Supply Chains B A 302
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Date Created: 11/01/15
BA 302 Final Review Module 22 I What is logistics quotthat part of the supply chain management that plans implements and controls the efficient effective forward and reverse flow and storage of goods services and related information between the point of origin and the point of consumption in order to meet customers requirementsquot 0 Companies depend on logistics systems to move goods and materials among supply chain partners and to manage the information flows necessary to carry out these tasks 0 Costs account for between 5 35 of total sales costs 0 Logistics expenses are now only second to material costs in terms of their impacts on cost of goods sold I Logistics quotValueadded Steps 0 Form utility changing the nature of the good more attractive form for customers 0 Place utility extending the physical boundaries of the marketplace creating more competition amp usually lowering prices 0 Time utility having products available when they are needed timing critical in today s environment for Lean customer service replenishment cycles etc 0 Quantity utility having correct product in the correct quantity available bridge gaps between demand and supply 0 Order fulfillment the final step in meeting customer requirements I Logistics interfaces with Business Functions 0 w Manufacturing I length of production runs less FG inventory lower logistics costs I push v pull manufacturing I seasonal demand inventory storage costs I inbound consolidation operations raw materials feeding production lines I industrial packaging packaging to protect the product from damage 0 wMarketing I Price quantity pricing to conform with shipment sizes weights or volumes I Product product design dimensions product mix consumer packaging I Promotion inventory requirement quantity location mix Push vs Pull promotion I Place channels ofdistribution B2C vs B2B o w Finance and Accounting I Income statement Impacts Sales COGS Gross Profits 2359 I Balance sheet impacts Inventory amp Total Assets316109 I Return on Assets Gross ProfitAssets 235916109 15 I Accounting Systems measure supply chain tradeoffs Traditional vs Activity Based Accounting I Logistics ActivitiesCost Drivers 0 Transportation Management I Selection evaluation of transportation alternatives to efficiently amp effectively link the network nodes plants warehouses vendors amp customers I Frequently the largest single variable cost in a firm s logistics system I Income Statement perspective operating expense fyou increase places of storage transportation costs will decrease Vice versus 0 Warehouse Management I Managing the facilities to hold inventory amp determining ownershipprivate public or contract number size layout and location 0 Inventory Management and Control I The determination of when to orderproduce how much to orderproduce where to store Focus minimizing inventory requirements I Largest fixed cost I Balance sheet perspective inventory is a current asset 0 Packaging Selecting the industrial exterior packaging to insure efficiency amp protection in storage handling amp transportation 0 Production and Inventory planning Matching demand amp supply also requires making appropriate plans to produce enough products on a timely basis to eliminate the difference between the demand forecast amp the balance of inventory on hand BOH at the lowest total cost 0 Procurement Acquisition of materials amp supplies to meet production plan or for other needs how much amp when to purchase impacts inventory cost amp where purchased impacts transportation cost I Approaches to Analyze logistics systems 4 I Inbound v Outbound Materials Management v Physical Distribution Balanced System Heavy Inbound Heavy Outbound Reverse Systems Total Cost Analysis and Cost Centers 0 TradeOffAnaysis emphasize one production mode over another based on the benefit you get from focusing on one v another I Example Total Cost w change to HigherCost Mode of Transport Costs Centers Riil m Transportation 300 420 Inventory 500 375 Packaging 450 320 Warehousing 150 75 Cost of Lost Sales 200 100 Total Cost 1500 1300 Motor is the better choice 0 Network Analysis Nodes Fixed points v Linksconnecting transportation services I Node fixed point where goods stop for storage or processing Examples plants warehouses distribution centers Link transportation goods in motion Examples planes trains tractor trailers Logistics Channel 0 Study the network of intermediaries engaged in the transfer storage handling communication and other functions contributing to the flow of goods I Part of the total distribution channel transaction flow I Looking at and mapping out entire system I Static or Short Run Analysis I Dynamic long run analysis you want on the lower side of the point of indifference 0 Total cost fixed cost total variable costamount in static variable cost per pound Module 23 I What is warehousing 0 Any operation that stores repackages stages sorts or centralizes goods or materials I Warehousing ValueAdded Roles 