, order entry will involve customers informing the retailer of the items and quantities they selected. The retailer then allocates the product to the customer order and may also provide a delivery date to the customer. The objective of the customer order entry process is to ensure that the order entry is quick and accurate and is communicated to all other supply chain process that are affected by it.
Customer Order Fulfillment During the customer order fulfillment process, the customer’s order is filled and sent to the customer. At a supermarket, the customer performs this process. At a mail order firm this process generally includes picking the order from inventory, packaging it, and shipping it to the customer. All inventories will need to be updated, which may result in the initiation of the replenishment cycle. In general, customer order fulfillment takes place from retail inventory. In a build-to-order scenario, in contrast, order fulfillment takes place directly from the manufacturer’s production line. The objective of the customer order fulfillment process is to get the correct and complete orders to customers by the promised due dates and at the lowest possible cost.
Customer Order Receiving During the customer order receiving process, the customer receives the order and takes ownership. Records of this receipt may be updated and cash payment initiated. At a supermarket, receiving occurs at the checkout counter. For a mail order firm, receiving occurs when the product is delivered to the customer.
Notes
*OUFHSBUFE-PHJTUJDT டՌྭื
ᡞҢॳ᭭կᑨࠄ៤ક䜡䗕ⱘկᑨ䫒㾚Ўϔᇍϔⱘ䖛ˈᡞ᠔᳝㒘៤ℸկᑨ䫒ⱘ㒘㒛㾚 ЎϔϾᭈԧˈ㗠䴲ߚ߿ㅵ⧚Ͼ߿ࡳ㛑DŽ
1.4 Logistical Operations
The internal operational scope of integrated logistics operations is illustrated by the shaded area of Figure 1.4.1. Information from and about customers flows through the enterprise in the form of sales activity, forecasts, and orders. Vital information is refined into specific manufacturing, merchandising, and purchasing plans. As products and materials are procured, a value-added inventory flow is initiated which ultimately results in ownership transfer of finished products to customers. Thus, the process is viewed in terms of two interrelated flows: inventory and information. While internal integrative management is important to success, the firm must also integrate across the supply chain. To be fully effective in today’s competitive environment, firms must extend their enterprise integration to incorporate customers and suppliers. This extension reflects the position of logistics in the broader perspective of supply chain management.
Figure 1.4.1 Logistical Integration
Suppliers Customers Inventory flow Information flow Enterprise Market distribution Manufacturing support Procurement Key points: logistical integration; inventory flow; information flow Difficult points: value-added process
Requirements:
By the end of this lesson, you should be able to
understand the internal operational scope of integrated logistics operations. understand the three logistics operating areas.
Inventory Flow
The operational management of logistics is concerned with movement and storage of materials and finished products. Logistical operations start with the initial shipment of a material or component part from a supplier and are finalized when a manufactured or processed product is delivered to a customer.
From the initial purchase of a material or component, the logistics process adds value by moving inventory when and where needed. Providing all goes well, materials and components gain value at each step of their transformation into finished inventory. In other words, an individual part has greater value after it is incorporated into a machine than it had as a part. Likewise, the machine has greater value once it is delivered to a customer.
To support manufacturing, work-in-process inventory must be properly positioned. The cost of each component and its movement becomes part of the value-added process. For better understanding, it is useful to divide logistical operations into three areas: (1) market distribution, (2) manufacturing support, and (3) procurement.
Market Distribution
The movement of finished product to customers is market distribution. In market distribution, the end customer represents the final destination. The availability of product is a vital part of each channel participant’s marketing effort. Even a manufacturer’s agent, who typically does not own inventory, must be supported by inventory availability to perform expected marketing responsibilities. Unless a proper assortment of products is efficiently delivered when and where needed, a great deal of the overall marketing effort will be jeopardized. It is through the market distribution process that the timing and geographical placement of inventory become an integral part of marketing. To support the wide variety of marketing systems that exist in a highly commercialized nation, many different market distribution systems are available. All market distribution systems have one common feature: They link manufacturers, wholesalers and retailers into supply chains to provide product availability.
