Logistics 3

Marketing

Comparatively less

• It was seen as something that was needed to do but it wasn't necessary to do it strategically
• There were only a handful of colleges that offered logistics as a specialization

• Putting together all the different pieces with all the different organizations
• The network of organizations and activities engaged in managing the movement and storage of products and services as well as the flow of information from the source to the customer

• Logistics strategy must be in line with corporate strategy
• Start with "who we are as a company" (corporate strategy
• Marketing strategy: defines who your customers are
• This then influences the supply chain strategy that has 3 components
• --supply strategy
• --operations strategy
• --logistics strategy
• 

• Understand and serve the customer
• Support the "place" utility of Marketing
• Seven rights

• Ad campaign: they wanted their cards to be meaningful so people would want a hallmark specific greeting card
• They also launched the Hallmark channel. 
• "The Hallmark Experience"
• The brand was so valuable at the time that everyone in the company had to be a "brand manager" and they decided to only align themselves with strong brands which might have costed more

• Their main thrust for competition: Low cost, great variety
• This dictates how they perform logistics because they focus on efficiency.
• They are so efficient because their company competes on low cost

• Amazon focuses on availability and speed with building large distribution centers
• Their logistics means they need lots of distribution and are creative with delivery (mopeds, roller skates in dense areas)

• Internal alignment- corporate, marketing
• External alignment- right for customer, right for product, also other members of supply chain align

• Planning Based Supply Chains
• Agile Supply Chains
• Lean Supply Chains
• Leagile Supply Chains (combination of lean and agile)

• Each company (materials supplier, manufacturer, retailer) has their own independent forecast
• However, they can all have different forecasts which is a problem
• Might be the least reliable bc if the manufacturer and retailer have different forecasts than the retailers might stock out.

• They might be afraid that if they provide their information to their partners then they might give the information to the competitors
• The competitors then might use the information against them

• Made to Stock (MTS)
• Supply chain based on being anticipatory 
• Getting product out into the market to be stocked in anticipation on demand
• You forecast by looking at the previous year's numbers
• Forecast based model

• Pushed based
• Means that the products are pushed to the consumer
• They make the stock and then wait for the customers to buy it

• The customer drives the supply chain
• The order is received and then the supply chain goes into action
• Customization is pull

• Primarily push model (a little of pull)
• Made to stock
• Forecast based
• It is lean because you are trying to reduce waste (specifically excess inventory)
• There is more coordination between the different entities (supplier, manufacturer, retailer)
• Centered on collaborative effort

• You decide how much you need based on a replenishment system 
• You push X amount of units into the market and then you monitor the market and see how many more units you need to replenish the inventory (that determines how much materials you need)

• Walmart developed a retail link (data system that all suppliers have access to)
• Colgate can log in and see in real time how their products are selling on Walmart shelves
• The POS system will register with retail link and it updates in real time
• This allows Colgate to better adjust lead times and quantities
• At any store we need to maintain 20 units. You can see how quickly the units are being depleted. You can also transfer inventory from a store that isn't selling as many to one that is selling a lot to prevent stock outs

• Made-to-order (MTO) supply chain
• You have the ability to be responsive
• You don't start making it until you get the order
• Dell used to use a model like this. You would place an order and then they would make a company. They then had to shift to MTS
• Example: the couple that ordered their Benz and then watch the car get made in Germany

• Hybrid of lean and agile
• Some push and pull (aka configure to order)
• Mass customization typically already have a base manufactured and then they customize at the last step

• Postponement
• We are postponing differentiation
• You can standardize the rest of the product and then you start customization based on the area

Changing the order of steps to allow postponement

• Demand forecast-ability: being able to prepared for the variability that is where the real problems are
• Lean and planning is best for if you have good accuracy with forecasting-- less expensive 
• You want Agile and Leagile if product demand is completely unpredictable. You can't accurately forecast

By understanding the nature of demand and the characteristics of the end product, you can develop and design a supply chain that best fits the product

• Product Life Cycle
• Variety Required
• Demand Predictability
• Market Standards for service and lead times

• Are customers generally prepared to wait?
• People aren't willing to wait for coke to manufacture a Dr. Pepper
• If people are willing to weight then you can do the Agile and Leagile bc you can customize it

• Staple products, often purchased in grocery stores and gas stations
• Basic needs that don't change much over time
• Life cycles are long
• Often low profit margins due to aggressive competition
• Examples: Campbell's tomato soup, Kellogg's corn flakes

• Use past information to predict
• If you have products that have been on the shelf for a long time then you have solid information to base the forecasts on

• Products characterized by adding an innovative "twist" to a functional product (Starbucks, Ben & Jerry's)
• Demand is unpredictable
• Life cycles are shorter due to competition
• Often higher profit margins

5-20% Functional with predictable demand

20-60% Innovative with unpredictable demand

Lean Management

• Agile Management
• More expensive but the profit margins are higher so you can afford it

• Errors
• Traffic Delays
• Shortage of Staff

• Natural Disasters
• Strikes
• Global Conflict

• Hurts the company image
• Such as: distribution centers malfunctioning, plant shut down, transportation

• The potential of something going wrong that prevents us from achieving the 7 R's
• You can't just ask for forgiveness

• You proactively assess things that might go wrong.
• Thinking through what could go wrong and how we prepare ourselves if something does go wrong

• 5) Sudden Demand Shocks
• 4) Terrorism
• 3) Conflict and political unrest
• 2) Extreme weather 
• 1) Natural disasters

• Aka "things that cause sudden demand shocks"
• Twitter is a real risk (happens quickly)
• Companies find influences and keep them happy
• Good or bad
• Used to be called the "Oprah Effect"

Cyber Attacks

• Risk Identification
• Risk Assessment (not all risks are created equal)
• Risk Prioritization
• Risk Mitigation (putting things in place in order to be prepared if those things occur)
• -- More companies are hiring meteorologists to get an idea of risk assessment for extreme weather

• Events with a track record
• Occur Frequently
• Known based on location: Kansas expects a tornado every year

Events that can happen but not consistent

• Are conceivable but unusual and unexpected events (9/11) 
• Very rare (black swan events)

• 
• Circled areas are IMPORTANT like Cyber Attacks

• Score on a 1-10 scale (10 highest)
• -- Probability of occurrence
• -- Severity with occurrence
• -- Ability to detect its occurence
• Multiply the three numbers for a total severity score
• Prioritize more severe Items
• Adds a 3rd category of detectability

• Spreading out risk like building the warehouse into 4 quadrants. That means that if anything happens in one quadrant it would be contained and you could still have the others to function in
• Investing in Safety Stock