4 0 Reduce transportation cost3 I Consolidation most cost effective take many shipments in ship one large out I Crossdocking large shipments in small shipments out when a warehouse receives goods from one source also referred to as breakbulk warehousing I Hub and spoke no storage rapidly reconfigured and pushed out strategically placed warehouses are used as sorting transferring facilities The hubs are placed at high trafficconvenient locations Spokes refer to the routes serving the destinations associated with the hubs 0 Improve operational efficiency4 I Postponement collection of generic goods uses warehouse to modify product before sending out to public I Product Mixing taking multiple shipments and putting on one load according to customers I Protecting against contingencies amp smoothing 0 Reduce Customer Lead Times 2 I Assortment Warehouses carry a wider array of goods for long periods of time I Spot Stock Warehouses focus on the positioning of seasonal goods such as lawn care products fashion goods and recreational equipment 0 Lower Inventory Costs 1 I Consolidate the safety stock for all stores in one centralized location which can provide same day service to all stores Frees up retail floor space reduces the amount of inventory needed to protect the stores against demand surges I Major Warehousing decisions 5 0 Total Cost Analysis landed cost cost of the product plus all the costs driven by logistics activities 0 Ownership3 I Publiccommon carriers use when you want to avoid capital investment user wants to refrain from flexibility 30 day contracts I Contract use when product is seasonal user wants to increase flexibility 1 year contracts I Private use when volume and shipping needsjustify use function provides a competitive advantage long term investments20years o Qua ntity1 Centralized vs Decentralized Quantity of Warehousing Facilities Shown in Cost Comparison 0 0 As more ware houses are added inventory cost increase warehousing cost increase transportation costs decrease and cost of lost sales decreases Total cost will decline initially but as inventory amp warehouse costs increase they will offset saving s in transportation amp COLS and total costs will rise Factors Favoring centralized systems more warehousing 5 O O O O 0 Module 24 The need for high levels of customer service Inadequate transportation services Small frequent orders Fast service critical Erratic demand Basic warehouse Operations 6 basic operations are movement and storage 0 000 0 Receiving from transportation network Placing into specific warehouse locations Storage Order Picking Preparing for Shippingpackaging Shipping Warehouse Size amp Design 0 General warehouse principles useful if you need to build design or buy a warehouse I Use single story facilities no need for elevators or staircases I Move goods in a straight line bottleneck limits the amount of space for movement of product I Use efficient material handling equipmentMHE less space stronger more efficient than human works I Use an efficient storage plan Maximize aisle space I Use maximum height of the building Cross Docking7 0 00000 Movement of goods directly from the receiving dock to the shipping dock May involve breaking from large incoming shipments to smaller outgoing shipments Minimizes or eliminates need for storage Received item proceeds to shipping areas Must know where item is going when received Requires supplier warehouse cooperation makes it easier to locate track packages Increase use of technology barcodes id packages and their pastfuture route of travel radio frequency technology amp bar codes frequent for crossdocking Warehouse Size amp Design 0 General warehouse design objectives I Fully use the cubic capacity of the building I Design for protection5 I Separate hazardousspecial storage of hazardous materials I Safeguard easily misplaced or stolen items I Safeguard controlled items items mandated by federal town state law or even by company I Accommodate heatcold sensitive items I Separate storage of fragile items Design for efficiency2 limit movement in warehouse the more you move the more chances of you breaking and item I Use height and minimize aisle space I Place items for minimal movement handling Consider the items activity levels size amp load look past the box and to what s inside I Hazardous Materials 0 Material Safety Data Sheet MSDS federally mandated a standardized form containing data regarding the properties ofa particular substance Informs warehouse worker of dangerspreca utionsstandards of storing package4 MSDS I Countrysupplierspecific I Focuses on the hazards of working with the material in an occupational setting I Intended to provide workers with procedures for handling that substance in a safe manner Includes physical data toxicity health effects first aid reactivity storage disposal protective equipment and spill handling procedures I Facility Location Factors 0 Cost considerations 6 Transportation rail air motor water Landfacilities costavailability Utilities Labor position of warehouse matters Toyquotr