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Distribution Channel Management
Chapter 13
Logistic and Supply Chain Management
Chapter 13 Outlines
Learning Objectives
- Understand the meaning of Logistics with its relation to
Supply Chain Management
- Know the Logistics management based on the Systems
Concept and the Total Cost Approach
- Understand the Supply Chain Management concept
- Describe the critical elements of Efficient Consumer
Response and Quick Response as the approach to
Supply Chain Management
- Understand why channel management is needed to implement
the supply chain management paradigm in an organization
Logistics and Supply Chain Management
Points of Discussion
- What is the meaning of Logistics and what is its
boundary?
- How is Logistics related to Supply Chain Management
concept?
Logistics and Supply Chain Management
The definition of Logistics
- According to Kotler’s definition, Logistics is defined
as “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 profit”
Logistics and Supply Chain Management
The scope of Logistics
- Logistics concerns the processing and tracking of
goods during warehousing, inventory control, transport,
customs documentation and delivery to customer
- Logistics is widely considered to be part of supply
chain management
Logistics System and Basic Components
Logistics and Supply Chain Management
The concept of Supply Chain Management (SCM)
- Cover any physical inputs, not just finished goods
- Involve every element of the value-added chain
- Route to market should coordinate with manufacturing
process
- Upstream element not only inventories of finished goods,
but also WIP and raw material of suppliers, suppliers
Logistics and Supply Chain Management
The concept of Supply Chain Management (SCM)
- Downstream covers all channel members down to
customers of customers
- Signal the very beginning of the chain what to do,
when to do it as a function of what happen at the very
end of the chain of distribution
A Typical Company Value Chain
Primary Activities and Costs
Inbound Operations Outbound Sales & Service Profit
Logistics
Margin
Logistics Marketing
Product R&D, Technology, Systems Development Support
Human Resources, General Management and Firm Activities
and Costs
Infrastructure
Logistics and Supply Chain Management
Requirements for the firms to service customers
efficiently
1. A market orientation – focused on last customer
2. Effective channel management to enable smooth
transfer of product and information
3. Effective logistics
Efficient Consumer Response (ECR)
ECR calls for cooperation from entire channel
members to improve on these four areas
1. A continuous replenishment program (CRP) – by
using purchase data of the final buyer to inform all
upstream supply chain members to end the
bullwhip effect
2. Efficient pricing and promotions – that can push
higher sales without problems of over stocking and
degrading of brand equity
Efficient Consumer Response (ECR)
ECR calls for cooperation from entire channel
members to improve on these four areas
3. Changes in product introduction – having more
accurate forecast on new product introduction
through market research information
4. Changes in merchandising – an effort to find better
ways to merchandise brands and associated
product categories
Efficient Consumer Response (ECR)
Obstacles to efficient consumer response
- ECR requires standardization of methods and
implementation is a long and expensive affair
- Trust and good working relationships are necessary
for information exchange among members
- ECR requires considerable change in internal
operations
- Teamwork must become permanent
Rapid or Quick Response (QR)
The elements concerning with QR
- It’s another approach to supply chain
management
- It’s originated from the fashion industry
- It’s fundamental pull system idea
Rapid or Quick Response (QR)
The same and contrast between ECR and QR
- What to make and what to ship quickly based on customer
purchase data
- Emphasis on inter-firm cooperation
- When mistakes are made, catch them soon and mark them
down quickly
- Difference coming from the volatile, unpredictable nature
of business involved (FMCG VS. Fashion industries)
- ECR focuses on shipments and promotions while QR focuses
more on flexible manufacturing techniques
Supply Chain Management Approach
Points of Discussion
Between QR and ECR, which model is better?
- QR – keep manufacturing design flexible, not focus
on minimizing transportation costs
- ECR – fix design, control cost tightly
- Both are pull systems but differ in how and when
they react
Type of goods for Supply Chain Management
Type of goods for Supply Chain Management
Functional goods VS. innovative products
- The keys to supplying functional goods are
efficient manufacturing and logistics cost
- The keys to innovative products are speedy
market responses, critical information flows
Type of goods for Supply Chain Management
Logistics and Supply Chain Management
Two critical elements to build a Supply Chain
Management mentality in an organization
1. An internal culture of cross-functional
integration (as opposed to functional silos)
2. Effective channel management – trust, good
working relations, the judicious exercise of
power