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50 Cards in this Set
- Front
- Back
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Supply chain design criteria |
Design to: - maximize control -maximize asset utilization - maximize competitive positioning (relevancy) - Minimize landed cost - Minimize Risk |
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Warehouse requirements |
- Warehouses exist to lower total cost or improve customer service - Warehouses specialize in supply or demand facing services - Facilities used for inbound materials are supply facing - Facilities used for outbound are demand facing |
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Warehouse justification is based on providing a service or cost advantage from their location |
Must achieve freight consolidation with warehouse positioning - inventory storage to support customized orders - Mixing facilities to support flow-through and cross-dock sorting |
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Network Design Physical Configuration and INfrastructure |
Infrastructure decisions - Number of facilities - locations - Size - Scale - Scope - Customers served - Sourcing requirements - Staffing |
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Systems Concept |
Analytical framework that seeks total integration of components essential to achieving stated objectives. |
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Components of logistical system are its functions |
- Order processing - Inventory - Transportation - Warehousing - Materials handling and packaging - Facility network design |
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Principals of general systems theory |
- Total system performance is singularly important - Individual components don't need to be optimized. Emphasis is on the integrated relationship between components - Functional relationship exists between components called a trade-off - may enhance or hinder total system performance - components linked together in a balanced system will produce greater end results than possible through individual performance |
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Total cost integration |
INitial network of facilities are driven by economic factors - transport economics - inventory economics Cost trade-offs of these individual functions are identified but - a systems analysis apporach is used to identify the least-total-cost for the combined facility network |
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Transportation Economics |
Two Basic Principles for Economical Transportation - quantity principle is that individual shipments should be as large as the carrier can legally transport in vehicle - tapering principle is that large shipments should be transported distances as long as possible - cost based warehouse justification - network transportation cost minimization |
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INventory Economics |
- Driven by service response time - Performance cycle is the key driver - Forward deploment of inventory potentially improves service response time but increases overall system inventory |
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Service Based Warehouse Justification |
Inventory consists of - base stock - in-transit stock - Safety stock |
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What is impact of adding warehouses to inventories (base stock, in transit, ss) |
Base stock is independent of number of market facing warehouses. - in transit stock reduces - more safety stock is needed because performance cycle days are reduced. number of performance cycles increases - Serving same market area by adding warehouses will increase uncertainty since each facility has its own replenishment cycle (therefore more safety stock)
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Inventory Summary |
- Base stock determination is independent of number of market facing warehouses- - in-transit stock will typically decrease with the addition of warehouses to the network - safety stock increases with number of warehouses added to the network - new performance cycles requires additional ss |
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General approach to finalizing a logistical strategy |
- Determine a least total cost network - Measure service availability and capability for this network - conduct sensitivity analysis for incremental service options - Use cost and revenue associated with each option - consider product or customer segmentation for variable service levels - finalize and socialize the plan |
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Threshold service level |
Customer service associated with the least-total-cost-system |
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Service sensitivity analysis uses the threshold service level to evaluate potential changes |
Basic service capabilities of a network change with variations - number of warehouses - performance cycles - safety stock policy |
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Square Root Law |
Future Inventory = Current Inventory X Sq(future locations/current locations) |
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Infrastructure congestion |
- Shortage of chassis - shortage of drayage drivers - high container ship volume - increasing size of ships - slowdowns by members of the international longshore and warehouse union |
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Estimated national logistics cost |
1 - Canada - 8.5 2 - Mexico - 8.24 3 - US 8.23 4 - North America - 8.32% |
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Major Reasons that Firms Expand into other countries |
- Increase revenue - achieve economies of scale - reduce direct cost - Advance technology - Reduce firm's global tax liability - Reduce market access uncertainty - Enhance sustainability |
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No International Strategy (advantages and disadvantages) |
Advantages - Focused on local market - Minimum coordination efforts - Cross functional decisions made by small group of executive managers Disadvantages - Growth limited to local markets - Not easy to respond to globally based customers - Not large enough to take advantage of economies of scale |
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Multi Domestic (adv and disadv) |
Advantages - Forcused on local market - Minimum coordination efforts - Allows firm to focus on key growth markets while minimizing complexity across a large number of markets Disadvantages - Not scalable - Not easy to respond to globally based customers |
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Global (adv and disadv) |
Advantages - Focused on local market - firm begins to take advantage of global brands and products - can meet the unique needs of individual markets Disadvantages - not scalable - not easy to respond to globally based customers - limited synergies when working with global customers - limited drivers for global data and processes |
