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Logistics has been increasing since 1980
-reduction in regulation
-increased consumer power
· Place utility- having products available where they are needed by customers; moved from points of lesser to greater value.
o Ex) moving pop from warehouse to store shelf.
· Time Utility- Having a product available when they are needed by customers.
· The view of Logistics operations as a system and seek to minimize the total cost of the system, not just individual functions.Like a stereo system
o Existing customers are often considered “cheaper” to sell to.
o Existing Customers are more loyal
o Existing customers buy more often
o Existing customer are good for referralsLifetime value of customer
· Establish a written customer service policy
o Should be based on customer perspective.
o Define how the standard will be measured.
· Communicate/give the policy statement to customers
o Critical to properly align expectations.
· Formally establish the policy.
o It must be believable.
o Essential to honor the penalties to establish credibility.
· Installation, Warranty, Alteration, and repair
· Product tracing
· Customer claims, complaints, and returns
· Temporary Product Replacement
· Failing to segment markets in terms of service offered
· Misuse of customer service by salespeople
· Inability to determine competitive service level
· Poor research.
· Nothing goes wrong from receipt to delivery
· Defined differently by customers and customer segments.
o Quality through process
o Clear communication
o Willingness to stay behind promise
o On Time
o IN Full
o Delivery of supplies when and where they are needed.
o Unconventional modes are utilized
o Rapid delivery
o Voluntary contributions. Who is paying for this?
o Stakeholders involved
o No infrastructure
o Delivery can be constrained due to military or government.
o Aid agencies don’t want product, they want money so they can buy exactly what they need
o Humanitarian vs. commercial
§ Strategic goals stands out. Study that up.
§ Commercial = profit
§ Humanitarian= minimize the loss of life and suffering.
o Maintain service requirements
o Cheaper to produce bulk
o Bulk transportation cheaper
o Buffer for variability
o Hedge against risk.
o Demand- It will never be exactly like the forecastPerformance Cycle- Performance is NOT constant
§ Order at specific inventory level.
§ Depending on demand, interval in between demand can change.
· Product ordered at a fixed time
Forecasting increases customer satisfaction.
o Requires less safety stock
o Reduce stock outs.
o Helps manage shipping
o Customer service pressure
o SKU Proliferation
o Scrambled merchandise (putting the same item in different places around the store)
o Lack of information
o Inventory transfers.
o Time needed to find thingsHigh variance
· Corporate compatibility
· Compatible philosophies
· Strong perspective of mutuality
· Symmetry between two parties
o Joint Operation controls
§ Enhanced profit
§ Improved Service
§ Reduced Cost
o A partnership is a tailored business relationship based on mutual trust and openness, shared risk and shared rewards.
§ Whoever has the least to get out of the relationship sets the relationship (that’s justice (dom voice))
o Logistics involved in:
§ Manufacture flow
§ Demand management
§ Product development
o Logistics involve sourcing and making
o Logistics involves delivering and returning
o 1. Who are the key supply chain members
o 2. What processes should be linked?
o 3. What level of integration and management should be used for this process?
o Information is power
o Supply chains must be quick and agile to account for the fast changing needs of the customer.
· Balance in the center
· Outside of balance is:
· The goal is BALANCED RESILIENCE
o Top is erosion of profit
o Bottom is exposure to risk
· the part of a firms logistics system that stores products, materials, good-in-process, etc.
1. Accumulating (Bulking)
Bringing in similar stock from different places.
§ 2. Allocating (Bulk Breaking)
Breaking Large quantities into small quantities.
§ 3. Assorting
Building up a variety of products.
§ 4. Sorting Out
Separating products based on grade and target market.
· Public Warehousing
o Space is rented
o Location flexible
o Drawbacks include lack of control over the facility
· Private Warehousing
o High fixed cost, only for companies with very high volume
o Warehouse can be made to your specifications.
o Service improvements
o Can make promises about what is in system
o Improves order picking
o Improved visibility
o Improved tracking
o Improved planning
· Market access
· Highway access
· Air cargoLow operating costs
logistics interact with other functional areas?
