Logistics - PROC 5850
Joe Walden
joewalden@supplychainresearch.com
Logistics - PROC 5850 Walden
•Personal Background
•Educational Background
•Books, Articles, Presentations
•Contact: Joe Walden
joewalden@supplychainresearch.com
(760) 447-3651
Logistics - PROC 5850 Walden
Syllabus
• Class 1: Jan 7 – Chapters 1 & 2, Supply Chain
Security
• Class 2: Jan 14 – Chapter 3 & 4
• Class 3: Jan 21 – Chapters 5 & 6
• Class 4: Jan 28 – review and mid term
• Class 5: Feb 4 – Chapters 7 & 8
• Class 6: Feb 11 - Chapters 9 & 10
• Class 7: Feb 18 – Chapters 11, 13
• Class 8: Feb 25 – Chapter 15 and Reverse
Logistics
• Class 9: Mar 4 - Course Critique, Review, Final
Exam
Logistics - PROC 5850 Walden
Class Slides and Information
• www.supplychainresearch.com
• Slides will be posted/updated week prior to
class – therefore the slides currently on the
website may change as new stuff comes
available
Logistics - PROC 5850 Walden
Grading
•
•
•
•
Mid term 35%
Final exam 35%
Case Study 15%
Paper 15%
Logistics - PROC 5850 Walden
CHAPTER 1
Logistics’ Role in the
Economy and the
Organization
Logistics - PROC 5850 Walden
Importance of Supply Chain Management
and The Art of War
• “War is a matter of vital importance to the
state; the province of life or death; the road to
survival or ruin. It is mandatory that it be
thoroughly studied.”
• Supply Chain Management is a matter of vital
importance to the company – the road to
survival or ruin for the company. It is
mandatory that it be thoroughly studied.
Logistics - PROC 5850 Walden
Business Logistics/Supply
Chain—A Vital Subject
The supply chain is simply another way of
saying “the whole process of business.”
Logistics - PROC 5850 Walden
Logistics Defined
Logistics is the process of planning, implementing and
controlling the efficient, cost-effective flow and storage
of raw materials, in-process inventory, finished goods
and related information from the point of origin to point
of consumption for the purpose of conforming to
customer requirements.
Council of Supply Chain Management
Practitioners
Supply Chain Management Defined
SCM is the integration of all activities associated with the
flow and transformation of goods from raw materials
through to end user, as well as information flows, through
improved supply chain relationships, to achieve a
sustainable competitive advantage.
Handfield and Nichols
Logistics - PROC 5850 Walden
Logistics and Supply Chain Importance
• >$1 Trillion annually on supply chains in
US
• ~$600 Billion on transportation alone in US
• 70% of all goods in US are transported at
some point in supply chain by trucks
Logistics - PROC 5850 Walden

Significance
of
Logistics
Costs are high




About 10.5% of GDP domestically
About 12% of GDP internationally
A range of 4 to 30% of sales for individual firms, avg. about 10%
70-80% of sales if purchasing and production are included
 Customers are more demanding of the supply chain
 Desire for quick response
 Access to information and ordering online
 Desire for mass customization
 An integral part of company strategy
 Generate revenue
 Improve profit
 Up to $12 dollars of increase in sales to = $1 saved in supply chain
 Logistical lines are lengthening
 Local vs. long distance supply – global supply chains
 Logistics is a key to trade and an increased standard of living
 Law of comparative economic advantage applies
 Logistics adds value
 Time and place utilities
Logistics - PROC 5850 Walden
Chapter One: Logistics Role in the
Economy and Organization
To identify how logistics affects the economy and
the performance of organizations
To briefly explore how logistics has developed over time
To understand how logistics contributes to value
creation (value-added)
To understand the concept of the systems approach
as it relates to logistics and marketing, the total cost
concept and profitability
To show how to recognize areas in which logistics
performance can be improved
Logistics - PROC 5850 Walden
Table 1-1: The Cost of the Business Logistics System In
Relation to Gross Domestic Product (GDP) In $ Billion
Year
Inventory
Carrying
Costs
Transportation
Costs
Administrative
Costs
Total U.S.
