Logistics Management and Strategy

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1 Logistics Management and Strategy Competing through the supply chain Fourth Edition Alan Harrison Remko van Hoek Financial Times Prentice Hall is an imprint of Harlow, England London New York Boston San Francisco Toronto Sydney Tokyo Singapore Hong Kong Seoul Taipei New Delhi Cape Town Madrid Mexico City Amsterdam Munich Paris Milan

2 Contents Foreword Preface Authors' acknowledgements Publisher's acknowledgements How to use this book Plan of the book xiii xv xvii xix xxi xxiii Part One COMPETING THROUGH LOGISTICS 1 Logistics and the supply chain 3 Introduction Logistics and the supply chain Definitions and concepts Supply chain: structure and tiering Material flow and information flow Material flow Information flow Competing through logistics Hard objectives Supportive capabilities Soft objectives Order winners and qualifiers Logistics strategy Defining'strategy' Aligning strategies Differentiating strategies trade-offs in logistics 31 Summary 32 Discussion questions 33 References 33 Suggested further reading 34 2 Putting the end-customer first 35 Introduction The marketing perspective Rising customer expectations The information revolution Segmentation Demand profiling Quality of service Customer loyalty Value disciplines ' 53

3 viii Contents Relationship marketing and customer relationship management (CRM) Measuring service quality Setting priorities for logistics strategy Step 1: Diagnose current approach to market segmentation Step 2a: Understand buying behaviour Step 2b: Customer value analysis Step 3: Measure logistics strategy drivers Step 4: Specify future approach to market segmentation 63 Summary. 68 Discussion questions 69 References 70 Suggested further reading 71 $ Value and logistics costs 73 Introduction Where does value come from? Return on investment (ROI) Financial ratios and ROI drivers How can logistics costs be represented? Fixed/variable Direct/indirect Engineered/discretionary Activity-based costing (ABC) ABC example Cost-time profile (CTP) Cost-to-serve (CTS) A balanced measurement portfolio Balanced measures Supply chain management and the balanced scorecard Supply chain financial model Supply chain operations reference model (SCOR) 101 Summary ' 105 Discussion questions 105 References 106 Suggested further reading 106 Part Two LEVERAGING LOGISTICS OPERATIONS 1 Managing logistics internationally 109 Introduction Drivers and logistics implications of internationalisation Logistical implications of internationalisation Time-to-market Global consolidation Risk in international logistics The tendency towards internationalisation Focused factories: from geographical to product segmentation Centralised inventories \ 121

4 Contents ix 4.3 The challenges of international logistics and location Extended lead time of supply Extended and unreliable transit times Multiple consolidation and break points Multiple freight modes and cost options Price and currency fluctuations Location analysis Organising for international logistics Layering and tiering The evolving role of individual plants Reconfiguration processes Reverse logistics Managing for risk readiness Immediate risk readiness Structural risk readiness Corporate social responsibility in the supply chain 145 Summary 150 Discussion questions 150 References 151 Suggested further reading Managing thejead-time frontier 153 Introduction 153 > 5.1 The role of time in competitive advantage Time-based competition: definition and concepts Variety and complexity Time-based initiatives Time-based opportunities to add value Time-based opportunities to reduce cost Limitations to time-based approaches P:D ratios and differences Using time as a performance measure Using time to measure supply pipeline performance Consequences when P-time is greater than D-time Time-based process mapping Stage 1: Create a task force Stage 2: Select the process to map Stage 3: Collect data Stage 4: Flow chart the process Stage 5: Distinguish between value-adding and non-value-adding time Stage 6: Construct the time-based process map Stage 7: Solution generation Managing timeliness in the logistics pipeline Strategies to cope when P-time is greater than D-time Practices to cope when P-time is greater than D-time A method for implementing time-based practices Step 1: Understand your need to change, Step 2: Understand your processes Step 3: Identify unnecessary process steps and large amounts of wasted time \ 181

5 x Contents Step 4: Understand the causes of waste Step 5: Change the process Step 6: Review changes Results When, where and how? 183 Summary 183 Discussion questions 184 References 184 Suggested further reading 184 Supply chain planning and control 185 Introduction The supply chain'game plan' Planning and control within manufacturing Managing inventory in the supply chain Planning and control in retailing Inter-firm planning and control Overcoming poor coordination in retail supply chains Efficient consumer response (ECR) Collaborative planning, forecasting and replenishment (CPFR) Vendor-managed inventory (VMI) Quick response (QR) 217 Summary 218 Discussion questions 219 References 219 Suggested further reading 220 Just-in-time and the agile supply chain 221 Introduction Just-in-time and lean thinking The just-in-time system The seven wastes JIT and material requirements planning Lean thinking Application of lean thinking to business processes Role of lean practices The concept of agility Classifying operating environments Preconditions for successful agile practice Developing measures that put the end-customer first to improve market sensitivity Shared goals to improve virtual integration Boundary spanning S&OP process to improve process integration 248 Summary 249 Discussion questions 250 References 251 Suggested further reading 252

6 Contents xi Part Three WORKING TOGETHER 8 Integrating the supply chain 255 Introduction Integration in the supply chain Internal integration: function to function Inter-company integration: a manual approach Electronic integration Choosing the right supply relationships Partnerships in the supply chain Economic justification for partnerships Advantages of partnerships Disadvantages of partnerships Supply base rationalisation Supplier management Lead suppliers Supplier networks Supplier associations Japanese keiretsu Italian districts Chinese industrial areas Supplier development Integrated processes Synchronous production Implementing strategic partnerships Managing supply chain relationships Creating closer relationships Factors in forming supply chain relationships 291 Summary, 292 Discussion questions 294 References 295 Suggested further reading Sourcing and supply management 299 Introduction What does procurement do? Drivers of procurement value Rationalising the supply base Segmenting the supply base Preferred suppliers Strategic relationships Establishing policies per supplier segment Vendor rating Executive ownership of supply relationships Migrating towards customer of choice status Procurement technology Markers of boardroom value What does top procurement talent look like? 327

7 xii Contents Summary 328 Discussion questions 329 References 329 Suggested further reading 330 Part Four CHANGING THE FUTURE 10 Logistics future challenges and opportunities 333 Introduction Changing economics? Internal alignment Selecting collaborative opportunities upstream and downstream Managing with cost-to-serve to support growth and profitability The supply chain manager of the future Changing chains 347 Summary 349 Discussion questions 350 References 350 Suggested further reading 350 Index " 351 Supporting resources Visit to find valuable online resources For instructors Complete, downloadable Instructor's Manual, containing teaching notes, notes on case studies and teaching tips, objectives and discussion points for each chapter Downloadable PowerPoint slides of all figures from the book For more information please contact your local Pearson Education sales representative or visit

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