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									Chapter 16:

       Logistics and Supply Chain
        Challenges for the Future
Learning Objectives -          After reading this
chapter, you should be able to do the following:

    Understand what is meant by strategy and
     how it applies to logistics and supply chain
     management.
    Trace the stages in the evolution of strategic
     planning and its application to logistics and
     supply chain management.
    Have a working knowledge of how logistics
     and supply chain strategies have benefited
     individual business firms.
 Chapter 16      Management of Business Logistics, 7th Ed.   2
Learning Objectives
   Be able to explain the relevance and
    importance of logistics and supply chain
    strategies of the following types: time-based,
    asset productivity, technology-based, and
    relationship-based.




Chapter 16     Management of Business Logistics, 7th Ed.   3
Learning Objectives
   Identify and explain a number of macro
    trends that will impact the future of logistics
    and supply chain management, such as: shift
    from vertical to virtual integration,
    collaboration, knowledge of core
    competencies, technology and connectivity,
    managing the people skills, and having a
    comprehensive supply chain perspective.


Chapter 16     Management of Business Logistics, 7th Ed.   4
    Logistics Profile: Creating a State-of-the
    Art VW Beetle Production
    Facility in Mexico
   In 1998, at Volkswagen’s Mexican assembly plant in
    Puebla, Exel implemented the JIT sequencing
    operation.
   Currently, the Mexican plant produces 1,600 vehicles
    daily, including the Beetle and Jetta.
   Parts delivery to a specific place on the line takes
    place within 40 minutes of an order, with one car
    built every 40 minutes, 24/7.
   Exel provides Volkswagen with expert logistics and
    supply chain management ported from a similar VW
    plant in Spain, proving that transfer of technology,
    human resources, and best practices is possible on a
    global basis.
    Chapter 16     Management of Business Logistics, 7th Ed.   5
Introduction
   Logistics and supply chain management are
    changing quickly, and are characterized by:
      Many innovations and improvements

      Movement towards being considered as

       players in strategic, competitive advantage
      Prime candidates for application of tried

       and proven approaches to strategic
       planning

Chapter 16     Management of Business Logistics, 7th Ed.   6
Overview of Strategic Planning for
Logistics and Supply Chain Management
   Historical Perspective on Strategy:
      Has become an appropriately meaningful and
       integrated activity in most globally competitive
       firms.
      Evolutionary development phases:

          In the 50s and 60s, was referred to as
           investment planning.
          In the 70s, began to focus on internal growth
           opportunities.
          In the 80s, a combination of outside
           investment and internal growth opportunities
           was used.

Chapter 16       Management of Business Logistics, 7th Ed.   7
Overview of Strategic Planning for
Logistics and Supply Chain Management
                In the 80s, a combination of outside
                 investment and internal growth opportunities
                 was used.
                In the 90s, refocused on gaining strategic
                 advantage in the marketplace and for
                 defending against competitors.
                In the early 2000s, strategic focus clearly
                 moved toward the development of effective,
                 interfirm relationships that would create
                 maximum value for the firm’s products and/or
                 services.

Chapter 16              Management of Business Logistics, 7th Ed.   8
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Definitions:
        Strategy – a course of action, a scheme,
         or a principal idea through which an
         organization hopes to accomplish a specific
         objective or goal.
        Tactics – refers to the operational aspects
         that are necessary to support strategy.



Chapter 16         Management of Business Logistics, 7th Ed.   9
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Examples:
        Cross-docking – a term that describes
         moving goods through a distribution center
         in less than a day, a tactic used by Wal-
         Mart among others to both lower prices
         while increasing customer service.
        Rapid inventory turns contribute to the
         lower costs, and the speed of the flow of
         inventory results in the increase in
         customer service.
Chapter 16       Management of Business Logistics, 7th Ed.   10
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Examples:
        Internet capabilities – employed by Best
         Buy to let customers order over the
         Internet and pickup items at a retail store
         location.
        Best Buy is combining its technological
         competencies with its logistics and supply
         chain capabilities of customer service and
         market positioning.
Chapter 16        Management of Business Logistics, 7th Ed.   11
Figure 16-1 Best Buy: Integrating
Retail, Catalog, and Online Sales




Chapter 16   Management of Business Logistics, 7th Ed.   12
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Examples:
        Inventory availability – Benneton is
         another retailer that has used good
         logistics to accomplish increased market
         share and higher profit levels
        By developing a QR system utilizing bar
         coding of cartons and linking production to
         retail locations, Benneton achieves low in-
         store inventory, right stock availability, and
         high levels of customer service.
Chapter 16        Management of Business Logistics, 7th Ed.   13
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Strategy Classification
        Porter’s model of basic strategies, namely, cost,
         differentiation, and focus is the most popular
         scheme.
        Strategies based on low cost essentially stress
         offering a product or service in a market at a price
         or cost lower than that of competitors.
        Automobiles and electronic products are two
         examples of this strategy, as are the general
         operations of retail firms such as Wal-Mart,
         Target, and McDonalds.

