logistics&channel management
TRANSCRIPT
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Logistics Management
Concerned specificallywith inventory and
product flow
Channel Management
Concerned with managing the structure and
relationships within the channel
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Planning, implementing, and controlling the
physical flows of materials and final goods
from points of origin to points of use to
meet customers’ needs at a profit.
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Logistical systems that emphasize close
cooperation and comprehensive
interorganizational management to integrate the
logistical operations of the different firms in the
channel
A series of value
adding steps
Physically locating
the product
Product
accessibility for the
customer
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The movement of the
right amount of the right
products to the right place
at the
right time
Earlier logistics was equated mainly with
transportation Now with growing complexities, various factors like
transportation, material handling, inventory control,
warehousing and packaging of goods are seen as
interrelated components of a system. Optimum combination of logistics components to meet
customer service demands
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In a commercial or profit making context –
which, of course involves most business
situations – the logistics manager also
attempts to achieve the desired level of
customer service at the lowest cost by
applying the total cost approach
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Satisfied/Loyal Customers
Time and Place utilities
Dependable product or service
Competitive Advantage
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Specialize in performing most or all of the
logistical tasks that manufacturers
or other channel members
would normally perform themselves
Currently growing rapidly into a major industry
How can we measure customer service created by
the logistics system?
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• Inventory Availability
• Service Capability
• Service Quality
Lead TimeQuick responseEfficient consumer response
DependabilityCommunicationConvenience
Lead TimeQuick responseEfficient consumer response
DependabilityCommunicationConvenience
In-stock or out-of-stock percentages
Order fill rate
Orders shipped complete
Orders arriving in good condition
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Speed of Service
Order cycle time
Order Cycle Consistency
Order Fulfillment Flexibility
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Ability of a firm to perform all order related activities
error free Firms with high service quality tend to:
implement mechanisms that facilitate customers’
access to information
have ways to resolve customer requests without
excessive delays
exhibit “brilliant recoveries” when faced with a
crisis
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Any logistics system consists of six basic
components1. Transportation 2. Material Handling3. Order Processing4. Inventory Control5. Warehousing6. Packaging
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Most fundamental and necessary component of any
logistics system - Highest % of the total cost of
logistics Physical movement of products from one location to
another location Very complex and technical task – Many questions… Overriding issue facing the firm: Choosing the
optimum mode of transportation to meet customer
service demands
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Often the most
expensive component
Considerations
include:
carrier ownership
Rate vs. service offered
reliability
cost vs. speed
competition28
Rail
Motor Carrier
Air
Water
Pipeline
Intermodal
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Range of activities & equipment involved in the placement & movement of products in storage areas
Issues: 1. Minimizing the distances products are moved within the warehouse during the course of receiving, storage, & shipping2. Choosing the kinds of mechanical equipment that should be used3. Making the best use of labor when receiving shipping, & handling products
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The key is order cycle time – the time between an
order is placed and when it is received by the
customer.
Lack of efficiency negatively impacts customer
service. Routine Vs Customized assortment
Lack of efficiency can negatively impact logistics costs
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The firm’s attempt to hold the lowest level of inventory that will still enable it to meet customer demand
Issue: Keeping inventory at the lowest possible level while concurrently placing orders for goods in large
quantities ▪ EOQ
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Goods-in-Transit
Safety Stock
Seasonal Stock
Promotional Stock
Speculative Stock
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Capital costs (Opportunity Costs)
Storage space costs
Inventory service costs
Inventory risk costs
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Transportation savings Production economies (tradeoff is lower product
costs vs. increased inventory costs) Seasonal demand (tradeoff is warehousing costs vs.
inventory costs Customer service (tradeoff is inventory costs vs.
threat of missed business)
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All members want to reduce their inventory levels
Expense may be passed on to customers
Relationships among members allows for
collaborative search for ways to reduce costs
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The holding of products until they are ready to be sold
Issues: 1. The location of warehouse facilities2. The number of warehousing units3. The size of the units4. The design of the units5. The question of ownership
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Packaging & its associated costs can affect the other
components of the system, types of transport used
Issue:
Using packaging to make a significant
difference in the effectiveness & efficiency of the
logistics system
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Forecasting demand
materials requirements planning sourcing
Goal is to minimize transaction and production costs
while maximizing transaction and product quality
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Interrelatedcomponents
of asystem
Warehousing
OrderProcessing
MaterialsHandling
InventoryControl
Transportation
Packaging
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SystemsConcept
Total Cost Approach
Addresses all the costs oflogistics together;
seeks to minimize thetotal cost
Views the costs of all components together in an attempt to find the lowest cost for the highest level of service
Consider all costs visible hidden cost tradeoffs zero sub optimization
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consider the impact of optimizing individual
components
When logistics components are coordinated via the
total systems concept, we move toward zero
suboptimization.
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