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UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

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Page 1: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

UMMC – Supply Chain Mgmt.

Course 3Logistics & Distribution Concepts

Page 2: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Objectives

• Discuss a general overview of the basics of logistics

• Gain an understanding of the complexity of logistics and distribution

• Be a better inventory professional by knowing what goes into the products you use

Page 3: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Agenda• Introduction to Logistics• Activity 1• Costs of logistics• Transportation• Activity 2• Distribution Concepts• Summary

Page 4: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

What is Logistics?

Materials Management

Integrated Logistics Management

Logistics ManagementDistribution

Physical Distribution Management

Business Logistics Management

Marketing Logistics

Industrial Logistics

Page 5: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Logistics Definitions

Common cultureHandling the details of an activity

DictionaryThe branch of military science having to do with procuring, maintaining,

and transporting material, personnel, and facilities

Page 6: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Business Logistics

The planning, implementation, & control of the efficient & effective flow and

storage of goods, services, & related information from point of origin to point of

use or consumption in order to meet customer requirements

Council of Logistics Management Professionals

Page 7: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

ProductSourcing ManufactureStorage Storage Distributor Retailer

Customer

OrderReceipt

Supplier Storage Manufacturer

Storage Distributor Customer End User

Peo

ple

Tech

nolo

gies

Pro

cess

es

Page 8: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Plan

Source

Make

Deliver

Buy

Page 9: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Place Utility-(Where)

• Moving goods from production surplus points to points where demand exists

• Extends physical boundaries of a marketing area, adding value to goods

• Created primarily through transportation

Page 10: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Time Utility (When)

• Economic value added by having good or service at a demand point at a specific time

• Proper inventory maintenance, strategic location of good/services, and transportation

Page 11: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Quantity Utility (How Much)

• Delivering the proper quantities of the item

• Done through production forecasting, production scheduling and inventory control

Page 12: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Cardinal Scorecard

September 2011

Overall, the average for the month was - 'True' fill 98.03% w/Subs 99.53%.

Some top items of the unfilled lines for the month:

• H100-05 (IM# 006011 - Medical Action) – Inventory Issue (6.58% of unfilled lines – 9/11-9/12)

• 176630 (IM# 800985 - United States Surgical) – Mfg backorder (5.76% of unfilled lines – 9/13-9/30)

• DVT10 (IM# 005336 - Sterilmed) – Forecast exceeded (3.91% of unfilled lines – 9/23-9/27)

Page 13: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Some Logistics Activities

Transportation

Warehousing & Storage

Materials HandlingOrder fulfillment

Procurement

Forecasting

Customer Service

Return Goods Handling

Page 14: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Activity 1

• Read about you logistical activity• Summarize it • Tells us an example of this activity

within FV• What utility could it be and why?

Page 15: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Utilities

Place: Moving goods from production surplus points to points where demand exists, Extends physical boundaries of a marketing area, Created primarily through transportation

Time: Economic value added by having good or service at a demand point at a specific time, Proper inventory maintenance, strategic location of good/services, and transportation

Quantity: Delivering the proper quantities of the item, Done through production forecasting, production scheduling and inventory control

Page 16: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts Transportation

CostsInventory Costs

Manufacturing Costs

Page 17: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Logistics Costs as a Percentage of GDP

Price of a 2-slice toaster:

1980: $23 ($4.14)

2010: $24.88 ($1.99)

Global Comparison

Logistics Cost % of GDP

• Asia 13-20%• China 15%

• Europe 12-14%• India 13%• Japan 11%• Mexico 14%

Page 18: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Components of Logistical Costs

Page 19: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Transportation Role

• Physical movement of people and goods between origin and destination

• Critical link between organizations• Allows for competition in global market• Critical to demand fulfillment• Services must be in line with customer

requirements

Page 20: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Challenges

• Complexity • Competing Goals• Changing customer demands• Limited information

Page 21: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

ChallengesA typical cross-border shipment involves the accurate completion and filing of 35 documents, interfacing with 25 parties including customs, carriers and freight

forwarders, and complying with over 600 laws and 500 trade agreements that are

constantly changing. Adrian Gonzalez, ARC Advisory Group

Page 22: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Modes of Transportation

Air

Pipeline

Water

Highway

Rail

Page 23: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Activity 2

• Each group will get a slide about their form of transportation.

• Answer the following questions:1. What is a strength of this form of

transportation?

2. What is a weakness of this form of transportation?

• Give an example of a disruption to this transportation process—real world example

Page 24: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Rail

Page 25: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Pipeline

Page 26: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Water

Page 27: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Air

Page 28: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Highway

Page 29: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Channel of Distribution Functions Direct/Indirect

Assorting Accumulation Storage Information feedback Warehousing

Allocation Buying Contacts New

Products Financing Distribution

Service Promotion Pricing Risk Taking Physical Possession

Sorting…………..

Page 30: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

How Cardinal Does It?

U.S. CAH Factories- 10%

Asian CAH Factories- 7%

*Includes sourced product

Mexican and Caribbean

CAH Factories- 3%

2 Redistribution Centers

U.S. Branded- 80%

Other Medical Distributors

Custom

ers

Page 31: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Jeopardy

Let the Games Begin!

Page 32: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Logistics Transportation/Costs

Distribution

$100 $100 $100

$200 $200 $200

$300 $300 $300

Page 33: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

LOGISTICS

1. This term is most widely used by organizations like banks and hospitals.

2. The planning, implementation, & control of the efficient & effective flow and storage of goods, services, & related information from point of origin to point of use or consumption in order to meet customer requirements

3. This utility focuses on proper inventory maintenance, strategic location of good/services, and transportation

TRANSPORTATION/COST

1. 63% of logistical costs of GDP

2. Slow, but dependable way to transport products

3.This ARC Advisory Group Director estimated that a typical cross-border shipment involves the accurate completion and filing of 35 documents, interfacing with 25 parties including customs, carriers and freight forwarders, and complying with over 600 laws and 500 trade agreements that are constantly changing.

DISTRIBUTION

1.

Page 34: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Rail

• high fixed costs (land, tracks)

• low variable costs (operating costs, e.g., labor, fuel)

• slow, but inexpensive way to transport heavy freight that doesn’t require special handling, long

distances

Page 35: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Highway

• low fixed costs (government builds, maintains highways)

• medium-high variable costs (operating costs, e.g., labor, fuel)

• most accessible mode (more highways than railroads, waterways, pipelines); best for transporting medium to

high value products short to moderate distances

Page 36: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Water

• moderate fixed costs (ships and freight handling equipment)

• low variable costs (operating costs, e.g., labor, fuel)

• very slow, but inexpensive way to transport large, heavy freight over long distances (e.g., oceans, rivers,

inland waterways, lakes)

Page 37: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Air

• low fixed costs (aircraft and freight handling equipment)

• highest variable costs (e.g., labor, fuel, maintenance)

• very fast; used for transporting high value and/or high perishability product over short to medium distances.

Page 38: UMMC – Supply Chain Mgmt. Course 3 Logistics & Distribution Concepts

Pipeline

• highest fixed costs (right of way & construction costs of equipment)

• lowest variable costs (no significant labor or fuel costs)

• slow, but dependable (e.g., no weather, traffic disruptions); no flexibility with regard to types of products that can be

transported – must be liquid (e.g., petroleum)