Logistics
Cost
Logistics As a
Percentage of
GDP
1960
31
44
3
78
14.7
1965
38
64
4
106
14.7
1970
56
91
6
153
14.7
1975
97
116
9
222
13.5
1980
220
214
17
451
16.1
1985
227
274
20
521
12.4
1990
283
351
25
659
11.4
1995
302
441
30
773
10.4
1,006
10.1
Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001
2000
377
Logistics - PROC 5850 Walden
590
39
Physical Distribution Costs
Category
Percent of sales
$/cwt.
3.34%
$26.52
Warehousing
2.02
18.06
Order entry
0.43
4.58
Administration
0.41
2.79
Inventory carrying
1.72
22.25
7.65%
$67.71
Transportation
Total
Add one-third for inbound supply costs
Source: Herb Davis & Company
Logistics - PROC 5850 Walden
Logistics cost
are about 10% of
sales w/o
purchasing costs
Logistics: the right product, in the right quantity,
in the right condition, at the right time, at the
right place. These are the components of the
Logistics metric for perfect order fulfillment.
Logistics - PROC 5850 Walden
Components of
Logistics Management
Inputs into
logistics
Natural
resources
Management actions
Planning
Human
resources Suppliers
Financial
resources
Information
resources
Outputs of
logistics
Implementation
Logistics management
Raw
In-process
materials inventory
Finished
goods
Control
Time and
Customers place utility
Logistics activities
Customer service
Demand forecasting
Inventory management
Logistics communications
Material handling
Order processing
Parts and service support
Logistics - PROC 5850 Walden
Competitive
advantage
Plant & warehouse site selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage
Efficient
movement
to customer
Proprietary
asset
Copyright © 2001 by The
McGraw-Hill Companies, Inc.
All rights reserved.
Logistics activities
Customer service
Demand forecasting
Inventory management
Logistics communications
Material handling
Order processing
Parts and service support
Logistics - PROC 5850 Walden
Plant & warehouse site selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage
Security
Customs Clearance
Marketing/Logistics
Management Concept
Customer satisfaction
•Suppliers
•Intermediate customers
•Final customers
Integrated effort
•Product
•Price
•Promotion
•Place (distribution)
Logistics - PROC 5850 Walden
Company profit
•Maximize long-term
profitability
•Lowest total costs
given an acceptable
level of customer
service
Cost Trade-offs in Marketing
and Logistics
Price
Order processing
and information
costs
Place/customer
service levels
Inventory
carrying costs
Transportation
costs
Lot quantity costs
Warehousing costs
Order processing
and information
costs
Logistics - PROC 5850 Walden
MARKETING
Product
Relationship of Logistics
Activities to Logistics Costs
•
•
•
•
•
•
Customer service levels
Transportation costs
Warehousing costs
Order processing/information systems costs
Lot quantity costs
Inventory carrying costs
Logistics - PROC 5850 Walden
Key Logistics Activities
• Customer service
• Demand forecasting
• Inventory
management
• Logistics
communications
• Material handling
• Order processing
• Packaging
Logistics - PROC 5850 Walden
• Parts and service
support
• Plant and warehouse
site selection
• Procurement
• Reverse logistics
• Traffic and
transportation
• Warehousing and
storage
Flow through the Supply Chain
Customer
Carrier
Distribution
center
Supplier
Customer
Carrier
Customer
Carrier
Carrier
Supplier
Manufacturing
site
Customer
Carrier
Supplier
Carrier
Customer
Distribution
center
Customer
Logistics - PROC 5850 Walden
Future Challenges and Areas for
Performance Improvement
•
•
•
•
•
•
•
Supply Chain Management
Strategic Planning
Total Quality Management
Just-in-Time
Quick Response
Efficient Consumer Response
Logistics as a Competitive Weapon
Logistics - PROC 5850 Walden
Future Challenges and Areas for
Performance Improvement (cont.)
•
•
•
•
•
•
Accounting for logistics costs
Logistics as a boundary-spanning activity
Global logistics
Increasing skill requirements
Logistics information systems
Strategic alliances, partnerships, and
outsourcing
• Green marketing and reverse logistics
Logistics - PROC 5850 Walden
CHAPTER 2
Supply Chain
Management
Goals of this chapter:
•To show how supply chain management can
play a key role in achieving corporate success
• To familiarize with the concept of supply
chain management
•To describe the factors that influence supply
chain network structure, supply chain business processes,
and supply chain management components
• Supply Chain Security issues
Logistics - PROC 5850 Walden
Supply Chain Management
The integration of key business
processes from end user through
original suppliers, that provides
products, services, and
information that add value for
customers and other
stakeholders.
