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Unit 1 Introduction to LogisticsContentsI.TheconceptoflogisticsinearlydaysII.Thedevelopmentfrom“PhysicalDistribution”to“Logistics”III.ThemeaningoflogisticsIV.Theemergenceofsupplychainmanagement(SCM)V.CategoriesoflogisticsVI.TheproposaloflogisticsstrategyVII.Decision-makinglevelsinanenterpriseVIII.CareersinlogisticsTheconceptoflogisticsinearlydaysArchShaw“SomeProbleminMarketDistribution”“PhysicalSupply”&“PhysicalDistribution”PaulD.Coverse“TheOtherHalfofMarketing”Japan“DistributionTechnology”Thedevelopmentfrom“PhysicalDistribution”to“Logistics”BusinessLogistics:“lotsofbusinessactivitiesincludingthecirculationofrawmaterials,thedistributionofgoods,transportation,procurement,controlofinventory,stockandcustomerservices.”CLMdefined“logistics”as“theprocessofplanning,implementing,andcontrollingtheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfrompointoforigintopointofconsumptionforthepurposeofconformingtocustomerrequirements”.Themeaningoflogistics1.ThedefinitionoflogisticsLogisticshasacloserelationshipwithdistributionsystemandproductionsystem.Logisticsistoensurethattherightproduct,intherightquantity,intherightquality,isdeliveredtotherightcustomerattherightplace,attherighttime,attherightcost.ThemeaningoflogisticsDefinitionbyCLM:Logisticsisthatpartofthesupplychainprocessthatplans,implements,andcontrolstheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepointoforigintothepointofconsumptiontomeetcustomersrequirements.Inabroadsense,logisticsincludesoriginofmaterialssupply-producer-seller-finalconsumer.Inanarrowone,logisticsisdelivery-seller-finalconsumer.Itcanbecalledsupplychainmanagement(SCM).Themeaningoflogistics2.TheimportanceoflogisticsHugeimpactonthedomesticandglobaleconomyImportanttohumansurvivalImpactonthequalityoflifeImpactonactivitiesotherthantheflowofindustrialandconsumerproductsTheemergenceofsupplychainmanagement(SCM)DifferencesbetweenlogisticsandSCMLogisticstypicallyreferstoactivitiesthatoccurwithinasingleorganization,whilesupplychainsrefertonetworksofcompaniesthatworktogethertodeliveraproducttomarket.Logisticsfocusesonactivitiessuchasprocurement,distribution,maintenance,andinventorymanagement,whileSCMincludesalltraditionallogisticsandalsootheractivitiessuchasmarketing,newproductdevelopment,finance,andcustomerservice.SCMisasystematicapproachthatprovidestheframeworkinwhichtobestrespondtodifferentbusinessrequirements.Theemergenceofsupplychainmanagement(SCM)Categoriesoflogistics1.Macro-logisticsvsMicro-logisticsMacro-logisticsreferstothelogisticsflowwithinaregion,acountryoracrossnationalborders.Micro-logisticsreferstothepracticalandspecificlogisticsactivitywhichthecustomersandenterprisescarryout.Categoriesoflogistics2.ExternallogisticsandinternallogisticsExternallogisticsreferstothelogisticswhichbeyondonefamilyandatacategoryofthewholesociety.Internallogisticsisviewedfromtheangleofenterprise,studyingthelogisticsactivitywhichisrelevanttotheenterprise.3.InternationallogisticsandregionallogisticsTheproposaloflogisticsstrategyManyenterprisescarriedoutlogisticsactivitiesseparatelyaccordingtotheirfunctionsinsteadofregardingthemasanoverallconcept,letalonefromastrategicperspectivebeforethe1980s.Inthe1970s,companiesadoptedintegrativelogisticsstrategyandletthekeydecision-makersleadlogisticsservice.Afterthe1980s,enterprisesrealizedthatahighlyefficientlogisticssystemwouldnotonlyreducethecost,butalsobetterservecustomersandmakemoreprofits.Decision-makinglevelsinanenterprise1.EnterprisemissionandobjectivesMissionisthepurposeofabusinesstoexistor“whatthebusinessengagesin”.Itisdecidedbythenatureofthebusiness.Missioncanindicatethegeneraldirectionforacorporation,aswellassetitsgoals.e.g.MissionstatementofIBMis“westrivetoleadintheinvention,developmentandmanufactureoftheindustrysmostadvancedinformationtechnologies,includingcomputersystems,software,storagesystemsandmicroelectronics”.2.CorporateandfunctionalstrategiesCorporatestrategyistheoveralldevelopmentoftheplanandlong-termbusinesstheenterprisetaketomeetfuturechangesintheenvironment,andtoseeklong-termsurvivalandstabledevelopment.Overallstrategystudiesthewholesituationofanenterprisetodeterminetheoverallbusinessobjectives,providesthegeneralbusinessoperationsandpursuestheoveralleffect.Functionalstrategyisthespecificstrategythateachfunctionaldepartmenttakes.(e.g.marketingstrategy,HRstrategy,logisticsstrategy)3.LogisticsstrategyLogisticsstrategyistheenterprisesguidingtheorywiththechosenlogisticsdevelopmenttargettoconstructitslogisticssystem,underwhichaseriesofdecision-makingandplanningarecarriedout.Threemainobjectivesoflogisticsstrategy:ReducelogisticsactivitiescostMinimizeinvestmentinthelogisticssystemwithoutloweringservicestandardsImprovecustomerservicestandardsandobtainefficientlogisticsandcompetitivedifferentiationadvantages4.TherelationshipbetweenlogisticsstrategyandcorporatestrategyLogisticsstrategyisakeyelementforthecorporatestrategytosuccesswhichcanhelpachieveanddevelopthegoalofcorporatestrategy,andgainstrategiccompetitiveadvantageswithinthebusinessfield.Logisticsstrategyandorganizationstrategyshouldbeconsistentinsteadofconflicting.CareersinlogisticsCompensationoflogisticsmanagersTable1CompensationrangesforlogisticsmanagementpositionsCareersinlogisticsOrganizationsinneedoflogisticsmanagersUnit 2 Customer Service and LogisticsContentsI.RoleofLogisticsinMarketingMixII.ThedefinitionofcustomerserviceIII.ImportanceofcustomerserviceinlogisticsIV.LogisticsservicequalitymanagementV.ThreelevelsofcustomerserviceinlogisticsVI.IssuesinimprovementofcustomerserviceRoleofLogisticsinMarketingMixMarketing,production,andlogisticsarecollectivelymanagedtoachievecustomerserviceobjectives.RoleofLogisticsinMarketingMixThefundamentalutilityofaproductiscreatedthroughproduction,marketingandlogistics.Production:formutilityMarketing:possessionutilityLogistics:placeandtimeutilityRoleofLogisticsinMarketingMixLogistics/SCinterfaceswithmarketingandproductionThedefinitionofcustomerserviceCustomer ServiceElementsMeasuresPre-transactionInventory availabilityTarget delivery datesTransactionOrder statusOrder tracingBackorder statusShipment shortagesShipment delaysProduct substitutionsRouting changesEtc.Post-transactionActual delivery datesReturns/adjustmentsThreecomponentsofcustomerserviceThedefinitionofcustomerserviceCustomerservicestandardsCustomer ServiceIn-stock percentageProduct or product groupStocking-point locationCustomer or class of customerTime periodOrder completenessTransit timeMode of shipmentStocking-point locationCustomer or class of customerTime periodSize of orderOrder cycle consistencyOn-time deliveryStocking-point locationCustomer or class of customerTime periodSize of