Procurement and supply chain management Essay

This payoff is come to with the vital subject of c every last(predicate)ing logistics and l rarity stove engineerion, an bea that s in extensionge be essential to a signs combative strategy and r withalue generation. This tensioning atomic number 18a has been described by numerous names, including personal dispersion, bodilys focus, deportationation caution, logistics, and succeed cosmic string circumspection. germane(predicate) disdain activities whitethorn take on iodine or much of the following argonas tape drive, coat up, baseb t bulge ensemble club affect, purchasing, w atomic number 18housing, sensibles handling, packaging, guest performance standards, and drudgery.The focus of this matter is on the thinkning, organizing, and get a lineling of these activities describe elements for successful wariness in any ecesis. surplus emphasis is given to strategic preparation and last making as an distinguished berth of the coun tr ansfering subroutine. Managerial efforts be directed towards orbit the direct up aim of the logistics activities so as to install harvestings and servicing gettable to clients at the clip and address required, and in the build and random variable bankd, in the nigh profitable and salute- in effect(p) way.Logistical activities waste al shipway been vital to giving medications, and so crease logistics and come forth concatenation perplexity represents a synthesis of umteen thoughts, principles, and modes from the more traditional atomic number 18as of merchandise, produceion, accounting, purchasing, and transportation, as intimately as from the disciplines of utilize mathematics, organizational behaviour, and economics. This Publication attempts to unify these elements to drive in the effectual solicitude of the bring ambit.The Publication aims to present compositions, principles and techniques that ar aboriginal to wide-cut worry logistic s practice. It concent grade on definitive activities of counsel such(prenominal) as planning, organizing, and tameling, and as salubrious on a triangle of interrelated transportation, enrolment, and location strategies, which ar at the heart of ingenuous logistics planning and decision making. coeval tr wind ups that proceed the domain and practice of handicraft logistics and deliver d freshstring anxiety pick out been corporate into the automobile trunk of the text.Firstly, emphasis is get offd on logistics and publish strand focus in a worldwide declineting to reflect the growing internationalization and globalization of communication channel in general. Secondly, the shift towards assistant-oriented economies by industrialized nations is express by showing how logistics concepts and principles atomic number 18 applicable to rough(prenominal) work-producing tirms and convergence-producing ones. Thirdly, perplexity is given to the integrated care of tack orbit activities. 1 LSCTMMOD1 aim for a disembarrass imitation of our prospectus give by airmail, telephone, telecommunicate or email, or via our website Britain. world(prenominal) home office College House, Leoville, jersey JE3 2DB, Britain autotype +44 (0)1534 485485 netmail datarmationcambridgetraining. com Website www. cambridgecollege. co. uk The Publication contains many virtual(a) and contemporary examples that show the applicability of the textual textile and assist in the curbment and learning of the discoer vizors and concepts.Each Chapter in this Cambridge foreign College Publication on Logistics, Chain put up & go Management includes An introduction section Examples and/or figures and diagrams to excuse the concepts being c everywhereed A summary of utmost comments Review Questions designed to reinforce learning and reflectivity of what is covered in the Chapter Advice on How to Study this chopine Every individual CIC Member approa ches his/her exact in a different manner, and different people whitethorn energize a particular accept method that they find most effective for them.However, the following is a tested and proven Study Method, suggested to you as a CIC Member in pasture to assist in making your study and learning easier and enjoyable and to assist you to quickly master the contents of this CIC Publication on Logistics, Chain fork over & Transport Management cadence 1 Set yourself a flexible study schedule, depending on the clipping you prepargon unattached and what is lift out for you. For example, the target set could be to study for 1 or 2 hours a night, or for 8 or 9 hours a week, or to virtuoso(a) one Chapter every 2 weeks. on that point is no set or compulsory schedule, exactly hardly put a schedule or death is often an authoritative action in ensuring that study is under pipn successfully and at bottom the specified sentenceframe. tint 2 Read the whole of the first Chapte r at your expression reading pace, without exhausting to memorise every matter covered or fact stated, but trying to get the feel of what is dealt with in the Chapter as a whole. Step 3 Start reading the Chapter once again from the beginning, this succession reading more slowly, paragraph by paragraph and section by section.Make sketch line of reasonings of any points, sentences, paragraphs or sections which you feel deal your nurture study, consideration or thought. You whitethorn wish to af unswerving any nones in a collapse single file or none bulk. Try to absorb and memorise on the whole the important topics covered. Step 4 Start reading the Chapter again from its start, this condemnation paying particular attention to and if necessary studying more thoroughly those split on which you earlier wrote nones for further study. It is outmatch that you do non pass on to former(a)wise part or topics until you atomic number 18 plastered you fully agnize and remember those parts you earlier noted as requiring your special attention.Try to fix everything taught steadyly in your mind. 2 LSCTMMOD1 load for a emancipate written matter of our course catalogue earmark by airmail, telephone, facsimile machine or email, or via our website Britain. world(prenominal) home plate College House, Leoville, tee shirt JE3 2DB, Britain facsimile +44 (0)1534 485485 email infocambridgetraining. com Website www. cambridgecollege. co. uk Step 5 There be self-assessment review questions at the end of the Chapter, and you ar strongly advised to try to process or intend astir(predicate) them as best you cigargontte but do not ship your answers to the College.If these questions/exercises risquelight any argonas that you feel you need to revision or re-read in the Chapter, then go frontwards and do that before moving on to Step 6. Step 6 Once you throw away realised steps 1 to 5 above, move on to the next Chapter and repeat steps 1 to 5 fo r sever completelyy subsequent Chapter. 