Logistics - PROC 5850 Walden
Evolution of Supply Chain Management
Activity fragmentation to 1960
2000+
Activity Integration 1960 to 2000
Demand forecasting
Purchasing
Requirements planning
Production planning
Manufacturing inventory
Purchasing/
Materials
Management
Warehousing
Logistics
Material handling
Packaging
Finished goods inventory
Distribution planning
Order processing
Transportation
Customer service
Strategic planning
Information services
Marketing/sales
Finance
CR (2004) Prentice Hall, Inc.
Logistics - PROC 5850 Walden
Physical
Distribution
Supply Chain
Supply Chain
Management
Management
SUPPLY CHAIN MANAGEMENT
Integrating and Managing Processes Across the Supply Chain
Information Flow
Tier 2
Supplier
Manufacturer
Tier 1
Supplier
Customer
Logistics
Marketing & Sales
Purchasing
Production
Consumer/
End-user
PRODUCT FLOW
Finance
R&D
Supply Chain Business Processes
CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER SERVICE MANAGEMENT
DEMAND MANAGEMENT
ORDER FULFILLMENT
MANUFACTURING FLOW MANAGEMENT
PROCUREMENT
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
RETURNS
Source: Douglas M. Lambert, Martha C. Cooper, Janus D. Pagh, “Supply Chain Management: Implementation Issues and Research Opportunities”, The International Journal
of Logistics Management, Vol. 9, No. 2, 1998, p. 2.
Logistics - PROC 5850 Walden
Supply Chain Network Structure
Tier 1
Suppliers
Tier 1
Customers
Tier 2
Customers
1
1
2
2
n
1
1
2
2
Tier 3 to
Consumers/
End-Customers
n
1
n
1
2
3
n
3
n
n
n
n
Logistics - PROC 5850 Walden
1
2
1
Focal Company
1
Members of the Focal Company’s Supply Chain
Tier 3 to n customers
n
Consumers / End-Customers
Tier 2
Suppliers
Tier 3 to n suppliers
Initial Suppliers
Tier 3 to
Initial
suppliers
Types of Business Process Links
• Managed Process Links – important
from company perspective
• Monitored Process Links – not as critical
• Not-Managed Process Links – not
actively involved – often overlooked and
may cause problems
• Nonmember Process Links – part of
supply chain but not direct supply chain
Logistics - PROC 5850 Walden
Underlying Process Vision
Supply Chain Management Vision
The key to achieving an integrated flow of product and information throughout
the supply chain is to create a focused customer interface, a focused supplier
interface, and an integrated, process-oriented, supply chain which is driven by
the customer.
Customer Relationship
Management
Customer
Service
Management
Fulfillment
Customer
Demand
Management
Procurement
Manufacturing Flow
Management
Logistics - PROC 5850 Walden
Source: 3M
Customer Relationship Management
• Customer service teams develop and implement
customer partnering programs.
• Product/service agreements are established.
• New customer interfaces lead to improved
communication and better predictions of
customer demand and improve the way
customers are serviced.
• Teams identify and eliminate sources of
production variability.
• Key performance evaluation criteria (both level
of service and customer profitability) are used
to measure results.
• Similar to first step in Six Sigma process
Logistics - PROC 5850 Walden
Customer Service Management
• Provides a single source of customer information,
a point of contact for administration of the
product/service agreement.
• Conveys real-time information through interface
with product and distribution operations.
• Requires an on-line/real-time product and
pricing information to assist customers with
inquiries, order placement, and after-sales
service.
• Includes front line technical service that assists
customers with product applications and
recommendations.
Logistics - PROC 5850 Walden
Customer Order Fulfillment
• “Customer need dates” and requirements drive
the process.
• Manufacturing, distribution, and
transportation plans are integrated.
• Strategic alliances with key supply chain
members and carriers are formed to meet
requirements and to reduce total-delivered-cost
to customers
• Key metrics: Required Delivery Date; Time
Definite Delivery; On time delivery rates;
perfect order fulfillment
Logistics - PROC 5850 Walden
Perfect Order Fulfillment
•
•
•
•
•
•
Right product
Right Place
Right Quantity
Right time
Right condition
Is 99% good enough?
