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DevelopingaLogisticsPerspectiveasPartof
SupplyChainManagementMarthaC.CooperProfessorofLogisticsDepartmentofMarketingandLogisticsTheOhioStateUniversityModernLogistical&EconomyDevelopmentInternationalForum
October23-25,2001DevelopingaLogisticsPerspec1OverviewWhatIsSupplyChainManagement?IsSupplyChainManagementMoreThanSimplyaNewNameforLogistics?
WhatistheRoleofLogisticsintheDomesticEconomy?WhatistheRoleofLogisticsintheGlobalEconomy?SummaryOverviewWhatIsSupplyChainM2LOGISTICSMANAGEMENTDEFINED….the
processofplanning,implementing,andcontrollingtheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepoint-of-origintothepoint-of-consumptioninordertomeetcustomers'requirements.CouncilofLogisticsManagement,1986LOGISTICSMANAGEMENTDEFINED….3SUPPLYCHAINMANAGEMENT…istheintegrationofkeybusinessprocessesfromenduserthroughoriginalsuppliers,thatprovidesproducts,services,andinformationthataddvalueforcustomersandotherstakeholders.SUPPLYCHAINMANAGEMENT…isthe41998CLMDEFINITIONOFLOGISTICS….isthatpartofthesupplychainprocessthatplans,implements,andcontrolstheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepoint-of-origintothepoint-of-consumptioninordertomeetcustomers'requirements.1998CLMDEFINITIONOFLOGISTI5Figure1SUPPLYCHAINMANAGEMENT:
IntegratingandManagingProcessesAcrosstheSupplyChainSupplyChainBusinessProcessesTier1SupplierTier2SupplierLogisticsPurchasing
Marketing&SalesR&DCustomerConsumer/End-userCUSTOMERRELATIONSHIPMANAGEMENTCUSTOMERSERVICEMANAGEMENTDEMANDMANAGEMENTORDERFULFILLMENTMANUFACTURING
FLOW
MANAGEMENTPROCUREMENTPRODUCT
DEVELOPMENT
AND
COMMERCIALIZATIONRETURNSPRODUCTFLOWProductionFinanceManufacturerInformationFlowFigure1SupplyChainBusiness6COSTTRADEOFFSREQUIREDINMARKETINGANDLOGISTICSProductPriceMarketingObjective:LogisticsObjective:Allocateresourcestothemarketingmixinsuchamannerastomaximizethelong-termprofitabilityofthefirm.MinimizeTotalCostsgiventhecustomerserviceobjectivewheretotalcosts=TransportationCosts+
WarehousingCosts+OrderProcessingandInformationCosts+LotQuantityCosts+InventoryCarryingCostsPromotionPlaceCustomerServiceLevelsInventoryCarryingCostsTransportationCostsWarehousingCostsOrderProcessingandinformationCostsLotQuantityCostsLogisticsMarketingCOSTTRADEOFFSREQUIREDINMARK7Figure2SUPPLYCHAINMANAGEMENTFRAMEWORK:ElementsandKeyDecisions2)Whatprocessesshouldbelinkedwitheachofthesekeysupplychainmembers?1)Whoarethekeysupplychainmemberswithwhomtolinkprocesses?3)Whatlevelofintegrationandmanagementshouldbeappliedforeachprocesslink?SupplyChainBusinessProcessesSupplyChainNetworkStructureSupplyChainManagementComponentsFigure22)Whatprocessesshou8ManagedProcessLinksMonitorProcessLinksNot-ManagedProcessLinksNon-MemberProcessLinksn2312n11n213nn1121n2n12n1n1nTier1CustomersTier
