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Chapter 16 Book notes

Significance of Supply Chain and Logistics Management

Relating Marketing Channels, logistics, and Supply Chain Management
Logistics-involves those activities that focus on getting the right amount of
the right procedures to the right place at the right time at the lowest
possible cost
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
Supply Chains versus Marketing Channels
Supply chain- a sequence of firms that perform activities required to
create and deliver a product or service to ultimate consumers or industrial
Supply Chain management- the integration and organization of
information and logistics activities across firms in a supply chain for the
purpose of creating and delivering products and services that provide
value to the ultimate consumers
Global Suppliers and Supply Chains
Global suppliers provide ingredients in processed food, materials and
parts in cars and trucks, components in consumer electronics, textiles and
dyes in clothing and the list goes on
Supply Chain Management and Marketing Strategy
Aligning a Supply chain with a marketing strategy
There are a variety of supply chain configurations, each of which is
designated to perform different tasks well
Follow 3 steps
1. Understand the consumer a company must identify the needs
of the customer segment being served
2. Understand the supply chain- a company must understand what
a supply chain is designed to do well
3. Harmonize the supply chain with the marketing strategy- a
company needs to ensure that what the supply chain is capable of
doing well is consistent with the targeted customers needs and its
marketing strategy
Dell: a Responsive Supply Chain
The dell marketing strategy primarily targets customers who
desire have the most up-to-date computer systems customized
to their needs
Walmart: An effective supply chain
Walmarts marketing strategy is to be a reliable, lower price
retailer for a wide variety of mass consumption consumer goods

Objective of information and logistics management in a customer-driven supply

The objective of information and logistics management in a customer-driven
supply chain is to minimize logistics costs while delivering maximum
customer service
Informations Role in Supply Chain Responsiveness and Efficiency
A variety of technologies are used to transmit and mange information
in a supply chain
Electronic data interchange (EDI)- combines proprietary computer
and telecommunication technologies to exchange electronic
invoices, payments, and information among suppliers,
manufacturers, and retailers
Total Logistics Cost Concept
Total logistics cost- includes expenses associated with transportation,
materials handling and warehousing, inventory, stock-outs, order
processing, and return good handling
Customer Service Concept
Customer service- the ability of logistics management to satisfy users
in terms of time, dependability, communication , and convenience
Time- in a supply chain setting, time refers to LEAD TIME for an
item, which means the lag from ordering an item until it is received
and ready for use or sale
Quick response- emphasis on making the process of reordering
and receiving products as simple as possible, often through
electron data inventory systems
Dependability- the consistency of replenishment
Communication- a two-way link between buyer and seller that helps
in monitoring service and anticipating future needs
Convenience- means that there should a be a minimum of effort on
the party of the buyer in doing business with the seller
Key Logistics Functions in a Supply chain
Four key logistic functions in a supply chain include 1.) Transportation
2.)Warehousing and materials handling 3.) Order processing and 4.) Inventory
Many companies have outsourced these functions to third-party logistics
Third-party logistics providers- firms that perform most or all of the
logistics functions that manufacturers, suppliers, and distributors
would normally perform themselves
Reasons for Inventory- carrying inventory has been justified on several
1. To offer a buffer against variations in a supply and demand, often
caused by uncertainty in forecasting demand
2. To provide better service for those customers who wish to be served
on demand

3. To promote production efficiencies

4. To provide a hedge against price increases by suppliers
5. To promote purchasing and transportation discounts
6. To protect the firm from contingencies such as strikes or shortages
Supply Chain Inventory Strategies
Just-in-time concept- an inventory supply system that operates with very
low inventories and requires fast, on time delivery
Vendor-managed inventory (VMI)- an inventory management system
whereby the supplier determines the product amount and assortment a
customer 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 use for repair,
remanufacturing, redistribution, or disposal