Manufacturing Support
The area of manufacturing support concentrates on managing work-in-process inventory as it flows between stages of manufacturing. The primary logistical responsibility in manufacturing is to participate in formulating a master production schedule and to arrange for its implementation by timely availability of materials, component parts and work-in-process inventory. Thus, the overall concern of manufacturing support is not how production occurs but rather what, when, and where products will be manufactured.
Manufacturing support is significantly different from market distribution. Market distribution attempts to service the desires of customers and therefore must accommodate the uncertainty of consumer and industrial demand. Manufacturing support involves movement requirements that are under the control of the manufacturing enterprise. The uncertainties introduced by random customer ordering and erratic demand that market distribution must accommodate are not typical in manufacturing operations. From the viewpoint of overall planning, the separation of manufacturing support from outbound market distribution and inbound procurement
activities provides opportunities for specialization and improved efficiency. The degree to which a firm adopts a response strategy serves to reduce or eliminate the separation of manufacturing.
Procurement
Procurement is concerned with purchasing and arranging inbound movement of materials, parts and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores. Depending on the situation, the acquisition process is commonly identified by different names. In manufacturing, the process of acquisition is typically called purchasing. In government circles, acquisition has traditionally been referred to as procurement. In retailing and wholesaling, buying is the most widely used term. In many circles, the process is referred to as inbound logistics. For the purposes of this text, the term procurement will include all types of purchasing. The term material is used to identify inventory moving inbound to an enterprise, regardless of its degree of readiness for resale. The term product is used to identify inventory that is available for consumer purchase. In other words, materials are involved in the process of adding value through manufacturing whereas products are ready for consumption. The fundamental distinction is that products result from the value added to material during manufacture, sortation, or assembly.
Within a typical enterprise, the three logistics operating areas overlap. Viewing each as an integral part of the overall value-adding process creates an opportunity to capitalize on the unique attributes of each within the overall process. The overall challenge of a supply chain is to integrate the logistical processes of participating firms in a manner that facilitates overall efficiency.
New Words And Terms
finalize v. [5fain[laiz] 㨑ᅲǃᅮϟᴹǃՓᅮḜ destination n. [desti5neiFEn] Ⳃⱘഄǃ㒜⚍˗Ⳃᷛ jeopardize v. [5dVep[daiz] ॅঞ acquisition n. [7Akwi5ziFn] 㦋ᕫǃᕫࠄ overlap v. [EuvE5lAp] ϢĂѸᨁ˗䞡 attribute n. [5Atribju:t] ሲᗻ reconcile v. [5rekEnsBil] Փད˗䇗ذ parallel a. [5pArElel] ᑇ㸠ⱘ˗Ⳍৠⱘ facilitate v. [fE5siliteit] Փᆍᯧǃࡽ䭓 framework n. [5freimwE:k] Ḛᶊǃᵘᶊǃ㒧ᵘ coordinate v. [kEu5Cdinit] Փण䇗ǃ䇗㡖 via prep.[5vBiE] 㒣䖛ǃ䗮䖛 constraint n. [kEn5streint] ᔎ䖿ǃ㒧ᴳ˗ᔎࠊ deploy v. [di5plCi] Փᓔྟ⌏ࡼᎹ duplicate v. [5dju:plikit] ࠊ
redundant a. [ri5dQnd[nt] 䖛ⱘǃݫ䭓ⱘǃԭⱘ
initiative n. [i5niFiEtiv] ϔℹ
radically adv. [5rAdikEli] ᗹ࠻ഄ
documentation n. [ 7dCkjumEn5teiFn] ᦤկ᭛ӊ
release v. [ri5li:s] 䞞ᬒ˗ᬒᵒ˗থ㸼
synchronization n. [7siNkr[nai5zeiFn] ৠℹǃৠᯊ䖯㸠
Sentence Explanations
1ˊProviding all goes well, materials and components gain value at each step of their transformation into finished inventory. In other words, an individual part has greater value after it is incorporated into a machine than it had as a part. Likewise, the machine has greater value once it is
delivered to a customer. བᵰ䖤ᕜདⱘ䆱ˈॳ᭭䳊䚼ӊ䕀বЎ᳔㒜ᄬ䋻ⱘ↣ϔℹ䛑Ӯ㦋
ᕫӋؐDŽᤶহ䆱䇈ˈϔϾऩ⣀ⱘ䳊ӊ㒘㺙䖯ܹᴎ఼Пৢ㽕↨Ў䳊ӊⱘӋؐ㽕催DŽৠḋഄˈ ᴎ఼ϔᮺ䗦Ѹ㒭乒ᅶህᢹ᳝催ⱘӋؐDŽ