Logistics - PROC 5850 Walden
Perfect Order Fulfillment
• Right Product % x Right Place % x
Right Quantity % x Right Time % x
Right Condition %
• Example: 99% x 99% x 99% x 99% x
99% = 95% Perfect Order Fulfillment
• 95% = 77.37% Perfect Order Fulfillment
Logistics - PROC 5850 Walden
Manufacturing Flow Management
• Product is pulled through the plant based on
customer needs.
• Manufacturing processes must flexibly respond
to market changes with rapid changeover
capabilities for mass customization.
• Minimum lot sizes are planned to move toward
a make to order environment.
• Production priorities are driven by required
delivery dates.
• Managers concentrate on keeping
setup/changeover costs very low.
Logistics - PROC 5850 Walden
Procurement
• Strategic plans of suppliers and company are
aligned to focus resources on holding down
costs and developing new products.
• Supplier categorization and management is
implemented on a corporate global basis, with
purchasing in a strategic contracting role.
• Purchase order transactions are integrated
with the supply process to improve productivity
and all areas of supplier performance.
Logistics - PROC 5850 Walden
Product Development
• Design what the customer wants/needs
• Create a need for the product – 3M/iPod
Logistics - PROC 5850 Walden
Reengineering SCM
Process Flow Chart
Mission statement
Business requirements
Assess:
• Culture
• Strategies
• Practices
• Processes
Acceptable
Not acceptable
Revise/reengineer
Strategic
partnerships
Organization
structure
Human
resource
capabilities
Information
systems
New enterprise design
for integrated process
Implement business
solution in supply chain
Douglas M. Lambert, Larry C. Guinipero, and Gary J. Ridenhower, “Supply Chain Management: A Key to Achieving
Logistics - PROC 5850 WaldenSource:
Business Excellence in the 21st Century,” unpublished manuscript. All Rights reserved.
IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT
Typical
Functions
Silos
Business
Processes
S
U
P
P
L
I
E
R
S
Customer
Relationship
Management
Sales &
Marketing
Account
Management
Account
Customer Service
Management
Administration
Technical
Logistics
Requirements Requirements
Definition
Definition
Sourcing
Strategy
Customer
Profitability
Priority
Assessment
Cost
To Serve
Tradeoff
Analysis
Coordinated
Execution
Capability
Planning
Sourcing
Plant
Direct
Selected
Supplier(s)
Distribution
Cost
Production
Planning
Integrated
Supply
Manufacturing
Cost
Integrated
Planning
Supplier
Management
Materials
Cost
Process
Specifications
Material
Specifications
R & D Cost
Process
Requirements
Network
Planning
Fulfillment
Special
Orders
Environmental
Requirements
Distribution
Management
Product
Development and
Commercialization
Manufacturing
Strategy
Performance
Specifications
Demand
Planning
Procurement
Finance &
Purchasing Accounting
Technical
Service
Demand
Management
Manufacturing Flow Packaging
Management
Specifications
Manufacturing
Process
Stability
Order
Booking
Material
Specifications
Business
Plan
Product
Design
Prioritization
Criteria
Inbound
Flow
Movement
Requirements
C
U
S
T
O
M
E
R
S
Information Architecture, Data Base Strategy, Information Visibility
Note: Process sponsorship and ownership must be established to drive the attainment of the supply chain vision and eliminate the functional barriers that
artificially separate the process flows.
Logistics - PROC 5850 Walden
Overview Presentation
Supply Chain
Operations Reference-model
(SCOR)
Logistics - PROC 5850 Walden
• The SCC is an independent, not-for-profit, global corporation with
membership open to all companies and organizations interested in
applying and advancing state-of-the-art supply chain management
systems and practices.
• Over 800 Company Members
• Cross-industry representation
• Chapters in Australia/New Zealand, Brazil, Europe, Japan,
North America, Southern Africa, and South East Asia with
petitions for additional chapters pending.
•The Supply-Chain Council (SCC) has developed and endorsed the
Supply Chain Operations Reference-model (SCOR) as the crossindustry standard for supply chain management
Logistics - PROC 5850 Walden
SCC Organization - Chapters and Staffing
SCC Global Headquarters
Pittsburgh, Pennsylvania,
USA
Disney
Japan Chapter
Tokyo, Japan
NEC
Europe
North America
Chapter
Oslo, Norway
Modus Media
South East Asia Chapter
Singapore
Venture Inc.
