Supply Chain Logistics Management
Chapter 2: Lean Logistics
United States Logistics Costs
1980
 GDP $2.88 trillion
 Logistics Cost $451 billion
 15.7% of GDP
 Trans. Cost $214 billion
 47.5 % of Logistics Cost
1000
900
700
600
$ Billions
$ billion
800
500
400
300
200
100
0
1980
Logistics
Year
1999
1999
 GDP $9.26 trillion
 Logistics Cost $921 billion
 9.9% of GDP
 Trans. Cost $554 billion
 60.2 % of Logistics Cost
Transportation
Source: Robert V. Delaney, 11th Annual “State Of Logistics Report” © June 5, 2000
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Integrated Logistics
Order
Processing
Facility
Network
Warehousing
Material Handling
Packaging
Inventory
Transportation
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
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Logistical Integration
Inventory Flow
Enterprise
Customers
Market
Distribution
Manufacturing
Support
Procurement
Suppliers
Information Flow
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Market Distribution
Operating Concerns
Market Distribution:
Activities related to providing customer service. Requires performing
order receipt and processing, deploying inventories, storage and
handling, and outbound transportation within a supply chain. Includes
the responsibility to coordinate with marketing planning in such areas
as pricing, promotional support, customer service levels, delivery
standards, handling return merchandise, and life-cycle support. The
primary market distribution objective is to assist in revenue generation
by providing strategically desired customer service levels at the lowest
total cost.
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Manufacturing Support
Operating Concerns
Manufacturing Support:
Activities related to planning, scheduling, and supporting
manufacturing operations. Requires master schedule planning and
performing work-in-process storage, handling, transportation, and time
phasing of components. Includes the responsibility for storage of
inventory at manufacturing sites and maximum flexibility in the
coordination of geographic and final assemblies postponement
between manufacturing and market distribution operations.
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Procurement
Operating Concerns
Procurement:
Activities related to obtaining products and materials from outside
suppliers. Requires performing resource planning, supply sourcing,
negotiation, order placement, inbound transportation, receiving and
inspection, storage and handling, and quality assurance. Includes the
responsibility to coordinate with suppliers in such areas as scheduling,
supply continuity, hedging, and speculation, as well as research
leading to new sources or programs. The primary procurement
objective is to support manufacturing or resale organizations by
providing timely purchasing at the lowest total cost.
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Logistics Information Requirements
PLANNING - COORDINATION
Strategic
Objectives
Capacity
Constraints
Logistics
Requirements
Manufacturing
Requirements
Procurement
Requirements
Transportation
and Shipping
Procurement
Inventory
Deployment
Forecasting
Inventory
Management
Order
Processing
Order
Assignment
Distribution
Operations
OPERATIONS
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Echeloned Structured Logistics
INFORMATION FLOWS
Supplier
Industrial
Distribution or
Consolidation
Warehouse
Manufacturer
Wholesaler or
Distribution
Center
Retailer
Customer
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Echeloned Structured Logistics
INFORMATION FLOWS
Supplier
Industrial
Distribution or
Consolidation
Warehouse
Manufacturer
Wholesaler or
Distribution
Center
Retailer
Customer
Support for
Direct Delivery
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Flexible Echeloned Structured Logistics
INFORMATION FLOWS
Supplier
Flow Through
Flow Through
Service Supplier Arrangements
Service Supplier Arrangements
Industrial
Distribution or
Consolidation
Warehouse
Manufacturer
Wholesaler or
Distribution
Center
Retailer
Customer
Support for
Direct Delivery
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Logistical Performance Cycles
Material
Source
Purchasing
Cycle
Lead Supplier
(Tier 1)
Manufacturing
Plant
Manufacturing
Support
Cycle
Node
Distributors
Physical
Distribution
Cycle
Customer
Transportation
Links
Communication
Links
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Multi-Echeloned Flexible Network
1
2
3
Material
Source
Material
Source
Material
Source
Manufacturing
Plant
Manufacturing
Plant
Manufacturing
Plant
Plant
Warehouse
Plant
Warehouse
Plant
Warehouse
Distribution
Warehouse
Distribution
Warehouse
Distribution
Warehouse
Customer
Customer
Customer
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Basic Market Distribution PerformanceCycle Activities
Order
Processing
Order
Transmission
Customer
Order
Order
Selection
Order
Transportation
Customer
Delivery
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Procurement-Cycle Activities
Sourcing
Order Placement
and Expediting
Supplier
Receiving
Transportation
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Performance-Cycle Uncertainty
Total Performance Cycle
1
Time Range - Days
1/2
10
5
Customer
Delivery
40
Order
Transmission
Time Range - Days
3
1
Time Range - Days
1/2
Order
Transportation
2
4
Order
Processing
10
Order
Selection
Time Range - Days
1
3
2
1
2
Time Range - Days
4
20
Time Range - Days
Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper.
Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.