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Logistic management



Logistics Management

Logistics - Strategy Formulation & Implementation

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Logistics Management

  1. 1. Logistics Management Logistics - Strategy Formulation & Implementation Anand Subramaniam
  2. 2. <ul><li>“You miss 100 percent of the shots you never take.&quot; </li></ul><ul><ul><li>- Wayne Gretzky </li></ul></ul>
  3. 3. Highlights <ul><li>Linking – Firm’s & Logistics Strategy </li></ul><ul><li>Logistics – Goals & Decisions </li></ul><ul><li>Logistics – Networks </li></ul><ul><li>Logistics – Strategy Formulation </li></ul><ul><li>Logistics – Channel Strategy </li></ul><ul><li>Logistics – Strategy Implementation </li></ul><ul><li>Measuring Logistics Performance </li></ul>
  4. 4. Link – Firm’s & Logistics Strategy
  5. 5. Firm’s - Strategies / Business Model Business Strategy Market Entry / Exit / Compete External PEST Factors Internal Vision Competencies Financial Order Winner / Qualifiers (Competing Priorities) Cost, Quality, Delivery, Flexibility, Service Make To Stock Structural Decisions Infra -structural Decisions Facility / Location Capacity Make To Order Process / Layout Techno-logy SC Design Logistic Design Quality Sourcing People Planning Systems Inventory Org Structure Alignment Alignment
  6. 6. Link – Business & Functional Strategies <ul><li>Purchasing </li></ul><ul><li>Supplier Selection </li></ul><ul><li>Supplier Development </li></ul><ul><li>Design Involvement </li></ul><ul><li>Supplier Capabilities </li></ul><ul><li>Capacity, Quality </li></ul><ul><li>Competencies </li></ul><ul><li>Process, Quality </li></ul><ul><li>Management </li></ul><ul><li>Planning & Control </li></ul><ul><li>Technology </li></ul><ul><li>Improvement </li></ul><ul><li>Operations </li></ul><ul><li>Technology </li></ul><ul><li>Facility </li></ul><ul><li>Supply Chain Design </li></ul><ul><li>Process Flow Layout </li></ul><ul><li>People </li></ul><ul><li>Sourcing </li></ul><ul><li>Quality </li></ul><ul><li>Planning & Scheduling </li></ul><ul><li>Inventory </li></ul><ul><li>Organisation Structure </li></ul><ul><li>Logistics </li></ul><ul><li>Inbound Transport </li></ul><ul><li>Outbound Transport </li></ul><ul><li>Transport Mode </li></ul><ul><li>Data / Information </li></ul><ul><li>Warehouse </li></ul><ul><li>Material Management </li></ul><ul><li>Distribution Planning </li></ul><ul><li>Quality Management </li></ul><ul><li>Carrier Management </li></ul><ul><li>Customs </li></ul><ul><li>Marketing </li></ul><ul><li>Brand Management </li></ul><ul><li>Category Management </li></ul><ul><li>Segmentation </li></ul><ul><li>Products / Services </li></ul><ul><li>Marketing Mix </li></ul><ul><li>Range / Assortment </li></ul><ul><li>Volumes </li></ul><ul><li>Customisation </li></ul><ul><li>Relationships </li></ul><ul><li>Channels </li></ul><ul><li>Geography / Region </li></ul>Business Strategy Cost Price - Purchase / Lifecycle Delivery – Speed, Reliability, NPD Quality – Performance, Conformance Flexibility – volume, Product Service – Customer Services Human Resources Product Develop Leadership Team Finance / IT Functional Strategies
  7. 7. Logistics – Goals / Decisions
  10. 10. Logistics Definition The task of coordinating Material & Information Flow acros the supply chain
  11. 11. Logistics – A Coordinator Carrier Customs broker Customer Receiving location Supplier Distribution center Freight forwarder Manufacturing plant Logistics - A Coordinator Assembly plant Cross dock
  12. 12. Align Goals – Firm’s & Logistics Logistics Goals Facility / Location Material Handling Operations & Firm’s Strategy Information Systems Investment Management Planning & Control Performance Measures Logistics Simulation Optimisation Drive Regulatory Compliance Reduce Time to Market Improve Uptime Optimise Operations Supply chain Visibility Traceability Fulfill, Flexible Accurate Improve Capacity, quality Improve Asset, Performance Improve Visibility. Inventory
  13. 13. Logistics Objectives <ul><li>Cost Reduction </li></ul><ul><li>Minimising the variable costs associated with movement and storage </li></ul>Service Improvement Pre-transaction Elements Transaction Elements Post-transaction Elements Capital Reduction Minimising the level of investment in logistics system. Maximising the return on logistics assets
