Logistics & Supply Chain Management Ch. 1 PDF

‫الخدمات اللوجستية وإدارة سلسلة التوريد‬ Logistics & Supply Chain Management CH.1: UNDERSTANDING THE LOGISTICS FUNCTION AND THE SUPPLY CHAIN Dr. Naif Alharbi  Chapter Contents 1. What is Logistics 2. What is a Supply Chain? 3. Decision Phases in a Supply...

‫الخدمات اللوجستية وإدارة سلسلة التوريد‬ Logistics & Supply Chain Management CH.1: UNDERSTANDING THE LOGISTICS FUNCTION AND THE SUPPLY CHAIN Dr. Naif Alharbi  Chapter Contents 1. What is Logistics 2. What is a Supply Chain? 3. Decision Phases in a Supply Chain 4. Flow/Process View of a Supply Chain 5. The Importance of Supply Chain Flows 6. Discussion question Logistics & Supply Chain Management 2  Jargon of Logistics and Supply-Chain Management (SCM) Logistics ‫لوجستية‬ Supply ‫ توريد‬,‫ امداد‬,‫تزويد‬ Supply-Chain (SC) ‫سلسلة التوريد‬ Supplier ‫ مزود‬,‫مورد‬ Customer, Client ‫عميل‬ Delivery ‫ توصيل‬,‫تسليم‬ Customer Orders ‫طلبات العمالء‬ Distribution ‫توزي ع‬ Transportation ‫نقل‬ Transfer ‫ إيصال‬,‫تحويل‬ Flow ‫تدفق‬ Logistics & Supply Chain Management 3  ‫‪Jargon of Logistics and‬‬ ‫)‪Supply-Chain Management (SCM‬‬ ‫‪Unloading, Discharging/Loading‬‬ ‫التفري غ‪ ,‬تحميل او شحن‬ ‫‪Containers‬‬ ‫الحاويات‬ ‫‪Load/Cargo/Goods or Merchandize‬‬ ‫الحمولة‪/‬الشحنة‪/‬البضاعة او السلعة‬ ‫‪Procurement/Purchasing‬‬ ‫تأمي وصولها من مصدرها‪ /‬رشاء‬ ‫توفي او الحصول عليها‪ ,‬ر ن‬ ‫ر‬ ‫تدبي المشييات‪ ,‬ر‬ ‫ر‬ ‫‪Sourcing‬‬ ‫ر‬ ‫رن‬ ‫وتأمي وصول المشييات‬ ‫تسنيد‪/‬إيجاد الموردين او مصادر التوريد‬ ‫‪Outsourcing‬‬ ‫تعهيد او استئجار خدمات او كفاءات من مؤسسات او جهات ثالثة‪:‬‬ ‫‪(Externalization)/Offshoring‬‬ ‫االستعانة بمصادر خارجية‪/‬النقل اىل الخارج‬ ‫‪Subcontracting‬‬ ‫المناولة‪ ,‬المقاولة الفرعية‪ ,‬التعاقد من الباطن‬ ‫‪Platform‬‬ ‫منصة او محطة لوجستية‬ ‫‪Warehouse, Depot‬‬ ‫مستودع‪ ,‬مخزن‬ ‫‪Logistic Hub‬‬ ‫لوجست‪ ,‬محطة لوجستية فرعية‪/‬صغرى‪/‬خلية‬ ‫ر‬ ‫مركز‬ ‫‪Facility‬‬ ‫منشأة‪ ,‬مرفق‬ ‫‪Logistics & Supply Chain Management‬‬ ‫‪4‬‬  ‫‪Jargon of Logistics and‬‬ ‫)‪Supply-Chain Management (SCM‬‬ ‫‪Docking‬‬ ‫رسو او االلتحام بالمرسى من اجل تحميل او تفريغ البضائع‬ ‫‪Cross-Docking‬‬ ‫المرور عبر‪/‬الترانزيت دون تخزين‬ ‫‪Cross-Docking Platform‬‬ ‫معبر بضائع‪ ,‬محطة عبور لوجستية‬ ‫)‪Material Handling (MH‬‬ ‫التعامل مع المواد‪ ,‬مناولة المواد‬ ‫‪Transshipment/Transboarding‬‬ ‫إعادة الشحن بنقل البضاعة من سفينة‪/‬مركبة الى أخرى‬ ‫)‪Catchment Area (Trading or Service Area‬‬ ‫منطقة التوزيع او التغطية اللوجستية‬ ‫‪Upstream Flow‬‬ ‫التدفق من المنبع‪/‬التدفق الداخل‬ ‫‪Downstream Flow‬‬ ‫التدفق نحو المصب‪/‬التدفق الخارج‬ ‫‪Transit‬‬ ‫الترانزيت‪ ,‬العبور‪ ,‬انتقال مباشر‬ ‫‪Picking/Allotment‬‬ ‫قطف‪ ,‬التقاط‪ ,‬اختيار وجمع‪ ,‬انتقاء‪/‬انتقاء وتخصيص‬ ‫‪Allotment, Allocation/Assignemnt‬‬ ‫تخصيص‪ ,‬تعيين‪/‬اسناد‪ ,‬إحالة‬ ‫‪DeliveryPickup, Collection‬‬ ‫تسلم‪ ,‬التقاط‪ ,‬اخذ‪ ,‬جمع ‪‬تسليم‬ ‫‪Reception‬‬ ‫استالم‬ ‫‪Logistics & Supply Chain Management‬‬ ‫‪5‬‬  Jargon of Logistics and Supply-Chain Management (SCM) Reception ‫استالم‬ Covering ‫تغطية‬ Location ‫ تحديد موقع‬,‫موقع‬ Vehicle Routing ‫توجيه المركبات‬ Consistency ‫ تناسق‬,‫تماسك‬ Synchronization ‫ توافق زمني‬,‫ مزامنة‬,‫تزامن‬ Timing, Chronometrage ‫ ضبط او تسجيل الوقت‬,‫احتساب الزمن‬ Scheduling, Timetabling ‫ جدولة األوقات‬,‫جدولة االعمال‬ Planning ‫تخطيط‬ Trucking ‫السحب بالشاحنات‬/‫النقل‬ Truckload ‫حمولة الشاحنة‬ Shipment Tracking ‫تتبع او تعقب الشحنة‬ Competition ‫ تسابق‬,‫تنافس‬ Logistics & Supply Chain Management 6  Jargon of Logistics and Supply-Chain Management (SCM) Coordination ‫تنسيق‬ Collaboration ‫تعاون‬ Organization ‫تنظيم‬ Distribution Channels ‫قنوات التوزيع‬ Integrated Logistics ‫ لوجستية مدمجة‬,‫لوجستية متكاملة‬ Storage, Inventory ‫ جرد المخزون‬,‫ المخزون‬,‫التخزين‬ Packaging ‫ تغليف‬,‫تعليب‬ Requirement, Demand ‫ الطلب‬,‫ الحاجة‬,‫المطلب‬ Supply and Demand ‫العرض والطلب‬ Forecasting ‫التنبؤ‬ Design ‫التصميم‬ Forward ‫الى االمام‬ Backward ‫الى الخلف‬ Logistics & Supply Chain Management 7  What is Logistics? Logistics [Engineering Definition] is the process of planning, coordinating, implementing, and controlling effective flow of goods (physical materials and products) or services, involving