3 LSCTMMOD1 guide for a freehanded double of our Prospectus hold back by airmail, telephone, fax or email, or via our website Britain. transnational Headquarters College House, Leoville, tee shirt JE3 2DB, Britain fax +44 (0)1534 485485 telecommunicate infocambridgetraining.com Website www. cambridgecollege. co. uk LOGISTICS, SUPPLY fibril & TRANSPORT MANAGEMENT political program MODULE ONE BUSINESS LOGISTICS/SUPPLY CHAIN A VITAL SUBJECT (based on Chapter 1 of Logistics, Supply Chain and Transport Management by Ronald H Ball(a)ou) Contents Introduction lineage Logistics define The Supply Chain The Activity aggregate richness of Logistics/Supply Chain (SC) Costs ar substantive Logistics client Service Expectations Are Increasing Supply and Distribution Lines Are Lengthening with great complexity Logistics/SC Is Important to StrategyLogistics/SC Adds operative Customer Value Customers Increasingly Want Quick, Customized ch emical reaction Logistics/SC in Non-Manufacturing Areas Service Industry host Environment Business Logistics/SC in the dissolute Objectives of Business Logistics/SC Questions and Problems Introduction As further back up as register records, the computables that people treasured were not evermore produced where they wanted to go with and through with(predicate) and through and through them, or these graves were not accessible when people wanted to consume them. Food and other commodities were widely dispersed and were further obtainable in abundance at certain measure of the year.Early peoples had the choice of consuming obedients at their conterminous location or moving the nices to a preferred site and storing them for later use. However, because no well developed transportation and storage trunks yet existed, the parkway of goods was expressage to what an individual could personally move, and storage of decayable commodities was possible for only a short time. This especial(a) movement-storage system generally constrained people to put out close to the sources of takings and to consume a preferably narrow range of goods.Even today, in or so parts of the world consumption and outpution take place only within a very limited geographic part. Striking examples grass still be observed in the developing nations of Asia, South America, Australia, and Africa, where some of the population live in small, self- fitted villages, and most of the goods needed by the residents are produced or acquired in the immediate vicinity. Few goods are imported from other areas. Therefore, fruit efficiency and the economic standard of keep are generally low.In this type of economy, a well-developed and inexpensive logistics system would encourage an telephone exchange of goods with other producing areas of the country, or level the world. 4 LSCTMMOD1 lodge for a FREE counterpart of our Prospectus book by airmail, telephone, fax or email, or via ou r website Britain. transnational Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 email infocambridgetraining. com Website www. cambridgecollege. co. uk As logistics systems improved, consumption and harvest-tideionion began to crack geographically.Regions would alter in those commodities that could be produced most in force(p)ly. Excess resultion could be shipped economically to other producing (or consuming) areas, and needed goods not produced locally were imported. This exchange process follows the principle of comparative degree improvement. This same principle, when applied to world markets, helps to explain the high aim of international business that takes place today. in force(p) logistics systems allow world businesses to take advantage of the fact that lands, and the people who occupy them, are not evenly yieldive.Logistics is the very middle of trade. It contributes to a higher(prenominal)(prenominal) economic standa rd of living for us all. To the individual profligate operating in a high-level economy, good centering of logistics activities is vital. Markets are often national or international in scope, whereas business may be concentrated at relatively hardly a(prenominal) points. Logistics activities provide the bridge mingled with production and market locations that are separated by time and distance. Effective management of these activities is the major concern of this Program. Business Logistic beBusiness logistics is a relatively wise field of integrated management study in resemblance with the traditional fields of finance, selling, and production. As previously noted, logistics activities scram been carried out by individuals for many years. Businesses also build continually engaged in movestore (transportation-inventory) activities. The upstartness of the field results from the concept of coordinated management of the related activities, sooner than the historical prac tice of managing them separately, and the concept that logistics adds honor to products or gos that are essential to node satisfaction and gross sales.Although co-ordinated logistics management has not been generally practiced until recently, the idea of co-ordinated management can be traced back to at least 1844. In the writings of Jules Dupuit, a French engineer, the idea of trading one cost for another (transportation be for inventory cost) was evident in the filling mingled with road and water transport The fact is that articulated lorry by road being quicker, more authorized and less subject to loss or damage, it possesses advantage to which businessmen often attach a goodly order.However, it may well be that a salvage induces the merchant to use a canal he can buy warehouses and increase his floating big(p) in devote to suck a sufficient add together of goods on hand to protect himself against gracelessness and irregularity of the canal, and if all told the sa ving in transport gives him a cost advantage, he ordain learn in favour of the new route. The first textual matter to suggest the benefits of co-ordinated logistics management appeared around 1961, in part explaining why a generally accepted rendering of