Logistics Exam 1 Flashcards
Logistics
Part of supply chain management that plans, implements, and controls the efficient, effective, forward, and reverse flows and storage of goods, services, and related information between the point of the origin and the point of consumption to meet customer’s requirements
Logistics Customer Perspective
Getting the right product
To the right customer
At the right time
In the right condition
In the right quantity
At the right place
At the right cost
Logistics vs. Supply Chain
Logistics: Single company focus - deals with product movements, product storage, inventory control
Supply Chain: Multi firm focus - deals with purchasing, demand management, customer relationships (subset of supply chain)
Logistics Cost Evolution
Lower costs in recent years - inventory efficiency, technology/automation/ transportation rate competition
Transportation
Mode selection and carrier selection, generally the largest logistics area
Storage
Where inventory is kept
Inventory tradeoffs with transportation
Slow transportation requires greater inventory
Inconsistent delivery requires greater inventory
Packaging
Protects the product during the shipment process
Packaging materials and factors
Corrugated, shrink wrap, banding, palletizing
Ocean shipments must be water resistant
Rail shipments must accommodate a rough ride
Materials handling
Mechanical equipment used for short distance movements
Inventory control
Maintain adequate inventory levels to support planned and unplanned business activity levels
Order fulfillment
Dependent on many other logistics activities
Order taking -> Logistics systems
Inventory allocation -> Inventory accuracy
Order picking -> Material handling
Order shipment -> Network design
Delivery -> Transportation
Forecasting, facility location, returns processing, customer service
Economic utility
Perceived value
Form (what), Place (where), Time (when), Quantity (how much), Possession (by whom)
Logistics Static Analysis
Analysis for a one time event
Logistics Costs Dynamic Analysis
Analysis that changes in cost given quantity growth over time
Push
Make product based on long term forecast and then try to push it out to your customers
Pull
Only make what is needed as it is needed - when you sell something make its replacement
Planning Based Fulfillment
Fulfillment strategy in which every company in a supply chain independently forecasts demand of their downstream partner, and react to situations when these forecasts are incorrect
Lean Fulfillment
The fulfillment strategy in which the company replenishes depleted DC stocks as they are consumed
Make to Stock
The strategy of producing a variety of products to stock in inventory holding locations according to forecasts and to replenish as these products are consumed, according to actual demand
Agile Fulfillment
Fulfillment strategy in which the company initiates and quickly completes the making of an order and then without losing any time the goods are sent to the customer directly from the manufacturing plant using expedite shipping
Leagile Fulfillment
The fulfillment strategy in which the company pushes semi-finished inventory to DC’s where products get customized according to specific customer orders after the orders come in
Known-Known
Events with a track record that occur frequently
Known-Unknown
Events you know can happen like a global pandemic but with no consistent pattern
Unknown-Unknown
Conceivable but unusual and unexpected
Risk Heat Map
Risks are positioned on the map based on likelihood and severity
Failure Mode and Effects Analysis
Lets companies assess the priorities of things that could go wrong (failure modes) by factoring in likelihood, severity, and detectability of each failure mode
A-B-C Classification
A Class: Major profit generating customers
B Class: Medium profit generating customers
C Class: Minor profit generating customers
Grid Technique
Sweep Method
What Customers Care About
Product availability
Timeliness of delivery
Transparency
Failure recovery
Optional efficiency
Sales vs. Cost Matrix
Cost of Stockouts
Amount is almost always underestimated
Difficult to gauge potential size of future sales impact
Every lost sales forces customer to investigate other options
Performance
The evaluation of how well previously established goals have been met
Performance Measurement
Create understanding and motivate behavior
Smart Goals
Specific, Measurable, Achievement, Relevant, Time Base
Measure
Raw, quantifiable data point (Restaurant served 200 customers today)
Metric
Combination of measures contextualized (utilization of capacity is 75% of restaurant seating)
Key Performance Indicators
Measure a company’s success versus target or industry peers
Quantitative Metrics
Can be expressed as an objective value
Stretch Goals OK
Ambitious targets set okay when tied to incremental progress rewards
Need to raise bar metrics
Keeping pace with improving competition, last year’s performance could be failure today
Encourages appropriate behavior metrics
Rewards productive behavior tied to compensation
Customer POV Important Metrics
External goal not completely under control of supply chain
Visible Metrics
Effects of the measure are publicly posted
Multi-Dimensional Metrics
Performance covers many aspects and may involve tradeoffs
Economical To Create Metrics
Must have a greater benefit than cost to create/determine
Must Adapt Metrics
As business evolves, eliminate unimportant metrics periodically
Balanced Scorecard: Goals/Business Processes
What must we excel at?
Balanced Scorecard: Customer
How do our customers see us?
Balanced Scorecard: Improve/Learn
How can we continue to improve and create value?
Balanced Scorecard: Financial
How do we look to shareholders?
Efficiency: How well resources expended are utilized
Providing the required service for the lowest cost
Financially based and cost oriented
Total landed cost, inventory turnover, order cycle time, fulfillment cost per order, transportation cost per shipment, returns processing cost per customer
Effectiveness: Gap between customer expectations and customer perceptions of the quality of service
SC Inventory Days of Supply
Total number of inventory required to support the chain form raw materials to final customer acquisition
Cash to Cash Cycle Time
Time required to convert a dollar spent to acquire raw materials into a dollar collected for finished product
Perfect Order Old Times: Internally generated goals of fill rate and inquiry handling time
Perfect Order New Times: Soft and perceptual goals of customer satisfaction.
95% Accuracy Problem
In a 7 step supply chain with 95% success at each step, only 69% of orders are perfect
Perfect Order
Percentage of orders that are delivered perfectly to the customer
Customer Inquiry Resolution Time
Average time elapsed to completely resolve a customer inquiry
On Shelf In Stock Percentage
Percent of time a product is available whenever a customer expects to find it
Financial Analysis Tradeoffs
Balance of Supply Chain and Level of Service
Emphasis on cost reduction increases may cause service to suffer
An emphasis on service enhancement increases may cause low cost performance goals to suffer
Profit Leverage Effect
Reducing costs (operating, supply chain, logistics, etc) has a more significant effect on profit than increasing sales by the same amount
Inventory Turnover
Number of times per year a business is able to use and sell off complete inventory of raw materials and finished goods
Logistics Costs Location in Financial Statements
Income Statement: Operating Expenses
Raw Materials Costs Location in Financial Statements
Income Statement: COGS
Inventory Location In Financial Statements
Balance Sheet: Current Assets
Conveyor System Location in Financial Statements
Balance Sheet: Fixed Assets
Strategic Profit Model
What if analysis can be used to model the impact of business changes