  14. 14. Logistics Challenges Inventory / Materials Inventory levels Control methods Forecasting Inventory Planning Planning & Procurement Wave Management Transport Strategy Modes of transport Routing / scheduling Shipment size / consolidation Distribution Requirements Planning Customer Service Written statement of CS policy Technical services System Accuracy Installation, warranty, alterations, repairs, parts Customer claims/ complaints Facility / Location Number, size & location of facilities Assignment of stocking points to sourcing points Assignment of demand to stocking or sourcing points Location & Yard Management
  15. 15. Logistics – Decision Focus Order Releasing & Expediting Suppliers Contracting, Vendor Selection, Forward Buying Developments of Suppliers-Buyer Relationships Purchasing Order Picking & Restocking Seasonal Space Choices & Space Utilisation Equipment Selection, Layout Design Warehousing Expediting Deliveries Priority Rules for Customer Orders Setting Standards Customer Services Processing Orders, Filling Backorders Order Entry, Transmittal & Processing System Design Order Processing Routing, Dispatching Seasonal Equipment Leasing Mode Selection Transportation Replenish Quantities & Timing Safety Stock Levels Stocking Locations & Control Policies Inventories #, Size & Location of Warehouses, Plants & Terminals Facility Location Operational Tactical Strategic Decision Area
  16. 16. Logistics - Networks
  17. 17. Logistics Networks – Product Flow Links The movement of materials between various inventory storage points ( nodes ). Nodes Points where the flow of inventory is temporary stopped (e.g. retail stores, warehouses, factories, vendors).
  18. 18. Logistics Networks – Information Flow Links (Non)/Electronic Methods - Revenues, Product costs, Inventory. levels, Warehouse, Utilisation, Forecasts, Transportation Rates Nodes Data collection & processing points - computerised or manual
  19. 19. Logistics Network Appraisal <ul><li>Demand </li></ul><ul><li>Level of Demand & Geographical Dispersion </li></ul><ul><li>Expansion / Reduction at the current facilities </li></ul><ul><li>Open/Close facilities </li></ul><ul><li>Customer Service </li></ul><ul><li>Inventory Availability, Speed of Delivery, Order-Filling Speed & Accuracy </li></ul><ul><li>Re-planning when service levels are changed due to competitive forces, policy revisions, etc. </li></ul><ul><li>Product Characteristic </li></ul><ul><li>Logistics costs & sensitivity to viz., weight, volume, value, risk. </li></ul><ul><li>Alter package design or finished state of the product during shipment and storage. </li></ul><ul><li>Re-planning when substantial changes are made. </li></ul><ul><li>Logistics Cost </li></ul><ul><li>High logistics costs can be reduced via frequent re-planning </li></ul><ul><li>Pricing Policies </li></ul><ul><li>Depends on who pays for the delivery of goods </li></ul>
  20. 20. Logistics – Strategy Formulation
  21. 21. Logistics Cycle
  22. 22. Logistics – Approach / Framework Current Approach to Market Segmentation Measure Logistics Strategy Drivers Specific Approach to Market Segmentation (Channel) Identify Key Buying Behaviours Customer Value Analysis
  23. 23. Logistics – Strategy Drivers Differentiated Distribution Total Cost Concept Mixed Strategy Standardisation Postponement Consolidation
  24. 24. Distributed Differentiation ABC Analysis = Product Costs, Sales Volume Shipment = Direct from warehouse or direct to customer Warehouse Movement = Fast (Field), Slow (Centralised) , Medium (Regional) Order = Regular, Back Orders
  25. 25. Postponement Types Labeling Packaging Assembly Manufacture Timing <ul><li>High unit value products </li></ul><ul><li>Large # of distribution WHS </li></ul><ul><li>High product value fluctuations </li></ul><ul><li>High proportion of ubiquitous materials </li></ul><ul><li>High unit value products / value fluctuations </li></ul><ul><li>Products with several versions </li></ul><ul><li>Product whose cube is greatly reduced if shipped unassembled </li></ul><ul><li>High unit value products with price fluctuations </li></ul><ul><li>Several package sizes </li></ul><ul><li>High unit value products / value fluctuations </li></ul><ul><li>Product under several brand names </li></ul><ul><li>High unit value products / value fluctuations </li></ul>
