Logistics and Supply Chain Management

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Logistics and Supply ChainManagement
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Logistics

• The process of planning, implementing, and
  controlling the efficient, cost-effective flow
  and storage of goods, services, and related
  information, from point of origin to point of
  consumption, for the purpose of conforming to
  customer requirements.
• Components of an Integrated Logistics System
• Physical Supply links suppliers to operations
  process
• Internal Operations manages in-process material
  flow
• Physical Distribution links operations process
  to customers

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Transportation and storage of inventory
Coal mining
Raw Material
Raw Material
Raw Material
Raw Material
Finished Goods
Auto body stamping
Auto assembly
Raw Material
Limestone mining
Finished Goods
Finished Goods
Raw Material
Finished Goods
Raw Material
Dealers
Steel making
Iron ore mining
Chassis building
Finished Goods
Finished Goods
Customers
Finished Goods
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Supply Chain Management

• A philosophy that describes how organizations
  should manage their supply chains to achieve
  strategic advantage
• The objective is to synchronize requirements of
  the final customer with the flow of materials and
  information along the supply chain. The goal is
  to eliminate variability and reach a balance
  between high customer service and low cost

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SCM the need to reduce variability or the impact
of variability on the supply chain

• Supply network variability
• late deliveries weather,equipment breakdown
• quality problems
• Manufacturing process variability
• machine reliability and equipment failure
• changeovers / setups / part expediting
• design and quality problems
• Customer network variability
• cancellations and irregular orders
• equipment failure
• scheduling

Carrying safety inventories are the most common
approach to dealing with variability
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Information Technology in SCM

• Seen as the key to variability reduction
• Links the success of independent suppliers,
  manufacturers, and customers
• Risks and rewards are shared among supply chain
  partners
• Many technologies are accepted among supply chain
  managers
• Electronic data interchange (EDI)
• Artificial intelligence / Expert systems
• Bar code and radio frequency systems
• Internet applications

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Environmental Sensitivity

• NOW Supply chains create tremendous amounts of
  waste material to protect goods in shipment and
  storage.
• FUTURE Distribution will use reverse logistics,
  the recycling or proper disposal of cardboard,
  packing material, strapping, shrink wrap,
  pallets, etc...

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Example
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Example
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EXAMPLE
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Bullwhip Effect
The magnification of variability in orders in the
supply-chain.
Retailers Orders
Wholesalers Orders
Manufacturers Orders
Order Quantity
Order Quantity
Order Quantity
Time
Time
Time
A lot of retailers each with little variability
in their orders.
can lead to greater variability for a fewer
number of wholesalers, and
can lead to even greater variability for a
single manufacturer.
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EXAMPLE
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Network
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A Multi-Period Transshipment Problem
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Monday
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Tuesday
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