orderImportanceofcustomerserviceinlogisticsCustomerserviceandcostarethetwomeasuresusedtoevaluatelogisticssystemeffectiveness.Customerservicepoliciesshouldbedevelopedwiththeunderstandingthatacriticalpurposeoflogisticsistodelivertointernalandexternalcustomersasagreedupon.Superiorcustomerserviceisoftenachievedthroughacombinationoffastresponse,localpresence,andquick,reliabledelivery.LogisticsservicequalitymanagementReliabilitystablesupplyofinventorycapableofprovidingdesiredperformancerapidsupplyofaccurateinformationContinuousimprovementThreelevelsofcustomerserviceinlogisticsValue-added ServiceThe Perfect OrderBasic Customer ServiceThreelevelsofcustomerserviceinlogistics1.Basiccustomerservice:supplyandperformanceSupply:theabilityofprovidingproductsandservicesimmediatelyascustomersrequireSupplycanbesetupbyinventorywhichincludesbasicinventoryandsafetyinventory.Supplycanbemeasuredbycriteriasuchasstock-outfrequency,ratioofsupplytodemandandorderfulfillmentrate.Performancecanbemeasuredbyspeed,reliability,flexibilityofresponseandrecoveryofdefect.Threelevelsofcustomerserviceinlogistics2.ThePerfectOrder:reachingthetargetedservicegoalseverytimewithzero-defectTheperfectorderoperationneedstodevelopastrongpartnershipwithspecificcustomers,andinvolvesalotofinformationexchanges.Toenjoyperfectorder,customersneedtomeetrequirementssuchasprovidingsubstantialbusinessvolume,establishingthecollaborationandsoon.Tocarryoutperfectorder,enterprisesneedtomakeeffortsonmanagementandoperation,tospendagreatsumofmoney,andneedoutstandinginformationsupport.Threelevelsofcustomerserviceinlogistics3.Value-addedservices:uniqueprogramsdevelopedbymanufacturersformajorcustomersonthebasisoftheperfectordere.g.productpackaging,makingmarksofcustomers,findingspecificbulkpackageandgivinginformationbeneficialtothepurchaserValue-addedservicescanberealizedthroughthecapacityofspecializationandtheadvantageofscaleeconomy.Issuesinimprovementofcustomerservice1.TheParetoprinciple(the80/20rule)Issuesinimprovementofcustomerservice1.TheParetoprinciple(the80/20rule)ABC-analysis:“A”forverypopularproducts,“B”formedium-velocityproducts,and“C”fortheslowmovers.Companiesoftenspend80percentoftheirefforton20percentoftheproductline,15percentoftheireffortonthenext40percentofproductsandtheremaining5percentonthelast40percentoftheproductline.Issuesinimprovementofcustomerservice2.ServicelevelimprovementImprovementofthelogisticsservicelevelmayincreaserevenues,especiallyinmarketswithhomogeneouslow-priceproducts.Theleveloflogisticsserviceisoftenexpressedthroughtheorder-cycletime,whichistheelapsedtimebetweentheinstantapurchaseorderisissuedandthetimegoodsarereceivedbythecustomer.IssuesinimprovementofcustomerserviceDeterminationoftheoptimumservicelevelIssuesinimprovementofcustomerservice3.LogisticstradeoffsTradeoffsamongtransportation,inventorycontrol,warehousing,andcustomerserviceTransportationInventoryWarehousingCustomerserviceTransportationInventoryWarehousingCustomerserviceIssuesinimprovementofcustomerserviceCreativemanagementoflogisticscandealwiththetradeoffs.Effectivetrafficmanagementmayresultinlowertotaltransportationcosts,lowerinventories,fewerwarehouselocations,andimprovedcustomerservice.Effectivemanagementofinventorylevelsmayreduceinventorieswhilemaintaining(orimproving)transportationcosts,warehouselocations,andcustomerservicelevels.Effectivewarehousingmanagementmayreducetotalfacilitycostswhilesavingontransportation,loweringinventories,andimprovingcustomerservice.Analysisofcustomerserviceneedsmayhelpdeveloptailoredcustomerserviceprogramsthatmeetcustomerneeds,bettermanagetransportationcosts,lowerinventorylevels,andreducewarehousingneeds.Issuesinimprovementofcustomerservice3.LogisticstradeoffsThreemajorchallengesinmanaginglogisticstradeoffsIdentifyingpotentialimprovementsinthelogisticssystemManagingtradeoffsamongtransportation,inventories,warehousing,andcustomerserviceImplementingchangessothatcostsavingsandservicepotentialscanberealizedCustomerServiceofl Founded in 1994 l Large-scale inter-provincial private catering enterpriselSpecializing in Sichuan style hotpotl60 chain stores in China lOne of the top 100 restaurants in ChinalChinese Famous Hotpot,Consumer Satisfaction Unit,Major TaxpayerZhangZhang YongYong The founder ofThe founder of HaiDiLaoHaiDiLao Characteristic Characteristic personalities:personalities:communist,communist,grass-root wisdomgrass-root wisdomOperation philosophy:“service differentiation strategy”;“Service first,customer first”;“Human-based、family-like service”（2）TheinsideservicesofHaiDiLao-TreatthestaffsasfamilymembersDecentapartmentwithairconditioner,heater,TV,telephoneandfreeNetworkRegularlycleaningtheroomandwashingthesheetsforthestaffs20-minutewalktotheworkplaceHigh-qualityclothesandshoesTrainingthestaffsbothworkingskillsandlivingskillsOfferingone-roomflattocouplesEstablishingschoolsforstaffschildrenSendingmoneymonthlydirectlytotheparentsoftheexcellentstaffsRightoffreechargeHaier:Five-star ServiceFree five-star service emotional debt repay by propagandizing strong potential consumer group leader in home appliance industryHaiDiLao:SuperFive-starServiceSpecialreceptionmovementWhilewaiting:freesnakes,tablegames,InternetaccessWhileeating:“flyingsquad”busboy,noodle-stretchingshowWhileleaving:littlegiftssometimes“Creepy”caringservice:manicure,shoes-polishingHunger Marketingbenefit itself,benefit its customers,harm the industry（利人利己不利他）（利人利己不利他）Dangdangs Service ModeFor reference Pre-transaction elements1 written customer service policy2 the written policy accessibility3 organization structure4 system flexibility5 management servicesTransaction elements1 stockout level2 expedite shipments3 transship4 order cycle time5 system accuracy6 inventory availability7 order fulfillment rate8 order status information9 order convenience10 product substitutionPost-transaction elements 1 availability of spares2 call-out time3 product tracing/warranty4 complaints,claimsC Co ommp po on ne en nt ts s o of f C Cu us st to omme er r S Se er rv vi ic ce eComponents of Customer ServicePre-transaction elements written customer service policy the written policy accessibilityTransaction elements expedite shipments order cycle time inventory availability order status information order convenience product substitution Post-transaction elementsproduct tracing/warrantycomplaints,claims Written customer service policyThe written policy accessibilityExpedite shipment Order cycle timeMOST OF MOST OF MOST OF MOST OF THE THE THE THE ORDERS ORDERS ORDERS ORDERS ARE ARE ARE ARE FULFILLED FULFILLED FULFILLED FULFILLED PROMPTLY.PROMPTLY.PROMPTLY.PROMPTLY.Inventory availabilityOrder status informationorder convenienceProduct substitutionProduct tracing/warrantyComplaints,claimsUnit 