2ˊFrom the viewpoint of overall planning, the separation of manufacturing support from outbound market distribution and inbound procurement activities provides opportunities for specialization and improved efficiency. Ңܼ䴶䅵ߦⱘ㾖⚍ⳟˈ⫳ѻᬃᣕᡞ䚼Ꮦഎߚ䫔ݙ䚼 䞛䌁⌏ࡼߚ⾏ˈЎϧϮ࣪ᦤ催ᬜ⥛ᦤկњᴎӮDŽ
3ˊIn other words, materials are involved in the process of adding value through manufacturing whereas products are ready for consumption. The fundamental distinction is that products result from the value added to material during manufacture, sortation, or assembly. ᤶহ䆱䇈ˈॳᴤ᭭ᰃ 䳔㽕⫳ѻ䖛Ёؐⱘˈ㗠ѻકᰃ⍜䌍㗙ᇚ㽕⍜䌍ⱘDŽᴀⱘᏂ߿ᰃѻકᰃॳᴤ᭭㒣䖛⫳ѻǃ ߚ㉏㒘㺙পᕫⱘӋؐؐᔶᓣDŽ
Questions
1ˊDiscuss why the firms extend their enterprise integration to incorporate customers and suppliers.
2ˊDescribe Figure 1.4.1 Logistical Integration. 3ˊExplain the logistical operations in your words.
4ˊDiscuss the ways to add value in each area of the logistical operations.
5ˊExplain the common features that the market distribution systems have in your words. 6ˊDiscuss the differences between market distribution and manufacturing support. 7ˊWhat is procurement?
Reading
*OGPSNBUJPO'MPX
Information flow identifies specific locations within a logistical system that have requirements. Information also integrates the three operating areas. Within individual logistics areas, different movement requirements exist with respect to size of order availability of inventory, and urgency of movement. Tie primary objective of information flow management is to reconcile these differentials to improve overall supply chain performance. It is important to stress that information requirements parallel the actual work performed in market distribution, manufacturing support, and procurement. Whereas these areas contain the actual logistics work, information facilitates coordination of planning and control of day-to-day operations. Without accurate information the effort involved in the logistical system can be wasted.
Logistical information has two major components: planning/coordination and operations. The interrelationship of the two types of logistical information is illustrated in Figure 1.4.2.The objective here is to introduce the framework that details information needed to manage integrated logistics.
Planning/Coordination
Operations
Figure 1.4.2 Logistics Information Requirements 1. Planning/Coordination
The overall purpose of planning/coordination is to identify required operational information and to facilitate supply chain integration via (1) strategic objectives, (2) capacity constraints, (3) logistical requirements, (4) inventory deployment, (5) manufacturing requirements, (6) procurement requirements, and (7) forecasting. Unless a high level of planning/coordination is achieved, the potential exists for operating inefficiencies and excessive inventory. The challenge is to achieve such planning/coordination across the range of firms participating in a supply chain to reduce duplication and unneeded redundancy.
The primary drivers of supply chain operations are strategic objectives derived from marketing Logistics requirements Manufacturing requirements Procurement requirements Capacity constraints Strategic objectives Inventory management Forecasting Inventory deployment Procurement Transportation and shipping Distribution operations Order assignmen t Order processing
and financial goals. These initiatives detail the nature and location of customers that supply chain operations seeks to match to the planned products and services. The financial aspects of strategic plans detail resources required to support inventory, receivables, facilities, equipment, and capacity.
Capacity constraints identify internal and external manufacturing and market distribution limitations. Given strategic objectives, capacity constraints identify limitations, barriers, or bottlenecks within manufacturing and distribution facilities. It also helps identify when specific manufacturing or distribution work should be outsourced. To illustrate, whereas Kellogg owns the brand and distributes Cracklin’ Oat Bran, all manufacturing is performed by a third party on a contract basis. The output of capacity constraint planning is time-phased objectives that detail and schedule facility utilization, financial resources, and human requirements.
