Day two?January 15th LSCM 360 Total logistics Concept: To find the lowest total cost that supports an organization?s customer service requirements. Time and variability are 2 things involved in order cycle time and inventory. Required Inventory for Order cycle length: Customer?s Perspective Order cycle length is the time an order is place to the time it is delivered. Adjusting time system?Immediate inventory Shorter order cycle time is better When graphing inventory and order cycle time variability determines the curve. Cost of lost sales vs. Inventory Cost Total cost curve is where the company wants to be which is the intercept between Cost of Lost Sales and Inventory Carry Cost. Above the curve is better for marketing and below the curve is better for finance Cost of lost Sales Going to a different store Different brands Which then can turn into a lost customer A 1 dollar of inventory sitting around costs .25 to .30 cents, which .20 cents of the is opportunity cost of capital Logistics interfaces with: 1. Finance and Accounting 2. Marketing and Sales 3. Production Logistics and Finance/Accounting Logistics tracks three flows -freight (goods) - Information - Money (payment and etc.) Logistics can have a major impact on ROA and ROI Logistics and Marketing?s 4 P?s Place Price?Pricing system and landed costs -FOB origin - FOB destination -Phantom Freight and Freight Absorption * Phantom Freight: Is freight chargers that you never see?ex: cost 300 to ship but really only cost 150 so there is 150 phantom freight. * Freight Absorption: Transportation that is far away?Ex: cost 500 to ship but pays set rate of 300. 200 of absorption freight?negative number Product Changes in the product packaging and role of logistics in product development can cost millions of dollars in logistics. Promotion Push vs. Pull Pull strategies tend to be more erratic Push strategies tend to be more predictable. These two strategies determine how demands flow through supply chain Push Strategies: lots of inventory?ex: china buffet Pull Strategies: little inventory ? easier to change their production path. Erratic: very up and down/ don?t really know what?s going to happen Barriers to SCM Lack of Top management Incompatible information system?don?t share information Incompatible corporate cultures
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