· Step 1: Identify a need to supply
· Step 2: Situational Analysis
o Internal and external environments are considered.
· Step 3: Identify and Evaluate Potential Suppliers
o Suppliers evaluated based on:
§ Relevant criteria
§ The weight of each criterion.
· This is entirely a computer problem now-a-days
· Grid SystemsCenter of gravity approach is when you weight the location of your warehouse based on where you are distributing to so all travel costs are the same
Facility relocation and closing
· Reasons for relocating can be the cost of your current location, your moving business in general, etc.
· Relocation can be very costly to your employees though.
· Union or city contracts may prevent relocation depending on your business.
· Contract Warehousing
o Started in 1990’s
o Referred to as 3rd party warehousing
o Costs less than private, but more than public
o Mitigates negatives, allows companies to focus on core competencies.
o The longer the contract, the less flexibility
· Multi-Client Warehousing
o Started in 2000’s
o Best for small companies
Define Intermodal transportation
· Environmental Regulation
o Enforced be EPA
§ There are penalties for things like engines that are too loud.
§ DOT (department of transportation)
§ STB- deals with railroad regulation
· Contract carrier- serves customers in its own best interest.
· Exempt carriers- exempt from economic regulation
· Private carrier- exempt, but also to serve itself. Most common in trucking.
Macro-environmental influences on international logistics
o Certificates of Origin: States the location of the manufacturer
o Commercial invoice: Summary of the transaction; payments, description, etc.
o Shippers Export Declaration: Transportation modes
o Shippers Letter of Instruction: indicates exactly who should receive what documents.
Terms of Sale
o When and where to transfer the following.
§ 1. Physical Goods
§ 2. Payment
§ 3. Legal title (ownership)
§ 4. Documentation5. Responsibility of product in logistics channel.
Methods of Payment
o 1. Cash in advance
o 2. Letter of Credit: issued by a bank to guarantee payment
o 3. Bills of exchange
o 4. Open account: where a seller sends the goods and all documents directly to the buyer and trusts the buyer to pay be a certain date. (RISKY)
Transportation considerations in international logistics
increase effective capacity
minimize aisle space
reduce product handling
develop effecctive working conditions
reduce heavy labor
improve logistics service
increase in the number of orders leads to higher order costs and lower carrying costs.
framework that identifies eight relevant processes, such as customer relationship management, demand management, and order fulfillment, associated with supply chain management (page 6; figure 3)
Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.
The critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future.
The cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver.
Delivering a service or a product at the lowest possible cost. Ex:Costco
Producing services or products that meet design specifications on a consistent basis. Tested to check margin of error.Ex: McDonalds
Meeting delivery-time promises
Planning processes to increase percent of customer orders shipped when promised. Ex: UPS
Quickly filling a customer’s order.
Design processes to reduce lead time. Ex: Dell
Quickly introducing a new service or a product. Cross-functional integration and involvement of critical external suppliers.
Satisfying the unique needs of each customer by changing service or products designs. Low volume, close customer contact, and easily reconfigured. Ex: Ritz Carlton
Handling a wide assortment of services or products efficiently
Capable of larger volumes than processes supporting customization. Ex: Amazon
Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand
Processes must be designed for excess capacity. Ex: USPS
The criterion customers use to differentiate the services or products of one firm from those of another.
The minimum level required from a set of criteria for a firm to do business in a particular market segment.
The value of outputs (services and products) produced divided by the values of input resources (wages, costs of equipment, etc.)
Productivity = Output
Policies Processed/Total # Employee Hours
600 policies/(3 employees)(40 hour weeks) = 5 policies/hour
Value of output/Labor cost + Materials cost
+ Overhead cost
400 units x $10/unit /(400+1000+300)
The synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services, and information with customer demand.
Each activity in a process should add value to the preceding activities; waste and unnecessary cost should be eliminated.
The set of tools used to identify opportunities for improvement, document current processes, evaluate processes to find performance gaps, redesign processes, and implement desired changes.
A tool to trace the flow of information, customers, equipment and materials through the various steps of a process.
A special flowchart of a service process that shows which steps have high customer contact.
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