2CustomersTier3toConsumers/End-CustomersTier2SuppliersTier1SuppliersTier3toInitialsuppliersn1Figure3TypesofInter-companyBusinessProcessLinksInitialSuppliersTier3tonsuppliersTier3toncustomersConsumers/End-customersMembersoftheFocalCompany’sSupplyChainNon-MembersoftheFocalCompany’sSupplyChainFocalCompanyManagedProcessLinksMonitorP9CommunicationandInformationFlowFacilityStructureWorkFlow/ActivityStructureOrganizationStructureProductFlowFacilityStructurePlanningandControlMethodsPhysical&TechnicalManagementComponentsManagementMethodsPowerandLeadershipStructureRiskandRewardStructureCultureandAttitudeManagerial&BehavioralManagementComponentsFigure4SupplyChainManagement:FundamentalManagementComponentsCommunicationWorkFlow/Organiz10WhatistheRoleofLogisticsintheDomesticEconomy?BusinessEnvironmentIssuesTrendsinUSLogisticsMeasuresImplicationsforBusinessinGeneralInfrastructureConsiderationsInformation TransportationWhatistheRoleofLogistics11IndexofBusinessLogistics
CostsAsAPercentofGDP1980-2000405060708090100110120198019811982198319841985198619871988198919901991199219931994199519961997199819992000Year1980=100InventoryTransportationTotalRobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure5IndexofBusinessLogisticsCo12Inventory-SalesRatioSource:FederalReserveBankofSt.Louis1.301.351.401.451.501.551.601991199219931994199519961997199819992000YearPercent1.25RobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure6Inventory-SalesRatioSource:F13InventoriesAreDrawnDownSharplySource:BusinessWeek,May14,2001Data:CommerceDept.-20BillionsofChainWeightedDollars020406080ChangesInInventories‘00I‘01IIIIIIIVRobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure7InventoriesAreDrawnDownSha14LogisticsInfrastructureConsiderationsTransportationWarehousingCustomerServiceInventoryControlInformationInfrastructureLogisticsInfrastructureConsi15WhatistheRoleofLogisticsintheGlobalEconomy?SameIssuesasDomesticInformationTransportationTheRoleofLogisticsinPostponementandSpeculationStrategiesWhatistheRoleofLogistics16Figure8
THEP/S-MATRIXAND
GENERICSUPPLYCHAINP/S-STRATEGIESSource:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure8
THEP/S-MATRIXAND
GE17Figure9
ILLUSTRATIONOFTHEFULL
SPECULATIONSTRATEGY
Source:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure9
ILLUSTRATIONOFTHEF18Figure10
ILLUSTRATIONOFTHE
FULLPOSTPONEMENTSTRATEGY
Source:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure10
ILLUSTRATIONOFTHE19Figure11
CONTINUUMOFP/S-STRATEGIES,
ANDPOSITIONINGOFTHECASE-EXAMPLES
Source:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure11
CONTINUUMOFP/S-STR20Figure12
USINGTHEPROFILEANALYSISTOOLSource:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure12
USINGTHEPROFILEAN21SummaryLogisticsispartofSupplyChainManagement.Recenteconomicconstraintshavepromptedfirmstomanagetheirinventoriesmoreclosely.Severalfactorsneedtobeconsideredtoselectanappropriatelogisticsstrategy.Theprofileanalysistoolcanassistinselectingapostponement/speculationstrategy.Today’scompetitive,globalenvironmentrequiresconsistencyandcoordinationamongthemanufacturingandlogisticsneedsofthesupplychain,theinformationandtransportationinfrastructures,andthefirm’spostponement/speculationstrategy.SummaryLogisticsispartofSu22InformationSourcesInformationSources23DevelopingaLogisticsPerspectiveasPartof
SupplyChainManagementMarthaC.CooperProfessorofLogisticsDepartmentofMarketingandLogisticsTheOhioStateUniversityModernLogistical&EconomyDevelopmentInternationalForum
October23-25,2001DevelopingaLogisticsPerspec24OverviewWhatIsSupplyChainManagement?IsSupplyChainManagementMoreThanSimplyaNewNameforLogistics?