Brazil Chapter
Effective 9/1/03
Australia/New Zealand Chapter
Sydney, Australia
Logistics - PROC 5850 Walden
Southern Africa
Johannesburg, South Africa
UTi
SCOR is structured around five distinct
management processes
Plan
Deliver
Return
Suppliers’
Supplier
Source
Make
Return
Deliver
Return
Source
Make
Return
Deliver
Return
Source
Return
Your Company
Supplier
Make
Deliver
Source
Return
Return
Customer
Internal or External
Internal or External
SCOR Model
Building Block Approach
Processes
Metrics
Best Practice
Technology
Logistics - PROC 5850 Walden
Customer’s
Customer
Linking Supply Chain Performance
Attributes and Level 1 Metrics
Performance
Attribute
Performance Attribute Definition
Level 1 Metric
The performance of the supply chain in delivering:
the correct product, to the correct place, at the
correct time, in the correct condition and
packaging, in the correct quantity, with the correct
documentation, to the correct customer.
Delivery Performance
Supply Chain
Responsiveness
The velocity at which a at which a supply
chain provides products to the customer.
Order Fulfillment Lead Times
Supply Chain
Flexibility
The agility of a supply chain in responding to
marketplace changes to gain or maintain
competitive advantage.
Supply Chain Response Time
The costs associated with operating the
supply chain.
Cost of Goods Sold
Supply Chain
Delivery
Reliability
Supply Chain
Costs
Fill Rates
Perfect Order Fulfillment
Production Flexibility
Total Supply Chain
Management Costs
Value-Added Productivity
Warranty / Returns Processing
Costs
Supply Chain
Asset
Management
Efficiency
The effectiveness of an organization in
managing assets to support demand
satisfaction. This includes the management
of all assets: fixed and working capital.
Logistics - PROC 5850 Walden
Cash-to-Cash Cycle Time
Inventory Days of Supply
Asset Turns
Just In Time - Logistics or Supply Chain?
Logistics - PROC 5850 Walden
Just -in-Time
According to APICS Dictionary:
“A philosophy of manufacturing based on
planned elimination of all waste and on
continuous improvement of productivity.”
Logistics - PROC 5850 Walden
Just in Time
• The process is important not the actual “zero
inventory” concept
• First Step - document the existing flow of products or
services - see the actual flow and determine which are
value added
• Second Step - determine the reasons for variations in
flow and why a new flow may be needed
• Implement change
• Mistake proof
• Start again at step 1
Logistics - PROC 5850 Walden
7 Wastes
•
•
•
•
•
•
•
Waste of overproduction
Waste of waiting
Waste of transportation
Waste of Stocks
Waste of motion
Waste of making defects
Waste of processing - when product
should not be made or process not used
• (added by Walden) Waste of Meetings
Logistics - PROC 5850 WaldenSource
: Just-in-Time: Making it Happen
Supply Chain Security
Logistics - PROC 5850 Walden
Supply Chain Security
What’s the cost of 9/11 to the
Supply Chain?
Fortune Magazine - $50-80 billion a
year
• inefficient supply chains
• higher transportation costs
• increased inventory
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Choosing the Right Supply Chain Strategy
Efficient
supply chain
Supplyto-stock
Responsive
supply chain
Supplyto-order
Logistics - PROC 5850 Walden
• Economical production runs
• Finished goods inventories
• Economical buy quantities
• Large shipment sizes
• Batch order processing
• Excess capacity
• Quick changeovers
• Short lead times
• Flexible processing
• Premium transportation
• Single order processing
Supply Chain Security
And Homeland Defense
Logistics - PROC 5850 Walden
Recent Headlines
• “New Budget includes $10.2 Billion for
Border Security.”