business logistics is still emerging.Therefore, it is worth era to explore several(prenominal) renderings for the scope and content of the subject. A dictionary comment of the line logistics is The branch of armament science having to do with procuring, maintaining, and transporting cloth, personnel, and facilities. This definition puts logistics into a soldiers context. To the extent that business objectives and activities differ from those of the military, this definition does not capture the essence of business logistics management.A damp representation of the field may be reflected in the definition proclaim by the Council of Logistics Management (CLM), a professional organization of logistics 5 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk managers, educators, and practitioners formed in 1962 for the purposes of continuing education and fostering the interchange of ideas.Its definition Logistics is that part of the grant mountain range process that plans, implements, and controls the efficient, effective arise and storage of goods, improvements, and related data from the point of origin to the point of consumption in order to meet nodes requirements. This is an excellent definition, conveying the idea that product flows are to be managed from the point where they exist as afflictive materials to the point where they are last-placely discarded. Logistics is also implicated with the flow of serve as well as physiological goods, an area of growing hazard for improvement.It also suggests that logistics is a process, meaning that it includes all the activities that have an impact on making goods and services available to customers when and where they wish to acquire them. However, the definition implies that logistics is part of the offer stove process, not the perfect process. So, what is the leave concatenation process or, more popularly, tally chain management? Supply chain management (SCM) is a term that has emerged in recent years that captures the essence of integrated logistics and even goes beyond it.Supply chain management underscores the logistics interactions that take place among the functions of selling, logistics, and production within a unshakable and those interactions that take place surrounded by the de jure separate plastereds within the product-flow line of business. Opportunities for cost or customer service improvement are get hold ofd through co-ordination and coaction among the bring members where some essential come forth chain activities may not be under the direct control of the logician.Although early definitions such as physical dispersal, materials management, industrial logistics and transmission line management all name employ to describe logistics have conjure upd this broad scope for logistics, at that place was petty(a) attempt to implement logistics beyond a familiaritys throw initiative boundaries, or even beyond its own infixed logistics function. Now, retail libertines are showing success in sharing development with suppliers, who in turn agree to maintain and manage inventories on retailers shelves.Channel inventories and product stockouts are lower. Manufacturing regulars operating under just-in-time production programing build relationships with suppliers for the benefit of both companies by lessen inventories. Definitions of the impart chain and come out chain management reflecting this broader scope are The cut cha in (SC) encompasses all activities associated with the flow and transformation of goods from the raw materials stage (extraction), through to the end user, as well as the associated info flows. veridicals and randomness flow both up and down the supply chain. Supply chain management (SCM) is the integration of these activities, through improved supply chain relationships, to achieve a sustainable competitive advantage. after(prenominal) mensural study of the various definitions being offered, Mentzer and other writers draw a bead on the broad and rather general definition as followsSupply chain management is defined as the systematic, strategic coordination of the traditional business functions and the tactics crosswise these business functions within a particular phoner and across businesses within the supply chain, for the purposes of improving the long-run performance of the individual companies and the supply chain as a whole. 6 LSCTMMOD1 Send for a FREE copy of our P rospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining.The supply chain management model in figure of speech 1-1 viewed as a pipeline shows the scope of this definition. It is important to note that supply chain management is somewhat(predicate) the co-ordination of product flows across functions and across companies to achieve competitive advantage and profitability for the individual companies in the supply chain and the supply chain members collectively. It is difficult, in a practical way, to separate business logistics management from supply chain management.In so many respects, they promote the same mission To get the right goods or services to the right place, at the right time, and in the desired condition, while making the greatest piece to the firm. approximately claim that supply chain management is just another name for integrated business logistics management (IBLM) and that the broad scope of supply chain management has been promoted over the years. Conversely, others say that logistics is a subset of SCM, where SCM considers excess issues beyond those of product flow. For example, SCM may be have-to doe with with product pricing and manufacturing quality.Although SCM promotes viewing the supply channel with the broadest scope, the reality is that firms do not practise this ideal. Fawcett and Magan shew that companies that do practise supply chain integration limit their scope to one tier upstream and one tier downstream. The focus seems to be concerned with creating seamless processes within their own companies and applying new schooling technologies to improve the quality of schooling and speed of its exchange among channel members. The boundary between the logistics and supply chain management ground is fuzzy.Even then, logistics activities are repeat once again as used products are recycled upstream in the logistics channel. A single firm generally is not able to control its entire product flow channel from raw material source to points of the final consumption, although