us had problem due to wage and educated population Taxesindustrial development incentives General climate local transportation to and from warehouse environmental considerations 0 DemandService Considerations3 New demand growingstabledeclining Customer service requirements responsiveness I MWeighted Center of Gravity Method 0 X demand1X1demand2X2demand3X3demand1damand2damand3 o YdemandlY1demand2Y2demand3Y3 demand ldemand2demand3 Module 25 I Transportation Goals6 0 Bridge the BuyerSeller Spatial gap 0 Reduce Total costs through supply chain may mean choosing higher form of transportation 0 Improve Operational flexibility 0 Reduce Customer Lead Times 0 Lower inventory Costs increase transportation 0 Optimize TradeOff Between Customer Service and cost tradeoff between being cost effect responsive system I Evaluation and Selection of Feasible Link Network Alternatives 0 Selection criteria7 o Capability ability to move what you need to move provide appropriate equipment amp facilities that a commodity require 0 Accessibility ability to get to where you need to 0 Transportation CostsRates 0 Transit Time amp Reliability speed consistency Timespeed Reliabilityconsistency not concerned wquick concerned with deadline 0 Security ability to deliver something in original condition how roughly will goods be handled 0 Special Services4 I Visibility can we track our package I Frequency how often a service is available I Expediting finding your package and speeding up its progress 0 Financial Stability of carriers easy entryexit of business trucks important markets are fixed railroad I Transportation Modes 0 Motor carrier vans trucks tractor trailers I Uses available roads high variable costs low fixed costs easy entryexit 0 Water boat charter barges I Uses available oceans lakes and navigable inland waterways high variable costs easy entryexit 0 Air planes I Uses airfieldsterminals high variable costs fixed costs may be higher than other modes private infrastructure high fixed costs monopolies as use increasescost per use decreases difficult entryexit o Rail I Low per unit cost accessibility limited slow transport 0 Combinations I Intermodal use multiple methods on same route ex Truck to Lewistown put cart on train Using various transportation modes together specialized applicationTOFC COFC Module 26 Return The Sustainable Green Supply Chain I Why emphasize Return Processes 0 May play a significant role in customer satisfaction customer may demand for that reverse supply chain 0 May be more profitable to harvest and reuse goodsmaterials rather than purchase new I Ex Recycle cans easier to recycle than buy more aluminum 0 Sources of difficult to obtain materials I Ex Raw materials iron steel coal oil 0 Government environmental and consumer group pressure to recycle I What are supply chain return processes 0 1 Reverse Supply chains processes dedicated to the reverse flow of products amp materials for the purpose of 39 Returns May play significant role in shaping customer satisfaction amp firm s competitive advantage 39 Repalr Want to be able to return ifit s not right I RemanUfaCture Want to be able to fix it rather than buy new I Recycling 0 2 Closed Loop Supply Chains processes that consider the elimination of waste in the production ofa good or service and the reuse andor recycling of all or a portion of the product when a user is finished with it I Ex Kodak singleuse cameras tires ink cartridges Xerox copiers cell phones I Condition Reuse I Gently used Repair I Good Condition Remanufacture unit I Good Condition Reuse parts I Unusable Recycle for materials I Ex Used cars se ustrade in if traded in the repair and put on their lot they sell to another dealer if not repaired and if there is extensive damage they sell it for parts too bad for that they sell for steel o 3 Design Strategies for Improving SC Performance Postponement If we don t make until last moment only make enough for demand we can reduce inventory forecasting helps cooperation throughout the supply chain is needed Finished goods SKU rationalization Component standardization one part fits all Aggregate Risk Pooling cut down on safety stock Maintainability make repairable items Environmentally Friendly 0 Environmental Designs Design products so that they do not contain environmentally harmful materials If harmful materials cannot be eliminated then design products to reduce these materials If harmful materials cannot be reduced then design products to reuse these materials in other items If harmful materials cannot be reused then design products such that the harmful materials are easily recycled o Ma39or Barriers Design of product does not facilitate recycling or reuse Economics and feasibility of I Product acquisition difficult or expensive to manage sources volumes amp condition of returning product I Reverse logistics need to be more flexible ma be less efficient due to less control over timing transportation amp packaging I Reprocessing processes need to accommodate and segregate repairs excess returns recycling I May require separate