information and financial flows management, material handling, production flow management (internal transfer coordination), packaging, inventory, warehousing and transportation for pickup and delivery (external transfer coordination). Logistics & Supply Chain Management 8  What is Logistics? Logistics is not only equal to transportation as it is commonly apprehended. But, transportation (for delivery/pickup & inter- facility) and internal material transfer with intermediate storage (storage between transport operations) and global coordination and planning constitute together the biggest components of Logistics. Logistics & Supply Chain Management 9  What is Logistics? Logistics [Military Definition] is the science of planning and carrying out the movement and maintenance of forces.... those aspects of military operations that deal with the design and development, acquisition, storage and etc. Logistics & Supply Chain Management 10  What is Logistics? Two main types of Logistics: Internal Logistics (Logistics of Production) See the Courses: (A) Production Planning and Inventory Control (B) Facility Planning and Layout External Logistics (= Logistics of Distribution and Transport  Supply-Chain Management (SCM) = This course Logistics & Supply Chain Management 11 ‫إطار التحسين‬ What are the Logistics Objectives? The main objective of Logistics is to meet Requirements of Customers or corporations with effective service and cost performances under certain given constraints  Logistics is then an optimization framework in which (Cost) + Time, Quantity and Quality (Service Quality) are important. Logistics is a demand-driven process ( pulled by demand) Logistics & Supply Chain Management 12  What are the Logistics Objectives? :‫الخدمات اللوجستية لها األهداف المجزأة التالية‬ Logistics has the following consequent segmented objectives: ‫تخفيض المخزون‬ (A) Reduction of Inventory: In the traditional system, firms had to carry lot of inventory for satisfying the customer and to ensure excellent customer service. But, when funds are blocked in inventory, they cannot be used for other productive purposes. These costs will drain the enterprise’s profit. Logistics helps in maintaining inventory at the lowest level, and thus achieving the customer goal. This is done through small, but frequent supplies. ‫يتم ذلك من خالل إمدادات صغيرة ولكنها متكررة‬. Logistics & Supply Chain Management 13  What ‫اقتصاد الشحن‬ are the Logistics Objectives? (B) Economy of Freight: Freight is a major source of cost in logistics. This can be reduced by following measures like selecting the proper mode of transport, consolidation of freight, route planning, long distance shipments etc. ‫الموثوقية واالتساق في أداء التسليم‬ (C) Reliability and Consistency in Delivery Performance: Material required by the customer must be delivered on time, not ahead of the schedule or behind the schedule. Proper planning of the transportation modes, with availability of inventory will ensure this. Logistics & Supply Chain Management 14  What are the Logistics Objectives? ‫الحد األدنى من الضرر الذي يلحق بالمنتجات‬ (D) Minimum Damage to Products: Sometimes products may be damaged due to improper packing, frequent handling of consignment, and other reasons. This damage adds to the logistics cost. The use of proper logistical packaging, mechanized material handling equipment, etc will reduce this damage. ‫استجابة أسرع وأسرع‬ (E) Quicker and Faster Response: A firm must have the capability to extend service to the customer in the shortest time frame. By utilizing the latest technologies in processing information and communication will improve the decision making, and thus enable the enterprise to be flexible enough so that the firm can fulfill customer requirements, in the shortest possible time frame.. Logistics & Supply Chain Management 15  Logistics Objectives  Logistics is Set of Optimization Problems "Logistics implies  / means in terms of objectives: having the right thing, at the right place, at the right time.