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Transnational advantages and disadvantages |
Advantages - Global focus to facilitate global solution development and delivery - Very scalable to domestic and global firms Disadvantages - requires substantial coordination and information integration - reduced ability to respond to market uniqueness |
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Global supply chain integration requires |
- Understanding the complexity of logistics in the global economy - Setting the firm on a path through the stages of interntational dvelopment (export/import, local presence, globally integrated enterprise) - Managing the global supply chain differently than domestic operations |
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Increased uncertainty of global economy results from |
- Greater distances
- longer leadtimes - decreased market knowledge |
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Increased variability of global economy arises from |
- unique customer requirements - unique documentation requirements - shifting political environments |
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Decreased control of global economy results from |
- extensive use of international service forms - potential customs requirements and trade restrictions by governemnts |
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Decreased visibility of global economy results from |
Longer transit times Longer holding times less ability to track shipment locations |
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Duplication of activities leads to |
- Loss of economies of scale - poor asset utilization - related to unique NA, Euro, and Pacific Rim strategies |
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Growth oriented firms are integrating their regional strategies into global business strategies to eliminate duplication |
- Requires global integration of the entire enterprise - Regionalization will remain viable for some firms |
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Globally integrated enterprise |
- Market, location, and resource decisions made with little or no regard to national boundaries - Locates work skills and operations wherever it makes sense |
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Truly Global Firms |
- Employ global brands with limited customization - Operate in most global regions - Employ a global resource view of production and logistics - Use integrated reporting systems and planning technologies - No specific home or parent country dominates policy |
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5 Major Differences between Domestic and International Operations |
- Performance cycle structure - Transportation - Operational considerations - Information systems integrations - Alliances |
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Length of performance cycle is a major difference |
Longer performance cycles for international operations - domestic is measured in days - international is measured in weeks or months - overall this change requires higher asset commitment (inventory is in transit for longer periods) |
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Reasons for longer order cycle to delivery cycle time |
- Communication delays - financing requirements - special packaging requirements - ocean freight scheduling - slow transit times - customs clearance |
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NOrth American Operating Challenges |
- Open geography - extensive transportation options - limited cross border documentation |
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European operation challenges |
- relatively compact geography - numerous potlical, cultural, regulatory, and language situations - congested transportation infrastructure |
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Pacific Rim Operating Challenges |
- Island-based geography - Relatively poor infrastructure - Extensive water and air shipments to travel vast distances |
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Removal of intermodal ownership and operation |
Reduced complexity of operation and tracking of international shipping |
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Increased carrier privatization |
- Government owned carriers often costly and unreliable - privatization has led to increased availability of efficient carriers |
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Relaxing of cabotage restrictions in EU |
Increases trade efficiency |
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Major constraints on physical infrastructure capacity |
- Significantly increasing demand on port and airport capacities - Infrastructure in much of the world was built over 50 years ago |
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Challenges in global operations |
Increased complexity - demand volatility - diversity/cultural considerations - distance and variability - documentation/languages - regulations/customs/legal - technologies |
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Operational considerations of international trade |
- requires multiple languages for both product and documentation (e.g., computer keyboard or handheld calculator) - May require unique national accomodations (e.g., performance features, tech characterstics, environmental considerations, and safety) - Requires large amount of documentaiton - high incidence of countertrade and duty drawback |
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Information Systems integration challenges |
- Systems integration typically lags the acquisition or merger udsed to make the enterprise global - Requires a substantial capital investment - requires two system types to be integrated (ERP system, GPS) - Few firms have fully integrated global information systems or capability |
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Potential Hidden Costs |
- Commisions to customs brokers - Financing charges, letter of credit fees, exchange rate differentials - Foreign taxes imposed - Extra inventory and carrying costs - Extra paperwork/documentation - INventory obsolescence, deterioriation, spoilage, pilferage - Packaging - Fees for consultants, inspectors - Marine insurance - Import tarrifs - freight forwarder - warehousing fees - transit time uncertainty |
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Alliances with carriers and service providers provide... |
- Market access - Market expertise - Reduced inherent risk of global operations |
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Using alliances an enterprise maintains contact with supploy chain partners around the globe |
- Retailers - Wholesalers - Manufactuerers - suppliers - service providers |
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List of general sourcing guidelines for use in decision making |
Product life cycle length Product variations in size, color, or style Labor content intellectual property content transport cost product value security or import constraints transport uncertainty |