Chapter 16          Management of Business Logistics, 7th Ed.   14
Figure 16-2
Strategies for Creating Value




Chapter 16   Management of Business Logistics, 7th Ed.   15
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Strategy Classification
        Strategies based on differentiation
         attempt to make a product or service look
         unique, such that consumers are willing to
         par a premium price.
        Perceptions based on better fit, higher
         quality, long product life, better service,
         and other similar attributes are typical of
         strategies based on differentiation.

Chapter 16        Management of Business Logistics, 7th Ed.   16
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Strategy Classification
        Strategies based on focus attempt to make a
         product or service fit a niche or small market
         segment where either cost or differentiation is
         then employed.
        Offering delivery, 24/7 hours, multiple offerings of
         similar products into differentiated segments and
         other similar strategies are typical of focus-
         based models of classification.


Chapter 16          Management of Business Logistics, 7th Ed.   17
Overview of Strategic Planning for
Logistics and Supply Chain Management

   Strategy Classification
        Porter’s value chain suggests that a
         company can be disaggregated into five
         primary activities and four support
         activities.
        Examine Figure 16-3.




Chapter 16       Management of Business Logistics, 7th Ed.   18
Figure 16-3
The Generic Value Chain




Chapter 16   Management of Business Logistics, 7th Ed.   19
Time-Based Strategies

   Reducing Cycle Time
      Logistics activities that shorten the length of the

       order/replenishment cycle have been the focus of
       much recent attention.
      Reductions in cycle time are based on three

       factors: processes, information, and decision
       making.
         If logistics is seen as a series of processes,

          performing those processes faster will reduce
          cycle time.

Chapter 16        Management of Business Logistics, 7th Ed.   20
Time-Based Strategies
      Utilization of faster, more efficient forms of
       order transmission---EDI or the Internet---
       can significantly reduce the time needed to
       complete the transaction.
      Finally, empowering individuals to make
       decisions can be one of the most important
       ways to speed cycle time.
      Pre-approvals and other delegated decision
       making models can lead to making mistakes,
       but the experience of Proctor & Gamble,
       among others, is that the risk is justified in
       terms of time saved and improvement in
       customer responsiveness.

Chapter 16         Management of Business Logistics, 7th Ed.   21
    Time-Based Strategies

   Time-Reduction Logistics Initiatives
      Push to pull

         Cross-docking, JIT, VMI, and CRP are

          all contemporary approaches that help
          logistics systems move from push to
          pull.
         Each strategy reduces the order cycle

          by shortening the total time from
          vendor to delivery to customers.

    Chapter 16    Management of Business Logistics, 7th Ed.   22
    Time-Based Strategies
   Time-Reduction Logistics Initiatives
      Anticipate customers’ needs

         Improved ability to anticipate through

          collaborative planning, forecasting, and
          replenishment (CPFR) enables the logistics and
          supply chain processes to make a more
          valuable contribution to corporate objectives.
         The switch from push to pull is a more

          demand-responsive system, but requires
          changes that may be difficult to achieve
          depending on the corporate culture in place.

    Chapter 16      Management of Business Logistics, 7th Ed.   23
     Time-Based Strategies
   Time-Reduction Logistics Initiatives
      Manufacturing impacts

         Pull approach requires a fast manufacturing
          system.
         Risk of low or no inventory depends on fast
          and frequent replenishment.
      Responding to demand

         Consistent with time-compression strategies

         Produce to order now being tried by furniture
          and farm implement manufacturers, both
          traditional “produce for stock” companies.


     Chapter 16      Management of Business Logistics, 7th Ed.   24
    Time-Based Strategies

   Time-Reduction Logistics Initiatives
      Postponement involves not completely

       finishing a product until an order arrives.
          Food processors that can “brights” and

           do not label until an order is received
          Auto manufacturers that pre-wire

           electronic harnesses to take any option,
           not knowing what a particular car order
           will specify.