return operations forward amp reverse logistics systems Sellingdistributiondisposal may be difficult due to regulation or customer preference Ex ABC Video Asian junk yards people turned their computerjunk to recycling center in Denver they sent them to Asian junk yard Module 27 I What Is EBusiness Information System a set of interrelated components that collect retrieve process store and distribute information to support decision making coordination and control EBusiness utilization of information and communication technologies in support of all the activities of business Ex computer based quotAll about cycle time speed globalization enhanced productivity reaching new customers and sharing knowledge across institutions for competitive advantage Louis Gerstner former IBM CEO I Supply Chain Information Systems 0 Strategic Information technologies support Execution amp transaction processing order entry amp processing financial accounting inventory management systems Speed amp accuracy are key the key is on data I Processing day to day activities Routine decision making master scheduling amp supplier evaluation systems speed accuracy and some flexibility are key customized system I Based on day to day recordings of activities analyze results for planning Tactical planning sales amp operations planning systems standard usable info amp flexibility are key I Using routine decisions and make global how accurate is data Strategic decision making decision support systems location amp capacity modeling optimization and simulation systems Flexibility is key I Few exisisting are customized I IT Plan amp Supply Chain Integration 0 ERP systems large integrated transaction processing and reporting systems that track organizational resources including people processes and technology while supporting the engineering of business processes Organizational resources including people processes and technology ERP Software Big Companies Primary advantage of ERP is that it pulls together business functions using a single data base I ERP Advantages 6 O 0 Integrated processes Supply chain production amp Administrative I Everyone sees the information Eliminates Fragmentation of quotLegacyquot Databases amp Systems dictated by software Incorporates Redesigned quotBest Processesquot Globalizes Communication amp Collaboration Delivers Strategic Advantage Streamlines Flows amp Provides through Realtime Operating Information I ERP Disadvantages 7 O O O O Expensive to purchase implement ROI Requires Process Modification to Adopt amp Adapt to Software Is This The Way To Do Business Difficult and Costly to Customize Difficult to Adjust to Software Complexities Implementation Is Never Complete Limited ERP Expertise Staffing is an ongoing Problem Impacts of EAI s Enterprise Application Integration boltno s I ITampSCOR Model 3 O O O Source Market Intelligence amp Online Auctions I We can see whose buyerssellers Reverse auctions online as buyerseller cheaper quicker more available Make amp Wikinomics I The Global Floor Plan Ex BOAING virtualy design aircraft online make company more compact get rid of parts when finished I The emergence of Prosumers Ex Lego build toy online order Lego sends you all the necessary Lego s require to build toy Deliver amp the Wireless World I How GPS wireless communication cell phones allow us to readily locate redirect a package I ITB2B O 0 across the Supply Chain Electronic Data Interchange Allows a company to talk to company on different data basesplatform Electronic data interchange I A communication standard supporting interorganizational exchange of common business documents and information Transactionbased I EDI standard formats and syntax language ANSI X12 EDIFACT I Translation software translates company database info into EDI formats I EDI mail service service that transmits EDI direct systemto system value added network VPN Internet EDI uses virtual private networks VPN tunnels to move information in defined formats between businesses usually using the same ERP system I EBusiness Advantages 9 O O 24x7x365 business operations Access to global markets Speed in communications Opportunity to reduce market research costs Hardware independent Reduction ofdelivery time for goods Promotes rapid customization Low entry costs Pay before shipment sellproduct buymaterials make modelcollect money I EBusiness Disadvantages 7 0 Actual Delivery of Goods and Services I Time you don t get it at time of purchase I Physical product supplier amp deliver uncertainty Lack of Sensory experience no immediate gratification Security Returning goods Transaction Integrity privacy payment identity contract Payment tend to be via credit card impacting size amp number of transactions Goods tens to be durable and nonperishable Module 28 Notes Forces shaping Marketplace of 21St Century6 0 Consumer Demands low cost high quality customization availability and convenience Channel RelationshipPower Shifts Global Competitive Environment Technology Availability of Information 0000 Global Collaboration Wikisconsumers help