this is an emerging hazard. For practical purposes, the business logistics for the individual firm has a narrower scope. Usually, the maximum managerial control that can be expected is over the immediate physical supply and physical dispersion channels, as shown in fingers breadth 1-2.The physical supply channel refers to the time and space gap between a firms immediate material sources and its processing points. Similarly, the physical distribution channel refers to the time and space gap between the firms processing points and its customers. Due to the similarities in the activities between the cardinal channels, physical supply (more commonly referred to as materials management) 8 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain.International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk and physical distribution moderate those activities that are integrated into business logistics. Business logistics management is now popularly referred to as supply chain management. Others have used terms such as nurture nets, value stream, and lean logistics to describe a similar scope and purpose. The evolution of the management of product flows toward SCM is captured in Figure 1-3.Although it is easy to think of logistics as managing the flow of products from the points of raw material acquisition to end customers, for many firms there is a reverse logistics channel that must be managed as well. The life of a product, from a logistics viewpoint, does not end with delivery to the customer. Products fit obsolete, damaged, or nonfunctioning and are returned to their source points for cover or disposition. Packaging materials may be returned to the shipper collectable to environmental regulations or because it makes good economic sense to use them.The reverse logistics channel may utilize all or a portion of the forward logistics channel or it may require a separate design. The supply chain terminates with the final disposition of a product. The reverse channel must be considered to be within the scope of logistics planning and control. The Activity Mix The activities to be managed that make up business logistics (supply chain process) vary from firm to firm, depending on a firms particular organizational social system, managements honest differences of opinion or so what constitutes the supply chain for its business, and the grandeur of individual activities to its functionings.Follow along the supply chain as shown in Figure 1-2 and note the important activities that take place. Again, accord to the CLM 9 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. ukThe components of a typical logistics system are customer service, demand prodigy, distribution communications, inventory control, material handling, order processing, parts and service suffer, plant and warehouse site pickaxe (location analysis), purchasing, packaging, return goods handling, salvage and mo disposal, traffic and transportation, and reposition and storage. Figure 1-4 organizes these components, or activities, according to where they are most likely to take place in the supply channel. The list is further divide into key and support activities, along with some of the decisions associated with severally performance.Customer service standards co-operate with marketing to a. Determine customer needs and wants for logistics cust omer service b. Determine customer response to service c. Set customer service levels 2. dose a. Mode and transport service selection b. Freight consolidation c. Carrier routing d. Vehicle computer programming e. Equipment selection f. Claims processing g. Rate auditing 3. Inventory management a. Raw materials and completed goods stocking policies b. Short-term sales forecasting c. Product shamble at stocking points 10 LSCTMMOD1Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk d. Number, size, and location of stocking points e. Just-in-time, push, and pull strategies 4. Information flows and order processing a. Sales order-inventory porthole procedures b. Order nurture transmittal methods c. Ordering rules Support Activities 1. Warehousing a. topo graphic point determination b. Stock layout and dock design c. store configuration d. Stock placement 2. Materials handling a. Equipment selection b. Equipment replacement policies c. Order-picking procedures d. Stock storage and retrieval 3. purchase a. Supply source selection b. Purchase time c. Purchase quantities 4. overprotective packaging designed for a. treatment b. Storage c. Protection from loss and damage 5. Co-operate with production/ trading operations to a. Specify aggregate quantities b. Sequence and time production output c. Schedule supplies for production/operations 6. Information concern a. Information collection, storage, and manipulation b. info analysisControl procedures Key and support activities are separated because certain activities will generally take place in every logistics channel, whereas others will take place, depending on the circumstances, within a particular firm. The key activities are on the critical loop within a firms immediate physical d istribution channel, as shown in Figure 1 to 5. They contribute most to the hit cost of logistics or they are essential to the effective co-ordination and completion of the logistics task. 11 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our websiteBritain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk Customer service standards set the level of output and degree of readiness to which the logistics system must respond. Logistics be increase in rest to the level of customer service provided, such that prospect the standards for service also affects the logistics costs to support that level of service. Setting very high service requirements can force logistics costs to exceedingly high levels. conveyance and inventories maintenance are the primary cost-absorbing logistics activities. Experience has shown that each will represent one-half to deuce- third gears of entirety logistics costs. shipping adds place value to products and services, whereas inventories maintenance adds time value. Transportation is essential because no modern firm can operate without providing for the movement of its raw materials or its finished products. This importance is underscored by the financial strains placed on many firms by such disasters as a national railroad strike or indie truckers refusal to move goods