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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