design the product the most powerful companies focus on customer the most Supply Chain Strategies amp Appications8 0 Cycle time reduction 0 Demand pul distribution systems going from long distribution centers transformed into smaller quicker responsive production centers Supply chain compression JT quick response vendor managed Asset productivity Supply chain compression Asset productivity Supply chain metrics Organizational Relationships OOOOOOO Customer ServiceSatisfactionValue o EBusiness Push System 0 Long productions 0 Lower unit costs 0 High finished product inventories 0 Multiple stocking levels 0 Traditional approach Pul 0 Demand responsive 0 Flexible amp quick manufacturing 0 Short production runs 0 Postponement Risk pooling one central ware house that supplies 56 local retailers Retail Direct Drop shipments skip distribution centers A disadvantage of using ECommerce or EBusiness would be the time for delivery of physical products Determining where to locate warehouses is not an example of the primary business processes around which an Enterprise Resource Planning ERP system is designed At the basic level of execution and transaction processing needs are met by systems that record information flows retrieve data execute and control physical and monetary flows You are looking to obtain a commodity from a supplier through a reverse auction process If competition is adequate the buyer will most likely get a much lower price than using other techniques materials used if necessary ifyou can t reduce the harmful materials make them reusable in other items ifthey cannot be reused make them recyclable Closedrloop supply chainiacceptable outcome repair item and put back into service remanufacture or replace parts ofthe item and put back into service reuse parts ofthe items in manufacturing new like items and recycle the materials making up the item for producing other items ReverseReturn logistics Reverse logistics systems are less cost efficient than forward based systems You are coordinatingtransportation ofa shipment of coal choose rail carrieri since coal isa low value high density product normally shipped in large quantities and railwould provide a low cost pe 39 P iToshiba 7 UPS designed a system in which UPS employees not onlytransported customer laptops tothe repair facility but also completed the repair and returned the laptop tothe customer Garmentsthat are manufactured overseas are shipped via oceanrgoing vessels in containers rgt port of Seattle loaded onto rail cars for movement to major distribution ce nterssgt the containers are then unloaded garments are transferred tractorrtrailers for delivery to retail stores Endrtorend transportation system is also referred to as Multimodal or intermodaltransport the number or needthe havethe Usingtraderoff 39 39 more inventory cost increase Accessibility ofthe ware house to large tractorrtrailers from suppliers customer response time requirements local land use laws and utility cost are factorsthat come into play when making yourfinal decision on warehouse location New product into the market where your distribution system is widely dispersed you re looking for storage capability to position your product 7 obtain public warehousing A successful crossrdocking operation requiresthe increased use oftechnology to rapidly sort and reconfigure shipments Neighborhood X Conrdinate V Coordinate Homes Based on the above information and using the weighted center ofgmvlty method which of the X 371 Y 250 X 507 V 1459 x e X n 9 N o 317 v 449 v 207 s A J L 39 uie u yuul e supply chain through A Product mixing A Quanlity 14 A summer intern developed the above cost graph based on the different cost structures of variable warehousing but forgot to label the graph Based on your BAaoz knowledge which of the owing is correct A All of the statements are correct B Line AvA 39 y 5 c LIneB B 4 6 it A 4 0 Line or represents private warehousing depicting mostly xed costs with some variable costs E Line Segment Ara and AC represents the xed or direct costs associated with each respective wereheuse type information about total logistics costs on a cost per unit basis Based on this information and usir trade offanalysis which mode of transportation would you recommend A A e 39 39 learn you 4i 39 39 propose 5 to position your rm for the longrun For System A the estimate indudes 84000 in monthly xed costs with variable costs of 500 per unit System B includes 96000 in xed costs and 350 per unit in variable cosis The marketing department forecasts this years demand at 4200 units per month but next year s demand will grow to 10000 units per month and remain steady at that level for at least another year quot 6 Imuch 5mmquot 01 Given the logistics system s cost structure above at what level of demand would the two proposals r 1 i r A 8000 units per month 12 Based on your company s goals and the marketing department s estimation what would be your recommendation for a logistics strategy to a opt A Select System 5 because it offers the better solution in the lone run