Using inputs from forecasting, promotional scheduling, customer orders, and inventory status, logistical requirements identify the specific work facilities, equipment, and labor forces required to support the strategic plan.
Inventory deployment interfaces with inventory management between planning/coordination and operations. The deployment plan details the timing of where inventory will be positioned to efficiently move inventory through the supply chain. From an information perspective, deployment specifies the what, where, and when for the logistics processes. From an operational viewpoint, inventory management is performed on a day-to-day basis.
In production situations, manufacturing requirements determine planned schedules. The traditional deliverable is a statement of time-phased inventory requirements that is used to drive Master Production Scheduling (MPS) and Manufacturing Requirements Planning (MRP). In situations characterized by a high degree of responsiveness, Advance Planning Systems (APS) are more commonly used to time-phase manufacturing.
Procurement requirements represent a time-sequenced schedule of material and components needed to support manufacturing requirements. In retailing and wholesaling establishments, purchasing determines inbound merchandise. In manufacturing situations, procurement arranges for arrival of materials and component parts from suppliers. Regardless of the business situation, purchasing information is used to coordinate decisions concerning supplier qualifications, degree of desired speculation, third-party arrangements, and feasibility of long-term contracting.
Forecasting utilizes historical data, current activity levels, and planning assumptions to predict future activity levels. Logistical forecasting is generally concerned with relatively short-term predictions. Typical forecast horizons are from 30 to 90 days. The forecast challenge is to quantify expected sales for specific products. These forecasts form the basis of logistics requirement and operating plans.
2. Operations
A second purpose of accurate and timely information is to facilitate logistical operations. To satisfy supply chain requirements, logistics must receive, process, and ship inventory. Operational information is required in six related areas: (1) order processing, (2) order assignment, (3) distribution operations, (4) inventory management, (5) transportation and shipping, and (6) procurement. These areas of information facilitate the areas of logistical work.
Order processing refers to the exchange of requirements information between supply chain members involved in product distribution. The primary activity of order management is accurate entry and qualification of customer orders. Information technology has radically changed the traditional process of order management.
Order assignment identifies inventory and organizational responsibility to satisfy customer requirements. The traditional approach has been to assign responsibility or planned manufacturing to customers according to predetermined priorities. In technology-rich order processing systems, two-way communication linkage can be maintained with customers to generate a negotiated order that satisfies customers within the constraints of planned logistical operations.
Distribution operations involve information to facilitate and coordinate work within logistics facilities. Emphasis is placed on scheduling availability of the desired inventory assortment with minimal duplication and redundant work effort. The key to distribution operations is to store and handle specific inventory as little as possible while still meeting customer order requirements.
Inventory management is concerned with information required to implement the logistics plan. Using a combination of human resources and information technology inventory is deployed and then managed to satisfy planned requirements. The work of inventory management is to make sure that the overall logistical system has appropriate resources to perform as planned.
Transportation and shipping information directs inventory movement. In distribution operations, it is important to consolidate orders so as to fully utilize transportation capacity. It is also necessary to ensure that the required transportation equipment is available when needed. Finally, because ownership transfer often results from transportation, supporting transaction documentation is required.
Procurement is concerned with the information necessary to complete purchase order preparation, modification, and release while ensuring overall supplier compliance. In many ways information related to procurement is similar to that involved in order processing. Both forms of information exchange serve to facilitate operations that link a firm with its customers and suppliers.
The overall purpose of operational information is to facilitate integrated management of market distribution, manufacturing support, and procurement operations. Planning/coordination identifies and prioritizes required work and identifies operational information needed to perform the day-to-day logistics. The dynamics of supply chain synchronization is discussed next.
Notes
1SPDVSFNFOU ᧔᠔
݀ৌҹড়⧚ⱘӋḐҢկᑨଚ㦋ᕫ䗖ᔧ⠽ક᳡ࡵⱘ᳝݇⌏ࡼˈࣙᣀ䗝ᢽկᑨॖଚǃӋ Ḑǃᴵӊǃϟ䅶ऩǃᬊ䋻偠ᬊㄝDŽѺ⿄կᑨㅵ⧚DŽ↨ऩ㒃ⱘ䌁ф˄purchasing˅᠔ࣙᣀ ⱘ㣗ೈDŽ
