Transcript Traditional View: Logistics in the Manufacturing Firm

Consumer Sales at Retailer
Retailer's Orders to Wholesaler
900
900
800
800
300
Wholesaler's Orders to Manufacturer
Manufacturer Order
1000
900
800
700
600
500
400
300
200
100
900
800
700
600
500
400
300
200
40
37
34
31
28
25
22
19
16
13
10
7
4
0
1
41
39
37
35
33
31
29
27
25
23
21
19
17
15
13
9
7
5
3
1
11
100
0
41
39
37
35
33
31
29
27
25
23
21
Manufacturer's Orders with Supplier
1000
Wholesaler Order
19
1
41
39
37
35
33
31
29
27
25
23
21
19
17
15
13
9
11
7
0
5
0
3
100
1
100
17
200
15
200
400
13
300
9
400
500
11
500
600
7
600
700
5
700
3
Retailer Order
1000
Consumer demand
1000

Demand forecast updating
◦ Amplification depends on lead time and forecasting method

Order Batching
◦ Upstream parties place orders with suppliers less frequently
than they receive customer orders
◦ Uses inventory to meet frequent customer orders and only
replenishes when inventory is low due to costs of
ordering/holding and quantity discounts

Price Fluctuations
◦ Change downstream party purchasing behavior

Rationing and Shortage Gaming
◦ Downstream parties try to maximize order fulfillment by
padding orders
Information Sharing:



◦
Point of sales systems
◦
Electronic Data Interchange (EDI)
◦
Radio Frequency Identification Tags
Channel Alignment
◦
Centralized supply chain: single stage control of replenishment
◦
Vendor-managed inventory
◦
Drop shipping
◦
Cross-docking; logistics outsourcing
◦
Order fulfillment based on past sales
◦
Collaborative planning, forecasting and replenishment (CPFR)
Operational Efficiency & Lead-time Reduction
◦
Postponement
◦
Standardization
◦
Every day low pricing
Functional Products:
Detergent, Gas
Price
Innovative Products:
High Fashion, AppleWatch
Customer Need
Responsiveness
Low
High
Implied Demand Uncertainty

Responsiveness: the ability to
◦
◦
◦
◦
◦

Respond to wide ranges of quantities demanded
Meet short lead times
Handle a large variety of products
Build highly innovative products
Meet a very high service level
Efficiency:
◦ Minimize the cost of making and delivering a
product to the customer
Efficient Chain
Responsive Chain
Primary Goal
Low Cost
Quick Response
Pricing Strategy
Lower Margins
Higher Margins
Manufacturing
Strategy
High Utilization
Maintain Capacity
Flexibility
Inventory Strategy
Minimize Inventory
Maintain Safety
Inventory
Lead Time Strategy
Reduce if possible
Aggressively Reduce
Transportation Strategy Low Cost Modes
Responsive Modes
Supplier Strategy
Select based on Cost
and Quality
Select based on Speed,
Flexibility and Quality
Supply Chain
Coordination
Collaborate; centralize; Achieve speed and
share info to cut costs flexibility
Tactic
Results

1. Reduce total number of
suppliers


Certify suppliers


Ask for JIT delivery from
key suppliers


Involve key suppliers in
new product design


Develop software linkages
to suppliers

Average 20% reduction in 5
years
Almost 40% of all companies
surveyed were themselves
currently certified
About 60% ask for this;
about 54% do this
Almost 80% claim to do this
About 50% claim this; about
15% more than have EDI
links to suppliers
Typical Firms
Benchmark
Firms
15
8
Time spent placing an order
42 minutes
15 minutes
Percentage of late deliveries
33%
2%
Percentage of rejected material
1.5%
.0001%
400
4
Lead time (weeks)
Number of shortages per year
Table 11.6
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publishing as Prentice Hall