because of rate disputes.In these circumstances, markets cannot be served, and products back up in the logistics pipeline to deteriorate or become obsolete. Inventories are also essential to logistics management because it is usually not possible or practical to provide instant production or envision delivery clock to customers. They serve as buffers between supply and demand so that needed product availability may be maintained for customers while providing flexibility for production and lo gistics in seeking efficient methods for manufacture and distribution of the product. Order processing is the final key activity.Its costs usually are electric razor compared to transportation or inventory maintenance costs. Nevertheless, order processing is an important element in the total time that it takes for a customer to receive goods or services. It is the activity triggering product movement and service delivery. Although support activities may be as critical as the key activities in any particular circumstance, they are considered here as contributing to the logistics mission. In addition, one or more of the support activities may not be a part of the logistics activity mix for every firm.For example, products such as finished automobiles or commodities such as coal, iron ore, or lambaste not needing the weather and security protection of warehousing will not require the warehousing activity, even though inventories are maintained. However, warehousing and materials hand ling are typically conducted wherever products are temporarily halted in their movement to the marketplace. 12 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain.International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk Protective packaging is a support activity of transportation and inventory maintenance as well as of warehousing and materials handling because it contributes to the efficiency with which these other activities are carried out. Purchasing and product scheduling often may be considered more a concern of production than of logistics.However, they also affect the overall logistics effort, and specifically they affect the efficiency of transportation and inventory management. Finally, information maintenance supports all other logistics activities in that it provides the needed information f or planning and control. The extended supply chain refers to those members of the supply channel beyond the firms immediate suppliers or customers. They may be suppliers to the immediate suppliers or customers of the immediate customers and so on until raw material source points or end customers are reached.It is important to plan and control the previously noted activities and information flows if they affect the logistics customer service that can be provided and the costs of supplying this service. Management of the extended supply chain has the likely of improving logistics performance beyond that of just managing the activities within the immediate supply chain. enormousness of Logistics/Supply Chain Logistics is about creating value value for customers and suppliers of the firm, and value for the firms stakeholders. Value in logistics is primarily expressed in terms of time and place.Products and services have no value unless they are in the possession of the customers when (time) and where (place) they wish to consume them. For example, concessions at a sports event have no value to consumers if they are not available at the time and place that the event is surpassring, or if inadequate inventories enduret meet the demands of the sports fans. Good logistics management views each activity in the supply chain as contributing to the process of adding value. If little value can be added, it is questionable whether the activity should exist.However, value is added when customers are willing to pay more for a product or service than the cost to place it in their hands. To many firms passim the world, logistics has become an increasingly important value-adding process for a number of reasons. Costs Are Significant all over the years, several studies have been conducted to adjudicate the costs of logistics for the whole economy and for the individual firm. There are widely varying estimates of the cost levels. match to the International Monetary Fund ( IMF), logistics costs amount about 12 pct of the 13 LSCTMMOD1Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk worlds stark(a) home(prenominal) product. Robert Delaney, who has tracked logistics costs for more than two decades, estimates that logistics costs for the U. S. economy are 9. 9 share of the U. S. gross domestic product (GDP), or $921 billion. For the firm, logistics costs have ranged from 4 portion to over 30 percent of sales.The results from a cost survey of individual firms are shown in Table 1-3. Although the results show physical distribution costs at about 8 percent of sales, this survey does not include physical supply costs. Probably another one-third may be added to this total to represent average logistics costs for the firm at a bout 11 percent of sales. Over the last decade, physical distribution costs have ranged between 7 percent and 9 percent of sales. There may be a twist of increasing costs for individual firms, although Wilson and Delaney show over the same period that logistics costs as a percent of U. S.GDP have declined by about 10 percent. Logistics costs, upstanding for most firms, rank plunk for only to the cost of goods sold (purchase costs) that are about 50 percent to 60 percent of sales for the average manufacturing firm. Value is added by minimizing these costs and by passing the benefits on to customers and to the firms shareholders. Logistics Customer Service Expectations Are Increasing The net, just-in-time operating procedures, and unvarying replenishment of inventories have all contributed to customers expecting rapid processing of their requests, quick delivery, and a high degree of product availability.According to the Davis Survey of hundreds of companies over the last decade, best competitors have average order cycle time (the time between when an order is placed and when it is received) of seven-spot to eight days and line item fill rates of 90 percent to 94 percent. LogFac summarizes frontmost logistics performance for domestic companies as Error rates of less than one per 1,000 orders shipped Logistics costs of well under 5 percent of sales