3 Purchasing and Supplier ManagementContentsI.LogisticsActivitiesII.ImportanceofPurchasingIII.OrderManagementIV.SupplierSelectionV.SuppliersClassificationVI.SupplierRelationshipVII.CollaborationStrategiesVIII.Vendor-ManagedInventory(VMI)LogisticsActivitiesKeyActivitiesCo-operationbetweencustomerservicestandardswithmarketingTransportationInventorymanagementInformationflowsandorderprocessingLogisticsActivitiesSupportActivitiesWarehousingMaterialshandlingPurchasingProtectivepackagingCo-operationwithproduction/operationsInformationmaintenanceImportanceofPurchasingPurchasingisofstrategicimportancenowandemphasizesonrelationshipsbetweenbuyersandsellers.Potentialsavingsinpurchasingishigh.IndustryPurchasingManufacturingComputer1%5%Electricalequipment3%11%Automotive1%4%Electronics2%6%Table3-1Requiredcostreductiontoachieve20%increaseinprofitabilityImportanceofPurchasingStepsofpurchasingEstablishacross-functionalteamIdentifyrequirementsforqualifiedserviceprovidersRequestpurchasingproposalsAnalyzepurchasingproposals(vendorselection,pricedeterminationandserviceselection)DeterminepurchaseagreementImportanceofPurchasingAtypicalpurchasingprocessOrderManagementOrdermanagement(Orderprocessing)ActivitiesthattakeplaceintheperiodbetweenthetimeafirmreceivesanorderandthetimeawarehouseisnotifiedtoshipthegoodstofillthatorderItisstrictlyrelatedtoinformationflowsinthelogisticssystem.OrderManagementStepsinordermanagementOrderPlanningOrderTransmittalOrderProcessingOrderPicking,AssemblyandOrderDeliveryOrderManagementFigure3-2FlowoforderprocessingsystemSupplierSelectionStepsinsuppliermanagementSupplierinvestigationResourcemarketinvestigationSupplierdevelopmentSupplierassessmentSupplierselectionandcollaborationSuppliermotivationandcontrolSuppliersClassificationSupplierasapartnerSupplierasapriorityKeycommercialsupplierCommercialsupplierSupplierRelationshipLevelsofSupplierRelationshipTransactionrelationshipRegularcontactShort-termcooperationLong-termcooperationSupplierpartnershipSupplierRelationshipEstablishingpartnershipwithasupplierFormulatesupplierclassificationandchoosepartnersClarifyobjectivesandevaluationindicatorsandmakeplansFollowupplanimplementationandassesssupplierperformanceItismoreimportanttomaintain,improve,anddevelopthepartnershipintheprocessofthesuppliermanagement.CollaborationStrategiesCompressionstrategiesSupplyChainManagement(SCM)DeterminewhichstrategytoadoptForgesuppliersrelationshipsChoosethepropertechnology(e.g.ERP,theInternet)CollaborationStrategiesFigure3-3ThePursuitofthe“PerfectOrder”RequiresAllSupplyChainPlayerstoWorkTogetherCollaborationStrategiesAdvantagesCollaborationbetweenbuyersandsellerscandecreaseexpensesforboth.Collaborationamongvendorsinthelogisticsendofthesupplychaincaneconomizeresources.Liaisonsarehelpfulincreatingcollaboration.ProblemsSolutionsthatwillbenefitallpartnersarehardtofind.Companiesareatdifferenttechnologicallevels.Vendor-ManagedInventory(VMI)BenefitsofVMIPlanningandInformationSystemsContinuousReplenishmentInventoryOwnershipPartnershipsandTrustBeginSmallVendor-ManagedInventory(VMI)InitiatingaVMIrelationshipAmulti-stepprocessthatincludescommitmentfromseniormanagement,employeealignment,informationmatching,transactiontesting,performancemetrics,andtransmitdemanddata.Measuresforsuccessoftherelationshipincludethephysicalmeasures,thereviewfrequency,andthecorrectiveactionpath.Unit 