Title: Logistics 7
1Logistics 7
2CHAPTER 15 Organizing for Effective Logistics
3Traditional Logistics Management
4Traditional Logistics Management cont.
5Control Exercised By Logistics Executives Over
Selected Logistics Functions
6Organization Design for Logistics as a Function
7Organization Design for Logistics as a Program
8Components of Corporate and Logistics Mission
Statements
- Targeted customers and markets
- Principal products/services
- Geographic domain
- Core technologies
9Components of Corporate and Logistics Mission
Statements (cont.)
- Survival, growth, and profitability
- Company philosophy
- Company self-concept
- Firms desired public image
10Ways of Improving Logistics Organizational
Effectiveness
- Strategic goal setting
- Resource acquisition and utilization
- Performance environment
- Communication process
- Leadership and decision making
- Organizational adaptation and innovation
11Logistics/Supply Chain Organization
A good organization structure does not by itself
produce good performance--just as a good
constitution does not guarantee great presidents,
or good laws, or a moral society. But a poor
organization structure makes good performance
impossible, no matter how good the individual
managers may be. To improve organization
structurewill therefore always improve
performance. Peter F. Drucker
12Activity Fragmentation in the Supply Chain
Responsibilities
President
Marketing
Finance
Operations
- Distribution channels
- Customer service
- Field inventories
- Revenue
- Cost of capital
- ROI
- Inventory carrying costs
- Supply alternatives and supply costs
- Warehousing
- Purchasing
- Transportation
CR (2004) Prentice Hall, Inc.
15-4
13Activity Fragmentation in the Supply Chain
(Contd)
Objectives
President
Marketing
Finance
Operations
- More inventory
- Frequent short production runs
- Fast order processing
- Fast delivery
- Field warehousing
- Less inventory
- Cheap order processing
- Less warehousing
- Long production runs
- Lowest cost routing
- Plant warehousing
15-5
CR (2004) Prentice Hall, Inc.
14Activity Fragmentation in the Supply Chain
(Contd)
- Reasons for fragmentation
- Lack of understanding of key cost tradeoffs
- Traditions and conventions
- Other areas considered to be more important to
the firm than logistics - Organization structure can be in an evolutionary
state - Benefits of fragmentation elimination
- Encourages important cost tradeoffs to be
effected - Focuses on an important, defined area by top
management - Sets the structure within which control can take
place
15Organizational Choices
- Informal structure
- Persuasion of top management
- Coordinating committees
- Incentive arrangements
- Profit sharing
- Cross charges
- Semi-formal structure
- Matrix organization
- Formal structure
- Line--creates value in products, therefore it has
operating status - Staff--provides assistance to the line
organization
16Logistics Matrix Organization
15-8
CR (2004) Prentice Hall, Inc.
17What is Systems Analysis?
- Systems analysis refers to the orderly and
planned observation of one or more segments in
the logistics network or supply chain to
determine how well each segment functions.
18General Questions
- Why do we perform each task?
- What value is added by it?
- Why are the tasks performed in the order they
are? - Can we alter the sequence of the processing steps
to increase efficiency? - Why are the tasks performed by a particular group
or individual? - Could others perform this task?
- Is there a better way for the system to operate?
19Problems in Systems Analysis
- Multiple business functions are impacted.
- There are trade-offs among conflicting
objectives. - Logistics system impacts are difficult to
precisely evaluate. - There are business issues unique to each
logistics system.
20Systems Integration Logistics Activities
Outside the Firm
- Third-party, or contract, logistics
- Integrated service providers
- Monitoring third-party performance
21Supply Chain Security
22Top 5 European Ports
- Rotterdam 9.287 million TEUs in 2005
- Hamburg 9.088 million TEUs
- Antwerp 6.488 million TEUs
- Bremen 3.735 million TEUs
- Giora Tauro 3.161 million TEUs
- LA/Long Beach 7.485 mil TEUs
Source Logistics Today, Feb 07, p.1, 20
23Other Key Ports
- Singapore 23.2 million TEUs
- Hong Kong 22.602 million
- Shanghai 18.080 million
- Shenzhen 16.2 million
- Pusan 11.94 million
24Rotterdam
- gt 900 intermodal barge moves daily to 72
locations - gt 200 rail moves
- 220 million people within 600 miles of Rotterdam
25Rail
- gt 15 of cargo to Germany via rail
- 13 of Belgium cargo
- 14 of French cargo
26Other issues
- 9000 distribution centers in the Netherlands
- 2000 - 64.4 billion USD in logistics and
distribution in The Netherlands
27Containers
- Cost to X-Ray containers
- Manpower
- Delays
- Radiation
28Why should you care about SC Security?
- Is it a US problem?
- Global Problem
- Heathrow Airport delays Superbowl weekend 2005
- RFID is this the solution?
- ISO Guidelines for SC Security
- Terrorism Insurance
29Transportation Worker Identification Credentials
- Port Employees
- Long Shoremen
- Unescorted access personnel
30HR 1
- Air Cargo Bill phase in inspection of all air
cargo - Sea Cargo safe seal shippers of gt75K TEUs to
US have 3 years to comply
31C-TPAT
- Security Freight Initiative
- Inspection of high risk containers _at_ gt50 ports
32Other issues
- theTruecosts.com costs of piracy and fakes
- Rotterdam 19 of all European Volume
- Amsterdam 440 million metric tonnes
- www.HIDC.com Holland International Distribution
Council
33Orlando International Airport
- No staffing of doors for employee entrance to
baggage claim areas - Guns smuggled into planes by employees
- no requirement for us to staff those doors OIA
Spokesperson TSA not my job! - Identified as security issues in 2004
- 2006 ½ of TSA Screeners failed test that
measured how well employees could identify
explosives, guns and other weapons on the scanner
but can identify bottles of mouthwash and
toothpaste
Source Mike Thomas, Orlando Sentinel, Mar 15,
2007, p. B-1
34Air Cargo World 2/07
- Bans on Russian Flights to Georgia
- Unfit Antonovs on list published by the
International Civil Aviation Organization 462
aircraft considered not air worthy - Not a terror threat but still a SC Threat
- Mostly used throughout Africa
35International BioTerrorism
- Peter Pan Peanut Butter e coli 2007
- E-coli from fresh Spinach 2006
- Chi Chis e-coli from green onions 2003
- Taco Bell e coli 2005
- None were terrorist attacks but impacted supply
chains
36Supply Chain SecurityAnd Homeland Defense
37Supply Chain Security
- We have proved to our management that good
security is good business. Ann Lister of Texas
Instruments
38Agenda
- What is Supply Chain Security
- How does it tie to Homeland Security?
- Is it Important?
- Is it a Problem?
- Risk Assessment
- Risk Management
- Conclusions/Questions
39Important?
- September 11, 2001 - 2 billion per day lost
- Longshoremen Strike 300-500 ships backed up
- Potential loss of attack to major port - 20
billion estimate - 2008 estimate 12 million containers into US up
to 200 million containers world wide
40Problem?
- Terrorism
- Obsolescence
- Pilferage
- Information Breach
- Proprietary Data Camera Phones Thumb Drives
- Cyberspace Security
- RFID Data Security
- 66 of Sealift Containers arrive at 20 Major
Ports - gt58 of all inbound containers come through New
York/New Jersey, Los Angeles, Long Beach - 44 through Los Angeles/Long Beach in 2003
- Lengthening of Supply Chains coupled with
Globalization
41Recent Headlines
- New Budget includes 10.2 Billion for Border
Security. - Battling the Bad Guys 2005 Was a Tough Year
Dec 2005 Baseline Magazine - Major Data Theft Leads to Major Legal Problems
Baseline Magazine - Polo Ralph Lauren Lost Point of Sale Data
- No One Stop Shopping to Stop Database
Pilferages E-Week, Dec 21, 2005
42Recent Headlines
- GAO Report Container Security Expansion of
Key Customs Programs Will Require Greater
Attention to Critical Success Factors - Security and Risk Strategy Become Integrated
Top Trends for 2006, CIO Magazine, January 2006 - Computer Security Becomes More Critical CIO
Magazine, January 2006 - Supply Chain and Security Remain in the
Forefront - ISO Publishes Supply Chain Security Guidelines
Plant Engineering Magazine, Sep 06 - New Budget Includes 10.2 Billion Increase for
Border Protection
43Recent Headlines
- Supply Chain Security Poses Opportunities,
Obstacles E-Week, Sep 23, 2005 - Supply Chain Risks Threaten the Worlds Biggest
Companies Logistics Today Financial
executives at some of the worlds biggest
companies believe supply chain risks post the top
threat to companies revenues.