“  Selecting/identifying, locating, planning/scheduling/synchronizing (well-deciding) Cost: must be minimized Service Quality: must be maximized Delivery Time Products Quantity and Quality After-Sale service Connectivity/proximity Reverse logistics reactivity Logistics & Supply Chain Management 16  Logistics Objectives  Logistics is Set of Optimization Problems Well-known Logistics Optimization Problems: Transportation models, assignment/allocation, Maximum/Total flow problem, Routing problems: Vehicle Routing Problem (VRP) for pickup and/or delivery  Related to The Travelling Salesman Problem (TSP), Shortest Path Problem (SPP) Sales orders scheduling: shipping problem Logistics Network design: covering problems, facility location problems Etc Logistics & Supply Chain Management 17  Logistics Objectives  Logistics is Set of Optimization Problems Well known Total Logistics Costs Tradeoff: Total logistics costs consider the whole range of costs associated with logistics, which includes transport and warehousing costs, but also inventory carrying, administration and order processing costs. Administration and order processing costs are relative to the total volume being handled. However, for the same volume being handled transport and warehousing costs will vary according to the distribution strategies being adopted. Logistics & Supply Chain Management 18  Logistics Objectives  Logistics is Set of Optimization Problems The following graph portrays a simple relationship between total logistics costs and two important cost components; transport and warehousing. Based upon the growth in the shipment size (economies of scale) or the number of warehouses (lower distances) a balancing act takes place between transport costs and warehousing (inventory carrying) costs. There is a cutting point representing the lowest total logistics costs, implying an optimal shipment size or number of warehouses for a a specific freight distribution system. Logistics & Supply Chain Management 19  Logistics Objectives  Logistics is Set of Optimization Problems Finding such a balance is a common goal in logistical operations and will depend on numerous factors such as if the good is perishable, the required lead time and the market density. ‫إن إيجاد مثل هذا التوازن هو هدف مشترك في العمليات اللوجستية وسيعتمد على العديد‬ ‫ والمهلة الزمنية المطلوبة وكثافة‬، ‫من العوامل مثل ما إذا كانت السلعة قابلة للتلف‬.‫السوق‬ Logistics & Supply Chain Management 20  Logistics Objectives  Logistics is Set of Optimization Problems A balance achieved between two desirable but incompatible features; a compromise. ‫حل وسط‬ Logistics & Supply Chain Management 21  What is Integrated Logistics?  Integrated Logistics is the system-wide management of the entire “logistics-chain” or entire logistic process as a single entity, instead of separate management of individual logistical functions. Logistics & Supply Chain Management 22  What is Reverse Logistics?  Reverse Logistics is the process of moving goods from their typical final destination and making them going backward into certain previously crossed points or into emanation points for the purpose of capturing value (maintenance, recycling, resale) or proper disposal or rejection  See After-sales service, collection logistics ( Distribution Logistics) Logistics & Supply Chain Management 23  ‫سلسلة التوريد‬ What is a Supply Chain? Introduction: flow in chain, chain process Definition The objective of a supply chain Logistics & Supply Chain Management 24  What is a Supply Chain? Transportation Transportation Customers Warehousing Information flows Factory Transportation Vendors/plants/ports Warehousing Transportation ‫الموانئ‬/ ‫المصانع‬/ ‫البائعون‬ Logistics & Supply Chain Management 25  Chain Concept Supply-Chain Term is based of the concept of chain in the description of the flow of materials and information Concretely The main link Logistics & Supply Chain Management 26  Chain Concept Indeed, each customer becomes itself a supplier in the next link in the chain: Logistics & Supply Chain Management 27  ‫إدارة سلسلة التوريد‬ Supply Chain Management Definition “The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.” (CSMP) Logistics & Supply Chain Management 28  Logistics vs. Supply Chain Management SCM is a younger concept Much academic and practitioner discussion has focused on the relationship between logistics and supply chain management A long debate… Logistics & Supply Chain Management 29  Logistics Management Definition “The part of SCM that plans, implements and controls the efficient*, effective** forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” (CSMP) ‫* كفاءة‬Efficient: Using the smallest input of resources ‫** فاعلية‬Effective: Doing the right things to create the most value for the company Logistics & Supply Chain Management 30 Supply Chain Representation Logistics & Supply Chain Management 31  What is a Supply Chain? Probably more accurate to use the term “supply network” or “supply web” ‫شبكة التوريد‬ Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers All stages may not be present in all supply chains (e.g., no retailer or distributor for Dell) Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions Logistics & Supply Chain Management 32 ‫معبر بضائع بدون تخزين‬ Logistics Facilities Cross-Docking is the practice of unloading materials from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars, with little or no storage in between. This may be done to change the type of conveyance, to sort materials intended for different destinations, or to combine material from different origins. Warehouse is a big facility used to store, arrange and manage merchandize, before orders preparation and delivery. Logistics & Supply Chain Management 33  Logistics Facilities Logistics Platform is a facility or organized arrangement space for the passage and cross-docking of goods, materials, people, etc. in general with no storage or very temporary and limit part of storage. Platform is basically (and in most of the role it performs): a Cross- Docking Warehouse!  A Logistics platform is the combination of infrastructure (facility), technology, processes, regulations and people that enable the movement, transformation and storage of products See also: hubs, Distribution Centers (DC), port warehouse, depots, etc. Logistics & Supply Chain Management 34  Supply Chain Activities Transportation Demand Forecasting Warehousing Production Planning/Scheduling Inventory Management Procurement Packaging Customer Service Materials Handling Facility Location Order Fulfillment Logistics & Supply Chain Management 35  Examples of Logistics and Supply-Chain Performance Indicators HW.1: provide similar information of Logistics in KSA for the last years. See the Next 6 slides as examples to follow. Logistics & Supply Chain Management 36 Importance of Logistics to the Economy Logistics & Supply Chain Management 37 Importance of Logistics to the Economy Logistics & Supply Chain Management 38  Logistics Sector in the UAE Strategic location between East and West With the booming economies of India and China in particular, Dubai is a focal point for global distribution One of Lowest Average Logistics Costs in the World One of the best logistic facilities in the world ◦ Free Trade Zones for Transshipment and Re-exporting ◦ Rated Best in Logistics Infrastructure in Middle East by World Bank’s Logistics Performance Index 2010 Logistics & Supply Chain Management 39 Logistics Sector in the UAE ‫متوسط التكلفة حسب القطاع‬ Logistics & Supply Chain Management 40  Traditional View: Logistics in the US Economy (2006, 2007) Expenses 2006 2007 Freight Transportation $809 Billion $856 Billion Inventory Expense $446 Billion $487 Billion Administrative Expense $50 Billion $54 Billion Total Logistics Costs $1.31 Trillion $1.4 Trillion Logistics Related Activity 10% of GNP 10.1% of GNP Source: 18th and 19th Annual State of Logistics Report – Logistics Magazine Logistics & Supply Chain Management 41  Traditional View: Logistics in the Manufacturing Firm Profit Profit 4% Logistics Cost Marketing Logistics Cost 21% Cost Marketing Cost 27% Manufacturing Cost Manufacturing Cost 48% Logistics & Supply Chain Management 42  Supply Chain Management: The Magnitude in the Traditional View Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies ◦ A typical box of cereal spends 104 days from factory to sale ◦ A typical car spends 15 days from factory to dealership Logistics & Supply Chain Management 43  Supply Chain Management: The True Magnitude Compaq estimates: it lost $0.