• “Battling the Bad Guys: 2005 Was a
Tough Year” Dec 2005 Baseline
Magazine
• “Major Data Theft Leads to Major
Legal Problems” Baseline Magazine
• “Polo Ralph Lauren – Lost Point of
Sale Data”
• “No One Stop Shopping to Stop
Database Pilferages” E-Week, Dec 21,
2005
Logistics - PROC 5850 Walden
Recent Headlines
• GAO Report: “Container Security – Expansion of
Key Customs Programs Will Require Greater
Attention to Critical Success Factors”
• “Security and Risk Strategy Become Integrated”
– Top Trends for 2006, CIO Magazine, January
2006
• “Computer Security Becomes More Critical” CIO
Magazine, January 2006
• “Supply Chain and Security Remain in the
Forefront”
• “ISO Publishes Supply Chain Security
Guidelines” Plant Engineering Magazine, Sep 06
• New Budget Includes $10.2 Billion Increase for
Border Protection
Logistics - PROC 5850 Walden
Recent Headlines
• “Supply Chain Security Poses
Opportunities, Obstacles” EWeek, Sep 23, 2005
• “Supply Chain Risks Threaten the
World’s Biggest Companies”
Logistics Today – “Financial
executives at some of the world’s
biggest companies believe supply
chain risks post the top threat to
companies revenues.”
Logistics - PROC 5850 Walden
Examples
•
•
•
•
•
•
Major Distributor, Dec 2006
Locks on trucks
SAFE Port Initiative
Scanning of Containers
C-TPAT
ISO Standards for Supply Chain Security
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Logistics - PROC 5850 Walden
Terrorism Risk Insurance
U.S. Terrorism Risk Insurance Act (TRIA) – Our property and casualty
insurance experts are helping clients with interests in the United States make
informed decisions about terrorism coverage.
U.S. President George W. Bush signed the Terrorism Risk Insurance Act (TRIA)
into law in November 2002 to stimulate business investment that had slowed to
a trickle after the events of September 11, 2001. The law creates a three-year
federal program that backs up insurance companies and guarantees that
certain terrorist-related claims will be paid.
TRIA is a short-term measure designed to give the insurance market time to
recover and develop new solutions.
Logistics - PROC 5850 Walden
Supply Chain Security
“We have proved to our management
that good security is good business.”
— Ann Lister of Texas Instruments
Logistics - PROC 5850 Walden
Risk
Supply Chains are inherently
complex, dynamic, and fluid,
characterized by uncertainty,
ambiguity, and friction. These
characteristics cloud the
operating environment: they
create risks
Logistics - PROC 5850 Walden
Important?
• September 11, 2001 - $2 billion
per day lost
• Longshoremen Strike, 2002 –
300-500 ships backed up
• Potential loss of attack to major
port - $20 billion estimate
Logistics - PROC 5850 Walden
Problem?
•
•
•
•
•
•
•
•
•
Terrorism
Obsolescence
Pilferage
Information Breach
Proprietary Data – Camera Phones; Thumb Drives
Cyberspace Security
RFID Data Security
66% of Sealift Containers arrive at 20 Major Ports
>58 % of all inbound containers come through New
York/New Jersey, Los Angeles, Long Beach
• ~44% through Los Angeles/Long Beach in 2003
• Lengthening of Supply Chains – coupled with
Globalization
• Top 5 “Hottest Global Markets”: China, Mexico,
Eastern Europe, Southeast Asia, India
Logistics - PROC 5850 Walden
Purpose of Risk Assessment
Identify those areas of the supply chain
that are vulnerable to interruptions of
support flow.
• People
• Processes
• Technologies
• External events
Logistics - PROC 5850 Walden
Risk Assessment
• Terrorism
• Port Security – over 12 million
containers annually to the US;
200 million world wide
• Port Security – 300 US Ports
• Longshoremen Strike – 2002
• Potential Airport Attack – LAX;
MPS; LGA
Logistics - PROC 5850 Walden
How do you identify Supply
Chain Risks?
•
•
•
•
•
•
You have to know your processes
Process maps
Understanding processes
Understanding where risks are
Internal Risks
External Risks
Logistics - PROC 5850 Walden
What are Supply Chain Hazards?
•
•
•
•
•
•
•
•
Theft/Pilferage
Competition
Information Systems
Cell Phones
Thumb Drives
Camera Phones
Disgruntled Employees
Lack of Training
Logistics - PROC 5850 Walden
What is a Catastrophic Risk?
•
•
•
•
•
•
Inaccurate receipts?
Customer Satisfaction?
Sloppy Warehousing?
National Emergency?
Hurricane?
Or, Only when it makes it to
CNN?
Logistics - PROC 5850 Walden
New Problem?
• “There were no ‘secure’ rear areas.”
