jw logandscm
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INTRODUCTION TO LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
Prof. Jarosaw Witkowski, PhdVice -rector for International Co-operation
Wroclaw University of Economics
Komandorska Street 118/120, 53-345 Wroclaw,
PolandTel. 0048713680151, Cell phone: 48501090903
E-mail:jwit@ae.jgora.pl
mailto:jwit@ae.jgora.plmailto:jwit@ae.jgora.pl -
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Lecture outline
1.Definition and main activities of businesslogistics
2. Trade-offs analyses
3. Idea of supply chains
4. Supply Chain Management matrix
5. Supply chain performance and efficiencyimprovement (SCOR and GSCF models)
6. Japanese and European supply chainnetworks
7. Simple EOQ formula
8. Center of Gravity Technique
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Logistics (according to CLM) is the process of
planning, implementing and controlling theefficient, cost-effective flow and storage of rawmaterials, in- process inventory, finished goodsand related information from point of origin to
point of consumption for the purpose ofconforming to customer requirements
The mission of logistics is to get the right goods
or services to the right place, at he right time, andin the desired condition and quantity in relation tocustomers order
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Main logistics activities and decisions:
cooperate with marketing to set customer servicelevels,
facility location decisions,
transportation activities (eg. transportation modeselection, vehicle scheduling, carrier routing),
inventory management (inventory short -termforecasting, planning and control, cooperate withproduction to calculate EOQ, sequence and timeproduction ),
information collection and flows and order processing, warehousing and materials handling,
packaging and packing.
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Cost- revenue trade- offs
Profits at different levels of customer serviceRevenue, costs, profit
Logistics costs
85% 91% 95%
Customer service
Revenue
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Inventory costs trade- off
Inventory carring costs (space costs, capital
costs, inventory risk and services costs)
Procurement costs (acquisition costs,
transportation costs, manufacturing and
handling costs)
Out of stock costs (lost sales and back
order costs)
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Supply chain (since 80s of XXc.)
In broader sense SC is any combination of processes,activities, relationships and pathways along whichproducts, services, information and financial transactionsmove in and between enterprices (Gattorna 2006, p. 2)
In narrow sens SC is restricted to materials andinformation flows from suppliers, through manufacturesand distribution centers to retailers and final customerse.g. M. Christopher (2005) defines SC as a network of
connected and independent organizations mutually andcooperatively working together to, control, manage andimprove the flow of materials and informations fromsuppliers to end users.
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Council of Supply Chain ManagementProfessionals (former Council of LogisticsManagement ): Supply ChainManagement is the systemic, strategiccoordination of the traditional business
functions and the tactics across businessfunctions within a particular company andacross businesses within the supply chainfor the purposes of improving the long-
term performance of the individualcompanies and a supply chain as a whle(CSCMP 2005).
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According to the new definition of
CSCMP
SCM encompasses the planning andmanagement of all activities involved insourcing and procurement, conversion, and all
logistics management activities (includingcoordination and collaboration with channelpartners).
In essence SCM integrates supply chain anddemand management within and acrosscompanies
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GSCMF (Lambert and others)
SCM is the integration of key business
processes from end user through original
supplier that provides products, services and
information that add value for customers and
other stakeholders.
GSCMF vs. SCOR model (8 vs 5 key processes)
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Supply Chain Operations Reference Model
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Global Supply Chain Managgement
Forum Model (from 1996)
Customer Relationship Management (key)
Demand Management
Order Fulfillement
Manufacturing Flow Management
Supplier Relationship Management (key)
Product Development
Commercialization
Returun Management
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Based on the product relationship matrix Cooper and
Slagmulder(1999, p.10) distinguished four key
decisions and activities areas in the integrated supply
chains, such as:
- configuration of product and network, which covers
the decisions concerning the main rules of cooperation,
- formation of the production network, mainly thechoice of production facility and warehousing locations
as well as their capabilities,
- product design with involvement the research and
development abilities of suppliers,- process optimization in order to reduce cycle times
and inventory level in the cost-effective way.