Finished goods inventory turnover of 20 or more times per year Total order cycle time of five working daysTransportation cost of one percent of sales revenue enhancement or less, if products sold are over $5 per calciferol gms As might be expected, the average company performs below these cost and customer service benchmarks, when compared with the statistics in Tables 1-3 and 1-4. Supply and Distribution Lines Are Lengthening with Greater Complexity The trend is toward an integrated world economy. Firms are seeking, or have developed, global strategies by shrewd their products for a world market and produc ing them wherever the low-priced 14 LSCTMMOD1Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk raw materials, components, and crusade can be found (e. g. , Fords Focus automobile), or they simply produce locally and sell internationally. In either case, supply and distribution lines are stretched, as compared with the producer who wishes to manufacture and sell only locally.Not only has the trend occurred of course by firms seeking to cut costs or expand markets, but it is also being promote by political arrangements that promote trade. Examples of the latter are the European Union, the North America Free divvy up Agreement (NAFTA) between Canada, the United States, and Mexico, and the economic trade agreement among several countries of South America (MERCOSUR). globalisation and internationalization of industries everywhere will depend severely on logistics performance and costs, as companies take more of a world view of their operations.As this happens, logistics takes on increased importance within the firm since its costs, particularly transportation, become a larger part of the total cost body structure. For example, if a firm seeks foreign suppliers for the raw materials that make up its final product or foreign locations to build its product, the motivation is to increase profit. Material and labor costs may be reduced, but logistics costs are likely to increase due to increased transportation and inventory costs. The tradeoff, as shown in Figure 1-6, may blow over to higher profit by reducing materials, labour, and overhead costs at the expense of logistics costs and tariffs.Outsourcing adds value, but it requires upkeepful management of logistics costs and product-flow times in the supply channel. Logistics/SC Is Important To Strategy Firms spend a great deal of time finding ways to differentiate their product gos from those of their competitors. When management recognizes that logistics/SC affects a significant portion of a firms costs and that the result of decisions made about the supply chain processes yields different levels of customer service, it is in a position to use this effectively to penetrate new markets, to increase market share, and to increase bread.When a firm incurs the cost of moving the product toward the customer or making an inventory available in a timely manner, for the customer value has been wee-weed that was not there previously. It is value as surely as that created through the production of a quality product or through a low price. It is generally recognise that business creates four types of value in products or services. These are form, time, place, and possession. Logistics creates two out of these four values. Manufacturing creates form value as inputs a re converted to outputs, that is raw materials are transformed into finished goods.Logistics controls the time and place values in products, mainly through transportation, information flows, and inventories. Possession value is often considered the right of marketing, engineering, and finance, where the value is created by helping customers acquire the product through such mechanisms as advertising (information), technical support, and terms of sale (pricing and credit availability). To the extent that SCM includes production, three out of the four values may be the province of the logistics/supply chain manager.Customers Increasingly Want Quick, Customized result Fast food retailers, automatic teller machines, nightlong package delivery, and electronic mail on the Internet have led us as consumers to expect that products and services can be made available in increasingly shorter times. In addition, improved information systems and flexible manufacturing processes have led the m arketplace toward dope customization. Rather than consumers having to accept the one size fits all philosophy in their purchases, suppliers are increasingly offering products that meet individual customer needs.Companies too have been applying the concept of quick response to their internal operations in order to meet the service requirements of their own marketing efforts. The quick response philosophy has been used to create a marketing advantage. Saks Fifth alley applied it, even though big profits are made through big margins and not on cost reductions that might be achieved from good logistics management. Supply chain costs may even rise, although the advantage is to more than cover these costs through increased profits. Logistics/SC in Non-manufacturing AreasIt is perhaps easiest to think of logistics/SC in terms of moving and storing a physical product in a manufacturing setting. This is too narrow a view and can exsert to many missed business opportunities. The logistics/ SC principles and concepts larn over the years can be applied to such areas as service industries, the military, and even environment management. Service Industry The service area of industrialized countries is large and growing. In the United States, over 70 percent of all jobs are in what the national government classifies as the service sector.The size of this sector exclusively forces us to ask if logistics concepts are not equally applicable here as they are to the manufacturing sector. If they are, there is a tremendous untapped opportunity yet to be fulfilled. Many companies designated as service firms in fact produce a product. Examples include McDonalds potty (fast foods) Dow Jones & Co. , Inc. (newspaper publishing) and Sears, Roebuck and Co. (merchandise retailing). These companies carry out all the typical supply chain activities of any manufacturing firm.However, for service companies such as lodge angiotensin-converting enzyme (retail banking), Marriott Corporat ion (lodging) and Consolidated Edison (electric power), supply chain activities, 16 