    Chapter 16      Management of Business Logistics, 7th Ed.   25
Asset Productivity Strategies

   Inventory Reduction
      Much evidence that companies have been

       successful in reducing inventories.
      Time reduction strategies have contributed.

   Facility Utilization
      Strategy to keep the goods moving throughout

       the logistics and supply chain system has
       contributed to effective use of logistics
       facilities thus squeezing more productivity
       from these assets.
Chapter 16       Management of Business Logistics, 7th Ed.   26
Asset Productivity Strategies

   Equipment Utilization Strategies
      Some reductions have occurred here as

       a result of contraction of this equipment
       and smarter, more sophisticated
       equipment dispatching software.
      Doing more with less is a result of leaner

       enterprises.



Chapter 16      Management of Business Logistics, 7th Ed.   27
    Asset Productivity Strategies

   Third-Party/Contract Logistics Services
      Use of 3PLs has resulted in dramatic positive

       impact on asset productivity.
      DuPont, Nabisco, Proctor & Gamble, General

       Electric and General Motors and others are users
       of 3PLs, focusing on managing logistics services
       rather than on the assets themselves.
   Examine Figure 16-4 on 4PLs potential impact.



    Chapter 16     Management of Business Logistics, 7th Ed.   28
Figure 16-4
Fourth-Party™ Logistics




Chapter 16   Management of Business Logistics, 7th Ed.   29
Technology-Based Strategies

   Disruptive technologies are those will help make
    firms more competitive, but will change the basis of
    competition.
      Examine Table 16-1

      Implications are that logistics and supply chain

       areas of the future will differ significantly from
       those of today.
   E-commerce e-procurement and electronic
    marketplaces will continue to grow in importance.


Chapter 16       Management of Business Logistics, 7th Ed.   30
Table 16-1
Disruptive Information Technologies




Chapter 16   Management of Business Logistics, 7th Ed.   31
Figure 16-5
Shifts in Technology




Chapter 16   Management of Business Logistics, 7th Ed.   32
Figure 16-6
Strategic Sourcing and Procurement




Chapter 16   Management of Business Logistics, 7th Ed.   33
Relationship-Based Strategies

   Collaboration
      Parties involved dynamically share and

       interchange information.
      Group benefits more than individual benefits.

      All parties modify their business practices.

      All parties conduct business in new and visibly

       different ways.
      All parties provide a mechanism and process

       for collaboration to occur.
Chapter 16      Management of Business Logistics, 7th Ed.   34
Figure 16-7
Types of Collaboration




Chapter 16   Management of Business Logistics, 7th Ed.   35
Relationship-Based Strategies

   Value Nets
      Taking the place of the old supply chain,

       the value net starts with the customer and
       is built around three powerful value
       propositions:
          High levels of customization

          Super service

          Convenient solutions



Chapter 16     Management of Business Logistics, 7th Ed.   36
Relationship-Based Strategies

   Value Nets
      Combines strategic thinking with the latest

       advances in digital supply chain management.
      Every customer is unique.

      Customers choose products or services they value

       most.
      Capture real choices in real time and transmit

       them digitally to other net participants.
      Examine Figure 16-8.




Chapter 16       Management of Business Logistics, 7th Ed.   37
Figure 16-8
Gateway’s Value Net




Chapter 16   Management of Business Logistics, 7th Ed.   38
Synthesis and Future Directions

   Shift from Vertical to Virtual Integration
   Collaboration
   Knowledge of Core Competencies
      Expertise

      Strategic fit

      Ability to trust

   Technology and Connectivity
   Managing-the-People Skills
   Comprehensive Supply Chain Perspective

Chapter 16       Management of Business Logistics, 7th Ed.   39
    On the Line: Modus
    Media International (MMI)
    In 1997, MMI began transforming itself from a
     contract manufacturer to a supply chain
     management services company.
    Key criteria for the technology selection process
     included: only best-of-breed technology; off-the-
     shelf software; industry or de facto standard;
     externally supported, E-business enabled, and
     supportive of business modeling and scripting.
    Planned to be completed in 2002, the results will
     help close the knowledge gap in its supply chain
     information systems.

    Chapter 16     Management of Business Logistics, 7th Ed.   40
          Chapter 16:
  Summary and Review Questions

 Students should review their knowledge of the
chapter by checking out the Summary and Study
           Questions for Chapter 16.
 End of Chapter 16 Slides


Logistics and Supply Chain
 Challenges for the Future

								
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