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principles of logistics and supply chain management pdf

It is only at the point of final demand, in this case at the depots, where forecasts can sensibly be made – in fact in most cases demand at the depot would itself be dependent upon retailers’ or other intermediaries’ demand, but since this is obviously outside the supplier’s direct control it is necessary to produce a forecasted estimate of demand. The strategy for these customers should be to seek relationships which make the customer less likely to want to look for alternative suppliers. In the future, organisations must be much more demand-driven than forecastdriven. Each of the several thousand stores in the chain tracks consumer preferences daily using their point-of-sale data. How much water does it take … To make a cup of coffee? Clearly it is a position of some strength, occupying ‘high ground’ that is extremely difficult for competitors to attack. India is a good case in point where because of a lack of previous investment there is an overwhelming shortage of capacity on the roads, railways and at the ports – particularly in the face of burgeoning demand. 40 0 obj 2.

Creating and Sustaining the High-Performance Business, Accenture, 2003. There is always the danger that they will descend into vague ‘motherhood’ statements that give everyone a warm feeling but provide no guidelines for action. L&F does not manufacture anything in-house, but as network co-ordinator it oversees the manufacturing and delivery processes end-to-end.

However, without an adequate logistics-oriented cost accounting system it is extremely difficult to identify the extent to which a particular trade-off is cost-beneficial.

Quadrant 2: Provide high availability These products are frequently demanded and they are more profitable. Srivastava, R. et al., ‘Market-based assets and shareholder value: a framework for analysis’, Journal of Marketing, Vol.

However, it was not sufficient to be innovative in design if new products could not be introduced rapidly and production adjusted quickly to match uncertain demand. Reproduced with permission of EMERALD GROUP PUBLISHING LIMITED in the format Textbook via Copyright Clearance Center. A global business is one that does more than simply export. Whilst managers will always be seeking better forecasts, the fact is that as uncertainty increases it gets harder to run a business on the basis of forecast demand at the stock keeping unit (SKU) level. Vertical integration normally implies ownership of upstream suppliers and downstream customers. Similarly, Britons consume more frozen foods than most other European countries and thus require more freezer space. The implications of such a supply base rationalisation are profound. Indeed, under the European Union emissions trading scheme (EU ETS), such a setup is already in effect for certain industries. Laying the foundations for synchronisation In the same way that the conventional wisdom in production and manufacturing is to seek economies of scale through larger batch quantities, similar thinking can often be found in the rest of the supply chain. << one reason for this is that it is estimated that for a manufacturer somewhere between 40 and 60 per cent of their total carbon footprint lies upstream of their operations, whilst for retailers it can be as high as 80 per cent.8 Depending on where and how those upstream materials and products are sourced and made, there can be major differences in resource consumption.

Here the strategy is one of ‘when its gone, its gone’, which requires a completely different logistics capability to the ‘continuous replenishment’ type of products. We can make use of the idea of ‘attributable costs’8 to operationalise the concept: Attributable cost is a cost per unit that could be avoided if a product or function were discontinued entirely without changing the supporting organisation structure.

Ideally the organisation should seek to develop an accounting system that would routinely collect and analyse data on customer profitability. 62, No.1, January 1998 Stanford University in the US analysed the financial performance of 636 companies in 24 industries and found that those companies classed as supply chain leaders also tended to be above average in terms of sustained profitability. Through collaboration and closely integrated logistics planning mechanisms the two parties 216 LOGISTICS & SUPPLY CHAIN MANAGEMEN T seek to achieve a situation where there are benefits to both parties. For example, SAB miller, one of the world’s biggest beer producers, compared its ‘water footprint’ in two different countries – South Africa and the Czech Republic. 2. 178 LOGISTICS & SUPPLY CHAIN MANAGEMEN T Supply chain event management (SCEM) is the term given to the process of monitoring the planned sequence of activities along a supply chain and the subsequent reporting of any divergence from that plan. These are some of the ways that product design decisions can affect supply chain complexity: MM Time-to-market and time-to-volume Decisions on the functionality of products can increase manufacturing complexity and reduce flexibility and responsiveness MM Added complexity through lack of commonality Decisions on product design impact the Bill of Materials.

To achieve this requires the central management of forecasts, requirements plans, material and production control, and purchasing. The answer in effect is to improve the visibility of demand along with enhancing the velocity of the supply chain. The car industry, which to many is the home of lean thinking and JIT practices, has certainly exhibited some of those characteristics.

The natural next step to stage 3 requires the establishment and implementation of an ‘end-to-end’ planning framework that will be fully described later in this book. /A 44 0 R In the first three years that the scheme was running it was estimated that 120 million road miles had been eliminated which is the equivalent of removing 2,000 lorries from the UK’s roads thus conserving 60 million litres of diesel fuel per year (2). This is why market share is considered to be so important in many industries. Figure 11.2 depicts a not-untypical situation where a car manufacturer’s purchased materials are 85 per cent of total costs.

the elapsed time from procurement of materials/components through to sale of the finished product) can be six months or longer in many manufacturing industries. Similarly the longer lead times involved may need to be countered by local stock holding, again possibly offsetting the production cost advantage. Reducing the supply chain’s carbon footprint will become an inescapable obligation. For example, in 2008 a cashmere pashmina could be bought in Tesco for £29 compared to as much as £200 for one manufactured in the UK and bought at a store such as Harvey Nichols. The last few decades have seen the introduction of flexible manufacturing systems (FMS), of new approaches to inventory based on materials requirements planning (MRP) and just-in-time (JIT) methods and, perhaps most important of all, a sustained emphasis on total quality management (TQM). The decision on where to manufacture, to assemble, to store, to transship and to consolidate can make the difference between profit and loss. The use of XML communications across the web means that even organisations with different information systems can be linked together. Figure 12.1 The functional organisation Purchasing Production Distribution Sales Each of the ‘vertical’ functions in the conventional organisation is normally headed by senior managers who come to regard their functional area as their ‘territory’. Agreement may not easily be achieved as no one likes to admit that the activity they are responsible for does not actually add any value for customers. ‘East or famine’, The economist, 27 February 2010 3. Logistics & Supply Chain Management examines the tools, core processes and initiatives that ensure businesses can gain and maintain competitive advantage. Stern, N., Stern review on the Economics of climate change, Hm Treasury, london, 2000. >> Consider the difference between the Ford Motor Company at the time of Henry Ford I producing a single model – the Model T, with the reputed offer of ‘any colour you like as long as it’s black’ – with the company today. Basically what this means is that ways have to be found to make it possible to react to demand within the customer’s order cycle. In the case of the 787 the only part manufactured in the Washington factory is the tail fin (and even this manufacturing is shared with another facility outside Washington).


7. It will also usually be the case that different customers may well have different requirements and expectations, so the definition of what constitutes a perfect order will have to be specific to each segment, channel or even individual key accounts. Globalisation also tends to lengthen supply chains as companies increasingly move production offshore or source from more distant locations. Also as the relationship develops there is an increased likelihood that they will give a greater part of their business to a supplier whom they are prepared to treat as a partner. In particular, what degree of centralisation is appropriate in terms of management, manufacturing and distribution, and how can the needs of local markets be met at the same time as the achievement of economies of scale through standardisation? >>

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