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The product- relationship SCM matrix
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K E I R E T S U
JIT
TQM
Kanban
JIT
TQM
Kanban
JIT
TQM
Kanban
JIT
TQM
Kanban
Supplier Producer Wholeseler Retailer
K a i z e n
Keiretsu and Kaizen as a source of the development of Supply Chain Management in Japan
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The traditional role and place of small firms within integrated
supply chains was mostly limited):- delivering raw- materials, parts or modules for the final
goods producers,
- delivering customer goods to wholesalers or selling small
quantities of this goods to the final customers,
- providing transportation and forwarding services,
- manufacturing goods and providing other services for
market niches which are considered as not enough profitable
for big companies (also as a subcontractor),
- trading under well known brand name of large distributionnetworks (franchising)
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Table:
The directins f SMEs changes as a links in supply chains and netwrks
Scope of changes in SMEs Hierarchical supply chains Polycentric supply network
Competences and skills
Flexibility
Role of small retailers
Key intermediary
Dominant logistics services
model
Small truck companies
Surce: Authrs wn discri tin
Narrow in particular
technological or functional
areas
Low or middle
Low and passive
Wholesaler or large retail
network
Self- or combined- service
model
Large number of
independent firms
Wide based on process
orientation, ability to
performance evaluation and
outsourcing
Middle or high
Increasing and active
Brokers or third party
logistics providers
Public logistics service
providers
Subcontractors dependent
on market leaders
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New vs. Traditional logistics
Integration (within organizational structures,
computer systems, supply chain and network)
Strategic approach
Outsourcing
Globalization and virtualization
Customer orientation City logistics and non- conventional
applications
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EOQ simple formula (Harris, Wilson)
Economic order quantity formula helps to find
the optimal number of units which should be
ordered or made in order to minimize the
total inventory costs
Developed in 1913 by Harris and applied in
industry by Wilson
Many disadvantages and several extensions
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Main assumptions (disadvatages) of
EOQ formula
Demand and ordering cost are constant
Maximum inventory is equal to order quantity,
new order is delivered when the inventory is zero
Lead time is fixed
No discount is avaliable for bigger orders
Replenishment is delivered at once
Lack of inflation
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The required parameters to calculate
EOQ: D demand quantity (units per year, month, day)
P purchase cost per each item
S fixed cost per order
i inventory carring cost rate related to capital invested in
inventory Q order quantity
D/Q number of orders
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How to calculate EOQ based on total
cost function?
Total cost of inventory TC= inventory carring cost +procurement cost
Q x P x i s x D
TC = ------------ + -------- min2 Q
2xDx s
Q = ---------P x i
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Facility location factors:
A.Weber, Polander, Thunen classical theories
Labour cost, land cost, transportation cost
Aviability and cost of materials, energy, water Socio- economic factors (taxes, political
stability, import and export restrictions,
enviromental regulations, quality of life, etc.)
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Analytical techniques for facility
location decisions:
Heuristic approach (e.g. factor rating by
weights reflecting the importance of each
factor)
Simulation models
Cost- benefit analisis
Center of gravity technique
Center of gravity (to find single
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Center of gravity (to find single
location that minimizes of
transportation cost)Technika Centrum Grawitacji
X
c (x,y)
0 Y
S3(x3; y3)S1(x1; y1)
Z2(x2 ; y2)
S2(x2; y2)Z1(x1 ; y1)
How to calculate the coordinates for
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How to calculate the coordinates for
CX and CYthe new facility
location?(Ballu, p.487) Parameters:
Vi volume at point i
Ri transportation rate to or from point i Xi and Yi coordinates of existing locations
Vi Ri Xi Vi Ri Yi
CX = -------------------- CY= ------------- Vi Ri Vi Ri
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Assumptions (disadvantages) of center
of gravity technique
Transportation rate is a linear function of
transported volume (units, tons, etc.) and the
traveling distance,
It deset cnsider real traveling distance
which is depended on the roads availability
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References:
[1] Ballu R.H.: Business logistics management, Prentice Hall International,New Jersey 1999
[2] Christopher M.: Logistics and Supply Chain Management. CreatingValue Adding Networks, Prentice Hall 2005
[3] Gattorna J.: Living Supply Chains. How to Mobilize the EnterpriseAround Delivering What Your Customers Want, Prentice Hall, 2006
[4] SCOR model http://supply-chain.org/
[5] CSCMP Supply Chain Management Definitions , www.cscmp.org
[6] Cooper R., Slagmulder R.: Supply Chain Development for the LeanEnterprise Inter- organizational Cost Management, Productivity PressPortland 1999
[7] Witkwski J.: Zarzdzanie aocuchem dstaw. Kncepcje, prcedury,dwiadczenia, PWE, Warszawa 2010
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