I. This is 80 per cent higher than in 1980, in line with the rise of GDP. market. However, logistics activity does not just generate cost, it also generates revenue through the provision of availability – thus it is important to understand the profit impact of logistics and supply chain decisions. SUPPLY CHAIN MANAGEMENT In Poland there are. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers. In other words the ultimate purpose of any logistics system is to satisfy customers. Sometimes a consolidation of the supply base happens through merger and acquisition. Ideally these teams will be cross-functional and will have access to all the skills necessary to undertake the detailed analysis and implementation involved in the supply chain risk management process. 2 Customer service management Because local markets have their own specific characteristics and needs there is considerable advantage to be achieved by shaping marketing strategies locally – albeit within overall global guidelines. Through close partnership with its worldwide network of dealers and distributors and through advanced inventory and information management systems, Caterpillar offers levels of customer support – and thus customer value – that few companies in any industry can match. Once processes have been flowcharted, the first step is to bring together the managers involved in those processes to debate and agree exactly which ST r AT EGIC LEAd -TIME MANAGEMENT 129 elements of the process can truly be described as value adding. In other words, the goal is to maximise customer service whilst simultaneously minimising costs and reducing assets locked up in the logistics pipeline. To help in identifying where the priority should be placed in supply chain risk management a useful tool is failure mode and effect analysis (FMEA). The costs of serving different customers can vary significantly. Innovative organisations can utilise their superior supply chain capabilities to act as orchestrators, as the Li and Fung case study below demonstrates. and Hendricks, K., ‘How supply chain glitches torpedo shareholder value’, Supply Chain Management Review, January/ February 2002. The impact that complexity can have on supply chain risk is well illustrated by the case of the Boeing 787 described below. INTERNATIONAL, 3RD EDITION This non-value-adding time is itself generated by the processes that underpin the supply chain. There are also arguments for increasing the size of vehicle or the vessel to achieve lower transport intensity per unit. Figure 2.11 shows how a typical company might find its profits varying by customer and by product. Wal-mart’s overall target is a 5 per cent reduction by 2013, saving the global supply chain $11 billion (£5.59 billion). Strong positive cash flow has become as much a desired goal of management as profit. that produced by Sir Nicholas Stern in the UK3 and the work of Al Gore in the USA,4 have brought these issues to the attention of governments, industry and the wider public on a global scale. http://www.espedytor.pl/news/166.php, 11.09.2013, agreement (the signing) occurs when the rail receives the package and stamps it at the, The CIM consignment note shall be made in five copies in the country of origin and. The other way out of the ‘commodity’ quadrant of the matrix is to seek a strategy of differentiation through service excellence. 92 LOGISTICS & SUPPLY CHAIN MANAGEMEN T 6 Measure performance The real test of how well a demand management/planning process is working should be how high the percentage of perfect order achievement is compared to the number of days of inventory and the amount of capacity needed to achieve that level. Previously logistics – or, more properly, distribution management – was seen as being primarily a concern with transportation and warehousing. The definition of sustainability that is most widely used originates from the United Nations Brundtland Commission, which reported in 1987. The challenges arise because of variations. Often the upstream logistics costs can represent a significant proportion of total supply chain costs embedded in the final product. of business continuity management system. 27 The marketing and logistics interface Even though the textbooks describe marketing as the management of the ‘Four Ps’ – product, price, promotion and place – it is probably true to say that, in practice, most of the emphasis has always been placed on the first three. suiting fabrics), but over time the company has become predominantly a womenswear business with a higher fashion content and with much shorter life cycles. facilitate the surveying necessary for modernization and construction of high-speed trains; assess the quality of the work or the technical condition of the track; quick location of a threat when one is detected. In this topic a brief introduction to each of the Logistics Function/Industry is attempted. Figure 1.9 suggests that there is in effect an evolution of integration from the stage 1 position of complete functional independence where each business function such as production or purchasing does its own thing in complete isolation from the other business functions. If, on the other hand, time-based metrics were to be employed then the focus could be on cycle-time reduction, set-up time reduction and other measures that encourage agile practices. In the case of the logistics pipeline it is the case that time is consumed not just in slow-moving processes but also in unnecessary stock holding – whether it be raw materials, work-in-progress, waiting at a bottleneck or finished inventory. 51–56. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Equally, with the continued volatility of many input costs, particularly oil and energy, many companies are already reviewing their existing supply chain strategies. However, such actions will probably lead to a loss of flexibility and the creation of additional inventory. Today the best run companies are taking a more proactive stance. The drivers of shareholder value The five basic drivers of enhanced shareholder value are shown in Figure 3.4. A further problem is that as retailers become more demanding in the delivery service they require and as the trend towards just-in-time delivery continues, the loss of flexibility becomes a problem. In the intervening years from the first to the fourth edition, many things have happened. MM What are the key causes of this failure? If in the next period consumer demand were to fall back to its old level then the same effect would happen in reverse. The perfect order is achieved only when each of those service needs is met to the customer’s satisfaction. For example, Tesco, one of the world’s biggest online retailers (as well as one of the world’s biggest bricks and mortar retailers), can see what its real product availability is because it is able to capture actual demand as it happens and is therefore able to measure on-the-shelf availability accurately. All of these issues are capable of quantification and measurement against customer requirements. or elimination of traffic violation etc. This basic definition will be extended and developed as the book progresses, but it makes an adequate starting point. A commodity market is characterised by perceived product equality in the eyes of customers resulting in a high preparedness to substitute one make of product for another. Thus: Economic value added (EVA) = Profit after tax − True cost of capital employed It will be apparent that it is possible for a company to generate a negative EVA. In more and more markets the power of the brand has declined and customers are more willing to accept substitutes; even technology differences between products have been reduced so that it is harder to maintain a competitive edge through the product itself. return to the normal activities of the organization after the settlement of the crisis. We believe every business can look at sustainability this way.’ Scott said that Asda had taken the lead on working with suppliers to reduce packaging, aiming for a reduction of 25 per cent by the end of 2008. The extract from The Times below illustrates some of the problems caused by a volcano a long way from the factories that were affected, and thus highlights the increasing interconnectedness of global supply chains. A further unforeseen impact of product design decisions is that if components or materials are specified which happen to have lengthy replenishment lead times then the ability to respond rapidly to changes in demand for the product will be impeded. 36 LOGISTICS & SUPPLY CHAIN MANAGEMEN T Figure 2.5 Customer retention indicators (a) New customers Retained customers No. The new competitive paradigm is that supply chain competes with supply chain and the success of any one company will depend upon how well it manages its supply chain relationships. From August 1, 2013, the International Railwa, Association (EPAL). Mapping your risk profile Rather than cataloguing all the possible risks a company might face, the first stage in strategic risk management is to understand the company’s internal processes in order to isolate the most relevant and critical threats.
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