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DevelopingaLogisticsPerspectiveasPartof

SupplyChainManagementMarthaC.CooperProfessorofLogisticsDepartmentofMarketingandLogisticsTheOhioStateUniversityModernLogistical&EconomyDevelopmentInternationalForum

October23-25,2001OverviewWhatIsSupplyChainManagement?IsSupplyChainManagementMoreThanSimplyaNewNameforLogistics?

WhatistheRoleofLogisticsintheDomesticEconomy?WhatistheRoleofLogisticsintheGlobalEconomy?SummaryLOGISTICSMANAGEMENTDEFINED….the

processofplanning,implementing,andcontrollingtheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepoint-of-origintothepoint-of-consumptioninordertomeetcustomers'requirements.CouncilofLogisticsManagement,1986SUPPLYCHAINMANAGEMENT…istheintegrationofkeybusinessprocessesfromenduserthroughoriginalsuppliers,thatprovidesproducts,services,andinformationthataddvalueforcustomersandotherstakeholders.1998CLMDEFINITIONOFLOGISTICS….isthatpartofthesupplychainprocessthatplans,implements,andcontrolstheefficient,effectiveflowandstorageofgoods,services,andrelatedinformationfromthepoint-of-origintothepoint-of-consumptioninordertomeetcustomers'requirements.Figure1SUPPLYCHAINMANAGEMENT:

IntegratingandManagingProcessesAcrosstheSupplyChainSupplyChainBusinessProcessesTier1SupplierTier2SupplierLogisticsPurchasing

Marketing&SalesR&DCustomerConsumer/End-userCUSTOMERRELATIONSHIPMANAGEMENTCUSTOMERSERVICEMANAGEMENTDEMANDMANAGEMENTORDERFULFILLMENTMANUFACTURING

FLOW

MANAGEMENTPROCUREMENTPRODUCT

DEVELOPMENT

AND

COMMERCIALIZATIONRETURNSPRODUCTFLOWProductionFinanceManufacturerInformationFlowCOSTTRADEOFFSREQUIREDINMARKETINGANDLOGISTICSProductPriceMarketingObjective:LogisticsObjective:Allocateresourcestothemarketingmixinsuchamannerastomaximizethelong-termprofitabilityofthefirm.MinimizeTotalCostsgiventhecustomerserviceobjectivewheretotalcosts=TransportationCosts+

WarehousingCosts+OrderProcessingandInformationCosts+LotQuantityCosts+InventoryCarryingCostsPromotionPlaceCustomerServiceLevelsInventoryCarryingCostsTransportationCostsWarehousingCostsOrderProcessingandinformationCostsLotQuantityCostsLogisticsMarketingFigure2SUPPLYCHAINMANAGEMENTFRAMEWORK:ElementsandKeyDecisions2)Whatprocessesshouldbelinkedwitheachofthesekeysupplychainmembers?1)Whoarethekeysupplychainmemberswithwhomtolinkprocesses?3)Whatlevelofintegrationandmanagementshouldbeappliedforeachprocesslink?SupplyChainBusinessProcessesSupplyChainNetworkStructureSupplyChainManagementComponentsManagedProcessLinksMonitorProcessLinksNot-ManagedProcessLinksNon-MemberProcessLinksn2312n11n213nn1121n2n12n1n1nTier1CustomersTier

2CustomersTier3toConsumers/End-CustomersTier2SuppliersTier1SuppliersTier3toInitialsuppliersn1Figure3TypesofInter-companyBusinessProcessLinksInitialSuppliersTier3tonsuppliersTier3toncustomersConsumers/End-customersMembersoftheFocalCompany’sSupplyChainNon-MembersoftheFocalCompany’sSupplyChainFocalCompanyCommunicationandInformationFlowFacilityStructureWorkFlow/ActivityStructureOrganizationStructureProductFlowFacilityStructurePlanningandControlMethodsPhysical&TechnicalManagementComponentsManagementMethodsPowerandLeadershipStructureRiskandRewardStructureCultureandAttitudeManagerial&BehavioralManagementComponentsFigure4SupplyChainManagement:FundamentalManagementComponentsWhatistheRoleofLogisticsintheDomesticEconomy?BusinessEnvironmentIssuesTrendsinUSLogisticsMeasuresImplicationsforBusinessinGeneralInfrastructureConsiderationsInformationTransportationIndexofBusinessLogistics

CostsAsAPercentofGDP1980-2000405060708090100110120198019811982198319841985198619871988198919901991199219931994199519961997199819992000Year1980=100InventoryTransportationTotalRobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"?,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’’sDugout.Figure5Inventory-SalesRatioSource:FederalReserveBankofSt.Louis1.301.351.401.451.501.551.601991199219931994199519961997199819992000YearPercent1.25RobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"??,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure6InventoriesAreDrawnDownSharplySource:BusinessWeek,May14,2001Data:CommerceDept.-20BillionsofChainWeightedDollars020406080ChangesInInventories‘00I‘01IIIIIIIVRobertV.DelaneyandRosalynWilson,"StateofLogisticsReport"??,June4,2001,co-sponsoredbyCassInformationSystemsandProLogis.Seewebsitecass@,Delaney’sDugout.Figure7LogisticsInfrastructureConsiderationsTransportationWarehousingCustomerServiceInventoryControlInformationInfrastructureWhatistheRoleofLogisticsintheGlobalEconomy?SameIssuesasDomesticInformationTransportationTheRoleofLogisticsinPostponementandSpeculationStrategiesFigure8THEP/S-MATRIXAND

GENERICSUPPLYCHAINP/S-STRATEGIESSource:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure9ILLUSTRATIONOFTHEFULLSPECULATIONSTRATEGYSource:JanusD.PaghandMarthaC.Cooper,“SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,”JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure10ILLUSTRATIONOFTHEFULLPOSTPONEMENTSTRATEGYSource:JanusD.PaghandMarthaC.Cooper,““SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,””JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure11CONTINUUMOFP/S-STRATEGIES,ANDPOSITIONINGOFTHECASE-EXAMPLESSource:JanusD.PaghandMarthaC.Cooper,““SupplyChainPostponementandSpeculationStrategy:HowtochoosetheRightStrategy,””JournalofBusinessLogistics,Vol.19,No.2,1998,pp.13-33.Figure12USINGTHEPROFILEANALYSISTOOLSo

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