WhatistheRoleofLogisticsintheDomesticEconomy?WhatistheRoleofLogisticsintheGlobalEconomy?SummaryOverviewWhatIsSupplyChainM25LOGISTICSMANAGEMENTDEFINED….the
processofplanning,implementing,andcontrollingtheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepoint-of-origintothepoint-of-consumptioninordertomeetcustomers'requirements.CouncilofLogisticsManagement,1986LOGISTICSMANAGEMENTDEFINED….26SUPPLYCHAINMANAGEMENT…istheintegrationofkeybusinessprocessesfromenduserthroughoriginalsuppliers,thatprovidesproducts,services,andinformationthataddvalueforcustomersandotherstakeholders.SUPPLYCHAINMANAGEMENT…isthe271998CLMDEFINITIONOFLOGISTICS….isthatpartofthesupplychainprocessthatplans,implements,andcontrolstheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepoint-of-origintothepoint-of-consumptioninordertomeetcustomers'requirements.1998CLMDEFINITIONOFLOGISTI28Figure1SUPPLYCHAINMANAGEMENT:
IntegratingandManagingProcessesAcrosstheSupplyChainSupplyChainBusinessProcessesTier1SupplierTier2SupplierLogisticsPurchasing
Marketing&SalesR&DCustomerConsumer/End-userCUSTOMERRELATIONSHIPMANAGEMENTCUSTOMERSERVICEMANAGEMENTDEMANDMANAGEMENTORDERFULFILLMENTMANUFACTURING
FLOW
MANAGEMENTPROCUREMENTPRODUCT
DEVELOPMENT
AND
COMMERCIALIZATIONRETURNSPRODUCTFLOWProductionFinanceManufacturerInformationFlowFigure1SupplyChainBusiness29COSTTRADEOFFSREQUIREDINMARKETINGANDLOGISTICSProductPriceMarketingObjective:LogisticsObjective:Allocateresourcestothemarketingmixinsuchamannerastomaximizethelong-termprofitabilityofthefirm.MinimizeTotalCostsgiventhecustomerserviceobjectivewheretotalcosts=TransportationCosts+
WarehousingCosts+OrderProcessingandInformationCosts+LotQuantityCosts+InventoryCarryingCostsPromotionPlaceCustomerServiceLevelsInventoryCarryingCostsTransportationCostsWarehousingCostsOrderProcessingandinformationCostsLotQuantityCostsLogisticsMarketingCOSTTRADEOFFSREQUIREDINMARK30Figure2SUPPLYCHAINMANAGEMENTFRAMEWORK:ElementsandKeyDecisions2)Whatprocessesshouldbelinkedwitheachofthesekeysupplychainmembers?1)Whoarethekeysupplychainmemberswithwhomtolinkprocesses?3)Whatlevelofintegrationandmanagementshouldbeappliedforeachprocesslink?SupplyChainBusinessProcessesSupplyChainNetworkStructureSupplyChainManagementComponentsFigure22)Whatprocessesshou31ManagedProcessLinksMonitorProcessLinksNot-ManagedProcessLinksNon-MemberProcessLinksn2312n11n213nn1121n2n12n1n1nTier1CustomersTier
2CustomersTier3toConsumers/End-CustomersTier2SuppliersTier1SuppliersTier3toInitialsuppliersn1Figure3TypesofInter-companyBusinessProcessLinksInitialSuppliersTier3tonsuppliersTier3toncustomersConsumers/End-customersMembersoftheFocalCompany’sSupplyChainNon-MembersoftheFocalCompany’sSupplyChainFocalCompanyManagedProcessLinksMonitorP32CommunicationandInformationFlowFacilityStructureWorkFlow/ActivityStructureOrganizationStructureProductFlowFacilityStructurePlanningandControlMethodsPhysical&TechnicalManagementComponentsManagementMethodsPowerandLeadershipStructureRiskandRewardStructureCultureandAttitudeManagerial&BehavioralManagementComponentsFigure4SupplyChainManagement:FundamentalManagementComponentsCommunicationWorkFlow/Organiz33WhatistheRoleofLogisticsintheDomesticEconomy?BusinessEnvironmentIssuesTrendsinUSLogisticsMeasuresImplicationsforBusinessinGeneralInfrastructureConsiderationsInformation TransportationWhatistheRoleofLogistics34IndexofBusinessLogistics
CostsAsAPercentofGDP1980-2000405060708090100110120198019811982198319841985198619871988198919901991199219931994199519961997199819992000Year1980=100InventoryTransportationTotalRobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure5IndexofBusinessLogisticsCo35Inventory-SalesRatioSource:FederalReserveBankofSt.Louis1.301.351.401.451.501.551.601991199219931994199519961997199819992000YearPercent1.25RobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure6Inventory-SalesRatioSource:F36InventoriesAreDrawnDownSharplySource:BusinessWeek,May14,2001Data:CommerceDept.-20BillionsofChainWeightedDollars020406080ChangesInInventories‘00I‘01IIIIIIIVRobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure7InventoriesAreDrawnDownSha37LogisticsInfrastructureConsiderationsTransportationWarehousingCustomerServiceInventoryControlInformationInfrastructureLogisticsInfrastructureConsi38WhatistheRoleofLogisticsintheGlobalEconomy?SameIssuesasDomesticInformationTransportationTheRoleofLogisticsinPostponementandSpeculationStrategiesWhatistheRoleofLogistics39Figure8
THEP/S-MATRIXAND
GENERICSUPPLYCHAINP/S-STRATEGIESSource:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure8
THEP/S-MATRIXAND
GE40Figure9
ILLUSTRATIONOFTHEFULL
SPECULATIONSTRATEGY
Source:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStra
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