4 JIT and Lean ProductionContentsI.DevelopmentofMaterialsManagementSystemII.PushSystemIII.PullSystemIV.Just-in-timeLogisticsV.TheAgileSupplyChainCompetinginVolatileMarketsDevelopmentofMaterialsManagementSystemPushSystemPullSystemPeriodBatchControlMaterialsRequirementsPlanning(MRP)PushSystemMaterialispushedfromtheproductionfacilitythroughdistributionuntiltheproductreachesthecustomerbasedonforecastorschedules.BenefitsLiabilitiesSmallermanufacturingplantwarehousesIncreasedsafetystockandinventorycarryingcostsEnhancedcustomersatisfactionIncreaseddistributionrequirementsLowertransportationcostsReducedsupplychainflexibilityTable4-1FeaturesofaPushDistributionSystemPullSystemInaPullsystem,anorderfromacustomergeneratesanorderfromtheDC,whichtriggersproductionruntoreplenishtheplantwarehouse.Figure4-1ATypicalPullDistributionSystemPullSystemBenefitsReducedsafetystockandsystem-wideinventorylevelsNostocktransfersbetweenDCsarerequiredtocoverregionaldemandvariabilityDirectshipmentsfromthemanufacturingplanttothecustomerLiabilitiesLargeron-sitemanufacturingwarehousesReducedcustomersatisfactionfromslowerorderfilltimeHighertransportationcostsasshipmentsfrommanufacturingarelessfullandmorefrequentPullSystemFigure4-2TheCounter-flowofPullandPushSystemPullSystemFigure4-3AComparisonofPushandPullSystemsPullSystemAhybridapproachofbothsystemsrequiresstoringslower-movingitemsinasmallerwarehouseattheplantwhilepushingtruckloadquantitiesofmorepopularitemstotheDCs.Figure4-4AHybridofPushandPullDistributionSystemJust-in-timeLogisticsJust-in-timeOriginJITisamanufacturing/deliveryprocesswhereaminimumofgoodsarekeptinstockanditemsareplannedtoarrivepreciselyatthetimetheyarerequiredforuseordispatch.HenryForddescribedessentiallythesameprocess,althoughitwasntthennamed,inhisautobiographyMyLifeandWorkin1922.Toyotanamedtheprocessinthe1950sanditspreadtotheUSandUKinthe1970s.Just-in-timeLogisticsWasteandVariabilityReductionWasteisanythingthatdoesnotaddvaluefromthecustomerpointofview.Fasterdelivery,reducedwork-in-process,andfasterthroughputallreducewaste.JITsystemsrequiremanagerstoreducevariabilitywhichresultsinlesswaste.Just-in-timeLogisticsFigure4-5InventoryHidestheProblemsFigure4-6JITandCompetitiveAdvantageJust-in-timeLogisticsJITPartnershipItexistswhenasupplierandpurchaserworktogethertoremovewasteanddrivedowncosts.Goals:eliminationofunnecessaryactivities,in-plantinventory,in-transitinventoryandpoorsuppliersJust-in-timeLogisticsJITLayoutBuildworkcellsforfamiliesofproductsIncludealargenumberofoperationsinasmallareaMinimizedistanceDesignlittlespaceforinventoryUseu-shapedpathJust-in-timeLogisticsSetuptimecanbereducedthroughpreparationpriortoshutdownandchangeover.Figure4-7AnExampleofReductioninSetupTimesJust-in-timeLogisticsKanbanThesystemisdesignedsothateachprocessintheproductionlinepullstherightnumberandtypeofcomponentsattherighttime.Bymonitoringandmaintainingtheflowofmaterials,Kanbanachievesprecisioninproduction.ToyotawasoneofthefirstcompaniestoapplytheKanbansystem.Just-in-timeLogisticsFigure4-8AnExampleofKanbanJust-in-timeLogisticsNumberofKanbans=(DemandinperiodOrderCycletimeSafetystock)Batchsize(orcontainerquantity)Figure4-9APullSignalCardJust-in-timeLogisticsLeanProductionSpecifyworkastocontent,sequence,timing,andoutcomeDirectcustomer-supplierconnectionSimpleanddirectp
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