44Risk Assessment
- If you do things the way youve always done
them, youll get the same things youve always
got. - -Darrell Waltrip
This is not your Dads Supply Chain! Security is
an integral part of the Supply Chain and
Homeland Defense
45Purpose of Risk Assessment
- Identify those areas of the supply chain that
are vulnerable to interruptions of support flow.
- People
- Processes
- Technologies
- External events
The identification and of hazards assessment of
hazards to determine risk to include the
probability and the resulting severity.
46Risk Assessment
- Supply Chains are inherently complex, dynamic,
and fluid, characterized by uncertainty,
ambiguity, and friction. These characteristics
cloud the operating environment they create
risks
47Risk Assessment
- Terrorism
- Port Security over 200 million containers
annually - Port Security 300 US Ports
- Longshoremen Strike 2002
- Potential Airport Attack LAX MPS LGA
48Risk Assessment/Management Steps
- Identify the hazards.
- Assess hazards to determine risks.
- Develop controls and make risk decisions.
- Implement controls.
- Supervise and evaluate.
49How do you identify your Supply Chain Risks?
- You have to know your processes
- Process maps
- Understanding processes
- Understanding where risks are
- Internal Risks
- External Risks
50What are your Hazards?
- Theft
- Pilferage
- Competition
- Information Systems
- Cell Phones
- Thumb Drives
- Camera Phones
- Disgruntled Employees
- Lack of Training
51What is Risk Management?
- The process of identifying, assessing, and
controlling risks from operational factors and
making decisions that balance the risk cost with
the operational benefits. - US Army Field Manual 100-14
52Risk Management
Risk management takes a new shape in extended
supply chain. Risk management and the security
of supply chains took on a new emphasis after
the attacks of September 11, 2001 and the
reactions of the world to security. Included in
this heightened security awareness are
initiatives such as C-TPAT and Homeland
Security initiatives. - Logistics Today
53Risk Management
- Identify the hazards.
- Assess hazards to determine risks.
- Develop controls and make risk decisions.
- Implement controls.
- Supervise and evaluate.
54Risk Management
- Conserving resources while avoiding unnecessary
risk - Deciding on the approval of an alternative
- Identifying feasible and effective control
measures where specific standards do not exist
55Risk Management Does Not
- Does not take away the leaders/managers
initiative or decision making ability - Eliminate risk or establish a climate of zero
defects - Allow the leader/manager to violate any laws
56(No Transcript)
57What is a Catastrophic Risk?
- Inaccurate receipts?
- Customer Satisfaction?
- Sloppy Warehousing?
- National Emergency?
- Hurricane?
- Or, Only when it makes it to CNN?
58Risk Management Programs
- Mitigate Risk
- Eliminate Risk
- Consequences of Risk or Mitigation probability
and severity - Courses of Action Analysis Feasible, Suitable,
Acceptable? - Manage Risk not react to Risk!
59New Problem?
- There were no secure rear areas. General
Joseph Heiser on Vietnam Logistics - Sun Tzu Chapter 1, The Art of War
60Supply Chain Security
- Supply Chain Security must protect the path from
the supplier to the customer. - End to End Security
- End to End Visibility RFID
- Information Security
- Personal Daily Obligation
- Operational Security
- Security and Velocity
61Supply Chain Security
If master small things, Anything becomes
possible - Mr. Miyagi The Next Karate Kid
62Conclusion
- Risk Assessment
- Risk Management
- Operational Security
- Supply Chain Success
63Final Thought
With an estimated 12 million cargo
containers coming into the United States, coupled
with an increase in the amount of jobs taken off
shore The resultant increase in imports and an
ever changing terrorist enemy Supply chain
security is extremely important to Homeland
Defense!
64Questions??