  26. 26. Postponement Characteristics <ul><li>Technology/ Process </li></ul><ul><ul><li>Feasible to decouple primary and postponed operations </li></ul></ul><ul><ul><li>Limited complexity of customising </li></ul></ul><ul><ul><li>Modular product design </li></ul></ul><ul><ul><li>Sourcing from multiple locations </li></ul></ul><ul><li>Product </li></ul><ul><ul><li>High commonality of modules </li></ul></ul><ul><ul><li>Specific formulation of products / specific peripherals </li></ul></ul><ul><ul><li>High value density of products </li></ul></ul><ul><ul><li>Product cube and/or weight increases through customisation </li></ul></ul><ul><li>Market </li></ul><ul><ul><li>Short product life cycles </li></ul></ul><ul><ul><li>High sales fluctuations </li></ul></ul><ul><ul><li>Short & reliable lead times </li></ul></ul><ul><ul><li>Price competition </li></ul></ul><ul><ul><li>Varied markets & customers </li></ul></ul>
  27. 27. Logistics – Channel Strategies
  28. 28. Logistics – Channel Strategy <ul><li>Supply to Order </li></ul><ul><li>Responsive Supply Chain </li></ul><ul><ul><ul><li>Excess capacity </li></ul></ul></ul><ul><ul><ul><li>Quick changeovers </li></ul></ul></ul><ul><ul><ul><li>Short lead times </li></ul></ul></ul><ul><ul><ul><li>Flexible processing </li></ul></ul></ul><ul><ul><ul><li>Premium transportation </li></ul></ul></ul><ul><ul><ul><li>Single order processing </li></ul></ul></ul><ul><li>Supply to stock </li></ul><ul><li>Efficient Supply Chain </li></ul><ul><li>Economical production runs </li></ul><ul><ul><ul><li>Finished goods inventories </li></ul></ul></ul><ul><ul><ul><li>Economical buy quantities </li></ul></ul></ul><ul><ul><ul><li>Large shipment sizes </li></ul></ul></ul><ul><ul><ul><li>Batch order processing </li></ul></ul></ul>
  29. 29. Supply – To Stock or To Order ? <ul><li>Predictable / Mature </li></ul><ul><ul><li>Predictable : Stable demand pattern </li></ul></ul><ul><ul><li>Mature : competition is keen & profit margins are low. </li></ul></ul><ul><ul><li>Low-cost supply channel </li></ul></ul><ul><li>Unpredictable / Introductory </li></ul><ul><ul><li>Often innovative, new product development incorporating new technology leading to higher profit margin </li></ul></ul>
  30. 30. Logistics – Strategy Implementation
  31. 31. Implementation Framework Form the Team Understand Current Requirements Baseline The System Understand Business Needs Identify Performance Outcomes Business Case Analysis Establish Agreement/ Business Model Develop Business Model Manage Change Process Implement And Oversight Manage Implementation
  32. 32. Measuring Logistics Performance
  33. 33. Measure Strategy Performance <ul><li>Cash Flow </li></ul><ul><ul><li>Money that a strategy generates </li></ul></ul><ul><li>Savings/Profit Improvement </li></ul><ul><ul><li>The change in all relevant costs associated with a strategy </li></ul></ul><ul><li>ROI </li></ul><ul><ul><li>The ratio of the annual savings from the strategy to the investment required by the strategy </li></ul></ul>
  34. 34. Drivers & Segmentation
  35. 35. Service Key Performance Measures <ul><li>Inventory & Product Availability </li></ul><ul><ul><li>Stock-out percentage </li></ul></ul><ul><ul><li>% of orders filled complete </li></ul></ul><ul><ul><li>Order fill rate & weighted average fill rate </li></ul></ul><ul><ul><li>Average percent of items on backorder </li></ul></ul><ul><li>Item fill rate </li></ul><ul><ul><li>% of order items that the picking operations actually fills within a given period of time. </li></ul></ul><ul><li>Product Damage </li></ul><ul><ul><li>Number of returns to total orders </li></ul></ul><ul><ul><li>Value of returns to total sales </li></ul></ul><ul><li>Production / Warehousing Processing Time </li></ul><ul><ul><li>Min, max, average time to process orders </li></ul></ul>
  36. 36. Service KPI (Contd.) <ul><li>Order Entry </li></ul><ul><ul><li>Min, max, avg time for order handling </li></ul></ul><ul><ul><li>% of orders handled within target time </li></ul></ul><ul><li>Order Documentation Accuracy </li></ul><ul><ul><li>% of order documents with errors </li></ul></ul><ul><li>Transportation </li></ul><ul><ul><li>% of deliveries on time </li></ul></ul><ul><ul><li>% of orders delivered by customer request date </li></ul></ul><ul><ul><li>Damage and loss claims </li></ul></ul>
  37. 37. <ul><li>“Even if you're on the right track, you'll get run over if you just sit there.&quot; </li></ul><ul><ul><li>- Arthur Godfrey </li></ul></ul>
  38. 38. <ul><li>Good Luck </li></ul><ul><li> </li></ul>
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Logistics - Strategy Formulation & Implementation


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