General Joseph Heiser on
Vietnam Logistics
• Sun Tzu – Chapter 1, The Art of War
• Native Americans
• American Civil War – Great Train
Chase
• Pirates of the Caribbean
Logistics - PROC 5850 Walden
Supply Chain Security
• Supply Chain Security must protect
the path from the supplier to the
customer.
• End to End Security
• End to End Visibility – RFID
• Information Security
• Personal Daily Obligation
• Operational Security
• Security and Velocity
Logistics - PROC 5850 Walden
Supply Chain Security
A Global Perspective
Logistics - PROC 5850 Walden
Top 5 European Ports
•
•
•
•
•
Rotterdam – 9.287 million TEUs in 2005
Hamburg – 9.088 million TEUs
Antwerp – 6.488 million TEUs
Bremen – 3.735 million TEUs
Giora Tauro – 3.161 million TEUs
• LA/Long Beach – 7.485 mil TEUs
Source: Logistics Today, Feb 07, p.1, 20
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Other Key Ports
•
•
•
•
•
Singapore – 23.2 million TEUs
Hong Kong – 22.602 million
Shanghai – 18.080 million
Shenzhen – 16.2 million
Pusan – 11.94 million
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Rotterdam
• > 900 intermodal barge moves daily to 72
locations
• > 200 rail moves
• 220 million people within 600 miles of
Rotterdam
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Rail
• > 15% of cargo to Germany via rail
• ~ 13% of Belgium cargo
• ~ 14 of French cargo
• US Rail – 4 major bridges over the
Mississippi River
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Other issues
• 9000 distribution centers in the Netherlands
• 2000 - $64.4 billion USD in logistics and
distribution in The Netherlands
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Containers
•
•
•
•
Cost to X-Ray containers
Manpower
Delays
Radiation
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Why should you care about SC Security?
• Is it a US problem?
• Global Problem
• Heathrow Airport delays Superbowl
weekend 2005
• RFID – is this the solution?
• ISO Guidelines for SC Security
• Terrorism Insurance
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Transportation Worker Identification
Credentials
• Port Employees
• Long Shoremen
• Unescorted access personnel
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HR 1
• Air Cargo Bill – phase in inspection of all
air cargo
• Sea Cargo – safe seal – shippers of >75K
TEUs to US have 3 years to comply
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C-TPAT
• Security Freight Initiative
• Inspection of high risk containers @ >50
ports
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Other issues
• theTruecosts.com – costs of piracy and
fakes
• Rotterdam – 19% of all European Volume
• Amsterdam – 440 million metric tonnes
• www.HIDC.com – Holland International
Distribution Council
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Orlando International Airport
• No staffing of doors for employee entrance to
baggage claim areas
• Guns smuggled into planes by employees
• “no requirement for us to staff those doors” OIA
Spokesperson; TSA – “not my job!”
• Identified as security issues in 2004
• 2006 – ½ of TSA Screeners failed test that
measured how well employees could identify
explosives, guns and other weapons on the scanner
– but can identify bottles of mouthwash and
toothpaste
Source: Mike Thomas, Orlando Sentinel, Mar 15, 2007, p. B-1
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Air Cargo World 2/07
• Bans on Russian Flights to Georgia
• Unfit Antonovs – on list published by the
International Civil Aviation Organization –
462 aircraft considered not air worthy
• Not a terror threat but still a SC Threat
• Mostly used throughout Africa
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International BioTerrorism
•
•
•
•
•
Peter Pan Peanut Butter – e coli – 2007
E-coli from fresh Spinach – 2006
Chi Chi’s e-coli – from green onions – 2003
Taco Bell – e coli 2005
None were terrorist attacks but impacted
supply chains
• US Salmonella scare 2008
Logistics - PROC 5850 Walden
Risk Assessment
“If you do things the way you’ve
always done them, you’ll get the
same things you’ve always got.”
-Darrell Waltrip
This is not your Dad’s Supply Chain!
Security is an integral part of the
Supply Chain and Homeland Defense
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Leadership and Security
SC
SECURITY
RISK
MGMT
ASSESSMEN
T/
TRAINING
VISION/
DIRECTION
LEADERSHIP
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PURPOSE/
MOTIVATION
Summary
• Direct link between supply chain security
and homeland security
• Logistics costs are large part of
manufacturing costs
• Savings in supply chain costs to bottom line
• Logistics
• Supply Chains
Logistics - PROC 5850 Walden
Next Class
• Chap 3 & Chap 4
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