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our website Britain. International Headquarters College House, Leoville, Jersey JE3 2DB, Britain Telefax +44 (0)1534 485485 Email infocambridgetraining. com Website www. cambridgecollege. co. uk especially those associated with physical distribution, are not as obvious.Even though many service-oriented companies may be distributing an intangible, nonphysical product, they do engage in many physical distribution activities and decisions. A infirmary may want to extend emergency medical care throughout the community and must make decisions as to the locations of the centers. United Parcel Service and federal official Express must locate terminals and route pickup truck and delivery trucks. The East Ohio Gas Company inventories indispensable gas in underground wells during the off-season in the region whe re demand will occur. Bank One must locate and have cash inventory on hand for its ATMs.The Federal Reserve Bank must select the methods of transportation to move sour cheques among member banks. The Catholic Church must square off the number, location, and size of the churches needed to meet shifts in size and location of congregations, as well as to plan the inventory of its pastoral staff. Xeroxs repair service for copying equipment is also a good example of the logistics decisions encountered in a service operation. The techniques, concepts, and methods discussed throughout this Program should be as applicable to the service sector as they are to the manufacturing sector.The key, according to Theodore Levitt, may be in transforming an intangible service into a tangible product. Problems will remain in conservatively identifying the costs associated with the distribution of an intangible product. Perhaps because of this, few service firms or organizations have a physical distr ibution manager on their staff, although they frequently do have a materials manager to handle supply matters. However, managing logistics in service industries does represent a new direction for the future development of logistics practice. Military in the lead businesses showed much interest in co-ordinating supply chain processes, the military was well organized to carry out logistics activities. More than a decade before business logistics developmental period, the military carried out what was called the most complex, best-planned logistics operation of that time-the aggression of Europe during human race War II. Although the problems of the military, with its super high customer service requirements, were not selfsame(a) with those of business, the similarities were great enough to provide a expensive experience base during the developmental years of logistics.For example, the military alone maintained inventories valued at about one-third of those held by all U. s. manuf acturers. In addition to the management experience that such large-scale operations provide, the military sponsored, and continues to sponsor, research in the logistics area through such organizations as the RAND Corporation and the Office of ocean Research. With this background, the field of business logistics began to grow. Even the term logistics seems to have had its origins in the military.A recent example of military logistics on a large scale was the action between the United States and Iraq over Iraqs invasion of the small country of Kuwait. This invasion has been described as the largest military logistics operation in history. The logistics support in that war is yet another illustration of what worldclass companies have always known Good logistics can be a source of competitive advantage. Lt General William Pagonis, in charge of logistics support for Desert Storm, observed When the ticker East started heating up, it seemed like a good time to pull out some history book s on desert warfare in this region .But there was nothing on logistics. Logistics is not a best seller. In a parallel of his diaries, Rommel talked about logistics. He thought the Germans lost the passage of arms not because they didnt have great soldiers or equipment in fact, the German tanks outfought ours almost throughout World War II but because the British had better logistics. 17 LSCTMMOD1 Send for a FREE copy of our Prospectus book by airmail, telephone, fax or email, or via our websiteThe first wave of 200,000 troops and their equipment was deployed in a month and a half, whereas troop deployment took club months in the Vietnam conflict. In addition, the application of many good logistics concepts was evident. Take customer service, for example We believed that if we took care of our troops, the objectives would be accomplished no matter whatever else happened. The soldiers are our customers. It is no different than a determined, single focus on customers that many su ccessful businesses have.Now, you take care of your soldiers not only by providing them cold sodas, and burgers, and good food you make sure they have the ammunition on the front line, so that when they go grapple the war they know they have what they need. This meant that when 120 mm guns rather than 105 mm guns were desired on tanks, they were changed. When brown vehicles were preferred over the traditional disguise green, they were repainted at the rate of 7,000 per month. Environment Population gain and resultant economic development have heightened our sensation of environmental issues.Whether it is recycling, packaging materials, transporting hazardous materials or refurbishing products for resale, logisticians are involved in a major way. After all, the United States alone produces more than 160 cardinal tons of waste each year, enough for a convoy of 10-ton garbage trucks reaching halfway to the moon. In many cases, planning for logistics in an environmental setting is no different from that in manufacturing or service sectors. However, in a few cases additional complications arise, such as governmental regulations that make the logistics for a product more costly by extending the distribution channel.Business Logistics in the Firm It has been the tradition in many firms to organize around marketing and production functions. Typically, marketing means selling something and production means making something. Although few business people would agree that their organization is so undecomposable, the fact remains that many businesses emphasize these functions while treating other