kerinmarketing16

AFTER READING THIS CHAPTER

YOU SHOULD BE ABLE TO:

•Explain what supply chain and logistics management are and how they relate to marketing strategy.

•

•Understand the distinction between supply chain responsiveness and efficiency.

•Explain how managers trade off different “logistics costs” relative to customer service in order to make a supply chain decision.

•Recognize how customer service in logistics decisions contributes to customer value and successful marketing programs.

•Describe the key logistics functions of transportation, warehousing and materials handling, order processing, and inventory management and the role of third-party logistics providers.

INTEGRATING SUPPLY CHAIN AND LOGISTICS MANAGEMENT

SNAP! CRACK! POP! EVEN WORLD-CLASS COMPANIES CAN FEEL THE BULLWHIP’S STING.

SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

•Relating marketing Channels, Logistics, and Supply Chain Management

§Logistics
§Logistics management
§Supply chain
§Supply chain management

Those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible price.

Logistics Management

The practice of organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements.

A sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users.

Supply Chain Management

The integration and organization of information and logistic activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to customers.

FIGURE 16-1 Relating marketing channels logistics management, and supply chain management

SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

Sourcing, Assembling, and Delivering a New Car: The Automotive Supply Chain

FIGURE 16-2 The automotive supply chain

SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

•Supply Chain Management and Marketing Strategy

•Aligning a Supply Chain with Marketing Strategy

§Understand the customer
§Understand the supply chain
§Harmonize the supply chain with
the marketing strategy

SIGNIFICANCE OF SUPPLY CHAIN AND LOGISTICS MANAGEMENT

•Supply Chain Management and Marketing Strategy (cont)

•Dell Computer Corporation: A Responsive Supply Chain
•Wal-Mart, Inc.: An Efficient Supply Chain
§Cross docking

Practice of unloading products from suppliers, sorting products for individual stores, and quickly reloading products onto trucks for a particular store.

1. What is the principal difference between a marketing channel and a supply chain?

A: The supply chain differs in membership because it includes suppliers of raw materials as well as those suppliers which deliver finished products to a company.

2. The choice of a supply chain involved what three steps?

A: 1. Understand the customer

2. Understand the supply chain

3. Harmonize the supply chain with the marketing strategy

INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN

•Information’s Role in Supply Chain Responsiveness and Efficiency

•Electronic data interchanges

•Total Logistics Cost Concept

Electronic Data Interchange (EDI)

Combine proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers.

Total Logistics Cost

Expenses associated with transportation, materials handling and warehousing, inventory, stockouts, order processing, and return goods handling.

FIGURE 16-3 How total logistics cost varies with number of warehouses used

INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN

Customer Service Concept

Customer Service

The ability of logistics management to satisfy users in terms of time , dependability, communication, and convenience.

FIGURE 16-4 Supply chain managers balance total logistics cost factors against customer service factors

INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN

•Customer Service Concept (cont)

•Lead Time
§Quick response
§Efficient consumer response
•Dependability
•Communication
•Convenience

•Customer Service Standards

Lag from ordering an item until it is received and ready for use or sale. Also called order cycle time or replenishment time.

An inventory management system designed to reduce the retailer’s lead time, thereby lowering its inventory investment, improving customer service levels, and reducing logistics expense.

1. The objective of information and logistics management in a supply chain is to ____________________ __________________________________________________________

A: minimize logistics cost while delivering maximum customer service

2. How does consumer demand information increase supply chain responsiveness and efficiency?

A: Because firms are better able to forecast customer needs and produce, transport, and store the required amount of inventory.

3. What is the relationship between the number of warehouses a company operates, its inventory costs, and its transportation costs?

A: As the number of warehouse increases, its inventory costs increase and its transportation costs decrease.

KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

•Third-party logistics providers
•Transportation

Third-Party Logistics Providers

Firms that perform most or all of the logistics functions that manufacturers, suppliers, and distributors would normally perform themselves.

FIGURE 16-5 Advantages and disadvantages of five modes of transportation

KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

•Transportation (cont)
•Railroads
§Intermodal transportation

Intermodal Transportation

Combining different transportation modes to get the best features from each.

KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

•Transportation (cont)

•Motor Carriers
•Air Carriers and Express Companies
•Freight Forwarders
•Warehousing and Materials Handling
•Order Processing

•

Freight Forwarders

Firms that accumulate small shipments into larger lots and then hire a carrier to move them, usually at reduced rates.

Materials Handling

Moving goods over short distances into, within, and out of warehouses and manufacturing plants.

KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

•Inventory Management

•
Reasons for Inventory
•Inventory Costs
•Supply Chain Inventory Strategies
§Just-in-time (JIT) concept
§Vendor-managed inventory

•CLOSING THE LOOP:
REVERSE LOGISTICS

Just-In-Time Concept

An inventory supply system that operates with very low inventories and requires fast, on-time delivery.

Vendor-Managed Inventory

An inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items.

CLOSING THE LOOP:

REVERSE LOGISTICS

Reverse Logistics

A process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or sue for repair, remanufacturing, redistribution, or disposal.

1. What are the basic trade-offs between the modes of transportation?

A: A comprehensive comparison is shown in Figure 16-5. A general trade-off is cost versus time and dependability.

2. What types of inventory should use storage warehouses and which type should use distribution centers?

A: Goods which will not be needed for substantial periods of time, such as excess or seasonal inventory, are best suited for storage warehouses which hold goods for substantial periods of time. Distribution centers are used when products need to keep moving toward the consumer.

3. What are the strengths and weaknesses of a just-in-time system?

A: Strengths: Save money on inventory; forces better planning of vendor selection, transportation selection, forecasting, scheduling, etc.

Weaknesses: Can cause stockouts, production disruptions, and higher costs if weak links appear.

Chapter 16 - Summary

Logistics involves those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost. Logistics management includes the coordination of the flows of both inbound and outbound goods, an emphasis on making these flows cost-effective, and customer service.
A supply chain is a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users. Supply chain management is the integration and organization of information and logistics across firms for the purpose of creating value for consumers.
The goals to be achieved by a firm's marketing strategy determines whether its supply chain needs to be more responsive or efficient in meeting customer requirements. Marketers today recognize that the choice of a supply chain involves three steps: (a) understand the customer, (b) understand the supply chain, and (c) harmonize the supply chain with the marketing strategy.
The objective of information and logistics management in a supply chain is to minimize logistics costs while delivering maximum customer service. Information can leverage logistics activities, reduce total logistics costs, and improve customer service.
Minimizing total logistics cost is irrelevant without specifying an acceptable customer service level that must be maintained. Although key customer service factors depend on the situation, important elements of the customer service program are likely to be time-related dependability, communications, and convenience.
Four key logistics functions in a supply chain include (a) transportation, (b) warehousing and material handling, (c) order processing, and (d) inventory management. Third-party logistics perform most or all of the logistics functions that manufacturers, suppliers, and distributors would normally perform themselves.
The modes of transportation (e.g., railroads, motor carriers, air carriers, and trucks) offer shippers different service benefits. Better service often costs more, although it should result in savings in other areas of the logistics system.
The function of warehousing and material handling in a supply chain is to facilitate storage and movement of goods. Distribution centers provide flexibility and facilitate sorting and consolidating products from different plants or different suppliers.
Inventory management and order processing go hand in hand in a supply chain. Both functions have benefited from information technology. Two popular supply chain inventory management practices are just-in-time and vendor-managed inventory management systems.
Reverse logistics closes the loop in a supply chain. Reverse logistics is the process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution, or disposal.

Chapter 16

Marketing: Integrating Supply Chain and Logistics Management