Strategic Logistics Planning
Compiled by Rulzion Rattray
Strategic Logistics Planning
Understand & assess the macro environment. Analyse & understand the internal capabilities. Combines these to set objectives in consultation & with the support of major elements of the organisation
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The Resource Environment
The Value Chain Michael Porter (1985)
Firms Infrastructure
Secondary Activities
Human Resource Management Technology Development
Procurement
Inbound Logistics Outbound Operations Logistics Marketing Service & Sales
Primary Activities
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Overview
External Factors
Social Ecological Political Technological Economic
Organisational Strategic Plan
Manufacturing Physical Distribution
Adapted from Capacito, W., & Rosenfield, D.B., (1984), Analytical Tools for Strategic Planning, 15(3), pp47-61, Council of Logistics Management USA.
Marketing
Finance
Logistics
Functional Strategic Plans
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Key Issues in Logistics Planning
Customer Service:
Demand for improved service, quality a major element in competitive advantage
Logistics costs:
Physical distribution, up to 30% of sales value
External pressures
Regulatory change pressures, competitive pressures of globalisation
Trade offs:
Response to change requires complex adjustment.
Organisational conflicts:
Often no clear responsibility for logistics
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Strategic Logistics Planning
Business goals & strategies Quality of Individual link of logistics system 1. 2. 3. 4. 5. 6. 7. 8. Facility location Operations strategy Inventory management Information systems Material handling Traffic & transportation Planning & control Organisation Customer service requirements
Integrating logistics planning
Design of integrated logistics management system
Overall performance
Adapted from Capacito, W., & Rosenfield, D.B., (1984), Analytical Tools for Strategic Planning, 15(3), pp47-61, Council of Logistics Management USA.
Pressures Influencing System
New customer Service requirements Changing costs
Regulatory change
Logistics System
Pressure for financial performance
Constantly improving IT availability Requirement for Adapted from Capacito, W., & Rosenfield, D.B., (1984), Analytical Tools for Strategic Planning, 15(3), pp47-61, innovation and efficiency Council of Logistics Management USA.
Pressure to reduce inventory
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Conflicts of Interest
High revenue through: Sales & Marketing High levels of availability Rapid introduction of new products
Higher Lower
Customer Service
Production
Cost effective production: High constant capacity utilisation Longer production runs, Fewer set up costs Tight budgets for: Cost
More Fewer
Disrupting factors in production
Finance & Control Stocks
Higher
Lower Stocks
Adapted from Capacito, W., & Rosenfield, D.B., (1984), Analytical Tools for Strategic Planning, 15(3), pp47-61, Council of Logistics Management USA.
Analytical Methods
Decisions support systems
Advantage of quick analysis, & can incorporate the complex trade offs.
Logistics cost analysis by:
Channel, Product, type of customer, geographic area, logistics function, etc.
Use of simulations:
What if simulations, (I.think) Optimisation
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Shapiro Grid framework
Breadth of product line
Cost Service Curves
Logistics costs Service costs or Delivery Time, etc
Decentralised Inventory
Narrow
Broad
Centralised Inventory
Elbows create concentration
away from elbow large increases in delivery time and only moderate decrease in costs
Straight steep curves variation and niches
more room for differentiators
Service consists of a range of dimensions A basis for competitor comparison on two dimensions
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References
Capacito, W., & Rosenfield, D.B., (1984), Analytical Tools for Strategic Planning, 15(3), pp47-61, Council of Logistics Management USA. Christopher, M., (1995), Logistics the Strategic Issues, Chapman Hall, London. Aitken, J., Supply Chain Integration within the Context of a Supplier Association, Cranfield University PHD Thesis, 1998. Cited in Christopher, M., (1998), Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service, Financial Times Pitman Publishing, London.
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Managing the Global Pipeline
Compiled by Rulzion Rattray
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The Globalisation of Markets.
Levitt, T. (1983).
Advances in Technology Driving the world to a converging commonality.
Proletarianisation of:
Communication, transport, travel
Global corporations which operate with resolute consistency at low relative cost using the entire world as a single market.
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Trade Offs in Global Logistics
Costs Transport Source to User
Inventory Material Production Localised Global
Important to recognise trade offs. Key to recognise the service needs of the market
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Globalisation in Supply Chains
Liberalisation effect of WTO, etc.
No longer have to set up in target country, instead can concentrate on developing economies of scale. Emergence of new manufacturing economies has resulted in increased competition and oversupply. Companies will have to find new ways of remaining competitive by lowering costs in other ways.
Supply chain efficiency will become even more important
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The Myth of Globalisation.
Susan Douglas & Yoram Wind.
Attacks Levitt's view of global standardisation as naive and over simplistic. Homogenisation not a clear & universal trend. Contra Evidence of homogenisation:
Food firms adapt to national characteristics. Growth of intra-country segmentation: growing demand for differentiated products.
The myth of economies of scale:
Technical developments lowering scale requirements. cost of production often only small part of total costs.
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Global Manufacture & Supply
Focussed factories:
Economies of scale, one factory for the world? May overlook crucial logistics trade offs:
Transport costs & delivery times. Requirement for local packaging
Centralised Inventories:
Centralising Inventory = less total inventory.
Square root rule
Christopher, M., (1998),
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to
5:2 i.e. 60% reduction
However may overlook benefit of local to customer
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Postponement & Localisation
Localisation:
Even in relatively homogeneous markets like Europe their can be considerable variety of local taste. This may be better catered for in a local assembly operation.
Postponement:
Design products using simple common platforms, using common components. Assembly does not take place until required.
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Customer Service Explosion
Increasing perception that there is little technical difference between products. Service crucial source of differentiation and competitive advantage.
Requirements:
Closely integrated marketing, manufacturing and supply strategies
Logistics of service delivery crucial!
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Strategic Lead time Management
Product and technology life cycles getting shorter. Requirements for success:
Ability to innovate. Ability to bring new products to market.
Logistical Lead time becomes crucial.
Time from sourcing and procurement though to recovery of investment by selling
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Organisational Integration
Recognition of the importance of taking a systems view of business.
Difficulty of achieving integration in functionally fixated organisations.
Move towards a requirement for generalists
Integration of all the different aspects of the organisation. Philosophy of integration beyond the confines of the organisation.
Supply Chain Management.
Requires that all the players in the value system work together.
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Throughput Management
The process of linking manufacturing and procurement to the needs of the market. Requirement for reducing the length of the supply chain pipeline! Target:
Lower cost, higher quality, greater variety, more flexibility, faster response times.
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Globalisation
Move to commodity markets and component specialisation:
firms shop freely amongst the nations of the world
Singer Sewing machines: Shells from US, motors from Brazil, drive shafts from Italy, machine assembled in Taiwan
Increasing need for local customisation
Washing machines: Germans want fast spin & Italians slow, British front loaders, French top loaders, etc
Challenge how to achieve benefit of standardisation at the same time?
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References
Christopher, M., (1998), Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service, Financial Times Pitman Publishing, London Levitt, T. (1983), The Globalisation of Markets, Harvard Business Review May/Jun. Douglas, S., & Wind, Y., (1987), The Myth of Globalisation, Columbia Journal of World Business, Winter.
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