activities, such as traffic, purchasing, accounting, and engineering, as support areas. Such an attitude is justified to a degree, because if a firms products cannot be produced and sold, little else matters.However, such a pattern is dangerously simple for many firms to follow in that it fails to recognize the importance of the activities that must take place between points and times of production or purchase and the points and times of demand. These are the logistics activities, and they affect the efficiency and effectiveness of both marketing and production. Scholars and practitioners of both marketing and production have not neglected the importance of logistics. In fact, each area considers logistics within its scope of action.For example, the following definition of marketing management includes physical distribution selling (management) is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges with target groups that satisfy individual and organizational objectives. merchandisings concern is to place its products or services in convenient distribution channels to facilitate the exchange process. The concept of production/ operations management often includes logistics activities.Now, viewing product flow activities as a process to be coordinated, product flo w aspects within marketing, production, and logistics are collectively managed to achieve customer service objectives. The difference in operating objectives (maximize revenue versus minimize cost) for marketing and production/operations may lead to a fragmentation of interest in, and responsibility for, logistics activities, as well as a overlook of co-ordination among logistics activities as a whole. This, in turn, may lead to lower customer service levels or higher total logistics costs than are necessary.Business logistics represents a regrouping, either by formal organizational structure or conceptually in the minds of management, of the move-store activities that historically may have been partially under the control of marketing and production/ operations. If logistics activities are looked upon as a separate area of managerial action, the relationship of logistics activities to those of marketing and production/ operations would be as is shown in Figure 1-7. Marketing would be primarily responsible for market research, promotion, sales-force management, and the product mix, which create possession value in the product.Production/ operations would be concerned with the cosmos of the product or service, which creates form value in the product. Key responsibilities would be quality control, production planning and scheduling, job design, capacity planning, maintenance, and work measurement and standards. Logistics would be concerned with those activities (previously defined) that give a product or service time and place value. This separation of the activities of the firm into three groupings rather than two is not always necessary or advisable to achieve the coordination of logistics activities that is sought.Marketing and production/operations, when broadly conceived and co-ordinated, can do an effective job of managing logistics activities without creating an additional organizational entity. Even if a separate operable area is created for logistics within the firm so as to achieve effective control of the firms immediate logistics activities, logisticians will need to view their responsibility as one of coordinate the entire supply chain process rather than being just a local logistics activity administrator. To do otherwise may miss substantial opportunities for cost reduction and logistics customer service improvement.The interface is created by the arbitrary separation of a firms activities into a limited number of structural areas. Managing the interface activities by one function alone can lead to sub-optimal performance for the firm by subordinating broader company goals to individual functional goals-a authority danger resulting from the departmental form of organizational structure so common in companies today. To achieve interfunctional coordination, some measurement system and incentives for cooperation among the functions involved need to be established.This is equally true of the inter-organizational co-ordinati on required to manage product flows across company boundaries. It is important to note, however, that establishing a third functional group is not without its disadvantages. Two functional interfaces now exist where only one between marketing and production/ operations previously existed. Some of the most difficult administrative problems arise from the interfunctional conflicts that occur when one is attempting to manage interface activities.Some of this potential conflict may be dissipated if a new organizational arrangement is created whereby production/ operations and logistics are merged into one group called supply chain. Just as managers are beginning to control the benefits of interfunctional logistics management, inter-organizational management is being encouraged. Supply chain management proponents who view the area more broadly than some logisticians have been strongly promoting the need for collaboration among supply channel members that are outside the immediate contro l of a companyslogistician, that is, members who are de jure separate companies.Collaboration among the channel members that are united through buyer-seller relationships is essential to achieving cost-service benefits unable to be realised by managers with strictly an internal view of their responsibilities. Supply chain managers consider themselves to have responsibility for the entire supply channel of the scope as illustrated in Figure 1-8. Managing in this broader environment is the new scrap for the contemporary logistician. Objectives of Business Logistics/SCWithin the broader objectives of the firm, the business logistician seeks to achieve supply channel process goals that will move the firm toward its overall objectives. Specifically, the desire is to develop a logistics activity mix that will result in the highest possible return on investment over time. There are two dimensions to this goal (1) the impact of the logistics system design on the revenue contribution, an d (2) the operating cost and capital requirements of the design. Ideally, the logistician should know how much additional revenue would be generated through incremental improvements.