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed.(Inventory issue) P&G estimates: it saved retail customers $65 million by collaboration resulting in a better match of supply and demand.(good planning) Logistics & Supply Chain Management 44  The Objective of a Supply Chain Maximize overall value created Supply Chain Value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request. Value – cost= Supply Chain Value Value is correlated to supply chain profitability (surplus): difference between revenue generated from the customer and the overall cost across the supply chain. ‫تقليل تكلفة سلسلة االمداد يرفع هامش‬ ‫الربح للمنتج‬ Logistics & Supply Chain Management 45  The Objective of a Supply Chain Example: Dell receives $1000 from a customer for a computer (revenue) Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) Difference between $1000 and the sum of all of these costs is the supply chain profit Logistics & Supply Chain Management 46  Major Supply Chain Issues Increased complexity for organizations Collection and storage of vast amounts of data The Bullwhip effect Cost/Value ◦ Efficiency (cost) and effectiveness (value) Collaboration and Organizational Relationships Corporate social responsibility and the environment. It involves: ◦ Reducing environmental impact ◦ Establishing good environment and relationships with employees, customers, suppliers, shareholders, government… Logistics & Supply Chain Management 47  Decision Phases of a Supply Chain Supply Chain Strategy or Design Supply Chain Planning Supply Chain Operation Logistics & Supply Chain Management 48  Supply Chain Strategy or Design Decisions about the structure of the supply chain and what processes each stage will perform Strategic supply chain decisions ◦ Locations and capacities of facilities ◦ Products to be made or stored at various locations ◦ Modes of transportation ◦ Information systems Supply chain design must support strategic objectives Supply chain design decisions are long-term and expensive to reverse Logistics & Supply Chain Management 49  Supply Chain Planning Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Planning decisions: ◦ Which markets will be supplied from which locations ◦ Subcontracting ◦ Inventory policies ◦ Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon Logistics & Supply Chain Management 50  Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders Much less uncertainty (short time horizon) Logistics & Supply Chain Management 51  Process View of a Supply Chain Cycle View: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/Pull View: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push) Logistics & Supply Chain Management 52 Cycle View of Supply Chains Customer Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Supplier Logistics & Supply Chain Management 53  Cycle View of a Supply Chain Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor-manufacturer) Procurement cycle (manufacturer-supplier) Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each process. Logistics & Supply Chain Management 54  Push/Pull View of Supply Chain Processes Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative) Push/Pull boundary separates push processes from pull processes Logistics & Supply Chain Management 55  Push/Pull View of Supply Chains Procurement, Customer Order Manufacturing and Cycle Replenishment cycles PUSH PROCESSES PULL PROCESSES Customer Order Arrives Logistics & Supply Chain Management 56  Push/Pull View of Supply Chain Processes Useful in considering strategic decisions relating to supply chain design – more global view of how supply chain processes relate to customer orders The relative proportion of push and pull processes can have an impact on supply chain performance Logistics & Supply Chain Management 57